Perched high in the rugged highlands of the Sudirman Mountain range in this Indonesian province is one of the richest and most remote copper-gold mining operations in the world. It may also be the world’s lowest-cost copper producer.
The Grasberg mine was host to some 51.3 billion lbs. copper, 64.2 million oz. gold and 153.1 million oz. silver at the end of 1998. The recoverable metal is contained in six separate deposits for a total proven and probable reserve of 2.48 billion tonnes grading 1.13% copper, plus 1.05 grams gold and 3.83 grams silver per tonne.
Recoverable reserve estimates are based on a copper price of US90 cents per lb. and a gold price of US$325 per oz. Using prices of US75 cents per lb. copper and US$280 per oz. gold diminishes the recoverable metal by about 9% for copper, 7% for gold and 9% for silver.
New Orleans-based
A decade of expansion through the 1990s has taken Grasberg beyond a daily throughput of 200,000 tonnes. Low metal prices and uncertain market conditions, brought on by economic and political instability in Indonesia have put any talk of further expansion on the back burner. Instead, Freeport has hunkered down and directed its efforts toward boosting the performance of its expanded milling facilities. The company eliminated quarterly cash dividends on common stocks in December 1998 to ensure it had the cash flow to continue to invest in operations and maintain its exploration program, while still reducing its overall debt, which stood at US$2.4 billion at the end of 1998.
Freeport was rewarded for its efforts in the third quarter of 1999, with cash production costs falling to US8 cents per lb. copper, net of gold and silver credits. Total production costs, including depreciation and amortization, were US26 cents per lb. during the quarter. For the first nine months of 1999, cash and total costs were a respective US9.1 cents and US27.1 cents per lb., compared with US16.2 cents and US33.2 cents per lb. for the corresponding period in 1998.
The operations, during the first nine months of 1999, produced about 1.2 billion lbs. copper, 2.3 million oz. gold and 2.7 million oz. silver, versus 1.2 billion lbs. copper, 1.8 million oz. gold and 2.7 million oz. silver in the corresponding period of 1998. Daily mill throughput has averaged 220,100 tonnes at a grade of 1.14% copper, 1.37 grams gold and 2.81 grams silver, compared with 191,700 tonnes averaging 1.24% copper, 1.28 grams gold and 2.86 grams silver. In 1999, Grasberg is on target to produce approximately 1.7 billion lbs. copper and 2.8 million oz. gold, of which PT-FI’s share is estimated to be 1.4 billion lbs. copper and 2.3 million oz. gold.
London-based
The PT-FI CoW includes the original 10-sq.-km Block A, which contains all of the ore reserves, and Block B, which covers 13,000 sq. km in the central highlands and includes the 5.7-million-oz. Wabu gold prospect, which averages 2.4 grams. The Eastern Mining CoW is held through another Freeport subsidiary, P.T. Irja Eastern Minerals., and covers 7,500 sq. km on the western and northern flanks of the highlands.
In addition, Freeport can earn an indirect interest in a CoW held by P.T. Nabire Bakti Mining, covering 1 million acres in five blocks contiguous to the PT-FI and Eastern Mining CoWs.
PT-FI’s mining complex was Indonesia’s first copper mining project, as well as the first major foreign investment in Indonesia following the economic development program instituted by the government in 1967. PT-FI was founded on the discovery of Ertsberg, a massive black outcropping of copper minerals high in the mountains of Irian Jaya, first discovered in 1936 by Jean-Jacques Dozy during an expedition for oil. The 180-metre-high outcrop sat on the edge of a glacial valley, 96 km north of what is now the port of Amamapare. A description of the find, published in 1939 in the Leiden Journal of Geology, went unnoticed until it was brought to the attention of Freeport Sulphur’s exploration manager, Forbes Wilson, in 1959. The following year, Wilson and Del Flint, Freeport’s chief field geologist, led an expedition to evaluate and sample Ertsberg. Some 300 kg of chip samples yielded 40-50% iron, mainly in the form of iron oxide and magnetite, and 3.5% copper, consisting primarily of chalcopyrite and bornite.
Freeport sat on its find for much of the 1960s while the western half of New Guinea underwent political changes. In the latter part of 1962, the Dutch handed over the territory to the United Nations, which, in turn, transferred it to Indonesia in 1963. The policies of then-president Achmed Sukarno were left-leaning and hostile to foreign ownership, forcing Freeport to shelve its exploration plans. After a failed communist coup in 1965, General Suharto rose to power and began courting foreign investment.
In April 1967, Freeport was granted the first CoW under the new foreign investment law. Exploration drilling began on Ertsberg in December 1967 and, after an initial 7,500 metres of diamond drilling, a resource was estimated at 33 million tons grading 2.5% copper. A final feasibility report was based on mining Ertsberg by open-pit, milling the ore on site at an initial rate of 3,700 tonnes per day and piping the concentrate slurry to the coast. Capital costs were initially estimated at US$100-120 million, though the final tally was US$200 million.
After securing long-term sales contracts and a loan package that involved 30 different lenders, full-scale construction began in May 1970. The project required that a 101-km access road be built from the port site through the swamps of the Jaramaya River and up the steep mountainous slopes to the mill site, which sits at an elevation of 2,900 metres in a valley below Ertsberg and Grasberg. This engineering feat required the construction of two mountain pass tunnels. The townsite of Tembagapura was constructed during this time at an elevation of 1,850 metres.
Ertsberg came on-stream toward the end of 1972 and was mined out by 1988. Trams delivered the ore from the mine to the mill until 1989, when PT-FI adopted an ore pass and conveyor system. However, tramways are still used to ferry workers from the mill to the mine area.
During the 1970s, Freeport geologists began investigating obvious surface signs of skarn mineralization in the immediate area of Ertsberg. This led to the discovery of the GBT and DOM deposits. The GBT, or Ertsberg East deposit, outcropped at the 4,100-metre elevation, 1.2 km east of the centre of the Ertsberg open pit, whereas DOM outcrops at 4,300 metres, nearly 2 km east-southeast of the Ertsberg pit. GBT was later shown to have two additional deeper zones: the intermediate ore zone (IOZ) and the deep ore zone (DOZ).
Whereas Ertsberg was a pendent-shaped skarn body that overlay an intrusive diorite body, the Ertsberg East skarn systems — GBT, IOZ and DOZ — are structurally controlled zones occurring on the periphery of the Ertsberg diorite and along the northwest-southeasterly striking hanging wall fault zone. This structure forms the northern boundary between ore-bearing skarn or tactite units on the south and the barren marble and siliceous hornfel units on the north. The three zon
es exhibit retrograde mineralization, with both copper and gold becoming higher-grade with depth.
GBT was mined by underground block cave methods, which extracted 68.6 million tonnes of ore during the mine’s life from 1982 to 1993. Currently, PT-FI is mining IOZ at the rate of about 20,000 tonnes per day. IOZ sits between elevations of 3,540 and 3,290 metres and hosts a reserve of 28.7 million tonnes grading 1.06% copper, 0.45 gram gold and 7.63 grams silver. A double ramp system is used to gain access to the underground deposits.
The DOZ lies below the 3,290-metre elevation and is being prepared for block cave production, sheduled to begin in July 2000. DOZ contains an estimated reserve of 181 million tonnes grading 1.15% copper, 0.87 gram gold and 5.2 grams silver. It remains open at depth and to the west, where PT-FI is actively exploring.
“There is a lot of potential to up the reserves in the DOZ,” Noris Belluz, superintendent of underground mine geology, told The Northern Miner during a recent mine tour.
Below the DOZ is a resource of 377 million tonnes averaging 1.15% copper-equivalent, which has yet to be drilled off into the reserve category. And out to the west and northwest, Belluz is finding low copper grades of 0.6-0.8% but with “very good grades of gold” in the range of 1.5 to 2 grams.
The DOM, another skarn deposit, has been about 80%-developed for underground block caving. Mining was suspended on DOM following the discovery of Grasberg. With a reserve of 30.9 million tonnes grading 1.67% copper, 0.42 gram gold and 9.63 grams silver, DOM will eventually be mined, Belluz said, and there are plans to mine the upper part by open-pit methods. An additional resource of 15 million tonnes averaging 2.28% copper-equivalent sits below DOM, waiting to be drilled off.
At the time the Grasberg deposit was discovered in 1988, PT-FI had expanded operations to a daily milling rate of 20,000 tonnes. Grasberg was named by Jean-Jacques Dozy during the 1936 Colijn expedition (Grasberg is Dutch for grass mountain). In his 1939 report, he noted the pyrite-magnetite-rich contact zone along the edges of the intrusion.
Freeport geologists investigated Grasberg for evidence of porphyry-style copper mineralization several times during the 1970s, yet, owing to surface depletion by weathering, little copper was found.
It wasn’t until 1987 that geologist David Potter, now Freeport’s executive vice-president exploration, gave the company some interesting results to ponder. An initial first pass of reconnaissance sampling on top of Grasberg revealed gold values in the order of 1-2 grams. A silica stockwork found on the southeastern peak yielded gold values of 1.5-2.5 grams. In addition, an altered granodiorite exposed in a small stream on the lower eastern edge of the mountain returned values of 1-1.5 grams gold and 1-2% copper.
An initial 5-hole program of diamond drilling was conducted from the top of the mountain in early 1988. While the first four holes showed significant intervals of both copper and gold mineralization in a highly altered intrusive, the fifth hole was drilled vertically and encountered 591 metres averaging 1.69% copper and 1.77 grams gold.
Grasberg was the sleeping giant, lying only 2.2 km northwest of the Ertsberg pit. Today, Grasberg is host to a proven and probable open-pit reserve of 1.2 billion tonnes grading 1.02% copper, 1.19 grams gold and 3 grams silver at a stripping ratio of 2.07-to-1. In addition, a block-cave underground reserve is estimated at 691 million tonnes grading 1.08% copper, 0.77 gram gold and 3.2 grams silver.
The Grasberg porphyry deposit contains the largest single gold reserve and is one of the three largest open-pit copper reserves in the world. A nearly vertical deposit, it is situated in the southeastern flank of the intrusive. It measures about 900 metres in diameter and extends over 1,500 metres vertically from the original ore intercepts at the 4,200-metre elevation. Thomas Henderson, general mine superintendent, said the deposit is still open at depth but that it starts to fall off at about the 2,600-metre elevation.
In early 1990, PT-FI drove the Amole adit, a 4-by-4-metre drift, from the mill deep into the Grasberg intrusive. While this was done chiefly in order to dewater the pit, the adit has also been used to conduct underground exploration.
The Big Gossan skarn deposit occurs 1.3 km west-southwest of the Ertsberg pit on a steep mountain side at an elevation of 3,300 metres. A 10-hole drilling program in 1991 established a significant resource. In 1992, drifting in the Amole tunnel encountered an extension of Big Gossan, 800 metres east of the surface drilling. Underground delineation drilling followed. Big Gossan hosts reserves of 37.3 million tonnes grading 2.69% copper, 1.02 grams gold and 16.4 grams silver. The steeply dipping deposit remains open at depth, with an additional 10-million-tonne resource at 2.34% copper-equivalent. It will be mined by blast-hole stoping and delayed backfill.
The Kucing Liar skarn body was discovered from the Amole drift, below the 2,900-metre elevation, 1.3 km south of the Grasberg pit. “Kucing Liar is really worth paying attention to,” said Bullez. It still open to the west, northwest and at depth. Kucing Liar was last estimated to contain proven and probable reserves of 320 million tonnes grading 1.41% copper, 1.41 grams gold and 5.3 grams silver. An additional resource sits at 307 million tonnes averaging 1.22% copper-equivalent. Bullez said he expects reserves at Kucing Liar to increase to 400 million tonnes by year-end.
Kucing Liar sits along the northwest-southeasterly trending Idenberg 1 fault, the major control to the orebody. The skarn body dips at a slope of 45 and likely will require a specialized mining method, though, for the time being, sub-level caving is being considered.
Along strike of Kucing Liar is Lembah Tembaga, a porphyry copper deposit that lies beneath Wanagon Lake, 2.2 km southwest of Grasberg. The monzonite intrusion occurs at the intersection of two major regional structures: the northwesterly trending Idenberg 2 fault and the northeasterly trending Grasberg fault. The geological resource is estimated at 53 million tonnes averaging 1.73% copper-equivalent.
The first ore from the Grasberg pit reached the mill in late 1989. Currently, almost 210,000 tonnes per day is being mined. “It’s a dream deposit to mine,” said Craig Tomlinson, chief mine engineer. “[The orebody] is so uniform at depth; it’s not a spotty resource at all. There is no problem in predicting what we’re going to encounter in the next bench.” The central core of the ore consists of a high-grade stockwork in the shape of a horseshoe. A halo of medium-grade mineralization extends outward from the core and is surrounded by a low-grade fringe.
“The weather is probably our biggest challenge,” Tomlinson said. “We have a wet season and we have a wetter season.” The mine is almost always shrouded in fog, creating visibility problems.
“We’re a large mine in the way of production,” said Henderson, “but we’re small in aerial size.” Because Grasberg is a nearly vertical orebody, Henderson does not have the luxury of wide push backs. “We’re mining tight conditions,” with 11 shovels and 103 trucks operating in the pit. Ore benches are 15 metres high, with a 65 face angle and a 45 overall slope.
PT-FI is currently mining from three areas of the pit. A top push-back is stripping overburden and will not be in ore until about a year. A middle push-back is just getting into lower-grade ore material of about 1% copper and 0.7 gram gold. The bottom bench is in high-grade material of 2% copper and 4-7 grams gold.
The waste material is transported primarily to the Wanagon area on the western side of the mine by a combination of truck haulage and conveyor-stacker installations.
Ore is hauled by trucks to one of three gyratory crushers, where it is reduced to minus-9 inches and conveyed to one of two coarse ore stockpiles. Each pile has a holding capacity of 600,000 tonnes and allows for additional blending of the higher-grade feed with lower-grade
cuts. Reclaim feeders under the piles feed material on to conveyors, which deliver the ore to vertical ore passes that have been cut through the mountain. The six ore passes allow the material to free-fall for 2,000 ft. into 150-metre-deep-by-18-sq.-metre ore bins at mill level. The rocks are further pulverized during the free fall.
From this point, the ore is fed to conveyors and transported to one of three mill stockpiles, which together can hold more than 1 million tonnes.
The North concentrator was commissioned in 1972 at an initial throughput rate of 3,700 tonnes per day. Two additional ball mills were added to the North mill in 1988-1989 to bring the milling capacity to 33,000 tonnes. The South concentrator utilizes four ball mills and was commissioned in 1991. The two concentrators together process 66,000 tonnes per day.
The No. 3 concentrator was commissioned in 1995, increasing daily milling tonnage to 125,000 tonnes. It incorporates a semi-autogenous grinding (SAG) mill followed by two ball mills. Expansion of the fourth concentrator, completed in early 1998, included a 38-ft.-diameter SAG mill (the second largest in the world) and four 24-ft. ball mills. “With the existing equipment, we think we can go to between 225,000 and 230,000 tonnes per day,” said Rick Coleman, senior manager of the concentrator. “We would have to put capital into it to get up any higher than 230,000.”
Although concentrator No. 5 is on the drawing boards, Coleman said there are no immediate expansion plans to take it much beyond 230,000 tonnes per day in light of current metal prices and the unstable political climate in Indonesia.
In simplified terms, the milling flow sheet involves secondary and tertiary crushing, screening, primary ball milling, a rougher flotation circuit, re-grind, and a cleaner column circuit. A final concentrate of about 30% copper and 30 grams gold is ground in the Tower mills to about 80% passing 50 microns. The concentrate is piped (in a slurry form of 65% solids) 119 km to the port site, where it is filtered and dried. PT-FI is shipping about 2.5 million tonnes of concentrate a year to buyers.
The tailings go to either a 245-ft. or a 400-ft. thickener and are channeled into the Agawagon River, which flows from the mill site to the Ajkwa deposition area in the lowlands.
Metallurgicaly, the ore is variable. Three different ore types are classified, based on recovery rates. Normally a better feed grade yields better recoveries. Recoveries average 85% for copper and almost 85% for gold. The main copper minerals are chalcocite and chalcopyrite, with secondary amounts of bornite, chalcocite and digenite.
Exploration in the immediate mine area is focused on replacing what has been mined. A significant portion of the 1.4-billion-tonne additional geological resource adjoins existing reserves. This year, Freeport’s geologists sought to fill in the gaps at Kucing Liar, Deep Grasberg and DOZ, and push the resource into the reserve category. “Our main limitation to how much ore we develop this year is how many rigs we have going,” said geologist Larry Johnson. “Wherever we put rigs right now, we can add ore to the reserve.”
There is talk of lowering the 0.6% copper-equivalent cutoff on the Grasberg pit to 0.45% for next year. This has the potential to add 355 million tonnes of lower-grade material averaging 0.69% copper-equivalent.
The exploration staff has tried to generate targets outside of the main resource. Towards that end, geochemical sampling was carried out along major structures parallel to thrust faulting.
Freeport posted improved results for the third quarter of 1999, with net earnings of US$26.8 million (or US16 cents per share), compared with US$23.8 million (US14 cents per share) a year ago and US$19 million (US12 cents per share) in the second quarter of 1999. The improved performance has enabled Freeport to begin repaying its debt, which, at the end of September, had been reduced by US$200 million to US$2.2 billion.
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