Grasberg suffers second slide (December 18, 2003)

New Orleans-based Freeport-McMoRan Copper & Gold (FCX-N) has declared force majeure on deliveries of copper concentrate from the massive Grasberg copper-gold mine in Indonesia.

The move follows a debris flow on Dec. 12 that has blocked access to the higher-grade ore areas of the mine. The flow, involving some 150,000 tonnes of loose material, happened in the same area of the open pit as another slippage on October 9; that accident left eight people dead. Freeport says that no one was injured in the latest incident, and there was little property damage.

Open-pit operations at Grasberg only recently resumed after Indonesia’s Department of Energy and Mineral Resources gave the nod following clean up of the Oct. 9 slippage. The department’s review of the slide concluded that the accident was due to a natural occurrence rather than negligence.

The company is now focussed on stabilizing the pit wall and removing waste to regain access to the high-grade areas. It will evaluate stabilization activities during the first quarter of 2004, and will follow up with estimated sales volumes for 2004.

In the meantime, mining will turn to lower-grade areas and as a result Freeport has trimmed its fourth-quarter copper sales estimates by 35 million lbs. to 165 million lbs. Estimated fourth-quarter copper sale had already been reduced by about 10% to 200 million lbs. after the slippage in October. Conversely, Freeport now pegs gold sales at 260,000 oz., 10,000 oz. better than previous estimates.

In all, full-year 2003 sales estimates have been adjusted to around 1.3 billion lbs. of copper (70,000 tonnes behind previous estimates) and 2.5 million ounces of gold (off 150,000 oz.).

Freeport intends to defer certain metal sales from 2004 until 2005; its previous plan for 2004 included the sale of 1.4 billion lbs. of copper and 2.2 million oz. of gold.

Grasberg’s 40,000-tonne-per-day underground operations are unaffected, and the company says that the revised mine sequencing does not affect long-term mine plans or recoverable ore reserves.

Grasberg is no stranger to accidents. In November, two workers suffocated in a tunnel while transporting surface ore to the operation’s mill. The workers were overcome when ore sourced from an area containing previously unencountered concentrations of elemental sulphur released fumes in the tunnel.

In 2000, unusually heavy rainfalls washed overburden into Lake Wanagon, sending a wave of rocks, sludge and water into the valley below. Four construction workers died.

News of the latest accident sent shares in Freeport down US$1.21, or 2.7%, to US$43.69 in mid-afternoon trading in New York on Dec. 18. Three-months copper ended Thursday’s trading session on the London Metals Exchange at US$2,225 per tonne, a level not seen in more than six years.