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present value costs. A decrease of one percent in the discount rates used has a similar effect resulting in an approximate 16 percent increase in the discounted present value costs. After discounting the projected cash flows, a market risk premium of 10 percent was applied to the total to reflect what a third party might require to assume these asset retirement obligations. The market risk premium was based on market-based estimates of rates that a third party would have to pay to insure its exposure to possible future increases in the value of these obligations. 

At January 1, 2003, we estimated the fair value of our aggregate asset retirement obligations to be $28.5 million. We recorded the fair value of these obligations and the related additional assets as of January 1, 2003. The net difference between our previously recorded reclamation and closure cost liability and the amounts estimated under SFAS No. 143, after taxes and minority interest, resulted in a gain of $9.1 million (after reduction by $8.5 million for taxes and minority interest sharing), $0.06 per share on a diluted basis, which was recognized as a cumulative effect adjustment for a change in accounting principle. As a result of adopting SFAS No. 143, we expect our future depreciation and amortization expense to be lower and our production costs to be higher, with no significant net impact on earnings for the near term. 

The effect of adopting SFAS No. 143 was to increase net income by approximately $1 million, $0.01 per share for 2003. Had we followed SFAS No. 143 during 2002, net income would have increased by approximately $0.5 million or less than $0.01 per share. 

At December 31, 2004 and 2003, PT Freeport Indonesia revised its estimates for (1) changes in the projected timing of certain reclamation costs because of the slippage and debris flow events in the Grasberg open pit, (2) changes in certain cost estimates, and (3) additional asset retirement obligations incurred during 2003. We estimated PT Freeport Indonesia’s aggregate asset retire- ment obligations to be about $149 million at December 31, 2004, and $130 million at December 31, 2003. An analysis of PT Freeport Indonesia’s discounted asset retire- ment obligation follows (in millions): 

<img src='content_image/10354.jpg'>

The expected deferral of certain costs was the primary change in estimates that caused the decline in the obligation balance over the last two years. These changes reduced the related asset balance and are not expected to have a material impact on future net income. 

## CONSOLIDATED RESULTS OF OPERATIONS 

Consolidated revenues include PT Freeport Indonesia’s sale of copper concentrates, which also contain significant quanti- ties of gold and silver, and the sale by Atlantic Copper of copper anodes, cathodes, wire and wire rod, and gold in anodes and slimes. Consolidated revenues and net income vary significantly with fluctuations in the market prices of copper and gold and other factors. PT Freeport Indonesia’s intercompany sales to Atlantic Copper are eliminated in consolidation. Consolidated revenues were $2.4 billion for 2004, compared with $2.2 billion for 2003, reflecting significantly higher copper and gold prices partly offset by lower-grade ore and reduced mill throughput as PT Freeport Indonesia accelerated the removal of overburden and mined low-grade ore prior to restoring safe access to the higher- grade ore areas in its Grasberg open-pit mine following the fourth-quarter 2003 slippage and debris flow events (see “Mining and Exploration Operations – PT Freeport Indonesia Operating Results”). Atlantic Copper’s 2004 revenues were adversely affected by its scheduled major maintenance turn- around (see “Smelting and Refining Operations – Atlantic Copper Operating Results”) partly offset by higher copper and gold prices. Consolidated revenues in 2003 benefited from higher copper and gold price realizations and higher gold sales volumes, partly offset by lower copper sales volumes when compared with 2002 revenues of $1.9 billion. 

Consolidated production and delivery costs were higher in 2004 at $1,450.3 million compared with $1,071.3 million for 2003 and $938.5 million for 2002. The increase in 2004 was primarily because of higher costs of concentrate purchases at Atlantic Copper caused by higher metals prices, higher produc- tion costs at PT Freeport Indonesia and the costs of Atlantic Copper’s smelter turnaround. Production and delivery costs in 2003 were higher than in 2002 primarily because of higher concentrates costs at Atlantic Copper caused by the increase in copper and gold prices during the year. Consolidated depreciation and amortization expense was $206.4 million in 2004, $230.8 million in 2003 and $260.4 million in 2002. Depreciation and amortization expense decreased each year during the last three years primarily because a large portion of our depreciation is calculated on a unit-of-production basis and our copper sales volumes at PT Freeport Indonesia declined each year. 

Exploration expenses increased to $8.7 million in 2004, from $6.4 million in 2003 and $3.1 million in 2002, reflecting increased exploration drilling in Block A. Our 2004 drilling 

