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TRAINING, eDUCATION & PAPUAN dEVELOPMENT

Training, continuing education and development are critical components to ensuring long-term operating efficiency in any business. These matters become even more important when operating in a developing region without a long history of advanced educational programs. Job training programs in Papua must offer more than technical skills development. PT Freeport Indonesia offers more classroom and on-the-job training hours than many universities. Training programs range from basic literacy and mathematics to “pre-apprenticeship” programs for individuals with no prior career training, advanced technical apprenticeships, career and leadership development, and business management programs that provide world-class skills to our workers.

In 1996, PT Freeport Indonesia committed to improve significantly an already aggressive program of training and education. The company pledged to double the number of indigenous Papuan employees throughout the workforce by 2001 and to double that number again by 2006. The company also pledged to at least double the total number of Papuan management and professional employees. Both goals were met in 2006, and the company is committed to further progress in providing employment and management opportunities for Papuans. At the end of 2006, PT Freeport Indonesia and its direct contractors had nearly 2,650 Papuan employees, including about 320 Papuan management staff employees, compared to 600 Papuan employees in 1996, of which fewer than 50 were management staff. Another 1,050 Papuans were employed by privatized companies serving PT Freeport Indonesia compared to year-end 2005. These numbers reflect a substantial increase since the end of 2005 in the number of Papuans employed directly and indirectly by PT Freeport Indonesia — a trend that the Company is committed to continuing.

In 2003, with a view toward long-term development of Papuans in the workforce, PT Freeport Indonesia formed the Nemangkawi Mining Institute. The Institute’s goal is to provide pre-apprentice, apprenticeship and advanced career development opportunities for hundreds of Papuans each year. In 2006, the Institute made significant advances. Over 1,000 Papuans are enrolled in the Institute’s apprentice and pre-apprentice programs. These students receive on- and off-the-job training in welding, heavy duty mechanics, equipment operations, electrical and instrumentation work, clerical and administration duties and numerous other trades. It is expected that most of these students will be hired by PT Freeport Indonesia and its associated partners. Since Nemangkawi’s opening, over 370 apprentices have been hired as employees of PT Freeport Indonesia or one of our partner companies. Further, more than 300 pre-apprentices, all Amungme and Kamoro, have graduated to the full apprentice program.

The Nemangkawi Foundation was formally established when a groundbreaking for the Institute’s new facility took place in November 2004. The new facility, which was constructed entirely by apprentices, opened in 2006. Also in 2006, Nemangkawi and PT Freeport Indonesia management began a partnership with the prestigious Institut Teknologi Institute of Technology (ITB) to offer a Master of Business Administration from ITB through Nemangkawi.

Training is a vital part of PT Freeport Indonesia’s employee development programs. During 2006, the company’s Quality Management Services Department provided over seven million hours of training to over 15,000 participants — a 16-percent increase over 2005. A state-of-the-art classroom and workshop facility accommodates some 300 employees per day, providing development opportunities in trades and management areas. In partnership with Caterpillar and Trakindo, this development center operates two computer-based training facilities and three equipment simulators — two at the Grasberg training facility and one at Nemangkawi. These simulators allow trainees to experience simulated pit conditions while operating haul trucks, dozers, or shovels in a safe environment. A new resource center, constructed entirely by local Papuan students enrolled in an adult education program, began operations in late 2006.

bUSINESS dEVELOPMENT

We support local business development to promote local economic growth, to enhance the standard of living and opportunities for the local population. Local economic growth is critical to achieving sustainable development. As local businesses grow and expand, they create more jobs, more wages, more spending and, ultimately, more revenue to support more new enterprises — building an economic system capable of sustained growth and increased opportunities for generations to come. Substantial recent growth in the economic output of the Papua province apart from PT Freeport Indonesia indicates the emergence of a diversifying, sustainable economy.

PT Freeport Indonesia’s Community Business Development team supports emerging businesses including this poultry project managed by Yayasan Jayasakti Mandiri.

Economic survey data from the Mimika regency, the local governmental district in which we operate, indicates that nearly 600 of 726 small and medium-sized enterprises (SMEs) created in the district were directly associated with our operations. These SMEs will serve as the foundation for a vibrant and flexible business sector. This growth of the Mimika economy, however, will increasingly attract outside businesses and products that will compete with local entrepreneurs.

To meet this challenge, PT Freeport Indonesia supports human capital development through apprentice programs, technical training schools and higher education assistance. Encouraging the application of appropriate technologies, providing business skills education and supplying access to working capital promotes sustained local economic growth and aids the viability of existing and future SMEs.

PT Freeport Indonesia’s Small and Medium-Sized Enterprise Development program had more than 110 participants during 2006 and provided more than 1,600 jobs. Most of the entrepreneurs in the program are from the Amungme and Kamoro tribes, traditional residents of the area of our operations. Seventeen new businesses in the SME program were started in the past two years (2004–2006). Eighty-one percent of the SME program participants have a positive cash flow, an important barometer of success for fledgling businesses.

Children in the Amungme village of Banti enjoy new infrastructure including schools, housing and shops as part of company-supported development programs.

In addition to the SME program, PT Freeport Indonesia has also established a loan foundation providing local business people and entrepreneurs access to capital and start-up cash. In 2006, 44 individuals received more than 13 billion rupiah in loan advances, funding 81 separate projects with the average realized loan repayment of 116 percent of payments due.

One successful local enterprise that began with company backing is the Amungme Agroforestry Program, which now provides income for some 50 Amungme families who grow, roast, and package the internationally known Arabica Coffee under the label Amungme Gold. In 2006, Amungme Agroforestry added 350 new coffee trees to the roughly 11,500 trees already producing beans in four different villages.

Partnership Harvests Bounty from the Sea

One of the goals of Freeport Indonesia’s Social Outreach and Local Development program is to assist neighboring communities in developing sustainable economic activities that will thrive long after mining is complete. Hundreds of local entrepreneurs are in businesses ranging from travel agencies to waste management, and landscaping to video production. While many endeavors have firmly taken root in the urban areas of the project area, Freeport’s business development teams are also working with institutions to ensure that the rural communities and traditional villages have a stake in the future according to their expressed needs.
Freeport’s Village-Based Development team has teamed up with the Catholic Diocese of Timika to help traditional Kamoro fishermen bring their catch to a growing population. “This is an ideal collaboration between stakeholders,” Freeport’s Development Group Leader Yahya Alkatiri explained. “The Catholic Church was the first institution to enter this area and is well-recognized by the Kamoro people. The knowledge and care the church has toward socioeconomic issues is in line with Freeport’s commitment to sustainable development, including productive economic activities like this,” Alkatiri added.
	Freeport and the church are cooperating with the Maria Bintang Laut Kamoro cooperative to facilitate the sale of fish caught by villagers in coastal communities. The cooperative collects the fish, provides necessary supplies such as ice and fuel, and facilitates the sale of the product in Timika, including stocking the Mitra Masyarakat Hospital. “The activities of this program, from the weighing of the fish to the supply of ice blocks and fuel for our outboard motors, have greatly assisted with our fish business,” said Longginus Powai, one of the fishermen involved in the program.
Catholic Bishop John Sakil says he welcomes this opportunity to assist the Kamoro community, which, due to the remote village locations, has traditionally faced the challenges of a lack of capital and poor access to markets. He says the program is also creating a new work ethic. “The fishing communities are starting to become aware that they have natural resources that can be responsibly developed to help them meet their needs, and that hard work will help them reach their goals,” Bishop Sakil said. Fisherman Tinus Ipi agrees that the work pays off. “After the start of this program, it was much easier to make ends meet,” Ipi said. Ipi and his partners can look forward to continued success as the project expands. The Maria Bintang Laut Kamoro cooperative is building a new base of operations at Kampung Lama, east of Timika.

Mining Institute Provides Sustainable Human Resource Development Programs

PT Freeport Indonesia’s employee development programs span the educational spectrum to create opportunities for staff and the local community: from pre-apprentice programs to develop basic literacy of local Papuans to post-secondary education.
Providing basic skills education to create opportunities for the local community: Two programs, the pre-apprenticeship program and the adult education program, are designed to raise the education levels of the local indigenous tribes to enable them to be competitive as apprentice and employee candidates. Many of the people from local tribes have not had the opportunity to attend secondary school. The pre-apprenticeship gives people from the local tribes a chance to raise their education levels to meet the entrance requirements of an apprenticeship, which in turn gives them an opportunity to develop the technical skills to obtain employment with world-class mining operations. The adult education programs are conducted specifically for the Amungme and Kamoro. A parallel program to develop literacy and numeracy competence is conducted together with programs to develop technical job competencies. These are three- to five-year programs, consisting of both off-job and on-job development.
Providing technical skills education creates a competent workforce: Apprentice programs are designed to provide opportunities for participants to develop the knowledge, skills and attitudes required to fill entry-level trade and operator positions at PT Freeport Indonesia, as well as its partner companies, and similar positions in other companies. The apprenticeship involves a three-year program with three to four months of classroom instruction each year and around eight months of on-the-job training.
	Providing management training to prepare the leaders of tomorrow: PT Freeport Indonesia and Bandung Institute of Technology’s School of Business and Management (SBM-ITB) in April 2007 launched an in-house Master of Business Administration (MBA) program for PTFI employees. The program will be administered through the Nemangkawi Mining Institute and is an extension of broad, long-standing commitment by PT Freeport Indonesia to staff development. The inaugural class has 44 participants, of whom six are native Papuans.
The Quality Management Services (QMS) Department administers the PT Freeport Indonesia employee development programs, as well as those at Nemangkawi Mining Institute. QMS Manager Peter Mosel expressed his pride in the program, “The real advantage of an in-house program is that we can apply what we are learning. It is not very often that we get an opportunity to offer a premier MBA program at our doorstep. We’ve got one of the top universities in Indonesia putting this on, with fabulous support from management — it is a magical combination.”
As Nemangkawi Mining Institute Expands, So Do Opportunities for Local Community
PT Freeport Indonesia’s employee development programs add value for the community, as well as the company. “This cooperation is important in light of the fact that Mimika Regency needs qualified human resources in order to further develop the human resource potential in our area,” said Mimika Education Agency Director Ausilius You. Edi Putro, a participant in the MBA Program and Safety Superintendent in the Concentrating Division with more than six years at the company, said of the program, “This is a really good program. Some of us with four year degrees have long hoped for continuing education, but sometimes it is hard to get such offerings in a remote location. Before, it was really only a dream. This will enhance our leadership and management skills, which is good for us and for the future of the company.” Construction of a new training workshop at the Nemangkawi Mining Institute (NMI) started at the end of 2006. NMI apprentices are involved in the building process, which is slated for completion at the end of 2007. The workshop will be used for practical training of apprentices of heavy duty mechanics, millwrights, electricians, and building trades. The new workshop will accommodate up to 350 apprentices and will be used mainly for level 2 and 3 apprentice training. Construction of a classroom block and resource center has been completed and will be officially opened in of 2007. Training of apprentices for the underground expansion has begun and construction of underground simulators will also begin in 2007.