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## Notes To Consolidated Financial Statements 

million and the remaining $30.5 million was paid in January 2005. After considering its joint venture partner’s interest in the proceeds, PT Freeport Indonesia’s joint venture share of proceeds totaled $95.0 million. As a result of the settle- ment, FCX recorded on its income statement an $87.0 million gain on insurance settlement for the business interruption recovery and an $8.0 million gain to production costs for the property loss recovery for a net gain of $48.8 million, after taxes and minority interest sharing, in 2004. 

## Environmental, Reclamation and Mine Closure. 

FCX has an environmental policy committing it not only to compliance with federal, state and local environmental statutes and regulations, but also to continuous improve- ment of its environmental performance at every operational site. FCX believes that its operations are being conducted pursuant to applicable permits and are in compliance in all material respects with applicable environmental laws, rules and regulations. FCX incurred aggregate environ- mental capital expenditures and other environmental costs, including Rio Tinto’s share, totaling $65.1 million in 2004, $72.1 million in 2003 and $62.6 million in 2002. 

The ultimate amount of reclamation and closure costs to be incurred at PT Freeport Indonesia’s operations will be determined based on applicable laws and regulations and PT Freeport Indonesia’s assessment of appropriate remedial activities in the circumstances, after consultation with governmental authorities, affected local residents and other affected parties and cannot currently be projected with precision. Estimates of the ultimate reclamation and closure 

costs PT Freeport Indonesia will incur in the future involve complex issues requiring integrated assessments over a period of many years and are subject to revision over time as more complete studies are performed. 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 mining activities, which are currently estimated to continue for more than 35 years. 

Effective January 1, 2003, FCX adopted SFAS No. 143 (see Note 1). At December 31, 2004 and 2003, PT Freeport Indonesia revised its reclamation and closure estimates for (1) changes in the projected timing of certain reclama- tion costs, (2) changes in certain cost estimates and (3) additional asset retirement obligations incurred during 2003. At December 31, 2004, FCX estimated these aggregate obligations to be approximately $149 million for PT Freeport Indonesia and $18 million for Atlantic Copper, and estimated PT Freeport Indonesia’s aggregate discounted asset retire- ment obligations to be $22.0 million and Atlantic Copper’s to be $0.8 million. At December 31, 2003, FCX estimated these aggregate obligations to be approximately $130 million for PT Freeport Indonesia and $17 million for Atlantic Copper, and estimated PT Freeport Indonesia’s aggregate discounted asset retirement obligations to be $25.7 million and Atlantic Copper’s to be $0.8 million. The changes reduced the related asset balances and are not expected to have a material impact on future net income. A rollforward of FCX’s consoli- dated discounted asset retirement obligations for 2004 and 2003 follows (in thousands): 

<img src='content_image/52009.jpg'>

In 1996, PT Freeport Indonesia began contributing to a cash fund ($6.0 million balance at December 31, 2004) designed to accumulate at least $100 million (including interest) by the end of its Indonesian mining activities. PT Freeport Indonesia plans to use this fund, including accrued interest, to pay the above-mentioned 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 FCX to incur additional costs that 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. 

Contract of Work. FCX is entitled to mine in Indonesia under the “Contract of Work” between PT Freeport Indonesia and the Government of Indonesia. The original Contract of Work was entered into in 1967 and was replaced with a new Contract of Work in 1991. The initial term of the current Contract of Work expires in 2021, but can be extended by PT Freeport Indonesia for two 10-year periods, subject to Indonesian government approval, which cannot be withheld or delayed unreasonably. Given the importance of contracts of work under the Indonesian legal system and PT Freeport Indonesia’s over 35 years of working with the Indonesian 

