Management’s Discussion and Analysis present value costs. A decrease of one percent in the  discount rates used has a similar effect resulting in an  approximate 16 percent increase in the discounted present  value costs. After discounting the projected cash flows, a  market risk premium of 10 percent was applied to the total  to reflect what a third party might require to assume these  asset retirement obligations. The market risk premium  was based on market-based estimates of rates that a third  party would have to pay to insure its exposure to possible  future increases in the value of these obligations. At January 1, 2003, we estimated the fair value of our  aggregate asset retirement obligations to be $28.5 million.  We recorded the fair value of these obligations and the  related additional assets as of January 1, 2003. The net  difference between our previously recorded reclamation  and closure cost liability and the amounts estimated under  SFAS No. 143, after taxes and minority interest, resulted  in a gain of $9.1 million (after reduction by $8.5 million  for taxes and minority interest sharing), $0.06 per share  on a diluted basis, which was recognized as a cumulative  effect adjustment for a change in accounting principle. As a  result of adopting SFAS No. 143, we expect our future  depreciation and amortization expense to be lower and  our production costs to be higher, with no significant net  impact on earnings for the near term. The effect of adopting SFAS No. 143 was to increase  net income by approximately $1 million, $0.01 per share  for 2003. Had we followed SFAS No. 143 during 2002, net  income would have increased by approximately $0.5 million  or less than $0.01 per share. At December 31, 2004 and 2003, PT Freeport Indonesia  revised its estimates for (1) changes in the projected  timing of certain reclamation costs because of the slippage  and debris flow events in the Grasberg open pit, (2)  changes in certain cost estimates, and (3) additional  asset retirement obligations incurred during 2003. We  estimated PT Freeport Indonesia’s aggregate asset retire- ment obligations to be about $149 million at December  31, 2004, and $130 million at December 31, 2003. An  analysis of PT Freeport Indonesia’s discounted asset retire- ment obligation follows (in millions): The expected deferral of certain costs was the primary  change in estimates that caused the decline in the obligation  balance over the last two years. These changes reduced  the related asset balance and are not expected to have a  material impact on future net income. Consolidated revenues include PT Freeport Indonesia’s sale of  copper concentrates, which also contain significant quanti- ties of gold and silver, and the sale by Atlantic Copper of  copper anodes, cathodes, wire and wire rod, and gold in  anodes and slimes. Consolidated revenues and net income  vary significantly with fluctuations in the market prices of  copper and gold and other factors. PT Freeport Indonesia’s  intercompany sales to Atlantic Copper are eliminated in  consolidation. Consolidated revenues were $2.4 billion for  2004, compared with $2.2 billion for 2003, reflecting  significantly higher copper and gold prices partly offset by  lower-grade ore and reduced mill throughput as PT Freeport  Indonesia accelerated the removal of overburden and mined  low-grade ore prior to restoring safe access to the higher- grade ore areas in its Grasberg open-pit mine following the  fourth-quarter 2003 slippage and debris flow events (see  “Mining and Exploration Operations – PT Freeport Indonesia  Operating Results”). Atlantic Copper’s 2004 revenues were  adversely affected by its scheduled major maintenance turn- around (see “Smelting and Refining Operations – Atlantic  Copper Operating Results”) partly offset by higher copper and  gold prices. Consolidated revenues in 2003 benefited from  higher copper and gold price realizations and higher gold  sales volumes, partly offset by lower copper sales volumes  when compared with 2002 revenues of $1.9 billion. Consolidated production and delivery costs were higher in  2004 at $1,450.3 million compared with $1,071.3 million for  2003 and $938.5 million for 2002. The increase in 2004 was  primarily because of higher costs of concentrate purchases at  Atlantic Copper caused by higher metals prices, higher produc- tion costs at PT Freeport Indonesia and the costs of Atlantic  Copper’s smelter turnaround. Production and delivery costs in  2003 were higher than in 2002 primarily because of higher  concentrates costs at Atlantic Copper caused by the increase  in copper and gold prices during the year. Consolidated  depreciation and amortization expense was $206.4 million in  2004, $230.8 million in 2003 and $260.4 million in 2002.  Depreciation and amortization expense decreased each year  during the last three years primarily because a large portion  of our depreciation is calculated on a unit-of-production basis and our copper sales volumes at PT Freeport Indonesia  declined each year. Exploration expenses increased to $8.7 million in 2004,  from $6.4 million in 2003 and $3.1 million in 2002, reflecting  increased exploration drilling in Block A. Our 2004 drilling  2004 ANNUAL REPORT  | 25 CONSOLIDATED RESULTS OF OPERATIONS 2004  2003  Asset retirement obligation at  beginning of year  $ 25.7  $27.9 Accretion expense  2.8  2.7 Revisions for changes in estimates   (6.5)   (4.3) Liabilities incurred  —  0.6 Liabilities settled  —   (1.2) Asset retirement obligation at end of year  $22.0  $25.7