Read Microsoft PowerPoint - Post Conflict Freeport McMoRan King.ppt text version

Tenke Fungurume Mining

"Investing in Post-Conflict Countries" CCA Africa Infrastructure Conference

October 7, 2008

www.fcx.com

Freeport-McMoRan Fact Sheet

2007 Revenues $16.9 Billion (Fortune 140) Activities in North America, South America, Africa and Asia 25,400 Direct Employees Publicly Traded on the New York Stock Exchange · Investors include Major Global Financial Institutions Global Headquarters: Phoenix, AZ

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Geographically Diverse, Long-Life Asset Base

Major Mine Operations & Development Projects

All major assets majority-controlled and operated

North America 1 North America 1

Reserves Cu Mo Production Cu Mo 25.8 billion lbs 1.8 billion lbs 1.75 billion lbs 77 million lbs

Copper Copper/Gold/Silver Molybdenum

Grasberg (90.64%) Grasberg (90.64%)

Reserves Cu Au Production Cu Au 37.1 billion lbs 41.0 million ozs 1.25 billion lbs 1.8 million ozs

South America 2 South America 2

Copper Reserves Production 25.9 billion lbs 1.4 billion lbs

Tenke (57.75%)

Reserves Cu 4.3 billion lbs Co 0.6 billion lbs

Note: FCX consolidated reserves and annual production; Reserves as of December 31, 2007. Production figures are based on average annual estimates for 2008-2010. 1 Cu operations: Morenci (85%), Sierrita (100%), Bagdad (100%), Chino/Cobre (100%), Tyrone (100%), Miami (100%) and Safford (100%), Primary Mo: Henderson (100%) and Climax (100%) 2 Copper operations Candelaria/Ojos del Salado (80%), Cerro Verde (53.6%) and El Abra (51%)

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Freeport-McMoRan History

Long History in Natural Resources Business (early 1900s) Historical Operations: · Hard Rock Mining · Sulphur Mining · Oil & Gas · Fertilizers · Geothermal Discovery of Grasberg in 1988 FCX Spun Off from Parent in 1995 Developed Grasberg into One of World's Best Assets World's Lowest Cost Producer Through a Period of Low Commodity Prices Acquired Phelps Dodge in March 2007 in $26 Billion Transaction

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Freeport-McMoRan Copper & Gold History

The "Freeport" organization has roots in the minerals industry going back to the early 1900's. In March of 2007, Phelps Dodge Corporation became part of Freeport:

1988 Grassberg copper-gold deposit was discovered in Indonesia. 20% of Freeport spun off from the parent company and was taken public on NYSE 1989 A series of expansions initiated following the Grasberg discovery 1991 New Contract of Work signed with Gov't of Indonesia with a 30-yr term and provisions for two 10-year extensions. FCX changed its name to Freeport-McMoRan Copper & Gold 1993 FCX completed the acquisition of Atlantic Copper in Spain (formerly Rio Tinto Minera), whose primary asses is a copper smelter 1995 The remaining 80% of FCX taken public on the NYSE. PT Freeport Indonesia announced $1.35B strategic alliance with Rio Tinto. FCX completed third concentrator mill expansion 1997 FCX received approval from Indonesia's Minister of Environment for a Regional AMDAL study (an environmental impact assessment), which permitted future expansion of the milling rate up to a maximum of 300,000 metric tons of ore per day 1998 Fourth concentrator mill expansion was completed, making FCX one of the world's leaders in high volume/low cost production of copper and gold. PT Indonesia smelting construction completed and operations commenced

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Freeport-McMoRan Copper & Gold History

2001 FCX signed a special voluntary Trust Fund agreement with the Amungme and Kamoro villagers living closest to the mining operations providing for an initial $2.5M and $500,000 each year thereafter, subsequently increased to $1M each year beginning in 2004 2002 Deep Ore Zone (DOZ) underground mine completed at 25,000 metric tons of ore per day with further expansion initiated 2004 FCX purchased 23.9M common shares from Rio Tinto for $882M. FCX-Rio Tinto Grasberg joint venture continues. DOZ expansion to 50,000 metric tons of ore per day initiated 2005 FCX achieves record copper and gold production 2007 Continued strong performance at the Grassberg mining complex, combined with positive markets, creates record revenue, earnings and cash flow. With the acquisition of Phelps Dodge Corporation, FCX becomes the larges publicly traded copper company in the world

Phelps Dodge entered mining in 1881 by investing in the Detroit Copper Mining Company in Morenci, Arizona. Over time, Phelps Dodge developed copper deposits in Arizona, New Mexico, and Mexico, ultimately obtaining mines in Chile and Peru as well. Known for innovations in productivity, the company was among the first in the industry in the early twentieth century to convert to open-pit mining from the conventional underground method. Phelps Dodge also occupied a leading role in the industry in developing the methods used to process ore. In the mid-1980s, it was the first to use solution extraction and electrowinning on a commercial scale. In addition, Phelps Dodge was among the first in the industry to incorporate global positioning satellite systems into its operating practices.

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Corporate Governance

Our Corporate Governance policies · Environmental · Environmental auditing · Corporate health and safety · Social, employment and human rights · Principles of business conduct We balance operations with environmental stewardship and respect for social needs of communities

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External Initiatives & Commitments

International Council on Mining and Metals (ICMM) ­ Requires environmental management and performance improvements, greenhouse gas emission reductions, social responsibility · FCX founding member · 10 Principles for Sustainable Development Voluntary Principles on Security and Human Rights · FCX was original signatory Global Reporting Initiative (GRI) ­ Promotes transparency through public reporting of non-financial performance · Started in 2005 Extractive Industries Transparency Initiative (EITI) ­ Promotes transparency regarding payments, especially to government entities

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Significant Economic Impact

Meaningful contributions to economies of Freeport's mining operations in North America and South America Largest private employer in Papua, Indonesia And one of largest taxpayers in Indonesia In Indonesia, taxes, royalties and dividends totaled $1.8 billion in 2007

· · ·

$6.9 billion since 1991 Papua ­ half of the province's GDP $300 million contributed to Freeport partnership funds for community development since 1996

In Democratic Republic of Congo, Freeport's Tenke Fungurume project is currently the largest single direct foreign investment project

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Tenke Fungurume Mining Democratic Republic of Congo

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Tenke Fungurume Project Location

KOV Kolwezi Kakanda Kamoto Dikuluwe Kambove Likasi

TENKE FUNGURUME DEPOSIT DEPOSI T TOWN RAILWAY Zambia

Democratic Republic Of Congo (Katanga) Ruashi

Kipushi Etoile Lubumbashi

Kansanshi

Musoshi Kinsenda Mufulira Konkola North Nchanga Kitwe Chambishi Sakania Nkana Ndola Luanshya

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0

Zambia

100 Km

Strategic Development: Where we are going Strategic Development: Where we are going

Develop a world class operation within five to seven years capable of profitable, cost-effective production of 400,000+ tonnes of copper per year

Tenke Fungurume Project

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Potential Growth Opportunities

World Class Operation

Operations · To have Mining, Processing, Support Facilities with the ultimate capability of producing approximately 1 Billion lbs/yr Cu for 40+ years Social and Environmental Commitments · To be a leading partner with government and local communities in establishing sustainable health, education, and local economic development programs for the communities in our concession and the greater DRC · To conduct our operations in accordance with international accepted best practices

Tenke Fungurume Project

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TFM Project Benefits: Revenue to DRC

Distribution of Phase I Project Benefits to Partners

$2/lb Cu & $10/lb Co

10%

without DRC Businesses

43% 47%

DRC Government Gecamines $5.5 Billion TF Holdings DRC Businesses

23%

with DRC Businesses

33% 8% 36%

$7.1 Billion

The information contained herein is based on the January 2008 Tenke Phase I mine plan for a 115kmtpa Cu processing plant and 6kmtpa Co metal refinery. Results will vary with price and cost changes, additional exploration, reserve updates and production expansions.

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Risk Assessment and Due Diligence

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Risk Assessment Major Due Diligence Elements

Political & Security · Professional risk assessment evaluations · Advocate of Voluntary Principles training for security forces Health/Safety · Implementation of Freeport's Zero and Beyond programs · Medical facilities · Implement malaria/vector control · Professional evaluation/support

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Risk Assessment Political History

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·

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Transitional government headed by Joseph Kabila in place since July 2003 · Brought end to lengthy civil war · Key leaders from opposing factions brought into government · Constitutional referendum 2005 · First elections in over 40 years held July 30, 2006 · Presidency, Nat'l Assembly, Prov. Legislatures · Joseph Kabila inaugurated in December 2006 Positive signs · High voter turnout (75-80%) · Excellent support from the UN and EU · High-level of interest in foreign investment Risks · Political volatility (recent resignation of Prime · Minister) · Continued violence in the northeast region · Judicial system ­ contract "review" process · High expectations from public

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Building Local Capacity ­ Social Commitments

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Our Guiding Principles ­ Social Responsibility

Equator Principles and IFC Performance Standards Voluntary Principles on Security and Human Rights Extractive Industries Transparency Initiative (EITI) Partnerships with government and NGOs Building Local Capacity Partnerships with Aid Agencies

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Social License to Operate ­ Key Elements

What we have done... Effective Communication · Multiple open house meetings conducted during ESIA · Community Liaison team engaged with local population · Socio-economic team is in villages daily Transparency Identified key decisions to our stakeholders · Regular updates to government and community regarding the project's progress

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Compensation program Community Engagement

Trust · Community development program based on local feedback · Delivered on commitment

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FUTURE DEVELOPMENT BENEFITS TO THE DRC FUTURE DEVELOPMENT BENEFITS TO THE DRC

Employment, Infrastructure, Investment

40+ years of operation 1,000+ permanent employees and 4,000+ indirect employees 4,000+ contractor employees during two-year construction Significant investment in local and regional infrastructure · Power generation and transmission system · Major improvement to national highway and regional roads · Schools and agriculture Engine for industry growth in Katanga ­ regional support Associated sustainable development projects · SNEL power sales to outside customers · Agricultural improvements · Small business initiatives ­ aggregate and limestone quarries, waste management, brick and fence manufacturing Significant initial capital investment

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Direct Employment and Capacity-Building

Engineers in training: USA Qualified work force: Drilling

TFM Benefits

Over 5,900 employees ­ 75% Congolese nationals

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Micro-Credit and SME Development

4,000+ construction and 1,000+ long-term jobs versus 61,000 local residents... Small-medium enterprises (SME) are: · Well received as an alternative to jobs · Win-win, as materials provided are needed for the project · I.e. brick making, aggregate production SME challenges: · Need transparency and equitability · Assure markets are there beyond project needs · Both are addressed through an SME program undertaken with NGO assistance

Aggregate entrepreneurs

Fence-making SME

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TFM Target to Create 4 Indirect Jobs for Each Permanent Employee Position

More than 6 million bricks produced to date with 40 SMEs Over 10km of fence produced to date by 6 SMEs...more than 15km still to produce

More than 10 women's micro-savings and literacy groups

10 SME's createdto produce paving blocks

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Community Development Programs

School Construction Employment Generation

30 Pair of Oxen Delivered Bovine Traction Program

Community Water Wells

(Lundin For Africa Foundation) 25

Social Development Programs

Improving Community Access to Healthcare

Existing Clinic: Fungurume Existing Clinic: Grasberg (Indonesia)

Baseline health survey conducted to develop appropriate public health program Working with government to upgrade and build capacity of clinics in Tenke and Fungurume

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Social Development Program

Improving Access to Potable Water

Plan to develop potable water system for urban population of Tenke and Fungurume water wells being constructed for rural communities 43

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Social Development Plan ­

Maximize Project Benefits

Improving Quality of Life Through Investments in Resettlement Existing Housing Resettlement Housing

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Social Development Commitments

Resettlement Environmental Protection Community Development Community Malaria Program National Highway Upgrade Kasumbalesa (border post) Upgrade Infrastructure SNEL Social Development Foundation = $ 9.0 million = $ 4.0 million = $ 9.0 million = $ 1.2 million = $10.0 million = $ 5.0 million = $36.0 million = 0.3% net revenues

Total: Construction Phase (2nd quarter 2009) = $74.2 million

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Public Benefits from Infrastructure

Construction Phase Investments National Highway Improvements Renovation of Kasumbalesa Border Infrastructure SNEL Total: Construction Phase (2nd quarter 2009) = $10 million = $ 5 million = $36 million = $51 million

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National Highway Project

Refurbishment of RN 39 just outside Nguba

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N'Seke Rehabilitation - SNEL Partnership

Purchase of transformers Replacement and upgrade of transmission lines Renovation of sub-stations Renovation of the N'Seke Plant (4 generators) Payment Capital Investment: $140 million · Loaned by TFM to SNEL

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Future Development Benefits - Supporting Peace

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Transparency

Transparency is key for strengthening governance, accountability and creating a positive environment for civil society engagement and dialogue Extractive Industries Transparency Initiative (EITI) · The EITI sets a global standard for companies publish what they pay and for governments to disclose what they receive · DRC is a candidate country · FCX endorsed EITI and already practices reporting what we pay in Indonesia Global Reporting Initiative (GRI) · The Global Reporting Initiative (GRI) is an international, multi-stakeholder network that collaborates to advance sustainability reporting · To date, more than 1,500 companies, including many of the worlds leading brands, have declared their voluntary adoption of the GRI Guidelines worldwide · Sets out principles and indicators for organizations to measure and report their economic, environmental and social performance · Framework that sets a global standard for transparency and communication with stakeholders

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Voluntary Principles on Security and Human Rights

Initiated by the Governments of the United States, the United Kingdom, the Netherlands and Norway, companies in the extractive and energy sectors, and NGOs The participants developed a set of voluntary principles to guide companies and create an ongoing dialogue in maintaining the safety and security of their operations within an operating framework that ensures respect for human rights and fundamental freedoms TFM is developing a program to implement the Voluntary Principles

· · · ·

Training for security staff Monthly meetings on human rights with other companies organized by Pact Planned risk assessment against the Voluntary Principles program Reviewing possibility of a human rights impact assessment

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Participatory Development

Serving as a catalyst for development Involving community in development strengthen civil society Start with the basics Involve government from the beginning Takes to build capacity Sustainable development is framework to

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Thank You!

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