Management’s Discussion and Analysis 23.9 million shares of FCX common stock owned by Rio Tinto  for $881.9 million (approximately $36.85 per share) and used  the remainder for general corporate purposes. Rio Tinto no  longer owns any equity interest in FCX; however, it is still  PT Freeport Indonesia’s joint venture partner. As of December 31, 2004, we had total unrestricted cash  and cash equivalents of $551.5 million and total outstanding  debt of $1.95 billion. In February 2003, our Board of Directors  authorized the initiation of an annual cash dividend on our  common stock of $0.36 per share, increased the dividend  in October 2003 to an annual rate of $0.80 per share and  increased the dividend again in October 2004 to an annual  rate of $1.00 per share. In December 2004, our Board of  Directors authorized a supplemental common stock dividend  of $0.25 per share, which was paid on December 29, 2004.  Dividend payments on common stock totaled $198.8 million  in 2004 and $41.7 million in 2003. As discussed above, in  February 2005 the Board authorized a supplemental common  stock dividend of $0.50 per share payable March 31, 2005.  The declaration and payment of dividends is at the discre- tion of our Board. The amount of our current quarterly cash  dividend on our common stock and the possible payment of  additional future supplemental cash dividends will depend  on our financial results, cash requirements, future prospects  and other factors deemed relevant by the Board. Pursuant to  the restricted payment covenants in our 10  1 /8% Senior Notes  and 6  7 /8% Senior Notes, the amount available for dividend  payments and other restricted payments as of December 31,  2004, was approximately $510 million. In August 2004, we funded the sixth of eight scheduled  annual redemption payments on our Silver-Denominated  Preferred Stock for $13.9 million. The mandatory redemption  resulted in a $12.5 million decrease in debt and a hedging  loss to revenues of $1.4 million ($0.7 million to net income  or less than $0.01 per share) in 2004. Mandatory partial  redemptions of our Silver-Denominated Preferred Stock totaled  $10.8 million in 2003 and $11.7 million in 2002. In 2003, the Board approved a new open market share  purchase program for up to 20 million shares, which replaced  our previous program. Under this new program, we acquired  3.4 million shares during the second quarter of 2004 for  $99.5 million, $29.39 per share average, and 16.6 million  shares remain available. No shares were purchased during  the second half of 2004 and through February 28, 2005. The  timing of future purchases of our common stock is dependent  on many factors including the price of our common shares,  our cash flow and financial position, and general economic  and market conditions. During the first quarter of 2003, we completed two senior  note offerings. On January 29, 2003, we sold $500 million  of 10  1 /8% Senior Notes due 2010. Interest on the notes is  payable semiannually on February 1 and August 1 of each  year. We may redeem some or all of the notes at our option  at a make-whole redemption price prior to February 1, 2007,  and afterwards at stated redemption prices. The indenture  governing the notes contains certain restrictions on  incurring debt, creating liens, entering into sale leaseback  transactions, taking actions to limit distributions from  certain subsidiaries, selling assets, entering into transactions  with affiliates, paying cash dividends on common stock,  repurchasing or redeeming common or preferred equity,  prepaying subordinated debt and making investments. In February 2003, we sold $575 million of 7% Convertible  Senior Notes due 2011. Interest on the notes is payable  semiannually on March 1 and September 1 of each year. The  notes are convertible, at the option of the holder, at any  time on or prior to maturity into shares of FCX’s common  stock at a conversion price of $30.87 per share, which is  equal to a conversion rate of approximately 32.39 shares of  common stock per $1,000 principal amount of notes. We used  a portion of the $1.046 billion in net proceeds from the two  first-quarter 2003 note offerings to repay all of the then- outstanding amounts under our bank credit facilities. In April 2003, we concluded tender offers to purchase our  outstanding 7.20% Senior Notes due 2026 and our 7.50%  Senior Notes due 2006. Of the $450 million outstanding at  March 31, 2003, notes with a face amount of $234.0 million  were tendered for $239.0 million cash. We recorded a charge of  $6.6 million ($4.8 million to net income or $0.03 per share)  in 2003 associated with these early extinguishments of  debt. In July 2003, we purchased an additional $76.0 million  face amount of our 7.20% Senior Notes for $77.2 million, and  recorded a $1.3 million ($0.9 million to net income or less  than $0.01 per share) charge to losses on extinguishment of  debt. In October 2003, the holders of $68.9 million of the  remaining $73.5 million of outstanding 7.20% Senior Notes  elected early repayment in November 2003. We currently have  outstanding $4.5 million of 7.20% Senior Notes and $66.5  million of 7.50% Senior Notes. In August 2003, we redeemed 6.0 million shares of Gold- Denominated Preferred Stock for $210.5 million and partially  redeemed our Silver-Denominated Preferred Stock for $10.8  million. The mandatory redemptions resulted in a $245.1  million decrease in debt and a hedging gain to revenues of  $23.8 million ($12.2 million to net income or $0.08 per share). In August 2003, we privately negotiated the early conver- sion of 51.5 percent of our 8  1 /4% Convertible Senior Notes,  which resulted in a $311.1 million reduction in debt. The  holders converted their notes into 21.76 million shares of  FCX common stock and received $23.0 million in cash from  restricted investments held in escrow for payment of future  36 |  FREEPORT-McMoRan COPPER & GOLD INC.