Indonesia says Freeport mine cannot resume production yet

JAKARTA (Reuters) - Indonesia has told Freeport McMoRan Copper and Gold Inc it cannot resume production yet at its huge copper mine following a major accident there, a government official said on Saturday, adding to doubts how much longer the company can continue to supply the metal.

Freeport suspended operations at its remote Grasberg complex in eastern Indonesia on May 15, a day after a training tunnel collapsed killing 28 people in one of Indonesia's worst mining accidents.

Another worker is in serious condition after another accident on Friday, prompting a union leader to tell members to stop work at the world's second-largest copper mine.

"On Thursday, the director general (at the energy and mineral resources ministry) issued a letter forbidding all production activity except for maintenance," chief mining inspector Syawaludin Lubis told Reuters in a text message.

He gave no time frame for the ban.

The Kompas daily quoted the ministry's director general, Thamrin Sihite, as saying the government had requested the temporary stoppage of production at both open-pit and underground mining while investigating the accident.

Prolonged closure could hit Freeport's ability to supply its customers and global supplies of copper.

Freeport has not said how long its stockpiles of ore might last.

Industry sources say large miners typically have three to four weeks of ore stockpiled at port, and about three days on site.

Freeport declared a force majeure on some concentrate sales about one month into a 2011 strike.

After the latest accident on Friday, in which a truck driver was seriously injured, Freeport union official Virgo Solossa asked the company to stop all activities at the remote complex in west Papua, and to review safety systems.

The accidents could have a bearing on contract renegotiations between the Indonesian government and the company, which is trying to obtain an extension beyond 2021.

The Arizona-based company wants to turn Grasberg into the world's biggest underground mining complex after 2016 when its open pit operations are due to end. Open-pit mining currently accounts for two-thirds of production.

Freeport said on Wednesday it had resumed some operations at the mine, which also holds the world's largest gold reserves.

Freeport Indonesia's sales are expected to reach 1.1 billion lb of copper and 1.2 million ounces of gold in 2013, up 54 percent and 31 percent over 2012, respectively.

Open-pit mining at Grasberg normally produces about 140,000 tonnes of copper ore a day, while underground operations yield 80,000 tonnes.

The problems at the mine have helped underpin copper prices, although a prolonged shutdown would be necessary to hit world supplies, which are still seen in a small surplus this year.

(Additional reporting by Yayat Supriatna and Michael Taylor; Writing by Jonathan Thatcher; Editing by Robert Birsel)

Updated Date: Jun 02, 2013 03:00 AM

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