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2016 Reclamation Cost Estimate Update — Climax Mine <br />3 Reclamation Costs <br />The estimated costs for the reclamation activities include the Direct Costs associated with each of the <br />sites described above and the Indirect Costs as discussed below, most of which are a percentage of <br />Direct Costs as required by DRMS. <br />3.1 Indirect Costs <br />The Indirect Cost allocations for Insurances, Bonds, and Contractor Profits are fixed DRMS Direct Cost <br />percentages at 2.02%, 1.05%, and 10%, respectively. The cost for a Job Superintendent was calculated <br />using the labor rates for a period of 4% years. The Financial Warranty Fee of $500 was a rate fixed by <br />DRMS. The final two Indirect Cost categories for Engineering, Bidding, Contracts and Management, <br />Administration have been set to 2% and 3%, respectively, of the total of Direct Costs, Overhead, and <br />Profit, to be consistent with the DRMS-approved reclamation cost estimate for the Henderson site. <br />3.2 Salvage Credits <br />As it has been mentioned in Sections 2.23, 2.24 and 2.25, this cost update takes into account a cost <br />credit for the salvage (scrap value) of ferrous demolition materials. It does not take into account salvage <br />and/or sale of significant other closure items such as chemical reagents, fixed and mobile equipment, and <br />other facility systems. In terms of structure demolition, a significant scrap steel credit is highly likely <br />(similar to that received for the Storke demolition projects of the 1990s and the No. 2 Crusher and No. 5 <br />Crusher demolition projects of 2005-7). Freeport McMoRan and its predecessors have historically paid for <br />the demolition of steel structures via the scrap steel credit received from recyclers for the salvage of <br />materials. This was the case for the demolition of significant structures like the Nos. 2 and 5 Crushers in <br />2005-7 and for the demolition of the Tailing Distribution House (TDH) in 2017. As proof of the stated steel <br />credit received by Climax for the TDH demolition, the invoice and check according to Settlement # <br />1021146 dated 9/29/17 received from Rocky Mountain Recycling is attached (scrap value = $0.04/lb = <br />$19.60/CF). Similarly, online resources indicate that August 2018 scrap value for Colorado is on the order <br />of $0.025/lb = $12.25/CF. However, rather than presenting a profit for the stated demolition projects, we <br />have therefore shown a nominal $0.01 /CF for a steel demolition unit rate. <br />November 2016 (revised August 2018) <br />