Making  Progress Payable Copper Sales Payable Gold Sales To Our Shareholders We successfully addressed significant operating challenges  for our Company in 2004, and by year’s end we positioned  our operations for strong performance in 2005 and beyond.  Following the Grasberg open-pit wall slippage events in the  fourth quarter of 2003, our first priority has been assuring  the safety of our workforce. We also took steps to provide  for the long-term stability of the Grasberg’s pit walls. While  the management decision to take these prudent actions  caused us to produce lower volumes of copper and gold during 2004, they positioned our operations for strong  future results. We achieved our goal of establishing safe  access to our high-grade ore areas and production ramped  up throughout 2004. By the fourth quarter of 2004, we  were mining high-grade material in the lower areas of the  Grasberg mine and achieving strong financial results. Our  outlook for 2005 is highly positive, both from an operating  and a market perspective.  Most important to our operating outlook is the signifi- cant progress we made in 2004 in our safety performance,  including new and enhanced workforce programs, renewed  and expanded management emphasis, the stabilizing work  in the Grasberg pit and additional state-of-the-art equip- ment. Our lost-time injury rate per 200,000 hours worked  at PT Freeport Indonesia for 2004 was 0.15 — a 56 percent  improvement over 2003 — compared to the U.S. metallic  mining industry average rate of 2.10 for 2003 (the latest  year available); and our total reportable rate (all reportable  injuries) for 2004 was 0.44 — a 32 percent improvement over  2003 — compared to the U.S. average of 3.39 in 2003. While  these results are positive, the focus of our organization will be  to improve our safety performance continually. Total sales for PT Freeport Indonesia, our Indonesian mining affiliate, for 2004 were 1.0 billion pounds of  copper and 1.44 million ounces of gold. Restoring safe  access to our high-grade ore is expected to provide substan- tially greater sales for 2005 — 1.5 billion pounds of copper  (50 percent more than 2004) and 2.9 million ounces of gold (100 percent more than 2004) net to PT Freeport  Indonesia’s interest.  The markets for both of our metals were strong in 2004, and the outlook for continued near-term strength is  positive. Our average realized price per pound of copper for  2004 was $1.37, a $0.55 increase from 2003. Our average  In recent years, we have aggressively reduced our  Company’s debt and lengthened the maturities of our  remaining obligations. Over the past five years, we have  reduced our debt by $966 million and our debt net of unre- stricted cash by $1.5 billion. At December 31, 2004, our  gross debt was $1.95 billion. Our net debt now totals $1.4  billion, including $575 million of our 7% convertible notes  which have a conversion price of $30.87 per share signifi- cantly below the current market price of our common stock.  We have relatively low amounts of debt maturing in the  Because the Grasberg mine and its supporting infrastruc- ture have been fully developed in past years, capital expen- ditures in recent years have been limited. In 2004, capital  expenditures totaled $141 million. We expect capital expen- ditures to total approximately $180 million in 2005 and to  average approximately $145 million annually for the next  five years. These expenditures include costs to maintain our  productive capacity, to continue to expand our underground  operations at our high-grade Deep Ore Zone underground  mine and to pursue the development of our underground  infrastructure for the long-term production of our signifi- cant underground reserves that are currently undeveloped.  With our expected strong cash flows from operations in  2005 and subsequent years, the relatively low level of capi- tal expenditures enables us to pursue a financial strategy  of continuing to improve our balance sheet while providing  returns to shareholders through dividends and purchases  of our common shares. realized price per ounce of gold was $412, a $45 increase  from 2003. Despite lower sales volumes, we generated net income for 2004 of $156.8 million, $0.85 per share,  compared to $154.2 million, $0.97 per share in 2003. We anticipate strong financial performance in 2005. At  annual average metals prices of $1.35 per pound for copper  and $420 per ounce for gold, our anticipated 2005 sales of copper and gold would be expected to provide operating  cash flows in excess of $1.1 billion, more than triple our  2004 cash flows.  2 |  FREEPORT-McMoRan COPPER & GOLD INC. a = Annual e = Estimate ounces in thousands 500 1,000 1,500 2,000 2,500 3,000 05e 04a 4Q04 3Q04 2Q04 1Q04 pounds in millions a = Annual e = Estimate 500 1,000 1,500 05e 04a 4Q04 3Q04 2Q04 1Q04