2010-05-07_REVISION - M1977493 (9)

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Permit Amendment (AM-06) - Climax Mine • Section 1 - Introduction 1.0 Introduction & Background The Climax Mine (Climax) is an active molybdenum mining and milling operation wholly owned and operated by the Climax Molybdenum Company (CIVIC). CIVIC is a subsidiary of Freeport-McMoRan Copper and Gold, Inc. Climax is located within a private land block of approximately 14,300 acres straddling the Continental Divide at Fremont Pass. The Climax Mine facilities are located near the summit of Fremont Pass (elevation 11,318 feet) where Colorado State Highway 91 crosses the Continental Divide. The mine is located approximately 12 miles south of 1-70 at Copper Mountain, Colorado and 13 miles north of Leadville, Colorado. The land ownership lies within Lake, Summit, Eagle and Park Counties. Climax is one of the world's largest primary producers of molybdenum. Operations at the Climax Mine began in 1917 and the existing permit, Mining and Reclamation Permit M- 1977-493 as amended, was initially approved by the Colorado Mined Land Reclamation Board (Board) in 1977 after passage of the Colorado Mined Land Reclamation Act (CMLRA). The existing permit remains in effect for the life of the mine as set forth in CMLRA §§34-32-103(6), 34-32-109 and 34-32-116(7)(q). CIVIC seeks an Amendment to the Climax Mine Reclamation Permit No. M-1977-493 (AM-06). Climax remains an active operation under the Board's Mineral Rules and Regulations with ongoing reclamation and composting operations, water treatment and compliance management, and general property management activities. The previous amendment, AM-05, clarified and confirmed the active operational status of the Climax Mine under evolving global markets for molybdenum. In addition to ongoing site reclamation and management activities that are consistent with Climax's mine plan, CIVIC has been planning to resume mineral extraction at the Climax Mine in response to demand for molybdenum concentrate by its chemical application customers. In 2006, CIVIC began conducting a feasibility study to evaluate the existing facilities and identify improvements necessary to enhance the current and future • viability of the Climax Mine under current economic conditions. Design and construction activities commenced in 2008 and several Technical Revisions (TR-14 and TR-15), submitted and approved in 2008, allowed for the initiation of a number of facility construction projects associated with the Climax restart project (then identified as 'Climax 2010'). In November 2008, CIVIC temporarily slowed construction activities associated with the restart of mineral extraction at the Climax Mine. This requested permit amendment (AM-06) is one component of activities that are underway to resume molybdenum extraction and production at the Climax Mine. The Climax molybdenum deposit is one of the largest known deposits of molybdenum in the world, and the current proven and probable reserves are estimated at approximately 209 million tons. The recommencement of mineral extraction at the Climax Mine is consistent with the objectives of the CMLRA, which was enacted, in part, to foster and encourage development of an economically sound and stable mining industry and to encourage the orderly development of the state's natural resources. Molybdenum is a metal used in numerous applications including metallurgical, lubricant, and chemical applications. Molybdenum is used principally as an alloying agent in steel, cast iron, and superalloys to enhance hardness, strength, toughness, and wear and corrosion resistance. The Climax deposit represents a significant resource to supply this important mineral resource in response to worldwide demand for decades to come. Resumption of molybdenum extraction and production at the Climax Mine will also promote local economic development through direct and secondary employment, acquisition of supplies, use of local contractors, and generation of tax revenues. CIVIC is an integral part of the local economy with operations at the Henderson and Climax Mines. However, the resumption of mineral extraction and production is not expected to significantly increase the demands on services provided by Summit, Eagle, or Park Counties. In terms of land use, Climax functions within existing zoning and county land use designations and is self-sufficient with respect to transport, infrastructure, water and wastewater facilities, operating private facilities within the site boundaries. During molybdenum extraction and production, the • total number of workers anticipated to be employed is approximately 350. Climax also supports local municipalities through numerous community outreach programs as well as the sustainable use of Introduction 1-1 May 2010