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Environmental Management

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III. ENVIRONMENTAL MANAGEMENT

Environmental Commitments
We are committed to managing and minimizing the impact of our operations on the surrounding environment and to reclaiming and revegetating affected land. Through our Environmental Policy (see Appendix A), we commit to sound environmental management and practices, to providing adequate resources to fulfill that responsibility and to continuous improvement of our environmental performance at every operational site. We are also strongly committed to our continued support of both scientific research to further understand the environments in which we operate and to comprehensive monitoring to determine the effectiveness of our management practices. We work with governmental agencies, academic institutions, recognized national and international experts, the local population and responsible nongovernmental organizations to enhance our environmental performance. We have adopted the principles of the Sustainable Development Framework of the International Council on Mining and Metals (ICMM), of which we are a member (see Appendix B). Accordingly, we have reported our performance related to these principles in informal conformance with the Global Reporting Initiative (GRI) for the reporting year 2005. This information is available on our web site at www.fcx.com. We are in the process of preparing our report in full conformance with GRI for the reporting year 2006. We have also reviewed our environmental monitoring and performance related to the World Bank/International Finance Corporation Performance Standards and we are in consonance with these internationally recognized guidelines.

Our ISO 14000 certified Environmental Management System commits us to improve continually by reducing the environmental impact of our operations. Each year we discuss areas for improvement and commit to follow through with formal Action Plans. In 2006, these Action Plans covered further development of our Closure Management Plan, continuing research related to overburden placement and acid rock drainage minimization, hazardous waste management improvements, upgrading a landfill leachate treatment plant, and further reducing any concentrate dust losses during loading operations.

Environmental Audits
In our Environmental Policy, we commit our company to routine internal and external environmental audits to assess our environmental compliance, management systems and practices. PT Freeport Indonesia’s environmental audits provide our managers with information on current environmental performance and help identify opportunities for improvement. PT Freeport Indonesia responds to the audits with action plans to implement suggestions made by the auditors. In 2006, three environmental audits were conducted:

• Representatives from Crescent Technology Inc., representing the Freeport-McMoRan Copper & Gold Inc. Board of Directors and senior management, audited PT Freeport Indonesia’s operations as part of the annual corporate internal auditing program. These annual audits have been taking place since 1994.

• The International Certification Services Division of Société Générale de Surveillance (SGS), an International Standardization Organization (ISO) 14001 registration and certification organization based in Geneva, Switzerland, with offices in Indonesia, performed a surveillance audit on PT Freeport Indonesia’s environmental management system, a requirement for maintaining our ISO 14001 certification. ISO 14001 provides companies with a systematic approach to effective environmental management and continuous improvement. PT Freeport Indonesia was one of the first mining operations in Indonesia to achieve this recognition when we were awarded ISO 14001 certification in December 2001 for our mining and ore processing operations. Annual follow-up reviews by the certification agency are required by ISO 14001 protocols to determine the status of conformance and to assess continued certification. Each of these audits verified that PT Freeport Indonesia’s Environmental Management System was in conformance with the requirements of the ISO 14001 standard, while providing guidance for continual improvement.

• PT Freeport Indonesia participated in the environmental management performance rating program, known as PROPER, which is administered by the Indonesian Ministry of Environment. The rating evaluation is mainly based on the performance of companies in managing effluent discharges, air emissions, and hazardous wastes. PT Freeport Indonesia dedicated significant resources and efforts to ensure successful follow up on recommendations made by the PROPER audit team. As of the publication of this report, we have not yet received the 2006 PROPER results, but our cooperative work with the Indonesian Ministry of Environment continues.

Our environmental management system also includes an in-house environmental inspection program that is conducted continually throughout the year. These inspections take place at nearly 400 facilities, including those of contractors and privatized companies, from the Grasberg mine to the port. The purpose is to assess conformance by all facilities to our environmental management system. The results from these inspections serve as a measurement of our environmental performance and a basis for determining continual improvement. The results are also taken into account in the determination of employee bonuses, providing an added incentive for our work force to maintain high environmental performance.

In December, the Minister of Energy and Minerals Resources presented PT Freeport Indonesia with the Gold Environmental Award. This award is recognition for PT Freeport Indonesia’s environmental work in erosion and sediment management in mining activities.

Construction of gabion groundsills and other civil engineering projects are part of an active, ongoing program designed for continuous improvement of tailings retention in the Modified Ajkwa Deposition Area.

In 2005, our triennial independent external environmental audit was conducted by Montgomery Watson Harza to fulfill one of PT Freeport Indonesia’s commitments included in its Environmental Impact Assessment (AMDAL) approved by the Government of Indonesia in 1997. The audit concluded that PT Freeport Indonesia’s mining operations “are among the largest and most environmentally challenging and complex in the world” and that the company’s “environmental management practices continue to be based on (and in some cases represent) best management practices for the international copper and gold mining industry.” The audit also concluded, as have previous independent audits, that PT Freeport Indonesia’s tailings management program (see next section) “remains the tailings management option best suited to the unique topographical and climatological conditions of the site, with a far lower level of environmental impact and risk” than those posed by other management alternatives. The Montgomery Watson Harza auditors also made a number of specific recommendations for improvements in PT Freeport Indonesia’s environmental management practices and these are being implemented. The audit and responses are available to the public on the FCX web site at www.fcx.com.