Management’s Discussion and Analysis Environmental Matters DISCLOSURES ABOUT MARKET RISKS Commodity Price Risk a. Funding plus accrued interest are projected to accumulate to $100.0 million by the end of our Indonesian mining activities.  b. Minimum payments under operating leases have not been reduced by aggregate minimum sublease rentals of $1.1 million due under noncancelable subleases. We believe that we conduct our Indonesian operations  pursuant to applicable permits and that we comply in all  material respects with applicable Indonesian environmental  laws, rules and regulations. We have had three independent  environmental audits conducted by internationally recognized  environmental consulting and auditing firms. Audits were  completed in 1996 by Dames & Moore, in 1999 by Montgomery  Watson, and in 2002 by SGS International Certification  Services Indonesia, a member of the Société Générale  de Surveillance group. The 2002 audit found that the overall  approach to practical management of environmental issues at  PT Freeport Indonesia is considered to be very sound. There  were no audit findings requiring corrective action. In connection with obtaining our environmental approvals  from the Indonesian government, we committed to  performing a one-time environmental risk assessment on the  impacts of our tailings management plan. We completed this  extensive environmental risk assessment with more than 90  scientific studies conducted over four years and submitted  it to the Indonesian government in December 2002. We  developed the risk assessment study with input from an  independent review panel, which included representatives  from the Indonesian government, academia and non-govern- mental organizations. The risks that we identified during  this process were in line with our impact projections of the  tailings management program contained in our environmental  approval documents. We will determine our ultimate reclamation and closure  activities based on applicable laws and regulations and  our assessment of appropriate remedial activities in the  circumstances after consultation with governmental authori- ties, affected local residents and other affected parties. As  of December 31, 2004, we estimated aggregate reclamation  and closure obligations to be approximately $149 million for  PT Freeport Indonesia and $18 million for Atlantic Copper.  Estimates of the ultimate reclamation and closure costs we  will incur in the future involve complex issues requiring  integrated assessments over a period of many years and are  subject to revision over time, and actual costs may vary  from our estimates. Some reclamation costs will be incurred  during mining activities, while most closure costs and the  remaining reclamation costs will be incurred at the end of  the Grasberg open-pit mining operations and at the end of all  mining activities, which are currently estimated to continue  for more than 35 years. In 1996, we began contributing to a cash fund ($6.0  million balance at December 31, 2004) designed to accu- mulate at least $100 million by the end of our Indonesian  mining activities. We plan to use this fund, including accrued  interest, to pay mine closure and reclamation costs. Any  costs in excess of the $100 million fund would be funded  by operational cash flow or other sources. Future changes  in regulations could require us to incur additional costs  which would be charged against future operations. Estimates  involving environmental matters are by their nature imprecise  and can be expected to be revised over time because of  changes in government regulations, operations, technology  and inflation. The cost of complying with environmental laws is a funda- mental cost of our business. We incurred aggregate environ- mental capital expenditures and other environmental costs  totaling $65.1 million in 2004, $72.1 million in 2003 and  $62.6 million in 2002, including tailings management levee  maintenance and mine reclamation. In 2005, we expect to  incur approximately $21 million of aggregate environmental  capital expenditures and $39 million of other environmental  costs. These environmental expenditures are part of our  overall 2005 operating budget. Our consolidated revenues include PT Freeport Indonesia’s  sale of copper concentrates, which also contain significant  quantities of gold and silver, and Atlantic Copper’s sale of  copper anodes, cathodes, wire rod, wire and precious metals  in slimes. Atlantic Copper sold its wire rod and wire assets in  December 2004. Our consolidated revenues and net income  vary significantly with fluctuations in the market prices  38 |  FREEPORT-McMoRan COPPER & GOLD INC. 1 Year  Years  Years More Than Total  or Less  2-3  4-5  5 Years PT Freeport Indonesia funding of mine closure and reclamation fund  $ 21.6$^{a}$  $ 0.9  $ 1.4  $ 1.4  $17.9 Atlantic Copper contractual obligation to insurance company  $118.1  $ 9.8  $19.7  $19.7  $68.9 Atlantic Copper contracts to purchase concentrates at market prices  (in thousand metric tons)   1,234   415   659   160  — Aggregate operating leases, including Rio Tinto’s share$^{b}$  $ 39.9  $ 7.6  $13.5  $12.6  $ 6.2 Open purchase orders at December 31, 2004  $ 44.7  $44.7  —  —  —