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Freeport strikes deal over Papua mine pay

Papuan workers of mining giant Freeport-McMoRan have agreed to a 37-per-cent pay increase over two years, with an initial 24-per-cent rise on Jan. 1, the remainder to come a year later.

Associated Press/Associated Press

A deal has been reached between thousands of striking workers and managers at Freeport-McMoRan Copper & Gold , ending a three-month labour dispute that has crippled production at the miner's Indonesian operations.

Losses have run as high as $18-million (U.S.) per day for the American company, which operates one of the world's largest gold and copper mines in the remote eastern highlands of Papua, since roughly 8,000 workers began industrial action on Sept. 15. The lost output has also lifted international copper prices.

Production was shut down completely in October due to sabotage of facilities and escalating violence. Police shot and killed two workers during a rowdy protest and unidentified assailants killed three miners on Freeport's sprawling Grasberg complex.

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A trade union official said on Wednesday they had agreed to a 37-per-cent pay increase over two years, with an initial 24-per-cent rise on Jan. 1 with the remainder coming a year later.

Union spokesman Juli Parorrongan said he expected the agreement to be signed at Freeport's Jakarta offices on Wednesday evening.

Freeport said it was "pleased to have reached mutually acceptable terms with its union workers" and that they would start reporting to their positions in the coming days. It is still repairing fuel lines damaged during the strike.

"Shipments of concentrate are expected to be limited until full operations are restored, which is expected by early 2012," it added.

Assuming there are no last-minute hitches, the deal will end the lengthiest and possibly the most costly strike in Indonesian history.

Freeport's Indonesian operations are 90.6-per-cent owned by U.S. parent company Freeport-McMoRan, based in Arizona, with the remainder in the hands of the Indonesian government. Freeport is also Indonesia's largest taxpayer, contributing $1.9-billion in 2010 and more than $19-billion over the past decade.

Grasberg produced 625,000 tons of copper last year, or about 3 per cent of global supplies. It is also one of the world's top gold mines.

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The strike has reduced production to just 5 per cent of normal capacity, leading to a fall in group profit and higher copper prices on international markets.

Papua is Indonesia's easternmost and least-developed province. Despite vast natural resources, its people remain poor and they suffer systemic abuses at the hands of Indonesian security forces, rights groups say.

Freeport has long been the source of conflict. The situation is further complicated by Indonesia's only remaining separatist movement. Low-level fighting between poorly armed rebels and government forces claims a few lives each year. A majority of Papuans, who have different ethnic and religious roots to their political leaders in Jakarta, want independence.

Copyright The Financial Times Ltd. All rights reserved.

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