Production stops at Grasberg after fatal accident

Freeport-McMoRan Copper & Gold (FCX-N) has agreed to cut back on production at its 85%-held Grasberg copper-gold operation in Indonesia pending the investigation of a waste-pile accident that killed four contract workers.

The Louisiana-based company voluntarily decided to cut the mining rate at the Grasberg open pit to 200,000 tonnes per day, a decrease of 5%.

Production of 20,000 tonnes per day from the underground portion of the operation remains unaffected.

The mine processed an average of 231,000 tonnes per day during the first quarter of the year. Production during the 3-month period consisted of 164,000 tonnes copper, 557,000 oz. gold and 831,800 oz. silver. Operating costs were US24 per lb. copper, making it the world’s lowest-cost producer.

In early May, slippage in the overburden waste-pile, west of the open pit, caused a wall of water to crest the spillway in the Wanagon basin and race downhill. It was the second such incident in three years (though there were no injuries in the first accident).

The company has stopped adding to the waste-pile, and the Indonesian government, along with international experts, has begun a full investigation. Early indications suggest that the accident was related to heavy rainfall over a 4-day period. Based on current data, the overflow material poses no threat to human health, nor will it have any long-term impact on the environment, the company said.

Freeport’s operating subsidiary, P.T. Freeport Indonesia, will compensate local residents for damage caused to property and will provide appropriate financial benefits to the families of the lost workers.