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Safety Performance

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Making a Statement:
The Safe Way is the Only Way

Presiding at his first monthly safety meeting with staff employees after being promoted to executive vice president and general manager of PT Freeport Indonesia's mining operation in 2004, Armando Mahler recalled one of his first conversations with the company's safety manager.

"He asked me what my operating goal was and I quickly answered 'to move 720,000 tons of material every day’," Mahler said. "He said, 'Wrong! Your goal is to safely move 720,000 tons of material every day’."

This simple story drew a chuckle from the assembled staff, but it also captured the essence of a strong safety program: safety is more than a good set of rules and enforcement program, it is a state of mind. A workplace cannot be truly safe until every employee, from top managers to the laborers, consciously makes safety a priority in every action.

This is the philosophy of Freeport-McMoRan Copper & Gold Inc.'s Safety and Health Policy Statement, which declares, in part: "No job will be considered so important, and no schedule so urgent that time cannot be taken to perform work in a safe manner." The policy declares the company's vision for exemplary safety performance, makes safety and health matters an important management responsibility and calls on every employee to take responsibility for their own safety.

To carry out this policy, comprehensive programs have been established at every operating location of Freeport- McMoRan Copper & Gold Inc. At PT Freeport Indonesia, our Indonesian mining affiliate, the policy is implemented through the Freeport Safety and Health Management System. This safety system also applies to all contractors and privatized companies serving our operations in Indonesia's Papua province.

Carrying out an effective safety program for such a large and varied operation - involving 18,000 workers engaged in mining and milling, ore flow and processing, power plants, ground transportation, aviation, port and marine vessel operation, power plants, residential towns, dormitories and a hotel - is a monumental and complex undertaking. It involves a comprehensive safety management system for every aspect of operations; introductory, fundamental, specific skill and supervisory training - including annual refresher courses; and a system to track progress in achieving safety goals.

The Grasberg operations management team is led by Executive Vice President and General Manager Armando Mahler (standing, third from right).

PT Freeport Indonesia measures its progress using the international NOSA (National Occupational Safety Association) 5 Star Rating System, plus the Supervisory Safety Accountability Program to measure supervisory safety performance. Annual safety and health goals are established by each operating unit annually, and management is held accountable for the results. Safety and health performance is a key indicator in the annual performance review of each supervisor and manager. This system has historically worked well for our company and our safety performance has consistently compared very favorably to mining operations in the U.S. and other nations.

In the fourth quarter of 2003, however, PT Freeport Indonesia suffered a slippage of material in the Grasberg open-pit mine and a separate accident in an ore tunnel that resulted in fatalities. Company management was saddened and disappointed by these events and implemented new safety initiatives designed to continually improve safety performance.

PT Freeport Indonesia took important steps during 2004 to re-establish the integrity of the pit walls. Prior to re-entering the higher-grade mining areas, PT Freeport Indonesia successfully restored safe access through a nine-month period of accelerated waste stripping on the south wall where the slippage occurred, and installation of additional and redundant slope monitoring systems in the open pit - including extensometers, robotic prisms and radar. Safety equipment in the ore tunnels and underground mining operations was also reviewed and upgraded. Due to intensive training and the addition of the latest equipment, our Mine Rescue Team was rated number one among all Indonesian mining companies in 2004.

Management also implemented additional programs and improved interdepartmental coordination. A key new element was the MASTER Program (Management Assists Supervisors To Eliminate And Rectify Unsafe Acts). The goal of the MASTER program is to help supervisors ensure that the behavior of their employees is safe. The program trains and encourages supervisors and documents their initiatives to identify unsafe acts within the workforce. Corrective actions are taken immediately and are charted over time to measure the supervisor's performance in this critical area. The MASTER Program observation requirements are part of each supervisor's responsibility under the Supervisor Safety Accountability Program.

These efforts during 2004 resulted in substantial improvements. The PT Freeport Indonesia lost-time injury rate per 200,000 hours worked for 2004 was 0.15 - which represents a 56 percent improvement over 2003 and compares favorably to the U.S. metallic mining industry average rate of 2.10 in 2003 (the latest year available). The total reportable rate (all reportable injuries) for 2004 for PT Freeport Indonesia was 0.44 - which represents a 32 percent improvement over 2003 and compares favorably with the U.S. average of 3.39 in 2003. Our Board of Directors has also adopted a policy to include quantitative safety factors in the determination of compensation. Continuous improvement of our safet performance will remain a primary objective of our management team.

Slope monitoring equipment in the Grasberg open pit mine includes extensometers, robotic prisms and radar.