Tenke Fungurume

World-class copper/cobalt project 10˚

20˚

30˚

40˚

An investment in the future of the Democratic Republic of the Congo

50˚

60˚

70˚

50˚

Slovakia

Liech.

Austria Slovenia

Moldova

Hungary

Romania

Croatia Bosnia & Herz.

San Marino

Serbia

Montenegro

a Italy

Inside:

Ukraine

Czech Rep.

Switz.

Kazakhstan

Poland

Bel. Lux.

Russia

Belarus

Germany

Neth.

Albania

Georgia

Bulgaria

Armenia

Macedonia

40˚

Azerbaijan

Greece

• One of the largest undeveloped copper/cobalt deposits in the world.

Turkey

Malta

Cyprus

Tunisia

Syria

DRC Businesses 23%

Government 31%

Iran

Lebanon Iraq Israel

• Significant impact to the DRC with jobs, taxes, infrastructure, business Kuwait development and state ownership Bahrain participation. 30˚

Jordan

i a

nea

• New mine under construction with Uzbekistan initial production by late 2008 or earlyTurkmenistan 2009.

L i b y a

Qatar

Egypt

U. A. E.

• Strong commitment to safety, Saudi Arabia environmental standards and sustainableOmandevelopment.

TMC 12%

Gecamines 9%

Phelps Dodge 26%

20˚

C h a d N i g e r S u d a n

• Y e mCommunity programs already under en way related to health, education, infrastructure and more. Dijbouti

Eritrea

10˚

Ethiopia

Central Africa Republic

Nigeria

Phelps Dodge and Tenke Mining are providing 100 percent of the initial US$650 million investment. However, over the life of the project, more than 60 percent of the cash generated stays in the DRC through taxes, royalties, salaries, purchases, etc.

Somalia

Cameroon

Kenya

Gabon

Uganda Congo

0˚

Rwanda Burundi Democratic Republic of the Congo

Tanzania

TENKE FUNGURUME

Seychelles

Angola

10˚

Comoros

Lobito 1949 km

Malawi Zambia Mozambique

Namibia

Tenke Fungurume Mining S.A.R.L.

Madagascar

Zimbabwe Beira 2776 km

NRC 7325-IDN 6-118-K30745D 20˚

Botswana Walvis Bay 2758 km



A commitment to responsible development It’s an exciting time for mining and the DRC The successful elections of 2006 were important milestones for the people of the Democratic Republic of Congo. As we have worked to develop the Tenke Fungurume copper/ cobalt project, we have had good support from the government, are pleased with the progress being made, and are excited about the future of the mine and the nation. Projects like Tenke Fungurume are essential Claude Polet as the DRC strives to improve the quality of life of its people and to further enhance the stability of the country. The DRC government recognizes this fact. It was through the cooperation of the various elements of the transitional government, and now the elected government, that the project has been able to proceed. Construction began late 2006, and we plan to be in production by late 2008 or in early 2009. We are grateful for the cooperation of local residents, the national government and so many others who are working to make this project a success for all involved. • We are looking forward to a close cooperation with the elected government and the newly elected Katangan Parliament. • We recognized the key role of the Mines Cadaster in Kinshasa, and at the provincial and local level, who have made major contributions to the project. • Local towns are working with us to develop education and other resources for the people in the area. • We are committed to developing the project in an environmentally and socially responsible manner that contributes significantly to the quality of life for the people of the DRC. • We’re employing some of the world’s top firms to help us: GRD Minproc (feasibility study), Golder Associates (environmental), Arcadis (social) and others. • The mine itself will provide good jobs and will generate significant tax revenue. Beyond that, we believe we have a responsibility to help with other issues, including health, safety and education. And we know the mine must be developed with modern, world-class environmental standards.

Quick Facts

Tenke Fungurume Project Location: In Katanga Province, about 180 km (112 miles) northwest of the provincial capital, Lubumbashi. Concession size: Approximately 1,600 sq km (approx. 600 sq miles). Operator: Phelps Dodge Mining Company Ownership of Tenke Fungurume Mining S.A.R.L. : Phelps Dodge

57.75%

Tenke Mining Corp.

24.75%

State-owned Gecamines

17.5%

Benefits to the DRC: • Significant initial capital investment – US $650 million.

• Education, schools.

• 1,100+ permanent employees and 4 to 6 indirect employees per direct employee.

• Engine for industry growth in Katanga – regional support.

• 1,200 – 2,400 contractor employees during two-year construction.

• Power generation and transmission system.

Once operating, we project that between 60 percent and 65 percent of the cash generated by the initial project will flow to Congolese entities in the form of taxes and royalties paid to the government, in dividends and transfer bonus payments made to Gecamines, and in local salaries and payments made to DRC businesses for goods

• Corporate income tax • Withholding taxes • Export duties

DRC Businesses 23%

Government 31%

• Import duties

Gecamines (Congolese state mining company)

TMC 12%

Gecamines 9%

Phelps Dodge 26%

• Annual common dividend (17.5% ownership)

DRC Businesses and Citizens • Electric power (SNEL) • Labor (~1,100 employees) • DRC consumables and others • Transportation and other services



and services. The mine’s initial production will be 115,000 tons per year of copper and 8,000 tons per year of cobalt. It should be noted that we anticipate reinvesting and expanding the initial facility if feasibility studies prove to be positive. Projections are that the first such expansion could occur sometime after 2012.

Democratic Republic of Congo Government

• Transfer bonus payments

The DRC population is estimated at more than 56 million.

• Agriculture.

More than 60 percent of cash to stay in the DRC

Sincerely,

CONGO FACT

• Associated sustainable development projects. • Small business initiatives – aggregate and limestone quarries, waste management, brick and fence manufacturing.

• Significant investment in local and regional infrastructure.

• Local development fund

Claude Polet Managing Director Tenke Fungurume Mining S.A.R.L.

• Health care and clinics.

• 40+ years of operation.

• Mining royalty These efforts already are providing meaningful benefits to the region. Learn more about those benefits and details of our project in this special report.

• Major improvement to national highway and regional roads.

Phelps Dodge and Tenke Mining are providing 100 percent of the initial US$650 million investment. However, over the life of the project, more than 60 percent of the cash generated stays in the DRC through taxes, royalties, salaries, purchases, etc.

TFM’s Commitments TFM is committed to developing the Tenke Fungurume project in a manner that supports basic needs, infrastructure and employment in the DRC and that expands the capacity of the local area to build and manage its own future. A set of formal principles is guiding us: • Equator Principles Fungurume school under construction; students lining up for classes.

• Voluntary Principles — Security and Human Rights

Community development projects already under way

• WHO water quality criteria and IFC guidelines • Extractive Industries Transparency Initiative

Agriculture, water, education among priorities As the Tenke Fungurume project has been under development, community leaders and nearby residents have been surveyed to establish a baseline of community needs. The public consultation process revealed the following needs: • Agricultural support • Health facilities • Education facilities • Road infrastructure and transportation • Safe drinking water and sanitation • Housing

• Electricity

• TFM social programs managed by NGOs

• Communication infrastructure and facilities Tenke Fungurume Mining is preparing a community development plan to make sure that social development takes place in a sustainable manner and helps provide for the needs of the local communities. Some projects already are under way. Three schools – two new, and one renovated – are now providing education for some 900 primary students from the region. TFM built the schools, and the local communities run them.

• Phelps Dodge high corporate standards

Oxen provided for farmers.

Ten community water wells are being developed to improve the quality and supply of drinking water. The wells will be constructed in the villages of Mpala, Pumpi, Mutaka, Kafwaya, Salabwe, Mwanga Kakunta, Kamungu Kitambo/Kabombwa, Kamungu Mulowa, Kwatebala Gare and Nguba. One of the more ambitious programs is to help improve agricultural production for a sustainable future. Thirty pair of oxen, along with seed and fertilizer, are being provided to farmers selected through village committees. The program was developed in cooperation with the Oeuvre Missionaire Ekumene Lokotola. The mission will purchase additional oxen and extend the project to more farmers as the first crops are produced.

Examples of commitments already made include: • A portion of net sales revenue from production will be set aside in a trust fund for local development. • TFM observes fundamental human rights and will preserve the dignity of all individuals within its area of operations. • TFM management and employees receive anti-corruption training. Corruption or bribery will not be tolerated. • TFM will not employ child labor. • TFM already provides employment opportunities to women, and will continue to do so.

Clean water for communities.

Public participation has been central to the process More than 120 meetings, open houses Public input is an essential element in creating the Environmental and Social Impact Statement for the Tenke Fungurume project. Scoping meetings began in February 2006, and final open houses for public

comments were conducted Nov. 29 – Dec. 2, 2006, in Lubumbashi, Tenke, Fungurume, Kolwezi and the villages of Lukotola, Mulumbu and Kilusonsa.

Public input was sought throughout the planning process. 

How the work will be done

TFM will use modern mining equipment and technology The mine plans to begin operation using open-pit mining technologies and an agitated leaching process. Material is ground in a mill, then sent to large tanks where it is leached. The resulting metal-bearing solution is then processed to produce copper and cobalt products. The remaining material is sent to a tailing impoundment. The process is efficient with high-grade ores and produces solution in a matter of hours, versus the 90 days or more required for traditional heap leaching. Cobalt is produced as a byproduct.

There eventually will be three open-pit operations, at Kwatebala Hill, Goma Hill and Fwaula. Total material mined per day will be about 55,000 tons, including 7,000 tons of ore, with the remainder being overburden and low-grade material stockpiled for processing at some point in the future. The plant will include a sulfuric acid plant, solution ponds (lined to prevent seepage to groundwater) and a system to recycle water from the tailing dam, so that it can be used again. Other infrastructure to be built will include groundwater wells, sewage treatment plants,

access roads, power lines, and permanent housing for employees. Some explosives will be used to remove surface rock to get access to the ore. Surface mining equipment will then be used to break rocks, instead of using explosives, thereby reducing dust. The broken rock will be loaded by front-end loaders. The mill grinds the ore to a finer material from which copper and cobalt can be extracted.

and cobalt are removed – will be sent by pipeline to a tailing impoundment. The solution will be neutralized with lime. The impoundment will be the first lined tailing facility in the DRC, protecting against seepage into groundwater. Inside the processing plant, the copper and cobalt will be extracted by hydrometallurgy, a process in which metals are extracted from the ore into liquid solutions and then deposited onto plates in pure form, using electric currents. No smelter is required.

Tailing – the rock and other material left over after the copper

The agitated leaching process is efficient with high-grade ores and produces solution bearing copper and cobalt in a matter of hours, versus the 90 days or more required for traditional heap leaching.

The mining process Surface mining vehicle

Copper/Cobalt Ore from Mine

Crushing and Grinding

Whole Ore Agitated Leaching

Tailings Neutralization Residue to Disposal

Copper cathode

Thickening and Counter Current Decantation First and Second Stage Impurity Removal Solvent Extraction Cobalt Hydroxide Precipitation

Copper Cathode to Market



Electrowinning

Cobalt Refinery

Intermediate Product to Market

Cobalt Metal to Market

Nara Kita

u

Mopti

Bamako

Douentza Deou

Kindia ierra eone

Niamey

Dori Burkina Faso

Guinea Wa

Korhogo Cote d'Ivoire

amoussoukro

Kara Togo

Lome Ghana

Abidjan

Nigeria

Accra

Nyala

Deb

Kadugli At 2,345,410 sq km (905,567 sq miles), the DRC is Birao comparable in size to Western Europe. Malakal

Garoua

Addi

Porto-Novo Lagos

Kosti

El Obeid Bongor

Abuja

Sokode

Wa

Abeche

Mongo N'Djamena CONGO FACT

Kaduna

Parakou

Ed Dueim

Guereda

Ati

Diffa

Dosso Benin

Bol

Iriba

Biltine

Mao

Zinder

Ouagadougou

Bobo-Dioulasso

Buchanan via Liberia Greenville Harper Tabou

Tanout

Tahoua

CENTRAL AFRICA REPUBLIC

Aba

Malabo

CAMEROON

Equatorial Guinea Sao Tome & Principe

Kisangani

GABON

UGANDA CONGO

Bandundu

RWANDA

Bukavu

DEMOCRATIC REPUBLIC OF THE CONGO

BURUNDI

Kinshasa Kananga

Matadi

Mbuji-mayi TENKE FUNGURUME

ANGOLA

Kolwezi

Lubumbashi

MALAW

ZAMBIA

Lubango is named for two small communities that border the mine area, NamibeTenke Fungurume which is located between the major cities of Lubumbashi and Kolwezi in the

in the southern area of the DRC. Tombua Katanga Province Xangongo

Ondjiva Ondangwa

Harare

Bindura

Kwekwe ZIMBABWE

Tsumeb

Outjo Khorixas Omaruru

Blantyre

Bulawayo

NAMIBIA

Mutare

Gweru

Francistown

WindhoekBOTSWANA Swakopmund

Pietersburg

Aranos

Gaborone

Maltahohe Keetmanshoop Luderitz

Mmabatho

Aus

SOUTH AFRICA

Kimberley Oranjemund

De Aar

A Katangan village.

Cape Town

How mining is done 10˚

Mining and Grinding

Overburden and low-grade ores are removed and set aside in stockpiles. The high-grade ore is mined using surface miners that crush the rock to a consistency suitable for milling. The crushed material is loaded by front-end loaders into haul trucks and taken to the mill where it is ground to a powder.

0˚

Agitated Leaching

The milled material is sent to large tanks where it is constantly stirred and leached with a weak acidic solution. The remaining material is neutralized with lime and is sent into a lined tailing impoundment. Cobalt is produced as a byproduct.

Durban Port Saint Johns

East London

Wellington

10˚

Solvent Extraction

LESOTHO

Umtata

Uitenhage

Chibut

Mapu Mbabane SWAZILAND Maseru

Queenstown

Vredenburg

Phelps Dodge is helping to renovate a hydroelectric facility as part of its commitment to help restore and expand the basic infrastructure of the area.

Pretoria

Bloemfontein Calvinia

Messina Homoine

The copper/cobalt-bearing solution is mixed with a product similar to kerosene that contains an organic compound specifically designed to extract the metals. This process produces an even richer copperbearing solution that is ready to be shipped to an electrowinning tankhouse.

Port Elizabeth

20˚

30˚

Electrowinning

In this final step, the rich electrolyte is pumped through a series of tanks or “cells” in the electrowinning tankhouse. Copper from the solution is formed into metal sheets. These sheets, called cathodes, are 99.999 percent pure copper. The solution that has passed through the tankhouse, now depleted of its copper, is recycled for further use. A similar process produces cobalt.



Developing world requires more copper to improve quality of life It’s easy for the developed world to take the benefits of mining for granted, but there are 2.5 billion people in the world without electricity. Mining makes it possible to bring clean water, energy and education to more and more people. The American Southwest, South America, Indonesia, the DRC and other mining regions help provide the building blocks of modern societies. In 2003, China became the world’s largest consumer of

copper, surpassing the United States. In a few years, India may be right behind. Responding to worldwide demand, copper prices and molybdenum prices set alltime highs this year. History tells us that prices go up and they go down. Phelps Dodge is managing its resources for the long term. We’re focused on safety and efficiency at our existing operations. We’re developing new mining properties in the United States, South America and Africa. We’re exploring around the world for new deposits.

Copper Consumption: Dramatic Shift to China World 990 0.9 Million Metric Tons

8% Rest of World % North America

9% Western Europe

6% Asia Pacific

6% China

World 005 6.9 Million Metric Tons

% Rest % % of % World Western Rest of Western Europe 6% World Europe North 6% America North 7% America Asia 7% Pacific % Asia China Pacific % China

Copper and cobalt are essential building blocks of modern life... Uses of Copper

Cobalt End Uses Construction -– 7% 37% Construction

% %

7%

Alloys and super alloys – 29%

8% 9%

Electronic Products -– 6% 26% Electronic

9%

9%

Catalysts – 11%

Industrial Machinery Machinery -– 5% 15% Industrial

5%

Hard Materials (carbides) – 11%

%

6%

Transportation -– % 11% Transportation

Batteries – 23%

%

%

Pigments – 9% Magnetic materials – 9%

Consumer Products Products -– % 11% Consumer

Tires – 8%

Freeport-McMoRan and Phelps Dodge join to create world’s largest publicly traded copper producer Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) and Phelps Dodge Corp. merged March 19, 2007, to create the world’s largest publicly traded copper producer – and second largest overall behind stateowned Codelco of Chile. The combined company is a new industry leader with large, long-lived, geographically diverse assets and significant proven and probable reserves of copper, gold and molybdenum. The company’s increased scale of operations, management depth and strengthened cash flow will provide an improved platform to capitalize on growth opportunities in the global market. The new company is the largest North American-based mining company. It enjoys one of the most geographically diversified portfolios of 

is the world’s largest copper and gold mine in terms of reserves, and mines in operation or under development in North and South America, and Africa, including the world-class Tenke Fungurume development project in the DRC. James R. Moffett, chairman of the board of FCX, said: “This transaction combines two leading mining companies to form a strong FCX corporate headquarters in Phoenix, Arizona, USA. industry leader at a time when we see significant operating, expansion and growth long-term opportunities in our projects in the copper mining industry. FCX has been built industry. Operations include through our exploration and the world-class Grasberg mine, located in Papua, Indonesia, which development capabilities, and we

will focus on aggressively pursuing opportunities in the extensive Phelps Dodge asset portfolio.” Richard C. Adkerson, FCX’s president and chief executive officer, said: “Together, FCX and Phelps Dodge will have the size, management depth and financial strength to optimize existing operations and accelerate our growth by aggressively pursuing promising new development projects, exploration and acquisitions. We are enthusiastic about the addition of Phelps Dodge’s highly regarded mining team, which will complement our existing organization, and are delighted to welcome Phelps Dodge’s talented team to the FCX family.” Assets US$40.7 billion (Pro forma Sept. 30, 2006, unaudited. Joint Proxy Statement.)

CONGO FACT An estimated 242 languages are spoken in the DRC. French and Swahili are predominant in the Tenke Fungurume area.

What do Phelps Dodge employees mean when they say Zero and Beyond? The only acceptable goal for safety incidents or injuries at any Phelps Dodge property is zero. The same philosophy should be true for our families and our communities. To capture that idea, Phelps Dodge implemented an initiative called Zero and Beyond—zero incidents not only at work but beyond the workplace as well.

Phelps Dodge sites share a commitment to safety, whether in the U.S. or abroad.

Total Recordable Incident Rate Recordable injuries per 100 workers per year (200,000 work hours) Construction Agriculture, Forestry, Fishing and Hunting Manufacturing Education and Health Services YEAR 2004

Trade, Transportation and Utilities Leisure and Hospitality Mining Services Real Estate Phelps Dodge Finance and Insurance

0

1

2

3

4

5

6

7

8

Recordable injuries per 100 workers per year Sources: U.S. Bureau of Labor Statistics, Phelps Dodge

Phelps Dodge requires extensive safety training of its employees to meet our own requirements and those of appropriate agencies worldwide. Regular refresher courses are required to ensure employees are up to date. Every meeting at Phelps Dodge—whether in a mine or at corporate headquarters —begins with a safety share, which can be a reminder of

specific safety procedures or a report of how a safety issue elsewhere was addressed. The mining industry, and Phelps Dodge in particular, has an overall safety record as good as or better than many other industries. But we aren’t at zero, and because we work with such huge, powerful equipment in rugged environments, mining accidents can be serious when they happen. One of the worst things any company interested in safety can do is to become complacent or too proud of its past safety record.

Bringing the Congo culture to America Phelps Dodge sponsored the WACONGO Dance Company, many of whose members come from the DRC, on a visit to Safford, Arizona, where the company also has a new copper mine under development. During one performance Congo drummers invited students from Fort Thomas Elementary School, which serves the nearby San Carlos Apache Reservation, to join them on stage.



Freeport-McMoRan and Phelps Dodge mining locations Freeport-McMoRan, parent company of Phelps Dodge, owns and operates the Grasberg Mine in Indonesia, the world’s largest gold mine and third-largest copper mine. Phelps Dodge produces about 55 percent of its copper in the United States, where it is the largest producer, and about 45 percent in Chile and Peru. Phelps Dodge also has molybdenum mines in the United States and produces molybdenum as a byproduct at three of its mines in the United States and its mine in Peru. Expansions and new development are needed both to replace declining reserves and to meet increasing worldwide demand.

Under construction at the Morenci Mine is the world’s first commercial-scale concentrate leaching facility, which eliminates the need for smelting and refining of certain types of ores. In a related project, the mine’s World War II-era mill and concentrator, idle since 1999, is being restarted.

Some of the remaining buildings from a former underground mine near Safford, Ariz., will be adapted for use in a new open-pit copper mine proposed to begin production in 2008. Construction began in August 2006.

Capacity at the Henderson molybdenum mine near Empire, Colo., (above) was increased in 2006. We have announced plans to modernize and resume production at the Climax molybdenum mine near Leadville, Colo., in 2009.

Colorado: • Henderson • Climax

New Mexico: • Tyrone • Chino

Arizona: • Morenci • Safford • Sierrita • Bagdad Miami (smelter) • Plus production from existing stockpiles at Bisbee and Tohono

Peru: • Cerro Verde

The proposed Tenke Fungurume copper/cobalt mine in the Democratic Republic of the Congo could begin production in late 2008 or early 2009. Consultants for Phelps Dodge are visiting with families and communities in the area to establish a baseline of economic and social needs.

Democratic Republic of Congo: • Tenke Fungurume

Chile: • El Abra • Candelaria • Ojos Del Salado

• Copper • Molybdenum • Copper and Molybdenum • Copper and Cobalt

The Grasberg Mine Papua, Indonesia, is the world’s largest copper and gold mine.

Papua Indonesia: • FCX Grasberg Mine