TIMIKA, Indonesia, May 1 (Reuters) - Thousands of workers from the Indonesian unit of Freeport McMoRan Inc staged a rally near its Papua mine on Monday, a union leader said, protesting against lay offs by the miner due to a contract dispute with the government.
The union representing a third of the 32,000 workforce sent a notice to Freeport on Monday threatening to strike from May 1 to the end of the month at the Grasberg mine, the world's second-biggest copper mine.
Freeport is trying to ramp up output and exports at Grasberg after reaching a temporary deal with the government following a 15-week stoppage linked to new mining rules, but customers are concerned that labour unrest could now hit supply.
Freeport has laid off about 10 percent of its workforce and warned it could cut another 5,000 to stem losses, sparking protests from workers.
"We are still waiting. We have good intention by opening up in a transparent and fair manner so the problem can be solved. We actually don't want a strike to happen," said the union leader Aser Gobai, adding that about 8,000 workers had taken part in the rally in Timika, the nearest town to the mine.
A spokesman for Freeport Indonesia did not respond to requests for comment.
Freeport Chief Executive Richard Adkerson said last month that the company was in talks with union leaders "in an effort to get them back to work", and warned it could punish workers for absenteeism.
Up to $40 million-per-month of spending on the Grasberg underground development could be cut if contract matters are not resolved, which could lead to more layoffs, he said.
Any delays in resuming exports could also support copper prices, with London Metal Exchange prices currently around $5,735 a tonne.
Adding to tensions around Grasberg, several Freeport workers and police were injured in a clash in Papua last month, when officers fired tear gas and rubber bullets at demonstrators in Timika who authorities said had been attempting to free a union leader at a court hearing.
New rules in Indonesia require Freeport to obtain a new mining permit, divest a 51 percent stake, build a second copper smelter, relinquish arbitration rights and pay new taxes and royalties.
Freeport insists any new permit must have the same fiscal and legal guarantees as under its 30-year mining contract, and in February it served notice to Jakarta, saying it has the right to commence arbitration if no agreement is reached by June 17. (Reporting by Samuel Wanda in TIMIKA; Additional reporting by Nulifar Rizki, Wilda Asmarini and Fergus Jensen in JAKARTA; Editing by Ed Davies & Simon Cameeron-Moore)