Management’s Discussion and Analysis CAUTIONARY STATEMENT CERTIFICATIONS statements include unanticipated mining, milling and other  processing problems, accidents that lead to personal injury  or property damage, persistent commodity price reductions,  changes in political, social or economic circumstances in our  area of operations, variances in ore grades, labor relations,  adverse weather conditions, the speculative nature of mineral  exploration, fluctuations in interest rates and other adverse  financial market conditions, and other factors described in  more detail under the heading “Risk Factors” in our Form  10-K for the year ended December 31, 2004 We have filed the certifications of our Chief Executive Officer  and our Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to our 2004 Form 10-K. Our discussion and analysis contains forward-looking state- ments in which we discuss our expectations regarding future  performance. Forward-looking statements are all statements  other than historical facts, such as those regarding antici- pated sales volumes, ore grades, commodity prices, general  and administrative expenses, unit cash production costs,  operating cash flows, royalty costs, capital expenditures,  future environmental costs, debt repayments and refinancing,  debt maturities, treatment charge rates, depreciation rates,  exploration efforts and results, dividend payments, liquidity  and other financial commitments. We caution you that these  statements are not guarantees of future performance, and  our actual results may differ materially from those projected,  anticipated or assumed in the forward-looking statements.  Important factors that can cause our actual results to differ  materially from those anticipated in the forward-looking  Years Ended December 31,  2004  2003  2002 Operating costs – PT Smelting (100%)  $ 64,858  $ 55,787  $ 64,108 Add: Gold and silver refining charges  4,064  6,200  4,263 Less: Acid and other by-product revenues  (13,732)  (10,665)  (5,275) Production cost of anodes sold  (225)  (4,743)  (3,135) Other  336  1,492  (1,013) Production costs used in calculating cathode cash production cost per pound  $ 55,301  $ 48,071  $ 58,948 Pounds of cathode produced  464,000   492,400  424,100 Cathode cash production cost per pound  $  0.12  $  0.10  $  0.14 Reconciliation to Amounts Reported  Operating costs per above  $ (64,858)  $ (55,787)  $ (64,108) Other costs   (852,911)   (780,530)   (517,438) Revenue and other income  926,914   859,715  565,788 PT Smelting net income (loss)  9,145  23,398  (15,758) PT Freeport Indonesia’s 25% equity interest  2,286  5,850  (3,940) Amortization of excess investment cost  (241)  (241)  (241) Equity in PT Smelting earnings (losses) reported in FCX’s consolidated financial statements  $   2,045  $  5,609  $  (4,181) 46 |  FREEPORT-McMoRan COPPER & GOLD INC.