After a tragic tunnel collapse at its massive copper mining complex in Indonesia on May 14, Freeport-McMoRan Copper & Gold Inc. (FCX) released a statement on Wednesday estimating losses in copper and gold production. The collapse happened in an underground training facility at the company’s Grasberg mine in Papua one month ago, killing 28 and injuring 10 more people in one of the worst mining accidents ever in Indonesia.
Following the accident, all operations were suspended as an investigation and safety checks commenced, even though the accident didn’t occur within the area of mining operations. Freeport-McMoRan also said that the mining halt was out of respect for and in sympathy of the deceased and injured workers and families.
The company estimates that the daily impact of the suspended operations equates to about 3 million pounds of copper and 3,000 ounces of gold. From May 15 to June 11, the estimated losses in production are about 80 million pounds of copper and 80,000 ounces of gold.
Some operations were resumed in the last week of May, but a second tunnel collapse followed with the Indonesian government then ordering a production shutdown. A mining union official called Freeport “arrogant” for sending workers back in the mine before all investigations were complete.
PT Freeport Indonesia, the Indonesian Department of Energy and Mineral Resources and other authorities are still investigating the mine’s operations. Freeport is working with these agencies on re-starting production in phases.
Freeport has declared a Force Majeure event under its concentrate sales agreements.
Again offering their deepest condolences to those affected by the accidents, James R. Moffett, Freeport chairman, and Richard C. Adkerson, vice chairman, president and chief executive of FCX, said, “This was an unprecedented event in our more than 40-year history of operations in Papua. We are taking all actions required to prevent future incidents and to assure the safety of our workforce.”
The Grasberg mine is the second-biggest copper mine in the world and contains the world’s largest gold reserves. In 2012, about 2 percent of all the copper produced globally came from Grasberg. The largest majority of operations are open-pit mining, which are slated to end in 2016. Freeport has plans to turn the mine into the world’s largest underground mining operation at that time, although the recent cave-ins may dampen investor sentiment about that happening.
Shares of FCX have not been drastically affected by the accidents, falling from around $31 on May 13 to be trading on Wednesday around $30 each. So far in 2013, shares are off about 8 percent as the major miner limps along with the rest of the industry with commodity prices downtrending this year.