Freeport-McMoRan 2011 Annual Report Download - page 101

2011 ANNUAL REPORT | 99
An application for an APP requires a description of a closure
strategy that will meet applicable groundwater protection
requirements following cessation of operations and an estimate of
the cost to implement the closure strategy. An APP may specify
closure requirements, which may include post-closure monitoring
and maintenance. A more detailed closure plan must be submitted
within 90 days aer a permitted entity noties ADEQ of its intent
to cease operations. A permit applicant must demonstrate its
nancial ability to meet the closure costs estimated in the APP.
Portions of Arizona mining facilities that operated aer
January 1, 1986, also are subject to the Arizona Mined Land
Reclamation Act (AMLRA). AMLRA requires reclamation to
achieve stability and safety consistent with post-mining land use
objectives specied in a reclamation plan. Reclamation plans must
be approved by the State Mine Inspector and must include an
estimate of the cost to perform the reclamation measures specied
in the plan. During 2008 and 2009, FCX updated its closure
approaches at the Sierrita, Tohono and Bagdad mines to address
site-specic regulatory obligations; during 2010, FCX updated its
closure approaches for certain facilities at the Bagdad and Morenci
mines. During 2011, FCX updated its closure approaches for
certain facilities at the Sierrita mine. FCX will continue to evaluate
options for future reclamation and closure activities at its other
operating and non-operating sites, which are likely to result in
additional adjustments to FCX’s ARO liabilities. At
December31,2011, FCX had accrued reclamation and closure costs
of $220 million for its Arizona operations.
Chilean Reclamation and Closure Programs. In July 2011, the
Chilean senate passed legislation regulating mine closure, which
establishes new requirements for closure plans and becomes eective
in November 2012. FCX’s Chilean operations will be required to
update closure plans and provide nancial assurance for these
obligations. FCX cannot predict at this time the cost of these closure
plans or the levels or forms of nancial assurance that may be
required. At December 31, 2011, FCX had accrued reclamation and
closure costs of $49 million for its Chilean operations.
PT Freeport Indonesia Reclamation and Closure Programs.e
ultimate amount of reclamation and closure costs to be incurred at
PT Freeport Indonesia’s operations will be determined based on
applicable laws and regulations and PT Freeport Indonesia’s
assessment of appropriate remedial activities in the circumstances,
aer consultation with governmental authorities, aected local
residents and other aected parties and cannot currently be
projected with precision. Estimates of the ultimate reclamation and
closure costs PTFreeport Indonesia will incur in the future involve
complex issues requiring integrated assessments over a period of
many years and are subject to revision over time as more complete
studies are performed. Some reclamation costs will be incurred
during mining activities, while most closure costs and the
remaining reclamation costs will be incurred at the end of mining
activities, which are currently estimated to continue for
approximately 30 years. At December31,2011, PT Freeport
Indonesia had accrued reclamation and closure costs of $140 million
and a long-term receivable for Rio Tinto’s share of the obligation
of $14 million (included in long-term receivables).
In 1996, PT Freeport Indonesia began contributing to a cash
fund ($15 million balance at December31,2011) designed to
accumulate at least $100 million (including interest) by the end of
its Indonesia mining activities. PTFreeport Indonesia plans to
use this fund, including accrued interest, to pay mine closure and
reclamation costs. Any costs in excess of the $100 million fund
would be funded by operational cash ow or other sources.
In December 2010, the President of Indonesia issued a regulation
regarding mine reclamation and closure, which requires a company
to provide a mine closure guarantee in the form of a time deposit
placed in a state-owned bank in Indonesia. In accordance with its
Contract of Work, PTFreeport Indonesia is working with the
Department of Energy and Mineral Resources to review these
requirements, including discussion of other options for the mine
closure guarantee. In December 2009, PT Freeport Indonesia
submitted its revised mine closure plan to the Department of Energy
and Mineral Resources for review and has addressed comments
received during the course of this review process.
Litigation. FCX is involved in numerous legal proceedings that
arise in the ordinary course of business or are associated with
environmental issues arising from legacy operations conducted
over the years by FMC and its aliates as discussed in this note
under “Environmental.” FCX is also involved periodically in other
reviews, investigations and proceedings by government agencies,
some of which may result in adverse judgments, settlements, nes,
penalties, injunctions or other relief. Management does not believe,
based on currently available information, that the outcome of any
legal proceeding reported below will have a material adverse
eect on FCX’s nancial condition, although individual outcomes
could be material to FCX’s operating results for a particular period,
depending on the nature and magnitude of the outcome and the
operating results for the period. Refer to Note 1 for further
discussion of FCX’s accounting policy for litigation contingencies.
Asbestos Claims. Since approximately 1990, FMC and various
subsidiaries have been named as defendants in a large number of
lawsuits that claim personal injury either from exposure to
asbestos allegedly contained in electrical wire products produced
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS