OVERVIEW In management’s discussion and analysis, “we,” “us” and  “our” refer to Freeport-McMoRan Copper & Gold Inc. (FCX)  and its consolidated subsidiaries. References to “aggregate”  amounts mean the total of our share and Rio Tinto plc’s share  as our joint venture partner. The results of operations reported  and summarized below are not necessarily indicative of future  operating results. The following discussion should be read together  with our consolidated financial statements and the related notes. We have one of the world’s largest copper and gold mining  and production operations in terms of reserves and produc- tion. We are also one of the lowest-cost copper producers in  the world, after taking into account credits for related gold  and silver production. Our principal asset is the Grasberg  minerals district, which contains the largest single gold  reserve and the second-largest copper reserves of any mine  in the world. We operate through our majority-owned subsidiaries,  PT Freeport Indonesia and PT Puncakjaya Power (Puncakjaya  Power), and through Atlantic Copper, S.A. (Atlantic Copper)  and PT Irja Eastern Minerals (Eastern Minerals), our principal  wholly owned subsidiaries. We acquired an 85.7 percent  ownership in Puncakjaya Power in 2003. Puncakjaya Power’s  sole business is to supply power to PT Freeport Indonesia’s  operations (see Note 2 of “Notes to Consolidated Financial  Statements”). Atlantic Copper’s operations are in Spain and  involve the smelting and refining of copper concentrates and  the marketing of refined copper products and precious metals  in slimes. PT Freeport Indonesia owns a 25 percent interest  in PT Smelting, an Indonesian company which operates a  copper smelter and refinery in Gresik, Indonesia. Eastern  Minerals conducts mineral exploration activities (which are  currently suspended) in Papua, Indonesia. PT Freeport Indonesia, our principal operating subsidiary,  operates under an agreement, called a Contract of Work,  with the Government of Indonesia. The Contract of Work  allows us to conduct exploration, mining and production  activities in a 24,700-acre area called Block A located in  Papua, Indonesia. Under the Contract of Work, PT Freeport  Indonesia also conducts exploration activities (which are  currently suspended, but are under review for resumption) in  an approximate 500,000-acre area called Block B in Papua.  All of our proven and probable mineral reserves and current  mining operations are located in Block A. Eastern Minerals  holds an additional Contract of Work originally covering a  2.5-million-acre area. Under the terms of Eastern Minerals’  Contract of Work, we have already relinquished 1.3 million  acres and must relinquish an additional 0.6 million acres at  the end of the three-year exploration period, which can be  extended by the Government of Indonesia for as much as  two additional years. Operating, nonexpansion capital and administrative costs  are shared proportionately between PT Freeport Indonesia  and Rio Tinto based on the ratio of (a) the incremental  revenues from production from our expansion completed  in 1998 to (b) total revenues from production from Block A,  including production from PT Freeport Indonesia’s previously  In 1996, we established joint ventures with Rio Tinto, an  international mining company with headquarters in London,  England. One joint venture covers PT Freeport Indonesia’s  mining operations in Block A and gives Rio Tinto, through  2021, a 40 percent interest in certain assets and future produc- tion exceeding specified annual amounts of copper, gold and  silver in Block A and, after 2021, a 40 percent interest in all  production from Block A. The agreement provides for adjust- ments to the specified annual metal sharing amounts upon  the occurrence of certain events that cause an extended inter- ruption in production to occur, including events such as the  fourth-quarter 2003 Grasberg open-pit slippage and debris flow.  We own 90.64 percent of PT Freeport Indonesia, of which  9.36 percent is owned through our wholly owned subsidiary,  PT Indocopper Investama. The Government of Indonesia  owns the remaining 9.36 percent of PT Freeport Indonesia.  In July 2004, we received a request from the Indonesian  Department of Energy and Mineral Resources that we offer  to sell to Indonesian nationals shares in PT Indocopper  Investama at fair market value. In response to this request  and in view of the potential benefits of having additional  Indonesian ownership in our project, we have agreed to  consider a potential sale of an interest in PT Indocopper  Investama at fair market value. Neither our Contract of  Work nor Indonesian law requires us to divest any portion  of our ownership interest in PT Freeport Indonesia or PT  Indocopper Investama. In addition to the PT Freeport Indonesia and Eastern  Minerals exploration acreage, we have the right to conduct  other mineral exploration activities in Papua pursuant to a  joint venture through PT Nabire Bakti Mining. Field explora- tion activities outside of our current mining operations  in Block A have been suspended in recent years because  of safety and security issues and regulatory uncertainty  relating to a possible conflict between our mining and  exploration rights in certain forest areas and an Indonesian  Forestry law enacted in 1999 prohibiting open-pit mining  in forest preservation areas. Recent Indonesian legislation  permits open-pit mining in PT Freeport Indonesia’s Block  B area, subject to certain requirements. We are currently  assessing these requirements and security issues. The timing  for our resumption of exploration activities in our Contract of Work areas outside of Block A depends on the resolution  of these matters. Joint Ventures with Rio Tinto plc (Rio Tinto)  FREEPORT-McMoRan COPPER & GOLD INC. 20 Management’s Discussion and Analysis