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Freeport expects to sign new contract with Indonesia union in two weeks

Chief Executive of PT Freeport Indonesia Rozik Soetjipto talks during a news conference in Jakarta May 15, 2013. REUTERS/Beawiharta
Chief Executive of PT Freeport Indonesia Rozik Soetjipto talks during a news conference in Jakarta May 15, 2013. REUTERS/Beawiharta

By Randy Fabi

NUSA DUA, Indonesia (Reuters) - Freeport-McMoRan Copper & Gold Inc and its Indonesian union workers are expected to sign a new contract within two weeks after reaching an agreement over wages, a senior company official said.

The deadline for a deal between workers and management at Freeport's Grasberg mine in Papua, which is the world's second- biggest copper mine, was supposed to be on Friday.

"We plan to have (talks) extended by maybe two weeks because we are thinking of having the signing of the agreement by mid-October. We are still preparing the document," Freeport Indonesia CEO Rozik Soetjipto told Reuters on the sidelines of an APEC (Asia Pacific Economic Cooperation) conference in Bali.

A union official had said on Wednesday a tentative agreement was reached but held out the option of a possible strike if a final deal was not reached this week.

The Freeport Indonesia workers' unions are yet to sign an agreement, Juli Parorrongan, spokesman for the workers' unions, told Reuters in a text message on Friday.

"I'm 95 percent sure there won't be a strike," CEO Soetjipto said, adding that talks were still ongoing over minor issues.

Freeport Indonesia employs about 24,000 workers including contractors and staff. About three-quarters are union members.

The negotiations, which are seeking agreement on workers' wages, benefits, rights, obligations and pensions, were temporarily suspended in May when a tunnel collapse killed 28 people, halting operations for weeks. The talks resumed in June.

The mine, which normally produces around 220,000 metric tons (1 metric ton = 1.1023 tons) of copper ore a day, is currently operating at 85 percent of its capacity, Soetjipto said.

MINERAL EXPORT BAN

Freeport warned that it could be forced to halt operations at Grasberg, along with Indonesia's only copper smelter, if the government does not ease a ban on mineral ore exports before it becomes effective in January.

The ban is a result of efforts by Indonesia, which is the world's top nickel ore, refined tin and thermal coal exporter, to generate more profits and influence in commodities markets.

But a tumbling currency, a precarious trade deficit position and protests from industry have made the Southeast Asian nation reconsider the measure, though no final decision has been made.

Soetjipto said PT Smelting, in which Freeport has a 25 percent stake, could be forced to shut down because the new rule would not allow it to export unprocessed gold slime.

The smelter's closure would be an ironic twist to Indonesia's export ban, which is aimed at building the country's refining capacity.

"If the smelter is shut down and then we are not allowed to export that means we cannot sell our product," he said. "If we cannot sell our product, of course we have to shut our operation."

A PT Smelting spokeswoman declined to comment on a possible shutdown.

(Additional reporting by Yayat Supriatna in JAKARTA; Editing by Muralikumar Anantharaman)

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