Technical Report Ok Tedi

TECHNICAL REPORT ON THEOK TEDI MINING LIMITEDMT. FUBILAN COPPER-GOLD MINEMINERAL RESOURCE AND MINERALRESERVE ESTIMATES,PAPUA NEW GUINEAPREPARED FORINMET MINING CORPORATION

NI 43-101 REPORT

Authors:James W. Hendry, P.Eng.Luke Evans, M.Sc., P.Eng.Gerd Wiatzka, P.Eng.

ROSCOE POSTLE ASSOCIATES INC.Toronto, Ontario.

Vancouver, B.C.

RPAAugust 2, 2005

ROSCOE POSTLE ASSOCIATES INC. www.rpacan.com

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TABLE OF CONTENTS PAGE

1 EXECUTIVE SUMMARY .......................................................................................... 1-1

2 INTRODUCTION AND TERMS OF REFERENCE .................................................. 2-1

3 LIST OF ABBREVIATIONS....................................................................................... 3-1

4 QUALIFICATIONS ..................................................................................................... 4-1

5 DISCLAIMER .............................................................................................................. 5-1

6 PROPERTY DESCRIPTION AND LOCATION........................................................ 6-1 Property Location....................................................................................................... 6-1 Property Status ........................................................................................................... 6-3

Surface Leases ..................................................................................................... 6-3 Land Act Tenements ............................................................................................ 6-4 Exploration Licenses............................................................................................ 6-8

Environmental and Permitting Status ........................................................................ 6-8 Regulatory Regime .............................................................................................. 6-8 Community Mine Continuation Agreements....................................................... 6-9 Social Commitments and Implementation......................................................... 6-10 Closure Requirements........................................................................................ 6-11

7 ACCESSIBILITY, LOCAL RESOURCES, PHYSIOGRAPHY AND INFRASTRUCTURE ...................................................................................................... 7-1

Accessibility............................................................................................................... 7-1 Climate....................................................................................................................... 7-1 Local Resources ......................................................................................................... 7-1 Infrastructure.............................................................................................................. 7-3 Physiography.............................................................................................................. 7-3

8 HISTORY ..................................................................................................................... 8-1 Exploration History.................................................................................................... 8-2 Historical Mineral Resource and Mineral Reserve Estimates ................................... 8-3

9 GEOLOGICAL SETTING ........................................................................................... 9-1 Regional Geology ...................................................................................................... 9-1 Property Geology....................................................................................................... 9-2

10 DEPOSIT TYPES..................................................................................................... 10-1

11 MINERALIZATION ................................................................................................ 11-1 Ore Types & Key Characteristics ............................................................................ 11-2 Geological Models ................................................................................................... 11-3


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12 EXPLORATION....................................................................................................... 12-1

13 DRILLING................................................................................................................ 13-1 Drill Core Logging................................................................................................... 13-1 Drill Core Size ......................................................................................................... 13-2 Collar Surveys.......................................................................................................... 13-2 Downhole Surveys ................................................................................................... 13-2 Core Recovery ......................................................................................................... 13-3

14 SAMPLING METHOD AND APPROACH............................................................ 14-1

15 SAMPLE PREPARATION, ANALYSES, AND SECURITY PROTOCOLS........ 15-1 Sample Preparation and Analysis ............................................................................ 15-1 Security .................................................................................................................... 15-3 Assay Quality Control and Quality Assurance ........................................................ 15-3

16 DATA VERIFICATION .......................................................................................... 16-1 Mount Fubilan Mine Database Validation............................................................... 16-1 Mount Fubilan Mine Database Verification ............................................................ 16-1

RPA Database Verification Work...................................................................... 16-1 Historical Database Verification Work.............................................................. 16-1

RPA Independent Sampling..................................................................................... 16-2

17 ADJACENT PROPERTIES ..................................................................................... 17-1

18 MINERAL PROCESSING AND RECOVERY....................................................... 18-1 Mill Operations ........................................................................................................ 18-1

Ore Types........................................................................................................... 18-5 Current Mill Operating Performance ....................................................................... 18-7

19 MINERAL RESOURCES AND MINERAL RESERVES ...................................... 19-1 Mineral Resources ................................................................................................... 19-1

OTML Drill Hole Database ............................................................................... 19-1 Composites......................................................................................................... 19-3 Wireframe Models ............................................................................................. 19-4 Cutting High Assays .......................................................................................... 19-5 Cut-off Grade ..................................................................................................... 19-5 Density Data....................................................................................................... 19-6 Variography ....................................................................................................... 19-7 Search Strategy and Grade Interpolation Parameters ........................................ 19-8 Block Models ..................................................................................................... 19-8 Block Model Validation..................................................................................... 19-8 Mineral Resource Classification ........................................................................ 19-9 Mineral Resource Estimate .............................................................................. 19-12

Mineral Reserves ................................................................................................... 19-13 Economic Optimization ................................................................................... 19-13 Revenue Parameters......................................................................................... 19-13 Mine Performance Parameters......................................................................... 19-13


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Mill Performance Parameters .......................................................................... 19-16 Key Product Characteristics............................................................................. 19-17 Mill Operating Cost Forecast........................................................................... 19-19 Overhead Cost Forecast ................................................................................... 19-20 Optimization Results........................................................................................ 19-21 Sensitivity ........................................................................................................ 19-21

Ultimate pit Design ................................................................................................ 19-22 Pit Slope Design Criteria ................................................................................. 19-22 Cutoff Grade .................................................................................................... 19-23 Mine Phase Designs......................................................................................... 19-24 Mineral Reserve ............................................................................................... 19-26

20 OTHER RELEVANT DATA AND INFORMATION ............................................ 20-1 Current Mine Operations ......................................................................................... 20-1 Current Mine Operating Performance ..................................................................... 20-2

Current Mine Equipment Fleet .......................................................................... 20-3 Kiunga Operations ............................................................................................. 20-4 Power Supply ..................................................................................................... 20-4

Environmental Impacts of Mining ........................................................................... 20-5 Vegetation dieback............................................................................................. 20-5 Acid Rock Drainage (ARD) Issues................................................................... 20-6 Other impacts ..................................................................................................... 20-7 Mine Waste Management .................................................................................. 20-8 Social Commitments and Implementation....................................................... 20-10 Closure Requirements...................................................................................... 20-11

Compliance ............................................................................................................ 20-13 Internal Management ....................................................................................... 20-15 Conclusions...................................................................................................... 20-15

Project Economics ................................................................................................. 20-18 Capital Costs .................................................................................................... 20-18 Operating Costs................................................................................................ 20-19 Processing ........................................................................................................ 20-19 Operations Support .......................................................................................... 20-20 Commercial Group Costs................................................................................. 20-20 Community and Business Support................................................................... 20-21

Contracts ................................................................................................................ 20-22 Taxes and Royalties ............................................................................................... 20-22 Cash Flow .............................................................................................................. 20-22

21 INTERPRETATION AND CONCLUSIONS.......................................................... 21-1 Mineral Resource Estimate ...................................................................................... 21-1 Mineral Reserve Estimate ........................................................................................ 21-2

22 RECOMMENDATIONS.......................................................................................... 22-1 Mineral Resource ..................................................................................................... 22-1

Drill Hole Database Recommendations............................................................. 22-1


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QA/QC and Sampling Recommendations ......................................................... 22-1 Resource Estimation Recommendations............................................................ 22-2

23 SOURCES OF INFORMATION ............................................................................. 23-1

24 SIGNATURE PAGE ................................................................................................ 24-1

25 CERTIFICATES OF QUALIFICATIONS .............................................................. 25-1 James W. Hendry ..................................................................................................... 25-1 Luke Evans............................................................................................................... 25-3 Gerd Wiatzka ........................................................................................................... 25-5

26 APPENDIX A........................................................................................................... 26-1 List of Acts, Amendments and Change Notices ...................................................... 26-1


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LIST OF TABLES PAGE

Table 1-1 December 2004 Mineral Resource Estimate With RPA Whittle Pit Depth Constraint......................................................................................................................... 1-8 Table 1-2 Mineral Reserve Estimates (Dec 31, 2004)................................................... 1-9 Table 1-3 Support cost estimates ................................................................................. 1-14 Table 1-4 Ok Tedi Cash Flow Projection ..................................................................... 1-16 Table 3-1 List of Abbreviations..................................................................................... 3-1 Table 6-1 List of Active Surface Leases........................................................................ 6-5 Table 6-2 List of Expired Surface Leases With Applications for Surrender................. 6-7 Table 6-3 OTML Exploration Licenses......................................................................... 6-8 Table 8-1 Mount Fubilan Mine Production History ...................................................... 8-2 Table 8-2 Recent Historical Mineral Resource Estimates ............................................. 8-4 Table 8-3 Recent Historical Mineral Reserve Estimates ............................................... 8-5 Table 11-1 Main Rock Types in Reserve Estimate ..................................................... 11-6 Table 13-1 Diamond Hole Core Recovery (from OTML (2004) ................................ 13-3 Table 19-1 OTML Drill Hole Database Records......................................................... 19-1 Table 19-2 OTML 2002 and 2004 Tonnage Factors ................................................... 19-7 Table 19-3 December 2004 Mineral Resource Estimate With RPA Whittle Pit Depth Constraint..................................................................................................................... 19-12 Table 19-4 Drilling & Blasting Costs ........................................................................ 19-14 Table 19-5 Mill Operating Parameters ...................................................................... 19-17 Table 19-6 Key Product Characteristics .................................................................... 19-19 Table 19-7 Processing Costs...................................................................................... 19-20 Table 19-8 Cut Off Grade Factors ............................................................................. 19-24 Table 19-9 Mineral Reserve Estimates (Dec 31, 2004)............................................. 19-26 Table 20-1 Primary Mine Equipment List ................................................................... 20-4 Table 20-2 Life of Mine Capital Cost by Area .......................................................... 20-19 Table 20-3 Ok Tedi Cash Flow Projection ................................................................ 20-23

LIST OF FIGURES PAGE

Figure 1-1 Ok Tedi NPV Sensitivity Analysis ............................................................ 1-17 Figure 1-2 Ok Tedi Sensitivity Analysis .................................................................... 1-18 Figure 6-1 General Location Map.................................................................................. 6-2 Figure 6-2 OTML Property Map ................................................................................... 6-6 Figure 7-1 Air Photo of Tabubil (Photo from www.oktedi.com) .................................. 7-2 Figure 7-2 Mount Fubilan Site and Tabubil in Background.......................................... 7-3


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Figure 9-1 Ok Tedi Property Geology........................................................................... 9-3 Figure 11-1 3-D Perspective of the Wireframes on December 2004 Pit Topography.11-7 Figure 15-1 OTML Laboratory Drill Core Sample Preparation and Analysis ............ 15-2 Figure 18-1 Ok Tedi Copper Concentrator Flowsheet ................................................ 18-2 Figure 19-1 Surface Drill Plan..................................................................................... 19-2 Figure 19-2 Resource Classification on the 1460 m bench (From OTML, 2004)...... 19-11 Figure 19-3 Resource Classification on Section 422,312N (From OTML, 2004). .... 19-11 Figure 19-4 Copper Mined vs. Copper Price Assumption......................................... 19-22 Figure 20-1 Ok Tedi NPV Sensitivity Analysis ........................................................ 20-24 Figure 20-2 Ok Tedi Sensitivity Analysis ................................................................ 20-25


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1 EXECUTIVE SUMMARY INTRODUCTION

Roscoe Postle Associates Inc. (RPA) was retained by Inmet Mining Corporation

(Inmet) and Ok Tedi Mining Limited (OTML) to independently review and audit the

Mineral Resource and Mineral Reserve estimates of the Mount Fubilan Mine in Papua

New Guinea and to prepare a National Instrument 43-101 (NI 43-101) report. This

technical report was written by RPA in accordance with the requirements of NI 43-101,

Companion Policy 43-101CP, and Form 43-101F1 of the Canadian Securities

Administrators (CSA).

OTML operates the Mount Fubilan Mine in the Western Province of Papua New

Guinea (PNG). Inmet owns an 18% interest in OTML, with 52% of OTML held by the

PNG Sustainable Development Program Limited. The remaining 30% interest in OTML

is owned by the PNG government.

The Ok Tedi porphyry copper prospect was discovered by Kennecott Copper

Corporation (Kennecott) in June 1968. Gold production commenced at the Mount

Fubilan Mine in 1984, after completion of feasibility studies in 1978 for an open pit

operation under an international consortium of companies led by the Broken Hill

Proprietary Company Limited (BHP). The first copper processing facilities were

commissioned in 1987.

This technical report is based on the OTML December 2004 Mineral Resource and

Mineral Reserve estimates for the Mount Fubilan Mine. The principal technical

documents and files related to RPA’s audit of the December 2004 Mineral Resource and

Mineral Reserve estimates are listed in the Sources of Information.

Work on this project was completed by RPA Principal Mining Engineer James

Hendry, P.Eng., RPA Consulting Geological Engineer Luke Evans, M.Sc., P.Eng, and


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Gerd Wiatzka, P.Eng., Principal, Manager Mining with SENES Consultants Limited

(SENES).

Mr. Hendry, Mr. Evans, and Mr. Wiatzka are Qualified Persons in accordance with

the requirements of NI 43-101. Mr. Hendry, Mr. Evans, and Mr. Wiatzka visited the

Mount Fubilan Mine from March 7 to 11, 2005.

Technical documents and reports on the property were reviewed and obtained from

OTML personnel at the site.

PROPERTY STATUS The Mount Fubilan Mine property comprises two contiguous mineral licenses

covering an area of 21,700 ha, one Special Mining Lease (SML), twenty Leases for

Mining Purposes (LMP), and one Special Mining Easement (SME) that collectively

cover an area of approximately 14,959 ha. All of the leases have been surveyed.

Special Mining Lease 1 and Lease for Mining Purposes 1 are being renewed currently

under the Mining Act for a further 21 years to May 2022. Fifteen expired surface leases

have been submitted for surrender. Other leases are current, and OTML expects all

surface and dredging operation lease agreements to remain for the life of the Mt. Fubilan

operation.

Exploration Licences have two year terms and can be renewed under the terms of the

Mining Act.

ENVIRONMENTAL AND PERMITTING STATUS The mine operates under the direction and obligations of the Mining Ok Tedi

Agreement Act Chapter 363 (the Ok Tedi Agreement Act) and supplementary

amendments.


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The regulatory regime is as set out in the the OTML Environmental Regime of

December 2001 which was put in place through passage of the Ok Tedi Mine

Continuation (Ninth Supplemental Agreement) Act. This agreement specifies the basis

for continuation of operations and the requirements for environmental and social impact

mitigation under the following principal components:

• Environmental Regime 2001

• PNG Sustainable Development Program

• Community Mine Continuation Agreements

• Ok Tedi Development Foundation

• Mine Closure Sinking Fund.

This regime put into place a work program of activities designed to improve the

understanding of potential mitigative measures. The environmental regime comprises

major management programs including Acid Rock Drainage (ARD), riverine ecology and

industrial sites. The regime is based on a set of values against which ongoing impacts are

assessed. These values relate to all aspects of the safety of the aquatic and terrestrial

environment.

Schedules 1 and 2 of the Ninth Supplement Agreement set out the key environmental

performance requirements for OTML, including closure and decommissioning standards.

The Community Mine Continuation Agreement (CMCA) was enacted by the PNG

government in 2001 and is monitored by independent non-government organizations.

The CMCA provides the framework for setting out the expected impacts of the OTML

operations as negotiated and agreed with the communities respective to ongoing

operations. Parties to the agreement include all local and national administration

stakeholders. CMCAs cover nine regions including 156 villages. They provide a mix of

benefits for landowners affected by the mine, including compensation for past and

current impacts as well as initiatives for sustained development beyond the life of the

mine.


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The PNG Sustainable Development Program and the Ok Tedi Development

Foundation have been set up as 40-year trust funds and are a means whereby funds will

be channelled back to the local communities and to the nation as a whole during

operations and post closure.

The Mine Closure Sinking Fund, which is known as the Ok Tedi Financial Assurance

Fund, is set aside in biannual contributions to handle the $100 million closure cost

estimate as accepted by the PNG government. Contributions commenced in July 2002

and currently stand at $36,057,664.

Finally, OTML operates a number of programs that provide advice and assistance for

local agriculture, health and education, and community development.

GEOLOGY AND MINERALIZATION The regional geologic setting comprises the northern margin of Proterozoic-Paleozoic

basement rocks of the Australian continent overlain by a fold-thrust belt of Mesozoic and

Tertiary platform cover rocks. Miocene-Pleistocene igneous intrusives within this belt

host major mineral-producing districts of the area including Ok Tedi (Mount Fubilan),

Ertsberg, Porgera, and Kare. Regional geology surrounding Ok Tedi is dominated by

continental margin marine sedimentary siltstones, mudstones, and limestones. These

sediments were deposited from the Cretaceous to mid-Miocene in an extensional

framework.

Emplacement of the Pliocene Sydney Monzodiorite is believed to have produced the

Ok Tedi skarns through metasomatic replacement of limestone/carbonate facies by

reaction with magmatic fluids. The Sydney Monzonite is relatively unaltered and

contains limited economic gold and copper mineralization, although it is enriched near

the Fubilan monzonite porphyry contact. The fault network provided conduits for

magma and intrusion by multiple phases of variably mineralized calc-alkaline stocks with

contemporaneous skarn formation.


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Subsequent intrusive bodies (porphyritic monzodiorite, southern monzonite porphyry)

are observed in the southern portion of the ore body within and adjacent to the Sydney

Monzodiorite. The Fubilan monzonite porphyry (1.1 Ma to 1.2 Ma) intruded the Sydney

Monzodiorite and associated stocks, breccias, skarn bodies and shallow dipping

sediments. Important Cu-Au mineralization is hosted within the Fubilan monzonite

porphyry. The protore Cu-Au-Ag mineralization is predominantly chalcopyrite with

pyrite-marcasite and small amounts of bornite and molybdenite within intrusives, skarns,

and fractured siltstones proximal to the intrusive stocks. Irregularly distributed sphalerite

and galena are present around the fringe areas of the deposit and within some skarns.

Magnetite skarns contain chalcopyrite-pyrite-marcasite-bornite mineralization,

sometimes with chalcocite, digenite, and covellite enrichment. Gold is closely associated

with the copper mineralization in both the skarns and intrusive rocks.

The near-surface weathering of the mineralized zones has led to the extensive

oxidation and leaching of the sulphide minerals. As a result, an oxide cap has developed

containing elevated gold values and virtually no remaining copper. The oxidation and

leaching process has resulted in the development of a supergene enriched copper zone of

chalcocite and digenite immediately below the oxide cap. Further downwards, this

supergene zone merges into lower grade chalcopyrite-dominated protore mineralization.

EXPLORATION AND PRODUCTION HISTORY After the discovery of the Mount Fubilan deposit by Kennecott in 1968, exploration

lapsed from 1972 to 1975 while Kennecott and the PNG government negotiated future

mining terms. The government then carried out exploration under the supervision of

Behre Dolbear and in 1976 entered into an agreement with an international consortium of

companies led by the Broken Hill Proprietary Company Limited (BHP) for final

feasibility studies, presented to the PNG government in 1979. Thereafter, the project

entered the construction phase with approval of the project and incorporation of OTML

in 1981. Subsequent exploration has been confined to mining project support and


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development of the environmental regime. Diamond drilling continues around the Mt.

Fubilan deposit in 2005.

Production commenced in 1985 with mining of the gold cap, and in 1987 the first

copper concentrate was produced. As of fiscal year end 2004, OTML has produced

3,030,522 tonnes of copper contained in 9,589,172 tonnes of copper concentrate and

7,579,725 oz of contained gold. 1,680,533 oz of gold bullion were produced from the

gold cap in the first five years of production.

MINERAL RESOURCES AND MINERAL RESERVES MINERAL RESOURCES

RPA has reviewed the current OTML December 31, 2004 Mineral Resource and

Reserve estimates, and considers that the resource block model is valid, reasonable, and

appropriate for supporting the OTML 2004 Mineral Resource estimate, summarized in

Table 1-1.

The current resource estimate is supported by 647 drill holes and 320 reverse

circulation (RC) drill holes where drill hole spacing is generally on a 70m x 100m grid

for intrusives and 50m x 50m for skarns. RPA found no significant problems with the

drill hole database.

RPA has reviewed a selection of the historical core logs and regards them to be

complete and of good quality. Downhole drill surveys, where taken, were carried out

with a multishot instrument, and are judged to be reliable. About one third of the

diamond drill holes used in the December 2004 resource estimate were not surveyed.

Drill hole deviations are expected to be minor due to the large diameter of holes drilled

and where most holes were collared vertical to sub-vertical. Excellent core recovery was

achieved with only 0.6% of the diamond drill hole samples having a core recovery less

than 90%.


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OTML has used composites from both diamond drill and RC drill holes to support the

current resource block model. Drill core sampling methods used were standard. RPA did

not have information on the RC sampling methodology; however, only 5% of the

composites used in the model were derived from RC drill holes.

RPA found the OTML assay laboratory to be clean, well-run and following

conventional procedures. An outside audit, independent of the laboratory, was completed

in June 2003. The procedures call for quality checks to be made using Cu-Au reference

standards at a frequency of one in every ten samples. RPA’s review of more recent

OTML laboratory reference standard graphs suggests that copper and gold results are

reliable and unbiased. RPA recommends measures to be taken to improve the reliability

of the in-house reference standards and QA/QC methodology, with regular checks on

pulps to be sent to an outside accredited laboratory.

The current resource estimate is based on a geological interpretation and on a three

dimensional wireframe model of the major rock types in the deposit. OTML currently is

updating the interpretation to reflect recent infill diamond drilling results. Sulphide

skarns represent approximately 25% of the resource tonnage, 44% of the contained

copper, and 40% of the contained gold, and are now the most important single component

of the remaining resource. The monzonite hosts approximately 38% of the resource

tonnage, 22% of the contained copper, and 18% of the contained gold.

The current resource model is based on the results of a 2002 review of the historical

specific gravity data. In 2004, OTML developed density versus depth relationships that

have now been incorporated. RPA believes that both the 2002 and 2004 tonnage factors

are reasonable. RPA recommends investigation on the use of an interpolated density

model, particularly for skarn mineralization.

RPA reviewed the omni-directional and down hole variograms for the composites in

the main rock types. RPA concurs with an OTML recommendation that a new

directional variography study be completed.


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OTML uses the Australasian Code for Reporting of Identified Mineral Resources and

Ore Reserves (the JORC Code). The resource and reserve classifications are similar to the

Canadian CIM (2000 and 2004) definitions.

OTML reported the December 2004 Mineral Resources based on using a bench

datum of 1,153 m ASL. It is RPA’s view that a portion of the OTML resource estimate

does not have reasonable prospects for economic extraction even at significantly higher

metal price assumptions. Based on the economic assessment work, RPA is of the opinion

that the portion of the model that can be classified as meeting the requirements of a

Measured and Indicated Mineral Resource under NI 43-101 guidelines is 543 million

tonnes averaging 0.77% copper and 0.9 grams per tonne gold

Table 1-1 summarizes the December 2004 classified Mineral Resources modelled

between the December 31, 2004 surface topography and the high metal price Whittle pit

shell developed by RPA.

TABLE 1-1 DECEMBER 2004 MINERAL RESOURCE ESTIMATE WITH RPA WHITTLE PIT DEPTH CONSTRAINT

Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Classification Million tonnes Copper % Gold grams per

tonne Measured 371 0.77 0.91

Indicated 171 0.78 0.98

Total Measured and Indicated 543 0.77 0.93

Inferred 33 0.92 1.44


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MINERAL RESERVES OTML undertook an optimization study in early 2005 to evaluate the extent of

economic mining limits at the Mount Fubilan deposit. The evaluation used metal price

assumptions of $0.90 Cu, $350 Au, and $4.75 Ag. Operating costs were developed and

forecast based on the current 2005 budget factors and estimates.

Cut-off grades are calculated based on an economic factor that reflects the costs and

recoveries appropriate for each of the seven ore types.

An ultimate pit design, 13D4, derived from the 2004 mine reserve assessment process

was used by OTML as the basis for calculating the mineable reserve for the Mount

Fubilan deposit. Two further development options have been identified: Phase 2,

expanding to the southeast beyond the 13D4, and Phase 3, expanding to the west. Both

would have added significantly to the mine life; however, they were abandoned due to

technical complications and extensive pre-stripping requirements. RPA concurs with this

assessment.

RPA notes that the current ultimate pit design is well within the potential economic

limits developed in the optimization study carried out by OTML.

Table 1-2 summarizes the Mineral Reserves as of December 31, 2004:

TABLE 1-2 MINERAL RESERVE ESTIMATES (DEC 31, 2004) Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Classification Ore

Tonnes (Mt)

Copper Grade

(%)

Gold Grade (g/t)

Contained Copper

(kt)

Contained Gold (koz)

Proven 226 0.85 1.04 1,920 7,550 Probable 24 0.76 1.26 180 970

Total Mineral Reserves 250 0.84 1.06 2,100 8,520


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In RPA’s opinion, the technical assessment carried out by OTML in preparing the

mineral reserve estimate has been thorough and complete in dealing with the complex

issues surrounding the Ok Tedi operations. RPA concludes that the Mineral Reserves as

estimated, based upon the 13D4 pit design, represent Proven and Probable Mineral

Reserves consistent with the definitions set out in NI 43-101 and specified in the CIM

Standards on Mineral Resources and Reserves Definitions and Guidelines adopted by the

CIM Council on August 20, 2000.

CURRENT MINE OPERATIONS The current mining operations of Ok Tedi Mining Limited are carried out at the

Mount Fubilan open pit using conventional open pit mining methods and equipment. As

of the end of December 2004, the main mining activities were being carried out on the

1550 m, 1565 m, and 1580 m benches in the main mining zone. Mining was also active

in the Moscow Ridge and Paris limestone quarry areas located adjacent to and above the

south end Paris waste dump site.

At the Mount Fubilan pit, waste rock material is hauled to the south end of the pit

where it is dumped and pushed over the edge of the topography. The material then slides

down the slope to lower elevations. Permanent dumps for accumulation and storage of

waste rock materials have not been established due to the steep topography and poor

ground stability conditions surrounding the Mount Fubilan mine.

The high rate of rainfall introduces substantial quantities of surface water into the

operation, and pit water management is one of the key components of the mining system.

At the present time, the rate of total material movement is primarily limited by the

capacity of the truck fleet. There is surplus excavator capacity.

MINERAL PROCESSING AND METALLURGY OTML operates a mill with a nominal capacity to process 80,000 tonnes of ore per

day. Ore is crushed and ground for treatment, and recovery of copper and gold values is


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achieved through a conventional flotation circuit to produce a high grade copper and gold

concentrate. The copper concentrate is pumped via an overland pipeline that delivers the

concentrate to the Kiunga dewatering and concentrate storage facilities located

approximately 157 kilometres to the east of the mine site. The pipeline has a capacity of

2,400 tonnes of concentrate per day.

Tailings are disposed of via the unconfined end of the pipe discharge to Harvey

Creek, which drains to the Ok Mani, and then eventually to the Ok Tedi and Fly Rivers.

The original project design called for the construction of a tailings dam (Lukwi) and a

conventional mine tailings management system. Successful construction of a tailings

dam structure was prevented by the natural instability of the terrain due to poor rock

strength characteristics, steep topography, and very high rates of precipitation. The

original design concept was abandoned and replaced with the present riverine disposal

system.

The discharge of rock and sand into the river has filled the Ok Tedi river bed

significantly and has raised its upper regions by many metres. Dredging of the river

sediment has become necessary to maintain a navigable channel for concentrate barges,

and for reducing the incidence of forest dieback due to flooding. OTML operates a

continuous river dredging operation at Bige on the Fly River. Dredged materials

including fine sediment and tailings are stockpiled in the areas adjacent to the river.

ENVIRONMENT In RPA’s opinion, OTML is doing excellent work in managing the environmental

impacts of the Mount Fubilan operation. The company recognized at the outset the

considerable problems arising from disposal of mine waste, and has engaged local,

national and international cooperation to conduct ongoing scientific studies in

environmental mitigation.

Mining at Ok Tedi has caused significantly greater environmental impacts than was

projected in the initial development stage. The key impact issues are:


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• 60– 90 million tonnes per annum of waste rock and tailings are discharged into the Ok Tedi River system with the legal approval of the PNG government.

• Build up of mine-derived sediment has raised the elevation of the riverbed,

resulting in over-bank flooding, vegetation dieback, and shallowing of the navigable waters. The fish habitat is being impacted in places by sediment.

• Acid Rock Drainage (ARD) has recently been identified as a potential

problem due to the oxidation of sulphides present in dredge stockpiles. Mitigation measures are now being identified and evaluated.

Numerous environmental, health, and engineering studies have been undertaken to

investigate the impacts of the Mount Fubilan operation. These studies have focused

primarily on the challenges associated with mine waste and process tailings impacts.

All stakeholders associated with the project, including the PNG government, the local

community, OTML, the World Bank, and NGOs have recognized the impact that the

operation is having on the associated areas. At the same time they recognize the

significant impact that would result from a cessation of operations. The stakeholders

have agreed to continue the operation while striving to minimize and mitigate both

current and long-term environmental impacts. This will be achieved through using

current best practice measures and by continuing scientific research.

RPA believes that OTML is pursuing these goals and that the impacts are being

managed consistent with the objectives set out in various agreements supporting the

operation.

MINE CLOSURE OTML set out its plans for mine closure in 1998 in a conceptual Rehabilitation and

Closure Plan. After many workshops and full discussions with interested parties, OTML

prepared a document entitled “Social and Sustainable Development Issues in Relation to

Mine Closure”. This was reviewed and accepted by the PNG government agencies, and

the “2002 Draft Mine Closure Plan” was approved by the Minister for Mining in August


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2003 and by the Minister for Environment and Conservation in May 2004. The closure

plan is the basis for the OTML Internal Mine Closure Planning Committee (IMCPC)

consultation with local communities.

The 2002 Draft Closure Plan estimated that the cost for closure of the sites would be

approximately $150 million. RPA understands that a revised closure plan has been

reviewed and accepted by the PNG government that sets out a revised estimate of

US$100 million. Financial assurance provisions require that funds be set aside in

biannual contributions to the Ok Tedi Financial Assurance Fund (FAF) to be held jointly

by the State and OTML. At present, the FAF stands at $36,057,664, with contributions

from July 2002 to January 2005. Impact management and site closure plans are currently

under review for the tailings sediment stockpile, and additional closure costs may be

incurred. RPA estimates that the latter could add between $40 and $80 million to the

overall cost.

CAPITAL COSTS A capital cost estimate totalling US$243 million has been provided for in the life of

mine plan based on the estimates presented by OTML. These include replacement

equipment and ongoing support items. One-time capital projects provided for within this

estimate encompass relocation of the Taranaki crusher and conveyor system, pit

dewatering, a new mill process control system and flotation optimization, and additional

power generation capacity. In the capital cost of $150 million for site closure in the last

year of mine life, RPA has included provision for the Bige tailings site to be closed along

with the mine and mill operations site.

OPERATING COSTS OTML has carried out a detailed analysis of historical operating costs to provide the

basis for estimating future costs. Unit mining costs are projected to range from $0.75 per

tonne mined in 2005, climbing to the highest level of $1.10 per tonne in the last year of

operation in 2013. Mining costs are forecast to average $0.82 per tonne over the

remaining nine years of mine life. Projected unit mining costs incorporate efficiency


1-14

improvements in haulage fleet productivity to reduce unit costs from the current level of

$0.84 per tonne.

Mill operating costs have been estimated based on the forecasts developed by OTML

in their 2004 Reserve Support Document. Unit milling costs are provided for each of the

primary ore types, reflecting their individual throughput rates and reagent consumption

factors. The mill costs are forecast to vary over a fairly narrow range between a low of

$1.78 per tonne milled to a high of $1.82 per tonne milled with the average over the nine

year life at $1.80 per tonne milled.

Operating costs for concentrate handling, including storage, barging, and reloading

onto export vessels, are forecast at $55.52 per tonne of concentrate.

Other support costs based on the 2004 Reserve Support Document, OTML 2005 – 3

Year Business Plan and on current experience are summarized in Table 1-3:

TABLE 1-3 SUPPORT COST ESTIMATES Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Item $ million per year

Dredging $30.4

Technical Services $7.7

Diesel power generation $19.3

Environment $2.5

Commercial Group (logistics, accounting, senior management) $64.2

Community and Business Support $42.5

Total $166.6


1-15

PROJECT ECONOMICS RPA has developed a project development scenario based on the December 2004

Mineral Reserves and on capital and operating cost estimates.

Table 1-4 presents the Ok Tedi life of mine cash flow projection:

2005 2006 2007 2008 2009 2010 2011 2012 2013 Total

Ore Mined (000 t) 28,966 28,112 28,900 29,588 29,481 29,282 28,968 29,018 16,759 249,074Total Waste Mined (000 t) 54,412 49,179 40,465 32,603 17,254 15,568 16,222 13,264 4,009 242,976

Total Mined (000 t) 83,378 77,291 69,365 62,191 46,735 44,850 45,190 42,282 20,768 492,050Strip Ratio 1.88 1.75 1.40 1.10 0.59 0.53 0.56 0.46 0.24 0.98

Mill Feed (000 t) 28,966 28,112 28,900 29,588 29,481 29,282 28,968 29,018 16,759 249,074Head Grade - Cu% 0.77 0.80 0.78 0.78 0.81 0.81 0.86 0.92 0.76 0.81 - Au g/t 0.79 1.04 1.13 1.04 1.04 1.02 1.09 1.20 1.09 1.05

Recovery - Cu % 85% 84% 84% 86% 87% 87% 87% 87% 89% 86% -Au % 72% 72% 70% 68% 68% 68% 68% 68% 67% 69%

Recovered Cu (000 t) 191.3 188.2 188.8 198.4 208.3 207.5 217.8 232.1 112.9 1,745.4Recovered Au kg 16,472 21,115 22,727 20,795 20,966 20,445 21,573 23,528 12,330 179,951

Cu Concentrate (000 t) 738,755 652,970 665,469 702,405 734,841 733,935 773,829 824,167 397,800 6,224,171

Copper Price ($/lb.) $1.15 $0.90 $0.90 $0.90 $0.90 $0.90 $0.90 $0.90 $0.90 $0.93Copper Revenue ($ 000) $404,761 $252,823 $252,672 $265,142 $278,195 $276,913 $290,261 $309,493 $151,416 $2,481,676

Gold Price ($/oz) $397 $361 $361 $361 $361 $361 $361 $361 $361 $364Precious Metal Revenue ($ 000) $202,589 $239,198 $257,978 $234,952 $236,601 $230,573 $243,314 $265,532 $139,513 $2,050,250

Total Revenue ($ 000) $607,350 $492,021 $510,650 $500,094 $514,797 $507,486 $533,575 $575,024 $290,928 $4,531,925

Operations Cost ($ 000) $214,894 $203,991 $201,406 $201,519 $193,714 $192,518 $195,676 $198,932 $134,628 $1,737,276Commercial and Mng. Director ($ 000) $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $577,800

Community & Business Support ($ 000) $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $382,500Subtotal Operating Cost ($ 000) $321,594 $310,691 $308,106 $308,219 $300,414 $299,218 $302,376 $305,632 $241,328 $2,697,576

Other Cost ($ 000) $61,811 $5,220 $5,220 $5,220 $5,220 $0 $0 $0 $0 $82,691Total Cost of Production ($ 000) $383,405 $315,911 $313,326 $313,439 $305,634 $299,218 $302,376 $305,632 $241,328 $2,780,267

Capital Costs ($ 000) $39,045 $14,785 $24,370 $17,385 $9,356 $11,145 $5,895 $11,813 $150,000 $283,794

Income Tax ($ 000) $64,381 $47,672 $55,976 $52,698 $61,230 $61,787 $70,534 $84,734 $8,348 $507,359Net Cash Flow ($ 000) $120,519 $113,653 $116,978 $116,572 $138,577 $135,336 $154,771 $172,846 -$108,748 $960,505

10% NPV $647,374 12% NPV $603,359

Table 1-4 Ok Tedi Cash Flow Forecast

RO

SCO

E PO

STL

E A

SSOC

IAT

ES IN

C.

ww

w.rp

aca

n.co

m

1-16


1-17

SENSITIVITY ANALYSIS RPA has developed a sensitivity analysis from the cash flow projection (Table 1-3) to

test the impact of the key assumptions such as grade forecast, capital cost estimate,

operating cost factors, and metal prices. The results of each of these sensitivities are

illustrated in Figures 1-1 and 1-2. The results indicate that the net present value of the

project cash flow estimate is most sensitive to metal prices, with the project being least

sensitive to the capital cost assumptions.

FIGURE 1-1 OK TEDI NPV SENSITIVITY ANALYSIS

Ok Tedi Cash Flow SensitivityBased on $0.90 Cu & $360 Au

($0.2)

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

-30% -20% -10% 0% 10% 20% 30%

Bill

ions

Percentage Change

Cas

hflo

w 1

5% N

PV

Price Grade Capital Operating Source: RPA


1-18

FIGURE 1-2 OK TEDI SENSITIVITY ANALYSIS

Ok Tedi Sensitivity SummaryCash Flow Sensitivity to +/- 30% Change on Key Factors

($0.2)

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

Price Operating Cost Grade Capital Cost

Bill

ions

Key Factors

15%

NPV

Cas

h Fl

ow V

alue

+/- 10% Sensitivity

+/- 30% Sensitivity

Source: RPA

INTERPRETATION AND CONCLUSIONS MINERAL RESOURCE ESTIMATE

OTML has produced a very thorough and well-organized December 2004 report on

Mount Fubilan mineral resources, describing all of the technical details related to the

2004 resource estimate. In RPA’s opinion, OTML has done an excellent job in

developing and documenting its 2004 resource estimation procedures.

Drill hole data and geological interpretations have been based on information that is

two years old, and newer information is now available. OTML is currently in the process

of updating these data for the next mineral resource estimate. RPA is of the opinion that

this issue primarily affects the confidence associated with the deep resources well below

the current ultimate pit design.


1-19

MINERAL RESERVE ESTIMATE

The ultimate pit design used to determine the estimate of Mineral Reserves is well

within the theoretical economic limits developed in the optimization study.

RPA concludes that some of the operating cost and performance parameters used in

the analysis are based on the assumptions of performance and cost improvements

compared to current experience. OTML is now implementing initiatives to reduce

haulage costs in the mine and to increase mill productivity and performance. These are

key factors underlying OTML’s life of mine cost estimates.

On the basis of the detailed and extensive analysis, and methods applied by OTML,

RPA concludes that the Mineral Reserves as estimated based on the 13D4 pit design

represent Proven and Probable Mineral Reserves consistent with the definitions set out in

NI 43-101 and specified in the CIM Standards on Mineral Resources and Reserves

Definitions and Guidelines adopted by the CIM Council on August 20, 2000.

EXPLORATION POTENTIAL No significant exploration potential has been found other than in the immediate

environs of the Mount Fubilan mine.

RECOMMENDATIONS RPA recommends that OTML continue its efforts to assess the management and

closure aspects of the Bige dredging operation and to evaluate the closure costs

associated with this aspect of the operation.

RPA has not identified any significant problems with the OTML resource estimation

methodology. OTML reported the December 2004 Mineral Resources based on a bench

datum of 1,153 m ASL. It is RPA’s view that a portion of the OTML resource estimate

does not have reasonable prospects for economic extraction even at significantly higher

metal price assumptions. RPA recommends that an economic pit limit based on higher


1-20

level price assumptions be adopted as a limit on the reported resource estimate. Other

RPA resource-related recommendations should be considered as opportunities for future

refinements. RPA notes that some of RPA’s recommendations have been made

previously in past reports by OTML and SRK, and that OTML could not implement these

refinements for the 2004 resource estimate because of time limitations.

RPA has made recommendations on streamlining the drill hole database, QA/QC

reviews specifically as they relate to assay checking, and on improvements to the mineral

resource modelling methodology.

RPA recommends that the ongoing geotechnical assessment and monitoring progress

be continued, specifically as it relates to the pit slope design and construction criteria as

well as to the dewatering and depressurization work necessary to achieve the design pit

limits safely and effectively.


2-1

2 INTRODUCTION AND TERMS OF REFERENCE

Roscoe Postle Associates Inc. (RPA) was retained by Inmet Mining Corporation

(Inmet) and Ok Tedi Mining Limited (OTML) to independently review and audit the

Mineral Resource and Mineral Reserve estimates of the Mount Fubilan Mine in Papua

New Guinea and to prepare a National Instrument 43-101 (NI 43-101) report. This

technical report was written by RPA in accordance with the requirements of NI 43-101,

Companion Policy 43-101CP, and Form 43-101F1 of the Canadian Securities

Administrators (CSA).

OTML operates the Mount Fubilan Mine located in the Western Province of Papua

New Guinea (PNG). Inmet owns an 18% interest in OTML, with 52% of OTML held by

the PNG Sustainable Development Program Limited and the remaining 30% interest in

OTML is owned by the PNG government.

The Ok Tedi porphyry copper prospect was discovered by Kennecott Copper

Corporation (Kennecott) in June 1968. Exploration lapsed from 1972 to 1975 while

Kennecott and the PNG government negotiated future mining terms. Over the following

fifteen months, the government carried out further exploration under the supervision of

Behre Dolbear and Company Inc. (Behre Dolbear) and in 1976 entered into an agreement

with an international consortium of companies led by the Broken Hill Proprietary

Company Limited (BHP) for final feasibility studies.

The mining of the deposit was planned in three phases. The initial phase involved

mining and processing of oxide gold mineralization from the gold cap. The second phase

consisted of mining and treatment of both sulphide copper and oxide gold ore. The final

and current stage involves mining of sulphide copper-gold ore, which includes both

porphyry and skarn types of mineralization. Gold production commenced at the Mount

Fubilan Mine in 1984, and the first copper processing facilities were commissioned in

1987.


2-2

This technical report presents the OTML December 2004 Mineral Resource and

Mineral Reserve estimates for the Mount Fubilan Mine. The principal technical

documents and files related to RPA’s audit of the December 2004 Mineral Resource and

Mineral Reserve estimates are listed in the Sources of Information.

Work on this project was completed by RPA Principal Mining Engineer James

Hendry, P.Eng., RPA Consulting Geological Engineer Luke Evans, M.Sc., P.Eng, and

Gerd Wiatzka, P.Eng., Principal, Manager Mining with SENES Consultants Limited

(SENES).

Mr. Hendry, Mr. Evans, and Mr. Wiatzka are Qualified Persons in accordance with

the requirements of NI 43-101. Mr. Hendry, Mr. Evans, and Mr. Wiatzka visited the

Mount Fubilan Mine from March 7 to 11, 2005.

Technical documents and reports on the property were reviewed and obtained from

OTML personnel at the site. Additional information was obtained from Inmet and public

sources. Discussions were held with the following technical personnel:

• Frank Balint, Inmet Vice-President Corporate Development

• Jochen E. Tilk, Inmet President and Chief Operating Officer

• Ian Sheppard, OTML Executive Manager Planning and Technical Services

• Andrew Sharp OTML Manager Mine Planning Services

• Michael Humphreys, OTML Senior Resource Analyst

• Janet Edgecombe, OTML Manager Mill Technical Services

• Norbert Baczynski, OTML Team Leader Geotechnical Engineering

• Jim Veness, OTML Manager Environment

• David L.K. Willy, Manager Laboratory Services

• Jonathan Kepa, OTML Senior Mine Geologist

• Benedict Jainona, OTML Senior Exploration Geologist

• Amane Sino, OTML Senior Resource Geologist


2-3

RPA would like to thank everyone for their co-operation and assistance in carrying

out this assignment.


3-1

3 LIST OF ABBREVIATIONS In this report, monetary units are United States dollars (US$) unless otherwise

specified. The metric system (SI) of measurements and units has been used unless

otherwise specified. A table showing abbreviations used in this report is provided below.

TABLE 3-1 LIST OF ABBREVIATIONS Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Abbreviation Meaning Abbreviat

ion

Meaning

Ag Silver m3 cubic metres

ASCu acid soluble copper m Metre

ASL elevation above sea level (m) mm millimetre

Au Gold Ma million years

Cu copper Mt million tonnes

ft Feet NQ drill core (47.6 mm

diam.)

g Grams oz troy ounce

g/t Grams per tonne pH acidity/alkalinity

Ha hectare (2.471 acres) ppm, ppb parts per million/billion

HQ drill core (63.5 mm diam.) PQ drill core (85mm diam.)

kg kilogram RC reverse circulation

km kilometre S Sulphur

koz kilo ounce SCu sulphide copper

kt kilotonne tonnes or t metric tonnes

m Metre


4-1

4 QUALIFICATIONS Roscoe Postle Associates Inc. (RPA) is an independent firm of Geological and

Mining Consultants based in Toronto with an office in Vancouver. Since its

establishment in 1985, RPA has carried out close to 1,000 consulting assignments

worldwide for more than 450 clients, including major mining companies, junior mining

and exploration companies, financial institutions, governments, law firms, and individual

investors. Our clients are principally Canadian, American, and European companies.

Our business primarily involves providing independent opinions on ore reserves,

technical aspects and economics of mining projects, valuation of mining and exploration

properties, and scoping, pre-feasibility, and feasibility studies. For chartered banks and

offshore banks, we have carried out a number of due diligence and project monitoring

assignments. We have completed assignments on projects located in all parts of Canada,

the United States, Russia, Latin America, Australia, and in other countries in Europe,

Africa and Asia.


5-1

5 DISCLAIMER This report has been prepared by RPA for Inmet and OTML. RPA has neither

verified the mineral land titles nor the status of ownership. RPA has relied on mineral

land title information as provided by OTML and Inmet. The information, conclusions,

and estimates contained herein are based on:

• Information available to RPA at the time of preparation of this report,

• Assumptions, conditions and qualifications as set forth in this report, and

• Data, reports, and opinions supplied by OTML and Inmet and other third party sources.


6-1

6 PROPERTY DESCRIPTION AND LOCATION

PROPERTY LOCATION

The Mount Fubilan Mine is located in the Western Province of Papua New Guinea

(PNG) at approximately longitude 141° 08’E and latitude 5° 12’S (Figure 6-1). The mine

is approximately twenty kilometres by road northeast of Tabubil.

The mine area is located 18 km east of the PNG-Indonesia border, on the

southernmost extremity of the Star Mountain Range, which is situated on the northwest

edge of the Western Province. Sitting roughly equidistant from the north and south

coastlines, the mine lies 210 km directly west of the Porgera gold mine. The headwaters

of the Fly River system are also in the Star Mountains.

The mining activities centre on Mount Fubilan, in a high rainfall area characterized

by near vertical cliffs and dense tropical rainforest. The ore treatment facilities are

located at Folomian at an elevation of 1,630 metres. Mount Fubilan has now been

reduced by over 300 metres from its original pre-mining elevation of 2,095 metres above

sea level.

Great B

arrier Reef

PAPUA NEW GUINEA

0°1

PACIFIC

OCEAN

MYANMAR

THAILAND

PHILIPPINESVIETNAM

CAMBODIA

MALAYSIA

PAPUA NEW GUINEA

INDONESIA

LAOS

TAIWANHong Kong

SINGAPORE

AUSTRALIA

CHINA

VANUATU

SOLOMON

ISLANDS

FIJI

NEW ZEALAND

NewCaledonia (Fr.)

BRUNEI

105° 120° 135° 150° 165°

30°

15°

15°

OK TEDI MINE

Australia

Solomon Islands

Ind

on

es

iaPacific Ocean

Coral Sea

Solomon Sea

Gulf ofCarpentaria

Arafura Sea

Bismarck Sea

Gulf of Papua

Torres Strait

River

Fly

Talbot Is.(Aus.)Saibai Is.(Aus.)

Woodlark Is.

Fergusson Is.

Goodenough Is.

Normanby Is.

Misima Is.

Tagula Is.Rossel Is.

Choiseul Isl.

New GeorgiaGroup

Rennell Is.

Buka Is.

Lihir Is.

Tabar Is.

Feni Is.

Manus Is.

Mussau Is.

Karkar Island

Umboi Is.

Long Island

Trobriand Islands

D'Entrecasteaux Islands

Louisiade Archipelago

Santa Is.

Guadalcanal

New Ireland

New Hanover

New Britain

Admirality Islands

HoniaraPort Moresby

Losuia

OkapaBulolo

Morobe

Abau

Kaintiba

Kupiand

Alotau

Popondetta

MadangMountHagen

KundiawaGoroka

Kerema

Lae

Kimbe

Wau

Kokoda

Hoskins

Talasea

Wabag

Daru

Mendi

Merauke

Kikori

Kiunga

Tabubil

Weam

Jayapura

AwarAngoramMaprik

Aitape

Vanimo

Wewak

Kavieng

Lorengau

RabaulNamatanai

Buin

Kieta

Hanahan

Arawa

Wuipa

Cooktown

Cairns

Kandrian

SepikWest

East Sepik

Enga

HighlandsSouthern

WesternGulf

Western Highlands

Chimbu

MadangEastern Highlands

Central

Northern

National CapitalDistrict

Morobe

Milne Bay

West NewBritain

East NewBritain

Manus New Ireland

Bougainville

150° 156°

0°

6°

12°

144°

Ok Tedi Mine

General Location Map

Inmet Mining Corporation

Papua New Guinea, South Pacific

Figure 6-1

June 2005

N

0 100 500

Kilometres

200 300 400

ROSCOE POSTLE ASSOCIATES INC.

6-2

www.rpacan.com

Legend:

National capital

City, town

Provincial capital

Major airport

International boundary

Main road

Provincial boundary


6-3

PROPERTY STATUS

SURFACE LEASES The Mount Fubilan Mine property comprises two contiguous mineral licenses

covering an area of 21,700 ha, one Special Mining Lease (SML 1), twenty Leases for

Mining Purposes (LMP), and one Special Mining Easement (SME) that collectively

cover an area of approximately 14,959 ha (Table 6-1). All of the leases have been

surveyed. OTML makes an annual rental payment to the Government Department of

Mines (DOM) at a fixed rate per hectare.

Special Mining Lease 1 was issued under the Mining Act and it grants a right to mine

at Mount Fubilan covering an area of 2,083 ha. Renewal negotiations for this lease are

now underway. Clause 12.2 of the Mining (Ok Tedi Agreement) Act gives a right to

renew for a further 21 years from the expiry date. Any new applications for land are tied

to the principal lease SML 1 which will be due for expiry in May 2022, once renewed.

OTML expects that leases will be renewed, as required, to enable full exploitation of the

Mount Fubilan Mine.

Under the Mining Act, a lease compensation agreement between OTML and the

landowners is necessary before a lease can be granted by the DOM. In the case of

OTML, the compensation payments per hectare are standardized and comprise a number

of cost components, including Occupation Fee, Restriction of Access Fee, Cleared Land

Fee, Physically Used Land Fee, and Non Renewable Resource Fund. Payments to the

Non Renewable Resource Fund are accumulated in the Lamin Trust Account for the

future generations of the landowners. The agreements all have five year review clauses,

and in the case of the SML and LMP the review will take place in 2006.

LMP 1 is currently under renewal and partial surrender. LMP 1 will cover an area of

8,593 ha once renewed. OTML also has 14 expired surface leases with applications for

surrender that cover an area of approximately 6,560 ha (Table 6-2). LMP 26, which


6-4

covers the southern part of the original Lukwi tailings area, has expired and an

application for surrender has been made.

The exploration licences and the main surface leases (SML 1 and LMP 1) are shown

in Figure 6-2.

There are smaller surface leases not shown in Figure 6-2 as they are generally

associated with small gravel pits, covering areas ranging from a few hectares to just over

100 ha, and environmental monitoring stations, covering areas that are less than one

hectare.

OTML also has two leases related to the dredging operation at Bige (Inset Drawing in

Figure 6-2). The surface areas for LMP 37 and LMP 79 are 2,116 ha and 1,504 ha,

respectively.

LAND ACT TENEMENTS Some portions of land used by OTML have been acquired under the Land Act

provisions and they mainly include the Tabubil Township and the Ok Menga Hydro

scheme (Figure 6-2). In the case of the Land Act provisions, the State acquires the land

for a period of ninety-nine years and then sub-lets it back to OTML for various periods of

time as required.

TABLE 6-1List of Active Surface Leases

Inmet Mining CorporationMount Fubilan Mine, Papua New Guinea

LeaseCount Number Lease Description Area (ha) Expiry Date Status

1 SML 1 Mine & Mill 2083 28/05/2002 Under Renewal, Application lodged 26/02/2002

2 LMP 1 Southern Dumps, Taranaki and Ok Mani Catchment 8,593 25/8/2002 Under Renewal & Partial Surrender, Application Lodged 26/02/2002

3 LMP 9 Primden Smarden (Alice) Gravel Pit 38.645 29/10/2003 Under Renewal, Application Lodged 17/12/2003

4 LMP 12 Migalkit gravel pit (Km. 122-123) 54 29/10/2003 Under Renewal, Application Lodged 17/12/2003

5 LMP 16 Sawmill flats (CampSite area) 11.07 28/12/2004 Under Renewal, Application Lodged 21/09/2004

6 LMP 17 Lower OK Tedi Gravel Pit South 5.5 28/12/2004 Under Renewal, Application Lodged 21/09/2004

7 LMP 22 Yuk Creek Mini Hydro 6.826 28/12/2004 Under Renewal, Application Lodged 21/09/2004

8 LMP 25 Rumginae Gravel Pit Extension 118.81 3/4/2006 Current9 LMP 27 Kumsumbip Gravel Pit (Km 142.5) 38.21 10/8/2010 Current10 LMP 28 Tabubil Plateau Extension (Eastern Escarpment) 219.1 Period tied to SML 1 Current11 LMP 29 Daplan Creek Water Supply 4.507 12/12/2011 Current12 LMP 31 Kuambit Environment Station 0.2404 Period tied to SML 1 Current13 LMP 32 Krohoi Environment Station 0.4736 Period tied to SML 1 Current14 LMP 33 Hukit Environment Station 0.1316 Period tied to SML 1 Current15 LMP 36 Tabubil East Extension 6.599 Period tied to SML 1 Current16 LMP 37 Dredge Trial/Mine waste camp 2,116 Period tied to SML 1 Current17 LMP 73 Alice Gravel Pit Extension 0.796 Current18 LMP 74 Haidauwogam Environmental Station 0.0435 Current19 LMP 75 Tabubil Escarpment Extension (down to Ok Tedi

River)153.96 Current

20 LMP 76 Alice Gravel Pit Access Road 0.825 Current21 LMP 79 West Bank – Sand Storage. 1,504.23 Period tied to SML 1 Current22 SME 4 Yuk/Dablan Creek Pipeline Easement. 3.165 Period tied to SML 1 Under Renewal

Total 14,959

NotesSML Special Mining LeaseLMP Lease for Mining PurposesSME Special Mining Easement


6-5

EL 581

EL 581

EL 1337

SML 1

LMP 1

LMP 26

Mt Anju

Mt Robinson

Tabubil Township Lease

Tabubil - KiungaRoad

Mine Access Road

Ok Mani River

Ok

Ted

iR

iver

Lukw

i Acc

ess

Road

Ok MengaHydro Plant Lease

Powerhouse Area

Ok MengaDam

Thermal Power Station

Industrial Area

ConstructionCamp

MineArea

Gold ProcessFacility

Ok NingiDam

Worlshop

5°10’0” S5°10’0” S

TABUBIL

320,0

00

E

310,0

00

E

300,0

00

E

340,0

00

E

330,0

00

E420,000 N

410,000 N

400,000 N

430,000 N

141°0

’0”

E

5°15’0” S

141°1

0’0

”E

141°30’E141°00’E

5°30’S

Tabubil

Fly

River

Ok

Ma

Ok

Tedi

Kiunga

Ningerum

Folomian

IRIA

NJA

YA

MINE

SITE

6°00’SPA

PU

AN

EW

GU

INE

A

0 30 km

Madang

145° E

Port Moresby

155° E

10° S

150° E

5° S

Ok Tedi

BIGE

KIUNGA

LMP 79

LMP 37

Ok

Tedi

River

FlyRiver

141°E

6°00’S

IRIA

NJA

YA

PA

PU

AN

EW

GU

INE

A

0 4 20

Kilometres

8 12 16

N

June 2005

Ok Tedi Mine

Exploration Licenses& Surface Leases



Figure 6-2

0 2 10

Kilometres

4 6 8

N

Legend:

Road

Drainage

RO

SC

OE

PO

ST

LE

AS

SO

CIA

TE

SIN

C.6

-6

ww

w.rp

aca

n.co

m

TABLE 6-2List of Expired Surface Leases With Applications for Surrender

Inmet Mining CorporationMount Fubilan Mine, Papua New Guinea

LeaseCount Number Lease Description Area (ha) Expiry Date Status

1 LMP 8 Haidum Gravel Pit Pit 92.11 29/10/2003 Expired. Applied for Surrender 17/12/2003.

2 LMP 10 Mariksim Gravel Pit (Km. 115) 31.55 29/10/2003 Expired. Applied for Surrender 17/12/2003.

3 LMP 11 Kalamuksim Gravel Pit (Km. 118) 5.76 29/10/2003 Expired. Applied for Surrender 17/12/2003.

4 LMP 14 Abayakbang Gravel Pit A (Km. 132) 2.092 29/10/2003 Expired. Applied for Surrender 17/12/2003.

5 LMP 15 Abayakbang Gravel Pit A1 (Km. 128) 2.135 29/01/2004 Expired. Applied for Surrender 17/12/2003.

6 LMP 18 Lower OK Tedi Gravel Pit North 23.4 28/12/2004 Expired. Applied for Surrender 21/09/2004

7 LMP 19 Old Sawmill Site East of Road 12.12 28/12/2004 Expired. Applied for Surrender 17/12/2003

8 LMP 21 Tabubil Explosive Magazine 9.13 28/12/2004 Expired. Applied for Surrender 17/12/2003

9 LMP 23 Maraksim Gravel Pit (Km 118) 2.957 22/3/2005 Expired, Applied for Surrender 21/09/04

10 LMP 24 Ok Whae Sand Pit 16.3 22/3/2005 Expired, Applied for Surrender 21/09/04

11 LMP 26 Lukwi Extension 6,200 25/08/2002 Expired, Applied for Surrender 26/02/2002

12 SME 1 Ok Ma Access Road 79.72 28/12/2004 Expired. Applied for Surrender 21/09/2004

13 SME 2 Tabubil/Mine Access Road 54.36 28/12/2004 Expired. Applied for Surrender 21/09/2004

14 SME 3 Tabubil/Ok Ningi Transmission Line 28.016 28/12/2004 Expired. Applied for Surrender 21/09/2004

Total 6,560

NotesSML Special Mining LeaseLMP Lease for Mining PurposesSME Special Mining Easement


6-7-7


6-8

EXPLORATION LICENSES Exploration Licenses (EL) have a term not exceeding two years and can be renewed

in accordance with the provisions of the Mining Act. The exploration licenses currently

have terms to November and December 2005 (Table 6-3). EL581 has an area of 18,000

ha surrounding the mine, and EL1337 covers 3,700 ha around Mount Binnie West. The

exploration licences are shown in Figure 6-2.

TABLE 6-3 OTML EXPLORATION LICENSES Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Exploration License Hectares Licence Term

EL581 18,000 22/12/03 to 21/12/05 EL1337 3,700 4/11/03 to 03/11/05 Total 21,700

ENVIRONMENTAL AND PERMITTING STATUS

REGULATORY REGIME The mine operates under the direction and obligations of the Mining (Ok Tedi

Agreement) Act Chapter 363 and its supplementary amendments (see complete list in

Appendix A).

At present the regulatory regime is defined by the OTML Environmental Regime,

which was brought into effect in December 2001 through passage of the Ok Tedi Mine

Continuation (Ninth Supplemental Agreement) Act. This supplemental agreement

provides the basis for continuation of operations, including requirements for

environmental and social obligations within the context of the following principal

components:

• Environmental Regime 2001

• PNG Sustainable Development Program

• Community Mine Continuation Agreements

• Ok Tedi Development Foundation


6-9

• Mine Closure Sinking Fund.

The Ninth Supplemental Agreement defines the expectations with respect to

environmental performance of the operation and the ongoing scientific research program

(Schedule 1 and 2, respectively). The mandatory requirements of Schedule 1 provide the

framework for reporting on the Environmental Values agreed to by the community, state,

and OTML. Schedule 2 provides the basis for research and development for critical

issues associated with the ongoing operation and for its effective closure and

decommissioning.

COMMUNITY MINE CONTINUATION AGREEMENTS The national government of PNG passed legislation in November 2001 establishing

the basis under which the Ok Tedi mine was to continue operating. The key aspect of

this legislation was the basis for the consent given by the communities affected by the

continuation of the mine operation.

The Community Mine Continuation Agreement (CMCA) process was the framework

for expressing the predicted mine impacts and negotiating with the communities with

respect to the ongoing operations. Principal parties to the agreements were landowner

representatives from six Fly River/Ok Tedi regions, the PNG National Government, and

OTML. The Fly River Provincial Government and relevant local governments were also

involved in the negotiations.

The process was observed by independent non-government organizations, the

Individual and Community Rights Advocacy Forum (ICRAF), and the PNG Council of

Churches. OTML also provided landowners with negotiation and conflict resolution

training through PEACE Foundation Melanesia.

The process was supported by three key functions:

• Setting up a development foundation to contribute to sustainable development in the Western Province into the future,


6-10

• A new environmental monitoring and reporting regime to better understand

the impacts of the mine operations,

• Legislation - Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act.

SOCIAL COMMITMENTS AND IMPLEMENTATION The CMCAs provide a mix of benefits for landowners affected by the mine that

includes compensation for past and current impacts as well as initiatives for sustained

development beyond the life of the mine. The mix of benefits acknowledges the need to

provide for the landowners’ families well beyond the mine's economic life, and that

replacement economic support must begin immediately. Activities in this respect have

included the following:

COMPENSATION AND SUSTAINABILITY

Before 2001, the only offset compensation was the Fly River Development

Trust and the Highway Development Trust, both of which have since been rolled

into the CMCAs.

The CMCAs cover nine regions that include 156 villages. The agreements

resulted from meetings and discussions with villagers, comprising at least two

consultation visits and sign off by 2 representatives of each village. As a result of

the agreements multiple community offsets are now in place, including:

• 9th Trust Mine Continuation Agreements (MCAs), which for most communities have 3 components to them, namely:

Cash component (not all) Investment Component (at closure, goes to development) Development Component.

• 8th Trust MCA provided for flooding and sedimentation impacts due to

production of mine waste and lease compensation.

• Lower Ok Tedi Agreement that deals with agreed settlement for dieback and development.


6-11

GOODWILL AND SUSTAINABILITY In addition to the community offset agreements outlined above, OTML also has a

number of goodwill programs underway that include for example:

• Food Security – food programs to help people stay in “home” areas for longer periods and agriculture training and support.

• Health and Education – provision of local community health programs,

mobile floating clinics, addressing malaria, TB, HIV/AIDS, upper respiratory diseases.

• Community Development training programs.

CLOSURE REQUIREMENTS

OTML commenced planning for mine closure in 1998 with a conceptual

Rehabilitation and Closure Plan. After many workshops and comprehensive discussions

with interested parties, OTML prepared a submission entitled “Social and Sustainable

Development Issues in Relation to Mine Closure”. This was subsequently accepted by the

State, and the “2002 Draft Mine Closure Plan” was approved by the Minister for Mining

in August 2003 and by the Minister for Environment and Conservation in May 2004. The

mine closure plans and supporting discussion have been used by the OTML Internal

Mine Closure Planning Committee (IMCPC) as the basis for community consultation and

subsequent preparation of the draft mine closure plan.

The first estimate of the closure cost totalled approximately $US150 million,

primarily for the mine and mill operations sites. RPA understands that the PNG

government had accepted a required closure cost estimate of US$100 million. A

Financial Assurance program is currently in place where OTML biannual contributions

are made to the Ok Tedi Financial Assurance Fund (FAF), held jointly by the state and

OTML. The FAF funds are to be used for the final closure, reclamation and

rehabilitation required after the operations cease. The FAF currently stands at US$36

million accumulated through contributions from July 2002 to January 2005.


7-1

7 ACCESSIBILITY, LOCAL RESOURCES, PHYSIOGRAPHY AND INFRASTRUCTURE

ACCESSIBILITY

Tabubil can be accessed via air and boat/road from Port Moresby. The primary

means of transporting personnel is via an OTML aircraft which provides regular flights

between Tabubil and Cairns Austalia, Port Moresby and smaller communities in the

immediate vicinity. Concentrate products and freight are primarily transported via river

barge between tidewater and Kiunga located on the Fly River at a distance of more than

800 km. From Kiunga freight is transported to the operation site via an all weather gravel

road approximately 137 km. Copper concentrate is transported by pipeline, in slurry

form, from the concentrator to Kiunga, where it is dewatered and loaded onto the barges

for transport and reloading into ocean going ships. Access between Tabubil and the

Mount Fubilan operations site is via the Mine Access Road (Figure 6-2).

CLIMATE

In Tabubil, temperatures range from a mean of 20° C at night to a daytime average of

27° C. Extremes of 12° C and 39° C have been recorded. Rain falls 339 days each year

and averages 8,000 mm per annum at Tabubil and approximately 10,000 mm per year at

Mount Fubilan, making this area one of the wettest places on earth. There is a

pronounced wet season from October to March. The high rainfall has enhanced

vegetation growth with moss forest and dense, broad leaf undergrowth.

LOCAL RESOURCES

Tabubil is a town that was established by OTML as a residential and support base for

the mine. The community has primary and secondary schools, churches, a hospital, a

supermarket, sporting facilities, a golf club, and a large number of locally-owned


7-2

businesses. People from all over PNG come to Tabubil for employment. Tabubil has a

population of about 10,000 people, making it the largest settlement in western PNG. The

Western Province is the most sparsely populated province in PNG with an estimated total

population of 155,000.

OTML operates its own hydro-electrical power generation plant on the Ok Menga

River (Figure 6-2).

FIGURE 7-1 AIR PHOTO OF TABUBIL (PHOTO FROM WWW.OKTEDI.COM)


7-3

INFRASTRUCTURE

The Mount Fubilan mine infrastructure is shown in Figure 7-2.

FIGURE 7-2 MOUNT FUBILAN SITE AND TABUBIL IN BACKGROUND

PHYSIOGRAPHY

The mining activities are centred on Mount Fubilan, which had a pre-mining peak

elevation of 2,095 m. The area experiences high rainfall and is characterized by near-

vertical cliffs surrounded by dense tropical rain forest. The terrain is mountainous, with

local relief of 1,500 m or more. Ridges are typically narrow with very steep flanks.

Mount Fubilan lies within the southern foothills of the Star Mountains, which rise to

4,000 m above sea level and form the watershed divide between the Sepik and Fly rivers.


8-1

8 HISTORY In 1963, a government patrol made first contact with the Min people of the Star

Mountains and noticed signs of copper mineralization near the present mine site. In 1968

the Mount Fubilan copper-gold deposit was discovered. In 1969, geologists from the

Kennecott Copper Corporation were issued a prospecting authority over the area

From 1969 to 1971 diamond-drilling programs established ore reserves; however,

Kennecott and the PNG Government could not reach agreement on terms to develop the

mine and in 1975 Kennecott withdrew from the project. In 1976, the Broken Hill

Proprietary Company Limited (BHP) of Australia entered into negotiations with the PNG

Government, and subsequently the government passed the Mining (Ok Tedi Agreement)

Act and an international consortium was formed to assess the feasibility of developing a

gold and copper mining operation. A ten-volume feasibility study was prepared and

presented to the PNG Government in 1979.

In February 1980 the national government approved the project and exercised its

option to take up a 20 per cent shareholding, and in June the Ok Tedi Supplemental

Agreement Act was passed. In 1981, Ok Tedi Mining Limited (OTML) was incorporated

to develop and operate the project, a lease was granted to OTML, and the construction

began. The development program took almost eight years and cost US$1,400 million.

The operation was planned to be developed in three phases:

• Phase 1: construction of the mine site infrastructure, including 170 kilometres of roads, a tug and barge system with full port facilities at Kiunga to operate over 1,300 kilometres of river and sea, and the Tabubil township, and mining of the gold ore capping the main copper deposit.

• Phase 2: development of separate treatment facilities for the copper ore,

construction of the hydroelectric power station, and provision of river transport and export loading facilities for copper concentrates.

• Phase 3: increased copper production and shutdown of the gold circuit after

exhaustion of the gold cap.


8-2

The third (current) stage involves mining of sulphide copper-gold ore, which includes

porphyry and skarn mineralization. Table 8-1 summarizes the production history.

TABLE 8-1 MOUNT FUBILAN MINE PRODUCTION HISTORY Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Financial Year

Gold Bullion (ozs.)

Copper Concentrate.

(tonnes)

Contained Copper (tonnes)

Contained Gold (ozs.)

1985 523,847 - - - 1986 601,475 - - - 1987 353,853 106,578 39,488 230,065 1988 198,770 196,360 52,677 381,365 1989 2,608 441,795 135,309 510,367 1990 521,267 170,210 443,766 1991 - 600,933 204,459 355,864 1992 - 568,599 193,359 337,415 1993 - 588,849 203,184 394,039 1994 - 587,644 207,236 476,643 1995 - 613,957 212,737 482,132 1996 - 542,415 185,665 425,611 1997 - 334,130 111,515 265,758 1998 - 491,336 151,556 413,265 1999 - 623,987 187,920 401,568 2000 - 693,654 203,060 533,959 2001 - 694,900 203,762 455,222 2002 - 716,021 208,123 467,886 2003 - 638,747 186,862 480,300 2004 628,000 173,400 524,500 Total 1,680,553 9,589,172 3,030,522 7,579,725

EXPLORATION HISTORY

The Ok Tedi porphyry copper prospect, now known as the Mount Fubilan mine, was

discovered by Kennecott Copper Corporation (Kennecott) in June 1968. Kennecott

geologists D. Fishburn and J. Felderhoff, on helicopter reconnaissance exploration,


8-3

discovered mineralized float at the confluence of the Ok Tedi and Ok Menga rivers and

traced it back to its source in the Mount Fubilan region. Exploration lapsed from 1972 to

1975 while Kennecott and the PNG government negotiated future mining terms. During

this period of initial exploration and negotiations on possible development of the deposit,

PNG itself was undergoing the change from colonial rule to self-government and finally

to full independence in September 1975. Negotiations failed in March 1975 when the

PNG government announced their refusal to renew the prospecting authorities that

covered the deposit and that had been held by Kennecott since 1968. Over the following

15 months, the government carried out exploration under the supervision of Behre

Dolbear and in 1976 entered into an agreement with an international consortium of

companies led by the Broken Hill Proprietary Company Limited (BHP) for final

feasibility studies (Howell et al., 1978).

Exploration continues at the present time with diamond drilling, specifically in the

immediate proximity of the Mount Fubilan mine.

HISTORICAL MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

The recent historical OTML Mineral Resource and Reserve estimates are summarized

below. RPA has not reviewed the historical estimates in detail and cannot comment on

their reliability. They are presented only as relevant historical information. OTML has

used the classification conventions of the Australasian Code for Reporting of Identified

Mineral Resources and Ore Reserves (the JORC Code-1996). The Australian JORC

Code (1996 and 2004) resource and reserve classification definitions are similar to the

Canadian CIM (2000 and 2004) definitions.

Table 8-2 presents a summary of the June 2002, December 2003, and June 2004

resource estimates. A significant increase in the global resource occurred in June 2004

due primarily to a lowering of the cut-off grade. SRK audited the December 2003 and


8-4

the June 2004 resource and reserve estimates and identified no material flaws (SRK,

2004a and 2004b).

TABLE 8-2 RECENT HISTORICAL MINERAL RESOURCE ESTIMATES Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Date Classification Tonnes

(Mt) Cu (%)

Au (g/t)

June 2002 Measured 470.6 0.87 0.96 June 2002 Indicated 217.6 0.55 0.65 June 2002 Inferred 15.5 0.46 0.46 June 2002 Total Mineral Resource 703.6 0.76 0.85

December 2003 Measured 432.2 0.87 0.97 December 2003 Indicated 215.8 0.56 0.65 December 2003 Inferred 15.4 0.46 0.46 December 2003 Total Mineral Resource 663.5 0.76 0.85

June 2004 Measured 375.1 0.79 0.92 June 2004 Indicated 352.7 0.56 0.67 June 2004 Inferred 176.4 0.49 0.68 June 2004 Total Mineral Resource 904.1 0.64 0.78

The resource estimates all have been based on geological interpretations developed in

2000 and 2001 and are reported as all material between the then current topographic

surface and a base datum of 1153 m elevation.

Table 8-3 summarizes the recent historical Mineral Reserve Estimates.


8-5

TABLE 8-3 RECENT HISTORICAL MINERAL RESERVE ESTIMATES


Date Classification Tonnes (Mt)

Cu (%)

Au (g/t)

June 2002 Proven 253.9 0.90 0.94 June 2002 Probable 34.1 0.57 0.67 June 2002 Total Mineral Reserves 288.0 0.85 0.91

December 2003 Proven 214.6 0.91 0.97 December 2003 Probable 31.5 0.58 0.67 December 2003 Total Mineral Reserves 246.1 0.87 0.93

June 2004 Proven 239.4 0.84 1.03 June 2004 Probable 24.7 0.75 1.27 June 2004 Total Mineral Reserves 264.1 0.84 1.05

The reserve estimates are each based on the then current pit limit designs and the

mining elevations at that time.


9-1

9 GEOLOGICAL SETTING REGIONAL GEOLOGY

The Ok Tedi mineral district lies at the fringe of the northwest trending physiographic

province in the southwestern region of PNG. The regional setting comprises the northern

margin of Proterozoic-Paleozoic basement rocks of the Australian continent overlain by a

fold-thrust belt of Mesozoic and Tertiary platform cover rocks. Miocene-Pleistocene

igneous intrusives within this belt host major mineral districts of the area, including Ok

Tedi (Mount Fubilan), Ertsberg, Porgera, and Kare. A belt of greenschist facies

metamorphic slates and phyllites occurs to the north. Unmetamorphosed overthrust slabs

of Eocene oceanic crust and Miocene volcanic rocks unconformably overlie the

metamorphic rocks. Island arc type volcanic rocks with wedges of basement oceanic

crust occur beyond the metamorphic rocks, fringing the PNG coastal range.

Regional deformation, metamorphism, and igneous activities accompanied a

southwest-northeast tectonic compression contemporaneous with north-west trending

basement core uplift. A prominent northeast-southwest trending regional structure

governs the attitudes of the steeply dipping north to northeast trending fractures,

dilational faults, and fractures. Igneous, hydrothermal activity and mineralization are

associated with the deformation events in the region.

Regional geology is dominated by continental margin marine sedimentary siltstones,

mudstones, and limestones. These sediments were deposited from the Cretaceous to mid-

Miocene in an extensional framework. The fault network provided conduits for magma

and fluid during subsequent reactivation.

Post depositional (<12 Ma) regional compression occurred in response to the oblique

convergence of the Australian Plate to the south and Pacific Plate to the north. This

compression produced regional folding and reactivation of the extensional structural

framework.


9-2

Emplacement of regional intrusive complexes along faults commenced approximately

2.6 Ma and continued intermittently until 0.7 Ma. Two major intrusives are recognised in

the region, including the Miocene - Pliocene Mount Ian Intrusive Complex in the

Townsville area and the younger Pliocene-Pleistocene (2.6Ma -1.1 Ma) Star Mountains

Intrusive Complex at Ok Tedi, in the Mount Frew and Mount Kwang areas.

The Mt. Ian Intrusive complex is zoned and comprises a younger gabbroic core (1.9±

0.2 Ma) which grades outward into older (12.9 Ma) monzodiorite, diorite, and andesitic

porphyries on the margins. The intrusives occur mainly as relatively flat lying sills and

as minor stocks and dikes. The regional thrust fault systems appear to have strong

control on the geometry of the flat lying intrusives.

The continued regional and localized compression produced reactivation of some

fracture sets, rapid uplift, and subsequent erosion and supergene enrichment.

PROPERTY GEOLOGY

The geological setting for the Ok Tedi mineralization consists of sediments intruded

by multiple phases of variably mineralized calc-alkaline stocks with contemporaneous

skarn formation (Figure 9-1).

Ieru Formation siltstone (mid-to-late Cretaceous) represents the dominant

sedimentary unit in the current OTML operation.


9-3

FIGURE 9-1 OK TEDI PROPERTY GEOLOGY


9-4

Darai Limestone (late Oligocene to early Miocene) was thrust both within (Parrot’s

Beak Thrust) and above (Taranaki Thrust) the Ieru Formation during a period of

compression and structural reactivation.

Pnyang Formation mudstones and siltstones (middle Miocene) conformably overlie

the Darai Limestone and display a gradational and variable facies change from

moderately carbonaceous near the basal contact to weakly or non-carbonaceous away

from the contact.

Sydney Monzodiorite (2.6 Ma) is the earliest and most extensive intrusive stock in the

Ok Tedi complex. It is porphyritic to equigranular in texture and contains andesine,

clinopyroxene, orthoclase, hornblende, and biotite with accessory sphene, apatite, and

magnetite. It is relatively unaltered and contains limited economic gold and copper

mineralization, although it is enriched near the Fubilan monzonite porphyry contact.

Hornfelsed Ieru siltstones displaying limited propylitic alteration and monzodiorite

siltstone breccias occur peripheral to the intrusion.

Emplacement of the Sydney Monzodiorite is believed to have produced the Ok Tedi

skarns through metasomatic replacement of limestone/carbonate facies by reaction with

magmatic fluids.

Skarns have formed along thrust faults proximal to the Sydney Monzodiorite with

more massive skarn bodies located along high angle monzodiorite-limestone contacts.

Skarn mineralization is characterized by an inner calc-silicate garnet and pyroxene

alteration of monzodiorite (endoskarn), a central massive magnetite pyroxene phase

which grades to massive sulphide and limited calc-silicate alteration at the outer contact

with siltstone or limestone sediments.

Subsequent intrusive bodies (porphyritic monzodiorite, southern monzonite porphyry)

are observed in the southern portion of the ore body within and adjacent to the Sydney

Monzodiorite.


9-5

The Fubilan monzonite porphyry (1.1 Ma to 1.2 Ma) intruded Sydney Monzodiorite

and associated stocks, breccias, skarn bodies, and shallow dipping sediments. Important

Cu-Au mineralization is hosted within the Fubilan monzonite porphyry. The rock

consists of phenocrysts of oligoclase, orthoclase, quartz, hydrothermal biotite after

hornblende and primary biotite with accessory apatite, sphene, rutile after sphene and

magnetite in a glassy fine grained felsite matrix.

The stock has undergone two phases of potassic alteration. Phase One is

characterized by pervasive dark brown to green brown primary igneous micas that were

partially clay altered. Sphene is partly replaced by rutile. Chalcopyrite and martitized

magnetite are commonly observed. Phase Two is more intense and is characterized by

pervasive and fracture controlled pale brown phlogopitic mica that forms aggregates after

mafic minerals and is commonly associated with chalcopyrite, bornite, molybdenite, and

gold. Argillic alteration is observed marginal to the potassic alteration.

Ieru siltstones were hornfelsed peripheral to the Fubilan monzonite porphyry

intrusion.

Intrusive breccias containing siltstone, Fubilan monzonite porphyry, skarn, and

Sydney Monzodiorite are observed within and proximal to the Fubilan monzonite

porphyry. These are believed to have exploited zones of weakness during structural

reactivation subsequent to emplacement of the Fubilan monzonite porphyry.

Significant skarn mineralization is believed to have been engulfed and absorbed by

the Fubilan monzonite porphyry stock. Skarn bodies were enriched peripheral to the

intrusion. The Fubilan monzonite porphyry contains an inverted cone-shaped quartz

stockwork core that has been intensively weathered and is now devoid of economic

copper or gold mineralization.


9-6

Late phase barren dikes (e.g. hornblende porphyry) transgress all other lithologies

within the mine area. Emplacement of these is believed to have occurred until

approximately 0.7 Ma.

The mine area has also experienced post emplacement regional compression, uplift,

water table fluctuation, leaching due to downward percolation of meteoric waters, and

supergene enrichment.


10-1

10 DEPOSIT TYPES The Ok Tedi (Mount Fubilan) copper-gold deposit is a porphyry copper deposit with

associated deposits of skarn type mineralization. The porphyry copper deposits are the

products of large, intrusion-related hydrothermal systems. The skarn mineralization has

formed by replacement of mostly carbonate-bearing rocks during contact metamorphism

and metasomatism.


11-1

11 MINERALIZATION The protore Cu-Au-Ag mineralization in intrusives, skarns, and fractured siltstones

proximal to the intrusive stocks is predominantly chalcopyrite with pyrite-marcasite and

small amounts of bornite and molybdenite. Irregularly distributed sphalerite and galena

are present around the fringe areas of the deposit and within some skarns. The primary

mineralization is distributed throughout the porphyry and well into the monzodiorite to

the south. However, the greatest concentration is contained within the upper central part

of the monzonite porphyry stock adjacent to the quartz core. Smaller intrusive events

within the same rock type are found to carry elevated metal values.

Massive magnetite skarns contain chalcopyrite-pyrite-marcasite-bornite

mineralization, sometimes with chalcocite, digenite and covellite enrichment. Gold is

closely associated with the copper mineralization in the skarns and intrusive rocks. A

department study suggests that much of the gold mineralization associated with massive

pyrite-marcasite skarn is refractory, being contained within pyrite-marcasite and

magnetite minerals.

Mineralization was significantly enriched through supergene processes. Oxidation

and leaching produced a gold-rich leached cap underlain by a supergene enriched copper

zone of chalcocite and digenite merging downwards into lower grade chalcopyrite-

dominated protore mineralization. Oxidation of copper and iron sulphides released

sulphate copper, which was then transported downward by meteoric water percolation.

In a reducing environment at or below the water table, the copper precipitated as

chalcocite and digenite, mostly as rinds on fresh chalcopyrite and to a lesser extent on

pyrite-marcasite grains. Leaching and enrichment has also occurred in the skarn bodies,

with oxidation preferentially developed to deep levels along the outer brecciated skarn

margins in contact with the Darai Limestone.


11-2

The boundary between the zone of enrichment and primary sulphide mineralization is

gradual and diffuse, exhibiting a slow decay of enrichment with depth.

The global ratio of Au to Cu in sulphide mineralization throughout the deposit

approximates 1.1 g/t Au to 1.0 % Cu. Current mining is predominantly exploiting the

protore and displays an Au to Cu ratio of approximately 1.0 g/t Au to 1.0 % Cu.

ORE TYPES & KEY CHARACTERISTICS

The Ok Tedi orebody displays some characteristics that are deleterious to optimal

processing and production of marketable concentrate. These elements require proactive

delineation and management (OTML, 2004).

OTML is contractually bound to produce a copper-gold concentrate containing lead,

zinc, and bismuth below specific grades and a penalty clause is invoked if the maximum

acceptable fluorine grade in the concentrate is exceeded. Copper grade of concentrate is

expected to range from 27 % to 37 %.

Elevated concentrations of fluorine are present locally within the orebody. Fluorine

is concentrated from talc and phlogopite during the mill flotation process. Talc is

produced as an alteration product of tremolite that is formed within the skarn orebodies

due to prograde metamorphism of carbonate facies. Phlogopite commonly occurs within

the Fubilan monzonite porphyry as a product of potassic alteration.

Lead, zinc, and bismuth concentrations are elevated at the extremities of the porphyry

system and contact margins or fault zones within the skarn orebodies.

Precipitation of chalcocite/digenite/chalcanthite produced thin overgrowths on pyrite/

marcasite and chalcopyrite grains during secondary enrichment. The overgrowths are

commonly observed in pyrite/marcasite skarns and are attracted to chemical collectors


11-3

during the milling process. This results in selective flotation of pyrite/marcasite grains

and production of a lower grade concentrate.

Acid soluble copper (ASCu) species such as cupriferous goethite, malachite, bornite,

chalcocite, chrysocolla, and native Cu are present in oxidized skarns, fault zones and

calc-silicate altered intrusives adjacent to skarns. Metal recovery is reduced when

processing these minerals.

Hard and blocky material requires additional milling time resulting in increased

production costs and reduced milling throughput. Hornfelsed siltstones and intrusive

lithologies with limited argillic alteration can cause milling problems.

Geological and operational controls have been implemented in the OTML systems to

manage and mitigate the effects of the various ore attributes described above on the

processing systems and the final product characteristics.

GEOLOGICAL MODELS

The current geological interpretation that is the basis for the current resource estimate

was developed in 2000 and 2001. OTML modelled the major rock types using wireframe

models. OTML is currently updating the interpretation in order to reflect the most recent

operating experience and infill drilling information. This new interpretation will provide

a new basis for the next Mineral Resource estimate.

The following are the major geological units identified and interpreted: • Siltstone - Hornfelsed, altered (potassic and argillic) and locally unaltered

siltstone of both the Ieru and Pnyang formations. Commonly sub-economic due to hardness and low grade mineralization. Ore grade mineralization is best developed along fractures in areas adjacent to intrusive rocks, in contact with skarns and in contact breccias formed proximal to the intrusive contacts.

• Limestone - The Darai Limestone unit includes unaltered limestone, marble and

fault gouge material associated with the Taranaki and Parrots Beak thrust faults. Limestone is barren and has a high acid neutralizing capacity. It is required for neutralization of sulphidic waste and tailings.


11-4

• Monzodiorite - Sydney Monzodiorite intrusion plus younger porphyritic

monzodiorite (PMD) intrusive rocks and dikes. Mainly chalcopyrite protore but includes small zones of chalcocite enrichment, quartz stockwork and breccias. Mineralization is generally present but is mostly of sub-economic grade.

• Endoskarn - Zone of calc-silicate alteration of the monzodiorite intrusive stock.

Associated with the formation of magnetite and sulphide skarn deposits.

• Skarn - Lithology formed by metasomatic alteration of sedimentary carbonate facies at the contacts with monzodiorite and monzonite intrusions. Skarns are most extensive in the Darai Limestone unit, with smaller calc-silicate skarn zones developed within the Ieru siltstone. The dominant skarn formation was associated with the monzodiorite intrusive with a later overprinting associated with the monzonite porphyry. The skarn deposits generally contain higher concentrations of Au and Cu mineralization than the associated intrusive rocks because they reflect a more chemically reactive environment for the precipitation of sulphide minerals from emanating hydrothermal fluids. The skarn ore bodies have internal zonation characterized by inner calc-silicate mineralogy, a central massive magnetite-dominated assemblage, and massive pyrite-marcasite on the outer margins.

• Monzonite - Includes the Fubilan monzonite porphyry intrusive complex,

Southern monzonite porphyry intrusion, plus minor dikes and younger intrusive rocks. Incorporates a leached zone, barren quartz core, the majority of the chalcocite supergene zone, and significant chalcopyrite protore. This rock unit contains economic mineralization with minor areas of internal waste.

• Oxide Skarn - Oxidation of sulphide and magnetite skarn. Dominated by

ubiquitous limonite, goethite, and hematite. Also characterized by the presence of Cu oxides (azurite, malachite, and cuprite) and native Cu. Oxide skarns contain elevated levels of acid soluble Cu. Occurrence at depth is generally due to structural zones, which provided channels for descending meteoric waters. The oxide zones have limited lateral extent and are often extremely variable in grade due to inconsistent leaching and remobilization of Cu.

• Thrust Zones - Breccia and gouge zones composed of siltstone, local skarn

material and very minor limestone, commonly with sericite-clay-pyrite-marcasite matrix. Two major thrust zones identified in the model are associated with the Taranaki and Parrot’s Beak thrusts.

The main rock types in the reserve estimate are summarized in Table 11-1. The

sulphide skarns contain approximately 25% of the remaining reserve tonnage


11-5

contributing 44% of the copper metal and 40% of the contained gold. This unit is now

the most important single component of the remaining reserve. The monzonite hosts

approximately 38% of the reserve tonnage, 22% of the contained copper, and 18% of the

contained gold.


11-6

TABLE 11-1 MAIN ROCK TYPES IN RESERVE ESTIMATE


Lithology Name

Colour Legend for Figure 11-1

Percent of Total Reserve Tonnage

Percent of Total Reserve Copper Metal

Percent of Total Reserve

Gold Metal

Siltstone Pnyang-cyan, Ieru-green 0.5% 0.4% 0.3%

Limestone Darai-blue 0.0% 0.0% 0.0%

Monzodiorite Brown 14.6% 6.3% 7.2%

Endoskarn Magenta 12.6% 13.3% 13.5%

Pyrite Skarn Orange 9.2% 13.6% 21.0%

Sulphide Skarn Orange 24.7% 44.0% 39.8%

Monzonite Pink 37.8% 21.8% 17.5%

Oxide Skarn Not Shown 0.6% 0.5% 0.8%

Thrust Zones Yellow 0.0% 0.0% 0.0%

Total 100.0% 100.0% 100.0%

A 3-D perspective that shows the geological wireframes at the December 2004 pit

topography is given in Figure 11-1. A lithological colour legend is included in Table 11-

1. All of the skarns are shown in orange.


11-7

FIGURE 11-1 3-D PERSPECTIVE OF THE WIREFRAMES ON DECEMBER 2004 PIT TOPOGRAPHY


12-1

12 EXPLORATION The chronology of exploration at the Mount Fubilan mine has been described above

under History.


13-1

13 DRILLING The exploration drill hole database is composed of both core and reverse circulation

drill hole data dating back to the earliest exploration drilling by Kennecott (1968 to

1971). From 1969 to 2005, some 889 diamond drill holes totalling 203,261 m and 2,116

reverse circulation holes totalling 97,275 m were drilled in the Mount Fubilan area.

Some of the short diamond drill holes and most of the reverse circulation holes are

only relevant in areas that have been mined out and these holes have been excluded from

the current resource database. The assays in these excluded holes, which are mostly

associated with the gold cap zone, would not influence the current resource estimate in

any case. The current resource estimate is supported by 647 drill holes and 320 reverse

circulation drill holes.

Drill hole spacing is generally targeted on a 70 m by 100 m grid for intrusives and 50

m by 50 m grid for skarns. Typically complex ore zones have increased drill hole

density. Drill holes are spaced further apart around the margins of the deposit and in

waste areas.

OTML has evaluated the use of blasthole assays to support resource estimation;

however it was found that they produced less reliable results. Consequently, the current

resource estimate does not use blasthole data.

DRILL CORE LOGGING

Drill core is logged and described in detail. The intervals and logging codes have

been entered into the drill hole database. Collar location, downhole surveys, and assay

results are also recorded in the database.


13-2

A review of some of the historical logs indicates that the geological information is

complete and of good quality. In RPA’s opinion, the graphical drill logs by OTML,

Behre Dolbear, and Kennecott are of high quality.

DRILL CORE SIZE

All recent and current drilling is diamond core drilling, with the greater part of the

remaining resource being estimated from this method of drilling. Diamond drill holes are

generally drilled in PQ (85 mm) diameter and completed in HQ (63.5 mm) and less

commonly NQ (47.6 mm).

COLLAR SURVEYS

All of the diamond drill holes and most of the reverse circulation holes related to the

resource estimate have collar surveys recorded. Some reverse circulation holes and a few

of the older diamond drill holes do not appear to have been surveyed. Although it is

preferable to survey all drill hole collars to minimize location uncertainty, RPA believes

that most of the unsurveyed collar coordinates are likely within a few metres of their

planned locations. This level of accuracy is acceptable considering that the drill holes are

generally spaced at 50 m to 100 m apart.

DOWNHOLE SURVEYS

Drill holes are surveyed via the Eastman single-shot method. General practice is to

have surveys taken within 20 metres of the surface and then repetitively at intervals of 40

m to 100 m down hole. RPA notes that approximately one third of the diamond drill

holes that support the December 2004 resource estimate have no downhole survey

measurements. The drill hole deviations, however, are generally minor due to the large

diameter drill rods used and because most of the drill holes are collared with vertical to

near-vertical orientations.


13-3

CORE RECOVERY

OTML reports that core recovery is generally good across all lithologies. Overall

recovery is summarized in Table 13-1.

TABLE 13-1 DIAMOND HOLE CORE RECOVERY (FROM OTML (2004) Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Core Recovery

(%) Cumulative Number of

Samples Cumulative Frequency

(%) 0 13 0.03

10 5 0.01 20 20 0.04 30 37 0.07 40 91 0.18 50 94 0.18 60 112 0.22 70 168 0.33 80 237 0.46 90 330 0.64 100 50,156 97.84

Total 51,263 100.00

Only 0.6% of the diamond drill hole samples have core recovery values that are less

than 90%. In RPA’s opinion, the OTML core recovery statistics are very good. RPA

notes that a number of deeper drill holes were abandoned in the thrusts due to blocky

ground and difficult drilling conditions.


14-1

14 SAMPLING METHOD AND APPROACH There are approximately 53,120 assays related to the resource diamond drill holes

(DDH) and 12,571 assays in the resource reverse circulation (RC) drill holes.

The historical drill hole samples vary in length. Approximately 76% of the core

samples and 83% of the RC samples have 3 m sample lengths. Approximately 1% of the

core samples and slightly less than 12% of the RC samples have 2 m sample lengths.

Over 2% of the core samples and 5% of the RC samples have 1 m sample lengths.

Diamond drill core is sawn in half, with half sent to the mine laboratory and half

preserved for future reference. Drill core from the pre-development holes was sent to a

number of laboratories. OTML has a large core logging and storage facility that

overlooks the open pit. The preserved half of the core is stored in plastic core trays for

future reference and use in special studies.

Approximately 33% of the resource database comes from RC drill holes. However,

most of the RC drill hole-related composites are derived from shallow holes that no

longer influence the resource block model significantly below the December 2004

topography. Some of the composites from RC holes may have a minor influence on the

recent reconciliation results. OTML only created composites that occur below the

surveyed surface as of the end of May 1992 (period 38) to help reduce the file sizes. The

OTML composite file contains 11,853 composites, including 10,130 from diamond drill

holes and 1,723 from reverse circulation drill holes. Only 292, or 5%, of the composites

located below the December 2004 surface are based on RC sample values. RPA

concludes that the resource-related assays from RC drill holes will have a minor

influence on the global resource estimate. RPA does not have information on the

sampling methodology for RC samples.


15-1

15 SAMPLE PREPARATION, ANALYSES, AND SECURITY PROTOCOLS

SAMPLE PREPARATION AND ANALYSIS

RPA visited the OTML Laboratory located adjacent to the mill. The laboratory

handles about 300 samples per day comprising 100 blasthole and 200 mill samples. The

laboratory is clean, bright, spacious and well-organized with low noise levels and low

levels of dust in the air. The OTML Laboratory has provided the majority of exploration

and production related assaying (OTML, 2004).

The OTML Laboratory sample preparation and analytical flow sheet for diamond

drill core is shown in Figure 15-1. Split drill core is dried for three to four hours and then

crushed to approximately 5 mm with a jaw crusher. The entire sample is further reduced

to minus 3 mm in a Nugget Crusher. A split of approximately 3 kg is obtained from the

minus 3 mm crushed product, which is then pulverized using a LM5 ring mill to about 75

microns. A sizing check is completed on approximately one in every 50 pulps. A split of

about 500 g is placed in labelled pulp packets ready for assaying. The coarse rejects and

pulp rejects from the above process are returned to the Geology Department for storage

or disposal as deemed appropriate.

Standard analysis was conducted for copper (Cu), gold (Au), acid soluble copper

(ASCu), and sulphur (S). Samples of skarn were additionally analyzed for fluorine and

occasionally for such elements as lead, zinc, and other deleterious elements.

Cu was assayed by an atomic absorption spectrometer (AAS) up until 2001, when

OTML installed an X-ray fluorescence spectrometer (XRF). Most copper assays were by

XRF since approximately August 2002. OTML used 0.5 g of pulp for the AAS assays

and 0.2 g of pulp is used for the XRF assays. Gold assays use 30 g of pulp and are fire

assays with an atomic absorption finish.


15-2

FIGURE 15-1 OTML LABORATORY DRILL CORE SAMPLE PREPARATION AND ANALYSIS

DDH

10 kg – 15 kg

Dried 140 +/- 10 oC 3 - 4 hours

Nugget Crush = 3mm

Riffle Split ( 3x)

Pulverize

3.5 kg or less

LM5

Finest Test

QC_95%

pass75micron

Assay Pulp

500g

Pulp Rejects

3.0 kg

(Return to Geology)

Coarse Rejects

(Return to Geology)

Jaw Crusher = 5mm

Report Results to Geology

Cu, S, Fe, Pb, Zn ( XRF) AsCu (AAS)Au (FA-AAS)Ag AASOther Tests as requested


15-3

Routine assaying of the ASCu grade is carried out for all diamond drill samples with

a total Cu grade exceeding 0.2 percent and for all skarn and endoskarn lithology blasthole

samples. These procedures have not always been followed, and significant areas in the

deposit have no ASCu assays.

SECURITY

All drill core and assay samples are stored on the mine site, which has its own gated

security.

ASSAY QUALITY CONTROL AND QUALITY ASSURANCE

A quality assurance (QA) and quality control (QC) check program was developed and

implemented in 2001. A suite of standards prepared from samples of the two major rock

types (monzonite porphyry and skarn) across a range of ore grades was prepared and

analyzed by the Geostats Sample and Assay Monitoring Service, Australia. In April

2003, a suite of monzonite porphyry certified standards was produced by Ore Research

Australia. These Cu-Au reference standards have routinely been inserted into the sample

stream since July 2003 at a frequency of approximately one in every ten samples by both

the geology department and the OTML Laboratory.

Quality controls include one OTML Laboratory blank, two OTML Laboratory

reference standards, two Geology Department reference standards and two replicates in

each batch of 25 samples for gold assays. The copper assay batches are larger, at

approximately 50 to 100 samples, and also include reference standards and replicates.

Replicates are two samples taken from the same pulp packet.

The OTML Laboratory procedures, the blast hole sampling methodology, the mine

QA/QC protocols, and other aspects were audited by Dominique Francois-Bongarcon of

Agoratek International (Agoratek) in June 2003 (Agoratek, 2003). Agoratek questioned

the reliability of some of the standards and their results and made a number of


15-4

recommendations to improve QA/QC procedures at the mine, particularly related to

properly compiling and reporting the QC results on a regular basis.

RPA’s review of some of the more recent OTML Laboratory reference standard

graphs suggests that the copper and gold results are reliable and unbiased. The OTML

Laboratory personnel monitor the laboratories’ reference standard results and will

investigate a whole batch if a laboratory reference standard result is outside of two

standard deviations from the expected value. Batches are re-assayed if a laboratory

reference standard result is over three times the standard deviation envelope.

RPA notes that the OTML standards are in-house reference standards and the rare

erratic assays that are well outside of the mean plus or minus three standard deviations

may be due to problems with the standards and not analytical mistakes. It may be

difficult to use the in-house reference standard results to investigate for minor analytical

biases. Nevertheless, RPA recommends that OTML compile the historical laboratory and

geology reference standard results to confirm that no major analytical biases existed. In

addition, RPA recommends that OTML send several hundred pulps to an outside

accredited laboratory and consider sending pulps out on a routine basis. RPA also

recommends that the geology department designate a responsible person to compile and

monitor all the QC data, including the OTML Laboratory reference standard and replicate

results. The historical laboratory replicate data should be compiled and the relative

standard deviation values should be documented for appropriate grade ranges.

RPA recommends that OTML review its QA/QC procedures with the objective of:

• Reducing the geology reference standard insertion rate from one every ten samples to one or two per diamond drill hole or approximately one in every fifty blast hole samples;

• Using barren split core or other suitable barren material for insertion into the

sample stream as blanks at a rate of one or two per drill hole or one in every fifty blast hole samples;

• Inserting the occasional drill core or blasthole duplicates.


16-1

16 DATA VERIFICATION MOUNT FUBILAN MINE DATABASE VALIDATION

RPA used a number of MS Access database tests, the Gemcom data validation

routine, and visual inspection to check the drill hole database. RPA found no significant

problems with the drill hole database. RPA notes that lithology data contains a

significant number of missing and zero length intervals.

RPA also recommends:

• Out of sequence intervals be cleaned up and the lithology codes be standardized,

• Some of the dates be corrected in the collar table.

MOUNT FUBILAN MINE DATABASE VERIFICATION

RPA DATABASE VERIFICATION WORK RPA checked 1,577 assay records in the drill hole database against assay certificates

and found three minor typographic errors, nine errors associated with assays that were not

entered, and four errors related to inconsistencies with replicates where the lowest assays

were used instead of the first assays. RPA also checked the collar coordinates and down

hole survey data for a number of holes with the drill logs and found no errors in the collar

coordinates. Interpolated downhole survey values in the database were similar to the

values indicated on the drill logs. It is RPA’s opinion that the Mount Fubilan drill hole

database is valid and acceptable for supporting resource estimation work.

HISTORICAL DATABASE VERIFICATION WORK

When the drill hole data was transferred to the Oracle database in 1995, some 10% of

the raw data fields were checked against the original assay records and back to the drill

logs (OTML, 2002).


16-2

During March 2000, April 2001, and June 2002, a further 5% of the drill holes were

checked back to the original assay certificates and drill logs. The records checked

included collar data, sample intervals, copper and gold assays, lithology and survey data.

In addition, every drill hole from DDH_600 onwards was checked for proper collar

survey coordinates. OTML reported that a few minor typographic errors and numerical

transpositions were discovered and corrected and no major discrepancies were found.

OTML planned to continue to check approximately 5% or ±40 holes every year (OTML,

2002).

In May 2003, OTML checked 37 diamond drill holes, including 19 drill holes that

had already been checked in 2001 and 2002. OTML found nine minor typographic

errors, including five errors in previously checked holes (OTML. 2003). RPA notes that

eight of these errors still need to be corrected.

The SRK audit of the 2003 resource and reserve work in January 2004 and the review

of the July 2004 resource model did not include any database verification work. OTML

did not complete any database verification work in 2004.

RPA recommends that OTML continue to check approximately 5% of the drill holes

every year and that OTML retain a digital list of all of the records that have been checked

and any corrections that have been made.

RPA INDEPENDENT SAMPLING

RPA did not take any independent samples to confirm the presence of gold and

copper mineralization because the Mount Fubilan mine has a long production history.


17-1

17 ADJACENT PROPERTIES There are no known significant deposits or mineralized zones on properties that are

immediately adjacent the OTML exploration licenses.


18-1

18 MINERAL PROCESSING AND RECOVERY

MILL OPERATIONS

Ore produced from the mine is dumped directly into the main in-pit crusher located in

a slot on the upper portion of the eastern wall of the Mount Fubilan open pit. The run of

mine ore material is processed through a 1,524 mm x 2,794 mm gyratory crusher and

conveyed to one of the series of crushed ore stockpiles located immediately ahead of and

adjacent to the mill facilities. The mill is located on the east facing natural hillside

immediately to the east of the pit. There is a second primary crusher and conveying

facility located in the upper north east corner of the pit, referred to as the Taranaki

crusher, which is also occasionally used to crush and deliver ore to mill. This crusher is

planned to be de-commissioned in the near future leaving the operation working solely

through the main in-pit crusher.

Crushed ore is recovered from the stockpiles on an as-required basis for feeding the

primary grinding mills. The grinding section of the mill consists of two parallel

processing circuits, each consisting of a semi-autogenous grinding mill feeding two ball

mills operating in closed circuit with cyclone classifiers. The primary grind size for

feeding the flotation section of the mill is 80% passing 180 microns. The flotation circuit

includes a series of rougher and rougher-scavenger flotation stages that complete an

initial recovery of copper and gold. The flotation product from this stage is processed

through a regrind circuit and cleaner and re-cleaner flotation stages producing a high

quality copper concentrate product. A portion of the regrind circuit stream is processed

in a gravity concentrator to recover a gravity gold concentrate. The gravity gold

concentrate is shipped as a finished product to precious metal refineries separately from

the bulk copper concentrate.

Figure 18-1 illustrates a flow sheet schematic for the Ok Tedi mill.

June 2005

OK Tedi Mine

Copper Concentrator Flowsheet



Figure 18-1

RO

SC

OE

PO

ST

LE

AS

SO

CIA

TE

SIN

C.18-2

ww

w.rp

aca

n.co

m


18-3

The mill has a nominal capacity of 80,000 tonnes of ore per day depending upon the

particular ore type and mineral nature being processed. Harder ore types are processed at

a somewhat lower throughput rate than softer materials. The main deleterious component

in the Mount Fubilan ore that can impact copper concentrate characteristics is fluorine.

Fluorine occurs in conjunction with talc minerals in certain zones and ore types in the

deposit. In order to deal with this material the mill circuit includes a Jameson cell

flotation circuit designed to treat the fluorine content ores and maintain the final product

specifications below penalty limits. The Jameson circuit is only operated when the ore

characteristics require it.

The finished copper concentrate is thickened in a 2x40 m concentrate thickener from

which the product is pumped to a concentrate batch plant feeding the overland

concentrate pipeline system. The 150 mm diameter overland pipeline delivers the

concentrate to the Kiunga dewatering and concentrate storage facilities located

approximately 157 kilometres to the east of the mine site. The pipeline has a capacity of

2,400 tonnes of concentrate per day.

The ground rock tailings from the process are disposed of via the unconfined end of

the pipe discharge to Harvey Creek, which drains to the Ok Mani, and then to the Ok

Tedi and Fly rivers. The original project design was based on the construction of a

tailings dam (Lukwi) for tailings containment and management. The tailings dam

structure failed during construction as a result of unstable conditions in the area due to

rock characteristics, steep topography, and very high rates of precipitation. Consequently

the original tailings impoundment plans were abandoned.

The discharge of finely ground rock and sand has filled the Ok Tedi river bed and has

raised its upper regions by many metres. Over-bank flooding was common due to flatter

river grades in the lower Ok Tedi, where the river leaves the foothills of the Star

Mountains. Dredging is necessary to maintain a navigable channel in the river for

concentrate barges and to reduce the incidence of forest dieback due to flooding. OTML


18-4

operates a continuous river dredging operation at Bige on the Fly River. Dredged

materials including fine sediment and tailings are stockpiled in areas adjacent to the river.

ORE TYPES Several different ore types present in the Mount Fubilan deposit are tracked and

monitored in the course of mining and milling the ore. These ore types display varied

and complex characteristics producing different responses and behaviours in the Ok Tedi

mill. The fundamental natures of these ore types cause dynamic changes in the

processing circuit that result in variations in mill throughput, metal recovery, and finished

concentrate grade.

Six primary ore types are tracked:

• Siltstone • Monzonite • Monzodiorite • Endoskarn • Skarn • Oxide Skarn • Pyrite Skarn

Each ore type displays various behaviours in the mill circuit relating to: processing

rate, copper recovery, gold recovery, reagent consumption, concentrate grade produced,

deleterious components in the concentrate, etc. OTML has developed an analysis of

historical performance for a set of parameters to predict the behaviour of each ore type

supporting the economic assessment of the mineral reserve estimate. The resource model

includes estimates of total copper grade, acid soluble copper grade, sulphide copper

grade, and gold grade for each of the ore types.

Of particular importance is the proportion of Pyrite Skarn and Oxide Skarn, as these

ore types display difficult processing characteristics. These ore types also tend to have

high copper and gold grades and to produce lower grade concentrate with relatively lower

recoveries of copper and gold. OTML has an ongoing metallurgical test program


18-5

underway to evaluate processing strategies and alternatives for these materials. The

present plan calls for blending of these materials to the mill feed at relatively low

proportions to minimize their effect on the overall mill performance.

Historically, Acid Rock Drainage (ARD) has not been a concern for the tailings due

to the high natural buffering capacity of the open pit host rock. However, the sulphide

content is expected to increase in the tailings as the mine deepens and an increasing

proportion of skarn deposits are mined.


18-6

CURRENT MILL OPERATING PERFORMANCE

During the last six months of 2003, the mill processed 14,892,000 tonnes of ore at an

average head grade of 0.86% copper and 0.85 grams per tonne gold. The process

achieved an average copper recovery of 83.3%, and a 69.8% gold recovery. Total

concentrate produced over the period was 368,203 tonnes with an average copper content

of 29.1% and 23 g/t gold.

In the 12 months of (calendar year) 2004, the mill processed 26,222,200 tonnes of ore

with an average head grade of 0.80% copper and 0.89 g/t gold. An average copper

recovery of 82.9% was achieved with a gold recovery of 70.2%. 995,963 tonnes of

concentrate were produced at an average grade of 28.2% copper and 23.9 g/t gold.

Mill operating costs, including crushing and conveying, averaged $1.78 per tonne of

ore processed in the last six months of 2003 and $1.96 per tonne over the full year of

2004.


19-1

19 MINERAL RESOURCES AND MINERAL RESERVES

RPA has reviewed the current OTML December 31, 2004 Mineral Resource and

Reserve estimates. The main resource estimation input parameters and assumptions, and

reserve estimation modifying factors, are discussed below.

MINERAL RESOURCES

OTML DRILL HOLE DATABASE RPA was provided with the OTML drill hole database while at the site in early March

2005. The database contains all of the diamond drill and reverse circulation drill holes

drilled on the Mount Fubilan deposit since 1969 and includes seven diamond drill holes

drilled in 2005. The drill hole database comprises 889 diamond drill holes totalling

203,261 m and 2,116 reverse circulation drill holes totalling 97,275 m. The OTML drill

hole database has the following tables and records (Table 19-1). The blast holes were not

used for the final 2004 resource estimate.

TABLE 19-1 OTML DRILL HOLE DATABASE RECORDS Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Table Name Number Of Records

COLLAR 3,005

SURVEY 35,515

ASSAY 98,463

LITHOLOGY 22,996

The OTML diamond drill hole and reverse circulation drill hole traces are shown in

black and blue, respectively, in Figure 19-1. Note that most of the reverse circulation

drill holes are located on the northern half of the deposit.

Inmet Mining CorporationMount Fubilan Mine, PNG

Figure 19-1

ROSCOE POSTLE ASSOCIATES INC.GEOLOGICAL AND MINING CONSULTANTS

55 University Avenue, Suite 501

Toronto, Ontario M5J 2H7 Scale: 1:12,000 June 2005

1423

1483

148 3

1483

1483

148

3

1543

1543

1543

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1543

1603

1 603

16 03

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16

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16 03

16 03

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160 3

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16

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17 23

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17 2 3

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17231723

1723

172

31723

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1723

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1 72 3

172

3

1783

1 783

1783

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178

3

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3

1 78

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1 78 3

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17 8

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3

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190 3

1903

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196 3

1963

1963

1963

1963

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3

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19 63

19 63

2023

2023

2023

20 23

2023

2023

2083

2083

2083

2083

83

2083

Gold Coast

Moscow

Paris

Edinburgh

TaranakiN

-100 0 100 200 300 400

3142

0 0 E

314 2

00 E

3144

0 0 E

314 4

00 E

3146

0 0 E

314 6

00 E

3148

0 0 E

314 8

00 E

3150

0 0 E

315 0

00 E

3152

0 0 E

315 2

00 E

3154

0 0 E

315 4

00 E

3156

0 0 E

315 6

00 E

3158

0 0 E

315 8

00 E

3160

0 0 E

316 0

00 E

3162

0 0 E

316 2

00 E

422600 N 422600 N

422800 N 422800 N

423000 N 423000 N

423200 N 423200 N

423400 N 423400 N

423600 N 423600 N

423800 N 423800 N

424000 N 424000 N

424200 N 424200 N

424400 N 424400 N

424600 N 424600 N

424800 N 424800 N

DDHs in black, RCs in Blue

December 2004 Topo - 15 m CI

Thrust

Endoskarn

Skarn

Darai Limestone

Surface Drill Plan



19-3

COMPOSITES The composite file used by OTML is based on diamond drill hole and reverse

circulation drill hole assays available up to May 23, 2003. The composite database has

not changed since the 2003 resource estimate. Some 37 diamond drill holes and 16

reverse circulation drill holes were drilled in 2003 and 2004 after the May 23, 2003 data

cut-off date. Most of the holes drilled in 2003 and 2004 targeted skarn mineralization at

depths well below the current ultimate pit design. Consequently, RPA concurs with

OTML that excluding the results from the 2003 and 2004 drilling programs will not have

a material affect on the current Mineral Reserve estimate.

OTML created composites that occur below the surveyed surface as of the end of

May 1992 (period 38) to help reduce the file sizes.

Previously, OTML has attempted to use blast hole samples in resource modelling in

addition to the diamond drill and RC data. However, OTML found that the blastholes

introduced a high bias on the grade estimates and that the bias was more pronounced in

the skarns. Consequently, the current resource estimate does not include blasthole assay

data.

OTML has been carrying out work to improve blasthole sampling. RPA believes that

the bias may also be related to assigning rock codes to the blast holes from inaccurate

wireframe boundaries. RPA recommends that OTML investigate the apparent high bias

related to the blast holes.

Approximately 77% of the sample assay composites are 15 m in length, 7% range in

length from 10 m to 15m, 9% range in length from 5 m to 10 m, and 7% are shorter than

5 m. OTML used length weighting in interpolating block model grades to compensate

for the variable length composites.


19-4

OTML selected 15 m composite lengths to reflect the expected variability related to 15 m

bench heights and also to incorporate the blast holes, which have approximately 17 m

lengths. The blast holes were excluded in the final estimate. RPA notes that a 3 m

composite length was used by OTML for some of the skarn mineralization in 2002. RPA

recommends that OTML review the composite length strategy and consider using shorter

length composites, particularly for the skarn mineralization which has more variable

grades and geometries. In RPA’s view, using shorter composites could result in a minor

improvement in the global resource estimate and could improve the local grade estimates.

WIREFRAME MODELS OTML modelled each of the major rock types separately. The OTML geological

wireframe models used for the December 31, 2004 resource estimate were built from

2000 and 2001 interpretations using Vulcan and Datamine software. The geological

wireframes appear to be reasonably consistent. Some minor gaps exist. OTML assigned

the nearest lithology to the blocks situated in gaps.

Most of the drill holes are vertical to steeply inclined and therefore sub-parallel to the

steeply dipping endoskarn and skarn contacts. As a consequence, although the horizontal

drill hole grid spacing is nominally 50 m by 50 m in the skarn areas, the actual pierce

points are spaced significantly further apart in vertical section. This situation is less than

ideal for constructing accurate geological wireframes. In RPA’s opinion, this problem

adds uncertainty primarily to the location of the interpreted geological contacts that

support the resources at depths well below the current ultimate pit design. Consequently

RPA views this as a minor issue that does not have a significant affect on the current

reserve estimate. OTML has recognized this issue and is carrying out a new drill

program designed to better define the skarn mineralization at depth.

OTML will develop a new interpretation and build new wireframe models to improve

the definition of the skarn zones. RPA believes that the new wireframe models will not


19-5

significantly affect the global resource estimate; however, the work will improve the

local estimates in skarn and endoskarn zones.

CUTTING HIGH ASSAYS OTML used histograms, log probability plots, and 3-D visualization to evaluate

cutting levels for the Cu, Au, ASCu, and S composite values. Depending on lithology,

composite grades were cut at levels ranging from 4% to 9% for copper and 4.0 g/t to 15

g/t for gold. In addition to cutting the composites, OTML applied shorter search

distances to higher composite values to reduce their influence. The OTML reconciliation

studies comparing model predictions with actual mine/mill performance indicates that the

OTML 2004 cutting practices are reasonable and acceptable.

RPA recommends that high assays be cut prior to compositing and that a study be

completed evaluating the appropriate cutting levels for the assay data. RPA notes that the

2004 OTML cutting levels have been determined for composites from both drill holes

and blast holes, and RPA recommends investigating different cutting levels for each

sample type.

The high grade restricted search parameters were introduced in part to compensate for

local problems with the wireframe models, particularly the skarn boundaries. RPA

recommends that OTML review its threshold grades and restrict search radii once the

new geological interpretation and wireframes are completed.

CUT-OFF GRADE The resources and reserves are reported at the same cut-off grades. OTML has

developed marginal cut-off grades for gold, sulphide copper (SCu), and acid soluble

copper (ASCu) for the seven main ore types. The OTML cut-off grades are discussed

further in the Mineral Reserves section.


19-6

DENSITY DATA There are currently 10,942 specific gravity tests entered in the assay table of the

OTML drill hole database.

In March 2002, OTML reviewed the historical specific gravity data available up to

June 2001 and updated the tonnage factors for the main rock types for the 2002 resource

estimate. OTML found that 7,346 or 67% of the 10,823 tests in 98 drill holes were

located below the April 2001 mine pit topography and that 3,688 were located between

that surface and the ultimate pit limit (PIT001). The 2002 study found that the density

increased with depth and developed new tonnage factors based on the density data

situated below the Period 145 surface. OTML concluded that there were sufficient

density data for most of the main rock types, with the exception of the skarns and

endoskarns. OTML recommended that density tests be taken for all new diamond drill

core in skarns. RPA recommends that OTML generate more density data for the skarns

and endoskarn.

In 2003, OTML developed linear equations for some of the main rock types to

correlate density with depth below the original topographic surface. The density values

in the 2004 block model have been assigned based on the equations and fixed values

shown in Table 19-2. The 2002 density values are also shown for comparison. RPA

believes that both the 2002 and 2004 tonnage factors are acceptable overall and that some

of the 2004 fixed tonnage factors for deeper blocks may be slightly conservative. RPA

notes that the 2004 skarn tonnage factor takes an unnatural step-like jump from 3.44 t/m³

to 3.85 t/m³ at 170 m below surface and that the same equation is applied to the Taranaki

and Parrot’s Beak thrusts. RPA recommends that OTML investigate the application of

modelling techniques to interpolate the block model density values.


19-7

TABLE 19-2 OTML 2002 AND 2004 TONNAGE FACTORS Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

2002 2004 <distance >distance Distance

Lithology (t/m³) (t/m³) (t/m³) M Pnyang Siltstone 2.65 2.3 + 0.0022(d) 2.65 170

Darai Limestone 2.71 2.71 All

Taranaki Thrust 2.23 1.6 + 0.009(d) 2.5 100

Parrot’s Beak 2.58 1.6 + 0.009(d) 2.5 100

Ieru Siltstone 2.65 2.3 + 0.0022(d) 2.65 170

Monzonite Porphyry 2.44 2.02 + 0.0028(d) 2.41 140

Monzodiorite 2.6 2.25 + 0.00194(d) 2.58 170

Endoskarn 2.85 2.86 All

Skarn (Sulphide) 3.92 3.44 3.85 170

Skarn (Oxide) 3.59 3.44 3.85 170

Pyrite Skarn 3.92 3.44 3.85 170

Where d = distance from natural surface

(from Sharp, 2003)

VARIOGRAPHY OTML carried out variography studies of the composite data to support the mineral

resource estimation work. RPA reviewed the OTML variograms. OTML constructed

omni-directional and down hole variograms from the Au, Cu, ASCu, and S composites

for the main rock types. The variography has been used to establish ranges of grade

continuity. Generally, the gold and copper composite values displayed similar ranges of

continuity. The monzonite porphyry range was approximately 160 m and the Gold Coast

skarn range was over 100 m. RPA concurs with OTML that a new directional

variography study should be completed.


19-8

SEARCH STRATEGY AND GRADE INTERPOLATION PARAMETERS

OTML used the same search orientations as in 2002. OTML divided the lithological

domains as defined by the geological wireframes into 49 zones. The search ellipsoid

orientations, radii, and other parameters were customized for Au, Cu, ASCu, and S for

each of the 49 zones. The grades were interpolated using inverse distance to a power

weighting. The weights used were 1.2 for sulphur, 1.3 for acid soluble copper, and 1.5

for copper and gold. OTML selected these weights based on the best match with kriging

a small test data set. In RPA’s opinion, the 2004 OTML search strategy and grade

interpolation methodology are reasonable. RPA recommends, however, that OTML use

ordinary kriging in future. Kriging should simplify the process and improve the local

grade estimates without changing the total resource estimate significantly. RPA also

suggests reducing some of the longer search radii to approximately two times the

variography ranges of continuity.

BLOCK MODELS The OTML block model is very large, containing a total of 27,280,000 blocks. The 5

m by 5 m by 15 m block model is re-blocked by merging 25 blocks into one mining

block, producing a final resource model that has 25 m by 25 m by 15 m high blocks.

BLOCK MODEL VALIDATION OTML reconciled the 2004 block model with the mill production over the two year

period from July 2002 to June 2004 and the one year period from July 2003 to June 2004.

For the two-year period, the block model overestimated ore tonnage by 6%, the copper

grade by 3%, the gold grade by 0%, the contained copper by 8%, and the contained gold

by 5%. For the more recent one year period, the block model overestimated the tonnage

by 7%, the copper grade by 3%, the gold grade by -3%, the contained copper by 10%,

and the contained gold by 2%. In RPA’s opinion, these reconciliation results indicate

that the 2004 OTML resource block model is reasonable and acceptable. RPA

recommends that OTML investigate developing a system to reconcile by rock type.


19-9

RPA compared the block grades with drill hole assay grades on sections and plans

and found good overall correlation with some minor low and high grade smearing.

RPA suggests that OTML construct scatter plots that show assays and block grades

by elevation, by easting, and by northing for each rock type as a further check on the

local block model grade estimates.

RPA considers that the block model is valid, reasonable and appropriate for

supporting the OTML 2004 Mineral Resource and Reserve estimates.

MINERAL RESOURCE CLASSIFICATION OTML used the classification conventions of the Australasian Code for Reporting of

Identified Mineral Resources and Ore Reserves (the JORC Code). The Australian JORC

Code (1996 and 2004) resource and reserve classification definitions are similar to the

Canadian CIM (2000 and 2004) definitions. One minor but practical difference is that

the JORC Code permits combining resource categories together as long as they are

reported separately. Inferred Mineral Resources cannot be combined and must always be

reported separately with the CIM definitions.

OTML developed a classification methodology based on the number of composites

found inside 150 m x 150 m search radii, centred on each block and for each bench. The

results are a measure of drilling density. The 150 m search radius is based on the

approximate maximum range of continuity observed in variograms and recommendations

by SRK (SRK, 2004). The count was used to define the breakpoints between resource

categories as follows:

• Measured if there are eight or more data inside the 150 m by 150 m search;

• Indicated if there are two or more data inside the 150 m by 150 m search;

• Inferred is assigned to the remaining resource with interpolated grades.


19-10

RPA found that the classification methodology results in reasonably continuous zones

of classified material. RPA recommends that this classification methodology be modified

to recognize the closer spaced drilling requirement for skarn and endoskarn

mineralization. In RPA’s opinion, the skarn and endoskarn resources currently classified

as Measured should be re-classified as Indicated. Examples of the OTML resource

classification are shown in Figures 19-2 and 19-3.


19-11

FIGURE 19-2 RESOURCE CLASSIFICATION ON THE 1460 M BENCH (FROM OTML, 2004).

FIGURE 19-3 RESOURCE CLASSIFICATION ON SECTION 422,312N (FROM

OTML, 2004).


19-12

MINERAL RESOURCE ESTIMATE The OTML Mineral Resource estimate as of December 2004, constrained at depth by a

high metal price Whittle pit shell developed by RPA, is summarized in Table 19-3. The

Measured and Indicated Mineral Resources of the Mount Fubilan mine total 543 million

tonnes at an average grade of 0.77% Cu and 0.93 g/t Au. In addition, Inferred Mineral

Resources total 33 million tonnes at an average grade of 0.92% Cu and 1.44 g/t Au.

TABLE 19-3 DECEMBER 2004 MINERAL RESOURCE ESTIMATE WITH RPA WHITTLE PIT DEPTH CONSTRAINT


Classification Million tonnes Copper % Gold grams per

tonne Measured 371 0.77 0.91

Indicated 171 0.78 0.98

Total Measured and Indicated 543 0.77 0.93

Inferred 33 0.92 1.44

RPA notes that the OTML reported Mineral Resources have been estimated to the

1,153 m elevation, and that part of these resources may not have reasonable prospects for

eventual economic extraction even at significantly higher metal prices. RPA has used a

high metal price optimization pit shell to constrain the resource estimate.

Based on the economic assessment work, RPA is of the opinion that the portion of the

model that can be suitably classified as meeting the requirements of a Measured and

Indicated Mineral Resource under NI 43-101 guidelines is 543 million tonnes averaging

0.77% copper and 0.9 grams per tonne gold (Table 19-3).


19-13

MINERAL RESERVES

ECONOMIC OPTIMIZATION The current economic optimization study for the Mount Fubilan mine was completed

by OTML in early 2005 and reported in a document entitled “Support Document for the

Reserve Statement as at 31st July 2004 & 31st December 2004” – Ok Tedi Mining

Limited – March 5th 2005 by Andrew Sharp, Manager Mine Planning Services. This

document describes in considerable detail the methodologies and parameters used in

estimating the extent of the economic mining of the Mount Fubilan deposit. In the

opinion of RPA, the report is thorough and the work extensive in dealing with the

complex issues surrounding the Ok Tedi operations.

REVENUE PARAMETERS The main economic evaluation has been based on the following metal price

assumptions: Copper - $0.90 /lb., Gold - $350/oz., Silver - $4.75 /oz. Operating costs

have been developed and forecast based on the current 2005 budget factors and estimates.

Deductions provided for in estimating the revenue value of the copper and gold

production at the mine site included: concentrate shipping and handling costs, smelter

charges, copper gold and silver refining charges, royalties, and concentrate penalty

charges.

MINE PERFORMANCE PARAMETERS

OTML has developed an analysis of historical operating costs to estimate unit mining

costs. The unit mining costs have been broken down into the key operating areas,

including drilling and blasting, loading, hauling, dozing, and support services. Some cost

components have been estimated as a function of the rock type characteristics

encountered, where other cost components are driven by other factors (i.e., haulage is a

function of pit depth). Some cost components are forecast to be fixed.


19-14

DRILL & BLAST

Drilling and blasting costs have been estimated based on rock type. There is a

wide variation in unit costs forecast depending upon the characteristics of each

type. Table 19-4 summarizes the drilling and blasting cost factors used in the

current assessment.

TABLE 19-4 DRILLING & BLASTING COSTS Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Rock Type Drill & Blast Cost

$/t Pnyang Limestone $ 0.03

Darai Limestone $ 0.12

Siltstone $ 0.07

Monzonite $ 0.20

Monsodiorite $ 0.12

Endoskarn $ 0.12

Skarn $ 0.17

Oxide Skarn $ 0.17

Pyrite Skarn $ 0.17

LOADING

Loading costs have been estimated based on recent historical performance at

$0.22 per tonne. This cost is forecast on the basis that virtually all of the primary

excavation materials will be loaded with the O&K hydraulic shovels and that

higher cost Marion cable shovels will be phased out of operation. HAULING

Hauling costs have been estimated based on 2003 actual experience using

truck operating cost per hour in conjunction with predicted haulage cycle times

forecast for each bench remaining to be mined. The general trend of increasing

haul distance and haul cycle times will occur as the pit deepens. This analysis


19-15

implicitly assumes that the current maintenance practices, fuel costs and usage

factors remain the same as they were in 2003. DOZING

Dozing costs are incurred as part of the waste handling process where the

trucks dump short of the dump edge due to safety concerns, in addition to the

normal bulldozing applications required around the pit. The unit cost forecast is

based on the 2003 experience and has been assigned at a rate of $0.05 per tonne

of waste hauled and $0.07 per tonne of ore. PIT SERVICES

The cost of pit services associated with the operation of various service

equipment employed in road maintenance, pit slope maintenance, drainage

control, electrical distribution, etc. is provided for as an average cost per tonne

mined. These expense items are not directly related to tonnage moved and they

tend to be fixed regardless of the volume of material moved. For this study the

category has been estimated based on a $0.06 per tonne mined factor, representing

the combination of a trend toward decreasing pioneering work in upper mining

benches, countered by changes in operating policy regarding fuelling and

servicing of equipment in the pit. Pit pumping costs have been provided for

separately as they are expected to show an increasing trend as the pit deepens.

Current pumping costs are essentially nil since the pit is free draining, however

the pump cost is forecast to rise to a maximum of $0.06 per tonne by the time the

pit bottom is reached.

Overall, the cost factors in the Optimization Study outlined above result in an

estimate of the current average mining cost per tonne of $0.70. This forecast

compares with an actual 2004 operating cost average of $0.84 per tonne moved. The

forecast has incorporated an improvement in efficiency and productivity in the mine

over current operating performance levels. These improvements are predominantly

associated with the productivity of the haulage fleet. An increase in productivity of

the haul fleet will increase the overall mine output, which will substantially reduce


19-16

unit operating costs. While these productivity improvements may be achieved, the

future cost of energy inputs, primarily in the form of diesel fuel, may adversely affect

the unit mining costs. Overall, RPA believes that the mine costs used in the

optimization work may be somewhat optimistic.

MILL PERFORMANCE PARAMETERS A number of mill performance parameters and factors have been analysed by OTML

in developing the assessment of the Mount Fubilan Mineral Reserve. The following

briefly outlines those parameters and summarizes the performance levels projected. The

key parameters include: mill throughput, primary sulphide copper recovery, secondary

copper recovery, and gold recovery.

MILL THROUGHPUT The mill processing rate is a key operational parameter. A significant portion

of the mill operating costs are fixed, consequently changes in throughput will

directly impact on the effective cost per tonne for treating the ore. RECOVERY

There are four key process recovery parameters that are used in developing

the economic evaluation. Recoveries have been estimated by rock type, for

sulphide copper, acid soluble copper, and gold.

FLOTATION RECOVERY OF COPPER

Two types of copper mineralization are analysed and tracked as there is a

substantial difference in the recovery achieved for each type. Primary sulphide

copper responds well in the flotation circuit, and good recovery and concentrate

grades are generally realized from these minerals. Acid soluble copper represents

secondary copper minerals present in the ore which generally produce lower

recovery results. The recovery factors used in the analysis reflect correlations

between historical recoveries achieved against the various ore types and

proportion of copper mineral species in the mill feed.


19-17

FLOTATION RECOVERY OF GOLD An estimation of gold recovery has been developed based on correlation

studies on historical mill performance versus ore types in the mill feed. The

following table outlines the range of factors used in the analysis.

GRAVITY RECOVERY OF GOLD

A study of historical recovery rates for gold in the gravity concentration

circuit was analysed against different ore types. The study produced no

discernable correlation, and consequently a fixed estimate of 4.5% has been used

in the analysis.

Table 19-5 summarizes the main variables:

TABLE 19-5 MILL OPERATING PARAMETERS Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Ore Type Throughput

t/op.hour Sulphide

Cu Recovery

Oxide Cu

Recovery

Flotation Au

Recovery

Gravity Au

Recovery Siltstone 2,000 77% 41% 53% 4.5%

Monzonite 4,070 94% 49.5% 73% 4.5%

Monsodiorite 3,300 91% 43.1% 73% 4.5%

Endoskarn 3,150 87.5% 42% 63.5% 4.5%

Skarn 3,050 91.8% 45% 66.4% 4.5%

Oxide Skarn 4,340 53% 23% 61.6% 4.5%

Pyrite Skarn 3,780 89% 42% 47.8% 4.5%

KEY PRODUCT CHARACTERISTICS The historical performance of a number of key product parameters and characteristics

has been analysed by OTML for developing the Mount Fubilan Mineral Reserve

estimate. These product parameters reflect the metallurgical response of the various ore

types based on their mineralogical characteristics and the conditions used in the Ok Tedi

mill. The following briefly outlines those parameters and summarizes the performance


19-18

levels projected for each ore type used in the analysis. The parameters include copper

grade in the copper concentrate and fluorine content in the copper concentrate. COPPER GRADE IN COPPER CONCENTRATE Concentrate grade is a key performance parameter that affects the tonnage of

product transported and processed downstream of the mill. Concentrate grade

factors have been developed based on correlation studies of historical production

records. FLUORINE CONTENT IN COPPER CONCENTRATE A penalty for fluorine content in the copper concentrate is levied by smelters

processing the Ok Tedi products. Fluorine occurs in all ore types, but certain

zones are recognized as contributing higher amounts that can result in

concentrates being penalized. Fluorine content that is associated with floatable

minerals can be removed and prevented from contaminating the concentrate by

using the Jameson flotation cell circuit in the mill. The OTML technical services

group have analyzed the relationship between ore type and fluorine content and

have developed a correlation.

SILVER/GOLD RATIO IN COPPER CONCENTRATE While silver is not specifically modeled in the resource as it represents a relatively

minor contributor to economic value, there is a consistent silver value reporting in

the concentrate, generally proportional to the gold content. The correlation

analysis has established a consistent ratio of 2.3 :1 Ag to Au used in the economic

analysis.

Table 19-6 summarizes the main variables:


19-19

TABLE 19-6 KEY PRODUCT CHARACTERISTICS Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Ore Type Cu % in Cu Conc. F ppm in Cu Conc. Ag:Au Ratio Siltstone 24.2% 400 2.3

Monzonite 29.8% 400 2.3

Monsodiorite 28.6 400 2.3

Endoskarn 27.5% 400 2.3

Skarn 28.9% 1600 2.3

Oxide Skarn 24.9% 1750 2.3

Pyrite Skarn 25.1% 1250 2.3

MILL OPERATING COST FORECAST The forecast of process operating costs developed by OTML is the product of a

comprehensive analysis of a number of factors, including the effect of some of the

operational parameters outlined above. The factors analyzed include power cost as a

function of weather patterns, reagent consumptions by rock type, throughput rates by

rock type, etc. The actual expenditures incurred over three years between 2001 and 2003

were used as the basis for assessing costs for elements not directly related to ore types.

This spending rate experience was then applied against the various throughput rates, for

each ore type, to derive expected base unit costs per tonne of mill feed for each ore type.

Material processed at relatively high rates attracts a correspondingly lower cost per tonne

for these basic cost elements. Costs are added to these basic cost elements, associated

with the mineralogical aspects of the ore types such as lime consumption, or Jameson cell

costs for treating fluorine in the ore. All of the various cost factors and elements derived

from this detailed analysis are combined to predict the cost of processing for each ore

types. The unit costs for processing include costs incurred for crushing and conveying

associated with the in-pit crusher.

Table 19-7 summarizes the unit costs forecast for each ore type in the current

economic analysis.


19-20

TABLE 19-7 PROCESSING COSTS Inmet Mining Corporation Mount Fubilan Mine, Papua

New Guinea

Ore Type Unit Milling Cost

$/t Siltstone $1.69

Monzonite $1.79

Monsodiorite $1.39

Endoskarn $1.56

Skarn $1.92

Oxide Skarn $2.07

Pyrite Skarn $1.73

RPA compared these costing factors with the 2004 actual cost experience by applying

the unit costs against the relative proportion of the ore types mined during 2004. The

average mill cost “predicted” on this basis in the Optimization Study for 2004 is $1.68

per tonne compared with an actual cost of $1.99 reported for 2004. In RPA’s opinion,

this indicates that the performance factors as applied in the economic analysis are in the

order of 20% lower than recent performance has achieved and therefore are contingent

upon realizing a number of process performance and cost improvements. A number of

initiatives are under way in the process department to develop efficiencies and

improvements in overall cost performance. These programs include reducing the use of

the Jameson cells as much as possible due to their high cost, maximizing the mill

throughput and improving grinding circuit performance.

OVERHEAD COST FORECAST A number of overhead cost items have been provided for in the estimate of the Mineral

Reserve. These overhead items include administration and management costs for the

mine and the mill, concentrate transport costs, dredging costs incurred in order to

maintain navigability of the Fly River, environmental management costs, engineering and

logistics support, general overhead costs, and replacement capital costs required to


19-21

maintain the operation going forward. In addition, there are provisions for the Mining

Levy charged by the PNG government, the contributions to the financial assurance fund.

Together, all of these costs, fees, and charges amount to an annual cost of $106 million.

These costs have been incorporated into the economic analysis based on an overhead

charge of $3.66 per tonne of ore.

OPTIMIZATION RESULTS

OTML carried out an open pit economic optimization analysis of the Mount Fubilan

deposit to assess the economic limits of mining given the set of factors and costs outlined

above applied against the current Mineral Resource block model. This optimization

analysis was performed using Lerchs Grossman programs provided in the Medsystem

Software system that OTML uses for mine planning and design. The optimization

process involved the input of the various mining cost, mill cost, metal recovery and

revenue parameters coupled with the assignment of pit slope definitions designed to

construct an ultimate pit limit that provides a safe and stable operating condition. The

base case analysis used a $0.90/lb copper price and a $350/oz. gold price. This work

produced an economic pit limit that mined a total of just under one billion tonnes of

material inside the pit, of which 419 million tonnes are classed as ore containing a total of

3.5 million tonnes of copper and 13.6 million ounces of gold.

SENSITIVITY

The sensitivity of the optimization result to the input factors was tested through a

process that involved running a series of optimization runs using a range of parameters.

Results were compared to the base case. The main variable tested in this process was the

metal price. A series of metal price values were used to calculate optimum economic pit

limits, with copper prices tested between a low of $0.50 per lb up to a high of $1.10 per

lb. Figure 19-4 shows total copper tonnage mined along with the simple calculated net

value for each pit in the series. All calculated values are based on the base case metal

prices. The optimum pit is selected as the pit shell where the net value is highest, in this

case the 5th pit, corresponding to the $0.90 copper price calculation. The results indicate


19-22

that the economic limits are reasonably sensitive to price variation with a 10% change in

price generating a 10% change in copper tonnage mined.

FIGURE 19-4 COPPER MINED VS. COPPER PRICE ASSUMPTION Mt. Fubilan Optimization Results - Ore Tonnes

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

$0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10

Mill

ions

Copper Price

Cop

per T

onne

s M

ined

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

Bill

ions

Pit V

alue

Optimum Economic Pit

3.5 million tonnes contained copper

ULTIMATE PIT DESIGN

PIT SLOPE DESIGN CRITERIA OTML has an in-house geotechnical group that monitors and manages pit slope

design aspects of the operation in addition to other geotechnical aspects. A broad set of

pit slope design criteria has been developed over the years of experience gained at the

site. Periodically, OTML brings in outside specialists to review and advise on specific

areas and aspects of concern. The designs used in the analysis of mineable reserves have

initially been based on these general criteria and have then been subjected to a detailed

review during the design process. Site specific design modifications are implemented

based on localized conditions likely to be encountered on the design pit slopes.


19-23

The general slope design parameters are:

• Overall inter-ramp slope of 35º in weathered and oxidized materials

• Overall inter-ramp slope of 45º in all other rock materials

• Berm face angle of 65º in rock materials

• Bench height – 15 m

• Catchment Berm interval – 15 m

Surface and groundwater management are key aspects to the ongoing management

and maintenance of stable pit slope conditions due to the high rainfall experienced in the

area. The geotechnical group undertook an extensive study of pit slope design and

management aspects at the Mount Fubilan operations in 1998 producing a design

optimization study report and a set of slope design constraints. In the design

recommendations, it was identified that depressurization, or dewatering, of the pit slopes

was a key factor for ensuring stable pit slopes. The recommended means of establishing

those conditions included the drilling of 200 m long horizontal drainage holes around the

perimeter of the pit. At present there are a number of horizontal holes in place that are

actively draining portions of the slopes; however, the actual frequency does not meet this

specification. The effectiveness of the current program in achieving depressurization in

all areas is uncertain and a program of monitoring pore water pressures in the slope

through the installation of piezometers is planned. The ongoing geotechnical

investigation of rock strength conditions and confirmation of pit slope depressurization

are important for achieving the ultimate pit slope designs and recovering all of the

economic reserve.

CUTOFF GRADE

The cutoff grade specifies the minimum metal content required for mineralized rock

to be classified as ore and scheduled for processing through the mill. The cutoff grade is

defined as that point where there is sufficient revenue potential in the material to at least

pay for all of the processing and downstream costs that will be incurred to realize the

revenue.


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OTML has developed a model parameter, called CUT_VAL, which reflects the

application of all of the various cost and performance factors for each ore type. The

appropriate factors based on ore type, mill throughput, recovery, concentrate grade,

milling cost, overhead cost, replacement capital, etc. are used to calculate the minimum

required content of primary sulphide copper, secondary sulphide copper, and gold to

justify classification as ore. The actual primary copper, secondary copper, and gold

grades in each block of the Mineral Resource model are divided by the minimum

required grade for each. The resulting fractions for each grade element are summed to

calculate the CUT_VAL parameter for each block in the model in order to produce a

value that represents the economic contributions of all three metals. Using this method, a

block in the model is classified as ore when the CUT_VAL parameter is greater than or

equal to 1.0. Table 19-8 summarizes the various cutoff grades for each element by ore

type.

TABLE 19-8 CUT OFF GRADE FACTORS Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Ore Type Primary

Cu % Secondary

Cu % Gold g/t

Siltstone 0.98% 1.86% 1.29 g/t

Monzonite 0.36% 0.69% 0.48 g/t

Monsodiorite 0.49% 1.04% 0.62 g/t

Endoskarn 0.54% 1.14% 0.74 g/t

Skarn 0.52% 1.06% 0.69 g/t

Oxide Skarn 0.85% 1.95% 0.61 g/t

Pyrite Skarn 0.54% 1.15% 0.87 g/t

MINE PHASE DESIGNS The 2004 mine reserve assessment process produced an ultimate pit design designated at

13D4, which has been used as the basis for calculating the mineable reserve for the


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Mount Fubilan deposit. This design was based on the above criteria while providing for

existing mine ramp access designs and operational conditions. This design is referred to

as Phase 1 by OTML. A production plan has been developed for the mining of this

design.

A development option has been identified in the design process to incorporate an

expansion beyond Phase 1 in the south eastern area of the pit, termed the Moscow zone.

This expansion is referred to as Phase 2. The scheduling of the mining of this pushback

requires an increase in the material excavation and haulage capacity of the operation and

introduces a number of additional technical issues. Phase 2 adds approximately 40

million tonnes of ore and extends the mine life by approximately 1.5 years beyond the

schedule produced for the 13D4 design.

A second development option, Phase 3, has been identified to incorporate an expansion to

the west involving the pushback of the western wall in areas referred to as Edinburgh,

Berlin, and Paris zones. This option adds approximately 70 million tonnes of ore and

extends the mine life by approximately 3 years.

The OTML Technical Services group developed production schedules for each of the

three primary alternatives and completed a preliminary cash flow analysis to assess their

relative merits. While the Phase 2 option added economic value based on this analysis,

the decision to pursue this option was deferred due to technical complications associated

with the development plan. The Phase 3 option economics did not appear to be attractive

due to the long period of pre-stripping required to develop the ore in that area of the pit.

On the basis of this analysis the Phase 1, or 13D4, ultimate pit design has been adopted as

the economic mining limit.


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MINERAL RESERVE The Mineral Reserve for the Mount Fubilan deposit has been determined based on the

13D4 pit design. Table 19-9 summarizes the Mineral Reserve as of December 31, 2004.

TABLE 19-9 MINERAL RESERVE ESTIMATES (DEC 31, 2004) Inmet Mining Corporation Mount Fubilan Mine, Papua New Guinea

Classification Ore

Tonnes (Mt)

Copper Grade

(%)

Gold Grade(

g/t)

Contained Copper

(kt)

Contained Gold (koz)

Proven 226 0.85 1.04 1,920 7,550 Probable 24 0.76 1.26 180 970

Total Mineral Reserves 250 0.84 1.06 2,100 8,520

The total material mined within the 13D4 pit design as of December 31, 2004 is

estimated to be 557 million tonnes, which includes 307 million tonnes of waste required

to be excavated to recover the ore. The resulting average stripping ratio is 1.2:1.

This reserve is considerably smaller than that indicated to be potentially mineable in

the optimization study outlined above. In that analysis the optimum pit shell mined a

total of 957 million tonnes of material, recovering an estimated 419 million tonnes of ore

containing a total of 3.5 million tonnes of copper. The average stripping ratio of the

optimized shell is 1.3:1. An additional 110 million tonnes of ore would be recovered if

the Phase 2 and Phase 3 designs were implemented as outlined. The remaining ore

materials inside the optimized shell but beyond the Phase 2 and 3 limits include remnant

areas where physical design constraints have limited the design from achieving the

theoretical limits as well as areas where there is geologic uncertainty that negates the

economic value of mining.


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20 OTHER RELEVANT DATA AND INFORMATION

CURRENT MINE OPERATIONS

The current mining operations of Ok Tedi Mining Limited are carried out at the

Mount Fubilan open pit using conventional open pit mining methods and equipment. As

of the end of December 2004, the main mining activities were being carried out on the

1550, 1565, and 1580m benches in the main mining zone. Mining was also active in the

Moscow Ridge and Paris limestone quarry areas located adjacent to and above the south

end Paris waste dump site.

Mining is carried out through a sequence of operations starting with drilling and

blasting the in place rock materials in preparation for excavation using large mining

shovels that load the broken rock materials into conventional mechanical drive mine

haulage trucks with a load carrying capacity of 190 tonnes. The vast majority of the

material mined requires drilling and blasting. A small portion of the excavated material

is moved using bulldozers to push material to the disposal site.

Ore materials are excavated using hydraulic shovels and backhoes and loaded into

haul trucks which then transport the material up and out of the pit via a system of pit

haulage ramps. The ore is delivered to and dumped into one of two crushers where the

material is reduced in size and conveyed to the mill complex for processing.

Waste rock, classified as material that contains copper and gold values below the

cutoff grade, is excavated to expose the mineralized ore. Waste is hauled by truck to a

disposal point beyond the pit limits where it is dumped for permanent disposal. Due to

the steep topography surrounding the Mount Fubilan mine the construction of a

conventional waste dump is not possible. The conditions are such that any significant

accumulation of the material would slide down the slope to lower elevations. Permanent

dumps for accumulation and storage of waste rock materials have not been established.


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At the Mount Fubilan pit, waste rock material is hauled to the south end of the pit

where it is dumped and pushed over the edge of the topography to slide down the slope to

lower elevations. These conditions make the dumping platforms dangerous for personnel

and equipment to operate on; consequently haul trucks dump the waste material at a

stable point (on bedrock), from where bulldozers push the material to, and over, the edge

of the platform. The vigilant monitoring of the dynamic behaviour of the platform

conditions is maintained constantly in order to ensure safe operations. When the platform

behaviour indicates unsafe conditions, dumping operations at the unstable site are

suspended and activity is diverted to other areas.

Surface water management in the pit and the maintenance of groundwater drainage in

the pit slopes are key operational issues. Presently, the highest pit slopes exist on the

west wall where the maximum vertical height is approximately 450 metres. The north

and east pit walls are generally in the range of 250 metres high. The pit is presently open

to the natural topography on the south end, allowing for the natural drainage of in-pit

water and the mine development is being sequenced from south to north with a consistent

gradient to the south to promote drainage. The high rate of rainfall introduces substantial

quantities of surface water into the operation, and pit water management is one of the key

components of the mining system.

CURRENT MINE OPERATING PERFORMANCE

At the present time, the rate of total material movement is primarily limited by the

capacity of the truck fleet. The excavator fleet has surplus capacity beyond what the

truck fleet can provide. RPA reviewed the production performance data for Ok Tedi

reported for the 18 month period from July 2003 through December 2004. In the last six

months of 2003, the mine averaged a daily output of 172,000 tonnes while the twelve

months of 2004 averaged 203,000 tonnes per day. The stripping ratio during these

periods were 1.1:1 and 1.8:1 respectively, indicating that increasing proportions of ore


20-3

reduces the overall capacity to mine material. The ore haul distance and time required to

deliver ore to the crusher are longer that the haul distance and truck cycle time associated

with handling waste.

The average unit mine operating costs per tonne moved were $0.81 during the last

half of 2003 and $0.85 in the year of 2004.

CURRENT MINE EQUIPMENT FLEET

Excavation is primarily carried out using a fleet of four large hydraulic mining

shovels which have a dipper capacity of 28 m3. There are two old Marion M204 cable

shovels in the mine which are used infrequently and are to be decommissioned in the near

future. Where selective mining of ore materials is required, smaller hydraulic excavators

in backhoe configuration are utilized. The primary haulage fleet is made up of twenty

two 190 tonne capacity haul trucks. Additional haulage capacity is available with a small

fleet of 90 tonne capacity trucks. Blasthole drilling is carried out with a fleet of Marion

M3 drills drilling 270 mm diameter holes for loading with explosives. A fleet of various

support equipment is maintained, including dozers for operating the waste dumps and

general clean up and operations support, as well as graders for maintenance of the haul

roads.

Table 20-1 lists the present mine equipment fleet:


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TABLE 20-1 PRIMARY MINE EQUIPMENT LIST Inmet Mining Corporation Mount Fubilan Mine, Papua

New Guinea No. Type Model Capacity 4 Hydraulic Shovel O&K RH200 28 m3 1 Cable Shovel Marion M204 25 m3 1 Hydraulic Shovel Hitachi EX1900 10 m3 2 Hydraulic Backhoe Hitachi EX1800 9.5m3 2 Frontend Loader Caterpillar 992 12 m3

22 Haul Truck Caterpillar 789 190 t 3 Haul Truck Caterpillar 777 90 t 5 Blasthole Drill Marion M3 270 mm 3 Bull Dozer Caterpillar D11 1 Rubber Tired Dozer Caterpillar 2 Grader Caterpillar 24H

The maintenance and office facilities for the mine are located on a wide excavated

flat berm on the east wall of the pit.

KIUNGA OPERATIONS At Kiunga, the concentrate delivered from the overland pipeline is filtered, dried, and

stockpiled for subsequent loading and transport by barge. The dried concentrate is loaded

onto barges and transported more than 800 kilometres down the Fly River to a silo vessel

anchored at the entrance to the Fly River delta or at Port Moresby, depending on weather

conditions. The barges are purpose-built for the shallow water conditions of the Fly

River. The largest vessel has a capacity of 6,200 tonnes. The concentrate barges carry

freight to Kiunga on their return trip. The moored silo vessel, the MV Erawan, stores

concentrate until it is loaded onto export ships that carry it to smelters around the world.

POWER SUPPLY Power for the mine, mill, and township of Tabubil is supplied by hydroelectric and diesel

generators. The Ok Menga hydroelectric run-of-river scheme supplies about 85 per cent

of the project's energy requirements. Maximum power output from Ok Menga is 59


20-5

megawatts. A 45-megawatt diesel power station at Tabubil and a two-megawatt

hydroelectric power station at Yuk Creek meet any additional power requirements. The

hydro power plant capacity varies depending upon weather patterns and accumulated

precipitation. In periods of low rainfall and resulting low river flows, the power

generation requirements are met through diesel generation capacity.

ENVIRONMENTAL IMPACTS OF MINING

Mining at Ok Tedi has caused significantly greater environmental impacts than

projected at the time of mine planning and commissioning in the 1970s and 1980s. Each

year, the mine discharges approximately 60 to 90 million tonnes of waste rock and

tailings to the Ok Tedi river system. This discharge is carried out with the legal approval

of the PNG Government under the terms of the Ninth Supplement to the Ok Tedi Mines

Act. Agreement has been obtained with local affected communities as expressed in the

Community Mine Continuation Agreements signed with some 156 communities. This

encompasses 9 regions along the Ok Tedi and Fly Rivers between the mine and Fly River

Estuary at the Gulf of Papua.

The discharge of rock and sand has filled the Ok Tedi river bed significantly and has

raised the river bed in the upper regions by many metres. Over-bank flooding was

common in areas of flatter river gradients in the lower Ok Tedi, where the river leaves the

foothills of the Star Mountains.

VEGETATION DIEBACK Build-up of mine-derived sediment in the lower Ok Tedi and Fly River has raised the

riverbed resulting in over-bank flooding and sediment deposition on the flood plain. This

inundation stresses, and can kill, flood-sensitive vegetation along the riverbanks and on

the floodplain. OTML monitors the amount and the distribution of resultant “dieback”

through satellite images and ground surveys. Dieback progressively increased as the

amount of sediment in the rivers increased. The total area of vegetation affected by


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flooding in 1992 was 18 km2. It increased to 106 square kilometres by 1995, 478 km2 by

1997, and was mapped at a total of 1,294 km2 in 2002. Modelling projections from the

Mine Waste Management Project expected that the maximum forest dieback would

eventually reach about 2,000 km2 if operations continued unmitigated.

The forest affected by dieback is predicted to slowly recover by natural processes

once the mine closes and release of sediment stops. Vegetation is returning to dieback

areas in the form of wetland grasses and shrubs that are more flood-tolerant than the

original forest plant assemblage. Rapid regeneration of forest has also been recorded

over about 170 km2 as a result of dredging at the Bige operation.

The dieback and other changes in vegetation have affected people living in villages

along and in the vicinity of the rivers. The major impacts include loss of gardens,

reduced supplies of sago palm (a staple food source) and more difficult travel due to

flooding. These people are compensated under a number of compensation arrangements.

ACID ROCK DRAINAGE (ARD) ISSUES OTML has long recognized that ARD issue may be a concern. Currently, water

runoff from the open pit is in the order of pH 3, and the sulphide content of the tailings is

in the order of about 3%. As the mine deepens and materials are extracted with less

buffering capacity, it is expected that the sulphide content of the tailings and waste rock

will increase significantly.

To manage the current ARD potential of the mine waste rock, OTML has calculated

that about 20% limestone needs to be mixed with the waste rock. Although limestone

quarrying has been carried out for this purpose, the ARD problem persists and needs

further consideration.

At present some evidence of ARD has been noted at the Bige dredge repository cells.

Estimated future increases of pyrite content in the ore and, as a result, an increase in the


20-7

tailings sulphide to about 8% suggest that tailing fines to be stored at Bige will have

significant ARD potential. This could result in additional management costs both during

operations and at project closure.

The high sulphide content of the Mount Fubilan ore body means that some potentially

acid-forming mine wastes are generated. This potentially acid-forming material needs to

be managed so that environmental impacts do not occur where acidic water, with

associated high metal content, is released to the environment. To date, small areas of

ARD have been observed on some sandbanks in the lower Ok Tedi during dry periods

when the river level is low. The analysis of river waters indicates no significant impact

on water quality, with alkalinity levels remaining high and copper concentrations within

safe limits.

An extensive ARD monitoring and management program is in place. The active

measures for managing ARD include adding extra limestone to waste rock at the mine to

maintain acid neutralising capacity in the waste rock dumps. OTML is assessing benefits

of preferential dredging of high and low sulphide sediments at Bige to allow better

management of the ARD potential of the dredged sands.

MINE AND MILL IMPROVEMENTS

OTML has been investigating a range of mine and mill improvements to increase

copper and gold recovery and to reduce copper and sulphide minerals released to the river

system. According to OTML, results to date suggest that modifications in the mill could

increase copper and gold recovery by up to five per cent. The studies also show that a

high percentage of the sulphur in mill tailings can be removed in the mill. Alternative

disposal plans for these materials remain to be developed.

OTHER IMPACTS Copper levels in the river system are slightly elevated due to copper in mine rock and

tailings, but are within Australian, PNG and World Health Organization drinking water

standards. Villagers along the river system obtain their drinking water from smaller


20-8

tributaries rather than the main river channels, although water in the main channels is safe

to drink once silt has settled.

Fish numbers have dropped significantly in the Ok Tedi and the Fly River below the

Ok Tedi junction down to the Strickland River junction. OTML believes this is due to

sediment smothering fish habitat in the main river channels. Fish numbers and variety in

the Fly River flood plain and off-river water bodies are said to be unaffected by the mine-

derived sediment. OTML states that independent studies have shown that mine sediment

in the Fly River catchment has not affected the Torres Strait or the Great Barrier Reef.

Detailed and numerous environmental, health, and engineering studies have been

undertaken to investigate the impacts of mining. Some of the studies are available on the

mine’s web site.

MINE WASTE MANAGEMENT BACKGROUND AND ISSUES

The management of mine rock waste, including waste rock from the pit and tailings

from the mill, is a significant challenge. OTML has undertaken numerous studies to

assess management options. The original Ok Tedi project design included a large tailings

dam on the Ok Ma. The foundations were destroyed by a landslide in 1984 and the dam

was never built. A small volume of tailings was retained in the Interim Tailings Scheme

near the mill in the early years of gold operations. Since that time, tailings have been

discharged directly into the Ok Tedi River system. In the early 1990s, large areas of

stressed vegetation and vegetation dieback became evident along the Ok Tedi and Upper

Fly systems, caused by increased flooding due to the build-up of mine-derived sediment

in the bed of the river.

RESEARCH INTO MINE WASTE MANAGEMENT

In 1996, OTML set up the Mine Waste Management Project (MWMP). This project

brought together international experts from a wide range of disciplines to undertake an

extensive two-year study of the engineering, environmental, social and risk components


20-9

involved in mitigating the environmental impacts of the mine waste. The MWMP also

included a two-year, US$60 million dredging trial in the lower Ok Tedi to investigate the

effectiveness of dredging as a measure to reduce sediment build up in the river system.

After reviewing a large number of mine waste management possibilities, four

possible options were examined in detail in the MWMP to deal with mine waste issues at

Ok Tedi:

• continue the current dredging trial in the lower Ok Tedi,

• dredge and pipe mine tailings to a storage area on land,

• do neither, or

• close the mine early.

The MWMP comprised a comprehensive risk assessment integrating information

from all environmental, health, engineering, social and economic studies. A large

component of the overall risk assessment, the Human Health and Ecological Risk

Assessment (HERA), was overseen by a group of five senior independent scientists from

around the world. This Peer Review Group provided advice, recommendations and the

peer review of all studies relating to the HERA.

The final Mine Waste Management Project Risk Assessment was completed and

provided to the PNG government in August 1999. The risk assessment concluded that

the environmental effects, particularly the over-bank flooding and vegetation dieback,

were likely to expand significantly and that none of the options examined offered a clear

solution to the environmental and social impacts of the mine operations.

WORLD BANK REVIEW

The government requested its own consultants and the World Bank to review the Risk

Assessment and set up a task force to advise the government on its response to these

findings. In January 2000, the World Bank reported that “from a purely environmental

perspective, the risk assessment suggests that the Ok Tedi mine needs to be moving


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towards closure as soon as possible”, but that “immediate closure would appear to carry

with it the worst social impact”.

PUBLIC CONSULTATION

The government and OTML undertook an extensive consultation process with local

people to inform them of the environmental predictions and to give them the opportunity

to express their views on the future of the mine. Through this process, the communities

within the region affected by the mine, which include about 50,000 people, endorsed the

continued operation of the mine until planned closure. This community endorsement has

been formalised through a series of Community Mine Continuation Agreements

(CMCAs). DREDGING AT BIGE

Following the scheduled completion of the Ok Tedi dredging trial at Bige in March

2000, the PNG Government requested that dredging continue on a permanent basis. To

date, almost 85 million tonnes of sand and gravel have been removed from the river and

significant recovery of dieback-affected forest has been documented.

SOCIAL COMMITMENTS AND IMPLEMENTATION At the village and regional levels, implementation plans have been put in place to

meet various program commitments. There are a wide range of concerns and opinions

among the local population regarding these plans.

To address these concerns OTML has:

• targeted that each village should be visited at least once a month, • developed a communications plan including Trust Meetings, Village Planning

Committee Meetings,

• combined OTML/VPC/Local Trustee Meetings,

• installed VHF radios in many of the villages and now can communicate with them much easier than before.


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Over a longer term, social and political issues will remain over how the dividends

flowing from the PNG Sustainable Development Program and the Ok Tedi Development

Foundation will be managed and used for local sustainable benefits. One third of the

annual distribution goes to the western region and two thirds go to the whole country in

40 year long-term trust fund.

CLOSURE REQUIREMENTS PROCESS

A conceptual Rehabilitation and Closure Plan was prepared by OTML following the

process of consultation in March 1998. Subsequent workshops and meetings with OTML

specialists led to the submission in November 2000 along with a companion report titled

“Social and Sustainable Development Issues in Relation to Mine Closure” in recognition

that social issues are a dominant consideration in relation to mine closure. The State

subsequently accepted the Plan and OTML produced the “2002 Draft Mine Closure Plan”

which was approved by the Minister for Mining in August 2003 and by the Minister for

Environment and Conservation in May 2004. The 2000 and 2002 draft Mine Closure

Plans and the comments received following the submission of those plans have been used

by the OTML Internal Mine Closure Planning Committee (IMCPC) as the basis for

community consultation and subsequent preparation of the draft mine closure plan.

MINE CLOSURE OBJECTIVES

The Mine Closure Code provides the guidance framework for the closure plan

including definitions and closure plan commitments/actions, financial assurance and

inspections. Schedule 1 of the code provides content guidance for all areas other than the

Mine Area Rehabilitation Plan, which is covered by Schedule 2. The Mine Closure Plan

provides the basis of proposed reclamation actions and assumptions associated with the

mine and mill site areas. The objective of the mine closure planning process is to

develop a mine closure plan that will:

• provide for orderly relinquishment of leases by satisfying the requirements of

the Mining (Ok Tedi Agreement) Act 1976;

• comply with the Mine Closure Code;


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• satisfy the requirements of other relevant applicable PNG Legislation, e.g.

Mine Safety Act, Chapter 195A;

• ensure facilities, plants, and materials are decommissioned and disposed of in

a safe manner which minimises adverse effects on the environment;

• minimize potential for any post-closure liability;

• satisfy the requirements of the owners/shareholders;

• obtain stakeholder acceptance of closure proposals;

• utilize, where feasible, low maintenance structures and facilities; and

• leave formerly leased land in a condition suitable for the agreed land use.

FINANCIAL ASSURANCE

The first estimate of closure cost for the project was in the order of $150 million.

However, more recent estimates by OTML and its consultants suggested $91 million.

RPA understands that at the time of the visit the PNG government has accepted a closure

cost estimate at $100 million as the basis for the Financial Assurance requirements. This

money is to be set aside in a reserve account, known as the Ok Tedi Financial Assurance

Fund (FAF), held jointly by the state and OTML. The FAF is to receive biannual

contributions with the first contribution to be made on or before 1 July 2002. Actual

contributions have been as follows:

• July 2002 $7,550,000

• January 2003 $7,550,000

• July 2003 $7,550,000

• January 2004 $4,636,344

• July 2004 $4,622,000

• January 2005 $ 4,199.329

• Total to date $36,057,664

RPA reviewed the closure cost estimates and noted that the closure costs for Bige

were estimated at less than US$700,000 providing costs for establishing vegetation on

200 ha of dredge cells. These costs do not reflect the potential need for cover placement


20-13

over the tailings sediment if such measures are needed to mitigate ARD. If covers are

required, the costs could be in the order of US$70,000 per ha. If this requirement were

developed, there could be a significant additional liability. RPA estimates that it could

range between US$40 million US$80 million.

COMPLIANCE FORMAL PNG REPORTING

The following information was extracted from the OTML 2004 annual report with

respect to the monitoring of compliance within the framework of the new regulatory

regime.

COMPLIANCE MONITORS

• There were no human health issues regarding water quality in terms of drinking standards. On each of the monthly sampling occasions, none of the water quality parameters exceeded drinking water guidelines.

• While variation in fish biomass was recorded, it was not statistically

significant and there were no issues relating to the edibility of any fish. However, biomass declines continue at Ogwa – this is thought to be attributable to the commercial fishing pressures at Obo. The edibility criteria will be refined in line with results from the current Community Health Survey.

• Floodplain food crops presented no challenges regarding edibility although

the method through which this is determined continues to require further attention. This is being actively addressed through the work being undertaken as part of a Community Health Survey.

• The main channels of the Ok Tedi and Fly River were navigable for most of

the reporting period and any hindrance during FY05 would be climatically influenced rather than mine related. At the time of writing this report (August – September 2004) El Nino-like conditions are resulting in low river levels which are having a marked influence on river navigability.

• Dissolved copper levels throughout the system were consistent with historical

trends and patterns of occurrence. Labile copper analyses continue to require ongoing datasets before any determination can be made relating to any trends


20-14

or patterns of occurrence. However, it appears that a relationship between pore water alkalinity and river chemistry is becoming established.

• Ecotoxicological monitoring analyses continue to require ongoing datasets

before any determination can be made relating to any trends or patterns of occurrence.

• Vegetation dieback mapping revealed a slight 2% increase in the area

affected by dieback but a 33% increase in the area under some form of recovery. This reflects a continuation of the drier climatic conditions also experienced during FY03 resulting in a slowing of dieback extension. However, this pattern can be readily reversed with the onset of wetter than normal conditions.

• There was no evidence of ARD related adverse changes to riverine chemistry

downstream of the mine. However, while as yet not evident, further work is required to examine oxidation of mine-derived minerals and any measurable increase in metal bioavailability or impact on the ecology of the river system that may result.

ENVIRONMENTAL VALUES

Each of the values was monitored during FY04. None of them was detrimentally

impacted, compared to existing status in December 2001, as a result of the mining

operation. Specifically

• Water quality within the main river channels was well within the stipulated drinking water guidelines.

• There was no statistically significant reduction in fish biomass at the

monitoring sites. • There were no instances of fish tissue metal levels presenting any human

health concerns. • Floodplain availability was not further impacted during FY04.

• As they are grown in flood free areas, no challenges were found regarding the

edibility of food crops.

• The main river channels were generally navigable. Any impact during FY05 will be related to climatic factors rather than mine-derived impacts.


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REGIME PROGRAMS The Regime currently comprises four programs, viz, the ARD Management Program,

the Riverine Aquatic Ecology Management Program, the Riverine Terrestrial Ecology

Management Program and the Industrial Sites Management Program. The status of each

of these programs is presented and a discussion of future direction identifies specific

activities to be undertaken during FY05. These activities are summarized in Schedule II

which is appended to this report as Appendix 1.

MITIGATION OPTIONS

Current mitigation options are limited to those related to the ARD program. Specific

options are currently in place addressing the buffering capacity contained within the

waste rock disposal areas and the stockpiled sands at the Bige dredge site. Further

development of these options is to be investigated during FY05.

INTERNAL MANAGEMENT OTML has engaged the services of external consultants to carry out independent third

party environmental performance audits. These audits have been used to confirm

environmental compliance, compare existing practices to best practices, identify

environmental performance issues, and to develop remedial action plans to address

concerns that become apparent. The audits focus primarily on the industrial aspects of

the operation and exclude issues related to social aspects, riverine impacts, and

environmental monitoring data. Key audit findings have been identified that can assist

OTML improve its environmental performance including waste management, secondary

containment, oily water separation, landfill disposal and management, and day to day site

management of environmental risks.

CONCLUSIONS The sound management and minimization of environmental impacts associated with

operations at the Ok Tedi mine are significant and ongoing challenges. Failure to achieve

the initially proposed designs for containment of mill tailings and waste rock, coupled

with the continuous erosion of mine site materials during the life of operation, has


20-16

resulted in a legacy of large scale sediment deposition and resultant flooding, dieback,

and changes in the river system and its use by humans along the length of the Ok Tedi

and Fly River before its confluence with the Strickland.

These impacts have been significant and have resulted in extensive concern by local

and regional groups, as well as by the government of PNG and international

environmental NGOs. To address these concerns, OTML initiated a far reaching Mine

Waste Management Program (MWMP) initiative that included extensive research and

scientific studies with respect to the areas of concern, as well an in-field large scale test

of river dredging to reduce impacts of sedimentation and consequent flooding and

changes in river use.

In acknowledgement of the MWMP’s conclusions that little could be done to

minimize existing impacts so long as the mine operated, OTML and the government of

PNG consulted with the local and regional communities to see if the mine should be

closed or continue operations. Based on the positive feedback from the communities

with respect to the benefits received especially in health and education services, OTML

developed a framework for continued operations. This framework included research and

development initiatives for areas of concern with the objective of minimizing mine

related impacts. Furthermore, OTML committed to a new environmental regime to

monitor the ongoing impacts of operations and mine discharges within the context of the

agreed to environmental values. OTML recognizes the impact of the past and current

practices. It has committed to compensation for past impacts and has provided a

framework for community development during operation and at closure.

OTML has made commitments to mine closure via its accepted closure code and draft

closure plans in addition to operating commitments. The code and plans provide the

framework, assumptions, and proposed actions for decommissioning facilities at the

mine, in and around Tabubil, at Kiunga and in other offsite areas and systems. The draft

closure plan is to be updated every two years and the final plan must be submitted no

later than four years before final closure. Closure funds are being set aside within a


20-17

Financial Assurance Fund on a biannual basis, with contributions to date exceeding

US$36 million of a required US$100 million. It was noted that this estimate only

includes minimal costs associated with the closure of the Bige dredge cells. It is RPA’s

opinion that closure liabilities at Bige may be significantly increased if the cells require

construction of engineered covers to minimize acid rock drainage, or if post closure water

management is necessary.

The social benefits associated with the mine have been enormous, contrary to the

environmental impacts of the operation on the regions. In addition to its role as a major

employer and wealth generator for employees, the mine has been a significant contributor

to the development and operation of regional infrastructure, including housing, roads, and

communications. Most importantly, the education and hospital and health care systems

have benefited considerably.

The environmental challenges have resulted in:

• An operational framework and community agreements

• Unique ownership status and commitments to the community and the region

• Impact offset compensation

• Operational and long-term development investment agreements

All these contribute to providing far reaching and significant contributions to the

long-term sustainability for the peoples of the region.


20-18

PROJECT ECONOMICS

RPA has developed a project development scenario based on the December 2004

Mineral Reserves as outlined above. The production schedule is based on the Mineral

Reserves and the mining schedule developed by OTML. The capital and operating cost

forecasts presented are based on the estimates and factors outlined below.

CAPITAL COSTS

Capital costs have been provided for in the life of mine plan based on the estimates

presented by OTML in the capital cost analysis section of the 2004 Reserve Support

Document. The capital costs include a number of replacement equipment items and

ongoing support items for the mine. In addition, some one-time capital projects are

provided for including the relocation of the Taranaki crusher and conveyor system, and

the implementation of a pit dewatering system. In the mill area, the capital estimate

provides for specific upgrades and replacement items in addition to the cost estimate for

implementation of a new process control system and projects such as flotation

optimization. Capital items for Bige include additional power generation capacity and

general equipment replacement allowances. Capital provisions for general and

administrative areas have also been included.

In addition to the cost estimates presented by OTML, RPA has included provisions

for site closure costs in the last year of the mine life. This allowance includes $50 million

for the mine area, $50 million for the mill site, and $50 million for the closure of the Bige

tailings site. These estimates are only rough allowances based on closure cost estimates

developed to date. Table 20-2 summarizes the life of mine capital cost forecast:


20-19

TABLE 20-2 LIFE OF MINE CAPITAL COST BY AREA Inmet Mining Corporation Mount Fubilan Mine, Papua New

Guinea

Area Cost Mine $87,155,000

Mill/ Kiunga $53,465,000

Bige $50,800,000

Power & Engineering $22,080,000

Planning & Tech. Services $1,088,000

Business Support $5,600,000

Public & Community Affairs $4,000,000

Commercial $4,000,000

Closure $15,000,000

Total Capital $243,188,000

OPERATING COSTS MINING

Mine operating costs have been estimated based on the forecasts and factors

presented by OTML in their 2004 Reserve Support Document. Various mining cost

factors have been developed to provide for differences expected in various rock types as

well as the impact of longer haul distances that will be incurred as the pit deepens. Unit

mining costs have been derived for each year of the operation over the remaining mine

life based on the productivity and performance estimates developed by OTML. Unit

mining costs are projected to run at $0.75 per tonne mined in 2005, climbing to the

highest level of $1.10 per tonne in the last year of operation in 2013. Mining costs are

forecast to average $0.82 per tonne over the nine years’ remaining mine life.

PROCESSING Mill operating costs have also been estimated based on the forecasts developed by

OTML in their 2004 Reserve Support Document. Unit milling costs have been

developed for each of the primary ore types to reflect their individual throughput rates


20-20

and reagent consumption factors. The costs are forecast to vary over a fairly narrow

range between a low of $1.78 and a high of $1.82 with the average over the nine year life

at $1.80 per tonne processed.

OPERATIONS SUPPORT Operating costs associated with various support functions have similarly been

estimated based on information presented in the 2004 Reserve Support Document as well

as the OTML 2005 – 3 Year Business Plan. Concentrate handling costs have been

forecast based on current experience and are based on an average unit cost of $55.52 per

tonne of concentrate throughput. These handling costs provide for operation of the

overland pipeline, dewatering and handling facilities at Kiunga, and the barging and final

re-handling onto export vessels at tide water. Dredging costs have been forecast as a

fixed annual cost of $30.4 million and cover the dredging of river sediments and stacking

and maintaining the tailings stockpiles.

The technical and management costs associated with the planning and technical

services group for the mine and mill are forecast as a fixed annual cost of $7.8 million.

Engineering and Power costs are provided for the general costs associated with operating

and maintaining the general peripheral infrastructure, including the transportation and

power systems, the town site, and other operating areas. The cost of diesel power

generation is provided for in this item as well. It is forecast as a fixed annual cost of

$19.3 million. Finally the Environment cost associated with the ongoing monitoring and

management of the environmental impact around the general sites is provided for at a rate

of $2.5 million per annum.

COMMERCIAL GROUP COSTS The commercial group cost provides for costs associated with various departments

involved in managing and maintaining OTML’s business activities. The commercial

group includes logistics, accounting, information services, marketing, and senior

management. An annual operating cost estimate of $48.0 million covers the logistics


20-21

operations, including the personnel transportation flight operations, freight operations,

and procurement. Accounting department and information services costs have been

estimated at a rate of $13.0 million per year, and senior management costs at $3.2

million. In total the commercial group is forecast to incur $64.2 million per year.

COMMUNITY AND BUSINESS SUPPORT The community and business support group includes the human resources department

and provides security, infrastructure support, and community services and support. In

total this area is forecast to cost $42.5 million per annum.


20-22

CONTRACTS

There are a number of contracts that OTML uses in managing and maintaining the

overall operation. On the whole, these contracts make up a relatively small part of the

overall OTML operations and individually do not represent key integral parts of the Ok

Tedi operation. The primary mine excavators are operated under the terms of an

operating contract with Starwest Constructions Pty Ltd. (“Starwest”). The contract has

been in effect since August 1998 for a period of seven years. Under the terms of the

contract, Starwest supplies and operates hydraulic excavators and provides supervisory,

operations and maintenance personnel, equipment, and supplies as required, to meet a

minimum guarantee on productivity performance. The contractor excavates ore and

waste materials and loads these materials into OTML operated haulage trucks. The

contractor is paid for services based on an hourly rate for equipment time. OTML report

that the contractor is operating satisfactorily and that they enjoy a good working

relationship.

TAXES AND ROYALTIES

A 2% net smelter return royalty is paid to the PNG government on all metal

production from the Ok Tedi mine. This royalty is calculated based on the net revenue

realized after deducting smelting, refining, transportation, and selling costs associated

with the metal sales.

CASH FLOW

Table 20-3 summarizes the operating parameters forecast for the remainder of the

mine life, including production quantities, revenues, costs, and net cash flow.

2005 2006 2007 2008 2009 2010 2011 2012 2013 Total

Ore Mined (000 t) 28,966 28,112 28,900 29,588 29,481 29,282 28,968 29,018 16,759 249,074Total Waste Mined (000 t) 54,412 49,179 40,465 32,603 17,254 15,568 16,222 13,264 4,009 242,976

Total Mined (000 t) 83,378 77,291 69,365 62,191 46,735 44,850 45,190 42,282 20,768 492,050Strip Ratio 1.88 1.75 1.40 1.10 0.59 0.53 0.56 0.46 0.24 0.98

Mill Feed (000 t) 28,966 28,112 28,900 29,588 29,481 29,282 28,968 29,018 16,759 249,074Head Grade - Cu% 0.77 0.80 0.78 0.78 0.81 0.81 0.86 0.92 0.76 0.81 - Au g/t 0.79 1.04 1.13 1.04 1.04 1.02 1.09 1.20 1.09 1.05

Recovery - Cu % 85% 84% 84% 86% 87% 87% 87% 87% 89% 86% -Au % 72% 72% 70% 68% 68% 68% 68% 68% 67% 69%

Recovered Cu (000 t) 191.3 188.2 188.8 198.4 208.3 207.5 217.8 232.1 112.9 1,745.4Recovered Au kg 16,472 21,115 22,727 20,795 20,966 20,445 21,573 23,528 12,330 179,951

Cu Concentrate (000 t) 738,755 652,970 665,469 702,405 734,841 733,935 773,829 824,167 397,800 6,224,171

Copper Price ($/lb.) $1.15 $0.90 $0.90 $0.90 $0.90 $0.90 $0.90 $0.90 $0.90 $0.93Copper Revenue ($ 000) $404,761 $252,823 $252,672 $265,142 $278,195 $276,913 $290,261 $309,493 $151,416 $2,481,676

Gold Price ($/oz) $397 $361 $361 $361 $361 $361 $361 $361 $361 $364Precious Metal Revenue ($ 000) $202,589 $239,198 $257,978 $234,952 $236,601 $230,573 $243,314 $265,532 $139,513 $2,050,250

Total Revenue ($ 000) $607,350 $492,021 $510,650 $500,094 $514,797 $507,486 $533,575 $575,024 $290,928 $4,531,925

Operations Cost ($ 000) $214,894 $203,991 $201,406 $201,519 $193,714 $192,518 $195,676 $198,932 $134,628 $1,737,276Commercial and Mng. Director ($ 000) $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $64,200 $577,800

Community & Business Support ($ 000) $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $42,500 $382,500Subtotal Operating Cost ($ 000) $321,594 $310,691 $308,106 $308,219 $300,414 $299,218 $302,376 $305,632 $241,328 $2,697,576

Other Cost ($ 000) $61,811 $5,220 $5,220 $5,220 $5,220 $0 $0 $0 $0 $82,691Total Cost of Production ($ 000) $383,405 $315,911 $313,326 $313,439 $305,634 $299,218 $302,376 $305,632 $241,328 $2,780,267

Capital Costs ($ 000) $39,045 $14,785 $24,370 $17,385 $9,356 $11,145 $5,895 $11,813 $150,000 $283,794

Income Tax ($ 000) $64,381 $47,672 $55,976 $52,698 $61,230 $61,787 $70,534 $84,734 $8,348 $507,359Net Cash Flow ($ 000) $120,519 $113,653 $116,978 $116,572 $138,577 $135,336 $154,771 $172,846 -$108,748 $960,505

10% NPV $647,374 12% NPV $603,359

Table 20-3 Ok Tedi Cash Flow Forecast

RO

SCO

E PO

STL

E A

SSOC

IAT

ES IN

C.

ww

w.rp

aca

n.co

m

20-23


20-24

SENSITIVITIES

RPA developed a sensitivity analysis that tested the impact of changing certain key

assumptions and factors on the base case cash flow in Table 20-3. The factors tested

included head grade forecast, capital cost estimate, operating cost factors, and metal

prices. The results of each of these sensitivities are illustrated in Figures 20-1 and 20-2.

The results indicate that the net present value of the project cash flow estimate is most

sensitive to metal prices, with the project being least sensitive to the capital cost

assumptions.

FIGURE 20-1 OK TEDI NPV SENSITIVITY ANALYSIS

Ok Tedi Cash Flow SensitivityBased on $0.90 Cu & $360 Au

($0.2)

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

-30% -20% -10% 0% 10% 20% 30%

Bill

ions

Percentage Change

Cas

hflo

w 1

5% N

PV

Price Grade Capital Operating Source: RPA


20-25

FIGURE 20-2 OK TEDI SENSITIVITY ANALYSIS

Ok Tedi Sensitivity SummaryCash Flow Sensitivity to +/- 30% Change on Key Factors

($0.2)

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

Price Operating Cost Grade Capital Cost

Bill

ions

Key Factors

15%

NPV

Cas

h Fl

ow V

alue

+/- 10% Sensitivity

+/- 30% Sensitivity

Source: RPA


21-1

21 INTERPRETATION AND CONCLUSIONS MINERAL RESOURCE ESTIMATE

OTML has produced a very thorough and well-organized report that describes all of

the technical details related to the December 2004 Mineral Resource estimate. In RPA’s

opinion, OTML has done an excellent job in documenting its 2004 resource estimation

procedures and results.

As of December 2004, OTML estimated the Measured and Indicated, and Inferred

Mineral Resources of the Mount Fubilan. In RPA’s opinion, the December 2004 Mineral

Resource estimate is reasonable and acceptable to support the Mineral Reserve estimate.

The Mineral Resources have been calculated to an elevation of 1,153 m. It is RPA’s

view that a portion of the resources do not have reasonable prospects for economic

extraction even at significantly higher metal price assumptions. Based on an economic

assessment using higher revenue value assumptions (Base Case prices x 1.4 factor,

approximately $1.25 Cu, $490 Au) RPA believes that the portion of the model that can be

suitably classified as meeting the requirements of a Measured and Indicated Mineral

Resource under NI 43-101 guidelines would be 543 million tonnes averaging 0.77%

copper and 0.9 grams per tonne gold.

It is RPA’s opinion that the estimate of Measured skarn and endoskarn resources

should be re-classified as Indicated.

Drill hole data and wireframe models were not updated for the 2004 resource

estimate. RPA concludes that this mostly affects reliability of the deeper resources

situated well below the current ultimate pit design called “13D4”.


21-2

OTML is drilling more holes to evaluate the open pit and underground potential of

the skarn mineralization located below the ultimate pit design.

MINERAL RESERVE ESTIMATE

The ultimate pit design used to determine the estimate of Mineral Reserves is well

inside the potential economic limits developed in the optimization study.

RPA concludes that some of the operating cost and performance parameters that have

been used in the economic optimization work are based on an assumption of performance

and cost improvements compared to current experience. At present, RPA regards some

of the forecast productivity factors to be optimistic but recognizes that OTML has

initiatives in place to reduce haulage costs and to increase mill productivity. These are

key factors underlying OTML’s life of mine cost estimates.

RPA concludes that ongoing geotechnical assessments of the pit slope stability and

implementation and monitoring of the depressurization program are key requirements to

achieving the ultimate pit limits and recovery of the Mineral Reserves.

On the basis of the detailed and extensive analysis, and methods applied by OTML,

RPA concludes that the Mineral Reserves as estimated based on the 13D4 pit design

represent Proven and Probable Mineral Reserves consistent with the definitions set out in

NI 43-101 and defined by the CIM Standards on Mineral Resources and Reserves

Definitions and Guidelines adopted by the CIM Council on August 20, 2000.


22-1

22 RECOMMENDATIONS MINERAL RESOURCE

RPA has not identified any significant problems with the OTML resource estimation

methodology and RPA’s resource related recommendations should be considered as

opportunities for future refinements. RPA notes that some of RPA’s recommendations

already exist in past reports by OTML and SRK and that OTML could not implement

these refinements for the 2004 resource estimate because of the time limitations. RPA

recommends the following:

DRILL HOLE DATABASE RECOMMENDATIONS 1. Continue to verify approximately 5% of the drill holes every year and retain a

digital record that lists all of the records that were checked and any corrections that were made.

2. Clean up the lithology data.

3. Correct some of the dates in the collar table.

QA/QC AND SAMPLING RECOMMENDATIONS 1. Review the QA/QC procedures, and the geology department should designate

someone to be responsible for compiling and monitoring all of the QC data, including the OTML Laboratory reference standard and replicate results.

2. Reduce the geology reference standard insertion rate from one every ten

samples to one or two per diamond drill hole or approximately one in every fifty blast hole samples.

3. Insert barren split core or other suitable barren material as blanks into the

sample stream at a rate of one or two per drill hole or one in every fifty blast hole samples.

4. Insert occasional drill core or blasthole duplicates.

5. Compile the historical laboratory and geology reference standard results to

confirm that no major analytical biases existed.


22-2

6. Send several hundred pulps to an outside accredited laboratory and consider sending pulps out on a routine basis.

7. Compile the historical laboratory replicate data.

8. Investigate the apparent high bias associated with the blast hole data.

RESOURCE ESTIMATION RECOMMENDATIONS 1. Complete the new wireframe models. 2. Investigate including the blast hole data. 3. Review the composite length strategy and consider using shorter length

composites, particularly for the skarn mineralization which has more variable grades and geometries.

4. Investigate whether different cutting levels should be applied to the drill holes

and blast holes. RPA’s preference is to cut high resource assays before compositing.

5. Review the threshold grades and restricted search radii once the new

wireframes are completed.

6. Generate more density data for the skarns and endoskarn mineralization.

7. Investigate interpolating the block model density values, particularly for the skarn mineralization.

8. Carry out new directional variography studies.

9. Use ordinary kriging in the future.

10. Reduce some of the longer search radii to approximately two times the

variography ranges of continuity.

11. Build a partial block model with 25 m by 25 m by 15 m high blocks. This would allow each lithology to be properly represented by its proportion in the block.

12. Investigate developing a system to reconcile by rock type.

13. Construct scatter plots that show assays and block grades by elevation, by

easting, and by northing for each rock type as a further check on the local block model grade estimates.


22-3

14. Modify the classification methodology so that it is more compatible with the closer spaced drilling required to define skarn and endoskarn resources.

15. Use a high metal price optimization pit shell to constrain future resource

estimates at depth.


23-1

23 SOURCES OF INFORMATION Agoratek International, 2003, Ok Tedi Mining Limited Audit of Sampling Procedures

and Equipment, Internal Report by Francois-Bongarcon Dated October, 2003. Bamford, W.R., 1972, The Mount Fubilan (Ok Tedi) Porphyry Copper Deposit, Territory

of Papua and New Guinea: Economic Geology, v. 67, p. 1019-1033. Cox, D.P., and Singer, D.A., 1992, Distribution of gold in porphyry copper deposits, in

DeYoung, J.H., and Hammerstrom, J.M. eds., Contributions to commodity research: U.S. Geological Survey Bulletin 1877, p. C1-C14.

Einaudi, M.T., Meinert, L.D., and Newberry, R.J., 1981, Skarn deposits, in Skinner, B.J.,

ed., Economic Geology 75th Anniversary Volume: El Paso, Texas, Economic Geology Publishing Co., p. 317-391.

Howell, W.J.S., Fardon, R.S.H., Carter, R.J., and Bumstead, E.D., 1978, History of the

Ok Tedi Porphyry Copper Prospect, Papua New Guinea, Economic Geology Vol. 73, p. 796-809.

Mining Journal Special Publication, 2004, Papua New Guinea, February 2004. OTML, 2005, Support Document for the Reserve Statement as at 31st July 2004 & 31st

December 2004, A document for OTML internal use detailing Ore Reserves by A. Sharp Dated March 5, 2005.

OTML, 2005, Exploration License 581 and SML1 Ok Tedi Annual Exploration Report

for Period Ending November 3, 2004, by J. Kepa, R. Sumaiang, and B.L. Jainona, Internal report Dated January 2005.

OTML, 2004, Resource Estimation Report for F405 Model, Internal Report by A. Sharp

and M. Humphreys Dated September 27, 2004. OTML, 2003, Prove Check of Drill Hole Data in Oracle Database, Internal Memorandum

by A. Sino Dated May 22, 2003. OTML, 2002, CY-03 Mineral Resource and Ore Reserve Report as at 31 December 2002,

Internal Report by D.T. Brost Dated December 2002. OTML, 2002, Untitled Internal Report on Density Data Dated March 2002. OTML, 2001, Ok Tedi Rock/Ore Types Moisture Content and Dry Density

Determination, Internal Memorandum by John Ninduara Dated May 12, 2001.


23-2

OTML, 2001, Annual Review 2001, OTML Report to Shareholders. Rogerson, R., and McKee, C., 1990, Geology, volcanism and mineral deposits of Papua

New Guinea, in Hughes, F.E., ed., Geology of the mineral deposits of Australia and Papua New Guinea: Melbourne, Australasian Institute of Mining and Metallurgy Monograph 14, p. 1689-1701.

Rush, P.M., and Seegers, H.J., 1990, Ok Tedi copper-gold deposits, in Hughes, F.E., ed.,

Geology of the mineral deposits of Australia and Papua New Guinea: Melbourne, Australasian Institute of Mining and Metallurgy Monograph 14, p. 1747-1754.

Sillitoe, R.H., 1989, Gold deposits in western Pacific island arcs: the magmatic

connection, in Keays, R.R., Ramsay, W.R.H., and Groves, D.I., eds., The geology of gold deposits: the perspective in 1988: Economic Geology Monograph 6, p. 274-291.

SRK Consulting, 2004a, Review of the July 2004 Resource Model and Related Practices

for the Mount Fubilan Operations, SRK Project OKT402, Internal Report by A. Wesson for OTML, July 2004.

SRK Consulting, 2004b, Ok Tedi Mining Limited Audit of Mineral Resources as at 31

July 2003 and Ore Reserve Estimate as at 31 December 2003, SRK Project OK301, Internal Report by A. Wesson and J. MacIsaac Dated January 2004.

CMCA 2004, CMCA Environmental Predictions Community Patrols – April-June. Ok Tedi Development Foundation 2001, Investing in the Future of Western Province,

November 2001. OTML, 2005, OTML Mine Closure Planning January 2005, Presentation Prepared by

Ani Topurua, OTML Tabubil, January 2005. OTML, 2005, Mine Area Creeks: Recent Findings, Presentation, February 2005. OTML, 2005, Provincial Health Services in Western Province/Telefomin District,

Presentation, 2005 Health Implementation Plan. OTML, 2005, Riverine Management Programs, Environment Department Ok Tedi

Mining Limited, March 2005. OTML, 2005, ARD Management Program: A Status Report, Presentation Prepared by

Henry Kundapen, Riverine Management, Environment Department, March 2005.


23-3

OTML, 2004, Annual Environmental Audit 2003, Final Report, January 2004. OTML, 2004, Annual Environmental Audit 2004, Draft Report, January 2004. OTML, 2004, Annual Environmental Report, FY04, Report ENV040920 Environment

Department, September 2004. OTML, 2004, Draft Mine Closure Plan, Part 1 – Decommissioning and Infrastructure

Plan, December 2004. OTML, 2004, Draft Mine Closure Plan, Part 2 – Social and Economic Impact Repor,.

December 2004. OTML, 2004, Draft Mine Closure Plan, Part 3 – Mine Area Rehabilitation Plan.

December 2004. OTML, 2004, Environment Presentation, Environment Department Ok Tedi Mining

Limited, May 2004. OTML, 2004, OTML Mine Closure Update December 2004, Part 1 – Decommissioning

and Infrastructure Plan, Presentation to the State February 2005. OTML, 2004, Past, Present and Future, 8th PNG Mining and Petroleum Investment

Conference, Sydney, December 2004. OTML, 2004, Personal Correspondence to David Gwyther re: OTML Riverine Review,

May 2004. OTML, 2004, Environment Presentation, Environment Department, May 2004. OTML, 2004, Patrol Report Presentation, November 2004. OTML, 2004, Social and Economic Impact Report, 2004 Draft Mine Closure Plan,

Presentation to the State February 2005. OTML, 2003, Environmental Action Plan 2002-2003, Actions Developed from Findings

of HLA-Envirosciences FY02 Audit Report, 14 January 2003, Report No. ENV 03 01 10.


23-4

OTML, 2001, Community Mine Continuation Agreement Between Middle Fly Communities and Ok Tedi Mining Limited, December 6, 2001.

OTML, 2001, Community Mine Continuation Agreement Between Lower Ok Tedi

Communities and Ok Tedi Mining Limited, November 28, 2001. OTML, 2001, Interim Tailings Storage Area Conceptual Closure Plan, Final Report, PM

6762 34, June 2001. OTML, 2001, OK Tedi Mine Closure and Decommissioning Code 2001. OTML, 2001, Independent State of Papua New Guinea, No. 7 of 2001, AN ACT entitled

– Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act, 2001, PNG National Legislation.

OTML, 2003, Annual Environmental Report, FY03, Report ENV030927 Environment

Department, September 2003. OTML, 2003, Environment Standards External Audit, April 30 – May 7, 2003, June

2003. OTML, 2003, Mine Closure Cost Review, Prepared by Ken Voigt, November 2003. OTML, 2003, OTML’s Response to the NSR Riverine Review, October 2003. OTML, 2003, Review of Compliance with the Environmental Regime and the Science of

OTML’s Monitoring Activities and Other Work Assessing the Effects of its Operations on the Downriver Environment, CR 1065_1_v4, October 2003.

OTML, 2002, Environment Standards, December 2002. OTML, 2001, Proposed Environmental Regime, Report ENV010914 Environment

Department, September 2001. OTML, 2003, Lower Ok Tedi Dredge Project, ARD Mitigation Option Studies. Klohn

Crippen, M09135 02. Final Report. OTML, 2003, Lower Ok Tedi Dredge Project. Phase 2 ARD Mitigation Study, Klohn

Crippen, M09135 06.


23-5

OTML, 2005, Lower Ok Tedi Dredge Project, Phase 3 ARD Mitigation Study, Klohn Crippen, M09135 A10.

OTML, Regional Development – Project Delivery Issues. OTML, Regional Development Strategies. OTML, 2004, OTML Welcomes you all to this Important Provincial Immunisation and

Fly River Community Healthy Services Program Planning Workshop, Presentation, August 2004.

Parametrix, Inc. and URS Greiner Woodward Clyde, 1999, Assessment of Human Health

and Ecological Risks for Proposed Mine Waste Mitigation Options at the Ok Tedi Mine, Papua New Guinea, Detailed Level Risk Assessment, Final Report, Prepared for Ok Tedi Mining Limited, November 1999.

Parametrix, Inc. and URS Greiner Woodward Clyde, 1999, Assessment of Human Health

and Ecological Risks for Proposed Mine Waste Mitigation Options at the Ok Tedi Mine, Papua New Guinea, Screening Level Risk Assessment, Final Report, Prepared for Ok Tedi Mining Limited, November 1999.


24-1

24 SIGNATURE PAGE This report titled “Technical Report on the Ok Tedi Mining Limited Mount Fubilan

Mine Mineral Resource and Mineral Reserve Estimates, Papua New Guinea, Prepared for

Inmet Mining Corporation” and dated August 2, 2005 was prepared and signed by the

following authors:

(Signed and Sealed) Dated at Toronto, Ontario James W. Hendry, P. Eng. August 2, 2005 ROSCOE POSTLE ASSOCIATES INC. Principal Mining Engineer

(Signed and Sealed) Dated at Toronto, Ontario Luke Evans, M.Sc., P.Eng. August 2, 2005 ROSCOE POSTLE ASSOCIATES INC. Consulting Geological Engineer

(Signed and Sealed)

Dated at Toronto, Ontario Gerd Wiatzka, P.Eng. August 2, 2005 SENES Consultants Limited Principal, Manager Mining


25-1

25 CERTIFICATES AND QUALIFICATIONS JAMES W. HENDRY

As an author of this report entitled “Technical Report on the Ok Tedi Mining Limited Mount Fubilan Mine Mineral Resource and Mineral Reserve Estimates, Papua New Guinea, Prepared for Inmet Mining Corporation” and dated August 2, 2005 (the Report) and on behalf of Inmet Mining Corporation (Inmet), I hereby make the following statements:

A. My name is James W. Hendry and I am Principal Mining Engineer with Roscoe Postle Associates Inc. My office address is 55 University Avenue, Suite 501, Toronto, Ontario M5J 2H7.

B. I have received the following degree in Mining Engineering:

• B.Sc. in Mining Engineering, Queen’s University, Kingston, Ontario.

C. I am registered as a Professional Engineer in the Province of Ontario. I am also a Member of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM).

D. I am a Qualified Person for the purposes of National Instrument 43-101. E. My contributions to the Report are based on my personal review of technical

reports provided by the Ok Tedi Mining Limited (OTML) and Inmet, on discussions with OTML and Inmet representatives, and on information available in public files. My relevant experience for the purpose of the Technical Report is:

• Mining engineering experience in mining industry since 1976 including

development of numerous open pit mine designs, feasibility studies, and operations reviews.

• Mining operations experience ranging from operations supervisor through senior executive responsible for overall operating performance.

• Reviews and evaluations of numerous open pit mines in Canada, the United States, Latin America, Russia, Europe, and Africa.

• Extensive experience with computerized modeling and optimization of open pit mines.

F. I have been practising as a professional mining engineer for over 25 years. G. I visited the Mount Fubilan Mine from March 7 to 11, 2005. H. I am responsible for the Mineral Reserve related parts of the Report:


25-2

I. I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.

J. I am independent of Inmet and OTML applying the tests set out in section 1.5 of

National Instrument 43-101. . I have no prior involvement with the property that is the subject of the Report.

K. I have read National Instrument 43-101 and Form 43-101F1, and the Technical

Report has been prepared in compliance with both of them. I consent to the filing of the Report with any stock exchange and other regulatory

authority and any publication by them, including electronic publication in the public company files on their websites accessible by the public, of the Report.

(Signed and Sealed)

Dated at Toronto, Ontario ROSCOE POSTLE ASSOCIATES INC. August 2, 2005 James W. Hendry, P.Eng. Principal Mining Engineer


25-3

LUKE EVANS


A. My name is Luke Evans and I am a Consulting Geological Engineer with Roscoe

Postle Associates Inc. (RPA). My office address is Suite 501, 55 University Avenue, Toronto, Ontario M5J 2H7. I am a Qualified Person for the purposes of National Instrument 43-101 of the Canadian Securities Administrators.

B. I have received the following degrees:

• B.A.Sc. (Geol. Eng.) 1983 - University of Toronto, Toronto, Ontario • M.Sc. (MinEx) 1986 - Queens University, Kingston, Ontario

C. I am registered as a Professional Engineer in the Province of Ontario and I am

designated as a Consulting Engineer. I am a Member of the Canadian Institute of Mining, Metallurgy and Petroleum, and the Prospectors and Developers Association of Canada.

D. I am a Qualified Person for the purposes of National Instrument 43-101. E. This Report is based on my personal review of information provided by Ok Tedi

Mining Limited (OTML) and Inmet and on information available in public files. My relevant experience for the purpose of the Report is:

• Exploration Geologist, Ontario, 1984 to 1985 • Mine Exploration Geologist, Chibougamau, Québec, 1986 to 1992 • AFRI Project Geoscientist, Toronto, 1993 • Supervisor, Ontario Drill Hole Database, 1994 • Consulting Geologist with RPA from 1995 to present

F. I have been practicing as a professional geologist for over 20 years. G. I visited the Mount Fubilan Mine from March 7 to 11, 2005. H. I am responsible for the geology and Mineral Resource related parts of this

Report.

I. I am not aware of any material fact or material change with respect to the subject matter of the Report, which is not reflected in the Report, the omission to disclose which makes the Report misleading.


25-4

J. I am independent of OTML and Inmet applying the tests set out in section 1.5 of National Instrument 43-101. I have no prior involvement with the property that is the subject of the Report.

K. I have read National Instrument 43-101 and National Instrument 43-101F1 and

this Report has been prepared in compliance with both of these Instruments. I consent to the filing of the Report with any stock exchange and other regulatory


(Signed and Sealed) Dated at Toronto, Ontario ROSCOE POSTLE ASSOCIATES INC. August 2, 2005 Luke Evans, M.Sc., P.Eng. Consulting Geological Engineer


25-5

GERD WIATZKA


A. My name is Gerd Wiatzka and I am Principal, Manager Mining with SENES

Consultants Limited (SENES). My office address is 121 Granton Avenue, Unit 12, Richmond Hill, Ontario, L4B-3N4. I am a Qualified Person for the purposes of National Instrument 43-101 of the Canadian Securities Administrators.

B. I have the following degree:

• B.A.Sc., (Honours) Civil Engineering, 1974, University of Waterloo

C. I am registered as a Professional Engineer in the Province of Ontario. D. I am a Qualified Person for the purposes of National Instrument 43-101. E. This Report is based on my personal review of information provided by Ok Tedi

Mining Limited (OTML) and Inmet and on information available in public files. My relevant experience for the purpose of the Report is:

• Senior Environmental Engineer with SENES from 1991 to present • SRK Toronto Branch Manager in 1991 • Director Information Services for Noranda Inc, from 1986 to 1990 • Manager Business Services fro Noranda Inc. from 1984 to 1986 • Construction and Environmental Manager for Mining Corporation of

Canada Inc. from 1978 to 1983 • Project Engineer for Kilborn Engineering Ltd. from 1974 to 1978

F. I have been practicing as a professional engineer for over 30 years. G. I visited the property from March 7 to 11, 2005. I am responsible for the

environmental aspects of this Report.

H. I am not aware of any material fact or material change with respect to the subject matter of the Report, which is not reflected in the Report, the omission to disclose which makes the Report misleading.

I. I am independent of OTML and Inmet applying the tests set out in section 1.5 of

National Instrument 43-101. I have no prior involvement with the property that is the subject of the Report.


25-6

J. I have read National Instrument 43-101 and National Instrument 43-101F1 and this Report has been prepared in compliance with both of these Instruments.

I consent to the filing of the Report with any stock exchange and other regulatory


(Signed and Sealed) Dated at Toronto, Ontario SENES Consultants Limited August 2, 2005 Gerd Wiatzka, P.Eng. Principal, Manager Mining


26-1

26 APPENDIX A

List of Acts, Amendments and Change Notices

(source OTML Registration of Environmental Obligations Allens Arthur Robinson, 27 2

2003) • The Mining (Ok Tedi Agreement) Act Chapter 363 (the Ok Tedi Agreement Act)

• The Agreement dated 22 March 1976 set out in the Schedule to the Ok Tedi Agreement Act (as

amended, the Principal Agreement)

• The Mining (Ok Tedi Supplemental Agreement) Act Chapter 363A (the First Supplemental

Agreement Act), as amended

• The Supplemental Agreement dated 26 June 1980 set out in the Schedule to the First

Supplemental Agreement Act (as amended, the First Supplemental Agreement)

• The Mining (Ok Tedi Second Supplemental Agreement) Act Chapter 363B (the Second

Supplemental Agreement Act), as amended

• The Second Supplemental Agreement dated 26 February 1981 set out in the Schedule to the

Second Supplemental Agreement Act, as amended

• The Mining (Ok Tedi Third Supplemental Agreement) Act Chapter 363C (the Third Supplemental


• The Third Supplemental Agreement dated 4 March 1982 set out in the Schedule to the Third

Supplemental Agreement Act, as amended

• The Mining (Ok Tedi Fourth Supplemental Agreement) Act Chapter 363D (the Fourth


• The Fourth Supplemental Agreement dated as of 1 March 1984 set out in the Schedule to the

Fourth Supplemental Agreement Act, as amended

• The Mining (Ok Tedi Fifth Supplemental Agreement) Act Chapter 363E (the Fifth Supplemental


• The Fifth Supplemental Agreement dated as of 1 August 1985 set out in the Schedule to the Fifth

Supplemental Agreement Act, as amended

• The Mining (Ok Tedi Sixth Supplemental Agreement) Act 1986 No 27 of 1986 (the Sixth


• The Sixth Supplemental Agreement dated as of 28 February 1986 set out in the Schedule to the

Sixth Supplemental Agreement Act, as amended (the Sixth Supplemental Agreement)


26-2

• The Mining (Ok Tedi Seventh Supplemental Agreement) Act 1986 No 39 of 1986 (the Seventh


• The Seventh Supplemental Agreement dated as of 10 July 1986 set out in the Schedule to the

Seventh Supplemental Agreement Act, as amended

• The Mining (Ok Tedi Restated Eighth Supplemental Agreement) Act 1995 No 48 of 1995 (the

Restated Eighth Supplemental Agreement Act)

• The Restated Eighth Supplemental Agreement dated as of 4 August 1995 set out in the Schedule

to the Restated Eighth Supplemental Agreement Act

• The Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001 No 7 of

2001 (the Mine Continuation Agreement Act)

• The Mine Continuation Agreement dated as of 11 December 2001 set out in the Schedule to the

Mine Continuation Act (the Mine Continuation Agreement).

• The Mine Closure and Decommissioning Code is the Third Schedule to the Mine Continuation

Agreement Act.

• The Approved Proposals (as defined in the Principal Agreement) comprising the Feasibility Study

and Development Proposals Supplement dated November 1979 completed under the Principal

Agreement, approved by the State in accordance with the Principal Agreement subject to certain

conditions set out in the instrument of approval dated 29 February 1980 (the Approved Proposals),

as amended and varied in accordance with the Principal Agreement

• Change Notice 1/29.2 - Alternate Tailings Disposal System, as approved by the State in

accordance with the Principal Agreement and subject to the conditions of approval

• Change Notice 2/29.2 - Environmental Management, as approved by the State in accordance with

the Principal Agreement and subject to the conditions of approval

• Change Notice 3/29.2 - Tailings Disposal System, as approved by the State in accordance with the

Principal Agreement and subject to the conditions of approval

• Change Notice 5/29.2 - Interim Tailings Disposal System, as approved by the State in accordance

with the Principal Agreement and subject to the conditions of approval

• Change Notice 5/29.2 - Interim Tailings Disposal System (amended), as approved by the State in


• Change Notice 5/29.2 - Interim Tailings Disposal System (addendum), as approved by the State in


• Change Notice 26/4.2; 8/29.2 - Permanent Tailings, as approved by the State in accordance with

the Principal Agreement and subject to the conditions of approval

• Change Notice 27/4.2; 9/29.2 - Permanent Tailings System Amendment, as approved by the State

in accordance with the Principal Agreement and subject to the conditions of approval


26-3

• Change Notice 28/4.2; 10/29.2 - Interim Tailings System, as approved by the State in accordance






• Change Notice 31/4.2; 13/29.2 - Interim Tailings System Amendment; Permanent Tailings System

Further Amendment; and Waste Dumping Amendment, as approved by the State in accordance


• Change Notice 32/4.2; 14/29.2 - Tailings System Further Amendment, as approved by the State in


• Change Notice 35/4.2; 15/29.2 - Project Stages, as approved by the State in accordance with the


• Change Notice 39/4.2; 16/29.2 - Interim Tailings System Further Amendment, as approved by the

State in accordance with the Principal Agreement and subject to the conditions of approval





• Change Notice 44/4.2; 19/29.2 - Environmental Monitoring and Environmental Facilities, as

approved by the State in accordance with the Principal Agreement and subject to the conditions of

approval

• Change Notice 45/4.2; 20/29.2 - Overburden Disposal (Southern Dumps), as approved by the

State in accordance with the Principal Agreement and subject to the conditions of approval

• Change Notice 47/4.2; 21/29.2 - Dredging Trial, as approved by the State in accordance with the


• Change Notice 48/4.2; 22/29.2 – Tailings System Further Amendment, as approved by the State in


• Change Notice 48A/4.2; 21A/29.2 – Continuation of Dredging, as approved by the State in


• Change Notice 49/4.2; 23/29.2 – New Environmental Regime, as approved by the State in

accordance with the Mine Continuation Agreement

Documents

Technical Report Ok Tedi