March 25, 1996

Dames and Moore is an engineering firm that conducted an environmental audit of Freeport's mining operation in Irian Jaya (West Papua).

A 42-page version of the report may be obtained by writing to:
Freeport-McMoRan Copper and Gold,
Attn: Communications Dept.,
P. O. Box 51777,
New Orleans, LA 70151.

The 42-page report is half in English and half in Indonesian. One nice feature of the 42-page report is a good map of the area, the towns, and the major physical components of Freeport's operation. The following is section 16 quoted in full, pages 34-41 of the report:

Conclusions Relating to Significant and/or Controversial Issues

The PTFI (Freeport) mining operations are located in a unique and hostile wilderness area. Until 1990 these operations were relatively small scale, based on mining of the Gunung Bijih and adjacent deposits. The engineering challenges, even for an operation of that size, were formidable and far outweighed any environmental concerns. With the development of the Grasberg deposits in 1990, and continuing significant exploration successes, the magnitude of the operation has escalated dramatically as have concerns with environmental management and protection.

PTFI acknowledges that it has been slow to react to those concerns. Environmental baseline and monitoring studies, for example, were only initiated after 1990. This has led to negative perceptions of PTFI on the part of the public and Government regulators.

PTFI has recently changed from a reactive to a proactive approach to environmental management. This was apparent during the course of the audit when recommendations and suggestions put forward by the audit team were readily discussed and agreed by top management.

Of the 33 principal recommendations made by the audit team, 13 have already been implemented during the audit process and 20 are either being implemented or studied.

Specific conclusions relating to the identified significant or/and controversial issues are now described.

Tailings Management. Tailings deposition has adversely impacted about 30 square kilometers of tropical lowlands rainforest. Until the confining levees reach their full lateral extent there is a risk that a large scale flood event could impact additional rainforest and the Minajerwi Estuary.

Levee construction is proceeding laterally at full pace and is due for completion in December, 1996, but the raising and maintenance of the levees will be a continuing activity during the life of the mine. Engineering design and modification of the levees and any associated spillway structures will also require an ongoing commitment on the part of PTFI. The Ajkwa Deposition Area is scheduled, on completion, to cover an area of 130 square kilometers.

The audit team concludes that the tailings are non-toxic, are suitable for reclamation post mine closure, and that the best practicable means for their disposal are being utilized given the unique nature of the operation and the particular circumstances that apply.

However, should the projected expansion of production proceed, a considerable additional load would be placed on the tailings disposal system. Alternative or additional methods of tailings disposal need to be examined and more detailed engineering studies of the existing system and sediment transport characteristics undertaken.

Overburden management. During the life of the mine some 3.2 billion tonnes of waste rock (overburden) will be dumped in the upper reaches of the Wanagon River catchment. A large proportion of the rock is acid generating. There is conclusive evidence that the older section of the dump is already generating acid rock drainage, characterized by acid leachate containing high dissolved copper concentrations. Lake Wanagon is spectacularly blue due to its copper content and acid nature. Interim measures for lime dosing are in place to control acid rock drainage into Lake Wanagon, and to neutralize the waters in the lake.

The revised overburden management plan is in the final stages of preparation by the overburden task force appointed by PTFI. It will allow for selective placement of acid neutralizing rock to combat acid rock drainage, and for segregation and future processing of low grade ore currently disposed as waste rock. These actions are compatible with best international mining practice. Recommendations are made for evaluation of a long term solution to acid rock drainage from the older section of the dump, preferably by interception and treatment for recovery of copper. Such a solution will allow the interim costly and unproductive lime dosing system to be discontinued.

Resource Conservation and Recovery. The mine cut-off grade of 0.85 per cent copper equivalent is high by world standards. Considerable effort, discussion and documentation were utilized by the audit team in order to reach an understanding of the rationale adopted by PTFI management in the selection of the cut-off grade.

The audit team is comfortable with the explanations provided, namely the high cost of infrastructure, the high overburden ratios and the return on investment required to support the operation. However, the audit team is not comfortable with the lack of a long term strategy for recovery of the lower grade ores from the existing overburden dump. This is an aspect of mine planning which requires detailed study.

It is noted that a proposed expansion of production would allow a reduction in cut-off grade to 0.40 per cent copper equivalent. This would be a very positive outcome of such an expansion but during the AMDAL process required for such an expansion, would need to be carefully balanced against any additional environmental pressures.

Environmental Management System. The audit team has carefully reviewed PTFI's compliance with the principal environmental regulations which apply to its operations, and to which it is obliged under the approved RKL and RPL documents. It is concluded that in all material respects PTFI is complying with GOI regulations. This conclusion does not infer that PTFI can relax its vigilance in relation to environmental compliance and the audit team has made recommendations which will expand and enhance the commitments PTFI has made in the RKL and RPL.

PTFI's Environmental and Social Strategic Plan, completed in November 1994, provides the framework for PTFI's environmental management system. The audit team concludes that the ESSP can be strengthened; that a formal environmental management system should be prepared; that greater authority for environmental decisions be placed in the hands of the PTFI environmental team in Indonesia; and an autonomous environmental advisory committee should be established.

Where possible, environmental compliance targets should be set and openly reported.

Environmental Monitoring. The impacts of PTFI's operations on the environment are assessed and reported through its environmental monitoring program. This program has been examined in detail. It complies with the commitments made in the RPL. The audit team has identified some areas where the program can be expanded, and these recommendations have been endorsed by PTFI. The fact there there are indications of elevated coper levels in the Minajerwi Estuary suggest that an ecological risk assessment should be undertaken. This is a recommendation of the audit team.

The audit team is particularly enthusiastic about the performance and capabilities of the PTFI custom built environmental laboratory in Timika.

Waste Management. Waste management was not previously a high priority for PTFI, with direct discharge of untreated sewage into river, and waste disposal to uncontrolled landfills. In the past two years there has been a complete turnaround with installation of sewage treatment plants, engineered landfill, incinerator, waste oil recycling and other initiatives.

The audit team endorses and supports these initiatives. Any liabilities from past activities should however be identified and incorporated into a mine closure plan.

Rehabilitation. Rehabilitation trials and research in the lowlands tailings are producing positive results and have provided the audit team with a degree of confidence for the future viability of the Ajkwa Deposition Area post mine closure. The uplands rehabilitation trials are not as advanced and recommendations have been made for an increased effort to be made by PTFI in this area.

Mine Closure Plan. Despite the projected long life of the mine, the audit team has urged PTFI to produce a mine closure plan as this will identify, at an early stage, the requirement for environmental activities and costs, post mine closure. Identification of potential environmental liabilities will allow PTFI to progressively adopt design modification to activities such as overburden management, to minimize and mitigate such liabilities. It will also allow PTFI to make financial provision for mine closure on an annual basis during the life of the mine. PTFI management has endorsed these recommendations.

Biodiversity. The location of the PTFI operation in a pristine wilderness area and its close proximity to the Lorentz Nature Reserve have raised concerns within Indonesia NGOs on the potential impact on biodiversity. The biodiversity studies completed to date do not indicate any loss of biodiversity nor any impact through PTFI operations nor from other activities such as transmigration or timber logging.

Nevertheless the results of PTFI's biodiversity studies have not been effectively communicated to the public. The audit team has recommended that a visiting scientist program be established in cooperation with LIPI, and that the results of biodiversity research and study be published on a regular basis.

Puncak Jaya Glaciers. One of the jewels of the Lorentz Nature Reserve area is the glacier field of Puncak Jaya. Its relative proximity and visibility from the Grasberg Mine has raised concerns about the impact of the mining operation on the glaciers.

The sad fact is that the Puncak Jaya glaciers are retreating dramatically, as are all other equatorial glaciers, and are predicted to disappear completely within 100 years. This retreat is consistent with the effects of global warming and is not related to PTFI's activities.

However, because of the unique nature of the Puncak Jaya glaciers, the audit team has recommended that PTFI support LIPI in undertaking more detailed research and monitoring of climatic trends near Puncak Jaya. PTFI management endorses this recommendation.