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## Notes To Consolidated Financial Statements 

FCX has provided a valuation allowance equal to its tax credit carryforwards ($509.6 million at December 31, 2004, and $466.0 million at December 31, 2003) as these would only be used should FCX be required to pay regular U.S. tax, which is considered unlikely for the foreseeable future and because the foreign tax credits expire after ten years. Atlantic Copper is subject to taxation in Spain and has not generated significant taxable income in recent years. FCX has provided a valuation allowance equal to the future tax 

benefits resulting from Atlantic Copper’s net operating losses totaling $423.8 million at December 31, 2004, and $282.6 million at December 31, 2003, which expire through the year 2019. 

PT Freeport Indonesia’s Indonesian income tax returns prior to 2000 have been audited or are no longer subject to review by the Indonesian tax authorities. FCX’s provision for income taxes consists of the following (in thousands): 

<img src='content_image/104711.jpg'>

Differences between income taxes computed at the contractual Indonesian tax rate and income taxes recorded 

follow (dollars in thousands): 

<img src='content_image/104712.jpg'>

## Note 9.  Investment in PT Smelting and Employee Benefits 

PT Smelting.  PT Smelting, an Indonesian company, operates a smelter/refinery in Gresik, Indonesia. In 2004, PT Smelting increased its stated production capacity of 200,000 metric tons of copper metal per year to 250,000 metric tons. PT Freeport Indonesia, Mitsubishi Materials Corporation (Mitsubishi Materials), Mitsubishi Corporation (Mitsubishi) and Nippon Mining & Metals Co., Ltd. (Nippon) own 25 percent, 60.5 percent, 9.5 percent and 5 percent, respectively, of the outstanding PT Smelting common stock. PT Freeport Indonesia provides nearly all of PT Smelting’s copper concentrate requirements. Under the PT Smelting contract, 

for the first 15 years of PT Smelting’s commercial opera- tions beginning December 1998, the treatment and refining charges on the majority of the concentrate PT Freeport Indonesia provides will not fall below specified minimum rates, subject to renegotiation in 2008. The rate was $0.23 per pound during the period from the commencement of PT Smelting’s operations in 1998 until April 2004, when it declined to a minimum of $0.21 per pound. In December 2003, PT Smelting’s shareholder agreement was amended to eliminate PT Freeport Indonesia’s assignment of its earnings in PT Smelting to support a 13 percent cumulative annual return to Mitsubishi Materials, Mitsubishi and Nippon for 

