Notes To Consolidated Financial Statements million in 2003 and $31.1 million in 2002. Management believes  these costs do not differ materially from the costs that would  have been incurred had the relevant personnel providing these  services been employed directly by FCX. The amounts FM Services  Company billed to the two other public companies totaled $4.3  million during 2004, $3.6 million during 2003 and $2.6 million  during 2002. Long-term receivables from one of those companies  totaled $3.2 million at December 31, 2004, and relate to certain  FM Services Company long-term employee benefit obligations. In July 2003, FCX acquired the 85.7 percent ownership  interest in Puncakjaya Power owned by affiliates of Duke  Energy Corporation for $78 million cash. Puncakjaya Power  is the owner of assets supplying power to PT Freeport  Indonesia’s operations, including the 3x65 megawatt coal-fired  power facilities. PT Freeport Indonesia purchases power from  Puncakjaya Power under infrastructure asset financing arrange- ments. At December 31, 2004, PT Freeport Indonesia had  infrastructure asset financing obligations to Puncakjaya Power  totaling $258.7 million and Puncakjaya Power had a receiv- able from PT Freeport Indonesia for $340.1 million, including  Rio Tinto’s share. As a result of this transaction, FCX is now  consolidating Puncakjaya Power and FCX’s consolidated balance  sheet no longer reflects PT Freeport Indonesia’s obligation to  Puncakjaya Power or Puncakjaya Power’s receivable from PT  Freeport Indonesia, but instead reflects the $187.0 million  of outstanding Puncakjaya Power bank debt at December 31,  2004, and a $73.5 million receivable ($11.5 million in other  accounts receivable and $62.0 million in long-term assets) for  Rio Tinto’s share of Puncakjaya Power’s receivable as provided  for in FCX’s joint venture agreement with Rio Tinto. Joint Ventures With Rio Tinto.  In March 2004, FCX  purchased Rio Tinto’s 23.9 million shares of FCX common  stock for $881.9 million (approximately $36.85 per share)  with a portion of the proceeds from the sale of the 5  1 /2%  Convertible Perpetual Preferred Stock (see Note 7). Rio Tinto  acquired these shares from FCX’s former parent company in  1995 in connection with the spinoff of FCX as an indepen- dent company. FCX and Rio Tinto have established certain  unincorporated joint ventures which are not impacted by  FCX’s purchase of its shares from Rio Tinto discussed above.  Under the joint venture arrangements, Rio Tinto has a 40  percent interest in PT Freeport Indonesia’s Contract of Work  and Eastern Minerals’ Contract of Work, and the option to  participate in 40 percent of any other future exploration  The components of inventories follow (in thousands): The average cost method was used to determine the cost of  essentially all materials and supplies inventory. Materials and  supplies inventory is net of obsolescence reserves totaling  $17.1 million at December 31, 2004, and $17.6 million at  December 31, 2003. Pursuant to the joint venture agreement, Rio Tinto has a 40  percent interest in certain assets and future production exceeding  specified annual amounts of copper, gold and silver through  2021 in Block A of PT Freeport Indonesia’s Contract of Work, and,  after 2021, a 40 percent interest in all production from Block  A. 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 PT Freeport Indonesia’s most recent expansion  completed in 1998 to (b) total revenues from production from  Block A, including production from PT Freeport Indonesia’s previ- ously existing reserves. PT Freeport Indonesia will continue to  receive 100 percent of the cash flow from specified annual  amounts of copper, gold and silver through 2021 calculated by  reference to its proven and probable reserves as of December 31,  1994, and 60 percent of all remaining cash flow. The agreement  provides for adjustments to the specified annual amounts of  copper, gold and silver attributable 100 percent to PT Freeport  Indonesia upon the occurrence of certain events which cause an  extended interruption in production to occur, including events  such as the fourth-quarter 2003 Grasberg open-pit slippage and  debris flow. As a result of the Grasberg slippage and debris flow  events, the 2004 specified amounts attributable 100 percent to  PT Freeport Indonesia were reduced by 178 million pounds for  copper and 280,000 ounces for gold. These reductions were offset  by increases in the specified amounts attributable to PT Freeport  Indonesia totaling 111 million pounds for copper and 175,000  ounces for gold in 2005, and 67 million pounds for copper and  105,000 ounces for gold in 2021. projects in Papua. Under the arrangements, Rio Tinto funded  $100 million in 1996 for approved exploration costs in the  areas covered by the PT Freeport Indonesia and Eastern  Minerals Contracts of Work. Agreed-upon exploration costs  in the joint venture areas are generally shared 60 percent by  FCX and 40 percent by Rio Tinto. December 31,  2004  2003 PT Freeport Indonesia: Concentrates – Average cost  $ 11,830  $ 2,643 Atlantic Copper:  Concentrates – FIFO   148,246  81,668 Work in process – FIFO  86,710  76,689 Finished goods – FIFO  6,479  9,925 Total product inventories   253,265   170,925 Total materials and supplies, net   213,447   226,102 Total inventories  $466,712  $397,027 Note 3.  Inventories 62 |  FREEPORT-McMoRan COPPER & GOLD INC.