Shared Commitments Shared Opportunities Working Toward Sustainable Development PT FREEPORT INDONESIA 2007 Working Toward Sustainable Development Report To Our Stakeholders 1 Shared Commitments– Shared Opportunities Our sustainable development programs are based on our commitments designed to provide the foundation for strong and enduring communities and opportunities for the future. Cover photo: An overhead look at a coniferous forest established in the tailings deposition area in the lowlands portion of the PT Freeport Indonesia project area. Photo on this page: A ground level view of the same reclamation project showing legume cover crops planted for use as biomass to accelerate the formation of soils for future productive agriculture. The individuals pictured on this page are among those featured in this report who participate in our progressive sustainable development programs. Semmy Yapsawakei, pg 13 Kerry Yarangga, pg 15 Sipriana Tawer, pg 19 CONTENTS To Our Stakeholders 3 Safety 27 State of the Art Technology Offers New Eyes Sustainability Policies and Commitments 5 on Safe Production 29 Economic Impacts 7 Environmental Management 31 Social Change and Development 11 Our Environmental Commitments 31 Social and Cultural Commitments 11 Environmental Audits 31 Building Mutually Beneficial Relationships 11 Tailings Management Program 33 Human Rights Commitment and Initiatives 12 Tailings Pave the Way for Regional Development 34 Long-time Freeport Staffer Leads Human Rights Reclamation And Revegetation 34 Compliance Initiative 13 Local Entrepreneurs Establish Roots In Social and Human Rights Performance Audit– Reclamation Project 36 2007 Update 13 Overburden and Acid Rock Drainage Management 38 Healthy Community Initiatives 14 Long-Term Environmental Monitoring Program 39 Public Health Education Bridges an Ocean 15 Waste Management and Recycling 42 Freeport Partnership Fund for Community Mine Closure 43 Development 15 Public Education And Awareness 43 Building Coalitions to Build Communities 17 A New Generation of Ideas on Climate Change 43 Training, Education and Papuan Development 18 Planting Seedlings–Sowing Inspiration 44 Young Drivers Take to High Road to Success 19 Biodiversity 45 Business Development 20 A Jump-Start To A Journey Home 47 Entrepreneurual Spirit–Building A New Mimika 21 Land Rights Recognition 22 Corporate Governance and Business Ethics 23 Provision of Security 24 Freeport Cares: Encouraging Employee Engagement with Local Communities 25 Items in italics indicate profiles or case studies. Sekinus Murib, pg 21 Herman Apoka, pg 36 Yosep Operawiri, pg 36 Contents 1 PT FREEPORT INDONESIA 2007 WTSD Report Working Toward Sustainable Development As one of the world’s leading producers of copper and gold, we recognize the importance of providing these essential metals to today’s economies. We have an obligation to do so in balance with our corporate and social responsibilities in order to safeguard future generations. Photo: Tsinga village, Mimika Regency 2 To Our Stakeholders To Our Stakeholders We are committed to providing opportunities for social, educational and economic development, while minimizing and mitigating our impact on the environment. Through our commitments to the The large investment required to develop • Contributed $53 million attributable governments of Indonesia, Papua Province the world-class Grasberg Mine, which to 2007 and nearly $300 million since and Mimika Regency, PT Freeport has produced these benefits, would not 1996 to the Freeport Partnership Fund Indonesia is able to provide substantial be possible without the certainty of our for Community Development, which is economic benefits and opportunities long-term contract with the Government of managed by a board of local Papuan for the people of Indonesia, Papua and Indonesia. Under our current Contract of leaders and has helped build schools Mimika. This report, titled “Shared Work, PT Freeport Indonesia: and dormitories, hospitals, places of Commitments; Shared Opportunities,” is • Invested over $5 billion to build com- worship, housing and community facili- the 2007 PT Freeport Indonesia Working pany infrastructure in Papua, including ties in Papua. Toward Sustainable Development Report. towns, electricity generation facilities, In the following pages, you will find seaports and airports, roads, bridges, Throughout the world, developing nations considerable information detailing our tunnels, waste disposal facilities, are bringing modernity to their citizens commitments and the economic benefits modern communications systems and and this creates tremendous demand for and opportunities that derive from our other infrastructure, most of which will the copper we produce at our Grasberg operations. revert to the Indonesian government at mining operations, which contain the the end of our contract term. largest single reserves of both copper The taxes, royalties, dividends and fees • Directly employed almost 9,800 people and gold in the world. We are proud to we paid to the Government of Indonesia in 2007. Of these, 98 percent are Indo- serve in this important role in the global in 2007 alone totaled approximately $1.8 nesian and almost 28 percent are from economy and both humbled and honored billion. Since our current contract with the Indonesian province of Papua. The to be managing these important natural the Indonesian government began in payroll for our employees has totaled resources, which have been declared a 1992, these direct government benefits to approximately $1.4 billion since 1992. vital national asset in Indonesia. Indonesia have totaled nearly $7 billion. • Provided indirect employment through The benefits provided by our contract contractors, privatized companies and At the same time, we recognize that as generally exceed those received by others serving our operations, which responsible stewards of these important other countries with substantial mining totaled 10,800 workers in 2007, mean- assets, we must balance the economic operations. Our corporate tax rate is ing that the total of those employed by need for our products with social and fixed at 35% by our contract, which is or serving our operations in Indonesia environmental considerations, so that, significantly higher than other businesses at the end of 2007 was approximately in meeting the demands of the present in Indonesia and the royalty rate on copper 20,600. generation, we do not impair the lives of produced from our operations at current • Purchased more than $5 billion of do- future generations. This is the core concept prices is 3.5%, which is among the highest mestically sourced goods and services. of sustainable development. We embrace royalty rates of any mineral producing • Accounted for 2.4 percent, 45 percent this responsibility both as one of our country. and 96 percent of the gross domestic principal duties as a corporate citizen and product (GDP) for the country of Indo- as a sound and prudent business practice. PT Freeport Indonesia’s operations have nesia, Papua Province and Kabupaten Working toward sustainable development contributed to Indonesia and Papua in Mimika respectively in 2007. in our business operations and programs many other ways since 1992 as well. • Contributed over $54 billion to national helps ensure healthy environments for our Our voluntary support for community GDP in total since 1992. workforce and vibrant communities in our development and recognition for • Paid taxes that accounted for 2.34 per- areas of operation, which are vital to our local community land rights and our cent of the Indonesian national budget. ongoing success. expenditures on our comprehensive • Accounted for 1.3 percent of all environmental management programs are household income in Indonesia and 25 substantial. percent of the household income in the Papua Province. To Our Stakeholders 3 PT FREEPORT INDONESIA 2007 WTSD Report At PT Freeport Indonesia, we have a programs through periodic independent Most importantly, this report puts human strong Environmental Policy and a Social, audits, the results of which are made faces on these efforts — introducing you Employment and Human Rights Policy publicly available to our stakeholders. to some of the individuals who work to which guide us on the path toward Our stakeholders include the Government implement these progressive programs sustainable development. We recognize of Indonesia, the Province of Papua, leading to sustainable development. They the significant challenges we must Kabupaten Mimika and neighboring share our commitment and together we overcome to stay on that path and are communities — who all have a stake in are working for a bright future for all our cognizant that our mining operations have seeing that our contributions result in stakeholders. impacts on the surrounding environment a sustainable future that benefits all. and neighboring communities. Our We maintain a regular dialogue with our Sincerely, responsibility and commitment is to stakeholders to ensure mutual success. minimize and mitigate environmental impacts and to maximize the beneficial Our commitment to sustainable economic and social results of our development is significant. We invested operations. over $140 million in sustainable development programs during 2007 Armando Mahler This is not a static commitment expressed in Papua, including $36 million on President Director and CEO through rigid programs. We are committed environmental management and $106 PT Freeport Indonesia to continuous improvement in our