Freeport and Indonesian workers agree on wage hike

December 14, 2011 - 9:20 AM

JAKARTA, Indonesia (AP) — Indonesian workers at Freeport-McMoRan's largest gold and copper mine ended a three-month strike Wednesday after the company agreed to a 37 percent wage hike and improved benefits.

Production at the troubled Grasberg mine in the remote mountains of easternmost Papua province has been crippled since 8,000 unionized employees earning $2.10 to $3.50 an hour walked off their jobs.

They were seeking a 300 percent increase, something analysts said was unlikely given the high cost of infrastructure — like roads and housing — needed to support operations in the rugged region.

But union spokesman Juli Parorongan said the pressures of surviving during the prolonged strike had forced workers to lower their demands.

"Finally we signed an agreement for a 37 percent hike over two years," he said by telephone, adding that the first year would see a 24 percent jump and the next, 13 percent.

"This is not the end of our struggle, but the beginning," the spokesman added. "We want the company to think of us as partners and to continue to listen to our aspirations."

Phoenix-based Freeport-McMoRan, meanwhile, said in a statement it had also agreed to a good benefits package, from housing allowances and educational assistance to an improved retirement savings plan.

Analysts said the agreed-upon wage increase was doable, given that labor only accounts for around 25 percent of Grasberg's site, production, and delivery costs.

Even a small increase in copper prices will cover the hike, the New York-based Dahlman Rose & Co. wrote in a statement, cautioning however that it will take time to ramp up production.

The deal could spell the end of months of violence and tensions at the sprawling mine.

At least nine people have been killed in the last three months, including several strikers shot by security forces.

Workers were accused of sabotaging a pipeline channeling fuel and concentrates to a port and blockading roads needed to bring food, medicine and other supplies to holed-up staffers and their families.

Freeport said repairs to damaged pipelines are almost complete.

Shipments, however, will be limited until full operations are restored, probably in early 2012, it said.

It was the second strike this year at the mine. The company said the first, eight-day work stoppage in July affected its revenue by $30 million a day.

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Associated Press writer Sandy Shore contributed to this report from Denver.

(This version CORRECTS Papua is in eastern Indonesia.)