##### 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



For the fiscal year ended December 31, 2000

Commission file number 1-82

PHELPS DODGE CORPORATION

(a New York corporation)

13-1808503

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

2600 North 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 
  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.

The aggregate market value of Common Shares of the issuer held
by nonaffiliates at March 6, 2001, was approximately
$2,938,088,553.

Number of Common Shares outstanding at March 6, 2001:
78,712,799 shares.

Documents Incorporated by Reference:

|                                        |  |                 
|--------------------------------------- |  | ----------------
|Document                                |  | Location in 10-K
|                                        |  |                 
|Proxy Statement for 2001 Annual Meeting |  | Part III        









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i


TABLE OF CONTENTS



|         |                                                                                   |                                                                                                   |                                                                    |                                         |                                                       |  |  | 
|-------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------- | ----------------------------------------------------- |  |  | 
|Part I  
|         | Items 1. and 2. Business and Properties                                          
|         |                                                                                   | PHELPS DODGE MINING COMPANY                                                                      
|         |                                                                                   |                                                                                                   | Properties, Facilities and Production                             
|         |                                                                                   |                                                                                                   |                                                                    | Mining Operations                      
|         |                                                                                   |                                                                                                   |                                                                    |                                         | Phelps Dodge Copper Production Data, by Source (a)   
|         |                                                                                   |                                                                                                   |                                                                    |                                         | Phelps Dodge Metal Production and Sales (a)(d)       
|         |                                                                                   |                                                                                                   |                                                                    |                                         | Phelps Dodge Smelter, Refinery and Rod Production (a)
|         |                                                                                   |                                                                                                   |                                                                    | Other Mining Operations and Investments
|         |                                                                                   |                                                                                                   | Exploration                                                       
|         |                                                                                   |                                                                                                   | Ore Reserves                                                      
|         |                                                                                   |                                                                                                   | Sales and Competition                                             
|         |                                                                                   |                                                                                                   | Prices, Supply and Consumption                                    
|         |                                                                                   |                                                                                                   | Costs                                                             
|         |                                                                                   |                                                                                                   | Energy Supplies                                                   
|         |                                                                                   |                                                                                                   | Environmental and Other Regulatory Matters                        
|         |                                                                                   |                                                                                                   | Ownership of Property                                             
|         |                                                                                   | PHELPS DODGE INDUSTRIES                                                                          
|         |                                                                                   |                                                                                                   | Specialty Chemicals Segment                                       
|         |                                                                                   |                                                                                                   | Wire and Cable Segment                                            
|         |                                                                                   |                                                                                                   | 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                                          
|         |                                                                                   | PHELPS DODGE CORPORATION AND CONSOLIDATED SUBSIDIARIES 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                                                                       
|EX-12   
|EX-21   
|EX-23   
|EX-24   



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PHELPS DODGE CORPORATION

Annual Report on Form 10-K For the Year Ended
December 31, 2000

Table of Contents

|          |                                                                                                 |                                                                   |                                                                     |                                         |                                                   |    |    |   | 
|--------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------- | ------------------------------------------------- | -- | -- | - | 
|          |                                                                                                 | Page                                                             
|          |                                                                                                 |                                                                  
|Part I.   |                                                                                                 |                                                                   |                                                                     |                                        
|         
|         
|         
|         
|          | Items 1. and 2. Business and Properties                                                         |                                                                   |                                                                     | 1                                       |                                                  
|         
|         
|         
|         
|          |                                                                                                 | Phelps Dodge Mining Company                                       |                                                                     |                                         | 2                                                 |   
|         
|         
|         
|         
|          |                                                                                                 |                                                                   | Properties, Facilities and Production                               |                                         |                                                   | 2  |   
|         
|         
|         
|         
|          |                                                                                                 |                                                                   |                                                                     | Mining Operations                       |                                                   |    | 2  |  
|         
|         
|         
|         
|          |                                                                                                 |                                                                   |                                                                     |                                         | Phelps Dodge Copper Production Data, by Source    |    |    | 6 | 
|         
|         
|         
|         
|          |                                                                                                 |                                                                   |                                                                     |                                         | Phelps Dodge Metal Production and Sales           |    |    | 8 | 
|         
|         
|         
|         
|          |                                                                                                 |                                                                   |                                                                     |                                         | Phelps Dodge Smelter, Refinery and Rod Production |    |    | 9 | 
|         
|         
|         
|         
|          |                                                                                                 |                                                                   |                                                                     | Other Mining Operations and Investments |                                                   |    | 10 |  
|         
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|         
|          |                                                                                                 |                                                                   | Exploration                                                         |                                         |                                                   | 10 |   
|         
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|         
|          |                                                                                                 |                                                                   | Ore Reserves                                                        |                                         |                                                   | 12 |   
|         
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|         
|          |                                                                                                 |                                                                   | Sales and Competition                                               |                                         |                                                   | 14 |   
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|          |                                                                                                 |                                                                   | Prices, Supply and Consumption                                      |                                         |                                                   | 14 |   
|         
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|          |                                                                                                 |                                                                   | Costs                                                               |                                         |                                                   | 15 |   
|         
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|         
|          |                                                                                                 |                                                                   | Energy Supplies                                                     |                                         |                                                   | 16 |   
|         
|         
|         
|         
|          |                                                                                                 |                                                                   | Environmental and Other Regulatory Matters                          |                                         |                                                   | 16 |   
|         
|         
|         
|         
|          |                                                                                                 |                                                                   | 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                                                                       |                                                                   |                                                                     | 25                                      |                                                  
|         
|         
|         
|         
|          | Item 4. Submission of Matters to a Vote of Security Holders                                     |                                                                   |                                                                     | 30                                      |                                                  
|         
|         
|         
|         
|          | Executive Officers of Phelps Dodge Corporation                                                  |                                                                   |                                                                     | 30                                      |                                                  
|Part II.  |                                                                                                 |                                                                   |                                                                     |                                        
|         
|         
|         
|         
|          | Item 5. Market for the Registrants Common Equity and
	Related Stockholder Matters              |                                                                   |                                                                     | 31                                      |                                                  
|         
|         
|         
|         
|          | Item 6. Selected Financial Data                                                                 |                                                                   |                                                                     | 31                                      |                                                  
|          | Item 7. Managements Discussion and Analysis                                                    |                                                                   |                                                                     |                                         |                                                  
|         
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|          |                                                                                                 | Managements Discussion and Analysis                              |                                                                     |                                         | 32                                                |   
|         
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|          |                                                                                                 |                                                                   | Results of Phelps Dodge Mining Company                              |                                         |                                                   | 38 |   
|         
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|          |                                                                                                 |                                                                   | Results of Phelps Dodge Industries                                  |                                         |                                                   | 43 |   
|         
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|         
|          |                                                                                                 |                                                                   | Other Matters Relating to the Statement of Consolidated
	Operations |                                         |                                                   | 46 |   
|         
|         
|         
|         
|          |                                                                                                 |                                                                   | Changes in Financial Condition; Capitalization                      |                                         |                                                   | 47 |   
|         
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|          |                                                                                                 |                                                                   | Capital Outlays                                                     |                                         |                                                   | 52 |   
|         
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|         
|         
|          |                                                                                                 |                                                                   | Inflation                                                           |                                         |                                                   | 52 |   
|         
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|         
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|          |                                                                                                 |                                                                   | Dividends and Market Price Ranges                                   |                                         |                                                   | 52 |   
|         
|         
|         
|         
|          |                                                                                                 |                                                                   | Quarterly Financial Data                                            |                                         |                                                   | 53 |   
|         
|         
|         
|         
|          | Item 8. Financial Statements and Supplementary Data Index
	to Consolidated Financial Statements |                                                                   |                                                                     | 54                                      |                                                  
|         
|         
|         
|         
|          |                                                                                                 | Report of Independent Accountants on Financial Statement Schedule |                                                                     |                                         | 54                                                |   
|         
|         
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|          |                                                                                                 | Report of Management                                              |                                                                     |                                         | 54                                                |   
|         
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|          |                                                                                                 | Report of Independent Accountants                                 |                                                                     |                                         | 55                                                |   
|         
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|          |                                                                                                 | Statement of Consolidated Operations                              |                                                                     |                                         | 56                                                |   
|         
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|         
|          |                                                                                                 | Consolidated Balance Sheet                                        |                                                                     |                                         | 57                                                |   
|         
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|         
|          |                                                                                                 | Consolidated Statement of Cash Flows                              |                                                                     |                                         | 58                                                |   
|         
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|         
|          |                                                                                                 | Consolidated Statement of Common Shareholders Equity             |                                                                     |                                         | 59                                                |   
|         
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|          |                                                                                                 | Notes to Consolidated Financial Statements                        |                                                                     |                                         | 60                                                |   
|         
|         
|         
|         
|          | Item 9. Disagreements on Accounting and Financial Disclosure                                    |                                                                   |                                                                     | 31                                      |                                                  
|Part III. |                                                                                                 |                                                                   |                                                                     |                                        
|         
|         
|         
|         
|          | Item 10. Directors and Executive Officers of the Registrant                                     |                                                                   |                                                                     | 87                                      |                                                  
|         
|         
|         
|         
|          | Item 11. Executive Compensation                                                                 |                                                                   |                                                                     | 87                                      |                                                  
|         
|         
|         
|         
|          | Item 12. Security Ownership of Certain Beneficial Owners
	and Management                        |                                                                   |                                                                     | 87                                      |                                                  
|         
|         
|         
|         
|          | Item 13. Certain Relationships and Related Transactions                                         |                                                                   |                                                                     | 87                                      |                                                  
|Part IV.  |                                                                                                 |                                                                   |                                                                     |                                        
|         
|         
|         
|         
|          | Item 14. Exhibits, Financial Statement Schedule and Reports
	on Form 8-K                        |                                                                   |                                                                     | 87                                      |                                                  
|         
|         
|         
|         
|          | Schedule II  Valuation and Qualifying Accounts and
	Reserves                                   |                                                                   |                                                                     | 91                                      |                                                  
|         
|         
|         
|         
|          | Signatures                                                                                      |                                                                   |                                                                     | 92                                      |                                                  



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##### Table of Contents



-1-

PHELPS DODGE CORPORATION

2000 Annual Report on Form 10-K











Items 1. and 2. Business and Properties

Phelps Dodge Corporation (the Company, which also may be
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 largest producer of molybdenum and molybdenum
products.

The Company consists of two divisions:

(i) Phelps Dodge Mining Company and (ii) Phelps Dodge
Industries.



| |      |                                                                                                                                                                                                                                                                                                                                                  | 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
| | (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 2000, Phelps Dodge Mining Company produced 1,200,300 tons of
copper for our account from worldwide mining operations, and an
additional 258,700 tons of copper for the accounts of our
minority interest joint-venture partners. Gold, silver,
molybdenum, copper sulfate, rhenium and sulfuric acid are
by-products of our copper operations. Production of copper for
our own account from our U.S. operations constituted
approximately 60 percent of the copper mined in the United
States in 2000. 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 copper 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 four 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
copper and aluminum energy cables, telecommunications cables and
specialty conductors.

On December 8, 2000, we announced our intention to explore
strategic alternatives for, including potential sale of, our
specialty chemicals and wire and cable segments.

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.



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##### Table of Contents



-2-

We employed 15,500 people on December 31, 2000.




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, copper sulfate, 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.




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.

In September of 1999, the Company announced plans to reduce
production costs of copper at its Morenci, Arizona, mine by
converting all production to a mine-for-leach process through
expansion of SX/ EX facilities. The $220 million conversion,
completed in early 2001, should allow the Morenci mine to
sustain copper production rates consistent with its current
total annual rate of approximately 410,000 tons. Cost reductions
are expected to be achieved by eliminating the process steps of
concentrating, smelting and refining in producing copper. The
conversion included expansion of the mines current
crushing and conveying system, installation of mobile stackers
that disperse crushed ore on leach stockpiles, expansion of
existing solution extraction facilities and construction of a
new electrowinning tankhouse.

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 of 1999, as a result of the acquisition of Cyprus
Amax together with the 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 parties. The resulting molybdenum oxide and
related products are either packaged for shipment to customers
worldwide or transported to other Phelps Dodge facilities for
further processing.



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##### Table of Contents



-3-

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.

On June 27, 2000, we announced a mine plan incorporating a
reduction in mining activities at the Miami mine. The new mine
plan temporarily suspended stripping in a higher cost portion of
the mine and will allow for the redistribution of a variety of
mining equipment to other Phelps Dodge mining operations to
reduce overall capital expenditures. The new mine plan had no
impact on 2000 production but is expected to result in
reductions in annual copper production of 17,500 tons and 42,500
tons, respectively, in 2001 and 2002.

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 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 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 Sociedad Contractual Minera
El Abra (El Abra), which holds mining concessions over more than
33,000 acres of land near Calama 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 of
Cerro Verde 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.

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
March 6, 2001.

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 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 March 6, 2001.

We are the worlds leading producer of copper using the SX/
EW process. In 2000, we produced a total of 806,300 tons of
cathode copper at our SX/ EW facilities, compared with 511,500
tons in 1999 and 430,800 tons in 1998. 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



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##### Table of Contents



-4-



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 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
2000 and 1999, the El Paso refinery operated significantly below
capacity due to the late 1999 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, and the El Paso refinery has an annual
production capacity of about 450,000 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, rhenium,
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. In 1998, the
Henderson 2000 project was initiated. 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 initiation of the development of a new production
level using more efficient high-lift caving methods. The new
crushing and conveying system reached full capacity in early
2000.

On May 8, 2000, as a result of an oversupply of molybdenum
and continued low prices in the world market, Phelps Dodge
announced a plan to curtail molybdenum production by
approximately 20 percent and reduce its workforce by
approximately 130 workers at Henderson.

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.

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 chemi-



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##### Table of Contents



-5-



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 molybdic 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 1996 through 2000; 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:



| |   |                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | conversion of the Morenci operations to mine-for-leach during
	1999 and 2000 (with completion in early 2001);                                                                                                                                                                                                                           
|
| |  | curtailment of Henderson operations beginning in the 2000 second
	quarter;                                                                                                                                                                                                                                                              
|
| |  | 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
	which reduced Morencis production during 2000;                                                                                                                                                                                                                       
|
| |  | 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; and                                                                                                                                                                                                                                                     
|
| |  | expansion of Chinos SX/ EW plant at Santa Rita in 1997.                                                                                                                                                                                                                                                                                



---



##### Table of Contents



-6-




Phelps Dodge Copper Production Data, by
Source (a)



|                                    |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |         |         | 
|----------------------------------- | -------------------------------------- | ---------------------- |  | ------- | ------- | ---- |  | ------- | ------- | ---- |  | ------- | ------- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                                    |                                        | 2000                   |  | 1999    |         | 1998 |  | 1997    |         | 1996
|                                    |                                        |                        |  |         |         |      |  |         |         |     
|Material mined (b)                  |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Morenci                                |                        |  | 274,871 |         |      |  | 297,872 |         |      |  | 288,200 |         |  |  | 291,698 |         |  |  | 297,688 |        
|                                   
|                                   
|                                   
|                                   
|                                    | Candelaria                             |                        |  | 116,541 |         |      |  | 126,903 |         |      |  | 131,155 |         |  |  | 90,045  |         |  |  | 83,962  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Tyrone                                 |                        |  | 113,937 |         |      |  | 113,422 |         |      |  | 108,359 |         |  |  | 107,896 |         |  |  | 102,936 |        
|                                   
|                                   
|                                   
|                                   
|                                    | El Abra                                |                        |  | 84,734  |         |      |  | 10,029  |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Sierrita                               |                        |  | 75,319  |         |      |  | 15,875  |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Bagdad                                 |                        |  | 69,101  |         |      |  | 16,233  |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Chino                                  |                        |  | 61,519  |         |      |  | 44,562  |         |      |  | 117,432 |         |  |  | 121,639 |         |  |  | 122,939 |        
|                                   
|                                   
|                                   
|                                   
|                                    | Cerro Verde                            |                        |  | 61,400  |         |      |  | 11,459  |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Miami                                  |                        |  | 46,446  |         |      |  | 13,787  |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Cobre                                  |                        |  |        |         |      |  | 4,558   |         |      |  | 15,763  |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Ojos del Salado                        |                        |  |        |         |      |  |        |         |      |  | 1,336   |         |  |  | 1,713   |         |  |  | 1,628   |        
|                                    |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|                                    |                                        | Total material mined   |  |         | 903,868 |      |  |         | 654,700 |      |  |         | 662,245 |  |  |         | 612,991 |  |  |         | 609,153 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Less minority participants shares (c) |                        |  | 126,565 |         |      |  | 89,830  |         |      |  | 108,605 |         |  |  | 102,305 |         |  |  | 102,421 |        
|                                    |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|                                    |                                        | Net Phelps Dodge share |  |         | 777,303 |      |  |         | 564,870 |      |  |         | 553,640 |  |  |         | 510,686 |  |  |         | 506,732 | 
|                                    |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|Ore mined (b)                       |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Morenci                                |                        |  | 27,329  |         |      |  | 40,447  |         |      |  | 49,392  |         |  |  | 50,951  |         |  |  | 47,136  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Candelaria                             |                        |  | 24,530  |         |      |  | 20,451  |         |      |  | 24,433  |         |  |  | 13,055  |         |  |  | 11,603  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Tyrone                                 |                        |  | 51,430  |         |      |  | 55,693  |         |      |  | 55,086  |         |  |  | 50,528  |         |  |  | 53,687  |        
|                                   
|                                   
|                                   
|                                   
|                                    | El Abra                                |                        |  | 43,711  |         |      |  | 8,706   |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Sierrita                               |                        |  | 57,249  |         |      |  | 12,383  |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Bagdad                                 |                        |  | 28,387  |         |      |  | 6,126   |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Chino                                  |                        |  | 14,371  |         |      |  | 16,362  |         |      |  | 17,306  |         |  |  | 18,413  |         |  |  | 20,061  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Cerro Verde                            |                        |  | 17,833  |         |      |  | 2,642   |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Miami                                  |                        |  | 11,032  |         |      |  | 2,501   |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Cobre                                  |                        |  |        |         |      |  | 870     |         |      |  | 4,898   |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Ojos del Salado                        |                        |  |        |         |      |  |        |         |      |  | 1,179   |         |  |  | 1,551   |         |  |  | 1,506   |        
|                                    |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|                                    |                                        | Total ore mined        |  |         | 275,872 |      |  |         | 166,181 |      |  |         | 152,294 |  |  |         | 134,498 |  |  |         | 133,993 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Less minority participants shares (c) |                        |  | 35,214  |         |      |  | 19,877  |         |      |  | 18,064  |         |  |  | 16,391  |         |  |  | 16,078  |        
|                                    |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|                                    |                                        | Net Phelps Dodge share |  |         | 240,658 |      |  |         | 146,304 |      |  |         | 134,230 |  |  |         | 118,107 |  |  |         | 117,915 | 
|                                    |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|Grade of ore mined  percent copper |                                        |                        |  |         |         |      |  |         |         |      |  |         |         |  |  |         |         |  |  |        
|                                   
|                                   
|                                   
|                                   
|                                    | Morenci                                |                        |  | 0.80    |         |      |  | 0.68    |         |      |  | 0.68    |         |  |  | 0.72    |         |  |  | 0.70    |        
|                                   
|                                   
|                                   
|                                   
|                                    | Candelaria                             |                        |  | 0.93    |         |      |  | 1.21    |         |      |  | 1.07    |         |  |  | 1.45    |         |  |  | 1.40    |        
|                                   
|                                   
|                                   
|                                   
|                                    | Tyrone                                 |                        |  | 0.26    |         |      |  | 0.28    |         |      |  | 0.26    |         |  |  | 0.29    |         |  |  | 0.30    |        
|                                   
|                                   
|                                   
|                                   
|                                    | El Abra                                |                        |  | 0.68    |         |      |  | 0.78    |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Sierrita                               |                        |  | 0.26    |         |      |  | 0.24    |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Bagdad                                 |                        |  | 0.49    |         |      |  | 0.42    |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Chino                                  |                        |  | 0.83    |         |      |  | 0.59    |         |      |  | 0.68    |         |  |  | 0.69    |         |  |  | 0.63    |        
|                                   
|                                   
|                                   
|                                   
|                                    | Cerro Verde                            |                        |  | 0.71    |         |      |  | 0.78    |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Miami                                  |                        |  | 0.71    |         |      |  | 0.57    |         |      |  |        |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Cobre                                  |                        |  |        |         |      |  | 1.00    |         |      |  | 0.93    |         |  |  |        |         |  |  |        |        
|                                   
|                                   
|                                   
|                                   
|                                    | Ojos del Salado                        |                        |  |        |         |      |  |        |         |      |  | 1.61    |         |  |  | 1.54    |         |  |  | 1.57    |        



---



##### Table of Contents



-7-

Phelps Dodge Copper Production Data, by Source (a)




|                       |                                        |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |       | 
|---------------------- | -------------------------------------- | --------------------------- |  | ----- | ------- | ---- |  | ----- | ------- | ---- |  | ----- | ------- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                       |                                        | 2000                        |  | 1999  |         | 1998 |  | 1997  |         | 1996
|                       |                                        |                             |  |       |         |      |  |       |         |     
|Recoverable copper (d) |                                        |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |      
|                      
|                      
|                      
|                      
|                       | Morenci:                               |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Concentrate                 |  |       | 132.3   |      |  |       | 195.2   |      |  |       | 247.2   |  |  |       | 269.9 |  |  |       | 247.1 | 
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 284.7   |      |  |       | 284.7   |      |  |       | 275.8   |  |  |       | 272.3 |  |  |       | 262.5 | 
|                      
|                      
|                      
|                      
|                       | Candelaria:                            |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Concentrate                 |  |       | 224.7   |      |  |       | 250.1   |      |  |       | 236.9   |  |  |       | 171.7 |  |  |       | 150.8 | 
|                      
|                      
|                      
|                      
|                       | Tyrone:                                |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Precipitate                 |  |       |        |      |  |       |        |      |  |       |        |  |  |       | 2.6   |  |  |       | 3.7   | 
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 79.3    |      |  |       | 80.1    |      |  |       | 82.6    |  |  |       | 76.6  |  |  |       | 76.0  | 
|                      
|                      
|                      
|                      
|                       | El Abra:                               |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 217.4   |      |  |       | 52.8    |      |  |       |        |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       | Sierrita:                              |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Concentrate                 |  |       | 95.9    |      |  |       | 19.7    |      |  |       |        |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 26.5    |      |  |       | 5.8     |      |  |       |        |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       | Bagdad:                                |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Concentrate                 |  |       | 111.5   |      |  |       | 22.3    |      |  |       |        |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 11.8    |      |  |       | 2.9     |      |  |       |        |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       | Chino:                                 |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Concentrate and precipitate |  |       | 87.0    |      |  |       | 74.3    |      |  |       | 85.5    |  |  |       | 99.9  |  |  |       | 99.0  | 
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 48.6    |      |  |       | 55.8    |      |  |       | 72.4    |  |  |       | 69.1  |  |  |       | 69.5  | 
|                      
|                      
|                      
|                      
|                       | Cerro Verde:                           |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 78.7    |      |  |       | 16.2    |      |  |       |        |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       | Miami:                                 |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Electrowon                  |  |       | 59.3    |      |  |       | 13.2    |      |  |       |        |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       | Cobre:                                 |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Concentrate                 |  |       |        |      |  |       | 6.6     |      |  |       | 34.2    |  |  |       |      |  |  |       |      | 
|                      
|                      
|                      
|                      
|                       | Ojos del Salado:                       |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |       |      
|                      
|                      
|                      
|                      
|                       |                                        | Concentrate                 |  |       |        |      |  |       |        |      |  |       | 17.9    |  |  |       | 21.1  |  |  |       | 21.3  | 
|                      
|                      
|                      
|                      
|                       | Other                                  |                             |  | 1.3   |         |      |  | 1.6   |         |      |  | 0.2   |         |  |  | 0.9   |       |  |  | 3.4   |      
|                       |                                        |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |      
|                       |                                        | Total recoverable copper    |  |       | 1,459.0 |      |  |       | 1,081.3 |      |  |       | 1,052.7 |  |  |       | 984.1 |  |  |       | 933.3 | 
|                      
|                      
|                      
|                      
|                       | Less minority participants shares (c) |                             |  | 258.7 |         |      |  | 191.2 |         |      |  | 178.7 |         |  |  | 172.0 |       |  |  | 162.9 |      
|                       |                                        |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |      
|                       |                                        | Net Phelps Dodge share      |  |       | 1,200.3 |      |  |       | 890.1   |      |  |       | 874.0   |  |  |       | 812.1 |  |  |       | 770.4 | 
|                       |                                        |                             |  |       |         |      |  |       |         |      |  |       |         |  |  |       |       |  |  |      



---



##### Table of Contents



-8-




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

|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |         |         | 
|---------------------------------------------- | -------------------------------------- | ------------------------------------- | ---- | ------- | ------- | ---- | ---- | ------- | ----- | ---- | ---- | ------- | ------- |  | ---- | ------- | ------- |  | ---- | ------- | ------- | 
|                                               |                                        | 2000                                  |      | 1999    |         | 1998 |      | 1997    |       | 1996
|                                               |                                        |                                       |      |         |         |      |      |         |       |     
|Copper (thousand tons)                         |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Total production                       |                                       |      | 1,459.0 |         |      |      | 1,081.3 |       |      |      | 1,052.7 |         |  |      | 984.1   |         |  |      | 933.3   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Less minority participants shares (c) |                                       |      | 258.7   |         |      |      | 191.2   |       |      |      | 178.7   |         |  |      | 172.0   |         |  |      | 162.9   |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               |                                        | Net Phelps Dodge share                |      |         | 1,200.3 |      |      |         | 890.1 |      |      |         | 874.0   |  |      |         | 812.1   |  |      |         | 770.4   | 
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               | Sales (e)                              |                                       |      | 1,200.6 |         |      |      | 884.2   |       |      |      | 876.3   |         |  |      | 812.8   |         |  |      | 771.6   |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|Gold (thousand ounces)                         |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Total production                       |                                       |      | 148     |         |      |      | 174     |       |      |      | 185     |         |  |      | 139     |         |  |      | 129     |        
|                                              
|                                              
|                                              
|                                              
|                                               | Less minority participants shares (c) |                                       |      | 31      |         |      |      | 35      |       |      |      | 36      |         |  |      | 30      |         |  |      | 26      |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               |                                        | Net Phelps Dodge share                |      |         | 117     |      |      |         | 139   |      |      |         | 149     |  |      |         | 109     |  |      |         | 103     | 
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               | Sales (e)                              |                                       |      | 120     |         |      |      | 136     |       |      |      | 145     |         |  |      | 113     |         |  |      | 125     |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|Silver (thousand ounces)                       |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Total production                       |                                       |      | 4,877   |         |      |      | 4,532   |       |      |      | 3,566   |         |  |      | 3,254   |         |  |      | 2,636   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Less minority participants share (c)  |                                       |      | 549     |         |      |      | 842     |       |      |      | 713     |         |  |      | 677     |         |  |      | 564     |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               |                                        | Net Phelps Dodge share                |      |         | 4,328   |      |      |         | 3,690 |      |      |         | 2,853   |  |      |         | 2,577   |  |      |         | 2,072   | 
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               | Sales (e)                              |                                       |      | 4,578   |         |      |      | 3,375   |       |      |      | 3,095   |         |  |      | 2,637   |         |  |      | 2,359   |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|Molybdenum (thousand pounds)                   |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Total production                       |                                       |      | 51,478  |         |      |      | 8,303   |       |      |      | 1,369   |         |  |      | 2,121   |         |  |      | 2,427   |        
|                                              
|                                              
|                                              
|                                              
|                                               | Less minority participants share (c)  |                                       |      | 419     |         |      |      | 241     |       |      |      | 355     |         |  |      | 472     |         |  |      | 501     |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               |                                        | Net Phelps Dodge share                |      |         | 51,059  |      |      |         | 8,062 |      |      |         | 1,014   |  |      |         | 1,649   |  |      |         | 1,926   | 
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               | Sales                                  |                                       |      | 57,988  |         |      |      | 11,417  |       |      |      | 1,050   |         |  |      | 1,272   |         |  |      | 2,141   |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|Sulfuric acid (thousand tons) (f)              |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                              
|                                              
|                                              
|                                              
|                                               | Total production                       |                                       |      | 1,231.8 |         |      |      | 1,172.1 |       |      |      | 1,222.1 |         |  |      | 1,263.4 |         |  |      | 1,235.3 |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                        | Less minority participants share (c) |      |         | 186.3   |      |      |         | 212.5 |      |      |         | 200.9   |  |      |         | 210.5   |  |      |         | 191.8   | 
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               |                                        | Net Phelps Dodge share                |      |         | 1,045.5 |      |      |         | 959.6 |      |      |         | 1,021.2 |  |      |         | 1,052.9 |  |      |         | 1,043.5 | 
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                               | Sales                                  |                                       |      | 4.2     |         |      |      | 625.5   |       |      |      | 196.1   |         |  |      | 383.5   |         |  |      | 464.0   |        
|                                               |                                        |                                       |      |         |         |      |      |         |       |      |      |         |         |  |      |         |         |  |      |        
|                                              
|COMEX copper price (g)                         |                                        | $                                     | 0.84 |         |         |      | 0.72 |         |       |      | 0.75 |         |         |  | 1.04 |         |         |  | 1.06 |        
|                                              
|                                              
|                                              
|                                              
|Metals Week- molybdenum dealer oxide price (h) |                                        | $                                     | 2.56 |         |         |      | 2.66 |         |       |      | 3.42 |         |         |  | 4.31 |         |         |  | 3.79 |        
|                                              



---



##### Table of Contents



-9-




Phelps Dodge Smelter, Refinery and Rod Production
(a)

|                        |                                       |                        |         |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |         |       | 
|----------------------- | ------------------------------------- | ---------------------- | ------- | ------- | ----- | ---- | ----- | ------- | ----- | ---- | ----- | ------- | ----- |  | ----- | ------- | ----- |  | ----- | ------- | ----- | 
|                        |                                       | 2000                   |         | 1999    |       | 1998 |       | 1997    |       | 1996
|                        |                                       |                        |         |         |       |      |       |         |       |     
|Smelters (i)            |                                       |                        |         |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|                       
|                       
|                       
|                       
|                        | Total copper (thousand tons)          |                        |         | 494.9   |       |      |       | 379.2   |       |      |       | 405.8   |       |  |       | 419.1   |       |  |       | 428.8   |      
|                       
|                       
|                       
|                       
|                        | Less minority participants share (c) |                        |         | 58.3    |       |      |       | 64.2    |       |      |       | 60.1    |       |  |       | 64.5    |       |  |       | 62.9    |      
|                        |                                       |                        |         |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|                        |                                       | Net Phelps Dodge share |         |         | 436.6 |      |       |         | 315.0 |      |       |         | 345.7 |  |       |         | 354.6 |  |       |         | 365.9 | 
|                        |                                       |                        |         |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|Refineries (j)          |                                       |                        |         |         |       |      |       |         |       |      |       |         |       |  |       |         |       |  |       |        
|                       
|                       
|                       
|                       
|                        | Copper (thousand tons)                |                        |         | 471.2   |       |      |       | 422.6   |       |      |       | 429.3   |       |  |       | 455.3   |       |  |       | 450.1   |      
|                       
|                       
|                       
|                       
|                        | Gold (thousand ounces)                |                        |         | 52.6    |       |      |       | 72.9    |       |      |       | 74.6    |       |  |       | 107.9   |       |  |       | 114.4   |      
|                       
|                       
|                       
|                       
|                        | Silver (thousand ounces)              |                        |         | 3,838.9 |       |      |       | 3,681.5 |       |      |       | 2,523.8 |       |  |       | 2,843.0 |       |  |       | 3,142.5 |      
|                       
|                       
|                       
|                       
|Rod (thousand tons) (k) |                                       |                        | 1,153.9 |         |       |      | 805.1 |         |       |      | 764.4 |         |       |  | 747.0 |         |       |  | 711.4 |        
|                       

Footnotes to tables on pages 6 through 9:



| |     |                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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. At Cerro Verde, in which we own common
	stock totaling 82 percent of the outstanding shares, the
	full consolidation method is used.
|
| | (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.                                                                                                                                                                                                                    
|
| | (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.                                                                                                                                                                                                                                    



---



##### Table of Contents



-10-




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 14.0 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
54.2 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 17.6 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 2000, we received dividend payments of
$3.8 million from SPCC, compared with $1.7 million in 1999 and
$5.7 million in 1998.

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. Over
the last three years, the underground mine has averaged
approximately 130 million pounds of zinc production 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. The operation ceased
processing in early January 2000.

On March 30, 2000, we sold Cyprus Australia Coal Company, a
wholly owned subsidiary which we acquired as part of the Cyprus
transaction, to a subsidiary of Glencore International for
approximately $150 million. Cyprus Australia Coal Company owned
48 percent of Oakbridge Pty. Ltd. and 50 percent of
the Springvale Mine in Australia. Cyprus had sold its principal
U.S. coal properties in June 1999.




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 25
countries and maintains offices in Australia, Austria, Brazil,
Canada, Chile, India, Indonesia, Mexico, Peru and the
Philippines.

The 2000 exploration program continued to place emphasis on the
search for and delineation of large-scale copper deposits and
lesser emphasis on gold and other base metal deposits. Phelps
Dodge expended $39.7 million on worldwide exploration during
2000, compared with $41.0 million in 1999 and $42.0 million in
1998. Approximately 23 percent of the 2000 expenditure
occurred in the United States with 17 percent being spent
at our U.S. mine sites. This compares with 25 percent in
1999 (19 percent at U.S. mine sites) and
26 percent in 1998 (19 percent at U.S. mine
sites). The balance of exploration expenditure was spent
principally in Australasia, Brazil, Chile, Mexico, Canada and
Peru.

During 2000, exploration efforts continued at our existing
copper operations. A major drill program to delineate
mineralized material for the first phase of mining was in
progress in the Garfield area at Morenci. Exploration programs
were initiated at Candelaria, El Abra, Cerro Verde, Sierrita and
Miami. Exploration for additional leach material continued at
Tyrone.

Environmental permitting is in progress to advance development
of the Dos Pobres and San Juan deposits in the Safford District
in eastern Arizona. The two deposits contain a total of 630
million tons of leachable reserves with a grade of
0.32 percent copper. Additionally, the Dos Pobres



---



##### Table of Contents



-11-



Internationally, Mineração Serra do Sossego S.A., a
50/ 50 joint venture with Companhia Vale do Rio Doce
(CVRD) located in Brazil, completed a prefeasibility study
early in 2000. A final feasibility study to further define the
quantity of mineralized material and economics of a potential
copper/gold project is scheduled for completion in the second
quarter of 2001.

Work continues on resource development and metallurgical review
to support a feasibility study on the Piedras Verdes property in
Sonora, Mexico, in which we own a 70 percent interest.
Strategic options for this project are being evaluated. The
results of the prefeasibility study indicate leachable
mineralized material of 290 million tons at 0.33 percent
copper.

In 2000, economic evaluation and environmental studies 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 regulatory and permitting
issues.

Work continued on the Kansanshi project in Zambia and a
prefeasibility study was completed. Results are being evaluated
to determine how to proceed with the project. The prefeasibility
results indicate mineralized material of 298 million tons at a
grade of 1.28 percent copper.



---



##### Table of Contents



-12-




Ore Reserves

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, 2000
|                       |  |                               
|                       |  |                                |         |          |  |       
|                       |  | Milling                        |         | Leaching |  |       
|                       |  | Reserves                       |         | Reserves |  | Phelps
|                       |  |                                |         |          |  | Dodge 
|                       |  | Million                        |         | %        |  | %      |      | Million |  | %      |      | Interest
|                       |  | Tons                           |         | Copper   |  | Moly   |      | Tons    |  | Copper |      | (%)     
|                       |  |                                |         |          |  |        |      |         |  |        |      |         
|Morenci                |  |                                | 362.7   |          |  |        | 0.64 |         |  |        |     |          |  |  | 1,680.9 |  |  |  | 0.23 |  |  |  | 85.0  | 
|                      
|                      
|                      
|                      
|Sierrita               |  |                                | 1,091.6 |          |  |        | 0.27 |         |  |        | 0.03 |          |  |  | 48.5    |  |  |  | 0.19 |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Safford (1)(2)         |  |                                | 330.0   |          |  |        | 0.65 |         |  |        |     |          |  |  | 630.0   |  |  |  | 0.32 |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Bagdad                 |  |                                | 915.7   |          |  |        | 0.36 |         |  |        | 0.02 |          |  |  | 17.7    |  |  |  | 0.29 |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|El Abra                |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 852.1   |  |  |  | 0.45 |  |  |  | 51.0  | 
|                      
|                      
|                      
|                      
|Chino                  |  |                                | 310.0   |          |  |        | 0.60 |         |  |        |     |          |  |  | 476.2   |  |  |  | 0.30 |  |  |  | 66.7  | 
|                      
|                      
|                      
|                      
|Cerro Verde            |  |                                | 464.0   |          |  |        | 0.61 |         |  |        | 0.02 |          |  |  | 194.0   |  |  |  | 0.61 |  |  |  | 82.0  | 
|                      
|                      
|                      
|                      
|Tyrone                 |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 460.7   |  |  |  | 0.30 |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Candelaria (3)         |  |                                | 403.4   |          |  |        | 0.84 |         |  |        |     |          |  |  |        |  |  |  |     |  |  |  | 80.0  | 
|                      
|                      
|                      
|                      
|Cobre (4)              |  |                                | 132.4   |          |  |        | 0.73 |         |  |        |     |          |  |  | 97.9    |  |  |  | 0.35 |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Ajo (1)                |  |                                | 150.0   |          |  |        | 0.56 |         |  |        |     |          |  |  |        |  |  |  |     |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Miami                  |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 127.9   |  |  |  | 0.38 |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Ojos del Salado (3)(4) |  |                                | 18.7    |          |  |        | 1.32 |         |  |        |     |          |  |  |        |  |  |  |     |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Henderson              |  |                                | 181.5   |          |  |        |     |         |  |        | 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, 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 | 
|                      
|                      
|                      
|                      
|Bagdad                 |  |                                | 775.4   |          |  |        | 0.37 |         |  |        | 0.02 |          |  |  | 16.5    |  |  |  | 0.29 |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|El Abra                |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 917.0   |  |  |  | 0.46 |  |  |  | 51.0  | 
|                      
|                      
|                      
|                      
|Chino                  |  |                                | 332.2   |          |  |        | 0.62 |         |  |        |     |          |  |  | 471.4   |  |  |  | 0.30 |  |  |  | 66.7  | 
|                      
|                      
|                      
|                      
|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 | 
|                      
|                      
|                      
|                      
|Ajo (1)                |  |                                | 150.0   |          |  |        | 0.56 |         |  |        |     |          |  |  |        |  |  |  |     |  |  |  | 100.0 | 
|                      
|                      
|                      
|                      
|Miami                  |  |                                |        |          |  |        |     |         |  |        |     |          |  |  | 188.7   |  |  |  | 0.38 |  |  |  | 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 | 






|    |                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 2000 and 1999.                     
|   
|(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.




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



---

|                                                     |  |      |      |      |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|---------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- |  |  |  | ---- |  |  |  | ---- | 
|                                                     |  | 2000 |      | 1999 |  | 1998 |      | 1997 |  | 1996
|                                                     |  |      |      |      |  |      |      |      |  |     
|Milling reserves (billion tons)                      |  |      | 4.3  |      |  |      | 4.2  |      |  |      | 1.6  |  |  |  | 1.6  |  |  |  | 1.3  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Leaching reserves (billion tons)                     |  |      | 3.8  |      |  |      | 4.1  |      |  |      | 3.2  |  |  |  | 2.5  |  |  |  | 2.2  | 
|                                                    
|                                                    
|                                                    
|                                                    
|Commercially recoverable copper (million tons)       |  |      | 24.1 |      |  |      | 24.4 |      |  |      | 14.5 |  |  |  | 13.7 |  |  |  | 12.1 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Commercially recoverable molybdenum (billion pounds) |  |      | 2.2  |      |  |      | 2.2  |      |  |      |     |  |  |  |     |  |  |  |     | 




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, 2000, for
Southern Peru Copper Corporation (in which we hold a
14.0 percent interest), based on available information,
were 2.1 billion tons of millable reserves at a grade of 0.68
percent copper and 2.0 billion tons of leachable reserves at an
average grade of 0.20 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.



---



##### Table of Contents



-13-

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 likely be required before operations could
commence at these properties. The deposits are estimated to
contain the following mineralized material as of
December 31, 2000:



---

|                            |  |          |            |                  |  |          |     |         |  |        |      |        |  |          |       |  |  |  |      |  |  |  |      |  |  |  |       | 
|--------------------------- |  | -------- | ---------- | ---------------- |  | -------- | --- | ------- |  | ------ | ---- | ------ |  | -------- | ----- |  |  |  | ---- |  |  |  | ---- |  |  |  | ----- | 
|                            |  |          |            |                  |  |          |     |         |  |        |      |       
|                            |  |          |            |                  |  | Leaching |     |         |  |       
|                            |  |          |            | Milling Material |  | Material |     |         |  | Phelps
|                            |  |          |            |                  |  |          |     |         |  | Dodge 
|                            |  |          |            | Million          |  | %        |     | Million |  | %      |      | %      |  | Interest
|                            |  | Location |            | Tons             |  | Copper   |     | Tons    |  | Copper |      | Nickel |  | (%)     
|                            |  |          |            |                  |  |          |     |         |  |        |      |        |  |         
|Ambatovy *                  |  |          | Madagascar |                  |  |          |    |         |  |        |     |        |  |          | 210   |  |  |  |     |  |  |  | 1.10 |  |  |  | 100.0 | 
|                           
|                           
|                           
|                           
|American Mountain (Morenci) |  |          | Arizona    |                  |  |          |    |         |  |        |     |        |  |          | 140   |  |  |  | 0.25 |  |  |  |     |  |  |  | 85.0  | 
|                           
|                           
|                           
|                           
|Cochise                     |  |          | Arizona    |                  |  |          |    |         |  |        |     |        |  |          | 210   |  |  |  | 0.40 |  |  |  |     |  |  |  | 100.0 | 
|                           
|                           
|                           
|                           
|El Abra                     |  |          | Chile      |                  |  |          | 650 |         |  |        | 0.55 |        |  |          | 79    |  |  |  | 0.31 |  |  |  |     |  |  |  | 51.0  | 
|                           
|                           
|                           
|                           
|Garfield (Morenci)          |  |          | Arizona    |                  |  |          |    |         |  |        |     |        |  |          | 1,000 |  |  |  | 0.27 |  |  |  |     |  |  |  | 85.0  | 
|                           
|                           
|                           
|                           
|Kansanshi                   |  |          | Zambia     |                  |  |          | 298 |         |  |        | 1.28 |        |  |          |      |  |  |  |     |  |  |  |     |  |  |  | 80.0  | 
|                           
|                           
|                           
|                           
|Lone Star (Safford)         |  |          | Arizona    |                  |  |          |    |         |  |        |     |        |  |          | 1,600 |  |  |  | 0.38 |  |  |  |     |  |  |  | 100.0 | 
|                           
|                           
|                           
|                           
|Lumwana                     |  |          | Zambia     |                  |  |          | 220 |         |  |        | 0.83 |        |  |          |      |  |  |  |     |  |  |  |     |  |  |  | 100.0 | 
|                           
|                           
|                           
|                           
|Niagara (Tyrone)            |  |          | New Mexico |                  |  |          |    |         |  |        |     |        |  |          | 500   |  |  |  | 0.29 |  |  |  |     |  |  |  | 100.0 | 
|                           
|                           
|                           
|                           
|Piedras Verdes              |  |          | Mexico     |                  |  |          |    |         |  |        |     |        |  |          | 290   |  |  |  | 0.33 |  |  |  |     |  |  |  | 70.0  | 
|                           
|                           
|                           
|                           
|Sanchez (Safford)           |  |          | Arizona    |                  |  |          |    |         |  |        |     |        |  |          | 230   |  |  |  | 0.29 |  |  |  |     |  |  |  | 100.0 | 
|                           
|                           
|                           
|                           
|Sossego **                  |  |          | Brazil     |                  |  |          | 240 |         |  |        | 1.14 |        |  |          |      |  |  |  |     |  |  |  |     |  |  |  | 50.0  | 
|                           
|                           
|                           
|                           
|Tohono                      |  |          | Arizona    |                  |  |          | 276 |         |  |        | 0.70 |        |  |          | 404   |  |  |  | 0.63 |  |  |  |     |  |  |  | 100.0 | 
|                           
|                           
|                           
|                           
|Western Copper (Morenci)    |  |          | Arizona    |                  |  |          | 530 |         |  |        | 0.55 |        |  |          | 500   |  |  |  | 0.31 |  |  |  |     |  |  |  | 85.0  | 






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



|   |                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------
|** | According to a prefeasibility study, the Sossego deposit also
	contains 0.01 ounces of gold per ton.



|      |                                                                                                                                                                                                                                                                                                                                                                                               
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.



---



##### Table of Contents



-14-




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 57 percent of PD Minings sales
in 2000. 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 19 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 competitive position with respect to a number of our
international competitors. For a discussion of the effects of
recent, abnormally high energy prices in the western United
States, see Costs beginning on page 15.

Other materials that compete with copper include aluminum,
plastics, stainless steel and fiber optics. Our principal
methods of competing include pricing, product properties,
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,
lubricants and feedstock for pure molybdenum metal used in
electronics. A substantial portion of Phelps Dodges
expected 2001 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 is produced as a
by-product of copper mining, which is relatively insensitive to
molybdenum price levels. Exports from China can also influence
competitive conditions.




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.

In 1998, the COMEX copper price averaged 75 cents per pound of
copper cathode, 29 cents less than the 1997 average price.
Concern over excess future supply, 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



---



##### Table of Contents



-15-



In 1999, the COMEX copper price averaged 72 cents per pound,
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 improving economic
conditions in Europe.

The COMEX copper price averaged 84 cents per pound for the year
2000, a 12-cent improvement over the previous year. The increase
in price was triggered by deficit market conditions created by
robust demand for the metal coupled with lower world copper
production growth following the closure of nearly 780,000 tons
of capacity during 1998 and 1999. After having added nearly
480,000 tons during the previous two years, combined Western
exchange inventories topped 930,000 tons in early
March 2000. Over the remainder of the year, LME and COMEX
inventories declined by approximately 515,000 tons to end the
year at 415,000 tons, a decline of 52 percent from the
beginning of the year. Strong global consumption, particularly
during the first half of the year, was lead by strong demand
from China, steady demand in the United States and continued
improvement in the European and Asian regions.

Molybdenum demand depends heavily on worldwide steel industry
consumption and, to a lesser extent, on chemical applications.
During the first half of 2000, there were significant gains made
in consumption with the recovery in stainless steel and chemical
products, particularly in the Asian region, that negatively
impacted demand in 1999. However, overproduction of stainless
and alloy steels and the resulting destocking of inventories
lead to lower consumption levels during the second half of 2000.
Overall, steel production capacity in the United States fell
from 90 percent during the first half of 2000 to below
70 percent by the end of the year. Despite a 5 percent
increase in global molybdenum demand in 2000 after the sharp
decline in 1999, prices could not muster support as world
production and existing inventories continued to apply downward
pressure. While production curtailments announced at North
Americas three primary mines remained in effect, increased
output from Chinese primary mines and global byproduct material
from copper mines kept the world molybdenum market oversupplied.
Following a brief period of rising prices in the first half of
the year, prices reversed direction and weakened throughout the
second half of 2000. Metals Weekdealer oxide prices
averaged $2.56 per pound for the year against 1999 and 1998
average prices of $2.66 per pound and $3.42 per pound,
respectively. Phelps Dodge received an average realized price of
$3.99 per pound for molybdenum products in 2000, reflecting the
broad mix of upgraded molybdenum products as well as molybdic
oxide.




Costs

In 2000, copper unit production costs were adversely impacted by
the effects of abnormally high energy prices. In total, higher
energy costs increased our 2000 copper unit production costs by
approximately 4 cents per pound relative to those
experienced in 1999.

Energy, including electricity, diesel fuel and natural gas,
represents a significant portion of the production costs for
Phelps Dodge operations. During 2000, the Companys Arizona
and New Mexico operations were adversely affected by
significantly higher costs for electricity, diesel fuel and
natural gas. In 2000, approximately 10 percent of the
Companys Arizona and New Mexico power requirements were
satisfied by internal generation. Approximately 63 percent
of the Companys 2000 power requirement in Arizona and New
Mexico was supplied under fixed price contracts. The remaining
power requirement (27 percent) was satisfied by spot
markets purchases.

Beginning in the spring of 2000, the combination of a power
supply/ demand imbalance in California, higher natural gas
prices, a drought in the Pacific Northwest (a region that has
provided a significant amount of hydroelectric power to
California and the Southwest) and service interruptions at
several California power plants due to both scheduled and
unscheduled maintenance, caused a shortage of electricity in the
western United States that resulted in extremely high spot
electricity prices. There was little respite in spot electricity
prices for the remainder of the year as unseasonally cold winter
temperatures in the western United States and the continuing



---



##### Table of Contents



-16-



During 2000, diesel fuel prices were adversely impacted by
rising global oil prices and the shortage of refining capacity
in certain parts of the United States. To mitigate the
Companys exposure to increases in diesel fuel prices,
Phelps Dodge entered into a diesel fuel price protection program
in December 2000. The objective of the program is to protect
against a significant upward movement in diesel fuel prices
while retaining the flexibility to participate in any favorable
price movement. To implement these objectives, the Company
purchased out-of-the-money (OTM) call options settled at
the average price for the option period representing
approximately 50 percent of planned first quarter 2001
diesel fuel consumption for the Arizona and New Mexico
properties. Purchase of these call options allows for full
participation in downward price movements.

Natural gas prices in the United States also increased
significantly during 2000 due to low levels of supply resulting
from a decade of relatively low natural gas prices that
depressed domestic exploration activities and failed to maintain
domestic production levels. To mitigate the Companys
exposure to further increases in the price of natural gas,
Phelps Dodge entered into a natural gas price protection program
in January 2001. The objective of the program is to protect
against a significant upward movement in natural gas prices
while retaining the flexibility to participate in any favorable
price movement. To implement these objectives, the Company
purchased OTM call options for natural gas covering
approximately 40 percent of its budgeted natural gas
consumption for the Arizona, New Mexico and Texas operations for
the months of April through October 2001. Purchase of these
call options allows for full participation in downward price
movements.

Our copper unit production costs in 1999 were 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.




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. For a
discussion of the effects of recent, abnormally high energy
prices in the western United States, see Costs
beginning on page 15.




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. Good progress has been made to meet the challenge of
increasingly complex environmental regulations. Major
environmental programs and developments of particular interest
are summarized in the paragraphs that follow.

The federal Clean Air Act, as amended (the Clean Air Act), has
had a significant impact, particularly on our smelters and power
plants. Costs associated with environmental compliance have
increased over time, and we expect these costs to continue to
rise in the future. The 1990 Amendments to the Clean Air Act
require the U.S. Environmental Protection Agency (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



---



##### Table of Contents



-17-



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. Historically, mining wastes have been exempted from the
federal hazardous waste regulations under RCRA. As a
result of decisions made by the 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.

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. A portion of the LDR rule recently was
vacated on appeal. 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.

The federal 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. Annually, we report the volume of naturally occurring
metals and other substances that we managed during the previous
year 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.

Our domestic copper operations are also subject to federal and
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.

The federal National Pollutant Discharge Elimination System
(NPDES) program requires a permit for the point source discharge
of pollutants to surface waters that qualify as waters of the
United States. Although most states have received authorization
to implement this program in lieu of EPA, Arizona and New Mexico
have not received such authorization and therefore the NPDES
permit program in Arizona and New Mexico continues to be
implemented primarily by EPA. The NPDES permit program recently
was expanded to regulate the discharge of storm water runoff
from active and inactive mines. Although EPA has issued general
permits that purport to cover discharges from active and
inactive mines, there is the potential that such discharges will
have to be covered in the future by individual NPDES permits,
which permits may impose more stringent discharge limits and
other conditions on storm water discharges from such sites. We
likely will continue to have to make expenditures to comply with
the NPDES permit program, especially as the program continues to
expand as applied to storm water discharges.

Arizona has adopted regulations for its aquifer protection
permit (APP) program that replaced the previous 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



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At the Hidalgo smelter in Playas, New Mexico, in accordance with
the groundwater discharge plan approved by the New Mexico
Environment Department (NMED) under state water quality
law, 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 constructed a
cap over the evaporation pond which was approved by NMED 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 pump-back wells that are being operated to remediate
groundwater and to prevent future contamination.

On December 23, 1994, Chino, located near Silver City, New
Mexico, entered into an Administrative Order on Consent
(AOC) with NMED. 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.

Our mining operations are subject to laws and regulations
establishing new requirements for mined land reclamation and
financial assurance. Colorado passed a mined land reclamation
law in the early 1970s establishing a Mined Land
Reclamation Board that adopted regulations in 1977. Significant
changes were made in 1993. Our Colorado mining operations have
had approved mined land reclamation plans and financial
assurance under these laws for several years. Arizona enacted
its mined land reclamation law in 1994. Our Arizona mining
operations submitted proposed reclamation plans and financial
assurance following the adoption of implementing rules in 1997,
and most of our Arizona operations have approved plans and
financial assurance. New Mexico passed a mined land reclamation
law in 1993 authorizing regulations that were adopted in 1994.
The permitting process for New Mexico mining operations
commenced in December 1994 and approved closeout
plans and financial assurance for our operations in that state
are due by December 31, 2001. In connection with the
development of closeout plans for its largest New Mexico
facilities, the Company has conducted a number of technical
studies. Those studies indicate that the Company will need to
increase the total financial assurance it provides for
reclamation of its New Mexico properties from approximately $100
million to approximately $200 million. Although the Company
believes that its most recent estimates of reclamation costs at
its New Mexico properties are based on a sound understanding of
the applicable science and regulations, it is likely that in the
public hearing and review process the State regulators may seek
to impose a significantly larger financial assurance
requirement. Actual reclamation costs may differ significantly
from the required amount of financial assurance based on a
variety of factors including possible changes in legal standards
over time and potential cost savings from use of the
Companys own personnel and equipment at each site compared
to third-party contractor costs (under New Mexico law financial
assurance requirements are calculated based on estimated
third-party costs), advances in technology and reclamation
techniques, and opportunities to prepare each site for more
efficient reclamation through careful development of the site
over time.

The federal Bureau of Land Management adopted amended
regulations governing mined land reclamation for mining on
federal lands in January 2001. New financial assurance
requirements for existing operations take effect in June 2001,
although the new reclamation requirements take effect only for



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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 BLMs hardrock mining surface management
regulations and propose revisions to expand environmental and
reclamation requirements, among other things. BLM issued new
regulations in late 2000. While the effect of the new
regulations on our current operations and other currently owned
mineral resources on private lands should be minimal, the new
regulations and the passage of mining law amendments 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 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 $29
million in 2001 and approximately $16 million in 2002; $13
million was spent on such programs in 2000. We also anticipate
making significant capital and other expenditures beyond 2002
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
reasonably estimate the total amount of such expenditures over
the longer term, but it may be potentially material. (See the
discussion of OTHER ENVIRONMENTAL MATTERS.)

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 have
a material adverse affect on our competitive position relative
to other U.S. copper producers. These domestic copper producers
are 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.




Ownership of Property

Generally, most of the land occupied by our copper and
molybdenum mines, concentrators, SX/ EW facilities, smelters,
refineries, rod mills, and molybdenum roasters or processing
facilities is owned by, or is 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. Small portions of our 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 (PD 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. On
December 8, 2000, we announced our intention to explore
strategic alternatives for, including the potential sale of, our
specialty chemicals and wire and cable segments.



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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 40 percent of our production
in North America and the remaining 60 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 the second quarter of 2000, we acquired the remaining
40 percent share in the carbon black manufacturing business
of Columbian Tiszai Carbon Ltd. in Hungary for $19.0 million,
bringing our total interest to 100 percent.

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.

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.

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. To achieve satisfactory financial results during periods
of increasing oil prices, we must be able to pass through to
customers increases in feedstock costs. 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.



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

Ownership of Property

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




Wire and Cable Segment

The wire and cable segment, 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; 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 was closed in
2000. Its productive assets were moved to other facilities in
the United States and Mexico. A non-recurring, pre-tax charge of
$5.8 million was recognized in 2000 for our wire and cable
operations in Austria as a result of the long-term impact of
continuing extremely competitive pricing conditions in Europe.
The continuing competitive pricing environment led to a
determination that we should assess the recoverability of our
Austrian wire and cable asset values. In addition, we
permanently ceased the relatively small production of magnet
wire at our company in Venezuela in 1999.

Energy and telecommunication cables for international markets
are manufactured in factories located in 12 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 seven
countries  Brazil, Chile, Costa Rica, Honduras,
Thailand, Venezuela and Zambia. We also have minority interests
in companies located in Hong Kong, China, Thailand and the
Philippines, accounted for on the equity basis, and in companies
located in Greece and India, accounted for on the cost basis.

During 2000, production ceased at two wire and cable plants in
Venezuela in the second quarter due to low forecast plant
utilization levels as a result of significantly reduced
infrastructure spending in the Latin America region. Production
also ceased at our majority-owned telephone cable operation in
El Salvador in the fourth quarter of 2000 due to low plant
utilization levels as a result of heightened global competition
for telecommunication cable. The plant closure resulted in a
non-recurring, pre-tax charge of $4.6 million. A charge of $7.2
million to miscellaneous income and expense was recognized to
reflect the impairment of our 40 percent equity interest in
a wire and cable operation in the Philippines. The impairment
was based upon an analysis of future cash flows of the
operation, continuing economic uncertainty in the Philippines
and the erosion of our strategic and operating influence.

During 1999, we converted a small manufacturing facility in
Ecuador to a distribution center. 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. At the end of
1999, we recognized impairments of our equity basis investment
in China as well as an impairment of the telecommunications
business in the Philippines. (See Note 3 to the
consolidated financial statements for a further discussion of
the 1999 and 2000 restructurings and impairments.)

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 and Elizabeth, New Jersey. As part of the manufacturing
rationalization program initiated in 1999, plants in Fairfield
and Montville, New Jersey, were closed in 2000. Their productive
capacities were 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.

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



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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 segment.

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.

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 closed
specialty conductor facilities in Fairfield and Montville, New
Jersey. This land is not material to our overall operations.




Environmental Matters

Federal and state 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 $9 million in 2001
and from $8 million to $9 million in 2002; $7 million was spent
on these programs in 2000. We anticipate making significant
capital and other expenditures after 2002 for continued
compliance with environmental laws and regulations. In the
future, some of our carbon black plants probably will be
regulated as major sources of hazardous air pollutants and will
be subject to a Maximum Achievable Control Technology standard.
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 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 Fort
Madison, Iowa, molybdenum processing facility, and some
employees at Chino are not represented by any unions.

In addition, we currently have labor agreements covering most of
our U.S. and international manufacturing division plants. Our
specialty chemicals plant in Marshall, West Virginia, has an
agreement covering approximately 60 employees that expired on
June 14, 2000. A new three-year agreement was ratified with
effective dates of June 30, 2000, through June 13,
2003. Our specialty chemicals plant in North Bend, Louisiana,
had an agree-



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After a review of the near-term market outlook for energy prices
and a thorough analysis of the molybdenum market, the Company
announced on January 25, 2001, that it would notify all
2,350 employees of its Chino and Tyrone, New Mexico, and
Sierrita, Arizona, operations of the possibility of production
curtailments. The possible production curtailments are
attributable primarily to high energy-related costs at the New
Mexico facilities, and a combination of low molybdenum prices
and high energy costs at the Sierrita facility. All affected
employees and the unions representing some of the employees at
Chino have received Worker Adjustment and Retraining
Notification (WARN) Act letters advising them that
production curtailments could become effective following the
legally required, 60-day notification period. The Company will
closely monitor the energy and molybdenum markets throughout the
60-day period to determine whether curtailment actions may be
necessary at any of the three facilities.




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 $24.7 million in 2000, compared with $16.5 million in
1999 and $18.0 million in 1998.




OTHER ENVIRONMENTAL MATTERS

Phelps Dodge or its subsidiaries have been advised by EPA, the
United States Forest Service and several state agencies that
they may be liable under the Comprehensive Environmental
Response Compensation and Liability Act (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 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 provided reserves for potential environmental
obligations that management considers probable and for which
reasonable estimates of such obligations can be made. 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 upon specific facts
and circumstances. 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 potentially responsible party (PRP), and the ability
of other PRPs to pay their allocated portions. Accordingly,
total environmental reserves of $307.1 million and $336.1
million, respectively, were recorded as of December 31,
2000 and 1999. The long-term portion of these reserves is
included in other liabilities and deferred credits on the
consolidated balance sheet and amounted to $244.9 million and
$254.4 million at December 31, 2000 and 1999, respectively.

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
in Miami, Arizona, and the former American Zinc and Chemical
site in Langeloth, Pennsylvania.

At the Pinal Creek site, remediation is being performed by the
Pinal Creek Group, which includes Phelps Dodge Miami Inc. and
other companies that have been determined to have contributed
through historic mining activities to the contaminated ground-



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In June 1999, Cyprus Amax received an information request
from the Pennsylvania Department of Environmental Protection
regarding the former American Zinc and Chemical site in
Langeloth, Pennsylvania. The site is currently being
investigated by the State of Pennsylvania. Studies initiated to
determine the nature and extent of remediation work that may be
required on the property indicated a cost range for reasonably
expected outcomes estimated to be from $18 million to $52
million. Phelps Dodge has reserved $20 million for the possible
remediation work at the Langeloth site representing the most
likely point within the range of estimates.

At December 31, 2000, the cost range for reasonably
possible outcomes for all reservable environmental remediation
sites other than Pinal Creek and Langeloth was estimated to be
from $146 million to $226 million, of which $158 million has
been reserved. Work on these sites is expected to be
substantially completed in the next several years, subject to
inherent delays involved in the remediation process.

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.

Phelps Dodge has a number of sites that are not the subject of
an environmental reserve because it is not probable that a
successful claim will be made against the Company for those
sites, but for which there is a reasonably possible likelihood
of an environmental remediation liability. At December 31,
2000, the cost range for reasonably possible outcomes for all
such sites was estimated to be from $12 million to $45 million.
The liabilities arising from potential environmental obligations
that have not been reserved at this time may be material to the
results of any single quarter or year in the future. Management,
however, believes the liability arising from potential
environmental obligations is not likely to have a material
adverse effect on the Companys liquidity or financial
position as such obligations could be satisfied over a period of
many years.

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
Matters and PD Industries  Environmental
Matters. The estimates given in those discussions of the
capital expenditures to comply with environmental laws and
regulations in 2001 and 2002, and the expenditures in 2000, are
separate from the reserves and estimates described above.

The Environmental, Health and Safety Committee of the Board of
Directors comprises four non-employee directors. The Committee
met four times in 2000 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.



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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.

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        



---



##### Table of Contents



-26-

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 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.



---



##### Table of Contents



-27-



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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. 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
	for-



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##### Table of Contents



-28-

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | mer 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | 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



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##### Table of Contents



-29-

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 Company has entered into a Consent Decree with the
Connecticut Department of Environmental Protection
(CDEP) regarding purported violations of state air
emissions limitations associated with the Phelps Dodge Norwich
rod mill in Norwich, Connecticut. Under the terms of the Consent
Decree, the Company will pay a penalty of $500,000, perform
environmental studies on environmental impacts near the rod
mill, fund a supplemental environmental project to be
administered by CDEP, and will undergo further testing of the
rod mills newly installed state-of-the-art air pollution
control equipment.

IV. On October 1, 1997, 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. On
September 6, 2000, EPA also issued a NOV to Phelps Dodge
Sierrita for alleged violations of Prevention of Significant
Deterioration permitting requirements, and New Source
Performance Standards under the federal Clean Air Act. No action
has been filed at this time, and the Company has asserted
defenses to the NOVs in its response to EPA.

V. 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. The Company has now completed all requirements of
the Consent Decree and has filed notice with EPA to begin the
termination process.

VI. In 2000, the Pinal Creek Group, comprising Phelps Dodge
Miami, Inc. (a wholly owned subsidiary of the Company) and other
companies, continued remediation of groundwater quality in the
shallow alluvial aquifers along Pinal Creek near Miami, Arizona.
The remediation 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 action is consistent with the National
Contingency Plan prepared by EPA as required by CERCLA. The
ongoing remediation program has resulted in continued
improvement of the water quality in the area. In
November 1997, Phelps Dodge Miami, Inc., 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 Phelps Dodge Miami, Inc. 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 $129 million remained in
the Companys Pinal Creek remediation reserve at
December 31, 2000. Phelps Dodge Miami, Inc. has commenced
contribution litigation against other parties involved in this
matter and has asserted claims against certain of its past
insurance carriers. While significant recoveries may be
achieved, the Company cannot reasonably estimate the amount and,
therefore, has not taken potential recoveries into consideration
in the recorded reserve.

VII. On February 28, 2000, Cobre Mining Company (Cobre)
received an Administrative Order (Docket No. CWA-6 1014-00,
the Order) from EPA. The Order alleges violations of
the Clean Water Act, requires Cobre to deliver a response
stating the steps it has taken to address each of the incidents
leading to the alleged violations, and requires Cobre to show
cause why no further action is necessary. Cobre has submitted
its response to EPA and is prepared to construct certain storm
water control upgrades as part of that response.

VIII. The Companys wholly owned subsidiary, Cyprus Amax
Minerals Company (Cyprus), is the plaintiff in an action
entitled Cyprus Amax



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##### Table of Contents



-30-



IX. In September 2000, RAG American Coal Company
(RAG) filed a complaint against Cyprus Amax Minerals
Company and Amax Energy Inc. (Cyprus) in the Supreme Court of
New York, County of New York (RAG American Coal
Company v. Cyprus Amax Minerals Company and Amax Energy
Inc., Index No. 00-604200). The complaint alleges
claims relating to breach of contract, fraud, negligent
misrepresentation, and negligence arising from alleged
inaccuracies in financial statements relating to the sale by
Cyprus of its coal subsidiary to RAG in June 1999. The
complaint seeks damages in the amount of $100 million under the
fraud claim and $115 million under each of the other claims.
Cyprus has filed a motion to dismiss, which has been fully
briefed and remains pending.






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


No matters were submitted during the fourth quarter of 2000 to a
vote of security holders, through solicitation of proxies or
otherwise.






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, 2001, the executive officers of Phelps Dodge
Corporation were as follows:

|                       |  |        |    |          |  |                                                               |  |  |      |  |  | 
|---------------------- |  | ------ | -- | -------- |  | ------------------------------------------------------------- |  |  | ---- |  |  | 
|                       |  | Age    |    |          |  | Officer of                                                   
|                       |  | at     |    |          |  | the Corporation                                              
|Name                   |  | 3/1/01 |    | Position |  | since                                                        
|                       |  |        |    |          |  |                                                              
|J. Steven Whisler      |  |        | 46 |          |  | Chairman of the Board, President and Chief Executive Officer  |  |  | 1987 | 
|Manuel J. Iraola       |  |        | 52 |          |  | Senior Vice President; President, Phelps Dodge Industries     |  |  | 1995 | 
|Timothy R. Snider      |  |        | 50 |          |  | Senior Vice President; President, Phelps Dodge Mining Company |  |  | 1997 | 
|S. David Colton        |  |        | 45 |          |  | Senior Vice President and General Counsel                     |  |  | 1998 | 
|Arthur R. Miele        |  |        | 59 |          |  | Senior Vice President, Marketing                              |  |  | 1987 | 
|Kalidas V. Madhavpeddi |  |        | 45 |          |  | Senior Vice President, Business Development                   |  |  | 1999 | 
|Ramiro G. Peru         |  |        | 45 |          |  | Senior Vice President and Chief Financial Officer             |  |  | 1995 | 
|David L. Pulatie       |  |        | 59 |          |  | 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. 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.

Mr. Madhavpeddi was elected Senior Vice President, Business
Development in November 2000. He was elected Vice
President, Business Development in November 1999. Prior to
that time Mr. Madhavpeddi was Vice President, Business
Development of Phelps Dodge Mining Company, a position he held
since 1995.



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##### Table of Contents



-31-




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 52
and 53 of this report.




Item 6. Selected Financial Data

(in millions except per share amounts)

|                                   |                                |      |         |      |  |      |         |       |   |      |         |      |  |  |         |      |  |  |         |      | 
|---------------------------------- | ------------------------------ | ---- | ------- | ---- |  | ---- | ------- | ----- | - | ---- | ------- | ---- |  |  | ------- | ---- |  |  | ------- | ---- | 
|                                   |                                | 2000 |         | 1999 |  | 1998 |         | 1997  |   | 1996
|                                   |                                |      |         |      |  |      |         |       |   |     
|Sales and other operating revenues |                                | $    | 4,525.1 |      |  |      | 3,114.4 |       |   |      | 3,063.4 |      |  |  | 3,914.3 |      |  |  | 3,786.6 |     
|                                  
|                                  
|                                  
|                                  
|Net income (loss)(a)               |                                | $    | 29.0    |      |  |      | (257.8  | )     |   |      | 190.9   |      |  |  | 408.5   |      |  |  | 461.8   |     
|                                  
|                                  
|                                  
|                                  
|                                   | Per common share  basic (b)   |      | $       | 0.37 |  |      |         | (4.19 | ) |      |         | 3.28 |  |  |         | 6.68 |  |  |         | 7.02 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Per common share  diluted (b) |      | $       | 0.37 |  |      |         | (4.19 | ) |      |         | 3.26 |  |  |         | 6.63 |  |  |         | 6.98 | 
|                                  
|                                  
|                                  
|                                  
|Total assets                       |                                | $    | 7,830.8 |      |  |      | 8,229.0 |       |   |      | 5,036.5 |      |  |  | 4,965.2 |      |  |  | 4,816.4 |     
|                                  
|                                  
|                                  
|                                  
|Long term debt                     |                                | $    | 1,963.0 |      |  |      | 2,172.5 |       |   |      | 836.4   |      |  |  | 857.1   |      |  |  | 554.6   |     
|                                  
|                                  
|                                  
|                                  
|Dividends per common share         |                                | $    | 2.00    |      |  |      | 2.00    |       |   |      | 2.00    |      |  |  | 2.00    |      |  |  | 1.95    |     



|    |                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 32 through 53 of this report.






Item 8. Financial Statements and Supplementary Data


The information called for in Item 8 appears on
pages 54 through 86 of this report.






Item 9. Disagreements on Accounting and Financial
Disclosure


None.



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##### Table of Contents



-32-




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;
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) diesel, electricity and natural gas; currency
fluctuations; 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 2000, consolidated earnings were $72.3 million, or
92 cents per common share, before non-recurring items. (All
references to per share earnings or charges are based on diluted
earnings per share.) Non-recurring items and their impact on
earnings per share are illustrated in the following table:




|                                                    |                                        |          |       |         |   |  |       |       |  
|--------------------------------------------------- | -------------------------------------- | -------- | ----- | ------- | - |  | ----- | ----- | -
|                                                    |                                        | $ in     |       |        
|                                                    |                                        | millions |       | $/share
|                                                    |                                        |          |       |        
|2000 full-year earnings before non-recurring items  |                                        | $        | 72.3  |         |   |  | 0.92  |      
|                                                    |                                        |          |       |         |   |  |       |      
|After-tax, non-recurring items: *                   |                                        |          |       |         |   |  |       |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | 2000 and 1999 restructuring plans      |          |       | (56.4   | ) |  |       | (0.72 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Income tax refund and related interest |          |       | 10.1    |   |  |       | 0.13  |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Willow Creek insurance settlement      |          |       | 3.0     |   |  |       | 0.04  |  
|                                                    |                                        |          |       |         |   |  |       |      
|Total non recurring items                           |                                        |          | (43.3 | )       |   |  | (0.55 | )    
|                                                    |                                        |          |       |         |   |  |       |      
|2000 full year net income after non recurring items |                                        | $        | 29.0  |         |   |  | 0.37  |      
|                                                    |                                        |          |       |         |   |  |       |      




|  |                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------
|* | Please see Note 3 to the consolidated
	financial statements for further discussion of these
	non-recurring items.




In the first quarter of 2000, non-recurring, pre-tax charges of
$2.1 million ($1.3 million, or 1 cent per share after
taxes) were recognized by PD Industries in conjunction with
the June 30, 1999, restructuring plan.

On June 27, 2000, we announced a plan to reduce operating
costs and restructure operations at our mining and wire and
cable segments. This plan comprised the following actions:

(i) Higher-cost production was curtailed at the Miami
copper mine in Arizona and production was reduced at the
Henderson molybdenum mine in Colorado resulting in a total
workforce reduction of 175 full-time employees beginning in the
second quarter (and substantially completed by year end). These
actions resulted in a pre-tax charge of $5.2 million.

(ii) Production ceased at two wire and cable plants in
Venezuela in the second quarter due to low forecast plant
utilization levels as a result of significantly reduced
infrastructure spending in the Latin America region. These plant
closures resulted in a total non-recurring, pre-tax charge of
$25.7 million, consisting of an impairment in the carrying value
of property, plant and equipment and other assets of $19.2
million, plant dismantling costs of $2.6 million, employee
severance of $2.2 million and impairment of goodwill of $1.7
million. In addition, working capital writedowns of $4.2 million
were recorded to cost of products sold as a result of the
decision to close the plants.

(iii) The closure of a telephone cable operation in El
Salvador in the fourth quarter of 2000 was



---



##### Table of Contents



-33-



(iv) A non-recurring, pre-tax charge of $5.8 million was
recognized for our wire and cable operations in Austria as a
result of the long-term impact of continuing extremely
competitive pricing conditions in Europe. The continuing
competitive pricing environment led to a determination that we
should assess the recoverability of our Austrian wire and cable
asset values. Our assessment of the carrying value of the
property, plant and equipment of $4.2 million and the goodwill
balance of $2.8 million indicated impairments of $3.0 million
and $2.8 million, respectively.

(v) A charge of $7.2 million to miscellaneous income and
expense was recognized to reflect the impairment of our
40 percent equity interest in a wire and cable operation in
the Philippines. The impairment was based upon an analysis of
future cash flows of the operation, continuing economic
uncertainty in the Philippines and the erosion of our strategic
and operating influence. These factors indicate that there is
little likelihood of recovery on our investment and management
is evaluating available alternatives.

In total, these actions resulted in second quarter
non-recurring, pre-tax charges of $41.3 million ($36.9 million,
or 47 cents per share, after taxes), a $6.4 million charge
to cost of products sold representing the working capital
component of the above actions ($6.4 million, or 8 cents
per share, after taxes), and a $7.2 million charge to
miscellaneous income and expense ($7.2 million, or 9 cents
per share, after taxes).

In addition to the above items, during the 2000 second quarter
we recognized certain ongoing costs of $2.9 million ($1.9
million, or 2 cents per share, after taxes and minority
interests) relating to the June 30, 1999, restructuring
plan.

In the third quarter of 2000, non-recurring, pre-tax charges of
$2.6 million ($1.7 million, or 2 cents per share, after
taxes) were recognized by PD Industries in conjunction with the
June 27, 2000, restructuring plan. In addition, a
non-recurring, pre-tax charge of $0.7 million ($0.4 million, or
1 cent per share, after taxes) was recognized by PD Mining
in the third quarter of 2000 in relation to the curtailment of
copper production at the Miami mine.

In the fourth quarter of 2000, PD Industries recognized
non-recurring, pre-tax charges of $2.2 million ($1.3 million, or
2 cents per share, after taxes) and a positive working
capital adjustment of $0.8 million ($0.8 million, or 1 cent
per share, after taxes) in connection with previously announced
restructuring plans.

In addition to the above items, we received in the 2000 second
quarter a tax refund of $6.5 million and related interest income
of $5.8 million ($3.6 million, or 4 cents per share, after
taxes) resulting from the settlement of the Companys 1990
and 1991 income tax audits. In the fourth quarter of 2000, the
Company recognized $4.5 million ($3.0 million, or 4 cents
per share, after taxes) of miscellaneous income relating to the
settlement of a business interruption insurance claim by a
former Cyprus Amax coal property.

In 1999, consolidated earnings were $21.7 million, or
35 cents per common share, before non-recurring items.
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 income 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 PD Mining and $21.7 million at PD Industries. The PD
Mining impairments included the write down of the Hidalgo



---



##### Table of Contents



-34-



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 18 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
carbon black plant in the Philippines, and selling a non-core
South African fluorspar mining unit. These actions resulted in
non-recurring, pre-tax charges in 1999 of $36.6 million at PD
Mining, $42.2 million at the wire and cable segment ($1.9
million of which was charged to non-operating expense) and $17.7
million at Columbian Chemicals. The minority interest add-back
to the restructuring reserve totaled $2.2 million at the wire
and cable segment and $0.2 million at Columbian Chemicals.

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.

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




|                                           |  |      |         |      |  |      |         |   |  |  |         | 
|------------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | 
|                                           |  | 2000 |         | 1999 |  | 1998
|                                           |  |      |         |      |  |     
|Sales and other operating revenues         |  | $    | 4,525.1 |      |  |      | 3,114.4 |   |  |  | 3,063.4 | 
|                                          
|                                          
|                                          
|                                          
|Operating income (loss)                    |  | $    | 237.0   |      |  |      | (315.6  | ) |  |  | 422.7   | 
|                                          
|                                          
|                                          
|                                          
|Net income (loss)                          |  | $    | 29.0    |      |  |      | (257.8  | ) |  |  | 190.9   | 
|                                          
|                                          
|                                          
|                                          
|Net income (loss) per common share basic   |  | $    | 0.37    |      |  |      | (4.19   | ) |  |  | 3.28    | 
|                                          
|                                          
|                                          
|                                          
|Net income (loss) per common share diluted |  | $    | 0.37    |      |  |      | (4.19   | ) |  |  | 3.26    | 




Sales

Consolidated 2000 revenues were $4,525.1 million, compared with
$3,114.4 million in 1999. The 2000 increase principally resulted
from a full year of sales from the Cyprus Amax copper and
molybdenum properties ($674 million and $191 million,
respectively), higher copper prices ($394 million), increased
wire and cable sales due to a higher level of infrastructure
development worldwide ($69 million) and increased carbon black
sales largely due to the pass through of higher feedstock costs
to customers ($55 million). The $51.0 million increase in
revenues in 1999 versus 1998 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



---



##### Table of Contents



-35-



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, 2000. We principally base our selling price on
the COMEX spot price per pound of copper cathode, which averaged
84 cents in 2000, 72 cents in 1999 and 75 cents
in 1998. The COMEX price averaged 83 cents per pound for
the first two months of 2001, and closed at 84 cents on
March 6, 2001. 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 1cent 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 the prevailing
spot price per pound of copper cathode at the end of each
period. 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 2001 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 Bulletinfor technical
grade molybdenum or ferromolybdenum. The Platts Metals
Weekmolybdenum technical grade (dealer oxide) price
averaged $2.56 per pound in 2000, compared with $2.66 per pound
in 1999. Prices for chemical products are generally less
directly based on the previously noted reference prices. 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.

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.



---



##### Table of Contents



-36-

At December 31, 2000, we had futures and swap contracts for
approximately 119 million pounds of copper with a net hedge
value of $103 million and a total face value of approximately
$106 million. At that date, we had $2 million in losses 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 1999, we had
futures and swap contracts in place for approximately 111
million pounds of copper at a net hedge value of $87 million and
a total face value of approximately $125 million. We had $7
million in deferred, unrealized gains at that time. At
December 31, 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.

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 2000, we would have
had a net loss from our copper futures contracts of
approximately $10 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 2000 production, we had
a total of 110 million pounds of copper cathode production
protected through contracts that effectively ensured minimum
(approximately 72 cents) and maximum (approximately 95 cents)
prices per pound. The minimum and maximum prices are based upon
average LME prices for the protection period. These contracts
expired without payment on December 31, 2000. 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 on December 31, 1999. We did not have any
outstanding copper price protection contracts at the end of
1998, 1999 and 2000.

Copper Scrap Purchase Hedging

From time to time, Phelps Dodge may purchase copper scrap as a
raw material to be processed eventually into rod for sale to
customers. The copper scrap is purchased from third parties at a
copper content price different from the price contracted with
eventual rod customers. To mitigate the copper price risk
resulting from the difference between the purchase and sales
price of the purchased copper, Phelps Dodge enters into a hedge
program. The hedge program involves the sale of an
over-the-counter swap priced at the COMEX average price in the
month of scrap delivery. In the month that the copper rod
associated with the scrap purchase is sold, the swap is
liquidated at the COMEX average price in the month of the copper
rod sale. At December 31, 2000, we had swap contracts for
approximately 3 million pounds of scrap copper with a net hedge
and total face value of approximately $2.5 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. We
did not have any outstanding copper scrap purchase hedge
contracts at the end of 1998 and 1999.

Aluminum Hedging

During 2000, our Brazilian wire and cable operation entered into
aluminum swap contracts with a financial institution to lock in
the cost of aluminum ingot needed in manufacturing aluminum
cable contracted by customers. At December 31, 2000, we had
swap contracts for approximately 9 million pounds of aluminum
with a net hedge value of approximately $6 million and a total
face value of approximately $8 million. At the end of the year,
these contracts did not have any material gains or losses that
were not recorded in our financial statements. A sensitivity
analysis of our aluminum futures contracts indicates that a
hypothetical 10 percent unfavorable change in aluminum
prices at the end of 2000 would have resulted in a loss of
approximately $0.5 million. That loss would have been virtually
offset by a similar amount of gain on the related customer
contracts. 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.

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



---



##### Table of Contents



-37-



At December 31, 2000, 1999 and 1998, we had net hedge and
total face values of approximately $16 million, $34 million and
$44 million, respectively, in forward exchange contracts to
hedge intercompany loans between our international subsidiaries
or foreign currency exposures with our trading partners. 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, 2000.

At year-end 2000, our foreign currency protection contracts
included the British pound, euro, Japanese yen 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 $2 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, 2000, we had no
currency swap contracts in place. At year-end 1999, we had
currency swap contracts in place with an approximate net hedged
and total face value of $21 million. At December 31, 1998,
we had currency swap contracts in place with an approximate net
hedged value of $31 million and 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.

In addition, we are exposed 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 2000 and 1999, we had
interest rate swap contracts in place with an approximate net
hedged and total face value of $396 million and $485 million,
respectively. At December 31, 2000, we had $7 million in
unrealized losses on these contracts. At the end of 2000, we
prepared an analysis to determine the sensitivity of our
interest rate swap contracts to changes in interest rates. A
hypothetical interest rate move against our interest rate swaps
of 1 percent (or 100 basis points) would have resulted in a
potential loss of approximately $10 million over the life of the
swap.

Diesel Fuel Price Protection Program

Phelps Dodge purchases large quantities of diesel fuel to
operate its mine sites as an input to the manufacturing process.
Price volatility of diesel fuel impacts the cost of producing
copper cathode and other copper products for our customers. The
objective of the diesel fuel price protection program is to
protect against a significant upward movement in diesel fuel
prices while retaining the flexibility to participate in any
downward price movement.

To implement these objectives, we may purchase
out-of-the-money (OTM) call options, settled at the average
price, for diesel fuel. Purchase of these calls protects us
against significant upward movement in diesel fuel prices while
allowing us full participation in downward movements. The
physical purchases and the options are both priced based on
Platts Gulf Coast, which eliminates pricing basis risk
between the hedge and the hedged item. We do not purchase diesel
fuel options for speculative purposes.

At December 31, 2000, we had option contracts to protect
first quarter 2001 diesel fuel consumption of approximately 8
million gallons with a net hedged and total face value of $7
million, for which we paid a premium of approximately $0.2
million. We did not have any significant gains or losses at
year-end that had not been recorded in our financial statements.
We did not have any diesel fuel price protection option
contracts at the end of 1998 or 1999.



---



##### Table of Contents



-38-

Natural Gas Price Protection Program

Phelps Dodge purchases substantial quantities of natural gas to
supply its operations primarily as an input to generate
electricity. Price volatility of natural gas impacts the cost of
producing copper cathode and other copper products for our
customers. The objective of the natural gas price protection
program is to protect against a significant upward movement in
natural gas prices while retaining the flexibility to
participate in downward price movements.

To implement these objectives, we may purchase OTM call options
or OTM collars (simultaneous call option purchase and put option
sale), settled at the average price, for natural gas. Purchase
of these call options protects us against significant upward
movement in natural gas prices while allowing us full
participation in downward movements in natural gas prices.
Purchase of collars provides us greater protection against
significant upward movement in natural gas prices, but limits
participation in downward movements in prices. The physical
purchases and the options are both priced based on San Juan
Basin, which eliminates pricing basis risk between the hedge and
the hedged item. We do not purchase or sell natural gas options
for speculative purposes.

In January 2001 we purchased both OTM call options and
collars for natural gas, covering approximately 10 percent
and 5 percent respectively, of our planned natural gas
consumption for the Arizona, New Mexico and Texas operations for
the months of April through October 2001. We did not have any
natural gas price protection programs in place at the end of
1998, 1999 or 2000.

Business Segments

Results for 2000, 1999 and 1998 can be meaningfully compared by
separate reference to our reporting divisions, PD Mining
and PD Industries. PD Mining 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. PD Industries
includes our specialty chemicals segment and our wire and cable
segment. 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. 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 20 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,
copper sulfate, 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.



---

|                                                                        |            |        |         |         |  |      |         |       |  |         |      
|----------------------------------------------------------------------- | ---------- | ------ | ------- | ------- |  | ---- | ------- | ----- |  | ------- | -----
|                                                                        |            | 2000 * |         | 1999 *  |  | 1998
|                                                                        |            |        |         |         |  |     
|Copper (from own mines  thousand tons) **                              |            |        |         |         |  |      |         |       |  |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Production |        |         | 1,200.3 |  |      |         | 890.1 |  |         | 874.0
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Sales      |        |         | 1,200.6 |  |      |         | 884.2 |  |         | 876.3
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|COMEX average spot copper price per pound  cathodes                    |            | $      | 0.84    |         |  |      | 0.72    |       |  | 0.75   
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Molybdenum production
	(million pounds) **                              |            |        | 51.1    |         |  |      | 8.1     |       |  | 1.0    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Metals Week  average technical grade
	molybdenum oxide price per pound |            | $      | 2.56    |         |  |      | 2.66    |       |  | 3.42   
|(millions of dollars)                                                  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Sales and other operating revenues unaffiliated customers               |            | $      | 3,073.7 |         |  |      | 1,786.6 |       |  | 1,667.7
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Operating income (loss) ***                                             |            | $      | 243.3   |         |  |      | (301.0  | )     |  | 110.3  




|   |                                                                                                                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  | 2000 and 1999 includes the results of Cyprus Amax
	since the effective date of acquisition, October 16,
	1999.                                                                                                                                                                       
|  
|** | Worldwide copper and molybdenum 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



---



##### Table of Contents



-39-

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 (copper only), and (iv) the
	49 percent interest in the El Abra copper mining operation in
	Chile held by Corporacion Nacional del Cobre de Chile (CODELCO).
	(copper only).

|                                     |                           |      |       |      |       |      |      
|------------------------------------ | ------------------------- | ---- | ----- | ---- | ----- | ---- | -----
|                                     |                           | 2000 |       | 1999 |       | 1998
|                                     |                           |      |       |      |       |     
|Excluded production (thousand tons): |                           |      |       |      |       |     
|                                    
|                                    
|                                    
|                                    
|                                     | Morenci  for Sumitomo    |      | 62.6  |      | 72.0  |      | 78.4 
|                                    
|                                    
|                                    
|                                    
|                                     | Chino  for Heisei        |      | 44.7  |      | 43.3  |      | 52.9 
|                                    
|                                    
|                                    
|                                    
|                                     | Candelaria  for Sumitomo |      | 44.9  |      | 50.0  |      | 47.4 
|                                    
|                                    
|                                    
|                                    
|                                     | El Abra  for CODELCO     |      | 106.5 |      | 25.9  |      |     
|                                     |                           |      |       |      |       |     
|                                     |                           |      | 258.7 |      | 191.2 |      | 178.7
|                                     |                           |      |       |      |       |     



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*** | Operating income for 2000 includes non-recurring,
	pre-tax charges of $5.8 million for costs associated with
	curtailments and indefinite closures. Operating loss 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. (See Note 3 to the consolidated
	financial statements.)




PD Mining  Operating Income



---

|                                                  |  |      |       |      |  |      |        |   |  |  |       |  
|------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ------ | - |  |  | ----- | -
|($ in millions)                                   |  | 2000 |       | 1999 |  | 1998
|                                                  |  |      |       |      |  |     
|Operating income before non-recurring items       |  | $    | 249.1 |      |  |      | 84.2   |   |  |  | 115.8 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Pre-tax, non-recurring items                      |  |      | (5.8  | )    |  |      | (385.2 | ) |  |  | (5.5  | )
|                                                  |  |      |       |      |  |      |        |   |  |  |       |  
|Operating income (loss) after non-recurring items |  | $    | 243.3 |      |  |      | (301.0 | ) |  |  | 110.3 |  
|                                                  |  |      |       |      |  |      |        |   |  |  |       |  




In 2000, our PD Mining segment reported operating income of
$249.1 million before $5.8 million of pre-tax, non-recurring
charges. The pre-tax, non-recurring charges of $5.8 million
comprised restructuring charges associated with the curtailment
of production at the Miami copper mine in Arizona ($1.5 million)
and the Henderson molybdenum mine in Colorado ($4.3 million).

The 2000 increase in operating income before non-recurring items
of $164.9 million was principally a result of higher average
copper prices ($288 million) and increased sales volumes ($66
million) resulting from the acquisition of Cyprus Amax,
partially offset by higher copper production costs ($139
million) largely as a result of higher energy-related costs.

On May 8, 2000, as a result of an oversupply of molybdenum
and continued low prices in the world market, Phelps Dodge
announced a plan to curtail molybdenum production by
approximately 20 percent and reduce its workforce by
approximately 130 workers at its Henderson mine in Colorado. The
curtailment of production resulted in a non-recurring, pre-tax
charge of $4.3 million for severance-related costs.

On June 27, 2000, the Company announced a mine plan
incorporating a reduction in mining activities at its Miami,
Arizona, copper mine. The new mine plan temporarily suspended
stripping in a higher  cost portion of the mine and
will allow the redistribution of a variety of mining equipment,
including shovels and haul trucks, to other Phelps Dodge mining
operations to reduce overall capital expenditures. The reduction
of mining activities resulted in a non-recurring, pre-tax charge
of $1.5 million for equipment relocation and severance-related
costs.

In 2000, copper unit production costs were adversely impacted by
the effects of abnormally high spot prices for energy. In total,
higher energy costs increased our 2000 copper unit production
costs by approximately 4 cents per pound relative to those
experienced in 1999.

Energy, including electricity, diesel fuel and natural gas,
represents a significant portion of the production costs for
Phelps Dodge operations. During 2000, the Companys Arizona
and New Mexico operations were adversely affected by
significantly higher costs for electricity, diesel fuel and
natural gas. In 2000, approximately 10 percent of the
Companys Arizona and New Mexico power requirements were
satisfied by internal generation. Approximately 63 percent of
the Companys 2000 power requirement in Arizona and New
Mexico was supplied under fixed price contracts. The remaining
power requirement (27 percent) was satisfied by spot markets
purchases.

Beginning in the spring of 2000, the combination of a power
supply/demand imbalance in California, higher natural gas
prices, a drought in the Pacific Northwest (a region that has
provided a significant amount of hydroelectric power to
California and the Southwest) and service interruptions at
several California power plants due to both scheduled and
unscheduled maintenance, caused a shortage of electricity in the
western United States that resulted in extremely high spot
electricity prices. There was little respite in spot electricity
prices for the remainder of the year as unseasonally cold winter
tempera-



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##### Table of Contents



-40-



During 2000, diesel fuel prices were adversely impacted by
rising global oil prices and the shortage of refining capacity
in certain parts of the United States. To mitigate the
Companys exposure to increases in diesel fuel prices,
Phelps Dodge entered into a diesel fuel price protection program
in December 2000. The objective of the program is to protect
against a significant upward movement in diesel fuel prices
while retaining the flexibility to participate in any favorable
price movement. To implement these objectives, the Company
purchased OTM call options settled at the average price for the
option period representing approximately 50 percent of
planned first quarter 2001 diesel fuel consumption for the
Arizona and New Mexico properties. Purchase of these call
options allows for full participation in downward price
movements.

Natural gas prices in the United States also increased
significantly during 2000 due to low levels of supply resulting
from a decade of relatively low natural gas prices that
depressed domestic exploration activities and failed to maintain
domestic production levels. To mitigate the Companys
exposure to further increases in the price of natural gas,
Phelps Dodge entered into a natural gas price protection program
in January 2001. The objective of the program is to protect
against a significant upward movement in natural gas prices
while retaining the flexibility to participate in any favorable
price movement. To implement these objectives, the Company
purchased OTM call options for natural gas covering
approximately 40 percent of its budgeted natural gas
consumption for the Arizona, New Mexico and Texas operations for
the months of April through October 2001. Purchase of these
call options allows for full participation in downward price
movements.

Copper production costs generally were stable for the two-year
period ended December 31, 1999, primarily as a result of
ongoing cost-containment programs and high levels of production
of low-cost cathode copper at our SX/ EW plants in Arizona, New
Mexico, Peru and Chile. In 2000, we produced a total of 806,300
tons of cathode copper at our SX/ EW facilities, (including
165,400 tons for minority participants) compared with 511,500
tons in 1999 (including 87,200 tons for minority participants).
The SX/ EW method is a cost-effective process of extracting
copper from certain types of ores.

Our international operations primarily sell copper production in
concentrate or cathode form. On the other hand, much of our U.S.
copper production, together with additional copper purchased
from others, is converted and sold as continuous-cast copper
rod. In addition, U.S. operations sell most of our molybdenum
production in a variety of metallurgical and chemical products.
In 2000, operations outside the United States provided 10
percent of PD Minings sales, compared with 14 percent in
1999 and 11 percent in 1998. During the year, operations outside
the United States contributed 29 percent of the segments
operating income, compared with a contribution of 67 percent and
a reduction of operating income of 9 percent before
non-recurring charges and provisions in 1999 and 1998,
respectively.

Operating income in 1999 was $84.2 million, before $385.2
million of non-recurring, pre-tax charges. The pre-tax,
non-recurring items were as follows: $320.4 million of asset
impairments including the writedown 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), mine development at the Copper Basin project 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 $31.6 million decrease in 1999 operating income before
non-recurring items reflected lower average copper prices ($53
million), partially offset



---



##### Table of Contents



-41-



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 in New Mexico and the
indefinite closures of operations at our Ojos del Salado
operation in Chile and Cobre Mining Company in New Mexico.

PD Mining  Operations Update

After a review of the near-term market outlook for energy prices
and a thorough analysis of the molybdenum market, the Company
announced on January 25, 2001, that it would notify all 2,350
employees of its Chino and Tyrone, New Mexico, and Sierrita,
Arizona, operations of the possibility of production
curtailments. The possible production curtailments are
attributable primarily to high energy-related costs at the New
Mexico facilities, and a combination of low molybdenum prices
and high energy costs at the Sierrita facility. All affected
employees and the unions representing some of the employees at
Chino have received Worker Adjustment and Retraining
Notification (WARN) Act letters advising them that
production curtailments could become effective following the
legally required, 60-day notification period. The Company will
closely monitor the energy and molybdenum markets throughout the
60-day period to determine whether curtailment actions may be
necessary at any of the three facilities.

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 producing copper and molybdenum concentrate, 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, an oxide leach system
with an SX/ EW plant producing copper cathodes; (vi) a
51 percent interest in the El Abra mine in northern Chile
consisting of an open-pit mine, crushing facility, on/off leach
pads 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 molybdenum mine in Colorado consisting of
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.

In September of 1999, the Company announced plans to reduce
production costs of copper at its Morenci, Arizona mine by
converting all production to a mine-for-leach process through
expansion of SX/ EW facilities. The $220 million conversion was
completed in early 2001 and will allow the Morenci mine to
sustain copper production rates consistent with its current
annual rate. Cost reductions are achieved by eliminating the
process steps of concentrating, smelting and refining in
producing copper. The conversion included expansion of the
mines current crushing and conveying system, installation
of mobile stackers that disperse crushed ore on leach
stockpiles, expansion of existing solution extraction facilities
and construction of a new electrowinning tankhouse.

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 conversion of
Morenci to a mine-for-leach operation, the Hidalgo smelter and
the Metcalf concentrator at Morenci were written down. 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



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##### Table of Contents



-42-



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 remains on care-and-maintenance status
at March 6, 2001.

On February 3, 1998, we acquired Cobre. The primary assets
of Cobre include 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 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, reducing copper production by 35,000 tons per
year. All Cobre operations remained on care-and-maintenance
status at March 6, 2001.

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 2000 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 $39.7 million on
worldwide exploration during 2000, compared with $41.0 million
in 1999 and $42.0 million in 1998. Approximately 23 percent
of the 2000 expenditures occurred in the United States with 17
percent being spent at our mine sites. This compares with
25 percent in 1999 (19 percent at mine sites) and
26 percent in 1998 (19 percent at mine sites). The
balance of exploration expenditures was spent principally in
Australasia, Brazil, Chile, Mexico, Canada and Peru.

During 2000, exploration efforts continued at our existing
copper operations. A major drill program to delineate
mineralized material for the first phase of mining was in
progress in the Garfield area at Morenci. Exploration programs
were initiated at Candelaria, El Abra, Cerro Verde, Sierrita and
Miami. In addition, exploration for additional leach material
also continued at Tyrone.

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 primary sulfide material at an
estimated grade of 0.65 percent copper.

Internationally, Mineração Serra do Sossego S.A., a
50/50 joint venture with Companhia Vale do Rio Doce
(CVRD) located in Brazil, completed a prefeasibility study
early in 2000. A final feasibility study to further define the
quantity of mineralized material and economics of a potential
copper/gold project is scheduled for completion in the second
quarter of 2001.

Work continues on resource development and metallurgical review
to support a feasibility study on our 70 percent owned
Piedras Verdes property in Sonora, Mexico. Strategic options for
this project are being evaluated. The results of a
prefeasibility study indicate leachable mineralized material of
290 million tons at 0.33 percent copper.

In 2000, 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 regulatory and
permitting issues.

Work continued on the Kansanshi project in Zambia and a
prefeasibility study was completed. Results were being evaluated
at year-end to determine how to proceed with the project. The
prefeasibility results indicate 298 million tons of mineralized
material at a grade of 1.28 percent copper.

PD Mining  Other Matters

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



---



##### Table of Contents



-43-



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. Our wire and
cable segment consists of three worldwide product line
businesses including magnet wire, energy and telecommunication
cables, and specialty conductors. In December 2000, Phelps
Dodge announced its intention to explore strategic alternatives
for, including the potential sale of, PD Industries.




|                                                             |                     |      |         |       |   |      |         |       |   |  |         |       | 
|------------------------------------------------------------ | ------------------- | ---- | ------- | ----- | - | ---- | ------- | ----- | - |  | ------- | ----- | 
|                                                             |                     |      |         |      
|($ in millions)                                              |                     |      |         |      
|                                                             |                     | 2000 |         | 1999  |   | 1998
|                                                             |                     |      |         |       |   |     
|Sales and other operating revenues (unaffiliated customers): |                     |      |         |       |   |      |         |       |   |  |         |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Specialty chemicals |      | $       | 598.4 |   |      |         | 543.0 |   |  |         | 454.6 | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Wire and cable      |      |         | 853.0 |   |      |         | 784.8 |   |  |         | 931.1 | 
|                                                             |                     |      |         |       |   |      |         |       |   |  |         |      
|                                                             |                     | $    | 1,451.4 |       |   |      | 1,327.8 |       |   |  | 1,385.7 |      
|                                                             |                     |      |         |       |   |      |         |       |   |  |         |      
|Operating income (loss):                                     |                     |      |         |       |   |      |         |       |   |  |         |      
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Specialty chemicals |      | $       | 88.1  |   |      |         | 92.5  |   |  |         | 87.6  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Wire and cable *    |      |         | (17.8 | ) |      |         | (42.8 | ) |  |         | 67.3  | 
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Other **            |      |         |      |   |      |         |      |   |  |         | 198.7 | 
|                                                             |                     |      |         |       |   |      |         |       |   |  |         |      
|                                                             |                     | $    | 70.3    |       |   |      | 49.7    |       |   |  | 353.6   |      
|                                                             |                     |      |         |       |   |      |         |       |   |  |         |      




|   |                                                                                                                                                                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  | 2000 includes a pre-tax charge of $41.0 million
        related to the Companys June  27, 2000, restructuring
        plan, $5.6 million for related working capital writedowns; and
        $5.0 million related to the Companys June 30, 1999,
        restructuring plan (see discussion of 1999 and 1998 operating
        income on page 45).
|  
|** | Other includes Accuride which was sold in 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.)                                                                                                                           




PD Industries reported sales of $1,451.4 million in 2000,
compared with $1,327.8 million in 1999. The increase principally
reflected higher average sales prices in the carbon black
segment as a result of the partial pass through to customers of
higher feedstock costs, partially offset by lower sales volumes.
The increase also reflected improved wire and cable segment
sales as a result of a higher level of infrastructure
development worldwide.

PD Industries  Operating Income




|                                                   |  |      |       |      |  |      |       |   |  |  |       | 
|-------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | 
|                                                   |  |      |       |     
|($ in millions)                                    |  |      |       |     
|                                                   |  | 2000 |       | 1999 |  | 1998
|                                                   |  |      |       |      |  |     
|Operating income before non-recurring items        |  | $    | 121.9 |      |  |      | 119.7 |   |  |  | 157.2 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Pre-tax, non-recurring items                       |  |      | (51.6 | )    |  |      | (70.0 | ) |  |  | 196.4 | 
|                                                   |  |      |       |      |  |      |       |   |  |  |       | 
|Operating income after non-recurring
        items |  | $    | 70.3  |      |  |      | 49.7  |   |  |  | 353.6 | 
|                                                   |  |      |       |      |  |      |       |   |  |  |       | 




Our PD Industries division reported operating income of $121.9
million in 2000 before non-



---



##### Table of Contents



-44-






|                                  |                                      |                 |      |      | 
|--------------------------------- | ------------------------------------ | --------------- | ---- | ---- | 
|                                  |                                      | ($ in millions)
|                                  |                                      |                
|June 30, 1999, restructuring plan |                                      | $               | 5.0  |     
|June 27, 2000, restructuring plan |                                      |                 |      |     
|                                 
|                                 
|                                 
|                                 
|                                  | Fixed asset and goodwill impairments |                 |      | 30.7 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Plant dismantling                    |                 |      | 2.6  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Employee severance                   |                 |      | 2.2  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Working capital write downs          |                 |      | 5.6  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Other                                |                 |      | 5.5  | 
|                                  |                                      |                 |      |     
|                                  |                                      | $               | 51.6 |     
|                                  |                                      |                 |      |     




Our PD Industries division reported operating income of $119.7
million in 1999 before non-recurring, pre-tax charges of $70.0
million. The non-recurring charges were as follows: $11.9
million of asset impairments to write down the value of our wire
and cable segments telecommunications assets in the fourth
quarter and $58.1 million for the June 30, 1999,
restructuring plan at both the wire and cable and specialty
chemicals segments. 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 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.

In 2000, operations outside the United States provided
63 percent of PD Industries sales, compared with
55 percent in 1999 and 53 percent in 1998. During the
year, operations outside the United States contributed
48 percent of PD Industries operating income,
compared with 59 percent in 1999 and 54 percent in 1998.

Specialty Chemicals  Operating Income




|                                             |  |      |      |      |  |      |       |   |  |  |      | 
|-------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ----- | - |  |  | ---- | 
|                                             |  |      |      |     
|($ in millions)                              |  |      |      |     
|                                             |  | 2000 |      | 1999 |  | 1998
|                                             |  |      |      |      |  |     
|Operating income before non-recurring
	items |  | $    | 88.1 |      |  |      | 110.2 |   |  |  | 87.6 | 
|                                            
|                                            
|                                            
|                                            
|Pre-tax, non-recurring items                 |  |      |     |      |  |      | (17.7 | ) |  |  |     | 
|                                             |  |      |      |      |  |      |       |   |  |  |      | 
|Operating income after non-recurring items   |  | $    | 88.1 |      |  |      | 92.5  |   |  |  | 87.6 | 
|                                             |  |      |      |      |  |      |       |   |  |  |      | 




Columbian Chemicals 2000 operating income decreased
primarily due to the effect of higher oil prices on feedstock
costs with only limited success in passing along these higher
costs to customers, and the unfavorable impact of weaker
European currencies.

Columbian Chemicals 1999 operating income before
non-recurring items was $22.6 million more than in 1998,
principally as a result of increased carbon black sales volumes
attributable to 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.

In the second quarter of 2000, we acquired the remaining
40 percent share in the carbon black manufacturing business
of Columbian Tiszai Carbon Ltd. in Hungary for $19.0 million,
bringing our total interest to 100 percent.

Production was discontinued at the Bataan, Philippines, facility
in November 1999, resulting 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,
Philippine Carbon Black Distribution Company, Inc., that will
market and distribute carbon blacks, principally from Columbian
Chemicals Korea, in the Philippines.

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



---



##### Table of Contents



-45-



Wire and Cable  Operating Income




|                                                  |  |      |       |      |  |      |       |   |  |  |      |  
|------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ---- | -
|                                                  |  |      |       |     
|($ in millions)                                   |  |      |       |     
|                                                  |  | 2000 |       | 1999 |  | 1998
|                                                  |  |      |       |      |  |     
|Operating income before non-recurring items       |  | $    | 33.8  |      |  |      | 9.5   |   |  |  | 69.6 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Pre-tax, non-recurring items                      |  |      | (51.6 | )    |  |      | (52.3 | ) |  |  | (2.3 | )
|                                                  |  |      |       |      |  |      |       |   |  |  |      |  
|Operating income (loss) after non-recurring items |  | $    | (17.8 | )    |  |      | (42.8 | ) |  |  | 67.3 |  
|                                                  |  |      |       |      |  |      |       |   |  |  |      |  




Our wire and cable segment reported operating income of $33.8
million in 2000 before non-recurring, pre-tax charges. The
pre-tax, non-recurring charges were as follows: $36.1 million
due to plant closures in Venezuela, Austria and El Salvador,
$9.9 million for the June 30, 1999, and June 27, 2000,
restructuring plans, and $5.6 million for working capital
writedowns. The increase in operating income was primarily due
to economic improvement in Asia and South America and the
realization of benefits from the previously announced
restructuring plans.

In January 2001, Alcoa Aluminio, S.A. exercised a put
option that required Phelps Dodge or a designee company to
acquire the 40 percent minority interest in Phelps Dodge
and Alcoa Fios e Cabos Electricos, S.A., a Phelps Dodge wire and
cable facility in Brazil. The transaction is scheduled to close
in March 2001. The indicated option price is $48 million,
however, the Company is in discussions with the optionor
regarding a final settlement price.

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. (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
$60.1 million less than 1998 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.

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

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 is 11,000 metric tons of
magnet wire annually.

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
non-operating, 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 27,800 metric tons out of a planned capacity of
38,000 metric tons of magnet wire.



---



##### Table of Contents



-46-






OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED
OPERATIONS




| |                                                 
| | ------------------------------------------------
| | Depreciation, Depletion and Amortization Expense

Depreciation, depletion and amortization expense was $464.2
million in 2000, compared with $329.1 million in 1999 and $293.3
million in 1998. The 2000 and 1999 increases primarily resulted
from the October 1999 acquisition of Cyprus Amax ($159.6
million and $52 million, respectively), partially offset by
decreases in production at certain U.S. and international mines,
as well as plant shutdowns and closures. (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 $135.1 million in
2000, compared with $115.5 million in 1999 and $102.0 million in
1998. The 2000 increase primarily resulted from higher costs to
support acquired entities and an increase in molybdenum selling
expenses, partially offset by the elimination of duplicate
Cyprus sales company expenses. 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. The results for the
three-year period reflects the reclassification of $26.1 million
and $20.9 million for 1999 and 1998, respectively, of operation
support costs from selling and general administrative expenses
to cost of products sold to conform to the current year
presentation.

Exploration and Research Expense

Exploration and research and development expense was $56.8
million in 2000, compared with $52.2 million in 1999 and $55.0
million in 1998. The 2000 increase resulted from a more fully
staffed research and development department and higher spending
at Phelps Dodges U.S. and international sites ($7.4
million), partially offset by decreased spending on former
Cyprus projects. The 1999 decrease resulted from continuing
cutbacks in exploration programs in view of current market
conditions, partially offset by the addition of Cyprus
Amaxs exploration spending of $4.9 million from
October 16 through December 31.

Interest Expense

We reported net interest expense in 2000 of $213.3 million,
compared with $120.2 million in 1999 and $94.5 million in 1998.
Net interest expense increased in 2000 primarily due to a full
year of interest expense on acquired Cyprus Amax debt. 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 $1.6 billion, which was reduced by $15.2 million to
reflect the fair value of the obligations at the acquisition
date. Interest paid by the Company in 2000 was $200.6 million,
compared with $121.0 million in 1999.

Miscellaneous Income and Expense, Net

Miscellaneous income and expense, net for the years ended
December 31 comprised the following:




|                                                                     |  |      |      |      |  |      |       |   |  |  |       |  
|-------------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                                                     |  |      |      |     
|($ in millions)                                                      |  |      |      |     
|                                                                     |  | 2000 |      | 1999 |  | 1998
|                                                                     |  |      |      |      |  |     
|Interest income                                                      |  | $    | 19.5 |      |  |      | 17.9  |   |  |  | 23.5  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Wire and cable segment asset impairments*                            |  |      | (7.2 | )    |  |      | (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  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Southern Peru Copper Corporation dividend (14.0% minority
	interest) |  |      | 3.8  |      |  |      | 1.7   |   |  |  | 5.7   |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Interest on IRS refund                                               |  |      | 5.8  |      |  |      |      |   |  |  |      |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Gain on sale of Australian iron ore royalties                        |  |      | 4.7  |      |  |      |      |   |  |  |      |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Willow Creek insurance settlement                                    |  |      | 4.5  |      |  |      |      |   |  |  |      |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Foreign currency exchange loss                                       |  |      | (1.5 | )    |  |      | (13.0 | ) |  |  | (5.7  | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other                                                                |  |      | 0.4  |      |  |      | 0.1   |   |  |  | 2.0   |  
|                                                                     |  |      |      |      |  |      |       |   |  |  |       |  
|                                                                     |  | $    | 30.0 |      |  |      | 9.1   |   |  |  | 8.8   |  
|                                                                     |  |      |      |      |  |      |       |   |  |  |       |  




| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Asset impairment of equity basis investment in PD
	Philippines ($7.2 million) during 2000, and Cobre Colada ($1.8
	million), PD Philippines ($3.1 million) and PD Yantai ($6.7
	million) during 1999.



|   |                                                                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Dissolution of joint ventures between Phelps
	Dodge and Sumi-tomo Electric Industries, Ltd., at five wire and
	cable manufacturing and support companies.




Provision for Taxes on Income

The effective tax rate changed from 40.0 percent in 1998 to
39.0 percent in 1999 to 35.8 percent in 2000. The
decrease in 2000 was primarily due to a significant increase in
the U.S. tax benefit from percentage depletion which was substan-



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##### Table of Contents



-47-



In December of 1999, we received and accepted Notices of Tax Due
for the years 1992 and 1993. The Internal Revenue Service audit
of the year 1994 (also settled in 1999) 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 Internal Revenue Service for the years 1990 and 1991.
As a result of these settlements, we have recorded a $30 million
reduction in our tax provision in 1999 and a $6 million
reduction in 2000.

During the year 2000, we reached agreement with the Internal
Revenue Service for the Cyprus Amax tax years 1994 through 1996
and paid the final assessments applicable to those years. We
have also reached agreement with the Internal Revenue Service
for the Phelps Dodge Corporation tax years 1995 through 1997 and
received an assessment during February 2001. Our management
believes that it has made adequate provision so that the
subsequent application of the issues involved will not have an
adverse effect on our consolidated financial condition or
results of operations.

The Internal Revenue Service has recently commenced its audit of
Phelps Dodge Corporation for the years 1998 and 1999 as well as
Cyprus Amax for the years 1997 through 1999. No issues have been
raised with respect to the current audit.



| |                                                            
| | -----------------------------------------------------------
| | 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 was 7.75 percent at
December 31, 2000 and 1999, compared with 6.75 percent
at December 31, 1998. (For a further discussion of pension
and other postretirement benefits, see Notes 15 and 16 to the
consolidated financial statements.)






CHANGES IN FINANCIAL CONDITION; CAPITALIZATION


Cash and Cash Equivalents

Cash and cash equivalents at the end of 2000 were $250.0
million, compared with $234.2 million at the beginning of the
year. Operating activities provided $511.2 million of cash
during the year. Cash provided by operating activities together
with proceeds from asset dispositions of $152.6 million were
used to fund capital outlays ($397.2 million), investments in
subsidiaries ($25.1 million), net payments on debt ($63.7
million) and dividend payments on common shares ($157.5 million).




|                                          |                       |                                          |      |        |        |      |      |        |        |   |      |        |        |  
|----------------------------------------- | --------------------- | ---------------------------------------- | ---- | ------ | ------ | ---- | ---- | ------ | ------ | - | ---- | ------ | ------ | -
|                                          |                       |                                          |      |       
|($ in millions)                           |                       |                                          |      |       
|                                          |                       | 2000                                     |      | 1999   |        | 1998
|                                          |                       |                                          |      |        |        |     
|Cash provided by (used in):               |                       |                                          |      |        |        |      |      |        |        |   |      |       
|                                         
|                                         
|                                         
|                                         
|                                          | Operating activities  |                                          | $    | 511.2  |        |      |      | 204.5  |        |   |      | 378.4  |       
|                                         
|                                         
|                                         
|                                         
|                                          | Investing activities: |                                          |      |        |        |      |      |        |        |   |      |        |       
|                                         
|                                         
|                                         
|                                         
|                                          |                       | Cyprus Amax acquisition                  |      |        |       |      |      |        | 35.7   |   |      |        |       |  
|                                         
|                                         
|                                         
|                                         
|                                          |                       | Capital expenditures and investments     |      |        | (422.3 | )    |      |        | (240.4 | ) |      |        | (668.3 | )
|                                         
|                                         
|                                         
|                                         
|                                          |                       | Accuride divestiture                     |      |        |       |      |      |        |       |   |      |        | 449.5  |  
|                                         
|                                         
|                                         
|                                         
|                                          |                       | Proceeds from Kinross sale               |      |        |       |      |      |        | 233.3  |   |      |        |       |  
|                                         
|                                         
|                                         
|                                         
|                                          |                       | Proceeds from Cyprus Australia Coal sale |      |        | 150.0  |      |      |        |       |   |      |        |       |  
|                                         
|                                         
|                                         
|                                         
|                                          |                       | Other investing activities               |      |        | (1.9   | )    |      |        | (22.6  | ) |      |        | 34.8   |  
|                                         
|                                         
|                                         
|                                         
|                                          | Financing activities  |                                          |      | (221.2 | )      |      |      | (198.0 | )      |   |      | (130.6 | )     
|                                          |                       |                                          |      |        |        |      |      |        |        |   |      |       
|Net increase in cash and cash equivalents |                       | $                                        | 15.8 |        |        |      | 12.5 |        |        |   | 63.8 |       
|                                          |                       |                                          |      |        |        |      |      |        |        |   |      |       




Working Capital

During 2000, net working capital (excluding cash and cash
equivalents and debt) decreased by $59.0 million. This net
decrease resulted principally from:



| |   |                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $46.8 million decrease in inventories primarily due to the
	planned reduction of molybdenum inventories throughout 2000 and
	a $7.4 million lower-of-cost-or-market adjustment to molybdenum
	inventories at December 31, 2000;                                  
|
| |  | a $135.7 million decrease in other current assets and prepaid
	expenses primarily due to the sale in March 2000 of Cyprus
	Australia Coal Company (in which our investment was classified
	as a current asset at December  31, 1999, due to its
	planned sale); and
|
| |  | a decrease in accounts payable and other accrued expenses of
	$116.7 million, due to a reduction of the current portion of
	environmental reserves, accrued interest and smelting and
	refining accruals.                                                          

Investing Activities

The $1,858 million purchase price for the 1999 acquisition of
Cyprus Amax comprised $1,125



---



##### Table of Contents



-48-



Capital expenditures and investments in 1999 were $120.5 million
for PD Mining and $149.5 million for PD Industries (including
$76.1 million for the acquisition of an 85 percent interest
in a Korean carbon black manufacturing business).

Capital expenditures and investments were $311.6 million in 2000
for PD Mining and $90.6 million for PD Industries
(including $19.0 million for the acquisition of the remaining
40 percent share of the companys carbon black
manufacturing facility in Hungary) and $20.1 million for other
corporate-related activities.

Capital expenditures and investments for 2001 are expected to be
approximately $275 million for PD Mining, approximately
$110 million for PD Industries and approximately $35
million for Corporate and other. These capital expenditures and
investments are expected to be funded primarily from operating
cash flow and cash reserves.

Financing Activities and Liquidity

The Companys total debt at December 31, 2000, was
$2,687.7 million, compared with $2,755.0 million at year-end
1999. Debt decreases associated with principal payments
primarily at our international mining projects were mostly
offset by increases in the Companys commercial paper
program. The Companys ratio of debt to total
capitalization was 45.7 percent at December 31, 2000,
compared with 45.0 percent at December 31, 1999.

A new revolving credit agreement between the Company and several
lenders became effective on May 10, 2000. The facility is
to be used for general corporate purposes, primarily as a
commercial paper backstop. The agreement permits borrowings of
up to $1 billion from time to time until its scheduled
maturity on May 10, 2005. The agreement allows for one-year
extensions of the maturity date under certain conditions subject
to the approval of lenders holding at least a majority of the
commitments. In the event of such approval, total commitments
under the agreement may total less than $1 billion depending
upon the willingness of the approving and other lenders to
assume the commitments of those lenders electing not to
participate in the renewal. Under the agreement, interest is
payable at a variable rate based on the agent banks prime
rate or at a fixed rate, based on the LIBOR or at fixed rates
offered independently by the several lenders, for maturities of
up to 360 days. This agreement provides for a facility fee
(currently 17.5 basis points (0.175 percent)) ranging from 9
basis points to 35 basis points (depending on our public
debt rating) on total commitments. The agreement requires us to
maintain a minimum consolidated tangible net worth of
$1.5 billion and limits indebtedness to 60 percent of
total consolidated capitalization. This agreement replaced an
earlier $1 billion revolving credit agreement, which was
amended and restated on June 25, 1997 and which was
scheduled to mature on June 25, 2002. There were no
borrowings under the new agreement at December 31, 2000, or
the earlier agreement at December 31, 1999.

On January 18, 2001, the Companys universal shelf
registration statement filed with the SEC in August 2000
became effective. Under the registration statement, up to $750
million of debt and equity securities may be sold from time to
time in one or more offerings on terms and conditions to be
determined in light of the circumstances. Authorized securities
include common and preferred equity, senior debt and junior
subordinated debt, share purchase contracts, share purchase
units, and warrants. The registration statement also provides
for the issuance of trust preferred securities guaranteed by the
Company. This new shelf registration will replace the
Companys existing $500 million senior-debt-only shelf
registration, which was filed in 1997. Under the 1997 shelf
registration, $250 million in senior debt securities was issued
in 1997. Upon effectiveness of the new shelf filing, the unused
debt capacity of the 1997 shelf registration was eliminated by
deregistration. The Company expects, at appropriate times and as
circumstances warrant, to use proceeds from any new shelf
offerings to reduce and/or restructure its existing debt
portfolio and to better coordinate debt maturities with
potential growth opportunities.

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 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 supported by an undrawn line of credit; the revolving
credit agreement described above provides



---



##### Table of Contents



-49-



Short-term borrowings, excluding borrowings under our Corporate
commercial paper program, were $50.3 million, all by our
international operations, at December 31, 2000, compared
with $101.8 million at December 31, 1999. The decrease was
primarily due to repayments of outstanding debt by our wholly
owned subsidiaries, PD Venezuela, Columbian Chemicals
Brazil, Canada and Philippines ($72.0) million, partially offset
by acquired short-term debt of $18.9 million.

The current portion of our long-term debt, scheduled for payment
in 2001, is $206.5 million including $8.5 million for our
international manufacturing operations, $97.7 million primarily
for our international mining operations and $100.3 million for
Corporate debt repayments.

Dividend payments on our common shares increased from $124.3
million in 1999 to $157.5 million in 2000, 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 2000 and 1999.

In 1999, in connection with the acquisition of Cyprus Amax,
Cyprus Amax called for redeeming 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.

During 1998, we purchased a total of 731,500 shares at a total
cost of $35.4 million under a 1997 share purchase authorization.
There were no shares purchased during 1999 and 2000 with respect
to this program. There were 78.7 million common shares
outstanding on December 31, 2000. (We may make purchases in
the open market as circumstances warrant, and may also consider
purchasing shares in privately negotiated transactions.)

Environmental Matters

Phelps Dodge is subject to various federal, state and local
environmental laws and regulations that govern emissions of air
pollutants; discharges of water pollutants; and the manufacture,
storage, handling and disposal of hazardous substances,
hazardous wastes and other toxic materials. The Company is also
subject to potential liabilities arising under the CERCLA and
similar state laws that impose responsibility on persons who
arranged for the disposal of hazardous substances, and on
current and previous owners and operators of a facility for the
cleanup of hazardous substances released from the facility into
the environment. In addition, the Company is subject to
potential liabilities under the RCRA and analogous state laws
that require responsible parties remediate releases of hazardous
or solid waste constituents into the environment associated with
past or present activities.

Phelps Dodge or its subsidiaries have been advised by EPA, the
United States Forest Service and several state agencies that
they may be liable under the Comprehensive Environmental
Response Compensation and Liability Act (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 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 provided reserves for potential environmental
obligations that management considers probable and for which
reasonable estimates of such obligations can be made. 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 upon specific facts
and circumstances. 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 potentially responsible party (PRP), and the ability
of other PRPs to pay their allocated portions. Accordingly,
total environmental reserves of $307.1 million and $336.1
million, respectively, were recorded as of December 31,
2000 and 1999. The long-term portion of these reserves is
included in other liabilities and deferred credits on the
consolidated balance sheet and amounted to



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##### Table of Contents



-50-



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
in Miami, Arizona, and the former American Zinc and Chemical
site in Langeloth, Pennsylvania.

At the Pinal Creek site, remediation is being performed by the
Pinal Creek Group, which includes Phelps Dodge Miami Inc. and
other companies that have been determined to have contributed
through historic mining activities to the contaminated
groundwater plume in the shallow alluvial aquifers of Pinal
Creek. The remediation 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 action is consistent with the National
Contingency Plan prepared by EPA as required by CERCLA. Ongoing
remediation efforts have resulted in continued improvement of
the water quality in the area. In November 1997, the Pinal
Creek Group joined with the State of Arizona in seeking approval
of the District Court for the 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 commits the Pinal Creek Group to complete the
remediation work outlined in the remedial action plan that was
submitted to the State in May 1997. Phelps Dodge Miami Inc.
has commenced contribution litigation against other parties
involved in this matter and has asserted claims against certain
of its past insurance carriers. While significant recoveries are
expected, the Company cannot reasonably estimate the amount and,
therefore, has not taken potential recoveries into consideration
in the recorded reserve. Phelps Dodge Miami Inc.s share of
the planned remediation work has a cost range for reasonably
expected outcomes estimated to be from $129 million to $235
million, and, as no point within the range is more likely than
any other, the lower end of the range has been reserved as
required by generally accepted accounting principles.

In June 1999, Cyprus Amax received an information request
from the Pennsylvania Department of Environmental Protection
regarding the former American Zinc and Chemical site in
Langeloth, Pennsylvania. The site is currently being
investigated by the state of Pennsylvania. Studies initiated to
determine the nature and extent of remediation work that may be
required on the property indicated a cost range for reasonably
expected outcomes estimated to be from $18 million to $52
million. Phelps Dodge has reserved $20 million for the possible
remediation work at the Langeloth site representing the most
likely point within the range of estimates.

At December 31, 2000, the cost range for reasonably
possible outcomes for all reservable environmental remediation
sites other than Pinal Creek and Langeloth was estimated to be
from $146 million to $226 million, of which $158 million has
been reserved. Work on these sites is expected to be
substantially completed in the next several years, subject to
potential delays involved in the remediation process.

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.

Phelps Dodge has a number of sites that are not the subject of
an environmental reserve because it is not probable that a
successful claim will be made against the Company for those
sites, but for which there is a reasonably possible likelihood
of an environmental remediation liability. At December 31,
2000, the cost range for reasonably possible outcomes for all
such sites was estimated to be from $12 million to $45 million.
The liabilities arising from potential environmental obligations
that have not been reserved for at this time may be material to
the results of any single quarter or year in the future.
Management, however, believes the liability arising from
potential environmental obligations is not likely to have a
material adverse effect on the Companys liquidity or
financial position as such obligations could be satisfied over a
period of many years.

As of December 31, 1998, Phelps Dodge had an environmental
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



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During 2000, net spending against environmental reserves totaled
$31.8 million and an additional $2.8 million was assigned to the
value of environmental liabilities assumed with the acquisition
of Cyprus Amax. As of December 31, 2000, the environmental
reserve balance associated with environmental matters at
shutdown operations or closed facilities within active
operations was $307.1 million.

Our mining operations are subject to laws and regulations
establishing new requirements for mined land reclamation and
financial assurance. Colorado passed a mined land reclamation
law in the early 1970s establishing a Mined Land
Reclamation Board that adopted regulations in 1977. Significant
changes were made in 1993. Our Colorado mining operations have
had approved mined land reclamation plans and financial
assurance under these laws for several years. Arizona enacted
its mined land reclamation law in 1994. Our Arizona mining
operations submitted proposed reclamation plans and financial
assurance following the adoption of implementing rules in 1997,
and most of our Arizona operations have approved plans and
financial assurance. New Mexico passed a mined land reclamation
law in 1993 authorizing regulations that were adopted in 1994.
The permitting process for New Mexico mining operations
commenced in December 1994 and approved closeout
plans and financial assurance for our operations in that state
are due by December 31, 2001. In connection with the
development of closeout plans for its largest New Mexico
facilities, the Company has conducted a number of technical
studies. Those studies indicate that the Company will need to
increase the total financial assurance it provides for
reclamation of its New Mexico properties from approximately $100
million to approximately $200 million. Although the Company
believes that its most recent estimates of reclamation costs at
its New Mexico properties are based on a sound understanding of
the applicable science and regulations, it is likely that in the
public hearing and review process the State regulators may seek
to impose a significantly larger financial assurance
requirement. Actual reclamation costs may differ significantly
from the required amount of financial assurance based on a
variety of factors including possible changes in legal standards
over time and potential cost savings from use of the
Companys own personnel and equipment at each site compared
to third-party contractor costs (under New Mexico law financial
assurance requirements are calculated based on estimated
third-party costs), advances in technology and reclamation
techniques, and opportunities to prepare each site for more
efficient reclamation through careful development of the site
over time.

The federal Bureau of Land Management adopted amended
regulations governing mined land reclamation for mining on
federal lands in January 2001. New financial assurance
requirements for existing operations take effect in June 2001,
although the new reclamation requirements take effect only for
new mining and certain modifications to existing mining
activities. Mined land reclamation is an ongoing activity and we
recognize estimated reclamation costs using a
units-of-production basis calculation. These laws and
regulations and the associated plan approval and permitting
requirements will likely increase our regulatory obligations and
compliance costs over time 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 BLMs 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



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FASB has issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, (as amended
by SFAS No. 137) and SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging
Activities. These statements require 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).
Appropriate 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 adopted by the Company
on January 1, 2001 and did not materially impact our
consolidated financial statements.

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.

In December 1999, the SEC issued Staff Accounting Bulletin
(SAB) 101, Revenue Recognition in Financial
Statements (as amended by SAB 101A and 101B) that
provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the
SEC. SAB 101 outlines the basic criteria that must be met
to recognize revenue and provides guidance for disclosures
related to revenue recognition policies and was adopted by the
Company effective with the fourth quarter of 2000. There was not
a material impact on our consolidated financial statements upon
implementation.

During 2000, the Emerging Issues Task Force (EITF) issued
EITF 00-10, Accounting for Shipping and Handling Fees
and Costs that provides guidance with respect to reporting
shipping and handling costs within the financial statements.
EITF 00-10 concludes that all amounts billed to a customer
in a sale transaction related to shipping and handling, if any,
represent revenues earned for the goods and should be classified
as revenue. In addition, the EITF reached consensus that the
classification of shipping and handling costs should be
disclosed if significant and are not included in costs of sales.
There was not a material impact on our consolidated financial
statements upon implementation.




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.




|                             |                     |      |       |       |  |      |       |      |  |  |       |       | 
|---------------------------- | ------------------- | ---- | ----- | ----- |  | ---- | ----- | ---- |  |  | ----- | ----- | 
|                             |                     |      |       |      
|($ in millions)              |                     |      |       |      
|                             |                     | 2000 |       | 1999  |  | 1998
|                             |                     |      |       |       |  |     
|Phelps Dodge Mining Company: |                     |      |       |       |  |      |       |      |  |  |       |      
|                            
|                            
|                            
|                            
|                             | United States       |      | $     | 272.0 |  |      |       | 95.9 |  |  |       | 188.3 | 
|                            
|                            
|                            
|                            
|                             | Molybdenum          |      |       | 8.9   |  |      |       | 20.4 |  |  |       |      | 
|                            
|                            
|                            
|                            
|                             | International       |      |       | 29.9  |  |      |       | 4.3  |  |  |       | 12.6  | 
|                            
|                            
|                            
|                            
|                             | Other               |      |       | 0.8   |  |      |       | 0.8  |  |  |       | 0.4   | 
|                             |                     |      |       |       |  |      |       |      |  |  |       |      
|                             |                     |      | 311.6 |       |  |      | 121.4 |      |  |  | 201.3 |      
|                             |                     |      |       |       |  |      |       |      |  |  |       |      
|Phelps Dodge Industries:     |                     |      |       |       |  |      |       |      |  |  |       |      
|                            
|                            
|                            
|                            
|                             | Specialty chemicals |      |       | 55.7  |  |      |       | 45.0 |  |  |       | 41.7  | 
|                            
|                            
|                            
|                            
|                             | Wire and cable      |      |       | 16.9  |  |      |       | 28.4 |  |  |       | 70.1  | 
|                             |                     |      |       |       |  |      |       |      |  |  |       |      
|                             |                     |      | 72.6  |       |  |      | 73.4  |      |  |  | 111.8 |      
|                             |                     |      |       |       |  |      |       |      |  |  |       |      
|Corporate and other          |                     |      | 13.0  |       |  |      | 6.1   |      |  |  | 5.0   |      
|                             |                     |      |       |       |  |      |       |      |  |  |       |      
|                             |                     | $    | 397.2 |       |  |      | 200.9 |      |  |  | 318.1 |      
|                             |                     |      |       |       |  |      |       |      |  |  |       |      









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, 2001, there were 29,609 holders of
record of our common shares. Throughout 1998, 1999 and 2000 the
quarterly dividend rate was maintained at 50 cents on each
common share. On February 7, 2001, the Board of Directors
declared a dividend of 50 cents per share for the 2001
first quarter, payable on March 9, 2001, to common
shareholders of record at the close of business on
February 16, 2001. Additional information required for this
item is provided in the Quarterly Financial Data table.



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-53-




QUARTERLY FINANCIAL DATA





---

|                                                            |  |         |         |         |  |         |         |         |  |  |         |  |  |  |         |  
|----------------------------------------------------------- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  |  | ------- |  |  |  | ------- | -
|                                                            |  | First   |         | Second  |  | Third   |         | Fourth 
|                                                            |  | Quarter |         | Quarter |  | Quarter |         | Quarter
|                                                            |  |         |         |         |  |         |         |        
|2000                                                        |  |         |         |         |  |         |         |         |  |  |         |  |  |  |         |  
|                                                            |  |         |         |         |  |         |         |         |  |  |         |  |  |  |         |  
|                                                           
|Sales and other operating revenues                          |  | $       | 1,119.7 |         |  |         | 1,112.9 |         |  |  | 1,193.4 |  |  |  | 1,099.1 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Operating income                                            |  |         | 79.8    |         |  |         | 5.2     |         |  |  | 101.3   |  |  |  | 50.7    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss)                                           |  |         | 19.4    |         |  |         | (37.8   | )       |  |  | 39.3    |  |  |  | 8.1     |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss) per common share  basic                  |  |         | 0.25    |         |  |         | (0.48   | )       |  |  | 0.50    |  |  |  | 0.10    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|Net income (loss) per common share  diluted                |  |         | 0.25    |         |  |         | (0.48   | )       |  |  | 0.50    |  |  |  | 0.10    |  
|                                                           
|Stock prices *                                              |  |         |         |         |  |         |         |         |  |  |         |  |  |  |         |  
|                                                           
|                                                           
|                                                           
|                                                           
|High                                                        |  |         | 73.00   |         |  |         | 53.00   |         |  |  | 46.75   |  |  |  | 57.00   |  
|                                                           
|                                                           
|                                                           
|                                                           
|Low                                                         |  |         | 44.25   |         |  |         | 36.06   |         |  |  | 36.50   |  |  |  | 40.00   |  
|                                                           
|                                                           
|                                                           
|                                                           
|Close                                                       |  |         | 47.38   |         |  |         | 37.19   |         |  |  | 41.75   |  |  |  | 55.81   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|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   |  






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






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-54-




PHELPS DODGE CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS




The consolidated balance sheet at December 31, 2000 and
1999, 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, 2000, and
notes thereto, together with the report thereon of
PricewaterhouseCoopers LLP dated January 24, 2001, appear
on pages 55 to 86 of this report. The financial statement
schedule which appears on page 91 should be read in
conjunction with these financial statements. Schedules not
included 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, 2000. 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, 2000, 1999 and 1998.



| |                                                                 
| | ----------------------------------------------------------------
| | II  Valuation and qualifying accounts and reserves on
	page 91.




REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT
SCHEDULE

To the Board of Directors and Shareholders of Phelps Dodge
Corporation

Our audits of the consolidated financial statements referred to
in our report dated January 24, 2001, appearing in this
Annual Report on Form 10-K of Phelps Dodge Corporation also
included an audit of the financial statement schedule listed in
Item 14(a)(2) of this Form 10-K. 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






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 safe guarded 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



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-55-



PricewaterhouseCoopers LLP, our independent accountants, 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.




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, 2000 and
1999, and the results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These
financial statements are the responsibility of the
Corporation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 of
America, 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 our opinion.

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

PricewaterhouseCoopers LLP

Phoenix, Arizona





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##### Table of Contents



-56-




STATEMENT OF CONSOLIDATED OPERATIONS





---

|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------- | -------------------------------- | ------- | ------- | - | ---- | ------- | ------- | - |  | ------- | ------- | -
|                                                                                                                                                       |                                                         |                                 
|                                                                                                                                                       |                                                         | For the years ended December 31,
|                                                                                                                                                       |                                                         |                                 
|                                                                                                                                                       |                                                         | 2000                             |         | 1999    |   | 1998
|                                                                                                                                                       |                                                         |                                  |         |         |   |     
|Sales and other operating revenues                                                                                                                     |                                                         | $                                | 4,525.1 |         |   |      | 3,114.4 |         |   |  | 3,063.4 |        
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Operating costs and expenses                                                                                                                           |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Cost of products sold                                   |                                  |         | 3,580.2 |   |      |         | 2,477.8 |   |  |         | 2,381.3 |  
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Depreciation, depletion and amortization                |                                  |         | 464.2   |   |      |         | 329.1   |   |  |         | 293.3   |  
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Selling and general administrative expense              |                                  |         | 135.1   |   |      |         | 115.5   |   |  |         | 102.0   |  
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Exploration and research expense                        |                                  |         | 56.8    |   |      |         | 52.2    |   |  |         | 55.0    |  
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Non-recurring charges and provisions                    |                                  |         | 51.8    |   |      |         | 455.4   |   |  |         | (190.9  | )
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|                                                                                                                                                       |                                                         |                                  | 4,288.1 |         |   |      | 3,430.0 |         |   |  | 2,640.7 |        
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Operating income (loss)                                                                                                                                |                                                         |                                  | 237.0   |         |   |      | (315.6  | )       |   |  | 422.7   |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Interest expense                                        |                                  |         | (217.8  | ) |      |         | (120.4  | ) |  |         | (96.4   | )
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Capitalized interest                                    |                                  |         | 4.5     |   |      |         | 0.2     |   |  |         | 1.9     |  
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Miscellaneous income and expense, net                   |                                  |         | 30.0    |   |      |         | 9.1     |   |  |         | 8.8     |  
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Income (loss) before taxes, minority interests and
	equity in net earnings (losses)of affiliated companies and
	cumulative effect of accounting change |                                                         |                                  | 53.7    |         |   |      | (426.7  | )       |   |  | 337.0   |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Provision for taxes on income                           |                                  |         | (19.2   | ) |      |         | 165.2   |   |  |         | (134.0  | )
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Minority interests in consolidated subsidiaries         |                                  |         | (7.0    | ) |      |         | 2.1     |   |  |         | (7.9    | )
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Equity in net earnings (losses) of affiliated companies |                                  |         | 1.5     |   |      |         | 5.1     |   |  |         | (4.2    | )
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Income (loss) before cumulative effect of accounting
	change                                                                                           |                                                         |                                  | 29.0    |         |   |      | (254.3  | )       |   |  | 190.9   |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Cumulative effect of accounting change                  |                                  |         |        |   |      |         | (3.5    | ) |  |         |        |  
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Net income (loss)                                                                                                                                      |                                                         | $                                | 29.0    |         |   |      | (257.8  | )       |   |  | 190.9   |        
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Average number of shares outstanding  basic                                                                                                           |                                                         |                                  | 78.4    |         |   |      | 61.6    |         |   |  | 58.2    |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|Basic earnings (loss) per share before cumulative effect of
	accounting change                                                                         |                                                         | $                                | 0.37    |         |   |      | (4.13   | )       |   |  | 3.28    |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Cumulative effect of accounting change                  |                                  |         |        |   |      |         | (0.06   | ) |  |         |        |  
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Basic earnings (loss) per share                                                                                                                        |                                                         | $                                | 0.37    |         |   |      | (4.19   | )       |   |  | 3.28    |        
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Average number of shares outstanding  diluted                                                                                                         |                                                         |                                  | 78.8    |         |   |      | 61.6    |         |   |  | 58.5    |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|Diluted earnings (loss) per share before cumulative effect of
	accounting change                                                                       |                                                         | $                                | 0.37    |         |   |      | (4.13   | )       |   |  | 3.26    |        
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                      
|                                                                                                                                                       | Cumulative effect of accounting change                  |                                  |         |        |   |      |         | (0.06   | ) |  |         |        |  
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        
|Diluted earnings (loss) per share                                                                                                                      |                                                         | $                                | 0.37    |         |   |      | (4.19   | )       |   |  | 3.26    |        
|                                                                                                                                                       |                                                         |                                  |         |         |   |      |         |         |   |  |         |        

See Notes to Consolidated Financial Statements



---



##### Table of Contents



-57-




CONSOLIDATED BALANCE SHEET






|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |         |       |         | 
|------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------- | ------------ | ----- | ------- | ------- | ------- | ----- | ------- | 
|                                                        |                                                                                                                                               | December 31,                                                                            |                     | December 31,
|                                                        |                                                                                                                                               | 2000                                                                                    |                     | 1999        
|                                                        |                                                                                                                                               |                                                                                         |                     |             
|Assets                                                  |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Current assets:                                                                                                                               |                                                                                         |                     |              |       |         |         |         |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Cash and cash equivalents                                                               |                     | $            | 250.0 |         |         |         | 234.2 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Accounts receivable, less allowance for doubtful accounts
	(2000  $17.6; 1999  $17.5) |                     |              | 528.7 |         |         |         | 541.5 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Inventories                                                                             |                     |              | 451.5 |         |         |         | 498.3 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Supplies                                                                                |                     |              | 151.2 |         |         |         | 149.0 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Other current assets and prepaid expenses                                               |                     |              | 36.7  |         |         |         | 172.4 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Deferred income taxes                                                                   |                     |              | 89.5  |         |         |         | 98.0  |        
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                        |                                                                                                                                               |                                                                                         | Current assets      |              |       | 1,507.6 |         |         |       | 1,693.4 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Investments and long-term accounts receivable                                                                                                 |                                                                                         |                     | 110.1        |       |         |         | 136.1   |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Property, plant and equipment, net                                                                                                            |                                                                                         |                     | 5,894.6      |       |         |         | 6,037.7 |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deferred income taxes                                                                                                                         |                                                                                         |                     | 45.1         |       |         |         | 16.9    |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other assets and deferred charges                                                                                                             |                                                                                         |                     | 273.4        |       |         |         | 344.9   |      
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                        |                                                                                                                                               | $                                                                                       | 7,830.8             |              |       |         | 8,229.0 |        
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|Liabilities                                             |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Current liabilities:                                                                                                                          |                                                                                         |                     |              |       |         |         |         |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Short-term debt                                                                         |                     | $            | 518.2 |         |         |         | 451.2 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Current portion of long-term debt                                                       |                     |              | 206.5 |         |         |         | 131.3 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Accounts payable and accrued expenses                                                   |                     |              | 669.8 |         |         |         | 786.5 |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                                                                               | Income taxes                                                                            |                     |              | 23.4  |         |         |         | 49.3  |        
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                        |                                                                                                                                               |                                                                                         | Current liabilities |              |       | 1,417.9 |         |         |       | 1,418.3 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Long-term debt                                                                                                                                |                                                                                         |                     | 1,963.0      |       |         |         | 2,172.5 |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deferred income taxes                                                                                                                         |                                                                                         |                     | 439.0        |       |         |         | 385.7   |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other liabilities and deferred credits                                                                                                        |                                                                                         |                     | 814.2        |       |         |         | 879.4   |      
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                        |                                                                                                                                               |                                                                                         | 4,634.1             |              |       |         | 4,855.9 |        
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|Commitments and contingencies (see Notes 6, 17 and
	18) |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|Minority interests in consolidated subsidiaries         |                                                                                                                                               |                                                                                         | 91.7                |              |       |         | 96.3    |        
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|Common shareholders equity                             |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Common shares, par value $6.25; 200.0 shares authorized; 78.7
	outstanding (1999  78.7) after deducting 17.1 shares
	(17.1) held in treasury |                                                                                         |                     | 491.9        |       |         |         | 491.6   |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Capital in excess of par value                                                                                                                |                                                                                         |                     | 1,017.7      |       |         |         | 1,016.4 |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Retained earnings                                                                                                                             |                                                                                         |                     | 1,831.7      |       |         |         | 1,959.8 |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accumulated other comprehensive income (loss)                                                                                                 |                                                                                         |                     | (226.4       | )     |         |         | (180.3  | )    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other                                                                                                                                         |                                                                                         |                     | (9.9         | )     |         |         | (10.7   | )    
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                        |                                                                                                                                               |                                                                                         | 3,105.0             |              |       |         | 3,276.8 |        
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        
|                                                        |                                                                                                                                               | $                                                                                       | 7,830.8             |              |       |         | 8,229.0 |        
|                                                        |                                                                                                                                               |                                                                                         |                     |              |       |         |         |        

See Notes to Consolidated Financial Statements



---



##### Table of Contents



-58-




CONSOLIDATED STATEMENT OF CASH FLOWS






|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |        |        |        |  
|---------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------------------------------- | ------ | ----- | ------ | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | -
|                                                                       |                                                                                           |                                                   
|                                                                       |                                                                                           | For the years ended                               
|                                                                       |                                                                                           | December 31,                                      
|                                                                       |                                                                                           |                                                   
|                                                                       |                                                                                           | 2000                                               |                                                     | 1999   |       | 1998  
|                                                                       |                                                                                           |                                                    |                                                     |        |       |       
|Operating activities                                                   |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Net income (loss)                                                                         |                                                    | $                                                   | 29.0   |       |        |       | (257.8 | )      |        |       | 190.9  |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Adjustments to reconcile net income (loss) to net cash
	provided by operating activities: |                                                    |                                                     |        |       |        |       |        |        |        |       |        |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           | Depreciation, depletion and amortization           |                                                     |        | 464.2 |        |       |        | 329.1  |        |       |        | 293.3  |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           | Deferred income taxes                              |                                                     |        | 12.8  |        |       |        | (191.7 | )      |       |        | 43.9   |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           | Equity earnings (losses) net of dividends received |                                                     |        | 0.9   |        |       |        | (4.4   | )      |       |        | 5.8    |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           | Changes in current assets and liabilities:         |                                                     |        |       |        |       |        |        |        |       |        |        |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Accounts receivable                                 |        |       | 9.7    |       |        |        | (144.5 | )     |        |        | 53.3   |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Inventories                                         |        |       | 39.3   |       |        |        | 31.2   |       |        |        | 6.4    |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Supplies                                            |        |       | (5.3   | )     |        |        | 1.7    |       |        |        | 2.5    |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Prepaid expenses                                    |        |       | 2.3    |       |        |        | 9.8    |       |        |        | (9.4   | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Deferred income taxes                               |        |       | (0.3   | )     |        |        | (5.3   | )     |        |        | 8.3    |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Interest payable                                    |        |       | (16.3  | )     |        |        | 2.2    |       |        |        | 2.2    |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Other accounts payable                              |        |       | (12.4  | )     |        |        | (2.2   | )     |        |        | (42.1  | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Accrued income taxes                                |        |       | (24.9  | )     |        |        | 7.2    |       |        |        | 13.8   |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           |                                                    | Other accrued expenses                              |        |       | (68.8  | )     |        |        | (27.4  | )     |        |        | (23.6  | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           | Non-recurring charges and provisions               |                                                     |        | 54.3  |        |       |        | 471.9  |        |       |        | (171.7 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                           | Other adjustments, net                             |                                                     |        | 26.7  |        |       |        | (15.3  | )      |       |        | 4.8    |       
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|                                                                       |                                                                                           |                                                    | Net cash provided by operating activities           |        |       | 511.2  |       |        |        | 204.5  |       |        |        | 378.4  |  
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|Investing activities                                                   |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Capital outlays                                                                           |                                                    |                                                     | (397.2 | )     |        |       | (200.9 | )      |        |       | (318.1 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Capitalized interest                                                                      |                                                    |                                                     | (4.5   | )     |        |       | (0.2   | )      |        |       | (1.9   | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Investment in subsidiaries, net of cash received                                          |                                                    |                                                     | (25.1  | )     |        |       | (39.5  | )      |        |       | (350.2 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Proceeds from asset dispositions and other                                                |                                                    |                                                     | 152.6  |       |        |       | 246.6  |        |        |       | 486.2  |       
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|                                                                       |                                                                                           |                                                    | Net cash provided by (used in) investing activities |        |       | (274.2 | )     |        |        | 6.0    |       |        |        | (184.0 | )
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|Financing activities                                                   |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Proceeds from issuance of debt                                                            |                                                    |                                                     | 114.6  |       |        |       | 348.8  |        |        |       | 108.0  |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Payment of debt                                                                           |                                                    |                                                     | (178.3 | )     |        |       | (209.1 | )      |        |       | (85.6  | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Common dividends                                                                          |                                                    |                                                     | (157.5 | )     |        |       | (124.3 | )      |        |       | (117.3 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Purchase of common shares                                                                 |                                                    |                                                     |       |       |        |       |       |        |        |       | (35.4  | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Other, net                                                                                |                                                    |                                                     |       |       |        |       | (213.4 | )      |        |       | (0.3   | )     
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|                                                                       |                                                                                           |                                                    | Net cash used in financing activities               |        |       | (221.2 | )     |        |        | (198.0 | )     |        |        | (130.6 | )
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|Increase in cash and cash equivalents                                  |                                                                                           |                                                    | 15.8                                                |        |       |        | 12.5  |        |        |        | 63.8  |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Cash and cash equivalents at beginning of year                         |                                                                                           |                                                    | 234.2                                               |        |       |        | 221.7 |        |        |        | 157.9 |       
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|Cash and cash equivalents at end of year                               |                                                                                           | $                                                  | 250.0                                               |        |       |        | 234.2 |        |        |        | 221.7 |       
|                                                                       |                                                                                           |                                                    |                                                     |        |       |        |       |        |        |        |       |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|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       
|                             |                                |                                               |                                         |            |   |       |       |             |   |               |         |         |   |              
|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, 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 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 losses on securities         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  | (0.2  | )     |      |   |   |         |         |        | (0.2  | )
|                            
|                            
|                            
|                            
|                             |                                |                                               | Additional pension liability            |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  | 3.0   |       |      |   |   |         |         |        | 3.0   |  
|                             |                                |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |        
|                             |                                |                                               | Other comprehensive loss                |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  | (66.4 | )     |      |   |   |         |         |        | (66.4 | )
|                             |                                |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |        
|                             |                                | Comprehensive 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 |        
|                            
|                            
|                            
|                            
|                             | Stock options exercised        |                                               |                                         |           |   |       |       | 0.2         |   |               |         | 1.4     |   |               |         |       |        |   |        |   |  |       |       |      |   |   |         | 1.6     |       
|                            
|                            
|                            
|                            
|                             | Tax benefit from stock options |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         | 0.4    |        |   |        |   |  |       |       |      |   |   |         | 0.4     |       
|                            
|                            
|                            
|                            
|                             | Restricted shares issued, net  |                                               |                                         |           |   |       |       | 0.1         |   |               |         | 0.5     |   |               |         |       |        |   |        |   |  |       |       | 0.8  |   |   |         | 1.4     |       
|                            
|                            
|                            
|                            
|                             | Other investment adjustments   |                                               |                                         |            |   |       |       |             |   |               |         | (0.6    | ) |               |         |        |        |   |        |   |  |       |       |      |   |   |         | (0.6    | )     
|                            
|                            
|                            
|                            
|                             | Dividends on common shares     |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         | (157.5 | )      |   |        |   |  |       |       |      |   |   |         | (157.5  | )     
|                            
|                            
|                            
|                            
|                             | Comprehensive income           |                                               |                                         |            |   |       |       |             |   |               |         | .       |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |         |       
|                            
|                            
|                            
|                            
|                             |                                | Net income                                    |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        | 29.0   |   |        |   |  |       |       |      |   |   |         |         | 29.0   |      
|                            
|                            
|                            
|                            
|                             |                                | Other comprehensive income (loss), net of tax |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |         |        |      
|                            
|                            
|                            
|                            
|                             |                                |                                               | Translation adjustment                  |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  | (45.9 | )     |      |   |   |         |         |        | (45.9 | )
|                            
|                            
|                            
|                            
|                             |                                |                                               | Unrealized gains on securities          |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  | 0.8   |       |      |   |   |         |         |        | 0.8   |  
|                            
|                            
|                            
|                            
|                             |                                |                                               | Additional pension liability            |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  | (1.0  | )     |      |   |   |         |         |        | (1.0  | )
|                             |                                |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |        
|                             |                                |                                               | Other comprehensive loss                |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  | (46.1 | )     |      |   |   |         |         |        | (46.1 | )
|                             |                                |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |        
|                             |                                | Comprehensive loss                            |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |         | (17.1  | )    
|                             |                                |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |        
|Balance at December 31, 2000 |                                |                                               | 78.7                                    |            |   | $     | 491.9 |             |   | $             | 1,017.7 |         |   | $             | 1,831.7 |        |        | $ | (226.4 | ) |  | $     | (9.9  | )    |   | $ | 3,105.0 |        
|                             |                                |                                               |                                         |            |   |       |       |             |   |               |         |         |   |               |         |        |        |   |        |   |  |       |       |      |   |   |         |        

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



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##### Table of Contents



-60-




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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.

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.



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##### Table of Contents



-61-

Our policy for repair and maintenance costs incurred in
connection with planned major maintenance activities is to
charge to operations such costs equally over the period
(generally 12 months) in which the major maintenance
activities are incurred.

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.

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 delivery and copper
concentrate at the LME average price in the month of settlement
with our customers. We initially record certain copper sales at
a provisional price at the time of sale, and adjust the pricing
for all outstanding shipments to reflect spot prices at the end
of each month until a final adjustment is made to the price of
the shipments upon settlement with our customers pursuant to the
terms of the contract.

Shipping and Handling Fees and Costs

Amounts billed to customers for shipping and handling are
classified as sales and other operating revenues. Amounts
incurred for shipping and handling are included in costs of
products sold, except for Columbian Chemicals amounts which are
netted against related revenues. These amounts are considered
immaterial for reclassification.

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 19.



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##### Table of Contents



-62-

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 and energy option contracts We
initially record net premiums paid on copper and energy 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 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 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 14 to the consolidated financial statements contains a
summary of the pro forma effects on reported net income
(loss) and earnings (losses) per share for 2000, 1999
and 1998 as if we had elected to recognize compensation cost
based on the fair value of the options granted as prescribed by
SFAS No. 123.

Effective July 1, 2000, we adopted the provisions of FASB
Interpretation No. 44 Accounting for Certain
Transactions Involving Stock Compensation: An Interpretation of
APB Opinion No. 25. The adoption of this
pronouncement did not have a significant impact on our financial
position or results of operations.

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.



---



##### Table of Contents



-63-

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

Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number
of 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
potentially dilutive common shares had been issued.




|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |      |       | 
|------------------------------------------- | --------------------------------- | -------------------------------------------- | - | ---- | ---- | ---- |  | ----- | ------ | - |  | ---- | ----- | 
|                                            |                                   | 2000                                         |   | 1999 |      | 1998
|                                            |                                   |                                              |   |      |      |     
|Basic Earnings (Loss) Per Share Computation |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|                                           
|                                           
|                                           
|                                           
|                                            | Numerator:                        |                                              |   |      |      |      |  |       |        |   |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Net income (loss)                            |   | $    | 29.0 |      |  |       | (257.8 | ) |  |      | 190.9 | 
|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|                                            | Denominator:                      |                                              |   |      |      |      |  |       |        |   |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average common shares outstanding            |   |      | 78.4 |      |  |       | 61.6   |   |  |      | 58.2  | 
|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|                                            | Basic earnings (loss) per share   |                                              | $ | 0.37 |      |      |  | (4.19 | )      |   |  | 3.28 |      
|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|Diluted Earnings Per Share Computation      |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|                                           
|                                           
|                                           
|                                           
|                                            | Numerator:                        |                                              |   |      |      |      |  |       |        |   |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Net income (loss)                            |   | $    | 29.0 |      |  |       | (257.8 | ) |  |      | 190.9 | 
|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|                                            | Denominator:                      |                                              |   |      |      |      |  |       |        |   |  |      |      
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average common shares outstanding            |   |      | 78.4 |      |  |       | 61.6   |   |  |      | 58.2  | 
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average employee stock options               |   |      | 0.1  |      |  |       |       |   |  |      | 0.1   | 
|                                           
|                                           
|                                           
|                                           
|                                            |                                   | Average restricted stock issued to employees |   |      | 0.3  |      |  |       |       |   |  |      | 0.2   | 
|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|                                            |                                   | Total average common shares outstanding      |   |      | 78.8 |      |  |       | 61.6   |   |  |      | 58.5  | 
|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |     
|                                            | Diluted earnings (loss) per share |                                              | $ | 0.37 |      |      |  | (4.19 | )      |   |  | 3.26 |      
|                                            |                                   |                                              |   |      |      |      |  |       |        |   |  |     




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


|                    |  |      |       |      |  |      |       |  |  |  |       | 
|------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                    |  | 2000 |       | 1999 |  | 1998
|                    |  |      |       |      |  |     
|Outstanding options |  |      | 4.4   |      |  |      | 3.1   |  |  |  | 2.6   | 
|                   
|                   
|                   
|                   
|Option price        |  | $    | 56.34 |      |  |      | 65.88 |  |  |  | 58.84 | 




New Accounting Standards

In 1999, 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.

FASB has issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, (as amended
by SFAS No. 137) and SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging
Activities. These statements require 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).
Appropriate 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 adopted by the Company
on January 1, 2001, and did not materially impact our
consolidated financial statements.

In December 1999, the SEC issued Staff Accounting Bulletin
(SAB) 101, Revenue Recognition in Financial
Statements (as amended by SAB 101A and 101B) that provides
guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize
revenue and provides guidance for disclosures related to revenue
recognition policies and was adopted by the Company effective
with the fourth quarter of 2000. There was not a material impact
on our consolidated financial statements upon implementation.

Reclassification

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

2.  Acquisitions and Divestitures

Columbian Hungary Acquisition

In the second quarter of 2000, we acquired the remaining
40 percent share in the carbon black manufacturing business
of Columbian Tiszai Carbon Ltd. in Hungary for $19.0 million,
bringing our total interest to 100 percent.



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##### Table of Contents



-64-

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 $1,858 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 $30 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 redeeming 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 has been based on an estimate
of the fair value for the assets acquired and liabilities
assumed at October 16, 1999. Assets acquired were $4.6
billion, including cash of $785 million. Liabilities assumed
totaled $2.8 billion including debt of $1.6 billion 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
were substantially paid out by the end of 2000.

On March 30, 2000, we sold Cyprus Australia Coal Company, a
wholly owned subsidiary, to Glencore Coal Australia Pty. Ltd., a
subsidiary of Switzerland-based Glencore International AG, for
approximately $150 million in cash with no gain or loss being
realized. We acquired Cyprus Australia Coal Company as part of
our acquisition of Cyprus Amax Minerals Company on
October 16, 1999. Cyprus Australia Coal Company owned
48 percent of Oakbridge Pty. Ltd. and 50 percent of
the Springvale Mine in Australia.

The unaudited pro forma information set forth below is presented
to show the estimated effect of the acquisition 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).




|                                         |                                          |              |       |       |   |  |       |      | 
|---------------------------------------- | ---------------------------------------- | ------------ | ----- | ----- | - |  | ----- | ---- | 
|                                         |                                          |             
|Pro Forma                                |                                          |             
|                                         |                                          |             
|                                         |                                          | Year ended  
|                                         |                                          | December 31,
|                                         |                                          |             
|                                         |                                          |             
|                                         |                                          | (Unaudited) 
|                                         |                                          | 1999         |       | 1998 
|                                         |                                          |              |       |      
|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.

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 Company subsidiary manages and operates the business,
including the 110,000 metric-ton-per-year manufacturing plant
located in Yosu, South Korea.



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##### Table of Contents



-65-

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.  Restructuring Charges and Non-Recurring
Items

2000 Restructuring Charges

In the first quarter of 2000, non-recurring pre-tax charges of
$2.1 million ($1.3 million, or 1 cent per share, after
taxes) were recognized by PD Industries in conjunction with
the June 30, 1999, restructuring plan (for details see
below under the heading 1999 Restructuring Charges).

On June 27, 2000, we announced a plan to reduce operating
costs and restructure operations at our mining and wire and
cable segments. This plan comprised the following actions:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) Higher-cost production was curtailed at the Miami
	copper mine in Arizona and production was reduced at the
	Henderson molybdenum mine in Colorado resulting in a total
	workforce reduction of 175 full-time employees beginning in the
	second quarter of 2000 (substantially completed by year end).
	These actions resulted in a pre-tax charge of $5.2 million.                                                                                                                                                                                                                                                                                                                                                               
|
| | (ii) Production ceased at two wire and cable plants in
	Venezuela in the second quarter of 2000 due to low forecast
	plant utilization levels as a result of significantly reduced
	infrastructure spending in the Latin America region. These plant
	closures resulted in a total non-recurring, pre-tax charge of
	$25.7 million, consisting of an impairment in the carrying value
	of property, plant and equipment and other assets of $19.2
	million, plant dismantling costs of $2.6 million, employee
	severance of $2.2 million and impairment of goodwill of $1.7
	million. In addition, working capital writedowns of $4.2 million
	were recorded to cost of products sold as a result of the
	decision to close the plants.
|
| | (iii) The closure of a telephone cable operation in El
	Salvador in the fourth quarter of 2000 was due to low plant
	utilization levels as a result of heightened global competition
	for telecommunication cable. The plant closure resulted in a
	non-recurring, pre-tax charge of $4.6 million, including $4.0
	million relating to the impairment of the carrying value of
	property, plant and equipment and $0.6 million associated with
	various other costs. In addition, working capital writedowns of
	$2.2 million were recorded to cost of products sold as a result
	of the decision to close the plant.                                                                                                                  
|
| | (iv) A non-recurring, pre-tax charge of $5.8 million was
	recognized for our wire and cable operations in Austria as a
	result of the long-term impact of continuing extremely
	competitive pricing conditions in Europe. The continuing
	competitive pricing environment led to a determination that we
	should assess the recoverability of our Austrian wire and cable
	asset values. Our assessment of the carrying value of the
	property, plant and equipment of $4.2 million and the goodwill
	balance of $2.8 million indicated impairments of $3.0 million
	and $2.8 million, respectively.                                                                                                                                   
|
| | (v) A charge of $7.2 million to miscellaneous income and
	expense was recognized to reflect the impairment of our
	40 percent equity interest in a wire and cable operation in
	the Philippines. The impairment was based upon an analysis of
	future cash flows of the operation, continuing economic
	uncertainty in the Philippines and the erosion of our strategic
	and operating influence. These factors indicate that there is
	little likelihood of recovery of our investment and management
	is evaluating available alternatives.                                                                                                                                                                                          



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##### Table of Contents



-66-

In total, these actions resulted in second quarter
non-recurring, pre-tax charges of $41.3 million ($36.9 million,
or 47 cents per share, after taxes), a $6.4 million charge to
cost of products sold representing the working capital component
of the above actions ($6.4 million, or 8 cents per share, after
taxes), and a $7.2 million charge to miscellaneous income and
expense ($7.2 million, or 9 cents per share, after taxes). The
following table presents a roll-forward of the liabilities
incurred in connection with the June 2000 Restructuring
Plan, which were all reflected as current liabilities in our
consolidated balance sheet:




|               |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |     | 
|-------------- | --------------------------------- | --------- | ---- | --------- |  | -------- | --- | -------- |  |  | ---- | ---- | - |  | --- | --- | 
|               |                                   | Beginning |      |           |  |          |     |         
|               |                                   | Accrual   |      | Additions |  | Payments |     | 12/31/00
|               |                                   |           |      |           |  |          |     |         
|PD Mining:     |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |    
|              
|              
|              
|              
|               | Employee severance                |           | $    | 5.2       |  |          |     |         |  |  |      | (3.6 | ) |  |     | 1.6 | 
|              
|              
|              
|              
|               | Equipment relocation (A)          |           |      |          |  |          |     | 0.7      |  |  |      | (0.7 | ) |  |     |    | 
|               |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |    
|               | PD Mining                         |           |      | 5.2       |  |          |     | 0.7      |  |  |      | (4.3 | ) |  |     | 1.6 | 
|               |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |    
|PD Industries: |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |    
|               | Wire and Cable                    |           |      |           |  |          |     |          |  |  |      |      |   |  |     |     | 
|              
|              
|              
|              
|               | Employee severance                |           |      | 2.2       |  |          |     |         |  |  |      | (2.2 | ) |  |     |    | 
|              
|              
|              
|              
|               | Plant removal and dismantling (A) |           |      | 2.8       |  |          |     | 0.9      |  |  |      | (0.7 | ) |  |     | 3.0 | 
|               |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |    
|               | PD Industries                     |           |      | 5.0       |  |          |     | 0.9      |  |  |      | (2.9 | ) |  |     | 3.0 | 
|               |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |    
|Total          |                                   | $         | 10.2 |           |  |          | 1.6 |          |  |  | (7.2 | )    |   |  | 4.6 |    
|               |                                   |           |      |           |  |          |     |          |  |  |      |      |   |  |     |    




|    |                                                      
|--- | -----------------------------------------------------
|(A) | Relocation costs are charged to expense as
	incurred.




In addition to the above items, during the 2000 second quarter
we recognized certain ongoing costs of $2.9 million ($1.9
million, 2 cents per share, after taxes and minority
interests) relating to the June 30, 1999, restructuring
plan.

In the third quarter of 2000, non-recurring, pre-tax charges of
$2.6 million ($1.7 million, or 2 cents per share, after
taxes) were recognized by PD Industries in conjunction with the
June 27, 2000 restructuring plan. In addition, a
non-recurring, pre-tax charge of $0.7 million ($0.4 million, or
1 cent per share, after taxes) was recognized by PD Mining
in the third quarter of 2000 in relation to the curtailment of
copper production at the Miami mine.

In the fourth quarter of 2000, PD Industries recognized
non-recurring, pre-tax charges of $2.2 million ($1.3 million, or
2 cents per share, after taxes) and a positive working
capital adjustment of $0.8 million ($0.8 million, or 1 cent
per share, after taxes) in connection with previously announced
restructuring plans.

2000 Other Non-Recurring Items

In addition to the above items, we received in the 2000 second
quarter a tax refund of $6.5 million and related interest income
of $5.8 million ($3.6 million, or 4 cents per share, after
taxes) resulting from the settlement of the Companys 1990
and 1991 income tax audits. In the fourth quarter of 2000 we
recognized $4.5 million ($3.0 million, or 4 cents per
share, after taxes) of miscellaneous income relating to the
settlement of a business interruption insurance claim by a
former Cyprus Amax coal property.

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 PD
Mining and $21.7 million at PD Industries. The PD Mining
impairments included the writedown 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 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. The amount of the impairment of the
Hidalgo smelter was determined through an assessment of the
projected cash flows of the existing smelting facilities and the
related infrastructure as an acid generating facility supplying
low-cost acid to the Companys domestic heap leach
operations. We believe that the assessment of projected cash
flows represents the best measure of fair value for the facility
in its proposed future use. This projection indicated that the
sum of the expected future cash flows from the reconfigured
facility was less than the carrying value. 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.

The acquisition of Cyprus Amax necessitated a review of the
combined Companys resources, particularly those in the
southwestern United States where the acquisition added 2.1
billion tons of proven and probable copper ore reserves to the
existing 4.8 billion tons. This review of the combined
Companys mineral resources included an assessment of the
capital requirements to develop individual resources, the
investment returns associated with the exploitation of
individual resources and the optimal utiliza-



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##### Table of Contents



-67-



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 18 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 ($58.7 million,
or $1.01 per share, after taxes and minority interests) in the
1999 second quarter, a pre-tax charge of $1.1 million ($0.7
million, or 1 cent per share, after taxes) in the 1999
third quarter and a pre-tax charge of $10.9 million ($6.3
million, or 9 cents 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 ($65.7 million, or $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.

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 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.

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



---



##### Table of Contents



-68-



The following schedule table presents a roll-forward from
December 31, 1999 of the liabilities incurred in connection
with the June 30, 1999 restructuring plan, which were all
reflected as current liabilities in our consolidated balance
sheet.




|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |     | 
|------------------- | ------------------------------------- | -------- | ---- | --------- |  | ---------- | ---- | -------- |  |  | ----- | ----- | - |  | --- | --- | 
|                    |                                       | 12/31/99 |      | Additions |  | (Payments) |      | 12/31/00
|                    |                                       |          |      |           |  |            |      |         
|PD Mining:          |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Employee severance                    |          | $    | 1.4       |  |            |      |         |  |  |       | (1.0  | ) |  |     | 0.4 | 
|                   
|                   
|                   
|                   
|                    | Mothballing/take or pay contracts     |          |      | 3.5       |  |            |      |         |  |  |       | (1.0  | ) |  |     | 2.5 | 
|                   
|                   
|                   
|                   
|                    | Environmental clean-up                |          |      | 5.9       |  |            |      |         |  |  |       | (5.9  | ) |  |     |    | 
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|                    | PD Mining                             |          |      | 10.8      |  |            |      |         |  |  |       | (7.9  | ) |  |     | 2.9 | 
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|PD Industries:      |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Wire and Cable                        |          |      |           |  |            |      |          |  |  |       |       |   |  |     |     | 
|                   
|                   
|                   
|                   
|                    | Employee severance and relocation (A) |          |      | 3.2       |  |            |      |         |  |  |       | (2.8  | ) |  |     | 0.4 | 
|                   
|                   
|                   
|                   
|                    | Take or pay contracts                 |          |      | 2.0       |  |            |      | 1.1      |  |  |       | (1.1  | ) |  |     | 2.0 | 
|                   
|                   
|                   
|                   
|                    | Plant removal and dismantling (A)     |          |      | 1.0       |  |            |      | 9.4      |  |  |       | (9.6  | ) |  |     | 0.8 | 
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|                    |                                       |          | 6.2  |           |  |            | 10.5 |          |  |  | (13.5 | )     |   |  | 3.2 |    
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|Specialty Chemicals |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|                   
|                   
|                   
|                   
|                    | Employee severance                    |          |      | 0.3       |  |            |      |         |  |  |       | (0.3  | ) |  |     |    | 
|                   
|                   
|                   
|                   
|                    | Disposal & dismantling                |          |      | 1.8       |  |            |      |         |  |  |       | (0.5  | ) |  |     | 1.3 | 
|                   
|                   
|                   
|                   
|                    | Environmental                         |          |      | 0.8       |  |            |      |         |  |  |       | (0.1  | ) |  |     | 0.7 | 
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|                    |                                       |          | 2.9  |           |  |            |     |          |  |  | (0.9  | )     |   |  | 2.0 |    
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|                    | PD Industries                         |          |      | 9.1       |  |            |      | 10.5     |  |  |       | (14.4 | ) |  |     | 5.2 | 
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    
|Total               |                                       | $        | 19.9 |           |  |            | 10.5 |          |  |  | (22.3 | )     |   |  | 8.1 |    
|                    |                                       |          |      |           |  |            |      |          |  |  |       |       |   |  |     |    




|    |                                                      
|--- | -----------------------------------------------------
|(A) | Relocation costs are charged to expense as
	incurred.




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, or $2.10 per common share, after
taxes). 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, or
14 cents per common share, after taxes). 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.

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, or 45 cents per
common share, after taxes) 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.



|   |                                      
|-- | -------------------------------------
|4. | Investments and Long-Term Receivables

Investments and long-term receivables were as follows:




|                                 |                                             |      |       |      |  |  |       |      | 
|-------------------------------- | ------------------------------------------- | ---- | ----- | ---- |  |  | ----- | ---- | 
|                                 |                                             | 2000 |       | 1999
|                                 |                                             |      |       |     
|Equity basis:                    |                                             |      |       |      |  |  |       |     
|                                
|                                
|                                
|                                
|                                 | International wire and cable manufacturers  |      | $     | 4.8  |  |  |       | 10.8 | 
|                                
|                                
|                                
|                                
|                                 | SIMSA 26.67% (Peruvian zinc mining company) |      |       | 11.3 |  |  |       | 14.0 | 
|                                
|                                
|                                
|                                
|                                 | Port Carteret (50%)                         |      |       | 21.7 |  |  |       | 16.2 | 
|                                
|                                
|                                
|                                
|                                 | Other                                       |      |       | 7.7  |  |  |       | 13.0 | 
|                                
|                                
|                                
|                                
|Cost basis and notes receivable: |                                             |      |       |      |  |  |       |     
|                                
|                                
|                                
|                                
|                                 | Southern Peru Copper Corporation (14.0%)    |      |       | 13.2 |  |  |       | 13.2 | 
|                                
|                                
|                                
|                                
|                                 | RAG American Coal Company                   |      |       | 2.5  |  |  |       | 18.7 | 
|                                
|                                
|                                
|                                
|                                 | Other                                       |      |       | 48.9 |  |  |       | 50.2 | 
|                                 |                                             |      |       |      |  |  |       |     
|                                 |                                             | $    | 110.1 |      |  |  | 136.1 |     
|                                 |                                             |      |       |      |  |  |       |     




Equity earnings (losses) were as follows (in millions):
2000  $1.5; 1999  $5.1; 1998 
($4.2).

Dividends from equity basis investments were received as follows
(in millions): 2000  $2.5; 1999  $0.7;
1998  $1.6.

Our retained earnings include undistributed earnings of equity
basis investments of (in millions): 2000  $66.9;
1999  $67.9; 1998  $63.5.

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



---



##### Table of Contents



-69-




|                  |  |      |       |      |  |      |       |  |  |  |       |  
|----------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | -
|                  |  | 2000 |       | 1999 |  | 1998
|                  |  |      |       |      |  |     
|Sales             |  | $    | 119.2 |      |  |      | 162.8 |  |  |  | 161.9 |  
|                 
|                 
|                 
|                 
|Net income (loss) |  | $    | (7.8  | )    |  |      | 1.1   |  |  |  | (12.5 | )




|                                  |  |      |       |      |  |      |       |   |  |  |       |  
|--------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                  |  | 2000 |       | 1999 |  | 1998
|                                  |  |      |       |      |  |     
|Net current assets                |  | $    | 3.2   |      |  |      | 49.7  |   |  |  | 7.3   |  
|                                 
|                                 
|                                 
|                                 
|Fixed assets, net                 |  |      | 90.5  |      |  |      | 152.2 |   |  |  | 101.2 |  
|                                 
|                                 
|                                 
|                                 
|Long term debt                    |  |      | (11.6 | )    |  |      | (37.9 | ) |  |  | (2.7  | )
|                                 
|                                 
|                                 
|                                 
|Other assets and liabilities, net |  |      | 21.8  |      |  |      | (4.3  | ) |  |  | (8.9  | )
|                                  |  |      |       |      |  |      |       |   |  |  |       |  
|Net assets                        |  | $    | 103.9 |      |  |      | 159.7 |   |  |  | 96.9  |  
|                                  |  |      |       |      |  |      |       |   |  |  |       |  






|   |                                      
|-- | -------------------------------------
|5. | Miscellaneous Income and Expense, Net

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




|                                                                     |  |      |      |      |  |      |       |   |  |  |       |  
|-------------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                                                     |  | 2000 |      | 1999 |  | 1998
|                                                                     |  |      |      |      |  |     
|Interest income                                                      |  | $    | 19.5 |      |  |      | 17.9  |   |  |  | 23.5  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Wire and cable segment asset impairments *                           |  |      | (7.2 | )    |  |      | (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  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Southern Peru Copper Corporation dividend (14.0% minority
	interest) |  |      | 3.8  |      |  |      | 1.7   |   |  |  | 5.7   |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Interest on IRS refund                                               |  |      | 5.8  |      |  |      |      |   |  |  |      |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Gain on sale of Australian iron ore royalties                        |  |      | 4.7  |      |  |      |      |   |  |  |      |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Willow Creek insurance settlement                                    |  |      | 4.5  |      |  |      |      |   |  |  |      |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Foreign currency exchange loss                                       |  |      | (1.5 | )    |  |      | (13.0 | ) |  |  | (5.7  | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other                                                                |  |      | 0.4  |      |  |      | 0.1   |   |  |  | 2.0   |  
|                                                                     |  |      |      |      |  |      |       |   |  |  |       |  
|                                                                     |  | $    | 30.0 |      |  |      | 9.1   |   |  |  | 8.8   |  
|                                                                     |  |      |      |      |  |      |       |   |  |  |       |  




| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Asset impairment of equity basis investment in PD
	Philippines ($7.2 million) during 2000, and Cobre Colada ($1.8
	million), PD Philippines ($3.1 million) and PD Yantai ($6.7
	million) during 1999.



|   |                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Dissolution of joint ventures between Phelps
	Dodge and Sumitomo Electric Industries, Ltd., at five wire and
	cable manufacturing and support companies.




6.  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 (losses) of affiliated
companies for the years ended December 31 were as follows:




|              |  |      |      |      |  |      |        |   |  |  |       |  
|------------- |  | ---- | ---- | ---- |  | ---- | ------ | - |  |  | ----- | -
|              |  | 2000 |      | 1999 |  | 1998
|              |  |      |      |      |  |     
|United States |  | $    | 42.4 |      |  |      | (408.4 | ) |  |  | 344.2 |  
|             
|             
|             
|             
|Foreign       |  |      | 11.3 |      |  |      | (18.3  | ) |  |  | (7.2  | )
|              |  |      |      |      |  |      |        |   |  |  |       |  
|              |  | $    | 53.7 |      |  |      | (426.7 | ) |  |  | 337.0 |  
|              |  |      |      |      |  |      |        |   |  |  |       |  




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




|                                 |         |      |      |       |   |      |        |        |   |  |       |      | 
|-------------------------------- | ------- | ---- | ---- | ----- | - | ---- | ------ | ------ | - |  | ----- | ---- | 
|                                 |         | 2000 |      | 1999  |   | 1998
|                                 |         |      |      |       |   |     
|Current:                         |         |      |      |       |   |      |        |        |   |  |       |     
|                                
|                                
|                                
|                                
|                                 | Federal |      | $    | (12.8 | ) |      |        | 1.3    |   |  |       | 54.4 | 
|                                
|                                
|                                
|                                
|                                 | State   |      |      | 2.3   |   |      |        | 0.2    |   |  |       | 9.1  | 
|                                
|                                
|                                
|                                
|                                 | Foreign |      |      | 16.9  |   |      |        | 23.8   |   |  |       | 26.6 | 
|                                 |         |      |      |       |   |      |        |        |   |  |       |     
|                                 |         |      | 6.4  |       |   |      | 25.3   |        |   |  | 90.1  |     
|                                 |         |      |      |       |   |      |        |        |   |  |       |     
|Deferred:                        |         |      |      |       |   |      |        |        |   |  |       |     
|                                
|                                
|                                
|                                
|                                 | Federal |      |      | 4.1   |   |      |        | (187.3 | ) |  |       | 37.8 | 
|                                
|                                
|                                
|                                
|                                 | State   |      |      | (1.0  | ) |      |        | (8.0   | ) |  |       | 5.3  | 
|                                
|                                
|                                
|                                
|                                 | Foreign |      |      | 9.7   |   |      |        | 3.6    |   |  |       | 0.8  | 
|                                 |         |      |      |       |   |      |        |        |   |  |       |     
|                                 |         |      | 12.8 |       |   |      | (191.7 | )      |   |  | 43.9  |     
|                                 |         |      |      |       |   |      |        |        |   |  |       |     
|Deferred taxes on start up costs |         |      |     |       |   |      | 1.2    |        |   |  |      |     
|                                 |         |      |      |       |   |      |        |        |   |  |       |     
|                                 |         | $    | 19.2 |       |   |      | (165.2 | )      |   |  | 134.0 |     
|                                 |         |      |      |       |   |      |        |        |   |  |       |     




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




|                                 |  |      |       |      |  |      |       |   |  |  |      |  
|-------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ---- | -
|                                 |  | 2000 |       | 1999 |  | 1998
|                                 |  |      |       |      |  |     
|Statutory tax rate               |  |      | 35.0  | %    |  |      | (35.0 | ) |  |  | 35.0 |  
|                                
|                                
|                                
|                                
|Depletion                        |  |      | (48.4 | )    |  |      | (1.4  | ) |  |  | (2.5 | )
|                                
|                                
|                                
|                                
|State and local income taxes     |  |      | 2.3   |      |  |      | (1.8  | ) |  |  | 2.9  |  
|                                
|                                
|                                
|                                
|Effective international tax rate |  |      | 9.0   |      |  |      | 0.8   |   |  |  | 5.3  |  
|                                
|                                
|                                
|                                
|Adjustments to prior years       |  |      | (12.0 | )    |  |      | (6.8  | ) |  |  |     |  
|                                
|                                
|                                
|                                
|Valuation allowance              |  |      | 42.8  |      |  |      | 4.6   |   |  |  | 2.4  |  
|                                
|                                
|                                
|                                
|Goodwill                         |  |      | 2.2   |      |  |      | 0.3   |   |  |  | 0.3  |  
|                                
|                                
|                                
|                                
|Other items, net                 |  |      | 4.9   |      |  |      | 0.3   |   |  |  | (3.4 | )
|                                 |  |      |       |      |  |      |       |   |  |  |      |  
|Effective tax rate               |  |      | 35.8  | %    |  |      | (39.0 | ) |  |  | 40.0 |  
|                                 |  |      |       |      |  |      |       |   |  |  |      |  




We paid federal, state, local and foreign income taxes of
approximately $75 million in 2000, compared with approximately
$31 million in 1999 and $77 million in 1998.

We received refunds of federal, state, local and foreign income
taxes of approximately $78 million in 2000, compared with
approximately $2 million in each of the years 1999 and 1998.

At December 31, 2000, we had alternative minimum tax
credits of approximately $289 million



---



##### Table of Contents



-70-



The Company has alternative minimum tax foreign tax credit
carryforwards for federal income tax purposes of approximately
$24 million expiring from 2001 to 2004.

The Company has U.S. net operating loss carryforwards for
regular tax purposes of $662 million expiring from 2001 to 2020,
Venezuelan net operating loss carryforwards of $102 million
expiring from 2001 to 2003, and Chilean net operating loss
carryforwards of $463 million that do not expire. The
U.S. losses include $378 million of Cyprus Amax
U.S. net operating loss carryforwards that are subject to
annual limitations on their usage after the acquisition. The
annual limitation on the utilization of these losses is
approximately $98 million. The Company also has
U.S. alternative minimum tax net operating loss
carryforwards of approximately $343 million expiring from 2018
to 2020.

The Company has $212 million of U.S. capital loss
carryforwards that expire in 2004 and 2005. Capital loss
carryforwards may only be used to offset net capital gains in
the carryforward periods. These losses include $122 million of
Cyprus Amax capital loss carryforwards that are subject to
annual limitations on their usage after the acquisition.

A valuation allowance of $280 million has been recorded against
all of these benefits.

We have reached agreement with the Internal Revenue Service for
the Cyprus Amax tax years 1994 through 1996 and paid the final
assessments applicable to those years. We have also reached
agreement in principle with the Internal Revenue Service for the
Phelps Dodge Corporation tax years 1995 through 1997, but we
have not yet received an assessment for those years. 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.

The Internal Revenue Service has recently commenced its audit of
Phelps Dodge Corporation for the years 1998 and 1999 as well as
Cyprus Amax for the years 1997 through 1999. No issues have been
raised with respect to the current audit.

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




|                                           |  |      |          |      |  |  |          |  
|------------------------------------------ |  | ---- | -------- | ---- |  |  | -------- | -
|                                           |  | 2000 |          | 1999
|                                           |  |      |          |     
|Minimum tax credits                        |  | $    | 288.6    |      |  |  | 235.8    |  
|                                          
|                                          
|                                          
|                                          
|Postretirement and postemployment benefits |  |      | 114.5    |      |  |  | 113.1    |  
|                                          
|                                          
|                                          
|                                          
|Reserves                                   |  |      | 173.7    |      |  |  | 183.7    |  
|                                          
|                                          
|                                          
|                                          
|Mining costs                               |  |      | 81.0     |      |  |  | 86.0     |  
|                                          
|                                          
|                                          
|                                          
|NOL carryovers                             |  |      | 336.0    |      |  |  | 170.7    |  
|                                          
|                                          
|                                          
|                                          
|Capital loss carryovers                    |  |      | 74.1     |      |  |  | 118.5    |  
|                                          
|                                          
|                                          
|                                          
|Other                                      |  |      | 22.6     |      |  |  | 22.6     |  
|                                           |  |      |          |      |  |  |          |  
|Deferred tax assets                        |  |      | 1,090.5  |      |  |  | 930.4    |  
|                                          
|                                          
|                                          
|                                          
|Valuation allowance                        |  |      | (280.2   | )    |  |  | (165.3   | )
|                                           |  |      |          |      |  |  |          |  
|Net deferred tax assets                    |  |      | 810.3    |      |  |  | 765.1    |  
|                                           |  |      |          |      |  |  |          |  
|Exploration and mine development costs     |  |      | (98.4    | )    |  |  | (100.9   | )
|                                          
|                                          
|                                          
|                                          
|Depreciation                               |  |      | (927.0   | )    |  |  | (847.9   | )
|                                          
|                                          
|                                          
|                                          
|Mining properties                          |  |      | (70.0    | )    |  |  | (70.0    | )
|                                          
|                                          
|                                          
|                                          
|Pensions                                   |  |      | (19.3    | )    |  |  | (17.1    | )
|                                           |  |      |          |      |  |  |          |  
|Deferred tax liabilities                   |  |      | (1,114.7 | )    |  |  | (1,035.9 | )
|                                           |  |      |          |      |  |  |          |  
|                                           |  | $    | (304.4   | )    |  |  | (270.8   | )
|                                           |  |      |          |      |  |  |          |  




Income taxes have not been provided on our share ($632 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 (before application of U.S. tax attributes),
net of foreign tax credits, in the amounts of $83 million and
$71 million, respectively.



---



##### Table of Contents



-71-

7.  Inventories and Supplies

Inventories at December 31 were as follows:




|                               |  |      |       |      |  |  |       | 
|------------------------------ |  | ---- | ----- | ---- |  |  | ----- | 
|                               |  | 2000 |       | 1999
|                               |  |      |       |     
|Metals and other raw materials |  | $    | 373.8 |      |  |  | 413.8 | 
|                              
|                              
|                              
|                              
|Work in process                |  |      | 10.6  |      |  |  | 15.2  | 
|                              
|                              
|                              
|                              
|Finished manufactured goods    |  |      | 64.4  |      |  |  | 66.6  | 
|                              
|                              
|                              
|                              
|Other                          |  |      | 2.7   |      |  |  | 2.7   | 
|                               |  |      |       |      |  |  |       | 
|                               |  | $    | 451.5 |      |  |  | 498.3 | 
|                               |  |      |       |      |  |  |       | 




Inventories valued by the last-in, first-out method would have
been greater if valued at current costs by approximately $109
million and $82 million at December 31, 2000 and 1999,
respectively.

Supplies in the amount of $151.2 million and $149.0 million at
December 31, 2000 and 1999, respectively, are stated net of
a reserve for obsolescence of $7.6 million and $8.4 million,
respectively.

8.  Property, Plant and Equipment

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




|                                                          |  |      |         |      |  |  |         | 
|--------------------------------------------------------- |  | ---- | ------- | ---- |  |  | ------- | 
|                                                          |  | 2000 |         | 1999
|                                                          |  |      |         |     
|Buildings, machinery and equipment                        |  | $    | 6,629.5 |      |  |  | 6,343.8 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Mining properties                                         |  |      | 1,613.7 |      |  |  | 1,660.9 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Capitalized mine development                              |  |      | 322.6   |      |  |  | 312.0   | 
|                                                         
|                                                         
|                                                         
|                                                         
|Land and water rights                                     |  |      | 361.1   |      |  |  | 377.8   | 
|                                                          |  |      |         |      |  |  |         | 
|                                                          |  |      | 8,926.9 |      |  |  | 8,694.5 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Less accumulated depreciation, depletion and amortization |  |      | 3,032.3 |      |  |  | 2,656.8 | 
|                                                          |  |      |         |      |  |  |         | 
|                                                          |  | $    | 5,894.6 |      |  |  | 6,037.7 | 
|                                                          |  |      |         |      |  |  |         | 




9.  Other Assets and Deferred Charges

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




|                                                                      |  |      |       |      |  |  |       | 
|--------------------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                                                      |  | 2000 |       | 1999
|                                                                      |  |      |       |     
|Goodwill, less accumulated amortization (2000  $37.1;
	1999  $30.6) |  | $    | 154.6 |      |  |  | 171.6 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Employee benefit plans                                                |  |      | 79.1  |      |  |  | 129.3 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Debt issue costs                                                      |  |      | 18.5  |      |  |  | 22.7  | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Other                                                                 |  |      | 21.2  |      |  |  | 21.3  | 
|                                                                      |  |      |       |      |  |  |       | 
|                                                                      |  | $    | 273.4 |      |  |  | 344.9 | 
|                                                                      |  |      |       |      |  |  |       | 




10.  Accounts Payable and Accrued Expenses

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




|                                       |  |      |       |      |  |  |       | 
|-------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                       |  | 2000 |       | 1999
|                                       |  |      |       |     
|Accounts payable                       |  | $    | 265.9 |      |  |  | 296.6 | 
|                                      
|                                      
|                                      
|                                      
|Salaries, wages and other compensation |  |      | 44.9  |      |  |  | 59.2  | 
|                                      
|                                      
|                                      
|                                      
|Employee benefit plans                 |  |      | 41.6  |      |  |  | 45.0  | 
|                                      
|                                      
|                                      
|                                      
|Insurance reserves                     |  |      | 14.9  |      |  |  | 19.3  | 
|                                      
|                                      
|                                      
|                                      
|Environmental reserves *               |  |      | 62.2  |      |  |  | 81.7  | 
|                                      
|                                      
|                                      
|                                      
|Smelting, refining and freight         |  |      | 35.7  |      |  |  | 61.0  | 
|                                      
|                                      
|                                      
|                                      
|Other accrued taxes                    |  |      | 34.5  |      |  |  | 33.3  | 
|                                      
|                                      
|                                      
|                                      
|Closure reserves                       |  |      | 30.9  |      |  |  | 42.7  | 
|                                      
|                                      
|                                      
|                                      
|Accrued utilities                      |  |      | 23.0  |      |  |  | 15.3  | 
|                                      
|                                      
|                                      
|                                      
|Interest **                            |  |      | 32.7  |      |  |  | 49.1  | 
|                                      
|                                      
|                                      
|                                      
|Returnable containers                  |  |      | 8.0   |      |  |  | 4.6   | 
|                                      
|                                      
|                                      
|                                      
|Other                                  |  |      | 75.5  |      |  |  | 78.7  | 
|                                       |  |      |       |      |  |  |       | 
|                                       |  | $    | 669.8 |      |  |  | 786.5 | 
|                                       |  |      |       |      |  |  |       | 




|   |                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------
|*  | Short-term portion of these reserves. Please
	refer to Note 18, Contingencies, for further
	discussion.
|  
|** | Interest paid by the Company in 2000 was $200.6
	million compared with $121.0 million in 1999.         




11.  Other Liabilities and Deferred Credits

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




|                                                   |  |      |       |      |  |  |       | 
|-------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                                   |  | 2000 |       | 1999
|                                                   |  |      |       |     
|Postretirement and postemployment
	benefit plans * |  | $    | 323.6 |      |  |  | 306.9 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Other employee benefit plans *                     |  |      | 60.8  |      |  |  | 141.8 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Environmental reserves **                          |  |      | 244.9 |      |  |  | 254.4 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Insurance reserves                                 |  |      | 16.9  |      |  |  | 20.0  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Closure                                            |  |      | 104.1 |      |  |  | 118.9 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Lease purchase obligation                          |  |      |      |      |  |  | 18.7  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Other                                              |  |      | 63.9  |      |  |  | 18.7  | 
|                                                   |  |      |       |      |  |  |       | 
|                                                   |  | $    | 814.2 |      |  |  | 879.4 | 
|                                                   |  |      |       |      |  |  |       | 




|   |                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------
|*  | Please refer to Note 16, Postretirement and
	Other Employee Benefits Other Than Pensions, for further
	discussion.
|  
|** | Please refer to Note 18, Contingencies, for
	further discussion.                                                  






---



##### Table of Contents



-72-

12.  Debt and Other Financing

Debt at December 31 is summarized below:




|                                                                    |                                             |      |         |      |  |  |         |      | 
|------------------------------------------------------------------- | ------------------------------------------- | ---- | ------- | ---- |  |  | ------- | ---- | 
|                                                                    |                                             | 2000 |         | 1999
|                                                                    |                                             |      |         |     
|10.125% Notes due 2002                                              |                                             | $    | 154.6   |      |  |  | 158.0   |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|9.875% Notes due 2001                                               |                                             |      | 92.5    |      |  |  | 94.5    |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|8.375% Debentures due 2023                                          |                                             |      | 151.2   |      |  |  | 151.2   |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|7.96% Notes due 2000                                                |                                             |      |        |      |  |  | 15.0    |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|7.75% Notes due 2002                                                |                                             |      | 100.0   |      |  |  | 100.0   |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|7.375% Notes due 2007                                               |                                             |      | 238.7   |      |  |  | 236.8   |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|7.125% Debentures due 2027                                          |                                             |      | 150.0   |      |  |  | 150.0   |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|6.625% Notes due 2005                                               |                                             |      | 236.6   |      |  |  | 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                                        |                                             |      | 236.8   |      |  |  | 269.8   |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Columbian Tiszai Carbon Ltd. (Hungary)                              |                                             |      | 15.2    |      |  |  | 2.0     |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Columbian Carbon Spain, S.A.                                        |                                             |      | 1.6     |      |  |  | 3.5     |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Columbian Chemicals Canada                                          |                                             |      | 4.4     |      |  |  | 6.8     |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Phelps Dodge Wire and Cable Group                                   |                                             |      | 14.5    |      |  |  | 16.6    |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Phelps Dodge Dublin                                                 |                                             |      | 5.0     |      |  |  | 5.0     |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Capital lease obligations                                           |                                             |      | 16.4    |      |  |  | 25.9    |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|El Abra Project Financing                                           |                                             |      | 348.9   |      |  |  | 402.6   |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Cerro Verde Project Financing                                       |                                             |      | 82.0    |      |  |  | 90.0    |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Various Pollution Control and Industrial Development Revenue
	Bonds |                                             |      | 41.7    |      |  |  | 46.5    |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Cerro Verde Bank Loan, due 2004                                     |                                             |      | 8.0     |      |  |  | 23.0    |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Other                                                               |                                             |      | 0.3     |      |  |  | 1.1     |     
|                                                                    |                                             |      |         |      |  |  |         |     
|Debt and capital lease obligations, including current portion       |                                             |      | 2,169.5 |      |  |  | 2,303.8 |     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Less current portion                                                |                                             |      | (206.5  | )    |  |  | (131.3  | )   
|                                                                    |                                             |      |         |      |  |  |         |     
|Debt, excluding current portion                                     |                                             | $    | 1,963.0 |      |  |  | 2,172.5 |     
|                                                                    |                                             |      |         |      |  |  |         |     




The amounts included above are shown net of unamortized
discounts and purchase price adjustments of $17.7 million.

The following is a schedule of future maturities of long-term
debt as of December 31, 2000:




|           |  |   |         | 
|---------- |  | - | ------- | 
|          
|          
|          
|          
|2001       |  | $ | 206.5   | 
|          
|          
|          
|          
|2002       |  |   | 367.2   | 
|          
|          
|          
|          
|2003       |  |   | 141.2   | 
|          
|          
|          
|          
|2004       |  |   | 216.4   | 
|          
|          
|          
|          
|2005       |  |   | 348.2   | 
|          
|          
|          
|          
|Thereafter |  |   | 890.0   | 
|           |  |   |         | 
|           |  | $ | 2,169.5 | 
|           |  |   |         | 




A new revolving credit agreement between the Company and several
lenders became effective on May 10, 2000. The facility is
to be used for general Corporate purposes, primarily as a
commercial paper backstop. The agreement permits borrowings of
up to $1 billion from time to time until its scheduled maturity
on May 10, 2005. The agreement allows for one-year
extensions of the maturity date under certain conditions subject
to the approval of lenders holding at least a majority of the
commitments. In the event of such approval, total commitments
under the agreement may total less than $1 billion depending
upon the willingness of the approving and other lenders to
assume the commitments of those lenders electing not to
participate in the renewal. Under the agreement, interest is
payable at a variable rate based on the agent banks prime
rate or at a fixed rate, based on the LIBOR or at fixed rates
offered independently by the several lenders, for maturities of
up to 360 days. This agreement provides for a facility fee
(currently 17.5 basis points (0.175 percent)) ranging from
9 basis points to 35 basis points (depending on our public debt
rating) on total commitments. The agreement requires us to
maintain a minimum consolidated tangible net worth of $1.5
billion and limits indebtedness to 60 percent of total
consolidated capitalization. This agreement replaced an earlier
$1 billion revolving credit agreement, which was amended and
restated on June 25, 1997, and which was scheduled to
mature on June 25, 2002. There were no borrowings under the
new agreement at December 31, 2000, or the earlier
agreement at December 31, 1999.

We established a commercial paper program on August 15,
1997, under a private placement agency agreement between two
placement agents and us. The agreement permits us to issue up to
$1 billion of short-term promissory notes (generally known as
commercial paper) at any 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 $467.9
million at December 31, 2000, and $349.4 million at
December 31, 1999.

Short-term borrowings, excluding borrowings under our corporate
commercial paper program, were $50.3 million, all by our
international operations, at December 31, 2000, compared
with $101.8 million at December 31, 1999.

The weighted average interest rate on total short-term
borrowings at December 31, 2000, and December 31,
1999, was 6.5 percent and 7.8 percent, respectively.



---



##### Table of Contents



-73-

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. Otherwise, the notes are not
redeemable by the Company prior to maturity.

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 on
February 1, 2013, and thereafter.

The 7.75 percent Notes, due in 2002, bear interest payable
semi-annually on January 1 and July 1. The
7.375 percent Notes, due May 15, 2007, bear interest
payable semi-annually on May 15 and November 15. The
6.625 percent Notes, due October 15, 2005, bear
interest payable semi-annually on October 15 and
April 15. The 6.375 percent Notes, due in 2004, bear
interest payable semi-annually on May 1 and
November 1. These notes are not redeemable by the Company
prior to maturity and will not be entitled to any sinking fund.

The 7.125 percent Notes, due in 2027, bear interest payable
semi-annually on May 1 and November 1. The notes are
redeemable by the Company at any time prior to maturity at par
plus a yield maintenance premium.

As of December 31, 2000, our 80 percent-owned joint
venture interest in Candelaria mining operation in Chile had
project debt outstanding of $236.8 million. The debt comprises
$209.0 million of floating-rate, dollar-denominated debt and
$27.8 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 2000. The floating rate debt is tied to six-month
LIBOR, but has been converted to fixed-rate debt with the use of
interest rate swap agreements. At December 31, 2000, the
overall weighted average interest rate including the interest
rate swap was 7.77 percent. 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.

At year-end 2000, our 51 percent-owned interest in El Abra
mining joint venture had outstanding project-financing debt of
$348.9 million. This debt has two components: (i) a
syndicated loan facility with two tranches, totaling $296.6
million (Tranche A: $226.8 million; Tranche B: $69.8
million); and (ii) a trade-related facility with a German
institution totaling $52.3 million. The Company currently has
guarantees outstanding of $136.8 million on this project debt
(including its share of Tranche B debt, as well as
Codelcos share). The debt has a 9.5 year term, due
May 15, 2007, and requires semi-annual principal payments
that began on May 15, 1998. A portion of the floating-rate
debt has been converted to fixed-rate debt with the use of
interest rate swap agreements. The weighted average interest
rate including the interest rate swaps on this debt at
December 31, 2000, was 7.34 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, 2000, our Cerro Verde mine had a total of
$82 million in project debt comprising two tranches, a $52.0
million facility that requires semi-annual installments of
varying amounts through April 1, 2005 (Tranche A), and
a $30.0 million revolving bullet loan due in the year 2003
(Tranche B). All of this facility is variable rate debt,
with LIBOR as a base rate, but a portion has been converted to
fixed-rate debt with the use of interest rate swap agreements.
The weighted average interest rate including the interest rate
swap on this debt at December 31, 2000, was
9.55 percent. The project debt is backed by proceeds from
sales collections, plus a pledge of $45 million in assets on the
bullet loan. In addition, Cerro Verde has a subordinated loan
facility, for up to $34 million, that can be used and repaid
whenever it has excess cash. The amount outstanding on the
subordinated loan facility as of December 31, 2000, was $8
million, compared with a balance outstanding of $23 million as
of December 31, 1999.

The various pollution control and industrial development revenue
bonds are due from 2001 through 2009. The interest on the bonds
is paid



---



##### Table of Contents



-74-



13.  Shareholders Equity

As of December 31, 2000, there were 78,709,000 shares
outstanding and 1.7 million shares authorized for purchase.
During 1999, we issued 20.6 million common shares along with a
cash payment to acquire Cyprus Amax. During 1998, we purchased
731,500 common shares 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, 2000, or December 31, 1999.

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.

14.  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.

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 219,578 shares of
Restricted Stock outstanding and 989,258 shares available for
grant at December 31, 2000.

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, 2000, 2,044,631 shares were available for
option grants (including 989,258 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 2000, the Company awarded 69,000 shares of Restricted
Stock under the 1998 plan, with a weighted-average fair value at
the date of grant of $54.44 per share. Compensation expense
related to this award was $3.8 million for 2000. Restricted
stock generally becomes fully vested in five years.

In addition, former Cyprus Amax stock options were converted to
1,870,804 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



-75-

Changes during 1998, 1999 and 2000 in options outstanding for
the combined plans were as follows:




|                                 |                               |        |           |                 |   |   |       |       | 
|-------------------------------- | ----------------------------- | ------ | --------- | --------------- | - | - | ----- | ----- | 
|                                 |                               |        |           | Average option 
|                                 |                               | Shares |           | price per share
|                                 |                               |        |           |                
|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 |      
|                                
|                                
|                                
|                                
|                                 | Granted                       |        |           | 1,450,412       |   |   |       | 51.81 | 
|                                
|                                
|                                
|                                
|                                 | Exercised                     |        |           | (44,122         | ) |   |       | 42.86 | 
|                                
|                                
|                                
|                                
|                                 | Expired or terminated         |        |           | (431,247        | ) |   |       | 64.65 | 
|                                 |                               |        |           |                 |   |   |       |      
|Outstanding at December 31, 2000 |                               |        | 8,179,836 |                 |   |   | 60.95 |      
|                                 |                               |        |           |                 |   |   |       |      




Options outstanding based on a range of exercise prices were as
follows:




|            |         |             |  |           |           |             |  |  |         |  |  |   |        | 
|----------- | ------- | ----------- |  | --------- | --------- | ----------- |  |  | ------- |  |  | - | ------ | 
|            |         |             |  |           |           | Average    
|Range       |         | Options     |  | Average   |           | Outstanding
|of Exercise |         | Outstanding |  | Remaining |           | Option     
|Prices      |         | at 12/31/00 |  | Term      |           | Price      
|            |         |             |  |           |           |            
|$           | 27-40   |             |  |           | 253,668   |             |  |  | 8 years |  |  | $ | 32.79  | 
|            | 40-60   |             |  |           | 4,150,683 |             |  |  | 8 years |  |  |   | 52.81  | 
|            | 60-80   |             |  |           | 3,394,668 |             |  |  | 5 years |  |  |   | 69.78  | 
|            | 80-100  |             |  |           | 254,069   |             |  |  | 3 years |  |  |   | 83.37  | 
|            | 100-102 |             |  |           | 126,748   |             |  |  | 2 years |  |  |   | 102.14 | 
|            |         |             |  |           |           |             |  |  |         |  |  |   |        | 
|            |         |             |  |           | 8,179,836 |             |  |  |         |  |  |   | 60.95  | 
|            |         |             |  |           |           |             |  |  |         |  |  |   |        | 




Exercisable options by plan and by range of exercise prices at
December 31, 2000:




|                  |           |        |           |                 |  |  |       |       | 
|----------------- | --------- | ------ | --------- | --------------- |  |  | ----- | ----- | 
|                  |           |        |           | Average        
|                  |           |        |           | option         
|                  |           | Shares |           | price per share
|                  |           |        |           |                
|PD Plans          |           |        |           |                 |  |  |       |      
|                 
|                 
|                 
|                 
|                  | 1998 Plan |        |           | 1,176,910       |  |  | $     | 54.72 | 
|                 
|                 
|                 
|                 
|                  | 1993 Plan |        |           | 2,690,790       |  |  |       | 66.76 | 
|                 
|                 
|                 
|                 
|                  | 1989 Plan |        |           | 49,364          |  |  |       | 50.10 | 
|                 
|                 
|                 
|                 
|                  | 1987 Plan |        |           | 59,631          |  |  |       | 46.19 | 
|                 
|                 
|                 
|                 
|Cyprus Amax Plans |           |        | 1,804,724 |                 |  |  | 68.67 |      
|                  |           |        |           |                 |  |  |       |      
|                  |           |        | 5,781,419 |                 |  |  |       |      
|                  |           |        |           |                 |  |  |       |      

|            |         |             |  |             |           |  |  |   |        | 
|----------- | ------- | ----------- |  | ----------- | --------- |  |  | - | ------ | 
|            |         |             |  | Average    
|Range       |         | Options     |  | Exercisable
|of Exercise |         | Exercisable |  | Option     
|Prices      |         | at 12/31/00 |  | Price      
|            |         |             |  |            
|$           | 27-40   |             |  |             | 252,768   |  |  | $ | 32.77  | 
|            | 40-60   |             |  |             | 1,769,667 |  |  |   | 53.65  | 
|            | 60-80   |             |  |             | 3,378,167 |  |  |   | 69.81  | 
|            | 80-100  |             |  |             | 254,069   |  |  |   | 83.37  | 
|            | 100-102 |             |  |             | 126,748   |  |  |   | 102.14 | 
|            |         |             |  |             |           |  |  |   |        | 
|            |         |             |  |             | 5,781,419 |  |  |   | 64.55  | 
|            |         |             |  |             |           |  |  |   |        | 




Changes during 1998, 1999 and 2000 in Restricted Stock were as
follows:




|                                 |            |        |         |          |  
|-------------------------------- | ---------- | ------ | ------- | -------- | -
|                                 |            | Shares
|                                 |            |       
|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 |         
|                                
|                                
|                                
|                                
|                                 | Granted    |        |         | 69,000   |  
|                                
|                                
|                                
|                                
|                                 | Terminated |        |         | (18,000  | )
|                                
|                                
|                                
|                                
|                                 | Released   |        |         | (113,272 | )
|                                 |            |        |         |         
|Outstanding at December 31, 2000 |            |        | 219,578 |         
|                                 |            |        |         |         




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:




|                                                  |  |      |      |      |  |      |        |   |  |  |       | 
|------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ------ | - |  |  | ----- | 
|                                                  |  | 2000 |      | 1999 |  | 1998
|                                                  |  |      |      |      |  |     
|Net income (loss)  as reported                   |  | $    | 29.0 |      |  |      | (257.8 | ) |  |  | 190.9 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Net income (loss)  pro forma                     |  |      | 21.3 |      |  |      | (265.5 | ) |  |  | 184.7 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Earnings (loss) per share  as reported (basic)   |  |      | 0.37 |      |  |      | (4.19  | ) |  |  | 3.28  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Earnings (loss) per share  pro forma (basic)     |  |      | 0.27 |      |  |      | (4.31  | ) |  |  | 3.17  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Earnings (loss) per share  as reported (diluted) |  |      | 0.37 |      |  |      | (4.19  | ) |  |  | 3.26  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Earnings (loss) per share  pro forma (diluted)   |  | $    | 0.27 |      |  |      | (4.31  | ) |  |  | 3.16  | 






---



##### Table of Contents



-76-

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:




|                                |  |      |         |      |  |      |         |   |  |  |         |  
|------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                |  | 2000 |         | 1999 |  | 1998
|                                |  |      |         |      |  |     
|Expected dividend yield         |  |      | 3.30    | %    |  |      | 3.10    | % |  |  | 2.98    | %
|                               
|                               
|                               
|                               
|Expected stock price volatility |  |      | 39.0    | %    |  |      | 32.0    | % |  |  | 29.0    | %
|                               
|                               
|                               
|                               
|Risk-free interest rate         |  |      | 5.4     | %    |  |      | 6.0     | % |  |  | 4.4     | %
|                               
|                               
|                               
|                               
|Expected life of options        |  |      | 3 years |      |  |      | 3 years |   |  |  | 3 years |  




The weighted-average fair value of options granted during 2000
was $13.47 per share, compared with $12.18 in 1999 and $10.84 in
1998.

15.  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
$54 million and the aggregate fair value of plan assets is $3
million.

Our pension plans were valued between December 1, 1998, and
January 1, 1999, and between December 1, 1999, and
January 1, 2000. The obligations were projected to and the
assets were valued as of the end of 1999 and 2000. 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 following table presents the benefit obligation, changes in
plan assets, the funded status of the pension plans and the
assumptions used:




|                                                    |                                                  |      |    |       |   |  |     |       |  
|--------------------------------------------------- | ------------------------------------------------ | ---- | -- | ----- | - |  | --- | ----- | -
|                                                    |                                                  | 2000 |    | 1999 
|                                                    |                                                  |      |    |      
|Assumptions:                                        |                                                  |      |    |       |   |  |     |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Discount rate                                    |      |    | 7.75  | % |  |     | 7.75  | %
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Rate of increase in salary levels                |      |    | 4.00  | % |  |     | 4.00  | %
|                                                   
|                                                   
|                                                   
|                                                   
|Change in benefit obligation:                       |                                                  |      |    |       |   |  |     |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Benefit obligation at beginning of year          |      | $  | 967   |   |  |     | 793   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Service cost  benefits earned during the period |      |    | 22    |   |  |     | 20    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Interest cost on benefit obligation              |      |    | 70    |   |  |     | 54    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Plan amendments                                  |      |    | 1     |   |  |     | 1     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Actuarial loss (gain)                            |      |    | (21   | ) |  |     | (119  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Benefits paid                                    |      |    | (66   | ) |  |     | (51   | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Curtailments and settlements                     |      |    | (1    | ) |  |     | (4    | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Special termination benefits                     |      |    |      |   |  |     | 13    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Acquisitions                                     |      |    |      |   |  |     | 262   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Currency translation adjustments                 |      |    | (3    | ) |  |     | (2    | )
|                                                    |                                                  |      |    |       |   |  |     |      
|                                                    | Benefit obligation at end of year                |      | $  | 969   |   |  |     | 967   |  
|                                                    |                                                  |      |    |       |   |  |     |      
|Change in plan assets:                              |                                                  |      |    |       |   |  |     |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Fair value of plan assets at beginning of year   |      | $  | 1,076 |   |  |     | 792   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Actual return on plan assets                     |      |    | 38    |   |  |     | 115   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Acquisitions                                     |      |    |      |   |  |     | 217   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Employer contributions                           |      |    | 5     |   |  |     | 2     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Currency translation adjustments                 |      |    | (3    | ) |  |     | 1     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Benefits paid                                    |      |    | (66   | ) |  |     | (51   | )
|                                                    |                                                  |      |    |       |   |  |     |      
|                                                    | Fair value of plan assets at end of year         |      | $  | 1,050 |   |  |     | 1,076 |  
|                                                    |                                                  |      |    |       |   |  |     |      
|Funded status                                       |                                                  | $    | 81 |       |   |  | 109 |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrecognized actuarial loss (gain)               |      |    | (118  | ) |  |     | (157  | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Unrecognized prior service cost                  |      |    | 31    |   |  |     | 35    |  
|                                                    |                                                  |      |    |       |   |  |     |      
|                                                    | Net amount recognized                            |      | $  | (6    | ) |  |     | (13   | )
|                                                    |                                                  |      |    |       |   |  |     |      
|Amounts recognized in the balance sheet consist of: |                                                  |      |    |       |   |  |     |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Prepaid benefit cost                             |      | $  | 80    |   |  |     | 69    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accrued benefit liability                        |      |    | (94   | ) |  |     | (89   | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Intangible asset                                 |      |    | 2     |   |  |     | 2     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deferred tax benefit                             |      |    | 2     |   |  |     | 2     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Accumulated other comprehensive income           |      |    | 4     |   |  |     | 3     |  
|                                                    |                                                  |      |    |       |   |  |     |      
|Net amount recognized                               |                                                  | $    | (6 | )     |   |  | (13 | )    
|                                                    |                                                  |      |    |       |   |  |     |      






---



##### Table of Contents



-77-

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




|                                         |                                                  |      |   |       |   |      |  |       |   |  |  |       |  
|---------------------------------------- | ------------------------------------------------ | ---- | - | ----- | - | ---- |  | ----- | - |  |  | ----- | -
|                                         |                                                  | 2000 |   | 1999  |   | 1998
|                                         |                                                  |      |   |       |   |     
|Assumptions:                             |                                                  |      |   |       |   |      |  |       |   |  |  |      
|                                        
|                                        
|                                        
|                                        
|                                         | Discount rate                                    |      |   | 7.75  | % |      |  | 6.75  | % |  |  | 7.25  | %
|                                        
|                                        
|                                        
|                                        
|                                         | Expected long-term rate of return                |      |   | 9.50  | % |      |  | 9.50  | % |  |  | 9.50  | %
|                                        
|                                        
|                                        
|                                        
|                                         | Rate of increase in salary levels                |      |   | 4.00  | % |      |  | 4.00  | % |  |  | 4.00  | %
|                                        
|                                        
|                                        
|                                        
|Components of net periodic benefit cost: |                                                  |      |   |       |   |      |  |       |   |  |  |      
|                                        
|                                        
|                                        
|                                        
|                                         | Service cost  benefits earned during the period |      | $ | 22.3  |   |      |  | 19.6  |   |  |  | 16.6  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Interest cost on benefit obligation              |      |   | 70.1  |   |      |  | 54.3  |   |  |  | 48.4  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Expected return on plan assets                   |      |   | (94.3 | ) |      |  | (70.5 | ) |  |  | (62.9 | )
|                                        
|                                        
|                                        
|                                        
|                                         | Amortization of transition obligation (asset)    |      |   |      |   |      |  | (1.3  | ) |  |  | (1.8  | )
|                                        
|                                        
|                                        
|                                        
|                                         | Amortization of prior service cost               |      |   | 4.2   |   |      |  | 4.4   |   |  |  | 4.2   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Recognized actuarial loss (gain)                 |      |   | (3.1  | ) |      |  | 0.8   |   |  |  | 0.5   |  
|                                         |                                                  |      |   |       |   |      |  |       |   |  |  |      
|                                         | Net periodic benefit cost                        |      | $ | (0.8  | ) |      |  | 7.3   |   |  |  | 5.0   |  
|                                         |                                                  |      |   |       |   |      |  |       |   |  |  |      




We recognize a minimum liability in our financial statements for
our underfunded pension plans. The accrued pension benefit cost
for the underfunded plans is $46 million while the minimum
liability is $54 million. Other Liabilities and Deferred
Credits at December 31, 2000, included $8 million
relating to this minimum liability, compared with $7 million at
December 31, 1999. This amount was offset by a $2 million
intangible asset, a $4 million reduction in Common
Shareholders Equity and a $2 million deferred tax
benefit at December 31, 2000, compared with a $2 million
intangible asset, a $3 million reduction in Common
Shareholders Equity and a $2 million deferred tax
benefit at December 31, 1999.



|    |                                                                
|--- | ---------------------------------------------------------------
|16. | 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:




|                              |                                                  |      |   |      |   |  |  |      |  
|----------------------------- | ------------------------------------------------ | ---- | - | ---- | - |  |  | ---- | -
|                              |                                                  | 2000 |   | 1999
|                              |                                                  |      |   |     
|Assumptions:                  |                                                  |      |   |      |   |  |  |     
|                             
|                             
|                             
|                             
|                              | Expected long-term rate of return on plan assets |      |   | 8.00 | % |  |  | 8.00 | %
|                             
|                             
|                             
|                             
|                              | Weighted average discount rate                   |      |   | 7.75 | % |  |  | 7.75 | %
|                             
|                             
|                             
|                             
|Change in benefit obligation: |                                                  |      |   |      |   |  |  |     
|                             
|                             
|                             
|                             
|                              | Benefit obligation at beginning of year          |      | $ | 307  |   |  |  | 175  |  
|                             
|                             
|                             
|                             
|                              | Service cost  benefits earned during the year   |      |   | 4    |   |  |  | 5    |  
|                             
|                             
|                             
|                             
|                              | Interest cost on benefit obligation              |      |   | 23   |   |  |  | 12   |  
|                             
|                             
|                             
|                             
|                              | Amendments                                       |      |   | 16   |   |  |  |     |  
|                             
|                             
|                             
|                             
|                              | Actuarial loss (gain)                            |      |   | 2    |   |  |  | (25  | )
|                             
|                             
|                             
|                             
|                              | Benefits paid                                    |      |   | (21  | ) |  |  | (9   | )
|                             
|                             
|                             
|                             
|                              | Restructuring                                    |      |   |     |   |  |  | 2    |  
|                             
|                             
|                             
|                             
|                              | Acquisitions                                     |      |   |     |   |  |  | 147  |  
|                              |                                                  |      |   |      |   |  |  |     
|                              | Benefit obligation at end of year                |      | $ | 331  |   |  |  | 307  |  
|                              |                                                  |      |   |      |   |  |  |     
|Change in plan assets:        |                                                  |      |   |      |   |  |  |     
|                             
|                             
|                             
|                             
|                              | Fair value of plan assets at beginning of year   |      | $ | 10   |   |  |  | 10   |  
|                             
|                             
|                             
|                             
|                              | Actual return on plan assets                     |      |   | 1    |   |  |  | 1    |  
|                             
|                             
|                             
|                             
|                              | Benefits paid                                    |      |   | (1   | ) |  |  | (1   | )
|                              |                                                  |      |   |      |   |  |  |     
|                              | Fair value of plan assets at end of year         |      | $ | 10   |   |  |  | 10   |  
|                              |                                                  |      |   |      |   |  |  |     
|                              | Funded (unfunded) status                         |      | $ | (321 | ) |  |  | (297 | )
|                             
|                             
|                             
|                             
|                              | Unrecognized actuarial gain                      |      |   | (13  | ) |  |  | (15  | )
|                             
|                             
|                             
|                             
|                              | Unrecognized prior service cost                  |      |   | 15   |   |  |  | (1   | )
|                              |                                                  |      |   |      |   |  |  |     
|                              | Net amount recognized  accrued liability        |      | $ | (319 | ) |  |  | (313 | )
|                              |                                                  |      |   |      |   |  |  |     




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




|                                         |                                                  |      |   |      |   |      |  |      |   |  |  |      |  
|---------------------------------------- | ------------------------------------------------ | ---- | - | ---- | - | ---- |  | ---- | - |  |  | ---- | -
|                                         |                                                  | 2000 |   | 1999 |   | 1998
|                                         |                                                  |      |   |      |   |     
|Assumptions:                             |                                                  |      |   |      |   |      |  |      |   |  |  |     
|                                        
|                                        
|                                        
|                                        
|                                         | Expected long-term rate of return on plan assets |      |   | 8.00 | % |      |  | 8.00 | % |  |  | 6.50 | %
|                                        
|                                        
|                                        
|                                        
|                                         | Discount rate                                    |      |   | 7.75 | % |      |  | 6.75 | % |  |  | 7.25 | %
|                                        
|                                        
|                                        
|                                        
|                                         | Rate of increase in salary levels                |      |   | 4.00 | % |      |  | 4.00 | % |  |  | 4.00 | %
|                                        
|                                        
|                                        
|                                        
|Components of net periodic benefit cost: |                                                  |      |   |      |   |      |  |      |   |  |  |     
|                                        
|                                        
|                                        
|                                        
|                                         | Service cost  benefits earned during the year   |      | $ | 4    |   |      |  | 5    |   |  |  | 4    |  
|                                        
|                                        
|                                        
|                                        
|                                         | Interest cost                                    |      |   | 23   |   |      |  | 13   |   |  |  | 11   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Expected return on plan assets                   |      |   | (1   | ) |      |  | (1   | ) |  |  | (1   | )
|                                         |                                                  |      |   |      |   |      |  |      |   |  |  |     
|                                         | Net periodic benefit cost                        |      | $ | 26   |   |      |  | 17   |   |  |  | 14   |  
|                                         |                                                  |      |   |      |   |      |  |      |   |  |  |     




For 2000 measurement purposes, the annual rate of increase in
the cost of covered health care benefits was assumed to average
14.0 percent for



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##### Table of Contents



-78-



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 |  | $                  | 1.4  |          |  |  | (0.9  | )
|                                                       
|                                                       
|                                                       
|                                                       
|Effect on postretirement benefit obligation             |  | $                  | 21.6 |          |  |  | (16.8 | )




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 $6.9 million
in 2000, $5.3 million in 1999, and $5.0 million in 1998.

17.  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, 2000, are future
minimum rentals and royalties under non-cancelable leases:




|                                |                                     |           |      |           |  |         |      |      |  |   |      |      | 
|------------------------------- | ----------------------------------- | --------- | ---- | --------- |  | ------- | ---- | ---- |  | - | ---- | ---- | 
|                                |                                     | Operating |      | Mineral   |  | Capital
|                                |                                     | Leases    |      | Royalties |  | Leases 
|                                |                                     |           |      |           |  |        
|2001                            |                                     | $         | 17.0 |           |  |         | 1.4  |      |  |   | 4.0  |     
|                               
|                               
|                               
|                               
|2002                            |                                     |           | 15.6 |           |  |         | 1.4  |      |  |   | 4.0  |     
|                               
|                               
|                               
|                               
|2003                            |                                     |           | 14.6 |           |  |         | 1.4  |      |  |   | 4.0  |     
|                               
|                               
|                               
|                               
|2004                            |                                     |           | 14.0 |           |  |         | 1.4  |      |  |   | 4.0  |     
|                               
|                               
|                               
|                               
|2005                            |                                     |           | 12.1 |           |  |         | 1.4  |      |  |   | 4.0  |     
|                               
|                               
|                               
|                               
|After 2005                      |                                     |           | 53.7 |           |  |         | 14.9 |      |  |   |     |     
|                                |                                     |           |      |           |  |         |      |      |  |   |      |     
|                                | Total payments                      |           | $    | 127.0     |  |         |      | 21.9 |  |   |      | 20.0 | 
|                                |                                     |           |      |           |  |         |      |      |  |   |      |     
|Present value of lease payments |                                     |           |      |           |  |         |      |      |  | $ | 16.4 |     
|                               
|                               
|                               
|                               
|Less current portion            |                                     |           |      |           |  |         |      |      |  |   | (2.7 | )   
|                                |                                     |           |      |           |  |         |      |      |  |   |      |     
|                                | Present value of long-term payments |           |      |           |  |         |      |      |  |   | $    | 13.7 | 
|                                |                                     |           |      |           |  |         |      |      |  |   |      |     




Summarized below as of December 31, 2000, is future
sub-lease income:




|           |  |           |      | 
|---------- |  | --------- | ---- | 
|           |  | Sub-lease
|           |  | Income   
|           |  |          
|2001       |  | $         | 2.4  | 
|          
|          
|          
|          
|2002       |  |           | 2.4  | 
|          
|          
|          
|          
|2003       |  |           | 2.4  | 
|          
|          
|          
|          
|2004       |  |           | 2.4  | 
|          
|          
|          
|          
|2005       |  |           | 2.4  | 
|          
|          
|          
|          
|After 2005 |  |           | 7.2  | 
|           |  |           |      | 
|Total      |  | $         | 19.2 | 
|           |  |           |      | 




Rent and royalty charged to expense were:




|                |  |      |      |      |  |      |      |  |  |  |      | 
|--------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  |  | ---- | 
|                |  | 2000 |      | 1999 |  | 1998
|                |  |      |      |      |  |     
|Rental expense  |  | $    | 29.1 |      |  |      | 17.5 |  |  |  | 13.7 | 
|               
|               
|               
|               
|Mineral royalty |  |      | 0.8  |      |  |      | 0.1  |  |  |  |     | 
|                |  |      |      |      |  |      |      |  |  |  |      | 
|Total charges   |  | $    | 29.9 |      |  |      | 17.6 |  |  |  | 13.7 | 
|                |  |      |      |      |  |      |      |  |  |  |      | 




In January 2001, Alcoa Aluminio, S.A. exercised a put option
that required Phelps Dodge or a designee company to acquire the
40 percent minority interest in Alcoa Fios e Cabos
Electricos, S.A., a Phelps Dodge wire and cable facility in
Brazil. The transaction is scheduled to close in March 2001. The
indicated option price is $48 million, however, the Company is
in discussions with the optionor regarding a final settlement
price.



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##### Table of Contents



-79-

18.  Contingencies

Phelps Dodge is subject to various federal, state and local
environmental laws and regulations that govern emissions of air
pollutants; discharges of water pollutants; and the manufacture,
storage, handling and disposal of hazardous substances,
hazardous wastes and other toxic materials. The Company is also
subject to potential liabilities arising under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA)
and similar state laws that impose responsibility on persons who
arranged for the disposal of hazardous substances, and on
current and previous owners and operators of a facility for the
cleanup of hazardous substances released from the facility into
the environment. In addition, the Company is subject to
potential liabilities under the Resource Conservation and
Recovery Act (RCRA) and analogous state laws that require
responsible parties remediate releases of hazardous or solid
waste constituents into the environment associated with past or
present activities.

Phelps Dodge or its subsidiaries have been advised by EPA, the
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
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 provided reserves for potential environmental
obligations that management considers probable and for which
reasonable estimates of such obligations can be made. 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 upon specific facts
and circumstances. 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 potentially responsible party (PRP), and the ability
of other PRPs to pay their allocated portions. Accordingly,
total environmental reserves of $307.1 million and $336.1
million, respectively, were recorded as of December 31,
2000 and 1999. The long-term portion of these reserves is
included in other liabilities and deferred credits on the
consolidated balance sheet and amounted to $244.9 million and
$254.4 million at December 31, 2000 and 1999, respectively.

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
in Miami, Arizona, and the former American Zinc and Chemical
site in Langeloth, Pennsylvania.

At the Pinal Creek site, remediation is being performed by the
Pinal Creek Group, which includes Phelps Dodge Miami Inc. and
other companies that have been determined to have contributed
through historic mining activities to the contaminated
groundwater plume in the shallow alluvial aquifers of Pinal
Creek. The remediation 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 action is consistent with the National
Contingency Plan prepared by EPA as required by CERCLA. Ongoing
remediation efforts have resulted in continued improvement of
the water quality in the area. In November 1997, the Pinal Creek
Group joined with the State of Arizona in seeking approval of
the District Court for the 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 commits
the Pinal Creek Group to complete the remediation work outlined
in the remedial action plan that was submitted to the State in
May 1997. Phelps Dodge Miami Inc. has commenced contribution
litigation against other parties involved in this matter and has
asserted claims against certain of its past insurance carriers.
While significant recoveries are expected, the Company cannot
reasonably estimate the amount and, therefore, has not taken
potential recoveries into consideration in the recorded reserve.
Phelps Dodge Miami Inc.s share of the planned remediation
work has a cost range for reasonably expected outcomes estimated
to be from $129 million to $235 million, and, as no point within
that range is more likely than any other, the lower end of the
range has been reserved as required by generally accepted
accounting principles.

In June 1999, Cyprus Amax received an information request from
the Pennsylvania Depart-



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-80-



At December 31, 2000, the cost range for reasonably
possible outcomes for all reservable environmental remediation
sites other than Pinal Creek and Langeloth was estimated to be
from $146 million to $226 million of which $158 million has been
reserved. Work on these sites is expected to be substantially
completed in the next several years, subject to inherent delays
involved in the remediation process.

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.

Phelps Dodge has a number of sites that are not the subject of
an environmental reserve because it is not probable that a
successful claim will be made against the Company for those
sites, but for which there is a reasonably possible likelihood
of an environmental remediation liability. At December 31,
2000, the cost range for reasonably possible outcomes for all
such sites was estimated to be from $12 million to $45 million.
The liabilities arising from potential environmental obligations
that have not been reserved for at this time may be material to
the results of any single quarter or year in the future.
Management, however, believes the liability arising from
potential environmental obligations is not likely to have a
material adverse effect on the Companys liquidity or
financial position as such obligations could be satisfied over a
period of many years.

The following summarizes environmental reserve activities for
the years ended December 31:




|                           |                                           |      |       |       |   |  |       |       |  
|-------------------------- | ----------------------------------------- | ---- | ----- | ----- | - |  | ----- | ----- | -
|                           |                                           | 2000 |       | 1999 
|                           |                                           |      |       |      
|Balance, beginning of year |                                           | $    | 336.1 |       |   |  | 106.0 |      
|                          
|                          
|                          
|                          
|                           | Additions to reserves                     |      |       |      |   |  |       | 36.5  |  
|                          
|                          
|                          
|                          
|                           | Spending against reserves, net            |      |       | (31.8 | ) |  |       | (20.0 | )
|                          
|                          
|                          
|                          
|                           | Liabilities assumed in Cyprus acquisition |      |       | 2.8   |   |  |       | 213.6 |  
|                           |                                           |      |       |       |   |  |       |      
|Balance, end of year       |                                           | $    | 307.1 |       |   |  | 336.1 |      
|                           |                                           |      |       |       |   |  |       |      




As of December 31, 1998, Phelps Dodge had an environmental
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, Phelps
Dodge 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.

During 2000, net spending against environmental reserves totaled
$31.8 million and an additional $2.8 million was assigned to the
value of environmental liabilities assumed with the acquisition
of Cyprus Amax. As of December 31, 2000, the environmental
reserve balance associated with environmental matters at
shutdown operations or closed facilities within active
operations was $307.1 million.

Our mining operations are subject to laws and regulations
establishing new requirements for mined land reclamation and
financial assurance. Colorado passed a mined land reclamation
law in the early 1970s establishing a Mined Land
Reclamation Board that adopted regulations in 1977. Significant
changes were made in 1993. Our Colorado mining operations have
had approved mined land reclamation plans and financial
assurance under these laws for several years. Arizona enacted
its mined land reclamation law in 1994. Our Arizona mining
operations submitted proposed reclamation plans and financial
assurance following the adoption of implementing rules in 1997,
and most of our Arizona operations have approved plans and
financial assurance. New Mexico passed a mined land reclamation



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-81-



The federal Bureau of Land Management adopted amended
regulations governing mined land reclamation for mining on
federal lands in January 2001. New financial assurance
requirements for existing operations take effect in June 2001,
although the new reclamation requirements take effect only for
new mining and certain modifications to existing mining
activities. Mined land reclamation is an ongoing activity and we
recognize estimated reclamation costs using a
units-of-production basis calculation. These laws and
regulations and the associated plan approval and permitting
requirements will likely increase our regulatory obligations and
compliance costs over time 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
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.

In September 2000, RAG American Coal Company (RAG) filed a
complaint against Cyprus Amax Minerals Company and Amax Energy
Inc. The complaint alleges claims relating to breach of
contract, fraud, negligent misrepresentation, and negligence
arising from alleged inaccuracies in financial statements
relating to the sale by Cyprus of its coal subsidiary to RAG in
June 1999. The complaint seeks damages in the amount of $100
million under the fraud claim and $115 million under each of the
other claims. Cyprus has filed a motion to dismiss, which has
been fully briefed and remains pending.



|    |                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------
|19. | 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



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-82-



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, 2000, we had futures and swap contracts for
approximately 119 million pounds of copper with a net hedge
value of $103 million and a total face value of approximately
$106 million. At that date, we had $2 million in losses 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 1999, we had
futures and swap contracts in place for approximately 111
million pounds of copper at a net hedge value of $87 million and
a total face value of approximately $125 million. We had $7
million in deferred, unrealized gains at that time. At
December 31, 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.

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 2000, we would have
had a net loss from our copper futures contracts of
approximately $10 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 2000 production, we had
a total of 110 million pounds of copper cathode production
protected through contracts that effectively ensured minimum
(approximately 72 cents) and maximum (approximately
95 cents) prices per pound. The minimum and maximum prices
are based upon average LME prices for the protection period.
These contracts expired without payment on December 31,
2000. 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 on December 31, 1999.
We did not have any outstanding copper price protection
contracts at the end of 1998, 1999 and 2000.

Copper Scrap Purchase Hedging

From time to time, Phelps Dodge may purchase copper scrap as a
raw material to be processed eventually into rod for sale to
customers. The copper scrap is purchased from third parties at a
copper content price different from the price contracted with
eventual rod customers. To mitigate the copper price risk
resulting from the difference between the purchase and sales
price of the purchased copper, Phelps Dodge enters into a hedge
program. The hedge program involves the sale of an
over-the-counter swap priced at the COMEX average price in the
month of scrap delivery. In the month that the copper rod
associated with the scrap purchase is sold, the swap is
liquidated at the COMEX average price in the month of the copper
rod sale. At December 31, 2000, we had swap contracts for
approximately 3 million pounds of scrap copper with a net hedge
and total face value of approximately $2.5 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. We
did not



---



##### Table of Contents



-83-



Aluminum Hedging

During 2000, our Brazilian wire and cable operation entered into
aluminum swap contracts with a financial institution to lock in
the cost of aluminum ingot needed in manufacturing aluminum
cable contracted by customers. At December 31, 2000, we had
swap contracts for approximately 9 million pounds of aluminum
with a net hedge value of approximately $6 million and a total
face value of approximately $8 million. At the end of the year,
these contracts did not have any material gains or losses that
were not recorded in our financial statements. A sensitivity
analysis of our aluminum futures contracts indicates that a
hypothetical 10 percent unfavorable change in aluminum
prices at the end of 2000 would have resulted in a loss of
approximately $0.5 million. That loss would have been virtually
offset by a similar amount of gain on the related customer
contracts. 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.

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, 2000, 1999 and 1998, we had net hedge and
total face values of approximately $16 million, $34 million and
$44 million, respectively, in forward exchange contracts to
hedge intercompany loans between our international subsidiaries
or foreign currency exposures with our trading partners. 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, 2000.

At year-end 2000, our foreign currency protection contracts
included the British pound, euro, Japanese yen 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 $2 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, 2000, we had no
currency swap contracts in place. At year-end 1999, we had
currency swap contracts in place with an approximate net hedged
and total face value of $21 million. At December 31, 1998,
we had currency swap contracts in place with an approximate net
hedged value of $31 million and 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.

In addition, we are exposed 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 2000 and 1999, we had
interest rate swap contracts in place with an approximate net
hedged and total face value of $396 million and $485 million,
respectively. At December 31, 2000 we had $7 million in
unrealized losses on these contracts. At the end of 2000, we
prepared an analysis to determine the sensitivity of our
interest rate swap contracts to changes in interest rates. A
hypothetical interest rate move against our interest rate swaps
of 1 percent (or 100 basis points) would have resulted in a
potential loss of approximately $10 million over the life of the
swap.



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##### Table of Contents



-84-

Diesel Fuel Price Protection Program

Phelps Dodge purchases large quantities of diesel fuel to
operate its mine sites as an input to the manufacturing process.
Price volatility of diesel fuel impacts the cost of producing
copper cathode and other copper products for our customers. The
objective of the diesel fuel price protection program is to
protect against a significant upward movement in diesel fuel
prices while retaining the flexibility to participate in any
downward price movement.

To implement these objectives, we may purchase out-of-the-money
(OTM) call options, settled at the average price, for
diesel fuel. Purchase of these calls protects us against
significant upward movement in diesel fuel prices while allowing
us full participation in downward movements. The physical
purchases and the options are both priced based on Platts
Gulf Coast, which eliminates pricing basis risk between the
hedge and the hedged item. We do not purchase diesel fuel
options for speculative purposes.

At December 31, 2000, we had option contracts to protect
first quarter 2001 diesel fuel consumption of approximately 8
million gallons with a net hedged and total face value of $7
million, for which we paid a premium of approximately $0.2
million. We did not have any significant gains or losses at
year-end that had not been recorded in our financial statements.
We did not have any diesel fuel price protection option
contracts at the end of 1998 or 1999.

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 2000. As a whole, we
have various guarantees and letters of credit totaling $246
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, 2000, were as follows:




|                                                                                                                                     |  |          |         |       |  |  |         | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | -------- | ------- | ----- |  |  | ------- | 
|                                                                                                                                     |  | Carrying |         | Fair 
|                                                                                                                                     |  | Amount   |         | Value
|                                                                                                                                     |  |          |         |      
|Cash and short-term investments                                                                                                      |  | $        | 250.0   |       |  |  | 250.0   | 
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|Diesel fuel call option                                                                                                              |  |          | 0.2     |       |  |  |        | 
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|Investments and long-term receivables (including amounts due
	within one year) for which it is practicable to estimate fair
	value * |  |          | 64.6    |       |  |  | 228.2   | 
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|Long-term debt (including amounts due within one year)                                                                               |  |          | 2,169.5 |       |  |  | 2,112.4 | 
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|                                                                                                                                    
|Foreign current exchange contracts  assets
	(liabilities)                                                                           |  |          | 0.4     |       |  |  | 0.3     | 




|  |                                                                                                                                                                                                                                                                                                                               
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | 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. 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.






---



##### Table of Contents



-85-

20.  Business Segment Data

Our business consists of two divisions, PD Mining and PD
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.

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, copper sulfate,
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 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. PD Industries also included
Accuride Corporation and its subsidiaries, our wheel and rim
operations, until Accuride was sold effective January 1,
1998.

On December 8, 2000, we announced our intention to explore
strategic alternatives for, including potential sale of, our
specialty chemicals and wire and cable segments.

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

The following tables give a summary of financial data by
business segment and geographic area for the years 1998 through
2000. Major unusual items during the three-year period included
(i) pre-tax charge of $51.6 million and $5.8 million for PD
Industries and PD Mining, respectively, related to the
June 30, 1999 and June 27, 2000 restructuring plans;
(ii) the fourth quarter 1999 acquisition of Cyprus Amax;
pre-tax asset impairments of $320.4 million at PD Mining and
$21.7 million at PD Industries; a pre-tax charge of $28.2
million for environmental provisions at PD Mining; a pre-tax
charge of $36.6 million at PD Mining and $59.9 million at PD
Industries for a restructuring plan announced on June 30,
1999; (iii) a 1998 pre-tax provision of $5.5 million at PD
Mining 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 (See Notes 2 and 3 to the consolidated
financial statements for a further discussion of these issues.)






FINANCIAL DATA BY GEOGRAPHIC AREA





|                                    |                        |                 |         |      |         |      |         |  |         |  |         |  |         | 
|----------------------------------- | ---------------------- | --------------- | ------- | ---- | ------- | ---- | ------- |  | ------- |  | ------- |  | ------- | 
|                                    |                        | 2000            |         | 1999 |         | 1998
|                                    |                        |                 |         |      |         |     
|Sales and other operating revenues: |                        |                 |         |      |         |      |         |  |         |  |         | 
|                                    | Unaffiliated customers |                 |         |      |         |      |         |  |         |  |         |  |        
|                                   
|                                   
|                                   
|                                   
|                                    |                        | United States   |         | $    | 3,373.6 |      |         |  | 2,093.8 |  |         |  | 2,141.0 | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Latin America   |         |      | 758.0   |      |         |  | 660.2   |  |         |  | 579.9   | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Other           |         |      | 393.5   |      |         |  | 360.4   |  |         |  | 342.5   | 
|                                    |                        |                 |         |      |         |      |         |  |         |  |         | 
|                                    |                        | $               | 4,525.1 |      |         |      | 3,114.4 |  |         |  | 3,063.4 | 
|                                    |                        |                 |         |      |         |      |         |  |         |  |         | 
|Long-lived assets at December 31:   |                        |                 |         |      |         |      |         |  |         |  |         | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | United States   |         | $    | 4,031.0 |      |         |  | 4,200.3 |  |         |  | 2,687.9 | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Latin America * |         |      | 1,938.0 |      |         |  | 2,093.3 |  |         |  | 1,109.8 | 
|                                   
|                                   
|                                   
|                                   
|                                    |                        | Other           |         |      | 309.1   |      |         |  | 225.1   |  |         |  | 239.6   | 
|                                    |                        |                 |         |      |         |      |         |  |         |  |         | 
|                                    |                        | $               | 6,278.1 |      |         |      | 6,518.7 |  |         |  | 4,037.3 | 
|                                    |                        |                 |         |      |         |      |         |  |         |  |         | 
|                                    |                        |                 |         |      |         |      |         |  |         |  |         | 
|*   Long-lived assets in Chile      |                        | $               | 1,201.1 |      |         |      | 1,261.5 |  |         |  | 645.1   | 






---



##### Table of Contents



-86-




FINANCIAL DATA BY BUSINESS SEGMENT

|                                         |                        |           |         |           |  |        |       |          |  |               |       |          |  |                 |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |         | 
|---------------------------------------- | ---------------------- | --------- | ------- | --------- |  | ------ | ----- | -------- |  | ------------- | ----- | -------- |  | --------------- | ----- | ------ |  |  | ------- | ------- |  |  | ------- | ------- |  |  | ----- | ------ | - |  | ------- | ------- | 
|                                         |                        |           |         |           |  |        |       |          |  |               |       |          |  | Corporate,      |       |       
|                                         |                        |           |         |           |  |        |       |          |  |               |       |          |  | Unallocated     |       |       
|                                         |                        | PD Mining |         | Specialty |  | Wire & |       | Other *  |  | PD Industries |       | Segment  |  | & Reconciling   |       |       
|                                         |                        | Company   |         | Chemicals |  | Cable  |       | Segments |  | Subtotal      |       | Subtotal |  | Eliminations ** |       | Totals
|                                         |                        |           |         |           |  |        |       |          |  |               |       |          |  |                 |       |       
|2000                                     |                        |           |         |           |  |        |       |          |  |               |       |          |  |                 |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                        
|                                        
|                                        
|                                        
|Sales & other operating revenues:        |                        |           |         |           |  |        |       |          |  |               |       |          |  |                 |       |        |  |  |         |         |  |  |         |         |  |  |       |        |   |  |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Unaffiliated customers |           | $       | 3,073.7   |  |        |       | 598.4    |  |               |       | 853.0    |  |                 |       |       |  |  |         | 1,451.4 |  |  |         | 4,525.1 |  |  |       |       |   |  |         | 4,525.1 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Intersegment           |           |         | 242.6     |  |        |       |         |  |               |       | 1.5      |  |                 |       |       |  |  |         | 1.5     |  |  |         | 244.1   |  |  |       | (244.1 | ) |  |         |        | 
|                                        
|                                        
|                                        
|                                        
|Depreciation, depletion and amortization |                        |           | 359.4   |           |  |        | 45.9  |          |  |               | 53.9  |          |  |                 |      |        |  |  | 99.8    |         |  |  | 459.2   |         |  |  | 5.0   |        |   |  | 464.2   |        
|                                        
|                                        
|                                        
|                                        
|Non-recurring charges and provisions     |                        |           | 5.8     |           |  |        |      |          |  |               | 46.0  |          |  |                 |      |        |  |  | 46.0    |         |  |  | 51.8    |         |  |  |       |        |   |  | 51.8    |        
|                                        
|                                        
|                                        
|                                        
|Operating income (loss)                  |                        |           | 243.3   |           |  |        | 88.1  |          |  |               | (17.8 | )        |  |                 |      |        |  |  | 70.3    |         |  |  | 313.6   |         |  |  | (76.6 | )      |   |  | 237.0   |        
|                                        
|                                        
|                                        
|                                        
|Interest income                          |                        |           | 12.1    |           |  |        | 4.3   |          |  |               | 1.3   |          |  |                 |      |        |  |  | 5.6     |         |  |  | 17.7    |         |  |  | 1.8   |        |   |  | 19.5    |        
|                                        
|                                        
|                                        
|                                        
|Interest expense                         |                        |           | 64.6    |           |  |        | 38.2  |          |  |               | 11.1  |          |  |                 |      |        |  |  | 49.3    |         |  |  | 113.9   |         |  |  | 103.9 |        |   |  | 217.8   |        
|                                        
|                                        
|                                        
|                                        
|Equity earnings (losses)                 |                        |           | (2.8    | )         |  |        |      |          |  |               | 2.7   |          |  |                 |      |        |  |  | 2.7     |         |  |  | (0.1    | )       |  |  | 1.6   |        |   |  | 1.5     |        
|                                        
|                                        
|                                        
|                                        
|Income tax expense (benefit)             |                        |           | 55.3    |           |  |        | 12.4  |          |  |               | 8.4   |          |  |                 |      |        |  |  | 20.8    |         |  |  | 76.1    |         |  |  | (56.9 | )      |   |  | 19.2    |        
|                                        
|                                        
|                                        
|                                        
|Equity basis investments                 |                        |           | 18.4    |           |  |        |      |          |  |               | 4.8   |          |  |                 |      |        |  |  | 4.8     |         |  |  | 23.2    |         |  |  | 22.3  |        |   |  | 45.5    |        
|                                        
|                                        
|                                        
|                                        
|Assets at December 31                    |                        |           | 6,036.7 |           |  |        | 768.6 |          |  |               | 683.5 |          |  |                 |      |        |  |  | 1,452.1 |         |  |  | 7,488.8 |         |  |  | 342.0 |        |   |  | 7,830.8 |        
|                                        
|                                        
|                                        
|                                        
|Expenditures for segment assets          |                        |           | 311.6   |           |  |        | 73.7  |          |  |               | 16.9  |          |  |                 |      |        |  |  | 90.6    |         |  |  | 402.2   |         |  |  | 20.1  |        |   |  | 422.3   |        
|                                        
|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 | ) |  |         |        | 
|                                        
|                                        
|                                        
|                                        
|Depreciation, depletion and amortization |                        |           | 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 | ) |  |         |        | 
|                                        
|                                        
|                                        
|                                        
|Depreciation, depletion and amortization |                        |           | 191.5   |           |  |        | 43.3  |          |  |               | 56.5  |          |  |                 |      |        |  |  | 99.8    |         |  |  | 291.3   |         |  |  | 2.0   |        |   |  | 293.3   |        
|                                        
|                                        
|                                        
|                                        
|Non-recurring charges and provisions     |                        |           | (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   |        
|                                        

|   |                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  | 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



-87-




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 1, 2001 (the 2001 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 2001 Proxy Statement is
being prepared and will be filed with the Securities and
Exchange Commission and furnished to shareholders on or about
April 1, 2001.




Part IV




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



|        |                                        
|------- | ---------------------------------------
|(a)  1. | Financial Statements: Index on page 54.



|   |                                                
|-- | -----------------------------------------------
|2. | Financial Statement Schedule: Index on page 54.
|  
|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 | Amended and Restated By-Laws of the Corporation, effective as of
        November 1, 2000 (except for Section 7,
        Article II, which is effective as of May 2, 2001)
        (incorporated by reference to Exhibit 3.2 to the
        Corporations Form  10-Q for the quarter ended
        September 30, 2000 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|4.1 | Credit Agreement, effective May 10, 2000, among the
        Corporation, the Lenders parties thereto, Salomon Smith Barney
        Inc., Bank of Tokyo-Mitsubishi Trust Company, and Citibank,
        N.A., as agent (incorporated by reference to Exhibit 4.2 of
        the Corporations Form 10-Q for the quarter ended
        March  31, 2000 (SEC File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|4.2 | 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.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.3 | 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)).
|   
|4.4 | Form of 6.375 percent Note, due November 1, 2004, of
        the Corporation issued on November 5, 1997, pursuant                                                                                                                                                                                                                                                                                                                                                                                                                                                             



---



##### Table of Contents



-88-

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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)).                                                                                                                                                  
|   
|4.5 | 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)).
|   
|4.6 | Tripartite/ Conversion Agreement, dated as of August 8,
        2000, among Chase Manhattan Bank and First Union National Bank,
        and acknowledged by the Corporation, pursuant to which First
        Union National Bank succeeded Chase Manhattan Bank as trustee
        under the Indenture dated as of September 22, 1997
        (incorporated by reference to the Corporations
        Registration Statement on Form S-3 (Reg.
        No. 333-43890) filed with the Securities and Exchange
        Commission on August 16, 2000).             



|    |                                                            
|--- | -----------------------------------------------------------
|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.



---



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-89-



|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 2001 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 2001 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)). Third Amendment to
        Plan, effective as of January 1, 2000 (incorporated by
        reference to Exhibit  10.9 of the Corporations
        Form 10-Q for the quarter ended June 30, 2000 (SEC
        File No. 1-82)).
|     
|10.10 | The Corporations Supplemental Savings Plan (SSP) (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 SSP,
        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)). Second Amendment to SSP, effective as of
        January 1, 2000 (incorporated by reference to the
        Corporations Form 10-Q for the quarter ended
        June 30, 2000 (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)). First Amendment to Plan, effective as of
        January 1, 2001 (incorporated by reference to Exhibit 10.11
        of the Corporations Form 10-Q for the quarter ended
        June 30, 2000 (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, effec-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



---



##### Table of Contents



-90-

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | tive 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)). First Amendment to
        the 1998 Plan, effective as of May 4, 2000 (incorporated by
        reference to Exhibit 10.12 of the Corporations
        Form 10-Q for the quarter ended June 30, 2000 (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 1998 Plan, which
contain substantially similar provisions to Exhibit 10.12
above.



|      |                                                                                                                                                                                                                                                                           
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13 | Advisory Services Agreement, dated as of May 3, 2000,
        between the Corporation and Douglas C. Yearley (incorporated by
        reference to Exhibit 10.13 of the Corporations
        Form 10-Q for the quarter ended March 31, 2000 (SEC
        File No. 1-82)).
|     
|12    | Statement regarding 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:

No reports on Form 8-K were filed by the Corporation during
the quarter ended December 31, 2000.



---



##### Table of Contents



-91-

Schedule II

PHELPS DODGE CORPORATION AND CONSOLIDATED SUBSIDIARIES




VALUATION AND QUALIFYING ACCOUNTS AND RESERVES





($ in millions)

|                                                                       |                      |                   |  |            |       |       |  |            |      |           |  |  |       |     |  |  |     |  |  |  |       | 
|---------------------------------------------------------------------- | -------------------- | ----------------- |  | ---------- | ----- | ----- |  | ---------- | ---- | --------- |  |  | ----- | --- |  |  | --- |  |  |  | ----- | 
|                                                                       |                      |                   |  |            |       |       |  |           
|                                                                       |                      |                   |  | Additions  |       |       |  |           
|                                                                       |                      |                   |  |            |       |       |  |           
|                                                                       |                      | Balance at        |  | Charged to |       |       |  |            |      | Balance  
|                                                                       |                      | beginning         |  | costs and  |       |       |  |            |      | at end   
|                                                                       |                      | of period         |  | expenses   |       | Other |  | Deductions |      | of period
|                                                                       |                      |                   |  |            |       |       |  |            |      |          
|Reserve deducted in balance sheet from the asset to which
	applicable: |                      |                   |  |            |       |       |  |            |      |           |  |  |       |     |  |  |     |  |  | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Accounts Receivable: |                   |  |            |       |       |  |            |      |           |  |  |       |     |  |  |     |  |  |  |      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 2000 |  | $          | 17.5  |       |  |            | 0.3  |           |  |  | (0.2  | )   |  |  |    |  |  |  | 17.6  | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | 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  | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Supplies:            |                   |  |            |       |       |  |            |      |           |  |  |       |     |  |  |     |  |  |  |      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 2000 |  | $          | 8.4   |       |  |            | 1.8  |           |  |  | (1.0  | )   |  |  | 1.6 |  |  |  | 7.6   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | 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   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Deferred Tax Asset:  |                   |  |            |       |       |  |            |      |           |  |  |       |     |  |  |     |  |  |  |      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 2000 |  | $          | 165.3 |       |  |            | 23.0 |           |  |  | 91.9  | (A) |  |  |    |  |  |  | 280.2 | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                      | December 31, 1999 |  |            | 27.6  |       |  |            |     |           |  |  | 137.7 | (A) |  |  |    |  |  |  | 165.3 | 



|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(A) | Deferred tax assets recorded in conjunction with the acquisition
	of Cyprus Amax.



---



##### Table of Contents



-92-




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)            

March 9, 2001

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

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

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.

|                                                                                                                                                                                                          |  |                                                                                                 |  |              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | -------------
|/s/ J. STEVEN WHISLERJ. Steven Whisler                                                                                                                                                                    |  | Chairman, President, Chief Executive Officer and Director
        (Principal Executive Officer) |  | March 9, 2001
|                                                                                                                                                                                                          | 
|/s/ RAMIRO G. PERURamiro G. Peru                                                                                                                                                                          |  | Senior Vice President and Chief Financial Officer
        (Principal Financial Officer)         |  | March 9, 2001
|                                                                                                                                                                                                          | 
|/s/ STANTON K. RIDEOUTStanton K. Rideout                                                                                                                                                                  |  | Vice President and Controller
        (Principal Accounting Officer)                            |  | March 9, 2001
|                                                                                                                                                                                                          | 
|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 9, 2001                                                                                  
|By: /s/ RAMIRO G. PERURamiro G. Peru
        Attorney-in-fact                                                                                                                                             |  |                                                                                                 |  |              



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##### Table of Contents



Exhibit Index

|        |     |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | --- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|Number  |     | Description
|        |     |            
|        | 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 |             |  | Amended and Restated By-Laws of the Corporation, effective as of
	November 1, 2000 (except for Section 7,
	Article II, which is effective as of May 2, 2001)
	(incorporated by reference to Exhibit 3.2 to the
	Corporations Form 10-Q for the quarter ended
	September  30, 2000 (SEC File No.  1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 4.1 |             |  | Credit Agreement, effective May 10, 2000, among the
	Corporation, the Lenders parties thereto, Salomon Smith Barney
	Inc., Bank of Tokyo-Mitsubishi Trust Company, and Citibank,
	N.A., as agent (incorporated by reference to Exhibit 4.2 of
	the Corporations Form 10-Q for the quarter ended
	March  31, 2000 (SEC File No.  1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 4.2 |             |  | 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.                                                                                                                                                                                                                                                                                                                                 
|        | 4.3 |             |  | 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)).                                                                                                                                                                                                                                                                      
|        | 4.4 |             |  | 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)).                                                                                                                                                                                                                                                                                                  
|        | 4.5 |             |  | 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)).                                                                                                                                                                                                                                                                          



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##### Table of Contents



|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | ---- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 4.6  |             |  | Tripartite/ Conversion Agreement, dated as of August  8,
	2000, among Chase Manhattan Bank and First Union National Bank,
	and acknowledged by the Corporation, pursuant to which First
	Union National Bank succeeded Chase Manhattan Bank as trustee
	under the Indenture dated as of September 22, 1997
	(incorporated by reference to the Corporations
	Registration Statement on Form S-3 (Reg. No. 
	333-43890) filed with the Securities and Exchange Commission on
	August 16, 2000).                                                                                                                                                                                                                                                                                                                                                                              
|        | 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 2001 Proxy Statement (incorporated by reference to
	the Corporations 1998 Form  10-K (SEC File
	No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



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##### Table of Contents



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 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 2001 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)). Third Amendment
	to Plan, effective as of January  1, 2000 (incorporated by
	reference to Exhibit 10.9 of the Corporations
	Form 10-Q for the quarter ended June  30, 2000 (SEC
	File No.  1-82)).
|        | 10.10 |             |  | The Corporations Supplemental Savings Plan (SSP) (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 SSP,
	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)). Second Amendment to SSP, effective as of
	January 1, 2000 (incorporated by reference to the
	Corporations Form 10-Q for the quarter ended
	June 30, 2000 (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)). First Amendment to Plan, effective as of
	January 1, 2001 (incorporated by reference to Exhibit 10.11
	of the Corporations Form 10-Q for the quarter ended
	June  30, 2000 (SEC File No.  1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                      



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##### Table of Contents



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 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)). First Amendment
	to the 1998 Plan, effective as of May 4, 2000 (incorporated
	by reference to Exhibit 10.12 of the Corporations
	Form 10-Q for the quarter ended June  30, 2000 (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 1998
	Plan, which contain substantially similar provisions to
	Exhibit 10.12 above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.13 |             |  | Advisory Services Agreement, dated as of May 3, 2000,
	between the Corporation and Douglas C. Yearley (incorporated by
	reference to Exhibit 10.13 of the Corporations
	Form 10-Q for the quarter ended March 31, 2000 (SEC
	File No. 1-82)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 12    |             |  | Statement regarding 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.