Freeport-McMoRan Copper & Gold Inc. has focused substantial effort on developing processes, technologies and services that improve our energy efficiency. This approach will continue into the future, as we continue to adhere to the ICMM’s Position Statement on Climate Change. Annually since 2006, we have provided responses to the Carbon Disclosure Project, an international initiative that encourages transparency among companies regarding their greenhouse gas emissions and efforts to reduce emissions.

Some recent examples of process improvements include the installation during 2000 and 2006 of 240 megawatts of natural gas-fired, state-of-the-art combined cycle generation to help meet our power requirements in the United States. These next-generation installations reduced requirements for local utility companies to expand their own coal-fired power generation, resulting in significantly lower greenhouse gas emissions.

To reduce diesel fuel consumption, the company has applied new engine technology for large mining equipment (240-ton class haul trucks), including the installation of new fuel-efficient high displacement engines in more than 135 large haul trucks between 2004 and 2007. This change reduced haulage fuel consumption by up to 10 percent in some operating units. We are testing fuel additives that improve fuel economy between 2 to 3 percent (and reduce emissions by approximately 15 percent) at several mines. Global use of these additives could potentially reduce diesel consumption by several million gallons annually.

The company has partnered with other parties to design and build a more energy-efficient shovel dipper, which provides a 1 percent reduction in energy requirements associated with ore loading. Globally, this could translate to over 1,000 MWh savings annually at our operations once complete implementation occurs.

Over the past eight years, we developed and commercialized a copper concentrate leaching technology that can be applied as an alternative to conventional smelting and refining. In 2003, we installed a large-scale commercial demonstration plant at the Bagdad, Arizona, mine to produce 16,000 tons per year of copper using a high-temperature pressure leaching process. This process consumes approximately 18 percent less energy than the traditional smelting and refining process for copper production, resulting in estimated energy savings of 4,780 BTU/lb of copper or 160,000 gigajoules (GJ) per year. In 2007, we installed a related system at Morenci, Arizona, to process concentrates. This new technology provides energy savings of approximately 22 percent compared with conventional transportation, smelting and refining, saving an estimated 5,400 BTU/lb of copper produced or 820,000 GJ per year. We continue to pursue and further develop effective concentrate leaching technology as a potential alternative to smelting and refining in certain applications.

During 2007, our El Abra operations in Chile received the National Energy Efficiency Award in the Mining category for efforts to improve energy efficiency.

At Atlantic Copper, energy is a significant part of our operational costs. We have made investments and process improvements to reduce energy consumption per tonne of product. From 1990 to 2006, we reduced our energy unit consumption per tonne of copper from 14.6 GJ to 10.3 GJ – a reduction of 30 percent.

Climate Change Risks

We have identified certain risks from climate change, although we are not at this time able to quantify potential costs given the uncertainty associated with climate change and potential regulatory requirements. Future regulation directed at reducing greenhouse gases is likely to increase some of our operational costs, such as power and fuel.

Energy is a significant input to our mining and processing operations. Our principal energy sources are electricity, purchased petroleum products, natural gas and coal. Many scientists believe that emissions from the combustion of carbon-based fuels contribute to greenhouse effects and therefore potentially to climate change.

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change. The December 1997 Kyoto Protocol established a set of greenhouse gas emission targets for developed countries that have ratified the Protocol. Although the Kyoto Protocol has not been ratified by the U.S., several states have initiated legislative action on climate change. Climate change legislation has been introduced in, but not yet passed by the U.S. Congress, which could result in increased future energy and compliance costs. From a medium and long-term perspective, we are likely to see an increase in costs relating to our assets that emit significant amounts of greenhouse gases as a result of regulatory initiatives in the countries in which we operate. These regulatory initiatives may be either voluntary or mandatory and may impact our operations directly or through our suppliers or customers. Assessments of the potential impact of future climate change regulation are uncertain, given the wide scope of potential regulatory change in countries in which we operate.

The potential physical impacts of climate change on our operations are highly uncertain, and would be particular to the geographic circumstances. These may include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperatures. These effects may adversely impact the cost, production and financial performance of our operations.

We believe that shifting consumer demand associated with climate change will have a generally positive impact on our company. As gas prices increase, more electric technologies emerge requiring more copper. For example, electric vehicles and hybrid vehicles, which reduce CO2 emissions, will use approximately twice as much copper as a conventional vehicle.

Our Process Technology Center in Safford, Arizona, directs a technology development program that invests significant capital to improve the energy efficiency of our operations and the overall efficiency of our copper recovery processes. The facility was established in 1996 to provide metallurgical services for the continuous improvement of existing operations and technologies currently in use as well as to develop new cost-competitive technologies.

 

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