Freeport McMoRan Copper & Gold Inc. halted copper and gold production on Monday at its giant Grasberg mine in Indonesia because of security fears and worker blockades, in the worst supply disruption since a strike began a month ago.
Freeport Indonesia said the main pipe carrying copper concentrate to its port from Grasberg, the world's second-biggest copper mine and with the biggest gold reserves, was cut earlier on Monday.
It said it did not know who cut the pipeline and is still evaluating the impact on copper shipments from the remote mountain mine, with no force majeure declared yet. The firm does not know how long it will take to fix the pipe.
Production is completely cut because the main pipe has been cut and because of security concerns, Freeport Indonesia spokesman Ramdani Sirait told a news conference, adding the mine's silver output had also been stopped.
The stoppage is a setback for the firm after it said last week it ramped up copper concentrate output at Grasberg to average more than 4,000 tonnes per day by relying largely on non-unionised and contract workers, a move criticised by the government.
The firm said it had still managed to ship 103,189 tonnes of concentrate in the past week.
Copper prices have so far shrugged off the supply disruption during the two-month strike that started on Sept. 15 because of worries a weakening global economy would hit demand for metals. Prices were flat on Monday.
It's all fairly bullish for the price, but the market doesn't seem terribly deterred, said Citigroup analyst David Thurtell. It seems to me that market funds are short.
Road blockades, part of the prolonged strike by around 12,000 of the mine's 23,000 workers, have now stopped containers carrying food and medicine from reaching the mine and jet fuel from reaching the nearest airport, the company said.
Logistics needed for production and activities in the highlands have been held at the port, said Sirait. There are hundreds and hundreds of containers now piling up at the port.
Freeport said last week it planned to ship 79,000 tonnes of copper concentrate from its Papua port.
Three men were killed in a shooting last week near the mine in Papua, though it was not clear if this was linked to the pay dispute, or to a simmering independence movement in the region.
Rebels in the eastern province, who have waged a low-level insurgency against the government for four decades, previously threatened to blockade the mine after police killed a separatist in an attack in late 2009.
A clash last week between striking workers and police near the mine led to the death of two protesters and injured others, as disgruntled and striking Grasberg workers protested after being barred from collecting belongings from their barracks.
Freeport has been trying to lure strikers back to work and has been using contractors at the mine, leading the country's labour ministry to say the U.S. miner has violated the country's labour laws by replacing striking workers.
Freeport Indonesia has denied the claim, saying this was part of an annual hiring process as the company required more workers to operate the mine.
Miners in other developing nations have walked out this year to demand better pay as corporate profits surged.
In Peru, the union has pulled out of talks with Freeport McMoRan to end a 16 day-old walkout on Friday and members threatened to go on hunger strike to push demands for a pay rise.
The government in the Latin American country has also said Freeport was committing a grave infraction by relying on volunteer staff to fill jobs vacated by strikers at its Cerro Verde mine.