Freeport, unions edge closer to wage and benefits deal

Amahl S. Azwar, The Jakarta Post, Jakarta | Business | Thu, October 17 2013, 12:34 PM

Following months of delay, PT Freeport Indonesia and the company’s workers union on Wednesday said they had agreed on some basic premises in their pay talks for the 2013-2015 period.

In the tentative agreement, the subsidiary of US-based giant mining company Freeport-McMoRan Copper and Gold Inc. and the workers shared ideas on the new labor contract as well as new wages within next two years.

“We are motivated by the latest development. Both the management and the union finally agreed on the best solution for the welfare of the workers as well as the company,” Freeport Indonesia president director Rozik B. Soetjipto said in a statement.

Details about the agreement were unavailable but the outcome of the deal was lauded by the workers and the union leader.

Sudiro, chairman of Freeport Indonesia Workers Union, said the union was upbeat about the latest tentative agreement, saying his organization would not have to go on strike to ensure its demands were heard.

“We hope the management will be committed to the principles of equality and partnership for the sake of the company as well as the welfare of workers and their family,” he said.

The talks on workers’ wages, benefits, rights, obligations and pensions were delayed in May when Freeport ceased operations following a fatal incident at the company’s training facility in Papua, in which 28 died.

Freeport Indonesia resumed operations at the mine in July this year.

The Grasberg open-pit mine produces 140,000 tons of gold and copper ore per day, or 64 percent of Freeport’s daily production of 220,000 tons of ore per day. The Deep Ore Zone mine, an underground block a few kilometers from Grasberg, which remains closed, contributes the rest.

In an interview with Reuters earlier this month, Rozik said the mine was currently operating at 85 percent capacity.

Freeport, the country’s largest miner, expects that the company and union’s negotiating teams would finalize the details by the end of October this year. The new labor contract, he said, would be effective on Oct. 1 retroactively.

Under the 2009 Mining Law, miners operating in Indonesia must process their ore domestically starting in 2014, meaning that they won’t be allowed to export raw mineral ore.

However, Rozik said the company would still ask for “flexibility” with the 2014 ban. Earlier this year, the company said that current regulations would make it impossible for Freeport to operate in 2014 and, thus, would mean worker redundancies.

Freeport, along with PT Newmont Nusa Tenggara, refused to establish its own smelters, claiming it would not be economically feasible.

But Freeport said earlier that the company would have no objection to supply copper concentrates to local smelting plants in a bid to comply with restrictions on unprocessed ore exports. The company has recently signed a memorandum of understanding (MoU) with two local firms, PT Indosmelt and PT Indovasi Mineral Indonesia.

Indovasi Mineral’s US$1.5-billion smelting plant, planned to be located either in Tuban or Gresik in East Java, is expected to begin construction by the end of 2014 and become operational in 2017 with an annual production of around 200,000 tons of copper cathode.

Meanwhile, Indosmelt’s $1.5 billion-smelting plant in Maros, South Sulawesi, is also expected to begin production in 2017 and is estimated to produce around 120,000 tons of copper cathode.

Currently, Freeport Indonesia allocates 40 percent of its annual production of around 2.5 million tons of copper concentrates to a local smelter belonging to PT Smelting in Gresik, of which Freeport owns 25 percent of its stake.

PT Smelting currently produces 300,000 tons of copper cathode per year.

Rozik said that all of the copper concentrates the company produced annually could be allocated domestically should the two smelting plants begin production in 2017.

Legal uncertainty in the mining sector resulted in the Canadian Fraser Institute in 2012 dubbing Indonesia “the worst” among the 10 least-attractive countries for the mining industry.

Overall, Indonesia was ranked bottom out of 96 countries reviewed by analysts from the Vancouver-based think-tank, a significant fall from 85 out of 93 countries in 2011.


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