PT Inco says nickel mines operating normally despite job cut protest

Vale's Indonesian nickel mining subsidiary says operations normal despite villagers blocking mine access over job cut protests.

SOROWAKO, Indonesia, (Reuters) - 

PT International Nickel Indonesia (INCO.JK: Quote) said its nickel mine on Indonesia's Sulawesi island was operating normally on Thursday after about 500 villagers blocked a key road to protest against job cuts.

Last month, Inco said it planned to cut 87 jobs, or nearly 3 percent of its workforce, to reduce costs in response to the global financial crisis, which has reduced demand for stainless steel and thus nickel, a key input.

Brazil's Vale Inco Ltd. (VALE5.SA: Quote) has a 60.8 percent stake in Inco: the Indonesian firm's Sulawesi mine is its only operation.

Several global mining firms have cut jobs and slowed mining projects as weaker demand has hit metal prices. Inco, which produced 72,400 tonnes of nickel-in-matte in 2008, or about 5 percent of world output, acording to Reuters data, has said it could cut output by 20 percent this year if prices remain weak.

Villagers near Inco's mine fear further job cuts by the firm, which employs many locals, Andi Duding, the head of the Sorowako Indigenous Group (KWAS), said.

"We want the company to ensure that locals do not lose their jobs. If they lose their job, they can't go anywhere because there is no farmland any more," Duding told Reuters.

Duding said villagers planned to meet Inco's board of directors on Thursday afternoon.

Nickel prices MNI3 at the London Metal Exchange traded at $19,600 a tonne on Thursday, about two-thirds below the record high of $51,800 a tonne hit in May 2007.

Tri Rachman Batara, Inco's spokesman in Sorowako, Sulawesi, told Reuters the villagers had blocked a road between the employees' housing area and the mine itself, forcing some employees to abandon their cars on the road.

"The mining operation is running as usual. There is no disruption and the police are negotiating with the villagers," Batara said, adding that the company had sent cars to pick up stranded employees.

Inco has around 3,400 employees, most of whom work at its mining site in Sorowako, South Sulawesi. It said the job cuts, which will affect workers near retirement age and some foreigners, will not affect this year's production.

In May, Inco announced it had revised down its capital expenditure this year to $166.4 million, from $228.8 million initially planned in February, reflecting a slump in global demand.

Inco's shares rose 1.05 percent to 4,825 rupiah, while the overall market was up 0.37 percent. (Reporting by Yusuf Ahmad in Sorowako and Fitri Wulandari in Jakarta; Editing by Sara Webb)

© Thomson Reuters 2009. All rights reserved.

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