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Partnership Fund

www.fcx.com

II. SOCIAL CHANGE AND DEVELOPMENT

FREEPORT PARTNERSHIP FUND FOR COMMUNITY DEVELOPMENT

PT Freeport Indonesia and our joint venture partner have since 1996 committed one percent of revenues for the benefit of the local community through the Freeport Partnership Fund for Community Development, which was previously called the Freeport Fund for Irian Jaya Development. Contributions to the partnership fund were approximately $22 million in 2003, and the total contributions to the fund are nearly $132 million since inception.

The partnership fund is administered and disbursed by an organization called the Lembaga Pengembangan Masyarakat Amungme dan Kamoro (LPMAK), which is the Indonesian acronym for the Amungme and Kamoro Community Development Institute. LPMAK is managed by a Board of Commissioners consisting of representatives from the local government; Papuan regional leaders; leaders from the Amungme and Kamoro; and PT Freeport Indonesia. LPMAK's Board of Commissioners establishes annual budgets for three main development program areas - health, education and village development. The budgets are based on development priorities determined by LPMAK's Board and the projects supported by LPMAK directly benefit the Amungme and Kamoro people and five other indigenous communities in the Mimika Regency - the Dani, Moni, Ekari/Mee, Damal and Nduga people. These groups are represented on the LPMAK board through their community, church and government leaders.

PT Freeport Indonesia provided funds to construct the Banti hospital in the highlands Amungme community, and supports medical facilities and programs throughout the region.

The activities of the LPMAK are conducted through program bureaus, consisting of expert facilitators and community leaders, who also cooperate with local government agencies and other non-governmental organizations. These teams review project proposals submitted in accordance with guidelines and budgets established by LPMAK. These proposals are then reviewed by LPMAK's Board of Directors. LPMAK programs are closely coordinated with the local government to ensure maximum impact in improving the quality of life for residents in the Mimika area.

The LPMAK guidelines ensure that project proposals reflect the charitable and development objectives of LPMAK and are subject to financial and audit guidelines. Certain types of activities are strictly prohibited and are not funded, including political activities and projects that do not have a wide impact on the community. Each year an independent auditor issues a report on the LPMAK activities, and regular monthly progress reports are made publicly available to ensure that LPMAK's activities are transparent.

LPMAK has made a significant impact on the lives of the local people by funding projects benefiting residents in villages throughout the Mimika area. Examples include hospitals in Timika and Banti which treat thousands of patients each year as described below; the LPMAK education program which has provided scholarships or educational assistance to thousands of Papuan students; and village-based programs which have provided electricity, water, church facilities, and other infrastructure to remote villages in the highlands of Papua. LPMAK is an accountable, professionally managed and successful development program which is one of the largest, privately funded social development programs in Asia.

Hands-on Commitment
Community Liaison Officers Help
to Develop Community Leaders

Papua is a land of barriers. Perhaps nowhere else in the world is there such a convergence of geographical, cultural and linguistic divides. In our Social, Employment and Human Rights Policy, Freeport-McMoRan Copper & Gold Inc. and PT Freeport Indonesia pledge to build positive relationships with our Papuan neighbors based on their expressed needs, to respect and work hard to understand their culture and to consult them on important issues.

These goals are important to us and we have professionals who design plans to achieve them. But how to carry them out, when our operations area includes: starkly different Papuan communities in the mountainous highlands and the tropical lowlands; seven different Papuan tribes, each with its unique culture and language; and the vast differences between the Papuan culture and languages and those of our workers from other parts of Indonesia and other nations? Clearly, without some special effort, any plan designed to implement our goals would be little more than a sheet of paper.

Freeport's Community Liaison Office (CLO) was created for this purpose, to breach those barriers. The CLO is part of our Social Outreach and Local Development Department, and shares its goals of building a positive relationship with our neighbors based on mutual trust, identifying the real needs of the local communities and assisting in implementing programs that meet those needs. There are two branches of the CLO - one for the villages in the highlands, one for the villages in the lowlands.

Our Community Liaison Officers (CLOs) are the first line of communication between the company and its neighboring communities. The 40 employees in this program meet with local leaders to hear their views about company operations as well as other important community issues and provide this feedback to management. In addition, they work with local government offices, through our Government Relations Department, and non-governmental organizations, through our Primary NGO Capacity Building Program and our NGO (Non-Governmental Organizations) Affairs Office, to assist in coordinating and socializing services designed to help the communities. They even help with community activities and events.

As part of the Women in Development initiative, Community Liaison Officer Mathea Mamoyau (right) discusses traditional arts business opportunities with women in the Kamoro community.

But the CLOs are also community goodwill ambassadors and help groom future community leaders. "Capacity-building is vital," said Daniel Ajamiseba, Manager of External Development. "The CLOs work with LEMASA and LEMASKO (the Amungme and Kamoro tribal organizations) to help prepare their leaders. They also meet with individuals to try to find out what their problems are with each other, then work to reconcile them."

An important CLO program is Women and Youth in Development, which, Ajamiseba explained, aims to enhance the development of women and youth in the community in terms of health, education and the reduction of family and community violence.

Women in Development activities include training in human rights with regard to family violence, education on HIV/AIDS, training in crafts and nutrition, development of a database of influential female leaders and organizations in the area, and a program to bring in speakers to provide educational programs on self improvement and development.

The Youth in Sports program provides coaching, training and competitive events for hundreds of local youth in soccer, rugby, boxing, volleyball, swimming and track and field. "Sports serve as an entry point to get youths in school," said CLO George Deda, who heads CLO programs in Kwamki Lama, a Papuan community near Timika. "The purpose is to keep teenagers and youths involved in good activities. On the social side, sports also create a community of interest."

George Deda

Youth in Sports programs include soccer, rugby, boxing, volleyball, swimming and track and field.

Community Liaison Officer George Deda (upper photo), says these activities develop leadership, character and motivation among youth in the growing Mimika region.

The coaches and participants take sports very seriously. Besides local and regional competitions, the rugby team and members of the boxing and swimming teams have competed at the national level. That determination to excel may actually have saved lives. The Timika rugby team, called the Kotekas, was in Bali in October 2002 for a national tournament. While members of many of the teams went out in the evening to party at well-known Balinese clubs, CLO Yan Yoteni, head of the Youth in Sports program, said he told his team "Don't go around tonight and we'll make the semifinals."

That was the night of the terrible October 12, 2002 bombing attack on Bali nightclubs that killed 202 people, including a number of rugby players. But none of the Timika team was hurt. "They all had discipline and stayed in," said Yoteni - and thus avoided the tragedy that could have threatened their lives.

AMUNGME GOLD
Boutique Coffee Business Blends
Traditional Ways, Modern Tastes

The Wa Valley in the Papuan Central Highlands is a long way from Seattle, Washington in many respects. Greater Seattle, with a population of more than three million, is a major city known globally as a birthplace of high technology and New Age thinking. The Wa Valley, population 1,500, is home to a traditional culture that is only emerging from the Stone Age. One would imagine that there are many degrees of separation between these two places at opposite ends of the earth.

There are, however, uncanny ties that bind the Wa Valley with the Pacific Northwest. They include an Anthropologist, a rainy, foggy, cool climate, and the coffee bean. Seattle gave birth to a movement that has transformed the way westerners think about a cup of coffee. Thanks to several well-known Seattle-based corporations and their ubiquitous coffee houses around the globe, folks are shelling out three dollars and upwards for café latte, espresso and exotic boutique brews. Enlightened consumers, who see coffee as much as a political statement as a pick-me-up, are demanding their gourmet beans be organically grown in the shade by businesses which empower traditional people.

As Seattle impacts the coffee world, coffee is having an impact in far-flung Utekini in the Wa Valley, as well as several adjacent valleys and the traditional Amungme villages of Tsinga, Aroanop, Jila and Hoea. Local farmers in these small settlements - men and women who only a few years ago were raising sweet potatoes and other staples for their families -- are poised to provide a hot commodity to a growing world of coffee connoisseurs.

What many of us now take for granted as a morning necessity is on the verge of transforming the way a small group of farmers and entrepreneurs think about their future. Thanks to the efforts of an Anthropologist and the backing of PT Freeport Indonesia, coffee and other crops grown in the Wa Valley are part of a sustainable agricultural project.

Women have taken a lead role in the Amungme Gold project. Entrepreneur Catarina Murib prepares fresh beans for roasting.

Carolyn Cook

Carolyn Cook, originally from the Pacific Northwest, came to Papua in the late 1970s as part of a Freeport expatriate family. So enamored of the traditional Amungme people, she later decided to pursue a PhD in Anthropology so that she could study and assist the traditional highlands people around the Freeport mining project. As part of her dissertation, Ms. Cook spent nine months living among the Amungme people in the remote Tsinga Valley, studying the traditional peoples' unique ties to their mountain land and a protein-rich nut from a native Pandanus palm. She returned to the area in the 1990s with a mission. Today, Dr. Cook is working to empower the Amungme from the Wa Valley - women and men alike - to help them develop a sustainable enterprise.

"Coffee is not among the traditional crops of the Amungme. But the climate here is ideal for great Arabica," explains Cook from a fog enshrouded terrace in Utekini. Two women, are at work on a terrace below harvesting red-leaf lettuce from a small plot, while several men transplant Pandanus trees onto a mountain slope above. "The Amungme in our program decided they wanted to try it, along with these other crops, knowing that there is a market for it. It was their decision to name it Amungme Gold," she says, with hopes that this commodity, like the gold and copper being mined several kilometers away, will bring a bright financial future to the people in the valley. "This coffee is the variety that is in demand around the world," says Cook, beaming an encouraging smile toward the women working the nearby field. "It is organically grown. No pesticides or chemical fertilizers. It is picked and processed by hand, and its sale will directly impact the growers in a positive way," explains Dr. Cook.

The venture is bringing about some fundamental social change in the valley. Cook explains that women have always done the hard work in this community. Now, she says, they are reaping financial gain and are equals when it comes to business decisions.

"These plants have been here for four years and they are bearing some great fruit," she explains - pointing out a small branch on a coffee plant loaded with rich red cherries that will soon be processed and roasted in the valley's processing center. Inside the open-air building, a young mother turns a crank on a machine designed to pull the hulls from dried coffee beans. Her two-year old son tugs at her skirt as Mom goes about her labor.

The project in Utekini and in the other nearby valleys is currently yielding only enough to supply the Freeport operation's retail shops and dining halls. However, time and additional nurturing from Dr. Cook and the Local Business Development Unit of PT Freeport Indonesia, will eventually lead to development of export markets. This project is one of dozens of similar projects the unit has started with an eye toward a future long after the mines have been depleted.

The Amungme Gold entrepreneurs are all members of the traditional landowning families from the Wa and adjacent valleys. Besides great-tasting coffee, they are prospering by cultivating Pandanus nuts, a traditional protein-providing staple important to the local population, fresh herbs, various lettuces, mushrooms and ornamental plants.

Dr. Cook admits that she won't be around to help the team forever. Her mission is to help the Amungme Gold farmers set up their business and slowly back off - leaving the future to the Amungme entrepreneurs and their families.

Jutak Jamang shares knowledge with his younger counterparts as they prepare soil for the transplant of Pandanus palms. The plant produces a protein-rich nut popular in the highlands communities.