Freeport Indonesia, Strikers in 2-Year Wage Pact

(REUTERS) - Freeport McMoRan Copper & Gold Inc. and its Indonesian union signed a pay deal on Wednesday to end a three-month strike that had paralysed output at the world's second-biggest copper mine, a union official and the company said.

The deal, which includes a pay rise of 37 percent over two years for workers, ends Indonesia's longest-running industrial dispute and was achieved as pressure grew to find an agreement before Christmas.

Confirming the agreement later on Wednesday, Freeport said wages would be lifted 24 percent in the first year and 13 percent in the second. It said mutually acceptable terms had been reached.

It also said it had begun ramping up milling operations at the remote Grasberg mine, which holds the world's largest gold reserves and produces silver.

However, comments by union spokesman Juli Parorrongan suggested the U.S. miner might still face further disputes.

This is the first page of the struggle, and not the end, Parorrongan said after the deal.

Indonesia has been hit by several other strikes in sectors as diverse as telecoms and retail since the Freeport strike started in mid-September, signs of growing unrest over rising costs and a sense that financial success in Southeast Asia's largest economy is not being shared by all.

Striking workers at the Grasberg mine will return to work and lift road blocks on Saturday, the union said, after a deal that also gave them extra benefits such as allowances for housing, education and pensions.

The firm has asked us to mobilise workers back to work on Dec. 17 and we have agreed as part of the pay deal, union field coordinator Hengki Binur said.

Freeport's CEO Richard Adkerson has been in Jakarta in recent weeks to help negotiate the deal. The agreement was signed by the CEO of Freeport's local unit, Armando Mahler, and the head of the union Sudiro, Parorrongan said.

The company has said it was losing 2 million pounds of copper and 3,000 ounces of gold in daily production. The firm's stock has lost nearly 10 percent since the strike started, amid global market volatility.

The strike action has helped support copper prices, which have been pushed lower on worries about weak global demand, so a resumption in output could undermine prices. Benchmark copper in London extended losses after news of the Freeport deal to trade down 2.4 percent by 1202 GMT on Wednesday.

The strike in Papua, eastern Indonesia, has been running since mid-September and the firm declared force majeure on its exports from Grasberg in October, freeing it from contractual obligations.

Even after workers return, it is likely to take some days to ramp up production, and longer to resume shipments. The firm needs to repair a sabotaged pipeline that takes metal concentrate from the mine to its port, although Freeport said those repairs were substantially complete.

The firm's operations have been crippled by attacks on pipelines, employees and blockades by workers and spear-wielding local tribesmen that have cut off its food and fuel supplies in a remote region with few roads.

Binur said that road blockades imposed since October would also be lifted after the pay agreement.

The union initially pushed for a pay rise to as much as $200 an hour, versus current pay of $2-$3 an hour, after finding out that other Freeport workers around the world earned 10 times as much as their workers and as it eyed a rally in gold prices to record highs this year.

It steadily dropped its demands in recent weeks to around $7.50 an hour, a level still deemed excessive by Adkerson.

I hope that with this strike, the company will treat us more as equals in operating their business cycle, said union spokesman Parorrongan.

The pay agreement is closer to the 35 percent rise offered by the company in recent weeks . The total extra cost to the company was not clear.

Freeport Indonesia, part owned by the Indonesian government, has 23,000 workers at its Grasberg operations. Many are Christians and have been worried they would not be able to celebrate Christmas since they are not getting paid during the strike, leading to a greater push for an agreement and potentially a better deal for Freeport.