Freeport Indonesia union refuses to rule out strikes ahead of pay talks

2011 deal to end in October
By Yayat Supriatna and Michael Taylor
||Last Updated: 04/17/2013

JAKARTA (Reuters) — Workers at the Indonesian unit of Freeport McMoRan Copper & Gold Inc. have refused to rule out a repeat of a 2011 strike that crippled the world's largest copper mine, trade union officials said in the run-up to pay negotiations next month.

A deal inked in December 2011 to resolve Indonesia's longest running industrial dispute is due to end in October at Freeport's Grasberg mine in west Papua province.

It included a pay rise of 37 per cent over two years for workers who joined the three-month strike demanding higher pay.

"Whether there will be a strike or not in 2013 is dependent on the result of the negotiations," union spokesman Juli Parorrongan told Reuters on Wednesday.

"The company is the one which can create a strike, not labour. If the company management offers, or decides, lower benefits than its ability or revenues, it means the company asks us to strike."

Indonesian officials of Arizona-based Freeport did not reply to e-mails or telephone calls from Reuters seeking comment.

Mining contributes around 12 per cent to GDP in Indonesia, which is also a major exporter of nickel ore, refined tin, bauxite and iron ore.

Under the 2011 deal, wage talks between union and Freeport representatives will start on May 2 in the town of Timika, about 100 km south of the mine in eastern Indonesia.

Up for discussion are workers' wages, benefits, rights, obligations and pensions, said Parorrongan, who declined to reveal an exact pay demand, so to avoid influencing the talks.

"Normally, negotiations last for 30 days," Parorrongan said by telephone. "If there is no agreement, it can be extended for another 30 days. We will try our best to avoid deadlock."

Freeport's mine is a technically challenging open pit in the remote highlands, where the firm and its contractors employ about 17,000 workers, Parorrongan said.

Freeport and its contractors were trying to weaken the union, said another union leader, Virgo Solossa.

"We are still facing unfair treatment and discrimination from the companies," Solossa said. "The companies still have different treatment for workers who joined in the 2011 strikes and those who did not."

Freeport's Indonesian unit, PT Freeport Indonesia, is 90.64 percent owned by the U.S.-based firm, with the government holding a 9 percent stake.

Sales from Freeport Indonesia will be around 1.1 billion pounds of copper and 1.2 million ounces of gold in 2013, up 54 percent and 31 percent over 2012 figures respectively, as mining moves into higher ore grades, the company said.

Lower benchmark copper prices could either encourage a swift settlement or leave unions and management divided, one analyst said.

"It is possible that this time around, they will be aware that companies aren't making as much money as they were," said BNP Paribas analyst Stephen Briggs.

Three-month copper on the London Metal Exchange has eased about 5 percent since early 2012. It traded at $7,194.75 a tonne by 0748 GMT.

Declines in benchmark copper prices over the past two years have prompted many mining unions to settle labour contracts ahead of expiry, Briggs said, pointing to evidence from Chile, the world's top copper producer.

But he added, "If there was a long-running strike, no question it would be supportive of the copper price."

After Indonesia announced new mining rules last year on foreign ownership and domestic processing, Freeport began talks with the government over divestment and higher royalty payments.

The talks also delay Freeport's decision to invest billions of dollars to develop underground mining and extend the life of Grasberg, which has the world's largest gold reserves.

Freeport has repeatedly said it is reluctant to build smelters in Indonesia.

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