content_image/79033.jpg content_image/79036.jpg content_image/79038.jpg
<img src='content_image/79033.jpg'>

a. Includes charges to the mining and exploration segment for FCX stock option exercises, which are eliminated in consolidation, totaling $87.3 million in 2004, $57.8 million in 2003 and $5.5 million in 2002. 

b. We defer recognizing profits on PT Freeport Indonesia’s sales to Atlantic Copper and on 25 percent of PT Freeport Indonesia’s sales to PT Smelting until their sales of final products to third parties. Changes in the amount of these deferred profits impacted operating income by $(24.7) million in 2004, $13.8 million in 2003 and $(28.8) million in 2002. Our consolidated earnings fluctuate depending on the timing and prices of these sales. At December 31, 2004, our deferred profits to be recognized in future periods’ operating income totaled $80.9 million, $41.6 million to net income, after taxes and minority interest sharing. 

## MINING AND EXPLORATION OPERATIONS 

A summary of changes in PT Freeport Indonesia’s revenues follows (in millions): 

<img src='content_image/79036.jpg'>

PT Freeport Indonesia, Gross Profit Per Pound of Copper, before intercompany profit eliminations (cents): 

<img src='content_image/79038.jpg'>

a. Net of deferred mining costs totaling $77.8 million (7.8 cents per pound) in 2004, $64.4 million (5.0 cents per pound) in 2003 and $30.6 million (2.0 cents per pound) in 2002. 

b. Includes a gain on insurance settlement totaling $8.0 million (0.8 cents per pound) in 2004 and equipment losses of $8.4 million (0.7 cents per pound) in 2003 related to the fourth-quarter 2003 Grasberg pit events. 

Net cash production costs (credits) per pound of copper is a measure intended to provide investors with information about the cash generating capacity of our mining operations expressed on a basis relating to its primary metal product, copper. PT Freeport Indonesia uses this measure for the same purpose and for monitoring operating performance by its mining operations. This information differs from 

measures of performance determined in accordance with generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance determined in accordance with generally accepted accounting principles. This measure is presented by other copper and gold mining companies, although our 

