End of Grasberg Strike Imminent - Report

(REUTERS) -- Freeport McMoRan Copper & Gold Inc and its Indonesian workers' union expect to sign a pay deal on Tuesday to end a three-month strike that has crippled production at the world's second-biggest copper mine, two sources told Reuters.

The two sides have agreed to a pay rise of 40 percent over two years to end Indonesia's longest-running industrial dispute, and will sign the agreement in Jakarta, said the sources, who declined to be identified because the deal was not public.

Freeport did not immediately respond to Reuters queries seeking comment. It was not clear when the U.S. miner would be able to resume production or end a force majeure on exports, which was declared in October and helped boost copper prices.

We will sign the deal today around noon, and from the Freeport management it is going to be Armando Mahler, said one of the sources, referring to the CEO of Freeport Indonesia.

The union initially asked for pay to be raised to as much as $200 an hour, versus current pay of around $2-$3 an hour. It had steadily dropped its demand in recent weeks to around $7.50 an hour, a level still deemed excessive by Freeport's CEO Richard Adkerson, who has been in Jakarta to help broker a deal.

Many Freeport Indonesia workers, who are mostly Christians, had been worried they would not be able to afford to celebrate Christmas due to the strike, since they are not getting paid, leading to a push for a deal in the past week.

Prices for copper, used in power and construction, have fallen by about 12 percent since the stoppage began on September 15, mostly due to uncertainty surrounding the European debt crisis, though supply worries have helped limit the price fall.

At the moment it won't impact the copper price very much because it has lasted for a long period, and recently the copper market is still dominated by the financial side of news, said Grace Qu, China-based copper consultant for CRU.

It is positive for copper mine supply, but if we need to say it is positive or negative for the copper price, it should be negative... It is good news for (Chinese) domestic copper smelters, she said.

Benchmark copper prices on the London Metal Exchange traded at $7,612 a tonne at 0407 GMT, versus $7,606 a tonne at the close on Monday.

The mine also has the world's biggest gold reserves and produces silver.