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4. Public Environmental Report Process

5. Test Pit – Southern Expansion

6. PER Lodgement Announcement

7. MRM Community Benefits Trust (pdf)

1. General Questions

What is proposed?

Xstrata Zinc has announced its intention to convert the underground zinc-lead mine at McArthur River to an open cut operation to enable the mine to continue production. The conversion to an open pit mine will extend the mine's life by 25 years and entails an investment of AUD66 million. The McArthur River ore body remains one of the largest deposits of zinc and lead in the world.

The conversion will mean that a surface pit covering 83 hectares will be constructed to access the ore, instead of accessing the orebody from MRM's extensive network of underground tunnels and rooms.

The development of open pit mining within the existing mine lease will necessitate the rechannelling of a 5.5 kilometre section of the McArthur River and about 2.5 kilometres of Barney and Surprise Creek around the open pit. No additional infrastructure will be constructed at the site. The rechannelling will be undertaken as a detailed environmental project over a two year period to encourage revegetation, minimise the loss of biodiversity, and avoid any impact on downstream fishing activities. See the Environment section for further information on the environmental impact of the proposed change in mining method at MRM.

The conversion of MRM to an open pit operation is dependent on approval by the Northern Territory government. An environmental and social impact study (EIS) was lodged in August 2005 for public review and comment and a supplementary EIS was lodged in December 2005.

What is the timeframe for the proposed conversion to open cut mining?

Subject to the necessary approvals and the successful completion of the environmental review process, construction would take around two years. The actual timing depends upon if and when approval is granted and the ability to schedule civil works around the wet seasons.

What will happen to McArthur River Mine if the proposed open cut operation is not approved?

MRM has made considerable progress in the last 18 months in reducing costs and improving the quality and commercial attractiveness of its bulk concentrate product, particularly through the reduction of its silica content. Despite these efforts, the mine in its current form has come to the end of its effective economic life. The most accessible underground ore has been extracted and the underground mining operations, which comprise over 100 kilometres of underground tunnels, are no longer financially viable.

If the proposal to convert MRM into an open pit mine is not approved, the underground operation will close and the mine will be rehabilitated in line with MRM's approved closure plan.

How does Xstrata's proposal differ from previous plans by the mine's former owner, MIM, to expand the operation?

The open cut development marks a considerable change from previous plans by the former MIM Holdings to expand the mine significantly, which entailed the construction of a zinc refinery and coal-fired power station on site and the damming of the Glyde River. The development of open pit mining within the existing mine lease will necessitate the rechannelling of the McArthur River but entails no additional infrastructure construction. The rechannelling will be undertaken as a detailed environmental project over a two year period to encourage revegetation and minimise the loss of biodiversity, and to avoid any impact on downstream fishing activities.

Are there still long-term plans to establish a refinery and expand the mine's operations?

Xstrata Zinc retains the option to develop MRM as a source of zinc feed for a future zinc refinery using the Group's Albion process technology, which would significantly improve the profitability of MRM's mining operations. Given the power requirements associated with zinc refineries, the MRM site has been ruled out as a possible location for an Albion plant and we continue to assess other potential sites.

What changes are expected from a shift from underground to open cut mining?
The current mine occupies about 12 square kilometres. The change to open pit operations will double this area to about 24 square kilometres. Other changes are:

An 83 hectare open pit will be created by removal of surface material and mining excavation operations.
About 5.5 kilometres of the McArthur River will be rechannelled, partly into an old water course, to allow the river to flow around the open pit.
About 2.5 kilometres of both Barney and Surprise Creeks will be rechannelled around the open pit.
A flood protection bund will be built around the pit and facilities as protection against flooding which sometimes occurs in the wet season.
A 300 hectare engineered overburden emplacement facility will be constructed to store and control waste rock produced from open pit mining.
Wastes from the processing facility (tailings) will be treated in a significantly upgraded tailings facility.
New haul roads and a run of mine storage area will be built to transport and store ore prior to processing.

MRM expected to start civil works in April 2006. What is the latest it can start work before the wet season starts?

The southern extension to the test pit is important for maintaining operations past the next wet season. The commencement of civil works is contingent on Government approval. Depending on if and when this is granted we will then amend our development schedule.

What are the mine's power requirements and how will these change?

At present, the mine requires about 18 MW of power, the majority of which is used in the mill. There will be no change in the operation's power demand. Power will continue to be generated by the existing on-site gas-fired power station.

Who owns MRM?

MRM is wholly owned by Xstrata Zinc. In September 2005, Xstrata acquired the 25% interest in McArthur River Mining previously held by a joint venture partner - ANT Minerals Pty Ltd.

What is the extent of deposits at the mine?

The McArthur River ore body remains one of the largest known deposits of zinc and lead in the world, with a measured and indicated ore resource of greater than 120 million tonnes. The proposed development would mine identified reserves of 43 million tonnes containing 11.9% zinc. 5.2% lead and 53 g/t silver.

What is unique about the MRM deposit?

Due to the fine grained nature of the deposit, the ore must be milled extremely finely (<10 microns) to free the valuable metals from the waste rock. Even at this fine grind, MRM can produce only a bulk concentrate. Imperial Smelters (ISP's) are the primary market for the bulk concentrate produced at MRM.

2. Environment

How will the mine site footprint change?

The major elements of the footprint of the existing mine are the surface processing facilities, the tailings storage facility, the accommodation camp and the airstrip. They occupy an area of about 12 square kilometres.

The open cut project will add the following additional components to the existing footprint, which will increase its area by about 12 square kilometres to include:

Open pit
Flood protection bund
River and creek rechannelling
Overburden emplacement facility.

The land required is within the current mining lease area and no new land is needed for the change of operation.

What will be the impact of rechannelling the McArthur River?

McArthur River flows for 300 kilometres. The 5.5 kilometre section being rechannelled accounts for about 1.6 per cent of the river. The river is actually an intermittently running or dry creek much of the year, with several permanent waterholes near the mine. During the Wet season, the river sometimes floods (three times in the past 10 years) and can be as wide as 15 kilometres.

The realigned channel will be designed to have similar hydraulic characteristics to the existing river channel so it is stable during floods. The lower channel bank will be stabilised against erosion and the banks and berms will be revegetated. This will minimise the risk of erosion and allow the riverine fauna corridor to re-establish.

Construction will be over two years, to help vegetation re-establish. There may be some extra silt in the first year's wet season but modelling suggests no long-term impact on water quality, flora or fauna. Part of the rechannelling follows an old watercourse. After about 20 years, the riverine environment should have been recreated.

What impact will this have on the floodplains, especially during the wet season?

Floods less than 1 in 5 year levels will be contained within the realigned channel. Floods greater than one in five years will extend over the McArthur River floodplain as happens at present.

The presence of the mine will result in increased flood water levels upstream of the mine (eg levels will increase by 1.4 metres for a 1 in 100 year flood). This increase will not have any adverse environmental effects but will increase the extent and duration of upstream flooding. The only significant impact will be on the Carpentaria Highway, which closes now during severe flooding. The highway's closure times will increase.

What will be the impact on fish generally and threatened species such as the Freshwater Sawfish?

The realigned river channel will be designed so there is no physical or hydraulic obstruction to fish passage. A variety of substrates and micro habitats will be provided along the channel to minimise impacts on fish. A comprehensive monitoring program for the Freshwater Sawfish is proposed.

How will the open pit be protected from flooding during the wet season?

The flood protection bund has been designed to keep flood waters out of the open cut. It will be high enough to retain the 1 in 500 year flood and will have a central clay core to provide an impervious barrier to water. The outside wall will be lined with rock to provide protection against erosion and scouring of flood waters.

What will happen to the Glyde River during this project?

The open cut project will not have any impact on the Glyde River as it is no longer part of the project area.

What impact has the existing tailings dam had on the environment?

Waste water and solids from the MRM processing plant are taken by pipeline to the nearby tailings dam, where water is recycled and solids are stockpiled.

The tailings dam has experienced some minor sulphate seepage, similar to salt deposits, into Surprise Creek. The creek runs for only a limited number of days each year. Close monitoring of the seepage area, analysing samples taken from the creek on a weekly basis as long as water is accessible, has shown that no heavy metals have entered Surprise Creek. Monitoring of flora and fauna in the area surrounding the tailings dam has equally recorded no impact on local flora or fauna.

MRM has worked to eliminate this seepage in a number of ways, including a trial involving injecting polymer fill along 750 metres of the most affected area. This successful trial led to a major AUD2 million project to apply the treatment to 1.5 kilometres of the tailings dam wall which was completed in September 2005.

The tailings dam will also be extended away from Surprise Creek as part of the move to open cut mining and new deposits will be placed in cells furthest away from Surprise Creek. Cells nearest Surprise Creek will be rehabilitated to prevent any further seepage.

What impact will the open pit have on groundwater systems?

A system of groundwater extraction bores will be built around the open pit to prevent groundwater flowing into the pit, which would interfere with mining activities. The extracted groundwater will be used as process water in the process plant.

Extracting the groundwater will cause groundwater levels surrounding the pit to drop. At the end of the mine's life, groundwater levels could have dropped by up to 35cm if no action is taken to manage it. MRM is looking into ways to make sure there is no draw down and will be regularly monitoring and measuring groundwater levels.

Even without mining, groundwater levels in the area fluctuate naturally by up to six metres between the wet and dry season. Once mining has stopped, groundwater will return to its pre-mining levels.

Will the project impact on the marine environment?

The marine environment has been annually monitored since 1992, three years before mining started in 1995. All of these studies show there has been no environmental harm caused by mining operations.

There will be no changes to the port facilities or marine operations as part of the open cut development.

MRM has already committed to expand its marine monitoring program to even more closely track the health of the flora and fauna as well as water quality and sediments.

For further information, refer to Factsheet 5: Riverine and Marine Environment.

What is the impact of the test pit?

The two stages of the test pit occupy a 12.4 hectare footprint and are located near the existing mine facilities and between Barney Hill and McArthur River. This is an area that is already partly disturbed and it will be mined using conventional open pit methods.

An archaeologist was been commissioned by MRM to ensure that no archaeological sites were disturbed during the construction of the test pit without assessment and approval under the Northern Territory Heritage Conservation Act 1991.

The two stages of the test pit were approved after MRM satisfied the NT Office of Environment on our action to address a range of environmental and social issues. For example:

Potentially acid-forming overburden material was placed underground as backfill;

Wet season surface water inflows are controlled with a bund wall around the pit;

Haul roads and access roads are contoured and bunded to direct run-off water via sediment containment structures;

Noise and blasting restrictions depend on weather conditions and the interaction with underground operations;

Water trucks are used to minimise dust generation;

Monitoring programs were expanded to cover dust and water monitoring.

What impact will the project have on carbon dioxide emissions?

The annual greenhouse gas emissions from MRM will increase marginally from 117,900 tonnes of carbon dioxide (equivalent) in 2004 to 124,100 tonnes in 2008. This small rise results from the increased tonnage of ore mined from 1.6 million tonnes to 1.8 million tonnes in order to maintain the existing concentrate production rate.

What role does the Australian Government have?

The Australian Government has declared that the project is a 'controlled action' under the provisions of the Environment Protection and Biodiversity Conservation Act 1999. This means that the Australian Government will assess the project's EIS and approval will be needed before the project can start.

The Australian Government review will occur as part of the NT assessment process under the terms of the Bilateral Agreement between the Australian and Northern Territory Governments.

What will happen to the mine at the end of its life?

MRM's mine closure strategy that has been approved by the Northern Territory Government. This strategy will be updated to incorporate the open cut project. Key elements of the mine closure strategy will include:

The river will continue to flow along the realigned river channel.
The flood bund will be breached and the open cut allowed to fill with flood water.
The processing plant and infrastructure facilities will be removed and the areas remediated and revegetated.
The overburden emplacement facility and the tailings storage facility will be topsoiled and revegetated.
Rehabilitation will ensure that the final result is a stable, vegetated landscape which has minimal impact on the surrounding environment.

3. Social

What benefits does the mine provide to the Northern Territory?

In the past, the mine has contributed about AUD350 million directly and indirectly to the Northern Territory economy and employed around 350 people.

The change in mining method to open-cut will ensure that approximately 270 jobs are retained at the mine and economic benefits of around AUD329 million continue to be generated.

The mine also works with around 400 suppliers in the Northern Territory supporting an estimated 1,430 jobs.

What jobs are available to the local community and Indigenous people?

McArthur River Mining's aim is to work with the local school to provide links between programs that encourage children to get an education and vocational training that provides long-term skills.

The mine has a pre-employment program, to help local people get work, and plans to double its current target of 10 trainees a year with the open cut mine. Over 200 local indigenous people have been employed by MRM.

What community consultation has taken place?

A community consultation program has been implemented which sought to capture the views of local residents and relevant organizations. Through a program of personal meetings, consultation meetings with community groups, and liaison with community advisers, MRM has maintained a dialogue with the community. In addition, a series of information sheets, an information line and this website have been available for further information.

Have traditional owners been consulted?

Traditional owners have been involved in all of the community consultation activities including several visits to the MRM site to view development plans and advise on sacred sites.

Are any sacred sites affected?

The Aboriginal Areas Protection Authority (AAPA) has identified 146 sites in the general McArthur River project area. This includes five registered sacred sites in the south-west corner of ML 1122 close to the McArthur River and one south of the mining lease.

The AAPA has issued authority certificates for all of the open cut project components in accordance with Section 22 of the Northern Territory Aboriginal Sacred Sites Act 1989. These certificates include special conditions to protect all sacred sites near the project.

MRM remains committed to ongoing consultation with traditional owners during the construction and operation of the open cut. AAPA certificate conditions will be strictly observed to ensure that any sensitive areas and/or issues are identified and managed to the benefit of all parties.

An archaeologist has been commissioned by MRM to ensure no archaeological sites are disturbed during the construction of the project without assessment and approval under the Northern Territory Heritage Conservation Act 1991.

What benefits does the mine deliver to traditional owners?

The mine is on the old McArthur River station. When it opened in 1995, the Australian Government negotiated directly with Gurdanji traditional owners, who relinquished title in return for the nearby Bauhinia Station.

An additional recent excision on the mine's land has been made by MRM for Gurdanji traditional owner Billy Coolibah.

As well as jobs and training, the continued export of concentrate delivers benefits to the Mawurli and Wirriwangkuma Aboriginal Association (MAWA). This is an indigenous business enterprise representing the four language groups in the region and which owns a 32% share in Carpentaria Shipping Service; a joint venture with P&O. This company operates the barge from the port of Bing Bong to ocean-going ships. Profits distributed to MAWA from this company contribute to local cultural, educational and social benefits.

4. Public Environmental Report Process

Is this a case of "back to the drawing board" for MRM's open cut proposal?

No. It is just part of the statutory process under the Environmental Assessment Act that needs to be followed. The overall project has not changed.

How long will the 14a process take?

The NT Government is responsible for the process so the timing is up to them.

14A is usually for altered projects - how is MRM altering its open cut proposal?

The overall project remains the same in that we still need to divert the McArthur River in order to move to open cut mining.

The modifications to the project relate to the design of the new river channel and our environmental monitoring program.

Is there any possibility of switching to open cut without diverting the river?

The nature of the orebody is that lies underneath the river. There is no way of accessing it long term without diverting the river.

We are conscious of the environmental concerns this raises but have done an enormous amount of work with Australian and international experts on the design of the new river channel.

Should you/Could you have worked harder in the first EIS to convince NT stakeholders about the need for the river diversion?

The draft EIS lodged in August represented more than two years' work by leading Australian and international environmental advisers. In hindsight you can always do more but we were satisfied with the depth of analysis and scientific evidence our documents provided.

5. Test Pit – Southern Expansion

Why is it called a test pit? What are you testing?

The aim of the first stage of the test pit was to confirm the nature of the outcrops of ore below the surface and enable metallurgical tests.

All ore generated by the test pit was processed through our concentrator to ensure it met specifications.

The second stage of the test pit will enable us to continually fine tune our methods. But the ore produced is important to keep the mine operating.

Isn' this the first stage of your open cut development?

It is a continuation of the Mining Management Plan that governed the initial test pit. The first stage of the test pit was always intended for ore sampling and production.

The second stage will allow us to fine tune our methods but the ore produced is important to keep the mine operating. It will provide security for our staff, suppliers and customers.

The open cut development is a 25 year plan. This test pit is important for us short term but it only represents a comparatively small area.

What process did you follow for the approval of the expanded test pit?

MRM submitted a proposal for an update to our Mining Management Plan (MMP) including a comprehensive environmental report. This was reviewed by the Department of Primary Industry, Fisheries and Mines and the Environmental Protection Agency under two Acts – the NT Environmental Assessment Act and the Mining Management Act. The approval was conditional on a security payment now totalling $25 million to which we agreed.

6. PER Lodgement Announcement

Is the proposal radically different to what was presented in the EIS?

The overall project remains the same – we still need to divert the McArthur River in order to move to open cut mining. The changes to the development relate to the design of the new river channel and our ongoing environmental monitoring program. The PER has taken all the planning to a greater level of detail.

Has Professor Erskine approved the modified river diversion design?

We have included Professor Erskine’s recommendations into the amended design for the river diversion. The PER will be reviewed for approval by the NT EPA. I expect Professor Erskine will be asked for his opinion as part of this review.

Is there anything Professor Erskine recommended that was not included in the design?

There was a series of technical discussions with Prof Erskine and he visited the site in early June. Through this we have agreed on the accuracy of models used, strategies for managing river velocity and erosion, revegetation plans and environmental monitoring.

How extensive have the modifications been to the design?

There are changes in the detail of the design of all aspects of the development. We have taken our plans a step further to refine the design. The new technical studies conducted allow us to now be more precise in exactly what the diversions will look like and how they will be developed.

When you are expecting to get a decision from the NT Government?

This is really up to the Government. Under the 14A process, the community will have 28 days from today to submit comments and then the NT EPA will submit its report. The earliest we might have a decision is August.

What happens if you don’t get a decision by August?

That would alter our development plan as we would hope to start work immediately if an approval is granted. We need to do some civil work before the wet season.

Has the government given any indication that they are keen for the mine to proceed?

We have to let the assessment process run its course. The NT Government has a specific process for reviews under the Environmental Assessment Act and we are following it.

Are you expecting the government to approve the development on the strength of the PER?

We would hope that we will have a decision either way at the end of this process.

What would be the consequences if the NT Government rejects the PER? Will the mine be closed immediately?

The southern extension to the test pit will support our operation until around March 2007. If the necessary approvals aren’t granted for the change in mining method the mine will then be closed and rehabilitated in accordance with MRM’s approved closure plan.