Management’s Discussion and Analysis discussion of its development and selection of critical  accounting estimates with the Audit Committee of our Board  of Directors. 1 of “Notes to Consolidated Financial Statements,” we  depreciate our mining and milling assets using the unit-of- production method based on our estimates of our proven  and probable recoverable copper reserves. We have other  assets that we depreciate on a straight-line basis over  their estimated useful lives. Our estimates of proven and  probable recoverable copper reserves and of the useful  lives of our straight-line assets impact our depreciation  and amortization expense. These estimates affect both  our “mining and exploration” and “smelting and refining”  segments. The positive market environment and investor sentiment  toward gold continued during 2004 with gold prices ranging  from $374 to $456 per ounce, supported by a weak U.S. dollar  reflecting large U.S. deficits, ongoing geopolitical strife and  terrorism concerns, growing investment demand for gold and  actions by gold producers to reduce hedge positions. Gold  prices averaged $410 per ounce in 2004. Recent movements  in gold prices have closely followed movements in the U.S.  dollar against other currencies and most analysts anticipate  that a weak U.S. dollar will continue to support gold prices.  The London gold price closed at approximately $435 per  ounce on February 28, 2005.  Effective January 1, 2002, we changed our method of  computing depreciation for PT Freeport Indonesia’s mining  and milling life-of-mine assets. See Note 1 of “Notes to  Consolidated Financial Statements” for a discussion of  this change. The cumulative effect of this change through  December 31, 2001, as reflected in our 2002 results,  reduced net income by $3.0 million ($0.02 per share), net  of taxes and minority interest sharing.  As shown in the graphs above, world metal prices  for copper have fluctuated during the period from 1992  through February 2005 from a low of approximately $0.60 per  pound in 2001 to a high of approximately $1.54 per pound  on February 28, 2005, and world gold prices have fluctuated  during the period from 1998 through February 2005 from a  low of approximately $250 per ounce in 1999 to a high of  approximately $456 per ounce in 2004. Copper and gold  prices are affected by numerous factors beyond our control  as described further in our Form 10-K for the year ended  December 31, 2004. The accounting estimates related to depreciation and  amortization are critical accounting estimates because  (1) the determination of copper reserves involves uncer- tainties with respect to the ultimate geology of our  reserves and the assumptions used in determining the  economic feasibility of mining those reserves, including  estimated copper and gold prices and costs of conducting  future mining activities, and (2) changes in estimated  proven and probable recoverable copper reserves and useful  asset lives can have a material impact on net income.  We perform annual assessments of our existing assets,  including a review of asset costs and depreciable lives, in  connection with the review of mine operating and develop- ment plans. When we determine that assigned asset lives  do not reflect the expected remaining period of benefit,  we make prospective changes to those depreciable lives. There are a number of uncertainties inherent in  estimating quantities of reserves, including many factors  beyond our control. Ore reserves estimates are based upon  engineering evaluations of samplings of drill holes and  other openings. Our estimates of proven and probable  recoverable reserves are prepared by our employees and  reviewed and verified by independent experts in mining,  geology and reserve determination. As of December 31,  2004, aggregate proven and probable recoverable copper  reserves totaled 56.2 billion pounds and PT Freeport  Indonesia’s estimated share totaled 40.5 billion pounds.  Management’s discussion and analysis of our financial  condition and results of operations are based on our consoli- dated financial statements, which have been prepared in  conformity with accounting principles generally accepted  in the United States. The preparation of these statements  requires that we make estimates and assumptions that  affect the reported amounts of assets, liabilities, revenues  and expenses. We base these estimates on historical experi- ence and on assumptions that we consider reasonable under  the circumstances; however, reported results could differ  from those based on the current estimates under different  assumptions or conditions. The areas requiring the use of  management’s estimates are discussed in Note 1 of “Notes  to Consolidated Financial Statements” under the subheading  “Use of Estimates.” Management has reviewed the following  22 |  FREEPORT-McMoRan COPPER & GOLD INC. CRITICAL ACCOUNTING ESTIMATES • Depreciation and Amortization –  As discussed in Note  London Gold Prices Through February 28, 2005 Dollars per ounce $300 $350 $400 $450 $500 05 04 03 02 01 00 99 98