STORAGE, MANAGEMENT AND MONITORING OF OK TEDI PYRITE CONCENTRATES AT BIGE, LOWER OK TEDI, WESTERN PROVINCE, PAPUA NEW GUINEA:

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1 STORAGE, MANAGEMENT AND MONITORING OF OK TEDI PYRITE CONCENTRATES AT BIGE, LOWER OK TEDI, WESTERN PROVINCE, PAPUA NEW GUINEA: Review Pursuant to Condition 10 of the Conditional Approval by the Minister for Environment and Conservation of Change Notice No. 50/4.2; 24/29.2 Prepared for: Minister for Environment and Conservation Papua New Guinea Prepared by: The Condition 10 Review Team: Chair: Mr. Mark Logsdon (Principal Geochemist, Geochimica, Inc, Aptos, California, USA) Geochemistry: Dr. David Blowes (Sala Groundwater Inc., Waterloo Ontario, Canada) Geotechnical Engineering: Dr. G. Ward Wilson (Professor, University of British Columbia, Vancouver, British Columbia, Canada) Hydrogeology: Dr. Leslie Smith (Professor, University of British Columbia, Vancouver, British Columbia, Canada) Risk Assessment: Mr. Michael Portigal (Principal Consultant, Portigal Consultancy, Calgary, Alberta, Canada) February 2008

2 TABLE OF CONTENTS EXECUTIVE SUMMARY THE CONDITION 10 REVIEW Change Notice No. 50/4.2; 24/29.2 and Condition Terms of Reference and Scope of the Review BACKGROUND Understanding of the Conceptual Design Inclusions and Exclusions from Our Scope of Work Review Process FINAL REVIEW FINDINGS Construction, Disposal and Management of Pyrite Concentrate Constructability of the PCon Cells Seepage Through PCon Cells 11 Loadings to Ok Tedi Due to Seepage of Groundwater Through PCon Cells 11 Saturation of West Bank Stockpile Geomorphic Stability of the PCon Cells Control of Acid-Rock Drainage (ARD) in the PCon Potential for Sulphide Oxidation During Transport Construction and Management of West Bank Stockpile in Support of PCon Disposal Stockpile Constructability and Geotechnical Stability 18 Geotechnical Stability of the PCon Pits, Access Channel and West Bank Stockpile During Construction 18 Long-Term Geotechnical Stability of the West Bank Stockpile 22

3 3.2.2 Seepage Through NAF and PAF Sands Within the West Bank Stockpile Oxygen Diffusion Through the Dredge-Sand Cover Control of Acid-Rock Drainage in the Dredge Sands Overlying PCon Disposal Cells CONCLUSIONS RECOMMENDATIONS REFERENCES 30 Attachment 1 Terms of Reference 31 Attachment 2 Final Report: Failure Modes and Effects Analysis 37

4 EXECUTIVE SUMMARY Ok Tedi Mining Limited (OTML) proposes modification of their mineral-processing and waste management systems to control sedimentation and also the geochemical reactivity of dredge sediment on the Lower Ok Tedi [Change Notice No. 50/4.2; 24/29.2]. OTML proposes isolation of sulphide waste material (called PCon, for pyrite concentrate ) through subaqueous disposal in cells excavated below the floodplain on the western bank of the Ok Tedi at Bige. The disposal cells would be covered with non-acid-forming sand, and the entire structure finished as engineered landforms. The design intent is to minimize acid rock drainage (ARD) compared to that which would exist under current conditions were they extended during the remaining life of the mine. The proposed changes to the system have been approved by the Minister for Environment and Conservation (MEC), subject to a set of 10 conditions. Condition 10, the subject of this report, was addressed through the appointment of a team of experts (Condition 10 Review Team), selected by senior staff of the Department of Environment and Conservation (DEC) and the Department of Mines (DOM). Terms of reference for the Review Team state: The overall objective of this review program is to report to the Minister for Environment and Conservation through the Director of Environment, the review s findings on its evaluation and assessment on whether the pyrite concentrate storage and management and monitoring strategy being adopted in the Change Notice will minimise the ARD issue currently being experienced in the Ok Tedi Fly River system. Our independent review of the Mine Waste and Tailings Project s (MWTP) plan to manage PCon and river sediment at Bige included detailed review and consideration of documents and site data, Project workshops, site inspections, discussions with key scientists and engineers supporting OTML s plans and designs, and our own experience in earth science, engineering, and risk assessment. The Review Team considers that if built, operated, and maintained as we understand the proposed OTML plan, the planned disposal system and its monitoring program will reduce ARD risk below that associated with the current practice in the time frame needed. In the longer time-frame of a few hundred years set out in our terms of reference, we expect the PCon to be stable physically and geochemically. Therefore, the Condition 10 Review Team encourages DEC/DOM and OTML to move forward with the plan to manage PCon by subaqueous disposal in dredged cells on the West Bank at Bige as described in the MWTP Change Notice Supporting Document (dated 8-Sep-06). The Condition 10 Review Team concludes that, with additional specific modifications to its documentation and planning program for control of physical and chemical risks in the West Bank Stockpile (as outlined in Section 3.2 of the main report), the Secretary can advise the Minister for Environment & Conservation that the design, operation and program for long-term security of the disposal cells and their contained PCon in the West Bank stockpile will adequately meet its design intent for hundreds of years after mine closure. The Review Team notes that OTML Geochimica, Inc. page 1 of February 2008

5 and its technical team already are implementing the recommendations, based on interactions during this review. 1.0 THE CONDITION 10 REVIEW 1.1 Change Notice No. 50/4.2; 24/29.2 and Condition 10 Ok Tedi Mining Limited (OTML) proposes modification of their mineral-processing and waste management systems to hold the river to the current aggradation predictions, and also to control the geochemical reactivity of dredge sediment on the Lower Ok Tedi, near Bige, Western Province, Papua New Guinea. OTML s plans are set out formally in Change Notice No. 50/4.2; 24/29.2, proposing subaqueous storage of pyrite concentrate emanating from processed tailings. The OTML strategy, which in the Change Notice is called the Mine Waste and Tailings Project (MWTP), involves isolation of sulphide waste material and burial in disposal cells excavated in the floodplain on the western bank of the Ok Tedi at Bige. The proposed changes to the system have been approved by the Minister for Environment and Conservation (MEC), subject to a set of conditions. The Minister has delegated review of the conditional approval to the Department of Environment and Conservation (DEC). MEC (2006) set ten (10) conditions for approval. Item 10 of DEC s Schedule Variation of Proposal states: 10. The Company shall assist the Department of Environment and Conservation to undertake an evaluation of the pit s design and management regime prior to the commissioning and operation of the pyrite storage pit. Engagement of any independent and qualified expert for this purpose will result from an agreed process by the Company and Secretary, Department of Environment and Conservation. In April, 2007, DEC chose Mark Logsdon to organize an independent, expert review team to assist the Department 1. 1 The Review Team members and their principal assignments are: Chair: Mr. Mark Logsdon (Principal Geochemist, Geochimica, Inc, Aptos, California, USA) Geochemistry: Dr. David Blowes (Sala Groundwater Inc., Waterloo Ontario, Canada) Geotechnical Engineering: Dr. G. Ward Wilson (Professor, University of British Columbia, Vancouver, British Columbia, Canada) Hydrogeology: Dr. Leslie Smith (Professor, University of British Columbia, Vancouver, British Columbia, Canada) Risk Assessment: Mr. Michael Portigal (Principal Consultant, Portigal Consultancy, Calgary, Alberta, Canada) Geochimica, Inc. page 2 of February 2008

6 1.2 Terms of Reference and Scope of the Review The terms of reference for the review are provided verbatim as Attachment 1. The fundamental nature of the review problem, summarized from Section 4 of the Terms of Reference is (emphasis added): The overall objective of this review program is to report to the Minister for Environment and Conservation through the Director of Environment, the review s findings on its evaluation and assessment on whether the pyrite concentrate storage and management and monitoring strategy being adopted in the Change Notice will minimise the ARD issue currently being experienced in the Ok Tedi Fly River system. The Condition 10 Review Team s Terms of Reference are mainly related to one portion of a complex system the West Bank stockpile. That complex system includes the mine, mill, pipeline, dredge, and construction of the dredge sand stockpiles. In addition to the overall objective related to disposal of the PCon, the Review Team has been asked to comment on how geotechnical, hydrological, and geochemical performance of the West Bank stockpile might contribute to the performance of the whole system. The Review Team spent significant effort agreeing on the boundaries of their review, subject to the overall objective that pyrite-concentrate storage will minimize ARD risk, and it is important for readers of this report to understand the consequent limitations of the conclusions within this report. The scope boundaries of each of the sub-objectives that were stated in the Terms of Reference are outlined in Table 1 below Table 1: Sub-objectives from the Terms of Reference and their interpreted scope boundaries Sub-Objective a) Review and comment on the engineering design basis for construction and geotechnical stability of the pits b) Review and comment on the hydrogeologic stability of the proposed site and encapsulation strategy. This review shall include consideration of geomorphic stability of the final landforms and the hydraulic (seepage) performance of the encapsulation plan. c) Review and comment on the geochemical processes and rates, both those associated with the pit design and operations, and also those associated with water quality conditions of the Ok Tedi and Fly River Interpreted Scope This is limited to PCon cells, but would include geotechnical stability of the system as long as the access channel is open. This relates to the West Bank stockpile as a whole (but limited to geomorphic stability and seepage performance) Because sub-objective c) mentions both the PCon cell performance and its impact on the water chemistry of the river, this element relates to geochemical performance of the West Bank stockpile as a whole, as it is logical to consider the Geochimica, Inc. page 3 of February 2008

7 performance of the PCon cells together with the dredge sediments which will encapsulate the PCon cells d) Review and comment on the degree to which the PCon disposal system at Bige can contribute to appropriate management of environmental conditions downstream e) Review and comment on the closure plans, including long-term monitoring as a basis for confirmation of the long-term geotechnical and geochemical stability. Because it says disposal system, this includes the PCon cells and their encapsulation. This relates to the West Bank stockpile as a whole (with respect to geotechnical and geochemical stability) f) Review and comment on technical risks at all stages of the disposal project, including the likely effects on controlling risks of OTML s mitigation strategies and contingency plans. This is silent as to its spatial domain, but limits scope to technical risks (i.e., excludes schedule and budget) On 01 August 2007, the Condition 10 Review Team submitted its Phase I Report, which concluded that there are no fatal flaws in the OTML plan for storage and management of pyrite concentrate. The Review Team reported that if built, operated, and maintained as we understand the proposed OTML plan, the planned disposal system will reduce ARD risk below that associated with the current practice in the time frame needed. The Phase I report stated that we expected our final report to conclude that the PCon would be stable physically and geochemically over the time frame of a few hundred years set out in our terms of reference. This document is the Final Report of the Condition 10 review. The report begins with background information in Section 2. Section 2 includes: (a) Section 2.1, documenting our understanding of the design for disposal of PCon and construction and maintenance of the West Bank Stockpile, and (b) Section 2.2, explaining our interpretation of the scope of work, relating to six subcomponents of the review associated with OTML s conceptual design. Taken together, the first two sections of Background describe the rationale for our riskbased review. The final background topic, Section 2.3, is a brief description of the review process executed by the Condition 10 Review Team. After presenting the background material, the main body of the report, Section 3, is divided into three portions: (a) Section 3.1 presents the Condition 10 Review Team s analysis of the overall objective of safe disposal of the PCon. Geochimica, Inc. page 4 of February 2008

8 (b) Section 3.2 presents the Team s evaluation of the six sub-objectives as they apply to the West Bank Stockpile that overlies the PCon disposal cells. (c) Section 3.3 summarizes the Team s overall evaluation of the environmental and safety risks of the PCon disposal and stockpile system in the form of a failuremodes-and-effects analysis. The formal documentation for the information summarized there is provided as Attachment B to the Final report. Section 4 summarizes the conclusions of the Condition 10 review, and Section 5 outlines four areas of recommended follow-up documentation for OTML that can be completed during final design and commissioning of the MWTP. 2.0 BACKGROUND 2.1 Understanding of the Conceptual Design The following material summarizes the OTML proposal, based on engineering plans presented to and reviewed by our team. OTML will separate acid-generating pyrite from the tailing stream at the mill site. The sulphide-rich concentrate, called PCon 2, will be transported in a new pipeline system from the mill to disposal sites that OTML will construct on the west bank of Ok Tedi near Bige. A sufficient mass of limestone will be discharged with the waste rock at the mine site to ensure that the dredge sands at Bige will be non-acid forming. At the disposal sites, OTML will implement engineered designs addressing three components of disposal as follows: 1. Disposal and management of the Pyrite Concentrate (PCon) by subaqueous disposal in cells excavated below the water table. OTML will use the existing dredge system to excavate disposal cells (currently, four are planned over the remaining life of the mine, including a final site at the edge of the dredge-access channel when all dredging is completed) into which the PCon will be disposed. In each cell, the PCon will have a water cover during active deposition and will remain fully saturated after each cell is completed; 2. Development of engineered embankments around and above the PCon disposal cells using Ok Tedi dredge sands. The entire stockpile is designed to maintain a high degree of saturation in the potentially acid-forming materials deeper in the stockpile, while also consuming oxygen needed to initiate and perpetuate sulphide oxidation and formation of acid-rock drainage. Initially, some of the dredge sands, placed prior to the commissioning of the pyrite-separation circuit, will be potentially acid forming (PAF), but once the pyrite removal process is implemented, OTML expect that the dredge sands which will be used for future construction in the embankments rapidly will become non-acid-forming (NAF) as a result of changes in the OTML mine and wastemanagement plans; 2 The sulphide-rich flotation concentrates are variously called SCon ( sulphide concentrate ) or PCon ( pyrite concentrate ). In keeping with current OTML nomenclature, to which the DEC review will necessarily refer, this document will call the concentrate PCon to emphasize that pyrite (FeS 2 ) is the dominant component of the material that needs to be addressed by the OTML plan. Geochimica, Inc. page 5 of February 2008

9 3. Covering any PAF sands and the deeper PCon disposal cells with an engineered layer of non-acid-forming (NAF) sands to protect the deeper parts of the system from rapid oxidation. The diffusion-control layer of NAF sand will be at least 4 m thick over the entire surface area. The thickness of the NAF sand will be much greater than 4 m above the PCon cells. The entire West Bank stockpile system (the maximum height of which is expected to be 22 m above the Ok Tedi floodplain, that is to an elevation of RL 42 m) will be completed as an engineered landform that will be designed to (a) remain stable against erosion for several hundred years, (b) maintain the water table above the top of the PCon cells, so the PCon is always saturated by water and the oxidation of pyrite does not occur to any significant degree, and (c) minimise ARD compared to that which would exist under current conditions were they extended during the remaining life of mining. Both OTML and the government expect the disposal system to be effective at controlling ARD for hundreds of years. The Review Team understands the phrase hundreds of years to mean more than 100 years but less than 500 years; to have a specific basis for considering risk, we consider the design life to be up to 200 years with respect to credible risks of failure. Where appropriate to the context of specific issues, we comment in general terms in the Final report about longer time frames of interest, also. 2.2 Inclusions and Exclusions from Our Scope of Work The geographic scope of this review includes the West Bank tailings storage scheme construction, operation and contingency plans. Aspects of the over-all system outside of this are only considered if they have a direct bearing on the construction or operation of the disposal plan for PCon. For example, if the pyrite separation at the mill were less efficient than planned, removal of 90% of the pyrite would result in larger than anticipated volumes of Pyrite Concentrate (PCon), which in turn could lead to potentially insufficient volumes of available storage to ensure that the PCon remains under water. The risk scope of the review is limited to technical and safety risks. Cost and schedule risks have been excluded, except for schedule risks that impact the potential delivery of PCon to the disposal cell(s). Specific environmental risks in the lower Ok Tedi and Fly drainages below Bige are excluded as well. These risks are considered implicitly within the technical risks by assessing the amount of potential ARD and metals release as compared with the design criteria. By inference, higher than specified releases of ARD materials will have higher than anticipated environmental impacts. However, specifying the risks in terms of potential human-health impacts is both outside of the Review Team s Terms of Reference, and outside of its expertise. The discipline scope of the review is limited to geotechnical, geochemical, hydrological, and constructability issues. The temporal scope of the review is limited to within 200 years from the present. The contextual scope of the review includes the written design, implementation, operation, and contingency plans. As a result, if a contingency action is mentioned in a formal plan, the Geochimica, Inc. page 6 of February 2008

10 Review Team s risk assessment assumes that if the risk occurred, OTML would take the action mentioned in the plan. Therefore our pre-mitigation assessment is post-contingency action for such matters. Where there are no contingency actions identified, the premitigation review assumes that no contingency action is planned currently. 2.3 Review Process The review process that led to the formulation of this report includes the following principle steps: Definition of the Project Terms of Reference; Approval by DEC, DOM and OTML of the qualifications of the Review Team; Critical review and analysis of documents provided by OTML to both the Condition 10 Review Team and DEC/DOM. These documents included the Change Notice and all its supporting documents, and also substantial additional documentation completed by OTML contractors in support of the proposed disposal option; A workshop in Vancouver, British Columbia, Canada on geotechnical testing and analysis for the Project (06 June, 2007). This workshop was hosted by senior engineers Mr. Len Murray and Mr. Harvey McLeod of Klohn Crippen Berger. The Condition 10 Review Team was represented in the workshop by Mr. Logsdon and Drs. Smith and Wilson. Mr. Portigal participated by web conference; A workshop in Sydney, Australia on geomorphic and geochemical analysis of the Project (June 30, 2007). This workshop was hosted by Drs. Stuart Miller and John Jeffrey of Environmental Geochemistry International Pty, Ltd. and Dr. Geoffrey Pickup, the long-time senior geomorphologist supporting the OTML program with respect to riverine conditions and sediment transport; Mr. J. Veness (OTML) also participated. The entire Condition 10 Review Team participated in this workshop; A three-day site review at Tabubil and along the river as far as Bige (01-03 July, 2007). At Tabubil, the Review Team evaluated additional documentation, inspected OTML facilities, and discussed technical questions with OTML staff and amongst ourselves. The field review included aerial and ground reconnaissance along the Ok Tedi, including aerial and ground inspections of the East Bank and West Bank disposal areas, and discussions with the dredging contractor, Dredeco Ltd. The entire Condition 10 Review Team participated in the site review at Tabubil, and all except Mr. Portigal flew to Bige and back. Logistical and technical support during the site review was provided by OTML staff under the direction of Mr. Jim Veness. At the conclusion of the review, the Condition 10 Review Team provided its initial comments to the senior management, engineering and environmental staff of OTML (Messrs. A. Breen and K. Faulkner; Mr. C. Williams; and Mr. J. Veness); A workshop in Cairns, Australia on risk assessment within the scope for our Condition 10 review (04 July, 2007). This workshop was led by Mr. Michael Portigal, the lead risk assessor for the Condition 10 Review Team. The workshop was limited to only members of the Condition 10 Review Team, and all team members participated; Geochimica, Inc. page 7 of February 2008

11 Additional document review and internal Review Team discussions following our return to North America. Based on the site and document reviews, the Review Team prepared and submitted its Phase I (Fatal Flaw) Report. Technical exchanges with OTML Contractors on specific issues raised in the Phase I Report. The Review Team notes that OTML and their contractors provided timely responses to the six open issues identified in the Phase I report. The clarifications and elaborations of the OTML contractors and detailed review of those documents completed the basis for our Final Report. The Review Team wishes to acknowledge the high degree of cooperation provided by OTML and its contractors, the transparent nature of our discussions with the OTML team, and the open access to any document or data set that was requested. 3.0 FINAL REVIEW FINDINGS The Review Team s findings are divided into three sections. Section 3.1 documents our findings with respect to the principal objective of the study, the disposal of PCon. Section 3.2 addresses our findings with respect to the overlying West Bank stockpile. As explained in Section 3.1, the entire project involves both the PCon disposal pits and the stockpile, which are designed to work together to provide long-term stability and prevent adverse water-quality impacts to Ok Tedi and downstream water bodies. For both components of the system, we address constructability, hydrology, geomorphology, and geochemistry. The Condition 10 review Team analysed the entire PCon disposal system through the Failure Modes and Effects Analysis (FMEA). FMEA is a formal procedure, prepared by knowledgeable experts, that systematically describes a system and how it is to be managed in terms of problems that can arise ( failure modes ) and how those may affect performance criteria ( effects ). The purpose of an FMEA is to assess vulnerabilities in a design-basis system and then to establish ways in which predictable problems can be avoided or their effects mitigated. The process focuses on evaluating risks of first the unmitigated and then the mitigated systems, including the impacts of the mitigated system on residual risk. The Condition 10 Review Team used the FMEA process to establish an orderly manner of identifying and prioritizing issues with the MWTP components that we studied and then tracking how OTML s plans for addressing such problems would limit environmental and human risks. The process used by the Review Team included six major steps: Define the probability, severity, and confidence criteria Agree the risk tolerance levels related to the risk matrix Identify fault modes and trigger events for each fault mode Assess the probability, likelihood, and confidence of each fault mode trigger pair For red, orange, and key yellow risks (i.e., those that range from critical to moderate risk), propose mitigation actions that would lower either the probability of occurrence and/or the severity of the impact for that event Geochimica, Inc. page 8 of February 2008

12 Re-assess the post-mitigation risk The order in which the steps are taken - from generalized, pre-assumption decisions about how to classify risk to specific assessments of risk in unmitigated (i.e., as proposed and then mitigated - after revised plans have been proposed conditions) conditions is critical to demonstrating that an objective analysis has been performed, rather than convenient answers being fit to pre-determined outcomes. The entire FMEA is described in greater detail in Appendix B to this report. Based on the FMEA, the Review Team has identified a series of specific findings that rise to levels of importance sufficient for presentation in this report. In Section 3 of this report, the Condition 10 Review Team separately considers findings specifically addressing the PCon disposal from those addressing scientific and engineering aspects of the West Bank Stockpile that overlie and protect the PCon disposal pits themselves. Specific findings in this report were drafted by the specialists of the team, as identified in Footnote 1 above, however, the final text is a consensus document reviewed and approved by the entire Review Team. There are no dissenting technical opinions to this Final Report. 3.1 Construction, Disposal and Management of Pyrite Concentrate Constructability of the PCon Cells The Review Team considers that the cells for disposal of PCon can be constructed using the dredge system. The early success in constructing the dredge channel through the floodplain supports this conclusion. OTML has contingency plans for alternative placement approaches, should segregation of PCon during disposal lead to higher slope angles than are currently expected. Because the construction is progressing on or ahead of schedule, OTML and their construction team should have time for additional analysis, testing and early field trials to finalize their construction and deposition plans. It is important to note the Review Team believes that in the event of a geotechnical instability in the overlying West Bank Stockpile (Section 3.3 below), the PCon cells constructed below the water table, would continue to be adequately protected from weathering and/or the release of PCon material. Issue: There is a potential that the PCon will be subject to segregation as it flows from the pipeline into the disposal cells, forming much higher slope angles during subaqueous deposition than the current plan anticipates. The mitigation for this has been documented with the proposed use of multiple discharge points, including barges as well as floating and peripheral discharge lines, in order to achieve acceptable depositional slopes and adequate water cover. OTML Approach: OTML s engineering plan proposes discharge of PCon to Pit 1 between Relative Elevations (RL) 10 and 24 m. It is assumed that the PCon will form an in situ density greater than 2.0 tonnes/m 3 (based on dry unit weight) with depositional slope angles Geochimica, Inc. page 9 of February 2008

13 of 4%. Two depositional options have been evaluated to optimize placement and minimize risk of segregation. Option 1 maximizes deposition from the perimeter of the dredge pit, while Option 2 which is the final OTML selection - maximizes the use of floating pipeline deposition. Side-slopes of 2H to 1V will be excavated to form the walls of the Pits and a 50 m set back was selected to provide a conservative easement between the excavation and the stockpile slopes. A minimum 1m water cover over the PCon will be maintained at RL25. OTML notes that the dredged cells are oversized for the anticipated disposal volumes, allowing for some loss of storage volume. Condition 10 Review Team Finding: Storage volume requirements of the PCon in the pits will depend on in situ density obtained for the PCon following settling and consolidation. No systematic test data data are currently available with respect to these physical properties. However, it is understood that settling and consolidation testing will be carried out at the initiation of the commissioning program to confirm and update the storage volume requirements. The storage capacity of Pit 1 has been calculated on the basis of the PCon forming a 4% slope radially outward from the discharge point. Experience with similar disposal methods for in-pit backfill and/or sub-aqueous disposal has shown that the tailings tend to segregate, producing slopes typically in the range of 10% in the sand near the discharge point. Flatter slopes eventually develop, but only in the region of the slimes. Performance of the system depends on the solids content, the fines content, rheology, apparent viscosity and shear induced thinning. OTML is currently evaluating various methods of disposal including multiple point discharge point and floating pipeline systems, and further testing by OTML is ongoing to properly document the final method that will be selected for the placement of the PCon. Segregation and slope angles may become a problem in achieving adequate storage volume, but the Review Team considers that with additional analysis and testing, OTML can successfully place the PCon below the water table. Recent experience with excavation of the dredge access channel and further slope stability analysis show it may not be possible to maintain 2H:1V side-slopes in the walls excavated for the pits, and as low as 4:1 slopes may be required. While this will not seriously affect storage capacity, maintaining stable walls along the pit will be critical for access and maintenance of the piping and discharge points along the edges of the pits. If the initial operating experience indicates less efficient pyrite recovery in the mill than is currently envisioned, it may be necessary to develop an incremental expansion in PCon storage volume. OTML is clear that PCon will not be stored above the level at which groundwater would naturally saturate it, and the Review Team concurs in this approach. The Review Team considers that, while the cells certainly can be constructed, further investigation, analysis and field trails may be required to develop optimal deposition techniques and systems for the PCon. We consider that such investigations can be accomplished during the final design and commissioning stages of the planned MWTP, and we are confident this will happen because we have reviewed additional test results during the formulation of the Final Report. Geochimica, Inc. page 10 of February 2008

14 3.1.2 Seepage Through PCon Cells As described in detail in the two items below, the Review Team considers that the design of the PCon cells is appropriate to limit risk of seepage that would transport acid-rock drainage and dissolved metals at levels that would adversely affect ground and surface waters. Loadings to Ok Tedi Due to Seepage of Groundwater Through PCon Cells Issue: Following capping and closure of the West Bank stockpile, seepage pathways will exist that have the potential to transport copper and other metals dissolved in groundwater from the PCon disposal cells to the adjacent surface waters, including direct discharge to the Ok Tedi. Estimates of the copper load to the Ok Tedi for this pathway must be developed to support the assumption that the copper loading will only be a small increment to the existing and expected metal concentrations in the Ok Tedi. OTML Approach: The copper load to the Ok Tedi due to leaching of metals from the PCon cells will principally depend upon: (1) geochemical conditions within the PCon cells that control dissolved and total copper concentrations in the pore water of the PCon, and (2) the volumetric flow of groundwater passing through the PCon cells and moving toward surface water discharge sites located adjacent to the West Bank Stockpile, or discharging directly into the Ok Tedi. The groundwater flow rates will depend on the hydraulic conductivity of the PCon and the native sediments lying beneath the floodplain, the topographic relief on the West Bank stockpile, the rainfall infiltration rate to the stockpile, and the proportion of that infiltration which enters the PCon cells. OTML, through its consultant Klohn Crippen Berger Limited (KCBL), has conducted a series of seepage analyses to estimate groundwater flow rates within and beneath the West Bank stockpile for the conditions anticipated to exist following capping and closure of the stockpile. The estimated seepage volumes passing through the PCon dredge pits are provided in Table 2 (for an average precipitation year). Table 2 PCon Dredge Pit Seepage Volume (m 3 /yr) Pit 1 285,000 Pit 2 18,500 Pit 3 * 20,000 Pit 4 295,000 * Estimate derived by analogy to Pit 2 These estimates were derived from a set of two-dimensional, vertical section models, with the seepage flux extrapolated to the three-dimensional geometry of the PCon cells and overlying dredge sands (OTML, September 2007). The predictions are based on hydrologic Geochimica, Inc. page 11 of February 2008

15 properties and average recharge rates derived by calibration of the groundwater model for the existing East Bank stockpile. The different estimates of seepage from Cell 1 and Cell 4, relative to Cells 2 and 3, occurs because both Cells 1 and 4 will penetrate floodplain alluvial gravel materials that extend to the Ok Tedi. OTML has adopted the conservative assumptions that these alluvial sands and gravels form a continuous layer between the cells and the river, and that this permeable unit occurs across the full lateral extent of the PCon cells. A sensitivity study indicated that the seepage volume is not dependent to a significant degree on the water level used to represent the average river stage in the Ok Tedi. Pits 2 and 3 will be constructed within the less permeable Awin Formation, leading to seepage volumes an order of magnitude lower than the estimates for Cells 1 and 4. Seepage from PCon Cells 2 and 3 is likely to discharge in areas to the west of the stockpile, and then flow as surface water to the Ok Tedi. Estimates of metal concentrations in the pore water of the saturated PCon cells have been provided by Geo-Environmental Management (2006), indicating copper concentrations of 30μg/l. The long-term loading to the Ok Tedi from copper originating within the PCon cells, assuming the PCon cells remain fully saturated after closure, ranges from 0.01 to 0.04 kg Cu/day (see Change Notice Supporting Document, page 48). This load is insignificant in comparison to the current daily load of dissolved copper passing Bige in the Ok Tedi. Condition 10 Review Team Finding: The analysis completed by OTML and its contractors supports the assertion that copper loading to the Ok Tedi that originates from seepage through perpetually-saturated PCon cells will contribute a very minor incremental load to the Ok Tedi. The Review Team expects that there would be no detectable increase in copper concentration within the Ok Tedi due to loading from this pathway. For this conclusion to hold, it is essential no PAF sand be placed above the PCon cells which, if it were to oxidize, would likely eventually lead to higher concentrations of metals being released from the PCon. As explained in the Supporting Document for the MWTP Change Notice, once PCon is generated, within a few months only NAF sand will be delivered by the river system to the dredge slot. While the river system is adjusting to the new conditions, OTML will place dredge sands only on the East Bank. Therefore the plan, which will be monitored, is highly reliable at ensuring that PAF sand will not be present above the PCon cells on the West Bank disposal system. The groundwater model used by KCBL (SEEP/W) is an accepted code, widely used in geotechnical practice. The model was applied in a suitable manner although ideally, the twodimensional sections would have been oriented parallel to the anticipated direction of groundwater flow, rather than along the Cartesian coordinate system. The adoption of parameter values derived from calibration of the East Bank stockpile model is a reasonable approach, given the West Bank stockpile is still under construction. At the request of the Condition 10 Review Team, KCBL carried out a sensitivity study to examine the dependence of the predicted copper loads on the value of hydraulic conductivity assigned to the PCon placed in the disposal cells. [The mass loading estimate assumes dissolved copper concentrations developed by OTML s geochemical advisors, Geochimica, Inc. page 12 of February 2008

16 Environmental Geochemistry International, which are supported by empirical test results. The KCBL calculations then really test only the effects of water flow.] At present, there is test work ongoing to document the hydraulic conductivity of the PCon that will be produced at the mill and then deposited in the disposal cells. In the opinion of the Review Team, seepage volumes listed in Table 1 reflect a conservative estimate of the hydraulic conductivity of the PCon and therefore indicate a higher loading than is likely to occur following closure. The loading estimates provided by OTML are based on a simple conceptualization that neglects both details of the flow path to the Ok Tedi and the time it would take for dissolved copper and other metals to migrate from the PCon cells to the Ok Tedi. It is the opinion of the Review Team that this basic set of calculations is sufficient to address the issue at hand, especially in light of the small incremental copper load that is anticipated. The Review Team anticipates solute travel times to the Ok Tedi through the floodplain sands and gravels will be many decades, if not centuries. Should acidity generated in any partially-saturated PAF sands that overlie the floodplain sand and gravel unit contribute to a reduction in the ph of the groundwater in those sands and gravels, the travel time of dissolved copper to the river would likely be reduced, but the estimated load released from the PCon cells would not increase. As noted later in Section 3.2.3, the Review Team sees merit in extending the analysis, for planning final closure, to quantitatively evaluate solute transport through the West Bank stockpiles. Saturation of West Bank Stockpile Issue: The success of the Mine Waste and Tailings Project is critically dependent upon maintaining saturated conditions in the PCon cells for all climate scenarios that can be anticipated to occur on the time scale of a few hundred years. If the water table in the West Bank stockpile were to decline to the extent that the upper region of the PCon cells came in contact with oxygen, even if only for a few months, then the PCon cells are likely to be a significant source of acidity, dissolved copper, and other metals. Loadings of dissolved copper to the Ok Tedi, once that pore water reached the river, could be several orders of magnitude higher than in the design case, at least temporarily. OTML Approach: KCBL has undertaken both two-dimensional calculations and more recently, three-dimensional simulations, to estimate the position of the water table in the West Bank stockpile, and the percentage of the stockpile that remains under saturated conditions, for different climatic conditions. These model-based investigations follow the same approach used by OTML to assess the seepage pathways through the PCon cells. A wide range of rainfall conditions has been examined including the average rainfall condition, a 1 in 50 year dry condition, and an extreme circumstance of no rainfall for a one year period. The latter simulation effectively examines how far the water table will fall if the stockpile was to simply drain for a period of one year. The results indicate that in exceptionally dry years, some regions of the stockpile that contain PAF sands can be expected to become partially saturated, however, in none of the cases examined did the Geochimica, Inc. page 13 of February 2008

17 water table decline to the level of the PCon cells. In fact, the simulations indicate that in the driest condition examined, there would be at least a 6 m saturated zone of NAF sands above the PCon, which is sufficient to largely prevent diffusion of oxygen into the PCon cells. Condition 10 Review Team Findings: The scope of the Review Team s assessment involves an examination of the confidence that can be placed in the assumption that the PCon cells will remain fully saturated over a 200 year time horizon. The location of the PCon cells beneath the floodplain adjacent to the Ok Tedi, and the model simulations carried out to examine the potential magnitude of water table fluctuations in the overlying stockpile, suggest the design is robust and it is reasonable to conclude the PCon cells will remain in a saturated state. The planned locations of the PCon cells in the topographically lowest areas of the West Bank floodplain, and the presence of standing water in much of that area, indicates the water table is close to ground surface for much of the year (ground surface elevations ranging from m). The PCon will not be deposited above an elevation of 24 m RL. Placement of dredge sands above the PCon cells will cause the water table to rise permanently in these areas. Model calculations suggest that for average rainfall conditions, the saturated zone above PCon Cell 3 will be at least 10 m in vertical extent, and for PCon Cell 1, 13 m. The modeling approach that has been applied, involving three-dimensional simulations of the transient fluctuations in the water table, based on the code FEFLOW, is consistent with best practice (OTML, June 2007). FEFLOW is a widely used code in hydrogeologic studies. A comprehensive suite of sensitivity trials have been completed to examine the potential magnitude of water table fluctuations in the stockpile due to variations in annual rainfall. Additional simulations were completed to understand how uncertainties in the water storage properties of the dredge sands influence the predictions of water table fluctuations, and how the water table position may depend upon the water level in the Ok Tedi. It should be noted that the three-dimensional simulations completed to date placed the top of the PCon cells at an elevation of 22 m RL, rather than the current design of 24 m RL. The Review Team considers the extreme case of no rainfall for a one year period as the best test of the degree to which the proposed configuration of the West Bank stockpile presents a robust design in the face of uncertainty in future rainfall conditions. While useful for gaining a sense of the magnitude of the transient fluctuations in the water table, the simulations for a 50 year return period do not capture the possible impacts of dry years for a 200 year timeframe of reference as does the more extreme case tested. For the extreme dry case, at the end of the dry period, the calculations suggest that the minimum saturated thickness of NAF sand above the PCon Cells 2 and 3 would be 6 m and for PCon Cell 1, the estimate is somewhat greater than 10 m. (given the PCon cells terminate at 22 m RL in these simulations). In our view, OTML has presented a sound case to support the claim that there will be a sufficient cover of saturated NAF sands above the dredge cells to ensure the pyrite concentrate will not acidify. Geochimica, Inc. page 14 of February 2008

18 3.1.3 Geomorphic Stability of the PCon Cells The Review Team finds that OTML and its contractors have appropriately evaluated the geomorphic stability of the PCon Cells and the entire West Bank stockpile over the design life of approximately 200 years. The OTML evaluation demonstrates that it is very unlikely that any significant erosional or other geomorphic impacts to the West Bank Stockpile would occur in time frames on the order of 200 years. Certainly there is only a very small likelihood that PCon would be disrupted. In fact, the available analysis indicates that geomorphic stability for the PCon disposal cells appears assured for at least 1,000 years and probably much longer. Issue: As described in Section 2.1 above, OTML proposes permanent disposal of PCon in dredged pits, protected by an overlying engineered superstructure. To function as designed, the physical structures must be stable against erosion or invasion by the Ok Tedi for hundreds of years. OTML Approach: OTML has a long-term technical program that addresses surface-water hydrology, sediment transport, and geomorphology from the mine site past Bige to the Fly River system. The program, executed by an international expert in fluvial geomorphology, Dr. Geoffrey Pickup, uses the traditional methods of field observation and description, supplemented by modern tools of remote sensing and hydraulic and sediment-transport modeling. There has been a specific examination of the geomorphology of the Bige area that includes consideration of flood conditions and overland flow velocities, river migration and its erosional consequences, and extraordinary changes in river mechanics capable of causing channel avulsion. Condition 10 Review Team Findings: The Review Team finds that the scope of geomorphic analysis is appropriate for consideration of stability of the West Bank Stockpile and the underlying PCon disposal cells during the design-basis period of 200 years. The mechanisms evaluated over the range of physically plausible issues, and the methods and procedures used by OTML to evaluate consequences are standard and sufficient for the purposes. The work has been very well and clearly documented. The hydraulic and sediment-transport data are adequate to show that while overbank flows are expected, velocities at the stockpile interface would be low, and the stockpile can easily be protected against incidental erosion from flowing water for return periods of 200 years. We concur in the conclusion that it is very unlikely that any significant erosional or other geomorphic impacts to the West Bank Stockpile would occur in time frames on the order of 200 years. In fact, the available analysis shows that geomorphic stability for the PCon disposal cells appears assured for at least 1,000 years and probably much longer Control of Acid-Rock Drainage (ARD) in the PCon As described below, concentration of the pyrite and deposition of the PCon in dedicated cells which would remain submerged and be covered by the NAF sands of the West Bank Stockpile is equivalent to the international best practice to control sulphide oxidation and mitigate risks to downstream water quality. To be effective in the very long term, it is important that the landform remain functionally stable and that the system be maintained adequately to ensure that this is so. Geochimica, Inc. page 15 of February 2008

19 Issue: OTML recognizes that the pyrite in the tailing, especially after mining progresses into the higher-sulphide Taranaki skarn zone, if disposed in the vadose zone would oxidize, releasing sulphuric acid and dissolved metals that could adversely affect water quality in the Ok Tedi and Fly River. The oxidation of pyrite and other sulfide minerals contained in the dredge sands is one of the principal concerns with the deposition of dredge sands in the elevated stockpiles. The oxidation of sulfide minerals is driven by exposure of these minerals to atmospheric oxygen through the reaction: FeS 2 (aq) + 7/2 O 2(aq) + H 2 O (l) Fe 2+ (aq) + 2SO 4 2-(aq) + 2H + (aq) (1) This reaction releases dissolved metals, sulfate and acidity to the water flowing through the dredge sediments. The ferrous iron (Fe(II)) released by sulfide oxidation can be further oxidized by atmospheric oxygen to ferric iron Fe(III). Fe 2+ (aq)+ ¼ O 2(aq) + H + (aq) Fe 3+ (aq) + ½ H 2 O (l) (2) Fe(III) may precipitate as a ferric oxyhydroxide mineral, which releases additional H +, Fe 3+ (aq) + 3H 2 O (l) Fe(OH) 3(s) + 3H + (aq) (3) under acidic conditions, dissolved Fe(III) may persist and may oxidize additional pyrite through the reaction: FeS 2(s) + 14Fe 3+ (aq) + 8H 2 O (l) 15Fe 2+ (aq) + 2SO 4 2-(aq) + 16H + (aq) (4) As a consequence, there are two potential oxidants of sulfide minerals, atmospheric oxygen and dissolved Fe(III). The transport of atmospheric oxygen in fine grained materials, such as the dredge sediments is controlled by diffusion. Diffusion of oxygen is much more rapid in dry materials than in saturated materials. OTML Approach: OTML will remove pyrite from its tailings at the mill, and transport the pyrite-rich concentrate (PCon) in a new pipeline to the West Bank of Ok Tedi at Bige. The PCon cells at Bige would be excavated using the existing dredge and would remain saturated. The subaqueous deposition of high sulfide tailings and the maintenance of a saturated cover over these wastes minimize the exposure of sulfide minerals to atmospheric oxygen. Condition 10 Review Team Findings: Isolation of mine wastes below a water cover has been rigorously demonstrated to lessen the effects of sulfide mineral oxidation in natural lakes (Pedersen, 1993) and in surface repositories (Davé and Vivyurka, 1994). The effectiveness of the water cover increases with increasing water cover depth, although the incremental effect decreases nonlinearly with additional depth. OTML proposes to place non-acid forming dredge sand over the completed PCon cells, which will increase the integrity of this disposal system. Overall, the concentration of the pyrite and deposition of the PCon in dedicated cells which would remain submerged and be covered by the NAF sands of the West Bank Stockpile is Geochimica, Inc. page 16 of February 2008