Blockade shuts down Freeport’s Grasberg mine

Vancouver – A large group of protesters, some toting weapons, effectively shut down operations at Freeport-McMoRan Copper & Gold’s (FCX-N) massive Grasberg mine complex in Papua, Indonesia.

A few hundred illegal miners blockaded the main road into the gold-copper mine following clashes with company security guards attempting to prevent their activities. Many locals earn a living by sifting through the Grasberg rock dumps, retrieving small amounts of gold and copper mineralization. Additionally, students attacked the company’s offices in Jakarta, vandalizing the facility.

It is estimated that the closure could cost the New Orleans-based company’s 90.6%-owned Indonesian subsidiary, PT Freeport Indonesia, up to US$10-12 million per day.

Grasberg is one of the world’s largest gold and copper producers with annual output of about 3.4 million oz. of gold plus 1.7 billion pounds (766,000 tonnes) of copper. The massive open pit operation processes roughly 220,000 tonnes of ore per day with an average grade of about 1.7 grams gold per tonne and 1.2% copper. The operation also produces several million oz. of by-product silver annually.The Grasberg orebody hosts proven and probable reserves of 2.8 billion tonnes grading 1.07% copper, 0.92 gram gold per tonne and 4 grams silver per tonne.

Joint venture partner Rio Tinto (RTP-N) holds a 40% interest in production from reserves above those reported at the year-end in 1994.

The mine was last closed in 2003 following a pit wall failure where 2.5 million tonnes of debris fell in to the open pit, killing several workers and burying equipment. In the prior year, an armed group ambushed a convey of vehicles carrying teachers and their families to the mine site, killing three.

Adding to the country’s political risk is an ongoing separatist movement in Papua province (previously called Irian Jaya) that seeks to free itself from Jakarta’s rule.