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Indonesia allows Freeport to restart underground mining

By Fergus Jensen

JAKARTA (Reuters) - Freeport McMoRan Copper and Gold Inc received Indonesian government permission on Tuesday to resume underground operations at the world's second-biggest copper mine, nearly two months after a tunnel cave-in that killed 28 people.

The government, which gave the go-ahead for a resumption of open pit mining last month, said the decision followed the completion of an independent investigation into the accident at the huge Grasberg mine in remote West Papua.

"From everything that has been done, that has been taken into consideration, including pressure from the community and local government, (we) have decided ok, it's safe," Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said in a prepared statement.

Freeport Indonesia President Director Rozik Soetjipto told a media conference it would take one month for underground mining operations at the mine to hit full capacity.

Open-pit mining has been running at full capacity since July 4.

The open-pit mine normally produces between 140,000 metric tons (1 metric ton = 1.1023 tons) and 150,000 metric tons of copper ore per day, while output from the underground operations is 80,000 metric tons.

Freeport was forced to declare force majeure on copper shipments after the accident.

This had yet to be lifted, Soetjipto said.

Before the accident, Freeport had expected sales of about 500,000 metric tons of copper from its Indonesia unit in 2013, along with 1.25 million ounces of gold.

Freeport is also in talks with the government to renegotiate a new mining contract to replace its current 30-year contract, which expires in 2021.

A member of the government team negotiating with Freeport said last week the accident should not delay those talks.

Benchmark three-month copper on the London Metal Exchange traded at $6,847 a metric ton on Tuesday, or $568 lower than the day before the accident.

(Additional reporting by Nadhila Renaldi; Reporting by Fergus Jensen; Writing by Michael Taylor; Editing by Richard Pullin)

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