Management’s Discussion and Analysis dollars or euros. Generally, our costs are positively affected  when the U.S. dollar strengthens in relation to those foreign  currencies and adversely affected when the U.S. dollar  weakens in relation to those foreign currencies. One U.S. dollar was equivalent to 9,270 rupiah at December  31, 2004, 8,437 rupiah at December 31, 2003, and 8,940  rupiah at December 31, 2002. PT Freeport Indonesia recorded  losses to production costs totaling $0.7 million in 2004, $3.0  million in 2003 and $3.5 million in 2002 related to its rupiah- denominated net monetary assets and liabilities. At December  31, 2004, net liabilities totaled $7.7 million at an exchange  rate of 9,270 rupiah to one U.S. dollar. Operationally, changes in the U.S. dollar to rupiah exchange  rate primarily impact PT Freeport Indonesia’s labor costs,  which are mostly rupiah denominated. At estimated annual  aggregate rupiah payments of 1.4 trillion and an exchange  rate of 9,270 rupiah to one U.S. dollar, the exchange rate  as of December 31, 2004, a one-thousand-rupiah increase  in the exchange rate would result in an approximate $15  million decrease in aggregate annual operating costs. A one- thousand-rupiah decrease in the exchange rate would result  in an approximate $18 million increase in aggregate annual  operating costs. PT Freeport Indonesia purchases certain materials, supplies  and services denominated in Australian dollars. The exchange  rate was $0.78 to one Australian dollar at December 31,  2004, $0.75 to one Australian dollar at December 31, 2003,  and $0.56 to one Australian dollar at December 31, 2002. At  estimated annual aggregate Australian dollar payments of  225 million and an exchange rate of $0.78 to one Australian  dollar, the exchange rate as of December 31, 2004, a $0.01  increase or decrease in the exchange rate would result  in an approximate $2 million change in aggregate annual  operating costs. At times, PT Freeport Indonesia has entered into foreign  currency forward contracts to hedge a portion of its  aggregate anticipated Indonesian rupiah and Australian dollar  payments. As of December 31, 2004, PT Freeport Indonesia  In November 2004, the FASB issued SFAS No. 151, “Inventory  Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151  clarifies that abnormal amounts of idle facility expense,  freight handling costs and wasted materials (spoilage)  should be recognized as current-period charges and requires  had foreign currency contracts to hedge 450.0 billion in  rupiah payments from April 2005 through December 2005,  or approximately 32 percent of aggregate projected rupiah  payments for 2005, at an average exchange rate of 10,059  rupiah to one U.S. dollar. PT Freeport Indonesia accounts for  these contracts as cash flow hedges. We recorded net gains  to production costs totaling $11.0 million in 2002 for PT  Freeport Indonesia’s previous foreign currency contracts. The majority of Atlantic Copper’s revenues are denominated  in U.S. dollars; however, operating costs other than concen- trate purchases and certain asset and liability accounts are  denominated in euros. Atlantic Copper’s estimated annual  euro payments total approximately 100 million euros. At a  December 31, 2004, exchange rate of $1.36 per euro, a $0.05  increase or decrease in the exchange rate would result in an  approximate $5 million change in annual costs. In connection with refinancing its debt in June 2000,  Atlantic Copper’s lenders required it to hedge its anticipated  euro-denominated operating costs. This hedging require- ment was removed when Atlantic Copper refinanced the  facility in March 2004. Atlantic Copper had no outstanding  currency hedging contracts at December 31, 2004. Atlantic  Copper’s operating results reflect gains (losses) on currency  hedging contracts totaling $9.6 million in 2003 and $(1.2)  million in 2002. Atlantic Copper had euro-denominated net monetary  liabilities at December 31, 2004, totaling $74.0 million. The  exchange rate was $1.36 per euro at December 31, 2004,  $1.26 per euro at December 31, 2003, and $1.05 per euro at  December 31, 2002. Adjustments to Atlantic Copper’s euro- denominated net monetary liabilities to reflect changes in  the exchange rate are recorded in other income (expense) and  totaled $(1.6) million in 2004, $(13.6) million in 2003 and  $(11.9) million in 2002. The table below presents average interest rates for our  scheduled maturities of principal for outstanding debt and  fair value at December 31, 2004 (dollars in millions).  the allocation of fixed production overheads to inventory  based on the normal capacity of the production facilities.  We must adopt SFAS No. 151 no later than January 1, 2006.  We have not yet determined when we will adopt SFAS No.  151; however, we currently do not expect adoption to have a  material impact on our accounting for inventory costs. 40 |  FREEPORT-McMoRan COPPER & GOLD INC. NEW ACCOUNTING STANDARDS Interest Rate Risk 2005  2006  2007  2008  2009  Thereafter  Fair Value Fixed-rate debt  $ —  $ 66.5  $ —  $ —  $ —  $1,419.8  $2,080.8 Average interest rate  —  7.5%  —  —  —  8.1%  8.1% Variable-rate debt  $78.2  $230.4  $45.9  $49.6  $47.7  $  13.8  $ 273.2 Average interest rate  4.6%  4.0%  4.5%  4.6%  4.6%  5.2%  4.3%