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From:   Tapol[SMTP:tapol@gn.apc.org]
Sent:   02 September 1996 17:26
Subject:        Critique of Dames and Moore Audit


West Papua Forum
Tel 0171-700 6189 or 0171-497 5355

PRESS RELEASE
September 2 1996

"A fossil of the sixties": Mine expert attacks environmental audit of one of
world's biggest mines

The Freeport/RTZ Grasberg copper-gold mine in West Papua (Indonesia) is one
of the biggest in the world

For nearly twenty years it has been the subject of severe criticism for its
alleged environmental pollution, danger to indigenous West Papuans and
complicity in human rights abuses. Last year, the US agency OPIC withdrew
political risk insurance from the mine, on environmental grounds.

In the face of such criticisms the company commissioned an environmental
audit from the well-known mining consultants, Dames and Moore. While
criticising Freeport/RTZ for some of its operations, Dames and Moore
nonetheless considered that a strong effort was being made to rectify the
problems. In response to the Dames and Moore audit, and suffering from heavy
political pressure from Freeport, OPIC has temporarily resumed political
risk insurance.


Now, however, a leading European geologist, with direct experience in the
region of the mine, and acknowledged as a world expert on the impacts of
copper mining, has issued a damning indictment of the Dames and Moore report.

According to this expert:

* the Dames and Moore report is "quite superficial" and hedged about with
qualifying phrases which "can justify almost any mode of operation". the
impacts of the huge amounts of rock waste from the mine have not been
properly calculated
* the highly toxic effects of copper in the marine environment have been
virtually ignored
* the site used for disposal of the wastes and the construction of levees to
contain further tailings (mill wastes) are inadequate.
* the dangers of acid rock drainage (ARD) are not properly addressed - yet
these constitute a "chemical reactor" which it will be extremely difficult
to control.
* the mine's mode of operation is a "fossil of the 1960's"


In releasing this expert's critique, a number of organisations concerned
about the Freeport/RTZ mine are calling for the immediate initiation of a
comprehensive, fully independent Environmental Impact Assessment, covering
areas neglected by the audit, before any further expansion of the mine's
operations. They include:
West Papua Forum, World Development Movement, Tapol (Indonesia Human Rights
Campaign), Minewatch, Partizans, Survival International.


THE EXPERTS report

1. Introduction

A copy of the Executive Summary of the Dames & Moore environmental audit
report on Freeport was received in early July from a British NGO. The author
of this paper was asked to briefly review the audit and make comments on the
environmental impact of the Freeport operation at Ertsberg/Grasberg in general.

Although described by its authors as an Executive Summary, the 42-pages
document now reviewed is actually entitled "PTFI Environmental Audit Report,
and to the author's knowledge, no other version is being made available for
public comment. The report is quite superficial. Important data on ore
reserves, production and volumes of residues generated are missing. Only
scant analytical data on water and sediment quality are given and important
information e.g. on the potential mobilization of copper from tailings and
waste rock deposited in the lowlands, is not included.

Following a short description of the mining project, selected aspects of
Freeport's operations at Grasberg and Ertsberg are analyzed in the order in
which they appear in the audit report.

2. Waste rock and tailings disposal by the Grasberg mine

The most critical environmental impact of Freeport's operations is the
discharge of waste rock, overburden and tailings into the head waters of the
Otomona-Ajkwa river system. The basis of any evaluation of this impact is
the calculation of the volume of rock material to be disposed of, and the
mode of disposal. Detailed information on both issues is not included in the
Dames & Moore report.

The Grasberg deposit holds reserves of about 1006 Mt of ore at 1.22 wt. %
Cu, 1,51 g/t gold, and 3.28 g/t silver (Mining Annual Review 1995), and mine
life is now put at 45 years (1990 -2035). Presently, 125,000 tons/day or 45
Mt/a (million tons/year) of ore at a cut-off grade of 0.85% copper are
processed and subsequently discharged as mill tailings. The mill is to be
expanded to a capacity of 190,000 tons/day; construction is expected to
begin later this year (Mining Journal June 14, 1996).

According to a March 1992 article in the Mining Magazine, the stripping
ratio (the relation between waste rock/overburden and ore) at the Grasberg
deposit is 4.5%, i.e. in order to extract one ton of ore, 4.5 tons of waste
rock have to be removed. Therefore, 562,500 tons of waste rock per day or
about 200 Mt/a have to be disposed of (at an ore production rate of 125,000
tons/day). However the stripping ratio of 4.5:1 probably refers to pre-ore
stripping and may eventually fall to 3.0:1. The Dames & Moore report states
that a total of 3,200 Mt of overburden and waste rock are to be removed from
the Grasberg open pit.

Overburden and waste rock go over the west side of the pit, into the upper
Wanagon valley. The Dames & Moore audit fails to report on the stability and
character of the waste dump. The description, and conclusions, given below
are based vn a visitor's observations (an American economic geologist) in
late 1994.

The Wanagon waste dump is a failing (erodible) .structure similar to the
waste dump operated at the Ok Tedi mine in the highlands of Papua New
Guinea. Given the steep slope of the dump and high rainfall at the site
(estimated at 4,000-6,000 mm/year), a significant proportion of the waste
will be washed down southwards to the Aghawagon River and Lake Wanagon. Due
to abrasion during alluvial transport, the waste rock material becomes finer
and mixes itself with the tailings downstream. It is unclear whether Lake
Wanagon acts as an effective sediment trap and what its storage capacity is.

The dewatered tailings slurry is directly discharged into the Aghawagon
river which joins with the Otomona River downstream. Presumably, all of the
tailings material is fine enough to be transported as wash load down to the
lowlands. Although the Dames & Moore report only refers to tailings
deposition in the lowlands and delta, there certainly is a significant
amount of waste rock in the mining residues transported as suspended load.

3. Review of the Dames & Moore Envionmental Audit

section 4. 0 Legislative and regulatory framework

P.T. Freeport operates under a Contract of Work (CoW) with the Government of
Indonesia. The CoW system, now in its fifth generation, has three important
features, which are (quotation from a seminar paper on "International mining
investment and regulation" held by the Centre for Petroleum & Mineral Law &
Policy, Dundee GB, in September 1995)
* Status of Law: A CoW supersedes al1 other government regulations and is
immune from the effects of any subsequent changes in legislation.
* Land Rights: A CoW takes precedence over any existing land rights.
Procedures for compensation and resettlement of local landowners are
relatively uncomplicated.
* Duration: A CoW can last up to thirty years with the possibility of
extensions. As these legal features also have implications for the
environmental management of Freeport's operation, they should have been
discussed in the audit report.

section 6. 0 Tailings Management

The statement that tailings derived from the Grasberg mine contain no toxic
chemicals and are low in trace metals like arsenic, cadmium and mercury may
be correct but is of little use: -tailings and eroded waste rock do contain
copper at highly elevated concentrations, and copper is both geochemically
mobile and highly toxic to aquatic organisms.

The conversion of the Otomona-Ajkwa freshwater resource, which had been used
for washing, bathing, river transport, fishing and - possibly - drinking
water supply for the local indigenous people, into a slurry channel carrying
several thousand milligrams per litre ol suspended solids, is much more than
"unsightly and unwelcome" and aesthetically disturbing!

The discussion of alternative methods of tailings disposal is illuminating.
The construction of a lowlands tailings storage of a calculated required
dimension of 36 km2 was rejected because of the associated environmental
risks - yet the company is now building a poorly engineered 130 km2 storage
facility on the "foundation" of a catastrophic flow event of the Ajkwa,
which flooded 30 km2 in the Timika area in 1990. The company is currently
constructing two levees about 3 km apart along the lower Ajkwa (about 40 km
length) to prevent further lateral over bank flow. The audit report quotes
sediment transport studies which indicate that most of the mining residues
will deposit in the artificial floodplain. Given the dynamic flow
characteristics of the Otomona-Ajkwa river system (very high transport
capacity at high river stages) and the fact that most tailings (Ok Tedi
mine: 78%) presumably are finer than 100 um, this is doubtful. ln any case,
storage within the levee containment will mainly be temporary because
erosion of the deposits will begin as soon as the suspended load of the
Ajkwa decreases (when mining ceases).

On the other hand, a surface of up to 130 km2 between the levees may finally
be covered with metal sulphide-rich sediments, exposed to weathering, i.e.
oxidation. The audit report fails to comment on the potential danger of
copper leaching from these deposits, although it is known to occur under
similar climatic conditions in the Fly River floodplain which is impacted by
mine-derived sediments from the Ok Tedi project. Even if dense vegetation
cover establishes itself on the Grasberg tailing sediments, copper may
continue to be mobilized since dissolved organic substances (humic and
fulvic acids produced by rotting vegetation) bring copper into solution.

section 7. 0 Overburden management

The Dames & Moore audit reports that acid rock drainage (ARD) is already
occuring from the main waste dump. ARD is caused by the bacterially mediated
oxidation of sulphide ore minerals and subsequent generation of sulphuric
acid a process which only starts when there is little or no buffering by
alkalinity-producing minerals, mainly carbonates. The reactions involved in
sulphide oxidation are complex and, to some extent, auto catalytic in that
H+ and Fe3 + ions and the heat produced in the reactions facilitate various
parts of the reaction cycle. At first sight, the development of ARD from the
Grasberg dump is amazing because the copper-gold intrusive complex is hosted
by carbonate rocks (New Guinea Limestone Group of Tertiary age, MacDonald &
Arnold 1994). Due to the morphology of the ore body, the overburden and
waste rock removed so far did not comprise carbonate rocks, which will be
mined once the open pit gets deeper. The fact that ARD has already developed
is alarming. A waste rock dump from which ARD is observed can be described
as a chemical reactor - once the sulphide oxidation has started, it is
extremely difficult to stop. The oxidation of sulphide minerals like pyrite
(FeS2) and chalcopyrite (CuFeS2) continues as long as sufficient oxygen and
water are available (supplied by air in porous rocks or by percolating
rainwater). ARD may be controlled by: preventing the
percolation/intiltration of water and oxygen by covering and sealing the
dump surface with impermeable material, e.g. clay, and establishing
vegetation to increase evaporation and surface run-off (and prevent further
erosion) - diversion of water away from acid-generating dump materials -
applying limestone (calcite) to the dump surt:ace to neutralize acidity -
application of surfactant-based selective bactericides.

All these treatment methods require a properly constructed dump with a lined
bottom, stable walls, graded surface, seepage collection dikes etc., but
will not work well on a "wild" dump like Freeport's. Huge amounts of
chemicals would be needed to control ARD in the dump and the steep, sliding
dump faces and high precipitation complicate the situation further. A
similar process of acid generation may occur in the lowlands storage
facility, although admixture of carbonate-rich natural sediments from the
Ajkwa catchment (hopefully) has a positive buttering etfect. ARD from the
tailings deposits in the floodplain of the Kawerong/Jaba rivers was observed
downstream of the Panguna mine on Bougainville, Papua New Guinea (Salomons
1995).

The measures foreseen in the "Overburden Management Plan" e.g. placement of
thick layers of non-acid producing waste over the pyritic material,
presumably will have only marginal effects on ARD generation.

section 8. 0 Resource conservation and recovery

The cut-off grade at Grasberg - i.e. the point below which ore is not
considered economic to be milled - is 0. 85 wt. % copper, the highest of any
copper mine in the world. This value is equivalent to the average ore grade
of the Ok Tedi mine, which operates at a cut-off of 0.2% copper (admittedly,
the stripping ratio of 1:1 is much better). Dumping of all ore which
contains less than 0.85% copper at Grasberg drastically increases the
environmental impact of the operation and is a waste of valuable resources
which should be a concern to the Government of Indonesia. Grasberg's
production costs are among the lowest in the world.

section 10.0 Environmental monitoring

The environmental monitoring and additional investigations of water and
sediment chemistry, sediment transport, trace metal mobilization, and
aquatic biology, which PTFI is currently maintaining, appear rudimentary
compared to what other companies (e.g. Ok Tedi Mining Ltd.) are doing. PTFI
is fulfilling its obligations under the agreements with the Indonesian
Government authorities (KPL, Environmental Monitoring Plan) but makes little
effort to address highly important issues like trace metal and turbidity
pollution of the Arafura Sea. It is interesting to note that submarine
tailings disposal was discarded because of environmental considerations -
the Arafura Sea is shallow and there are coral reefs close to the shore.
Bewilderingly, however, the continued massive discharge of tailings material
carried in suspension into that same sea is apparently not considered a problem.

section 12.0 Rehahllitation

The audit gives some information on overburden reclamation. It is unclear to
what deposits of overburden this refers to - the main waste rock and
overburden dump with its steep and sliding surfaces certainly can only be
revegetated and stabilized in small sections, but is this considered sufficient?

Due to the interruption of local surface drainage to the west of the newly
constructed Ajkwa levee (in the lowlands), a stagnant water body has formed
in which forest trees have drowned. Yet the audit report terms this the
'creation of an extensive lake and wetland system', even calling it a
'significant achievement! '

4. Concluding remarks on methodology and approach of the Dames & Moore report

The audit report frequently uses phrases like "(...) PTFl has adopted the
most suitable option considering the circumstances that appfy" (page 3).
Under "given circumstances" and "economic constraints", any mode of
operation may be justified - this is merely a political question. The
important issue is the environmental impact on a fragile and value ecosystem
in which tens of thousands of people are living, and whether it is deemed
apropriate to eliminate and/or endanger part of this ecosystem in order to
ensure the operation of one of the world's most protitable mining projects.

Today, most multinational companies apply similar or even identical
environmental standards to their projects in developing countries as they do
at home - the Freeport operation in these terms is a fossil of the 1960s.

5. References

Hettler, J. & Lehmann, B. (1995). Environmental impact of large-scale mining
in Papua New Guinea: Mining residue disposal by the Ok Tedi copper-gold
mine. Final report on a study funded by the United Nations Environment
Programme. SPREP Reports and Studies Series No. 90, 1-71.

MacDonald, G.D. & Arnold, L.C. (1994). Geological and geochemical zoning of
the Grasberg Igneous Complex, Irian Jaya, Indonesia. J. Geochem. Expl. 50,
143-178.

Salomons, W. (1995). Environmental impact of metals derived from mining
activities: Processes, predictions and prevention. J. Geochem. Expl. 52, 5-23.

various articles from the Mining Journal, Mining Magazine and Mining
Environmental Management

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