EXPLORATION ’94 — Freeport’s Grasberg copper-gold project in

Tucked away in the western part of the island of New Guinea is one of the world’s three largest open-pit copper reserves and perhaps the single largest gold reserve to be found anywhere.

That, at least, is the contention of Freeport-McMoRan Copper and Gold (NYSE), which is currently exploring its Grasberg deposit in the Irian Jaya province of Indonesia.

Proven and probable reserves stand at 977 million tonnes grading 1.25% copper and 1.55 grams gold per tonne. Reserves for all deposits included in the original mining area total 1.1 billion tonnes averaging 1.31% copper, plus 1.47 grams gold and 4.04 grams silver per tonne.

Grasberg is perched in the highlands of the Sudirman Mountain range, in the vicinity of another deposit being mined by Freeport-McMoRan — the Ertsberg East. This second deposit is being excavated by underground block caving methods. In 1993, Freeport achieved a record production, from both deposits combined, of 298.6 million kg (658.4 million lb.) copper, 24.5 million grams (786,700 oz.) gold and 47.9 million grams (1.5 million oz.) silver. For the first nine months of 1994, the company produced 226.7 million kg (499.8 million lb.) copper, 17.3 million grams (557,200 oz.) gold and 28.7 million grams (922,900 oz.) silver, giving an increase of 9.5% copper and 21.5% gold over the same time last year.

With total production costs of 47.6 cents per lb. copper for the first nine months of this year, an averaged realized price of 101.8 cents per lb. copper, and credits for gold and silver, Grasberg returned a gross profit of 53.7 cents per lb. copper.

Ertsberg East entered production in 1980 and is currently winding down operations as the orebody is nearing depletion. It produced 4.4 million tonnes of ore last year, providing 18% of the total ore production. Increased production of Grasberg will offset the depletion of Ertsberg East, supplemented by underground block cave mining of the IOZ, DOZ and DOM orebodies, all of which have undergone preproduction development. Each of the three orebodies contains 25-30 million tons, with an approximate grade of 1.75% copper, 0.6 grams gold and 9 grams silver. Mining will proceed on the IOZ, situated 350 metres above the 2,900-metre level adit of Ertsberg East, downwards to the DOZ, which was previously worked between 1989 and 1991. The DOM orebody’s initial working level lies 380 metres above Ertsberg East’s mining operation, but production from the former is deferred for the time being.

Open-pit mining of Grasberg, situated 2 km from Ertsberg, began in early 1990 and production for 1993 totaled 19.8 million tonnes of ore. The milling rate for ore from both Grasberg and Ertsberg East averages 62,300 tonnes per day. In order to develop Grasberg, the initial milling rate of 20,000 tonnes per day was expanded in stages to the current 71,500 tonnes. A further expansion to 115,000 tonnes is expected by the latter part of 1995, which would result in annual production of 500 million kg (1.1 billion lb.) copper and 46.7 million grams (1.5 million oz.) gold.

Grasberg remains open at depth below the 3,100-metre level. To delineate the orebody further, the Amole adit of Ertsberg East is being driven at the 2,900-metre level. It is hoped this will provide access for deeper drilling. The adit is planned for completion by 1996.

Exploration focuses on three land packages held by Freeport: the original 9,900-hectare mining area known as Block A (which contains all the aforementioned deposits); a 2.6-million-hectare contract-of-work area known as Block B; and a 1-million-hectare area adjacent to Block B known as the eastern blocks.

Freeport-McMoRan holds an 86% interest in Blocks A and B, with the Indonesian government holding 9.5% and the remaining 4.5% held by private Indonesians. The company controls 84.9% of the eastern blocks, with the remaining 15.1% held privately in Indonesia.

Block A also contains the Big Gossan deposit, situated 1 km from the existing mill and discovered as a result of drilling the base of the Grasberg orebody. Underground delineation drilling continues to define Big Gossan, which is now estimated to contain a geologic resource of 32 million tonnes grading 2.9% copper and 0.91 grams gold, including a proven and probable reserve of 8.5 million tonnes averaging 2.4% copper and 0.77 grams gold.

Current drilling continues to explore extensions of the orebody to the west and to delineate an area previously encountered by initial surface drilling. The cost of bringing the orebody into production is estimated at US$130 million, with development expected to begin in early 1995.

Exploration of the original land package has identified two targets: the Lembah Tembaga and Wanagon. Two holes, drilled 200 metres apart at Lembah Tembaga, intersected stockwork mineralization within a granitic intrusion. A 265-metre interval averaging 1.3% copper, 0.13 grams gold and 9 grams silver was returned for one hole, while the other intersected 270 metres of 1.21% copper, 0.27 grams gold and 2.8 grams silver. Lembah Tembaga is 3 km northwest of Big Gossan and 1 km southwest of the Grasberg mine. Two kilometres northwest of Big Gossan, in the same structural setting and trend, is the Wanagon prospect, where exploration drilling has intersected significant copper values below the 2,900-metre elevation.

Exploration in Block B has outlined more than 50 targets, including the promising Wabu deposit. A mineral resource of 21.8-52.9 million grams gold is estimated by a preliminary analysis of 69 drill holes. The deposit lies within the larger, mineralized Hitalipa district and is open to the east, west and at depth.

Preliminary exploration of the eastern blocks (by geochemical and geophysical methods) has identified several anomalies. The Etna Bay prospect was discovered by such methods, and exploratory drilling is under way. The company believes the prospect is on-trend and contains geological characteristics similar to those found in the Ertsberg-Grasberg mining area. Grasberg is a stockwork and porphyry-type deposit, whereas the original Ertsberg, Ertsberg East, IOZ, DOZ and DOM are skarn-type deposits. Exploration expenditures for 1994 are expected to total US$40 million, and those planned for 1995 are set at about the same amount.