##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 1999

Commission file number 1-82

PHELPS DODGE CORPORATION

(a New York corporation)


13-1808503

(I.R.S. Employer Identification No.)


2600 N. Central Avenue, Phoenix, AZ 85004-3089

Registrants telephone number: (602) 234-8100

Securities registered pursuant to Section 12(b) of the
Act:


|                                         |  |                        
|---------------------------------------- |  | -----------------------
|                                         |  | Name of each exchange  
|Title of each class                      |  | on which registered    
|                                         |  |                        
|Common Shares, $6.25 par value per share |  | New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject
to such filing requirements for the past
90 days.  Yes  [X]  No 
[   ].

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
 herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.  [X]

The aggregate market value of Common Shares of the issuer held by
 nonaffiliates at March 6, 2000, was approximately
$3,665,633,000.

Number of Common Shares outstanding at March 6, 2000:
78,725,000 shares.

Documents Incorporated by Reference:

|                                        |  |                  |  | 
|--------------------------------------- |  | ---------------- |  | 
|Document                                |  | Location in 10-K
|                                        |  |                 
|Proxy Statement for 2000 Annual Meeting |  | Part III        



---






---



1


TABLE OF CONTENTS



|                                                      |                                                                                   |                                                                    |                                                         |                                         |                                                         |  |  | 
|----------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------- | --------------------------------------- | ------------------------------------------------------- |  |  | 
|Part I                                               
|                                                      | Items 1. and 2. Business and Properties                                          
|                                                      |                                                                                   | PHELPS DODGE MINING COMPANY                                       
|                                                      |                                                                                   |                                                                    | PD Mining -- Properties, Facilities and Production     
|                                                      |                                                                                   |                                                                    |                                                         | Mining Operations                      
|                                                      |                                                                                   |                                                                    |                                                         |                                         | Phelps Dodge Copper Production Data, by Source(a)      
|                                                      |                                                                                   |                                                                    |                                                         |                                         | Phelps Dodge Metal Production and Sales(a)(d)          
|                                                      |                                                                                   |                                                                    |                                                         |                                         | Phelps Dodge Smelters, Refineries and Rod Production(a)
|                                                      |                                                                                   |                                                                    |                                                         | Other Mining Operations and Investments
|                                                      |                                                                                   |                                                                    | Exploration                                            
|                                                      |                                                                                   |                                                                    | Ore Reserves                                           
|                                                      |                                                                                   |                                                                    | PD Mining -- Sales and Competition                     
|                                                      |                                                                                   |                                                                    | PD Mining -- Prices, Supply and Consumption            
|                                                      |                                                                                   |                                                                    | PD Mining -- Costs                                     
|                                                      |                                                                                   |                                                                    | PD Mining -- Energy Supplies                           
|                                                      |                                                                                   |                                                                    | PD Mining -- Environmental and Other Regulatory Matters
|                                                      |                                                                                   |                                                                    | PD Mining -- Ownership of Property                     
|                                                      |                                                                                   | PHELPS DODGE INDUSTRIES                                           
|                                                      |                                                                                   |                                                                    | Specialty Chemicals Segment                            
|                                                      |                                                                                   |                                                                    | Wire and Cable Segment                                 
|                                                      |                                                                                   |                                                                    | Phelps Dodge Industries -- Environmental Matters       
|                                                      |                                                                                   | LABOR MATTERS                                                     
|                                                      |                                                                                   | RESEARCH AND DEVELOPMENT                                          
|                                                      |                                                                                   | OTHER ENVIRONMENTAL MATTERS                                       
|                                                      | Item 3. Legal Proceedings                                                        
|                                                      | Item 4. Submission of Matters to a Vote of Security Holders                      
|                                                      | Executive Officers of Phelps Dodge Corporation                                   
|Part II                                              
|                                                      | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters
|                                                      | Item 6. Selected Financial Data                                                  
|                                                      | Item 7. Managements Discussion and Analysis                                     
|                                                      | Item 8. Financial Statements and Supplementary Data                              
|                                                      | Item 9. Disagreements on Accounting and Financial Disclosure                     
|                                                      |                                                                                   | MANAGEMENTS DISCUSSION AND ANALYSIS                              
|                                                      |                                                                                   | RESULTS OF PHELPS DODGE MINING COMPANY                            
|RESULTS OF PHELPS DODGE INDUSTRIES                   
|                                                      |                                                                                   | OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS
|                                                      |                                                                                   | CHANGES IN FINANCIAL CONDITION; CAPITALIZATION                    
|                                                      |                                                                                   | CAPITAL OUTLAYS                                                   
|                                                      |                                                                                   | INFLATION                                                         
|                                                      |                                                                                   | DIVIDENDS AND MARKET PRICE RANGES                                 
|                                                      |                                                                                   | QUARTERLY FINANCIAL DATA                                          
|                                                      |                                                                                   | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                        
|                                                      |                                                                                   | REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE 
|                                                      |                                                                                   | REPORT OF MANAGEMENT                                              
|                                                      |                                                                                   | REPORT OF INDEPENDENT ACCOUNTANTS                                 
|                                                      |                                                                                   | STATEMENT OF CONSOLIDATED OPERATIONS                              
|                                                      |                                                                                   | CONSOLIDATED BALANCE SHEET                                        
|CONSOLIDATED STATEMENT OF CASH FLOWS                 
|CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS EQUITY
|                                                      |                                                                                   | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                        
|                                                      |                                                                                   | Financial Data by Geographic Area                                 
|                                                      |                                                                                   | Financial Data by Business Segment                                
|PART III                                             
|                                                      | Items 10, 11, 12 and 13.                                                         
|PART IV                                              
|                                                      | Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.        
|                                                      | VALUATION AND QUALIFYING ACCOUNTS AND RESERVES                                   
|                                                      | SIGNATURES                                                                       



---



PHELPS DODGE CORPORATION

ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 1999


TABLE OF CONTENTS

|         |                                                                                    |                                       |                                                                     |                                         |                                                   |    |    |    | 
|-------- | ---------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------------------------------- | --------------------------------------- | ------------------------------------------------- | -- | -- | -- | 
|         |                                                                                    | Page                                 
|         |                                                                                    |                                      
|Part I.  |                                                                                    |                                       |                                                                     |                                        
|        
|        
|        
|        
|         | Items 1. and 2. Business and Properties                                            |                                       |                                                                     | 3                                       |                                                  
|        
|        
|        
|        
|         |                                                                                    | Phelps Dodge Mining Company           |                                                                     |                                         | 4                                                 |   
|        
|        
|        
|        
|         |                                                                                    | Properties, Facilities and Production |                                                                     |                                         | 4                                                 |   
|        
|        
|        
|        
|         |                                                                                    |                                       |                                                                     | Mining Operations                       |                                                   |    | 4  |   
|        
|        
|        
|        
|         |                                                                                    |                                       |                                                                     |                                         | Phelps Dodge Mining Production Data, by Source    |    |    | 8  | 
|        
|        
|        
|        
|         |                                                                                    |                                       |                                                                     |                                         | Phelps Dodge Metal Production and Sales           |    |    | 9  | 
|        
|        
|        
|        
|         |                                                                                    |                                       |                                                                     |                                         | Phelps Dodge Smelters and Refineries  Production |    |    | 10 | 
|        
|        
|        
|        
|         |                                                                                    |                                       |                                                                     | Other Mining Operations and Investments |                                                   |    | 11 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Exploration                                                         |                                         |                                                   | 11 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Ore Reserves                                                        |                                         |                                                   | 13 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Sales and Competition                                               |                                         |                                                   | 15 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Prices, Supply and Consumption                                      |                                         |                                                   | 15 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Costs                                                               |                                         |                                                   | 16 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Energy Supplies                                                     |                                         |                                                   | 17 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Environmental and Other Regulatory Matters                          |                                         |                                                   | 17 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Ownership of Property                                               |                                         |                                                   | 19 |   
|        
|        
|        
|        
|         |                                                                                    | Phelps Dodge Industries               |                                                                     |                                         | 19                                                |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Specialty Chemicals Segment                                         |                                         |                                                   | 20 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Wire and Cable Segment                                              |                                         |                                                   | 21 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Environmental Matters                                               |                                         |                                                   | 22 |   
|        
|        
|        
|        
|         |                                                                                    | Labor Matters                         |                                                                     |                                         | 22                                                |   
|        
|        
|        
|        
|         |                                                                                    | Research and Development              |                                                                     |                                         | 23                                                |   
|        
|        
|        
|        
|         |                                                                                    | Other Environmental Matters           |                                                                     |                                         | 23                                                |   
|        
|        
|        
|        
|        
|         | Item 3. Legal Proceedings                                                          |                                       |                                                                     | 24                                      |                                                  
|        
|        
|        
|        
|        
|         | Item 4. Submission of Matters to a Vote of Security Holders                        |                                       |                                                                     | 29                                      |                                                  
|        
|        
|        
|        
|        
|         | Executive Officers of Phelps Dodge Corporation                                     |                                       |                                                                     | 29                                      |                                                  
|        
|Part II. |                                                                                    |                                       |                                                                     |                                        
|        
|        
|        
|        
|         | Item 5. Market for the Registrants Common Equity and
	Related Stockholder Matters |                                       |                                                                     | 30                                      |                                                  
|        
|        
|        
|        
|        
|         | Item 6. Selected Financial Data                                                    |                                       |                                                                     | 30                                      |                                                  
|        
|         | Item 7. Managements Discussion and Analysis                                       |                                       |                                                                     |                                         |                                                  
|        
|        
|        
|        
|         |                                                                                    | Managements Discussion and Analysis  |                                                                     |                                         | 31                                                |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Results of Phelps Dodge Mining Company                              |                                         |                                                   | 36 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Results of Phelps Dodge Industries                                  |                                         |                                                   | 40 |   
|        
|        
|        
|        
|         |                                                                                    |                                       | Other Matters Relating to the Statement of Consolidated
	Operations |                                         |                                                   | 43 |   



---



##### Table of Contents



2

|          |                                                              |                                                                           |  |     |    | 
|--------- | ------------------------------------------------------------ | ------------------------------------------------------------------------- |  | --- | -- | 
|          |                                                              | Page                                                                     
|          |                                                              |                                                                          
|          |                                                              | Changes in Financial Condition; Capitalization                            |  |     | 45 | 
|         
|         
|         
|         
|          |                                                              | Capital Outlays                                                           |  |     | 50 | 
|         
|         
|         
|         
|          |                                                              | Inflation                                                                 |  |     | 50 | 
|         
|         
|         
|         
|          |                                                              | Dividends and Market Price Ranges                                         |  |     | 50 | 
|         
|         
|         
|         
|          |                                                              | Quarterly Financial Data                                                  |  |     | 51 | 
|         
|          | Item 8. Financial Statements and Supplementary Data          |                                                                           |  |     |   
|         
|         
|         
|         
|          |                                                              | Index to Consolidated Financial Statements                                |  |     | 52 | 
|         
|         
|         
|         
|          |                                                              | Report of Independent Accountants on Financial Statement Schedule         |  |     | 53 | 
|         
|         
|         
|         
|          |                                                              | Report of Management                                                      |  |     | 54 | 
|         
|         
|         
|         
|          |                                                              | Report of Independent Accountants                                         |  |     | 55 | 
|         
|         
|         
|         
|          |                                                              | Statement of Consolidated Operations                                      |  |     | 56 | 
|         
|         
|         
|         
|          |                                                              | Consolidated Balance Sheet                                                |  |     | 57 | 
|         
|         
|         
|         
|          |                                                              | Consolidated Statement of Cash Flows                                      |  |     | 58 | 
|         
|         
|         
|         
|          |                                                              | Consolidated Statement of Common Shareholders Equity                     |  |     | 59 | 
|         
|         
|         
|         
|          |                                                              | Notes to Consolidated Financial Statements                                |  |     | 60 | 
|         
|         
|         
|         
|          |                                                              | Financial Data by Geographic Area                                         |  |     | 90 | 
|         
|         
|         
|         
|          |                                                              | Financial Data by Business Segment                                        |  |     | 91 | 
|         
|         
|         
|         
|         
|          | Item 9. Disagreements on Accounting and Financial Disclosure |                                                                           |  | N/A |   
|         
|Part III. |                                                              |                                                                           |  |    
|         
|         
|         
|         
|          |                                                              | Item 10. Directors and Executive Officers of the Registrant               |  |     | 93 | 
|         
|         
|         
|         
|          |                                                              | Item 11. Executive Compensation                                           |  |     | 93 | 
|         
|         
|         
|         
|          |                                                              | Item 12. Security Ownership of Certain Beneficial Owners and
	 Management |  |     | 93 | 
|         
|         
|         
|         
|          |                                                              | Item 13. Certain Relationships and Related Transactions                   |  |     | 93 | 
|         
|Part IV.  |                                                              |                                                                           |  |    
|         
|         
|         
|         
|          |                                                              | Item 14. Exhibits, Financial Statement Schedule and Reports
	on Form 8-K  |  |     | 93 | 
|         
|         
|         
|         
|         
|          |                                                              | Valuation and Qualifying Accounts and Reserves                            |  |     | 97 | 
|         
|         
|         
|         
|         
|          |                                                              | Signatures                                                                |  |     | 98 | 



---



##### Table of Contents



3

PHELPS DODGE CORPORATION

1999 ANNUAL REPORT ON FORM 10-K




Part I




Items 1. and 2.  Business and Properties

Phelps Dodge Corporation (the Company, which may be also referred
 to as Phelps Dodge, PD, we, us or ours) is the worlds
second largest producer of copper, among the worlds largest
 carbon black and magnet wire producers, and is the worlds
largest producer of continuous-cast copper rod. On
October 16, 1999, we acquired Cyprus Amax Minerals Company
(Cyprus Amax or Cyprus) thereby enhancing our copper assets with
significant operations in the United States and South America. As
 a result of the acquisition, we also became the worlds
leading producer of molybdenum and molybdenum products.

The Company comprises two divisions: (i) Phelps Dodge Mining
 Company and (ii) Phelps Dodge Industries. These are more
fully described in Note 21 to the Consolidated Financial
Statements which also sets forth financial information about the
divisions including the sales and long-lived assets of our
international operations.

(i)  Phelps Dodge Mining Company is a business segment that
includes our worldwide copper operations from mining through rod
production, marketing and sales; molybdenum operations from
mining through manufacturing, marketing and sales; other mining
operations and investments; and worldwide mineral exploration and
 development programs.

(ii)  Phelps Dodge Industries includes our specialty
chemicals segment, our wire and cable segment, and, until they
were sold in 1998, our wheel and rim operations.

In 1999, including production from the acquired Cyprus operations
 as of October 16, Phelps Dodge Mining Company produced
890,100 tons of copper for our account from worldwide mining
operations, and an additional 191,200 tons of copper for the
accounts of our minority interest joint-venture partners. Gold,
silver, molybdenum, copper sulfate and sulfuric acid are
by-products of our copper operations. Production of copper for
our own account from our U.S. operations constituted
approximately 35 percent of the copper mined in the United
States in 1999. Much of our U.S. cathode copper production,
together with additional copper purchased from others, is used to
 produce continuous-cast copper rod, the basic feed for the
electrical wire and cable industry. We also explore for metals
and minerals throughout the world.

Our international mining operations include Candelaria and El
Abra, major copper mines in Chile, the Cerro Verde mine in Peru,
and other operations and investments in Chile and Peru. These
operations produce a variety of metals and minerals including
copper, gold and silver.

Molybdenum concentrate is produced at our Henderson mine in
Colorado, and as a by-product at several of our U.S. copper
operations. The concentrate is roasted to produce molybdenum
oxide at one of our three roasting operations, and various
molybdenum metallurgical and chemical products are produced at
our three conversion facilities.

In addition to our mining interests, we produce engineered
products principally for the global energy, telecommunications,
transportation and specialty chemicals sectors through Phelps
Dodge Industries.

We produce specialty chemicals at operations in North America,
Europe, Latin America and Asia through Columbian Chemicals
Company, one of the worlds largest producers of carbon
black. Carbon black is a reinforcing agent in natural and
synthetic rubber that increases the service life of tires, hoses,
 belting and other products for the rubber industry. We also
produce specialty carbon black for other industrial applications
such as pigments for printing, coatings, plastics and other
non-rubber applications.

Our wire and cable segment has operations in the United States,
Latin America, Asia, Europe and Africa. This segment produces
magnet wire and other copper products for sale principally to
original equipment manufacturers for use in electrical motors,
generators, transformers and other products, and manufactures
energy and telecommunications cables and specialty conductors.



---



##### Table of Contents



4

Our world headquarters is located in Phoenix, Arizona, with a
temporary satellite facility in Tempe, Arizona. The Phoenix and
Tempe offices are leased properties.

Throughout this document, unless otherwise stated, all references
 to tons are to short tons, and references to ounces are to troy
ounces.

We employed 16,400 people on December 31, 1999.




PHELPS DODGE MINING COMPANY

Phelps Dodge Mining Company (PD Mining) is our international
business segment that comprises a group of companies involved in
vertically integrated copper operations including mining,
concentrating, electrowinning, smelting and refining, rod
production, marketing and sales, and related activities. PD
Mining sells copper to others primarily as rod, cathode or
concentrate, and as rod to our wire and cable segment. In
addition, PD Mining at times smelts and refines copper and
produces copper rod for customers on a toll basis. It is also an
integrated producer of molybdenum, with mining, roasting and
processing facilities producing molybdenum concentrate as well as
 metallurgical and chemical products. In addition, it produces
gold, silver, molybdenum, rhenium and copper chemicals as
by-products, and sulfuric acid from its air quality control
facilities. This business segment also includes worldwide mineral
 exploration and development programs.




PD Mining  Properties, Facilities and
Production




Mining Operations

We produce copper concentrate from open-pit mines and
concentrators located in Morenci, Bagdad, and Green Valley,
Arizona; Santa Rita, New Mexico; and near Copiapó, Chile. We
 produce electrowon copper cathode at solution extraction/
electrowinning (SX/EW) operations in Tyrone and Santa Rita, New
Mexico; Morenci, Miami, Bagdad and Green Valley, Arizona; near
Arequipa, Peru; and near Calama, Chile.

The Morenci complex in southeastern Arizona comprises an open-pit
 mine, a concentrator, four solution extraction facilities and
two electrowinning tankhouses. A second concentrator, the Metcalf
 concentrator, was shut down in 1999. We operate Morenci and own
an 85 percent undivided interest; the remaining
15 percent interest is owned by Sumitomo Metal Mining
Arizona, Inc. (Sumitomo), a jointly owned subsidiary of Sumitomo
Metal Mining Co., Ltd., and Sumitomo Corporation. Sumitomo takes
in kind its share of Morenci production. Morenci is the largest
copper producing operation in North America.

On June 30, 1999, we announced the placement of the Metcalf
concentrator on standby resulting in a reduction of approximately
 70,000 tons of annual copper production. In the fourth quarter,
as a result of the acquisition of Cyprus Amax together with the
planned conversion of Morenci to mine-for-leach, it was
determined that the Metcalf concentrator would be permanently
closed. At that time, we recognized an impairment of $88 million
pre-tax for its closure. See Note 3 to the Consolidated
Financial Statements for more information.

Litigation concerning the allocation of available water supplies
could adversely affect the water supplies for the Morenci
operation and our other properties in Arizona. See Item 3,
Legal Proceedings for information concerning the
status of these proceedings.

Our wholly owned Bagdad mine in northwestern Arizona primarily
mines copper sulfide ore and produces copper concentrate with
significant molybdenum and minor silver by-products. The
operation consists of an open-pit mine, sulfide ore concentrator
producing copper and molybdenum concentrates, and an oxide
leaching system with an SX/EW plant producing copper cathode.

We also own the Sierrita mine near Green Valley, Arizona. The
facility consists of an open-pit mine, sulfide ore concentrator,
a molybdenum recovery plant and two molybdenum roasters. Copper
ore mined at Sierrita is processed into copper and molybdenum
concentrates. Sierrita also uses an oxide and low-grade sulfide
ore dump leaching system with an SX/EW plant to produce copper
cathode. Sierritas on-site roasters process molybdenum
concentrates produced at Sierrita, Bagdad and Chino, and on a
toll basis for third



---



##### Table of Contents



5



Our wholly owned Miami operations consist of an open-pit copper
mine, an SX/EW plant producing copper cathode, a smelter, an acid
 plant, an electrolytic refinery and a copper rod plant. The
facilities are located near Miami, Arizona.

We operate an open-pit copper mine, concentrator and SX/EW
facility in Santa Rita, New Mexico, and a smelter in Hurley, New
Mexico, that are owned by Chino Mines Company (Chino), a general
partnership in which we hold a two-thirds partnership interest.
Heisei Minerals Corporation (Heisei), a subsidiary of Mitsubishi
Materials Corporation and Mitsubishi Corporation, owns the
remaining one-third interest in Chino. Each partner purchases its
 proportionate share of Chinos copper production each
month. On October 21, 1998, we announced that we would
curtail production at Chino. The production curtailment occurred
in phases between October 31, 1998, and the first half of
1999. The curtailment resulted in a reduction of 35,000 tons of
annual copper production.

Our Tyrone mine-for-leach, open-pit copper mine and SX/EW plant
near Silver City, New Mexico, are wholly owned.

We also operate the Candelaria mine located near Copiapó in
the Atacama Desert of northern Chile. We completed construction
and commenced operations at Candelaria in October 1994, and
completed an expansion of the facility in 1997. The operation
presently consists of an open-pit copper mine, concentrator, port
 and associated facilities. We own an 80 percent interest in
 Candelaria through Phelps Dodge Candelaria, Inc., a wholly owned
 subsidiary. Sumitomo Metal Mining Co., Ltd., and Sumitomo
Corporation own the remaining 20 percent interest.

Phelps Dodge owns 51 percent of El Abra, located near
Calama, which holds mining concessions over more than 33,000
acres of land in the copper-rich Second Region of northern Chile.
 The remaining 49 percent is owned by the state-owned copper
 enterprise Corporación Nacional del Cobre de Chile
(Codelco). The El Abra operation, which began commercial
production in December 1996, consists of a mine-for-leach open
pit mining operation that uses three stages of crushing prior to
leaching, an on/off leach pad, and an SX/EW plant to produce
copper cathode. El Abra also contains a copper sulfide deposit
with currently identified mineralized material of about 650
million tons.

We own approximately 82 percent of the common stock of
Sociedad Minera Cerro Verde S.A. (Cerro Verde). Compañia de
Minas Buenaventura S.A., a long-established Peruvian mining
concern owns approximately 9 percent and the employees own
approximately 9 percent. The operation, located
approximately 30 kilometers southwest of Arequipa, Peru, consists
 of two open pits, Cerro Verde and Santa Rosa, a heap-leach
operation and an SX/EW plant to produce copper cathode. The ore
is processed through primary, secondary and tertiary crushers and
 placed on leach pads after agglomeration. Studies to date
indicate that development of a sulfide operation following the
current leach project at Cerro Verde may be viable.

Until the fourth quarter of 1998, we produced copper concentrate
from two underground mines and a concentrator located near
Copiapó, Chile, through our wholly owned Chilean subsidiary,
 Compañía Contractual Minera Ojos del Salado (Ojos del
Salado). We suspended operations indefinitely at Ojos del Salado
on October 21, 1998, resulting in a reduction of more than
20,000 tons of annual copper production. Ojos del Salado remained
 on care and maintenance status at year end.

We are the worlds leading producer of copper using the
SX/EW process. In 1999, including production from acquired Cyprus
 operations as of October 16, we produced a total of 511,500
 tons of cathode copper at our SX/EW facilities, compared with
430,800 tons in 1998 and 418,000 tons in 1997. SX/EW is a
cost-effective process of extracting copper from certain types of
 ores. SX/EW is a major factor in our continuing efforts to
maintain internationally competitive costs. Our total annual
capacity of electrowon copper cathode production is currently
290,000 tons at Morenci, 248,000 tons at El Abra, 75,000 tons at
the Santa Rita plant, 75,000 tons at Tyrone, 105,000 tons at
Miami, and 75,000 tons at Cerro Verde.



---



##### Table of Contents



6

On February 3, 1998, we acquired Cobre Mining Company Inc.
(Cobre) located in southwestern New Mexico adjacent to our Chino
operations. The primary assets of Cobre include the Continental
Mine, which comprises an open-pit copper mine, two underground
copper mines, two mills, and the surrounding 11,000 acres of
land, including mineral rights. On October 21, 1998, we
indefinitely suspended underground mining at Cobre due to low
copper prices. On March 17, 1999, the remaining operations
were suspended reducing copper production by 35,000 tons per
year. The entire operation remained on care and maintenance
status at year end.

We own and operate a copper smelter in Miami, Arizona, and,
through Chino Mines Company, a two-thirds interest in the Chino
smelter in Hurley, New Mexico. We smelt virtually all of our
share of our U.S. copper concentrate production and occasionally
some concentrate production from Candelaria. In addition, we
purchase concentrate to keep our smelters operating at efficient
levels. On June 30, 1999, we announced a restructuring plan
that included temporarily shutting down our Hidalgo smelter in
Hidalgo County, New Mexico. On September 3, 1999, we
suspended operations at the Hidalgo smelter. As a result of the
successful acquisition of Cyprus Amax and the planned conversion
at Morenci to a mine-for-leach operation, the Hidalgo smelter is
expected to be reconfigured to allow it to be a reliable source
of acid. This reconfiguration resulted in a pre-tax write down of
 the Hidalgo assets of $201.5 million.

We refine our share of anode copper production from our smelters
at our refineries in El Paso, Texas, and Miami, Arizona. During
1999, the El Paso refinery operated significantly below capacity
due to the late third quarter closing of the Hidalgo smelter. The
 closure of the Hidalgo smelter resulted not only in a
curtailment of operations at the El Paso refinery, but also a
reduction of approximately 200 refinery jobs. Our Miami refinery
has an annual production capacity of about 200,000 tons of copper
 cathode. The total combined capacity of about 650,000 tons of
electrolytic copper per year is sufficient to refine all the
anode copper we produce for our account at our operating smelters
 as well as anodes from other customers that we refine on a toll
basis. Our refineries also produce varying quantities of gold,
silver and copper sulfate and recover small amounts of selenium,
platinum and palladium as by-products of the copper refining
process.

We are the worlds largest producer of continuous-cast
copper rod, the basic feed for the electrical wire and cable
industry. Most of our refined copper, and additional purchased
copper, is converted into rod at our continuous-cast copper rod
facilities in El Paso, Texas; Norwich, Connecticut; Miami,
Arizona; and Chicago, Illinois. Our four plants have a collective
 annual capacity to convert more than 1.1 million tons of refined
 copper into rod and other refined copper products.

Phelps Dodge owns the underground Henderson molybdenum mine near
Empire, Colorado. The operation consists of an underground block
caving mine where molybdenite ore is mined and transported to a
conventional sulfide mill. The concentrator is capable of
operating at a rate of 32,000 tons of ore per day, producing
molybdenum disulfide concentrate containing up to 58 percent
 molybdenum. Most of the concentrate is shipped to our Fort
Madison roasting and chemical processing facility in Iowa where a
 number of different products are made for final sale to
customers. A portion of Hendersons production is sold to
customers as molybdenum disulfide. For the period October 16
 through December 31, 1999, the mine and mill were in
start-up following completion of the Henderson 2000 project. The
Henderson 2000 project consisted of the replacement of a
20 year old underground and surface rail transportation
system with a modern conveyor. It also included the development
of a new production level using more efficient high-lift caving
methods. The new crushing and conveying system is on-line and
full capacity is expected by March 31, 2000. At year end
1999, due to reduced customer requirements, a curtailment at
Henderson was announced that will reduce production by
approximately 20 percent and the number of employees by 110,
 or 19 percent.

Phelps Dodge also owns the Climax molybdenum mine near Leadville,
 Colorado. The operation consists of both an underground and
open-pit mine, and an 18,000 ton-per-day concentrator. The
operation is on standby. The property occupies more than 14,000
acres.

Phelps Dodge processes molybdenum concentrates at its conversion
plants in the United States and Europe into such products as
technical grade molybdic oxide, ferromolybdenum, pure molybdic
oxide, ammonium molybdates and molysulfide powder. The Company
operates molybdenum roasters at Green Valley, Arizona; Fort
Madison, Iowa; and Rotterdam, The Netherlands.



---



##### Table of Contents



7

The Fort Madison conversion plant is located in Fort Madison,
Iowa. The facilities consist of two molybdenum roasters, a
sulfuric acid plant, a metallurgical (technical oxide) packaging
facility, and a chemical conversion plant, which includes a wet
chemicals plant and sublimation equipment. In the chemical plant,
 technical grade oxide is further refined into various high
purity molybdenum chemicals for a wide range of uses by chemical
and catalyst manufacturers. The Fort Madison facility produces
ammonium dimolybdate, pure molybdic oxide, ammonium
heptamolybdate, ammonium octamolybdate, sodium molybdate,
sublimed pure oxide and molybdenum disulfide.

The Rotterdam conversion plant consists of a molybdenum roaster,
sulfuric acid plant, a metallurgical packaging facility and a
chemical conversion plant. The plant produces metallurgical
products primarily for third parties. Ammonium dimolybdate and
pure molibdic oxide are produced in a wet chemical plant.

We also produce ferromolybdenum and molybdenum disulfide at our
conversion plant located in Stowmarket, United Kingdom, for both
European and worldwide customers. The plant is operated as both
an internal and external customer tolling facility.

The following tables show our worldwide copper production by
source for the years 1995 through 1999; aggregate production and
sales data for copper, gold, silver, molybdenum and sulfuric acid
 from these sources for the same years; annual average copper and
 molybdenum prices; and production from our smelters and
refineries. Major changes in operations during the five-year
period included:



| |   |                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | acquisition of Cyprus Amax on October 16, 1999 (the primary
	assets acquired included the Bagdad, Sierrita, Miami, El Abra and
	 Cerro Verde copper mines; the Henderson and Climax molybdenum
	mines; a copper smelter, refinery and two rod plants; three
	molybdenum roasting operations and three molybdenum conversion
	facilities);
|
| |  | permanent closure of the Metcalf concentrator at the end of 1999;                                                                                                                                                                                                                                                                        
|
| |  | temporary closure of Hidalgo smelter facilities on
	September 3, 1999, (Hidalgo smelter is expected to be
	reconfigured to an acid conversion facility);                                                                                                                                                                                 
|
| |  | sale of Phelps Dodge Mining (Pty.) Limited (fluorspar operation)
	at the end of the 1999 second quarter;                                                                                                                                                                                                                                 
|
| |  | curtailment of Chino operations beginning in the 1998 fourth
	quarter;                                                                                                                                                                                                                                                                   
|
| |  | acquisition of Cobre in February 1998 followed by indefinite
	 suspension of underground mining in October 1998 and the
	remaining facilities on March 17, 1999;                                                                                                                                                                         
|
| |  | indefinite suspension of operations at Ojos del Salado in October
	 1998;                                                                                                                                                                                                                                                                
|
| |  | completion of the Southwest solution extraction project at
	Morenci in the 1998 third quarter;                                                                                                                                                                                                                                           
|
| |  | expansion of concentrator operations at Candelaria in the 1997
	fourth quarter;                                                                                                                                                                                                                                                          
|
| |  | expansion of Chinos SX/EW plant at Santa Rita in 1997.                                                                                                                                                                                                                                                                                  



---



##### Table of Contents



8




Phelps Dodge Copper
Production Data, by Source(a)

|                                      |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |         | 
|------------------------------------- | ---------------------- | --------------- | ------- | ------- |  | ---- | ------- | ------- |  | ---- | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                                      |                        | 1999            |         | 1998    |  | 1997 |         | 1996    |  | 1995
|                                      |                        |                 |         |         |  |      |         |         |  |     
|                                      |                        |                
|                                      |                        | (thousand tons)
|                                     
|                                     
|                                     
|                                     
|Material mined(b)                     |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                     
|                                     
|                                     
|                                     
|Morenci                               |                        |                 | 297,872 |         |  |      | 288,200 |         |  |      | 291,698 |         |  |  | 297,688 |         |  |  | 261,264 |        
|                                     
|                                     
|                                     
|                                     
|Candelaria                            |                        |                 | 126,903 |         |  |      | 131,155 |         |  |      | 90,045  |         |  |  | 83,962  |         |  |  | 72,068  |        
|                                     
|                                     
|                                     
|                                     
|Tyrone                                |                        |                 | 113,422 |         |  |      | 108,359 |         |  |      | 107,896 |         |  |  | 102,936 |         |  |  | 83,935  |        
|                                     
|                                     
|                                     
|                                     
|Chino                                 |                        |                 | 44,562  |         |  |      | 117,432 |         |  |      | 121,639 |         |  |  | 122,939 |         |  |  | 115,821 |        
|                                     
|                                     
|                                     
|                                     
|Bagdad                                |                        |                 | 16,233  |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Sierrita                              |                        |                 | 15,875  |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Miami                                 |                        |                 | 13,787  |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Cerro Verde                           |                        |                 | 11,459  |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|El Abra                               |                        |                 | 10,029  |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Cobre                                 |                        |                 | 4,558   |         |  |      | 15,763  |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Ojos del Salado                       |                        |                 |        |         |  |      | 1,336   |         |  |      | 1,713   |         |  |  | 1,628   |         |  |  | 1,855   |        
|                                      |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                      | Total material mined   |                 |         | 654,700 |  |      |         | 662,245 |  |      |         | 612,991 |  |  |         | 609,153 |  |  |         | 534,943 | 
|                                     
|                                     
|                                     
|                                     
|Less minority participants shares(c) |                        |                 | 89,830  |         |  |      | 108,605 |         |  |      | 102,305 |         |  |  | 102,421 |         |  |  | 92,211  |        
|                                      |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                      | Net Phelps Dodge share |                 |         | 564,870 |  |      |         | 553,640 |  |      |         | 510,686 |  |  |         | 506,732 |  |  |         | 442,732 | 
|                                      |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Ore mined(b)                          |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                     
|                                     
|                                     
|                                     
|Morenci                               |                        |                 | 40,447  |         |  |      | 49,392  |         |  |      | 50,951  |         |  |  | 47,136  |         |  |  | 44,284  |        
|                                     
|                                     
|                                     
|                                     
|Candelaria                            |                        |                 | 20,451  |         |  |      | 24,433  |         |  |      | 13,055  |         |  |  | 11,603  |         |  |  | 11,439  |        
|                                     
|                                     
|                                     
|                                     
|Tyrone                                |                        |                 | 55,693  |         |  |      | 55,086  |         |  |      | 50,528  |         |  |  | 53,687  |         |  |  | 55,986  |        
|                                     
|                                     
|                                     
|                                     
|Chino                                 |                        |                 | 16,362  |         |  |      | 17,306  |         |  |      | 18,413  |         |  |  | 20,061  |         |  |  | 17,026  |        
|                                     
|                                     
|                                     
|                                     
|Bagdad                                |                        |                 | 6,126   |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Sierrita                              |                        |                 | 7,918   |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Miami                                 |                        |                 | 2,501   |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Cerro Verde                           |                        |                 | 2,642   |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|El Abra                               |                        |                 | 8,706   |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Cobre                                 |                        |                 | 870     |         |  |      | 4,898   |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Ojos del Salado                       |                        |                 |        |         |  |      | 1,179   |         |  |      | 1,551   |         |  |  | 1,506   |         |  |  | 1,596   |        
|                                      |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                      | Total ore mined        |                 |         | 161,716 |  |      |         | 152,294 |  |      |         | 134,498 |  |  |         | 133,993 |  |  |         | 130,331 | 
|                                     
|                                     
|                                     
|                                     
|Less minority participants shares(c) |                        |                 | 19,877  |         |  |      | 18,064  |         |  |      | 16,391  |         |  |  | 16,078  |         |  |  | 14,606  |        
|                                      |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                      | Net Phelps Dodge share |                 |         | 141,839 |  |      |         | 134,230 |  |      |         | 118,107 |  |  |         | 117,915 |  |  |         | 115,725 | 
|                                      |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Grade of ore mined  percent copper   |                        |                 |         |         |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                     
|                                     
|                                     
|                                     
|Morenci                               |                        |                 | 0.68    |         |  |      | 0.68    |         |  |      | 0.72    |         |  |  | 0.70    |         |  |  | 0.64    |        
|                                     
|                                     
|                                     
|                                     
|Candelaria                            |                        |                 | 1.21    |         |  |      | 1.07    |         |  |      | 1.45    |         |  |  | 1.40    |         |  |  | 1.88    |        
|                                     
|                                     
|                                     
|                                     
|Tyrone                                |                        |                 | 0.28    |         |  |      | 0.26    |         |  |      | 0.29    |         |  |  | 0.30    |         |  |  | 0.34    |        
|                                     
|                                     
|                                     
|                                     
|Chino                                 |                        |                 | 0.59    |         |  |      | 0.68    |         |  |      | 0.69    |         |  |  | 0.63    |         |  |  | 0.71    |        
|                                     
|                                     
|                                     
|                                     
|Bagdad                                |                        |                 | 0.42    |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Sierrita                              |                        |                 | 0.24    |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Miami                                 |                        |                 | 0.57    |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|Cerro Verde                           |                        |                 | 0.78    |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        
|                                     
|                                     
|                                     
|                                     
|El Abra                               |                        |                 | 0.78    |         |  |      |        |         |  |      |        |         |  |  |        |         |  |  |        |        



---



##### Table of Contents



9

|                                      |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |       | 
|------------------------------------- | --------------------------- | --------------- | ----- | ------- |  | ---- | ----- | ------- |  | ---- | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                                      |                             | 1999            |       | 1998    |  | 1997 |       | 1996    |  | 1995
|                                      |                             |                 |       |         |  |      |       |         |  |     
|                                      |                             |                
|                                      |                             | (thousand tons)
|                                     
|                                     
|                                     
|                                     
|Cobre                                 |                             |                 | 1.00  |         |  |      | 0.93  |         |  |      |      |       |  |  |      |       |  |  |      |      
|                                     
|                                     
|                                     
|                                     
|Ojos del Salado                       |                             |                 |      |         |  |      | 1.61  |         |  |      | 1.54  |       |  |  | 1.57  |       |  |  | 1.40  |      
|                                     
|                                     
|                                     
|                                     
|Recoverable copper(d)                 |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|Morenci:                              |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Concentrate                 |                 |       | 195.2   |  |      |       | 247.2   |  |      |       | 269.9 |  |  |       | 247.1 |  |  |       | 211.6 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 284.7   |  |      |       | 275.8   |  |      |       | 272.3 |  |  |       | 262.5 |  |  |       | 225.7 | 
|                                     
|                                     
|                                     
|                                     
|Candelaria:                           |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Concentrate                 |                 |       | 250.1   |  |      |       | 236.9   |  |      |       | 171.7 |  |  |       | 150.8 |  |  |       | 165.7 | 
|                                     
|                                     
|                                     
|                                     
|Tyrone:                               |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Precipitate                 |                 |       |        |  |      |       |        |  |      |       | 2.6   |  |  |       | 3.7   |  |  |       | 4.3   | 
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 80.1    |  |      |       | 82.6    |  |      |       | 76.6  |  |  |       | 76.0  |  |  |       | 70.4  | 
|                                     
|                                     
|                                     
|                                     
|Chino:                                |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Concentrate and precipitate |                 |       | 74.3    |  |      |       | 85.5    |  |      |       | 99.9  |  |  |       | 99.0  |  |  |       | 100.6 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 55.8    |  |      |       | 72.4    |  |      |       | 69.1  |  |  |       | 69.5  |  |  |       | 68.1  | 
|                                     
|                                     
|                                     
|                                     
|Bagdad:                               |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Concentrate                 |                 |       | 22.3    |  |      |       |        |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 2.9     |  |      |       |        |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|Sierrita:                             |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Concentrate                 |                 |       | 19.7    |  |      |       |        |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 5.8     |  |      |       |        |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|Miami:                                |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 13.2    |  |      |       |        |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|Cerro Verde:                          |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 16.2    |  |      |       |        |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|El Abra:                              |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Electrowon                  |                 |       | 52.8    |  |      |       |        |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|Cobre:                                |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Concentrate                 |                 |       | 6.6     |  |      |       | 34.2    |  |      |       |      |  |  |       |      |  |  |       |      | 
|                                     
|                                     
|                                     
|                                     
|Ojos del Salado:                      |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|                                      | Concentrate                 |                 |       |        |  |      |       | 17.9    |  |      |       | 21.1  |  |  |       | 21.3  |  |  |       | 19.6  | 
|                                     
|                                     
|                                     
|                                     
|Bisbee precipitate and miscellaneous  |                             |                 | 1.6   |         |  |      | 0.2   |         |  |      | 0.9   |       |  |  | 3.4   |       |  |  | 1.6   |      
|                                      |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                      | Total recoverable copper    |                 |       | 1,081.3 |  |      |       | 1,052.7 |  |      |       | 984.1 |  |  |       | 933.3 |  |  |       | 867.6 | 
|                                     
|                                     
|                                     
|                                     
|Less minority participants shares(c) |                             |                 | 191.2 |         |  |      | 178.7 |         |  |      | 172.0 |       |  |  | 162.9 |       |  |  | 154.9 |      
|                                      |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      
|                                      | Net Phelps Dodge share      |                 |       | 890.1   |  |      |       | 874.0   |  |      |       | 812.1 |  |  |       | 770.4 |  |  |       | 712.7 | 
|                                      |                             |                 |       |         |  |      |       |         |  |      |       |       |  |  |       |       |  |  |       |      




Phelps Dodge Metal Production
 and Sales(a)(d)

|                                      |                        |      |         |       |  |      |         |       |  |      |       |       |  |  |       |       |  |  |       |       | 
|------------------------------------- | ---------------------- | ---- | ------- | ----- |  | ---- | ------- | ----- |  | ---- | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                                      |                        | 1999 |         | 1998  |  | 1997 |         | 1996  |  | 1995
|                                      |                        |      |         |       |  |      |         |       |  |     
|Copper (thousand tons)                |                        |      |         |       |  |      |         |       |  |      |       |       |  |  |       |       |  |  |       |      
|                                     
|                                     
|                                     
|                                     
|Total production                      |                        |      | 1,081.3 |       |  |      | 1,052.7 |       |  |      | 984.1 |       |  |  | 933.3 |       |  |  | 867.6 |      
|                                     
|                                     
|                                     
|                                     
|Less minority participants shares(c) |                        |      | 191.2   |       |  |      | 178.7   |       |  |      | 172.0 |       |  |  | 162.9 |       |  |  | 154.9 |      
|                                      |                        |      |         |       |  |      |         |       |  |      |       |       |  |  |       |       |  |  |       |      
|                                      | Net Phelps Dodge share |      |         | 890.1 |  |      |         | 874.0 |  |      |       | 812.1 |  |  |       | 770.4 |  |  |       | 712.7 | 
|                                      |                        |      |         |       |  |      |         |       |  |      |       |       |  |  |       |       |  |  |       |      
|Sales(e)                              |                        |      | 884.2   |       |  |      | 876.3   |       |  |      | 812.8 |       |  |  | 771.6 |       |  |  | 696.6 |      
|                                      |                        |      |         |       |  |      |         |       |  |      |       |       |  |  |       |       |  |  |       |      



---



##### Table of Contents



10

|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |         | 
|---------------------------------------------- | ---------------------- | ---- | ------- | ----- |  | ---- | ------- | ------- |  | ---- | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                                               |                        | 1999 |         | 1998  |  | 1997 |         | 1996    |  | 1995
|                                               |                        |      |         |       |  |      |         |         |  |     
|Gold (thousand ounces)                         |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                              
|                                              
|                                              
|                                              
|Total production                               |                        |      | 174     |       |  |      | 185     |         |  |      | 139     |         |  |  | 129     |         |  |  | 151     |        
|                                              
|                                              
|                                              
|                                              
|Less minority participants shares             |                        |      | 35      |       |  |      | 36      |         |  |      | 30      |         |  |  | 26      |         |  |  | 31      |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                               | Net Phelps Dodge share |      |         | 139   |  |      |         | 149     |  |      |         | 109     |  |  |         | 103     |  |  |         | 120     | 
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Sales(e)                                       |                        |      | 136     |       |  |      | 145     |         |  |      | 113     |         |  |  | 125     |         |  |  | 125     |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Silver (thousand ounces)                       |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                              
|                                              
|                                              
|                                              
|Total production                               |                        |      | 4,532   |       |  |      | 3,566   |         |  |      | 3,254   |         |  |  | 2,636   |         |  |  | 2,739   |        
|                                              
|                                              
|                                              
|                                              
|Less minority participants shares             |                        |      | 842     |       |  |      | 713     |         |  |      | 677     |         |  |  | 564     |         |  |  | 545     |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                               | Net Phelps Dodge share |      |         | 3,690 |  |      |         | 2,853   |  |      |         | 2,577   |  |  |         | 2,072   |  |  |         | 2,194   | 
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Sales(e)                                       |                        |      | 3,375   |       |  |      | 3,095   |         |  |      | 2,637   |         |  |  | 2,359   |         |  |  | 1,985   |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Molybdenum (thousand pounds)                   |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                              
|                                              
|                                              
|                                              
|Total production                               |                        |      | 8,303   |       |  |      | 1,369   |         |  |      | 2,121   |         |  |  | 2,427   |         |  |  | 2,024   |        
|                                              
|                                              
|                                              
|                                              
|Less minority participants share              |                        |      | 241     |       |  |      | 355     |         |  |      | 472     |         |  |  | 501     |         |  |  | 507     |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                               | Net Phelps Dodge share |      |         | 8,062 |  |      |         | 1,014   |  |      |         | 1,649   |  |  |         | 1,926   |  |  |         | 1,517   | 
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Sales                                          |                        |      | 11,417  |       |  |      | 1,050   |         |  |      | 1,272   |         |  |  | 2,141   |         |  |  | 1,328   |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Sulfuric acid (thousand tons)(f)               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                              
|                                              
|                                              
|                                              
|Total production                               |                        |      | 1,172.1 |       |  |      | 1,222.1 |         |  |      | 1,263.4 |         |  |  | 1,235.3 |         |  |  | 1,252.6 |        
|                                              
|                                              
|                                              
|                                              
|Less minority participants share              |                        |      | 212.5   |       |  |      | 200.9   |         |  |      | 210.5   |         |  |  | 191.8   |         |  |  | 181.3   |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|                                               | Net Phelps Dodge share |      |         | 959.6 |  |      |         | 1,021.2 |  |      |         | 1,052.9 |  |  |         | 1,043.5 |  |  |         | 1,071.3 | 
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|Sales                                          |                        |      | 625.5   |       |  |      | 196.1   |         |  |      | 383.5   |         |  |  | 464.0   |         |  |  | 554.3   |        
|                                               |                        |      |         |       |  |      |         |         |  |      |         |         |  |  |         |         |  |  |         |        
|COMEX Copper price(g)                          |                        |      | $0.72   |       |  |      | 0.75    |         |  |      | 1.04    |         |  |  | 1.06    |         |  |  | 1.35    |        
|                                              
|                                              
|                                              
|                                              
|Metals Week  Molybdenum dealer oxide price(h) |                        |      | $2.66   |       |  |      | 3.42    |         |  |      | 4.31    |         |  |  | 3.79    |         |  |  | 8.08    |        




Phelps Dodge Smelters,
Refineries and Rod Production(a)

|                       |                                   |                        |       |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |         |       | 
|---------------------- | --------------------------------- | ---------------------- | ----- | ------- | ----- | ---- | ----- | ------- | ----- | ---- | ----- | ------- | ----- |  | ----- | ------- | ----- |  | ----- | ------- | ----- | 
|                       |                                   | 1999                   |       | 1998    |       | 1997 |       | 1996    |       | 1995
|                       |                                   |                        |       |         |       |      |       |         |       |     
|Smelters(i)            |                                   |                        |       |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|                      
|                      
|                      
|                      
|                       | Total copper (thousand tons)      |                        |       | 379.2   |       |      |       | 405.8   |       |      |       | 419.1   |       |  |       | 428.8   |       |  |       | 422.5   |      
|                      
|                      
|                      
|                      
|                       | Less minority participants share |                        |       | 64.2    |       |      |       | 60.1    |       |      |       | 64.5    |       |  |       | 62.9    |       |  |       | 58.6    |      
|                       |                                   |                        |       |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|                       |                                   | Net Phelps Dodge share |       |         | 315.0 |      |       |         | 345.7 |      |       |         | 354.6 |  |       |         | 365.9 |  |       |         | 363.9 | 
|                       |                                   |                        |       |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|Refineries(j)          |                                   |                        |       |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|                      
|                      
|                      
|                      
|                       | Copper (thousand tons)            |                        |       | 422.6   |       |      |       | 429.3   |       |      |       | 455.3   |       |  |       | 450.1   |       |  |       | 453.0   |      
|                      
|                      
|                      
|                      
|                       | Gold (thousand ounces)            |                        |       | 72.9    |       |      |       | 74.6    |       |      |       | 107.9   |       |  |       | 114.4   |       |  |       | 145.4   |      
|                      
|                      
|                      
|                      
|                       | Silver (thousand ounces)          |                        |       | 3,681.5 |       |      |       | 2,523.8 |       |      |       | 2,843.0 |       |  |       | 3,142.5 |       |  |       | 3,441.5 |      
|                      
|                      
|                      
|                      
|Rod (thousand tons)(k) |                                   |                        | 805.1 |         |       |      | 764.4 |         |       |      | 747.0 |         |       |  | 711.4 |         |       |  | 654.2 |        








|    |                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes Cyprus Amax production and sales from the time it was
	acquired on October 16, 1999.                                                                                                                                                      
|   
|(b) | Includes material mined for leaching operations.                                                                                                                                                                                                   
|   
|(c) | Interests in mining joint ventures in which we own more than
	50 percent are reported using the proportional consolidation
	 method. Cerro Verde, in which we own 82 percent of its
	common stock, is reported using the full consolidation method.
|   
|(d) | Includes smelter production from custom receipts and fluxes as
	well as tolling gains or losses.                                                                                                                                                   
|   
|(e) | Excludes sales of purchased copper, silver and gold.                                                                                                                                                                                               



---



##### Table of Contents



11



|    |                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------
|(f) | Sulfuric acid production results from smelter air quality control
	 operations; sales do not include Internal usage.
|   
|(g) | New York Commodity Exchange annual average spot price per
	pound  cathodes.                                        
|   
|(h) | Annual molybdenum dealer oxide average price per pound as
	quoted in Platts Metals Week.                           
|   
|(i) | Includes production from purchased concentrates and copper
	smelted for others on a toll basis.                     
|   
|(j) | Includes production from purchased material and copper refined
	for others on a toll basis.                         
|   
|(k) | Includes rod, wire and other shapes.                                                                                




Other Mining Operations
and Investments

In the 1999 second quarter, we sold Phelps Dodge Mining (Pty.)
Limited, our wholly owned subsidiary that operated the Witkop
open-pit fluorspar mine and mill in the western Transvaal, South
Africa. Witkop produced acid-grade fluorspar concentrates for
customers in South Africa, the United States, Europe, Australia
and Asia. The mine was sold to The South African Land and
Exploration Company Limited for $12.5 million in cash.

We own a 13.9 percent interest in Southern Peru Copper
Corporation (SPCC), which operates two open-pit copper mines, two
 concentrators, an SX/ EW plant, a smelter and a refinery in
Peru. SPCCs other principal shareholders are a subsidiary
of Grupo Mexico, S.A. de C.V., with a 54.3 percent interest
and Cerro Trading Company, Inc., with a 14.2 percent
interest. The common stock we hold as well as that held by Grupo
Mexico and Cerro Trading Company is not registered for trading. A
 total of 14.2 percent interest is publicly held.
SPCCs results are not included in our earnings because we
account for our investment in SPCC on the cost basis. During
1999, we received dividend payments of $1.7 million from
SPCC, compared with $5.7 million in 1998 and
$14.1 million in 1997.

On May 6, 1997, we acquired an indirect 40 percent
voting interest, representing an indirect 26.67 percent
economic interest, in a leading Peruvian zinc mining company,
Compañía San Ignacio de Morococha S.A. (SIMSA) and
 its San Vicente mine. SIMSAs other shareholder with voting
 shares is the Jesus Arias family. The underground mine produces
approximately 130 million pounds of zinc annually. We account for
 our investment in SIMSA on the equity basis.

Other operations include the Tohono copper operation in south
central Arizona, which consists of a test open pit, heap-leach
pads and an SX/ EW plant capable of producing copper cathode. The
 facility is located on reservation lands leased from the Tohono
OOdham Nation. Although mining of ore ceased in
July 1997, production of copper continued from existing
leach pads until February 1999 when the facility was placed
on care and maintenance status.

Phelps Dodge has a 50 percent partnership interest with an
affiliate of Shell Oil Company in a spent catalyst recycling
operation located in Braithwaite, Louisiana. Recoverable products
 include vanadium, molybdenum, alumina trihydrate and
nickel-cobalt. In 1998, an agreement was reached with the Shell
Oil affiliate to shut down the operation and dissolve the
partnership. The operation ceased processing in early
January 2000, and the partnership dissolution is expected to
 occur by the end of the year.

On March 16, 2000, we announced an agreement to sell Cyprus
Australia Coal Company, which we acquired as part of the Cyprus
transaction, to a subsidiary of Glencore International for
$150 million. Cyprus had sold its principal U.S. coal
properties in June 1999. We have received a note from the
purchaser of the U.S. properties claiming that there were
misrepresentations in the sale agreement with respect to the
amount of projected pension, medical and workers
compensation benefits.




Exploration

Our exploration groups primary objectives are to increase
copper reserves through discoveries, acquisitions and joint
ventures and, where appropriate, to diversify into other metals,
minerals and geographic areas. This group operates in over 30
countries and maintains offices in Australia, Austria, Brazil,
Canada, Chile, India, Indonesia, Mexico, Peru, the Philippines,
South Africa and Zambia.



---



##### Table of Contents



12

The 1999 exploration program continued to place emphasis on the
search for and delineation of large scale copper, gold and other
base metal deposits. Phelps Dodge expended $41.0 million on
worldwide exploration during 1999 (including exploration
expenditures from Cyprus Amax from October 16 through
December 31), compared with $42.0 million in 1998 and
$74.1 million in 1997. Approximately 25 percent of the
1999 expenditures occurred in the United States (19 percent
at our mine sites). This compares with 26 percent in 1998
(19 percent at our mine sites) and 33 percent in 1997
(23 percent at our mine sites). The balance of exploration
expenditures was spent principally in Australasia, Brazil, Chile,
 Mexico, Canada and Peru.

During 1999, exploration efforts continued at our existing copper
 operations. In New Mexico, additional mine-for-leach material
was delineated at the Tyrone mine in the Niagara area, and
exploration drilling at Chino indicated extensions to known
open-pit copper mineral deposits. The mineralized material in the
 Niagara area amounted to 500 million tons of leach material at
an estimated grade of 0.29 percent copper. In Arizona,
additional mine-for-leach mineral deposits were also delineated
in the Western Copper area of the Morenci mine.

Environmental permitting is in progress to advance development of
 the Dos Pobres and San Juan mineral deposits in the Safford
District of eastern Arizona. The two deposits contain a total of
630 million tons of leach material at an estimated grade of
0.32 percent copper. Additionally, the Dos Pobres deposit
contains 330 million tons of milling material at an estimated
grade of 0.65 percent copper.

Internationally, Mineracão Serra do Sossego S.A., a 50/50
joint venture with Companhia Vale do Rio Doce (CVRD) located
 in Brazil, continued to evaluate the Sossego deposit. The
deposit contains an estimated 240 million tons of
mineralized material at an estimated grade of 1.14 percent
copper and 0.34 grams of gold per ton. A pre-feasibility study,
which will further define the mineralized material and determine
the viability of the project, is expected to be completed in the
second quarter of 2000.

Work continues on our 70 percent-owned Piedras Verdes
property in Sonora, Mexico. The final prefeasibility study was
accepted by the minority partner and a feasibility study is
expected to commence in 2000. The results of the prefeasibility
study indicate leachable mineralized material of 290 million
 tons at an estimated grade of 0.33 percent copper.

In 1999, economic evaluation and environmental remediation
continued on our Ambatovy nickel/cobalt deposit in central
Madagascar. Mineralized material of 210 million tons at an
estimated grade of 1.1 percent nickel and 0.1 percent
cobalt was previously identified in a feasibility study. The
project is on hold pending resolution of certain permitting and
other regulatory issues.

Two copper exploration properties, Kansanshi located in Zambia
and Frieda River located in Papua New Guinea, were added with the
 acquisition of Cyprus Amax. In 1999, work continued at
Kansanshi, and a prefeasibility study is scheduled to be
completed in mid-year 2000. The Frieda River project was
terminated and the ownership interest in the property was
returned to the owners.



---



##### Table of Contents



13




Ore Reserves

The estimated ore reserves include the copper, copper-molybdenum
and molybdenum mining operations of the recently acquired Cyprus
Amax Minerals Company. Ore reserves at each of our active
operations and at Safford, Ajo, Ojos del Salado, Cobre and Climax
 have been estimated as follows:

|                      |  |                                |         |          |  |        |      |         |  |        |      |          |  |  |         |  |  |  |      |  |  |  |       | 
|--------------------- |  | ------------------------------ | ------- | -------- |  | ------ | ---- | ------- |  | ------ | ---- | -------- |  |  | ------- |  |  |  | ---- |  |  |  | ----- | 
|                      |  |                               
|                      |  | Estimated at December 31, 1999
|                      |  |                               
|                      |  |                                |         |          |  |       
|                      |  | Milling                        |         | Leaching |  |       
|                      |  | Reserves                       |         | Reserves |  | Phelps
|                      |  |                                |         |          |  | Dodge 
|                      |  | Million                        |         | %        |  | %      |      | Million |  | %      |      | Interest
|                      |  | Tons                           |         | Copper   |  | Moly   |      | Tons    |  | Copper |      | (%)     
|                      |  |                                |         |          |  |        |      |         |  |        |      |         
|Morenci               |  |                                | 416.0   |          |  |        | 0.64 |         |  |        |     |          |  |  | 1,863.8 |  |  |  | 0.22 |  |  |  | 85.0  | 
|                     
|                     
|                     
|                     
|Sierrita              |  |                                | 1,063.1 |          |  |        | 0.27 |         |  |        | 0.03 |          |  |  | 64.1    |  |  |  | 0.18 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Safford(1)(2)         |  |                                | 330.0   |          |  |        | 0.65 |         |  |        |     |          |  |  | 630.0   |  |  |  | 0.32 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|El Abra               |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 917.0   |  |  |  | 0.46 |  |  |  | 51.0  | 
|                     
|                     
|                     
|                     
|Chino                 |  |                                | 332.2   |          |  |        | 0.62 |         |  |        |     |          |  |  | 471.4   |  |  |  | 0.30 |  |  |  | 66.7  | 
|                     
|                     
|                     
|                     
|Bagdad                |  |                                | 775.4   |          |  |        | 0.37 |         |  |        | 0.02 |          |  |  | 16.5    |  |  |  | 0.29 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Cerro Verde           |  |                                | 464.0   |          |  |        | 0.61 |         |  |        | 0.02 |          |  |  | 211.7   |  |  |  | 0.61 |  |  |  | 82.0  | 
|                     
|                     
|                     
|                     
|Tyrone                |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 498.6   |  |  |  | 0.30 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Candelaria(3)         |  |                                | 460.2   |          |  |        | 0.82 |         |  |        |     |          |  |  |        |  |  |  |     |  |  |  | 80.0  | 
|                     
|                     
|                     
|                     
|Cobre(4)              |  |                                | 132.4   |          |  |        | 0.73 |         |  |        |     |          |  |  | 97.9    |  |  |  | 0.35 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Miami                 |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 188.7   |  |  |  | 0.38 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Ajo(1)                |  |                                | 150.0   |          |  |        | 0.56 |         |  |        |     |          |  |  |        |  |  |  |     |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Ojos del Salado(3)(4) |  |                                | 18.7    |          |  |        | 1.32 |         |  |        |     |          |  |  |        |  |  |  |     |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Henderson             |  |                                | 187.1   |          |  |        |     |         |  |        | 0.21 |          |  |  |        |  |  |  |     |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Climax(4)             |  |                                | 145.2   |          |  |        |     |         |  |        | 0.23 |          |  |  |        |  |  |  |     |  |  |  | 100.0 | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                      |  |                                |       |          |  |         |      |        |  |          |         |  |  |  |      |  |  |  |       | 
|--------------------- |  | ------------------------------ | ----- | -------- |  | ------- | ---- | ------ |  | -------- | ------- |  |  |  | ---- |  |  |  | ----- | 
|                      |  |                               
|                      |  | Estimated at December 31, 1998
|                      |  |                               
|                      |  |                                |       |          |  |        
|                      |  | Milling                        |       | Leaching |  |        
|                      |  | Reserves                       |       | Reserves |  | Phelps 
|                      |  |                                |       |          |  | Dodge  
|                      |  | Million                        |       | %        |  | Million |      | %      |  | Interest
|                      |  | Tons                           |       | Copper   |  | Tons    |      | Copper |  | (%)     
|                      |  |                                |       |          |  |         |      |        |  |         
|Morenci               |  |                                | 475.8 |          |  |         | 0.63 |        |  |          | 2,076.9 |  |  |  | 0.22 |  |  |  | 85.0  | 
|                     
|                     
|                     
|                     
|Sierrita              |  |                                |      |          |  |         |     |        |  |          |        |  |  |  |     |  |  |  |      | 
|                     
|                     
|                     
|                     
|Safford(1)(2)         |  |                                | 330.0 |          |  |         | 0.65 |        |  |          | 558.2   |  |  |  | 0.34 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|El Abra               |  |                                |      |          |  |         |     |        |  |          |        |  |  |  |     |  |  |  |      | 
|                     
|                     
|                     
|                     
|Chino                 |  |                                | 350.3 |          |  |         | 0.62 |        |  |          | 483.0   |  |  |  | 0.30 |  |  |  | 66.7  | 
|                     
|                     
|                     
|                     
|Bagdad                |  |                                |      |          |  |         |     |        |  |          |        |  |  |  |     |  |  |  |      | 
|                     
|                     
|                     
|                     
|Cerro Verde           |  |                                |      |          |  |         |     |        |  |          |        |  |  |  |     |  |  |  |      | 
|                     
|                     
|                     
|                     
|Tyrone                |  |                                |      |          |  |         |     |        |  |          | 466.3   |  |  |  | 0.32 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Candelaria(3)         |  |                                | 456.1 |          |  |         | 0.85 |        |  |          |        |  |  |  |     |  |  |  | 80.0  | 
|                     
|                     
|                     
|                     
|Cobre(4)              |  |                                | 133.6 |          |  |         | 0.73 |        |  |          | 98.0    |  |  |  | 0.35 |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Miami                 |  |                                |      |          |  |         |     |        |  |          |        |  |  |  |     |  |  |  |      | 
|                     
|                     
|                     
|                     
|Ajo(1)                |  |                                | 150.0 |          |  |         | 0.56 |        |  |          |        |  |  |  |     |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Ojos del Salado(3)(4) |  |                                | 18.7  |          |  |         | 1.32 |        |  |          |        |  |  |  |     |  |  |  | 100.0 | 
|                     
|                     
|                     
|                     
|Henderson             |  |                                |      |          |  |         |     |        |  |          |        |  |  |  |     |  |  |  |      | 
|                     
|                     
|                     
|                     
|Climax(4)             |  |                                |      |          |  |         |     |        |  |          |        |  |  |  |     |  |  |  |      | 




|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Safford and Ajo properties are at various stages in the
	permitting process.                                                                                 
|   
|(2) | The Safford deposit includes Dos Pobres and San Juan reserves.                                                                                                   
|   
|(3) | The Candelaria and Ojos del Salado deposits also contained,
	respectively, 0.006 ounces and 0.008 ounces of gold per ton in
	1999 and 1998.                      
|   
|(4) | Cobre, Ojos del Salado and Climax are standby properties where no
	 current mining is taking place pending an improvement in the
	price of copper and molybdenum.



---



##### Table of Contents



14

Our estimated share of aggregate ore reserves at the above named
properties at December 31 is as follows:

|                                                   |  |      |      |      |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|-------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- |  |  |  | ---- |  |  |  | ---- | 
|                                                   |  | 1999 |      | 1998 |  | 1997 |      | 1996 |  | 1995
|                                                   |  |      |      |      |  |      |      |      |  |     
|Milling reserves (billion tons)                    |  |      | 4.2  |      |  |      | 1.6  |      |  |      | 1.6  |  |  |  | 1.3  |  |  |  | 1.2  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Leaching reserves (billion tons)                   |  |      | 4.1  |      |  |      | 3.2  |      |  |      | 2.5  |  |  |  | 2.2  |  |  |  | 1.8  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Commercially recoverable copper (million tons)     |  |      | 24.4 |      |  |      | 14.5 |      |  |      | 13.7 |  |  |  | 12.1 |  |  |  | 12.3 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Commercially recoverable molybdenum (million tons) |  |      | 1.1  |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     | 

Ore reserves are those estimated quantities of ore that may be
profitably mined and processed for extraction of their
constituent values. Estimates of our reserves are based upon our
engineering evaluations of assay values derived from samplings of
 drill holes and other openings. In our opinion, the sites for
such samplings are spaced sufficiently close and the geologic
characteristics of the deposits are sufficiently well defined to
render the estimates reliable. Leaching reserves include copper
estimated to be recoverable from leach reserves remaining to be
mined at Morenci, Chino, Tyrone, Cobre, Safford, Bagdad,
Sierrita, Cerro Verde, El Abra and Miami. Commercially
recoverable copper includes our share of the amount of copper
estimated to be recoverable from milling and leaching reserves as
 well as the copper that will be recovered from existing
stockpiles of leach material at Morenci, Chino, Tyrone and Cobre.

Ore reserves projected as of December 31, 1999, for Southern
 Peru Copper Corporation (in which we hold a 13.9 percent
interest) based on available information, were 2.1 billion tons
of millable reserves at a grade of 0.66 percent copper and
1.3 billion tons of leachable reserves at an average grade of
0.22 percent copper. These tonnages are the total combined
mineable reserves for both Cuajone and Toquepala properties, and
the tonnages include significant reserve increases at the
Toquepala mine announced during 1999. Reported drilling programs
have further indicated 247 million tons of mineralized material
grading 0.68 percent copper.

We hold various other properties containing mineralized material
that we believe could be brought into production should market
conditions warrant. Permitting and significant capital
expenditures would be required before operations could commence
at these properties. The deposits are estimated to contain the
following mineralized material as of December 31, 1999:

|                  |  |          |            |                  |  |                   |     |         |  |        |      |        |  |          |       |  |  |  |      |  |  |  |      |  |  |  |       | 
|----------------- |  | -------- | ---------- | ---------------- |  | ----------------- | --- | ------- |  | ------ | ---- | ------ |  | -------- | ----- |  |  |  | ---- |  |  |  | ---- |  |  |  | ----- | 
|                  |  |          |            |                  |  |                   |     |        
|                  |  |          |            | Milling Material |  | Leaching Material |     | Phelps 
|                  |  |          |            |                  |  |                   |     | Dodge  
|                  |  |          |            | Million          |  | %                 |     | Million |  | %      |      | %      |  | Interest
|                  |  | Location |            | Tons             |  | Copper            |     | Tons    |  | Copper |      | Nickel |  | (%)     
|                  |  |          |            |                  |  |                   |     |         |  |        |      |        |  |         
|American Mountain |  |          | Arizona    |                  |  |                   |    |         |  |        |     |        |  |          | 140   |  |  |  | 0.25 |  |  |  |     |  |  |  | 85.0  | 
|                 
|                 
|                 
|                 
|Cochise           |  |          | Arizona    |                  |  |                   |    |         |  |        |     |        |  |          | 210   |  |  |  | 0.40 |  |  |  |     |  |  |  | 100.0 | 
|                 
|                 
|                 
|                 
|Garfield          |  |          | Arizona    |                  |  |                   |    |         |  |        |     |        |  |          | 1,000 |  |  |  | 0.27 |  |  |  |     |  |  |  | 85.0  | 
|                 
|                 
|                 
|                 
|Lone Star         |  |          | Arizona    |                  |  |                   |    |         |  |        |     |        |  |          | 1,600 |  |  |  | 0.38 |  |  |  |     |  |  |  | 100.0 | 
|                 
|                 
|                 
|                 
|Niagara           |  |          | New Mexico |                  |  |                   |    |         |  |        |     |        |  |          | 500   |  |  |  | 0.29 |  |  |  |     |  |  |  | 100.0 | 
|                 
|                 
|                 
|                 
|Sanchez           |  |          | Arizona    |                  |  |                   |    |         |  |        |     |        |  |          | 230   |  |  |  | 0.29 |  |  |  |     |  |  |  | 100.0 | 
|                 
|                 
|                 
|                 
|Tohono            |  |          | Arizona    |                  |  |                   | 276 |         |  |        | 0.70 |        |  |          | 404   |  |  |  | 0.32 |  |  |  |     |  |  |  | 100.0 | 
|                 
|                 
|                 
|                 
|Western Copper    |  |          | Arizona    |                  |  |                   | 530 |         |  |        | 0.55 |        |  |          | 500   |  |  |  | 0.31 |  |  |  |     |  |  |  | 85.0  | 
|                 
|                 
|                 
|                 
|Piedras Verdes    |  |          | Mexico     |                  |  |                   |    |         |  |        |     |        |  |          | 290   |  |  |  | 0.33 |  |  |  |     |  |  |  | 70.0  | 
|                 
|                 
|                 
|                 
|Sossego*          |  |          | Brazil     |                  |  |                   | 240 |         |  |        | 1.14 |        |  |          |      |  |  |  |     |  |  |  |     |  |  |  | 50.0  | 
|                 
|                 
|                 
|                 
|El Abra           |  |          | Chile      |                  |  |                   | 650 |         |  |        | 0.55 |        |  |          | 79    |  |  |  | 0.31 |  |  |  |     |  |  |  | 51.0  | 
|                 
|                 
|                 
|                 
|Ambatovy**        |  |          | Madagascar |                  |  |                   |    |         |  |        |     |        |  |          | 210   |  |  |  |     |  |  |  | 1.10 |  |  |  | 100.0 | 
|                 
|                 
|                 
|                 
|Kansanshi         |  |          | Zambia     |                  |  |                   | 190 |         |  |        | 1.48 |        |  |          |      |  |  |  |     |  |  |  |     |  |  |  | 100.0 | 
|                 
|                 
|                 
|                 
|Lumwana           |  |          | Zambia     |                  |  |                   | 220 |         |  |        | 0.83 |        |  |          |      |  |  |  |     |  |  |  |     |  |  |  | 100.0 | 




| |   |                                                           
| | - | ----------------------------------------------------------
| | * | Sossego deposit also contains 0.01 ounces of gold per ton.



|   |                                                    
|-- | ---------------------------------------------------
|** | Ambatovy deposit also contains 0.10 percent cobalt.



---



##### Table of Contents



15

Note:  Mineralized material is a mineralized body that has
been delineated by appropriately spaced drilling and/or
underground sampling to support the reported tonnage and average
grade of metal(s). Such a deposit does not qualify as a reserve,
until comprehensive evaluation based upon unit cost, grade,
recoveries, and other material factors conclude legal and
economic feasibility.




PD Mining  Sales and Competition

The majority of our copper, produced or purchased, is cast into
rod. Rod sales to outside wire and cable manufacturers
constituted approximately 59 percent of PD Minings
sales in 1999. We also sell copper as concentrate and cathode.
Sales of rod and cathode are made directly to wire and cable
fabricators and brass mills under contracts principally of a
one-year duration. Our rod also is used by our wire and cable
segment.

We sell our copper rod and cathode at a premium over New York
Commodity Exchange (COMEX) or London Metal Exchange
(LME) prices. We also sell copper concentrate based on COMEX
 or LME prices. From time to time, we engage in hedging programs
designed to enable us to realize current average prices for metal
 delivered or committed to be delivered. We also enter into price
 protection arrangements from time to time, depending on market
circumstances, to ensure a minimum price for a portion of
expected future mine production (see Managements Discussion
 and Analysis and Notes 1 and 20 to the Consolidated
Financial Statements for a further discussion of such
arrangements).

Most of the refined copper we sell is incorporated into
electrical wire and cable products worldwide for use in the
construction, electric utility, communications and transportation
 industries. It is also used in industrial machinery and
equipment, consumer products and a variety of other electrical
and electronic applications.

When we sell copper as rod, cathode and concentrate, we compete,
directly or indirectly, with many other sellers including at
least two other U.S. primary producers as well as numerous
foreign producers, metal merchants, custom refiners and scrap
dealers. Some major producers outside the United States have cost
 advantages resulting from richer ore grades, lower labor costs
and in some cases a lack of strict regulatory requirements. We
believe that our ongoing programs to contain costs, improve
productivity and employ new technologies have significantly
narrowed these cost advantages and have placed us in a favorable
competitive position with respect to a number of our
international competitors.

Other materials that compete with copper include aluminum,
plastics, stainless steel and fiber optics. Our principal methods
 of competing include pricing, product quality, customer service
and dependability of supply.

Molybdenum oxide is used primarily in the steel industry for
corrosion resistance, strengthening and heat resistance.
Molybdenum chemicals are used in a number of diverse applications
 such as catalysts for petroleum refining, and feedstock for pure
 molybdenum metal used in electronics and lubricants. A
substantial portion of Phelps Dodges expected 2000
molybdenum production is committed for sale throughout the world
pursuant to annual agreements based on prevailing market prices
at the time of sale.

Molybdenum sales generally are characterized by cyclical and
volatile prices, little product differentiation and strong
competition. Prices are influenced by production costs of
domestic and foreign competitors, worldwide economic conditions,
world supply/demand balances, inventory levels, the U.S. dollar
exchange rate and other factors. Molybdenum prices also are
affected by the demand for end-use products in, for example, the
construction, transportation and durable goods markets. A
substantial portion of world molybdenum production is a
by-product of copper mining, which is relatively insensitive to
molybdenum price levels. Exports from China can also influence
competitive conditions.




PD Mining  Prices, Supply and
Consumption

Copper is an internationally traded commodity, and its prices are
 effectively determined by the two major metals
exchanges  COMEX and LME. The prices on these
exchanges generally reflect the worldwide balance of copper
supply and demand, but are also influenced significantly from
time to time by speculative actions and by currency exchange
values.



---



##### Table of Contents



16

In 1997, the COMEX copper price averaged $1.04 per pound of
copper cathode, 2 cents less than the 1996 average price.
The bullish market of 1996 continued into early 1997 driven by a
buoyant North American economy, excellent growth in the copper
rod and brass mill markets in the United States, and the
beginning of an economic recovery in Europe. Copper inventories
increased steadily during the third quarter of 1997, however,
driving prices down. In late 1997, concern about excess future
supply from expansions at existing copper operations and the
start-up of new mining projects, combined with market volatility
as a result of the collapse of several Southeast Asian economies,
 caused dramatic decreases in the price of copper. Consumption in
 the region dropped sharply and, at the same time, Asian copper
users liquidated existing inventories. By the close of the year,
copper prices had plummeted to a four-year low.

In 1998, the COMEX copper price averaged 75 cents per pound
of copper cathode, 29 cents less than the 1997 average
price. The negative factors present in the market at the end of
1997 continued into 1998. Asian economies continued to weaken and
 the financial turmoil spread to other developing economies,
depressing the price of copper as well as other base metals and
commodities. The price also was pressured by announcements of
increases in production by some existing mines and the completion
 of new mines during the year. Although Asian copper consumption
remained weak, demand in both Europe and North America was
strong, especially in the first half of the year. After falling
in the second quarter of the year, copper inventories increased
throughout the third and fourth quarters with LME warehouse
inventories ending the year at their highest levels since early
1994. Spot copper ended 1998 at 66 cents per pound, the lowest
price seen since 1987.

In 1999, the COMEX copper price averaged 72 cents,
3 cents lower than the 1998 average. The decrease in price
from the previous year primarily was due to a market surplus
brought on by production increases and low consumption growth. As
 a result of the surplus, exchange inventories grew to record
levels and the price dropped to 61 cents per pound during March,
the lowest price of the century when adjusted for inflation.
Western world exchange inventories increased by 217,760 tons in
1999 following the 1998 increase of 283,291 tons. Positive
factors affecting the market included substantial closures and
curtailments and consumption growth in 1999 that surpassed
earlier anticipation. The better than expected consumption growth
 was primarily due to steady demand in the United States, a
recovery in some of the Asian economies and an improving Europe.

Molybdenum demand depends heavily on worldwide steel industry
consumption and, to a lesser extent, on chemical applications. In
 1999, world molybdenum consumption continued to be negatively
impacted by weak demand from Asia. Lower consumption levels
experienced in the second half of 1998 were extended through
1999. Overall 1999 world consumption declined an estimated
6 percent from 1998 levels. Production curtailments
announced in the fourth quarter of 1998 remained in effect in
China and at three primary mines in North America. However, the
world molybdenum market remained oversupplied during 1999. Metals
 Week dealer oxide prices in 1999 averaged $2.66 per pound
against a 1998 average of $3.42 per pound. Phelps Dodges
molybdenum realizations averaged $3.96 per pound for the period
October 16 through December 31, 1999, versus Metals
Week dealer oxide prices of $2.60 per pound for the same period,
with realizations positively impacted by higher-valued molybdenum
 chemical products. Phelps Dodges molybdenum inventories
declined about 3 million pounds from October 16 through
December 31, 1999, to satisfy customer requirements during
the start-up of the Henderson 2000 project.




PD Mining  Costs

Our unit production cost of copper in 1999 was lower than in
1998, principally as a result of curtailing higher cost copper
production with the closures of our Cobre mine operation and
Hidalgo smelter in New Mexico, and the smaller of two
concentrators at our Morenci mining operations in Arizona, as
well as curtailing production by 50 percent at our copper
refinery in El Paso, Texas.

Our molybdenum unit operating costs included the impact of the
start-up of the Henderson 2000 projects new crushing and
conveying system, at the Henderson mine, for the period
October 16 through December 31, 1999. The new crushing
and conveying system is expected to be operating at full capacity
 by March 31, 2000.



---



##### Table of Contents



17




PD Mining  Energy Supplies

The principal sources of energy for our mining operations are
electricity purchased from public utilities, petroleum products,
natural gas and waste heat generated in the smelting processes.
Most of our mine power plants, roasters and smelters use natural
gas or petroleum products as their primary fuel. We have not
experienced any difficulties in recent years in obtaining
adequate fuel to maintain production.




PD Mining  Environmental and Other
Regulatory Matters

Our operations in the United States are subject to stringent
federal, state and local laws and regulations relating to
improving or maintaining environmental quality. Our global
operations are also subject to many environmental protection
laws. The federal Clean Air Act, as amended (the Clean Air Act),
has had a significant impact, particularly on our smelters. Costs
 associated with environmental compliance have increased over
time, and we expect these costs to continue to rise in the
future. Improving environmental performance is our goal. Good
progress has been made to meet the challenge of increasingly
complex environmental regulations, particularly those
environmental regulations affecting the mining industry.

The solid wastes of our domestic copper operations
are subject to regulation under the federal Resource Conservation
 and Recovery Act (RCRA) and related state laws. To the
extent these wastes affect surface waters, our domestic
operations are regulated under the federal Clean Water Act and
similar state water quality laws. Historically, mining wastes
have been exempted from the federal hazardous waste
regulations under RCRA. As a result of policies made by the
Environmental Protection Agency (EPA), all extraction
 and beneficiation wastes and 20 mineral
processing wastes retain the exemption, and are to be
 regulated as solid waste, rather than as
hazardous waste, under RCRA Subtitle C. Only
three of the 20 exempt processing wastes are copper
processing wastes. Because of this EPA regulation,
the generation and management of any other mineral smelting or
refining waste could be subject to hazardous waste
regulation if the waste exhibits a hazardous waste characteristic
 or if EPA specifically designates it as a listed hazardous
 waste. We have taken steps to address the potential
regulation as hazardous waste of any of our wastes
which no longer meet the definition of exempt mineral
processing wastes.

RCRA Subtitle D rules regulating mineral
extraction and beneficiation wastes and
processing wastes that are exempt from RCRA
Subtitle C have not yet been put into effect by EPA,
Arizona, New Mexico, Texas or Colorado. In 1998 EPA finalized its
 supplemental Land Disposal Restriction Phase IV
(LDR) rules which impose hazardous waste
regulation on processing waste or secondary material
that is stored or treated before it is recycled. This final LDR
rule also subjects mineral processing materials that exhibit a
hazardous waste characteristic to stringent treatment standards
if the materials are disposed on land. We cannot now estimate the
 impact of any future solid waste rules on our
operations. In addition, while EPAs final LDR rule likely
will require us to continue to make expenditures, it is not
possible to determine the full impact on us of the new LDR
requirements until the requirements are fully adopted and
implemented by Arizona, New Mexico, Texas and Colorado.

Our domestic copper operations are also subject to state laws and
 regulations protecting both surface water and groundwater
quality. We possess, or have applied for, the necessary permits
or governmental approvals presently required under these rules
and regulations.

At the Hidalgo smelter in Playas, New Mexico, in accordance with
the discharge plan approved by the New Mexico Environment
Department (NMED), we continue to monitor and report to NMED
 on our progress associated with groundwater quality near the
smelters compacted, clay-lined evaporation pond. We have
implemented appropriate technologies and contingency plans to
protect groundwater beneath the evaporation pond. We have also
agreed during the term of an earlier discharge plan to stop
placing acidic fluids on the evaporation pond. In addition, we
have agreed to construct a cap over the evaporation pond and have
 commenced a groundwater remediation program for any existing
contamination. To do this we have installed a neutralization
facility, a series of lined impoundments, and a series of
pumpback wells that are being operated to remediate groundwater
and to prevent future contamination.



---



##### Table of Contents



18

Cyprus Tohono Corporation (Tohono) has negotiated a Consent
Decree with EPA that resolves outstanding issues relating to a
process line break in 1992. The Consent Decree required Tohono to
 pay a penalty of $100,000 and perform two Supplemental
Environmental Projects with an estimated total cost of $225,000.

In 1989, Arizona adopted regulations for its aquifer protection
permit (APP) program, that replaced the then existing
Arizona groundwater quality protection permit regulations.
Several of our properties continue to operate pursuant to the
transition provisions for existing facilities under the APP
regulations. The APP regulations require permits for new
facilities, activities and structures for mining, concentrating
and smelting. The APP may require mitigation and discharge
reduction or elimination of some discharges. APP applications for
 existing facilities operating under the APP transition
provisions are not required to modify operations until requested
by the State, or unless a major modification at the facility
alters the existing discharge characteristics. We have received
an APP for a closed tailing pile in Clarkdale, Arizona. We have
also conducted groundwater studies and submitted APP applications
 for several of our other properties and facilities, including
the Morenci, Bagdad, Sierrita and Miami mines, our Safford
development property and Copper Queen and United Verde branches.
We will continue to submit all required APP applications for our
remaining properties and facilities, as well as for any new
properties or facilities. We do not know what the APP
requirements are going to be for all existing and new facilities
and, therefore, it is not possible for us to estimate such costs.
 We are likely to continue to have to make expenditures to comply
 with the APP program and regulations.

In the United States, the Emergency Planning and Community
Right-to-know Act was expanded in 1997 to cover mining
operations. This law, which has applied to other Phelps Dodge
businesses for more than a decade, requires companies to report
to EPA the amount of certain materials managed in or released
from their operations each year. During June 1999, we
reported the volume of naturally occurring metals and other
substances that we managed during 1998 once the usable copper was
 extracted. These materials are very high in volume and how they
are managed is covered by existing regulations and permit
requirements.

On December 23, 1994, Chino, located near Silver City, New
Mexico, entered into an Administrative Order on
Consent (AOC) with the New Mexico Environment Department.
This AOC requires Chino to study the environmental impacts and
potential health risks associated with portions of the Chino
property affected by historical mining operations. We acquired
Chino at the end of 1986. The studies began in 1995 and, while we
 currently are unaware of any additional liabilities that need to
 be accrued, until the studies are completed, it is not possible
to determine the nature, extent, cost, and timing of remedial
work that could be required under the AOC. Remedial work is
expected to be required under the AOC.

In 1993 and 1994, the New Mexico and Arizona legislatures,
respectively, passed laws requiring the reclamation of mined
lands in those states. The New Mexico Mining Commission adopted
rules for the New Mexico program during 1994, and our operations
began submitting the required permit applications in December
1994. The Arizona State Mine Inspector adopted rules for the
Arizona program in January 1997, and our operations began
submitting the required reclamation plans in 1997. Colorado also
has a similar program. Reclamation is an ongoing activity and we
recognize estimated reclamation costs using a units of production
 basis calculation. These laws and regulations will likely
increase our regulatory obligations and compliance costs with
respect to mine closure and reclamation.

The 1990 Amendments to the federal Clean Air Act require EPA to
develop and implement many new requirements, and they allow
states to establish new programs to implement some of the new
requirements, such as the requirements for operating permits
under Title V of the 1990 Amendments and hazardous air
pollutants under Title III of the 1990 Amendments. Because
EPA has not yet adopted or implemented all of the changes
required by Congress, the air quality laws will continue to
expand and change in coming years as EPA develops new
requirements and then implements them or allows the states to
implement them. In response to these new laws, several of our
subsidiaries have submitted applications for Title V
operating permits. These programs will likely increase our
regulatory obligations and compliance costs. These costs could
include implementation of maximum achievable control technology
for any of our facilities if any are determined to be a major
source of federal Hazardous Air Pollutants (HAPs). For
example, it is probable that



---



##### Table of Contents



19



We estimate that our share of capital expenditures for programs
to comply with applicable environmental laws and regulations that
 affect our mining operations will total approximately $45
million in 2000 and from $15 million to $30 million in 2001; $19
million was spent on such programs in 1999. We also anticipate
making significant capital and other expenditures beyond 2001 for
 continued compliance with such laws and regulations. In light of
 the frequent changes in the laws and regulations and the
uncertainty inherent in this area, we are unable to estimate
reasonably the total amount of such expenditures over the longer
term, but it may be potentially material. (See the discussion of
OTHER ENVIRONMENTAL MATTERS.)

In 1995, legislation was introduced in both the U.S. House of
Representatives and the U.S. Senate to amend the Mining Law of
1872. None of the bills was enacted into law. Also, mining law
amendments were added to the 1996 budget reconciliation bill,
which was vetoed by the President. Among other things, the
amendments contained in the 1996 bill would have imposed a
5 percent net proceeds royalty on minerals extracted from
federal lands, required payment of fair market value for
patenting federal lands, and required that patented lands used
for non-mining purposes revert to the federal government. Several
 of these same concepts likely will continue to be pursued
legislatively in the future. The Secretary of the Interior also
ordered the Bureau of Land Management (BLM) to form a task
force to review BLMs hardrock mining surface management
regulations and propose revisions to expand environmental and
reclamation requirements, among other things. While the effect of
 such changes on our current operations and other currently owned
 mineral resources on private lands would be minimal, passage of
mining law amendments or revisions to the hardrock mining surface
 management regulations could result in additional expenses in
the development and operation of new mines on federal lands.

We are also subject to federal and state laws and regulations
pertaining to plant and mine safety and health conditions. These
laws include the Occupational Safety and Health Act of 1970 and
the Mine Safety and Health Act of 1977. Present and proposed
regulations govern worker exposure to a number of substances and
conditions present in work environments. These include dust,
mist, fumes, heat and noise. We are making and will continue to
make expenditures to comply with health and safety laws and
regulations.

We do not expect that the additional capital and operating costs
associated with achieving compliance with the many environmental,
 health and safety laws and regulations will materially adversely
 affect our competitive position relative to other U.S. copper
producers. These domestic copper producers are also subject to
comparable requirements. However, because copper is an
internationally traded commodity, these costs could significantly
 affect us in our efforts to compete globally with those foreign
producers not subject to such stringent requirements.




PD Mining  Ownership of Property

Generally most of the land on which our copper and molybdenum
mines, concentrators, SX/EW facilities, smelters, refineries, rod
 mills, and molybdenum roasters or processing facilities are
owned by, or are located on unpatented mining claims owned by,
the Company. Our Chino partnership leases insignificant amounts
of real property under a variety of terms. This leased real
property is not critical to the Chino operations. A small portion
 of each of our recently acquired Miami, Bagdad and Sierrita
operations are located on government-owned land and are operated
under a Mine Plan of Operations (MPO). We also lease space for
small sales offices in various locations.




PHELPS DODGE INDUSTRIES

Phelps Dodge Industries is our manufacturing division comprising
two business segments that produce engineered products
principally for the global energy, telecommunications,
transportation and specialty chemicals sectors. Its operations
are characterized by products with significant market share,
internationally competitive costs and quality, and specialized
engineering capabilities. The two segments are specialty
chemicals and wire and cable.



---



##### Table of Contents



20




Specialty Chemicals Segment

Columbian Chemicals Company and its subsidiaries (Columbian
Chemicals), our specialty chemicals segment headquartered in
Marietta, Georgia, is an international producer and marketer of
carbon blacks. At Columbian Chemicals, we produce a full range of
 rubber and industrial carbon blacks in 12 plants worldwide, with
 approximately 41 percent of our production in North America
 and the remaining 59 percent at facilities in Europe, Asia
and Latin America. Our rubber carbon blacks improve the tread
wear and durability of tires, and extend the service life of many
 rubber products such as belts and hoses. Our industrial carbon
blacks are used in such diverse applications as pigmentation of
coatings, inks and plastics; ultraviolet stabilization of
plastics; and as conductive insulation for wire and cable.

In January 1999, we acquired an 85 percent interest in
the Korean carbon black manufacturing business of Korea Kumho
Petrochemical Co., Ltd., for $76.1 million. This business
includes a 110,000 metric ton per year manufacturing plant. In
October 1998, we acquired the Brazilian carbon black
manufacturing business of Copebras S.A., a subsidiary of Minorco,
 for $220 million. This manufacturing facility has an annual
 production capacity of 170,000 metric tons of carbon black. Both
 of these businesses are managed by Columbian Chemicals. We also
maintain sales offices in 13 countries and make use of
distributors worldwide.

On June 30, 1999, we announced the planned closure of our
manufacturing facility in Bataan, Philippines. Production was
discontinued at that facility in November 1999. The
Philippine plant, which had a relatively small production
capacity of 18,000 metric tons, did not have the economies of
scale to compete profitably with imports from larger regional
producers. Columbian Chemicals has opened a distribution company,
 Philippine Carbon Black Distribution Company, Inc., which will
market and distribute carbon blacks principally from Columbian
Chemicals Korea in the Philippines.

Extensive research, development and engineering are performed at
four of our specialty chemicals locations. Our main specialty
chemicals technology center, which was relocated from Swartz,
Louisiana, to Marietta, Georgia, in 1998, is responsible for
studies specific to both industrial and rubber applications of
carbon black. Carbon black product and process development at the
 technology center is supported by development work at the
companys North Bend, Louisiana, and Hamilton, Ontario,
plants. The European Central Laboratory at Avonmouth, United
Kingdom, provides technical support for our European specialty
chemical operations.

Specialty
Chemicals  Competition and Markets

The principal competitive factors in the various markets in which
 our specialty chemicals segment competes are price, product
quality, customer service, dependability of supply, delivery lead
 time, breadth of product line, and research and development.

Columbian Chemicals is among the worlds largest producers
of carbon black. Approximately 90 percent of the carbon
black it produces is used in rubber applications, a substantial
portion of which is used in the tire industry.

Major tire manufacturers worldwide account for a substantial
portion of our carbon black sales. In addition, we maintain a
strong competitive position in mechanical rubber goods markets
based on our commitment to quality and service. We are not aware
of any product that could be substituted for carbon black to a
significant extent in any of its principal applications.
Including Columbian Chemicals, there are a total of six carbon
black producers in the United States, two in Canada, three in
Western Europe and two major producers in South America. There
are also many producers in Asia. The carbon black industry is
highly competitive, particularly in the rubber black market.

Specialty
Chemicals  Raw Materials and Energy Supplies

Carbon black is produced primarily from heavy residual oil, a
by-product of the crude oil refining process. At Columbian
Chemicals, we purchase substantially all of our feedstock on a
spot basis at prices that fluctuate with world oil prices. Our
residual oil feedstock and other raw materials for our specialty
chemicals business are purchased from various suppliers. The cost
 of feedstock is a significant factor in the cost of carbon
black.



---



##### Table of Contents



21



Our specialty chemical operations generally use purchased
electricity and natural gas as their principal sources of energy.

Specialty
Chemicals  Ownership of Property

Columbian Chemicals owns all property other than the leased land
at its closed Philippine and Hamburg facilities and the land at
its Hannover facility.




Wire and Cable Segment

In 1999, the businesses of Phelps Dodge Magnet Wire Company,
Phelps Dodge International Corporation, and Phelps Dodge High
Performance Conductors were consolidated into the Phelps Dodge
Wire and Cable Group. The new organization, headquartered in
Coral Gables, Florida, consists of three worldwide product line
businesses and a shared support services operation. The three
product line businesses are magnet wire, energy and
telecommunications cables, and specialty conductors.

Magnet wire, the insulated conductor used in most electrical
motors, is manufactured in the United States at plants in Fort
Wayne, Indiana; Hopkinsville, Kentucky; Laurinburg, North
Carolina; and El Paso, Texas. We also manufacture magnet
wire at wholly owned subsidiaries in Mureck, Austria, and
Monterrey, Mexico. Our multi-product factory in Zambia also
produces magnet wire. As part of a manufacturing rationalization
program aimed at significant cost reductions, the Hopkinsville,
Kentucky, plant has been targeted for closure in 2000. Its
productive assets will be moved to the other facilities in the
United States and Mexico. In addition, we permanently ceased the
relatively small production of magnet wire at our 90 percent
 owned company in Venezuela in 1999.

Energy and telecommunications cables for international markets
are manufactured in factories located in 13 countries. These are
all joint venture operations. We provide management, marketing
assistance, technical support, and engineering and purchasing
services to these companies. Three of our international wire and
cable companies have continuous-cast copper rod facilities (a
fourth facility was closed in 1999), and three of our
international wire and cable companies have continuous-cast
aluminum rod facilities. We have majority interests in companies
with production facilities in eight countries  Brazil,
 Chile, Costa Rica, El Salvador, Honduras, Thailand,
Venezuela and Zambia. We also have minority interests in
companies located in Hong Kong, Thailand and the Philippines,
accounted for on the equity basis, and in companies located in
Greece and India, accounted for on the cost basis. At the end of
1999, we recognized an impairment of our equity basis investment
in China as well as an impairment of the telecommunications
business in the Philippines.

During 1999, we converted a small manufacturing facility in
Ecuador to a distribution center in that country. Also in 1999,
we opened a distribution center in Colombia. In all, we operate
distribution centers in eight countries in addition to the United
 States  Guatemala, El Salvador, Honduras,
Panama, Puerto Rico, Colombia, Ecuador and South Africa.

We manufacture and market specialty conductors for the aerospace,
 automotive, biomedical, computer and consumer electronics
markets. Those products are manufactured in plants located in
Inman, South Carolina; Trenton, Georgia; and West Caldwell,
Elizabeth, Fairfield and Montville, New Jersey. As part of the
manufacturing rationalization program initiated in 1999, the
Fairfield and Montville plants will be closed in 2000. Their
productive capacity will be transferred to the remaining
facilities. The principal products are highly engineered
conductors of copper and copper alloy wire electroplated with
silver, tin or nickel for sophisticated, specialty product
niches.

Wire and
Cable  Competition and Markets

Phelps Dodge is one of the worlds largest manufacturers of
magnet wire. Our plants draw, roll and insulate copper and
aluminum wire which is sold as magnet wire and bare conductors to
 original equipment



---



##### Table of Contents



22



Wire and
Cable  Raw Materials and Energy Supplies

The principal raw materials used by our magnet wire manufacturing
 operations are copper, aluminum and various chemicals and resins
 used in the manufacture of electrical insulating materials. Most
 of the copper purchased for our magnet wire operations is from
our mining division.

The principal raw materials used by our international energy and
telecommunication cable companies are copper, copper alloy,
aluminum, aluminum alloy, copper-clad steel and various
electrical insulating materials.

The specialty conductor product line is usually plated with
silver, nickel or tin. With the exception of copper needed in
specialty conductors, a majority of the materials used by these
companies is purchased from others. We do not believe that the
loss of any one supplier would have a material adverse effect on
our financial condition or on the results of our operations.

Most of our wire and cable operations generally use purchased
electricity and natural gas as their principal sources of energy.
 Our magnet wire companys principal manufacturing equipment
 uses natural gas; however, it is also equipped to burn
alternative fuels.

Wire and
Cable  Ownership of Property

We own most of the plants and land on which our wire and cable
operations are located. The exceptions are the leased land and
buildings of our magnet wire facilities in Austria and our
specialty conductor plants in Fairfield and Montville, New
Jersey. Additionally, four international plants are located on
leased land. This land is not material to our overall operations.




Phelps Dodge Industries 
Environmental Matters

Federal environmental laws and regulations affect many aspects of
 our domestic industrial operations. We estimate that capital
expenditures for programs to comply with applicable environmental
 laws and regulations within our Phelps Dodge Industries division
 will total approximately $10 million in 2000 and from
$10 million to $15 million in 2001; $12 million
was spent on these programs in 1999. We anticipate making
significant capital and other expenditures after 2001 for
continued compliance with environmental laws and regulations.
Because of the frequent changes in environmental laws and
regulations and the uncertainty these changes create for us, we
are unable to estimate reasonably the total amount of such
expenditures over the longer term, but it may be potentially
material. (See the discussion of OTHER ENVIRONMENTAL
MATTERS.)




LABOR MATTERS

Employees at PD Minings Arizona operations, El Paso
refinery and rod mill, Tyrone, Hidalgo smelter, the Norwich and
Chicago rod mills, the Henderson mine in Colorado, the
Ft. Madison, Iowa, molybdenum processing facility, and some
employees at Chino are not represented by any unions.



---



##### Table of Contents



23

In addition, we currently have labor agreements covering most of
our U.S. and international manufacturing division plants. Our
magnet wire plant in Ft. Wayne, Indiana, had a four-year
agreement covering approximately 270 employees that expired
on May 1, 1999. New bargaining agreements were ratified with
 effective dates of May 2, 1999, through May 1, 2002.
Our specialty chemicals plant in El Dorado, Arkansas, had an
 agreement covering approximately 42 employees that expired
on March 31, 1999. A new three-year agreement was ratified
with effective dates of April 12, 1999, through
March 31, 2002. Our specialty chemicals plant in Marshall,
West Virginia, has an agreement covering approximately
60 employees that expires on June 14, 2000. Our
specialty chemicals plant in North Bend, Louisiana, had an
agreement covering 110 employees that expired on
February 28, 2000. A new three-year agreement was ratified
at that plant with effective dates of February 29, 2000,
through February 28, 2003. Our wire plant in Bayway, New
Jersey, has an agreement covering 65 employees that expires
on July 31, 2000.




RESEARCH AND DEVELOPMENT

We conduct research and development programs relating to
technology for exploration for minerals, recovery of metals from
ores, concentrates and solutions, smelting and refining of
copper, metal processing and product development. We also conduct
 research and development programs related to our carbon black
products through Columbian Chemicals, and our wire insulating
processes and materials and conductor materials and processes
through our wire and cable segment. Expenditures for all of these
 research and development programs, together with contributions
to industry and government-supported programs, totaled
$16.5 million in 1999, compared with $18.0 million in
1998 and $17.7 million in 1997.




OTHER ENVIRONMENTAL MATTERS

Phelps Dodge or its subsidiaries have been advised by the EPA,
United States Forest Service and several state agencies that they
 may be liable under CERCLA or similar state laws and regulations
 for costs of responding to environmental conditions at a number
of sites that have been or are being investigated by the EPA, the
 Forest Service or states to establish whether releases of
hazardous substances have occurred and, if so, to develop and
implement remedial actions. Phelps Dodge has been named a
potentially responsible party (PRP) or has received
requests for information for several sites. Of the sites in which
 Phelps Dodge or its subsidiaries have been named a PRP, 19 are
on the National Priorities List (NPL) and two have
been proposed for listing. For all such sites, Phelps Dodge had
an aggregate reserve of $208.7 million as of December 31,
1999, including reserves for the Pinal Creek and Langeloth sites
discussed below, for its share of the estimated liability.

Liability estimates are based on an evaluation of among other
factors, currently available facts, existing technology,
presently enacted laws and regulations, Phelps Dodges
experience in remediation, other companies remediation
experience, Phelps Dodges status as a PRP, and the ability
of other PRPs to pay their allocated portions. The cost range for
 reasonably expected outcomes for all sites excluding Pinal Creek
 in Arizona, and Langeloth in Pennsylvania, is estimated to be
from $28 million to $110 million, and work on these
sites is expected to be substantially completed in the next
several years, subject to inherent delays involved in the
process.

The sites for which Phelps Dodge has received a notice of
potential liability or an information request that are currently
considered to be the most significant are Pinal Creek, which has
a cost range for reasonably expected outcomes estimated to be
from $143 million to $250 million, and the former
American Zinc and Chemical site in Langeloth, which has a cost
range for reasonably expected outcomes estimated to be from
$10 million to $67 million. Phelps Dodge has reserved
$143 million for the Pinal Creek site.

Cyprus Amax received an information request from the Pennsylvania
 Department of Environmental Protection regarding the former
American Zinc and Chemical site. The site is currently being
investigated by the state of Pennsylvania. Phelps Dodge has
reserved $20 million for this site. While Phelps Dodge has
substantial defenses to liability at this site, no defense or
offset was considered in setting the reserve.

Phelps Dodge believes certain insurance policies partially cover
the foregoing environmental liabilities; however, some of the
insurance carriers have denied coverage. We are presently
litigating these disputes.



---



##### Table of Contents



24



As of December 31, 1998, we had a reserve balance of $106.0
million for estimated future costs associated with environmental
matters at shutdown operations or closed facilities within active
 operations. During 1999, net spending against that reserve
totaled $20.0 million including $2.8 million for the
acquired Cyprus Amax properties between October 16 and
December 31. During the second quarter of 1999, we recorded
an additional $8.3 million provision for estimated future
costs associated with environmental matters directly related to
our restructuring plan announced on June 30, 1999.
Additionally, we recorded a $28.2 million provision in the fourth
 quarter of 1999 for estimated future costs associated with
environmental matters. The acquisition of Cyprus Amax increased
our reserve by $213.6 million. As of December 31, 1999, the
reserve balance was $336.1 million.

We record liabilities for environmental expenditures when it is
probable that obligations have been incurred and the costs can be
 reasonably estimated. Our estimates of these costs are based
upon available facts, existing technology, and current laws and
regulations and are recorded on an undiscounted basis. Where the
available information is sufficient to estimate the amount of
liability, that estimate has been used. Where the information is
only sufficient to establish a range of probable liability and no
 point within the range is more likely than any other, the lower
end of the range has been used. Based upon the information
available to us, the range of obligations, both individually and
in the aggregate, from known environmental liabilities are not
expected to result in material additional costs beyond those
already identified.

We have other potential environmental liabilities that cannot be
reasonably estimated. This is due to factors such as the unknown
extent of the remedial actions that may be required. In addition,
 in the case of certain sites not owned by us, the extent of our
liability in proportion to the liability of other parties is
difficult to estimate. While we cannot currently estimate the
total additional loss we may incur for these environmental
liabilities, we will make appropriate additional accruals if
information comes to our attention in the future that would allow
 us to reasonably estimate our probable losses. Furthermore, we
will make additional accruals if there are future changes in
laws, regulations and/or regulatory interpretations and such
changes result in additional liabilities; these potential
liabilities could be material.

Our operations are subject to many environmental laws and
regulations in jurisdictions both in the United States and in
other countries in which we do business. For further discussion
of these laws and regulations, please see PD
Mining  Environmental and Other Regulatory MattersandPhelps Dodge Industries  Environmental
Matters. The estimates given in those discussions of the
capital expenditures to comply with environmental laws and
regulations in 1999 and 2000, and the expenditures in 1998, are
separate from the reserves and estimates described above.

The Environmental, Health and Safety Committee of the Board of
Directors comprises three non-employee directors. The Committee
met four times in 1999 to review, among other things, the
Companys policies with respect to environmental, health and
 safety matters, and the adequacy of managements programs
for implementing those policies. The Committee reports on such
reviews and makes recommendations with respect to those policies
to the Board of Directors and to management.




Item 3.  Legal Proceedings

I.  We are a member of several trade associations. As a
participating member of these trade associations, we also are
active in legal proceedings challenging administrative
regulations which are considered by the trade association to be
poor policy. In some instances, the legal challenges brought by
the trade associations request that the government consider the
full impact and results of the proposed regulation on business
operations. For example, the EPA is requiring air quality
controls and air measurement obligations that industry considers
too burdensome.



---



##### Table of Contents



25

II.  Water rights adjudication proceedings.



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | A.  The following state water rights adjudication
	proceedings are pending in Arizona Superior Court:



| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.  In re the General Adjudication of All Rights to Use
	Water in the Little Colorado River System and Source,
	No. 6417 (Superior Court of Arizona, Apache County).



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)  Petition was filed by us on or about February 17,
	1978, and process has been served on all potential claimants.
	Virtually all statements of claimant have been filed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (b)  The principal parties, in addition to us, are the State
	 of Arizona, the Navajo Nation, the Hopi Indian Tribe, the San
	Juan Southern Paiute Tribe and the United States on its own
	behalf and on behalf of those Indian tribes. In this adjudication
	 and in the adjudications reported in items 2.(a), (b) and
	(c) below, the United States and the Indian tribes seek to
	have determined and quantified their rights to use water arising
	under federal law on the basis that, when the Indian reservations
	 and other federal reservations were established by the United
	States, water was reserved from appropriation under state law for
	 the use of those reservations.
|
| | (c)  This proceeding could affect, among other things, our
	rights to impound water in Show Low Lake and Blue Ridge Reservoir
	 and to transport this water into the Salt River and Verde River
	watersheds for exchange with the Salt River Valley Water
	Users Association. We have filed statements of claimant for
	 these and other water claims. This litigation is stayed pending
	the outcome of current settlement negotiations. The Court has not
	 set a final schedule of cases to go to trial, should the
	litigation resume.                                                                                                                                                  



| |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.  In re the General Adjudication of All Rights to Use
	Water in the Gila River System and Source, Nos. W-1
	(Salt River), W-2 (Verde River), W-3 (Gila River) and W-4 (San
	Pedro River) (Superior Court of Arizona, Maricopa County). As a
	result of consolidation proceedings, this action now includes
	general adjudication proceedings with respect to the following
	three principal river systems and sources:



| |                                                    
| | ---------------------------------------------------
| | (a)  The Gila River System and Source Adjudication:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  Petition was filed by us on February 17, 1978.
	Process has been served on water claimants in the upper and lower
	 reaches of the watershed and virtually all statements of
	claimant have been filed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (ii)  The principal parties, in addition to us, are the Gila
	 Valley Irrigation District, the San Carlos Irrigation and
	Drainage District, the State of Arizona, the San Carlos Apache
	Tribe, the Gila River Indian Community and the United States on
	its own behalf and on behalf of the tribe and the community.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (iii)  This proceeding could affect, among other things, our
	 claim to the approximately 3,000 acre-feet of water that it
	diverts annually from Eagle Creek, Chase Creek or the San
	Francisco River and its claims to percolating groundwater that is
	 pumped from wells located north of its Morenci Branch operations
	 in the Mud Springs and Bee Canyon areas and in the vicinity of
	the New Cornelia Branch at Ajo. We have filed statements of
	claimant with respect to waters that it diverts from these
	sources. This proceeding also could affect water right claims
	associated with recently acquired Cyprus operations at Sierrita,
	Twin Buttes and the Christmas mine, and miscellaneous former
	Cyprus land holdings in the area encompassed by the Gila River
	System and Source Adjudication. Statements of claimant have been
	filed in connection with these claims, and are under review for
	possible amendment and supplementation.
|
| | (iv)  In 1997, issues of dispute arose between Phelps Dodge
	and the San Carlos Apache Tribe regarding our use and occupancy
	of the Black River Pump Station which delivers water to the
	Morenci operation. On May 12, 1997, the Tribe filed suit
	against us in San Carlos Apache Court, seeking our eviction from
	the Tribes Reservation and claiming                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



---



##### Table of Contents



26

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | substantial compensatory and punitive damages, among other
	relief. In May 1997, we reached an agreement with the Tribe,
	 and subsequently federal legislation (Pub. L. No. 105-18,
	5003, 111 stat. 158, 181-87) was adopted which mandated dismissal
	 of the tribal court suit. The legislation prescribes
	arrangements intended to ensure a future supply of water for the
	Morenci mining complex in exchange for certain payments by us.
	The legislation does not address any potential claims by the
	Tribe relating to our historical occupancy and operation of our
	facilities on the Tribes Reservation, but does require that
	 any such claims be brought, if at all, exclusively in federal
	district court. By order dated October 13, 1997, the tribal
	court dismissed the lawsuit with prejudice, as contemplated by
	the legislation.
|
| | The 1997 legislation required that the Company and the Tribe
	enter a lease for the delivery of Central Arizona Project water
	through the Black River Pump Station to Morenci on or before
	December 31, 1998. In the event a lease was not signed, the
	legislation expressly provided that the legislation would become
	the lease. The legislation included the principal terms for that
	eventuality. To date, we have not entered into a lease with the
	Tribe, but are relying on our rights under the legislation and
	are prepared to enforce those rights if necessary. We are
	cooperating with the United States, which operates the pump
	station, to reach an agreement with the Tribe on the lease issue.                                                                                                                                    
|
| | (v)  On May 4, 1998, we executed a settlement agreement
	 with the Gila River Indian Community (the Community) that
	resolves the issues between us and the Community pertinent to
	this litigation. This settlement is subject to the approval of
	the Secretary of the Interior and the passage of federal
	legislation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



| |                                                    
| | ---------------------------------------------------
| | (b)  The Salt River System and Source Adjudication:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  Petition was filed by the Salt River Valley Water
	Users Association on or about April 25, 1974. Process
	has been served, and statements of claimant have been filed by
	virtually all claimants.                                                                                                                                                                                                                                                                                                                                 
|
| | (ii)  Principal parties, in addition to us, include the
	petitioner, the State of Arizona and the United States, on its
	own behalf and on behalf of various Indian tribes and communities
	 including the White Mountain Apache Tribe, the San Carlos Apache
	 Tribe, the Fort McDowell Mohave-Apache Indian Community, the
	Salt River Pima-Maricopa Indian Community and the Gila River
	Indian Community.                                                                                                                            
|
| | (iii)  We have filed a statement of claimant to assert our
	interest in the water exchange agreement with the Salt River
	Valley Water Users Association by virtue of which it
	diverts from the Black River water claimed by the Association and
	 repays the Association with water impounded in Show Low Lake and
	 Blue Ridge Reservoir on the Little Colorado River Watershed, and
	 to assert our interest in water credits to which we
	are entitled as a result of our construction of the Horseshoe Dam
	 on the Verde River.
|
| | (iv)  The Salt River Pima-Maricopa Indian Community, Salt
	River Valley Water Users Association, the principal Salt
	River Valley Cities, the State of Arizona and others have
	negotiated a settlement as among themselves for the Verde and
	Salt River system. The settlement has been approved by Congress,
	the President and the Arizona Superior Court. Under the
	settlement, the Salt River Pima-Maricopa Indian Community waived
	all water claims it has against all other water claimants
	(including us) in Arizona.       
|
| | (v)  Active proceedings with respect to other claimants have
	 not yet commenced in this adjudication.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (vi)  This proceeding could affect, among other things, the
	water claims associated with the recently acquired Cyprus
	operation at Miami, and miscellaneous former Cyprus land holdings
	 in the area encompassed by the Salt River System and Source
	Adjudication.                                                                                                                                                                                                                                                                   



---



##### Table of Contents



27

| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Statements of claimant have been filed in connection with these
	claims, and are under review for possible amendment and
	supplementation.



| |                                                     
| | ----------------------------------------------------
| | (c)  The Verde River System and Source Adjudication:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  Petition was filed by the Salt River Valley Water
	Users Association on or about February 24, 1976, and
	process has been served. Virtually all statements of claimant
	have been filed.                                                                                                                                                                                                                                                                                                                                     
|
| | (ii)  The principal parties, in addition to us, are the
	petitioner, the Fort McDowell Mohave-Apache Indian Community, the
	 Payson Community of Yavapai Apache Indians, the Salt River
	Pima-Maricopa Indian Community, the Gila River Indian Community,
	the United States on its own behalf and on behalf of those Indian
	 communities, and the State of Arizona.                                                                                                                                                              
|
| | (iii)  This proceeding could affect, among other things, our
	 Horseshoe Dam water credits with the Salt River
	Valley Water Users Association resulting from its
	construction of the Horseshoe Dam on the Verde River. (See the
	Black River water exchange referred to in Paragraph II.A.
	2.(b)(iii) above.) We have filed statements of claimant with
	respect to Horseshoe Dam and water claims associated with the
	former operations of the United Verde Branch.                                                        
|
| | (iv)  The Fort McDowell Mohave-Apache Indian Community, Salt
	 River Valley Water Users Association, the principal Salt
	River Valley Cities, the State of Arizona and others have
	negotiated a settlement as among themselves for the Verde River
	system. This settlement has been approved by Congress, the
	President and the Arizona Superior Court. Under this settlement,
	the Fort McDowell Mohave-Apache Indian Community waived all water
	 claims it has against all other water claimants (including us)
	in Arizona.



| |                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | B.  The following proceedings involving water rights
	adjudication are pending in the U.S. District Court for the
	District of Arizona:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.  On June 29, 1988, the Gila River Indian Community
	filed a complaint-in-intervention in United States v. Gila
	Valley Irrigation District, et al., and Globe Equity
	No. 59 (D. Ariz.). The underlying action was initiated by
	the United States in October 1925 to determine conflicting
	claims to water rights in certain portions of the Gila River
	watershed. Although we were named and served as a defendant in
	that action, we were dismissed without prejudice as a defendant
	in March 1935. In June 1935, the Court entered a decree
	 setting forth the water rights of numerous parties, but not
	ours. The Court retained, and still has, jurisdiction of the
	case. The complaint-in-intervention does not name us as a
	defendant; however, it does name the Gila Valley Irrigation
	District as a defendant. Therefore, the complaint-in-intervention
	 could affect the approximately 3,000 acre-feet of water that we
	divert annually from Eagle Creek, Chase Creek or the San
	Francisco River pursuant to the agreement between us and the Gila
	 Valley Irrigation District.
|
| | During 1998, we purchased farmlands with associated water rights
	that are the subject of this litigation. As a result, we have
	been named and served as a party in this case. The lands and
	associated water rights are not currently used in connection with
	 any mining operation of ours.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | The recently acquired Cyprus Miami Mining Corporation was named
	and served as a defendant in this action in 1989. These
	proceedings may affect water rights associated with former Cyprus
	 Miami lands in the Gila River Watershed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | 2.  Prior to January 1, 1983, various Indian tribes
	filed several suits in the U.S. District Court for the District
	of Arizona claiming prior and paramount rights to use waters
	which are presently being used by many water users, including us,
	 and claiming damages for prior use in derogation of their
	allegedly paramount rights. These federal proceedings have been
	stayed pending state court adjudication.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



---



##### Table of Contents



28



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.  Cyprus Sierrita Corporations predecessor in
	interest was a defendant in United States, et al. v. City of
	Tucson, et al., No. CIV 75-39 (D. Ariz.). This is a
	consolidation of several actions seeking a declaration of the
	rights of the United States, the Papago Indian Tribe (now known
	as the Tohono OOdham Nation), and individual allottees of
	the Tohono OOdham Nation, to surface water and groundwater
	in the Santa Cruz River Watershed; damages from the
	defendants use of surface water and groundwater from the
	Watershed in derogation of those rights; and injunctive relief.
	Congress in 1982 enacted the Southern Arizona Water Rights
	Settlement Act, which was intended to resolve the water right
	claims of the Tohono OOdham Nation and its member allottees
	 relating to the San Xavier Reservation and the Schuk Toak
	District of the Sells Papago Reservation. The allottees contested
	 the validity of the Act and contended that the Court could not
	dismiss the litigation without their consent. This prompted
	additional litigation, and eventually culminated in settlement
	negotiations. The Court suspended most aspects of the litigation
	to enable the parties to negotiate a settlement with the
	allottees. The Courts recent attention has been devoted to
	the composition of appropriate classes of allottees and
	identification of class representatives, so that any settlement
	that is reached would bind the allottees. It is anticipated that
	a settlement and authorizing legislation would conclude all
	litigation on behalf of the Tohono OOdham Nation, its
	allottee members, and the United States as Trustee for the nation
	 and its allottee members, relating to water rights. As of this
	writing, however, a settlement has not been reached. The outcome
	of this dispute could impact water right claims associated with
	the recently acquired Cyprus operations at Sierrita and Twin
	Buttes, and miscellaneous former Cyprus land holdings in the
	Santa Cruz River Watershed.

III.  The Connecticut Department of Environmental Protection
 (the Department) advised the Company during February 1999,
that it intended to file suit regarding purported violations of
the state air emissions limitations associated with the Phelps
Dodge Norwich rod mill in Norwich, Connecticut. As threatened,
the action would seek substantial money penalties. During 1999,
the Company initiated several measures designed to address the
Departments concerns. No complaint has yet been filed, and
the Company is continuing to work with the Department to resolve
these issues.

IV.  On October 1, 1997, the Environmental Protection
Agency (EPA) issued a Notice of Violation (NOV) to Cyprus
Amaxs (now the Companys) Sierrita operations in
southeastern Arizona. The NOV alleged certain emission standards
and permitting violations associated with the molybdenum roasting
 facility at Sierrita. Cyprus Amax and the Corporation entered
into tolling agreements with the EPA to allow time for further
investigation. The Company does not believe that the outcome of
this proceeding will have a material adverse effect on it.

V.  Cyprus Tohono Corporation (Tohono) has negotiated a
Consent Decree with the EPA that resolves outstanding issues
relating to a process line break in 1992. The Consent Decree
required Tohono to pay a penalty of $100,000 and perform two
Supplemental Environmental Projects with an estimated total cost
of $225,000.

VI.  In 1999, the Pinal Creek Group, comprising Cyprus Miami
 Mining Corporation (a wholly owned subsidiary of the Company)
and other companies, continued remediation and assessment of
groundwater quality in the shallow alluvial aquifers along Pinal
Creek near Miami, Arizona. The removal, remediation and
assessment work is being conducted in accordance with the
requirements of the Arizona Department of Environmental
Qualitys Water Quality Assurance Revolving Fund program. In
 addition, the remedial and removal action is consistent with the
 National Contingency Plan prepared by the EPA as required by
CERCLA. The ongoing removal, remediation and assessment program,
initiated in 1989, has resulted in continued improvement of the
sub-surface water quality in the area. In November 1997,
Cyprus Miami, as a member of the Pinal Creek Group, joined with
the State of Arizona in seeking approval of the District Court
for entry of a Consent Decree resolving all matters related to an
 enforcement action contemplated by the State of Arizona with
respect to the groundwater matter. On August 13, 1998, the
court approved the Decree that committed Cyprus Miami and the
other Pinal Creek Group members to complete the remediation work
outlined in the remedial action plan that was submitted to the
State in May 1997. Approximately $143 million remained in
the Companys Pinal Creek remediation reserve at
December 31, 1999. Cyprus Miami has commenced contribution
litigation against other parties involved in this matter and has
asserted claims against



---



##### Table of Contents



29








Item 4.  Submission of Matters to a Vote of
Security Holders


A special meeting of the shareholders of the Company was held on
October 13, 1999. A total of 45,529,685 common shares, or
about 78.49 percent of our issued and outstanding common
shares, were represented at the meeting. Set forth below is a
description of the matters voted upon at the meeting and a
summary of the voting regarding each matter:

Proposal 1: to approve the issuance of up to 17,082,064 shares of
 Phelps Dodges common stock in connection with an exchange
offer made to the shareholders of Asarco Incorporated and a
subsequent merger of that entity with a subsidiary of the
Company.

Proposal 2: to approve the issuance of up to 28,357,520 shares of
 Phelps Dodges common stock in connection with an exchange
offer made to the shareholders of Cyprus Amax Minerals Company
and a subsequent merger of that entity with a subsidiary of the
Company.

|           |  |     |            |         |  |             |           |  |  |  |        | 
|---------- |  | --- | ---------- | ------- |  | ----------- | --------- |  |  |  | ------ | 
|Voting     |  | For |            | Against |  | Abstentions
|           |  |     |            |         |  |            
|Proposal 1 |  |     | 43,599,200 |         |  |             | 1,860,138 |  |  |  | 70,325 | 
|Proposal 2 |  |     | 45,145,450 |         |  |             | 316,136   |  |  |  | 68,059 | 






Executive Officers of Phelps Dodge Corporation


The executive officers of Phelps Dodge Corporation are elected to
 serve at the pleasure of its Board of Directors. As of
March 1, 2000, the executive officers of Phelps Dodge
Corporation were as follows:

|                   |  |        |    |          |  |                                                               |  |  |      | 
|------------------ |  | ------ | -- | -------- |  | ------------------------------------------------------------- |  |  | ---- | 
|                   |  | Age at |    |          |  | Officer of the                                               
|Name               |  | 3/1/00 |    | Position |  | Corporation since                                            
|                   |  |        |    |          |  |                                                              
|Douglas C. Yearley |  |        | 64 |          |  | Chairman of the Board                                         |  |  | 1981 | 
|                  
|                  
|                  
|                  
|J. Steven Whisler  |  |        | 45 |          |  | President and Chief Executive Officer                         |  |  | 1987 | 
|                  
|                  
|                  
|                  
|Manuel J. Iraola   |  |        | 51 |          |  | Senior Vice President; President, Phelps Dodge Industries     |  |  | 1995 | 
|                  
|                  
|                  
|                  
|Timothy R. Snider  |  |        | 49 |          |  | Senior Vice President; President, Phelps Dodge Mining Company |  |  | 1997 | 
|                  
|                  
|                  
|                  
|S. David Colton    |  |        | 44 |          |  | Senior Vice President and General Counsel                     |  |  | 1998 | 
|                  
|                  
|                  
|                  
|Ramiro G. Peru     |  |        | 44 |          |  | Senior Vice President and Chief Financial Officer             |  |  | 1995 | 
|                  
|                  
|                  
|                  
|David L. Pulatie   |  |        | 58 |          |  | Senior Vice President, Human Resources                        |  |  | 1999 | 

Except as stated below, all of the above have been officers of
Phelps Dodge Corporation for the past five years.

Mr. Snider was elected Senior Vice President in
September 1998. Prior to his election, Mr. Snider was
Vice President of the Corporation, a position he held since 1997.
 Prior to that time, he was Vice President, Arizona operations,
of Phelps Dodge Mining Company.

Mr. Colton was elected Senior Vice President in
November 1999. He was elected Vice President and General
Counsel in April 1998. Prior to that time, Mr. Colton
was Vice President and Counsel for Phelps Dodge Exploration, a
position he held since 1995.

Mr. Peru was elected Senior Vice President and Chief
Financial Officer in January 1999. Prior to that time,
Mr. Peru was Senior Vice President for Organization
Development and Information Technology, a position he held since
January 1997. Prior to that, Mr. Peru was Vice
President and Treasurer of Phelps Dodge Corporation, a position
he held since 1995.

Mr. Pulatie was elected Senior Vice President, Human
Resources in March 1999. Mr. Pulatie joined Phelps Dodge in
March 1999 after a 34-year career with Motorola Inc.



---



##### Table of Contents



30




Part II




Item 5.  Market for the Registrants
Common Equity and Related Stockholder Matters

The information called for in Item 5 appears on
pages 50 and 51 of this report.




Item 6.  Selected Financial Data

|                                   |                               |                                        |         |       |   |      |         |      |  |      |         |      |  |  |         |      |  |  |         |       | 
|---------------------------------- | ----------------------------- | -------------------------------------- | ------- | ----- | - | ---- | ------- | ---- |  | ---- | ------- | ---- |  |  | ------- | ---- |  |  | ------- | ----- | 
|                                   |                               | 1999                                   |         | 1998  |   | 1997 |         | 1996 |  | 1995
|                                   |                               |                                        |         |       |   |      |         |      |  |     
|                                   |                               |                                       
|                                   |                               | (In millions except per share amounts)
|                                  
|                                  
|                                  
|                                  
|Sales and other operating revenues |                               | $                                      | 3,114.4 |       |   |      | 3,063.4 |      |  |      | 3,914.3 |      |  |  | 3,786.6 |      |  |  | 4,185.4 |      
|                                  
|                                  
|                                  
|                                  
|Net Income (loss)(a)               |                               | $                                      | (257.8  | )     |   |      | 190.9   |      |  |      | 408.5   |      |  |  | 461.8   |      |  |  | 746.6   |      
|                                  
|                                  
|                                  
|                                  
|                                   | Per common share  basic(b)   |                                        | $       | (4.19 | ) |      |         | 3.28 |  |      |         | 6.68 |  |  |         | 7.02 |  |  |         | 10.72 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Per common share  diluted(b) |                                        | $       | (4.19 | ) |      |         | 3.26 |  |      |         | 6.63 |  |  |         | 6.98 |  |  |         | 10.66 | 
|                                  
|                                  
|                                  
|                                  
|Total assets                       |                               | $                                      | 8,229.0 |       |   |      | 5,036.5 |      |  |      | 4,965.2 |      |  |  | 4,816.4 |      |  |  | 4,645.9 |      
|                                  
|                                  
|                                  
|                                  
|Long-term debt                     |                               | $                                      | 2,172.5 |       |   |      | 836.4   |      |  |      | 857.1   |      |  |  | 554.6   |      |  |  | 613.1   |      
|                                  
|                                  
|                                  
|                                  
|Dividends per common share         |                               | $                                      | 2.00    |       |   |      | 2.00    |      |  |      | 2.00    |      |  |  | 1.95    |      |  |  | 1.80    |      




|    |                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | For a further discussion of earnings, please see
	Managements Discussion and Analysis.                                                                                                                                                                
|   
|(b) | In 1997, we adopted Statement of Financial Accounting
	Standards (SFAS) No.  128, Earnings per
	Share. For comparative purposes, all prior period earnings
	per common share computations have been restated to reflect the
	effect of SFAS No.  128.



|      |                                                                                                                                                                              
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: | See Managements Discussion and Analysis for a discussion of
	 the effect on our results of material changes in the price we
	receive for copper or in unit production costs.




Item 7.  Managements Discussion and
Analysis

The information called for in Item 7 appears on
pages 31 through 51 of this report.




Item 8.  Financial Statements and
Supplementary Data

The information called for in Item 8 appears on
pages 56 through 92 of this report.




Item 9.  Disagreements on Accounting and
Financial Disclosure

None.



---



##### Table of Contents



31




MANAGEMENTS DISCUSSION AND ANALYSIS

The U.S. securities laws provide a safe harbor for
certain forward-looking statements. This annual report contains
forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially from those
projected in such forward-looking statements. Statements
regarding the expected commencement dates of operations,
projected quantities of future production, capital costs,
production rates and other operating and financial data are based
 on expectations that the Company believes are reasonable, but we
 can give no assurance that such expectations will prove to have
been correct. Factors that could cause actual results to differ
materially include, among others: risks and uncertainties
relating to general U.S. and international economic and political
 conditions, the cyclical and volatile price of copper and other
commodities, political and economic risks associated with foreign
 operations, unanticipated ground and water conditions,
unanticipated grade and geological problems, metallurgical and
other processing problems, availability of materials and
equipment, delays in the receipt of or failure to receive
necessary government permits, appeals of agency decisions or
other litigation, volatility in the price of oil (the main
feedstock for our carbon black operations), changes in laws or
regulations or the interpretation and enforcement thereof
(including changes in treaties or laws governing international
trade or tariffs), the occurrence of unusual weather or operating
 conditions, force majeure events, lower than expected ore
grades, the failure of equipment or processes to operate in
accordance with specifications or expectations, unanticipated
difficulties consolidating acquired operations and obtaining
expected synergies, labor relations, accidents, delays in
anticipated start-up dates, environmental risks and the results
of financing efforts and financial market conditions. These and
other risk factors are discussed in more detail herein. Many such
 factors are beyond our ability to control or predict. Readers
are cautioned not to put undue reliance on forward-looking
statements. We disclaim any intent or obligations to update these
 forward-looking statements, whether as a result of new
information, future events or otherwise.

Earnings

In 1999, consolidated earnings were $21.7 million, or
35 cents per common share, before non-recurring items. (All
references to per share earnings or charges are based on diluted
earnings per share.) Results for the year include those of Cyprus
 Amax Minerals Company (Cyprus Amax) for the two and one-half
month period beginning on October 16, 1999 (the effective
acquisition date by Phelps Dodge). Non-recurring items and their
impact on earnings are illustrated in the following table:

|                                                   |                                        |          |        |         |   |  |       |       |  
|-------------------------------------------------- | -------------------------------------- | -------- | ------ | ------- | - |  | ----- | ----- | -
|                                                   |                                        | $ in     |        |        
|                                                   |                                        | millions |        | $/share
|                                                   |                                        |          |        |        
|1999 full-year earnings before non-recurring items |                                        | $        | 21.7   |         |   |  | 0.35  |      
|                                                   |                                        |          |        |         |   |  |       |      
|After-tax, non-recurring items:*                   |                                        |          |        |         |   |  |       |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Asset impairments                      |          |        | (222.5  | ) |  |       | (3.61 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Environmental provisions               |          |        | (17.8   | ) |  |       | (0.29 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | June 30, 1999, restructuring plan      |          |        | (65.7   | ) |  |       | (1.07 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cumulative effect of accounting change |          |        | (3.5    | ) |  |       | (0.06 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Adjustment for prior years taxes      |          |        | 30.0    |   |  |       | 0.49  |  
|                                                   |                                        |          |        |         |   |  |       |      
|Total non-recurring items                          |                                        |          | (279.5 | )       |   |  | (4.54 | )    
|                                                   |                                        |          |        |         |   |  |       |      
|1999 full-year net loss after non-recurring items  |                                        | $        | (257.8 | )       |   |  | (4.19 | )    
|                                                   |                                        |          |        |         |   |  |       |      




|  |                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------
|* | Please see Note 3 to the Consolidated Financial Statements for
	further discussion of these non-recurring items.

In the 1999 fourth quarter, the Company recognized non-recurring,
 pre-tax charges for asset impairments of $320.4 million at
Phelps Dodge Mining Company (PD Mining) and $21.7 million at
Phelps Dodge Industries (PD Industries). The PD Mining
impairments included the write down of the Hidalgo smelter in New
 Mexico ($201.5 million) and the Metcalf concentrator at the
Morenci operations in Arizona ($88.0 million). As a result of the
 successful acquisition of Cyprus Amax and the planned conversion
 of Morenci to a



---



##### Table of Contents



32

.


In the 1999 fourth quarter, the Company also recognized a
non-recurring, pre-tax charge of $28.2 million for estimated
future costs associated with environmental matters applicable to
PD Mining. For further information, see Environmental Matters
later in this discussion and Note 19 to the Consolidated
Financial Statements.

On June 30, 1999, Phelps Dodge announced a wide-ranging plan
 to reduce costs and improve operating performance by further
curtailing higher cost copper production, restructuring certain
wire and cable assets to respond to changing market conditions,
suspending operations at Columbian Chemicals Companys
carbon black plant in the Philippines, and selling a non-core
South African fluorspar mining unit. These actions resulted in a
non-recurring, pre-tax charge of $36.6 million in 1999 at PD
Mining, $42.2 million in 1999 at the wire and cable segment ($1.9
 million of which was charged to non-operating expense) and $17.7
 million in 1999 at Columbian Chemicals Company. The minority
interest add-back to the restructuring reserve in 1999 totaled
$2.2 million at the wire and cable segment and $0.2 million at
Columbian Chemicals Company.

During 1999, culminating with Notices of Tax Due received in
December, the Company reached a settlement with the Internal
Revenue Service on several issues raised in its audits of the
years 1990 through 1994. As a result, the Company recorded a $30
million reduction in its tax liabilities.

In 1998, consolidated earnings were $91.8 million, or $1.57 per
common share, before non-recurring items. Non-recurring items
included an after-tax gain of $131.1 million, or $2.24 per common
 share, from the disposition of Accuride Corporation (Accuride),
and an after-tax loss of $32.0 million, or 55 cents per
common share, in the fourth quarter. The fourth quarter
non-recurring loss included $26.4 million, or 45 cents per
common share, from the sale of our 44.6 percent interest in
a South African mining company, and $5.6 million, or
10 cents per common share, for costs associated with
previously announced curtailments and indefinite closures
primarily at PD Mining. Net income including non-recurring items
was $190.9 million, or $3.26 per common share.

Earnings in 1997 were $440.1 million, or $7.14 per common share,
before non-recurring, after-tax charges of $31.6 million, or
51 cents per common share. The non-recurring charges
primarily reflected provisions for estimated future costs
associated with environmental matters and an early retirement
program at PD Mining. Net income including non-recurring charges
was $408.5 million, or $6.63 per common share.

Note 3 to the Consolidated Financial Statements contains
further information to which reference should be made for a
fuller understanding of the non-recurring items in 1999, 1998 and
 1997.



---



##### Table of Contents



33

Consolidated financial results (in millions except per common
share amounts):

|                                             |  |      |         |      |  |      |         |  |  |  |         | 
|-------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                                             |  | 1999 |         | 1998 |  | 1997
|                                             |  |      |         |      |  |     
|Sales and other operating revenues           |  | $    | 3,114.4 |      |  |      | 3,063.4 |  |  |  | 3,914.3 | 
|                                            
|                                            
|                                            
|                                            
|Operating income (loss)                      |  | $    | (315.6  | )    |  |      | 422.7   |  |  |  | 611.0   | 
|                                            
|                                            
|                                            
|                                            
|Net income (loss)                            |  | $    | (257.8  | )    |  |      | 190.9   |  |  |  | 408.5   | 
|                                            
|                                            
|                                            
|                                            
|Net income (loss) per common share  basic   |  | $    | (4.19   | )    |  |      | 3.28    |  |  |  | 6.68    | 
|                                            
|                                            
|                                            
|                                            
|Net income (loss) per common share  diluted |  | $    | (4.19   | )    |  |      | 3.26    |  |  |  | 6.63    | 

Sales

Consolidated 1999 revenues were $3,114.4 million, compared with
$3,063.4 million in 1998. The 1999 increase principally resulted
from the October 16, 1999, acquisition of Cyprus Amax ($253
million) and higher sales of carbon black ($88 million),
partially offset by lower average copper prices ($70 million) and
 lower sales of wire and cable products ($146 million). The
$850.9 million decrease in 1998 versus 1997 principally resulted
from lower average copper prices ($472 million), the absence of
Accuride ($333 million) and lower wire and cable sales ($48
million), partially offset by higher sales volumes of carbon
black ($25 million) and copper ($3 million).

Copper Prices

Copper is an internationally traded commodity, and its price is
effectively determined by the two major metals
exchanges  the New York Commodity Exchange
(COMEX) and the London Metal Exchange (LME). The prices on
these exchanges generally reflect the worldwide balance of copper
 supply and demand, but also are influenced significantly from
time to time by speculative actions and by currency exchange
rates.

The price of copper, our principal product, was a significant
factor influencing our results over the three-year period ended
December 31, 1999. We principally base our selling price on
the COMEX spot price per pound of copper cathode, which averaged
72 cents in 1999, 75 cents in 1998 and $1.04 in 1997.
The COMEX price averaged 84 cents per pound for the first
two months of 2000, and closed at 79 cents on March 6,
2000. Internationally, our copper selling prices are based on LME
 spot price per tonne of cathode.

Any material change in the price we receive for copper, or in our
 unit production costs, has a significant effect on our results.
Our share of current annual production is approximately 2.4
billion pounds of copper. Accordingly, each 1 cent per pound
 change in the average annual copper price, or in average annual
unit production costs, causes a variation in annual operating
income before taxes of approximately $24 million.

Due to the market risk arising from the volatility of copper
prices, our objective is to sell copper cathode and rod at the
COMEX average price in the month of shipment and copper
concentrate at the LME average price in the month of settlement
with our customers. We initially record copper concentrate sales
at a provisional price at the time of shipment, and adjust the
pricing for all outstanding shipments to reflect market
conditions at the end of each quarter. A final adjustment is made
 to the price of the shipments upon settlement with our
customers.

Molybdenum Prices

Molybdenum oxide is used primarily in the steel industry for
corrosion resistance, strengthening and heat resistance.
Molybdenum chemicals are used in a number of diverse applications
 such as catalysts for petroleum refining and feedstock for pure
molybdenum metal used in electronics and lubricants. A
substantial portion of Phelps Dodges expected 2000
molybdenum production is committed for sale throughout the world
pursuant to annual agreements based on prevailing market prices
at the time of sale.

Molybdenum sales generally are characterized by cyclical and
volatile prices, little product differentiation and strong
competition. Prices for metallurgical products generally
reference prior period Platts Metals Week,
Ryans Notes, or Metal Bulletin for technical grade
molybdenum or ferromolybdenum. Prices for chemical products are
generally less directly based on the previously noted reference
prices. Prices are influenced by



---



##### Table of Contents



34



Copper Hedging

Some of our wire, cathode and rod customers request a fixed sales
 price instead of the COMEX or LME average price in the month of
shipment or receipt. As a convenience to these customers, we
enter into copper swap and futures contracts to hedge the sales
in a manner that will allow us to receive the COMEX or LME
average price in the month of shipment or receipt while our
customers receive the fixed price they requested. We accomplish
this by liquidating the copper futures contracts and settling the
 copper swap contracts during the month of shipment or receipt,
which generally results in the realization of the COMEX or LME
average price.

Because of the nature of the hedge settlement process, the net
hedge value, rather than the sum of the face values of our
outstanding futures contracts, is a more accurate measure of our
market risk from the use of such hedge contracts. The contracts
that may result in market risk to us are those related to the
customer sales transactions under which copper products have not
yet been shipped.

At December 31, 1999, we had futures and swap contracts for
approximately 111 million pounds of copper with a net hedge value
 of $87 million and a total face value of approximately $125
million. At that date, we had $7 million in gains on these
contracts not yet recorded in our financial statements because
the copper products under the related customer transactions had
not yet been shipped or received. At year-end 1998, we had
futures and swap contracts in place for approximately 86 million
pounds of copper at a net hedge value of $65 million and a total
face value of approximately $138 million. We had $7 million in
deferred, unrealized losses at that time. At year-end 1997, we
had futures and swap contracts in place for approximately 140
million pounds of copper at a net hedge value of $130 million and
 an approximate total face value of $146 million. We had $19
million in deferred, unrealized losses at that time.

We do not acquire, hold or issue futures contracts for
speculative purposes. All of our copper futures and swap
contracts have underlying customer agreements or other related
transactions. We have prepared an analysis to determine how
sensitive our net futures contracts are to copper price changes.
In our market risk analysis, if copper prices had dropped a
hypothetical 10 percent at the end of 1999, we would have
had a net loss from our copper futures contracts of approximately
 $9 million. That loss would have been virtually offset by a
similar amount of gain on the related customer contracts.

From time to time, we may purchase or sell copper price
protection contracts for a portion of our expected future mine
production. We do this to limit the effects of potential
decreases in copper selling prices. For 1999 production, we had
fourth quarter protection contracts that gave us a minimum
monthly average LME price of 69 cents per pound for approximately
 200 million pounds of copper cathode that expired without
payment. We did not have any copper price protection contracts at
 the end of 1998 or 1997.

For first quarter 2000 production, we have protection contracts
in place that will give us a minimum monthly average LME price of
 71 cents per pound for approximately 200 million pounds of
copper cathode. For overall 2000 production, we have a
combination of minimum (approximately 72 cents) and maximum
(approximately 95 cents) annual average LME prices per pound
 for approximately 110 million pounds of copper cathode.

Aluminum Hedging

During 1999, our Venezuelan wire and cable operation entered into
 aluminum futures contracts with a financial institution to lock
in the cost of aluminum ingot needed in manufacturing aluminum
cable contracted by customers. At December 31, 1999, we had
futures contracts for approximately 1 million pounds of



---



##### Table of Contents



35



Foreign Currency Hedging

We are a global company and we transact business in many
countries and in many currencies. Foreign currency transactions
increase our risks because exchange rates can change between the
time agreements are made and the time foreign currencies are
actually exchanged. One of the ways we manage these exposures is
by entering into forward exchange and currency option contracts
in the same currency as the transaction to lock in or minimize
the effects of changes in exchange rates. With regard to foreign
currency transactions, we may hedge or protect transactions for
which we have a firm legal obligation or when anticipated
transactions are likely to occur. We do not enter into foreign
exchange contracts for speculative purposes. In the process of
protecting our transactions, we may use a number of offsetting
currency contracts. Because of the nature of the hedge settlement
 process, the net hedge value, rather than the sum of the face
value of our outstanding contracts, is a more accurate measure of
 our market risk from the use of such contracts.

At December 31, 1999, we had a net hedge and total face
value of approximately $34 million in forward exchange contracts
to hedge intercompany loans between our international
subsidiaries or foreign currency exposures with our trading
partners.

At December 31, 1998, we had a net hedge and total face
value of approximately $44 million in forward exchange contracts
to hedge intercompany loans between our international
subsidiaries. At year-end 1997, we had foreign currency
protection in place for $158 million that represented both the
net hedged amount and the total face value of the forward
contracts. We did not have any significant gains or losses at
year end that had not been recorded in our financial statements
for each of the three years in the period ended December 31,
 1999.

At year-end 1999, our foreign currency protection contracts
included the British pound, euro, German mark and Thai baht. A
sensitivity analysis of our exposure to market risk with respect
to our forward foreign exchange contracts indicates that if
exchange rates had moved against the rates in our protection
agreements by a hypothetical 10 percent, we would have
incurred a potential loss of approximately $4 million. This
loss would have been virtually offset by a gain on the related
underlying transactions.

Interest Rate Hedging

In some situations, we may enter into structured transactions
using currency swaps that result in lower overall interest rates
on borrowings. We do not enter into currency swap contracts for
speculative purposes. At December 31, 1999, we had currency
swap contracts in place swapping fixed-rate U.S. dollar loans
into floating-rate Brazilian real loans with an approximate net
hedged and total face value of $21 million. At year-end 1998, we
had currency swap contracts in place with an approximate net
hedged value of $31 million and a total face value of $36
million. These currency swaps involved swapping fixed-rate
Brazilian real loans into fixed-rate U.S. dollar loans, and
swapping floating-rate U.S. dollar loans into fixed-rate Thai
baht loans. At the end of 1999, we prepared an analysis to
determine our sensitivity to changes in interest and exchange
rates. A hypothetical interest rate move against our currency
swap rates of 1 percent (or 100 basis points) would be
insignificant. A hypothetical 10 percent unfavorable change
in exchange rates would cause us to incur additional costs of
approximately $1 million.

In addition, we are vulnerable to increasing costs from interest
rates associated with floating-rate debt. We may enter into
interest rate swap contracts to manage or limit such interest
expense costs. We do not enter into interest rate swap contracts
for speculative purposes. At the end of 1999, we had interest
rate swap



---



##### Table of Contents



36



Business Segments

Results for 1999, 1998 and 1997 can be meaningfully compared by
separate reference to our reporting divisions, Phelps Dodge
Mining Company and Phelps Dodge Industries. Phelps Dodge Mining
Company is a business segment that includes our worldwide copper
operations from mining through rod production, marketing and
sales; molybdenum operations from mining through manufacturing,
marketing and sales; other mining operations and investments, and
 worldwide mineral exploration and development programs. Through
December 31, 1997, Phelps Dodge Industries included our
specialty chemicals segment, our wire and cable segment, and our
wheel and rim operations. Effective January 1, 1998,
90 percent of Accuride Corporation and its subsidiaries, our
 wheel and rim business, was sold to an affiliate of Kohlberg
Kravis Roberts and Co. (KKR), and the existing management of
Accuride. The remaining 10 percent interest was sold to RSTW
 Partners III, L.P., on September 30, 1998.

In 1998, we adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, that
requires financial information to be reported on the basis that
it is used by management to evaluate segment performance and
determine the allocation of resources between segments. All prior
 year segment information presented in this report has been
restated to reflect the reporting requirements of this new
standard. Significant events and transactions have occurred
within each segment which, as indicated in the separate
discussions presented below, are material to an understanding of
the particular years results and to a comparison with
results of the other periods. (See Note 21 to the
Consolidated Financial Statements for further segment
information.)




RESULTS OF PHELPS DODGE MINING COMPANY

PD Mining is our international business segment that comprises a
group of companies involved in vertically integrated copper
operations including mining, concentrating, electrowinning,
smelting, refining, rod production, marketing and sales, and
related activities. PD Mining sells copper to others primarily as
 rod, cathode or concentrate, and as rod to our wire and cable
segment. In addition, PD Mining at times smelts and refines
copper and produces copper rod for customers on a toll basis. It
is also an integrated producer of molybdenum, with mining,
roasting and processing facilities producing molybdenum
concentrate as well as metallurgical and chemical products. In
addition, it produces gold, silver, molybdenum and copper
chemicals as by-products, and sulfuric acid from its air quality
control facilities. This business segment also includes worldwide
 mineral exploration programs.

|                                                                         |            |                       |         |       |  |      |         |       |  |  |         |       | 
|------------------------------------------------------------------------ | ---------- | --------------------- | ------- | ----- |  | ---- | ------- | ----- |  |  | ------- | ----- | 
|                                                                         |            | 1999*                 |         | 1998  |  | 1997
|                                                                         |            |                       |         |       |  |     
|Copper (from own mines  thousand tons)**                                |            |                       |         |       |  |      |         |       |  |  |         |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Production |                       |         | 890.1 |  |      |         | 874.0 |  |  |         | 812.1 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Sales      |                       |         | 884.2 |  |      |         | 876.3 |  |  |         | 812.8 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|COMEX average spot copper price per pound  cathodes                     |            | $                     | 0.72    |       |  |      | 0.75    |       |  |  | 1.04    |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Molybdenum production (million pounds)                                   |            |                       | 8.1     |       |  |      | 1.0     |       |  |  | 1.6     |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Metals Week  average technical grade molybdenum
	 oxide price per pound |            | $                     | 2.66    |       |  |      | 3.42    |       |  |  | 4.31    |      
|                                                                         |            | (millions of dollars)
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Sales and other operating revenues  unaffiliated
	customers             |            | $                     | 1,786.6 |       |  |      | 1,677.7 |       |  |  | 2,173.3 |      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Operating income (loss)***                                               |            | $                     | (301.0  | )     |  |      | 110.3   |       |  |  | 459.2   |      




|  |                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------
|* | 1999 includes the results of the acquired Cyprus Amax properties
	since the date of the merger, October 16, 1999.



---



##### Table of Contents



37



|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Worldwide copper production and sales exclude the amounts
	attributable to (i)  the 15 percent undivided interest
	in the Morenci, Arizona, copper mining complex held by Sumitomo
	Metal Mining Arizona, Inc. (Sumitomo), (ii) the one-third
	partnership interest in Chino Mines Company in New Mexico held by
	 Heisei Minerals Corporation (Heisei), (iii) the
	20 percent interest in Candelaria in Chile held by SMMA
	Candelaria, Inc., a jointly owned indirect subsidiary of Sumitomo
	 Metal Mining Co., Ltd., and Sumitomo Corporation, and
	(iv) the 49 percent interest in the El Abra copper
	mining operation in Chile held by Corporación Nacional del
	Cobre de Chile (Codelco).

|                                     |                           |      |  |      |  |      |  |      |  |  |  |      | 
|------------------------------------ | ------------------------- | ---- |  | ---- |  | ---- |  | ---- |  |  |  | ---- | 
|                                     |                           | 1999 |  | 1998 |  | 1997
|                                     |                           |      |  |      |  |     
|Excluded production (thousand tons): |                           |      |  |      |  |      |  |      |  |  |  |     
|                                    
|                                    
|                                    
|                                    
|                                     | Morenci  for Sumitomo    |      |  | 72.0 |  |      |  | 78.4 |  |  |  | 81.3 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Chino  for Heisei        |      |  | 43.3 |  |      |  | 52.9 |  |  |  | 56.3 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Candelaria  for Sumitomo |      |  | 50.0 |  |      |  | 47.4 |  |  |  | 34.4 | 
|                                    
|                                    
|                                    
|                                    
|                                     | El Abra  for Codelco     |      |  | 25.9 |  |      |  |     |  |  |  |     | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*** | Operating income for 1999 includes non-recurring, pre-tax charges
	 of $385.2  million comprising the following: asset
	impairments of $320.4 million, environmental provisions of
	$28.2  million, and restructuring costs of
	$36.6 million. 1998 includes a non-recurring, pre-tax charge
	 of $5.5 million for costs associated with curtailments and
	indefinite closures. 1997 includes a non-recurring, pre-tax
	charge of $40.5 million for an early retirement program and
	environmental provisions. (See Note 3 to the Consolidated
	Financial Statements.) Operating income has been presented in
	compliance with SFAS No. 131, Disclosures about
	Segments of an Enterprise and Related Information (with
	1997 restated).

PD Mining  Operating Income

|                                                  |  |                 |        |      |  |      |       |   |  |  |       |  
|------------------------------------------------- |  | --------------- | ------ | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                                  |  | 1999            |        | 1998 |  | 1997
|                                                  |  |                 |        |      |  |     
|                                                  |  |                
|                                                  |  | ($ in millions)
|                                                 
|                                                 
|                                                 
|                                                 
|Operating income before non-recurring items       |  | $               | 84.2   |      |  |      | 115.8 |   |  |  | 499.7 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Pre-tax, non-recurring items                      |  |                 | (385.2 | )    |  |      | (5.5  | ) |  |  | (40.5 | )
|                                                  |  |                 |        |      |  |      |       |   |  |  |       |  
|Operating income (loss) after non-recurring items |  | $               | (301.0 | )    |  |      | 110.3 |   |  |  | 459.2 |  
|                                                  |  |                 |        |      |  |      |       |   |  |  |       |  

Our PD Mining segment reported operating income of
$84.2 million in 1999, before $385.2 million of
non-recurring, pre-tax charges. The pre-tax, non-recurring items
are as follows: $320.4 million of asset impairments included
 the write-down of the Hidalgo smelter in New Mexico
($201.5 million), the Metcalf concentrator at the Morenci
operations in Arizona ($88.0 million), a real estate
development project in Arizona ($12.2 million), a mine
development project at the Tyrone operations in New Mexico
($11.9 million), and mine development at the Copper Basin
operation in Arizona ($6.8 million); $28.2 million for
environmental provisions; and $36.6 million for the
restructuring plan announced in the 1999 second quarter.

The 1999 decrease in operating income before non-recurring items
reflected lower average copper prices ($53 million),
partially offset by lower copper production costs (approximately
$30 million).

Operating income in 1998 was $115.8 million before
$5.5 million of non-recurring, pre-tax charges associated
with a production curtailment at Chino Mines Company (Chino) in
New Mexico and the indefinite closures of operations at our Ojos
del Salado operation in Chile and Cobre Mining Company (Cobre) in
 New Mexico.

Operating income in 1997 was $499.7 million before
$40.5 million of non-recurring, pre-tax charges which
reflected an early retirement program and estimated future costs
associated with environmental matters. The decrease in 1998
operating income compared with 1997 reflected lower average
copper prices (approximately $470 million), partially offset
 by higher volumes of copper sold from mine production
(approximately $8 million) and lower exploration costs
(approximately $33 million).

Copper unit production costs generally have been stable for the
three-year period ended December 31, 1999, primarily as a
result of ongoing cost-containment programs and high levels of
production of low-cost



---



##### Table of Contents



38



In 1999, operations outside the United States provided
14 percent of PD Minings sales, compared with
11 percent in 1998 and 9 percent in 1997. During the
year, operations outside the United States contributed
67 percent of the segments operating income, compared
with reductions of 9 percent in 1998 and contributions of
9 percent in 1997.

PD Mining  Operations Update

On October 16, 1999, Phelps Dodge acquired Cyprus Amax
Minerals Company. This included (i) the Bagdad mine in
northwestern Arizona, consisting of an open-pit mine, an
approximate 85,000 ton-per-day sulfide ore concentrator
producing copper and molybdenum concentrates, and an oxide
leaching system with an SX/ EW plant producing copper cathode;
(ii) the Sierrita mine in south central Arizona, consisting
of an open-pit mine, an approximate 115,000 ton-per-day
sulfide ore concentrator, a molybdenum recovery plant, two
molybdenum roasters, and an oxide and low-grade sulfide ore dump
leaching system with an SX/ EW plant producing copper cathodes;
(iii) the Miami mine near Miami, Arizona, consisting of an
open-pit mine producing acid soluble copper ore for heap leaching
 operations, an SX/ EW plant producing copper cathode, a smelter,
 an electrolytic refinery, and a copper rod plant; (iv) a
copper rod plant in Chicago, Illinois; (v) an
82 percent interest in the Cerro Verde mine in Peru,
consisting of two open pits, a heap leach operation and an SX/ EW
 plant; (vi) a 51 percent interest in the El Abra mine
in northern Chile, consisting of an open-pit mine, crushing
facility, on/off leach pad and an SX/ EW plant producing copper
cathodes; (vii) the Henderson mine near Empire, Colorado,
consisting of an underground block caving mine, a conveying
system and a concentrator that produces molybdenum disulfide
concentrates; (viii) the Climax mine in Colorado, consisting
 of an underground and open-pit mine and concentrator which are
on standby; (ix) conversion facilities in the United States
and Europe that use molybdenum roasters and chemical conversion
plants to convert molybdenum concentrates into such products and
technical grade molybdic oxide, ferromolybdenum, pure molybdic
oxide, ammonium molybdates, and molysulfide powder; and
(x) other mining-related facilities.

On June 30, 1999, Phelps Dodge announced a plan to reduce
costs and improve operating performance by curtailing higher cost
 copper production by temporarily closing our Hidalgo smelter in
New Mexico and the smaller of two concentrators at our
Morenci mining operations in Arizona, as well as curtailing
production by 50 percent at our copper refinery in
El Paso, Texas. In the fourth quarter of 1999, as a result
of the successful acquisition of Cyprus Amax and the planned
conversion of Morenci to a mine-for-leach operation, the Hidalgo
smelter was written down by $201.5 million and the Metcalf
concentrator at Morenci by $88.0 million. The Hidalgo
smelter is expected to be reconfigured to allow it to continue to
 be a reliable source of sulfuric acid.

The Henderson molybdenum mine completed a major project in early
October 1999 to replace a 20-year-old underground and surface
rail transportation system with a modern conveyor and underground
 primary crusher. In addition, it began development of a new
production level using more efficient high-lift caving methods.
As a result, PD Minings 1999 operating results included the
 impact of the start-up costs at Henderson. The new crushing and
conveying system is expected to be operating at full capacity by
March 31, 2000.

On October 21, 1998, we announced that we would curtail
production at Chino. The production curtailment occurred in
phases between October 31, 1998, and the first quarter of
1999. The curtailment reduced copper production by
35,000 tons annually. In addition, we announced the
immediate, indefinite suspension of operations at our Ojos del
Salado mine. This shutdown reduced copper production by more than
 20,000 tons annually. Ojos del Salado remained on care and
maintenance status at year end.

On February 3, 1998, we acquired Cobre. The primary assets
of Cobre include the Continental Mine, which comprises an
open-pit copper mine, two underground copper mines, two mills,
and the surrounding 11,000 acres of land, including mineral
rights, located in southwestern New Mexico adjacent to our Chino



---



##### Table of Contents



39



We have additional sources of copper that could be placed in
production should market circumstances warrant. However,
permitting and significant capital expenditures would be required
 to develop such additional production capacity.

The 1999 exploration program continued to place emphasis on the
search for and delineation of large scale copper, gold and other
base metal deposits. Phelps Dodge expended $41.0 million on
worldwide exploration during 1999, compared with
$42.0 million in 1998 and $74.1 million in 1997.
Approximately 25 percent of the 1999 expenditures occurred
in the United States with 19 percent being spent at our mine
 sites. This compares with 26 percent in 1998
(19 percent at mine sites) and 33 percent in 1997
(23 percent at mine sites). The balance of exploration
expenditures was spent principally in Australasia, Brazil, Chile,
 Mexico, Canada and Peru.

During 1999, exploration efforts continued at our existing copper
 operations. In New Mexico, additional mine-for-leach mineralized
 material was delineated at the Tyrone mine in the Niagara area,
and exploration drilling at Chino indicated extensions to known
open-pit copper mineralized material. The mineralized material at
 Niagara amounted to 500 million tons of leach material at an
estimated grade of 0.29 percent copper. In Arizona,
additional mine-for-leach mineralized material also was
delineated in the Western Copper area of the Morenci mine.

Environmental permitting is in progress to advance development of
 the Dos Pobres and San Juan mineral deposits in the Safford
District of eastern Arizona. The two deposits contain a total of
630 million tons of leach material at an estimated grade of
0.32 percent copper. Additionally, the Dos Pobres deposit
contains 330 million tons of milling material at an estimated
grade of 0.65 percent copper.

Internationally, Mineracão Serra do Sossego S.A., a 50/50
joint venture with Companhia Vale do Rio Doce (CVRD) located
 in Brazil, continued to evaluate the Sossego deposit. The
deposit contains an estimated 240 million tons of
mineralized material at an estimated grade of 1.14 percent
copper and 0.34 grams per ton gold. A prefeasibility study,
which will further define the mineralized material and determine
the viability of the project, is expected to be completed in the
second quarter of 2000.

Work continues on our 70 percent-owned Piedras Verdes
property in Sonora, Mexico. The final prefeasibility study was
accepted by the minority partner and a feasibility study is
expected to commence in 2000. The results of the prefeasibility
study indicate leachable mineralized material of 290 million
 tons at an estimated grade of 0.33 percent copper.

In 1999, economic evaluation and environmental remediation
continued on our Ambatovy nickel/cobalt deposit in central
Madagascar. Mineralized material of 210 million tons at an
estimated grade of 1.1 percent nickel and 0.1 percent
cobalt was previously identified in a feasibility study.

Two copper exploration properties, Kansanshi located in Zambia
and Frieda River located in Papua New Guinea, were added with the
 acquisition of Cyprus Amax. Work continued in 1999 at Kansanshi,
 and a prefeasibility study is scheduled to be completed in
June 2000. The Frieda River project was terminated and the
property was returned to the owners.

PD Mining  Other Matters

In December 1996, the United States District Court of the
Eastern District of New York ruled that our 1986 sale of
property in Maspeth, New York, to the United States Postal
Service was to be rescinded. The Court ordered us to return the
$14.8 million originally paid by the Postal Service for the
property and to pay interest on the sales price for a portion of
the time since that sale. In August 1997, we returned
$14.8 million to the Postal Service for the Maspeth property
 and paid $6.6 million of interest to the Postal Service.

In 1997, issues of dispute arose between Phelps Dodge and the San
 Carlos Apache Tribe regarding our use and occupancy of the Black
 River Pump Station which delivers water to the Morenci
operation. On



---



##### Table of Contents



40



The 1997 legislation required that the Company and the Tribe
enter a lease for the delivery of Central Arizona Project water
through the Black River Pump Station to Morenci on or before
December 31, 1998. In the event a lease was not signed, the
legislation expressly provided that the legislation would become
the lease. The legislation included the principal terms for that
eventuality. To date, we have not entered into a lease with the
Tribe, but are relying on our rights under the legislation and
are prepared to enforce those rights if necessary. We are
cooperating with the United States, which operates the pump
station, to reach an agreement with the Tribe on the lease issue.




RESULTS OF PHELPS DODGE INDUSTRIES

PD Industries, our manufacturing division, produces engineered
products principally for the global energy, telecommunications,
transportation and specialty chemicals sectors. Its operations
are characterized by products with significant market share,
internationally competitive cost and quality, and specialized
engineering capabilities. The manufacturing division includes our
 specialty chemicals segment, our wire and cable segment and,
until they were sold in 1998, our wheel and rim operations
(Accuride Corporation). Our specialty chemicals segment includes
Columbian Chemicals Company and its subsidiaries (Columbian
Chemicals or Columbian). Our wire and cable segment consists of
three worldwide product line businesses including magnet wire,
energy and telecommunications cables, and specialty conductors.

|                                                              |                            |                       |         |       |   |      |         |       |  |  |         |       | 
|------------------------------------------------------------- | -------------------------- | --------------------- | ------- | ----- | - | ---- | ------- | ----- |  |  | ------- | ----- | 
|                                                              |                            | 1999                  |         | 1998  |   | 1997
|                                                              |                            |                       |         |       |   |     
|                                                              |                            |                      
|                                                              |                            | (millions of dollars)
|                                                             
|                                                             
|                                                             
|                                                             
|Sales and other operating revenues  unaffiliated
	customers: |                            |                       |         |       |   |      |         |       |  |  |         |      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Specialty chemicals        |                       | $       | 543.0 |   |      |         | 454.6 |  |  |         | 429.5 | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Wire and cable             |                       |         | 784.8 |   |      |         | 931.1 |  |  |         | 978.5 | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Other*                     |                       |         |      |   |      |         |      |  |  |         | 333.0 | 
|                                                              |                            |                       |         |       |   |      |         |       |  |  |         |      
|                                                              |                            | $                     | 1,327.8 |       |   |      | 1,385.7 |       |  |  | 1,741.0 |      
|                                                              |                            |                       |         |       |   |      |         |       |  |  |         |      
|                                                              | Operating income (loss):** |                       |         |       |   |      |         |       |  |  |         |       | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Specialty chemicals***     |                       | $       | 92.5  |   |      |         | 87.6  |  |  |         | 74.9  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Wire and cable****         |                       |         | (42.8 | ) |      |         | 67.3  |  |  |         | 83.1  | 
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Other*                     |                       |         |      |   |      |         | 198.7 |  |  |         | 49.8  | 
|                                                              |                            |                       |         |       |   |      |         |       |  |  |         |      
|                                                              |                            | $                     | 49.7    |       |   |      | 353.6   |       |  |  | 207.8   |      
|                                                              |                            |                       |         |       |   |      |         |       |  |  |         |      




|  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Other includes Accuride which was sold in 1998. Ninety percent of
	 Accuride was sold to an affiliate of KKR and the existing
	management of Accuride effective January 1, 1998, and the
	remaining 10 percent interest was sold to RSTW Partners III,
	 L.P., on September 30, 1998, resulting in a total pre-tax
	gain of $198.7 million. (See Note 3 to the Consolidated
	 Financial Statements for a further discussion of this sale.)



|   |                                                                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Operating income has been presented in compliance with SFAS
	No. 131, Disclosures about Segments of an Enterprise
	and Related Information (with 1997 restated).



|    |                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|*** | Includes a pre-tax charge of $17.7 million in 1999 as a result of
	 the suspension of operations at Columbians carbon black
	plant in the Philippines.



---



##### Table of Contents



41



|     |                                                                                                                                                                                                                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**** | Includes a pre-tax charge of $11.9 million in 1999 for
	impairment of value of the Wire and Cable Groups
	majority-owned telecommunications assets and $40.4 million
	related to the companys June 30, 1999, restructuring
	plan. 1998 includes a pre-tax charge of $2.3 million for an
	early retirement program.

PD Industries reported sales of $1,327.8 million in 1999,
compared with $1,385.7 million in 1998. The decrease
principally reflected lower sales in the wire and cable segment
($146 million), primarily in South America. That decrease
was partially offset by higher sales volumes in the carbon black
segment ($88 million), which included sales from facilities
acquired in Brazil and Korea in the 1998 fourth quarter and 1999
first quarter, respectively.

PD Industries  Operating Income

|                                            |  |                 |       |      |  |      |       |  |  |  |       | 
|------------------------------------------- |  | --------------- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                            |  | 1999            |       | 1998 |  | 1997
|                                            |  |                 |       |      |  |     
|                                            |  |                
|                                            |  | ($ in millions)
|                                           
|                                           
|                                           
|                                           
|Operating income before non-recurring items |  | $               | 119.7 |      |  |      | 157.2 |  |  |  | 207.8 | 
|                                           
|                                           
|                                           
|                                           
|Pre-tax, non-recurring items                |  |                 | (70.0 | )    |  |      | 196.4 |  |  |  |      | 
|                                            |  |                 |       |      |  |      |       |  |  |  |       | 
|Operating income after non-recurring items  |  | $               | 49.7  |      |  |      | 353.6 |  |  |  | 207.8 | 
|                                            |  |                 |       |      |  |      |       |  |  |  |       | 

Our PD Industries segment reported operating income of
$119.7 million in 1999 before non-recurring, pre-tax charges
 of $70.0 million. The non-recurring charges in operating
income are as follows: $11.9 million of asset
impairments to write down the value of our wire and cable
segments telecommunications assets and $58.1 million
for the June 30, 1999, restructuring plan at both the wire
and cable and specialty chemicals segments of PD Industries. In
addition to the non-recurring items in operating expense, asset
impairment charges of $6.7 million and $3.1 million
were recorded in non-operating expense for the impairment of an
equity basis investment in China as well as the
telecommunications assets of an equity basis investment in the
Philippines, respectively ($1.9 million was recorded as
non-operating expense related to the June 30, 1999,
restructuring plan). See Note 3 to the Consolidated
Financial Statements for further discussion of these
non-recurring items.

PD Industries reported operating income of $157.2 million in
 1998, before the effect of a $198.7 million pre-tax gain
from the sale of Accuride and $2.3 million of non-recurring,
 pre-tax charges primarily for an early retirement program at
PD Magnet Wire. This compares with 1997 operating income of
$158.0 million before Accurides $49.8 million
contribution. 1998 earnings approximated the corresponding prior
year period, excluding Accuride, despite continuing Asian
economic difficulties. This reflected strong performances by our
U.S. and European carbon black businesses and the addition of the
 wire and cable operation in Brazil that was acquired in December
 1997.

In 1999, operations outside the United States provided
55 percent of PD Industries sales, compared with
53 percent in 1998 and 49 percent in 1997. During the
year, operations outside the United States contributed
59 percent of PD Industries operating income, compared
 with 54 percent in 1998 and 43 percent in 1997.

Specialty Chemicals  Operating
Income

|                                            |  |                 |       |      |  |      |      |  |  |  |      | 
|------------------------------------------- |  | --------------- | ----- | ---- |  | ---- | ---- |  |  |  | ---- | 
|                                            |  | 1999            |       | 1998 |  | 1997
|                                            |  |                 |       |      |  |     
|                                            |  |                
|                                            |  | ($ in millions)
|                                           
|                                           
|                                           
|                                           
|Operating income before non-recurring items |  | $               | 110.2 |      |  |      | 87.6 |  |  |  | 74.9 | 
|                                           
|                                           
|                                           
|                                           
|Pre-tax, non-recurring items                |  |                 | (17.7 | )    |  |      |     |  |  |  |     | 
|                                            |  |                 |       |      |  |      |      |  |  |  |      | 
|Operating income after non-recurring items  |  | $               | 92.5  |      |  |      | 87.6 |  |  |  | 74.9 | 
|                                            |  |                 |       |      |  |      |      |  |  |  |      | 

On June 30, 1999, we announced the planned closure of our
manufacturing facility in Bataan, Philippines. Production was
discontinued at the facility in November 1999, and the suspension
 resulted in a pre-tax, non-recurring charge to operating income
of $17.7 million. The Philippine plant, which had a
relatively small production capacity of 18,000 metric tons,
did not have economies of scale necessary to compete profitably
with imports from larger regional producers. Columbian Chemicals
has opened a distribution company,



---



##### Table of Contents



42



Columbians 1999 operating income before non-recurring items
 was more than in 1998, principally as a result of increased
carbon black sales volumes ($35 million, primarily as result
 of the October 1998 acquisition of Copebras S.A., a
Brazilian carbon black manufacturing business, and the January
1999 acquisition of an 85 percent interest in the Korean
carbon black business of Korea Kumho
Petrochemical Co., Ltd.). Columbians 1998
operating income was higher than in 1997 as a result of increased
 carbon black sales volumes (12 percent higher) and lower
feedstock costs, partially offset by lower carbon black sales
pricing. European demand was driven by strong vehicle production
and North American growth was driven by an increase in our
production capacity that allowed us to gain a greater market
share.

In January 1999, we acquired an 85 percent interest in the
Korean carbon black manufacturing business of Korea Kumho
Petrochemical Co., Ltd., for $76.1 million. Columbian
manages and operates the business, including the 110,000
metric-ton-per-year manufacturing plant located in Yosu, South
Korea.

In October 1998, we acquired Copebras S.A., a subsidiary of
Minorco, for $220 million. This manufacturing facility has an
annual production capacity of 170,000 metric tons of carbon
black. Columbian manages and operates the company.

Wire and Cable  Operating Income

|                                                  |  |                 |       |      |  |      |      |   |  |  |      | 
|------------------------------------------------- |  | --------------- | ----- | ---- |  | ---- | ---- | - |  |  | ---- | 
|                                                  |  | 1999            |       | 1998 |  | 1997
|                                                  |  |                 |       |      |  |     
|                                                  |  |                
|                                                  |  | ($ in millions)
|                                                 
|                                                 
|                                                 
|                                                 
|Operating income before non-recurring items       |  | $               | 9.5   |      |  |      | 69.6 |   |  |  | 83.1 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Pre-tax, non-recurring items                      |  |                 | (52.3 | )    |  |      | (2.3 | ) |  |  |     | 
|                                                  |  |                 |       |      |  |      |      |   |  |  |      | 
|Operating income (loss) after non-recurring items |  | $               | (42.8 | )    |  |      | 67.3 |   |  |  | 83.1 | 
|                                                  |  |                 |       |      |  |      |      |   |  |  |      | 

Our wire and cable segment reported operating income of
$9.5 million in 1999 before non-recurring, pre-tax charges.
The pre-tax, non-recurring items were as
follows: $11.9 million of asset impairments to write
down our international telecommunications assets and
$40.4 million for the June 30, 1999, restructuring
plan. In addition to the non-recurring items in operating income,
 the wire and cable segment incurred the following charges in
non-operating expense: asset impairment charges of
$6.7 million and $3.1 million for the impairment of an
equity basis investment in China as well as the
telecommunications assets of an equity basis investment in the
Philippines, respectively, and $1.9 million related to the
June 30, 1999, restructuring plan. Please see Note 3 to
 the Consolidated Financial Statements for further discussion of
these non-recurring items.

The wire and cable segments 1999 operating income was less
than that in 1998 by $60.1 million, before the effect of
non-recurring items, primarily as a result of economic
difficulties that plagued most of Latin America and Asia. The
downturn in Latin America began with the Brazilian currency
crisis in early 1999. This factor, along with political and
economic instability in the Andean region, significantly impacted
 results at our Latin American operations where operating income
decreased by $46 million. In Asia, economic problems
continued to hamper the performance of our wire and cable
operations where operating income decreased by $3 million from
already depressed levels. Efforts continue to be made to increase
 exports outside the region, although progress has been slower
than expected.

Operating income in 1998 was $69.6 million before
$2.3 million of non-recurring, pre-tax charges for an early
retirement program.

Lower operating income in 1998 compared to 1997 in the wire and
cable segment resulted from lower selling prices, continuing
Asian economic difficulties that began in 1997, the effect of
political uncertainty in Venezuela and continued depressed demand
 in the U.S. aerospace and electronic components industries
served by our specialty conductors business. These negative
factors were partially offset by our acquisition of PD Alcoa in
Brazil, which contributed $12.8 million in 1998. Operating
income decreased in Asia by



---



##### Table of Contents



43



In the 1998 fourth quarter, we restructured our magnet wire
facilities in Hopkinsville, Kentucky, and Fort Wayne, Indiana,
reducing jobs to cut costs and improve our competitive position.
This resulted in a non-recurring charge of $2.3 million
principally reflecting provisions for early retirements.

On July 15, 1998, we purchased Eldra Elektrodaht-Erzeugung
GmbHs 49 percent interest in Phelps Dodge Eldra GmbH
resulting in the operation becoming our wholly owned subsidiary
under the name of Phelps Dodge Magnet Wire (Austria) GmbH. The
production capacity of the facility has been expanded twice since
 1992 nearly doubling the annual capacity to 11,000 metric tons
of magnet wire.

In June 1998, our wire and cable segment and Sumitomo Electric
Industries, Ltd., dissolved joint-venture partnerships at five
wire and cable manufacturing and support companies. The
dissolution was achieved through the exchange of cash and
ownership shares in the companies. The transaction resulted in a
pre-tax gain of $10.3 million.

In March 1998, we began commercial production at Phelps Dodge
Magnet Wire de Mexico, S.A. de C.V., a $42 million
 magnet wire manufacturing plant in Monterrey, Mexico. The new
facility uses state-of-the-art technology and currently has
installed capacity of 20,400 metric tons out of a planned
capacity of 38,000 metric tons of magnet wire.

In December 1997, we acquired for $72 million a
60 percent interest in the copper and aluminum wire and
cable manufacturing business of Alcoa Aluminio, S.A., of Brazil.
Its product line is focused on energy transmission and
distribution, with dominance in aluminum conductors and solid
participation in the copper wire and cable business. During the
first quarter of 1998, we began managing and operating this joint
 venture.

PD Industries  Other Operations

Accuride was sold in 1998. Ninety percent was sold to an
affiliate of KKR and the existing management of Accuride
effective January 1, 1998, and the remaining 10 percent
 interest was sold to RSTW Partners III, L.P., on September
30, 1998, resulting in a pre-tax gain of $198.7 million and an
after-tax gain of $131.1 million. (See Note 3 to the
Consolidated Financial Statements.)




OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED
OPERATIONS

Depreciation, Depletion and Amortization
Expense

Depreciation, depletion and amortization expense was
$329.1 million in 1999, compared with $293.3 million in
 1998 and $283.7 million in 1997. The 1999 increase
primarily resulted from the acquisition of Cyprus Amax ($52
million), partially offset by a decrease in Phelps Dodges
U.S. and international mine production. The 3 percent
increase in 1998 over 1997 resulted from increased U.S. and
international mine production and an increase in U.S.
depreciation rates partially offset by the effect of the sale of
Accuride. (Please refer to Note 1 to the Consolidated
Financial Statements for a discussion of depreciation methods.)

Selling and General Administrative Expense

Selling and general administrative expense was $141.6 million in
1999, compared with $122.9 million in 1998 and $141.8 million in
1997. The 1999 increase primarily resulted from the acquisition
of Cyprus Amax which had $14.6 million in selling and general
administrative expenses from October 16 through
December 31, and an increase in corporate expense for
incentive plans and other general administrative expenses. The
13 percent decrease in 1998 from 1997 reflected the absence
of Accuride ($13 million) and a decrease in corporate expense for
 legal and professional fees, incentive plans and other general
administrative expenses.

Exploration and Research and Development
Expense

Exploration and research and development expense was $52.2
million in 1999, compared with $55.0 million in 1998 and $87.8
million in 1997. The 1999 decrease resulted from continuing
cutbacks in exploration



---



##### Table of Contents



44



Interest Expense

Net interest expense was $120.2 million in 1999, compared with
$94.5 million in 1998 and $62.5 million in 1997. The
27 percent increase in 1999 was primarily due to the
assumption of Cyprus Amaxs debt. The 51 percent
increase in 1998 over 1997 principally resulted from interest
associated with corporate debt issued in the 1997 fourth quarter
and decreases in capitalized interest resulting from the
completion of the Candelaria expansion in October 1997.

Miscellaneous Income and Expense, Net

Miscellaneous income, net of miscellaneous expense, was $9.1
million in 1999, compared with $8.8 million in 1998 and $33.4
million in 1997. The 1999 increase primarily resulted from a
$30.0 million payment received from ASARCO Incorporated (Asarco)
for terminating its merger agreement with Phelps Dodge, partially
 offset by $16.0 million in expenses related to the Asarco
transaction and $11.9 million in equity basis investment asset
impairments in the wire and cable segment. The 1998 decrease
compared with 1997 primarily resulted from a $27.0 million
pre-tax loss on the sale of our 44.6 percent interest in the
 Black Mountain mine in South Africa, partially offset by a
pre-tax gain of $10.3 million from the dissolution of
joint-venture partnerships between Phelps Dodge and Sumitomo
Electric Industries, Ltd., at five wire and cable manufacturing
and support companies. In addition, 1998 dividend income from our
 13.9 percent interest in Southern Peru Copper Corporation
(SPCC) was $8.4 million lower than in 1997.

Provision for Taxes on Income

The effective tax rate changed from 40 percent in 1998 to a
39 percent benefit in 1999. The effective tax rate increased
 from 31 percent in 1997 to 40 percent in 1998. This
increase was due to a decrease in the U.S. tax benefit for
percentage depletion resulting from lower copper prices, as well
as increased taxes on foreign earnings resulting from a change in
 the mix of those earnings.

In December of 1999, we received and accepted Notices of Tax Due
from the Internal Revenue Service (IRS) for the years 1992
and 1993. The IRS audit of the year 1994 resulted in a refund.
Issues settled in the years 1992 through 1994 also impacted the
years 1990 and 1991 and enabled us to enter a closing agreement
with the IRS for the years 1990 and 1991. We are currently
awaiting receipt of an executed copy of the closing agreement
from the IRS. As a result of these settlements, we have recorded
a $30 million reduction in our tax liabilities.

Phelps Dodge Corporations federal income tax returns for
the years 1995 through 1997 are currently under examination by
the IRS. The Cyprus Amax federal income tax returns for the years
 1994 through 1996 also are currently under examination by the
IRS. The IRS has raised a number of issues in the current
examinations that may result in proposed additional assessments
of income tax at the conclusion of the current examinations. Our
management believes that it has made adequate provision so that
final resolution of the issues involved, including application of
 those determinations to subsequent open years, will not have an
adverse effect on our consolidated financial condition or results
 of operations.

Discount Rate  Pensions and
Other Postretirement Benefits

Under current financial accounting standards, any significant
year-to-year movement in the rate of interest on long-term,
high-quality corporate bonds necessitates a change in the
discount rate used to calculate the actuarial present value of
our accumulated pension and other postretirement benefit
obligations. The discount rate increased to 7.75 percent at
December 31, 1999, compared with 6.75 percent at
December 31, 1998. (For a further discussion of these
issues, see Notes 16 and 17 to the Consolidated
Financial Statements.)



---



##### Table of Contents



45

Year 2000

Phelps Dodge and Cyprus Amax both had identified and prepared for
 Year 2000 (Y2K) issues as discussed separately in their
respective September 30, 1999, Form 10-Qs. Both
companies had created and staffed a Y2K program management office
 to oversee and coordinate the Y2K conversion. Event management
command centers were manned continually from December 27,
1999, through January 3, 2000, with all sites being
monitored and events reported through this facility. There were
no significant Y2K events reported. The program management
offices were shut down in mid-January and any problems that may
occur in the future will be handled as a normal event within the
established processes. The costs incurred to prepare for Y2K were
 not material to our financial position.




CHANGES IN FINANCIAL CONDITION; CAPITALIZATION

Cash and Cash Equivalents

Cash and cash equivalents at the end of 1999 were $234.2 million,
 compared with $221.7 million at the beginning of the year.
Operating activities provided $204.5 million of cash during the
year, which was used along with the issuance of Phelps Dodge
stock to purchase Cyprus Amax, and to fund investing activities
and dividend payments on common stock.

|                                                     |                       |                                      |      |        |        |      |      |        |        |   |        |        |        |  
|---------------------------------------------------- | --------------------- | ------------------------------------ | ---- | ------ | ------ | ---- | ---- | ------ | ------ | - | ------ | ------ | ------ | -
|                                                     |                       | 1999                                 |      | 1998   |        | 1997
|                                                     |                       |                                      |      |        |        |     
|                                                     |                       |                                     
|                                                     |                       | (millions of dollars)               
|                                                    
|                                                    
|                                                    
|                                                    
|Cash provided by (used in):                          |                       |                                      |      |        |        |      |      |        |        |   |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Operating activities  |                                      | $    | 204.5  |        |      |      | 378.4  |        |   |        | 764.6  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investing activities: |                                      |      |        |        |      |      |        |        |   |        |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                       | Cyprus Amax acquisition              |      |        | 35.7   |      |      |        |       |   |        |        |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                       | Capital expenditures and investments |      |        | (276.1 | )    |      |        | (668.3 | ) |        |        | (789.2 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                       | Accuride divestiture                 |      |        |       |      |      |        | 449.5  |   |        |        |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                       | Proceeds from Kinross sale           |      |        | 233.3  |      |      |        |       |   |        |        |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                       | Other investing activities           |      |        | 13.1   |      |      |        | 34.8   |   |        |        | (4.6   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Financing activities  |                                      |      | (198.0 | )      |      |      | (130.6 | )      |   |        | (283.0 | )     
|                                                     |                       |                                      |      |        |        |      |      |        |        |   |        |       
|Net increase (decrease) in cash and cash equivalents |                       | $                                    | 12.5 |        |        |      | 63.8 |        |        |   | (312.2 | )     
|                                                     |                       |                                      |      |        |        |      |      |        |        |   |        |       

Working Capital

During 1999, net working capital (excluding cash and cash
equivalents, debt and adjustments for foreign currency exchange
rate changes) increased by $127.3 million. This net increase
resulted principally from:



| |   |                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $144.5 million increase in accounts receivable primarily due to
	 the effect of higher copper prices, eliminations of receivable
	factoring at Cyprus Amax after the acquisition and an increase in
	 receivables resulting from increased business at Columbian
	Chemicals Brazilian and Korean plants that were acquired in
	 late 1998 and early 1999, respectively; and
|
| |  | a $32.9 million decrease in inventories and supplies primarily
	due to reduced copper inventories and lower wire and cable
	business in Asia and Latin America.                                                                                                                                                                                                               

Investing Activities

The total purchase price for Cyprus Amax was $1,855 million
including $1,125 million for the issuance of 20.6 million shares
of Phelps Dodge common stock, $10 million for the conversion of
Cyprus Amax stock options, cash of $693 million and acquisition
costs of $27 million (financial advisory, legal, accounting, and
printing costs). In addition, certain acquisition-related stock
compensation and the resulting tax obligations of Cyprus Amax of
$29 million were recorded in purchase accounting and paid by
Phelps Dodge. Capital expenditures and investments were $120.5
million in 1999 for PD Mining and $149.5 million for PD
Industries



---



##### Table of Contents



46



Investing activities in 1998 included PD Mining capital
expenditures of $201.3 million and an investment of $108.7
million in Cobre Mining Company. They also included PD
Industries $111.8 million of capital expenditures and an
investment of $219.9 million in the Brazilian carbon black
business. The Accuride divestiture and the sale of Black Mountain
 generated cash proceeds of $449.5 million and $18.5 million,
respectively.

Capital expenditures and investments for 2000 are expected to be
approximately $330 million for PD Mining and approximately $100
million for PD Industries. These capital expenditures and
investments are expected to be funded primarily from cash
reserves and operating cash flow.

Financing Activities and Liquidity

The Companys total debt at December 31, 1999, was
$2,755.0 million, compared with $1,021.0 million at year-end
1998. Debt increased primarily as a result of the acquisition of
Cyprus Amax and financing for the first quarter 1999 purchase of
a carbon black business in Korea. The debt acquired with the
purchase of Cyprus Amax totaled $1,595.6 million. The
Companys ratio of debt to total capitalization was
45.0 percent at December 31, 1999, compared with
27.6 percent at December 31, 1998.

An existing revolving credit agreement between us and several
lenders was amended on June 25, 1997. The agreement, as
amended and restated, allows us to borrow up to $1 billion from
time to time until its scheduled maturity on June 25, 2002.
The agreement allows for two, one-year renewals beyond the
scheduled maturity date if we request and receive approval from
those lenders representing at least two-thirds of the commitments
 provided by the facility. In the event of such approval, total
commitments under the facility would depend upon the willingness
of other lenders to assume the commitments of those lenders
electing not to participate in the renewal. Interest is payable
at a fluctuating rate based on the agent banks prime rate,
or a fixed rate, based on the LIBOR, or at fixed rates offered
independently by the several lenders, for maturities of between
seven and 360 days. This agreement provides for a facility
fee of six and one-half basis points (0.065 percent) on
total commitments. The agreement requires us to maintain a
minimum consolidated tangible net worth of $1.1 billion and
limits indebtedness to 50 percent of total consolidated
capitalization. There were no borrowings under this agreement at
either December 31, 1999, or December 31, 1998.

We established a commercial paper program on August 15,
1997, under a private placement agency agreement with two
placement agents. The agreement permits us to issue up to $1
billion of short-term promissory notes (generally known as
commercial paper) at any one time. Commercial paper may bear
interest or be sold at a discount, as mutually agreed by the
placement agents and us at the time of each issuance. Our
commercial paper program requires that issuances of commercial
paper be backed by an undrawn line of credit; the revolving
credit agreement described above provides such support.
Borrowings under this commercial paper program were $349.4
million at December 31, 1999. There were no borrowings under
 the commercial paper program at December 31, 1998.

Short-term borrowings, excluding borrowings under our corporate
commercial paper program, were $101.8 million, all by our
international operations, at December 31, 1999, compared
with $116.1 million at December 31, 1998. The decrease was
primarily due to repayments of outstanding debt by our wholly
owned subsidiary, Columbian Chemicals Brasil, partially offset by
 acquired short-term debt of $7.5 million.

The current portion of our long-term debt, scheduled for payment
in 2000, is $131.3 million including $7.1 million for our
international manufacturing operations, $94.7 million primarily
for our international mining operations and $29.5 million for
corporate debt repayments.

Dividend payments on our common shares increased from $117.3
million in 1998 to $124.3 million in 1999, reflecting the
increased number of common shares outstanding due to our fourth
quarter 1999 issuance of 20.6 million shares as part of the
Cyprus Amax acquisition. The dividend was $2.00 per common share
in 1999 and 1998.



---



##### Table of Contents



47

In connection with the acquisition of Cyprus Amax, Cyprus Amax
called for redemption of all 4,664,302 of its Series A
Convertible Preferred shares. Prior to the redemption date, a
total of 3,968,801 shares were redeemed for cash and the
remainder was converted to Cyprus Amax common shares, which were
subsequently exchanged for 0.5 million shares of Phelps Dodge
common stock as part of the acquisition. The cash required for
the redemption totaled $208.3 million including accumulated
dividends.

A share purchase program announced on May 7, 1997, provided
for the purchase of up to an additional 6 million of our common
shares, approximately 10 percent of our then outstanding
shares. We purchased 6,554,000 of our common shares in 1997 at a
total cost of $511.5 million, including 3,606,000 shares at a
cost of $292.9 million, under the 1997 share authorization.
During 1998, we purchased 731,500 of our common shares at a total
 cost of $35.4 million under the 1997 program. There were no
shares purchased during 1999. There were 78.7 million common
shares outstanding on December 31, 1999. We may continue to
make purchases in the open market as circumstances warrant, and
may also consider purchasing shares in privately negotiated
transactions.

Environmental Matters

Phelps Dodge or its subsidiaries have been advised by the EPA,
United States Forest Service and several state agencies that they
 may be liable under CERCLA or similar state laws and regulations
 for costs of responding to environmental conditions at a number
of sites that have been or are being investigated by the EPA, the
 Forest Service, or states, to establish whether releases of
hazardous substances have occurred and, if so, to develop and
implement remedial actions. Phelps Dodge has been named a
potentially responsible party (PRP) or has
received requests for information for several sites. Of the sites
 in which Phelps Dodge or its subsidiaries have been named a PRP,
 19 are on the National Priorities List
(NPL) and two have been proposed for listing. For all such
sites, Phelps Dodge had an aggregate reserve of $208.7 million as
 of December 31, 1999, including reserves for Pinal Creek in
 Arizona, and Langeloth in Pennsylvania, for its share of the
estimated liability.

Liability estimates are based on an evaluation of among other
factors, currently available facts, existing technology,
presently enacted laws and regulations, Phelps Dodges
experience in remediation, other companies remediation
experience, Phelps Dodges status as a PRP, and the ability
of other PRPs to pay their allocated portions. The cost range for
 reasonably expected outcomes for all sites excluding Pinal Creek
 and Langeloth is estimated to be from $28 million to $110
million, and work on these sites is expected to be substantially
completed in the next several years, subject to inherent delays
involved in the process.

The sites for which Phelps Dodge has received a notice of
potential liability or an information request that are currently
considered to be the most significant are the Pinal Creek site,
which has a cost range for reasonably expected outcomes estimated
 to be from $143 million to $250 million, and the former American
 Zinc and Chemical site in Langeloth, which has a cost range for
reasonably expected outcomes estimated to be from $10 million to
$67 million. The Pinal Creek site is described in more detail in
the legal proceedings section of this report. Phelps Dodge has
reserved $143 million for the Pinal Creek site.

Cyprus Amax received an information request from the Pennsylvania
 Department of Environmental Protection regarding the former
American Zinc and Chemical site. The site is currently being
investigated by the state of Pennsylvania. Phelps Dodge has
reserved $20 million for this site.

Phelps Dodge believes certain insurance policies partially cover
the foregoing environmental liabilities; however, some of the
insurance carriers have denied coverage. We are presently
litigating these disputes. Further, Phelps Dodge believes that it
 has other potential claims for recovery from other third
parties, including the U.S. Government and other PRPs, as well as
 liability offsets through lower cost remedial solutions. Neither
 insurance recoveries nor other claims or offsets have been
recognized in the financial statements unless such offsets are
considered probable of realization.

As of December 31, 1998, we had a reserve balance of $106.0
million for estimated future costs associated with environmental
matters at shutdown operations or closed facilities within active
 operations. During 1999, net spending against that reserve
totaled $20.0 million including $2.8 million for the acquired



---



##### Table of Contents



48



The 1990 Amendments to the federal Clean Air Act require the EPA
to develop and implement many new requirements, and they allow
states to establish new programs to implement some of the new
requirements, such as the requirements for operating permits
under Title V of the 1990 Amendments and hazardous air
pollutants under Title III of the 1990 Amendments. Because
the EPA has not yet adopted or implemented all of the changes
required by Congress, the air quality laws will continue to
expand and change in coming years as the EPA develops new
requirements and then implements them or allows the states to
implement them. In response to these new laws, several of our
subsidiaries have submitted applications for Title V
operating permits. These programs will likely increase our
regulatory obligations and compliance costs. These costs could
include implementation of maximum achievable control technology
for any of our facilities if they are determined to be a major
source of federal hazardous air pollutants (HAPs). For example,
it is probable that some of our carbon black plants and possibly
one of our smelters will be regulated as a major source of HAPs.
Until more of the implementing regulations are adopted, and more
experience with the new programs is gained, it is not possible to
 determine the full impact of the new requirements.

We record liabilities for environmental expenditures when it is
probable that obligations have been incurred and the costs can be
 reasonably estimated. Our estimates of these costs are based
upon available facts, existing technology, and current laws and
regulations and are recorded on an undiscounted basis. Where the
available information is sufficient to estimate the amount of
liability, that estimate has been used. Where the information is
only sufficient to establish a range of probable liability and no
 point within the range is more likely than any other, the lower
end of the range has been used. Based upon the information
available to us, the range of obligations, both individually and
in the aggregate, from known environmental liabilities are not
expected to result in material additional costs beyond those
already identified.

We have other potential environmental liabilities that cannot be
reasonably estimated. This is due to factors such as the unknown
extent of the remedial actions that may be required. In addition,
 in the case of certain sites not owned by us, the extent of our
liability in proportion to the liability of other parties is
difficult to estimate. While we cannot currently estimate the
total additional loss we may incur for these environmental
liabilities, we will make appropriate additional accruals if
information comes to our attention in the future that would allow
 us to reasonably estimate our probable losses. Furthermore, we
will make additional accruals if there are future changes in
laws, regulations and/or regulatory interpretations, and such
changes result in additional liabilities, these potential
liabilities could be material.

The possibility of recovery of some of the environmental
remediation costs from insurance companies or other parties
exists. However, we do not recognize these recoveries in our
financial statements until they become probable.

Our operations are subject to many environmental laws and
regulations in jurisdictions both in the United States and in
other countries in which we do business. For further discussion
of these laws and regulations, please see PD
Mining  Environmental and Other Regulatory Mattersand PD Industries  Environmental Matters.
The estimates given in those discussions of the capital
expenditures to comply with environmental laws and regulations in
 2000 and 2001, and the expenditures in 1999, are separate from
the reserves and estimates described above.

In the United States, the Emergency Planning and Community
Right-to-know Act was expanded in 1997 to cover mining
operations. This law, which has applied to other Phelps Dodge
businesses for more than a decade, requires companies to report
to the EPA the amount of certain materials managed in or released
 from their operations each year. During June 1999, we
reported the volume of naturally occurring metals and other
substances that we managed during 1998 once the usable copper was
 extracted. These materials are very high in volume and how they
are managed is covered by existing regulations and permit
requirements.



---



##### Table of Contents



49

On December 23, 1994, Chino, located near Silver City, New
Mexico, entered into an Administrative Order on Consent
(AOC) with the New Mexico Environment Department. This AOC
requires Chino to study the environmental impacts and potential
health risks associated with portions of the Chino property
affected by historical mining operations. We acquired Chino at
the end of 1986. The studies began in 1995 and, while we
currently are unaware of any additional liabilities that need to
be accrued, until the studies are completed, it is not possible
to determine the nature, extent, cost, and timing of remedial
work that could be required under the AOC. Remedial work is
expected to be required under the AOC.

In 1993 and 1994, the New Mexico and Arizona legislatures,
respectively, passed laws requiring the reclamation of mined
lands in those states. The New Mexico Mining Commission adopted
rules for the New Mexico program during 1994, and our operations
began submitting the required permit applications in
December 1994. The Arizona State Mine Inspector adopted
rules for the Arizona program in January 1997, and our
operations began submitting the required reclamation plans in
1997. Colorado also has a similar program. Reclamation is an
ongoing activity and we recognize estimated reclamation costs
using a units of production basis calculation. These laws and
regulations will likely increase our regulatory obligations and
compliance costs with respect to mine closure and reclamation.

Other Matters

In 1995, legislation was introduced in both the U.S. House of
Representatives and the U.S. Senate to amend the Mining Law of
1872. None of the bills was enacted into law. Also, mining law
amendments were added to the 1996 budget reconciliation bill,
which was vetoed by the President. Among other things, the
amendments contained in the 1996 bill would have imposed a 5
percent net proceeds royalty on minerals extracted from federal
lands, required payment of fair market value for patenting
federal lands, and required that patented lands used for
non-mining purposes revert to the federal government. Several of
these same concepts likely will continue to be pursued
legislatively in the future. The Secretary of the Interior also
ordered the Bureau of Land Management (BLM) to form a task
force to review BLMs hardrock mining surface management
regulations and propose revisions to expand environmental and
reclamation requirements, among other things. While the effect of
 such changes on our current operations and other currently owned
 mineral resources on private lands would be minimal, passage of
mining law amendments or revisions to the hardrock mining surface
 management regulations could result in additional expenses in
the development and operation of new mines on federal lands.

In February 1998, the Financial Accounting Standards Board
(FASB) issued SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement
Benefits. This statement became effective for fiscal years
beginning after December 15, 1997. We adopted this statement
 in 1998.

In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities. This statement requires recognition of all
derivatives as either assets or liabilities on the balance sheet
and measurement of those instruments at fair value. Changes in
the fair value of derivatives are recorded each period in current
 earnings or other comprehensive income (loss). Proper accounting
 for changes in the fair value of derivatives held is dependent
on whether the derivative transaction qualifies as an accounting
hedge and on the classification of the hedge transaction. The
statement was originally required to be adopted in the first
quarter of 2000. Citing concerns about companies ability to
 modify their information systems and educate their managers in
time to apply SFAS 133, FASB has delayed its effective date for
one year. We will adopt SFAS 133 in the first quarter of 2001. We
 are evaluating the effect this statement will have on our
financial reporting and disclosures as well as on our derivative
and hedging activities.

In the 1999 first quarter, we adopted SOP 98-5, Reporting
on the Costs of Start-Up Activities. The implementation
resulted in a $3.5 million after-tax charge, or 6 cents per
common share, representing the write off of previously
unamortized start-up costs at our Candelaria mining operation in
Chile and our magnet wire operation in Monterrey, Mexico.



---



##### Table of Contents



50




CAPITAL OUTLAYS

Capital outlays in the following table exclude capitalized
interest and the minority joint-venture interest portions of the
expenditures at Morenci, Chino, El Abra and Candelaria.

|                             |                                   |                       |       |       |  |      |       |       |  |  |       |       | 
|---------------------------- | --------------------------------- | --------------------- | ----- | ----- |  | ---- | ----- | ----- |  |  | ----- | ----- | 
|                             |                                   | 1999                  |       | 1998  |  | 1997
|                             |                                   |                       |       |       |  |     
|                             |                                   |                      
|                             |                                   | (millions of dollars)
|                            
|                            
|                            
|                            
|Phelps Dodge Mining Company: |                                   |                       |       |       |  |      |       |       |  |  |       |      
|                            
|                            
|                            
|                            
|                             | Candelaria                        |                       | $     | 7.2   |  |      |       | 8.0   |  |  |       | 161.7 | 
|                            
|                            
|                            
|                            
|                             | Other                             |                       |       | 114.2 |  |      |       | 193.3 |  |  |       | 293.6 | 
|                             |                                   |                       |       |       |  |      |       |       |  |  |       |      
|                             |                                   |                       | 121.4 |       |  |      | 201.3 |       |  |  | 455.3 |      
|                             |                                   |                       |       |       |  |      |       |       |  |  |       |      
|Phelps Dodge Industries:     |                                   |                       |       |       |  |      |       |       |  |  |       |      
|                            
|                            
|                            
|                            
|                             | Specialty chemicals               |                       |       | 45.0  |  |      |       | 41.7  |  |  |       | 75.7  | 
|                            
|                            
|                            
|                            
|                             | Wire and cable                    |                       |       | 28.4  |  |      |       | 70.1  |  |  |       | 102.5 | 
|                            
|                            
|                            
|                            
|                             | Other (Accuride was sold in 1998) |                       |       |      |  |      |       |      |  |  |       | 24.0  | 
|                             |                                   |                       |       |       |  |      |       |       |  |  |       |      
|                             |                                   |                       | 73.4  |       |  |      | 111.8 |       |  |  | 202.2 |      
|                             |                                   |                       |       |       |  |      |       |       |  |  |       |      
|Corporate and other          |                                   |                       | 6.1   |       |  |      | 5.0   |       |  |  | 4.1   |      
|                             |                                   |                       |       |       |  |      |       |       |  |  |       |      
|                             |                                   | $                     | 200.9 |       |  |      | 318.1 |       |  |  | 661.6 |      
|                             |                                   |                       |       |       |  |      |       |       |  |  |       |      




INFLATION

The principal impact of general inflation upon our financial
results has been on unit production costs, especially supply
costs, at our mining and industrial operations. It is important
to note, however, that the selling price of our principal
product, copper, does not necessarily parallel the rate of
inflation or deflation.




DIVIDENDS AND MARKET PRICE RANGES

The principal market for our common stock is the New York Stock
Exchange. At March 6, 2000, there were 27,671 holders of
record of our common shares. In the 1996 second quarter, the
quarterly dividend was increased to 50 cents from 45 cents on
each common share and continued at that rate throughout 1997,
1998 and 1999. Additional information required for this item is
provided in the Quarterly Financial Data table.



---



##### Table of Contents



51




QUARTERLY FINANCIAL DATA

|                                                            |       |                                               |       |         |  |         |       |         |  |  |       |       |  |  |         |       | 
|----------------------------------------------------------- | ----- | --------------------------------------------- | ----- | ------- |  | ------- | ----- | ------- |  |  | ----- | ----- |  |  | ------- | ----- | 
|                                                            |       | First                                         |       | Second  |  | Third   |       | Fourth 
|                                                            |       | Quarter                                       |       | Quarter |  | Quarter |       | Quarter
|                                                            |       |                                               |       |         |  |         |       |        
|                                                            |       |                                              
|                                                            |       | (In millions except per common share amounts)
|                                                           
|                                                           
|                                                           
|                                                           
|1999                                                        |       |                                               |       |         |  |         |       |         |  |  |       |       |  |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|Sales and other operating revenues                          |       | $                                             | 663.1 |         |  |         | 691.1 |         |  |  | 742.7 |       |  |  | 1,017.5 |      
|                                                           
|                                                           
|                                                           
|                                                           
|Operating income (loss)                                     |       |                                               | 27.6  |         |  |         | (54.8 | )       |  |  | 51.5  |       |  |  | (339.9  | )    
|                                                           
|                                                           
|                                                           
|                                                           
|Income (loss) before cumulative effect of accounting change |       |                                               | 0.5   |         |  |         | (57.5 | )       |  |  | 15.4  |       |  |  | (212.7  | )    
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss)                                           |       |                                               | (3.0  | )       |  |         | (57.5 | )       |  |  | 15.4  |       |  |  | (212.7  | )    
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss) per common share  basic                  |       |                                               | (0.05 | )       |  |         | (0.99 | )       |  |  | 0.27  |       |  |  | (2.91   | )    
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss) per common share  diluted                |       |                                               | (0.05 | )       |  |         | (0.99 | )       |  |  | 0.27  |       |  |  | (2.91   | )    
|Stock prices*                                               |       |                                               |       |         |  |         |       |         |  |  |       |       |  |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | High  |                                               |       | 61.31   |  |         |       | 70.63   |  |  |       | 66.94 |  |  |         | 67.31 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Low   |                                               |       | 41.88   |  |         |       | 48.88   |  |  |       | 54.00 |  |  |         | 50.56 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Close |                                               |       | 49.25   |  |         |       | 61.94   |  |  |       | 55.06 |  |  |         | 67.31 | 
|                                                           
|                                                           
|                                                           
|                                                           
|1998                                                        |       |                                               |       |         |  |         |       |         |  |  |       |       |  |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|Sales and other operating revenues                          |       | $                                             | 798.3 |         |  |         | 794.4 |         |  |  | 764.0 |       |  |  | 706.7   |      
|                                                           
|                                                           
|                                                           
|                                                           
|Operating income                                            |       |                                               | 273.9 |         |  |         | 73.8  |         |  |  | 65.3  |       |  |  | 9.7     |      
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss)                                           |       |                                               | 163.7 |         |  |         | 40.4  |         |  |  | 28.6  |       |  |  | (41.8   | )    
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss) per common share  basic                  |       |                                               | 2.80  |         |  |         | 0.69  |         |  |  | 0.49  |       |  |  | (0.72   | )    
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss) per common share  diluted                |       |                                               | 2.79  |         |  |         | 0.69  |         |  |  | 0.49  |       |  |  | (0.72   | )    
|Stock prices*                                               |       |                                               |       |         |  |         |       |         |  |  |       |       |  |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | High  |                                               |       | 69.25   |  |         |       | 71.75   |  |  |       | 62.56 |  |  |         | 61.75 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Low   |                                               |       | 58.06   |  |         |       | 56.13   |  |  |       | 43.88 |  |  |         | 49.56 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Close |                                               |       | 64.56   |  |         |       | 57.19   |  |  |       | 52.19 |  |  |         | 50.88 | 




|  |                                        
|- | ---------------------------------------
|* | As reported in the Wall Street Journal.



---



##### Table of Contents



52

PHELPS DODGE CORPORATION AND CONSOLIDATED SUBSIDIARIES






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


The consolidated balance sheet at December 31, 1999 and
1998, and the related consolidated statements of operations, of
cash flows and of common shareholders equity for each of
the three years in the period ended December 31, 1999, and
notes thereto, together with the report thereon of
PricewaterhouseCoopers LLP dated January 26, 2000, appear on
 pages 52 to 92 of this report. The additional financial
data referred to below should be read in conjunction with these
financial statements. Schedules not included with the additional
financial data have been omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto. The individual financial statements of the
Company have been omitted because the Company is primarily an
operating company and all subsidiaries included in the
consolidated financial statements, in the aggregate, do not have
minority equity interests and/or indebtedness to any person other
 than the Company or its consolidated subsidiaries in amounts
which together exceed 5 percent of total consolidated assets
 at December 31, 1999. Separate financial statements of
subsidiaries not consolidated and investments accounted for by
the equity method, other than those for which summarized
financial information is provided in Note 4 to the
Consolidated Financial Statements, have been omitted because, if
considered in the aggregate, such subsidiaries and investments
would not constitute a significant subsidiary.

ADDITIONAL FINANCIAL DATA

Financial statement schedule for the years ended
December 31, 1999, 1998 and 1997:



| |                                                                 
| | ----------------------------------------------------------------
| | II  Valuation and qualifying accounts and reserves on
	page 97.



---



##### Table of Contents



53




REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT
SCHEDULE

To the Board of Directors of Phelps Dodge Corporation

Our audits of the consolidated financial statements referred to
in our report dated January 26, 2000, included an audit of
the Financial Statement Schedule listed in the foregoing index
titled Additional Financial Data. In our opinion,
this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in
 conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Phoenix, Arizona





---



##### Table of Contents



54




REPORT OF MANAGEMENT

Our management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements presented in
 this annual report. The statements have been prepared in
accordance with accounting principles generally accepted in the
United States and include amounts that are based on
managements best estimates and judgments. Management also
accepts responsibility for the preparation of other financial
information included in this document.

Management maintains a system of internal controls to provide
reasonable assurance that assets are safeguarded and that
transactions are properly recorded and executed in accordance
with managements authorization. The system includes formal
policies and procedures that are communicated to employees with
significant roles in the financial reporting process and updated
as necessary. The system also includes the careful selection and
training of qualified personnel, an organization that provides a
segregation of responsibilities and a program of internal audits
that independently evaluates the effectiveness of internal
controls and recommends possible improvements.

The Audit Committee, currently consisting of five non-employee
directors, meets at least three times a year to review, among
other matters, internal control conditions and internal and
external audit plans and results. It meets periodically with
senior officers, internal auditors and independent accountants to
 review the adequacy and reliability of our accounting, financial
 reporting and internal controls.

Our independent accountants, PricewaterhouseCoopers LLP, have
audited the annual financial statements in accordance with
auditing standards generally accepted in the United States. The
independent accountants report expresses an informed
judgment as to the fair presentation of our reported operating
results, financial position and cash flows. This judgment is
based on the results of auditing procedures performed and such
other tests that they deemed necessary, including consideration
of our internal control structure.

Our management also recognizes its responsibility for fostering a
 strong ethical climate so that our affairs are conducted
according to the highest standards of personal and corporate
conduct. This responsibility is characterized and reflected in
our code of business ethics and policies, which is distributed
throughout the Company. The code of conduct addresses:



| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | the necessity of ensuring open communication within the Company;          
|
| |  | potential conflicts of interest;                                          
|
| |  | compliance with all applicable laws (including financial
	disclosure); and
|
| |  | the confidentiality of proprietary information.                           

We maintain a systematic program to assess compliance with these
policies.



---



##### Table of Contents



55




REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Phelps Dodge
Corporation

In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of operations, of cash flows
and of common shareholders equity present fairly, in all
material respects, the financial position of Phelps Dodge
Corporation and its subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows
for each of the three years in the period ended December 31,
 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
 responsibility of Phelps Dodges management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.

As described in Note 1 to the consolidated financial statements,
Phelps Dodge changed its method of accounting for start-up costs
effective January 1, 1999.

PricewaterhouseCoopers LLP

Phoenix, Arizona





---



##### Table of Contents



56




STATEMENT OF CONSOLIDATED OPERATIONS

|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ----------------------------------- | ------- | ------- | - | ---- | ------- | ------- | - |  | ------- | ------- | -
|                                                                                                                                                         |                                                                          |                                    
|                                                                                                                                                         |                                                                          | For the years ended December 31,   
|                                                                                                                                                         |                                                                          |                                    
|                                                                                                                                                         |                                                                          | 1999                                |         | 1998    |   | 1997
|                                                                                                                                                         |                                                                          |                                     |         |         |   |     
|                                                                                                                                                         |                                                                          |                                    
|                                                                                                                                                         |                                                                          | (In millions except per share data)
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|Sales and other operating revenues                                                                                                                       |                                                                          | $                                   | 3,114.4 |         |   |      | 3,063.4 |         |   |  | 3,914.3 |        
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Operating costs and expenses                                                                                                                             |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Cost of products sold                                                    |                                     |         | 2,451.7 |   |      |         | 2,360.4 |   |  |         | 2,744.1 |  
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Depreciation, depletion and amortization                                 |                                     |         | 329.1   |   |      |         | 293.3   |   |  |         | 283.7   |  
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Selling and general administrative expense                               |                                     |         | 141.6   |   |      |         | 122.9   |   |  |         | 141.8   |  
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Exploration and research expense                                         |                                     |         | 52.2    |   |      |         | 55.0    |   |  |         | 87.8    |  
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Non-recurring charges and provisions                                     |                                     |         | 455.4   |   |      |         | (190.9  | ) |  |         | 45.9    |  
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|                                                                                                                                                         |                                                                          |                                     | 3,430.0 |         |   |      | 2,640.7 |         |   |  | 3,303.3 |        
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Operating income (loss)                                                                                                                                  |                                                                          |                                     | (315.6  | )       |   |      | 422.7   |         |   |  | 611.0   |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Interest expense                                                         |                                     |         | (120.4  | ) |      |         | (96.4   | ) |  |         | (74.2   | )
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Capitalized interest                                                     |                                     |         | 0.2     |   |      |         | 1.9     |   |  |         | 11.7    |  
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Miscellaneous income and expense, net                                    |                                     |         | 9.1     |   |      |         | 8.8     |   |  |         | 33.4    |  
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Income (loss) before taxes, minority interests and equity
	 in net earnings (losses) of affiliated companies and cumulative
	effect of accounting change |                                                                          |                                     | (426.7  | )       |   |      | 337.0   |         |   |  | 581.9   |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Provision for taxes on income                                            |                                     |         | 165.2   |   |      |         | (134.0  | ) |  |         | (180.4  | )
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Minority interests in consolidated subsidiaries                          |                                     |         | 2.1     |   |      |         | (7.9    | ) |  |         | (4.7    | )
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Equity in net earnings (losses) of affiliated companies                  |                                     |         | 5.1     |   |      |         | (4.2    | ) |  |         | 11.7    |  
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Income (loss) before cumulative effect of accounting
	change                                                                                             |                                                                          |                                     | (254.3  | )       |   |      | 190.9   |         |   |  | 408.5   |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Cumulative effect of accounting change (SOP 98-5 
	Start-up Activities) |                                     |         | (3.5    | ) |      |         |        |   |  |         |        |  
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Net income (loss)                                                                                                                                        |                                                                          | $                                   | (257.8  | )       |   |      | 190.9   |         |   |  | 408.5   |        
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Average number of shares outstanding  basic                                                                                                             |                                                                          |                                     | 61.6    |         |   |      | 58.2    |         |   |  | 61.1    |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|Basic earnings (loss) per share before cumulative effect
	of accounting change                                                                           |                                                                          | $                                   | (4.13   | )       |   |      | 3.28    |         |   |  | 6.68    |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Cumulative effect of accounting change (SOP 98-5 
	Start-up Activities) |                                     |         | (0.06   | ) |      |         |        |   |  |         |        |  
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Basic earnings (loss) per share                                                                                                                          |                                                                          | $                                   | (4.19   | )       |   |      | 3.28    |         |   |  | 6.68    |        
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Average number of shares outstanding  diluted                                                                                                           |                                                                          |                                     | 61.6    |         |   |      | 58.5    |         |   |  | 61.6    |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|Diluted earnings (loss) per share before cumulative
	effect of accounting change                                                                         |                                                                          | $                                   | (4.13   | )       |   |      | 3.26    |         |   |  | 6.63    |        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                        
|                                                                                                                                                         | Cumulative effect of accounting change (SOP 98-5 
	Start-up Activities) |                                     |         | (0.06   | ) |      |         |        |   |  |         |        |  
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        
|Diluted earnings (loss) per share                                                                                                                        |                                                                          | $                                   | (4.19   | )       |   |      | 3.26    |         |   |  | 6.63    |        
|                                                                                                                                                         |                                                                          |                                     |         |         |   |      |         |         |   |  |         |        

See Notes to Consolidated Financial Statements



---



##### Table of Contents



57




CONSOLIDATED BALANCE SHEET

|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |         |       |       | 
|------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------- | ------------ | ----- | ------- | ------- | ------- | ----- | ----- | 
|                                                       |                                                                                                                                                      | December 31,                                                                            |                     | December 31,
|                                                       |                                                                                                                                                      | 1999                                                                                    |                     | 1998        
|                                                       |                                                                                                                                                      |                                                                                         |                     |             
|                                                       |                                                                                                                                                      |                                                                                        
|                                                       |                                                                                                                                                      | (In millions except per share values)                                                  
|                                                      
|                                                      
|                                                      
|                                                      
|Assets                                                 |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Current assets:                                                                                                                                      |                                                                                         |                     |              |       |         |         |         |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Cash and cash equivalents                                                               |                     | $            | 234.2 |         |         |         | 221.7 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Accounts receivable, less allowance for doubtful accounts
	(1999  $17.5; 1998  $14.9) |                     |              | 541.5 |         |         |         | 321.1 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Inventories                                                                             |                     |              | 498.3 |         |         |         | 266.0 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Supplies                                                                                |                     |              | 149.0 |         |         |         | 110.9 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Other current assets and prepaid expenses                                               |                     |              | 172.4 |         |         |         | 16.5  |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Deferred income taxes                                                                   |                     |              | 98.0  |         |         |         | 43.8  |      
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                       |                                                                                                                                                      |                                                                                         | Current assets      |              |       | 1,693.4 |         |         |       | 980.0 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Investments and long-term accounts receivable                                                                                                        |                                                                                         |                     | 136.1        |       |         |         | 85.6    |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Property, plant and equipment, net                                                                                                                   |                                                                                         |                     | 6,037.7      |       |         |         | 3,587.2 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Deferred income taxes                                                                                                                                |                                                                                         |                     | 16.9         |       |         |         | 0.7     |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other assets and deferred charges                                                                                                                    |                                                                                         |                     | 344.9        |       |         |         | 383.0   |      
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                       |                                                                                                                                                      | $                                                                                       | 8,229.0             |              |       |         | 5,036.5 |        
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|Liabilities                                            |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Current liabilities:                                                                                                                                 |                                                                                         |                     |              |       |         |         |         |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Short-term debt                                                                         |                     | $            | 451.2 |         |         |         | 116.1 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Current portion of long-term debt                                                       |                     |              | 131.3 |         |         |         | 68.5  |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Accounts payable and accrued expenses                                                   |                     |              | 786.5 |         |         |         | 451.3 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                                                                                                                                      | Income taxes                                                                            |                     |              | 49.3  |         |         |         | 15.2  |      
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                       |                                                                                                                                                      |                                                                                         | Current liabilities |              |       | 1,418.3 |         |         |       | 651.1 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Long-term debt                                                                                                                                       |                                                                                         |                     | 2,172.5      |       |         |         | 836.4   |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Deferred income taxes                                                                                                                                |                                                                                         |                     | 385.7        |       |         |         | 508.6   |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other liabilities and deferred credits                                                                                                               |                                                                                         |                     | 879.4        |       |         |         | 359.7   |      
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                       |                                                                                                                                                      |                                                                                         | 4,855.9             |              |       |         | 2,355.8 |        
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|Commitments and contingencies (see Notes 7, 18 and 19) |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                      
|                                                      
|                                                      
|                                                      
|Minority interests in consolidated subsidiaries        |                                                                                                                                                      |                                                                                         | 96.3                |              |       |         | 93.3    |        
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|Common shareholders equity                            |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Common shares, par value $6.25; 200.0 shares authorized; 78.7
	outstanding (1998  57.9) after deducting 17.1 shares
	(1998  17.3) held in treasury |                                                                                         |                     | 491.6        |       |         |         | 362.1   |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Capital in excess of par value                                                                                                                       |                                                                                         |                     | 1,016.4      |       |         |         | 1.8     |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Retained earnings                                                                                                                                    |                                                                                         |                     | 1,959.8      |       |         |         | 2,345.0 |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Accumulated other comprehensive income (loss)                                                                                                        |                                                                                         |                     | (180.3       | )     |         |         | (113.9  | )    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Other                                                                                                                                                |                                                                                         |                     | (10.7        | )     |         |         | (7.6    | )    
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                       |                                                                                                                                                      |                                                                                         | 3,276.8             |              |       |         | 2,587.4 |        
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        
|                                                       |                                                                                                                                                      | $                                                                                       | 8,229.0             |              |       |         | 5,036.5 |        
|                                                       |                                                                                                                                                      |                                                                                         |                     |              |       |         |         |        

See Notes to Consolidated Financial Statements



---



##### Table of Contents



58




CONSOLIDATED STATEMENT OF CASH FLOWS

|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |        |       |        |  
|------------------------------------------------ | ----------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------------------- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ------ | ------ | ----- | ------ | -
|                                                 |                                                                                           |                                                   
|                                                 |                                                                                           | For the years ended December 31,                  
|                                                 |                                                                                           |                                                   
|                                                 |                                                                                           | 1999                                               |                                                     | 1998   |        | 1997  
|                                                 |                                                                                           |                                                    |                                                     |        |        |       
|                                                 |                                                                                           |                                                   
|                                                 |                                                                                           | (In millions)                                     
|                                                
|                                                
|                                                
|                                                
|Operating activities                             |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income (loss)                                                                         |                                                    | $                                                   | (257.8 | )      |        |       | 190.9  |        |        |        | 408.5  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income (loss) to net cash
	provided by operating activities: |                                                    |                                                     |        |        |        |       |        |        |        |        |        |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           | Depreciation, depletion and amortization           |                                                     |        | 329.1  |        |       |        | 293.3  |        |        |        | 283.7 |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           | Deferred income taxes                              |                                                     |        | (191.7 | )      |       |        | 43.9   |        |        |        | 40.7  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           | Equity earnings (losses) net of dividends received |                                                     |        | (4.4   | )      |       |        | 5.8    |        |        |        | (6.5  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           | Changes in current assets and liabilities:         |                                                     |        |        |        |       |        |        |        |        |        |       |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | (Increase) decrease in accounts receivable          |        |        | (144.5 | )     |        |        | 53.3   |        |        |       | 36.5   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | (Increase) decrease in inventories                  |        |        | 31.2   |       |        |        | 6.4    |        |        |       | (6.2   | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | (Increase) decrease in supplies                     |        |        | 1.7    |       |        |        | 2.5    |        |        |       | (0.1   | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | (Increase) decrease in prepaid expenses             |        |        | 9.8    |       |        |        | (9.4   | )      |        |       | (2.3   | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | (Increase) decrease in deferred income taxes        |        |        | (5.3   | )     |        |        | 8.3    |        |        |       | (5.8   | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | Increase (decrease) in interest payable             |        |        | 2.2    |       |        |        | 2.2    |        |        |       | (1.0   | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | Increase (decrease) in other accounts payable       |        |        | (2.2   | )     |        |        | (42.1  | )      |        |       | 21.1   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | Increase (decrease) in accrued income taxes         |        |        | 7.2    |       |        |        | 13.8   |        |        |       | (13.4  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           |                                                    | Increase (decrease) in other accrued expenses       |        |        | (27.4  | )     |        |        | (23.6  | )      |        |       | (12.0  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           | Non-recurring charges and provisions               |                                                     |        | 471.9  |        |       |        | (171.7 | )      |        |        | 45.9  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                           | Other adjustments, net                             |                                                     |        | (15.3  | )      |       |        | 4.8    |        |        |        | (24.5 | )     
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|                                                 |                                                                                           |                                                    | Net cash provided by operating activities           |        |        | 204.5  |       |        |        | 378.4  |        |        |       | 764.6  |  
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|Investing activities                             |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital outlays                                                                           |                                                    |                                                     | (200.9 | )      |        |       | (318.1 | )      |        |        | (661.6 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Capitalized interest                                                                      |                                                    |                                                     | (0.2   | )      |        |       | (1.9   | )      |        |        | (11.7  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Investment in subsidiaries                                                                |                                                    |                                                     | (39.5  | )      |        |       | (350.2 | )      |        |        | (127.6 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from asset dispositions and other                                                |                                                    |                                                     | 246.6  |        |        |       | 486.2  |        |        |        | 7.1    |      
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|                                                 |                                                                                           |                                                    | Net cash provided by (used in) investing activities |        |        | 6.0    |       |        |        | (184.0 | )      |        |       | (793.8 | )
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|Financing activities                             |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Increase in debt                                                                          |                                                    |                                                     | 348.8  |        |        |       | 108.0  |        |        |        | 418.4  |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Payment of debt                                                                           |                                                    |                                                     | (209.1 | )      |        |       | (85.6  | )      |        |        | (66.9  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Common dividends                                                                          |                                                    |                                                     | (124.3 | )      |        |       | (117.3 | )      |        |        | (122.7 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of common shares                                                                 |                                                    |                                                     |       |        |        |       | (35.4  | )      |        |        | (511.5 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Other, net                                                                                |                                                    |                                                     | (213.4 | )      |        |       | (0.3   | )      |        |        | (0.3   | )    
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|                                                 |                                                                                           |                                                    | Net cash used in financing activities               |        |        | (198.0 | )     |        |        | (130.6 | )      |        |       | (283.0 | )
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|Increase (decrease) in cash and cash equivalents |                                                                                           |                                                    | 12.5                                                |        |        |        | 63.8  |        |        |        | (312.2 | )     
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of year   |                                                                                           |                                                    | 221.7                                               |        |        |        | 157.9 |        |        |        | 470.1  |       
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       
|Cash and cash equivalents at end of year         |                                                                                           | $                                                  | 234.2                                               |        |        |        | 221.7 |        |        |        | 157.9  |       
|                                                 |                                                                                           |                                                    |                                                     |        |        |        |       |        |        |        |        |       

Supplemental schedule of noncash investing and financing
activities:

In 1999, as partial consideration for the acquisition of Cyprus
Amax, the Company issued 20.6 million common shares valued at
$1,125 million. (See Note 2.)

See Notes to Consolidated Financial Statements



---



##### Table of Contents



59




CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS EQUITY

|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |        |       |  
|------------------------------ | --------------------------------------------- | --------------------------------------- | ---- | ---------- |  | ----- | ----- | ----------- |  | ------------- | ------- | ------ |  | ------------- | ------- | ------ | - | - | ------ | - | ----- | - | ----- | - |  | - | ------- | ------ | ----- | -
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |       
|                               |                                               | Common Shares                           |      | Capital in |  |       |       | Accumulated |  |               |         |       
|                               |                                               |                                         |      | Excess of  |  |       |       | Other       |  |               |         | Common
|                               |                                               | Number                                  |      | At Par     |  | Par   |       | Retained    |  | Comprehensive |         |        |  | Shareholders
|                               |                                               | of Shares                               |      | Value      |  | Value |       | Earnings    |  | Income (loss) |         | Other  |  | Equity       
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |              
|                               |                                               |                                        
|                               |                                               | (In millions)                          
|                              
|                              
|                              
|                              
|Balance at December 31, 1996   |                                               |                                         | 64.7 |            |  |       | 404.4 |             |  |               |        |        |  |               | 2,465.0 |        |   |   | (102.0 | ) |       |   | (11.5 | ) |  |   | 2,755.9 |       
|                              
|                              
|                              
|                              
|Stock options exercised        |                                               |                                         | 0.5  |            |  |       | 2.9   |             |  |               |         |        |  |               | 11.4    |        |   |   |        |   |       |   |       |   |  |   | 14.3    |       
|                              
|                              
|                              
|                              
|Tax benefit from stock options |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               | 8.4     |        |   |   |        |   |       |   |       |   |  |   | 8.4     |       
|                              
|                              
|                              
|                              
|Common shares purchased        |                                               |                                         | (6.6 | )          |  |       | (40.9 | )           |  |               |         |        |  |               | (470.6  | )      |   |   |        |   |       |   |       |   |  |   | (511.5  | )     
|                              
|                              
|                              
|                              
|Restricted shares issued, net  |                                               |                                         |     |            |  |       | 0.1   |             |  |               |         |        |  |               | 1.0     |        |   |   |        |   |       |   | 1.3   |   |  |   | 2.4     |       
|                              
|                              
|                              
|                              
|Dividends on common shares     |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               | (122.7  | )      |   |   |        |   |       |   |       |   |  |   | (122.7  | )     
|                              
|                              
|                              
|                              
|Comprehensive income           |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                              
|                              
|                              
|                              
|                               | Net income                                    |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         | 408.5  |   |   |        |   |       |   |       |   |  |   |         | 408.5  |      
|                              
|                              
|                              
|                              
|                               | Other comprehensive income (loss), net of tax |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |        |      
|                              
|                              
|                              
|                              
|                               |                                               | Translation adjustment                  |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (45.2 | ) |       |   |  |   |         |        | (45.2 | )
|                              
|                              
|                              
|                              
|                               |                                               | Additional pension liability            |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | 1.0   |   |       |   |  |   |         |        | 1.0   |  
|                              
|                              
|                              
|                              
|                               |                                               | Unrealized gains (losses) on securities |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (0.7  | ) |       |   |  |   |         |        | (0.7  | )
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               |                                               | Other comprehensive income (loss)       |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (44.9 | ) |       |   |  |   |         |        | (44.9 | )
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               | Comprehensive income                          |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         | 363.6  |      
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|Balance at December 31, 1997   |                                               |                                         | 58.6 |            |  |       | 366.5 |             |  |               |        |        |  |               | 2,301.0 |        |   |   | (146.9 | ) |       |   | (10.2 | ) |  |   | 2,510.4 |       
|                              
|                              
|                              
|                              
|Stock options exercised        |                                               |                                         |     |            |  |       | 0.3   |             |  |               |         |        |  |               | 1.9     |        |   |   |        |   |       |   |       |   |  |   | 2.2     |       
|                              
|                              
|                              
|                              
|Tax benefit from stock options |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               | 0.3     |        |   |   |        |   |       |   |       |   |  |   | 0.3     |       
|                              
|                              
|                              
|                              
|Common shares purchased        |                                               |                                         | (0.7 | )          |  |       | (4.6  | )           |  |               |         |        |  |               | (30.8   | )      |   |   |        |   |       |   |       |   |  |   | (35.4   | )     
|                              
|                              
|                              
|                              
|Restricted shares issued, net  |                                               |                                         |     |            |  |       | (0.1  | )           |  |               |         |        |  |               | (1.0    | )      |   |   |        |   |       |   | 2.6   |   |  |   | 1.5     |       
|                              
|                              
|                              
|                              
|Other investment adjustments   |                                               |                                         |      |            |  |       |       |             |  |               | 1.8     |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   | 1.8     |       
|                              
|                              
|                              
|                              
|Dividends on common shares     |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               | (117.3  | )      |   |   |        |   |       |   |       |   |  |   | (117.3  | )     
|                              
|                              
|                              
|                              
|Comprehensive income           |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                              
|                              
|                              
|                              
|                               | Net income                                    |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         | 190.9  |   |   |        |   |       |   |       |   |  |   |         | 190.9  |      
|                              
|                              
|                              
|                              
|                               | Other comprehensive income (loss), net of tax |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |        |      
|                              
|                              
|                              
|                              
|                               |                                               | Reclassification adjustment *           |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | 37.7  |   |       |   |  |   |         |        | 37.7  |  
|                              
|                              
|                              
|                              
|                               |                                               | Translation adjustment                  |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (1.7  | ) |       |   |  |   |         |        | (1.7  | )
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               |                                               | Translation, net of reclass adjustments |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | 36.0  |   |       |   |  |   |         |        | 36.0  |  
|                              
|                              
|                              
|                              
|                               |                                               | Additional pension liability            |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (3.0  | ) |       |   |  |   |         |        | (3.0  | )
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               |                                               | Other comprehensive income              |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | 33.0  |   |       |   |  |   |         |        | 33.0  |  
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               | Comprehensive income                          |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         | 223.9  |      
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|Balance at December 31, 1998   |                                               |                                         | 57.9 |            |  | $     | 362.1 |             |  | $             | 1.8     |        |  | $             | 2,345.0 |        |   | $ | (113.9 | ) |       | $ | (7.6  | ) |  | $ | 2,587.4 |       
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|Stock options exercised        |                                               |                                         | 0.1  |            |  |       | 0.4   |             |  |               | 2.4     |        |  |               |        |        |   |   |        |   |       |   |       |   |  |   | 2.8     |       
|                              
|                              
|                              
|                              
|Tax benefit from stock options |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               | 0.4     |        |   |   |        |   |       |   |       |   |  |   | 0.4     |       
|                              
|                              
|                              
|                              
|Restricted shares issued, net  |                                               |                                         | 0.1  |            |  |       | 0.6   |             |  |               | 4.6     |        |  |               |        |        |   |   |        |   |       |   | (3.1  | ) |  |   | 2.1     |       
|                              
|                              
|                              
|                              
|Other investment adjustments   |                                               |                                         |      |            |  |       |       |             |  |               | 1.0     |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   | 1.0     |       
|                              
|                              
|                              
|                              
|Dividends on common shares     |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               | (127.8  | )      |   |   |        |   |       |   |       |   |  |   | (127.8  | )     
|                              
|                              
|                              
|                              
|Cyprus Amax acquisition        |                                               |                                         | 20.6 |            |  |       | 128.5 |             |  |               | 1,006.6 |        |  |               |        |        |   |   |        |   |       |   |       |   |  |   | 1,135.1 |       
|                              
|                              
|                              
|                              
|Comprehensive income           |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                              
|                              
|                              
|                              
|                               | Net income (loss)                             |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         | (257.8 | ) |   |        |   |       |   |       |   |  |   |         | (257.8 | )    
|                              
|                              
|                              
|                              
|                               | Other comprehensive income (loss), net of tax |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |        |      
|                              
|                              
|                              
|                              
|                               |                                               | Reclassification adjustment**           |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | 11.8  |   |       |   |  |   |         |        | 11.8  |  
|                              
|                              
|                              
|                              
|                               |                                               | Translation adjustment                  |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (81.0 | ) |       |   |  |   |         |        | (81.0 | )
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               |                                               | Translation, net of reclass adjustments |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (69.2 | ) |       |   |  |   |         |        | (69.2 | )
|                              
|                              
|                              
|                              
|                               |                                               | Unrealized gains (losses) on securities |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (0.2  | ) |       |   |  |   |         |        | (0.2  | )
|                              
|                              
|                              
|                              
|                               |                                               | Additional pension liability            |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | 3.0   |   |       |   |  |   |         |        | 3.0   |  
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               |                                               | Other comprehensive income (loss)       |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   | (66.4 | ) |       |   |  |   |         |        | (66.4 | )
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|                               | Comprehensive income (loss)                   |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         | (324.2 | )    
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       
|Balance at December 31, 1999   |                                               |                                         | 78.7 |            |  | $     | 491.6 |             |  | $             | 1,016.4 |        |  | $             | 1,959.8 |        |   | $ | (180.3 | ) |       | $ | (10.7 | ) |  | $ | 3,276.8 |       
|                               |                                               |                                         |      |            |  |       |       |             |  |               |         |        |  |               |         |        |   |   |        |   |       |   |       |   |  |   |         |       




Disclosure of reclassification amount:




| |   |                                                                                 
| | - | --------------------------------------------------------------------------------
| | * | The 1998 reclassification adjustment resulted from
	 the sale of Black Mountain.



|   |                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------
|** | The 1999 reclassification adjustment represents
	the write-off of cumulative translation adjustments as a result
	of the sale of PD Mining Ltd.

See Notes to Consolidated Financial Statements



---



##### Table of Contents



60




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in tables stated in millions except as noted)


1.  Summary of Significant Accounting Policies

Basis of Consolidation. The consolidated financial
statements include the accounts of Phelps Dodge Corporation (the
Company, which may be referred to as Phelps Dodge, PD, we, us or
ours), and its majority-owned subsidiaries. Interests in mining
joint ventures in which we own more than 50 percent are
reported using the proportional consolidation method. Interests
in other majority-owned subsidiaries are reported using the full
consolidation method; the consolidated financial statements
include 100 percent of the assets and liabilities of these
subsidiaries and the ownership interests of minority participants
 are recorded as Minority interests in consolidated
subsidiaries. All material intercompany balances and
transactions are eliminated.

Investments in unconsolidated companies owned 20 percent or
more are recorded on an equity basis. Investments in companies
less than 20 percent owned, and for which we do not exercise
 significant control, are carried at cost.

Managements Estimates and Assumptions.The
preparation of financial statements in conformity with generally
accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Foreign Currency Translation.Except as noted below, the
assets and liabilities of foreign subsidiaries are translated at
current exchange rates, while revenues and expenses are
translated at average rates in effect for the period. The related
 translation gains and losses are included in accumulated other
comprehensive income (loss) within common shareholders
 equity. For the translation of the financial statements of
certain foreign subsidiaries dealing predominantly in U.S.
dollars and for those affiliates operating in highly inflationary
 economies, assets and liabilities receivable or payable in cash
are translated at current exchange rates, and inventories and
other non-monetary assets and liabilities are translated at
historical rates. Gains and losses resulting from translation of
such financial statements are included in operating results, as
are gains and losses incurred on foreign currency transactions.

Statement of Cash Flows.For the purpose of preparing the
Consolidated Statement of Cash Flows, we consider all highly
liquid investments with a maturity of three months or less when
purchased to be cash equivalents.

Inventories and Supplies.Inventories and supplies are
stated at the lower of cost or market. Cost for metal inventories
 is determined by the last-in, first-out method (LIFO), and cost
for substantially all other inventories is determined by the
first-in, first-out method (FIFO) or a moving average
method. Cost for substantially all supplies is determined by a
moving average method.

Property, Plant and Equipment.Property, plant and
equipment are carried at cost. Cost of significant assets
includes capitalized interest incurred during the construction
and development period. Expenditures for replacements and
betterments are capitalized; maintenance and repair expenditures
are charged to operations as incurred.

The principal depreciation method used for mining, smelting and
refining operations is the units of production method applied on
a group basis. Buildings, machinery and equipment for other
operations are depreciated using the straight-line method over
estimated lives of five to 40 years, or the estimated life
of the operation if shorter. Upon disposal of assets depreciated
on a group basis, cost less salvage is charged to accumulated
depreciation.

Values for mining properties represent mainly acquisition costs
or pre-1932 engineering valuations. Depletion of mines is
computed on the basis of an overall unit rate applied to the
pounds of principal products sold from mine production.



---



##### Table of Contents



61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Mine exploration costs and development costs to maintain
production of operating mines are charged to operations as
incurred. Mine development expenditures at new mines and major
development expenditures at operating mines that are expected to
benefit future production are capitalized and amortized on the
units of production method over the estimated commercially
recoverable minerals.

Environmental Expenditures. Environmental expenditures are
 expensed or capitalized depending upon their future economic
benefits. Liabilities for such expenditures are recorded when it
is probable that obligations have been incurred and the costs
reasonably can be estimated. For closed facilities and closed
portions of operating facilities with closure obligations, an
environmental liability is considered probable and is accrued
when a closure determination is made and approved by management.
Environmental liabilities attributed to CERCLA or analogous state
 programs are considered probable when a claim is asserted, or is
 probable of assertion, and we have been associated with the
site. Other environmental remediation liabilities are considered
probable based on the specific facts and circumstances. Our
estimates of these costs are based upon available facts, existing
 technology and current laws and regulations, and are recorded on
 an undiscounted basis. Where the available information is
sufficient to estimate the amount of liability, that estimate has
 been used. Where the information is only sufficient to establish
 a range of probable liability and no point within the range is
more likely than any other, the lower end of the range has been
used. The possibility of recovery of some of these costs from
insurance companies or other parties exists; however, we do not
recognize these recoveries in our financial statements until they
 become probable.

Mine Closure Costs.Reclamation is an ongoing activity and
 we recognize estimated reclamation costs on a units of
production basis.

Goodwill. Included in Other assets and deferred
charges are costs in excess of the net assets of businesses
 acquired. These amounts are amortized on a straight-line basis
over periods of 15 to 30 years.

Impairments.We evaluate our long-term assets to be held
and used, our identifiable intangible assets, and goodwill for
impairment when events or changes in economic circumstances
indicate the carrying amount of such assets may not be
recoverable. We use an estimate of the future undiscounted net
cash flows of the related asset or asset grouping over the
remaining life to measure whether the assets are recoverable and
measure any impairment by reference to fair value. Fair value is
generally estimated using the Companys expectation of
discounted net cash flows. Long-term assets to be disposed of are
 carried at the lower of cost or fair value less the costs of
disposal.

Revenue Recognition.Revenue is recorded when title passes
 to the customer. The passing of title is based on terms of the
contract which is generally upon shipment. Copper revenue is
recognized based on the monthly average of prevailing commodity
prices according to the terms of the contracts. Price estimates
used for provisionally priced concentrate shipments are based on
managements judgment of expected price levels and are
adjusted to actual prices at settlement. We use futures contracts
 and other financial instruments as hedges for our sales and cash
 management program. Gains and losses on such transactions
related to sales are matched to specific sales contracts and
charged or credited to sales revenue.

Hedging Programs.We do not purchase, hold or sell
derivative financial contracts unless we have an existing asset,
obligation or anticipate a future activity that is likely to
occur that will result in exposing us to market risk. Derivative
financial instruments are used to manage well-defined commodity
price, foreign exchange and interest rate risks from our primary
business activities. For a discussion on why we use derivative
financial contracts, our year-end derivative position and related
 financial results, please refer to Note 20.

Commodity futures contracts We recognize gains
 and losses on commodity futures contracts in income when the
underlying customer sale is recognized. We also recognize gains
and losses whenever a previous customer contract is no longer
expected to occur.

Copper option contracts  We initially
record net premiums paid on copper option contracts as prepaid
assets and then amortize the premium on a straight-line basis
over the hedge protection period. We recognize hedging gains and
losses in income at the maturity of the option contract. We
record any premiums received



---



##### Table of Contents



62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


on the sale of option contracts as accrued expenses until the
maturity of the option contract when the premium received is
recorded as income.

Foreign exchange contracts  We initially
record premiums paid on currency option contracts and
unrecognized gains and losses on forward exchange contracts as
prepaid assets. Hedge premiums on forward exchange contracts are
amortized on a straight-line basis over the hedge protection
period. Gains and losses on forward exchange contracts are
credited or charged to miscellaneous income or expense. Changes
in market value of forward exchange contracts protecting actual
transactions are recognized in the period incurred. For currency
option contracts, we recognize unamortized premium and hedging
gains and losses in income when the underlying hedged transaction
 is recognized or when a previously hedged transaction is no
longer expected to occur.

Currency swap contracts  For certain of
our currency swap contracts, which are in substance forward
exchange contracts, we amortize hedge premiums on a straight-line
 basis over the hedge protection period while gains and losses
are recognized in income in the period incurred. For other types
of currency swap contracts, we recognize costs associated with
such agreements to interest expense over the term of the
agreement.

Interest rate swaps  The costs associated
with interest rate swap agreements are amortized to interest
expense over the term of the agreement.

Stock Compensation.In accordance with the provisions of
Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based
Compensation, we apply Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued
 to Employees, and related interpretations to account for
our stock option plans. Note 15 to the Consolidated
Financial Statements contains a summary of the pro forma effects
on reported net income and earnings per share for 1999, 1998 and
1997 if we had elected to recognize compensation cost based on
the fair value of the options granted as prescribed by SFAS
No. 123.

Income Taxes.In addition to charging income for taxes
actually paid or payable, the provision for taxes reflects
deferred income taxes resulting from changes in temporary
differences between the tax bases of assets and liabilities and
their reported amounts in the financial statements. The effect on
 deferred income taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.

Pension Plans.We have trusteed, non-contributory pension
plans covering substantially all of our U.S. employees and some
employees of international subsidiaries. The benefits are based
on, in the case of certain plans, final average salary and years
of service and, in the case of other plans, a fixed amount for
each year of service. Our funding policy provides that payments
to the pension trusts shall be at least equal to the minimum
funding requirements of the Employee Retirement Income Security
Act of 1974 for U.S. plans or, in the case of international
subsidiaries, the minimum legal requirements in that particular
country. Additional payments may also be provided from time to
time.

Postretirement Benefits Other Than Pensions.We have
several postretirement health care and life insurance benefit
plans covering most of our U.S. employees and, in some cases,
employees of international subsidiaries. Postretirement benefits
vary among plans and many plans require contributions from
employees. We account for these benefits on an accrual basis. Our
 funding policy provides that payments shall be at least equal to
 our cash basis obligation, plus additional amounts that may be
approved by us from time to time.

Postemployment Benefits.We have certain postemployment
benefit plans covering most of our U.S. employees and, in some
cases, employees of international subsidiaries. The benefit plans
 may provide severance, disability, supplemental health care,
life insurance or other welfare benefits. We account for these
benefits on an accrual basis. Our funding policy provides that
payments shall be at least equal to our cash basis obligation.
Additional amounts may also be provided from time to time.

Earnings Per Share.In 1997, we adopted SFAS No. 128,
 Earnings Per Share. Basic earnings per share is
computed by dividing income available to common shareholders by
the weighted average number of



---



##### Table of Contents



63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


common shares outstanding for the period. Diluted earnings per
share is similar to basic earnings per share except that the
denominator is increased to include the number of additional
common shares that would have been outstanding if the dilutive
potential common shares had been issued.

|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |      |       | 
|------------------------------------------- | --------------------------------- | -------------------------------------------- | - | ----- | ------ | ---- |  | ---- | ----- |  |  | ---- | ----- | 
|                                            |                                   | 1999                                         |   | 1998  |        | 1997
|                                            |                                   |                                              |   |       |        |     
|Basic Earnings (Loss) Per Share Computation |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|                                           
|                                           
|                                           
|                                           
|                                            | Numerator:                        |                                              |   |       |        |      |  |      |       |  |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Net income (loss)                            |   | $     | (257.8 | )    |  |      | 190.9 |  |  |      | 408.5 | 
|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|                                            | Denominator:                      |                                              |   |       |        |      |  |      |       |  |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average common shares outstanding            |   |       | 61.6   |      |  |      | 58.2  |  |  |      | 61.1  | 
|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|                                            | Basic earnings (loss) per share   |                                              | $ | (4.19 | )      |      |  | 3.28 |       |  |  | 6.68 |      
|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|Diluted Earnings Per Share Computation      |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|                                           
|                                           
|                                           
|                                           
|                                            | Numerator:                        |                                              |   |       |        |      |  |      |       |  |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Net income (loss)                            |   | $     | (257.8 | )    |  |      | 190.9 |  |  |      | 408.5 | 
|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|                                            | Denominator:                      |                                              |   |       |        |      |  |      |       |  |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average common shares outstanding            |   |       | 61.6   |      |  |      | 58.2  |  |  |      | 61.1  | 
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average employee stock options               |   |       |       |      |  |      | 0.1   |  |  |      | 0.3   | 
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average restricted stock issued to employees |   |       |       |      |  |      | 0.2   |  |  |      | 0.2   | 
|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|                                            |                                   | Total average common shares outstanding      |   |       | 61.6   |      |  |      | 58.5  |  |  |      | 61.6  | 
|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |     
|                                            | Diluted earnings (loss) per share |                                              | $ | (4.19 | )      |      |  | 3.26 |       |  |  | 6.63 |      
|                                            |                                   |                                              |   |       |        |      |  |      |       |  |  |     

Stock options excluded from the computation of diluted earnings
per share because option prices exceeded fair market value were
as follows:

|                    |  |      |       |      |  |      |       |  |  |  |       | 
|------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                    |  | 1999 |       | 1998 |  | 1997
|                    |  |      |       |      |  |     
|Outstanding options |  |      | 3.1   |      |  |      | 2.6   |  |  |  | 0.1   | 
|                   
|                   
|                   
|                   
|Option price        |  | $    | 65.88 |      |  |      | 58.84 |  |  |  | 76.45 | 

New Accounting Standards.In the 1999 first quarter, we
adopted SOP 98-5, Reporting on the Costs of Start-Up
Activities. The implementation resulted in a $3.5 million
after-tax charge, or 6 cents per common share, representing the
write off of previously unamortized start-up costs at our
Candelaria mining operation in Chile and our magnet wire
operation in Monterrey, Mexico.

We adopted SFAS No. 130, Reporting Comprehensive
Income, in the 1998 first quarter. The required information
 has been presented in the Consolidated Financial Statement of
Common Shareholders Equity. We also adopted SFAS
No. 131, Disclosures about Segments of an Enterprise
and Related Information, in 1998. The required information
has been presented in Note 21  Business Segment
Data. In February 1998, the Financial Accounting Standards
Board (FASB) issued SFAS No. 132, Employers
 Disclosures about Pensions and Other Postretirement
Benefits. We adopted this statement in 1998. They have no
effect on our results of operations, financial position, capital
resources or liquidity. Prior year disclosures have been restated
 for comparative purposes.

In June 1998, FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities. This statement requires recognition of all
derivatives as either assets or liabilities on the balance sheet
and measurement of those instruments at fair value. Changes in
the fair value of derivatives are recorded each period in current
 earnings or other comprehensive income (loss). Proper accounting
 for changes in fair value of derivatives held is dependent on
whether the derivative transaction qualifies as an accounting
hedge and on the classification of the hedge transaction. The
statement was originally required to be adopted in the first
quarter of 2000. Citing concerns about companies ability to
 modify their information systems and educate their managers in
time to apply SFAS 133, FASB has delayed its effective date for
one year. We will



---



##### Table of Contents



64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


adopt SFAS 133 in the first quarter of 2001. We are evaluating
the effect this statement will have on our financial reporting
and disclosures as well as on our derivative and hedging
activities.

Reclassification. For comparative purposes, certain prior
year amounts have been reclassified to conform with the current
year presentation.

2.  Acquisitions

Cyprus Amax Acquisition

In the 1999 fourth quarter, Phelps Dodge acquired all the issued
and outstanding shares of Cyprus Amax Minerals Company (Cyprus
Amax). Prior to the acquisition, Cyprus Amax was a worldwide
producer of copper and molybdenum. The acquisition of Cyprus Amax
 was accounted for using the purchase method and accordingly, the
 results of Cyprus Amax operations have been included in the
accompanying consolidated financial statements from the date of
the acquisition, October 16, 1999.

The total purchase price for Cyprus Amax was $1,855 million
including $1,125 million for the issuance of 20.6 million shares
of Phelps Dodge common stock, $10 million for the conversion of
Cyprus Amax stock options, cash of $693 million and acquisition
costs of $27 million (financial advisory, legal, accounting, and
printing costs). In addition, certain acquisition-related stock
compensation and the resulting tax obligations of Cyprus Amax of
$29 million were recorded in purchase accounting and paid by
 Phelps Dodge.

In connection with the acquisition of Cyprus Amax, Cyprus Amax
called for redemption of all 4,664,302 of its Series A
Convertible Preferred shares. Prior to the redemption date, a
total of 3,968,801 shares were redeemed for cash and the
remainder converted to Cyprus Amax common shares, which were
subsequently exchanged for 0.5 million shares of Phelps Dodge
common stock as part of the acquisition. The cash required for
the redemption totaled $208.3 million, including accumulated
dividends.

Allocation of the purchase price was based on an estimate of the
fair value for the assets acquired and liabilities assumed at
October 16, 1999, and is subject to final adjustment based
on the completion of final valuation and other procedures. Assets
 acquired were $4.2 billion, including cash of $785 million.
 Liabilities assumed totaled $2.4 billion including debt of
$1,595.6 million which was reduced by $15.2 million to
reflect the fair value of the obligations at the acquisition
date. Liabilities recorded at acquisition included costs of
$22 million associated with merging Cyprus Amaxs
operations into the Companys operations such as lease and
other contract cancellation costs, and employee termination
costs, primarily for duplicate administrative and management
functions. Costs for these liabilities incurred in connection
with the integration plan are expected to be substantially paid
out by the end of 2000.

Phelps Dodge has decided to sell the Australian coal assets
acquired in the merger. These assets consist of a 50 percent
 interest in the Springvale underground mine located in New South
 Wales, Australia, and a 48 percent interest in Oakbridge
Limited which has three operating mines also located in New South
 Wales. These assets have been classified on the balance sheet as
 other current assets and prepaid expenses and were assigned an
estimated net realizable value of $140 million based on an
estimated pre-tax value of $150 million less
$10 million for transaction costs and other provisions.

The unaudited pro forma information set forth below is presented
to show the estimated effect of the merger on the consolidated
operations of Phelps Dodge had it been consummated at the
beginning of each period, after giving effect to certain
adjustments, including additional depreciation and amortization
of assets acquired. The pro forma financial information gives
effect to Cyprus Amaxs disposition of its coal
(1999) and lithium (1998) segments. Accordingly, the
operating results and resulting gain (loss) of these
segments have been excluded from income (loss) from
continuing operations and included in net income (loss).



---



##### Table of Contents



65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                         |                                          |             |       |       |   |  |       |      | 
|---------------------------------------- | ---------------------------------------- | ----------- | ----- | ----- | - |  | ----- | ---- | 
|                                         |                                          |            
|                                         |                                          | Year Ended 
|                                         |                                          | December 31
|                                         |                                          |            
|Pro Forma                                |                                          | 1999        |       | 1998 
|                                         |                                          |             |       |      
|                                         |                                          |            
|                                         |                                          | (Unaudited)
|                                        
|                                        
|                                        
|                                        
|Revenue                                  |                                          | $           | 4,018 |       |   |  | 4,661 |     
|                                        
|                                        
|                                        
|                                        
|Income (loss) from continuing operations |                                          | $           | (419  | )     |   |  | 11    |     
|                                        
|                                        
|                                        
|                                        
|Net income (loss)                        |                                          | $           | (449  | )     |   |  | 207   |     
|Earnings (loss) per share                |                                          |             |       |       |   |  |       |     
|                                        
|                                        
|                                        
|                                        
|                                         | Income (loss) from continuing operations |             | $     | (5.32 | ) |  |       | 0.14 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Net income (loss)                        |             | $     | (5.71 | ) |  |       | 2.63 | 

The unaudited pro forma financial information is provided for
illustrative purposes only and does not purport to represent what
 the actual consolidated results of operations of Phelps Dodge
would have been had the acquisition of Cyprus Amax occurred on
the dates presented, nor is it necessarily indicative of future
consolidated operating results. The pro forma adjustments do not
include operating efficiencies and cost savings that Phelps Dodge
 expects to achieve.

KKPC Acquisition

In January 1999, we acquired an 85 percent interest in
the Korean carbon black manufacturing business of Korea Kumho
Petrochemical Co., Ltd., for $76.1 million. Our Columbian
Chemicals subsidiary manages and operates the business, including
 the 110,000 metric-ton-per-year manufacturing plant located in
Yosu, South Korea.

Copebras Acquisition

In October 1998, we acquired the Brazilian carbon black
manufacturing business of Copebras S.A., a subsidiary of Minorco,
 for $220.0 million. This manufacturing facility has an annual
production capacity of 170,000 metric tons of carbon black.

Cobre Acquisition

On February 3, 1998, we acquired the stock of Cobre Mining
Company Inc. (Cobre) for $108.7 million including
acquisition costs. The acquisition was at a price of $3.85 per
common share for Cobres 27 million common shares,
including shares issuable upon the exercise of outstanding
warrants and options. The primary assets of Cobre include the
Continental Mine, which comprises an open-pit copper mine, two
underground copper mines, two mills, and the surrounding land,
including mineral rights, located in southwestern New Mexico
adjacent to the Companys Chino Mines Company (Chino)
operations. On October 21, 1998, we indefinitely suspended
underground mining at Cobre due to low copper prices. On
March 17, 1999, the remaining operations were suspended.
Cobre remains on care and maintenance status.

3.  Non-Recurring Charges and Provisions

1999 Asset Impairments and Provisions

During the 1999 fourth quarter, we recorded non-recurring,
pre-tax charges for asset impairments of $320.4 million at
Phelps Dodge Mining Company (PD Mining) and $21.7 million at
 Phelps Dodge Industries (PD Industries). The PD Mining
impairments included the write-down of the Hidalgo smelter in New
 Mexico ($201.5 million) and the Metcalf concentrator at the
 Morenci operations in Arizona ($88.0 million). As a result
of the successful acquisition of Cyprus Amax and the planned
conversion of Morenci to a mine-for-leach operation, the Hidalgo
smelter is expected to be reconfigured to allow it to continue to
 be a reliable source of acid. Management also determined that
the Metcalf concentrator, which was on standby, would thereafter
be permanently closed and the Morenci concentrator, which will be
 required through the mine-for-leach start-up, subsequently will
be maintained on standby to provide alternative processing
capability. In



---



##### Table of Contents



66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


addition, as the Company began integrating the acquired Cyprus
Amax mining properties, a review of copper resources was
performed and a determination of the viability of each resource
reviewed was made. Based on that review, PD Mining wrote off a
mine development project at the Tyrone operation in New Mexico
($11.9 million) and wrote off a mine development project at
the Copper Basin operation in Arizona ($6.8 million).
Management further decided to write down a real estate
development project in Arizona ($12.2 million). The PD
Industries impairment charge comprised $6.7 million for the
 write off of an equity investment in China (charged to
non-operating expense) and $15.0 million for the impairment
of value of the wire and cable segments telecommunications
assets ($3.1 million of which was charged to non-operating
expense). The minority interest add-back against the impairment
of value of the telecommunications assets totaled $1.5 million.

During the 1999 fourth quarter, the Company also recognized a
non-recurring, pre-tax charge of $28.2 million for estimated
 future costs associated with environmental matters applicable to
 PD Mining. See Note 19 to the Consolidated Financial
Statements for further discussion of environmental matters.

1999 Restructuring Charges

On June 30, 1999, we announced a plan to reduce costs and
improve operating performance at all three of our business
segments by (i) curtailing higher cost copper production by
temporarily closing our Hidalgo smelter in New Mexico and the
Metcalf concentrator, as well as curtailing production by
50 percent at our copper refinery in El Paso, Texas;
(ii) selling a non-core South African fluorspar mining unit;
 (iii) restructuring certain wire and cable assets to
respond to changing market conditions; and (iv) suspending
operations at Columbian Chemicals Companys carbon black
plant in the Philippines. These actions resulted in a total
non-recurring, pre-tax charge of $84.7 million (or
$58.7 million, $1.01 per share, after taxes and minority
interests) in the 1999 second quarter, a pre-tax charge of
$1.1 million (or $0.7 million, $0.01 per share, after
taxes) in the 1999 third quarter and a pre-tax charge of
$10.9 million (or $6.3 million, $0.09 per share, after
taxes and minority interests) in the 1999 fourth quarter. Total
1999 non-recurring charges for the June 30, 1999,
restructuring plan were $96.7 million (or
$65.7 million, $1.07 per share, after taxes and minority
interests).

PD Minings $36.6 million in non-recurring, pre-tax charges
from the June 30, 1999, restructuring plan included
$7.0 million from a loss on the sale of our fluorspar mining
 operation in South Africa. Also included in the restructuring
plan were charges associated with employee severance
($6.9 million), pension and other postretirement obligations
 ($9.0 million), environmental cleanup ($7.3 million)
and mothballing and take or pay contracts ($6.4 million).
Approximately 900 positions, including temporary and contract
employees, have been or are in the process of being eliminated as
 part of the plan. The current liability components of the
restructuring plan related to employee severance, mothballing and
 take or pay contracts during 1999 were as follows:

|                                 |  |           |      |              |  |       |      |   |  |  |      |  
|-------------------------------- |  | --------- | ---- | ------------ |  | ----- | ---- | - |  |  | ---- | -
|                                 |  |           |      | Mothballing/ |  |      
|                                 |  |           |      | Take or      |  |      
|                                 |  | Employee  |      | Pay          |  |      
|                                 |  | Severance |      | Contracts    |  | Total
|                                 |  |           |      |              |  |      
|June 30, 1999 balance            |  | $         | 8.2  |              |  |       | 6.4  |   |  |  | 14.6 |  
|                                
|                                
|                                
|                                
|Reclassification of restructure* |  |           | (1.3 | )            |  |       |     |   |  |  | (1.3 | )
|                                
|                                
|                                
|                                
|Payments made                    |  |           | (5.5 | )            |  |       | (2.9 | ) |  |  | (8.4 | )
|                                 |  |           |      |              |  |       |      |   |  |  |      |  
|December 31, 1999                |  | $         | 1.4  |              |  |       | 3.5  |   |  |  | 4.9  |  
|                                 |  |           |      |              |  |       |      |   |  |  |      |  




|  |                                                                
|- | ---------------------------------------------------------------
|* | Reclassified to pension and postretirement benefit obligations.

Our specialty chemicals segment had non-recurring, pre-tax
charges of $19.9 million in the 1999 second quarter from the
 June 30, 1999, restructuring plan. Included in that amount
were costs associated with asset and investment write-offs
($14.9 million), environmental and disposal and dismantling
($3.0 million), and



---



##### Table of Contents



67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


employee severance ($2.0 million). That non-recurring charge
 was decreased by $2.2 million in the 1999 fourth quarter to
 $17.7 million, primarily due to a reassessment of expected
obligations. Approximately 80 positions have been or are in
the process of being eliminated as part of the plan. The current
liability components of the restructuring plan related to
employee severance and disposal and dismantling costs during 1999
 were as follows:

|                               |  |           |      |             |  |       |      |   |  |  |      |  
|------------------------------ |  | --------- | ---- | ----------- |  | ----- | ---- | - |  |  | ---- | -
|                               |  |           |      | Disposal    |  |      
|                               |  | Employee  |      | and         |  |      
|                               |  | Severance |      | Dismantling |  | Total
|                               |  |           |      |             |  |      
|June 30, 1999 balance          |  | $         | 2.0  |             |  |       | 2.0  |   |  |  | 4.0  |  
|                              
|                              
|                              
|                              
|Adjustment to the restructure* |  |           | (0.4 | )           |  |       |     |   |  |  | (0.4 | )
|                              
|                              
|                              
|                              
|Payments made                  |  |           | (0.6 | )           |  |       | (0.1 | ) |  |  | (0.7 | )
|                               |  |           |      |             |  |       |      |   |  |  |      |  
|December 31, 1999              |  | $         | 1.0  |             |  |       | 1.9  |   |  |  | 2.9  |  
|                               |  |           |      |             |  |       |      |   |  |  |      |  




|  |                                          
|- | -----------------------------------------
|* | Revised assessment of severance expenses.

Our wire and cable segment had non-recurring, pre-tax charges of
$42.2 million in 1999 from the June 30, 1999,
restructuring plan. Included in the 1999 restructuring plan
charges were fixed and other asset write-offs
($23.8 million), lease payments ($1.7 million),
employee severance and relocation ($6.4 million), equipment
disposal, dismantling and relocation ($4.6 million), pension
 and postretirement obligations ($3.8 million) and the write
 off of an equity basis investment ($1.9 million). Nearly
200 full-time, permanent positions have been or are in the
process of being eliminated as part of the plan. The current
liability components of the restructuring plan related to
employee severance and relocation and equipment disposal and
dismantling and relocation during 1999 were as follows:

|                                      |  |             |      |               |  |       |      |   |  |  |      |  
|------------------------------------- |  | ----------- | ---- | ------------- |  | ----- | ---- | - |  |  | ---- | -
|                                      |  |             |      | Equipment     |  |      
|                                      |  | Employee    |      | Disposal,     |  |      
|                                      |  | Severance & |      | Dismantling & |  |      
|                                      |  | Relocation  |      | Relocation    |  | Total
|                                      |  |             |      |               |  |      
|June 30, 1999 balance                 |  | $           | 5.0  |               |  |       | 1.0  |   |  |  | 6.0  |  
|                                     
|                                     
|                                     
|                                     
|Relocation expenses*                  |  |             | 1.1  |               |  |       | 3.7  |   |  |  | 4.8  |  
|                                     
|                                     
|                                     
|                                     
|Additional severance                  |  |             | 1.6  |               |  |       |     |   |  |  | 1.6  |  
|                                     
|                                     
|                                     
|                                     
|Reclassification of the restructure** |  |             | (1.4 | )             |  |       |     |   |  |  | (1.4 | )
|                                     
|                                     
|                                     
|                                     
|Payments made                         |  |             | (3.1 | )             |  |       | (3.7 | ) |  |  | (6.8 | )
|                                      |  |             |      |               |  |       |      |   |  |  |      |  
|December 31, 1999                     |  | $           | 3.2  |               |  |       | 1.0  |   |  |  | 4.2  |  
|                                      |  |             |      |               |  |       |      |   |  |  |      |  




|   |                                                                                  
|-- | ---------------------------------------------------------------------------------
|*  | Relocation costs are charged to expense as incurred.                             
|  
|** | Reclassification of severance to pension and postretirement
	benefit obligations.

Sale of Accuride

Effective January 1, 1998, we sold a 90 percent
interest in our wheel and rim manufacturing business, Accuride
Corporation and related subsidiaries (Accuride), to an affiliate
of Kohlberg Kravis Roberts and Co. (KKR) and the existing
management of Accuride. That sale resulted in a pre-tax gain of
$186.1 million, ($122.8 million after taxes, or $2.10 per common
share). The remaining 10 percent interest in Accuride was
sold to RSTW Partners III, L.P., on September 30, 1998,
 resulting in a pre-tax gain of $12.6 million
($8.3 million after taxes, or $0.14 per common share). Under
 the terms of the sales agreements, we received total proceeds of
 $465.9 million from the two transactions, less $16.4 million in
working capital adjustments and transaction costs.



---



##### Table of Contents



68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Sale of Black Mountain

Effective October 1, 1998, we sold our 44.6 percent
interest in Black Mountain Mineral Development Company to Amcoal
Colliery and Industrial Operations Limited, a public company
incorporated in South Africa. The sale resulted in a pre-tax loss
 of $27.0 million ($26.4 million after taxes, or $0.45
per common share) including the write off of cumulative
translation adjustments. Under the terms of the sales agreement,
we received total proceeds of $18.5 million from the
transaction.

1998 Charges

During 1998, we recorded non-recurring, pre-tax charges of
$5.5 million, at PD Mining for costs associated with
indefinite closures and curtailments of certain mining operations
 and $2.3 million at the wire and cable segment for an early
 retirement program. These charges reduced net income by
$5.6 million, or 10 cents per common share, after
taxes.

1997 Charges

During 1997, we recorded non-recurring, pre-tax charges of $42.1
million primarily at PD Mining. These charges reflect
additional provisions of $23.0 million for estimated future
costs associated with environmental matters and
$19.1 million for a voluntary early retirement program.
These charges reduced net income in 1997 by $29.0 million,
or 47 cents per common share, after taxes.

4.  Investments and Long-Term Receivables

Investments and long-term receivables were as follows:

|                                 |                                             |      |       |      |  |  |      |      | 
|-------------------------------- | ------------------------------------------- | ---- | ----- | ---- |  |  | ---- | ---- | 
|                                 |                                             | 1999 |       | 1998
|                                 |                                             |      |       |     
|Equity basis:                    |                                             |      |       |      |  |  |      |     
|                                
|                                
|                                
|                                
|                                 | International wire and cable manufacturers  |      | $     | 10.8 |  |  |      | 22.3 | 
|                                
|                                
|                                
|                                
|                                 | SIMSA 26.67% (Peruvian zinc mining company) |      |       | 14.0 |  |  |      | 13.8 | 
|                                
|                                
|                                
|                                
|                                 | Port Cartaret (50%)                         |      |       | 16.2 |  |  |      |     | 
|                                
|                                
|                                
|                                
|                                 | Other                                       |      |       | 13.0 |  |  |      | 5.0  | 
|                                
|                                
|                                
|                                
|Cost basis and notes receivable: |                                             |      |       |      |  |  |      |     
|                                
|                                
|                                
|                                
|                                 | Southern Peru Copper Corporation (13.9%)    |      |       | 13.2 |  |  |      | 13.2 | 
|                                
|                                
|                                
|                                
|                                 | General Foods Corporation                   |      |       | 18.7 |  |  |      |     | 
|                                
|                                
|                                
|                                
|                                 | Other                                       |      |       | 50.2 |  |  |      | 31.3 | 
|                                 |                                             |      |       |      |  |  |      |     
|                                 |                                             | $    | 136.1 |      |  |  | 85.6 |     
|                                 |                                             |      |       |      |  |  |      |     

Equity earnings (losses) were as follows:

|                                           |  |      |     |      |  |      |      |   |  |  |      | 
|------------------------------------------ |  | ---- | --- | ---- |  | ---- | ---- | - |  |  | ---- | 
|                                           |  | 1999 |     | 1998 |  | 1997
|                                           |  |      |     |      |  |     
|International wire and cable manufacturers |  | $    | 4.2 |      |  |      | (5.9 | ) |  |  | 3.9  | 
|                                          
|                                          
|                                          
|                                          
|Black Mountain (see Note 3)                |  |      |    |      |  |      | 1.6  |   |  |  | 3.7  | 
|                                          
|                                          
|                                          
|                                          
|Other                                      |  |      | 0.9 |      |  |      | 0.1  |   |  |  | 4.1  | 
|                                           |  |      |     |      |  |      |      |   |  |  |      | 
|                                           |  | $    | 5.1 |      |  |      | (4.2 | ) |  |  | 11.7 | 
|                                           |  |      |     |      |  |      |      |   |  |  |      | 



---



##### Table of Contents



69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Dividends from equity basis investments were received as follows:

|                                           |  |      |     |      |  |      |     |  |  |  |     | 
|------------------------------------------ |  | ---- | --- | ---- |  | ---- | --- |  |  |  | --- | 
|                                           |  | 1999 |     | 1998 |  | 1997
|                                           |  |      |     |      |  |     
|International wire and cable manufacturers |  | $    |    |      |  |      | 0.1 |  |  |  | 0.3 | 
|                                          
|                                          
|                                          
|                                          
|Black Mountain (see Note 3)                |  |      |    |      |  |      | 1.1 |  |  |  | 3.4 | 
|                                          
|                                          
|                                          
|                                          
|SIMSA                                      |  |      |    |      |  |      | 0.4 |  |  |  | 0.8 | 
|                                          
|                                          
|                                          
|                                          
|Other                                      |  |      | 0.7 |      |  |      |    |  |  |  | 0.6 | 
|                                           |  |      |     |      |  |      |     |  |  |  |     | 
|                                           |  | $    | 0.7 |      |  |      | 1.6 |  |  |  | 5.1 | 
|                                           |  |      |     |      |  |      |     |  |  |  |     | 

Our retained earnings include undistributed earnings of equity
basis investments of: 1999  $67.9; 1998 
$63.5; 1997  $69.3.

Condensed financial information for our equity basis investments
as of December 31, 1999, was as follows:

|                                  |  |      |       |      |  |      |       |   |  |  |       |  
|--------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                  |  | 1999 |       | 1998 |  | 1997
|                                  |  |      |       |      |  |     
|Sales                             |  | $    | 162.8 |      |  |      | 161.9 |   |  |  | 395.6 |  
|                                 
|                                 
|                                 
|                                 
|Net income (loss)                 |  |      | 1.1   |      |  |      | (12.5 | ) |  |  | 32.4  |  
|                                 
|                                 
|                                 
|                                 
|Net current assets                |  | $    | 49.7  |      |  |      | 7.3   |   |  |  | 49.3  |  
|                                 
|                                 
|                                 
|                                 
|Fixed assets, net                 |  |      | 152.2 |      |  |      | 101.2 |   |  |  | 151.7 |  
|                                 
|                                 
|                                 
|                                 
|Long-term debt                    |  |      | (37.9 | )    |  |      | (2.7  | ) |  |  | (19.2 | )
|                                 
|                                 
|                                 
|                                 
|Other assets and liabilities, net |  |      | (4.3  | )    |  |      | (8.9  | ) |  |  | (2.9  | )
|                                  |  |      |       |      |  |      |       |   |  |  |       |  
|Net assets                        |  | $    | 159.7 |      |  |      | 96.9  |   |  |  | 178.9 |  
|                                  |  |      |       |      |  |      |       |   |  |  |       |  

5.  Interest Expense, Net of Amount Capitalized

We reported net interest expense in 1999 of $120.2 million,
compared with $94.5 million in 1998 and $62.5 million
in 1997. Net interest expense increased in 1999, primarily due to
 the inclusion of $24.5 million of interest expense on
Cyprus Amax acquired debt. The debt acquired with the purchase of
 Cyprus Amax totaled $1,595.6 million, which was reduced by
$15.2 million to reflect the fair value of the obligations
at the acquisition date. Net interest expense increased in 1998,
primarily due to the full year inclusion of $250.0 million of
notes payable issued in the fourth quarter of 1997, and the
completion in 1997 of the Candelaria expansion project resulting
in a decrease of capitalized interest costs.



---



##### Table of Contents



70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


6.  Miscellaneous Income and Expense, Net

Miscellaneous income and expense, net for the years ended
December 31 were as follows:

|                                                                     |  |      |       |      |  |      |       |   |  |  |      |  
|-------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ---- | -
|                                                                     |  | 1999 |       | 1998 |  | 1997
|                                                                     |  |      |       |      |  |     
|Interest income                                                      |  | $    | 17.9  |      |  |      | 23.5  |   |  |  | 22.2 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Wire and cable segment asset impairments*                            |  |      | (11.6 | )    |  |      |      |   |  |  |     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Asarco merger termination (net of related expenses)                  |  |      | 14.0  |      |  |      |      |   |  |  |     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Loss on sale of Black Mountain                                       |  |      |      |      |  |      | (27.0 | ) |  |  |     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Dissolution of Sumitomo joint venture**                              |  |      |      |      |  |      | 10.3  |   |  |  |     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Greek cost basis investment share exchange***                        |  |      |      |      |  |      |      |   |  |  | 6.0  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Southern Peru Copper Corporation dividend (13.9% minority
	interest) |  |      | 1.7   |      |  |      | 5.7   |   |  |  | 14.1 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Foreign currency exchange loss                                       |  |      | (13.0 | )    |  |      | (5.7  | ) |  |  | (9.6 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other                                                                |  |      | 0.1   |      |  |      | 2.0   |   |  |  | 0.7  |  
|                                                                     |  |      |       |      |  |      |       |   |  |  |      |  
|                                                                     |  | $    | 9.1   |      |  |      | 8.8   |   |  |  | 33.4 |  
|                                                                     |  |      |       |      |  |      |       |   |  |  |      |  




|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Asset impairment of equity basis investments in Cobre Colada
	($1.8), PD  Philippines ($3.1) and PD Yantai ($6.7).                                      
|   
|**  | Dissolution of joint ventures between Phelps Dodge and Sumitomo
	Electric Industries, Ltd., at five wire and cable manufacturing
	and support companies.
|   
|*** | The exchange of shares of a cost basis investment in a wire and
	cable business located in Greece.                                                      

7.  Income Taxes

We use the asset and liability approach for accounting and
reporting income taxes. Changes in tax rates and laws are
reflected in income from operations in the period such changes
are enacted. Balance sheet classification of deferred income
taxes is determined by the balance sheet classification of the
related asset or liability.

Geographic sources of income (loss) before taxes, minority
interests and equity in net earnings of affiliated companies for
the years ended December 31 were as follows:

|              |  |      |        |      |  |      |       |   |  |  |       | 
|------------- |  | ---- | ------ | ---- |  | ---- | ----- | - |  |  | ----- | 
|              |  | 1999 |        | 1998 |  | 1997
|              |  |      |        |      |  |     
|United States |  | $    | (408.4 | )    |  |      | 344.2 |   |  |  | 468.6 | 
|             
|             
|             
|             
|Foreign       |  |      | (18.3  | )    |  |      | (7.2  | ) |  |  | 113.3 | 
|              |  |      |        |      |  |      |       |   |  |  |       | 
|              |  | $    | (426.7 | )    |  |      | 337.0 |   |  |  | 581.9 | 
|              |  |      |        |      |  |      |       |   |  |  |       | 



---



##### Table of Contents



71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


The provision (benefit) for income taxes for the years ended
 December 31 were as follows:

|          |                                  |      |        |        |   |      |       |      |  |  |       |      | 
|--------- | -------------------------------- | ---- | ------ | ------ | - | ---- | ----- | ---- |  |  | ----- | ---- | 
|          |                                  | 1999 |        | 1998   |   | 1997
|          |                                  |      |        |        |   |     
|Current:  |                                  |      |        |        |   |      |       |      |  |  |       |     
|         
|         
|         
|         
|          | Federal                          |      | $      | 1.3    |   |      |       | 54.4 |  |  |       | 89.9 | 
|         
|         
|         
|         
|          | State                            |      |        | 0.2    |   |      |       | 9.1  |  |  |       | 15.0 | 
|         
|         
|         
|         
|          | Foreign                          |      |        | 23.8   |   |      |       | 26.6 |  |  |       | 34.8 | 
|          |                                  |      |        |        |   |      |       |      |  |  |       |     
|          |                                  |      | 25.3   |        |   |      | 90.1  |      |  |  | 139.7 |     
|          |                                  |      |        |        |   |      |       |      |  |  |       |     
|Deferred: |                                  |      |        |        |   |      |       |      |  |  |       |     
|         
|         
|         
|         
|          | Federal                          |      |        | (187.3 | ) |      |       | 37.8 |  |  |       | 22.4 | 
|         
|         
|         
|         
|          | State                            |      |        | (8.0   | ) |      |       | 5.3  |  |  |       | 6.0  | 
|         
|         
|         
|         
|          | Foreign                          |      |        | 3.6    |   |      |       | 0.8  |  |  |       | 12.3 | 
|          |                                  |      |        |        |   |      |       |      |  |  |       |     
|          |                                  |      | (191.7 | )      |   |      | 43.9  |      |  |  | 40.7  |     
|          |                                  |      |        |        |   |      |       |      |  |  |       |     
|          | Deferred taxes on start-up costs |      |        | 1.2    |   |      |       |     |  |  |       |     | 
|          |                                  |      |        |        |   |      |       |      |  |  |       |     
|          |                                  | $    | (165.2 | )      |   |      | 134.0 |      |  |  | 180.4 |     
|          |                                  |      |        |        |   |      |       |      |  |  |       |     

A reconciliation of the U.S. statutory tax rate to our effective
tax rate was as follows:

|                                 |  |      |       |      |  |      |      |   |  |  |      |  
|-------------------------------- |  | ---- | ----- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                 |  | 1999 |       | 1998 |  | 1997
|                                 |  |      |       |      |  |     
|Statutory tax rate               |  |      | (35.0 | )%   |  |      | 35.0 |   |  |  | 35.0 |  
|                                
|                                
|                                
|                                
|Depletion                        |  |      | (1.4  | )    |  |      | (2.5 | ) |  |  | (7.5 | )
|                                
|                                
|                                
|                                
|State and local income taxes     |  |      | (1.8  | )    |  |      | 2.9  |   |  |  | 2.3  |  
|                                
|                                
|                                
|                                
|Effective international tax rate |  |      | 5.4   |      |  |      | 7.7  |   |  |  | 1.0  |  
|                                
|                                
|                                
|                                
|Adjustments to prior years       |  |      | (6.8  | )    |  |      |     |   |  |  |     |  
|                                
|                                
|                                
|                                
|Other items, net                 |  |      | 0.6   |      |  |      | (3.1 | ) |  |  | 0.2  |  
|                                 |  |      |       |      |  |      |      |   |  |  |      |  
|Effective tax rate               |  |      | (39.0 | )%   |  |      | 40.0 |   |  |  | 31.0 |  
|                                 |  |      |       |      |  |      |      |   |  |  |      |  

We paid federal, state, local and foreign income taxes of
approximately $31 million in 1999, compared with
approximately $77 million in 1998 and $173 million in
1997.

At December 31, 1999, we had alternative minimum tax credits
 of approximately $236 million available for carryforward
for federal income tax purposes. These credits can be carried
forward indefinitely, but may only be used to the extent the
regular tax exceeds the alternative minimum tax in any given
year.

The Company has alternative minimum foreign tax credit
carryforwards for federal income tax purposes of approximately
$31 million, of which approximately $5 million will
expire in 2000 if not used.

The Company has U.S. net operating loss carryforwards for regular
 tax purposes of $384 million expiring from 2000 to 2014,
and Chilean net operating loss carryforwards of $488 million that
 do not expire. The U.S. losses include $148 million of
Cyprus Amax Separate Return Limitation Year net operating losses
and $236 million of Cyprus Amax U.S. net operating loss
carryforwards that are subject to annual limitations after the
acquisition because of the U.S. Internal Revenue Code
Section 382 change in ownership rules. The annual limitation
 on the use of these losses is approximately $98 million.
The Company also has alternative minimum tax net operating loss
carryforwards of approximately $206 million which expire in
2019.

A valuation allowance of $138 million has been recorded against
all of these benefits.

In December 1999, we received and accepted Notices of Tax
Due for the years 1992 and 1993 from the Internal Revenue Service
 (IRS). The IRS audit of the year 1994 resulted in a refund.
Issues settled for the years 1992 through 1994 also impacted the
years 1990 and 1991 and enabled us to enter a closing agreement
with the IRS for the years 1990 and 1991. We are currently
awaiting receipt of an executed copy of the closing



---



##### Table of Contents



72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


agreement from the IRS. As a result of these settlements, we
recorded a $30 million reduction in our tax liabilities.

The Phelps Dodge federal income tax returns for the years 1995
through 1997 are currently under examination by the IRS. The
Cyprus Amax federal income tax returns for the years 1994 through
 1996 are also currently under examination by the IRS. The IRS
has raised a number of issues in the current examinations that
may result in proposed additional assessments of income tax at
the conclusion of the current examinations. Our management
believes that it has made adequate provision so that final
resolution of the issues involved, including application of those
 determinations to subsequent open years, will not have an
adverse effect on our consolidated financial condition or results
 of operations.

Deferred income tax assets (liabilities) comprised the
following at December 31:

|                                           |                          |      |        |          |   |  |        |        |  
|------------------------------------------ | ------------------------ | ---- | ------ | -------- | - |  | ------ | ------ | -
|                                           |                          | 1999 |        | 1998    
|                                           |                          |      |        |         
|Minimum tax credits                        |                          | $    | 235.8  |          |   |  | 65.0   |       
|                                          
|                                          
|                                          
|                                          
|Postretirement and postemployment benefits |                          |      | 120.3  |          |   |  | 60.2   |       
|                                          
|                                          
|                                          
|                                          
|Reserves                                   |                          |      | 281.6  |          |   |  | 70.2   |       
|                                          
|                                          
|                                          
|                                          
|Mining costs                               |                          |      | 114.2  |          |   |  | 47.4   |       
|                                          
|                                          
|                                          
|                                          
|Inventories                                |                          |      | 13.2   |          |   |  | 3.8    |       
|                                          
|                                          
|                                          
|                                          
|Exploration and mine development costs     |                          |      | 27.5   |          |   |  | 2.0    |       
|                                          
|                                          
|                                          
|                                          
|Assets held for sale                       |                          |      | 60.6   |          |   |  |       |       
|                                          
|                                          
|                                          
|                                          
|NOL carryovers                             |                          |      | 206.4  |          |   |  |       |       
|                                          
|                                          
|                                          
|                                          
|Other                                      |                          |      | 12.9   |          |   |  | 1.9    |       
|                                           |                          |      |        |          |   |  |        |       
|                                           | Deferred tax assets      |      |        | 1,072.5  |   |  |        | 250.5  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Valuation allowance      |      |        | (137.7   | ) |  |        |       |  
|                                           |                          |      |        |          |   |  |        |       
|                                           | Net deferred tax assets  |      |        | 934.8    |   |  |        | 250.5  |  
|                                           |                          |      |        |          |   |  |        |       
|Depreciation                               |                          |      | (972.5 | )        |   |  | (637.7 | )     
|                                          
|                                          
|                                          
|                                          
|Mining properties                          |                          |      | (212.0 | )        |   |  | (53.0  | )     
|                                          
|                                          
|                                          
|                                          
|Pensions                                   |                          |      | (21.1  | )        |   |  | (23.9  | )     
|                                           |                          |      |        |          |   |  |        |       
|                                           | Deferred tax liabilities |      |        | (1,205.6 | ) |  |        | (714.6 | )
|                                           |                          |      |        |          |   |  |        |       
|                                           |                          | $    | (270.8 | )        |   |  | (464.1 | )     
|                                           |                          |      |        |          |   |  |        |       

Income taxes have not been provided on our share
($571 million) of undistributed earnings of international
manufacturing and mining interests abroad over which we have
sufficient influence to control the distribution of such earnings
 and have determined that such earnings have been reinvested
indefinitely. These earnings could become subject to additional
tax if they were remitted as dividends, if foreign earnings were
lent to any of our U.S. entities, or if we sell our stock in the
subsidiaries. It is estimated that repatriation of these foreign
earnings would generate additional foreign tax withholdings and
U.S. tax, net of foreign tax credits, in the amounts of $83
million and $61 million, respectively.



---



##### Table of Contents



73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


8.  Inventories and Supplies

Inventories at December 31 were as follows:

|                               |  |      |       |      |  |  |       | 
|------------------------------ |  | ---- | ----- | ---- |  |  | ----- | 
|                               |  | 1999 |       | 1998
|                               |  |      |       |     
|Metals and other raw materials |  | $    | 413.8 |      |  |  | 183.0 | 
|                              
|                              
|                              
|                              
|Work in process                |  |      | 15.2  |      |  |  | 16.0  | 
|                              
|                              
|                              
|                              
|Finished manufactured goods    |  |      | 66.6  |      |  |  | 63.9  | 
|                              
|                              
|                              
|                              
|Other                          |  |      | 2.7   |      |  |  | 3.1   | 
|                               |  |      |       |      |  |  |       | 
|                               |  | $    | 498.3 |      |  |  | 266.0 | 
|                               |  |      |       |      |  |  |       | 

Inventories valued by the last-in, first-out method would have
been greater if valued at current costs by approximately
$82 million and $110 million at December 31, 1999
and 1998, respectively.

Supplies in the amount of $149.0 million and
$110.9 million at December 31, 1999 and 1998,
respectively, are stated net of a reserve for obsolescence of
$8.4 million and $6.7 million, respectively.

9.  Property, Plant and Equipment

Property, plant and equipment at December 31 comprised the
following:

|                                                          |  |      |         |      |  |  |         | 
|--------------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                                          |  | 1999 |         | 1998
|                                                          |  |      |         |     
|Buildings, machinery and equipment                        |  | $    | 6,343.8 |      |  |  | 5,366.1 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Mining properties                                         |  |      | 1,660.9 |      |  |  | 299.7   | 
|                                                         
|                                                         
|                                                         
|                                                         
|Capitalized mine development                              |  |      | 312.0   |      |  |  | 311.5   | 
|                                                         
|                                                         
|                                                         
|                                                         
|Land and water rights                                     |  |      | 377.8   |      |  |  | 103.9   | 
|                                                          |  |      |         |      |  |  |         | 
|                                                          |  |      | 8,694.5 |      |  |  | 6,081.2 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Less accumulated depreciation, depletion and amortization |  |      | 2,656.8 |      |  |  | 2,494.0 | 
|                                                          |  |      |         |      |  |  |         | 
|                                                          |  | $    | 6,037.7 |      |  |  | 3,587.2 | 
|                                                          |  |      |         |      |  |  |         | 

10.  Other Assets and Deferred Charges

|                                                                   |  |  |  | 
|------------------------------------------------------------------ |  |  |  | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Other assets and deferred charges at December 31 were as
	follows: |  |  |  | 

|                                                                      |  |      |       |      |  |  |       | 
|--------------------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                                                      |  | 1999 |       | 1998
|                                                                      |  |      |       |     
|Goodwill, less accumulated amortization (1999  $30.6;
	1998  $23.2) |  | $    | 171.6 |      |  |  | 226.2 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Employee benefit plans                                                |  |      | 129.3 |      |  |  | 119.3 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Debt issue costs                                                      |  |      | 22.7  |      |  |  | 27.5  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest rate swaps                                                   |  |      | 6.2   |      |  |  |      | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Other                                                                 |  |      | 15.1  |      |  |  | 10.0  | 
|                                                                      |  |      |       |      |  |  |       | 
|                                                                      |  | $    | 344.9 |      |  |  | 383.0 | 
|                                                                      |  |      |       |      |  |  |       | 



---



##### Table of Contents



74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


11.  Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at December 31 were as
 follows:

|                                       |  |      |       |      |  |  |       | 
|-------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                       |  | 1999 |       | 1998
|                                       |  |      |       |     
|Accounts payable                       |  | $    | 296.6 |      |  |  | 227.9 | 
|                                      
|                                      
|                                      
|                                      
|Salaries, wages and other compensation |  |      | 59.2  |      |  |  | 34.7  | 
|                                      
|                                      
|                                      
|                                      
|Employee benefit plans                 |  |      | 45.0  |      |  |  | 27.5  | 
|                                      
|                                      
|                                      
|                                      
|Insurance reserves                     |  |      | 19.3  |      |  |  | 14.7  | 
|                                      
|                                      
|                                      
|                                      
|Environmental reserves*                |  |      | 81.7  |      |  |  | 21.6  | 
|                                      
|                                      
|                                      
|                                      
|Smelting, refining and freight         |  |      | 61.0  |      |  |  | 22.6  | 
|                                      
|                                      
|                                      
|                                      
|Other accrued taxes                    |  |      | 33.3  |      |  |  | 16.4  | 
|                                      
|                                      
|                                      
|                                      
|Other shutdown reserves                |  |      | 26.3  |      |  |  | 16.8  | 
|                                      
|                                      
|                                      
|                                      
|Restructure reserve**                  |  |      | 16.4  |      |  |  |      | 
|                                      
|                                      
|                                      
|                                      
|Accrued utilities                      |  |      | 15.3  |      |  |  | 4.3   | 
|                                      
|                                      
|                                      
|                                      
|Interest***                            |  |      | 49.1  |      |  |  | 18.5  | 
|                                      
|                                      
|                                      
|                                      
|Returnable containers                  |  |      | 4.6   |      |  |  | 3.9   | 
|                                      
|                                      
|                                      
|                                      
|Other                                  |  |      | 78.7  |      |  |  | 42.4  | 
|                                       |  |      |       |      |  |  |       | 
|                                       |  | $    | 786.5 |      |  |  | 451.3 | 
|                                       |  |      |       |      |  |  |       | 




|    |                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------
|*   | Short-term portion of these reserves. Please refer to Note 12,
	Other Liabilities and Deferred Credits, for further discussion.
|   
|**  | Please refer to Note 3, Non-recurring Charges and Provisions, for
	 further discussion of this reserve.                        
|   
|*** | Interest paid by the Company in 1999 was $121.0 million, compared
	 with $94.9 million in 1998 and $72.6 million in 1997.      

12.  Other Liabilities and Deferred Credits

Other liabilities and deferred credits at December 31 were
as follows:

|                                                 |  |      |       |      |  |  |       | 
|------------------------------------------------ |  | ---- | ----- | ---- |  |  | ----- | 
|                                                 |  | 1999 |       | 1998
|                                                 |  |      |       |     
|Postretirement and postemployment benefit plans* |  | $    | 306.9 |      |  |  | 166.0 | 
|                                                
|                                                
|                                                
|                                                
|Other employee benefit plans*                    |  |      | 141.8 |      |  |  | 69.8  | 
|                                                
|                                                
|                                                
|                                                
|Environmental reserves**                         |  |      | 254.4 |      |  |  | 84.4  | 
|                                                
|                                                
|                                                
|                                                
|Insurance reserves                               |  |      | 20.0  |      |  |  | 25.6  | 
|                                                
|                                                
|                                                
|                                                
|Closure and restructuring***                     |  |      | 118.9 |      |  |  | 3.6   | 
|                                                
|                                                
|                                                
|                                                
|Lease purchase obligation                        |  |      | 18.7  |      |  |  |      | 
|                                                
|                                                
|                                                
|                                                
|Other                                            |  |      | 18.7  |      |  |  | 10.3  | 
|                                                 |  |      |       |      |  |  |       | 
|                                                 |  | $    | 879.4 |      |  |  | 359.7 | 
|                                                 |  |      |       |      |  |  |       | 




|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Please refer to Note 17, Postretirement and Other Employee
	Benefits Other Than Pensions, for further discussion.                                                                                         
|   
|**  | Environmental reserves increased $170.0 million, primarily due to
	 the acquired Cyprus Amax reserves of $213.6 million, partially
	offset by the reclassification of $27.7 million to current
	liability.
|   
|*** | Closure and restructuring includes $112.8 million in closure
	reserves from the Cyprus Amax acquisition.                                                                                                  



---



##### Table of Contents



75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


13.  Long-Term Debt and Other Financing

Long-term debt at December 31 is summarized below:

|                                                                                            |                                             |      |         |      |  |  |       |      | 
|------------------------------------------------------------------------------------------- | ------------------------------------------- | ---- | ------- | ---- |  |  | ----- | ---- | 
|                                                                                            |                                             | 1999 |         | 1998
|                                                                                            |                                             |      |         |     
|10.125% Notes due 2002                                                                      |                                             | $    | 158.0   |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|9.875% Notes due 2001                                                                       |                                             |      | 94.5    |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|8.375% Debentures due 2023                                                                  |                                             |      | 151.2   |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|7.96% Notes due 2000                                                                        |                                             |      | 15.0    |      |  |  | 35.0  |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|7.75% Notes due 2002                                                                        |                                             |      | 100.0   |      |  |  | 100.0 |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|7.375% Notes due 2007                                                                       |                                             |      | 236.8   |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|7.125% Debentures due 2027                                                                  |                                             |      | 150.0   |      |  |  | 150.0 |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|6.625% Notes due 2005                                                                       |                                             |      | 234.4   |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|6.375% Notes due 2004                                                                       |                                             |      | 100.0   |      |  |  | 100.0 |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Air Quality Control Obligations:                                                            |                                             |      |         |      |  |  |       |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | 5.45% Notes due 2009                        |      |         | 81.1 |  |  |       | 81.1 | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | 6.50% Installment sale obligations due 2013 |      |         | 90.0 |  |  |       | 90.0 | 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Candelaria Project Financing                                                                |                                             |      | 269.8   |      |  |  | 304.8 |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Columbian Tiszai Carbon Ltd. (Hungary)                                                      |                                             |      | 2.0     |      |  |  | 6.0   |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Columbian Carbon Spain, S.A.                                                                |                                             |      | 3.5     |      |  |  | 6.0   |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Columbian Chemicals Canada                                                                  |                                             |      | 6.8     |      |  |  | 6.5   |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Phelps Dodge Wire & Cable Group                                                             |                                             |      | 16.6    |      |  |  | 21.8  |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Phelps Dodge Dublin                                                                         |                                             |      | 5.0     |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Capital Lease Obligation interest rates range from 7.2% to 8.2%
	due from 2000 through 2005 |                                             |      | 25.9    |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|El Abra Project Financing                                                                   |                                             |      | 402.6   |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cerro Verde Project Financing                                                               |                                             |      | 90.0    |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Various Pollution Control and Industrial Development Revenue
	Bonds                         |                                             |      | 46.5    |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Cerro Verde Bank Loan, 10.5% for 1999, due 2004                                             |                                             |      | 23.0    |      |  |  |      |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Other                                                                                       |                                             |      | 1.1     |      |  |  | 3.7   |     
|                                                                                            |                                             |      |         |      |  |  |       |     
|Long-term debt and capital lease obligations, including current
	portion                    |                                             |      | 2,303.8 |      |  |  | 904.9 |     
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Less current portion                                                                        |                                             |      | (131.3  | )    |  |  | (68.5 | )   
|                                                                                            |                                             |      |         |      |  |  |       |     
|Long-term debt, excluding current portion                                                   |                                             | $    | 2,172.5 |      |  |  | 836.4 |     
|                                                                                            |                                             |      |         |      |  |  |       |     

Annual maturities of debt outstanding at December 31, 1999,
are as follows: 2000  $131.3; 2001  $205.2;
 2002  $365.4; 2003  $138.4;
2004  $234.4.

An existing revolving credit agreement between the Company and
several lenders was amended on June 25, 1997. The agreement,
 as amended and restated, permits borrowings of up to $1 billion
from time to time until its scheduled maturity on June 25,
2002. The agreement allows for two, one-year renewals beyond the
scheduled maturity date if we request and receive approval from
those lenders representing at least two-thirds of the commitments
 provided by the facility. In the event of such approval, total
commitments under the facility would depend upon the willingness
of other lenders to assume the commitments of those lenders
electing not to participate in the renewal. Interest is payable
at a fluctuating rate based on the agent banks prime rate
or at a fixed rate, based on the London Interbank Offered Rate
(LIBOR) or at fixed rates offered independently by the
several lenders, for maturities of between seven and
360 days. This agreement provides for a facility fee of six
and one-half basis points (0.065 percent) on total
commitments. The agreement requires us to maintain a minimum
consolidated tangible net worth of $1.1 billion and limits
indebtedness to 50 percent of total consolidated
capitalization. There were no borrowings under this agreement at
either December 31, 1999, or December 31, 1998.



---



##### Table of Contents



76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


We established a commercial paper program on August 15,
1997, under a private placement agency agreement between us and
two placement agents. The agreement permits us to issue up to $1
billion of short-term promissory notes (generally known as
commercial paper) at any one time. Commercial paper may bear
interest or be sold at a discount, as mutually agreed by us and
the placement agents at the time of each issuance. Our commercial
 paper program requires that issuances of commercial paper be
backed by an undrawn line of credit; the revolving credit
agreement described above provides such support. Borrowings under
 this commercial paper program were $349.4 million at
December 31, 1999. There were no borrowings under the
commercial paper program at December 31, 1998.

Short-term borrowings, excluding borrowings under our corporate
commercial paper program, were $101.8 million, all by our
international operations, at December 31, 1999, compared
with $116.1 million at December 31, 1998. The decrease was
primarily due to repayments of outstanding borrowings by our
wholly owned subsidiary in Brazil.

The weighted average interest rate on total short-term borrowings
 at December 31, 1999, and December 31, 1998, was
7.8 percent and 24.4 percent, respectively.

In order to fund the cash portion of the Cyprus Amax acquisition
price, we borrowed $650 million from a U.S. bank on
October 21, 1999, under a one-month bridge financing
facility. Interest and costs of $3.2 million (or 6.0075 percent
annualized) were paid in November with cash acquired through the
merger.

As of December 31, 1999, our 80 percent-owned
joint-venture Candelaria mining operation in Chile, had
outstanding project financing of $269.8 million. The debt
comprises $237.0 million of floating-rate, dollar-denominated
debt and $32.8 million of fixed-rate, dollar-denominated debt.
The debt and repayments are scheduled to vary from period to
period with all debt maturing by the year 2008. Candelaria did
not borrow funds in 1999. All floating rate debt is tied to
six-month LIBOR, but has been converted to 7.84 percent,
fixed-rate debt with the use of interest rate swap agreements.
The debt obligations and the interest rate swaps are non-recourse
 to us. Under the proportional consolidation method, the debt
amounts listed above represent our 80 percent share.

In October 1999, as part of the acquisition of Cyprus Amax,
the Company assumed long-term debt with a stated value of
$1,595.6 million, which was reduced by $15.2 million to reflect
the fair market value of these obligations at the acquisition
date. The net discount will be amortized over the term of the
notes, debentures and bonds and recorded as interest expense.
Following is a brief description of the debt assumed in the
merger:

Immediately after the acquisition, a $100 million term loan
facility scheduled to mature in 2001 was retired with available
cash.

The 10.125 percent Notes, due in 2002, bear interest payable
 semi-annually on April 1 and October 1. In the event
of both a Designated Event and a Rating Decline (as defined in
the agreement), each holder of a note may require the Company to
redeem the holders notes, in whole or in part, at
100 percent of the principal amount plus accrued interest to
 the date of redemption.

The 9.875 percent Notes, due June 13, 2001, are not
redeemable prior to maturity and are secured by certain principal
 property of the Company. The interest is paid semi-annually on
June 13 and December 13.

The 8.375 percent Debentures, due in 2023, bear interest
payable semi-annually on February 1 and August 1. The
debentures are not redeemable prior to February 1, 2003. On
or after that date, at the option of the Company, the debentures
may be redeemed in whole or in part at 103.73 percent of the
 principal amount, together with any accrued and unpaid interest,
 declining at the rate of 0.375 percent per year to
February 1, 2013, and at 100 percent thereafter. The
debentures are general unsecured obligations of the Company and
rank senior in right of payment to all subordinated securities.

The 7.375 percent Notes, due May 15, 2007, bear
interest payable semi-annually on May 15 and
November 15. The notes are not redeemable by the Company
prior to maturity.



---



##### Table of Contents



77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


The 6.5625 percent Notes, due October 15, 2005, bear
interest payable semi-annually on October 15 and
April 15. The notes are not redeemable by the Company prior
to maturity.

On December 31, 1999, our 51 percent-owned El Abra
 mining joint venture had outstanding financing composed of
senior debt consisting of $850 million in project financing
provided by a syndicate of banks and $150 million of original
financing provided by a German financial institution. The Company
 currently has guarantees outstanding of $157.9 million of the
original $850 million tranche. Cyprus Amaxs proportional
share of the original $1 billion borrowings was $510 million, of
which $402.6 million remains outstanding at year-end 1999. The
debt has a 9.5 year term, due May 15, 2007, and
requires semi-annual principal payments that began on
May 15, 1998. The weighted average interest rate on this
debt at December 31, 1999, was 6.6 percent. The loan
agreement specifies certain restrictions on additional borrowings
 by El Abra and on dividend and subordinated debt payments. Under
 the proportional consolidation method, the debt amounts listed
above represent our 51 percent share.

On December 31, 1999, our 82 percent-owned Cerro Verde
mine, had project financing composed of two tranches, an $80
million facility that requires semi-annual installments of
varying amounts through April 1, 2005, and a $30 million
revolving bullet loan currently due in the year 2003. There was
$90.0 million outstanding under these facilities at year-end
1999. The bullet facility may be extended for one year on each
anniversary. The weighted average interest rate on this debt at
December 31, 1999, was 9.6 percent. Both financings are
 secured by proceeds from sales collections, plus a pledge of $45
 million in assets on the bullet loan.

The various pollution control and industrial development revenue
bonds are due from 2001 through 2009. The interest on the bonds
is paid either quarterly or semi-annually at various times of the
 year. The weighted average interest rates on these bonds at
December 31, 1999, ranged from 3.9 percent to 13.9
percent.

In September 1999, Cyprus Amax obtained a $34 million bank
loan for the Cerro Verde copper mine in Peru of which $23 million
 was outstanding at December 31, 1999. The loan is payable
on September 30, 2004. The weighted average interest rate at
 December 31, 1999, was 10.5 percent.

14.  Shareholders Equity

During the 1999 fourth quarter, we issued 20.6 million common
shares along with a cash payment to acquire Cyprus Amax. On
May 7, 1997, we announced that our board of directors had
authorized the purchase of up to 6 million of our common shares,
approximately 10 percent of our then outstanding shares. As
of December 31, 1999, there were 78,656,000 shares
outstanding and 1.7 million shares authorized for purchase under
the 1997 authorization. During 1998, we purchased 731,500 common
shares under the 1997 authorization at a total cost of $35.4
million.

We have 6,000,000 authorized preferred shares with a par value of
 $1.00 each; no shares were outstanding at either
December 31, 1999, or December 31, 1998.

We have in place a Preferred Share Purchase Rights Plan that
contains provisions to protect stockholders in the event of
unsolicited offers or attempts to acquire Phelps Dodge, including
 acquisitions in the open market of shares constituting control
without offering fair value to all stockholders and other
coercive or unfair takeover tactics that could impair the board
of directors ability to represent the stockholders
interests fully.

15.  Stock Option Plans; Restricted Stock

Executives and other key employees have been granted options to
purchase common shares under stock option plans adopted in 1987,
1993 and 1998. The option price equals the fair market value of
the common shares on the day of the grant and an options
maximum term is 10 years. Options granted vest ratably over
a three-year period.



---



##### Table of Contents



78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


If an optionee exercises an option under the 1987, 1993 or 1998
plan with already owned shares of the Company, the optionee
receives a reload option that restores the option
opportunity on a number of common shares equal to the number of
shares used to exercise the original option. A reload option has
the same terms as the original option except that it has an
exercise price per share equal to the fair market value of a
common share on the date the reload option is granted and is
exercisable six months after the date of grant.

The 1998 plan provides (and the 1993 and 1987 plan provided) for
the issuance to executives and other key employees, without any
payment by them, of common shares subject to certain restrictions
 (Restricted Stock). There were 281,850 shares of Restricted
Stock outstanding at December 31, 1999, and 1,040,258 shares
 available for grant.

Under the 1989 Directors Stock Option Plan (the 1989 plan),
options to purchase common shares have been granted to directors
who have not been employees of the Company or its subsidiaries
for one year or are not eligible to participate in any plan of
the Company or its subsidiaries entitling participants to acquire
 stock, stock options or stock appreciation rights. In 1996, we
suspended the plan, thereby eliminating the annual grant of
options to directors. The 1989 plan was replaced with the 1997
Directors Stock Unit Plan which provides to each non-employee
director an annual grant of stock units having a value equivalent
 to our common shares.

At December 31, 1999, 3,147,968 shares were available for
option grants (including 1,040,258 shares as Restricted Stock
awards) under the 1998 plan. These amounts are subject to future
adjustment as described in the plan agreement. No further options
 may be granted under the 1993, 1989 or 1987 plans.

During 1999, the Company awarded 97,400 shares of Restricted
Stock under the 1998 plan, with a weighted-average fair value at
the date of grant of $57.29 per share. Compensation expense
related to this award was $5.6 million for 1999.

In addition, former Cyprus Amax stock options were converted to
1,870,804 in Phelps Dodge options. These options retain the terms
 by which they were originally granted under the Cyprus Amax
Management Incentive Program. These options carry a maximum term
of 10 years and became fully vested upon the acquisition of
Cyprus Amax. Exercise periods ranged up to eight years at
acquisition. No further options may be granted under this plan.



---



##### Table of Contents



79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Changes during 1997, 1998 and 1999 in options outstanding for the
 combined plans were as follows:

|                                   |                               |        |           |                 |   |   |       |       | 
|---------------------------------- | ----------------------------- | ------ | --------- | --------------- | - | - | ----- | ----- | 
|                                   |                               |        |           | Average option 
|                                   |                               | Shares |           | price per share
|                                   |                               |        |           |                
|Outstanding at December 31, 1996   |                               |        | 3,199,194 |                 |   | $ | 60.76 |      
|                                  
|                                  
|                                  
|                                  
|                                   | Granted                       |        |           | 1,110,431       |   |   |       | 69.33 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Exercised                     |        |           | (827,243        | ) |   |       | 52.30 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Expired or terminated         |        |           | (47,891         | ) |   |       | 69.63 | 
|                                   |                               |        |           |                 |   |   |       |      
|Outstanding at December 31, 1997   |                               |        | 3,434,491 |                 |   |   | 65.44 |      
|                                  
|                                  
|                                  
|                                  
|                                   | Granted                       |        |           | 1,075,784       |   |   |       | 55.45 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Exercised                     |        |           | (64,332         | ) |   |       | 50.25 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Expired or terminated         |        |           | (174,423        | ) |   |       | 66.85 | 
|                                   |                               |        |           |                 |   |   |       |      
|Outstanding at December 31, 1998   |                               |        | 4,271,520 |                 |   |   | 63.10 |      
|                                  
|                                  
|                                  
|                                  
|                                   | Granted                       |        |           | 1,208,176       |   |   |       | 52.93 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Cyprus Amax options converted |        |           | 1,870,804       |   |   |       | 68.30 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Exercised                     |        |           | (80,517         | ) |   |       | 48.53 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Expired or terminated         |        |           | (65,190         | ) |   |       | 64.24 | 
|                                   |                               |        |           |                 |   |   |       |      
|Outstanding at December 31, 1999 * |                               |        | 7,204,793 |                 |   |   | 62.89 |      
|                                   |                               |        |           |                 |   |   |       |      




|  |                                                                                                                                                                                                                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Exercise prices for options outstanding at December 31,
	1999, range from a minimum of approximately $27 per share to a
	maximum of approximately $102 per share. The average remaining
	maximum term of options outstanding is approximately seven years.
	 The following table summarizes information concerning options
	outstanding based on a range of exercise prices.

|            |           |             |  |           |           |             |  |             |         |             |  |   |        |  |  |  |           |  |  |   |        | 
|----------- | --------- | ----------- |  | --------- | --------- | ----------- |  | ----------- | ------- | ----------- |  | - | ------ |  |  |  | --------- |  |  | - | ------ | 
|            |           |             |  |           |           | Average     |  | Options     |         | Average    
|Range       |           | Options     |  | Average   |           | Outstanding |  | Exercisable |         | Exercisable
|of Exercise |           | Outstanding |  | Remaining |           | Option      |  | at          |         | Option     
|Prices      |           | at 12/31/99 |  | Term      |           | Price       |  | 12/31/99    |         | Price      
|            |           |             |  |           |           |             |  |             |         |            
|$           | 20  40   |             |  |           | 274,224   |             |  |             | 9 years |             |  | $ | 32.66  |  |  |  | 274,224   |  |  | $ | 32.66  | 
|            | 40  60   |             |  |           | 2,880,034 |             |  |             | 9 years |             |  |   | 53.34  |  |  |  | 1,053,948 |  |  |   | 53.18  | 
|            | 60  80   |             |  |           | 3,611,567 |             |  |             | 6 years |             |  |   | 69.63  |  |  |  | 3,353,943 |  |  |   | 69.94  | 
|            | 80  100  |             |  |           | 311,608   |             |  |             | 4 years |             |  |   | 83.58  |  |  |  | 308,940   |  |  |   | 83.59  | 
|            | 100  120 |             |  |           | 127,360   |             |  |             | 4 years |             |  |   | 102.14 |  |  |  | 127,360   |  |  |   | 102.14 | 
|            |           |             |  |           |           |             |  |             |         |             |  |   |        |  |  |  |           |  |  |   |        | 
|            |           |             |  |           | 7,204,793 |             |  |             |         |             |  | $ | 62.89  |  |  |  | 5,118,415 |  |  | $ | 66.12  | 
|            |           |             |  |           |           |             |  |             |         |             |  |   |        |  |  |  |           |  |  |   |        | 

Exercisable options at December 31, 1999:

|                  |           |        |           |                 |  |  |       |       | 
|----------------- | --------- | ------ | --------- | --------------- |  |  | ----- | ----- | 
|                  |           |        |           | Average option 
|                  |           | Shares |           | price per share
|                  |           |        |           |                
|PD Plans          |           |        |           |                 |  |  |       |      
|                 
|                 
|                 
|                 
|                  | 1998 Plan |        |           | 387,176         |  |  | $     | 55.38 | 
|                 
|                 
|                 
|                 
|                  | 1993 Plan |        |           | 2,742,652       |  |  |       | 67.10 | 
|                 
|                 
|                 
|                 
|                  | 1989 Plan |        |           | 49,364          |  |  |       | 50.10 | 
|                 
|                 
|                 
|                 
|                  | 1987 Plan |        |           | 89,231          |  |  |       | 44.24 | 
|                 
|                 
|                 
|                 
|Cyprus Amax Plans |           |        | 1,849,992 |                 |  |  | 68.39 |      



---



##### Table of Contents



80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Changes during 1997, 1998 and 1999 in Restricted Stock were as
follows:

|                                 |            |        |         |         |  
|-------------------------------- | ---------- | ------ | ------- | ------- | -
|                                 |            | Shares
|                                 |            |       
|Outstanding at December 31, 1996 |            |        | 227,700 |        
|                                
|                                
|                                
|                                
|                                 | Granted    |        |         | 15,250  |  
|                                
|                                
|                                
|                                
|                                 | Terminated |        |         | (800    | )
|                                 |            |        |         |        
|Outstanding at December 31, 1997 |            |        | 242,150 |        
|                                
|                                
|                                
|                                
|                                 | Granted    |        |         | 10,500  |  
|                                
|                                
|                                
|                                
|                                 | Terminated |        |         | (9,750  | )
|                                
|                                
|                                
|                                
|                                 | Released   |        |         | (46,750 | )
|                                 |            |        |         |        
|Outstanding at December 31, 1998 |            |        | 196,150 |        
|                                
|                                
|                                
|                                
|                                 | Granted    |        |         | 97,400  |  
|                                
|                                
|                                
|                                
|                                 | Terminated |        |         | (4,100  | )
|                                
|                                
|                                
|                                
|                                 | Released   |        |         | (7,600  | )
|                                 |            |        |         |        
|Outstanding at December 31, 1999 |            |        | 281,850 |        
|                                 |            |        |         |        

In accordance with the provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, we apply APB
 Opinion 25 and related interpretations in accounting for
our stock option plans and, accordingly, do not recognize
compensation cost. If we had elected to recognize compensation
cost based on the fair value of the options granted at grant date
 as prescribed by SFAS No. 123, net income and earnings per
share would have been reduced to the pro forma amounts indicated
in the table below:

|                                                     |  |      |        |      |  |      |       |  |  |  |       | 
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                                     |  | 1999 |        | 1998 |  | 1997
|                                                     |  |      |        |      |  |     
|Net income (loss)  as reported                      |  | $    | (257.8 | )    |  |      | 190.9 |  |  |  | 408.5 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Net income (loss)  pro forma                        |  |      | (265.5 | )    |  |      | 184.7 |  |  |  | 402.4 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Earnings (losses) per share  as reported (basic)    |  |      | (4.19  | )    |  |      | 3.28  |  |  |  | 6.68  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Earnings (losses) per share  pro forma (basic)      |  |      | (4.31  | )    |  |      | 3.17  |  |  |  | 6.56  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Earnings (losses) per share  as reported
	(diluted) |  |      | (4.19  | )    |  |      | 3.26  |  |  |  | 6.63  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Earnings (losses) per share  pro forma (diluted)    |  |      | (4.31  | )    |  |      | 3.16  |  |  |  | 6.54  | 

The fair value of each option grant is estimated on the date of
grant using a Black-Scholes option-pricing model with the
following assumptions:

|                                |  |         |  |         |  |        
|------------------------------- |  | ------- |  | ------- |  | -------
|                                |  | 1999    |  | 1998    |  | 1997   
|                                |  |         |  |         |  |        
|Expected dividend yield         |  | 3.10%   |  | 2.98    |  | 3.02   
|                               
|                               
|                               
|                               
|Expected stock price volatility |  | 32.0%   |  | 29.0    |  | 23.0   
|                               
|                               
|                               
|                               
|Risk-free interest rate         |  | 6.0%    |  | 4.4     |  | 5.8    
|                               
|                               
|                               
|                               
|Expected life of options        |  | 3 years |  | 3 years |  | 3 years

The weighted-average fair value of options granted during 1999
was $12.18 per share, compared with $10.84 in 1998 and $10.62 in
1997.

16.  Pension Plans

Our pension plans cover substantially all of our U.S. employees
and certain employees of our international subsidiaries. Benefits
 are based on years of service and depending on the plan either
final average salary or a fixed amount for each year of service.
Participants generally vest in their benefits after five years of
 service. In a number of these plans, the plan assets exceed the
accumulated benefit obligations (overfunded plans) and in the
remainder of the plans, the accumulated benefit obligations
exceed the plan assets (underfunded plans). For the underfunded
plans, the aggregate benefit obligation is $52 million and the
aggregate fair value of plan assets is $4 million.



---



##### Table of Contents



81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


The following table presents the benefit obligation, changes in
plan assets, the funded status of the pension plans and the
assumptions used:

|                                                    |                                                  |      |     |       |   |  |    |      |  
|--------------------------------------------------- | ------------------------------------------------ | ---- | --- | ----- | - |  | -- | ---- | -
|                                                    |                                                  | 1999 |     | 1998 
|                                                    |                                                  |      |     |      
|Assumptions:                                        |                                                  |      |     |       |   |  |    |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Discount rate                                    |      |     | 7.75  | % |  |    | 6.75 |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Rate of increase in salary levels                |      |     | 4.0   | % |  |    | 4.0  |  
|                                                   
|                                                   
|                                                   
|                                                   
|Change in benefit obligation:                       |                                                  |      |     |       |   |  |    |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Benefit obligation at beginning of year          |      | $   | 793   |   |  |    | 699  |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Service cost  benefits earned during the period |      |     | 20    |   |  |    | 17   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Interest cost on benefit obligation              |      |     | 54    |   |  |    | 49   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Employee contributions                           |      |     |      |   |  |    | 1    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Plan amendments                                  |      |     | 1     |   |  |    | 1    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Actuarial loss (gain)                            |      |     | (119  | ) |  |    | 102  |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Benefits paid                                    |      |     | (51   | ) |  |    | (49  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Curtailments and settlements                     |      |     | (4    | ) |  |    | 6    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Special termination benefits                     |      |     | 13    |   |  |    | 2    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Acquisitions                                     |      |     | 262   |   |  |    |     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Divestitures                                     |      |     |      |   |  |    | (30  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Currency translation adjustments                 |      |     | (2    | ) |  |    | (5   | )
|                                                    |                                                  |      |     |       |   |  |    |     
|                                                    | Benefit obligation at end of year                |      | $   | 967   |   |  |    | 793  |  
|                                                    |                                                  |      |     |       |   |  |    |     
|Change in plan assets:                              |                                                  |      |     |       |   |  |    |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Fair value of plan assets at beginning of year   |      | $   | 792   |   |  |    | 778  |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Actual return on plan assets                     |      |     | 115   |   |  |    | 90   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Acquisitions                                     |      |     | 217   |   |  |    |     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Divestitures                                     |      |     |      |   |  |    | (30  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Employer contributions                           |      |     | 2     |   |  |    | 2    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Employee contributions                           |      |     |      |   |  |    | 1    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Currency translation adjustments                 |      |     | 1     |   |  |    |     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Benefits paid                                    |      |     | (51   | ) |  |    | (49  | )
|                                                    |                                                  |      |     |       |   |  |    |     
|                                                    | Fair value of plan assets at end of year         |      | $   | 1,076 |   |  |    | 792  |  
|                                                    |                                                  |      |     |       |   |  |    |     
|Funded status                                       |                                                  | $    | 109 |       |   |  | (1 | )   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrecognized initial net liability (asset)       |      |     |      |   |  |    | (1   | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrecognized actuarial loss (gain)               |      |     | (157  | ) |  |    | 9    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrecognized prior service cost                  |      |     | 35    |   |  |    | 42   |  
|                                                    |                                                  |      |     |       |   |  |    |     
|                                                    | Net amount recognized                            |      | $   | (13   | ) |  |    | 49   |  
|                                                    |                                                  |      |     |       |   |  |    |     
|Amounts recognized in the balance sheet consist of: |                                                  |      |     |       |   |  |    |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Prepaid benefit cost                             |      | $   | 69    |   |  |    | 72   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued benefit liability                        |      |     | (89   | ) |  |    | (36  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Intangible asset                                 |      |     | 2     |   |  |    | 4    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deferred tax benefit                             |      |     | 2     |   |  |    | 3    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accumulated other comprehensive income           |      |     | 3     |   |  |    | 6    |  
|                                                    |                                                  |      |     |       |   |  |    |     
|                                                    | Net amount recognized                            |      | $   | (13   | ) |  |    | 49   |  
|                                                    |                                                  |      |     |       |   |  |    |     



---



##### Table of Contents



82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Our pension plans were valued between December 1, 1997, and
January 1, 1998, and between December 1, 1998, and
January 1, 1999. The obligations were projected to and the
assets were valued as of the end of 1998 and 1999. Effective
October 16, 1999, nine qualified and two non-qualified
pension plans were obtained in conjunction with the acquisition
of Cyprus Amax Minerals Company. The majority of plan assets are
invested in a diversified portfolio of stocks, bonds and cash or
cash equivalents. A small portion of the plan assets is invested
in pooled real estate and other private corporate investment
funds.

The assumptions used and the annual cost related to these plans
consist of the following:

|                                         |                                                  |      |   |       |   |      |  |       |   |  |  |       |  
|---------------------------------------- | ------------------------------------------------ | ---- | - | ----- | - | ---- |  | ----- | - |  |  | ----- | -
|                                         |                                                  | 1999 |   | 1998  |   | 1997
|                                         |                                                  |      |   |       |   |     
|Assumptions:                             |                                                  |      |   |       |   |      |  |       |   |  |  |      
|                                        
|                                        
|                                        
|                                        
|                                         | Discount rate                                    |      |   | 6.75  | % |      |  | 7.25  |   |  |  | 7.25  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Expected long-term rate of return                |      |   | 9.5   | % |      |  | 9.5   |   |  |  | 9.5   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Rate of increase in salary levels                |      |   | 4.0   | % |      |  | 4.0   |   |  |  | 4.0   |  
|                                        
|                                        
|                                        
|                                        
|Components of net periodic benefit cost: |                                                  |      |   |       |   |      |  |       |   |  |  |      
|                                        
|                                        
|                                        
|                                        
|                                         | Service cost  benefits earned during the period |      | $ | 19.6  |   |      |  | 16.6  |   |  |  | 17.5  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Interest cost on benefit obligation              |      |   | 54.3  |   |      |  | 48.4  |   |  |  | 46.8  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Expected return on plan assets                   |      |   | (70.5 | ) |      |  | (62.9 | ) |  |  | (61.0 | )
|                                        
|                                        
|                                        
|                                        
|                                         | Amortization of transition obligation (asset)    |      |   | (1.3  | ) |      |  | (1.8  | ) |  |  | (1.8  | )
|                                        
|                                        
|                                        
|                                        
|                                         | Amortization of prior service cost               |      |   | 4.4   |   |      |  | 4.2   |   |  |  | 4.3   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Recognized actuarial loss                        |      |   | 0.8   |   |      |  | 0.5   |   |  |  | 0.5   |  
|                                         |                                                  |      |   |       |   |      |  |       |   |  |  |      
|                                         | Net periodic benefit cost                        |      | $ | 7.3   |   |      |  | 5.0   |   |  |  | 6.3   |  
|                                         |                                                  |      |   |       |   |      |  |       |   |  |  |      

We recognize a minimum liability in our financial statements for
our underfunded pension plans. The accrued pension benefit cost
for the underfunded plans is $44 million while the minimum
liability is $51 million. Other Liabilities and Deferred
Credits at December 31, 1999, included $7 million
relating to this minimum liability, compared with $13 million at
December 31, 1998. This amount was offset by a $2 million
intangible asset, a $3 million reduction in Common
Shareholders Equity and a $2 million deferred tax
benefit at December 31, 1999, compared with a $4 million
intangible asset, a $6 million reduction in Common
Shareholders Equity and a $3 million deferred tax
benefit at December 31, 1998.

17.  Postretirement and Other Employee Benefits Other
Than Pensions

We record obligations for postretirement medical and life
insurance benefits on the accrual basis. One of the principal
requirements of the method is that the expected cost of providing
 such postretirement benefits be accrued during the years
employees render the necessary service.

Our postretirement plans provide medical insurance benefits for
many employees retiring from active service. The coverage is
provided on a noncontributory basis for certain groups of
employees and on a contributory basis for other groups. The
majority of these benefits are paid by the Company. We also
provide life insurance benefits to our U.S. employees who retire
from active service on or after normal retirement age of 65 and
to some of our international employees. Life insurance benefits
also are available under certain early retirement programs or
pursuant to the terms of certain collective bargaining
agreements. The majority of the costs of such benefits were paid
out of a previously established fund maintained by an insurance
company.

The following table presents the change in benefit obligation,
change in plan assets and the funded status of the other
postretirement benefit plans and the assumptions used:

|             |                                                  |      |  |      |   |  |  |      | 
|------------ | ------------------------------------------------ | ---- |  | ---- | - |  |  | ---- | 
|             |                                                  | 1999 |  | 1998
|             |                                                  |      |  |     
|Assumptions: |                                                  |      |  |      |   |  |  |     
|            
|            
|            
|            
|             | Expected long-term rate of return on plan assets |      |  | 8.0  | % |  |  | 6.5  | 
|            
|            
|            
|            
|             | Weighted average discount rate                   |      |  | 7.75 | % |  |  | 6.75 | 



---



##### Table of Contents



83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                              |                                                     |      |   |      |   |  |  |      |  
|----------------------------- | --------------------------------------------------- | ---- | - | ---- | - |  |  | ---- | -
|                              |                                                     | 1999 |   | 1998
|                              |                                                     |      |   |     
|Change in benefit obligation: |                                                     |      |   |      |   |  |  |     
|                             
|                             
|                             
|                             
|                              | Benefit obligation at beginning of year             |      | $ | 175  |   |  |  | 162  |  
|                             
|                             
|                             
|                             
|                              | Service cost  benefits earned during the year      |      |   | 5    |   |  |  | 4    |  
|                             
|                             
|                             
|                             
|                              | Interest cost on benefit obligation                 |      |   | 12   |   |  |  | 11   |  
|                             
|                             
|                             
|                             
|                              | Actuarial loss (gain)                               |      |   | (25  | ) |  |  | 12   |  
|                             
|                             
|                             
|                             
|                              | Benefits paid                                       |      |   | (9   | ) |  |  | (6   | )
|                             
|                             
|                             
|                             
|                              | Restructuring                                       |      |   | 2    |   |  |  |     |  
|                             
|                             
|                             
|                             
|                              | Acquisitions                                        |      |   | 147  |   |  |  |     |  
|                             
|                             
|                             
|                             
|                              | Divestitures                                        |      |   |     |   |  |  | (8   | )
|                              |                                                     |      |   |      |   |  |  |     
|                              | Benefit obligation at end of year                   |      | $ | 307  |   |  |  | 175  |  
|                              |                                                     |      |   |      |   |  |  |     
|Change in plan assets:        |                                                     |      |   |      |   |  |  |     
|                             
|                             
|                             
|                             
|                              | Fair value of plan assets at beginning of year      |      | $ | 10   |   |  |  | 10   |  
|                             
|                             
|                             
|                             
|                              | Actual return on plan assets                        |      |   | 1    |   |  |  | 1    |  
|                             
|                             
|                             
|                             
|                              | Employer contribution                               |      |   |     |   |  |  |     |  
|                             
|                             
|                             
|                             
|                              | Benefits paid                                       |      |   | (1   | ) |  |  | (1   | )
|                              |                                                     |      |   |      |   |  |  |     
|                              | Fair value of plan assets at end of year            |      | $ | 10   |   |  |  | 10   |  
|                              |                                                     |      |   |      |   |  |  |     
|                              | Funded status                                       |      | $ | (297 | ) |  |  | (165 | )
|                             
|                             
|                             
|                             
|                              | Unrecognized actuarial loss (gain)                  |      |   | (15  | ) |  |  | 9    |  
|                             
|                             
|                             
|                             
|                              | Unrecognized prior service cost                     |      |   | (1   | ) |  |  | (1   | )
|                              |                                                     |      |   |      |   |  |  |     
|                              | Net amount recognized (accrued benefit (liability)) |      | $ | (313 | ) |  |  | (157 | )
|                              |                                                     |      |   |      |   |  |  |     

The components of net periodic postretirement benefit cost were
as follows:

|                                         |                                                  |      |   |      |   |      |  |      |   |  |  |      |  
|---------------------------------------- | ------------------------------------------------ | ---- | - | ---- | - | ---- |  | ---- | - |  |  | ---- | -
|                                         |                                                  | 1999 |   | 1998 |   | 1997
|                                         |                                                  |      |   |      |   |     
|Assumptions:                             |                                                  |      |   |      |   |      |  |      |   |  |  |     
|                                        
|                                        
|                                        
|                                        
|                                         | Expected long-term rate of return on plan assets |      |   | 8.0  | % |      |  | 6.5  |   |  |  | 8.0  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Discount rate                                    |      |   | 6.75 | % |      |  | 7.25 |   |  |  | 7.25 |  
|                                        
|                                        
|                                        
|                                        
|Components of net periodic benefit cost: |                                                  |      |   |      |   |      |  |      |   |  |  |     
|                                        
|                                        
|                                        
|                                        
|                                         | Service cost  benefits earned during the year   |      | $ | 5    |   |      |  | 4    |   |  |  | 4    |  
|                                        
|                                        
|                                        
|                                        
|                                         | Interest cost                                    |      |   | 13   |   |      |  | 11   |   |  |  | 11   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Expected return on plan assets                   |      |   | (1   | ) |      |  | (1   | ) |  |  | (1   | )
|                                         |                                                  |      |   |      |   |      |  |      |   |  |  |     
|                                         | Net periodic benefit cost                        |      | $ | 17   |   |      |  | 14   |   |  |  | 14   |  
|                                         |                                                  |      |   |      |   |      |  |      |   |  |  |     

For 1999 measurement purposes, the annual rate of increase in the
 cost of covered health care benefits was assumed to average
11.0 percent for 2000 and is projected to decrease to
5.5 percent by 2008 and remain at that level. For 1998
measurement purposes, the annual rate of increase in the cost of
covered health care benefits was assumed to average
6.9 percent for 1999 and was projected to decrease to
5.0 percent by 2008 and remain at that level.

Assumed health care cost trend rates have a significant effect on
 the amounts reported for the health care plan. A
1 percentage-point change in assumed health care cost trend
rates assumed for postretirement benefits would have the
following effects:

|                                                        |  |                    |      |          |  |  |       |  
|------------------------------------------------------- |  | ------------------ | ---- | -------- |  |  | ----- | -
|                                                        |  |                   
|                                                        |  | 1 Percentage-point
|                                                        |  |                   
|                                                        |  | Increase           |      | Decrease
|                                                        |  |                    |      |         
|Effect on total of service and interest cost components |  | $                  | 1.1  |          |  |  | (1.0  | )
|                                                       
|                                                       
|                                                       
|                                                       
|Effect on postretirement benefit obligation             |  |                    | 18.6 |          |  |  | (16.7 | )



---



##### Table of Contents



84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


We also sponsor savings plans for the majority of our employees.
The plans allow employees to contribute a portion of their
pre-tax and/or after-tax income in accordance with specified
guidelines. We match a percentage of the employee contributions
up to certain limits. Our contributions amounted to $5.3 million
in 1999, $5.0 million in 1998, and $5.4 million in 1997.

18.  Commitments

Phelps Dodge leases mineral interests and various other types of
properties, including shovels, offices, and miscellaneous
equipment. Certain of the mineral leases require minimum annual
royalty payments, and others provide for royalties based on
production.

Summarized below as of December 31, 1999, are future minimum
 rentals and royalties under non-cancelable leases:

|                                |                                     |           |      |           |  |         |     |      |  |  |      |      | 
|------------------------------- | ----------------------------------- | --------- | ---- | --------- |  | ------- | --- | ---- |  |  | ---- | ---- | 
|                                |                                     | Operating |      | Mineral   |  | Capital
|                                |                                     | Leases    |      | Royalties |  | Leases 
|                                |                                     |           |      |           |  |        
|2000                            |                                     | $         | 17.1 |           |  |         | 1.8 |      |  |  | 11.7 |     
|                               
|                               
|                               
|                               
|2001                            |                                     |           | 12.5 |           |  |         | 1.4 |      |  |  | 4.0  |     
|                               
|                               
|                               
|                               
|2002                            |                                     |           | 8.4  |           |  |         | 1.4 |      |  |  | 4.0  |     
|                               
|                               
|                               
|                               
|2003                            |                                     |           | 7.2  |           |  |         | 1.4 |      |  |  | 4.0  |     
|                               
|                               
|                               
|                               
|2004                            |                                     |           | 7.0  |           |  |         | 1.4 |      |  |  | 4.2  |     
|                               
|                               
|                               
|                               
|After 2004                      |                                     |           | 37.7 |           |  |         | 2.8 |      |  |  | 3.9  |     
|                                |                                     |           |      |           |  |         |     |      |  |  |      |     
|                                | Total payments                      |           | $    | 89.9      |  |         |     | 10.2 |  |  |      | 31.8 | 
|                                |                                     |           |      |           |  |         |     |      |  |  |      |     
|Present value of lease payments |                                     |           |      |           |  |         |     |      |  |  | 25.9 |     
|                               
|                               
|                               
|                               
|Less current portion            |                                     |           |      |           |  |         |     |      |  |  | (9.5 | )   
|                                |                                     |           |      |           |  |         |     |      |  |  |      |     
|                                | Long-term capital lease obligations |           | $    |           |  |         |     |      |  |  |      | 16.4 | 
|                                |                                     |           |      |           |  |         |     |      |  |  |      |     

Summarized below as of December 31, 1999, is future
sub-lease income:

|           |  |                 |      | 
|---------- |  | --------------- | ---- | 
|           |  | Sublease Income
|           |  |                
|2000       |  | $               | 1.0  | 
|          
|          
|          
|          
|2001       |  |                 | 2.2  | 
|          
|          
|          
|          
|2002       |  |                 | 2.2  | 
|          
|          
|          
|          
|2003       |  |                 | 2.2  | 
|          
|          
|          
|          
|2004       |  |                 | 2.2  | 
|          
|          
|          
|          
|After 2004 |  |                 | 8.2  | 
|           |  |                 |      | 
|Total      |  | $               | 18.0 | 
|           |  |                 |      | 

Rent and royalty charged to expense were:

|                |               |      |      |      |  |      |      |      |  |  |      |      | 
|--------------- | ------------- | ---- | ---- | ---- |  | ---- | ---- | ---- |  |  | ---- | ---- | 
|                |               | 1999 |      | 1998 |  | 1997
|                |               |      |      |      |  |     
|Rental expense  |               | $    | 17.5 |      |  |      | 13.7 |      |  |  | 18.6 |     
|               
|               
|               
|               
|Mineral royalty |               |      | 0.1  |      |  |      |     |      |  |  |     |     
|                |               |      |      |      |  |      |      |      |  |  |      |     
|                | Total charges |      | $    | 17.6 |  |      |      | 13.7 |  |  |      | 18.6 | 
|                |               |      |      |      |  |      |      |      |  |  |      |     

19.  Contingencies

Phelps Dodge or its subsidiaries have been advised by the EPA,
United States Forest Service and several state agencies that they
 may be liable under CERCLA or similar state laws and regulations
 for costs of responding to environmental conditions at a number
of sites that have been or are being investigated by the



---



##### Table of Contents



85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


EPA, the Forest Service or states to establish whether releases
of hazardous substances have occurred and, if so, to develop and
implement remedial actions. Phelps Dodge has been named a
potentially responsible party (PRP) or has
received requests for information for several sites. Of the sites
 in which Phelps Dodge or its subsidiaries have been named a PRP,
 19 are on the National Priorities List
(NPL) and two have been proposed for listing. For all such
sites, Phelps Dodge had an aggregate reserve of $208.7 million as
 of December 31, 1999, including reserves for Pinal Creek in
 Arizona, and Langeloth in Pennsylvania, for its share of the
estimated liability.

Liability estimates are based on an evaluation of among other
factors, currently available facts, existing technology,
presently enacted laws and regulations, Phelps Dodges
experience in remediation, other companies remediation
experience, Phelps Dodges status as a PRP, and the ability
of other PRPs to pay their allocated portions. The cost range for
 reasonably expected outcomes for all sites excluding Pinal Creek
 and Langeloth is estimated to be from $28 million to $110
million, and work on these sites is expected to be substantially
completed in the next several years, subject to inherent delays
involved in the process.

The sites for which Phelps Dodge has received a notice of
potential liability or an information request that are currently
considered to be the most significant are the Pinal Creek site,
which has a cost range for reasonably expected outcomes estimated
 to be from $143 million to $250 million, and the former American
 Zinc and Chemical site in Langeloth, which has a cost range for
reasonably expected outcomes estimated to be from $10 million to
$67 million. Phelps Dodge has reserved $143 million for the Pinal
 Creek site.

Cyprus Amax received an information request from the Pennsylvania
 Department of Environmental Protection regarding the former
American Zinc and Chemical site. The site is currently being
investigated by the state of Pennsylvania. Phelps Dodge has
reserved $20 million for this site.

Phelps Dodge believes certain insurance policies partially cover
the foregoing environmental liabilities; however, some of the
insurance carriers have denied coverage. We are presently
litigating these disputes. Further, Phelps Dodge believes that it
 has other potential claims for recovery from other third
parties, including the U.S. Government and other PRPs, as well as
 liability offsets through lower cost remedial solutions. Neither
 insurance recoveries nor other claims or offsets have been
recognized in the financial statements unless such offsets are
considered probable of realization.

As of December 31, 1998, we had a reserve balance of $106.0
million for estimated future costs associated with environmental
matters at shutdown operations or closed facilities within active
 operations. During 1999, net spending against that reserve
totaled $20.0 million including $2.8 million at Cyprus
Amax between October 16 and December 31. During the
second quarter of 1999, we recorded an additional $8.3 million
provision for estimated future costs associated with
environmental matters directly related to our restructuring plan
announced on June 30, 1999. Additionally, we recorded a
$28.2 million provision in the fourth quarter of 1999 for
estimated future costs associated with environmental matters. The
 acquisition of Cyprus Amax increased our reserve by $213.6
million. As of December 31, 1999, the reserve balance was
$336.1 million.

In 1993 and 1994, the New Mexico and Arizona legislatures,
respectively, passed laws requiring the reclamation of mined
lands in those states. The New Mexico Mining Commission adopted
rules for the New Mexico program during 1994, and our operations
began submitting the required permit applications in
December 1994. The Arizona State Mine Inspector adopted
rules for the Arizona program in January 1997, and our
operations began submitting the required reclamation plans in
1997. Colorado also has a similar program. Reclamation is an
ongoing activity and we recognize estimated reclamation costs
using a units of production basis calculation. These laws and
regulations will likely increase our regulatory obligations and
compliance costs with respect to mine closure and reclamation.

In 1997, issues of dispute arose between Phelps Dodge and the San
 Carlos Apache Tribe regarding our use and occupancy of the Black
 River Pump Station which delivers water to the Morenci
operation. On May 12, 1997, the Tribe filed suit against us
in San Carlos Apache Court, seeking our eviction from the



---



##### Table of Contents



86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


Tribes Reservation and claiming substantial compensatory
and punitive damages, among other relief. In May 1997, we
reached an agreement with the Tribe, and subsequently federal
legislation (Pub. L. No. 105-18, 5003, 111
stat. 158, 181-87) was adopted which mandated dismissal of
the tribal court suit. The legislation prescribes arrangements
intended to ensure a future supply of water for the Morenci
mining complex in exchange for certain payments by us. The
legislation does not address any potential claims by the Tribe
relating to our historical occupancy and operation of our
facilities on the Tribes Reservation, but does require that
 any such claims be brought, if at all, exclusively in federal
district court. By order dated October 13, 1997, the tribal
court dismissed the lawsuit with prejudice, as contemplated by
the legislation.

The 1997 legislation required that the Company and the Tribe
enter a lease for the delivery of Central Arizona Project water
through the Black River Pump Station to Morenci on or before
December 31, 1998. In the event a lease was not signed, the
legislation expressly provided that the legislation would become
the lease. The legislation included the principal terms for that
eventuality. To date, we have not entered into a lease with the
Tribe, but are relying on our rights under the legislation and
are prepared to enforce those rights if necessary. We are
cooperating with the United States, which operates the pump
station, to reach an agreement with the Tribe on the lease issue.



|    |                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------
|20. | Derivative Financial Instruments Held for Purposes Other Than
	Trading and Fair Value of Financial Instruments

We do not purchase, hold or sell derivative contracts unless we
have an existing asset, obligation or anticipate a future
activity that is likely to occur and will result in exposing us
to market risk. We will use various strategies to manage our
market risk, including the use of derivative contracts to limit,
offset or reduce our market exposure. Derivative instruments are
used to manage well-defined commodity price, foreign exchange and
 interest rate risks from our primary business activities. The
fair values of our derivative instruments, as summarized later in
 this note, are based on quoted market prices for similar
instruments and on market closing prices at year end. A summary
of the derivative instruments we hold is listed as follows:

Copper Hedging

Copper is an internationally traded commodity, and its prices are
 effectively determined by the two major metals
exchanges  the New York Commodity Exchange (COMEX) and
 the London Metal Exchange (LME). The prices on these exchanges
generally reflect the worldwide balance of copper supply and
demand, but also are influenced significantly from time to time
by speculative actions and by currency exchange rates.

Some of our wire, cathode and rod customers request a fixed sales
 price instead of the COMEX or LME average price in the month of
shipment or receipt. As a convenience to these customers, we
enter into copper swap and futures contracts to hedge the sales
in a manner that will allow us to receive the COMEX or LME
average price in the month of shipment or receipt while our
customers receive the fixed price they requested. We accomplish
this by liquidating the copper futures contracts and settling the
 copper swap contracts during the month of shipment or receipt,
which generally results in the realization of the COMEX or LME
average price.

Because of the nature of the hedge settlement process, the net
hedge value, rather than the sum of the face values of our
outstanding futures contracts is a more accurate measure of our
market risk from the use of such hedge contracts. The contracts
that may result in market risk to us are those related to the
customer sales transactions under which copper products have not
yet been shipped.

At December 31, 1999, we had futures and swap contracts for
approximately 111 million pounds of copper with a net hedge
value of $87 million and a total face value of approximately
 $125 million. At that date, we had $7 million in gains
 on these contracts not yet recorded in our financial statements
because the copper products under the related customer
transactions had not yet been shipped or received. These futures
contracts had maturities of 30 months or less. At year-end
1998, we had futures and swap contracts in place



---



##### Table of Contents



87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


for approximately 86 million pounds of copper at a net hedge
 value of $65 million and a total face value of
approximately $138 million. We had $7 million in
deferred, unrealized losses at that time.

From time to time, we may purchase or sell copper price
protection contracts for a portion of our expected future mine
production. We do this to limit the effects of potential
decreases in copper selling prices. For first quarter 2000
production, we have protection contracts in place that will give
us a minimum monthly average LME price of 71 cents per pound
 for approximately 200 million pounds of copper cathode. For
 overall 2000 production, we have a combination of minimum
(approximately 72 cents) and maximum (approximately 95
cents) annual average LME prices per pound for approximately
110 million pounds of copper cathode.

Aluminum Hedging

During 1999, our Venezuelan wire and cable operation entered into
 aluminum futures contracts with a financial institution to lock
in the cost of aluminum ingot needed in manufacturing aluminum
cable contracted by customers. At December 31, 1999, we had
futures contracts for approximately 1 million pounds of
aluminum with a net hedge and total face value of approximately
$1 million. At the end of the year, these contracts did not
have any significant gains or losses that were not recorded in
our financial statements. The maturities on these aluminum
futures contracts were less than one year. At December 31,
1998, we had futures contracts for approximately 6 million
pounds of aluminum with a net hedge and total face value of
approximately $4 million. Prior to 1998, we had not entered
into aluminum futures contracts.

Foreign Currency Hedging

We are a global company and we transact business in many
countries and in many currencies. Foreign currency transactions
increase our risks because exchange rates can change between the
time agreements are made and the time foreign currencies are
actually exchanged. One of the ways we manage these exposures is
by entering into forward exchange and currency option contracts
in the same currency as the transaction to lock in or minimize
the effects of changes in exchange rates. With regard to foreign
currency transactions, we may hedge or protect transactions for
which we have a firm legal obligation or when anticipated
transactions are likely to occur. We do not enter into foreign
exchange contracts for speculative purposes. In the process of
protecting our transactions, we may use a number of offsetting
currency contracts. Because of the nature of the hedge settlement
 process, the net hedge value rather than the sum of the face
value of our outstanding contracts is a more accurate measure of
our market risk from the use of such contracts.

At December 31, 1999, we had a net hedge and total face
value of approximately $34 million in forward exchange
contracts to hedge intercompany loans between our international
subsidiaries or foreign currency exposures with our trading
partners. The forward exchange contracts on December 31,
1999, had maturities of less than one year. At year-end 1998, we
had foreign currency protection in place for $44 million to
hedge intercompany loans. At year-end 1997, we had $158 million
in both the net hedged amount and the total face value of the
forward contracts. We did not have any significant gains or
losses at year end that had not been recorded in our financial
statements for each of the three years in the period ended
December 31, 1999.

At year-end 1999, our foreign currency protection contracts
included the British pound, euro, German mark and Thai baht.

Interest Rate Hedging

In some situations, we may enter into structured transactions
using currency swaps that result in lower overall interest rates
on borrowings. We do not enter into currency swap contracts for
speculative purposes. At year-end 1999, we had currency swap
contracts in place with an approximate net hedged value and total
 face value of $21 million. These currency swaps involved
swapping fixed-rate U.S. dollar loans into floating-rate
Brazilian real loans. The currency swap contracts on this date
had maturities of less than a year.



---



##### Table of Contents



88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


In addition, we are vulnerable to increasing costs from interest
rates associated with floating-rate debt. We may enter into
interest rate swap contracts to manage or limit such interest
expense costs. We do not enter into interest rate swap contracts
for speculative purposes. At year-end 1999, we had interest rate
swap contracts in place with an approximate net hedged and total
face value of $485 million. The interest rate swap on this date
had maturities of nine years or less. At year-end 1998, our
Candelaria copper mine had interest rate swaps to convert $264.9
million of floating-rate, dollar-denominated debt into fixed-rate
 debt for the life of the debt (through the year 2008). Under the
 terms of the floating-rate debt agreement, the Candelaria
borrowings are scheduled to vary from period to period during the
 life of the debt. In order to match the projected changes in
debt balances, the face value of the interest rate swaps
approximate the amounts of the underlying debt.

Credit Risk

We are exposed to credit loss in cases when the financial
institutions in which we have entered into derivative
transactions (commodity, foreign exchange and currency/ interest
rate swaps) are unable to pay us when they owe us funds as a
result of our protection agreements with them. To minimize the
risk of such losses, we only use highly rated financial
institutions that meet certain requirements. We also periodically
 review the credit worthiness of these institutions to ensure
that they are maintaining their ratings. We do not anticipate
that any of the financial institutions that we have dealt with
will default on their obligations.

The methods and assumptions we used to estimate the fair value of
 each group of financial instrument for which we can reasonably
determine a value are as follows:

Cash and cash equivalents  the financial
statement amount is a reasonable estimate of the fair value
because of the short maturity of those instruments.

Investments and long-term receivables  the fair
 values of some investments are estimated based on quoted market
prices for those or similar investments. The fair values of other
 types of instruments are estimated by discounting the future
cash flows using the current rates at which similar instruments
would be made with similar credit ratings and maturities.

Long-term debt  the fair value of substantially
 all of our long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current
notes offered to us for debt with similar remaining maturities.

Derivative hedge instruments  the fair values
of some derivative instruments are estimated based on quoted
market prices and on calculations using market closing prices for
 those or similar instruments.

Financial guarantees and standby letters of credit
  the fair value of guarantees and letters of credit
are based on fees currently charged for similar agreements or on
the estimated cost to terminate them or otherwise settle our
obligations with the holders of the guarantees or letters of
credit at year-end 1999. As a whole, we have various guarantees
and letters of credit totaling $248 million. There is no market
for our guarantees or standby letters of credit. Therefore, it is
 not practicable to establish their fair value.

The estimated fair values of our financial instruments as of
December 31, 1999, were as follows:

|                                                                                                                                    |  |          |         |       |  |  |         |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ------- | ----- |  |  | ------- | -
|                                                                                                                                    |  | Carrying |         | Fair 
|                                                                                                                                    |  | Amount   |         | Value
|                                                                                                                                    |  |          |         |      
|Cash and short-term investments                                                                                                     |  | $        | 234.2   |       |  |  | 234.2   |  
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|Currency swap agreements  assets (liabilities)                                                                                     |  |          |        |       |  |  | (1.0    | )
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|Investments and long-term receivables (including amounts due
	within one year) for which it is practicable to estimate fair
	value* |  |          | 82.1    |       |  |  | 261.5   |  
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|Long-term debt (including amounts due within one year)                                                                              |  |          | 2,303.8 |       |  |  | 2,277.5 |  



---



##### Table of Contents



89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                            |  |          |      |       |  |  |      |  
|----------------------------------------------------------- |  | -------- | ---- | ----- |  |  | ---- | -
|                                                            |  | Carrying |      | Fair 
|                                                            |  | Amount   |      | Value
|                                                            |  |          |      |      
|Interest rate swap agreements  assets (liabilities)        |  |          |     |       |  |  | 5.8  |  
|                                                           
|                                                           
|                                                           
|                                                           
|Foreign currency exchange contracts  assets
	(liabilities) |  |          | (0.5 | )     |  |  | (0.6 | )




|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Our largest cost basis investment is our minority interest in
	Southern Peru Copper Corporation (SPCC), which is carried at a
	book value of $13.2 million. Based on the New York Stock
	Exchange closing market price of SPCC shares as of
	December 31, 1999, the estimated fair value of our
	investment in SPCC is approximately $173 million. Our ownership
	interest in SPCC is represented by our share of a class of SPCC
	common stock that is currently not registered for trading on any
	public exchange.

21.  Business Segment Data

Our business consists of two divisions, Phelps Dodge Mining
Company and Phelps Dodge Industries. The principal activities of
each division are described below, and the accompanying tables
present results of operations and other financial information by
significant geographic area and by segment.

Phelps Dodge Mining Company (PD Mining) is our international
business segment that comprises a group of companies involved in
vertically integrated copper operations including mining,
concentrating, electrowinning, smelting, refining, rod
production, marketing and sales, and related activities. PD
Mining sells copper to others primarily as rod, cathode or
concentrate, and as rod to our wire and cable segment. In
addition, PD Mining at times smelts and refines copper and
produces copper rod for customers on a toll basis. It is also an
integrated producer of molybdenum, with mining, roasting and
processing facilities producing molybdenum concentrate as well as
 metallurgical and chemical products. In addition, it produces
gold, silver, molybdenum and copper chemicals as by-products, and
 sulfuric acid from its air quality control facilities. This
business segment also includes worldwide mineral exploration
programs.

Phelps Dodge Industries is our manufacturing division comprising
two business segments that produce engineered products
principally for the global energy, telecommunications,
transportation and specialty chemicals sectors. The two business
segments are specialty chemicals which comprises Columbian
Chemicals Company and its subsidiaries, and wire and cable which
comprises three worldwide product line businesses and a shared
support services operation. The three product line businesses in
the wire and cable segment are magnet wire, energy and
telecommunications cables, and specialty conductors. Phelps Dodge
 Industries also included Accuride Corporation and its
subsidiaries, our wheel and rim operations, until Accuride was
sold effective January 1, 1998.

Intersegment sales reflect the transfer of copper from Phelps
Dodge Mining Company to Phelps Dodge Industries at the same
prices charged to outside customers.

The following tables give a summary of financial data by
geographic area and business segment for the years 1997 through
1999. Major unusual items during the three-year period included
(i) the fourth quarter 1999 acquisition of Cyprus Amax;
pre-tax asset impairments of $320.4 million at Phelps Dodge
Mining Company and $21.7 million at Phelps Dodge Industries; a
pre-tax charge of $28.2 million for environmental provisions at
Phelps Dodge Mining Company; a pre-tax charge of $36.6 million at
 Phelps Dodge Mining Company and $59.9 million at Phelps Dodge
Industries for a restructuring plan announced on June 30, 1999;
(ii) a 1998 pre-tax provision of $5.5 million at Phelps
Dodge Mining Company for costs associated with indefinite mine
shutdowns and curtailments; a $2.3 million pre-tax provision in
our wire and cable segment, primarily for an early retirement
program; and a $198.7 million pre-tax gain in other segments from
 the disposition of Accuride; and (iii) a 1997 pre-tax
provision of $40.5 million included at Phelps Dodge Mining
Company for costs associated with a voluntary early retirement
program, environmental matters and other; and a 1997 pre-tax
provision of $5.4 million included in Corporate, Unallocated and
Reconciling Eliminations and operating income for costs
associated with environmental matters and a voluntary early
retirement



---



##### Table of Contents



90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


program. (See Notes 2 and 3 to the Consolidated Financial
Statements for a further discussion of these issues.)




Financial Data by Geographic Area

|                                    |                        |                |         |      |         |      |         |  |         |  |         |  |         | 
|----------------------------------- | ---------------------- | -------------- | ------- | ---- | ------- | ---- | ------- |  | ------- |  | ------- |  | ------- | 
|                                    |                        | 1999           |         | 1998 |         | 1997
|                                    |                        |                |         |      |         |     
|Sales and other operating revenues: |                        |                |         |      |         |      |         |  |         |  |         | 
|                                    | Unaffiliated customers |                |         |      |         |      |         |  |         |  |         |  |        
|                                   
|                                   
|                                   
|                                   
|                                    |                        | United States  |         | $    | 2,093.8 |      |         |  | 2,141.0 |  |         |  | 2,870.9 | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Latin America  |         |      | 660.2   |      |         |  | 579.9   |  |         |  | 464.8   | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Other          |         |      | 360.4   |      |         |  | 342.5   |  |         |  | 578.6   | 
|                                    |                        |                |         |      |         |      |         |  |         |  |         | 
|                                    |                        | $              | 3,114.4 |      |         |      | 3,063.4 |  |         |  | 3,914.3 | 
|                                    |                        |                |         |      |         |      |         |  |         |  |         | 
|Long-lived assets at December 31:   |                        |                |         |      |         |      |         |  |         |  |         | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | United States  |         | $    | 4,200.3 |      |         |  | 2,687.9 |  |         |  | 2,631.8 | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Latin America* |         |      | 2,093.3 |      |         |  | 1,109.8 |  |         |  | 948.0   | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Other          |         |      | 242.8   |      |         |  | 239.6   |  |         |  | 318.0   | 
|                                    |                        |                |         |      |         |      |         |  |         |  |         | 
|                                    |                        | $              | 6,536.4 |      |         |      | 4,037.3 |  |         |  | 3,897.8 | 
|                                    |                        |                |         |      |         |      |         |  |         |  |         | 
|                                    |                        |                |         |      |         |      |         |  |         |  |         | 
|* Long-lived assets in Chile        |                        | $              | 1,261.5 |      |         |      | 645.1   |  |         |  | 689.5   | 



---



##### Table of Contents



91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)







Financial Data by Business Segment

|                                                                |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |         | 
|--------------------------------------------------------------- | ---------------------- | ------------- | ------- | ----------------------- |  | ------ | ----- | ------------- |  | ----- | ----- | -------- |  | -------------- | ----- | ------ |  |  | ------- | ------- |  |  | ------- | ------- |  |  | ----- | ------ | - |  | ------- | ------- | 
|                                                                |                        |               |         |                         |  |        |       |               |  |      
|                                                                |                        | Phelps        |         | Phelps Dodge Industries |  |        |       | Corporate,    |  |      
|                                                                |                        | Dodge         |         |                         |  |        |       | Unallocated & |  |      
|                                                                |                        | Mining        |         | Specialty               |  | Wire & |       | Other*        |  |       |       | Segment  |  | Reconciling    |       |       
|                                                                |                        | Company       |         | Chemicals               |  | Cable  |       | Segments      |  | Total |       | Subtotal |  | Eliminations** |       | Totals
|                                                                |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |       
|                                                                |                        |              
|                                                                |                        | (In millions)
|                                                               
|                                                               
|                                                               
|                                                               
|1999                                                            |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|Sales & other operating revenues:                               |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Unaffiliated customers |               | $       | 1,786.6                 |  |        |       | 543.0         |  |       |       | 784.8    |  |                |       |       |  |  |         | 1,327.8 |  |  |         | 3,114.4 |  |  |       |       |   |  |         | 3,114.4 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Intersegment           |               |         | 224.4                   |  |        |       |              |  |       |       | 0.9      |  |                |       |       |  |  |         | 0.9     |  |  |         | 225.3   |  |  |       | (225.3 | ) |  |         |        | 
|                                                               
|                                                               
|                                                               
|                                                               
|Depr., depl. and amort.                                         |                        |               | 222.6   |                         |  |        | 45.2  |               |  |       | 58.5  |          |  |                |      |        |  |  | 103.7   |         |  |  | 326.3   |         |  |  | 2.8   |        |   |  | 329.1   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Non-recurring charges and provisions                            |                        |               | (385.2  | )                       |  |        | (17.7 | )             |  |       | (52.3 | )        |  |                |      |        |  |  | (70.0   | )       |  |  | (455.2  | )       |  |  | (0.2  | )      |   |  | (455.4  | )      
|                                                               
|                                                               
|                                                               
|                                                               
|Operating income (loss)                                         |                        |               | (301.0  | )                       |  |        | 92.5  |               |  |       | (42.8 | )        |  |                |      |        |  |  | 49.7    |         |  |  | (251.3  | )       |  |  | (64.3 | )      |   |  | (315.6  | )      
|                                                               
|                                                               
|                                                               
|                                                               
|Interest income                                                 |                        |               | 6.9     |                         |  |        | 4.4   |               |  |       | 2.4   |          |  |                |      |        |  |  | 6.8     |         |  |  | 13.7    |         |  |  | 4.2   |        |   |  | 17.9    |        
|                                                               
|                                                               
|                                                               
|                                                               
|Interest expense                                                |                        |               | 36.1    |                         |  |        | 40.5  |               |  |       | 16.0  |          |  |                |      |        |  |  | 56.5    |         |  |  | 92.6    |         |  |  | 27.8  |        |   |  | 120.4   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Equity earnings (losses)                                        |                        |               | (0.9    | )                       |  |        | 0.1   |               |  |       | 4.2   |          |  |                |      |        |  |  | 4.3     |         |  |  | 3.4     |         |  |  | 1.7   |        |   |  | 5.1     |        
|                                                               
|                                                               
|                                                               
|                                                               
|Income tax expense (benefit)                                    |                        |               | (126.9  | )                       |  |        | 9.4   |               |  |       | (13.5 | )        |  |                |      |        |  |  | (4.1    | )       |  |  | (131.0  | )       |  |  | (34.2 | )      |   |  | (165.2  | )      
|                                                               
|                                                               
|                                                               
|                                                               
|Equity basis investments                                        |                        |               | 26.8    |                         |  |        | 0.3   |               |  |       | 10.8  |          |  |                |      |        |  |  | 11.1    |         |  |  | 37.9    |         |  |  | 16.1  |        |   |  | 54.0    |        
|                                                               
|                                                               
|                                                               
|                                                               
|Assets at December 31                                           |                        |               | 6,345.1 |                         |  |        | 772.6 |               |  |       | 748.3 |          |  |                |      |        |  |  | 1,520.9 |         |  |  | 7,866.0 |         |  |  | 363.0 |        |   |  | 8,229.0 |        
|                                                               
|                                                               
|                                                               
|                                                               
|Expenditures for segment assets                                 |                        |               | 148.7   |                         |  |        | 121.1 |               |  |       | 28.5  |          |  |                |      |        |  |  | 149.6   |         |  |  | 298.3   |         |  |  | (57.9 | )      |   |  | 240.4   |        
|                                                               
|                                                               
|                                                               
|                                                               
|1998                                                            |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|Sales & other operating revenues:                               |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Unaffiliated customers |               | $       | 1,677.7                 |  |        |       | 454.6         |  |       |       | 931.1    |  |                |       |       |  |  |         | 1,385.7 |  |  |         | 3,063.4 |  |  |       |       |   |  |         | 3,063.4 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Intersegment           |               |         | 248.7                   |  |        |       |              |  |       |       | 1.6      |  |                |       |       |  |  |         | 1.6     |  |  |         | 250.3   |  |  |       | (250.3 | ) |  |         |        | 
|                                                               
|                                                               
|                                                               
|                                                               
|Depr., depl. and amort.                                         |                        |               | 191.5   |                         |  |        | 43.3  |               |  |       | 56.5  |          |  |                |      |        |  |  | 99.8    |         |  |  | 291.3   |         |  |  | 2.0   |        |   |  | 293.3   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Gain (loss) on asset disposition & other
	non-recurring charges |                        |               | (5.5    | )                       |  |        |      |               |  |       | (2.3  | )        |  |                | 198.7 |        |  |  | 196.4   |         |  |  | 190.9   |         |  |  |      |        |   |  | 190.9   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Operating income (loss)                                         |                        |               | 110.3   |                         |  |        | 87.6  |               |  |       | 67.3  |          |  |                | 198.7 |        |  |  | 353.6   |         |  |  | 463.9   |         |  |  | (41.2 | )      |   |  | 422.7   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Interest income                                                 |                        |               | 7.3     |                         |  |        | 1.5   |               |  |       | 4.3   |          |  |                |      |        |  |  | 5.8     |         |  |  | 13.1    |         |  |  | 10.4  |        |   |  | 23.5    |        
|                                                               
|                                                               
|                                                               
|                                                               
|Interest expense                                                |                        |               | 27.0    |                         |  |        | 8.5   |               |  |       | 21.0  |          |  |                |      |        |  |  | 29.5    |         |  |  | 56.5    |         |  |  | 39.9  |        |   |  | 96.4    |        
|                                                               
|                                                               
|                                                               
|                                                               
|Equity earnings (losses)                                        |                        |               | 1.7     |                         |  |        |      |               |  |       | (5.9  | )        |  |                |      |        |  |  | (5.9    | )       |  |  | (4.2    | )       |  |  |      |        |   |  | (4.2    | )      
|                                                               
|                                                               
|                                                               
|                                                               
|Income tax expense (benefit)                                    |                        |               | 38.8    |                         |  |        | 26.5  |               |  |       | 26.7  |          |  |                | 67.6  |        |  |  | 120.8   |         |  |  | 159.6   |         |  |  | (25.6 | )      |   |  | 134.0   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Equity basis investments                                        |                        |               | 18.7    |                         |  |        | 0.1   |               |  |       | 22.3  |          |  |                |      |        |  |  | 22.4    |         |  |  | 41.1    |         |  |  |      |        |   |  | 41.1    |        
|                                                               
|                                                               
|                                                               
|                                                               
|Assets at December 31                                           |                        |               | 3,218.2 |                         |  |        | 729.5 |               |  |       | 879.2 |          |  |                |      |        |  |  | 1,608.7 |         |  |  | 4,826.9 |         |  |  | 209.6 |        |   |  | 5,036.5 |        
|                                                               
|                                                               
|                                                               
|                                                               
|Expenditures for segment assets                                 |                        |               | 309.3   |                         |  |        | 261.6 |               |  |       | 97.4  |          |  |                |      |        |  |  | 359.0   |         |  |  | 668.3   |         |  |  |      |        |   |  | 668.3   |        



---



##### Table of Contents



92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


|                                                       |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |         | 
|------------------------------------------------------ | ---------------------- | ------------- | ------- | ----------------------- |  | ------ | ----- | ------------- |  | ----- | ----- | -------- |  | -------------- | ----- | ------ |  |  | ------- | ------- |  |  | ------- | ------- |  |  | ----- | ------ | - |  | ------- | ------- | 
|                                                       |                        |               |         |                         |  |        |       |               |  |      
|                                                       |                        | Phelps        |         | Phelps Dodge Industries |  |        |       | Corporate,    |  |      
|                                                       |                        | Dodge         |         |                         |  |        |       | Unallocated & |  |      
|                                                       |                        | Mining        |         | Specialty               |  | Wire & |       | Other*        |  |       |       | Segment  |  | Reconciling    |       |       
|                                                       |                        | Company       |         | Chemicals               |  | Cable  |       | Segments      |  | Total |       | Subtotal |  | Eliminations** |       | Totals
|                                                       |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |       
|                                                       |                        |              
|                                                       |                        | (In millions)
|                                                      
|                                                      
|                                                      
|                                                      
|1997                                                   |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                                      
|                                                      
|                                                      
|                                                      
|Sales & other operating revenues:                      |                        |               |         |                         |  |        |       |               |  |       |       |          |  |                |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Unaffiliated customers |               | $       | 2,173.3                 |  |        |       | 429.5         |  |       |       | 978.5    |  |                |       | 333.0  |  |  |         | 1,741.0 |  |  |         | 3,914.3 |  |  |       |       |   |  |         | 3,914.3 | 
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Intersegment           |               |         | 288.4                   |  |        |       |              |  |       |       | 2.6      |  |                |       |       |  |  |         | 2.6     |  |  |         | 291.0   |  |  |       | (291.0 | ) |  |         |        | 
|                                                      
|                                                      
|                                                      
|                                                      
|Depr., depl. and amort.                                |                        |               | 172.4   |                         |  |        | 37.2  |               |  |       | 51.4  |          |  |                | 20.7  |        |  |  | 109.3   |         |  |  | 281.7   |         |  |  | 2.0   |        |   |  | 283.7   |        
|                                                      
|                                                      
|                                                      
|                                                      
|(Provision) for environ. & other non-recurring charges |                        |               | (40.5   | )                       |  |        |      |               |  |       |      |          |  |                |      |        |  |  |        |         |  |  | (40.5   | )       |  |  | (5.4  | )      |   |  | (45.9   | )      
|                                                      
|                                                      
|                                                      
|                                                      
|Operating income (loss)                                |                        |               | 459.2   |                         |  |        | 74.9  |               |  |       | 83.1  |          |  |                | 49.8  |        |  |  | 207.8   |         |  |  | 667.0   |         |  |  | (56.0 | )      |   |  | 611.0   |        
|                                                      
|                                                      
|                                                      
|                                                      
|Interest income                                        |                        |               | 10.9    |                         |  |        | 1.0   |               |  |       | 3.0   |          |  |                | 0.5   |        |  |  | 4.5     |         |  |  | 15.4    |         |  |  | 6.8   |        |   |  | 22.2    |        
|                                                      
|                                                      
|                                                      
|                                                      
|Interest expense                                       |                        |               | 25.2    |                         |  |        | 3.7   |               |  |       | 14.3  |          |  |                | 0.2   |        |  |  | 18.2    |         |  |  | 43.4    |         |  |  | 30.8  |        |   |  | 74.2    |        
|                                                      
|                                                      
|                                                      
|                                                      
|Equity earnings (losses)                               |                        |               | 4.5     |                         |  |        | (0.1  | )             |  |       | 4.6   |          |  |                | 2.7   |        |  |  | 7.2     |         |  |  | 11.7    |         |  |  |      |        |   |  | 11.7    |        
|                                                      
|                                                      
|                                                      
|                                                      
|Income tax expense (benefit)                           |                        |               | 132.2   |                         |  |        | 27.1  |               |  |       | 30.0  |          |  |                | 18.7  |        |  |  | 75.8    |         |  |  | 208.0   |         |  |  | (27.6 | )      |   |  | 180.4   |        
|                                                      
|                                                      
|                                                      
|                                                      
|Equity basis investments                               |                        |               | 27.7    |                         |  |        | 0.2   |               |  |       | 28.3  |          |  |                | 24.8  |        |  |  | 53.3    |         |  |  | 81.0    |         |  |  |      |        |   |  | 81.0    |        
|                                                      
|                                                      
|                                                      
|                                                      
|Assets at December 31                                  |                        |               | 3,026.8 |                         |  |        | 490.3 |               |  |       | 889.4 |          |  |                | 356.5 |        |  |  | 1,736.2 |         |  |  | 4,763.0 |         |  |  | 202.2 |        |   |  | 4,965.2 |        
|                                                      
|                                                      
|                                                      
|                                                      
|Expenditures for segment assets                        |                        |               | 470.3   |                         |  |        | 75.7  |               |  |       | 176.5 |          |  |                | 47.3  |        |  |  | 299.5   |         |  |  | 769.8   |         |  |  | 19.4  |        |   |  | 789.2   |        




|  |                                                                                                                                                                                      
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Other segments include Accuride Corporation which was sold
	effective January 1, 1998. (See Note 3 to the
	Consolidated Financial Statements for a further discussion of
	this sale.)



|   |                                                                                      
|-- | -------------------------------------------------------------------------------------
|** | Represents corporate, unallocated and reconciling elimination
	activities and assets.



---



##### Table of Contents



93




PART III




Items 10, 11, 12 and 13.

The information called for by Part III (Items 10, 11,
12 and 13) is incorporated herein by reference from the material
included under the captions Election of Directors,
Beneficial Ownership of Securities, Executive
Compensation and Other Matters in Phelps Dodge
Corporations definitive proxy statement (to be filed
pursuant to Regulation 14A) for its Annual Meeting of
Shareholders to be held May 3, 2000 (the 2000 Proxy
Statement), except that the information regarding executive
officers called for by Item 401 of Regulation S-K is
included in Part I of this report. The 2000 Proxy Statement
is being prepared and will be filed with the Securities and
Exchange Commission and furnished to shareholders on or about
April 1, 2000.




PART IV




Item 14.  Exhibits, Financial Statement
Schedule, and Reports on Form 8-K.

|    |  |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  |  | --- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  |  | 1.  |  |  | Financial Statements: Index on page 52.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |  |  | 2.  |  |  | Financial Statement Schedule: Index on page 52.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |  |  | 3.  |  |  | Exhibits:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |  |  | 3.1 |  |  | Complete composite copy of the Certificate of Incorporation of
	the Corporation as amended to date (incorporated by reference to
	Exhibit 3.1 to the Corporations Form 10-Q for the
	 quarter ended June 30, 1999, (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |  |  | 3.2 |  |  | By-Laws of the Corporation, as amended effective May 7, 1997
	 (incorporated by reference to Exhibit 3.2 to the
	Corporations Form 10-Q for the quarter ended
	June 30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |  |  | 4.1 |  |  | Reference is made to Exhibits 3.1 and 3.2 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |  |  | 4.2 |  |  | Second Amended and Restated Credit Agreement, dated as of
	June 25, 1997, among the Corporation, several banks and
	other lending institutions, and The Chase Manhattan Bank, as
	administrative agent (incorporated by reference to Exhibit 
	4.2 to the Corporations Form 10-Q for the quarter
	ended June 30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |  |  | 4.3 |  |  | Rights Agreement, dated as of February 5, 1998 between the
	Corporation and The Chase Manhattan Bank (which replaces the
	Rights Agreement dated as of July 29, 1988 as amended and
	restated as of December 6, 1989, the rights issued
	thereunder having been redeemed by the Corporation), which
	includes the form of Certificate of Amendment setting forth the
	terms of the Junior Participating Cumulative Preferred Shares,
	par value $1.00 per share, as Exhibit A, the form of Right
	Certificate as Exhibit B and the Summary of Rights to
	Purchase Preferred Shares as Exhibit C (incorporated by
	reference to Exhibit 1 to the Corporations Current
	Report on Form 8-K and in the Corporations
	Form 8-A, both filed on February 6, 1998 (SEC File
	No. 1-82)).
|    |  |  |     |  |  | Note: Certain instruments with respect to long-term debt of the
	Corporation have not been filed as Exhibits to this Report since
	the total amount of securities authorized under any such
	instrument does not exceed 10 percent of the total assets of
	 the Corporation and its subsidiaries on a consolidated basis.
	The Corporation agrees to furnish a copy of each such instrument
	upon request of the Securities and Exchange Commission.                                                                                                                                                                                                                                                                                                                               
|    |  |  | 4.4 |  |  | Form of Indenture, dated as of September 22, 1997, between
	the Corporation and The Chase Manhattan Bank, as Trustee
	(incorporated by reference to the Corporations Registration
	 Statement and Post-Effective Amendment No. 1 on
	Form S-3 (Registration Nos. 333-36415 and 33-44380)) filed
	with the Securities and Exchange Commission on September 25,
	 1997 (incorporated by reference to Exhibit 4.3 to the
	Corporations Form 10-Q for the quarter ended
	September  30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                   



---



##### Table of Contents



94

| |  |  |      |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | ---- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 4.5  |  |  | Form of 6.375 percent Note, due November 1, 2004, of the
	Corporation issued on November 5, 1997, pursuant to the
	Indenture, dated as of September 22, 1997, between the
	Corporation and The Chase Manhattan Bank, as Trustee
	(incorporated by reference to the Corporations Current
	Report on Form 8-K filed with the Securities and Exchange
	Commission on November 3, 1997 and Exhibit 4.4 of
	Form  10-Q for the quarter ended September 30, 1997
	(SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | 4.6  |  |  | Form of 7.125 percent Debenture, due November 1, 2027, of
	the Corporation issued on November 5, 1997, pursuant to the
	Indenture, dated as of September 22, 1997, between the
	Corporation and The Chase Manhattan Bank, as Trustee
	(incorporated by reference to the Corporations Current
	Report on Form 8-K filed with the Securities and Exchange
	Commission on November 3, 1997 and Exhibit 4.5 of the
	Corporations Form 10-Q for the quarter ended
	September  30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | 10.  |  |  | Management contracts and compensatory plans and agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | 10.1 |  |  | The Corporations 1987 Stock Option and Restricted Stock
	Plan (the 1987 Plan), as amended to and including June 3,
	1992, and form of Stock Option Agreement and form of Reload
	Option Agreement, both as modified through June 3, 1992
	(incorporated by reference to Exhibit 10.2 of the
	Corporations Form 10-Q for the quarter ended
	June 30, 1992 (SEC File No. 1-82)). Form of Restricted
	Stock letter under the 1987 Plan (incorporated by reference to
	Exhibit  10.1 to the Corporations 1990 10-K (SEC File
	No. 1-82)) and the amendment thereto dated June 25,
	1992 (incorporated by reference to Exhibit 10.2 to the
	Corporations 1992 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                               
| |  |  | 10.2 |  |  | The Corporations 1989 Directors Stock Option Plan (the 1989
	 Directors Plan), as amended to and including June 3, 1992,
	suspended effective November 6, 1996 (incorporated by
	reference to Exhibit 10.3 to the Corporations
	Form 10-Q for the quarter ended June 30, 1992 (SEC File
	 No. 1-82)). Form of Stock Option Agreement under the 1989
	Directors Plan (incorporated by reference to the
	Corporations Registration Statement on Form S-8 (Reg.
	No. 33-34363)).                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | 10.3 |  |  | The Corporations 1993 Stock Option and Restricted Stock
	Plan (the 1993 Plan), as amended through December 1, 1993,
	and form of Restricted Stock letter under the 1993 Plan
	(incorporated by reference to Exhibit 10.4 to the
	Corporations 1993 Form 10-K (SEC File No. 1-82)).
	 Amendment to 1993 Plan effective May 7, 1997 (incorporated
	by reference to Exhibit 10.15 to the Corporations
	Form  10-Q for the quarter ended June 30, 1997 (SEC
	File No.  1-82)). Amended and restated form of Stock Option
	Agreement, amended through February 5, 1997 (incorporated by
	 reference to Exhibit 10.3 of the Corporations 1997
	Form 10-K (SEC File No. 1-82)). Form of Reload Option
	Agreement, amended through November 2, 1994, under the 1993
	Plan (incorporated by reference to Exhibit 10.3 to the
	Corporations 1994 Form 10-K (SEC File No. 1-82)).
| |  |  |      |  |  | Note: Omitted from filing pursuant to the Instruction to
	Item 601(b)(10) are actual Stock Option Agreements between
	the Corporation and certain officers, under the 1987 Plan and the
	 1993 Plan, and certain Directors, under the 1989 Directors Plan,
	 which contain substantially similar provisions to
	Exhibits 10.1, 10.2 and 10.3 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |  | 10.4 |  |  | Description of the Corporations Incentive Compensation Plan
	 (incorporated by reference to Exhibit 10.5 to the
	Corporations 1993 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.5 |  |  | Amended and restated Deferred Compensation Plan for the Directors
	 of the Corporation, dated as of December 3, 1998, effective
	 January 1, 1999 (incorporated by reference to the
	Corporations 1998 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | 10.6 |  |  | Modified form of Change-of-Control Agreement between the
	Corporation and certain executives, including all of the current
	executive officers to be listed in the summary compensation table
	 to the 1998 Proxy Statement (incorporated by reference to the
	Corporations 1998 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



---



##### Table of Contents



95

| |  |  |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | ----- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 10.7  |  |  | Amended and restated form of Severance Agreement between the
	Corporation and certain executives, including all of the current
	executive officers to be listed in the summary compensation table
	 to the 1998 Proxy Statement (incorporated by reference to
	Exhibit 10.7 of the Corporations 1997 Form 10-K
	(SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.8  |  |  | The Corporations Retirement Plan for Directors, effective
	January 1, 1988, terminated for active directors effective
	December 31, 1997 (incorporated by reference to
	Exhibit  10.13 to the Corporations 1987 Form 10-K
	 (SEC File No.  1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | 10.9  |  |  | The Corporations Supplemental Retirement Plan (which
	amends, restates and re-names the provisions of the
	Corporations Comprehensive Executive Nonqualified
	Retirement and Savings Plan other than the supplemental savings
	provisions of such plan), effective (except as otherwise noted
	therein) as of January 1, 1997 (incorporated by reference to
	 Exhibit 10.9 to the Corporations 1997 Form 10-K
	(SEC File No. 1-82)). First amendment to Plan, effective
	January 1, 1998 (incorporated by reference to
	Exhibit 10.9 to the Corporations 1998 Form 10-K
	(SEC File No. 1-82)). Second Amendment to Plan, effective
	January 1, 1999 (incorporated by reference to the
	Corporations Form 10-Q for the quarter ended
	June 30, 1999 (SEC File No. 1-82)).
| |  |  | 10.10 |  |  | The Corporations Supplemental Savings Plan (which amends,
	restates, and replaces the supplemental savings provisions of the
	 Corporations Comprehensive Executive Nonqualified
	Retirement and Savings Plan), effective (except as otherwise
	noted therein) as of January 1, 1997 (incorporated by
	reference to Exhibit 10.10 of the Corporations 1997
	Form  10-K (SEC File No. 1-82)); as amended by the
	First Amendment to such Supplemental Savings Plan, effective as
	of January 1, 1999 (incorporated by reference to
	Exhibit  10.10 of the Corporations Form 10-Q for
	the quarter ended September 30, 1999 (SEC File
	No. 1-82)).                                                                                                                         
| |  |  | 10.11 |  |  | The Corporations Directors Stock Unit Plan effective
	January 1, 1997 (incorporated by reference to Exhibit 
	10.10 to the Corporations 1996 Form 10-K (SEC File
	No.  1-82)) as amended and restated, effective
	January 1, 1998 (incorporated by reference to
	Exhibit 10.11 of the Corporations 1997 Form 10-K
	(SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  | 10.12 |  |  | The Corporations 1998 Stock Option and Restricted Stock
	Plan (the 1998 Plan) and forms of Reload Option Agreement and of
	Restricted Stock Agreement under the 1998 Plan, effective March
	4, 1998 (incorporated by reference to Exhibit 10.12 to the
	Corporations Form 10-Q for the quarter ended
	June 30, 1998 (SEC File No. 1-82)), and amended form of
	 Stock Option Agreement, effective June 22, 1999
	(incorporated by reference to the Corporations Form 
	10-Q for the quarter ended June 30, 1999 (SEC File No. 
	 1-82)).                                                                                                                                                                                                                                  
| |  |  |       |  |  | Note: Omitted from filing pursuant to the Instruction to
	Item 601(b)(10) are actual Stock Option Agreements between
	the Corporation and certain officers, under the 1987 Plan and the
	 1993 Plan, and certain Directors, under the 1989 Directors Plan,
	 which contain substantially similar provisions to
	Exhibits 10.1, 10.2 and 10.3 above.                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | 12    |  |  | Statement re computation of ratios of total debt to total
	capitalization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |  | 21    |  |  | List of Subsidiaries and Investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |  | 23    |  |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 24    |  |  | Powers of Attorney executed by certain officers and directors who
	 signed this Annual Report on Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |  |       |  |  | Note:  Shareholders may obtain copies of Exhibits by
	making written request to the Secretary of the Corporation and
	paying copying costs of 10 cents per page, plus postage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

(b)  Reports on Form 8-K:

The Corporation filed 6 reports on Form 8-K during the
quarter ended December 31, 1999. The following is a list of
the filings and the date they were filed.



---



##### Table of Contents



96

Phelps Dodge filed a Current Report on Form 8-K on
October 6, 1999, with respect to an Agreement and Plan of
Merger among Phelps Dodge Corporation, AAV Corporation and Asarco
 Incorporated dated October 5, 1999.

Phelps Dodge filed a Current Report on Form 8-K on
October 8, 1999, with respect to a press release issued on
October 8, 1999, stating that it could not raise its offer
for Asarco Incorporated.

Phelps Dodge filed a Current Report on Form 8-K on
October 13, 1999, with respect to a press release issued on
October 13, 1999, stating that its shareholders approved the
 issuance of shares for Cyprus Amax Minerals Company and Asarco
Incorporated. The press release also stated that Phelps Dodge
expected completion of the Cyprus Amax exchange offer and that it
 will not increase its offer for Asarco Incorporated.

Phelps Dodge filed a Current Report on Form 8-K on
October 22, 1999, stating that it had completed its exchange
 offer for Cyprus Amax Minerals Company.

Phelps Dodge filed a Current Report on Form 8-K on
December 2, 1999, with respect to a press release issued on
December 2, 1999, that Phelps Dodge Corporation had
completed the acquisition of Cyprus Amax Minerals Company.

Phelps Dodge filed a Current Report on Form 8-K on
December 30, 1999, for an amendment filed to provide
unaudited pro forma combined financial information for the merger
 among Phelps Dodge Corporation, CAV Corporation and Cyprus Amax
Minerals Company.



---



##### Table of Contents



97

Schedule II

PHELPS DODGE CORPORATION AND CONSOLIDATED SUBSIDIARIES






VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


|                                                                       |                      |                   |  |            |      |       |  |            |     |           |  |  |       |   |  |  |     |  |  |  |       | 
|---------------------------------------------------------------------- | -------------------- | ----------------- |  | ---------- | ---- | ----- |  | ---------- | --- | --------- |  |  | ----- | - |  |  | --- |  |  |  | ----- | 
|                                                                       |                      |                   |  |            |      |       |  |           
|                                                                       |                      |                   |  | Additions  |      |       |  |           
|                                                                       |                      |                   |  |            |      |       |  |           
|                                                                       |                      | Balance at        |  | Charged to |      |       |  |            |     | Balance  
|                                                                       |                      | beginning         |  | costs and  |      |       |  |            |     | at end   
|                                                                       |                      | of period         |  | expenses   |      | Other |  | Deductions |     | of period
|                                                                       |                      |                   |  |            |      |       |  |            |     |          
|                                                                       |                      |                  
|                                                                       |                      | (In millions)    
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Reserve deducted in balance sheet from the asset to which
	applicable: |                      |                   |  |            |      |       |  |            |     |           |  |  |       |   |  |  |     |  |  | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Accounts Receivable: |                   |  |            |      |       |  |            |     |           |  |  |       |   |  |  |     |  |  |  |      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1999 |  | $          | 14.9 |       |  |            | 4.1 |           |  |  | (0.6  | ) |  |  | 0.9 |  |  |  | 17.5  | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1998 |  |            | 13.8 |       |  |            | 3.5 |           |  |  | (0.9  | ) |  |  | 1.5 |  |  |  | 14.9  | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1997 |  |            | 14.2 |       |  |            | 1.5 |           |  |  | (0.6  | ) |  |  | 1.3 |  |  |  | 13.8  | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Supplies:            |                   |  |            |      |       |  |            |     |           |  |  |       |   |  |  |     |  |  |  |      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1999 |  | $          | 6.7  |       |  |            | 3.4 |           |  |  | 0.2   |   |  |  | 1.9 |  |  |  | 8.4   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1998 |  |            | 8.7  |       |  |            | 0.9 |           |  |  | (0.2  | ) |  |  | 2.7 |  |  |  | 6.7   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1997 |  |            | 8.9  |       |  |            | 0.6 |           |  |  | 0.2   |   |  |  | 1.0 |  |  |  | 8.7   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Deferred Tax Asset:  |                   |  |            |      |       |  |            |     |           |  |  |       |   |  |  |     |  |  |  |      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1999 |  | $          |     |       |  |            |    |           |  |  | 137.7 |   |  |  |    |  |  |  | 137.7 | 



---



##### Table of Contents



98






SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



| |                         
| | ------------------------
| | PHELPS DODGE CORPORATION
| | (Registrant)            



| |     |               
| | --- | --------------
| | By: | RAMIRO G. PERU

| |                            
| | ---------------------------
| |                            
| | Ramiro G. Peru             
| | Senior Vice President      
| | and Chief Financial Officer

March 20, 2000

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.

|                                                                                                                                                                                                                  |  |                                                                                  |  |               
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------- |  | --------------
|J. STEVEN WHISLERJ. Steven Whisler                                                                                                                                                                                |  | President, Chief Executive Officer and Director
	(Principal Executive Officer)   |  | March 20, 2000
|                                                                                                                                                                                                                 
|RAMIRO G. PERURamiro G. Peru                                                                                                                                                                                      |  | Senior Vice President and Chief Financial Officer
	(Principal Financial Officer) |  | March 20, 2000
|                                                                                                                                                                                                                 
|STANTON K. RIDEOUTStanton K. Rideout                                                                                                                                                                              |  | Vice President and Controller
	(Principal Accounting Officer)                    |  | March 20, 2000
|                                                                                                                                                                                                                 
|Douglas C. Yearley (Chairman of the Board), Robert N. Burt, Archie W. Dunham,William A. Franke, Paul Hazen, Manuel J. Iraola, Marie L. Knowles, Robert D.Krebs, Southwood J. Morcott, Gordon
R. Parker, Directors |  | March  20, 2000                                                                 
|By: RAMIRO G. PERURamiro G. Peru
	Attorney-in-fact                                                                                                                                                                |  |                                                                                  |  |               





---



##### Table of Contents



EXHIBIT INDEX

|        |     |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | --- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |                        
|Number  |     | Description of Document
|        |     |                        
|        | 3.1 |                         |  | Complete composite copy of the Certificate of Incorporation of
	the Corporation as amended to date (incorporated by reference to
	Exhibit 3.1 to the Corporations Form 10-Q for the
	 quarter ended June 30, 1999, (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 3.2 |                         |  | By-Laws of the Corporation, as amended effective May 7, 1997
	 (incorporated by reference to Exhibit 3.2 to the
	Corporations Form 10-Q for the quarter ended
	June 30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 4.1 |                         |  | Reference is made to Exhibits 3.1 and 3.2 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 4.2 |                         |  | Second Amended and Restated Credit Agreement, dated as of
	June 25, 1997, among the Corporation, several banks and
	other lending institutions, and The Chase Manhattan Bank, as
	administrative agent (incorporated by reference to Exhibit 
	4.2 to the Corporations Form 10-Q for the quarter
	ended June 30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 4.3 |                         |  | Rights Agreement, dated as of February 5, 1998 between the
	Corporation and The Chase Manhattan Bank (which replaces the
	Rights Agreement dated as of July 29, 1988 as amended and
	restated as of December 6, 1989, the rights issued
	thereunder having been redeemed by the Corporation), which
	includes the form of Certificate of Amendment setting forth the
	terms of the Junior Participating Cumulative Preferred Shares,
	par value $1.00 per share, as Exhibit A, the form of Right
	Certificate as Exhibit B and the Summary of Rights to
	Purchase Preferred Shares as Exhibit C (incorporated by
	reference to Exhibit 1 to the Corporations Current
	Report on Form 8-K and in the Corporations
	Form 8-A, both filed on February 6, 1998 (SEC File
	No. 1-82)).
|        |     |                         |  | Note: Certain instruments with respect to long-term debt of the
	Corporation have not been filed as Exhibits to this Report since
	the total amount of securities authorized under any such
	instrument does not exceed 10 percent of the total assets of
	 the Corporation and its subsidiaries on a consolidated basis.
	The Corporation agrees to furnish a copy of each such instrument
	upon request of the Securities and Exchange Commission.                                                                                                                                                                                                                                                                                                                               
|        | 4.4 |                         |  | Form of Indenture, dated as of September 22, 1997, between
	the Corporation and The Chase Manhattan Bank, as Trustee
	(incorporated by reference to the Corporations Registration
	 Statement and Post-Effective Amendment No. 1 on
	Form S-3 (Registration Nos. 333-36415 and 33-44380)) filed
	with the Securities and Exchange Commission on September 25,
	 1997 (incorporated by reference to Exhibit 4.3 to the
	Corporations Form 10-Q for the quarter ended
	September  30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                   
|        | 4.5 |                         |  | Form of 6.375 percent Note, due November 1, 2004, of the
	Corporation issued on November 5, 1997, pursuant to the
	Indenture, dated as of September 22, 1997, between the
	Corporation and The Chase Manhattan Bank, as Trustee
	(incorporated by reference to the Corporations Current
	Report on Form 8-K filed with the Securities and Exchange
	Commission on November 3, 1997 and Exhibit 4.4 of
	Form  10-Q for the quarter ended September 30, 1997
	(SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                 
|        | 4.6 |                         |  | Form of 7.125 percent Debenture, due November 1, 2027, of
	the Corporation issued on November 5, 1997, pursuant to the
	Indenture, dated as of September 22, 1997, between the
	Corporation and The Chase Manhattan Bank, as Trustee
	(incorporated by reference to the Corporations Current
	Report on Form 8-K filed with the Securities and Exchange
	Commission on November 3, 1997 and Exhibit 4.5 of the
	Corporations Form 10-Q for the quarter ended
	September  30, 1997 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                          
|        | 10. |                         |  | Management contracts and compensatory plans and agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



---



##### Table of Contents



|        |      |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | ---- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|        | 10.1 |                         |  | The Corporations 1987 Stock Option and Restricted Stock
	Plan (the 1987 Plan), as amended to and including June 3,
	1992, and form of Stock Option Agreement and form of Reload
	Option Agreement, both as modified through June 3, 1992
	(incorporated by reference to Exhibit 10.2 of the
	Corporations Form 10-Q for the quarter ended
	June 30, 1992 (SEC File No. 1-82)). Form of Restricted
	Stock letter under the 1987 Plan (incorporated by reference to
	Exhibit  10.1 to the Corporations 1990 10-K (SEC File
	No. 1-82)) and the amendment thereto dated June 25,
	1992 (incorporated by reference to Exhibit 10.2 to the
	Corporations 1992 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                               
|        | 10.2 |                         |  | The Corporations 1989 Directors Stock Option Plan (the 1989
	 Directors Plan), as amended to and including June 3, 1992,
	suspended effective November 6, 1996 (incorporated by
	reference to Exhibit 10.3 to the Corporations
	Form 10-Q for the quarter ended June 30, 1992 (SEC File
	 No. 1-82)). Form of Stock Option Agreement under the 1989
	Directors Plan (incorporated by reference to the
	Corporations Registration Statement on Form S-8 (Reg.
	No. 33-34363)).                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.3 |                         |  | The Corporations 1993 Stock Option and Restricted Stock
	Plan (the 1993 Plan), as amended through December 1, 1993,
	and form of Restricted Stock letter under the 1993 Plan
	(incorporated by reference to Exhibit 10.4 to the
	Corporations 1993 Form 10-K (SEC File No. 1-82)).
	 Amendment to 1993 Plan effective May 7, 1997 (incorporated
	by reference to Exhibit 10.15 to the Corporations
	Form  10-Q for the quarter ended June 30, 1997 (SEC
	File No.  1-82)). Amended and restated form of Stock Option
	Agreement, amended through February 5, 1997 (incorporated by
	 reference to Exhibit 10.3 of the Corporations 1997
	Form 10-K (SEC File No. 1-82)). Form of Reload Option
	Agreement, amended through November 2, 1994, under the 1993
	Plan (incorporated by reference to Exhibit 10.3 to the
	Corporations 1994 Form 10-K (SEC File No. 1-82)).
|        |      |                         |  | Note: Omitted from filing pursuant to the Instruction to
	Item 601(b)(10) are actual Stock Option Agreements between
	the Corporation and certain officers, under the 1987 Plan and the
	 1993 Plan, and certain Directors, under the 1989 Directors Plan,
	 which contain substantially similar provisions to
	Exhibits 10.1, 10.2 and 10.3 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10.4 |                         |  | Description of the Corporations Incentive Compensation Plan
	 (incorporated by reference to Exhibit 10.5 to the
	Corporations 1993 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10.5 |                         |  | Amended and restated Deferred Compensation Plan for the Directors
	 of the Corporation, dated as of December 3, 1998, effective
	 January 1, 1999 (incorporated by reference to the
	Corporations 1998 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10.6 |                         |  | Modified form of Change-of-Control Agreement between the
	Corporation and certain executives, including all of the current
	executive officers to be listed in the summary compensation table
	 to the 1998 Proxy Statement (incorporated by reference to the
	Corporations 1998 Form 10-K (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10.7 |                         |  | Amended and restated form of Severance Agreement between the
	Corporation and certain executives, including all of the current
	executive officers to be listed in the summary compensation table
	 to the 1998 Proxy Statement (incorporated by reference to
	Exhibit 10.7 of the Corporations 1997 Form 10-K
	(SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.8 |                         |  | The Corporations Retirement Plan for Directors, effective
	January 1, 1988, terminated for active directors effective
	December 31, 1997 (incorporated by reference to
	Exhibit  10.13 to the Corporations 1987 Form 10-K
	 (SEC File No.  1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



---



##### Table of Contents



|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ----- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10.9  |                         |  | The Corporations Supplemental Retirement Plan (which
	amends, restates and re-names the provisions of the
	Corporations Comprehensive Executive Nonqualified
	Retirement and Savings Plan other than the supplemental savings
	provisions of such plan), effective (except as otherwise noted
	therein) as of January 1, 1997 (incorporated by reference to
	 Exhibit 10.9 to the Corporations 1997 Form 10-K
	(SEC File No. 1-82)). First amendment to Plan, effective
	January 1, 1998 (incorporated by reference to
	Exhibit 10.9 to the Corporations 1998 Form 10-K
	(SEC File No. 1-82)). Second Amendment to Plan, effective
	January 1, 1999 (incorporated by reference to the
	Corporations Form 10-Q for the quarter ended
	June 30, 1999 (SEC File No. 1-82)).
|        | 10.10 |                         |  | The Corporations Supplemental Savings Plan (which amends,
	restates, and replaces the supplemental savings provisions of the
	 Corporations Comprehensive Executive Nonqualified
	Retirement and Savings Plan), effective (except as otherwise
	noted therein) as of January 1, 1997 (incorporated by
	reference to Exhibit 10.10 of the Corporations 1997
	Form  10-K (SEC File No. 1-82)); as amended by the
	First Amendment to such Supplemental Savings Plan, effective as
	of January 1, 1999 (incorporated by reference to
	Exhibit  10.10 of the Corporations Form 10-Q for
	the quarter ended September 30, 1999 (SEC File
	No. 1-82)).                                                                                                                         
|        | 10.11 |                         |  | The Corporations Directors Stock Unit Plan effective
	January 1, 1997 (incorporated by reference to Exhibit 
	10.10 to the Corporations 1996 Form 10-K (SEC File
	No.  1-82)) as amended and restated, effective
	January 1, 1998 (incorporated by reference to
	Exhibit 10.11 of the Corporations 1997 Form 10-K
	(SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10.12 |                         |  | The Corporations 1998 Stock Option and Restricted Stock
	Plan (the 1998 Plan) and forms of Reload Option Agreement and of
	Restricted Stock Agreement under the 1998 Plan, effective March
	4, 1998 (incorporated by reference to Exhibit 10.12 to the
	Corporations Form 10-Q for the quarter ended
	June 30, 1998 (SEC File No. 1-82)), and amended form of
	 Stock Option Agreement, effective June 22, 1999
	(incorporated by reference to the Corporations Form 
	10-Q for the quarter ended June 30, 1999 (SEC File No. 
	 1-82)).                                                                                                                                                                                                                                  
|        |       |                         |  | Note: Omitted from filing pursuant to the Instruction to
	Item 601(b)(10) are actual Stock Option Agreements between
	the Corporation and certain officers, under the 1987 Plan and the
	 1993 Plan, and certain Directors, under the 1989 Directors Plan,
	 which contain substantially similar provisions to
	Exhibits 10.1, 10.2 and 10.3 above.                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 12    |                         |  | Statement re computation of ratios of total debt to total
	capitalization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 21    |                         |  | List of Subsidiaries and Investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 23    |                         |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 24    |                         |  | Powers of Attorney executed by certain officers and directors who
	 signed this Annual Report on Form 10-K.