Non managed operations
Rio Tinto holds interests in companies and ventures it does not manage. However, we engage as members of the boards of directors operating committees and/or technical committees. Because we believe that the principles in The way we work are universal, in our dealings with joint venture partners and non-controlled companies we make every effort to ensure that those standards of conduct are respected at all times.
Examples of our non managed operations include Escondida copper mine in Chile and the Grasberg copper-gold mine in Indonesia.
Rio Tinto has a 30 per cent interest in Escondida, which is managed by BHP Billiton. Our seats on the Owners' Council allow us regular input on strategic and policy matters. We played a part in establishing the Escondida Foundation, which is funded by one per cent of the mine's pre-tax profits and is a vehicle through which Escondida fulfils some of its social responsibilities.
There was one fatality at the Escondida mine in 2010 as a result of injuries sustained whilst operating a cathode stripping machine. We worked closely with BHP Billiton to support its investigation into the incident and make improvements to safety procedures.
A subsidiary of the mining company Freeport-McMoRan Copper & Gold, Inc (Freeport-McMoRan), PT Freeport Indonesia owns and operates the Grasberg mine. We have a joint venture interest in the 1995 expansion of the mine, which entitles us to a 40 per cent share of production above specified levels until 2021 and 40 per cent of all production after 2021. We do not own shares in Freeport-McMoRan and we do not control the management of the joint venture. However, we have the ability to engage with and influence local management through our representation on the joint venture's operating committee.
The operator of the Grasberg mine manages complex social, community and environmental issues and has faced opposition from time to time. There have also been instances of violence in areas near the mine, including a series of shooting incidents along the road leading to the mining and milling operations that have resulted in three fatalities in 2009.
Both Rio Tinto and Freeport-McMoRan support the Voluntary Principles on Security and Human Rights and work together to ensure practice is consistent with these principles. At least one per cent of the mine's net sales is committed to support village based programmes, amounting to cumulative funding of US$467 million since 1996.
The Grasberg mine has used a controlled riverine tailings management programme throughout its long history. This programme was approved by the government of Indonesia following numerous technical studies to identify the appropriate tailings management plan for the site.
The practice of riverine tailings disposal has been subject to scrutiny for many years by a range of stakeholders, including certain Indonesian governmental authorities and some NGOs. We recognise that riverine tailings disposal has been criticised and that the World Bank does not consider it as good industry practice, in accordance with the International Finance Corporation's (IFC) 2007 Environmental, Health, and Safety Guidelines for mining.
However, we continue to believe that the use of riverine tailings disposal at the Grasberg operation is appropriate given the extremely rugged topography, high rainfall and high seismic risk that makes construction of more conventional tailings management facilities technically challenging. We remain actively engaged in supporting the mine's operator, PT Freeport Indonesia, in reducing the impact of waste rock management and tailings disposal.
PT Freeport Indonesia has implemented a number of significant improvements in tailings management at the Grasberg mine. These include the construction of lateral levees to limit the surface area disturbed by tailings deposition in the lowlands and to protect adjacent river systems, the diversion of the Ajkwa river system to preserve its water quality and to enhance tailings retention within the deposition area, the successful progressive rehabilitation of the now inactive tailings within the Ajkwa diversion area and the new islands forming at the mouth of the diversion area and the completion of an ecological risk assessment.
The focus of our work with the operator continues to be on minimising the geochemical risks posed by waste rock management and tailings, providing for effective acid rock drainage management, and promoting progressive rehabilitation.
We seek to ensure that investors understand the actions we are taking in relation to sustainable development issues and we are aware that the decision to buy or sell our shares may be influenced by their understanding of these issues. For example the 2008 sale of a 0.6 per cent interest in Rio Tinto by the Norwegian Government Pension Fund was stated to be a result of concerns in relation to the environmental practices at the Grasberg mine.
