Freeport-McMoRan Copper & Gold Inc.'s massive Grasberg mine in Indonesia is producing copper, gold and silver ore at 5 percent of its full capacity, a senior official at the energy and mineral resources ministry said on Thursday.

The mill to process the ore has stopped running because of the damage in the pipeline ... So Freeport's ore production is only about 5 percent of its full capacity now, Thamrin Sihite, the director general of mineral resources, told reporters.

Freeport said on Tuesday that production and processing rates at its strike-hit Grasberg mine have dipped below levels needed to meet fourth-quarter sales targets.

The firm had also said that no concentrate was heading from Grasberg to its port in the remote Papua region, implying the force majeure that it declared last week on some concentrate sales could be expanded or extended in length.

The company said it could take a month to fix its main sabotage-hit pipeline to take concentrate from the world's second-biggest copper mine to its port, where there are no stockpiles left for shipping.

Freeport started repairing the damage but has not been able to gain full access to the affected areas because of road blocks by striking workers, and could take a month to fix, it added.

As a result, the firm suggested it might not achieve fourth-quarter production and sales targets. It has said it expects fourth-quarter sales of 915 million pounds of copper and 305,000 ounces of gold, of which 185 million pounds of copper and 280,000 ounces of gold are expected from Grasberg.

Those estimates were based on fourth-quarter mill throughput averaging 175,000 metric tons per day. But the average so far after one month of the quarter has been only 120,000 metric tons per day, the company said.

The point is, when the pipe was cut, the mill stopped because ore and concentrate could not be processed, Sihite said.

They keep on piling the ore but they also have limit on how they store it, he said adding that the government is concerned about the strike because there are open mines at Grasberg that need maintenance.

Without proper maintenance it could cause an avalanche and it then becomes a security and safety issue.

The Phoenix, Arizona-based company said the Grasberg open pit mine and the adjacent DOZ underground mine were operating at reduced rates using non-striking employees and contractors.

A Freeport union spokesman said they are ready to restart stalled negotiations over pay on Nov. 7, adding that they are sticking to their demand for $7.5 an hour, as much as a fivefold hike from the $1.5-$3.0 per hour that workers at the mountain mine currently earn.

But this is much lower than its initial demand for $30-$200 per hour, while the company has offered workers a 30 percent pay rise, up from 25 percent when the last talks began on Oct. 21.

Grasberg holds more gold and copper reserves than any other mine and also produces silver. The supply disruption has been supportive for copper prices, which have been under pressure due to concerns over the global economy.

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