Statement In Opposition           Your Board of Directors is keenly aware of the Company's environmental and social obligations in Irian Jaya and believes that the Company is doing an excellent job of meeting those responsibilities.  The proponent of the foregoing proposal is misinformed and appears to have accepted at face value the propaganda of certain activist groups who oppose commercial development in Irian Jaya.  Your management's offers to discuss these issues with the proponent were not accepted.

        Under the constitution and laws of the Republic of Indonesia, the Government holds title to all land and natural resources for the benefit of the people.  The Government may grant mining rights to approved companies pursuant to a "Contract of Work," which has the force of law.  PT-FI's mining operations are governed by a Contract of Work, which grants PT-FI the right to use defined land areas for exploration and mining activities.  In addition to its Contract of Work, PT-FI has several agreements with indigenous tribes covering the use of lands historically used by them.  Although PT-FI has been advised that all existing agreements are valid, and that it has no legal obligation to offer additional compensation, PT-FI recognizes the special relationship that the local people have with their traditional lands and has, among other things, recently proposed an initiative that would provide certain of the local people with additional compensation based on the profitability of the mine.  The initiative was proposed following extensive discussion and review by local leaders, their advisors, Government representatives and PT-FI.  Additional information about the initiative is contained in the Company's Annual Report to Stockholders.

        The Company's operations in Irian Jaya are subject to comprehensive regulation by Indonesian environmental authorities and are in material compliance with all applicable laws, regulations, permits and orders.  An environmental audit conducted by Dames & Moore, and internationally recognized environmental consulting firm, concluded that PT-FI's comprehensive Tailing and River Management Plan was the most appropriate method of tailings disposal available under the circumstances.  The Company's arbitration with the Overseas Private Investment Corporation ("OPIC") was settled shortly after the release of the Dames & Moore report, at which time OPIC publicly stated that it was encouraged by the Company's "willingness to undertake the voluntary study and its continuing efforts to manage the environmental impact of the mine."

        As a part of its settlement with OPIC, the Company agreed to establish a mine closure fund and to make annual contributions to the fund so that it will accumulate a total of $100 million by the end of the mine's life.  The first annual contribution to the fund was made in 1996.  The Company accounts for mine closure and remediation expenses in accordance with United States generally accepted accounting principles.

        Although LEMASA, one of eight yayasans (foundations) representing indigenous tribes in the area of PT-FI's operations, has rejected certain programs proposed by PT-FI for the benefit of the indigenous people, the other seven representative yayasans have accepted and are participating in these programs.

        The Company's commercial operations and social programs have brought modern employment, education, sanitation, housing, medicine and social services to the area.  In addition, the Company's operations employ sophisticated, comprehensive environmental management and monitoring programs to back up it strong commitment to responsible stewardship of the environment in which it operates.

        Your Board believes that adoption of the foregoing proposal would be a disservice to the Company, its stockholders and the people of Irian Jaya, as compliance with the proposal would substantially damage the Company's future operating results and stockholder values, would harm its relations with Indonesian authorities, and would reduce employment opportunities in Irian Jaya.  More specifically, postponement of the mine expansion to optimal throughput rates, which is currently under way, would idle a $960 million project, dramatically increasing its overall cost, delaying indefinitely any opportunity to earn a return on that investment, and eliminating many attractive employment opportunities for local residents.  Furthermore, ending cooperation with Indonesia authorities is not legally permissible under PT-FI's Contract of Work, and any effort to do so would damage the Company's relations with the Government.  Any "drastic" reduction of military presence in the Company's operating area could affect the safety of Company personnel as well as local residents.  The Company has neither the authority nor the expertise to advise local authorities on such matters.  Additionally, the preliminary social audit report produced by the internationally recognized consulting firm of Labat Anderson (which is the only report issued by Labat Anderson to date) and the Dames & Moore environmental audit report have been released publicly and are available to any stockholder who requests them.  No other outside audits of PT-FI's environmental or social programs have been conducted in the past five years.  Finally, the Company does not believe that environmental monitoring by self-appointed experts is constructive or warranted.  Such monitoring should be, and has been, carried out responsibly and effectively under the auspices of the Government.

        Accordingly, your Board of Directors urges you to vote AGAINST the foregoing proposal.