Kaltim Prima Coal may declare force majeure due to strikes

Kaltim Prima Coal may declare force majeure due to strikes

JAKARTA (Reuters): Indonesia's largest coal miner PT Kaltim
Prima Coal (KPC) -- jointly owned by Rio Tinto and BP Amoco Plc
-- said on Tuesday it may declare force majeure on some
commercial contracts due to a prolonged strike.

The mine, located in East Kalimantan province has annual
output of around 15 million tons of coal, and a substantial
amount is exported to Taiwan, South Korea and Japan.

"We are now running at 50 percent of capacity since the strike
began in early February. Our stocks are running down and we may
have to declare force majeure if the strike continues," said
Bambang Susanto, KPC general manager for external affairs.

"We are now studying what contracts will be affected."

The firm's fresh labor woes mark the latest disruption to
foreign mining and oil firms, increasingly at odds with local
residents and workers in Indonesia since the iron rule of former
President Soeharto ended amid economic and social chaos in 1998.

Susanto told Reuters that disgruntled workers had been seizing
KPC's heavy equipment and forcing the company to cut output. It
has had regular problems with striking workers, although until
Tuesday there had been little publicity about the latest strife.

Susanto said the striking workers were not directly employed
by KPC, but by a local contractor called PT Liber. They have gone
on strike over wages and welfare benefits.

The exact services PT Liber provided to KPC were not clear.

"Actually it's not directly our problem, but we are hit by the
impact," Susanto said, adding talks between the workers and PT
Liber had failed to resolve the impasse.

Susanto said KPC had asked local government and police to help
end the strike but there was no progress so far.

Last year, strikes and road blockades by KPC's own workers
forced the company to declare force majeure twice.

The constant woes faced by mining and oil firms during
Indonesia's messy transition to democracy -- and confusion over
new autonomy laws that give regions more power -- have darkened
the outlook for the two critical sectors.

Many disputes with foreign companies are over wages and land
compensation. Security has also been a problem.

Earlier this month Exxon Mobil closed major gas fields it
operates in Aceh province on the tip of Sumatra island because of
the cumulative effect of dozens of security incidents over the
past two years in the province. Rebels have been fighting for
independence for decades in restive Aceh.

KPC, which began operations in 1992, is obliged under its
contract to divest up to 51 percent of its shares to the
Indonesian government and local entities between five and 10
years after starting commercial production.

No deal has yet been reached on divestment because of
disagreements over the value of the stake on offer.