PT Freeport Indonesia Concentrating Division

AUTHORIZATION FOR EXPENDITURE (AFE)

MAHAKA LIME LINE REPLACEMENT
SUMMARY
There are two lime boreholes which pass lime slurry from the Mahaka plant down to the Mill Level storage
tank system. The existing lime line #2 borehole from Mahaka to Mill area was damaged during the
construction of GBC development drift GVD7. In October 2010, GVD7 development crews intersected the
borehole, which impacted the availability to deliver lime slurry to the mill. A full incident investigation was
conducted and it quickly became apparent that the GVD8 development drift will pass close by or intersect
Mahaka Lime line #1 borehole.
Rehabilitation of lime line no 2 was in progress from that time until July 2012, primarily by drilling and casing
the borehole and connecting the missing section at GVD7 by pipe. This action was stopped when the casing
installation activity failed, with the resulting loss of the borehole. With only one lime line functional, the mill is
at a high risk of shutdown if the other borehole plugs up.
This project seek to install 2 ea. lines which would run from Mahaka to the Mill facilities through the Upper
Oreflow Conveyor drifts and down through the ore pass Inspection Raise, and connect up with existing
transport piping near GRS70. This will effectively replace and improve lime line transfer capability in terms of
Mill requirements. Approximate length of piping will be approx. 2,300 meters for each line or 4,600 meters
total. The lime slurry capacity requirements for existing use and future mill expansion use dictate a pipe size
of 6-schedule 80 for the entire length. Flushing ports and Pressure Gauges need to be installed at specified
locations for maintenance and cleanout activities. Pressure gauges are also needed before the pipes enter
the Inspection Raise and on the line directly after exiting the Inspection Raise.
It is critical to install the lines as soon as possible to provide capacity assurance for the mill lime supply. The
new route will be safe from any other future GBC activity, since it is not installed on PTFI UG development
areas, and will also accommodate future lime plant plans.
Anticipated project cost is USD $ 2.72M

CURRENT SITUATION
The Mill requirement for lime is about 600 gallon per minute, running 8-12 hrs daily. Currently, Mahaka lime
line#1 is the only line which can be utilized to support Mill operations, since lime line#2 is was impacted
during the UG GBC development of GVD#7. Lime line#1 availability will be at risk starting after September
2012 since GBC will begin developing GVD#8 which will pass by approximately 5 meters away from
remaining lime line borehole#1. Although UG GBC team already is aware of maintaining their activity to
preserve Lime line Borehole no#1, the opportunity of having as same problem as lime line borehole#2 on
lime line borehole#1 is high. The borehole is un-cased and will likely be affected by blasting activities at the
close proximity of the line. Given the uncertainty of the lime borehole location, it is possible that the drift may
actually intersect the line #1 similar to what happened on line#2.

PROPOSED ACTION
This AFE is proposed to replace and improve current lime slurry transporting capability so its availability can
still be reliable during PTFI Production development sequences. The New Lime slurry transfer system needs
to at minimum have same capacity as the current line setup, so it can provide Mill site requirements.
Additionally, the line is sized to accommodate the higher lime delivery requirements which will be incurred
during GBC ore processing.

PT Freeport Indonesia Concentrating Division

REASON FOR PROPOSED ACTION
Prior to the October 2010 GVD#7 intersection incident, the boreholes would often plug up over time and
have to be drilled out occasionally. Reviewing the activity of PTFI UG production development, the existing
un-cased borehole design for transporting slurry lime from Mahaka to Mill is becoming vulnerable. Boreholes
have the possibility to become broken or plugged during the blasting sequences of drift development.
Therefore another design is needed to minimize the effect caused by all UG activity. Modifying lime transport
model also ensure the access to the pipeline at all locations. Maintenance activity regarding the lime line
transporting system would be achievable and can be done in house (Maintenance crew).

ALTERNATIVES CONSIDERED
There are several alternatives being studied to maintain the reliability of lime slurry line from Mahaka to Mill,
They are:
1. Do Nothing
Doing nothing and rely on the existing lime line 1 to provide the mill requirement. This is not
recommended, as GVD 8 development will soon become pass closely by our existing lime line no1,
with a high risk of borehole collapse during blasting activities. The Mill supply of lime would be
disrupted by a borehole collapse, leading to a rapid 100% mill shutdown until lime supply is restored.
2. New borehole for replacement.
This action would be conducted by drilling and casing another borehole to replace the #2 borehole,
and re-connect the new borehole outlet to the existing lime line pipe which goes to Mill area. This
was estimated to cost about USD$ 602,947.2 and involve specialty directional drill equipment. A
detailed cost estimate can be found at Appendix 1 following this package. This action will have as
same failure risk as the previous action of rehabilitating lime line 2 as mention before. Additionally,
the directional drill collar also cannot be fixed at the required angle- which has a high risk of not
hitting the target area of drift in GRS70. Drilling another borehole to replace the existing also has
high risk of having another same intersect problem since PTFI UG group is still on the development
sequence. In discussing this option, it must be noted that there is no guarantee that the borehole
would hit the drift and if that were to happen, we would be forced to re-drill yet again. This option
also does not account for the risk attached to Lime Line #1 by GVD8 development. If GVD8 work
impacts the Lime Line #1, then yet another borehole would be required.
3. Install pipes for borehole replacement.
This action would be conducted by installing pipelines to accommodate lime slurry transport to the
mill area. There are planned to be 2 ea. lines connecting Mahaka and the Mill through the Oreflow
Conveyors and Inspection raise. The approximate pipe length required is 4,600 meters (2,300
meters for each pipeline). These lines will need to be schedule 80, 6 diameter black iron, complete
with flushing ports and pressure gauges. The new lime lines will be routed from the Mahaka plant
site to the Mill area via: Conveyor 463, Conveyor 463A, Conveyor 464, Conveyor 465, inspection
raise #2 near the ore passes, out the bottom of the inspection raise, along Conveyor 467 and
reconnect to exiting lime line at Conveyor 70 at X-cut #5.
This action is estimated to cost about USD $2.72M with minimum installation failure and
maintenance risk, since all the lines from Mahaka to the Mill will not intersect with other PTFI U/G
Development activities. A detailed cost estimate can be found in Appendix 2, while the overview
design can be found at Appendix 3 following this package.

PT Freeport Indonesia Concentrating Division

Considering future impact on the current lime line and to support production activity involving all PTFI
Department needs, applying this action is suitable and achievable.
This is the recommended action

RISKS AND OPPORTUNITIES

There is no substantive risk involved to execute this project. Although it requires a bit more time and effort to
convert the boreholes to pipe lines, it is safe for the future usage without interruption by other development
projects. By converting the Borehole system to a Pipeline system, ground movement caused by natural or
man-made means will not affect the lime slurry transport system. The Mill lime requirement can be met with a
far higher degree of capacity assurance.

RELATIONSHIP TO PRIOR OR FUTURE PROGRAMS

There are a numbers of PTFI expansion projects ongoing at the Underground and Surface mine area.
Projects include development of access tunnels and ore mining. By removing the lime slurry line from
expansion area, it will support an ongoing and future PTFI expansion planning, without intersecting Mill
needs in lime for processing. Additionally, with the GBC and KL ores forecasted to require a far higher lime
delivery to the mill (up to 6 kg/tonne from the current ~1-2 kg/tonne), the new 6 lines will provide sufficient
capacity to meet these needs.

INVENTORY REQUIREMENTS
No additional stock levels will be required to implement the project or support the system going forward. This
project only will affect capital spares of piping. Although priced at standard concentrate pipeline costs
(coated green 6 pipe), there is opportunity to utilize pipe from warehouse stocks which does not meet
concentrate pipeline specifications, but does meet the lime pipeline requirements. This may assist in utilizing
the warehouse stocks of pipe which may otherwise not be used.

PT Freeport Indonesia Concentrating Division

STRATEGIC PLAN SUPPORT
Lime slurry pipelines will hold a position of critical importance to the business function. This project provides
capacity assurance and eliminates lime shortages which may be caused by unavailability of a lime slurry
transport line.

GLOBAL OPERATIONS IMPACT

By relocating and improving the lime line outside the PTFI expansion project area, public safety and
environmental health can be achievable and the lines well maintained.

ECONOMIC RETURN
There is no quantifiable economic return to this project. This project is classified as a Stay in Business
project, as lime slurry line must operate without interruption.

PT Freeport Indonesia Concentrating Division

Appendix 1
PT. REDPATH INDONESIA
FREEPORT INDONESIA PROJECTS
PROPOSAL NUMBER
SUBJECT
DATE

: RB-PTRI/005/2012
: LLB #1 600m 12 1/4 inch diameter
: 8-Aug-12

SUMMARY
1.
SCOPE OF WORK
2.
EQUIPMENT
3.
LABOR COST
4.
DRILLING SERVICES
5.
MATERIAL COST

: 600
: Pilot hole 12 1/4" x 600 m
: 82 R
:
USD
193,970.18
:
USD
403,917.12
:
USD
2,530.24
USD
600,417.53
:

Xrate

6.
7.
8.
9.

OVERALL TOTAL COST

DURATION (SHIFT)
DURATION (DAY)
COST PER METER

1.0199

: 86 SHIFTS
: 42.8 WORKING DAYS
:
USD
1,000.70

I-1. DIRECT LABOR COST BACK UP RAISEBORE

NO.

ACTIVITY

QTY

UNIT

PERF. /
DAY

MANPOWER
QTY

TYPE

MH /
DAY

DURATION
(DAY)

TOTAL
MANHOURS

TARGET COST
(USD)

TOTAL TARGET
COST (USD)

Mobilize & Set up Drill Machine

1.0

LS

0.2

2.0
4.0

Expat
National

11

6.0

132.0
264.0

USD
USD

96.43 USD
14.91 USD

Collaring

5.0

Meter

5.0

2.0
4.0

Expat
National

11

1.0

22.0
44.0

USD
USD

96.43
14.91

USD
USD

2,121.48
656.18

Piloting

595.0

Meter

20.0

2.0
4.0

Expat
National

11

29.8

654.5
1309.0

USD
USD

96.43
14.91

USD
USD

63,114.10
19,521.41

Pull Rods after finishing the work

1.0

LS

6.0

2.0
4.0

Expat
National

11

2.0

44.0
88.0

USD
USD

96.43
14.91

USD
USD

4,242.96
1,312.36

Demob

1.0

LS

0.3

2.0
4.0

Expat
National

11

4.0

88.0
176.0

USD
USD

96.43
14.91

USD
USD

8,485.93
2,624.73

42.8

2821.5

USD

118,745.16

TOTAL

12,728.89
3,937.09

I-3. DRILLING SERVICES

NO.

DESCRIPTION

1.

Rental Setup

2.

Pilot Hole

QTY

UNIT

UNIT COST

LS

USD 15,971.63

USD

15,971.63

CAD
15,660.00

600

USD

USD

387,945.48

633.96

USD

403,917.12

646.58

TOTAL

TOTAL COST

I-2. INDIRECT LABOR COST BACK UP RAISEBORE

NO.

DESCRIPTION

MANPOWER
QTY
TYPE

MH /
DAY

DURATION
(DAY)

TOTAL
MANHOURS

TARGET COST
(USD)

1.
2.

Supervision / Raisebore
J6 Shop Maintenance
Subtotal - Indirect National Labor Cost

1.00
1.00

National
National

11.0
11.0

42.8
42.8

470.3
470.3
940.5

USD
USD

3.
4.
5.

Project Manager
General Superintendent
Superintendent

0.06
0.12
0.25

Expat
Expat
Expat

11.0
11.0
11.0

42.8
42.8
42.8

28.2
56.4
117.6

4.43
6.00

Expat
National

11.0
11.0

42.8
42.8

Subtotal - Indirect Expat Labor Cost

7.
8.

Expat Reimbursable
National Supervision Reimbursable

14.91
14.91

USD
USD
USD

7,012.94
7,012.94
14,025.89

USD
USD
USD

149.67 USD
142.33 USD
132.45 USD

4,222.98
8,031.55
15,571.64

USD

27,826.18

2083.2
2821.5

USD
USD

12.05 USD
1.53 USD

25,092.27
4,316.47

USD

29,408.75

3964.2

USD

USD

3,964.21

USD

75,225.0

202.2

Subtotal - Reimbursable Cost

9.

TOTAL

Corporate Overheads

TOTAL TARGET
COST (USD)

1.00

PT Freeport Indonesia Concentrating Division

PT. REDPATH INDONESIA
FREEPORT INDONESIA PROJECTS
III. MATERIAL COST BACK UP (RAISEBORE)
RODS RACK
ITEM

UNIT

TIMBER 6x6
TIMBER 2x6
NAIL 4"

STOCK NO.

ea
ea
kg

UNIT COST
USD
USD
USD

31.36
7.57
1.91

QTY

PER

16
0
0

TOTAL COST

TOTAL

USD
USD
USD

501.76
-

USD

501.76

ITEM
ITEM

UNIT

STOCK NO.

HYDRAULIC OIL
GEAR OIL
SEALANT
GREASE

DRUM
DRUM
TUBE
TUBE

437061
2025062
1051200
822098

UNIT COST
USD
USD
USD
USD

433.73
460.41
4.39
57.57

QTY

PER

0
0
0
0

Meter
Meter
Meter
Meter

COST / METER

TOTAL

USD
USD
USD
USD

USD

PERSONAL PROTECTIVE EQUIPMENT

MH Dirct
Man
0.0

ITEM
MANHOURS

COST / HR
USD

TOTAL COST

0.33 USD

USD

TOTAL
EQUIPMENT COST
ITEM

Hour/Day

1700 ELPHINSTONE

STOCK NO.

UNIT COST
USD

63.39

QTY
1.0

PER
USD

507.12

TOTAL COST
USD

2,028.48

TOTAL

USD

2,028.48

ESTIMATED RAISEBORE MATERIAL COST

USD

2,530.24

This project will utilize the Raisebore Crew working 2 shifts/day , 11 hours/shift, 6.0 days/week.
Notes:
-

This cost estimation is subject to approval by Redpath - North Bay Office.

PTFI will be responsible to provide all equipment required to complete this project.
PTFI will be responsible to provide all maintenance for this project.
All other work performed and not mentioned in the scope of this proposal will be considered extra work, to be performed at existing rates and performances.
Cost of supervision based on present man power and number of projects. Could be subject to change.
Drilling performance number is possible to fluctuate based on ground condition.

PT Freeport Indonesia Concentrating Division

Appendix 2