KPC declares force majeure

PT Kaltim Prima Coal (KPC), a subsidiary of Australian mining giant Rio Tinto, announce a force majeure to its local and foreign buyers on Wednesday as a workers' strike had made it impossible to continue coal shipment.

KPC president Grant Thorne said that the force majeure was effective on the company's sales contracts with various power plants and steel mills around the world.

"It means that any penalties for breach of contract are not effective," he told reporters at a media conference.

KPC stopped operating on June 15 after some 150 protesting workers took control of its important mining facilities to demand, among other things, a 15 percent increase in salaries.

Thorne was quoted by the Jakarta Post as saying that due to the strike, the company had to rely on its stockpiles, which, however, had run out.

Without the force majeure, he said, the company would have to pay each ship demurrage charges amounting to tens of thousands of U.S. dollars per day.

With the force majeure, he said, customers would have to find other suppliers to meet their coal needs. "Our hope is that they would come back."

The company currently has 31 customers worldwide, of which 64 percent are power plants, 34 percent steel mills, and the remainder industrial users.

The company initially expected this year's coal export to increase to 15 million ton from 14 million ton last year.

Separately, East Kutai Regent Awang Faroek was quoted by the local Kaltim Post daily as saying that he regretted KPC's decision to announce the force majeure which could have adverse impact to the local mining sector and the overall economy.

"This is just like slapping us in the face. This (the force majeure) would seem that the administration can't solve the problem," he said.

Awang was speaking to the press following a meeting at the local House of Representatives with KPC and the protesting employees to help resolve the dispute.

KPC operates in the Sangatta area of East Kutai regency.

But Kaltim Post said that the negotiation ended up with no concrete results as both sides maintained their own position.

"To be frankly, I am very disappointed with the KPC management. We have tried to mediate so that the problem can be resolved quickly, but this seems impossible because KPC doesn't have good intention," Awang said.

Meanwhile, the protesting workers demanded KPC to withdraw its decision to dismiss 66 of the protesting employees as a condition for a further negotiation. The demand is supported by several legislators.(*)