freeport-mcmoran copper & gold inc

THESTRENGTHOF OUR

COMMITMENT

FREEPORT-McMoRan COPPER & GOLD INC.2003 WORKING TOWARD SUSTAINABLE DEVELOPMENT REPORT

FREEPORT-McMoRan COPPER & GOLD INC.1615 POYDRAS STREETNEW ORLEANS, LOUISIANA 70112 WWW.FCX.COM

39966_FM_COV.QXD 3/11/04 5:41 PM

On the Cover: THE FACES OF THE PROGRAMS that lie at the heart of our commitment to ensure a healthy environment and strongcommunities in our area of operation in Papua, Indonesia.

Top from left : PAPUAN EMPLOYEE DEVELOPMENT, agro-forestry business development, and provision of healthcare.

Bottom from left : COMMUNITY sports programs, education and infrastructure.

Back Cover Top: NATIVE SPECIES of grasses, shrubs and trees revegetate large sections of the AjkwaDeposition Area, offering a thriving ecosystem for birds and other animals . Other portions of the tailingssediment deposition area are being actively reclaimed with trees and cash crops.

Back Cover Bottom: THE MODIFIED AJKWA DEPOSITION AREA is the engineered, managed system for deposition and control of thetailings sediment from the mining operations. Reclamation programs in soils containing tailings, including the Maurujaya ReclamationCenter, have demonstrated success in growing dozens of plants and cash crops, and supporting aquaculture and livestock projects.

2003 Working Toward Sustainable Development 2003 Working Toward Sustainable DevelopmentFREEPORT-McMoRan COPPER & GOLD INC.

Indonesia

Papua,Indonesia

Papua

GrasbergMineComplex

Jakarta

Jayapura

Tembagapura

Timika

Arafura Sea

Indian Ocean

Kuala Kencana

39966_FM_COV.QXD 3/11/04 5:42 PM

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

PT FREEPORT INDONESIA

I. ECONOMIC IMPACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

II. SOCIAL CHANGE AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Social and Cultural Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Building Mutually Beneficial Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Human Rights Commitments and Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

HANDS-ON COMMITMENT: FREEPORT’S COMMUNITY LIAISON OFFICE (CLO) . . . . . . . . . . .8Freeport Partnership Fund for Community Development . . . . . . . . . . . . . . . . . . . . .10

THE ARROW POINTS UPWARD FOR PAPUAN EMPLOYEE DEVELOPMENT . . . . . . . 12Provision of Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Training, Education and Papuan Development . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

AMUNGME GOLD: BOUTIQUE COFFEE BUSINESS BLENDS TRADITIONAL WAYS, MODERN TASTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Business Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Land Rights Recognition Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Social and Human Rights Performance Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22Provision of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22August 31, 2002 Incident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Political Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25Making Business Ethics a Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

III. ENVIRONMENTAL MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Environmental Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27Environmental Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27ISO 14001 Environmental Management System . . . . . . . . . . . . . . . . . . . . . . . . . . .28Tailings Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29Reclamation and Revegetation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30Overburden and Acid Rock Drainage Management . . . . . . . . . . . . . . . . . . . . . . . . .33Long-Term Environmental Monitoring Program . . . . . . . . . . . . . . . . . . . . . . . . . . . .34Waste Management and Recycling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34Biodiversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

ATLANTIC COPPER, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

FREEPORT-McMoRan COPPER & GOLD INC. 1

TABLE OF CONTENTS

2 2003 Working Toward Sustainable DevelopmentFREEPORT-McMoRan COPPER & GOLD INC.

FINANCIAL BENEFITSTO INDONESIA

TAXES, ROYALTIES, FEES& OTHER PAYMENTS

TOTAL DIRECT & INDIRECT BENEFITS*

US $ 329,000,000

US $3,000,000,000

2003 1992-2003

US $ 2,347,000,000

US $30,000,000,000

Figure 1. The financial benefits to the people and Government of Indonesiain the illustration above are shown for 2003 and cumulative amounts forthe years 1992-2003.

Institute For Economics and Social Research, Faculty of Economics,University of Indonesia, 2003 Study (multiplier effect of PT FreeportIndonesia contributions)

DIRECT BENEFITS to the local

community include provision of

medical infrastructure. The 75-

bed Mimika Community Hospital

was built with funds from the

Freeport Partnership Fund for

Community Development.

*

INTRODUCTION

The world needs the metals we produce for

expanding economies and developing nations. The

copper concentrate from our mining complex in

Papua, Indonesia, and the copper products from our

wholly owned smelter in Spain and our 25-percent-

owned smelter in Indonesia are essential for

communications, electronics and industr y. Yet the

modern world also aspires to a sustainable society

where economic, social and environmental issues

are balanced to meet the needs of the present

without impairing the ability of future generations to

meet their own needs.

At Freepor t-McMoRan Copper & Gold Inc., we

share this aspiration because it is responsible

thinking as well as prudent business practice. We

are mining one of the world's largest mineral

deposits and our planning horizon is 30 to 40 years

into the future. Working toward sustainable

development through our operations and programs

helps ensure a healthy environment and

communities in our area of operation, which is vital

to our future success.

Like most industrial activities, our mining

operations impact the environment and nearby

communities. In order to work toward sustainability

in our operations, we are committed to minimizing,

mitigating and rehabilitating environmental impacts

and to maximizing positive economic and social

development results. This is a continuous ef for t

that seeks constant improvement, conducted in

par tnership with governments and local

communities where we operate.

Demonstrating the strength of our commitment,

we spent a total of $93 million on sustainable

development programs in the area of our mining

operations during 2003, including $52 million on

environmental management and $41 million on

social development. Our world-class mining

operations, long-lived ore reserves and strong

Contract of Work with the Indonesian government

ensure a long project life in Papua. However, the

social, cultural and environmental projects we

establish lay the groundwork for future generations

to benefit from economic activity not dependent on

mining.

It is this continuous ef for t to create sustainable

development that is described in this annual repor t.

PT FREEPORT INDONESIA

I. ECONOMIC IMPACTS

PT Freepor t Indonesia, our Indonesian mining

af filiate, provides substantial direct and indirect

economic benefits for the central, provincial and

local governments of Indonesia, and for the

economies of Papua and the nation as a whole.

Direct benefits are the traditional contribution of a

company to the Republic of Indonesia, and include

taxes and royalties. We are often the largest

taxpayer in Indonesia. In 2003, we paid $329

million in taxes and royalties, the highest amount in

our histor y. Since 1992, these direct benefits to

Indonesia have totaled $2.3 billion.

PT Freepor t Indonesia's indirect contributions to

Indonesia are much larger and include:

• Investment of more than $4.5 billion to build

company infrastructure in Papua, including

towns, electricity generation, seapor ts and

airpor ts, roads, bridges, tunnels, waste

disposal facilities, modern communications

systems, and many other types of fixed

infrastructure, most of which will rever t to the

Indonesian government at the end of our

contract term.

• Investment of over $300 million since 1992 in

social infrastructure directly benefiting the

people, such as schools, places of worship,

hospitals, of fices, recreational facilities and

small and medium sized businesses.

Economic Impacts FREEPORT-McMoRan COPPER & GOLD INC. 3

I. ECONOMIC IMPACTS

• Direct employment by PT Freepor t Indonesia of

over 7,800 people in 2003, 27% of whom are

Papuans. PT Freepor t Indonesia's payroll for its

own employees has totaled more than $800

million since 1992.

• Employment of contract employees ser ving PT

Freepor t Indonesia, which totaled 10,500

workers in 2003, meaning that the total of

those employed by or ser ving our operations in

Indonesia at the end of 2003 was 18,300

people.

• Purchase of almost $3 billion of domestically

sourced goods and ser vices since 1992.

Direct and indirect contributions produce a

"multiplier ef fect" in the Indonesian economy

spurring additional employment, wages, purchases

and economic activity. This ef fect is well-known to

economists. In 2003, we commissioned the

Institute For Economics and Social Research,

Faculty of Economics, University of Indonesia to

conduct an economic impact analysis on the

multiplier ef fect impact on Papua and Indonesia

from PT Freepor t Indonesia's operations since

1992. The university's economists found that PT

Freepor t Indonesia's total economic benefit to

Indonesia and Papua was $3 billion in 2003 alone

and $30 billion from 1992-2003, accounting for

almost 2% of the whole gross domestic product of

Indonesia, and more than 58% of the gross

domestic product of Papua.

In addition, since 1996, PT Freepor t Indonesia's

operations have committed one percent of

revenues for the benefit of the local community

through the Freepor t Par tnership Fund for

Community Development. This fund has helped

build schools, hospitals, places of worship, housing

and community facilities in our area of operations

in Papua. The fund also suppor ts a comprehensive

series of health and educational programs. In

addition to this fund, we suppor t training and small

business development initiatives so that Papuans

benefit from the economic development taking

place in the area. Contributions to the par tnership

fund, including Rio Tinto’s share as our joint

venture par tner, totaled approximately $22 million

in 2003, and the total contributions to the fund are

nearly $132 million since inception.

In its December 1, 2003 issue, BusinessWeek

magazine published the results of its sur vey

ranking America's most philanthropic companies

and listed Freeport-McMoRan Copper & Gold Inc. as

America's most philanthropic company in terms of cash

given as a percentage of revenues. This is largely due

to the Freeport Partnership Fund for Community

Development.

I. ECONOMIC IMPACTS


1,800

PT Freeport Indonesia’s (PT- FI) 19 91 Contract of Work (COW)

Estimated Income Taxes and Royalties Under Other Countries’Regulations

1,20 0

60 0

30 0

F igu r e 2 . Roya l t y and Income-ba s ed Compar i s on F rom 1993 - 2 0 0 3 by Coun t r y

(IN MILLIONS OF DOLLARS)

IND

ON

ESIA

-PT-

FI’S

19

91 C

OW

AU

STR

ALI

A

PAPU

A N

EW G

UIN

EA

CAN

AD

A

SOU

TH A

FRIC

A

UN

ITED

STA

TES

PER

U

CH

ILE

900

1,50 0

Shown above (Figure 2) are income taxes and royalties under PT Freeport Indonesia’s1991 Contract of Work compared to the regulations of other countries.

PT FREEPORT INDONESIA'S suppor t of events like the

Kamoro Ar t and Culture Festival helps the local indigenous

communities preserve impor tant cultural traditions.

5

II. SOCIAL CHANGE AND DEVELOPMENT

SOCIAL AND CULTURAL COMMITMENTS

We are committed to building and maintaining

positive relationships with our Papuan neighbors, in

par ticular those closest to our area of operation.

We have adopted a Social, Employment and Human

Rights Policy, which is included in appendices to

this repor t. We are committed to providing

oppor tunities for social, educational and economic

development, including special ef for ts to train and

hire those indigenous to the area. We also strive to

learn more about the Papuan people, their histories

and changing circumstances, in order to build more

constructive relationships and better structure our

outreach ef for ts. Most impor tant is our

commitment to extend respect to indigenous

Papuans and their culture and consult with them on

issues impacting their communities.

We understand the need of the unique peoples

of Papua to preserve their cultural traditions and

are committed to helping them accomplish this

goal. We have long suppor ted the Asmat and

Kamoro Ar t and Cultural Festivals. In an ef for t to

improve our understanding as well as to aid cultural

preservation, we have sponsored social, ar tistic,

cultural, language and economic studies of the

Amungme and Kamoro peoples. These studies have

improved mutual communication and understanding

with our neighbors, and have also contributed

significantly to world knowledge of their unique

cultures. We have also sponsored two books about

the Kamoro and Amungme to help us and others

throughout the world understand and appreciate

their special cultures.

BUILDING MUTUALLY BENEFICIAL RELATIONSHIPS

In fur therance of our commitment to build and

maintain constructive and positive relationships

with our Papuan neighbors, we engage in continual

dialogue with local leaders. These dialogues have

led to impor tant agreements with the Amungme and

Kamoro peoples.

In a 2001 agreement, PT Freepor t Indonesia

established a trust fund of $2.5 million initially and

annual contributions thereafter at a current level of

$1 million annually for the Amungme and Kamoro,

enabling them to use some of these funds to

purchase shares in Freepor t-McMoRan Copper &

Gold Inc., thereby becoming shareholders in the

mine. This fund is in addition to the social

development fund (see Freepor t Par tnership Fund

for Community Development) established by

PT Freepor t Indonesia, which has received nearly



$132 million from our operations since 1996 for

investments in projects selected by a board of local

stakeholders.

A memorandum of understanding consummated

in 2000 by Amungme and Kamoro local community

organizations and PT Freepor t Indonesia focuses on

socioeconomic resources, human rights, land and

environmental rights. This landmark agreement,

achieved after five years of negotiations, fosters

continuous dialogue to improve mutual

understanding and respect, to enable the local

people to achieve their aspirations and to continue

harmonious relationships. This continual dialogue

has led to other agreements and mutually beneficial

projects and has achieved a great deal in terms of

instilling a sense of par tnership and community

between us and our Papuan neighbors and aligning

our shared interests in a sustainable and more

promising future.

HUMAN RIGHTS COMMITMENTS AND INITIATIVES

Freepor t-McMoRan Copper & Gold Inc. and PT

Freepor t Indonesia have made strong, unequivocal

commitments to human rights. This commitment is

expressed in a company policy, formally adopted by

both the Board of Directors of Freepor t-McMoRan

Copper & Gold Inc. and the Board of

Commissioners of PT Freepor t Indonesia, to

conduct our operations in a manner consistent with

the Universal Declaration of Human Rights, to

educate our employees about human rights, and to

protect any employee who repor ts suspected

violations. We require appropriate personnel to certify

annually that they have neither par ticipated in nor are

aware of any human rights violation. If a human

rights violation

is repor ted, information about that violation would

be forwarded to the Indonesian Human Rights

Commission.

Social Change and Development FREEPORT-McMoRan COPPER & GOLD INC. 7

(continued on page 10)

WITH AN EYE TOWARD THE FUTURE, PT Freepor t Indonesia works in par tnership with the local people and the

government to foster sustainable education, health and economic development initiatives.

HANDS-ON COMMITMENT COMMUNITY LIAISON OFFICERS HELPTO DEVELOP COMMUNITY LEADERS

AS PART OF THE WOMEN IN DEVELOPMENT

INITIATIVE, Community Liaison Of ficer

Mathea Mamoyau (right) discusses

traditional ar ts business oppor tunities with

women in the Kamoro community.

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, Freepor t-McMoRan

Copper & Gold Inc. and PT Freepor t 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 impor tant issues.

These goals are impor tant to us and we have professionals who design plans to achieve them. But how

to carr y them out, when our operations area includes: starkly dif ferent Papuan communities in the

mountainous highlands and the tropical lowlands; seven dif ferent Papuan tribes, each with its unique

culture and language; and the vast dif ferences between the Papuan culture and languages and those of our

workers from other par ts of Indonesia and other nations? Clearly, without some special ef for t, any plan

designed to implement our goals would be little more than a sheet of paper.

Freepor t's Community Liaison Of fice (CLO) was created for this purpose, to breach those barriers. The

CLO is par t of our Social Outreach and Local Development Depar tment, 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 Of ficers (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 impor tant community issues and provide this feedback to

management. In addition, they work with local government of fices, through our Government Relations

Depar tment, and non-governmental organizations, through our Primary NGO Capacity Building Program and

our NGO (Non-Governmental Organizations) Af fairs Of fice, to assist in coordinating and socializing ser vices

designed to help the communities. They even help with community activities and events.

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


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.

also meet with individuals to tr y to find out what their problems are with each other, then work to reconcile

them."

An impor tant 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 Spor ts program provides coaching, training and competitive events for hundreds of local

youth in soccer, rugby, boxing, volleyball, swimming and track and field. "Spor ts ser ve as an entr y 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, spor ts also create a community of interest."

The coaches and par ticipants take spor ts ver y 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 par ty at well-known Balinese clubs, CLO Yan Yoteni, head of the Youth in Spor ts 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 hur t. "They all had discipline

and stayed in," said Yoteni - and thus avoided the tragedy that could have threatened their lives.


We have also joined other mining and oil and

gas companies and human rights organizations in

endorsing the joint U.S. Depar tment of State-British

Foreign Of fice Voluntar y Principles on Human Rights

and Security. These Principles are included in

appendices to this repor t. Twice each year,

par ticipants in the voluntar y principles program

meet to review the implementation of the principles

and to seek better ways to provide security for

extractive industr y operations around the world to

protect employees and investments while assuring

the highest level of human rights compliance.

Freepor t-McMoRan Copper & Gold Inc.

representatives regularly par ticipate in these

meetings.

Overseeing the development and implementation

of our policy on human rights is an internationally

recognized exper t, Judge Gabrielle Kirk McDonald.

Judge McDonald has been a distinguished civil

rights attorney and U.S. federal judge and formerly

ser ved as President of the International Criminal

Tribunal for the former Yugoslavia. She ser ves as

Special Counsel on Human Rights to the Chairman

of the Board of Freepor t-McMoRan Copper & Gold

Inc. and is an Advisor y Director for the company.

Judge McDonald repor ts regularly to the Freepor t-

McMoRan Copper & Gold Inc. Chairman and Board

of Directors on human rights issues and

developments.

FREEPORT PARTNERSHIP FUND FOR COMMUNITY

DEVELOPMENT

PT Freepor t Indonesia and our joint venture par tner

have since 1996 committed one percent of

revenues for the benefit of the local community

through the Freepor t Par tnership Fund for

Community Development, which was previously

called the Freepor t Fund for Irian Jaya

Development. Contributions to the par tnership fund

were approximately $22 million in 2003, and the

total contributions to the fund are nearly $132

million since inception.

The par tnership 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

Freepor t 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 suppor ted 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.



(continued from page 7)

The activities of the LPMAK are conducted

through program bureaus, consisting of exper t

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. Cer tain 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 repor t on the LPMAK

activities, and regular monthly progress repor ts are

made publicly available to ensure that LPMAK's

activities are transparent.


PT FREEPORT

INDONESIA PROVIDED

FUNDS to construct the

Banti hospital in the

highlands Amungme

community, and suppor ts

medical facilities and

programs throughout the

region.


THE ARROW POINTSFOR PAPUAN EMPLOYEE

"Nemangkawi" means "white arrow" in Amungkal, the traditional language of the Amungme community. It is

the name the Amungme gave to the glacier and snow-covered mountain that reaches the highest point

between the Andes and the Himalaya. The snow-covered mountain sits just to the east of the Grasberg

mining complex. On a clear day, Nemangkawi can be seen from the Arafura Sea some 130 kilometers

south. Silas Natkime, a leader of the Amungme community and a supervisor with PT Freepor t Indonesia's

employee development unit, feels that the name "Nemangkawi" appropriately captures the aspirations of

most Papuan employees of PT Freepor t Indonesia. As a result, he suggested it as the name for the new

forward-looking employee development institution that PT Freepor t Indonesia will char ter to foster the

development of and oppor tunities for the Papuan people.

"The arrow points upward; so should the future for the workers from this area," explains Silas, whose

job is to see to it that the company lives up to its commitments to Papuan employee development. The

Nemangkawi Mining Institute is a key to make it happen. The Institute's goal is to develop 300 trained

Papuan apprentices with world-class skills who can enter into the workforce - working for PT Freepor t

Indonesia, one of its contractors or other businesses in Papua - each year. The Institute is par t of a

sweeping employee development program that seeks to provide ongoing oppor tunities for all PT Freepor t

Indonesia employees across the operations, as well as for the new recruits.

Quick with a broad smile and a firm handshake, Silas is a natural communicator (he speaks his native

Amungme, Indonesian and English) and his enthusiasm for his job is infectious. He has worked for the

mining company for 19 years; moving up the ladder from an entr y-level job as a Welding Trainee to his

current position as General Forman of Papuan Development in PT Freepor t Indonesia's Quality Management

Services Depar tment (QMS). He is also a leader of a Papuan Employees Organization known as Tongoi of

Papua, a group that provides a communications link between the company management and its rank and

file Papuan workers.

Having grown up the son of an impor tant tribal leader in the traditional Amungme community of Wa,

Silas has watched PT Freepor t Indonesia grow from a small operation in the 1970s to the world-class

mining complex it is today. At 40 years old, he explains

that meaningful employment for members of his generation

has been tough to come by for a number of reasons. "The

local Papuan people did not have the means to get a good

education for many years. Back in the 1970s the closest

schools were several days walk away," Silas explains. PT

Freepor t Indonesia has sent thousands of local youth to

school on scholarships, has built local schools and has

worked with the local government to set up programs to

improve local education. But, according to Peter Mosel,

Silas' mentor and the Manager of QMS for PT Freepor t

Indonesia, the vast majority of applicants from the local

area, even in recent years, were not properly prepared for

most good jobs.

To remedy the situation, Mosel, Silas and the senior

management of PT Freepor t Indonesia have adopted a


EMPLOYEE DEVELOPMENT MENTORS Silas

Natkime (left) and Peter Mosel (in red

jacket) oversee programs ranging from

basic literacy to advanced technical

skills with a goal of guiding hundreds of

local Papuans into careers.

UPWARDDEVELOPMENT

TRIFENA TINAL

multi-faceted approach to company training ef for ts. "We're looking to prepare as many as 300 indigenous

Papuans to enter the workforce each year," says Mosel, an Australian native who has spent most of his

professional career at various mining projects in Indonesia. "We assess 40-50 applicants each week from

the seven local traditional communities. A small percentage is ready to enter into our Apprenticeship

programs. However, we've found that most of those tested have been falling shor t, so we've geared our

ef for ts toward getting them prepared," explains Mosel. "We created a Pre-Apprentice program that begins

with the ver y basics - learning to read and to do basic mathematics. From there, they move up to learning

a craft that is most suited to their strengths," Mosel adds, with Silas Natkime nodding in agreement.

"Silas' role includes counseling these young people - finding out what their interests are and guiding them

into a career path." Par ticipants understand that jobs are not guaranteed to those who complete the

program. The intent is to develop skills in the Papuan people so that they are able to compete for jobs and

per form in the workplace on the same basis as those from Indonesia's more developed regions who have

had better educational oppor tunities.

The Pre-Apprentice and Apprentice programs are managed by Trifena Tinal, a young engineer from the

Damal/Amungme community who grew up in Freepor t's company town Tembagapura. Trifena obtained her

Civil Engineering degree at the University of New Orleans and has returned home to devote her energy to

preparing her fellow Papuans for the workforce.

Trifena says that these programs are reversing the way managers think about hiring employees from the

local area. "When people don't hire Papuans, they say the Papuans don't have the skills. Now we're

providing that skill, so their employment oppor tunities are greater. What we're doing is solving the root

causes of unemployment," she explains.

Optimistic about what the future holds for her generation and beyond, Trifena says that it is essentially

up to the individual to succeed, now that there are so many oppor tunities being of fered. "Freepor t has

made the commitments and it's up to us to take advantage of them. There are so many oppor tunities now,

it's scar y," she says, laughing.

Mosel says that Silas and Trifena's enthusiasm are indicative of the program's success. "Trifena came

in after her last group of pre-apprentices achieved the highest scores in their round of advanced tests and

shouted 'It's working!..It's working!' Seeing that kind of excitement is the payoff for all the hard work," he says.


APPRENTICE TRAINEES in the Deep

Ore Zone underground mine learn

skills to work in one of the world's

largest mining complexes.

TRIFENA TINAL (upper photo)

manages the Pre-Apprentice and

Apprentice programs.


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.

PROVISION OF MEDICAL SERVICES

One of the most impor tant positive impacts from PT

Freepor t Indonesia's presence in Papua has been

the provision of medical ser vices carried out

through LPMAK. Prior to the initiation of the

programs suppor ted by PT Freepor t Indonesia,

healthcare was minimal or nonexistent in our

operations area. We have worked for years to

develop an integrated and coordinated healthcare

system capable of delivering comprehensive,



PT FREEPORT INDONESIA PUBLIC

HEALTH INITIATIVES include a sweeping

program to fight malaria through vector

control, education, preventive healthcare

and treatment. Identifying malaria-

carrying mosquitos is a daily routine for

dozens of PT-FI Public Health

Depar tment workers.

competent and sustainable medical ser vices to the

local Papuans, both in the highlands and lowlands

areas near our operations.

This system relies on community-based health

clinics providing a range of preventive and

outpatient ser vices, coordinated with two modern

hospitals which provide comprehensive inpatient

healthcare. Thousands of Papuans receive quality

medical ser vices each year from this system. The

results have been gratifying - dramatically reducing

infant mor tality and the incidence of malaria, for

example.

Construction was completed in 2002 of a 74-

bed hospital in Banti which is now providing

healthcare to Papuans in the highlands area. A

separate 75-bed hospital opened in Timika in 1999

to ser ve Papuans living in the lowlands. PT Freepor t

Indonesia provided funds to construct both of these

facilities and suppor ts 10 other clinics providing

quality medical care to those living in other

communities. We have under taken comprehensive

public health programs for prenatal care, and the

prevention and control of malaria, tuberculosis and

HIV/AIDS.

TRAINING, EDUCATION AND PAPUAN DEVELOPMENT

Training, development and continuing education are

critical components to ensuring long-term operating

ef ficiency in any business. These matters become

even more impor tant when operating in a

developing region without a long histor y of

advanced educational programs. Job training

programs in Papua must of fer more than technical

skills development. PT Freepor t Indonesia of fers

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 Freepor t Indonesia committed to

significantly improve 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 surpassed ahead of target dates.


16

AN AGGRESSIVE TRAINING AND

EMPLOYEE DEVELOPMENT PROGRAM

seeks to provide skills and create job

oppor tunities for hundreds of local

Papuans each year.

At the end of 2003, PT Freepor t Indonesia and its

direct contractors had approximately 2,500 Papuan

employees, compared to 600 in 1996, including

210 Papuan management staf f employees,

compared to less than 50 in 1996. Another 1,000

Papuans were employed by privatized companies

serving PT Freepor t Indonesia.

With a view toward long-term development of

additional underground mining projects in the PT

Freepor t Indonesia project area, employee

development managers, working with members of

the local community, have formed the Nemangkawi

Mining Institute. The Institute's goal is to provide

pre-apprentice, apprenticeship and advanced career

development oppor tunities for some 300 Papuans

per year, with enrollment projected at 1,000 at any

given time. Graduates of the Institute will compete

on equal terms for positions within the Freepor t

organization and related enterprises each year.

In addition to these training and education

programs, educational assistance for non-PT

Freepor t Indonesia employees has been provided to

thousands of Papuan students through LPMAK and

the Freepor t Par tnership Fund for Community

Development. However, recent assessments have

indicated that the desired results for the traditional

inhabitants of our operations area were not being

achieved through this program. Significant deficits

in local elementar y, junior high and high school

educational programs meant that the scholarship

funds were benefiting Papuans from outside the

area of our operations more than local Papuans.

Due to this, LPMAK has embarked on a three-

year transformation of its educational program to

emphasize working with the local Mimika

government and provincial government to upgrade

the local educational system from elementar y

through high school. The program will involve

teacher recruitment, curriculum development,

upgrading school buildings and facilities and

creating a monitoring system to help ensure that

education in Mimika is ef fective and ef ficient.

Scholarships for Papuans, especially those at the

university level, will continue, but will not be the

major focus of the LPMAK program.



3/96 12/96 12 / 97 12/98 12/99 12/00 12 / 01 12 / 02 12 / 03

2,000

2,50 0

1,50 0

Goal

Actual

1,000

50 0

TOTAL PAPUAN EMPLOYEES

Goal

Actual

3/96 12/96 12 / 97 12/98 12/99 12/00 12 / 01 12 / 02 12 / 03

20 0

250

150

50

Number of StaffNumber of Employees

10 0

TOTAL PAPUAN PROFESS IONAL STAFF

Figure 3. PT Freeport Indonesia has surpassed its goals for Papuan employees and Papuan staff since 1996.

AMUNGME GOLDBOUTIQUE COFFEE BUSINESS BLENDSTRADITIONAL 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 bir thplace 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 ear th.

There are, however, uncanny ties that bind the Wa

Valley with the Pacific Nor thwest. They include an

Anthropologist, a rainy, foggy, cool climate, and the cof fee

bean. Seattle gave bir th to a movement that has

transformed the way westerners think about a cup of

cof fee. Thanks to several well-known Seattle-based

corporations and their ubiquitous cof fee houses around

the globe, folks are shelling out three dollars and

upwards for café latte, espresso and exotic boutique

brews. Enlightened consumers, who see cof fee 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 cof fee world, cof fee 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

cof fee 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 ef for ts of an

Anthropologist and the backing of PT Freepor t Indonesia, cof fee and other crops grown in the Wa Valley are

par t of a sustainable agricultural project.

Carolyn Cook, originally from the Pacific Nor thwest, came to Papua in the late 1970s as par t of a

Freepor t 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 Freepor t

mining project. As par t of her disser tation, 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.


WOMEN HAVE TAKEN A LEAD ROLE in

the Amungme Gold project. Entrepreneur

Catarina Murib prepares fresh beans for

roasting.

CAROLYN COOK

"Cof fee 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 tr y 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 cof fee 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 fer tilizers. 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 cof fee 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 cof fee beans. Her two-year old son tugs at her skir t as Mom

goes about her labor.

The project in Utekini and in the other nearby valleys is currently yielding only enough to supply the

Freepor t operation's retail shops and dining halls. However, time and additional nur turing from Dr. Cook

and the Local Business Development Unit of PT

Freepor t Indonesia, will eventually lead to

development of expor t markets. This project is one

of dozens of similar projects the unit has star ted

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 cof fee, they are prospering by cultivating

Pandanus nuts, a traditional protein-providing

staple impor tant 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 of f - leaving the future to the Amungme

entrepreneurs and their families.


JUTAK JAMANG SHARES KNOWLEDGE with his younger

counterpar ts as they prepare soil for the transplant of

Pandanus palms. The plant produces a protein-rich nut

popular in the highlands communities.

BUSINESS DEVELOPMENT

An essential par t of working toward a sustainable

economy in the area of our operations is helping

Papuans learn how to run their own businesses and

providing star tup assistance to get Papuan

entrepreneurs star ted. In the lowlands, for example,

we are working with the Kamoro, the traditional

inhabitants, to develop fisheries with expor t

potential. Such ef for ts in the past had been

hampered by the lack of an ice factor y and a quality

processing facility. With PT Freepor t Indonesia's

help, PT Kapiri, a Kamoro-owned company, has

star ted an ice factor y and processing facility and is

purchasing vessels to collect fish from Kamoro

fishermen.

Similarly, an integrated animal husbandr y and

poultr y production center is being developed in

Timika in the lowlands. This enterprise, which

employs 400 Papuans, produces pigs, chickens,

ducks and chicken and duck eggs. A Papuan-owned

meat market has also been established in Timika

with help from the business assistance program

and is now operating profitably. In the village of

Banti in the highlands, the supermarket is owned by

a highland Amungme company and its staf f is

completely Papuan.

LAND RIGHTS RECOGNITION PROGRAMS

Under the Indonesian constitution, all unimproved

land is, by law, owned by the government and all

minerals belong to the government. PT Freepor t

Indonesia's "Januar y Agreement" of 1974 with the

Amungme was the first recognition in Indonesia of

hak ulayat, or the right of traditional people to

undeveloped land they used for hunting and

gathering. Subsequent to that agreement, the

government formally recognized the right to

compensation for hak ulayat land rights.

Compensation in the form of rekognisi, or

recognition, is paid to communities for a release of

hak ulayat rights, as hak ulayat is a communal

proper ty right. PT Freepor t Indonesia has paid

recognition in several instances over the years

through programs mutually agreed upon with the

af fected local Papuans and the government.

Two such multi-year programs were successfully

completed in 2003:

• The Kamoro Village Recognition Program, a

five-year program compensating for the release

of land to the government by five Kamoro

villages in the lowlands, including land used for

the tailings deposition area, cargo dock

facilities, the por t and electrical transmission

line corridor.




• The Tiga Desa (Three Village) Development

Program, a similar program for three Amungme

villages in the highlands. This program provided

additional recognition to the Amungme living

nearest the mine, who had been compensated

in the 1974 agreement, for the expanded

scope and continuing success of our

operations.

These two programs provided millions of dollars

wor th of infrastructure, social and economic

development projects including housing, school

buildings and student dormitories, medical clinics,

places of worship, community buildings, of fice

buildings, roads, bridges, water tanks, electrical

power, motorboats for transpor tation and fishing,

spor ts facilities and feasibility studies for business

oppor tunities.

In addition, the Land Rights Trust Fund for the

Amungme and Kamoro communities was created in

2001 to provide voluntar y special recognition for

the holders of the hak ulayat, or traditional land

rights, in the mining area and for the expanded

scope and continuing success of the mining

operations. PT Freepor t Indonesia provided $2.5

million initially and annual contributions thereafter

at a current level of $1 million annually, enabling

the Amungme and Kamoro tribes to use some of

these funds to purchase shares in Freepor t-

McMoRan Copper & Gold Inc., thereby becoming

stakeholders in the mine.


NEARLY HALF OF THE

HOMEOWNERS in the

modern environmental

planned community of

Kuala Kencana are

indigenous Papuans.

SOCIAL AND HUMAN RIGHTS PERFORMANCE AUDIT

Our Social, Employment and Human Rights Policy

reflects the general standards for the social and

economic development of the people within PT

Freepor t Indonesia's Contract of Work area; the

commitment of the company to the increased

employment of native Papuans, both in number and

positions of authority; and the respect for and

protection of the human rights of employees, their

dependents and the local community around our

operations. While we believe we have a strong

policy, only ef fective implementation of its goals will

make it a reality. In 2003, Freepor t-McMoRan

Copper & Gold Inc., PT Freepor t Indonesia and the

International Center for Corporate Accountability

(ICCA) announced that ICCA will audit our policy,

which has been adopted by both companies, to

assess its ef fectiveness and the extent of our

compliance.

During 2003, teams from ICCA traveled to

Papua to gather information to be the basis of

benchmarks in a repor ting system. Once the

repor ting system is complete, ICCA will review it

with our staf f to ensure understanding. Following

this process, the formal audit will begin and is

expected to be completed by the end of 2004. ICCA

will repor t its findings to the company, noting areas

where improvements are needed. The company will

respond with a plan to implement these

improvements. Both ICCA's repor t and the

company's response will be made public.

PROVISION OF SECURITY

Consistent with our Contract of Work, corporate

responsibility and the Voluntar y Principles on

Human Rights and Security as well as our

company's duty to protect its employees and

proper ty, PT Freepor t Indonesia has taken

appropriate steps to provide a safe and secure

working environment. As par t of its security

program, the company maintains its own internal

security depar tment, which per forms functions such

as protecting company facilities, monitoring the

shipment of company goods through the airpor t and

terminal, assisting in traf fic control and aiding

rescue operations. PT Freepor t Indonesia's civilian

security employees (numbering about 670) are

unarmed and per form duties consistent with their

internal security role. For 2003, the total costs for

its internal civilian security depar tment were $13.9

million ($11.2 million net to PT Freepor t Indonesia).

The security depar tment receives human rights

training and each member is required to cer tify his

compliance with our human rights policy.

PT Freepor t Indonesia, on the same basis as all

businesses and residents of Indonesia, relies on

the Government of Indonesia for the provision of

public order, upholding the rule of law and

protection of personnel and proper ty. The Grasberg

mine has been designated by the Indonesian

government as one of Indonesia's vital national

assets. This designation results in the militar y's

playing a significant role in protecting the area of

company operations. The government is

responsible for employing police and militar y

personnel and funding and directing their



operations. From the outset of PT Freepor t

Indonesia's operations, the government has looked

to the company to provide logistical and

infrastructure suppor t and supplemental funding for

these necessar y ser vices, because of the limited

resources of the government and the remote

location and lack of development in Papua. The

need for this type of suppor t is not unique to the

company nor is it limited to the security arena in

Indonesia.

Prior to a civil disturbance incident in

Tembagapura in 1996, there was limited and

inadequate infrastructure for government security

personnel. Following company discussions with the

government in the aftermath of the civil

disturbance, the government conducted a complete

review of our project area - which encompasses

700,000 acres and currently has a population of

more than 120,000 - and subsequently

implemented a new comprehensive approach to

security in the area. In addition, the local Mimika

government became a full Kabupaten, a larger

governmental entity encompassing a larger

geographic area and requiring more government

personnel, including police and militar y. The

number of government security personnel grew from

200 to over 2,000, including, among other units,

Coast Guard at the portsite, Air Force at the airport,


THE POPULATION IN TIMIKA, the largest local community in the PT Freepor t Indonesia operations area, has grown from

fewer than 1,000 in the early 1970's to more than 80,000 today.

riot control personnel to deal with civil disturbances,

and both perimeter and on-site security at the mine

and the mill.

In addition to establishing separate

infrastructure (such as of fices and housing), the

suppor t and assistance for the government-provided

security in Papua includes mitigating living costs

and the hardship elements of posting in Papua,

better ensuring that personnel are properly fed and

lodged, and have the logistical resources to patrol

company roads and secure its operating area.

Oversight of suppor t requests is conducted to verify

that only appropriate and legitimate requests are

granted.

This suppor t for the government security

institutions assigned to the company's area of

operations represents a prudent response by our

company to protect its workforce and proper ty,

especially considering the expectations imposed by

the government on companies conducting business

in remote areas of Indonesia. In addition, the

provision of suppor t is consistent with the

company's obligations under the Contract of Work,

our philosophy of responsible corporate citizenship,

the joint U.S. State Depar tment-British Foreign

Office Voluntar y Principles on Human Rights and

Security, and is in keeping with our commitment to

pursue practices to promote human rights.

For 2003, the total expenses associated with

suppor t for government-provided security for the

operations were $7.3 million ($5.9 million net to PT

Freepor t Indonesia). The suppor t consists of costs

incurred and allocated by the company for

infrastructure, food, housing, fuel, travel, vehicle

repairs, allowances to cover incidental and

administrative costs, and community assistance

programs conducted by the militar y and police. The

total capital costs for associated infrastructure for

2003 was $0.8 million ($0.6 million net to PT

Freepor t Indonesia).

AUGUST 31, 2002 INCIDENT

A shooting incident involving unknown assailants on

a remote section of the mountain road near the PT

Freepor t Indonesia mine on August 31, 2002

resulted in the deaths of two American teachers

and an Indonesian teacher and injuries to ten other

individuals. The Indonesian government

subsequently enhanced security at our operations

and there have been no fur ther incidents of this

kind. The Government of Indonesia and the U.S.

Federal Bureau of Investigation continue to actively

investigate this terrible criminal act. PT Freepor t

Indonesia has suppor ted and cooperated fully with

the investigations and sincerely hopes that the

perpetrators, whoever they are, will soon be brought

to justice. After meeting in Bali, Indonesia on October

22, 2003, U.S. President George W. Bush and

Indonesian President Megawati Soekarnoputri



issued a joint statement expressing their sorrow

over the killings, noting that the joint

Indonesian/U.S. investigations were proceeding

well, and reaf firming their "shared commitment to

find the murderers and bring them to justice,

whoever they may be."

POLITICAL ISSUES

On July 5, 2004, Indonesia, an emerging

democracy, is scheduled to hold its first-ever direct

Presidential election. The central government in

Indonesia has also approved a measure granting

greater autonomy to its provinces. Many leaders in

the Province of Papua, where PT Freepor t

Indonesia's operations are located, continue to

dispute the manner in which the autonomy measure

is being implemented. In addition, the central

government has approved a measure dividing the

Province of Papua into three provinces to improve

governance and this has also been opposed by

some Papuans, while other Papuans suppor t it. In

August 2003, when Papuan suppor ters of the

par titioning attempted to implement creation of the

new Central Irian Jaya Province, which includes PT

Freepor t Indonesia, conflict erupted in Timika, the

largest city in the area of our operations with a

population estimated at 80,000. Fighting between

Papuans suppor ting and opposing the new province

resulted in five deaths and allegations from both

sides of other human rights violations.

As a private contractor to the Republic of

Indonesia, PT Freepor t Indonesia takes no position

for or against any candidate for political of fice. We

have had excellent working relationships with four

Indonesian presidential administrations and fully

expect that relationship will continue with the next

administration. In addition, as a contractor to the

government, we do not take a position on issues

that are the purview of the Indonesian government,

such as autonomy and par titioning of the Province

of Papua. However, we strongly suppor t democratic

dialogue and peaceful resolution of these issues. In

the case of the August 2003 fighting over

par titioning, for example, PT Freepor t Indonesia

actively suppor ted the peace agreement between

the two sides in the conflict by providing

compensation for the families of victims on both

sides and by suppor ting the traditional peace

celebrations that ended the fighting.


ONGOING DIALOGUE WITH OUR

NEIGHBORS helps to develop mutual

understanding and par tnership for

sustainable development programs.

Pictured, Gabrielle McDonald

(second from left), Special Counsel

on Human Rights to the Chairman of

the Board of Freepor t-McMoRan

Copper & Gold Inc., and community

leaders in Timika.

MAKING BUSINESS ETHICS A PRIORITY

Freepor t-McMoRan Copper & Gold Inc., PT Freepor t

Indonesia and Atlantic Copper, S.A. have in place a

comprehensive Ethics and Business Conduct Policy

which requires all employees to adhere to ethical

standards established by the company and

consistent with applicable laws, including the U.S.

Foreign Corrupt Practices Act (FCPA) and the

Sarbanes-Oxley Act. All appropriate company

personnel are required to cer tify annually their

adherence to this policy. In addition, employees are

required to notify the company compliance of ficer of

any activity, transaction or other information

involving a suspected violation of the policy. Any

repor ted incidents or concerns about violations or

potential violations are investigated and resolved

appropriately.

We conduct periodic training sessions for our

managers, supervisors and other personnel so they

can identify potential issues and know how to

respond appropriately. We also periodically review

our policies and procedures to ensure that

applicable legal requirements and expectations

regarding corporate responsibility are met.

See our Ethics and Business Conduct Policy on

our web site (www.fcx.com).



DOLPHINS FEED along the coast of the Arafura Sea in the PT Freepor t Indonesia Project Area.

III. ENVIRONMENTAL MANAGEMENT

ENVIRONMENTAL COMMITMENTS

We are committed to minimizing the impact of our

operations on the surrounding environment and to

reclaiming and revegetating af fected land. Through

our Environmental Policy, which is included as an

appendix to this repor t, we have also adopted the

Environmental Char ter of the International Council

on Mining and Metals. We commit in these policies

to sound environmental management and practices,

to providing adequate resources to fulfill that

responsibility and to continuous improvement of our

environmental per formance at ever y operational

site. We are also strongly committed to continue

suppor ting scientific research to understand the

environments in which we operate and improve

environmental technologies; and, to comprehensive

monitoring to determine the ef fectiveness of our

management practices. We also work with

governmental agencies, the local population and

responsible non-governmental organizations to

enhance our environmental per formance.

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 Freepor t

Indonesia's environmental audits provide our

managers with information on current environmental

per formance and help identify oppor tunities for

improvement.

In 2003, two environmental audits were

conducted. Representatives from Freepor t-

McMoRan Copper & Gold Inc. audited PT Freepor t

Indonesia's operations in August as par t of the

annual corporate internal auditing program.

Environmental Management FREEPORT-McMoRan COPPER & GOLD INC. 27


1998 1999 2000 20 01 20 02 20 03

20,000

15,000

Personnel Trained Man-Hours of Training

10,000

5,000

Figure 4. Environmental training of all employees and contractpersonnel is an important aspect of PT Freeport Indonesia’sEnvironmental Management System (EMS).

In November, the International Cer tification

Services Division of Société Générale de

Surveillance (SGS), an ISO 14001 registration body

based in Geneva, Switzerland with of fices in

Indonesia, conducted an environmental

management system audit of PT Freepor t Indonesia

as a requirement to maintain the ISO 14001

cer tification granted in 2001. (Please see ISO

14001 Environmental Management System section

below.) Actions have been taken to implement

recommendations for improvements that were made

in both audits.

Our environmental management system also

includes an in-house environmental inspection

program that is conducted continually throughout

the year. These inspections are conducted at 369

facilities, including contractors and privatized

companies, from the Grasberg mine site to the

por t. The purpose is to assess conformance by all

facilities to our environmental management system.

The results from these inspections ser ve as a

measurement of our environmental per formance

and a basis for determining continual improvement.

The results are also used in the calculation of

employee bonuses, providing an added incentive for

our workforce to maintain high environmental

per formance.

ISO 14001 ENVIRONMENTAL MANAGEMENT SYSTEM

ISO (International Standardization Organization)

14001 is an international standard that provides

companies with a systematic approach to ef fective

environmental management and continuous

improvement. PT Freepor t Indonesia was one of the

first mining operations in Indonesia to achieve this

recognition when we were awarded ISO 14001

cer tification in December, 2001 for our mining and

ore processing operations. This significant

achievement demonstrates our strong commitment

to providing ef fective environmental management at

our operations. This formal cer tified environmental

management system is the basis for measuring

continual improvements in our environmental

per formance, a cornerstone of ISO 14001.

Periodic follow-up reviews are required by ISO

14001 protocols. These are conducted by the

cer tification agency to determine the status of

conformance and to assess continued cer tification

for our operational facilities. PT Freepor t Indonesia

was reviewed in 2002 and again in November 2003

in conjunction with the audit by the cer tification

agency, SGS International Cer tification Services,

Inc. The audit verified that PT Freepor t Indonesia's

Environmental Management System was in

conformance to the ISO 14001 standards in both

2002 and 2003 and remains cer tified.



TAILINGS MANAGEMENT PROGRAM

Tailings are finely ground natural rock residue from

the processing of mineralized ore by physical

grinding and flotation methods used in our

operations. PT Freepor t Indonesia uses a river

system for tailings transpor t to a designated area

in the lowlands and coastal zone, called the

Modified Ajkwa Deposition Area, which is an

engineered, managed system for the deposition and

control of tailings.

The tailings deposition system is operated

under PT Freepor t Indonesia's comprehensive

tailings management plan, as approved by the

Government of Indonesia. The first stage of

construction of the lateral containment structures,

or levees, for the deposition area was completed in

1997. The second stage of construction work,

including an extension of the levees, was

completed in 2002. Work is continually conducted

on various enhancements to the system, including

inspections, monitoring and physical works.

We continually evaluate and update the tailings

management plan to minimize potential risks. PT

Freepor t Indonesia conducted comprehensive

technical evaluations of alternative tailings disposal

options using internationally recognized scientific

exper ts and adopted the most appropriate site-

specific management system. Independent

environmental audits of PT Freepor t Indonesia's

environmental management system concluded that

the company's tailings management plan

represents the best alternative, considering the

applicable geotechnical, topographic, climatological,

seismic and water quality conditions.


THE MODIFIED AJKWA DEPOSITION AREA is the engineered, managed system for deposition and control of the tailings sediment

from the mining operations. Reclamation programs in soils containing tailings, including the Maurujaya Reclamation Center have

demonstrated success in growing dozens of plants and cash crops, and suppor ting aquaculture and livestock projects.

PT Freepor t Indonesia has also submitted to the

Government of Indonesia a thorough Environmental

Risk Assessment of the tailings management

system. This assessment found that the

environmental impacts of PT Freepor t Indonesia's

expanded operations were consistent with those

anticipated by the company's comprehensive

environmental and social impact study, the AMDAL,

which was completed in 1997 and approved by the

Government of Indonesia.

Studies of tailings reclamation and

establishment of demonstration plots on tailings

areas show that tailings can be readily revegetated

with native forestr y - in fact, natural re-colonization

takes place rapidly - and agricultural plants.

Details of results to date are discussed in more

detail below.

Extensive sampling of water quality in the

tailings management system shows that the water

in the Ajkwa River, which transpor ts the tailings

from PT Freepor t Indonesia's mill in the highlands

to the lowlands deposition area, meets the

Indonesian and U.S. Environmental Protection

Agency drinking water standards for dissolved

metals. Data from biological sampling continue to

demonstrate that the estuary downstream of the

tailings deposition area is a functioning ecosystem

based both on the number of species and the

number of specimens collected of nektonic, or free-

swimming, organisms such as fish and shrimp.

RECLAMATION AND REVEGETATION

PT Freepor t Indonesia is committed to

reclaiming or revegetating disturbed land when it is

no longer used for our operations. We have

conducted comprehensive reclamation studies and

programs for many years in both the highlands and

the lowlands areas to provide sound, scientific data

to guide our management decisions as to the best

techniques and plant species to maximize success

of these programs.

HIGHLANDS

The highland ecosystem is shaped by environmental

extremes that include ver y low nocturnal

temperatures, high solar radiation during the day

but with shor t periods of photosynthesis, heavy fog,

high rainfalls and poor soils. Plants growing there

are highly specialized, having evolved to sur vive in

these harsh conditions. International scientific

exper ts and PT Freepor t Indonesia staf f have



1998 1999 2000 20 01 20 02 20 03

1.00

0 .75

0.50

1.50

1. 25

0.25

0.00

Figure 5. Copper concentrations in the Ajkwa River arewell within drinking water standards for dissolved metals.

Annual Average Concentration

Part

s Pe

r M

illio

n

U.S. EPA drinking water standard for dissolved copper

Indonesian drinking water standard for dissolved copper

studied the ecology of the alpine ecosystem in our

work area and have developed methods to reliably

produce planting stock for native species. Studies

under taken to date include: ethno-botany,

biodiversity of the sub-alpine and alpine

ecosystems, the use of moss for pioneering

reclamation strategies, and tissue culture for

propagating native alpine plants. Although final

closure of the overburden areas is decades away,

we are committed to reclaim areas of overburden

each year as they become available, monitoring the

per formance of various planting techniques and

modifying programs to enhance their long-term

success.

Through year-end 2003, more than 56 hectares

of disturbed land at the mine have been

revegetated to comply with PT Freepor t Indonesia's

commitment to the Government of Indonesia. Most

of the disturbed areas in the highlands remain in

active use and therefore are not yet available for

revegetation. In 2003, some 9.5 hectares were

revegetated.

The intensive studies in the past have identified

the types of native highlands plant species that do

well in reclamation, while current research is

designed to learn how to help improve sur vival of

these species in the harsh conditions. Therefore,

highlands reclamation in 2003 focused on the

implementation of recommendations from previous

studies. Native bacteria were used to enhance

moss establishment at the final placement areas of

overburden. Tissue culture techniques and

conventional cutting methods were used to develop

large-scale propagation that successfully resulted in

a 78 percent sur vival rate of 22,000 propagated

plants, comprising three species of native alpine

plants.

LOWLANDS

In the lowlands, reclamation research has

repeatedly demonstrated that native species

successfully colonize naturally and grow on soils

containing tailings. Soils containing tailings are ver y

suitable for growing many agricultural crops when

the soils are ameliorated with organic carbon. The

objective of PT Freepor t Indonesia's reclamation

and revegetation program in the lowlands is to

transform the tailings deposits in the Modified

Ajkwa Deposition Area into agricultural or other

productive land use or to return it to native

vegetation after mining is completed.

Cumulatively through the end of 2003, 142

plant species have been planted experimentally on

soils containing tailings and 125 of these were

considered successful. Some plant species that

were successfully tested to date include legume

cover crops for fodder; local trees such as

Casuarina, betel nut and matoa; cash crops plants

such as pineapple, melon, and banana; and,

vegetables and grains such as chili peppers,

cucumbers, tomatoes, rice, string beans and


Figure 6. Reclamation testing shows success for manyspecies on soils containing tailings; overburden testing,utilizing only native species, is more difficult due tohigh altitude conditions, but successes continue toincrease.

(Data is cumulative 19 95 through 20 03.)

Tailings Overburden

9 0

60

120

150

30

Species Tested Species Successful

Number of Plant Species

pumpkins.

Harvests of edible plants and fruit from many of

these species were conducted in 2003. A total of

321 samples from 51 edible plants and fruit were

collected during 2003 for metals-uptake analysis.

PT Freepor t Indonesia's comprehensive sampling

program monitors environmental conditions in the

tailings deposition area and rigorous testing

per formed on these edible plants and fruits

continues to indicate that metals uptake from the

minerals naturally contained in the tailings is

minimal and levels remain safely below the

maximum allowable levels stipulated in national and

international standards for all plants.

PT Freepor t Indonesia exceeded its commitment

to the Government of Indonesia to reclaim 375

hectares of tailings deposition area by the end of

2003, when 473 hectares were planted. Some

16,000 trees were planted in 2003 in the tailings

deposition area, consisting primarily of Casuarina

(15,000 trees) and matoa (1,000 trees). Monitoring

of the growth of these trees continues to indicate

excellent progress.

An animal husbandr y program has been

developed in the lowlands to demonstrate that

cattle can be safely raised and grazed on deposited

tailings. This project was established in cooperation

with the local government to monitor cattle health.

Legumes have been planted along with sago and

Casuarina. The legumes are nitrogen-fixers that add

nutrients to the soils containing tailings. They are

harvested as feed for the cattle and the cattle's

manure provides fur ther soil enrichment.

In addition to the production of commercial

crops, another strategy of tailings reclamation is to

encourage natural ecological succession (the

natural regrowth of native species) in designated

areas. Natural succession occurs quickly in many

areas of the deposition area, led by Phragmites

karka grass. The Phragmites grass produces detrital

biomass which enrichens soils containing tailings.

This process improves water retention capacity of

the soils so that other species can propagate. An

independent research project, completed in late

2002 on natural succession of vegetation on

tailings in an area outside the current deposition

area, but which previously received tailings, found

that, in a period of only a few years, 264 plant

species have naturally colonized and are growing



PINEAPPLES ARE AMONG THE DOZENS OF PLANTS AND CASH

CROPS that grow successfully on tailings. Locally hired

reclamation employees apply traditional knowledge of plants

and animals as par t of the sustainable agricultural program.

well. This aspect of tailings reclamation has been

observed and studied by PT Freepor t Indonesia for

years, but the formal confirmation and

documentation of this process by independent

scientists is significant.

The Ajkwa estuar y receives a por tion of tailings,

which pass through the Modified Ajkwa Deposition

Area. Some of the newly-formed lands from these

sediments have been naturally colonized by

mangroves. Within the past several years, six

mangrove species, 30 species of crabs and

shrimps, four species of snails and several species

of fish and marine polychaetes (worms) were

identified in the mangrove colonization areas. To

accelerate the primary succession process in these

newly formed lands, PT Freepor t Indonesia initiated

an assisted mangrove colonization program in April

2002. A total of 75,000 mangrove seedlings were

planted in 2003 on 30 hectares, utilizing

contractors from the Kamoro people, the traditional

lowlands inhabitants. Monitoring of the sur vival rate

of mangrove seedlings that were planted showed

that the planted seedlings growth and sur vival rates

are similar to rates repor ted for other assisted

colonization programs from around the world

described in scientific literature.

OVERBURDEN AND ACID ROCK DRAINAGE MANAGEMENT

Overburden is rock that must be moved aside to

gain access to ore that is mined and processed to

produce metals for commercial purposes. PT

Freepor t Indonesia handles overburden under a

comprehensive Overburden Management Plan

approved by the Government of Indonesia. Most

metals occur in nature as sulphide minerals. When

ore is mined and overburden containing sulphides

is left exposed to the elements, the action of water,

oxygen and natural bacteria has the potential to

create sulphuric acid. This acidic water can dissolve

metals contained in overburden rock and be

transpor ted in water drainage systems and, if not

properly managed, cause adverse environmental

impacts. This process is known as acid rock

drainage.

PT Freepor t Indonesia manages and monitors

acid rock drainage from its operations. Independent

audits of PT Freepor t Indonesia's environmental

management system concluded that our overburden

management programs are "…consistent with

international practice." Under the Government-

approved overburden management plan, PT Freepor t

Indonesia places overburden in managed areas

around the Grasberg open pit.

PT Freepor t Indonesia's acid rock drainage

mitigation plans provide for capture and treatment

of the existing acid rock drainage, in conjunction

with limestone blending and limestone capping of

existing overburden placement areas. These actions

are expected to significantly reduce future acid rock

drainage generation. Throughout 2003, acid rock

drainage from the mine was captured and

transpor ted via a system of pipes to the mill for

lime neutralization.


NATIVE HIGHLANDS SPECIES of grasses, mosses and shrubs

are successfully grown on overburden placement areas.

Overburden sites and the open pit will be revegetated or

reclaimed after the end of mine-life.

LONG-TERM ENVIRONMENTAL MONITORING PROGRAM

PT Freepor t Indonesia's long-term environmental

monitoring program evaluates potential impacts of

our operations by routinely measuring water quality,

biology, hydrology, sediments, air quality and

meteorology in our area of operations. For 2003,

the overall monitoring program included the

collection of over 6,500 environmental samples and

over 44,000 separate analyses on these samples,

which included aquatic biology, aquatic tissue, plant

tissue, mine water, sur face water, ground water,

sanitar y wastewater, river sediments and tailings.

The program ensures that we have the scientific

information necessar y to make management

decisions about our operations to minimize and

mitigate environmental impacts.

In 2003, PT Freepor t Indonesia monitored water

quality at over 150 locations throughout the project

area, collected over 1,800 water samples and

conducted over 20,000 water quality analyses. We

monitored more than 200 sampling locations for

nekton, benthos, plankton, and mangrove

inver tebrates in the aquatic biology program. Data

from this sampling continue to show that the

estuar y downstream of the tailings deposition is a

functioning ecosystem, based on both the number

of species and the number of specimens collected

of nektonic, or free-swimming, organisms such as

fish and shrimp. Between 1999 and 2003, more

than 2,000 samples of aquatic fauna were

collected and a total of nearly 17,000 analyses

were conducted on them.

The monitoring of benthos, or bottom-dwelling

organisms, continued in 2003 at 12 sites in the

estuaries and 40 sites in the Arafura Sea. The

results of this monitoring indicated that tailings

sites generally have lower species counts, but high

densities of ver y small polychaetes, or marine

worms, which are pioneer species to disturbed

areas. Recover y of benthos diversity is now

occurring in areas that once received tailings in the

Minajerwi estuar y. The monitoring found no impact

of tailings on the marine benthos in the Arafura Sea

outside of the tailings management area.

WASTE MANAGEMENT AND RECYCLING

PT Freepor t Indonesia's environmental management

programs involve all aspects of its operations, not

just those related to monitoring. We have a

comprehensive waste management system using

the principles of re-use, recycling and reduction.



AquaticTissue

SurfaceWater

Tailings

20,000

15,000

10,000

5,000

Figure 7. The comprehensive Long-Term EnvironmentalMonitoring Program encompasses a large number ofsamples and analyses used by PT Freeport Indonesia forenvironmental assessments.

Type of Analysis

20 01 20 02 20 03

AquaticBiology

Waste minimization programs involving reduction

and substitution with environmentally friendly

products have been previously established and will

be continued. Bulk containers, waste oil, used

papers and tires are all re-used locally in an

environmentally acceptable manner. Other

recyclable materials such as aluminum, scrap

metals and used batteries are collected and stored

in a temporar y storage area for subsequent

disposal in accordance with the requirements of the

Indonesian government.

Wastes, including small amounts of hazardous

waste, are segregated at the point of origin

wherever possible. Medical wastes are separated

from other wastes in a special container for final

destruction in an approved high-temperature waste

incinerator. Collection and packaging of small

amounts of wastes from gold assay work on ore

samples are conducted in compliance with

Indonesian government regulations. PT Freepor t

Indonesia's other solid wastes are disposed in

three designated locations, including landfills for

iner t wastes and a landfill for biodegradable

wastes, which is lined and equipped with a leachate

collection and treatment system. The second cell of

the lined-landfill star ted operation in the first-

quar ter 2003 to replace the first cell that is now

full.

PT Freepor t Indonesia has implemented new

government regulations on Domestic Liquid Waste

(Decree of Environmental Ministr y, Government of

Indonesia: Number 112 - 2003) that af fect our ten

sewage treatment plants. The ef fluent quality from

all sewage treatment plants is monitored regularly

for the parameters of pH, BOD, TSS and oil and

grease.

BIODIVERSITY

The PT Freepor t Indonesia project area is located in

the Province of Papua, which is an area of high

biodiversity. In order to gather baseline information

necessar y for ef fective biodiversity management,

we have conducted a number of ecological studies

within our project area. These biodiversity studies,

conducted by PT Freepor t Indonesia and

international exper ts from 1996-2003, included

surveys of: vegetation (from Lowland, Montane,

Sub-alpine, Alpine and Nival Zones), ethno-botany,

medicinal plants, mammals, birds, amphibians,

reptiles, fish, soil fauna, and both aquatic and

terrestrial insects.

Extensive botanical and taxonomy surveys within

the PT Freepor t Indonesia project area (from

Coastal to Nival Zones) were also carried out over a

six-year period by staf f from the KEW Garden,

London, in conjunction with assistance from

Indonesian institutions. More than 5,000 flowering

and fruiting plant species were identified and

prepared for herbariums. Posters of the vegetation

zones and taxonomy of the plants were produced.

From the scientific point of view, PT Freepor t

Indonesia's biodiversity programs have significantly

contributed to the knowledge of natural science in

Papua through the discover y of new species,

reference collections, and the publication of

papers, books and posters. Most recently, PT

Freepor t Indonesia has published two books in its

biodiversity series: "The Freshwater Fish of the

Timika Region, New Guinea" and "The Butter flies of

Mimika."


SAFETY

Our safety per formance has consistently compared

favorably to the average per formance of U.S. and

international mining companies. In 2003, our lost-

time injur y rate per 200,000 hours worked was

0.34 compared to the U.S. metallic mining industr y

average rate of 2.18 for 2002 (the latest data

available). Our total repor table rate (all repor table

injuries) for 2003 was 0.65 compared to the U.S.

average of 3.70.

However, an October 9, 2003 slippage of

material in the Grasberg open pit mine resulted in

the deaths of eight workers. On November 22,

2003, two workers were asphyxiated in an

underground tunnel conveying ore from the

Grasberg mine to mill facilities. The incident

occurred when ore from the Grasberg sur face mine

containing previously unencountered concentrations

of elemental sulphur released fumes in the tunnel.

These were unforeseeable events. These

dishear tening accidents contributed to PT Freepor t

Indonesia's fatal accident rate per 200,000 hours

worked of 0.06, compared to the U.S. average of

0.01.

While unforeseeable, these events were

unacceptable and a comprehensive series of safety

initiatives have been and are being implemented to

improve safety per formance. Due to safety

concerns accociated with the slippage, PT Freepor t

Indonesia changed its mine plan sequencing to shift

from mining high-grade ore to focus on mining the

south wall of the pit so that safe access to the

high-grade ore areas can be restored. Other safety

initiatives include the addition of safety personnel,

and management emphasis on the top priority to be

given to safety policy and procedures through direct

contact with employees in the field and direct

involvement of management in the implementation

of safety procedures and policy.

Visit our web sites at: www.fcx.com

and www.ptfi.com.

SAFETY


ATLANTIC COPPER, S.A.

ENVIRONMENTAL PROGRAMS UPDATE

As a wholly owned subsidiar y of Freepor t-McMoRan

Copper & Gold Inc., Atlantic Copper, S.A. is also

committed to sustainable development in its

operations through its Policy of Social

Responsibility, social development and

environmental management programs. Atlantic

Copper, S.A. management is currently par ticipating

in a program designed to help Spanish companies

integrate the principles of sustainable development

into all their decisions and activities.

In 2003, the environmental management

systems at Atlantic Copper's operations in Huelva,

Córdoba and Barcelona were audited by the

Spanish Association for Standardization and

Cer tification (AENOR), in accordance with ISO

14001:96 international cer tification standard and

the new European Union Environmental, Eco-

Management and Eco-Auditing (EMAS) Regulation

No. 761/2001. All of these received positive

results from the audits, which are required annually

to retain the ISO 14001 cer tification that Atlantic

Copper achieved in prior years.

The annual Freepor t-McMoRan Copper & Gold

Inc. internal, environmental and safety audit was

conducted at the Huelva operations in 2003. (The

smaller Córdoba and Barcelona operations are

audited on a bi-annual basis). The audit repor t

noted that environmental programs at the Huelva

smelter facility were comprehensive, well-managed

and reflected a strong commitment by all levels of

management to fulfill the company's environmental

responsibilities. The facility was found to be in

material compliance with applicable Spanish and

European Union laws, regulations and directives.

In Februar y 2003, Atlantic Copper and the

Andalusian Regional Government entered into a

Voluntar y Agreement for Sustainable Development

that establishes a plan for Atlantic Copper to

achieve compliance with the new European Union

requirements of the Integrated Pollution Prevention

and Control Program (IPPC). The agreement

establishes Atlantic Copper as a leader within its

sector in moving forward promptly to implement this

program, which will be required of all industries in

the European Union by October 30, 2007.

Visit our web site at: www.atlantic-copper.es.

Atlantic Copper, S.A. FREEPORT-McMoRan COPPER & GOLD INC. 37

ATLANTIC COPPER, S.A.

AT THE ATLANTIC COPPER

SMELTER, molten copper from the

furnace is cast into anodes using a

continuous casting wheel. In 2003,

Atlantic Copper produced almost

650 million pounds of anodes.

Environmental Policy . . . . . . . . . . . . . . . . . . . . . . . . . .APPENDIX A

Social, Employment and Human Rights Policy . . . . . . . . . . . . . . . . . . . . . . . . .APPENDIX B

Human Rights Policy and Implementation . . . . . . . . . . . . . .APPENDIX C

Voluntary Principles on Security and Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . .APPENDIX D

38 FREEPORT-McMoRan COPPER & GOLD INC.

APPENDIX TABLE OF CONTENTS

APPENDIX AFREEPORT-McMoRan COPPER & GOLD INC.

ENVIRONMENTAL POLICY

GENERAL

Freeport-McMoRan Copper & Gold Inc. (FCX)believes that, as a responsible corporate citizen, itis the duty of the company and its operatingaffiliates to minimize the impact of their operationson the environment and, where feasible, to protectand enhance the quality of the environment in areaswhere they operate. FCX is also committed toproviding a safe working environment for itsemployees and a healthy social/economicenvironment for the local people in its operationalareas.

FCX is committed not only to compliance withfederal, state, and local environmental statutes andregulations, but also to continuous improvement ofits environmental performance at every operationalsite. Environmental audits will continue to beconducted to assess environmental compliance,management systems and practices. Goals andbenchmarks will be established in each operatingunit as a yardstick to measure environmentalperformance. FCX will also work with governmentalagencies, the local population and responsible non-governmental organizations to enhance itsenvironmental performance.

ENVIRONMENTAL PRINCIPLES

To achieve these Policy objectives, FCX and itsoperating affiliates will:

● Comply in all material respects with allapplicable environmental laws and regulations and,in jurisdictions where these are absent orinadequate, apply cost-effective managementpractices to advance environmental protection andto minimize environmental risks.

● Make environmental management a highcorporate priority and the integration ofenvironmental policies, programs, and practices anessential element of management.

● Provide adequate resources, staff, and requisite

training so that employees at all levels are able tofulfill their environmental responsibilities; andcommunicate with all employees, contractors andvendors on the importance of environmentalprotection.

● Review and take account of the environmentaleffects of each activity, whether exploration, miningor processing; and plan and conduct the design,development, operation, and closure of any facility,including pollution control systems, in a mannerthat optimizes the economic use of resources whilereducing adverse environmental effects.

● Promote responsible stewardship and recyclingefforts of its products.

● Conduct regular environmental reviews,assessments and audits and act on the results.

● Acknowledge that certain areas may haveparticular ecological or cultural values as well asdevelopment potential and, in such instances,consider these values along with the economic,social, and other benefits resulting fromdevelopment.

● Support research to expand scientific knowledgeand develop improved technologies to protect theenvironment, promote the international transfer oftechnologies that mitigate adverse environmentaleffects, and use technologies and practices whichtake due account and respect of local cultures,customs and values as well as the economic andenvironmental needs.

● Recognize local communities as stakeholdersand engage with them in a process of consultationand communication regarding environmentalmanagement issues and impacts.

● Accept the responsibility of supporting resource conservation and sustainable development in all operational areas.

ENVIRONMENTAL AUDITING

Environmental auditing is a key component of thisEnvironmental Policy. This process is a systematic,

2003 Working Toward Sustainable Development APPENDIX A

objective evaluation of facility operations andpractices which is designed to:

1. Verify compliance with environmental regulations,internal policies, and accepted practices.

2. Evaluate the effectiveness of environmentalmanagement systems in place.

3. Identify and assess any reasonably foreseeablerisks associated with hazardous conditionsattributable to environmental and related factorsand provide an avenue for effective prevention andresolution.

As prescribed in the FCX Environmental AuditingProtocol, major operational facilities are to continueto be internally audited on an annual basis. Smallerfacilities, with senior management concurrence, canbe audited on a biannual basis. Periodic, externalaudits may also be deemed appropriate for certainfacilities by FCX Senior Management. The formalauditing protocol covers all aspects ofenvironmental management, programs, controls andtreatment facilities.

OVERSIGHT AND COMMUNICATION

The FCX Board of Directors Public Policy Committeeand the Board will periodically review and updatethis Environmental Policy. Based on the resultsobtained from the periodic evaluations and audits,FCX Senior Management will review and revise, asneeded, environmental objectives, environmentalprograms and the environmental managementsystem of each operating unit.

FCX will work to foster throughout the Companyand its operating affiliates a sense of responsibilityregarding the environment. FCX also recognizes itsresponsibility to communicate to the public on itsenvironmental status and progress through annualreports, publication of external audit results,notifications of all environmental certifications, andother public statements and announcements.

FREEPORT-McMoRan COPPER & GOLD INC.APPENDIX A

APPENDIX BFREEPORT-McMoRan COPPER & GOLD INC.

SOCIAL, EMPLOYMENT AND HUMANRIGHTS POLICY

GENERAL

Freeport-McMoRan Copper & Gold Inc. (FCX)believes that, as a responsible corporate citizen, itis the duty of the company and its operatingaffiliates to foster positive social and employmentrelationships in every area where they operate, andFCX is committed to continuous improvement ofthose relationships. FCX is dedicated to ensuringthat its operations are conducted in a manner thatrespects the Universal Declaration of Human Rightsand other applicable international standards ofhuman rights, the laws and regulations of the hostcountry, and the culture of the people who areindigenous to the areas in which the companyoperates. FCX will work to be a partner in the socialand economic development of the people in andaround areas of operations.

SOCIAL RELATIONSHIPS AND DEVELOPMENT

To achieve these Policy objectives, FCX and itsoperating affiliates will:

● Build relationships with people in the hostcountry and especially with people indigenous toareas of operations or exploration;

● Work continuously to understand the culture andsocial patterns of the people in the host countryand especially the people indigenous to areas ofoperations or exploration. To accomplish this, thecompany and its affiliates will undertake social,cultural and medical studies;

● Consult with local populations about important operational issues that will impact theircommunities;

● Work with the host country government, the localpeople and responsible non-governmentalorganizations to create and periodically updatesocial integration and/or sustainable development

plans for all operational sites. These plans shalladdress the issue of economic and social viabilityof each operating area after cessation ofoperations;

● Provide for periodic outside, independent auditsof the social and human rights performance of thecompany.

EMPLOYMENT

FCX and its operating affiliates will:

● Obey the laws and regulations of the hostcountry with respect to employment practices;

● Adhere to applicable international standards ofhealth and safety;

● Employ as many citizens of the host country aspracticable and will, wherever practicable, employpeople who are indigenous to the operational orexploration site;

● Provide training to citizens of the host countryand especially to those indigenous to anoperational or exploration area to prepare them foremployment in the operation;

● Promote employees on the basis of theirwillingness and ability to perform the job withoutdiscriminating on the basis of race, creed, genderor national origin. However, special efforts will bemade to train and hire people indigenous to eachoperational or exploration area.

HUMAN RIGHTS

FCX, its affiliates and employees are dedicated tothe promotion of the rule of law and protection ofhuman rights at all operational sites. The companyand its affiliates will adhere to the principles of theUniversal Declaration of Human Rights and otherapplicable international standards of human rightsand all laws of the host country wherever thecompany operates. The company and its affiliateswill:

● Educate employees about human rights;

2003 Working Toward Sustainable Development APPENDIX B

● Notify all employees that the company requiresthem to treat employees and non-employees in andaround areas of company operation with dignity andrespect;

● Take appropriate action against any employeewho violates the human rights of others;

● Report any credible accusation of a human rights violations to the appropriate government authoritiesand other agencies;

● Provide the company’s full cooperation with any responsible human rights investigation and tosupport appropriate punishment for any provenviolations;

● Protect all employees who report suspectedhuman rights violations;

● Work proactively to create a constructive climatefor promotion of human rights in all areas where itoperates by implementing programs and policiesaimed at building positive relationships, and bysetting a good example;

● Do all in its power to make certain its propertyand/or equipment is not used by any party in theviolation of human rights.

HUMAN RIGHTS REPORTING

Each operational site will have a Human RightsCompliance Officer and there will be a corporateHuman Rights Compliance Officer. The HumanRights Compliance Officers will be responsible toreceive all reports of possible human rightsviolations, to evaluate those reports and to forward them to appropriate government authoritiesand, where applicable, to non-governmentalorganizations. Each year staff employees, allsecurity employees and all community developmentemployees will be required to fill out and submit tothe corporate Human Rights Compliance Officer aHuman Rights Assurance Letter stating that theyunderstand the company’s Social and Human RightsPolicy and that they have neither taken part in anyactivities that would violate human rights nor havethey witnessed any such activities. The corporateHuman Rights Compliance Officer will make a reportto the Public Policy Committee of the FCX Board ofDirectors each year about human rights andcompliance with the company’s Social, Employmentand Human Rights Policy.

FREEPORT-McMoRan COPPER & GOLD INC.APPENDIX B

APPENDIX CFREEPORT-McMoRan COPPER & GOLD INC.

HUMAN RIGHTS POLICY AND IMPLEMENTATION

I. POLICY

The Board of Directors of Freeport-McMoRan Copper &Gold Inc. (FCX) adopted a Social and Human RightsPolicy at its meeting on February 2, 1999. As part ofthat policy, the management of FCX and its affiliates arerequired to support the human rights of all those wholive and work around the sites of FCX or any FCXaffiliate operations and to inform and educate allemployees about human rights. Also, FCX and itsaffiliates are committed to establish a mechanism bywhich employees and others can report suspectedhuman rights violations to Company management. Thefull text of the human rights portion of the FCX Socialand Human Rights Policy follows.

GENERAL

Freeport-McMoRan Copper & Gold Inc. (FCX) believesthat, as a responsible corporate citizen, it is the duty ofthe Company and its operating affiliates to fosterpositive social relationships in every area in which theyoperate, and FCX is committed to continuousimprovement of those relationships. FCX is dedicatedto ensuring that its operations are conducted in amanner that respects the Universal Declaration ofHuman Rights and other applicable internationalstandards of human rights, the laws and regulations ofthe host country, and the culture of the people who areindigenous to the areas in which the Company operates.FCX will work to be a patient partner in the social andeconomic development of the people in and around allareas of operations.

HUMAN RIGHTS

FCX, its affiliates and its employees are dedicated tothe promotion and protection of human rights. Thecompany and its affiliates will adhere to the principlesof the Universal Declaration of Human Rights and otherapplicable standards of human rights and all laws of thehost country wherever the company operates. Thecompany and its affiliates will:

● educate employees about human rights;

● notify all employees that the company requires themto treat employees and non-employees in and aroundareas of company operation with dignity and respect;

● take appropriate action against any employee whoviolates the human rights of others;

● report any credible accusation of a human rightsviolations to the appropriate government authorities andother agencies;

● provide the company’s full cooperation with any responsible human rights investigation, and to supportappropriate punishment for any proven violations;

● protect all employees who report suspected humanrights violations;

● work proactively to create a constructive climate forpromotion of human rights in all areas where itoperates by implementing programs and policies aimedat building positive relationships and by setting a goodexample; and

● do all in its power to make certain its propertyand/or equipment is not used by any party in violationof human rights.

II.POLICY IMPLEMENTATIONHUMAN RIGHTS COMPLIANCE OFFICER

The FCX Human Rights Compliance Officer will belocated at the FCX corporate headquarters in NewOrleans, Louisiana. The Compliance Officer will beassisted by on-site officers at all operational locations.The Compliance Officer and his/her assistants willreceive by telephone, electronic mail, or fax all reportsabout possible human rights violations. The ComplianceOfficer and the on-site assistants will investigate allreports of possible violations, and the ComplianceOfficer will report to the Public Policy Committee of theBoard of Directors at least annually on compliance withthe Social and Human Rights Policy. Alison Hartman isthe company-wide corporate Human Rights ComplianceOfficer.

2003 Working Toward Sustainable Development APPENDIX C

HUMAN RIGHTS DECLARATION FOR EMPLOYEES

Once each year all staff employees, all employees ofthe Security Department and all communitydevelopment employees will be asked to sign thefollowing declaration about human rights as part of theannual Assurance Letter process:“I hereby declare that I have neither participated in norwitnessed any action which deprived the human rightsof any person in or around any operations area of FCXor any FCX affiliate. I further agree during the comingyear to report to the Company’s Human RightsCompliance Officer any action I see taken either byemployees or others in or around the operations areaof FCX or any FCX affiliate that could be construed as aviolation of human rights.”

HUMAN RIGHTS-DEFINITIONS AND PROCEDURES

The Universal Declaration of Human Rights providesthe standard definition of human rights. Although theUniversal Declaration is intended to set a standard ofhuman rights for governments, it also can give generalguidance to companies and others that wish toestablish a standard for decision making whichrespects both employees and the communities in whichthey work. Of the thirty articles in the UniversalDeclaration, several are of special importance for PTFreeport Indonesia’s Social and Human Rights Policy:

Article 3: Everyone has the right to life, liberty, andsecurity of person.

Article 5: No one shall be subjected to torture or tocruel, inhuman, or degrading treatment or punishment.

Article 9: No one shall be subjected to arbitrary arrest,detention, or exile.

Article 12: No one shall be subjected to arbitraryinterference with his privacy, family, home orcorrespondence, nor attacks upon his honor andreputation. Everyone has the right to the protection ofthe law against such interference or attacks.

Employees are expected to respect these humanrights principles, and if an employee sees any of these

principles being disregarded it is the employee’sobligation to report such disregard to the HumanRights Compliance Officer.

EMPLOYEE AND CONTRACTOR GUIDANCE

There are several scenarios involving potential humanrights problems of which employees should be aware.The most difficult involves property that may beconstrued as belonging to Freeport. This includesbuildings, containers, aircraft, trucks, busses, lightvehicles and other company equipment. Under certainconditions, Indonesian law permits the police andmilitary to request the use of and/or commandeersuch equipment in cases where they believe anemergency situation exists. Even when thoseconditions do not exist, there have been times whengovernment officials have requested the use ofcompany and contractor equipment and in some cases,equipment has been commandeered. If a requestcomes from Indonesian authorities to use Freeportequipment and there is time for managementconsideration of the request, you should ask therequesting party to contact the General Manager. Ifequipment in your control is commandeered and thereis no opportunity to refer the matter to companymanagement, you should surrender the vehicle to theofficer, but you should not operate the equipment andyou should immediately notify senior management thatthe equipment has been commandeered. You shouldfully identify the equipment commandeered, where andwhen the equipment was taken, by whom (if known)and for what purpose (if known).

If you see a Freeport employee, contractor or anyoneelse behaving in such a way that you suspect that he isviolating someone’s human rights, you should note theperson’s name (if known) and department (if a Freeportemployee or contractor), the time and place in whichthe incident took place, the nature of the possibleviolation and any other information that would behelpful to the company and the authorities ininvestigating the incident. This should be reportedimmediately to the Human Rights Compliance Officer atthe employee’s work location. Generally, you shouldnot try to intervene in the incident.

FREEPORT-McMoRan COPPER & GOLD INC.APPENDIX C

APPENDIX DDECEMBER 19, 2000

VOLUNTARY PRINCIPLES ON SECURITY AND HUMAN RIGHTS

The Governments of the United States and the UnitedKingdom, companies in the extractive and energysectors ("Companies"), and non-governmentalorganizations, all with an interest in human rights andcorporate social responsibility, have engaged in adialogue on security and human rights.

The participants recognize the importance of thepromotion and protection of human rights throughoutthe world and the constructive role business and civilsociety (including non-governmental organizations,labor/trade unions and local communities) can play inadvancing these goals. Through this dialogue, theparticipants have developed the following set ofvoluntary principles to guide Companies in maintainingthe safety and security of their operations within anoperating framework that ensures respect for humanrights and fundamental freedoms. Mindful of thesegoals, the participants agree to the importance ofcontinuing this dialogue and keeping under review theseprinciples to ensure their continuing relevance andefficacy.

___________________

Acknowledging that security is a fundamental need,shared by individuals, communities, businesses andgovernments alike, and acknowledging the difficultsecurity issues faced by Companies operating globally,we recognize that security and respect for human rightscan and should be consistent;

Understanding that governments have the primary responsibility to promote and protect human rights andthat all parties to a conflict are obliged to observeapplicable international humanitarian law, we recognizethat we share the common goal of promoting respectfor human rights, particularly those set forth in theUniversal Declaration of Human Rights, andinternational humanitarian law;

Emphasizing the importance of safeguarding theintegrity of company personnel and property, Companiesrecognize a commitment to act in a manner consistentwith the laws of the countries within which they arepresent, to be mindful of the highest applicableinternational standards, and to promote the observanceof applicable international law enforcement principles(e.g., the U.N. Code of Conduct for Law Enforcement

Officials and the U.N. Basic Principles on the Use ofForce and Firearms by Law Enforcement Officials),particularly with regard to the use of force;

Taking note of the effect that Companies’ activities mayhave on local communities, we recognize the value ofengaging with civil society and host and homegovernments to contribute to the welfare of the localcommunity while mitigating any potential for conflictwhere possible;

Understanding that useful, credible information is avital component of security and human rights, werecognize the importance of sharing and understandingour respective experiences regarding, inter alia, bestsecurity practices and procedures, country human rightssituations, and public and private security, subject toconfidentiality constraints;

Acknowledging that home governments and multilateralinstitutions may, on occasion, assist host governmentswith security sector reform, developing institutionalcapacities and strengthening the rule of law, werecognize the important role Companies and civilsociety can play in supporting these efforts;

We hereby express our support for the followingvoluntary principles regarding security and human rightsin the extractive sector, which fall into three categories,risk assessment, relations with public security andrelations with private security:

RISK ASSESSMENT

The ability to assess accurately risks present in aCompany’s operating environment is critical to thesecurity of personnel, local communities and assets;the success of the Company’s short and long-termoperations; and to the promotion and protection ofhuman rights. In some circumstances, this is relativelysimple; in others, it is important to obtain extensivebackground information from different sources;monitoring and adapting to changing, complex political,economic, law enforcement, military and socialsituations; and maintaining productive relations withlocal communities and government officials.

The quality of complicated risk assessments is largelydependent on the assembling of regularly updated,credible information from a broad range of perspectives- local and national governments, security firms, othercompanies, home governments, multilateral institutionsand civil society knowledgeable about local conditions.This information may be most effective when shared to

2003 Working Toward Sustainable Development APPENDIX D

the fullest extent possible (bearing in mindconfidentiality considerations) between Companies,concerned civil society, and governments.

Bearing in mind these general principles, werecognize that accurate, effective risk assessmentsshould consider the following factors:

● Identification of security risks. Security risks canresult from political, economic, civil or social factors.Moreover, certain personnel and assets may be atgreater risk than others. Identification of security risksallows a Company to take measures to minimize riskand to assess whether Company actions may heightenrisk.

● Potential for violence. Depending on theenvironment, violence can be widespread or limited toparticular regions, and it can develop with little or nowarning. Civil society, home and host governmentrepresentatives and other sources should be consultedto identify risks presented by the potential for violence.Risk assessments should examine patterns of violencein areas of Company operations for educational,predictive and preventative purposes.

● Human rights records. Risk assessments shouldconsider the available human rights records of publicsecurity forces, paramilitaries, local and national lawenforcement, as well as the reputation of privatesecurity. Awareness of past abuses and allegations canhelp Companies to avoid recurrences as well as topromote accountability. Also, identification of thecapability of the above entities to respond to situationsof violence in a lawful manner (i.e., consistent withapplicable international standards) allows Companies todevelop appropriate measures in operatingenvironments.

● Rule of law. Risk assessments should consider thelocal prosecuting authority and judiciary’s capacity tohold accountable those responsible for human rightsabuses and for those responsible for violations ofinternational humanitarian law in a manner thatrespects the rights of the accused.

● Conflict analysis. Identification of andunderstanding the root causes and nature of localconflicts, as well as the level of adherence to humanrights and international humanitarian law standards bykey actors, can be instructive for the development ofstrategies for managing relations between the Company,local communities, Company employees and theirunions, and host governments. Risk assessmentsshould also consider the potential for future conflicts.

● Equipment transfers. Where Companies provide equipment (including lethal and non-lethal equipment) topublic or private security, they should consider the riskof such transfers, any relevant export licensingrequirements, and the feasibility of measures tomitigate foreseeable negative consequences, includingadequate controls to prevent misappropriation ordiversion of equipment which may lead to human rightsabuses. In making risk assessments, companiesshould consider any relevant past incidents involvingprevious equipment transfers.

INTERACTIONS BETWEEN COMPANIES AND PUBLICSECURITY

Although governments have the primary role ofmaintaining law and order, security and respect forhuman rights, Companies have an interest in ensuringthat actions taken by governments, particularly theactions of public security providers, are consistent withthe protection and promotion of human rights. In caseswhere there is a need to supplement security providedby host governments, Companies may be required orexpected to contribute to, or otherwise reimburse, thecosts of protecting Company facilities and personnelborne by public security. While public security isexpected to act in a manner consistent with local andnational laws as well as with human rights standardsand international humanitarian law, within this contextabuses may nevertheless occur.

In an effort to reduce the risk of such abuses and topromote respect for human rights generally, we haveidentified the following voluntary principles to guiderelationships between Companies and public securityregarding security provided to Companies:

SECURITY ARRANGEMENTS

● Companies should consult regularly with host governments and local communities about the impact oftheir security arrangements on those communities.

● Companies should communicate their policiesregarding ethical conduct and human rights to publicsecurity providers, and express their desire that securitybe provided in a manner consistent with those policiesby personnel with adequate and effective training.

● Companies should encourage host governments topermit making security arrangements transparent andaccessible to the public, subject to any overriding safetyand security concerns.

FREEPORT-McMoRan COPPER & GOLD INC.APPENDIX D

DEPLOYMENT AND CONDUCT

● The primary role of public security should be tomaintain the rule of law, including safeguarding humanrights and deterring acts that threaten Companypersonnel and facilities. The type and number of publicsecurity forces deployed should be competent,appropriate and proportional to the threat.

● Equipment imports and exports should comply withall applicable law and regulations. Companies thatprovide equipment to public security should take allappropriate and lawful measures to mitigate anyforeseeable negative consequences, including humanrights abuses and violations of internationalhumanitarian law.

● Companies should use their influence to promotethe following principles with public security:(a) individuals credibly implicated in human rightsabuses should not provide security services forCompanies; (b) force should be used only when strictlynecessary and to an extent proportional to the threat;and (c) the rights of individuals should not be violatedwhile exercising the right to exercise freedom ofassociation and peaceful assembly, the right to engagein collective bargaining, or other related rights ofCompany employees as recognized by the UniversalDeclaration of Human Rights and the ILO Declaration onFundamental Principles and Rights at Work.

● In cases where physical force is used by publicsecurity, such incidents should be reported to theappropriate authorities and to the Company. Whereforce is used, medical aid should be provided to injuredpersons, including to offenders.

CONSULTATION AND ADVICE

● Companies should hold structured meetings withpublic security on a regular basis to discuss security,human rights and related work-place safety issues.Companies should also consult regularly with otherCompanies, host and home governments, and civilsociety to discuss security and human rights. WhereCompanies operating in the same region have commonconcerns, they should consider collectively raising thoseconcerns with the host and home governments.

● In their consultations with host governments,Companies should take all appropriate measures topromote observance of applicable international lawenforcement principles, particularly those reflected inthe U.N. Code of Conduct for Law Enforcement Officials

and the U.N. Basic Principles on the Use of Force andFirearms.

● Companies should support efforts by governments,civil society and multilateral institutions to providehuman rights training and education for public securityas well as their efforts to strengthen state institutionsto ensure accountability and respect for human rights.

RESPONSES TO HUMAN RIGHTS ABUSES

● Companies should record and report any credible allegations of human rights abuses by public security intheir areas of operation to appropriate host governmentauthorities. Where appropriate, Companies should urgeinvestigation and that action be taken to prevent anyrecurrence.

● Companies should actively monitor the status of investigations and press for their proper resolution.

● Companies should, to the extent reasonable,monitor the use of equipment provided by the Companyand to investigate properly situations in which suchequipment is used in an inappropriate manner.

● Every effort should be made to ensure thatinformation used as the basis for allegations of humanrights abuses is credible and based on reliableevidence. The security and safety of sources should beprotected. Additional or more accurate information thatmay alter previous allegations should be made availableas appropriate to concerned parties.

INTERACTIONS BETWEEN COMPANIES AND PRIVATESECURITY

Where host governments are unable or unwilling to provideadequate security to protect a Company’s personnel orassets, it may be necessary to engage private securityproviders as a complement to public security. In thiscontext, private security may have to coordinate with stateforces, (law enforcement, in particular) to carry weaponsand to consider the defensive local use of force. Given therisks associated with such activities, we recognize thefollowing voluntary principles to guide private securityconduct:

● Private security should observe the policies of thecontracting Company regarding ethical conduct and humanrights; the law and professional standards of the countryin which they operate; emerging best practices developedby industry, civil society, and governments; and promotethe observance of international humanitarian law.

2003 Working Toward Sustainable Development APPENDIX D

● Private security should maintain high levels oftechnical and professional proficiency, particularly withregard to the local use of force and firearms.

● Private security should act in a lawful manner. Theyshould exercise restraint and caution in a mannerconsistent with applicable international guidelinesregarding the local use of force, including the U.N.Principles on the Use of Force and Firearms by LawEnforcement Officials and the U.N. Code of Conduct forLaw Enforcement Officials, as well as with emergingbest practices developed by Companies, civil society,and governments.

● Private security should have policies regardingappropriate conduct and the local use of force (e.g.,rules of engagement). Practice under these policiesshould be capable of being monitored by Companies or,where appropriate, by independent third parties. Suchmonitoring should encompass detailed investigationsinto allegations of abusive or unlawful acts; theavailability of disciplinary measures sufficient to preventand deter; and procedures for reporting allegations torelevant local law enforcement authorities whenappropriate.

● All allegations of human rights abuses by privatesecurity should be recorded. Credible allegationsshould be properly investigated. In those cases whereallegations against private security providers areforwarded to the relevant law enforcement authorities,Companies should actively monitor the status ofinvestigations and press for their proper resolution.

● Consistent with their function, private security shouldprovide only preventative and defensive services andshould not engage in activities exclusively theresponsibility of state military or law enforcementauthorities. Companies should designate services,technology and equipment capable of offensive anddefensive purposes as being for defensive use only.

● Private security should (a) not employ individualscredibly implicated in human rights abuses to providesecurity services; (b) use force only when strictlynecessary and to an extent proportional to the threat;and (c) not violate the rights of individuals whileexercising the right to exercise freedom of associationand peaceful assembly, to engage in collectivebargaining, or other related rights of Companyemployees as recognized by the Universal Declaration ofHuman Rights and the ILO Declaration on FundamentalPrinciples and Rights at Work.

● In cases where physical force is used, privatesecurity should properly investigate and report theincident to the Company. Private security should referthe matter to local authorities and/or take disciplinaryaction where appropriate. Where force is used, medicalaid should be provided to injured persons, including tooffenders.

● Private security should maintain the confidentiality ofinformation obtained as a result of its position assecurity provider, except where to do so wouldjeopardize the principles contained herein.

To minimize the risk that private security exceed theirauthority as providers of security, and to promoterespect for human rights generally, we have developedthe following additional voluntary principles andguidelines:

● Where appropriate, Companies should include the principles outlined above as contractual provisions in agreements with private security providers and ensurethat private security personnel are adequately trained torespect the rights of employees and the localcommunity. To the extent practicable, agreementsbetween Companies and private security should requireinvestigation of unlawful or abusive behavior andappropriate disciplinary action. Agreements should alsopermit termination of the relationship by Companieswhere there is credible evidence of unlawful or abusivebehavior by private security personnel.

● Companies should consult and monitor privatesecurity providers to ensure they fulfill their obligation toprovide security in a manner consistent with theprinciples outlined above. Where appropriate,Companies should seek to employ private securityproviders that are representative of the local population.

● Companies should review the background of private security they intend to employ, particularly with regard tothe use of excessive force. Such reviews should includean assessment of previous services provided to thehost government and whether these services raiseconcern about the private security firm’s dual role as aprivate security provider and government contractor.

● Companies should consult with other Companies,home country officials, host country officials, and civilsociety regarding experiences with private security.Where appropriate and lawful, Companies shouldfacilitate the exchange of information about unlawfulactivity and abuses committed by private securityproviders.

FREEPORT-McMoRan COPPER & GOLD INC.APPENDIX D

On the Cover: THE FACES OF THE PROGRAMS that lie at the heart of our commitment to ensure a healthy environment and strongcommunities in our area of operation in Papua, Indonesia.

Top from left : PAPUAN EMPLOYEE DEVELOPMENT, agro-forestry business development, and provision of healthcare.

Bottom from left : COMMUNITY sports programs, education and infrastructure.

Back Cover Top: NATIVE SPECIES of grasses, shrubs and trees revegetate large sections of the AjkwaDeposition Area, offering a thriving ecosystem for birds and other animals . Other portions of the tailingssediment deposition area are being actively reclaimed with trees and cash crops.

Back Cover Bottom: THE MODIFIED AJKWA DEPOSITION AREA is the engineered, managed system for deposition and control of thetailings sediment from the mining operations. Reclamation programs in soils containing tailings, including the Maurujaya ReclamationCenter, have demonstrated success in growing dozens of plants and cash crops, and supporting aquaculture and livestock projects.

2003 Working Toward Sustainable Development 2003 Working Toward Sustainable DevelopmentFREEPORT-McMoRan COPPER & GOLD INC.

Indonesia

Papua,Indonesia

Papua

GrasbergMineComplex

Jakarta

Jayapura

Tembagapura

Timika

Arafura Sea

Indian Ocean

Kuala Kencana

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THESTRENGTHOF OUR

COMMITMENT

FREEPORT-McMoRan COPPER & GOLD INC.2003 WORKING TOWARD SUSTAINABLE DEVELOPMENT REPORT

FREEPORT-McMoRan COPPER & GOLD INC.1615 POYDRAS STREETNEW ORLEANS, LOUISIANA 70112 WWW.FCX.COM

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