Exhibit 10.5


                           Deferred Compensation Plan
                              for the Directors of
                            Phelps Dodge Corporation
                   Amended and Restated as of December 4, 1996
                   -------------------------------------------


1.       Eligibility
--------------------

                  Each  member  of  the  Board  of  Directors  of  Phelps  Dodge
Corporation  (the  "Corporation")  who is not also an officer or employee of the
Corporation   (a   "Director")  is  eligible  to  participate  in  the  Deferred
Compensation  Plan for the Directors of Phelps Dodge  Corporation  (the "Plan").
The  Secretary  of the  Corporation  shall  provide  a copy of the  Plan to each
Director  together  with a form of letter which may be used,  if the Director so
elects,  to notify the  Corporation of his or her election to participate in the
Plan.

2.       Participation
----------------------

                  (a) Deferral  Election.  Prior to December 31st of any year, a
Director  may  elect to defer  receipt  of all or any part of his or her  annual
retainer  and/or  meeting fees (the amount  elected to be deferred  being herein
referred to as "Fees") for the calendar  year  following  the year in which such
election is made, and to have such amounts  credited,  in whole or in part, to a
memorandum account credited with a fixed annual return (the "Interest  Account")
and/or a memorandum  account deemed to be invested in notional  Common Shares of
the Corporation  (the "Stock  Account").  Any person who shall become a Director
during any calendar year may elect, not later than the 30th day after his or her
term begins,  to defer payment of all or any part of his or her annual  retainer
and/or meeting fees payable for the portion of such calendar year following such
election.
                  (b)  Form  and  Duration  of  Deferral  Election.  A  deferral
election  shall  be made by  written  notice  filed  with the  Secretary  of the
Corporation.  Such election shall continue in effect  (including with respect to
compensation  payable  for  subsequent  calendar  years)  unless  and  until the
Director  revokes or modifies  such  election by written  notice  filed with the
Secretary of the Corporation.  Any such revocation or modification of a deferral
election shall become effective as of the end of the calendar year in which such
notice is given and only with respect to compensation  payable for services as a
Director thereafter.  Amounts credited to the Director's Interest Account and/or
Stock Account (collectively,  the "Accounts") prior to the effective date of any
such revocation or modification of a deferral  election shall not be affected by
such revocation or modification and shall be distributed only in accordance with
the otherwise applicable terms of the Plan.

                  (c)  Renewal.  A  Director  who has  revoked  an  election  to
participate  in the Plan may file a new  election  to  defer  fees  payable  for
services to be rendered in the calendar  year  following  the year in which such
election is filed.

3.       Director's Accounts
-----------------------------

                  (a) Establishment of Accounts.  The Corporation shall maintain
an Interest  Account and a Stock  Account for each  Director  who has elected to
participate in the Plan, and shall make additions to and subtractions  from such
Accounts as provided in this Plan.

                  (b) Interest  Account.  Fees allocated to the Interest Account
pursuant to this Section 3 shall be credited to the  Interest  Account as of the
date such Fees would have been paid to the  Director.  In the case of a transfer
of any amount from the Stock Account to the Interest  Account,  the amount to be
credited to the Interest  Account shall be  determined  pursuant to Section 4(e)
below.  Any amounts  credited to the  Interest  Account  shall be credited  with
interest annually on December 31 of each calendar year, except that in the event
a Director  dies  while the  balance in such  Director's  Interest  Account is a
positive number, interest shall be credited on such balance as of the end of the
calendar month in which the Director dies. The amount to be credited as interest
pursuant  to the  preceding  sentence  with  respect to amounts  credited to the
Interest  Account on January 1 of the then current  calendar year shall be equal
to the product of such  amounts  and the  Applicable  Interest  Rate (as defined
below).  With  respect to each amount  credited to the  Interest  Account  after
January 1 of the then  current  calendar  year,  the  amount to be  credited  as
interest pursuant to this Section 3(b) shall be equal to (i) the product of such
amount and the Applicable Interest Rate times (ii) a fraction,  the numerator of
which is the number of days in such  calendar  year during  which such amount is
credited to the Interest Account and the denominator of which is 365.

                  Effective January 1, 1993, the Applicable  Interest Rate shall
mean the  percentage  equal to the prime rate of interest in effect at The Chase
Manhattan Bank (or any successor  thereto) on the first business day of the then
current  calendar  year (the  "Annual  Rate"),  except  that,  in the case of an
interest  calculation  being made as of the end of the month in which a Director
dies,  the  Applicable  Interest  Rate shall equal the product of (i) the Annual
Rate and (ii) a fraction,  the numerator of which is the number of full calendar
months  during such year which have been  completed on or prior to such date and
the  denominator  of which is 12. (Prior to January 1, 1993,  interest  shall be
calculated and credited as provided in the Plan as previously in effect.)

                  (c) Stock  Account.  Any Fees  allocated to the Stock  Account
pursuant  to this  Section  3 shall be  deemed  to be  invested  in a number  of
notional Common Shares of the Corporation (the "Units") equal to the quotient of
(i) the dollar  amount of such Fees  divided by (ii) the Market  Value Per Share
(as  defined  below)  on the date the Fees  then  being  allocated  to the Stock
Account  would  otherwise  have  been  paid to the  Director.  In the  case of a
transfer  of any amount  from the  Interest  Account to the Stock  Account,  the
amount  being  transferred  shall be deemed to be  invested in a number of Units
equal to the quotient of (i) the dollar amount of such transfer  divided by (ii)
the Market Value Per Share on the effective  date of such  transfer.  Fractional
Units  shall  be  credited,  but  shall  be  rounded  to the  nearest  hundredth
percentile,  with  amounts  equal to or greater than .005 rounded up and amounts
less than .005 rounded down.

                  The Market  Value Per Share on any date shall mean the average
of the high and low prices per share for a Common  Share of the  Corporation  as
reported on the  Consolidated  Tape of the New York Stock Exchange on such date.
If such date is not a business  day or if no sale  occurs on such  date,  Market
Value Per Share shall be determined,  in the manner  described  above, as of the
first preceding business day on which a sale occurs.

                  Whenever a dividend other than a dividend  payable in the form
of the Corporation's Common Shares is declared with respect to the Corporation's
Common  Shares,  the number of Units in the  Director's  Stock  Account shall be
increased by the number of Units  determined  by dividing (i) the product of (A)
the number of Units in the  Director's  Stock  Account on the  related  dividend
record date and (B) the amount of any cash dividend  declared by the Corporation
on a Common  Share (or, in the case of any  dividend  distributable  in property
other than Common Shares, the per share value of such dividend, as determined by
the  Corporation  for purposes of income tax reporting) by (ii) the Market Value
Per Share on the related  dividend  payment  date.  In the case of any  dividend
declared on the  Corporation's  Common Shares which is payable in Common Shares,
the Director's  Stock Account shall be increased by the number of Units equal to
the product of (i) the number of Units credited to the Director's  Stock Account
on the  related  dividend  record  date and (ii) the  number of shares of Common
Shares (including any fraction thereof)  distributable as a dividend on a Common
Share.

                  In  the  event  of  any  change  in  the  number  or  kind  of
outstanding  Common  Shares by reason of any  recapitalization,  reorganization,
merger,  consolidation,  stock split or any similar change  affecting the Common
Shares,  other than a stock dividend as provided  above,  the Board of Directors
shall make an  appropriate  adjustment  in the number of Units  credited  to the
Director's Stock Account.

                  (d)  Investment  Elections  for Deferred  Fees.  At the time a
Director  elects to defer Fees  pursuant to Section  2(a),  the  Director  shall
designate  in writing the  portion of such  Director's  Fees,  stated as a whole
percentage,  to be  credited  to the  Interest  Account  and the  portion  to be
credited to the Stock  Account.  Any Fees to be credited to either Account shall
be rounded to the nearest  whole cent,  with  amounts  equal to or greater  than
$.005 rounded up and amounts  below $.005  rounded down. If a Director  fails to
notify the  Secretary as to how to allocate  the Fees between the two  Accounts,
100% of such Fees shall be credited to the Interest  Account.  By written notice
to the Secretary of the Corporation delivered not later than the last day of any
calendar  quarter,  a Director  may change the manner in which Fees payable with
respect to services to be rendered  after the end of such  calendar  quarter are
allocated among the Accounts.

                  (e) Transfers between Accounts.  At any time, and from time to
time, a Director may elect to make transfers  between  Accounts (with respect to
all or a portion of his or her existing  Account  balances) by written notice to
the Secretary of the Corporation.  Any such transfer shall take effect as of the
date such notice is received.

4.  Distribution from Accounts
------------------------------

                  (a) Form of  Distribution  Election.  At the  time a  Director
makes a deferral election pursuant to Section 2(a), the Director shall also file
with the  Secretary  of the  Corporation  a written  election  (a  "Distribution
Election")  with  respect to (i) the timing  and manner of  distribution  of the
aggregate  amount, if any, credited to the Interest Account and the value of any
Units to be credited to the Stock Account and (ii) the form of the  distribution
from  the  Stock  Account.   A  Distribution   Election  shall  specify  that  a
distribution from the Director's Accounts shall:

         (A)     commence  on  the  first  business  day  of  any calendar  year
                 following  the calendar  year in which such Fees are  deferred,
                 but not later than the calendar year of the electing Director's
                 75th birthday;

         (B)     be  in  one lump sum  payment  or  in  such  number  of  annual
                 installments (not to exceed ten) as the Director may designate;
                 and

         (C)     with respect to the portion of the distribution to be made from
                 the Stock Account, be payable in cash  or in  Common Shares  of
                 the Corporation.

                  (b) Amendment of Distribution  Election. A Director may at any
time, and from time to time, change the Distribution  Election applicable to his
or her Accounts. Notwithstanding the foregoing, no election to change the method
and/or timing of any distribution with respect to the Director's  Accounts shall
be effective  unless (i) it is made in writing and received by the  Secretary of
the Corporation  prior to the time at which the Director ceases to be a Director
of the Corporation and (ii) at least one full calendar year elapses between

                  (A)    the date as of which such election is so filed and

                  (B)    (I) the date as of which a distribution would otherwise
                         have commenced and

                         (II) the date as which such distribution  will commence
                         under such election.

Such timing  restrictions shall not apply to a Director's election to change the
form of payment with respect to the portion of the distribution  from his or her
Stock Account.

                  (c) Payment of Plan Distributions. Any distribution hereunder,
whether in the form  of a lump sum payment or  installments,  shall  commence in
accordance  with the  Distribution  Election  made by the Director in accordance
with Section 4(a) or 4(b). If a Director  fails to specify a  commencement  date
for a distribution in accordance  with Section 4(a) or 4(b),  such  distribution
shall  commence  on the first  business  day of the  calendar  year  immediately
following  the  year in  which  the  Director  ceases  to be a  Director  of the
Corporation.  If a Director fails to specify in accordance  with Section 4(a) or
4(b) that a  distribution  shall be made  in a lump sum  payment  or a number of
installments,  such  distribution  shall  be made  in a lump sum  payment.  If a
Director fails to specify,  in accordance with Section 4(a) or 4(b), the form of
payment for the portion of the distribution from the Stock Account, such portion
shall be payable in cash. In the case of any  distribution  being made in annual
installments,  each installment after the first installment shall be paid on the
first  business day of each calendar year following the year in which such first
installment  is paid  until  the  entire  amount  subject  to  such  installment
Distribution Election shall have been paid.

                  (d)  Valuation  of  Units on  Transfer  or  Distribution.  Any
transfer or cash distribution from the Director's Stock Account,  whether to the
Interest  Account or to the Director or his or her  beneficiary and whether part
of a lump sum  distribution  or an installment  payment,  shall be determined by
multiplying the number of Units then subject to distribution by the Market Value
Per Share on the date prior to the date as of which  distribution is to be made.
In the event of a distribution  from the Director's  Stock Account to be paid in
Common Shares,  the number of Common Shares payable shall be equal to the number
of whole  Units  subject  to such  distribution.  Any  fractional  Units will be
settled  in cash  based on the  Market  Value Per Share on the date prior to the
date as of which distribution is to be made.

                  (e) Interest Account  Installment  Payments.  Where a Director
receives the balance of his or her Accounts in annual  installments,  the amount
of each  installment  from the Interest Account shall be equal to the product of
(i) the balance  credited to such  Interest  Account on the date of such payment
and (ii) a fraction,  the numerator of which is one (1) and the  denominator  of
which is the total number of installments remaining to be paid at that time.

                  (f)  Stock  Account  Installment  Payments.  Where a  Director
receives the balance of his or her Accounts in annual  installments,  the number
of Units subject to such  distribution  shall be equal to the product of (i) the
number of Units in the Stock Account on the date of such distribution and (ii) a
fraction,  the numerator of which is one (1) and the denominator of which is the
total number of installments remaining to be paid at that time.

5.  Distribution on Death
-------------------------

                  If a Director shall die before payment of all amounts credited
to the  Director's  Accounts has been  completed,  the total unpaid balance then
credited to such Director's Accounts shall be paid to the Director's  designated
beneficiaries  or estate in a single  lump sum  payment  in cash  within 30 days
after the Secretary of the Corporation receives notice of the Director's death.

6.  Designation of a Beneficiary
--------------------------------

                  A Director may designate a beneficiary or beneficiaries (which
may be an entity other than a natural person) to receive any payments to be made
upon the  Director's  death pursuant to Section 5. At any time, and from time to
time, any such  designation  may be changed or canceled by the Director  without
the consent of any  beneficiary.  Any such  designation,  change or cancellation
must be made by written notice filed with the Secretary of the Corporation. If a
Director   designates   more  than  one   beneficiary,   any  payments  to  such
beneficiaries  made  pursuant to Section 5 shall be made in equal shares  unless
the Director has designated otherwise,  in which case the payments shall be made
in the shares designated by the Director.  If no beneficiary has been named by a
Director, payment shall be made to the Director's estate.

7.  Amendment and Termination
-----------------------------

                  The Board of Directors  may at any time amend or terminate the
Plan;  provided no such  amendment or  termination  shall impair the rights of a
Director with respect to amounts then credited to his Accounts under the Plan.

8.  Miscellaneous
-----------------

                  (a) Unfunded Plan. The  Corporation  shall not be obligated to
fund  its  liabilities  under  the  Plan,  the  separate   memorandum   Accounts
established for each Director  electing  deferment shall not constitute  trusts,
and a Director  shall have no claim against the  Corporation or its assets other
than as an unsecured general creditor.

                  (b) No Rights as Shareholder.  A Director shall have no rights
as a shareholder  of the  Corporation  with respect to any Units credited to the
Stock Account  pursuant to the Plan unless and until Common Shares are delivered
pursuant to Section 4 above.

                  (c)  Nonalienation.  The  right of a  Director  to  receive  a
distribution of the value of such Director's  Accounts  payable  pursuant to the
Plan shall not be subject to assignment or alienation.