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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2003

Commission file number 1-82



PHELPS DODGE CORPORATION

(a New York corporation)



13-1808503

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

One North Central Avenue, Phoenix, AZ 85004

Registrants telephone number: (602) 366-8100

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

Indicate by a check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x No o .

Number of Common Shares outstanding at July 24, 2003: 89,040,960 shares.



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-i-

PHELPS DODGE CORPORATION

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2003

Table of Contents

|                              |                                                                   |                                                                    |  |      |    | 
|----------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------ |  | ---- | -- | 
|                              |                                                                   |                                                                    |  | Page
|                              |                                                                   |                                                                    |  |     
|Part I. Financial Information |                                                                   |                                                                    |  |     
|                              | Item 1. Financial Statements (unaudited)                          |                                                                    |  |      |   
|                              |                                                                   | Statement of Consolidated Operations                               |  |      | 1  | 
|                              |                                                                   | Consolidated Balance Sheet                                         |  |      | 2  | 
|                              |                                                                   | Consolidated Statement of Cash Flows                               |  |      | 3  | 
|                              |                                                                   | Consolidated Statement of Shareholders Equity                     |  |      | 4  | 
|                              |                                                                   | Financial Data by Business Segment                                 |  |      | 5  | 
|                              |                                                                   | Notes to Consolidated Financial Information                        |  |      | 7  | 
|                              |                                                                   | Review by Independent Accountants                                  |  |      | 25 | 
|                              |                                                                   | Report of Independent Accountants                                  |  |      | 26 | 
|                              | Item 2. Managements Discussion and Analysis                      |                                                                    |  |      |   
|                              |                                                                   | Results of Operations                                              |  |      | 27 | 
|                              |                                                                   | Results of Phelps Dodge Mining Company                             |  |      | 31 | 
|                              |                                                                   | Results of Phelps Dodge Industries                                 |  |      | 49 | 
|                              |                                                                   | Other Matters Relating to the Statement of Consolidated Operations |  |      | 51 | 
|                              |                                                                   | Changes in Financial Condition                                     |  |      | 54 | 
|                              | Item 3. Quantitative and Qualitative Disclosure About Market Risk |                                                                    |  | 57   |   
|                              | Item 4. Controls and Procedures                                   |                                                                    |  | 57   |   
|Part II. Other Information    |                                                                   |                                                                    |  |     
|                              | Item 1. Legal Proceedings                                         |                                                                    |  | 57   |   
|                              | Item 4. Submission of Matters to a Vote of Security Holders       |                                                                    |  | 58   |   
|                              | Item 6. Exhibits and Reports on Form 8-K                          |                                                                    |  | 58   |   
|                              | Signatures                                                        |                                                                    |  | 58   |   
|                              | Certifications                                                    |                                                                    |  | 58   |   
|                              | Index to Exhibits                                                 |                                                                    |  | 60   |   



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##### 



-1-

PHELPS DODGE CORPORATION AND SUBSIDIARIES

Part I. Financial Information


Item 1. Financial Statements

STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited; in millions except per share data)

|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |         |  
|-------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | - | -------------- | ----- | -------- |  | -------------- | ----- | ---- |  | ---------------- | ------- | -------------- |  | ------- | ------- | -
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  | Six Months Ended
|                                                                                                                                 |                                                                                        |   | Second Quarter |       | June 30,
|                                                                                                                                 |                                                                                        |   |                |       |         
|                                                                                                                                 |                                                                                        |   | 2003           |       | 2002     |  | 2003           |       | 2002
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |     
|                                                                                                                                 |                                                                                        |   |                |       |          |  | (As Restated)* |       |      |  |                  |         | (As Restated)*
|Sales and other operating revenues                                                                                               |                                                                                        | $ | 962.2          |       |          |  | 966.8          |       |      |  | 1,940.2          |         |                |  | 1,885.3 |        
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Operating costs and expenses                                                                                                     |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|                                                                                                                                 | Cost of products sold (exclusive of items shown separately below)                      |   |                | 787.0 |          |  |                | 804.6 |      |  |                  | 1,594.3 |                |  |         | 1,570.4 |  
|                                                                                                                                 | Depreciation, depletion and amortization                                               |   |                | 107.2 |          |  |                | 103.1 |      |  |                  | 208.8   |                |  |         | 206.0   |  
|                                                                                                                                 | Selling and general administrative expense                                             |   |                | 35.8  |          |  |                | 29.8  |      |  |                  | 68.5    |                |  |         | 62.0    |  
|                                                                                                                                 | Exploration and research expense                                                       |   |                | 12.9  |          |  |                | 9.2   |      |  |                  | 22.5    |                |  |         | 17.9    |  
|                                                                                                                                 | Special items and provisions, net (see Note 5)                                         |   |                | 2.1   |          |  |                | 30.3  |      |  |                  | 0.2     |                |  |         | 26.5    |  
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|                                                                                                                                 |                                                                                        |   | 945.0          |       |          |  | 977.0          |       |      |  | 1,894.3          |         |                |  | 1,882.8 |        
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Operating income (loss)                                                                                                          |                                                                                        |   | 17.2           |       |          |  | (10.2          | )     |      |  | 45.9             |         |                |  | 2.5     |        
|                                                                                                                                 | Interest expense                                                                       |   |                | (37.0 | )        |  |                | (49.2 | )    |  |                  | (73.0   | )              |  |         | (102.0  | )
|                                                                                                                                 | Capitalized interest                                                                   |   |                | 0.1   |          |  |                |      |      |  |                  | 0.2     |                |  |         |        |  
|                                                                                                                                 | Miscellaneous income (expense), net                                                    |   |                | 12.3  |          |  |                | (0.3  | )    |  |                  | 13.2    |                |  |         | 1.7     |  
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Loss before taxes, minority interests, equity in net earnings of
affiliated companies and cumulative effect of accounting change |                                                                                        |   | (7.4           | )     |          |  | (59.7          | )     |      |  | (13.7            | )       |                |  | (97.8   | )      
|                                                                                                                                 | Benefit (provision) for taxes on income (see Note 10)                                  |   |                | (6.5  | )        |  |                | 27.5  |      |  |                  | (21.9   | )              |  |         | 64.5    |  
|                                                                                                                                 | Minority interests in consolidated subsidiaries                                        |   |                | (1.9  | )        |  |                | (2.7  | )    |  |                  | (4.0    | )              |  |         | (4.0    | )
|                                                                                                                                 | Equity in net earnings of affiliated companies                                         |   |                | 0.6   |          |  |                | 0.6   |      |  |                  | 1.0     |                |  |         | 1.1     |  
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Loss before cumulative effect of accounting change                                                                               |                                                                                        |   | (15.2          | )     |          |  | (34.3          | )     |      |  | (38.6            | )       |                |  | (36.2   | )      
|                                                                                                                                 | Cumulative effect of accounting change, net of tax of $(1.3) in 2003 and $10.1 in 2002 |   |                |      |          |  |                |      |      |  |                  | 8.4     |                |  |         | (22.9   | )
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Net loss                                                                                                                         |                                                                                        | $ | (15.2          | )     |          |  | (34.3          | )     |      |  | (30.2            | )       |                |  | (59.1   | )      
|                                                                                                                                 | Preferred stock dividends                                                              |   |                | (3.4  | )        |  |                | (2.4  | )    |  |                  | (6.8    | )              |  |         | (2.4    | )
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Loss applicable to common shares                                                                                                 |                                                                                        | $ | (18.6          | )     |          |  | (36.7          | )     |      |  | (37.0            | )       |                |  | (61.5   | )      
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Average number of common shares outstanding  basic                                                                              |                                                                                        |   | 88.6           |       |          |  | 80.6           |       |      |  | 88.6             |         |                |  | 79.6    |        
|Basic loss per common share before cumulative effect of accounting change                                                        |                                                                                        | $ | (0.21          | )     |          |  | (0.46          | )     |      |  | (0.51            | )       |                |  | (0.48   | )      
|                                                                                                                                 | Cumulative effect of accounting change                                                 |   |                |      |          |  |                |      |      |  |                  | 0.09    |                |  |         | (0.29   | )
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Basic loss per common share                                                                                                      |                                                                                        | $ | (0.21          | )     |          |  | (0.46          | )     |      |  | (0.42            | )       |                |  | (0.77   | )      
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Average number of common shares outstanding  diluted**                                                                          |                                                                                        |   | 88.6           |       |          |  | 80.6           |       |      |  | 88.6             |         |                |  | 79.6    |        
|Diluted loss per common share before cumulative effect of accounting change                                                      |                                                                                        | $ | (0.21          | )     |          |  | (0.46          | )     |      |  | (0.51            | )       |                |  | (0.48   | )      
|                                                                                                                                 | Cumulative effect of accounting change                                                 |   |                |      |          |  |                |      |      |  |                  | 0.09    |                |  |         | (0.29   | )
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        
|Diluted loss per common share**                                                                                                  |                                                                                        | $ | (0.21          | )     |          |  | (0.46          | )     |      |  | (0.42            | )       |                |  | (0.77   | )      
|                                                                                                                                 |                                                                                        |   |                |       |          |  |                |       |      |  |                  |         |                |  |         |        



|*  |  | Refer to Note 2 to Consolidated
Financial Information.                                                                                                                                                                 
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Diluted loss per share would have been anti-dilutive if based on fully diluted shares adjusted to reflect the
assumed conversion of mandatory convertible preferred shares to common shares and stock option exercises.

See Notes to Consolidated Financial Information



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##### 



-2-

CONSOLIDATED BALANCE SHEET
(Unaudited; in millions except per share prices)

|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |         |         | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ------- | -------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                |                                                                                                                |                                                                                        |         | June 30, |         | December 31,
|                                                |                                                                                                                |                                                                                        |         | 2003     |         | 2002        
|                                                |                                                                                                                |                                                                                        |         |          |         |             
|Assets                                          |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                | Current assets:                                                                                                |                                                                                        |         |          |         |              |         |         |        
|                                                |                                                                                                                | Cash and cash equivalents                                                              |         | $        | 298.2   |              |         |         | 349.8   | 
|                                                |                                                                                                                | Accounts receivable, less allowance for doubtful
accounts (2003 - $15.4; 2002 - $14.1) |         |          | 492.1   |              |         |         | 391.1   | 
|                                                |                                                                                                                | Mill and leach stockpiles                                                              |         |          | 32.6    |              |         |         | 48.9    | 
|                                                |                                                                                                                | Inventories                                                                            |         |          | 385.4   |              |         |         | 398.5   | 
|                                                |                                                                                                                | Supplies                                                                               |         |          | 142.2   |              |         |         | 142.8   | 
|                                                |                                                                                                                | Prepaid expenses and other current assets                                              |         |          | 22.9    |              |         |         | 26.5    | 
|                                                |                                                                                                                | Deferred income taxes                                                                  |         |          | 72.2    |              |         |         | 70.6    | 
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                |                                                                                                                | Current assets                                                                         |         |          | 1,445.6 |              |         |         | 1,428.2 | 
|                                                | Investments and long-term receivables                                                                          |                                                                                        |         | 134.1    |         |              |         | 132.3   |        
|                                                | Property, plant and equipment, net (see Note 3)                                                                |                                                                                        |         | 4,740.9  |         |              |         | 4,813.7 |        
|                                                | Long-term mill and leach stockpiles                                                                            |                                                                                        |         | 77.3     |         |              |         | 64.3    |        
|                                                | Deferred income taxes                                                                                          |                                                                                        |         | 8.5      |         |              |         | 11.0    |        
|                                                | Goodwill                                                                                                       |                                                                                        |         | 99.6     |         |              |         | 90.7    |        
|                                                | Intangible assets (see Note 3)                                                                                 |                                                                                        |         | 334.6    |         |              |         | 345.9   |        
|                                                | Other assets and deferred charges                                                                              |                                                                                        |         | 117.3    |         |              |         | 142.9   |        
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                |                                                                                                                | $                                                                                      | 6,957.9 |          |         |              | 7,029.0 |        
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|Liabilities                                     |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                | Current liabilities:                                                                                           |                                                                                        |         |          |         |              |         |         |        
|                                                |                                                                                                                | Short-term debt                                                                        |         | $        | 61.5    |              |         |         | 35.2    | 
|                                                |                                                                                                                | Current portion of long-term debt                                                      |         |          | 134.7   |              |         |         | 127.0   | 
|                                                |                                                                                                                | Accounts payable and accrued expenses                                                  |         |          | 562.9   |              |         |         | 609.1   | 
|                                                |                                                                                                                | Dividends payable                                                                      |         |          | 3.4     |              |         |         | 3.4     | 
|                                                |                                                                                                                | Accrued income taxes                                                                   |         |          | 22.0    |              |         |         | 9.4     | 
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                |                                                                                                                | Current liabilities                                                                    |         |          | 784.5   |              |         |         | 784.1   | 
|                                                | Long-term debt                                                                                                 |                                                                                        |         | 1,864.9  |         |              |         | 1,948.4 |        
|                                                | Deferred income taxes                                                                                          |                                                                                        |         | 434.7    |         |              |         | 430.8   |        
|                                                | Other liabilities and deferred credits                                                                         |                                                                                        |         | 983.0    |         |              |         | 986.8   |        
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                |                                                                                                                |                                                                                        | 4,067.1 |          |         |              | 4,150.1 |        
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|Minority interests in consolidated subsidiaries |                                                                                                                |                                                                                        | 71.8    |          |         |              | 65.3    |        
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|Shareholders equity                            |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                | Common shares, par value $6.25; 200.0 shares authorized;
89.0 outstanding in 2003 and 88.9 outstanding in 2002 |                                                                                        |         | 556.2    |         |              |         | 555.6   |        
|                                                | Cumulative preferred shares, par value $1.00; 6.0 shares authorized;
2.0 outstanding in 2003 and 2002          |                                                                                        |         | 2.0      |         |              |         | 2.0     |        
|                                                | Capital in excess of par value                                                                                 |                                                                                        |         | 1,554.6  |         |              |         | 1,552.1 |        
|                                                | Retained earnings                                                                                              |                                                                                        |         | 1,136.3  |         |              |         | 1,173.3 |        
|                                                | Accumulated other comprehensive loss                                                                           |                                                                                        |         | (418.3   | )       |              |         | (458.5  | )      
|                                                | Other                                                                                                          |                                                                                        |         | (11.8    | )       |              |         | (10.9   | )      
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                |                                                                                                                |                                                                                        | 2,819.0 |          |         |              | 2,813.6 |        
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        
|                                                |                                                                                                                | $                                                                                      | 6,957.9 |          |         |              | 7,029.0 |        
|                                                |                                                                                                                |                                                                                        |         |          |         |              |         |        

See Notes to Consolidated Financial Information



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##### 



-3-

CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; in millions)

|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |        |                |       |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ----- | ---------------- | ----- | ----- | ------ | -------------- | ----- | -
|                                                 |                                                                                 |                                                     |                                                     |       | Six Months Ended
|                                                 |                                                                                 |                                                     |                                                     |       | June 30,        
|                                                 |                                                                                 |                                                     |                                                     |       |                 
|                                                 |                                                                                 |                                                     |                                                     |       | 2003             |       | 2002 
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |      
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |        | (As Restated)*
|Operating activities                             |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|                                                 | Net loss                                                                        |                                                     | $                                                   | (30.2 | )                |       |       | (59.1  | )             
|                                                 | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                     |                                                     |       |                  |       |       |        |               
|                                                 |                                                                                 | Depreciation, depletion and amortization            |                                                     |       | 208.8            |       |       |        | 206.0          |      
|                                                 |                                                                                 | Deferred income taxes                               |                                                     |       | 3.5              |       |       |        | (3.1           | )    
|                                                 |                                                                                 | Equity earnings (losses), net of dividends received |                                                     |       | (0.3             | )     |       |        | 1.2            |      
|                                                 |                                                                                 | Special items and provisions                        |                                                     |       | (6.2             | )     |       |        | 27.7           |      
|                                                 |                                                                                 | Cumulative effect of accounting change              |                                                     |       | (9.7             | )     |       |        | 33.0           |      
|                                                 |                                                                                 | Changes in current assets and liabilities:          |                                                     |       |                  |       |       |        |                |      
|                                                 |                                                                                 |                                                     | Accounts receivable                                 |       |                  | (86.8 | )     |        |                | (24.2 | )
|                                                 |                                                                                 |                                                     | Proceeds from sale of accounts receivable           |       |                  | (5.3  | )     |        |                | 4.7   |  
|                                                 |                                                                                 |                                                     | Mill and leach stockpiles                           |       |                  | 16.3  |       |        |                | 11.5  |  
|                                                 |                                                                                 |                                                     | Inventories                                         |       |                  | 18.8  |       |        |                | 37.4  |  
|                                                 |                                                                                 |                                                     | Supplies                                            |       |                  | 1.6   |       |        |                | (0.3  | )
|                                                 |                                                                                 |                                                     | Prepaid expenses                                    |       |                  | (2.7  | )     |        |                | (9.9  | )
|                                                 |                                                                                 |                                                     | Interest payable                                    |       |                  | 0.5   |       |        |                | (7.5  | )
|                                                 |                                                                                 |                                                     | Other accounts payable                              |       |                  | (9.2  | )     |        |                | (29.7 | )
|                                                 |                                                                                 |                                                     | Accrued income taxes                                |       |                  | 13.9  |       |        |                | 1.5   |  
|                                                 |                                                                                 |                                                     | Other accrued expenses                              |       |                  | (47.9 | )     |        |                | (15.6 | )
|                                                 |                                                                                 | Other adjustments, net                              |                                                     |       | (28.1            | )     |       |        | 6.1            |      
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|                                                 |                                                                                 |                                                     | Net cash provided by operating activities           |       |                  | 37.0  |       |        |                | 179.7 |  
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|Investing activities                             |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|                                                 | Capital outlays                                                                 |                                                     |                                                     | (76.7 | )                |       |       | (48.9  | )             
|                                                 | Capitalized interest                                                            |                                                     |                                                     | (0.2  | )                |       |       |       |               
|                                                 | Investment in subsidiaries, net of cash received                                |                                                     |                                                     | (0.6  | )                |       |       | (1.9   | )             
|                                                 | Proceeds from asset dispositions                                                |                                                     |                                                     | 13.1  |                  |       |       | 24.6   |               
|                                                 | Other investing, net                                                            |                                                     |                                                     | 3.4   |                  |       |       | (28.7  | )             
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|                                                 |                                                                                 |                                                     | Net cash used in investing activities               |       |                  | (61.0 | )     |        |                | (54.9 | )
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|Financing activities                             |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|                                                 | Proceeds from issuance of debt                                                  |                                                     |                                                     | 23.2  |                  |       |       | 16.8   |               
|                                                 | Payment of debt                                                                 |                                                     |                                                     | (78.3 | )                |       |       | (246.7 | )             
|                                                 | Preferred dividends                                                             |                                                     |                                                     | (6.8  | )                |       |       |       |               
|                                                 | Issuance of shares                                                              |                                                     |                                                     |      |                  |       |       | 592.2  |               
|                                                 | Other financing, net                                                            |                                                     |                                                     | 34.3  |                  |       |       | (3.7   | )             
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|                                                 |                                                                                 |                                                     | Net cash provided by (used in) financing activities |       |                  | (27.6 | )     |        |                | 358.6 |  
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|(Decrease) increase in cash and cash equivalents |                                                                                 |                                                     | (51.6                                               | )     |                  |       | 483.4 |       
|Cash and cash equivalents at beginning of period |                                                                                 |                                                     | 349.8                                               |       |                  |       | 386.9 |       
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       
|Cash and cash equivalents at end of period       |                                                                                 | $                                                   | 298.2                                               |       |                  |       | 870.3 |       
|                                                 |                                                                                 |                                                     |                                                     |       |                  |       |       |       



|* |  | Refer to Note 2 to Consolidated
Financial Information.
|- |  | ------------------------------------------------------

See Notes to Consolidated Financial Information



---



##### 



-4-

CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(Unaudited; in millions)

|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      |       |      |  
|---------------------------- | --------------------------------------- | ---------------------------------------------- | ---------------------------------- | --- | ------------- | - | ---------------- | --- | ---------- |  | ------ |  | --------- | - | -------- |  | ------------- | - | ------- | --- | ------ | - | ------------- | ---- | ----- | - | ------ | - |  | ---- | ----- | ---- | - | - | ------- | ---- | ----- | ---- | -
|                             |                                         |                                                |                                    |     | Common Shares |   | Preferred Shares |     |            |  |        |  |           |   |          |  | Accumulated   |   |         |     |        |   |               |      |      
|                             |                                         |                                                |                                    |     |               |   |                  |     | Capital in |  |        |  |           |   | Other    |  |               |   |         |     |        |   |              
|                             |                                         |                                                |                                    |     | Number        |   | At Par           |     | Number     |  | At Par |  | Excess of |   | Retained |  | Comprehensive |   |         |     |        |   | Shareholders
|                             |                                         |                                                |                                    |     | of Shares     |   | Value            |     | of Shares  |  | Value  |  | Par Value |   | Earnings |  | Income (Loss) |   | Other   |     | Equity
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |       
|Balance at December 31, 2002 |                                         |                                                | 88.9                               |     |               | $ | 555.6            |     |            |  | 2.0    |  |           | $ | 2.0      |  |               | $ | 1,552.1 |     |        | $ | 1,173.3       |      |       | $ | (458.5 | ) |  | $    | (10.9 | )    |   | $ | 2,813.6 |     
|                             | Stock options exercised                 |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         | 0.1 |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         | 0.1  |      
|                             | Restricted shares issued/cancelled, net |                                                |                                    | 0.1 |               |   |                  | 0.6 |            |  |        |  |           |   |          |  |               |   |         | 2.4 |        |   |               |      |       |   |        |   |  |      |       | (0.9 | ) |   |         | 2.1  |      
|                             | Dividends on preferred shares           |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               | (6.8 | )     |   |        |   |  |      |       |      |   |   |         | (6.8 | )    
|                             | Comprehensive income (loss):            |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      |      
|                             |                                         | Net loss                                       |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      | (30.2 | ) |        |   |  |      |       |      |   |   |         |      | (30.2 | )   
|                             |                                         | Other comprehensive income (loss), net of tax: |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      |       |     
|                             |                                         |                                                | Translation adjustment             |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | 35.7 |       |      |   |   |         |      |       | 35.7 |  
|                             |                                         |                                                | Net gain on derivative instruments |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | 4.1  |       |      |   |   |         |      |       | 4.1  |  
|                             |                                         |                                                | Other investment adjustments       |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | (0.2 | )     |      |   |   |         |      |       | (0.2 | )
|                             |                                         |                                                | Unrealized gains on securities     |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | 0.6  |       |      |   |   |         |      |       | 0.6  |  
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     
|                             |                                         |                                                | Other comprehensive income         |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | 40.2 |       |      |   |   |         |      |       | 40.2 |  
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     
|                             |                                         | Comprehensive loss                             |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      | 10.0  |     
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     
|Balance at June 30, 2003     |                                         |                                                | 89.0                               |     |               | $ | 556.2            |     |            |  | 2.0    |  |           | $ | 2.0      |  |               | $ | 1,554.6 |     |        | $ | 1,136.3       |      |       | $ | (418.3 | ) |  | $    | (11.8 | )    |   | $ | 2,819.0 |     
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     

See Notes to Consolidated Financial Information



---



##### 



-5-

FINANCIAL DATA BY BUSINESS SEGMENT
(Unaudited; in millions)

|                                                            |                        |  |            |       |                      |  |         |       |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |      | 
|----------------------------------------------------------- | ---------------------- |  | ---------- | ----- | -------------------- |  | ------- | ----- | ------ |  | ------ | --- | ---------- |  | ----- | ---- | ------- |  | ---------- | ---- | ----- |  | ----- | ---- |  |  | ------- | ---- |  |  | ----- | ---- |  |  | ----- | ---- | 
|                                                            |                        |  | U.S. Mines |       | South American Mines |  |         |       |       
|                                                            |                        |  |            |       |                      |  |         |       |       
|                                                            |                        |  |            |       |                      |  | Bagdad/ |       | Miami/ |  | Chino/ |     |            |  |       |      |         |  |            |      | Cerro |  |       |      |  |  | Primary
|                                                            |                        |  | Morenci    |       | Sierrita             |  | Bisbee  |       | Cobre  |  | Tyrone |     | Candelaria |  | Verde |      | El Abra |  | Molybdenum
|                                                            |                        |  |            |       |                      |  |         |       |        |  |        |     |            |  |       |      |         |  |           
|Second Quarter 2003                                         |                        |  |            |       |                      |  |         |       |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|Sales and other operating revenues:                         |                        |  |            |       |                      |  |         |       |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|                                                            | Unaffiliated customers |  |            |      |                      |  |         |      |        |  |        |    |            |  |       | 0.1  |         |  |            |     |       |  |       | 60.0 |  |  |         | 9.0  |  |  |       | 30.0 |  |  |       | 93.4 | 
|                                                            | Intersegment           |  |            | 138.1 |                      |  |         | 119.4 |        |  |        | 9.2 |            |  |       | 8.4  |         |  |            | 21.9 |       |  |       | 7.1  |  |  |         | 28.4 |  |  |       | 20.8 |  |  |       |     | 
|Depreciation, depletion and amortization                    |                        |  | 20.3       |       |                      |  | 7.8     |       |        |  | 1.5    |     |            |  | 2.0   |      |         |  | 3.5        |      |       |  | 9.7   |      |  |  | 7.3     |      |  |  | 17.1  |      |  |  | 6.8   |     
|Operating income (loss) before special
items and provisions |                        |  | 4.9        |       |                      |  | 18.3    |       |        |  | (2.6   | )   |            |  | (2.8  | )    |         |  | (4.5       | )    |       |  | 13.6  |      |  |  | 8.6     |      |  |  | 5.2   |      |  |  | 0.4   |     
|Special items and provisions                                |                        |  |           |       |                      |  |        |       |        |  | (0.5   | )   |            |  |      |      |         |  |           |      |       |  |      |      |  |  |        |      |  |  |      |      |  |  |      |     
|Operating income (loss)                                     |                        |  | 4.9        |       |                      |  | 18.3    |       |        |  | (3.1   | )   |            |  | (2.8  | )    |         |  | (4.5       | )    |       |  | 13.6  |      |  |  | 8.6     |      |  |  | 5.2   |      |  |  | 0.4   |     
|Assets at June 30                                           |                        |  | 1,051.2    |       |                      |  | 749.0   |       |        |  | 122.0  |     |            |  | 297.1 |      |         |  | 164.3      |      |       |  | 643.6 |      |  |  | 433.4   |      |  |  | 539.9 |      |  |  | 784.3 |     
|Expenditures for segment assets                             |                        |  | 3.8        |       |                      |  | 4.6     |       |        |  | 0.1    |     |            |  | 0.6   |      |         |  |           |      |       |  | 1.0   |      |  |  | 0.9     |      |  |  | 0.5   |      |  |  | 2.7   |     
|Second Quarter 2002 (as restated)                           |                        |  |            |       |                      |  |         |       |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|Sales and other operating revenues:                         |                        |  |            |       |                      |  |         |       |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|                                                            | Unaffiliated customers |  |            |      |                      |  |         |      |        |  |        |    |            |  |       | 0.3  |         |  |            |     |       |  |       | 37.6 |  |  |         | 10.7 |  |  |       | 47.7 |  |  |       | 63.0 | 
|                                                            | Intersegment           |  |            | 138.0 |                      |  |         | 72.9  |        |  |        | 2.4 |            |  |       | 12.1 |         |  |            | 25.8 |       |  |       | 40.4 |  |  |         | 23.6 |  |  |       | 30.5 |  |  |       |     | 
|Depreciation, depletion and amortization                    |                        |  | 19.9       |       |                      |  | 6.6     |       |        |  | 1.3    |     |            |  | 2.7   |      |         |  | 3.1        |      |       |  | 9.4   |      |  |  | 7.6     |      |  |  | 16.2  |      |  |  | 6.2   |     
|Operating income (loss) before special
items and provisions |                        |  | 12.9       |       |                      |  | 4.5     |       |        |  | (3.8   | )   |            |  | 1.3   |      |         |  | 0.6        |      |       |  | 13.2  |      |  |  | 6.8     |      |  |  | 0.2   |      |  |  | 0.5   |     
|Special items and provisions                                |                        |  |           |       |                      |  |        |       |        |  |       |     |            |  |      |      |         |  |           |      |       |  |      |      |  |  |        |      |  |  |      |      |  |  |      |     
|Operating income (loss)                                     |                        |  | 12.9       |       |                      |  | 4.5     |       |        |  | (3.8   | )   |            |  | 1.3   |      |         |  | 0.6        |      |       |  | 13.2  |      |  |  | 6.8     |      |  |  | 0.2   |      |  |  | 0.5   |     
|Assets at June 30                                           |                        |  | 1,121.0    |       |                      |  | 767.5   |       |        |  | 129.0  |     |            |  | 407.4 |      |         |  | 145.9      |      |       |  | 646.9 |      |  |  | 441.0   |      |  |  | 542.8 |      |  |  | 792.5 |     
|Expenditures for segment assets                             |                        |  | 0.6        |       |                      |  | 8.8     |       |        |  | 0.1    |     |            |  | 0.8   |      |         |  | 2.5        |      |       |  | 0.6   |      |  |  | 1.2     |      |  |  | 1.1   |      |  |  | 2.6   |     

|                                                            |                        |  |               |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |       | 
|----------------------------------------------------------- | ---------------------- |  | ------------- | ----- | ------ |  | ------- | ---- | -------- |  | --------- | ------ | ------ |  | -------- | ----- | ------- |  | ------ | ----- |  |  | ----- | ----- |  |  | ------- | ----- |  |  | ---------- | ----- | - |  | ------- | ----- | 
|                                                            |                        |  |               |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  | Corporate, |       |   |  |        
|                                                            |                        |  | Manufacturing |       |        |  |         |      | PDMC     |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  | Other & |       |  |  |           
|                                                            |                        |  | and           |       | Other  |  | Elimi-  |      | PDMC     |  | Specialty |        | Wire & |  | PDI      |       | Elimi-  |  |        |       | 
|                                                            |                        |  | Sales         |       | Mining |  | nations |      | Subtotal |  | Chemicals |        | Cable  |  | Subtotal |       | nations |  | Totals
|                                                            |                        |  |               |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |       
|Second Quarter 2003                                         |                        |  |               |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|Sales and other operating revenues:                         |                        |  |               |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|                                                            | Unaffiliated customers |  |               | 443.4 |        |  |         | 5.7  |          |  |           |       |        |  |          | 641.6 |         |  |        | 166.1 |  |  |       | 154.5 |  |  |         | 320.6 |  |  |            |      |   |  |         | 962.2 | 
|                                                            | Intersegment           |  |               | 70.1  |        |  |         | 17.7 |          |  |           | (410.2 | )      |  |          | 30.9  |         |  |        |      |  |  |       | 0.1   |  |  |         | 0.1   |  |  |            | (31.0 | ) |  |         |      | 
|Depreciation, depletion and amortization                    |                        |  | 4.0           |       |        |  | 2.0     |      |          |  |          |        |        |  | 82.0     |       |         |  | 11.7   |       |  |  | 8.9   |       |  |  | 20.6    |       |  |  | 4.6        |       |   |  | 107.2   |      
|Operating income (loss) before special
items and provisions |                        |  | 6.5           |       |        |  | (21.3   | )    |          |  |          |        |        |  | 26.3     |       |         |  | 15.0   |       |  |  | 3.5   |       |  |  | 18.5    |       |  |  | (25.5      | )     |   |  | 19.3    |      
|Special items and provisions                                |                        |  |              |       |        |  |        |      |          |  |          |        |        |  | (0.5     | )     |         |  |       |       |  |  |      |       |  |  |        |       |  |  | (1.6       | )     |   |  | (2.1    | )    
|Operating income (loss)                                     |                        |  | 6.5           |       |        |  | (21.3   | )    |          |  |          |        |        |  | 25.8     |       |         |  | 15.0   |       |  |  | 3.5   |       |  |  | 18.5    |       |  |  | (27.1      | )     |   |  | 17.2    |      
|Assets at June 30                                           |                        |  | 486.2         |       |        |  | 1,490.6 |      |          |  | (1,593.4  | )      |        |  | 5,168.2  |       |         |  | 737.0  |       |  |  | 518.2 |       |  |  | 1,255.2 |       |  |  | 534.5      |       |   |  | 6,957.9 |      
|Expenditures for segment assets                             |                        |  | 1.9           |       |        |  | 1.0     |      |          |  |          |        |        |  | 17.1     |       |         |  | 5.9    |       |  |  | 4.1   |       |  |  | 10.0    |       |  |  | 22.9       |       |   |  | 50.0    |      
|Second Quarter 2002 (as restated)                           |                        |  |               |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|Sales and other operating revenues:                         |                        |  |               |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|                                                            | Unaffiliated customers |  |               | 478.8 |        |  |         | 6.4  |          |  |           |       |        |  |          | 644.5 |         |  |        | 140.5 |  |  |       | 181.8 |  |  |         | 322.3 |  |  |            |      |   |  |         | 966.8 | 
|                                                            | Intersegment           |  |               | 109.3 |        |  |         | 13.0 |          |  |           | (430.7 | )      |  |          | 37.3  |         |  |        |      |  |  |       |      |  |  |         |      |  |  |            | (37.3 | ) |  |         |      | 
|Depreciation, depletion and amortization                    |                        |  | 6.0           |       |        |  | 0.6     |      |          |  |          |        |        |  | 79.6     |       |         |  | 10.7   |       |  |  | 10.7  |       |  |  | 21.4    |       |  |  | 2.1        |       |   |  | 103.1   |      
|Operating income (loss) before special
items and provisions |                        |  | (1.0          | )     |        |  | (17.9   | )    |          |  |          |        |        |  | 17.3     |       |         |  | 17.0   |       |  |  | 3.3   |       |  |  | 20.3    |       |  |  | (17.5      | )     |   |  | 20.1    |      
|Special items and provisions                                |                        |  |              |       |        |  | 20.9    |      |          |  |          |        |        |  | 20.9     |       |         |  |       |       |  |  |      |       |  |  |        |       |  |  | (51.2      | )     |   |  | (30.3   | )    
|Operating income (loss)                                     |                        |  | (1.0          | )     |        |  | 3.0     |      |          |  |          |        |        |  | 38.2     |       |         |  | 17.0   |       |  |  | 3.3   |       |  |  | 20.3    |       |  |  | (68.7      | )     |   |  | (10.2   | )    
|Assets at June 30                                           |                        |  | 528.5         |       |        |  | 1,724.5 |      |          |  | (1,831.5  | )      |        |  | 5,415.5  |       |         |  | 687.8  |       |  |  | 572.3 |       |  |  | 1,260.1 |       |  |  | 1,216.8    |       |   |  | 7,892.4 |      
|Expenditures for segment assets                             |                        |  | 1.5           |       |        |  | 0.9     |      |          |  |          |        |        |  | 20.7     |       |         |  | 3.2    |       |  |  | 2.6   |       |  |  | 5.8     |       |  |  | 1.5        |       |   |  | 28.0    |      



---



##### 



-6-

FINANCIAL DATA BY BUSINESS SEGMENT
(Unaudited; in millions)

|                                                            |                        |  |            |       |                      |  |         |       |        |  |        |      |            |  |       |      |         |  |            |      |       |  |       |       |  |  |         |      |  |  |       |      |  |  |       |       | 
|----------------------------------------------------------- | ---------------------- |  | ---------- | ----- | -------------------- |  | ------- | ----- | ------ |  | ------ | ---- | ---------- |  | ----- | ---- | ------- |  | ---------- | ---- | ----- |  | ----- | ----- |  |  | ------- | ---- |  |  | ----- | ---- |  |  | ----- | ----- | 
|                                                            |                        |  | U.S. Mines |       | South American Mines |  |         |       |       
|                                                            |                        |  |            |       |                      |  |         |       |       
|                                                            |                        |  |            |       |                      |  | Bagdad/ |       | Miami/ |  | Chino/ |      |            |  |       |      |         |  |            |      | Cerro |  |       |       |  |  | Primary
|                                                            |                        |  | Morenci    |       | Sierrita             |  | Bisbee  |       | Cobre  |  | Tyrone |      | Candelaria |  | Verde |      | El Abra |  | Molybdenum
|                                                            |                        |  |            |       |                      |  |         |       |        |  |        |      |            |  |       |      |         |  |           
|Six Months Ended 2003                                       |                        |  |            |       |                      |  |         |       |        |  |        |      |            |  |       |      |         |  |            |      |       |  |       |       |  |  |         |      |  |  |       |      |  |  |       |      
|Sales and other operating revenues:                         |                        |  |            |       |                      |  |         |       |        |  |        |      |            |  |       |      |         |  |            |      |       |  |       |       |  |  |         |      |  |  |       |      |  |  |       |      
|                                                            | Unaffiliated customers |  |            |      |                      |  |         |      |        |  |        |     |            |  |       | 0.2  |         |  |            |     |       |  |       | 119.2 |  |  |         | 18.9 |  |  |       | 61.5 |  |  |       | 169.3 | 
|                                                            | Intersegment           |  |            | 274.3 |                      |  |         | 214.8 |        |  |        | 18.2 |            |  |       | 17.8 |         |  |            | 48.6 |       |  |       | 30.6  |  |  |         | 55.6 |  |  |       | 41.8 |  |  |       |      | 
|Depreciation, depletion and amortization                    |                        |  | 39.0       |       |                      |  | 15.1    |       |        |  | 3.4    |      |            |  | 4.0   |      |         |  | 6.8        |      |       |  | 20.5  |       |  |  | 14.6    |      |  |  | 31.6  |      |  |  | 12.9  |      
|Operating income (loss) before special
items and provisions |                        |  | 17.3       |       |                      |  | 25.0    |       |        |  | (3.3   | )    |            |  | (4.9  | )    |         |  | (8.9       | )    |       |  | 36.7  |       |  |  | 16.1    |      |  |  | 10.8  |      |  |  | 0.5   |      
|Special items and provisions                                |                        |  |           |       |                      |  |        |       |        |  | (0.5   | )    |            |  |      |      |         |  |           |      |       |  |      |       |  |  |        |      |  |  |      |      |  |  |      |      
|Operating income (loss)                                     |                        |  | 17.3       |       |                      |  | 25.0    |       |        |  | (3.8   | )    |            |  | (4.9  | )    |         |  | (8.9       | )    |       |  | 36.7  |       |  |  | 16.1    |      |  |  | 10.8  |      |  |  | 0.5   |      
|Assets at June 30                                           |                        |  | 1,051.2    |       |                      |  | 749.0   |       |        |  | 122.0  |      |            |  | 297.1 |      |         |  | 164.3      |      |       |  | 643.6 |       |  |  | 433.4   |      |  |  | 539.9 |      |  |  | 784.3 |      
|Expenditures for segment assets                             |                        |  | 9.9        |       |                      |  | 10.8    |       |        |  | 0.1    |      |            |  | 1.6   |      |         |  | 0.2        |      |       |  | 1.6   |       |  |  | 1.9     |      |  |  | 0.7   |      |  |  | 5.2   |      
|Six Months Ended 2002 (as restated)                         |                        |  |            |       |                      |  |         |       |        |  |        |      |            |  |       |      |         |  |            |      |       |  |       |       |  |  |         |      |  |  |       |      |  |  |       |      
|Sales and other operating revenues:                         |                        |  |            |       |                      |  |         |       |        |  |        |      |            |  |       |      |         |  |            |      |       |  |       |       |  |  |         |      |  |  |       |      |  |  |       |      
|                                                            | Unaffiliated customers |  |            |      |                      |  |         |      |        |  |        |     |            |  |       | 0.5  |         |  |            |     |       |  |       | 85.4  |  |  |         | 19.2 |  |  |       | 85.5 |  |  |       | 124.3 | 
|                                                            | Intersegment           |  |            | 268.5 |                      |  |         | 172.4 |        |  |        | 11.9 |            |  |       | 34.0 |         |  |            | 50.1 |       |  |       | 59.7  |  |  |         | 48.4 |  |  |       | 48.3 |  |  |       |      | 
|Depreciation, depletion and amortization                    |                        |  | 39.4       |       |                      |  | 13.2    |       |        |  | 2.6    |      |            |  | 5.8   |      |         |  | 6.1        |      |       |  | 19.4  |       |  |  | 15.0    |      |  |  | 32.7  |      |  |  | 11.7  |      
|Operating income (loss) before special
items and provisions |                        |  | 24.7       |       |                      |  | 0.2     |       |        |  | (8.3   | )    |            |  | 7.0   |      |         |  | (1.1       | )    |       |  | 33.4  |       |  |  | 13.6    |      |  |  | 0.7   |      |  |  | 0.2   |      
|Special items and provisions                                |                        |  |           |       |                      |  |        |       |        |  |       |      |            |  |      |      |         |  |           |      |       |  |      |       |  |  |        |      |  |  |      |      |  |  |      |      
|Operating income (loss)                                     |                        |  | 24.7       |       |                      |  | 0.2     |       |        |  | (8.3   | )    |            |  | 7.0   |      |         |  | (1.1       | )    |       |  | 33.4  |       |  |  | 13.6    |      |  |  | 0.7   |      |  |  | 0.2   |      
|Assets at June 30                                           |                        |  | 1,121.0    |       |                      |  | 767.5   |       |        |  | 129.0  |      |            |  | 407.4 |      |         |  | 145.9      |      |       |  | 646.9 |       |  |  | 441.0   |      |  |  | 542.8 |      |  |  | 792.5 |      
|Expenditures for segment assets                             |                        |  | 2.3        |       |                      |  | 16.4    |       |        |  | 0.1    |      |            |  | 0.9   |      |         |  | 2.6        |      |       |  | 1.0   |       |  |  | 3.4     |      |  |  | 2.6   |      |  |  | 4.5   |      

|                                                            |                        |  |             |       |        |  |         |      |          |  |           |        |        |  |          |         |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |         | 
|----------------------------------------------------------- | ---------------------- |  | ----------- | ----- | ------ |  | ------- | ---- | -------- |  | --------- | ------ | ------ |  | -------- | ------- | ------- |  | ------ | ----- |  |  | ----- | ----- |  |  | ------- | ----- |  |  | ---------- | ----- | - |  | ------- | ------- | 
|                                                            |                        |  |             |       |        |  |         |      |          |  |           |        |        |  |          |         |         |  |        |       |  |  |       |       |  |  |         |       |  |  | Corporate, |       |   |  |        
|                                                            |                        |  | Manufactur- |       |        |  |         |      | PDMC     |  |           |        |        |  |          |         |         |  |        |       |  |  |       |       |  |  | Other & |       |  |  |           
|                                                            |                        |  | ing and     |       | Other  |  | Elimi-  |      | PDMC     |  | Specialty |        | Wire & |  | PDI      |         | Elimi-  |  |        |       | 
|                                                            |                        |  | Sales       |       | Mining |  | nations |      | Subtotal |  | Chemicals |        | Cable  |  | Subtotal |         | nations |  | Totals
|                                                            |                        |  |             |       |        |  |         |      |          |  |           |        |        |  |          |         |         |  |       
|Six Months Ended 2003                                       |                        |  |             |       |        |  |         |      |          |  |           |        |        |  |          |         |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |        
|Sales and other operating revenues:                         |                        |  |             |       |        |  |         |      |          |  |           |        |        |  |          |         |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |        
|                                                            | Unaffiliated customers |  |             | 916.8 |        |  |         | 10.7 |          |  |           |       |        |  |          | 1,296.6 |         |  |        | 328.2 |  |  |       | 315.4 |  |  |         | 643.6 |  |  |            |      |   |  |         | 1,940.2 | 
|                                                            | Intersegment           |  |             | 155.4 |        |  |         | 34.0 |          |  |           | (830.2 | )      |  |          | 60.9    |         |  |        |      |  |  |       | 0.1   |  |  |         | 0.1   |  |  |            | (61.0 | ) |  |         |        | 
|Depreciation, depletion and amortization                    |                        |  | 8.2         |       |        |  | 3.1     |      |          |  |          |        |        |  | 159.2    |         |         |  | 22.7   |       |  |  | 17.8  |       |  |  | 40.5    |       |  |  | 9.1        |       |   |  | 208.8   |        
|Operating income (loss) before special
items and provisions |                        |  | 15.0        |       |        |  | (42.3   | )    |          |  |          |        |        |  | 62.0     |         |         |  | 25.9   |       |  |  | 6.9   |       |  |  | 32.8    |       |  |  | (48.7      | )     |   |  | 46.1    |        
|Special items and provisions                                |                        |  |            |       |        |  |        |      |          |  |          |        |        |  | (0.5     | )       |         |  | 3.2    |       |  |  |      |       |  |  | 3.2     |       |  |  | (2.9       | )     |   |  | (0.2    | )      
|Operating income (loss)                                     |                        |  | 15.0        |       |        |  | (42.3   | )    |          |  |          |        |        |  | 61.5     |         |         |  | 29.1   |       |  |  | 6.9   |       |  |  | 36.0    |       |  |  | (51.6      | )     |   |  | 45.9    |        
|Assets at June 30                                           |                        |  | 486.2       |       |        |  | 1,490.6 |      |          |  | (1,593.4  | )      |        |  | 5,168.2  |         |         |  | 737.0  |       |  |  | 518.2 |       |  |  | 1,255.2 |       |  |  | 534.5      |       |   |  | 6,957.9 |        
|Expenditures for segment assets                             |                        |  | 3.5         |       |        |  | 1.5     |      |          |  |          |        |        |  | 37.0     |         |         |  | 9.7    |       |  |  | 6.7   |       |  |  | 16.4    |       |  |  | 23.9       |       |   |  | 77.3    |        
|Six Months Ended 2002 (as restated)                         |                        |  |             |       |        |  |         |      |          |  |           |        |        |  |          |         |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |        
|Sales and other operating revenues:                         |                        |  |             |       |        |  |         |      |          |  |           |        |        |  |          |         |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |        
|                                                            | Unaffiliated customers |  |             | 932.5 |        |  |         | 8.8  |          |  |           |       |        |  |          | 1,256.2 |         |  |        | 269.8 |  |  |       | 359.3 |  |  |         | 629.1 |  |  |            |      |   |  |         | 1,885.3 | 
|                                                            | Intersegment           |  |             | 205.5 |        |  |         | 28.7 |          |  |           | (853.2 | )      |  |          | 74.3    |         |  |        |      |  |  |       | 0.2   |  |  |         | 0.2   |  |  |            | (74.5 | ) |  |         |        | 
|Depreciation, depletion and amortization                    |                        |  | 12.0        |       |        |  | 1.4     |      |          |  |          |        |        |  | 159.3    |         |         |  | 21.2   |       |  |  | 21.4  |       |  |  | 42.6    |       |  |  | 4.1        |       |   |  | 206.0   |        
|Operating income (loss) before special
items and provisions |                        |  | (2.7        | )     |        |  | (36.9   | )    |          |  |          |        |        |  | 30.8     |         |         |  | 30.2   |       |  |  | 6.1   |       |  |  | 36.3    |       |  |  | (38.1      | )     |   |  | 29.0    |        
|Special items and provisions                                |                        |  |            |       |        |  | 34.7    |      |          |  |          |        |        |  | 34.7     |         |         |  |       |       |  |  |      |       |  |  |        |       |  |  | (61.2      | )     |   |  | (26.5   | )      
|Operating income (loss)                                     |                        |  | (2.7        | )     |        |  | (2.2    | )    |          |  |          |        |        |  | 65.5     |         |         |  | 30.2   |       |  |  | 6.1   |       |  |  | 36.3    |       |  |  | (99.3      | )     |   |  | 2.5     |        
|Assets at June 30                                           |                        |  | 528.5       |       |        |  | 1,724.5 |      |          |  | (1,831.5  | )      |        |  | 5,415.5  |         |         |  | 687.8  |       |  |  | 572.3 |       |  |  | 1,260.1 |       |  |  | 1,216.8    |       |   |  | 7,892.4 |        
|Expenditures for segment assets                             |                        |  | 3.0         |       |        |  | 1.3     |      |          |  |          |        |        |  | 38.1     |         |         |  | 5.2    |       |  |  | 4.3   |       |  |  | 9.5     |       |  |  | 3.2        |       |   |  | 50.8    |        



---



##### 



-7-

NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)



|1. |  | General Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The unaudited consolidated financial information of Phelps Dodge
Corporation (the Company, which may be referred to as Phelps Dodge, PD,
we, us or ours) presented herein has been prepared in accordance with the
instructions to Form 10-Q and does not include all of the information and
note disclosures required by generally accepted accounting principles.
Therefore, this information should be read in conjunction with the
consolidated financial statements and notes thereto included in our Form
10-K for the year ended December 31, 2002. This information reflects all
adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods reported. Our business
consists of two divisions, Phelps Dodge Mining Company (PDMC) and Phelps
Dodge Industries (PDI).
|  
|   |  | The results of operations for the quarter and six-month periods ended June
30, 2003, are not necessarily indicative of the results to be expected for
the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|2. |  | Restatements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | In Note 1, Summary of Significant Accounting Policies, and Note 22,
Restatement of Consolidated Financial Statements, in the Companys Form
10-K for the year ended December 31, 2002, we identified certain
accounting matters in the fourth quarter of 2002 that required restatement
of our December 31, 2001 and 2000, Consolidated Financial Statements and
our financial information for the quarterly periods ended March 31, 2001,
through September 30, 2002. Additionally, our presentation of reportable
segment information for PDMC for the quarter and six months ended June 30,
2002, has been revised to reflect additional segments.                                                                                                                                                                                    
|  
|   |  | Following are summaries of selected unaudited quarterly financial data, as
restated for the quarter and six months ended June 30, 2002:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

(Unaudited; $ in millions except per share data)

|                                                                                      |  |                     |       |         |  |          |      |  |  |   |       |  
|------------------------------------------------------------------------------------- |  | ------------------- | ----- | ------- |  | -------- | ---- |  |  | - | ----- | -
|                                                                                      |  | Second Quarter 2002
|                                                                                      |  |                    
|                                                                                      |  | As                  |       |         |  |          |      |  |  |  
|                                                                                      |  | Previously          |       | Adjust- |  | As      
|                                                                                      |  | Reported            |       | ments   |  | Restated
|                                                                                      |  |                     |       |         |  |         
|Sales and other operating
revenues                                                    |  | $                   | 966.8 |         |  |          |     |  |  | $ | 966.8 |  
|Operating loss                                                                        |  |                     | (15.8 | )       |  |          | 5.6  |  |  |   | (10.2 | )
|Loss before cumulative
effect of accounting
change                                    |  |                     | (36.4 | )       |  |          | 2.1  |  |  |   | (34.3 | )
|Net loss                                                                              |  |                     | (36.4 | )       |  |          | 2.1  |  |  |   | (34.3 | )
|Basic and diluted loss per
common share before
cumulative effect of
accounting change |  |                     | (0.48 | )       |  |          | 0.02 |  |  |   | (0.46 | )
|Basic and diluted loss per
common share                                               |  |                     | (0.48 | )       |  |          | 0.02 |  |  |   | (0.46 | )



---

Adjustments comprise the following:



|(1) |  | To adjust the units-of-production depreciation rate calculation for
PDMCs mining, smelting and refining operations. This change reduced our
depreciation and amortization expense and reduced our operating loss by
$3.0 million in the second quarter of 2002. Additionally, this change
decreased our net loss by $2.4 million, or 3 cents per common share, in
the second quarter of 2002.                                                                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | To adjust the acquired reclamation obligations assumed in the Cyprus Amax
Minerals Company acquisition. This change increased our cost of products
sold and our operating loss by $0.9 million in the second quarter of 2002.
Additionally, this change increased our net loss by $0.7 million, or 1
cent per common share, in the second quarter of 2002.                                                                                                         
|   
|(3) |  | To adjust the estimated reclamation obligation at our Tyrone mine in 2002
to exclude mineralized material from the determination of the unit
reclamation and closure
accrual rate. This change increased both our cost of products sold and our
operating loss and increased our net loss by $2.1 million, or 3 cents per
common share, in the second quarter of 2002.                                                                                             
|   
|(4) |  | To capitalize costs associated with material in mill and leach stockpiles
and the consequent in-process material being converted to salable copper
products, which were stated at lower of cost or market. This change
decreased both our cost of products sold and our operating loss by $5.6
million in the second quarter of 2002. Additionally, this change
decreased our net loss by $5.1 million, or 7 cents per common share, in
the second quarter of 2002.
|   
|(5) |  | In 2001, a deferred tax asset valuation allowance of $57.9 million
associated with our El Abra copper mine in Chile was established. The
adjustment to the deferred tax asset caused an increase to our net loss by
$2.2 million, or 3 cents per common share, in the second quarter of 2002.                                                                                                                                                                      
|   
|(6) |  | The overall effect of the aforementioned adjustments resulted in an
incremental income tax expense that increased our net loss by $0.4
million, or 1 cent per common share, in the second quarter of 2002.                                                                                                                                                                                                                                                         



---



##### 



-8-

(Unaudited; $ in millions except per share data)

|                                                                                      |  |                  |         |         |  |          |      |  |  |   |         |  
|------------------------------------------------------------------------------------- |  | ---------------- | ------- | ------- |  | -------- | ---- |  |  | - | ------- | -
|                                                                                      |  | Six Months Ended
|                                                                                      |  | June 30, 2002   
|                                                                                      |  |                 
|                                                                                      |  | As               |         |         |  |          |      |  |  |  
|                                                                                      |  | Previously       |         | Adjust- |  | As      
|                                                                                      |  | Reported         |         | ments   |  | Restated
|                                                                                      |  |                  |         |         |  |         
|Sales and other operating
revenues                                                    |  | $                | 1,885.3 |         |  |          |     |  |  | $ | 1,885.3 |  
|Operating income (loss)                                                               |  |                  | (8.8    | )       |  |          | 11.3 |  |  |   | 2.5     |  
|Loss before cumulative
effect of accounting
change                                    |  |                  | (41.2   | )       |  |          | 5.0  |  |  |   | (36.2   | )
|Net loss                                                                              |  |                  | (64.1   | )       |  |          | 5.0  |  |  |   | (59.1   | )
|Basic and diluted loss per
common share before
cumulative effect of
accounting change |  |                  | (0.55   | )       |  |          | 0.07 |  |  |   | (0.48   | )
|Basic and diluted loss per
common share                                               |  |                  | (0.84   | )       |  |          | 0.07 |  |  |   | (0.77   | )



---

Adjustments comprise the following:



|(1) |  | To adjust the units-of-production depreciation rate calculation for
PDMCs mining, smelting and refining operations. This change reduced our
depreciation and amortization expense and decreased our operating loss by
$5.7 million for the six months ended June 30, 2002. Additionally, this
change decreased our net loss by $4.6 million, or 6 cents per common
share, for the six months ended June 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | To adjust the acquired reclamation obligations assumed in the Cyprus Amax
Minerals Company acquisition. This change increased both our cost of
products sold and our operating loss by $1.8 million for the six months
ended June 30, 2002. Additionally, this change increased our net loss by
$1.5 million, or 2 cents per common share, for the six months ended June
30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) |  | To adjust the estimated reclamation obligation at our Tyrone mine in 2002
to exclude mineralized material from the determination of the unit
reclamation and closure
accrual rate. This change increased our cost of products sold and our
operating loss and net loss by $4.2 million, or 5 cents per common share, for
the six months ended June 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) |  | To capitalize costs associated with material in mill and leach stockpiles
and the consequent in-process material being converted to salable copper
products, which were stated at lower of cost or market. This change
decreased our cost of products sold and our operating loss by $11.6
million for the six months ended June 30, 2002. Additionally, this change
decreased our net loss by $10.7 million, or 14 cents per common share, for
the six months ended June 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(5) |  | In 2001, a deferred tax asset valuation allowance of $57.9 million
associated with our El Abra copper mine in Chile was established. The
adjustment to the deferred tax asset caused an increase to our net loss by
$4.2 million, or 5 cents per common share, for the six months ended June
30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(6) |  | The overall effect of the aforementioned adjustments resulted in an
incremental income tax expense that increased our net loss by $0.4
million, or 1 cent per common share, for the six months ended June 30,
2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|3.  |  | Reclassification of Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | The Company has recently had discussions with the Staff of the Securities
and Exchange Commission regarding the balance sheet classification of
certain mining concessions, primarily mining concessions containing proven
and probable ore reserves and mineralized material at the Companys South
American mines, and whether such assets constitute tangible or intangible
assets based upon certain guidance contained in Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. Historically the Company has
classified such assets less the related accumulated depreciation,
depletion and amortization, as Property, plant and equipment, net on its
consolidated balance sheet. The Company has reclassified such mining
concessions as intangible assets. Previously reported historical amounts
also have been reclassified for comparative purposes. These assets will
continue to be amortized over their respective useful lives. The
reclassifications had no effect on the Companys net loss or shareholders
equity.
|   
|    |  | The following table summarizes the gross and net carrying amount of
intangible assets at December 31, 2002, and June 30, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | (Unaudited; $ in millions)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                              |  |          |        |              |  |  |       |  
|----------------------------- |  | -------- | ------ | ------------ |  |  | ----- | -
|                              |  | June 30, |        | December 31,
|                              |  | 2003     |        | 2002        
|                              |  |          |        |             
|Gross carrying
amount         |  | $        | 443.6  | *            |  |  | 439.5 |  
|Less accumulated
amortization |  |          | (109.0 | )*           |  |  | (93.6 | )
|                              |  |          |        |              |  |  |       |  
|                              |  | $        | 334.6  |              |  |  | 345.9 |  
|                              |  |          |        |              |  |  |       |  



|* |  | Includes amounts for recording an asset retirement cost
associated with the implementation of SFAS No. 143. (See Note 6,
Accounting Standards, for further discussion.)
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Amortization expense related to intangible assets was $6.2 million and
$6.5 million for the three months ended June 30, 2003 and 2002,
respectively, and $13.4 million and $13.1 million for the six months ended
June 30, 2003 and 2002, respectively.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---



##### 



-9-



| |  | The estimated annual aggregate amortization expense for intangibles is as
follows:
| |  | ----------------------------------------------------------------------------------
|
| |  | (Unaudited; $ in millions)                                                        

|     |  |   |      | 
|---- |  | - | ---- | 
|2004 |  | $ | 27.2 | 
|2005 |  |   | 27.3 | 
|2006 |  |   | 27.3 | 
|2007 |  |   | 27.4 | 
|2008 |  |   | 27.6 | 



|4. |  | Stock Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | We account for our stock option plans by measuring compensation cost using
the intrinsic-value-based method presented in Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. No compensation cost is reflected in
consolidated net loss, as all options granted under the plans had an
exercise price equal to the market value of the underlying common stock on
the date of the grant. The following table presents the effect on net
loss and loss per common share as if we had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, to compensation cost.

(Unaudited; $ in millions except per share data)

|                      |                                                                                             |   |                |       |      |  |                |       |  
|--------------------- | ------------------------------------------------------------------------------------------- | - | -------------- | ----- | ---- |  | -------------- | ----- | -
|                      |                                                                                             |   | Second Quarter
|                      |                                                                                             |   |               
|                      |                                                                                             |   | 2003           |       | 2002
|                      |                                                                                             |   |                |       |     
|                      |                                                                                             |   |                |       |      |  | (As Restated)*
|Net loss as reported  |                                                                                             | $ | (15.2          | )     |      |  | (34.3          | )    
|Deduct:               |                                                                                             |   |                |       |      |  |                |      
|                      | Total compensation cost
determined under fair value
based method for all awards,
net of tax |   |                | (3.1  | )    |  |                | (2.9  | )
|                      |                                                                                             |   |                |       |      |  |                |      
|Pro formanet loss     |                                                                                             | $ | (18.3          | )     |      |  | (37.2          | )    
|                      |                                                                                             |   |                |       |      |  |                |      
|Loss per common share |                                                                                             |   |                |       |      |  |                |      
|                      | Basic  as reported                                                                         |   | $              | (0.21 | )    |  |                | (0.46 | )
|                      | Basic  pro forma                                                                           |   | $              | (0.24 | )    |  |                | (0.49 | )
|Loss per common share |                                                                                             |   |                |       |      |  |                |      
|                      | Diluted  as reported                                                                       |   | $              | (0.21 | )    |  |                | (0.46 | )
|                      | Diluted  pro forma                                                                         |   | $              | (0.24 | )    |  |                | (0.49 | )



|* |  | Refer to Note 2, Restatements, for further discussion.
|- |  | ------------------------------------------------------

(Unaudited; $ in millions except per share data)

|                      |                                                                                             |   |                  |       |      |  |                |       |  
|--------------------- | ------------------------------------------------------------------------------------------- | - | ---------------- | ----- | ---- |  | -------------- | ----- | -
|                      |                                                                                             |   | Six Months Ended
|                      |                                                                                             |   | June 30,        
|                      |                                                                                             |   |                 
|                      |                                                                                             |   | 2003             |       | 2002
|                      |                                                                                             |   |                  |       |     
|                      |                                                                                             |   |                  |       |      |  | (As Restated)*
|Net loss as reported  |                                                                                             | $ | (30.2            | )     |      |  | (59.1          | )    
|Deduct:               |                                                                                             |   |                  |       |      |  |                |      
|                      | Total compensation cost
determined under fair value
based method for all awards,
net of tax |   |                  | (6.5  | )    |  |                | (6.9  | )
|                      |                                                                                             |   |                  |       |      |  |                |      
|Pro formanet loss     |                                                                                             | $ | (36.7            | )     |      |  | (66.0          | )    
|                      |                                                                                             |   |                  |       |      |  |                |      
|Loss per common share |                                                                                             |   |                  |       |      |  |                |      
|                      | Basic  as reported                                                                         |   | $                | (0.42 | )    |  |                | (0.77 | )
|                      | Basic  pro forma                                                                           |   | $                | (0.49 | )    |  |                | (0.86 | )
|Loss per common share |                                                                                             |   |                  |       |      |  |                |      
|                      | Diluted  as reported                                                                       |   | $                | (0.42 | )    |  |                | (0.77 | )
|                      | Diluted  pro forma                                                                         |   | $                | (0.49 | )    |  |                | (0.86 | )



---



|* |  | Refer to Note 2, Restatements, for further discussion.
|- |  | ------------------------------------------------------



---



##### 



-10-



|5. |  | Special Items and Provisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Special items and provisions are unpredictable and atypical of the
Companys operations in a given period. We believe consistent
identification, disclosure and discussion of such items, both favorable
and unfavorable, provide additional information to assess the quality of
our performance and our earnings or losses. In addition, management
measures the performance of its reportable segments excluding special
items. This supplemental information is not a substitute for any U.S.
generally accepted accounting principles (GAAP) measure and should be
evaluated within the context of our U.S. GAAP results.

Note: Supplemental Data



| |  | The following schedule summarizes the special items and provisions for the
quarter and six months ended June 30, 2003:
| |  | ----------------------------------------------------------------------------------------------------------------------

(Unaudited; gains (losses) in millions except per share amounts)

|                                     |                       |                                         |      |                     |      |           |      |   |      |   |       |   |       |  
|------------------------------------ | --------------------- | --------------------------------------- | ---- | ------------------- | ---- | --------- | ---- | - | ---- | - | ----- | - | ----- | -
|                                     |                       |                                         |      | Second Quarter 2003
|                                     |                       |                                         |      |                    
|Statement of Consolidated            |                       | Pre-tax                                 |      | After-tax           |      | $/Share  
|Operations Line Item                 |                       | Earnings                                |      | Earnings            |      | After-tax
|                                     |                       |                                         |      |                     |      |          
|Special items and provisions, net:   |                       |                                         |      |                     |      |           |      |   |      |   |       |  
|                                     | PDMC
                |                                         |      |                     |      |           |      |   |      |   |       |   |      
|                                     |                       | Environmental provisions                |      | $                   | (0.5 | )         |      |   | (0.4 | ) |       |   |      |  
|                                     |                       |                                         |      |                     |      |           |      |   |      |   |       |  
|                                     | Corporate
and Other  |                                         |      |                     |      |           |      |   |      |   |       |   |      
|                                     |                       | Environmental
provisions                |      |                     | (2.1 | )         |      |   | (2.0 | ) |       |   | (0.02 | )
|                                     |                       | Environmental insurance
recoveries, net |      |                     | 0.5  |           |      |   | 0.5  |   |       |   |      |  
|                                     |                       |                                         |      |                     |      |           |      |   |      |   |       |  
|                                     |                       |                                         | (1.6 | )                   |      |           | (1.5 | ) |      |   | (0.02 | )
|                                     |                       |                                         |      |                     |      |           |      |   |      |   |       |  
|                                     |                       |                                         | (2.1 | )                   |      |           | (1.9 | ) |      |   | (0.02 | )
|                                     |                       |                                         |      |                     |      |           |      |   |      |   |       |  
|Miscellaneous income
(expense), net: |                       |                                         |      |                     |      |           |      |   |      |   |       |  
|                                     |                       | Sale of cost investment                 |      |                     | 6.4  |           |      |   | 6.4  |   |       |   | 0.07  |  
|                                     |                       |                                         |      |                     |      |           |      |   |      |   |       |  
|                                     |                       | $                                       | 4.3  |                     |      |           | 4.5  |   |      |   | 0.05  |  
|                                     |                       |                                         |      |                     |      |           |      |   |      |   |       |  

(Unaudited; gains (losses) in millions except per share amounts)

|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |   |       |  
|-------------------------------------- | --------------------- | ---------------------------------------------------- | ---- | ---------------- | ---- | --------- | ---- | - | ---- | - | ----- | - | ----- | -
|                                       |                       |                                                      |      | Six Months Ended
|                                       |                       |                                                      |      | June 30, 2003   
|                                       |                       |                                                      |      |                 
|Statement of Consolidated              |                       | Pre-tax                                              |      | After-tax        |      | $/Share  
|Operations Line Item                   |                       | Earnings                                             |      | Earnings         |      | After-tax
|                                       |                       |                                                      |      |                  |      |          
|Special items and provisions, net:     |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|                                       | PDMC
                |                                                      |      |                  |      |           |      |   |      |   |       |   |      
|                                       |                       | Environmental provisions                             |      | $                | (0.5 | )         |      |   | (0.4 | ) |       |   |      |  
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|                                       | PDI
                 |                                                      |      |                  |      |           |      |   |      |   |       |   |      
|                                       |                       | Termination of a foreign
postretirement benefit
plan |      | $                | 3.2  |           |      |   | 2.4  |   |       |   | 0.03  |  
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|                                       | Corporate
and Other  |                                                      |      |                  |      |           |      |   |      |   |       |   |      
|                                       |                       | Environmental
provisions                             |      |                  | (3.4 | )         |      |   | (3.3 | ) |       |   | (0.03 | )
|                                       |                       | Environmental insurance
recoveries, net              |      |                  | 0.5  |           |      |   | 0.5  |   |       |   |      |  
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|                                       |                       |                                                      | (2.9 | )                |      |           | (2.8 | ) |      |   | (0.03 | )
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|                                       |                       |                                                      | (0.2 | )                |      |           | (0.8 | ) |      |   |      |  
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|Miscellaneous income
(expense), net:   |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|                                       |                       | Sale of cost investment                              |      |                  | 6.4  |           |      |   | 6.4  |   |       |   | 0.07  |  
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|Cumulative effect of
accounting change |                       |                                                      | 9.7  |                  |      |           | 8.4  |   |      |   | 0.09  |  
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  
|                                       |                       | $                                                    | 15.9 |                  |      |           | 14.0 |   |      |   | 0.16  |  
|                                       |                       |                                                      |      |                  |      |           |      |   |      |   |       |  



| |  | In the 2003 second quarter, a special, net pre-tax gain of $4.3 million
was recognized consisting of (i) a pre-tax gain of $6.4 million (before
and after taxes) for the sale of a cost-basis wire and cable investment;
(ii) a $2.6 million charge ($2.4 million after-tax) for environmental
provisions (refer to Note 7, Environmental, and Reclamation and Closure
Matters); and (iii) a $0.5 million net gain (before and after taxes) from
recoveries associated with insurance settlements on historic environmental
claims.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In the 2003 first quarter, a special, net pre-tax gain of $11.6 million
was recognized consisting of (i) a pre-tax gain of $9.7 million ($8.4
million after-tax) for the cumulative effect of an accounting change
(refer to Note 6, Accounting Standards, for further discussion); (ii) a
$1.3 million charge (before and after taxes) for environmental provisions
(refer to Note 7, Environmental, and Reclamation and Closure Matters); and
(iii) a $3.2 million gain ($2.4 million after-tax) from the termina-               



---



##### 



-11-



| |  | tion of
a foreign postretirement benefit plan.
| |  | ----------------------------------------------

Note: Supplemental Data



| |  | The following schedule summarizes the special items and provisions for the
quarter and six months ended June 30, 2002:
| |  | ----------------------------------------------------------------------------------------------------------------------

(Unaudited; gains (losses) in millions except per share amounts)

|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |      |       |  
|------------------------------------ | ------------------------------------------------------- | -------------------------------------------------------------------- | ----- | ------------------- | ----- | --------- | ----- | ---- | ----- | - | ----- | ---- | ----- | -
|                                     |                                                         |                                                                      |       | Second Quarter 2002
|                                     |                                                         |                                                                      |       |                    
|Statement of Consolidated            |                                                         | Pre-tax                                                              |       | After-tax           |       | $/Share  
|Operations Line Item                 |                                                         | Earnings                                                             |       | Earnings            |       | After-tax
|                                     |                                                         |                                                                      |       |                     |       |          
|Special items and provisions, net:   |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     | PDMC
                                                  |                                                                      |       |                     |       |           |       |      |       |   |       |      |      
|                                     |                                                         | Environmental insurance
recoveries, net                              |       | $                   | (1.7  | )         |       |      | (1.5  | ) |       |      | (0.02 | )
|                                     |                                                         | Sale of non-core
real estate                                         |       |                     | 22.6  |           |       |      | 22.6  |   |       |      | 0.28  |  
|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     |                                                         |                                                                      | 20.9  |                     |       |           | 21.1  |      |       |   | 0.26  |     
|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     | Corporate
and Other                                    |                                                                      |       |                     |       |           |       |      |       |   |       |      |      
|                                     |                                                         | Environmental
provisions                                             |       |                     |      |           |       |      | 2.4   |   |       |      | 0.03  |  
|                                     |                                                         | Environmental insurance
recoveries, net                              |       |                     | 6.5   |           |       |      | 5.0   |   |       |      | 0.06  |  
|                                     |                                                         | Historic Cyprus Amax
lawsuit settlement                              |       |                     | (11.2 | )         |       |      | (8.9  | ) |       |      | (0.11 | )
|                                     |                                                         | Historic Cyprus Amax
arbitration award with
regard to Plateau
Mining |       |                     | (46.5 | )         |       |      | (44.5 | ) |       |      | (0.55 | )
|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     |                                                         |                                                                      | (51.2 | )                   |       |           | (46.0 | )    |       |   | (0.57 | )   
|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     |                                                         |                                                                      | (30.3 | )                   |       |           | (24.9 | )    |       |   | (0.31 | )   
|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|Miscellaneous income
(expense), net: |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     |                                                         | Cost investment
write-downs                                          |       |                     | (0.7  | )         |       |      | (0.8  | ) |       |      | (0.01 | )
|Taxes:                               |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     | Release of taxes provided
with regard to Plateau
Mining |                                                                      |       |                    |       |           |       | 13.0 |       |   |       | 0.16 |      
|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     
|                                     |                                                         | $                                                                    | (31.0 | )                   |       |           | (12.7 | )    |       |   | (0.16 | )   
|                                     |                                                         |                                                                      |       |                     |       |           |       |      |       |   |       |     

(Unaudited; gains (losses) in millions except per share amounts)

|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |      |       |  
|-------------------------------------- | ------------------------------------------------------- | -------------------------------------------------------------------- | ----- | ---------------- | ----- | --------- | ----- | ---- | ----- | - | ----- | ---- | ----- | -
|                                       |                                                         |                                                                      |       | Six Months Ended
|                                       |                                                         |                                                                      |       | June 30, 2002   
|                                       |                                                         |                                                                      |       |                 
|Statement of Consolidated              |                                                         | Pre-tax                                                              |       | After-tax        |       | $/Share  
|Operations Line Item                   |                                                         | Earnings                                                             |       | Earnings         |       | After-tax
|                                       |                                                         |                                                                      |       |                  |       |          
|Special items and provisions, net:     |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       | PDMC
                                                  |                                                                      |       |                  |       |           |       |      |       |   |       |      |      
|                                       |                                                         | Environmental insurance
recoveries, net                              |       | $                | 12.1  |           |       |      | 9.7   |   |       |      | 0.12  |  
|                                       |                                                         | Sale of non-core
real estate                                         |       |                  | 22.6  |           |       |      | 22.6  |   |       |      | 0.28  |  
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       |                                                         |                                                                      | 34.7  |                  |       |           | 32.3  |      |       |   | 0.40  |     
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       | Corporate
and Other                                    |                                                                      |       |                  |       |           |       |      |       |   |       |      |      
|                                       |                                                         | Environmental
provisions                                             |       |                  | (12.1 | )         |       |      | (9.7  | ) |       |      | (0.12 | )
|                                       |                                                         | Environmental insurance
recoveries, net                              |       |                  | 8.6   |           |       |      | 6.9   |   |       |      | 0.08  |  
|                                       |                                                         | Historic Cyprus Amax
lawsuit settlement                              |       |                  | (11.2 | )         |       |      | (8.9  | ) |       |      | (0.11 | )
|                                       |                                                         | Historic Cyprus Amax
arbitration award with
regard to Plateau
Mining |       |                  | (46.5 | )         |       |      | (44.5 | ) |       |      | (0.56 | )
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       |                                                         |                                                                      | (61.2 | )                |       |           | (56.2 | )    |       |   | (0.71 | )   
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       |                                                         |                                                                      | (26.5 | )                |       |           | (23.9 | )    |       |   | (0.31 | )   
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|Miscellaneous income
(expense), net:   |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       |                                                         | Cost investment
write-downs                                          |       |                  | (1.2  | )         |       |      | (1.2  | ) |       |      | (0.01 | )
|Taxes:                                 |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       | Release of taxes provided
with regard to Plateau
Mining |                                                                      |       |                 |       |           |       | 13.0 |       |   |       | 0.16 |      
|                                       | Tax benefit for 2001 net
operating loss carryback       |                                                                      |       |                 |       |           |       | 38.5 |       |   |       | 0.49 |      
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       |                                                         |                                                                      |      |                  |       |           | 51.5  |      |       |   | 0.65  |     
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|Cumulative effect of
accounting change |                                                         |                                                                      | (33.0 | )                |       |           | (22.9 | )    |       |   | (0.29 | )   
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     
|                                       |                                                         | $                                                                    | (60.7 | )                |       |           | 3.5   |      |       |   | 0.04  |     
|                                       |                                                         |                                                                      |       |                  |       |           |       |      |       |   |       |     



| |  |  | In the 2002 second quarter, a special, net pre-tax loss of $31.0 million
was recognized consisting of (i) pre-tax charges of $46.5 million ($44.5
million after-tax) associated with an award made in a binding arbitration
proceeding filed against Cyprus Amax Minerals Company (Cyprus Amax) by
Plateau Mining Corporation (a former subsidiary of Cyprus Amax); (ii) an
$11.2 million charge including expenses ($8.9 million after-tax) for the
settlement of a lawsuit related to Amax Oil & Gas acquired with the Cyprus
Amax purchase; (iii) a $0.7 million loss on the write-off of a
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---



##### 



-12-



| |  |  | cost
investment; (iv) a $22.6 million gain (before and after taxes) on the sale
of a non-core parcel of real estate in New Mexico; and (v) a $4.8 million
net gain ($3.8 million after-tax) from recoveries associated with
insurance settlements on historic environmental claims. The taxes
associated with special items were a net benefit of $18.3 million,
including release of deferred taxes previously provided ($13.0 million)
and year-to-date adjustments ($2.0 million) reflecting refinements in
forecast estimates of U.S. net operating loss carrybacks prior to 2002
(refer to Note 10, Benefit (Provision) for Taxes on Income).                                                                                                                                                                                                                                                
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In the 2002 first quarter, a special, net pre-tax loss of $29.7 million
was recognized consisting of (i) pre-tax charges of $33.0 million ($22.9
million after-tax) for the cumulative effect of an accounting
change (refer to Note 6, Accounting Standards, for further discussion);
(ii) a $12.1 million charge (before and after taxes) for environmental
provisions; (iii) a $0.5 million ($0.4 million
after-tax) write-off of a cost-basis investment; and (iv) a $15.9 million gain ($13.1 million
after-tax), net of fees and expenses, from recoveries associated with
insurance settlements reached with companies on historic environmental
claims. In addition, the 2002 first quarter included a tax benefit of
$38.5 million for net operating loss carryback prior to 2002 resulting
from recent U.S. tax legislation (refer to Note 10, Benefit (Provision)
for Taxes on Income).
|
| |  |  | In September 2002, we announced the temporary closure of two U.S. wire and
cable plants and other actions to improve efficiencies and consolidate
certain wire and cable operations. Refer to the Companys Form 10-K for
the year ended December 31, 2002, for additional discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | The following schedule presents a roll-forward from December 31, 2002, of
the liabilities incurred in connection with the September 2002
restructuring program, which were reflected as current liabilities in our
consolidated balance sheet:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

(Unaudited; $ in millions)

|               |                    |  |          |     |          |  |         |      |   |  |  |     | 
|-------------- | ------------------ |  | -------- | --- | -------- |  | ------- | ---- | - |  |  | --- | 
|               |                    |  | 12/31/02 |     | Payments |  | 6/30/03
|               |                    |  |          |     |          |  |        
|PDI
          |                    |  |          |     |          |  |         |      |   |  |  |    
|Wire and Cable |                    |  |          |     |          |  |         |      |   |  |  |    
|               | Employee severance |  | $        | 1.3 |          |  |         | (1.1 | ) |  |  | 0.2 | 
|               |                    |  |          |     |          |  |         |      |   |  |  |    

Note: In the 2003 second quarter, payments were $(0.2) million.



| |  | In the second quarter of 2001, we announced a restructuring of our
professional, administrative and operational support functions, as well as
various other operational improvement initiatives. Also in the fourth
quarter of 2001, we announced a series of actions to address the
then-current economic environment, including changes in copper operations
that led us to curtail approximately 220,000 metric tons of copper
production annually (including our partners share) and to curtail 54,000
metric tons of North American carbon black production annually in 2002.
Additionally, in the second quarter of 2000 and 1999, we announced plans
to reduce operating costs and restructure operations at our PDMC division
and our Wire and Cable segment. Refer to the Companys Form 10-K for the
year ended December 31, 2002, for additional discussion.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---



##### 



-13-



| |  | The following schedules present a roll-forward from December 31, 2002 and
2001, of the liabilities incurred in connection with the 2001
restructuring programs, which were reflected as current liabilities in our
consolidated balance sheet:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|                        |                    |                                   |     |          |     |          |      |         |      |   |   |   |   | 
|----------------------- | ------------------ | --------------------------------- | --- | -------- | --- | -------- | ---- | ------- | ---- | - | - | - | - | 
|                        |                    |                                   |     | 12/31/02 |     | Payments |      | 6/30/03
|                        |                    |                                   |     |          |     |          |      |        
|PDMC
                  |                    |                                   |     |          |     |          |      |         |      |   |   |  
|U.S. Mines              |                    |                                   |     |          |     |          |      |         |      |   |   |  
|                        | Morenci            |                                   |     |          |     |          |      |         |      |   |   |   |  
|                        |                    | Employee
severance                |     | $        | 0.1 |          |      |         | (0.1 | ) |   |   |  | 
|                        |                    |                                   |     |          |     |          |      |         |      |   |   |  
|                        | Bagdad/Sierrita    |                                   |     |          |     |          |      |         |      |   |   |   |  
|                        |                    | Mothballing/take-or-pay
contracts |     |          | 0.2 |          |      |         | (0.2 | ) |   |   |  | 
|                        |                    |                                   |     |          |     |          |      |         |      |   |   |  
|                        | Miami/Bisbee       |                                   |     |          |     |          |      |         |      |   |   |   |  
|                        |                    | Mothballing/take-or-pay
contracts |     |          | 0.1 |          |      |         | (0.1 | ) |   |   |  | 
|                        |                    |                                   |     |          |     |          |      |         |      |   |   |  
|                        | Chino/Cobre        |                                   |     |          |     |          |      |         |      |   |   |   |  
|                        |                    | Employee
severance                |     |          | 0.1 |          |      |         | (0.1 | ) |   |   |  | 
|                        |                    |                                   |     |          |     |          |      |         |      |   |   |  
|                        |                    |                                   | 0.5 |          |     |          | (0.5 | )       |      |   |  |  
|                        |                    |                                   |     |          |     |          |      |         |      |   |   |  
|Manufacturing and Sales |                    |                                   |     |          |     |          |      |         |      |   |   |  
|                        | Employee
severance |                                   |     | 0.1      |     |          |      | (0.1    | )    |   |   |  |  
|                        |                    |                                   |     |          |     |          |      |         |      |   |   |  
|                        |                    | $                                 | 0.6 |          |     |          | (0.6 | )       |      |   |  |  
|                        |                    |                                   |     |          |     |          |      |         |      |   |   |  

Note: All payments were made in the 2003 first quarter.

(Unaudited; $ in millions)

|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |     |     | 
|----------------------- | --------------------------------- | --------------------------------- | ---- | -------- | --- | -------- | ---- | ------- | ---- | - | --- | --- | --- | 
|                        |                                   |                                   |      | 12/31/01 |     | Payments |      | 6/30/02
|                        |                                   |                                   |      |          |     |          |      |        
|PDMC
                  |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|U.S. Mines              |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Morenci                           |                                   |      |          |     |          |      |         |      |   |     |     |    
|                        |                                   | Employee
severance                |      | $        | 0.3 |          |      |         | (0.3 | ) |     |     |    | 
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Bagdad/Sierrita                   |                                   |      |          |     |          |      |         |      |   |     |     |    
|                        |                                   | Employee
severance                |      |          | 3.5 |          |      |         | (1.0 | ) |     |     | 2.5 | 
|                        |                                   | Mothballing/take-or-pay
contracts |      |          | 3.1 |          |      |         | (1.4 | ) |     |     | 1.7 | 
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        |                                   |                                   | 6.6  |          |     |          | (2.4 | )       |      |   | 4.2 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Miami/Bisbee                      |                                   |      |          |     |          |      |         |      |   |     |     |    
|                        |                                   | Employee
severance                |      |          | 1.8 |          |      |         | (1.0 | ) |     |     | 0.8 | 
|                        |                                   | Mothballing/take-or-pay
contracts |      |          | 1.0 |          |      |         | (0.4 | ) |     |     | 0.6 | 
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        |                                   |                                   | 2.8  |          |     |          | (1.4 | )       |      |   | 1.4 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Chino/Cobre                       |                                   |      |          |     |          |      |         |      |   |     |     |    
|                        |                                   | Employee
severance                |      |          | 1.2 |          |      |         | (0.4 | ) |     |     | 0.8 | 
|                        |                                   | Mothballing/take-or-pay
contracts |      |          | 0.2 |          |      |         | (0.2 | ) |     |     |    | 
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        |                                   |                                   | 1.4  |          |     |          | (0.6 | )       |      |   | 0.8 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Tyrone                            |                                   |      |          |     |          |      |         |      |   |     |     |    
|                        |                                   | Employee
severance                |      |          | 0.2 |          |      |         | (0.2 | ) |     |     |    | 
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        |                                   |                                   | 11.3 |          |     |          | (4.9 | )       |      |   | 6.4 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|Manufacturing and Sales |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Employee
severance                |                                   |      | 1.4      |     |          |      | (0.4    | )    |   |     | 1.0 |    
|                        | Mothballing/take-or-pay
contracts |                                   |      | 4.1      |     |          |      | (2.9    | )    |   |     | 1.2 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        |                                   |                                   | 5.5  |          |     |          | (3.3 | )       |      |   | 2.2 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|Primary Molybdenum      |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Employee
severance                |                                   |      | 0.1      |     |          |      | (0.1    | )    |   |     |    |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|Other Mining            |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        | Employee
severance                |                                   |      | 0.8      |     |          |      | (0.5    | )    |   |     | 0.3 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    
|                        |                                   | $                                 | 17.7 |          |     |          | (8.8 | )       |      |   | 8.9 |    
|                        |                                   |                                   |      |          |     |          |      |         |      |   |     |    



---



##### 



-14-

|                    |                          |   |          |     |          |  |         |      |   |  |     |     | 
|------------------- | ------------------------ | - | -------- | --- | -------- |  | ------- | ---- | - |  | --- | --- | 
|                    |                          |   | 12/31/01 |     | Payments |  | 6/30/02
|                    |                          |   |          |     |          |  |        
|PDI
               |                          |   |          |     |          |  |         |      |   |  |     |    
|Specialty Chemicals |                          |   |          |     |          |  |         |      |   |  |     |    
|                    | Disposal and
dismantling |   |          | 0.5 |          |  |         | (0.1 | ) |  |     | 0.4 | 
|                    | Employee
severance       |   |          | 0.8 |          |  |         | (0.5 | ) |  |     | 0.3 | 
|                    |                          |   |          |     |          |  |         |      |   |  |     |    
|                    |                          |   | 1.3      |     |          |  | (0.6    | )    |   |  | 0.7 |    
|                    |                          |   |          |     |          |  |         |      |   |  |     |    
|                    |                          | $ | 19.0     |     |          |  | (9.4    | )    |   |  | 9.6 |    
|                    |                          |   |          |     |          |  |         |      |   |  |     |    

Note: In the 2002 second quarter, payments were $(3.0) million.



| |  | The following schedules present a roll-forward from December 31, 2002 and
2001, of the liabilities incurred in connection with the June 2000
restructuring program, which were reflected as current liabilities in our
consolidated balance sheet:
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|               |                               |  |          |     |          |  |         |   |  |  |  |     | 
|-------------- | ----------------------------- |  | -------- | --- | -------- |  | ------- | - |  |  |  | --- | 
|               |                               |  | 12/31/02 |     | Payments |  | 6/30/03
|               |                               |  |          |     |          |  |        
|PDI
          |                               |  |          |     |          |  |         |   |  |  |  |    
|Wire and Cable |                               |  |          |     |          |  |         |   |  |  |  |    
|               | Plant removal and
dismantling |  | $        | 0.5 |          |  |         |  |  |  |  | 0.5 | 
|               |                               |  |          |     |          |  |         |   |  |  |  |    

(Unaudited; $ in millions)

|               |                               |  |          |     |       |  |           |      |   |  |  |     | 
|-------------- | ----------------------------- |  | -------- | --- | ----- |  | --------- | ---- | - |  |  | --- | 
|               |                               |  |          |     |       |  | Reassess- |      |   |  | 
|               |                               |  | 12/31/01 |     | ments |  | 6/30/02  
|               |                               |  |          |     |       |  |          
|PDI
          |                               |  |          |     |       |  |           |      |   |  |  |    
|Wire and Cable |                               |  |          |     |       |  |           |      |   |  |  |    
|               | Plant removal and
dismantling |  | $        | 1.9 |       |  |           | (0.6 | ) |  |  | 1.3 | 
|               |                               |  |          |     |       |  |           |      |   |  |  |    

Note: In the 2002 second quarter, reassessments were $(0.4) million.



| |  | PDIs Wire and Cable segment reassessment related to a non-cash deduction
associated with the devaluation of Venezuelan currency.                                                                                                                 
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The following schedules present a roll-forward from December 31, 2002 and
2001, of the liabilities incurred in connection with the June 1999
restructuring program, which were reflected as current liabilities in our
consolidated balance sheet:

(Unaudited; $ in millions)

|               |                                   |   |          |     |          |  |         |   |  |  |     |     | 
|-------------- | --------------------------------- | - | -------- | --- | -------- |  | ------- | - |  |  | --- | --- | 
|               |                                   |   | 12/31/02 |     | Payments |  | 6/30/03
|               |                                   |   |          |     |          |  |        
|PDMC
         |                                   |   |          |     |          |  |         |   |  |  |     |    
|Other Mining   |                                   |   |          |     |          |  |         |   |  |  |     |    
|               | Mothballing/take-or-pay
contracts |   | $        | 0.6 |          |  |         |  |  |  |     | 0.6 | 
|               |                                   |   |          |     |          |  |         |   |  |  |     |    
|PDI
          |                                   |   |          |     |          |  |         |   |  |  |     |    
|Wire and Cable |                                   |   |          |     |          |  |         |   |  |  |     |    
|               | Take-or-pay
contracts             |   |          | 1.0 |          |  |         |  |  |  |     | 1.0 | 
|               |                                   |   |          |     |          |  |         |   |  |  |     |    
|               |                                   | $ | 1.6      |     |          |  |        |   |  |  | 1.6 |    
|               |                                   |   |          |     |          |  |         |   |  |  |     |    

(Unaudited; $ in millions)

|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |     | 
|------------------- | --------------------------------- | - | -------- | --- | ----- |  | --------- | ---- | ------- |  | ---- | ---- | - |  | --- | --- | 
|                    |                                   |   |          |     |       |  | Reassess- |      | Pay-    |  |      |      |  
|                    |                                   |   | 12/31/01 |     | ments |  | ments     |      | 6/30/02
|                    |                                   |   |          |     |       |  |           |      |        
|PDMC
              |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|Other Mining        |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    | Employee
severance                |   | $        | 0.2 |       |  |           |     |         |  |      | (0.1 | ) |  |     | 0.1 | 
|                    | Mothballing/take-or-pay
contracts |   |          | 1.4 |       |  |           |     |         |  |      | (0.6 | ) |  |     | 0.8 | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    |                                   |   | 1.6      |     |       |  |          |      |         |  | (0.7 | )    |   |  | 0.9 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|PDI
               |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|Specialty Chemicals |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    | Disposal and
dismantling          |   |          | 0.3 |       |  |           | 0.1  |         |  |      |     |   |  |     | 0.4 | 
|                    | Environmental                     |   |          | 0.6 |       |  |           |     |         |  |      |     |   |  |     | 0.6 | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    |                                   |   | 0.9      |     |       |  | 0.1       |      |         |  |     |      |   |  | 1.0 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|Wire and Cable      |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    | Take-or-pay
contracts             |   |          | 1.1 |       |  |           |     |         |  |      |     |   |  |     | 1.1 | 
|                    | Plant removal and
dismantling     |   |          | 0.2 |       |  |           | (0.1 | )       |  |      |     |   |  |     | 0.1 | 
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    |                                   |   | 1.3      |     |       |  | (0.1      | )    |         |  |     |      |   |  | 1.2 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    |                                   |   | 2.2      |     |       |  |          |      |         |  |     |      |   |  | 2.2 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    
|                    |                                   | $ | 3.8      |     |       |  |          |      |         |  | (0.7 | )    |   |  | 3.1 |    
|                    |                                   |   |          |     |       |  |           |      |         |  |      |      |   |  |     |    

Note: The reassessments occurred in the 2002 second quarter.



---



##### 



-15-



|   |  | PDIs Specialty Chemicals segment reassessment related to an adjustment to
disposal and dismantling charges at a Philippine plant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | PDIs Wire and Cable segment reassessment related to a non-cash deduction
resulting from the devaluation of Venezuelan currency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|6. |  | Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | On January 1, 2003, we adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. With the adoption of this Statement, we
recognize asset retirement obligations (AROs) as liabilities when
incurred, with the initial measurement at fair value. These liabilities
will be accreted to full value over time through charges to income. In
addition, an asset retirement cost was capitalized as part of the related
assets carrying value and will subsequently be depreciated over the
assets useful life. Our AROs consist primarily of costs associated with
mine reclamation and closure activities. These activities, which tend to
be site specific, generally include costs for earthwork, revegetation,
water treatment and demolition. Upon adoption, we recorded an increase to
our closure and reclamation reserve of approximately $2.5 million, net, an
increase to our mining properties assets of approximately $12.2 million
and a cumulative gain of $8.4 million, net of deferred income taxes. For
the three and six months ended June 30, 2003, the effect of adopting SFAS
No. 143 decreased loss before cumulative effect of accounting change by
approximately $8 million, or 9 cents per common share, and $11 million, or
12 cents per common share, respectively.
|  
|   |  | The following table summarizes the balance sheet impact associated with
the adoption of SFAS No. 143:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

(Unaudited; $ in millions)

|                                           |                              |   |              |       |          |  |          |      |            |  |        |       | 
|------------------------------------------ | ---------------------------- | - | ------------ | ----- | -------- |  | -------- | ---- | ---------- |  | ------ | ----- | 
|                                           |                              |   |              |       |          |  | SFAS     |      | January 1,
|                                           |                              |   | December 31, |       | No. 143  |  | 2003    
|                                           |                              |   | 2002         |       | Adoption |  | After   
|                                           |                              |   | As Reported* |       | Impact   |  | Adoption
|                                           |                              |   |              |       |          |  |         
|Mining properties                          |                              | $ | 907.4        |       |          |  | 63.8     | **   |            |  | 971.2  |      
|Mining properties
accumulated
depreciation |                              |   | (197.1       | )     |          |  | (53.2    | )    |            |  | (250.3 | )    
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|                                           | Net mining
properties
assets |   | $            | 710.3 |          |  |          | 10.6 |            |  |        | 720.9 | 
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|Intangibles                                |                              | $ | 439.5        |       |          |  | 3.6      | **   |            |  | 443.1  |      
|Intangibles -
accumulated
amortization     |                              |   | (93.6        | )     |          |  | (2.0     | )    |            |  | (95.6  | )    
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|                                           |                              | $ | 345.9        |       |          |  | 1.6      |      |            |  | 347.5  |      
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|Asset retirement
obligation
liability      |                              | $ | 138.6        |       |          |  | 10.4     | ***  |            |  | 149.0  |      
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      



---



|*   |  | Reflects the reclassification of mining concessions from property, plant
and equipment, net to intangible assets (refer to Note 3, Reclassification
of Intangible Assets, for further discussion).                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|**  |  | Amounts include $84.0 million and $7.5 million of additions related to
recording an asset retirement cost, offset by $20.2 million and $3.9
million to reclassify amounts recognized as ore reserves in purchase
accounting.
|   
|*** |  | Amount consists of
$2.5 million of liabilities recognized at adoption and
$7.9 million of reclassifications related to closure obligations
from other liabilities at adoption.                                              



---



##### 



-16-



| |  | The pro formaeffects of the application of SFAS No. 143 as if this
Statement had been adopted on January 1, 2002, are presented below:
| |  | --------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions except per share data)

|                                                                     |                                 |                                 |       |               |       |  
|-------------------------------------------------------------------- | ------------------------------- | ------------------------------- | ----- | ------------- | ----- | -
|                                                                     |                                 |                                 |       | Three Months 
|                                                                     |                                 |                                 |       | Ended        
|                                                                     |                                 |                                 |       | June 30, 2002
|                                                                     |                                 |                                 |       |              
|Loss before cumulative effect of
accounting change as reported       |                                 | $                               | (34.3 | )            
|Reduced cost of products sold, net
of tax                            |                                 |                                 | 4.5   |              
|Additional depreciation expense,
net of tax benefit                  |                                 |                                 | (0.5  | )            
|                                                                     |                                 |                                 |       |              
|Pro formaloss before cumulative
effect of accounting change          |                                 | $                               | (30.3 | )            
|                                                                     |                                 |                                 |       |              
|Loss per common share before
cumulative effect of accounting
change: |                                 |                                 |       |              
|                                                                     |                                 | Basic and diluted  as reported |       | $             | (0.46 | )
|                                                                     |                                 | Basic and diluted  pro forma   |       | $             | (0.41 | )
|Net loss as reported                                                 |                                 | $                               | (34.3 | )            
|Pro formanet loss                                                    |                                 | $                               | (30.3 | )            
|Loss per common share:                                               |                                 |                                 |       |              
|                                                                     | Basic and diluted  as reported |                                 | $     | (0.46         | )    
|                                                                     | Basic and diluted  pro forma   |                                 | $     | (0.41         | )    

(Unaudited; $ in millions except per share data)

|                                                                     |                                 |                                 |       |                  |       |      |       |       |       |  
|-------------------------------------------------------------------- | ------------------------------- | ------------------------------- | ----- | ---------------- | ----- | ---- | ----- | ----- | ----- | -
|                                                                     |                                 |                                 |       | Six Months Ended
|                                                                     |                                 |                                 |       | June 30,        
|                                                                     |                                 |                                 |       |                 
|                                                                     |                                 |                                 |       | 2003             |       | 2002
|                                                                     |                                 |                                 |       |                  |       |     
|Loss before cumulative effect of
accounting change as reported       |                                 | $                               | (38.6 | )                |       |      | (36.2 | )    
|Reduced cost of products sold, net
of tax                            |                                 |                                 |      |                  |       |      | 9.3   |      
|Additional depreciation expense,
net of tax benefit                  |                                 |                                 |      |                  |       |      | (1.0  | )    
|                                                                     |                                 |                                 |       |                  |       |      |       |      
|Pro formaloss before cumulative
effect of accounting change          |                                 | $                               | (38.6 | )                |       |      | (27.9 | )    
|                                                                     |                                 |                                 |       |                  |       |      |       |      
|Loss per common share before
cumulative effect of accounting
change: |                                 |                                 |       |                  |       |      |       |      
|                                                                     |                                 | Basic and diluted  as reported |       | $                | (0.51 | )    |       |       | (0.48 | )
|                                                                     |                                 | Basic and diluted  pro forma   |       | $                | (0.51 | )    |       |       | (0.38 | )
|Net loss as reported                                                 |                                 | $                               | (30.2 | )                |       |      | (59.1 | )    
|Pro formanet loss                                                    |                                 | $                               | (38.6 | )                |       |      | (50.8 | )    
|Loss per common share:                                               |                                 |                                 |       |                  |       |      |       |      
|                                                                     | Basic and diluted  as reported |                                 | $     | (0.42            | )     |      |       | (0.77 | )    
|                                                                     | Basic and diluted  pro forma   |                                 | $     | (0.51            | )     |      |       | (0.67 | )    



| |  | The pro formaasset retirement obligation liability balances as if SFAS
No. 143 had been adopted on January 1, 2002, are as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|                                                 |                   |  |   |       | 
|------------------------------------------------ | ----------------- |  | - | ----- | 
|Pro formaasset retirement obligation
liability  |                   |  |   |      
|                                                 | January 1, 2002   |  | $ | 138.1 | 
|Pro formaasset retirement obligation
liability  |                   |  |   |      
|                                                 | December 31, 2002 |  | $ | 149.0 | 



| |  | Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. Under SFAS No. 142, goodwill and intangible
assets that have indefinite useful lives are not amortized, but rather
tested at least annually for impairment. Intangible assets that have
finite useful lives will continue to be amortized over their useful lives.
Upon completion of the transitional impairment tests, the fair value of
three of the Companys international wire and cable reporting units was
determined to be less than the related carrying amount. The resulting
impairment loss recognized upon adoption of SFAS No. 142 in the first
quarter of 2002 was $33.0 million, pre-tax ($22.9 million after-tax), and
was recognized as a cumulative effect of a change in accounting principle.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Subsequently, the Company completed its annual goodwill impairment test as
of December 31, 2002, with no additional impairments. The Company will
continue to test its goodwill annually as of December 31, unless events
occur or circumstances change between annual tests that would more likely
than not reduce the fair value of a reporting unit below its carrying
amount.                                                                                                                                                                                                                                                                                                                                                                                                                                       



---



##### 



-17-



| |  | The changes in the carrying amount of goodwill for the year ended December
31, 2002, and six months ended June 30, 2003, were as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|                                                     |  |           |       |          |  |       |       |   |  |  |       |  
|---------------------------------------------------- |  | --------- | ----- | -------- |  | ----- | ----- | - |  |  | ----- | -
|                                                     |  | Specialty |       | Wire and |  |       |       |  
|                                                     |  | Chemicals |       | Cable    |  |       |       |  
|                                                     |  | Segment   |       | Segment  |  | Total
|                                                     |  |           |       |          |  |      
|Balance as of
December 31, 2001                      |  | $         | 88.5  |          |  |       | 54.6  |   |  |  | 143.1 |  
|Goodwill acquired
during period                      |  |           |      |          |  |       |      |   |  |  |      |  
|Impairment losses upon
adoption of SFAS
No. 142      |  |           |      |          |  |       | (33.0 | ) |  |  | (33.0 | )
|Goodwill included in
the disposal of a
business unit |  |           |      |          |  |       |      |   |  |  |      |  
|Foreign currency translation adjustments             |  |           | (19.4 | )        |  |       |      |   |  |  | (19.4 | )
|                                                     |  |           |       |          |  |       |       |   |  |  |       |  
|Balance as of
December 31, 2002                      |  |           | 69.1  |          |  |       | 21.6  |   |  |  | 90.7  |  
|Goodwill acquired
during period                      |  |           |      |          |  |       |      |   |  |  |      |  
|Impairment losses                                    |  |           |      |          |  |       |      |   |  |  |      |  
|Goodwill included in
the disposal of a
business unit |  |           |      |          |  |       |      |   |  |  |      |  
|Foreign currency translation adjustments             |  |           | 8.9   |          |  |       |      |   |  |  | 8.9   |  
|                                                     |  |           |       |          |  |       |       |   |  |  |       |  
|Balance as of
June 30, 2003                          |  | $         | 78.0  |          |  |       | 21.6  |   |  |  | 99.6  |  
|                                                     |  |           |       |          |  |       |       |   |  |  |       |  



| |  | In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. Under SFAS No. 4, all gains and losses from extinguishment
of debt were required to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. This Statement
eliminates SFAS No. 4 and, thus, the exception to applying APB No. 30 to
all gains and losses related to extinguishments of debt. As a result,
gains and losses from extinguishment of debt should be classified as
extraordinary items only if they meet the criteria in APB No. 30.
Applying the provisions of APB No. 30 will distinguish transactions that
are part of an entitys recurring operations from those that are unusual
or infrequent or that meet the criteria for classification as an
extraordinary item. Under SFAS No. 13, the required accounting treatment
of certain lease modifications that have economic effects similar to
sale-leaseback transactions was inconsistent with the required accounting
treatment for sale-leaseback transactions. This Statement amends SFAS No.
13 to require that those lease modifications be accounted for in the same
manner as sale-leaseback transactions. This Statement was adopted by the
Company on January 1, 2003. As a result of this Statement being adopted,
we will reclassify the third quarter 2002 extraordinary item for debt
extinguishment to recurring operations in our Form 10-Q filing for the
quarter ended September 30, 2003.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between this Statement and EITF
94-3 relates to its requirements for recognition of a liability for a cost
associated with an exit or disposal activity. This Statement requires
that a liability for a cost associated with an exit or disposal activity
be recognized when the liability is incurred. Under EITF 94-3, a
liability was recognized at the date of an entitys commitment to an exit
plan. This Statement is effective for exit or disposal activities
initiated after December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | In November 2002, FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of certain guarantees, a guarantor must recognize a liability for
the fair value of an obligation assumed under the guarantee. FIN 45 also
requires significant new disclosures by guarantors, in both interim and
annual financial statements, about obligations associated with guarantees
issued. FIN 45 disclosure requirements were adopted for our year ended
December 31, 2002; the initial recognition and measurement provisions were
adopted on a prospective basis to guarantees issued or modified after
December 31, 2002. There were no such                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



---



##### 



-18-



|   |  | guarantees issued or modified in
the first six months of 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In December 2002, FASB issued SFAS No. 148, Accounting for Stock Based
Compensation  Transition and Disclosure  an Amendment of SFAS No. 123.
The Statement amends SFAS No. 123, Accounting for Stock-Based
Compensation, and provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. This Statement also amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures
in both annual and interim financial statements about the method of
stock-based employee compensation and the effect of the method used on
reported results. This Statement was effective for fiscal years ending
after December 15, 2002. The Company adopted this Statement in regards to
disclosure provisions for the year ended December 31, 2002, and has
provided the interim information in Note 4, Stock Compensation.                                                                                                                                                                                                                                                                                           
|  
|   |  | In January 2003, FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46) to
clarify when a company should consolidate in its financial statements the
assets, liabilities and activities of a variable interest entity. FIN 46
provides general guidance as to the definition of a variable interest
entity and requires a variable interest entity to be consolidated if a
company absorbs the majority of the variable interest entitys expected
losses, or is entitled to receive a majority of the variable interest
entitys residual returns, or both. FIN 46 is effective immediately for
all new variable interest entities created after January 31, 2003. For
variable interest entities created before February 1, 2003, the
consolidation provisions of FIN 46 must be applied for the first interim
or annual reporting period beginning after June 15, 2003. The disclosure
provisions of FIN 46 apply to financial statements issued after January
31, 2003, regardless of when the variable interest entity was established.
The adoption of FIN 46 did not have a material impact on the Companys
financial reporting and disclosures.
|  
|   |  | In April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. In particular, this Statement clarifies
under what circumstances a contract with an initial net investment meets
the characteristic of a derivative and when a derivative contains a
financing component that warrants special reporting in the statement of
cash flows. This Statement is generally effective for contracts entered
into or modified after June 30, 2003. We are currently analyzing the
impact of adoption of SFAS No. 149 on our financial reporting and
disclosures.                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 changes the accounting for certain financial
instruments that, under previous guidance, could be classified as equity
or mezzanine equity, by now requiring those instruments to be classified
as liabilities (or assets in some circumstances) in the statement of
financial position. Further, SFAS No. 150 requires disclosure regarding
the terms of those instruments and settlement alternatives. The guidance
in SFAS No. 150 generally is effective for all financial instruments
entered into or modified after May 31, 2003, and is otherwise effective at
the beginning of the first interim period beginning after June 15, 2003.
We have evaluated SFAS No. 150 and determined that it does not have an
impact on our financial reporting and disclosures.                                                                                                                                                                                                                                                                                       
|  
|7. |  | Environmental, and Reclamation and Closure Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | As of December 31, 2002, we had a reserve balance of $305.9 million for
estimated future costs associated with environmental matters at closed
facilities and closed portions of certain operating facilities.
During the first six months of 2003, we had a $2.6 million net
decrease in the reserve estimate ($3.9 million of additions and $6.5
million of reclassification to asset retirement obligation liability) and
$8.4 million of spending against the reserve. As                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



---



##### 



-19-



| |  | of June 30, 2003, the
reserve balance was $294.9 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The sites for which Phelps Dodge has received a notice of potential
liability or an information request that currently are considered to be
significant are the Pinal Creek site near Miami, Arizona; the Laurel Hill
site at Maspeth, New York; the former American Zinc and Chemical site in
Langeloth, Pennsylvania; and the Cyprus Tohono site near Casa Grande,
Arizona. At June 30, 2003, the cost range for reasonably possible
outcomes for all reservable remediation sites was estimated to be from
$266 million to $520 million of which approximately $295 million has been
reserved.                                                                                                                                                                                                                                       
|
| |  | 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.
As of June 30, 2003, the cost range for reasonably possible outcomes for
all such sites was estimated to be from $4 million to $37 million. The
liabilities arising from potential environmental obligations that have not
been reserved at this time may be material to the operating results of a
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.
|
| |  | On January 1, 2003, we adopted SFAS No. 143 (refer to Note 6, Accounting
Standards, for further discussion). The following table summarizes our
asset retirement obligation liability as of June 30, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

(Unaudited; $ in millions)

|                                                 |  |         |       |               |  |  |       |  
|------------------------------------------------ |  | ------- | ----- | ------------- |  |  | ----- | -
|                                                 |  | 2003    |       | Six Months   
|                                                 |  | Second  |       | Ended        
|                                                 |  | Quarter |       | June 30, 2003
|                                                 |  |         |       |              
|Beginning balance                                |  | $       | 152.0 |               |  |  | 138.6 |  
|Liability recorded upon adoption
of SFAS No. 143 |  |         |      |               |  |  | 10.4  |  
|New liabilities during the period                |  |         | 0.6   |               |  |  | 0.6   |  
|Accretion expense                                |  |         | 3.5   |               |  |  | 6.9   |  
|Payments                                         |  |         | (0.4  | )             |  |  | (0.8  | )
|Revisions to cash flow estimates                 |  |         | 21.3  |               |  |  | 21.3  |  
|Foreign currency translation
adjustments         |  |         | 0.1   |               |  |  | 0.1   |  
|                                                 |  |         |       |               |  |  |       |  
|Ending balance                                   |  | $       | 177.1 |               |  |  | 177.1 |  
|                                                 |  |         |       |               |  |  |       |  



| |  | During the second quarter 2003, we revised our cash flow estimates ($21.3
million discounted) for the Chino and Tyrone mines based on an agreement
with NMED on the cost estimate for Chino reached in April 2003 and
preliminary cost estimate for Tyrone identified in May 2003 by NMED for
the financial assurance requirements as part of the closure plans related
to the operations at Chino, Cobre and Tyrone (refer to Note 8,
Contingencies, for further discussion). The effect of this change in
estimate did not have a material impact on our results of operations for
the three and six months ended June 30, 2003.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | We have estimated the total cost of asset retirement obligations at
approximately $1.1 billion (unescalated, undiscounted and on a third-party
cost basis), leaving approximately $912 million remaining to be accreted
over time. These aggregate costs may increase or decrease materially in
the future as a result of changes in regulations, technology, mine plans
or other factors. Asset retirement obligation activities and expenditures
generally are made over a number of years or potentially greater periods
commencing near the end of the mine life.                                                             



---



##### 



-20-



|8. |  | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Significant New Mexico Closure and Reclamation Programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Mining and smelting operations with leaching, tailing ponds, surface
impoundments and other discharging facilities in New Mexico are subject to
regulation under the New Mexico Water Quality Act and the Water Quality
Control Commission (WQCC) Regulations. The Chino, Cobre and Tyrone mines
and the Hidalgo smelter each have obtained multiple discharge permits for
their operations, which specify operational, monitoring and notification
requirements. These permits are issued for five-year terms and require
renewal following the end of each permit term. The WQCC Regulations
authorize the New Mexico Environment Department (NMED), which administers
the discharge permit program, to require the submission of closure plans
showing how applicable discharge permit requirements will be met following
closure. Under certain circumstances, NMED also may require submission
and approval of abatement plans to address the exceedance of applicable
water quality standards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | Further, Chino, Cobre, Tyrone and Hidalgo must submit closure plans for
their operations. Hidalgo has an approved closure plan under its
discharge permit. The three mines have submitted closure plans, which
have been combined with closeout plans under the New Mexico Mining Act
(NMMA), as discussed below. The proposed closure plans currently are
subject to approval by NMED as part of separate discharge permits for
closure for each of the three operations that would supplement the
existing discharge permits (hereinafter referred to as closure permits).
The proposed closure permits contain a number of permit conditions that
would modify the proposed closure plans. Chino Mines Company and NMED
reached agreement in December 2001 on proposed closure permit conditions
presented at a public hearing in February 2002. On January 23, 2003,
NMEDs hearing officer issued a decision approving the closure permit as
proposed by NMED and Chino, with minor changes. NMED issued a permit
consistent with the hearing officers decision on February 24, 2003. An
appeal has been filed by a local environmental group. Phelps Dodge
Tyrone, Inc. and NMED were unable to reach agreement on permit terms
before a public hearing held in May 2002, and presented competing permit
proposals. Other parties who participated in the public hearing presented
their own proposals. On March 7, 2003, Tyrone received the hearing
officers decision on its permit, which generally adopted NMEDs proposal.
On April 2, 2003, Tyrone filed an appeal of the hearing officers
decision with the WQCC. NMED issued a permit in accordance with the
hearing officers decision on April 8, 2003, which Tyrone also has
appealed. Cobre Mining Company and NMED also have not reached agreement
on the terms of a closure permit. The closure permit for Cobre Mining
Company does not require a public hearing, and may be issued by NMED at
any time.
|  
|   |  | Chino, Cobre and Tyrone also are subject to permit requirements under
NMMA, which was passed in 1993. Following adoption of the New Mexico
Mining Act Rules (NMMAR) in 1994, Chino, Cobre and Tyrone received initial
permits as existing mining operations under NMMAR in 1997. These permits
require revisions to incorporate approved closeout plans, which consist of
plans for reclamation of the mining operations to achieve a
self-sustaining ecosystem or an approved post-mining land use following
cessation of operations at a mine. Existing mining operations may seek a
waiver of these reclamation standards for open pits and waste units based
upon a demonstration that achieving these standards is technically or
economically infeasible or environmentally unsound, as long as measures
will be taken to meet air and water quality standards following closure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | NMMAR originally required approval of a closeout plan for an existing
mining operation by December 31, 1999, based upon an extension granted by
the Director of the Mining and Minerals Division (MMD). NMMAR
subsequently was amended to extend the deadline for closeout plan approval
until December 31, 2001, and later to October 1, 2002. NMMAR contains a
requirement that
NMED must provide MMD with a determination that a closeout plan meets
applicable environmental standards, including air                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         





---



##### 



-21-



| |  | and water quality
standards, before MMD can approve the closeout plan. NMEDs policy is to
issue this determination after it has issued closure permits for the
facility that submits the closeout plan. In early 2001, Chino, Cobre and
Tyrone submitted comprehensive closure/closeout plans (CCPs) to both
NMED and MMD intended to address the requirements of both the WQCC
Regulations and NMMAR. Approval of the CCPs under NMMAR would require the
granting of waivers by MMD as authorized under NMMAR. The CCPs were the
subject of the public hearings before NMED for Chino and Tyrone, as
discussed above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | As of October 1, 2002, NMED had not issued closure permits for Chino,
Cobre or Tyrone. Consequently, as of October 1, 2002, MMD had not
approved closeout permits for these three mines. MMD issued Notices of
Violation (NOVs) to Chino, Cobre and Tyrone because the three mines did
not obtain approved closeout plans by the October 1, 2002, deadline. The
NOVs were modified by the Mining Commission following a public hearing to
set new deadlines for closeout plan approval tied to NMED permit actions.
Based on NMEDs permit actions, closeout plan approval for Chino is now
due by September 24, 2003, and the closeout plan approval date for Tyrone
is April 8, 2004. The closeout plan approval deadline for Cobre will be
nine months from the date of NMEDs permit issuance, which is currently
pending.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | NMMAR contains specific requirements regarding financial assurance that
must be provided to MMD to assure that sufficient funds would be available
to MMD to carry out the closeout plan in the event of a default by the
permittee. NMED also may require financial assurance under the WQCC
Regulations. The financial assurance requirements are based upon the net
present value of estimated costs to carry out the requirements of the
closure permit and the approved closeout plan, assuming the state would
hire a third-party contractor to conduct the work. Actual reclamation
costs may differ significantly from the costs estimated under the permits
due to advances in technology and reclamation techniques and opportunities
to prepare each site for more efficient reclamation through careful
development of the site over time. Consequently, the estimated costs
under the permits are higher than the cost the Company would be expected
to incur if the Company performed the work.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The CCPs submitted in early 2001 contained cost estimates of approximately
$100 million for Chino, $121 million for Tyrone, and $9 million for Cobre,
based upon unescalated and undiscounted capital and operating costs over a
30-year operating period. The closure permit negotiated by NMED and Chino
Mines Company and approved by the NMED hearing officer has an estimated
cost of approximately $394 million, based upon third-party unescalated and
undiscounted capital and operating costs over a 100-year operating period,
including the cost of technical studies required under the permit. The
Companys two-thirds share of NMEDs $394 million estimate is
approximately $263 million and our joint venture partners cost share is
approximately $131 million. We estimate total costs for Chino Mines
Company to achieve the closure standards required by NMED to be
approximately $264 million (100 percent basis); that estimate is
approximately one-third lower than the financial assurance cost estimate
as a result of the Companys historical cost advantages, savings from the
use of the Companys own personnel and equipment versus third-party
contract costs, and opportunities to prepare the site for more efficient
reclamation. The financial assurance cost estimate includes approximately
$10 million (100 percent basis) of costs the Company has recognized in
environmental reserves. The Companys two-thirds share of these costs is
approximately $176 million and our joint venture partners cost share is
approximately $88 million. At June 30, 2003, and December 31, 2002, we
had accrued approximately $18 million and $8 million, respectively,
(two-thirds basis) for reclamation at Chino. The NMED cost estimate for
Chino is subject to further
review, and possible adjustment, by MMD under NMMAR.
|
| |  | NMED estimated the cost to carry out the requirements of its proposed
closure permits for Tyrone at approximately $440 million, without
discounting or escalation, under NMEDs proposal at the May 2002 hearing;
Tyrone estimated the cost of its                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                





---



##### 



-22-



| |  | proposal at approximately $328 million,
without discounting or escalation over a 100-year operating period. NMED
has not yet supplied its proposed cost estimate for Cobre. The proposed
terms of the closure permits would require additional studies over the
five-year term of the permits to refine the closure plan. The plan
requirements and cost estimates may increase or decrease based upon the
results of the studies and other factors, including changes in technology,
completion of some closure and reclamation work, and inflation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Based upon NMEDs undiscounted financial assurance cost estimates for the
Tyrone plan of approximately $440 million, and considering the same cost
advantages as indicated in the above discussion regarding Chino, we
estimate the Companys costs to achieve the closure standards under that
estimate to be approximately $288 million for Tyrone. The Company has not
obtained approval from NMED of an estimate of its cost to achieve the
closure standards that would be required by the hearing officers
decision. The Companys current cost estimate for Cobre of approximately
$9 million will be updated with the issuance of the discharge permit. At
June 30, 2003, and December 31, 2002, we had accrued closure costs of
approximately $60 million and $27 million, respectively, at Tyrone and
approximately $6 million and $2 million, respectively, at Cobre.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Following NMEDs issuance of the closure permits, Chino, Cobre and Tyrone
are required to submit proposals for financial assurance based upon the
permit requirements and subject to NMEDs approval. Under the proposed
closure permit terms, the amount of financial assurance may be based upon
the net present value (NPV) of the estimated cost for a third-party to
implement the plan, using discount and escalation rates specified in the
permit. These amounts are expected to be substantially lower than the
undiscounted and unescalated cost estimates. For example, based upon the
cost estimate approved by NMED, the financial assurance amount for Chino
could be approximately $191 million. This amount is based on annual
escalation rates of approximately 3.2 percent for long-term water
treatment costs and approximately 3.6 percent for other costs and discount
rates of 5 percent for years one through 12 of the plan and 8 percent for
years 13 through 100.                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | NMMAR requires that financial assurance for a closeout plan be approved
and put in place before MMD can approve the closeout plan. Chino and
Tyrone have provided approximately $56 million and $58 million of
financial assurance in the form of surety bonds, respectively, to NMED
under the terms of several discharge permits. The closure and financial
assurance requirements of these permits have been superseded by the
recently issued NMED closure permits. Consequently, the Company has
advised NMED that this financial assurance should be terminated and
replaced by new financial assurance under the terms of the new closure
permits. Chino and Tyrone have submitted financial assurance proposals in
accordance with the schedules under their NMED closure permit proposing
financial assurance primarily in the form of corporate performance
guarantees from the Company. Cobre also has approximately $2 million of
financial assurance in place held jointly by NMED and MMD. Following
NMEDs issuance of the closure permits, and prior to MMDs approval of the
closeout plans, Chino, Tyrone and Cobre will be required to provide
substantial amounts of additional financial assurance to cover the amounts
of the approved cost estimates. Hidalgo currently has provided financial
assurance in the amount of approximately $11 million under its discharge
permit.
|
| |  | In late May 2003, the Company and the state announced an agreement on a
framework for the Company to provide financial assurance for Chino, Tyrone
and Cobre under both NMMAR and WQCC regulations. Under this agreement,
the
Company will provide financial assurance based upon the NPV of the cost
estimates in a total amount of approximately $484 million.
Initially, approximately
70 percent of this amount will be covered by a corporate performance guarantee. At
least $50 million will be provided in the form of trust funds, increasing
to at least $75 million after five years. The balance will be provided as
collateral, including liens on certain owned parcels of non-mining real
estate located in New Mexico. In addition,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   





---



##### 



-23-



|   |  | the Company will expend at
least $30 million on accelerated closure and reclamation work over the
next 10 years. The amount of the guarantee will be reduced to
approximately 64 percent by the amount
of accelerated reclamation performed.
Finalization of the financial assurance is subject to completion of the
permitting process, including additional public comment and hearings. MMD
also has proposed some changes to NMMAR for consideration by the Mining
Commission, which could affect the final financial assurance package.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|9. |  | Earnings (Loss) Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | Basic earnings (loss) per share is computed by dividing net income (loss)
available to common shares by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per common share is
computed in a similar manner except that the denominator is increased to
include the incremental number of common shares that would have been
outstanding assuming the conversion of mandatory convertible preferred
shares, the exercise of stock options where the exercise prices were less
than the average market price of the Companys common shares during the
period, and the number of unvested restricted shares, but all of the
foregoing only to the extent that the related impacts are not
anti-dilutive. Additionally, dividends on mandatory convertible preferred
shares that were deducted in arriving at net income (loss) available to
common shares are added back to the numerator as a result of the assumed
conversion of such preferred shares.
|  
|   |  | As a result of the net loss experienced for the quarter and six-months
ended June 30, 2003, the number of incremental common shares relating to
the assumed conversion of the mandatory convertible preferred shares (5.0
million) and unvested restricted stock (0.5 million) were excluded from
the calculation as the related impacts were anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | As a result of the net loss experienced for the quarter and six-months
ended June 30, 2002, the number of incremental common shares relating to
the assumed conversion of the mandatory convertible preferred shares (1.1
million and 0.5 million, respectively), unvested restricted stock (0.2
million) and stock options (0.1 million) issued to employees were excluded
from the calculation as the related impacts were anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Finally, common shares relating to stock options where the exercise prices
exceeded the average market price of the Companys common shares during
the period were also excluded from the diluted earnings per share
calculation as the related impact was anti-dilutive. Incremental shares
relating to these options totaled 7.2 million shares at an average
exercise price of $58.66 for the 2003 second quarter and 8.6 million at an
average exercise price of $55.30 for the six months ended June 30, 2003;
and 7.4 million shares at an average exercise price of $61.66 and $61.65
for the quarter and six months ended June 30, 2002.                                                                                                                                                                                                                                                                                                                                                      

(Unaudited; $ in millions except per share data)

|                                              |                               |                                              |   |                |       |      |  |                |       |  
|--------------------------------------------- | ----------------------------- | -------------------------------------------- | - | -------------- | ----- | ---- |  | -------------- | ----- | -
|                                              |                               |                                              |   | Second Quarter
|                                              |                               |                                              |   |               
|                                              |                               |                                              |   | 2003           |       | 2002
|                                              |                               |                                              |   |                |       |     
|                                              |                               |                                              |   |                |       |      |  | (As Restated)*
|Basic Earnings (Loss) Per Share Computation   |                               |                                              |   |                |       |      |  |               
|                                              | Numerator:                    |                                              |   |                |       |      |  |                |      
|                                              |                               | Net loss                                     |   | $              | (15.2 | )    |  |                | (34.3 | )
|                                              |                               | Preferred stock dividends                    |   |                | (3.4  | )    |  |                | (2.4  | )
|                                              |                               |                                              |   |                |       |      |  |                |       |  
|                                              |                               | Net loss applicable
to common shares         |   | $              | (18.6 | )    |  |                | (36.7 | )
|                                              | Denominator:                  |                                              |   |                |       |      |  |                |      
|                                              |                               | Weighted average common
shares outstanding   |   |                | 88.6  |      |  |                | 80.6  |  
|                                              |                               |                                              |   |                |       |      |  |                |       |  
|                                              | Basic loss per common share   |                                              | $ | (0.21          | )     |      |  | (0.46          | )    
|                                              |                               |                                              |   |                |       |      |  |                |       |  
|Diluted Earnings (Loss) Per Share Computation |                               |                                              |   |                |       |      |  |               
|                                              | Numerator:                    |                                              |   |                |       |      |  |                |      
|                                              |                               | Net loss                                     |   | $              | (15.2 | )    |  |                | (34.3 | )
|                                              | Denominator:                  |                                              |   |                |       |      |  |                |      
|                                              |                               | Weighted average common
shares outstanding** |   |                | 88.6  |      |  |                | 80.6  |  
|                                              |                               |                                              |   |                |       |      |  |                |       |  
|                                              | Diluted loss per common share |                                              | $ | (0.21          | )     |      |  | (0.46          | )    
|                                              |                               |                                              |   |                |       |      |  |                |       |  



---

|*  |  | Refer to Note 2, Restatements, for further discussion.                                                                       
|-- |  | -----------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Excludes mandatory convertible preferred shares, unvested restricted
stock and stock options due to the anti-dilutive impact.





---



##### 



-24-

(Unaudited; $ in millions except per share data)

|                                              |                               |                                              |   |                  |       |      |  |                |       |  
|--------------------------------------------- | ----------------------------- | -------------------------------------------- | - | ---------------- | ----- | ---- |  | -------------- | ----- | -
|                                              |                               |                                              |   | Six Months Ended
|                                              |                               |                                              |   | June 30,        
|                                              |                               |                                              |   |                 
|                                              |                               |                                              |   | 2003             |       | 2002
|                                              |                               |                                              |   |                  |       |     
|                                              |                               |                                              |   |                  |       |      |  | (As Restated)*
|Basic Earnings (Loss) Per Share Computation   |                               |                                              |   |                  |       |      |  |               
|                                              | Numerator:                    |                                              |   |                  |       |      |  |                |      
|                                              |                               | Net loss                                     |   | $                | (30.2 | )    |  |                | (59.1 | )
|                                              |                               | Preferred stock dividends                    |   |                  | (6.8  | )    |  |                | (2.4  | )
|                                              |                               |                                              |   |                  |       |      |  |                |       |  
|                                              |                               | Net loss applicable
to common shares         |   | $                | (37.0 | )    |  |                | (61.5 | )
|                                              | Denominator:                  |                                              |   |                  |       |      |  |                |      
|                                              |                               | Weighted average common
shares outstanding   |   |                  | 88.6  |      |  |                | 79.6  |  
|                                              |                               |                                              |   |                  |       |      |  |                |       |  
|                                              | Basic loss per common share   |                                              | $ | (0.42            | )     |      |  | (0.77          | )    
|                                              |                               |                                              |   |                  |       |      |  |                |       |  
|Diluted Earnings (Loss) Per Share Computation |                               |                                              |   |                  |       |      |  |               
|                                              | Numerator:                    |                                              |   |                  |       |      |  |                |      
|                                              |                               | Net loss                                     |   | $                | (30.2 | )    |  |                | (59.1 | )
|                                              | Denominator:                  |                                              |   |                  |       |      |  |                |      
|                                              |                               | Weighted average common
shares outstanding** |   |                  | 88.6  |      |  |                | 79.6  |  
|                                              |                               |                                              |   |                  |       |      |  |                |       |  
|                                              | Diluted loss per common share |                                              | $ | (0.42            | )     |      |  | (0.77          | )    
|                                              |                               |                                              |   |                  |       |      |  |                |       |  



---

|*  |  | Refer to Note 2, Restatements, for further discussion.                                                                       
|-- |  | -----------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Excludes mandatory convertible preferred shares, unvested restricted
stock and stock options due to the anti-dilutive impact.



|10. |  | Benefit (Provision) for Taxes on Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Companys income tax provision for the 2003 second quarter principally
resulted from (i) taxes on earnings at international operations ($12.2
million) that cannot be offset by losses at domestic operations and (ii) a
benefit from finalizing year-end 2002 estimates in the Companys 2002 U.S.
tax return filed in June 2003 ($4.2 million). The Companys income tax
provision for the six months ended June 30, 2003, primarily comprised the
following: (i) taxes on earnings at international operations ($26.3
million) that cannot be offset by losses at domestic operations and (ii) a
benefit from finalizing year-end 2002 estimates in the Companys 2002 U.S.
tax return filed in June 2003 ($4.2 million).                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | The Companys income tax provision for the 2002 second quarter, primarily
comprised the following: (i) a $21.9 million benefit recognized for the
second quarter 2002 net operating losses that, based on
the March enactment of the Job Creation and Worker Assistance Act of 2002,
may be carried back to recover prior years taxes paid; (ii) a $13.0
million benefit for release of deferred taxes previously provided with
regard to Plateau Mining Corporation; and (iii) a $4.1 million expense for
taxes on earnings at international operations. The Companys income tax
benefit for the six months ended June 30, 2002, principally comprised the
following items: (i) a $38.5 million tax benefit associated with the
carryback of 2001 net operating losses that, based on the new tax
legislation, may also be carried back to recover prior years taxes paid;
(ii) a $34.8 million benefit recognized for the first half of 2002 net
operating losses, based on the new tax legislation; (iii) a $15.8 million
expense for taxes on earnings at international operations; and (iv) a
$13.0 million benefit for release of deferred taxes previously provided.
|   
|11. |  | Accounting for Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | The Company does 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 expose us to market risk. We do not enter into
any contracts for speculative purposes. We use various strategies to
manage our market risk, including the use of derivative contracts to
limit, offset or reduce our market exposure. Derivative instruments are
used to manage well-defined commodity price, energy, foreign exchange and
interest rate risks from our primary business activities. The fair values
of our derivative instruments are based on quoted market prices for
similar instruments at period end. Refer to Managements Discussion and
Analysis and Note 20, Derivative Financial Instruments Held for Purposes
Other Than Trading and Fair Value of Financial Instruments, to the
Consolidated Financial Statements included in the Companys Form 10-K for
the year ended December 31, 2002, for a discussion on our derivative
instruments.                                                                                                                       
|   
|    |  | During the quarter and six months ended June 30, 2003, we reclassified
approximately $2.8 million and $4.0 million, respectively, of other
comprehensive losses to the statement of consolidated opera-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       





---



##### 



-25-



|    |  | tions, principally as a result of our floating-to-fixed interest rate swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | During the quarter and six month periods ended June 30, 2002, we
reclassified approximately $3.2 million and $6.8 million, respectively, of
other comprehensive losses to the statement of operations, principally as
a result of our floating-to-fixed interest rate swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|12. |  | Shareholders Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | Series A Mandatory Convertible Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Each share of Series A Mandatory Convertible Preferred Stock (Series A
Stock) is convertible into 2.083 shares of Common Stock, subject to
certain adjustments, at any time prior to August 15, 2005, and is entitled
to an annual dividend of $6.75, paid quarterly. On August 15, 2005, each
share of Series A Stock will automatically convert, subject to certain
adjustments, into between 2.083 and 2.5 shares of Common Stock depending
on the then-current market price of our Common Stock. Each share of
Series A Stock is non-voting and entitled to a liquidation preference of
$100 plus any accrued but unpaid dividends. There were 6 million
authorized shares and 2 million outstanding shares of Series A Stock at
June 30, 2003.

REVIEW BY INDEPENDENT ACCOUNTANTS

The financial information as of June 30, 2003, and for the three-month and
six-month periods ended June 30, 2003 and 2002, included in Part I pursuant to
Rule 10-01 of Regulation S-X has been reviewed by PricewaterhouseCoopers LLP
(PricewaterhouseCoopers), the Companys independent accountants, in accordance
with standards established by the American Institute of Certified Public
Accountants. PricewaterhouseCoopers report is included in this quarterly
report.

PricewaterhouseCoopers does not carry out any significant or additional
procedures beyond those that would have been necessary if its report had not
been included in this quarterly report. Accordingly, such report is not a
report
or part of a registration statement within the meaning of Sections 7 and
11 of the Securities Act of 1933 and the liability provisions of Section 11 of
such Act do not apply.





---



##### 



-26-

Report of Independent Accountants

To the Board of Directors and Shareholders
of Phelps Dodge Corporation

We have reviewed the accompanying consolidated balance sheet of Phelps Dodge
Corporation and its subsidiaries as of June 30, 2003, and the related statement
of consolidated operations for each of the three-month and six-month periods
ended June 30, 2003 and 2002, the consolidated statement of cash flows for the
six-month periods ended June 30, 2003 and 2002, and the consolidated statement
of shareholders equity for the six-month period ended June 30, 2003. This
interim financial information is the responsibility of the Companys
management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial information for it
to be in conformity with accounting principles generally accepted in the United
States of America.

As described in Note 2 to the consolidated interim financial information, the
Company restated its consolidated interim financial information for the
three-month and six-month periods ended June 30, 2002.

We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2002, and the related consolidated statements of operations, of cash flows
and of shareholders equity for the year then ended (not presented herein), and
in our report dated April 3, 2003 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet information as of December 31,
2002, is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
July 25, 2003





---



##### 



-27-

Item 2. Managements Discussion and Analysis

The United States securities laws provide a safe harbor for certain
forward-looking statements. This quarterly report contains forward-looking
statements that express expectations of future events or results. All
statements based on future expectations rather than historical facts are
forward-looking statements that involve a number of risks and uncertainties,
and Phelps Dodge Corporation (the Company, which may be referred to as Phelps
Dodge, PD, we, us or ours) cannot give assurance that such statements will
prove to be correct. Our business consists of two divisions, Phelps Dodge
Mining Company (PDMC) and Phelps Dodge Industries (PDI). Refer to Managements
Discussion and Analysis in the Companys report on Form 10-K for the year ended
December 31, 2002, for a further discussion of such risks and uncertainties,
our operations, and our critical accounting policies. Additionally, refer to
Note 6, Accounting Standards, to our unaudited June 30, 2003, Consolidated
Financial Information for a discussion on the adoption of Statement of
Financial Accounting (SFAS) No. 143.

Restatements

As discussed in Note 2, Restatements, in this Form 10-Q for the quarter
ended June 30, 2003, certain accounting matters were identified in the fourth
quarter of 2002 that required restatement of our December 31, 2001 and 2000,
Consolidated Financial Statements and our financial statements for the
quarterly periods ended March 31, 2001, through September 30, 2002. The
adjustments for the quarter and six months ended June 30, 2002, decreased
operating loss by $5.6 million and $11.3 million, respectively, and decreased
net loss by $2.1 million, or 2 cents per common share, and $5.0 million, or 7
cents per common share, respectively.

Additionally, our presentation of reportable segment information for PDMC
for the quarter and six months ended June 30, 2002, has been revised to reflect
additional segments.

RESULTS OF OPERATIONS

Consolidated Financial Results

(Unaudited; $ in millions except per share amounts)

|                                                   |  |                |       |      |  |               |       |  
|-------------------------------------------------- |  | -------------- | ----- | ---- |  | ------------- | ----- | -
|                                                   |  | Second Quarter
|                                                   |  |               
|                                                   |  | 2003           |       | 2002
|                                                   |  |                |       |     
|                                                   |  |                |       |      |  | (As Restated)
|Sales and other operating revenues                 |  | $              | 962.2 |      |  |               | 966.8 |  
|Operating income (loss)                            |  | $              | 17.2  |      |  |               | (10.2 | )
|Loss before cumulative effect
of accounting change |  | $              | (15.2 | )    |  |               | (34.3 | )
|Cumulative effect of
accounting change             |  |                |      |      |  |               |      |  
|                                                   |  |                |       |      |  |               |       |  
|Net loss                                           |  | $              | (15.2 | )    |  |               | (34.3 | )
|                                                   |  |                |       |      |  |               |       |  
|Net loss per common
share, basic and diluted       |  | $              | (0.21 | )    |  |               | (0.46 | )
|                                                   |  |                |       |      |  |               |       |  

The Company had a consolidated net loss in the 2003 second quarter of
$15.2 million, or 21 cents per common share, including a special, net gain of
$4.5 million, or 5 cents per common share, after taxes. In the 2002 second
quarter, the consolidated net loss was $34.3 million, or 46 cents per common
share, including a special, net loss of $12.7 million, or 16 cents per common
share, after taxes.

The $19.1 million decrease in consolidated loss in the 2003 second quarter
compared with the corresponding 2002 period primarily was due to higher copper
prices (approximately $8 million), lower interest expense ($12.2 million) and a
favorable change in special items and provisions ($35.3 million); partially
offset by a higher tax provision ($34.0 million) resulting primarily from the
absence of the effect of 2002 tax legislation that permitted a five-year
carryback of our 2001 and 2002 net operating losses.





---



##### 



-28-

(Unaudited; $ in millions except per share amounts)

|                                                                                       |  |                  |         |      |  |               |         |  
|-------------------------------------------------------------------------------------- |  | ---------------- | ------- | ---- |  | ------------- | ------- | -
|                                                                                       |  | Six Months Ended
|                                                                                       |  | June 30,        
|                                                                                       |  |                 
|                                                                                       |  | 2003             |         | 2002
|                                                                                       |  |                  |         |     
|                                                                                       |  |                  |         |      |  | (As Restated)
|Sales and other operating revenues                                                     |  | $                | 1,940.2 |      |  |               | 1,885.3 |  
|Operating income                                                                       |  | $                | 45.9    |      |  |               | 2.5     |  
|Loss before cumulative effect
of accounting change                                     |  | $                | (38.6   | )    |  |               | (36.2   | )
|Cumulative effect of
accounting change                                                 |  |                  | 8.4     |      |  |               | (22.9   | )
|                                                                                       |  |                  |         |      |  |               |         |  
|Net loss                                                                               |  | $                | (30.2   | )    |  |               | (59.1   | )
|                                                                                       |  |                  |         |      |  |               |         |  
|Loss before cumulative effect of
accounting change per common
share, basic and diluted |  | $                | (0.51   | )    |  |               | (0.48   | )
|Cumulative effect of
accounting change                                                 |  |                  | 0.09    |      |  |               | (0.29   | )
|                                                                                       |  |                  |         |      |  |               |         |  
|Net loss per common
share, basic and diluted                                           |  | $                | (0.42   | )    |  |               | (0.77   | )
|                                                                                       |  |                  |         |      |  |               |         |  

The Company had a consolidated loss for the six months ended June 30,
2003, of $30.2 million, or 42 cents per common share, including a special, net
gain of $14.0 million, or 16 cents per common share, after taxes. For the six
months ended June 30, 2002, the consolidated loss was $59.1 million, or 77
cents per common share, including a special, net gain of $3.5 million, or 4
cents per common share, after taxes.

The $28.9 million decrease in consolidated loss for the six months ended
June 30, 2003 compared with the corresponding 2002 period primarily was due to
a higher cumulative income effect of accounting changes ($31.3 million) mostly
due to the goodwill impairment losses upon adoption of SFAS No. 142 in 2002,
higher LME copper prices (approximately $33 million), favorable change in
special items and provisions ($33.9 million) and lower interest expense
primarily resulting from extinguishment of debt in the third quarter of 2002
($29 million); partially offset by a higher tax provision ($86.4 million)
resulting primarily from the absence of the effect of 2002 tax legislation that
permitted a five-year carryback of the 2001 and 2002 net operating losses.

Special Items

Throughout Managements Discussion and Analysis there is disclosure and
discussion of what management believes to be special items. We view special
items as unpredictable and atypical of our operations in the period. We
believe consistent identification, disclosure and discussion of such items,
both favorable and unfavorable, provide additional information to assess the
quality of our performance and our earnings or losses. In addition, management
measures the performance of its reportable segments excluding special items.
This supplemental information is not a substitute for any U.S. generally
accepted accounting principles (GAAP) measure and should be evaluated within
the context of our U.S. GAAP results. Any supplemental information references
to earnings, losses or results excluding special items or before special items,
our non-GAAP measure of items, may not be comparable to similarly titled
measures reported by other companies.

Note: Supplemental Data

(Unaudited; $ in millions)

|                                             |  |                |       |      |  |               |       |  
|-------------------------------------------- |  | -------------- | ----- | ---- |  | ------------- | ----- | -
|                                             |  | Second Quarter
|                                             |  |               
|                                             |  | 2003           |       | 2002
|                                             |  |                |       |     
|                                             |  |                |       |      |  | (As Restated)
|Special items, net of taxes                  |  | $              | 4.5   |      |  |               | (12.7 | )
|Losses excluding special
items (after taxes) |  | $              | (19.7 | )    |  |               | (21.6 | )

(Unaudited; $ in millions)

|                                             |  |                  |       |      |  |               |       |  
|-------------------------------------------- |  | ---------------- | ----- | ---- |  | ------------- | ----- | -
|                                             |  | Six Months Ended
|                                             |  | June 30,        
|                                             |  |                 
|                                             |  | 2003             |       | 2002
|                                             |  |                  |       |     
|                                             |  |                  |       |      |  | (As Restated)
|Special items, net of taxes                  |  | $                | 14.0  |      |  |               | 3.5   |  
|Losses excluding special
items (after taxes) |  | $                | (44.2 | )    |  |               | (62.6 | )





---



##### 



-29-

Note: Supplemental Data

The following schedules summarize the special items and provisions for the
quarter and six-month periods ended June 30, 2003 and 2002:

(Unaudited; gains (losses) in millions except per share amounts)

|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |       |  
|------------------------------------ | ------------------------------------------------------- | -------------------------------------------------------------------- | ---- | ------------------- | --- | ------------------- | ---- | --------- | --- | -------- | ----- | --------- | - | --------- | ----- | ----- | ----- | - | ----- | ----- | ----- | - | ----- | ----- | ----- | -
|                                     |                                                         |                                                                      |      | 2003 Second Quarter |     | 2002 Second Quarter
|                                     |                                                         |                                                                      |      |                     |     |                    
|                                     |                                                         |                                                                      |      | Pre-tax             |     | After-tax           |      | $/share   |     | Pre-tax  |       | After-tax |   | $/share  
|                                     |                                                         |                                                                      |      | Earnings            |     | Earnings            |      | After-tax |     | Earnings |       | Earnings  |   | After-tax
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |          
|Special items and provisions, net:   |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |      
|                                     | PDMC (see Business Segment disclosure)                  |                                                                      | $    | (0.5                | )   |                     |      | (0.4      | )   |          |       |          |   |           |       | 20.9  |       |   |       | 21.1  |       |   |       | 0.26  |      
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|                                     | PDI (see Business Segment disclosure)                   |                                                                      |      |                    |     |                     |      |          |     |          |       |          |   |           |       |      |       |   |       |      |       |   |       |      |      
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|                                     | Corporate and Other 
Environmental provisions          |                                                                      |      | (2.1                | )   |                     |      | (2.0      | )   |          |       | (0.02     | ) |           |       |      |       |   |       | 2.4   |       |   |       | 0.03  |      
|                                     |                                                         | Environmental insurance recoveries, net                              |      |                     | 0.5 |                     |      |           | 0.5 |          |       |           |  |           |       |       | 6.5   |   |       |       | 5.0   |   |       |       | 0.06  |  
|                                     |                                                         | Historic Cyprus Amax lawsuit settlement                              |      |                     |    |                     |      |           |    |          |       |           |  |           |       |       | (11.2 | ) |       |       | (8.9  | ) |       |       | (0.11 | )
|                                     |                                                         | Historic Cyprus Amax arbitration award with regard
to Plateau Mining |      |                     |    |                     |      |           |    |          |       |           |  |           |       |       | (46.5 | ) |       |       | (44.5 | ) |       |       | (0.55 | )
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|                                     |                                                         |                                                                      | (1.6 | )                   |     |                     | (1.5 | )         |     |          | (0.02 | )         |   |           | (51.2 | )     |       |   | (46.0 | )     |       |   | (0.57 | )    
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|                                     |                                                         |                                                                      | (2.1 | )                   |     |                     | (1.9 | )         |     |          | (0.02 | )         |   |           | (30.3 | )     |       |   | (24.9 | )     |       |   | (0.31 | )    
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|Miscellaneous income (expense), net: |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |      
|                                     | Cost investment write-downs                             |                                                                      |      |                    |     |                     |      |          |     |          |       |          |   |           |       | (0.7  | )     |   |       | (0.8  | )     |   |       | (0.01 | )    
|                                     | Gain on sale of cost investment                         |                                                                      |      | 6.4                 |     |                     |      | 6.4       |     |          |       | 0.07      |   |           |       |      |       |   |       |      |       |   |       |      |      
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|                                     |                                                         |                                                                      | 6.4  |                     |     |                     | 6.4  |           |     |          | 0.07  |           |   |           | (0.7  | )     |       |   | (0.8  | )     |       |   | (0.01 | )    
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|Benefit for taxes on income:         |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |      
|                                     | Release of taxes provided with regard to Plateau Mining |                                                                      |      |                    |     |                     |      |          |     |          |       |          |   |           |       |      |       |   |       | 13.0  |       |   |       | 0.16  |      
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      
|                                     | Total                                                   |                                                                      | $    | 4.3                 |     |                     |      | 4.5       |     |          |       | 0.05      |   |           |       | (31.0 | )     |   |       | (12.7 | )     |   |       | (0.16 | )    
|                                     |                                                         |                                                                      |      |                     |     |                     |      |           |     |          |       |           |   |           |       |       |       |   |       |       |       |   |       |       |      

(Unaudited; gains (losses) in millions except per share amounts)

|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |       |  
|--------------------------------------------------- | --------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | ---------------- | --- | ---------------- | ---- | --------- | --- | -------- | ----- | --------- | - | --------- | ----- | ----- | ----- | - | ----- | ---- | ----- | - | ----- | ----- | ----- | -
|                                                    |                                                                 |                                                                      |      | Six Months Ended |     | Six Months Ended
|                                                    |                                                                 |                                                                      |      | June 30, 2003    |     | June 30, 2002   
|                                                    |                                                                 |                                                                      |      |                  |     |                 
|                                                    |                                                                 |                                                                      |      | Pre-tax          |     | After-tax        |      | $/share   |     | Pre-tax  |       | After-tax |   | $/share  
|                                                    |                                                                 |                                                                      |      | Earnings         |     | Earnings         |      | After-tax |     | Earnings |       | Earnings  |   | After-tax
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |          
|Special items and provisions, net:                  |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |      
|                                                    | PDMC (see Business Segment disclosure)                          |                                                                      | $    | (0.5             | )   |                  |      | (0.4      | )   |          |       |          |   |           |       | 34.7  |       |   |       | 32.3 |       |   |       | 0.40  |      
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|                                                    | PDI (see Business Segment disclosure)                           |                                                                      |      | 3.2              |     |                  |      | 2.4       |     |          |       | 0.03      |   |           |       |      |       |   |       |     |       |   |       |      |      
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|                                                    | Corporate and Other 
Environmental provisions                  |                                                                      |      | (3.4             | )   |                  |      | (3.3      | )   |          |       | (0.03     | ) |           |       | (12.1 | )     |   |       | (9.7 | )     |   |       | (0.12 | )    
|                                                    |                                                                 | Environmental insurance recoveries, net                              |      |                  | 0.5 |                  |      |           | 0.5 |          |       |           |  |           |       |       | 8.6   |   |       |      | 6.9   |   |       |       | 0.08  |  
|                                                    |                                                                 | Historic Cyprus Amax lawsuit settlement                              |      |                  |    |                  |      |           |    |          |       |           |  |           |       |       | (11.2 | ) |       |      | (8.9  | ) |       |       | (0.11 | )
|                                                    |                                                                 | Historic Cyprus Amax arbitration award with regard
to Plateau Mining |      |                  |    |                  |      |           |    |          |       |           |  |           |       |       | (46.5 | ) |       |      | (44.5 | ) |       |       | (0.56 | )
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|                                                    |                                                                 |                                                                      | (2.9 | )                |     |                  | (2.8 | )         |     |          | (0.03 | )         |   |           | (61.2 | )     |       |   | (56.2 | )    |       |   | (0.71 | )    
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|                                                    |                                                                 |                                                                      | (0.2 | )                |     |                  | (0.8 | )         |     |          |      |           |   |           | (26.5 | )     |       |   | (23.9 | )    |       |   | (0.31 | )    
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|Miscellaneous income (expense), net:                |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |      
|                                                    | Cost investment write-downs                                     |                                                                      |      |                 |     |                  |      |          |     |          |       |          |   |           |       | (1.2  | )     |   |       | (1.2 | )     |   |       | (0.01 | )    
|                                                    | Gain on sale of cost investment                                 |                                                                      |      | 6.4              |     |                  |      | 6.4       |     |          |       | 0.07      |   |           |       |      |       |   |       |     |       |   |       |      |      
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|                                                    |                                                                 |                                                                      | 6.4  |                  |     |                  | 6.4  |           |     |          | 0.07  |           |   |           | (1.2  | )     |       |   | (1.2  | )    |       |   | (0.01 | )    
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|Benefit for taxes on income:                        |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |      
|                                                    | Release of taxes provided with regard to Plateau Mining         |                                                                      |      |                 |     |                  |      |          |     |          |       |          |   |           |       |      |       |   |       | 13.0 |       |   |       | 0.16  |      
|                                                    | Tax benefit for 2001 net operating loss carryback (see Note 10) |                                                                      |      |                 |     |                  |      |          |     |          |       |          |   |           |       |      |       |   |       | 38.5 |       |   |       | 0.49  |      
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|                                                    |                                                                 |                                                                      |     |                  |     |                  |     |           |     |          |      |           |   |           |      |       |       |   | 51.5  |      |       |   | 0.65  |      
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|Cumulative effect of accounting change (see Note 6) |                                                                 |                                                                      | 9.7  |                  |     |                  | 8.4  |           |     |          | 0.09  |           |   |           | (33.0 | )     |       |   | (22.9 | )    |       |   | (0.29 | )    
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      
|                                                    | Total                                                           |                                                                      | $    | 15.9             |     |                  |      | 14.0      |     |          |       | 0.16      |   |           |       | (60.7 | )     |   |       | 3.5  |       |   |       | 0.04  |      
|                                                    |                                                                 |                                                                      |      |                  |     |                  |      |           |     |          |       |           |   |           |       |       |       |   |       |      |       |   |       |       |      





---



##### 



- 30 -

Quest for ZeroOperational Improvement Program

Phelps Dodge announced in October 2001 that it was commencing Quest for
Zero (QFZ), a comprehensive, lean-production program, designed to, among other
things, improve operating income by a targeted $250 million annually. Quest
for Zeroencompasses both the October 2001 program and the $150 million cost
improvement program announced in May 2001. The Companys goal is to achieve
these combined annual operating income improvements of $400 million by the end
of 2003 when compared with the results that were then expected for 2001.

In order to achieve the full $400 million target, PDMC chartered business
improvement teams to drive performance improvement projects and best practices.
The elimination of variance and waste are key factors in this process, coupled
with the rapid transfer of best practices to all business units. On a
quarterly basis, we document improvement successes, failures and potential
projects yet to be implemented. New project ideas are generated at internal
conferences where statistical analysis tools are utilized on current
performance data to identify improvement opportunities. Improvement projects
are prioritized and implemented accordingly. Key elements of the plan going
forward include six-sigma quality programs, technology innovations, global
procurement strategies and improved operating practices.

During the 2003 second quarter, we achieved $76 million (an annual run
rate slightly in excess of $300 million) in improvements, bringing total
improvements in the eight quarters since the program was announced to $421
million.

We remain determined to drive toward our stretch goal of an implied
production cost of 60 cents per pound. We have experienced a leveling off of
the rate of improvement due to the increased challenge that comes with
multi-year improvement projects as we begin to tackle more difficult
initiatives; unforeseen costs including higher energy, pension and medical
costs, and higher administrative costs and professional fees; and our Companys
decision to emphasize growth-oriented projects. We expect to achieve fourth
quarter 2003 QFZimprovements of $90 million to $100 million, equating to an
annualized run-rate of $360 million to $400 million.

The following is a summary of improvement dollars:

(Unaudited; $ in millions)

|                        |                      |   |                |    |      |  |    |    | 
|----------------------- | -------------------- | - | -------------- | -- | ---- |  | -- | -- | 
|                        |                      |   | Second Quarter
|                        |                      |   |               
|                        |                      |   | 2003           |    | 2002
|                        |                      |   |                |    |     
|U.S. Mining Operations* |                      | $ | 47             |    |      |  | 34 |   
|South American Mines**  |                      |   | 16             |    |      |  | 10 |   
|Primary Molybdenum      |                      |   | 4              |    |      |  | 2  |   
|                        |                      |   |                |    |      |  |    |   
|                        | Total PDMC           |   |                | 67 |      |  |    | 46 | 
|                        |                      |   |                |    |      |  |    |   
|Specialty Chemicals     |                      |   | 5              |    |      |  | 4  |   
|Wire and Cable          |                      |   | 4              |    |      |  | 3  |   
|                        |                      |   |                |    |      |  |    |   
|                        | Total PDI            |   |                | 9  |      |  |    | 7  | 
|                        |                      |   |                |    |      |  |    |   
|                        | Total Quest for Zero |   | $              | 76 |      |  |    | 53 | 
|                        |                      |   |                |    |      |  |    |   

(Unaudited; $ in millions)

|                        |                      |   |                  |     |      |  |    |    | 
|----------------------- | -------------------- | - | ---------------- | --- | ---- |  | -- | -- | 
|                        |                      |   | Six Months Ended
|                        |                      |   | June 30,        
|                        |                      |   |                 
|                        |                      |   | 2003             |     | 2002
|                        |                      |   |                  |     |     
|U.S. Mining Operations* |                      | $ | 103              |     |      |  | 65 |   
|South American Mines**  |                      |   | 27               |     |      |  | 18 |   
|Primary Molybdenum      |                      |   | 7                |     |      |  | 4  |   
|                        |                      |   |                  |     |      |  |    |   
|                        | Total PDMC           |   |                  | 137 |      |  |    | 87 | 
|                        |                      |   |                  |     |      |  |    |   
|Specialty Chemicals     |                      |   | 9                |     |      |  | 5  |   
|Wire and Cable          |                      |   | 9                |     |      |  | 5  |   
|                        |                      |   |                  |     |      |  |    |   
|                        | Total PDI            |   |                  | 18  |      |  |    | 10 | 
|                        |                      |   |                  |     |      |  |    |   
|                        | Total Quest for Zero |   | $                | 155 |      |  |    | 97 | 
|                        |                      |   |                  |     |      |  |    |   



---

|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     

Business Divisions

Results for 2003 and 2002 can be meaningfully compared by separate
reference to our reporting divisions, PDMC and PDI. PDMC is a business
division 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. PDMC comprises 11
reportable segments. PDI, our manufacturing division, produces engineered
products principally for



---



##### 



- 31 -

the global energy, telecommunications, transportation
and specialty chemical sectors. PDI includes our Specialty
Chemicals segment and our Wire and Cable segment. 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.

RESULTS OF PHELPS DODGE MINING COMPANY

PDMC is our international business division that comprises our vertically
integrated copper operations from mining through rod production, primary
molybdenum operations through conversion, marketing and sales, and worldwide
exploration. PDMC comprises 11 reportable segments.

Our copper mines comprise five reportable segments in the United States
(Morenci, Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre and Tyrone) and three
reportable segments in South America (Candelaria, Cerro Verde and El Abra).
These segments include open-pit mining, sulfide ore concentrating and
electrowinning. In addition, some of these produce gold and silver, and the
Bagdad and Sierrita mines also produce molybdenum and rhenium as by-products.

The Manufacturing and Sales segment consists of conversion facilities
including our smelters, refineries and rod mills, as well as sales and
marketing. The Manufacturing and Sales segment sells copper to others
primarily as rod, cathode or concentrate, and as rod to our Wire and Cable
segment. In addition, at times it smelts and refines copper and produces
copper rod for customers on a toll basis. Toll arrangements require the
tolling customer to deliver appropriate copper-bearing material to our
facilities, which we then process into a product that is returned to the
customer. The customer pays PDMC for processing its material into the
specified products.

The Primary Molybdenum segment consists of the Henderson and Climax mines
and related conversion facilities. This segment is an integrated producer of
molybdenum, with mining, roasting and processing facilities producing
high-purity, molybdenum-based chemical and metallurgical products. In
addition, at times it roasts and/or processes material on a toll basis. Toll
arrangements require the tolling customer to deliver appropriate
molybdenum-bearing material to our facilities, which we then process into a
product that is returned to the customer. The customer pays PDMC for
processing its material into the specified products.

Other Mining includes our worldwide mineral exploration and development
programs, a process technology center that directs its activities at improving
existing processes and developing new cost-competitive technologies, and other
ancillary operations.

(Unaudited; $ in millions except per pound amounts)

|                                                             |                                        |   |                |       |      |  |               |       | 
|------------------------------------------------------------ | -------------------------------------- | - | -------------- | ----- | ---- |  | ------------- | ----- | 
|                                                             |                                        |   | Second Quarter
|                                                             |                                        |   |               
|                                                             |                                        |   | 2003           |       | 2002
|                                                             |                                        |   |                |       |     
|                                                             |                                        |   |                |       |      |  | (As Restated)
|Sales and other operating revenues
to unaffiliated customers |                                        | $ | 641.6          |       |      |  | 644.5         |      
|Operating income                                             |                                        | $ | 25.8           |       |      |  | 38.2          |      
|Copper production (thousand short tons):                     |                                        |   |                |       |      |  |               |      
|                                                             | Total production                       |   |                | 318.8 |      |  |               | 316.6 | 
|                                                             | Less minority participants
shares (A) |   |                | 59.5  |      |  |               | 62.0  | 
|                                                             |                                        |   |                |       |      |  |               |      
|                                                             | Net Phelps Dodge share                 |   |                | 259.3 |      |  |               | 254.6 | 
|                                                             |                                        |   |                |       |      |  |               |      
|Copper sales (thousand short tons):                          |                                        |   |                |       |      |  |               |      
|                                                             | Net Phelps Dodge share
from own mines  |   |                | 266.5 |      |  |               | 264.7 | 
|                                                             | Purchased copper                       |   |                | 84.7  |      |  |               | 123.1 | 
|                                                             |                                        |   |                |       |      |  |               |      
|                                                             | Total copper sales                     |   |                | 351.2 |      |  |               | 387.8 | 
|                                                             |                                        |   |                |       |      |  |               |      
|LME average spot copper price
per pound  cathodes           |                                        | $ | 0.744          |       |      |  | 0.730         |      
|COMEX average spot copper price
per pound  cathodes         |                                        | $ | 0.747          |       |      |  | 0.741         |      
|Implied unit cost of
copper production  full                |                                        | $ | 0.695          |       |      |  | 0.698         |      
|Implied unit cost of
copper production  cash                |                                        | $ | 0.535          |       |      |  | 0.534         |      
|Molybdenum production (million pounds)                       |                                        |   | 13.1           |       |      |  | 10.4          |      
|Molybdenum sales (million pounds):                           |                                        |   |                |       |      |  |               |      
|                                                             | Net Phelps Dodge share
from own mines  |   |                | 13.5  |      |  |               | 11.3  | 
|                                                             | Purchased molybdenum                   |   |                | 2.2   |      |  |               | 2.8   | 
|                                                             |                                        |   |                |       |      |  |               |      
|                                                             | Total molybdenum sales                 |   |                | 15.7  |      |  |               | 14.1  | 
|                                                             |                                        |   |                |       |      |  |               |      
|Metals Week:                                                 |                                        |   |                |       |      |  |               |      
|Molybdenum oxide price per pound                             |                                        | $ | 5.21           |       |      |  | 4.35          |      



---



##### 



- 32 -

(Unaudited; $ in millions except per pound amounts)

|                                                             |                                        |   |                  |       |      |  |               |       | 
|------------------------------------------------------------ | -------------------------------------- | - | ---------------- | ----- | ---- |  | ------------- | ----- | 
|                                                             |                                        |   | Six Months Ended
|                                                             |                                        |   | June 30,        
|                                                             |                                        |   |                 
|                                                             |                                        |   | 2003             |       | 2002
|                                                             |                                        |   |                  |       |     
|                                                             |                                        |   |                  |       |      |  | (As Restated)
|Sales and other operating revenues
to unaffiliated customers |                                        | $ | 1,296.6          |       |      |  | 1,256.2       |      
|Operating income                                             |                                        | $ | 61.5             |       |      |  | 65.5          |      
|Copper production (thousand short tons):                     |                                        |   |                  |       |      |  |               |      
|                                                             | Total production                       |   |                  | 636.0 |      |  |               | 638.5 | 
|                                                             | Less minority participants
shares (A) |   |                  | 116.3 |      |  |               | 126.7 | 
|                                                             |                                        |   |                  |       |      |  |               |      
|                                                             | Net Phelps Dodge share                 |   |                  | 519.7 |      |  |               | 511.8 | 
|                                                             |                                        |   |                  |       |      |  |               |      
|Copper sales (thousand short tons):                          |                                        |   |                  |       |      |  |               |      
|                                                             | Net Phelps Dodge share
from own mines  |   |                  | 530.3 |      |  |               | 533.2 | 
|                                                             | Purchased copper                       |   |                  | 178.4 |      |  |               | 220.5 | 
|                                                             |                                        |   |                  |       |      |  |               |      
|                                                             | Total copper sales                     |   |                  | 708.7 |      |  |               | 753.7 | 
|                                                             |                                        |   |                  |       |      |  |               |      
|LME average spot copper price
per pound  cathodes           |                                        | $ | 0.749            |       |      |  | 0.718         |      
|COMEX average spot copper price
per pound  cathodes         |                                        | $ | 0.754            |       |      |  | 0.732         |      
|Implied unit cost of
copper production  full                |                                        | $ | 0.691            |       |      |  | 0.689         |      
|Implied unit cost of
copper production  cash                |                                        | $ | 0.535            |       |      |  | 0.526         |      
|Molybdenum production (million pounds)                       |                                        |   | 24.6             |       |      |  | 21.0          |      
|Molybdenum sales (million pounds):                           |                                        |   |                  |       |      |  |               |      
|                                                             | Net Phelps Dodge share
from own mines  |   |                  | 27.3  |      |  |               | 24.1  | 
|                                                             | Purchased molybdenum                   |   |                  | 3.6   |      |  |               | 5.4   | 
|                                                             |                                        |   |                  |       |      |  |               |      
|                                                             | Total molybdenum sales                 |   |                  | 30.9  |      |  |               | 29.5  | 
|                                                             |                                        |   |                  |       |      |  |               |      
|Metals Week:                                                 |                                        |   |                  |       |      |  |               |      
|Molybdenum oxide price per pound                             |                                        | $ | 4.63             |       |      |  | 3.55          |      



---

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

Note: Supplemental Data

Implied unit cost of copper production measures the all-in cost of
each pound of copper produced by PDMC. As the title indicates, this measure is
the cost implied by the market price of copper (i.e., London Metal Exchange
average spot) for a given period versus PDMCs operating income (loss) for the
same period.

There is no established common standard for calculating unit production
costs in the copper industry. PDMCs implied unit production costs indicator
(which is based on readily accessible, publicly disclosed data) acts as a proxy
to enable investors to follow and interpret cost trends over historical
periods.

PDMC calculates its all-in operating margin per pound of copper sold by
dividing its operating income (loss) excluding special items by the total
pounds of copper sold from its own mines for its own account (as disclosed in
the table above). This results in an all-in operating margin (i.e., inclusive
of cost of products sold; depreciation, depletion and amortization; selling and
general administrative expense; and exploration and research expense for the
segments operations) that is compared to the market price of copper to render
an implied cost of copper production. Following is the calculation of implied
unit cost of copper production for the quarters and six months ended June 30,
2003 and 2002:

(Unaudited; $ in millions except per pound amounts)

|                                                   |                              |   |                |      |      |  |               |      | 
|-------------------------------------------------- | ---------------------------- | - | -------------- | ---- | ---- |  | ------------- | ---- | 
|                                                   |                              |   | Second Quarter
|                                                   |                              |   |               
|                                                   |                              |   | 2003           |      | 2002
|                                                   |                              |   |                |      |     
|                                                   |                              |   |                |      |      |  | (As Restated)
|PDMC implied unit cost of
copper production        |                              |   |                |      |      |  |               |     
|                                                   | Operating income             |   | $              | 25.8 |      |  |               | 38.2 | 
|                                                   | Less special operating items |   |                | (0.5 | )    |  |               | 20.9 | 
|                                                   |                              |   |                |      |      |  |               |     
|Operating income excluding
special items           |                              | $ | 26.3           |      |      |  | 17.3          |     
|                                                   |                              |   |                |      |      |  |               |     
|Copper sales from own mines 
million pounds       |                              |   | 533.0          |      |      |  | 529.4         |     
|Operating margin  per
pound of copper sold        |                              | $ | 0.049          |      |      |  | 0.032         |     
|LME average spot copper price
per pound  cathodes |                              | $ | 0.744          |      |      |  | 0.730         |     
|Implied unit cost of copper
production per pound   |                              | $ | 0.695          |      |      |  | 0.698         |     



---



##### 



- 33 -

(Unaudited; $ in millions except per pound amounts)

|                                                   |                              |   |                  |      |      |  |               |      | 
|-------------------------------------------------- | ---------------------------- | - | ---------------- | ---- | ---- |  | ------------- | ---- | 
|                                                   |                              |   | Six Months Ended
|                                                   |                              |   | June 30,        
|                                                   |                              |   |                 
|                                                   |                              |   | 2003             |      | 2002
|                                                   |                              |   |                  |      |     
|                                                   |                              |   |                  |      |      |  | (As Restated)
|PDMC implied unit cost of
copper production        |                              |   |                  |      |      |  |               |     
|                                                   | Operating
income             |   | $                | 61.5 |      |  |               | 65.5 | 
|                                                   | Less special operating items |   |                  | (0.5 | )    |  |               | 34.7 | 
|                                                   |                              |   |                  |      |      |  |               |     
|Operating income excluding
special items           |                              | $ | 62.0             |      |      |  | 30.8          |     
|                                                   |                              |   |                  |      |      |  |               |     
|Copper sales from own mines 
million pounds       |                              |   | 1,060.6          |      |      |  | 1,066.4       |     
|Operating margin  per
pound of copper sold        |                              | $ | 0.058            |      |      |  | 0.029         |     
|LME average spot copper price
per pound  cathodes |                              | $ | 0.749            |      |      |  | 0.718         |     
|Implied unit cost of copper
production per pound   |                              | $ | 0.691            |      |      |  | 0.689         |     

Note: Our measure of implied unit cost of copper production may not be
comparable to similarly titled measures reported by other companies.

Total PDMC Division  Sales

PDMCs sales and other operating revenues to unaffiliated customers
decreased $2.9 million in the 2003 second quarter compared with the 2002 second
quarter. The decrease reflected lower sales volumes (approximately $52
million) associated with lower market demand; partially offset by higher
average copper prices (approximately $19 million), higher average molybdenum
prices (approximately $24 million) and higher sales volumes of molybdenum
(approximately $6 million).

PDMCs sales and other operating revenues to unaffiliated customers
increased $40.4 million, or 3 percent, in the first six months of 2003 compared
with the first six months of 2002. The increase reflected higher average
copper prices (approximately $48 million), higher average molybdenum prices
(approximately $39 million) and higher sales volumes of molybdenum
(approximately $6 million); partially offset by lower copper sales volumes
(approximately $58 million) associated with lower market demand.

Total PDMC  Operating Income (Loss)

PDMC reported operating income of $25.8 million in the 2003 second
quarter, including a special, net pre-tax loss of $0.5 million, compared with
operating income of $38.2 million in the 2002 second quarter, including a
special, net pre-tax gain of $20.9 million. The decrease in operating income
primarily reflected lower pre-tax special gains ($21.4 million), partially
offset by higher copper prices (approximately $8 million).

PDMC reported operating income of $61.5 million in the first six months of
2003, including a special, net pre-tax loss of $0.5 million, compared with
operating income of $65.5 million in the first six months of 2002, including a
special, net pre-tax gain of $34.7 million. The decrease in operating income
primarily reflected lower pre-tax special gains ($35.2 million), partially
offset by higher copper prices (approximately $33 million).

The New York Commodity Exchange (COMEX) spot price per pound of copper
cathode, primarily upon which we base our U.S. sales, averaged 74.7 cents and
74.1 cents in the second quarters of 2003 and 2002, respectively, and 75.4
cents and 73.2 cents for the first six months of 2003 and 2002, respectively.
The London Metal Exchange (LME) spot price per pound of copper cathode,
primarily upon which we base our international sales, averaged 74.4 cents and
73.0 cents in the second quarters of 2003 and 2002, respectively, and 74.9
cents and 71.8 cents for the first six months of 2003 and 2002, respectively.

The implied full and cash unit cost of copper production for the second
quarter of 2003 was comparable to the second quarter of 2002. Favorable Quest for
Zerooperating income improvements and molybdenum prices reduced implied unit
production costs by approximately 4 and 3.5 cents per pound, respectively.
These improvements were primarily offset by unfavorable stockpile and inventory
changes (approximately 2.5 cents per pound), unfavorable mine haulage profiles
and ore grades (approximately 2.5 cents per pound), higher energy costs
(approximately 1.5 cents per pound), and higher salary and benefit costs
(approximately 1 cent per pound).

The implied full unit cost of copper production for the first six months
of 2003 was comparable to the corresponding 2002 period. The cash unit cost of
copper production for the first six months of 2003 increased approximately 1
cent per pound compared with the six months ended June 30, 2002. Favorable
Quest for Zerooperating income improvements and molybdenum prices reduced
implied unit production costs by approximately 4.5 and 2.5 cents per pound,
respectively. These improvements were primarily offset by higher energy costs
(approximately 1.5 cents per pound), unfavorable stockpile and inventory
changes (approximately 1.5 cents per pound),



---



##### 



- 34 -

unfavorable mine haulage profiles and ore grades (approximately 1.5 cents
per pound), and higher salary and benefit costs (approximately 1 cent per
pound).

Note: Supplemental Data

The following table summarizes PDMCs special items for the quarters and
six months ended June 30, 2003 and 2002, and the resultant earnings (losses)
excluding these special items.

(Unaudited; $ in millions)

|                                                         |                         |  |                |      |      |  |               |      |  
|-------------------------------------------------------- | ----------------------- |  | -------------- | ---- | ---- |  | ------------- | ---- | -
|                                                         |                         |  | Second Quarter
|                                                         |                         |  |               
|                                                         |                         |  | 2003           |      | 2002
|                                                         |                         |  |                |      |     
|                                                         |                         |  |                |      |      |  | (As Restated)
|Special, pre-tax items:                                  |                         |  |                |      |      |  |               |     
|                                                         | U.S. Mining Operations* |  | $              | (0.5 | )    |  |               | 20.9 |  
|                                                         | South American Mines**  |  |                |     |      |  |               |     |  
|                                                         | Primary Molybdenum      |  |                |     |      |  |               |     |  
|                                                         |                         |  |                |      |      |  |               |      |  
|                                                         |                         |  | (0.5           | )    |      |  | 20.9          |     
|                                                         |                         |  |                |      |      |  |               |      |  
|Segment operating income (loss)
excluding special items: |                         |  |                |      |      |  |               |     
|                                                         | U.S. Mining Operations* |  | $              | (1.5 | )    |  |               | (3.4 | )
|                                                         | South American Mines**  |  |                | 27.4 |      |  |               | 20.2 |  
|                                                         | Primary Molybdenum      |  |                | 0.4  |      |  |               | 0.5  |  
|                                                         |                         |  |                |      |      |  |               |      |  
|                                                         |                         |  | 26.3           |      |      |  | 17.3          |     
|                                                         |                         |  |                |      |      |  |               |      |  

(Unaudited; $ in millions)

|                                                         |                         |  |                  |      |      |  |               |       |  
|-------------------------------------------------------- | ----------------------- |  | ---------------- | ---- | ---- |  | ------------- | ----- | -
|                                                         |                         |  | Six Months Ended
|                                                         |                         |  | June 30,        
|                                                         |                         |  |                 
|                                                         |                         |  | 2003             |      | 2002
|                                                         |                         |  |                  |      |     
|                                                         |                         |  |                  |      |      |  | (As Restated)
|Special, pre-tax items:                                  |                         |  |                  |      |      |  |               |      
|                                                         | U.S. Mining Operations* |  | $                | (0.5 | )    |  |               | 34.7  |  
|                                                         | South American Mines**  |  |                  |     |      |  |               |      |  
|                                                         | Primary Molybdenum      |  |                  |     |      |  |               |      |  
|                                                         |                         |  |                  |      |      |  |               |       |  
|                                                         |                         |  | (0.5             | )    |      |  | 34.7          |      
|                                                         |                         |  |                  |      |      |  |               |       |  
|Segment operating income (loss)
excluding special items: |                         |  |                  |      |      |  |               |      
|                                                         | U.S. Mining Operations* |  | $                | (2.1 | )    |  |               | (17.1 | )
|                                                         | South American Mines**  |  |                  | 63.6 |      |  |               | 47.7  |  
|                                                         | Primary Molybdenum      |  |                  | 0.5  |      |  |               | 0.2   |  
|                                                         |                         |  |                  |      |      |  |               |       |  
|                                                         |                         |  | 62.0             |      |      |  | 30.8          |      
|                                                         |                         |  |                  |      |      |  |               |       |  



---

|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     

Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.

Note: Supplemental Data

Special, pre-tax items and provisions in operating income (loss) were as
follows:

(Unaudited; $ in millions)

|                              |  |                      |      |          |  |         |   |  |  |  |   | 
|----------------------------- |  | -------------------- | ---- | -------- |  | ------- | - |  |  |  | - | 
|                              |  | Second Quarter 2003 
|                              |  | and Six Months Ended
|                              |  | June 30, 2003       
|                              |  |                     
|                              |  | U.S.                 |      | South    |  | Primary
|                              |  | Mining               |      | American |  | Molyb- 
|                              |  | Operations           |      | Mines    |  | denum  
|                              |  |                      |      |          |  |        
|Environmental
provisions, net |  | $                    | (0.5 | )        |  |         |  |  |  |  |  | 
|                              |  |                      |      |          |  |         |   |  |  |  |   | 

(Unaudited; $ in millions)

|                                        |  |                     |      |          |  |         |   |  |  |  |   | 
|--------------------------------------- |  | ------------------- | ---- | -------- |  | ------- | - |  |  |  | - | 
|                                        |  | Second Quarter 2002
|                                        |  |                    
|                                        |  | U.S.                |      | South    |  | Primary
|                                        |  | Mining              |      | American |  | Molyb- 
|                                        |  | Operations          |      | Mines    |  | denum  
|                                        |  |                     |      |          |  |        
|Environmental insurance
recoveries, net |  | $                   | (1.7 | )        |  |         |  |  |  |  |  | 
|Sale of non-core real
estate            |  |                     | 22.6 |          |  |         |  |  |  |  |  | 
|                                        |  |                     |      |          |  |         |   |  |  |  |   | 
|                                        |  | $                   | 20.9 |          |  |         |  |  |  |  |  | 
|                                        |  |                     |      |          |  |         |   |  |  |  |   | 

(Unaudited; $ in millions)

|                                        |  |                  |      |          |  |         |   |  |  |  |   | 
|--------------------------------------- |  | ---------------- | ---- | -------- |  | ------- | - |  |  |  | - | 
|                                        |  | Six Months Ended
|                                        |  | June 30, 2002   
|                                        |  |                 
|                                        |  | U.S.             |      | South    |  | Primary
|                                        |  | Mining           |      | American |  | Molyb- 
|                                        |  | Operations       |      | Mines    |  | denum  
|                                        |  |                  |      |          |  |        
|Environmental insurance
recoveries, net |  | $                | 12.1 |          |  |         |  |  |  |  |  | 
|Sale of non-core real
estate            |  |                  | 22.6 |          |  |         |  |  |  |  |  | 
|                                        |  |                  |      |          |  |         |   |  |  |  |   | 
|                                        |  | $                | 34.7 |          |  |         |  |  |  |  |  | 
|                                        |  |                  |      |          |  |         |   |  |  |  |   | 

Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.

PDMC Results by Reportable Segments

The following tables summarize, on a segment basis, the production and
sales statistics and the operating income (loss) and special items and
provisions for the second quarter and first six months of 2003 and 2002. Our
presentation of reportable segment information for PDMC for the quarter and six
months ended June 30, 2002, has been revised to reflect additional segments.



---



##### 



- 35 -

PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |       | 
|---------------------------------------- | ------------------------------------- | - | ---------- | ----- | -------- |  | ------- | ---- | ------ |  | ------ | --- | -------- |  | ---- | ---- |  |  | ---- | ---- |  |  | ---- | ----- | 
|                                         |                                       |   | U.S. Mines
|                                         |                                       |   |           
|                                         |                                       |   |            |       |          |  | Bagdad/ |      | Miami/ |  | Chino/ |     |          |  |      |      |  |  |     
|                                         |                                       |   | Morenci    |       | Sierrita |  | Bisbee  |      | Cobre  |  | Tyrone |     | Subtotal
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |         
|Second Quarter 2003                      |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total production                      |   |            | 105.5 |          |  |         | 46.4 |        |  |        | 3.9 |          |  |      | 7.9  |  |  |      | 14.3 |  |  |      | 178.0 | 
|                                         | Less minority participants shares    |   |            | 15.8  |          |  |         |     |        |  |        |    |          |  |      | 2.6  |  |  |      |     |  |  |      | 18.4  | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |            | 89.7  |          |  |         | 46.4 |        |  |        | 3.9 |          |  |      | 5.3  |  |  |      | 14.3 |  |  |      | 159.6 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |            | 89.7  |          |  |         | 53.3 |        |  |        | 5.9 |          |  |      | 5.3  |  |  |      | 14.3 |  |  |      | 168.5 | 
|                                         | Purchased copper                      |   |            |      |          |  |         |     |        |  |        |    |          |  |      |     |  |  |      |     |  |  |      |      | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total copper sales                    |   |            | 89.7  |          |  |         | 53.3 |        |  |        | 5.9 |          |  |      | 5.3  |  |  |      | 14.3 |  |  |      | 168.5 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|($ in millions)                          |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 4.9        |       |          |  | 18.3    |      |        |  | (3.1   | )   |          |  | (2.8 | )    |  |  | (4.5 | )    |  |  | 12.8 |      
|Special items and provisions             |                                       | $ |           |       |          |  |        |      |        |  | (0.5   | )   |          |  |     |      |  |  |     |      |  |  | (0.5 | )    
|Second Quarter 2002 (as restated)        |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total production                      |   |            | 105.9 |          |  |         | 38.8 |        |  |        | 1.9 |          |  |      | 13.4 |  |  |      | 16.7 |  |  |      | 176.7 | 
|                                         | Less minority participants shares    |   |            | 15.9  |          |  |         |     |        |  |        |    |          |  |      | 4.4  |  |  |      |     |  |  |      | 20.3  | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |            | 90.0  |          |  |         | 38.8 |        |  |        | 1.9 |          |  |      | 9.0  |  |  |      | 16.7 |  |  |      | 156.4 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |            | 90.0  |          |  |         | 37.2 |        |  |        | 1.5 |          |  |      | 8.9  |  |  |      | 16.8 |  |  |      | 154.4 | 
|                                         | Purchased copper                      |   |            |      |          |  |         |     |        |  |        |    |          |  |      |     |  |  |      |     |  |  |      |      | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total copper sales                    |   |            | 90.0  |          |  |         | 37.2 |        |  |        | 1.5 |          |  |      | 8.9  |  |  |      | 16.8 |  |  |      | 154.4 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|($ in millions)                          |                                       |   |            |       |          |  |         |      |        |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 12.9       |       |          |  | 4.5     |      |        |  | (3.8   | )   |          |  | 1.3  |      |  |  | 0.6  |      |  |  | 15.5 |      
|Special items and provisions             |                                       | $ |           |       |          |  |        |      |        |  |       |     |          |  |     |      |  |  |     |      |  |  |     |      

Refer to segment discussion on pages 41 through 45.

Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally, certain costs are not
allocated to the reportable segments. (Refer to pages 41 and 42 for further discussion.)



---



##### 



- 36 -

PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |       | 
|---------------------------------------- | ------------------------------------- | - | -------------------- | ---- | ----------- |  | ------- | ---- | -------- |  | --- | ---- |  |  | ---- | ----- | 
|                                         |                                       |   | South American Mines
|                                         |                                       |   |                     
|                                         |                                       |   | Candelaria           |      | Cerro Verde |  | El Abra |      | Subtotal
|                                         |                                       |   |                      |      |             |  |         |      |         
|Second Quarter 2003                      |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total production                      |   |                      | 52.5 |             |  |         | 24.8 |          |  |     | 61.9 |  |  |      | 139.2 | 
|                                         | Less minority participants shares    |   |                      | 10.5 |             |  |         |     |          |  |     | 30.3 |  |  |      | 40.8  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |                      | 42.0 |             |  |         | 24.8 |          |  |     | 31.6 |  |  |      | 98.4  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |                      | 39.3 |             |  |         | 24.9 |          |  |     | 32.5 |  |  |      | 96.7  | 
|                                         | Purchased copper                      |   |                      | 7.7  |             |  |         |     |          |  |     | 1.5  |  |  |      | 9.2   | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total copper sales                    |   |                      | 47.0 |             |  |         | 24.9 |          |  |     | 34.0 |  |  |      | 105.9 | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|($ in millions)                          |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 13.6                 |      |             |  | 8.6     |      |          |  | 5.2 |      |  |  | 27.4 |      
|Special items and provisions             |                                       | $ |                     |      |             |  |        |      |          |  |    |      |  |  |     |      
|Second Quarter 2002 (as restated)        |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total production                      |   |                      | 52.5 |             |  |         | 23.6 |          |  |     | 63.8 |  |  |      | 139.9 | 
|                                         | Less minority participants shares    |   |                      | 10.5 |             |  |         |     |          |  |     | 31.2 |  |  |      | 41.7  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |                      | 42.0 |             |  |         | 23.6 |          |  |     | 32.6 |  |  |      | 98.2  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |                      | 48.3 |             |  |         | 23.5 |          |  |     | 38.5 |  |  |      | 110.3 | 
|                                         | Purchased copper                      |   |                      | 12.7 |             |  |         |     |          |  |     | 15.1 |  |  |      | 27.8  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total copper sales                    |   |                      | 61.0 |             |  |         | 23.5 |          |  |     | 53.6 |  |  |      | 138.1 | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|($ in millions)                          |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 13.2                 |      |             |  | 6.8     |      |          |  | 0.2 |      |  |  | 20.2 |      
|Special items and provisions             |                                       | $ |                     |      |             |  |        |      |          |  |    |      |  |  |     |      

Refer to segment discussion on pages 41 through 45.

Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally, certain costs
are not allocated to the reportable segments. (Refer to pages 41 and 42 for further discussion.)

- 37 -PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |        |        | 
|---------------------------------------- | ------------------------------------- | ---------------------- | --- | ---------- | ------ | ------------- | ---- | ------------ | - | ---- | ----- | ----- | - |  | ---- | ------ | ------ | 
|                                         |                                       |                        |     | Primary    |        | Manufacturing |      |              |   |      |       | Total
|                                         |                                       |                        |     | Molybdenum |        | and Sales     |      | Other Mining |   | PDMC
|                                         |                                       |                        |     |            |        |               |      |              |   |     
|Second Quarter 2003                      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper production (thousand short tons): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total production                      |                        |     |           |        |               |      | 1.6          |   |      |       |      |   |  |      | 318.8  |       
|                                         | Less minority participants shares    |                        |     |           |        |               |      | 0.3          |   |      |       |      |   |  |      | 59.5   |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share                |                        |     |           |        |               |      | 1.3          |   |      |       |      |   |  |      | 259.3  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper sales (thousand short tons):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     |           |        |               |      | 1.3          |   |      |       |      |   |  |      | 266.5  |       
|                                         | Purchased copper                      |                        |     |           |        |               |      | 75.5         |   |      |       |      |   |  |      | 84.7   |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total copper sales                    |                        |     |           |        |               |      | 76.8         |   |      |       |      |   |  |      | 351.2  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum production (thousand pounds): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Primary  Henderson                   |                        |     | 5,775      |        |               |      |             |   |      |       |      |   |  |      | 5,775  |       
|                                         | By-product                            |                        |     | 7,350      |        |               |      |             |   |      |       |      |   |  |      | 7,350  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total production       |     |            | 13,125 |               |      |              |  |      |       |       |  |  |      |        | 13,125 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum sales (thousand pounds):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     | 13,517     |        |               |      |             |   |      |       |      |   |  |      | 13,517 |       
|                                         | Purchased molybdenum                  |                        |     | 2,152      |        |               |      |             |   |      |       |      |   |  |      | 2,152  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total molybdenum sales |     |            | 15,669 |               |      |              |  |      |       |       |  |  |      |        | 15,669 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|($ in millions)                          |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Operating income (loss)                  |                                       | $                      | 0.4 |            |        |               | 6.5  |              |   |      | (21.3 | )     |   |  | 25.8 |       
|Special items and provisions             |                                       | $                      |    |            |        |               |     |              |   |      |      |       |   |  | (0.5 | )     
|Second Quarter 2002 (as restated)        |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper production (thousand short tons): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total production                      |                        |     |           |        |               |      |             |   |      |       |      |   |  |      | 316.6  |       
|                                         | Less minority participants shares    |                        |     |           |        |               |      |             |   |      |       |      |   |  |      | 62.0   |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share                |                        |     |           |        |               |      |             |   |      |       |      |   |  |      | 254.6  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper sales (thousand short tons):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     |           |        |               |      |             |   |      |       |      |   |  |      | 264.7  |       
|                                         | Purchased copper                      |                        |     |           |        |               |      | 95.3         |   |      |       |      |   |  |      | 123.1  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total copper sales                    |                        |     |           |        |               |      | 95.3         |   |      |       |      |   |  |      | 387.8  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum production (thousand pounds): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Primary  Henderson                   |                        |     | 5,193      |        |               |      |             |   |      |       |      |   |  |      | 5,193  |       
|                                         | By-product                            |                        |     | 5,165      |        |               |      |             |   |      |       |      |   |  |      | 5,165  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total production       |     |            | 10,358 |               |      |              |  |      |       |       |  |  |      |        | 10,358 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum sales (thousand pounds):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     | 11,309     |        |               |      |             |   |      |       |      |   |  |      | 11,309 |       
|                                         | Purchased molybdenum                  |                        |     | 2,745      |        |               |      |             |   |      |       |      |   |  |      | 2,745  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total molybdenum sales |     |            | 14,054 |               |      |              |  |      |       |       |  |  |      |        | 14,054 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|($ in millions)                          |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Operating income (loss)                  |                                       | $                      | 0.5 |            |        |               | (1.0 | )            |   |      | 3.0   |       |   |  | 38.2 |       
|Special items and provisions             |                                       | $                      |    |            |        |               |     |              |   |      | 20.9  |       |   |  | 20.9 |       

Refer to segment discussion on pages 41 through 45.

Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally, certain costs are not
allocated to the reportable segments. (Refer to pages 41 and 42 for further discussion.)



---



##### 



- 38 -

PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |       | 
|---------------------------------------- | ------------------------------------- | - | ---------- | ----- | -------- |  | ------- | ---- | ------ |  | ------ | ---- | -------- |  | ---- | ---- |  |  | ---- | ---- |  |  | ---- | ----- | 
|                                         |                                       |   | U.S. Mines
|                                         |                                       |   |           
|                                         |                                       |   |            |       |          |  | Bagdad/ |      | Miami/ |  | Chino/ |      |          |  |      |      |  |  |     
|                                         |                                       |   | Morenci    |       | Sierrita |  | Bisbee  |      | Cobre  |  | Tyrone |      | Subtotal
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |         
|Six Months Ended 2003                    |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total production                      |   |            | 209.0 |          |  |         | 89.1 |        |  |        | 9.3  |          |  |      | 16.3 |  |  |      | 31.4 |  |  |      | 355.1 | 
|                                         | Less minority participants shares    |   |            | 31.3  |          |  |         |     |        |  |        |     |          |  |      | 5.4  |  |  |      |     |  |  |      | 36.7  | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |            | 177.7 |          |  |         | 89.1 |        |  |        | 9.3  |          |  |      | 10.9 |  |  |      | 31.4 |  |  |      | 318.4 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |            | 177.7 |          |  |         | 97.4 |        |  |        | 11.7 |          |  |      | 10.9 |  |  |      | 31.4 |  |  |      | 329.1 | 
|                                         | Purchased copper                      |   |            |      |          |  |         |     |        |  |        |     |          |  |      |     |  |  |      |     |  |  |      |      | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total copper sales                    |   |            | 177.7 |          |  |         | 97.4 |        |  |        | 11.7 |          |  |      | 10.9 |  |  |      | 31.4 |  |  |      | 329.1 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|($ in millions)                          |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 17.3       |       |          |  | 25.0    |      |        |  | (3.8   | )    |          |  | (4.9 | )    |  |  | (8.9 | )    |  |  | 24.7 |      
|Special items and provisions             |                                       | $ |           |       |          |  |        |      |        |  | (0.5   | )    |          |  |     |      |  |  |     |      |  |  | (0.5 | )    
|Six Months Ended 2002 (as restated)      |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total production                      |   |            | 207.4 |          |  |         | 76.9 |        |  |        | 3.9  |          |  |      | 31.7 |  |  |      | 32.8 |  |  |      | 352.7 | 
|                                         | Less minority participants shares    |   |            | 31.1  |          |  |         |     |        |  |        |     |          |  |      | 10.5 |  |  |      |     |  |  |      | 41.6  | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |            | 176.3 |          |  |         | 76.9 |        |  |        | 3.9  |          |  |      | 21.2 |  |  |      | 32.8 |  |  |      | 311.1 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |            | 176.3 |          |  |         | 89.9 |        |  |        | 7.8  |          |  |      | 21.1 |  |  |      | 32.9 |  |  |      | 328.0 | 
|                                         | Purchased copper                      |   |            |      |          |  |         |     |        |  |        |     |          |  |      |     |  |  |      |     |  |  |      |      | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total copper sales                    |   |            | 176.3 |          |  |         | 89.9 |        |  |        | 7.8  |          |  |      | 21.1 |  |  |      | 32.9 |  |  |      | 328.0 | 
|                                         |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|($ in millions)                          |                                       |   |            |       |          |  |         |      |        |  |        |      |          |  |      |      |  |  |      |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 24.7       |       |          |  | 0.2     |      |        |  | (8.3   | )    |          |  | 7.0  |      |  |  | (1.1 | )    |  |  | 22.5 |      
|Special items and provisions             |                                       | $ |           |       |          |  |        |      |        |  |       |      |          |  |     |      |  |  |     |      |  |  |     |      

Refer to segment discussion on pages 41 through 45.

Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally, certain costs are not
allocated to the reportable segments. (Refer to pages 41 and 42 for further discussion.)



---



##### 



- 39 -

PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |       | 
|---------------------------------------- | ------------------------------------- | - | -------------------- | ----- | ----------- |  | ------- | ---- | -------- |  | ---- | ----- |  |  | ---- | ----- | 
|                                         |                                       |   | South American Mines
|                                         |                                       |   |                     
|                                         |                                       |   | Candelaria           |       | Cerro Verde |  | El Abra |      | Subtotal
|                                         |                                       |   |                      |       |             |  |         |      |         
|Six Months Ended 2003                    |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|Copper production (thousand short tons): |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Total production                      |   |                      | 112.5 |             |  |         | 49.4 |          |  |      | 115.0 |  |  |      | 276.9 | 
|                                         | Less minority participants shares    |   |                      | 22.5  |             |  |         |     |          |  |      | 56.3  |  |  |      | 78.8  | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Net Phelps Dodge share                |   |                      | 90.0  |             |  |         | 49.4 |          |  |      | 58.7  |  |  |      | 198.1 | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |                      | 88.4  |             |  |         | 49.5 |          |  |      | 60.0  |  |  |      | 197.9 | 
|                                         | Purchased copper                      |   |                      | 17.4  |             |  |         |     |          |  |      | 7.3   |  |  |      | 24.7  | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Total copper sales                    |   |                      | 105.8 |             |  |         | 49.5 |          |  |      | 67.3  |  |  |      | 222.6 | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|($ in millions)                          |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|Operating income (loss)                  |                                       | $ | 36.7                 |       |             |  | 16.1    |      |          |  | 10.8 |       |  |  | 63.6 |      
|Special items and provisions             |                                       | $ |                     |       |             |  |        |      |          |  |     |       |  |  |     |      
|Six Months Ended 2002 (as restated)      |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|Copper production (thousand short tons): |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Total production                      |   |                      | 110.2 |             |  |         | 46.5 |          |  |      | 128.7 |  |  |      | 285.4 | 
|                                         | Less minority participants shares    |   |                      | 22.0  |             |  |         |     |          |  |      | 63.0  |  |  |      | 85.0  | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Net Phelps Dodge share                |   |                      | 88.2  |             |  |         | 46.5 |          |  |      | 65.7  |  |  |      | 200.4 | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |                      | 89.7  |             |  |         | 46.6 |          |  |      | 68.6  |  |  |      | 204.9 | 
|                                         | Purchased copper                      |   |                      | 22.8  |             |  |         |     |          |  |      | 23.6  |  |  |      | 46.4  | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|                                         | Total copper sales                    |   |                      | 112.5 |             |  |         | 46.6 |          |  |      | 92.2  |  |  |      | 251.3 | 
|                                         |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|($ in millions)                          |                                       |   |                      |       |             |  |         |      |          |  |      |       |  |  |      |      
|Operating income (loss)                  |                                       | $ | 33.4                 |       |             |  | 13.6    |      |          |  | 0.7  |       |  |  | 47.7 |      
|Special items and provisions             |                                       | $ |                     |       |             |  |        |      |          |  |     |       |  |  |     |      

Refer to segment discussion on pages 41 through 45.

Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally, certain costs
are not allocated to the reportable segments. (Refer to pages 41 and 42 for further discussion.)

- 40 -PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |        |        | 
|---------------------------------------- | ------------------------------------- | ---------------------- | --- | ---------- | ------ | ------------- | ---- | ------------ | - | ---- | ----- | ----- | - |  | ---- | ------ | ------ | 
|                                         |                                       |                        |     | Primary    |        | Manufacturing |      |              |   |      |       | Total
|                                         |                                       |                        |     | Molybdenum |        | and Sales     |      | Other Mining |   | PDMC
|                                         |                                       |                        |     |            |        |               |      |              |   |     
|Six Months Ended 2003                    |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper production (thousand short tons): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total production                      |                        |     |           |        |               |      | 4.0          |   |      |       |      |   |  |      | 636.0  |       
|                                         | Less minority participants shares    |                        |     |           |        |               |      | 0.8          |   |      |       |      |   |  |      | 116.3  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share                |                        |     |           |        |               |      | 3.2          |   |      |       |      |   |  |      | 519.7  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper sales (thousand short tons):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     |           |        |               |      | 3.3          |   |      |       |      |   |  |      | 530.3  |       
|                                         | Purchased copper                      |                        |     |           |        |               |      | 153.7        |   |      |       |      |   |  |      | 178.4  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total copper sales                    |                        |     |           |        |               |      | 157.0        |   |      |       |      |   |  |      | 708.7  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum production (thousand pounds): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Primary  Henderson                   |                        |     | 10,614     |        |               |      |             |   |      |       |      |   |  |      | 10,614 |       
|                                         | By-product                            |                        |     | 14,014     |        |               |      |             |   |      |       |      |   |  |      | 14,014 |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total production       |     |            | 24,628 |               |      |              |  |      |       |       |  |  |      |        | 24,628 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum sales (thousand pounds):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     | 27,299     |        |               |      |             |   |      |       |      |   |  |      | 27,299 |       
|                                         | Purchased molybdenum                  |                        |     | 3,632      |        |               |      |             |   |      |       |      |   |  |      | 3,632  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total molybdenum sales |     |            | 30,931 |               |      |              |  |      |       |       |  |  |      |        | 30,931 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|($ in millions)                          |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Operating income (loss)                  |                                       | $                      | 0.5 |            |        |               | 15.0 |              |   |      | (42.3 | )     |   |  | 61.5 |       
|Special items and provisions             |                                       | $                      |    |            |        |               |     |              |   |      |      |       |   |  | (0.5 | )     
|Six Months Ended 2002 (as restated)      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper production (thousand short tons): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total production                      |                        |     |           |        |               |      | 0.4          |   |      |       |      |   |  |      | 638.5  |       
|                                         | Less minority participants shares    |                        |     |           |        |               |      | 0.1          |   |      |       |      |   |  |      | 126.7  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share                |                        |     |           |        |               |      | 0.3          |   |      |       |      |   |  |      | 511.8  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Copper sales (thousand short tons):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     |           |        |               |      | 0.3          |   |      |       |      |   |  |      | 533.2  |       
|                                         | Purchased copper                      |                        |     |           |        |               |      | 174.1        |   |      |       |      |   |  |      | 220.5  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Total copper sales                    |                        |     |           |        |               |      | 174.4        |   |      |       |      |   |  |      | 753.7  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum production (thousand pounds): |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Primary  Henderson                   |                        |     | 9,529      |        |               |      |             |   |      |       |      |   |  |      | 9,529  |       
|                                         | By-product                            |                        |     | 11,455     |        |               |      |             |   |      |       |      |   |  |      | 11,455 |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total production       |     |            | 20,984 |               |      |              |  |      |       |       |  |  |      |        | 20,984 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Molybdenum sales (thousand pounds):      |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         | Net Phelps Dodge share from own mines |                        |     | 24,104     |        |               |      |             |   |      |       |      |   |  |      | 24,104 |       
|                                         | Purchased molybdenum                  |                        |     | 5,366      |        |               |      |             |   |      |       |      |   |  |      | 5,366  |       
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|                                         |                                       | Total molybdenum sales |     |            | 29,470 |               |      |              |  |      |       |       |  |  |      |        | 29,470 | 
|                                         |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|($ in millions)                          |                                       |                        |     |            |        |               |      |              |   |      |       |       |   |  |      |       
|Operating income (loss)                  |                                       | $                      | 0.2 |            |        |               | (2.7 | )            |   |      | (2.2  | )     |   |  | 65.5 |       
|Special items and provisions             |                                       | $                      |    |            |        |               |     |              |   |      | 34.7  |       |   |  | 34.7 |       

Refer to segment discussion on pages 41 through 45.

Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally, certain costs are not
allocated to the reportable segments. (Refer to pages 41 and 42 for further discussion.)



---



##### 



- 41 -

Sales of Copper (U.S. and South America) and Molybdenum

The Manufacturing and Sales segment is responsible for selling all copper
produced at the U.S. mines. Intersegment revenues of the individual U.S. mines
represent an internal allocation based on PDMCs sales to unaffiliated
customers. Therefore, the following discussion and analysis combines the U.S.
Mines and Other Mining segments with the Manufacturing and Sales segment.
Additionally, the South American Mines sold approximately 36 percent of their
copper to the Manufacturing and Sales segment in each of the second quarters of
2003 and 2002. Intersegment sales by the South American Mines are based upon
arms-length prices at the time of the sale. Intersegment sales of any
individual mine may not be reflective of the actual prices PDMC ultimately
receives due to a variety of factors including additional processing, timing of
sales to unaffiliated customers, and transportation premiums. These sales are
reflected in the Manufacturing and Sales segment.

(Unaudited; $ in millions)

|                        |                          |                |       |       |      |  |       |       |  
|----------------------- | ------------------------ | -------------- | ----- | ----- | ---- |  | ----- | ----- | -
|                        |                          |                |       |       |      |  |       |      
|                        |                          | Second Quarter
|                        |                          |                |      
|                        |                          |                | 2003  |       | 2002
|                        |                          |                |       |       |     
|U.S. Mining Operations* |                          |                |       |       |      |  |       |      
|                        | Unaffiliated customers   |                | $     | 449.2 |      |  |       | 485.5 |  
|                        | Intersegment elimination |                |       | (56.3 | )    |  |       | (94.5 | )
|                        |                          |                |       |       |      |  |       |      
|                        |                          |                | 392.9 |       |      |  | 391.0 |      
|                        |                          |                |       |       |      |  |       |      
|South American Mines**  |                          |                |       |       |      |  |       |      
|                        | Unaffiliated customers   |                |       | 99.0  |      |  |       | 96.0  |  
|                        | Intersegment             |                |       | 56.3  |      |  |       | 94.5  |  
|                        |                          |                |       |       |      |  |       |      
|                        |                          |                | 155.3 |       |      |  | 190.5 |      
|                        |                          |                |       |       |      |  |       |      
|Primary Molybdenum      |                          |                |       |       |      |  |       |      
|                        | Unaffiliated customers   |                |       | 93.4  |      |  |       | 63.0  |  
|                        | Intersegment             |                |       |      |      |  |       |      |  
|                        |                          |                |       |       |      |  |       |      
|                        |                          |                | 93.4  |       |      |  | 63.0  |      
|                        |                          |                |       |       |      |  |       |      
|Total PDMC              |                          |                |       |       |      |  |       |      
|                        | Unaffiliated customers   |                | $     | 641.6 |      |  |       | 644.5 |  
|                        |                          |                |       |       |      |  |       |      

(Unaudited; $ in millions)

|                        |                          |                  |          |         |      |  |       |         |  
|----------------------- | ------------------------ | ---------------- | -------- | ------- | ---- |  | ----- | ------- | -
|                        |                          |                  |          |         |      |  |       |        
|                        |                          | Six Months Ended
|                        |                          |                  | June 30,
|                        |                          |                  |         
|                        |                          |                  | 2003     |         | 2002
|                        |                          |                  |          |         |     
|U.S. Mining Operations* |                          |                  |          |         |      |  |       |        
|                        | Unaffiliated customers   |                  | $        | 927.7   |      |  |       | 941.8   |  
|                        | Intersegment elimination |                  |          | (128.0  | )    |  |       | (156.4  | )
|                        |                          |                  |          |         |      |  |       |         |  
|                        |                          |                  | 799.7    |         |      |  | 785.4 |        
|                        |                          |                  |          |         |      |  |       |         |  
|South American Mines**  |                          |                  |          |         |      |  |       |        
|                        | Unaffiliated customers   |                  |          | 199.6   |      |  |       | 190.1   |  
|                        | Intersegment             |                  |          | 128.0   |      |  |       | 156.4   |  
|                        |                          |                  |          |         |      |  |       |         |  
|                        |                          |                  | 327.6    |         |      |  | 346.5 |        
|                        |                          |                  |          |         |      |  |       |         |  
|Primary Molybdenum      |                          |                  |          |         |      |  |       |        
|                        | Unaffiliated customers   |                  |          | 169.3   |      |  |       | 124.3   |  
|                        | Intersegment             |                  |          |        |      |  |       |        |  
|                        |                          |                  |          |         |      |  |       |         |  
|                        |                          |                  | 169.3    |         |      |  | 124.3 |        
|                        |                          |                  |          |         |      |  |       |         |  
|Total PDMC              |                          |                  |          |         |      |  |       |        
|                        | Unaffiliated customers   |                  | $        | 1,296.6 |      |  |       | 1,256.2 |  
|                        |                          |                  |          |         |      |  |       |         |  



---

|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     

U.S. Mines, Other Mining and Manufacturing and Sales Segments  Sales

Sales and other operating revenues to unaffiliated customers by U.S.
Mines, Other Mining and Manufacturing and Sales decreased $36.3 million, or 7
percent, in the 2003 second quarter compared with the 2002 second quarter.
This decrease primarily was due to lower copper sales volumes (approximately
$42 million) and lower precious metals sales (approximately $3 million);
partially offset by higher average copper prices (approximately $8 million).

Sales and other operating revenues to unaffiliated customers by U.S.
Mines, Other Mining and Manufacturing and Sales decreased $14.1 million, or 2
percent, in the first six months of 2003 compared with the corresponding 2002
period. This decrease primarily was due to lower copper sales volumes
(approximately $52 million) and lower precious metals sales (approximately $3
million); partially offset by higher average copper prices (approximately $37
million).



---



##### 



- 42 -

South American Mines Segments  Sales

South American Mines sales and other operating revenues to unaffiliated
customers increased $3.0 million, or 3 percent, in the 2003 second quarter
compared with the 2002 second quarter. This increase primarily was due to
higher realized copper prices (approximately $10 million) and higher precious
metals sales (approximately $3 million); partially offset by lower sales
volumes of copper (approximately $10 million).

South American Mines sales and other operating revenues to unaffiliated
customers increased $9.5 million, or 5 percent, in the first six months of 2003
compared with the corresponding 2002 period. This increase primarily was due
to higher realized copper prices (approximately $13 million) and higher
precious metals sales (approximately $3 million); partially offset by lower
sales volumes of copper (approximately $7 million).

Primary Molybdenum Segment  Sales

Primary Molybdenum sales and other operating revenues to unaffiliated
customers increased $30.4 million, or 48 percent, in the 2003 second quarter
compared with the 2002 second quarter. This increase primarily was due to
higher average molybdenum prices (approximately $24 million) and higher sales
volumes of molybdenum (approximately $6 million).

Primary Molybdenum sales and other operating revenues to unaffiliated
customers increased $45.0 million, or 36 percent, in the first six months of
2003 compared with the corresponding 2002 period. This increase primarily was
due to higher average molybdenum prices (approximately $39 million) and higher
sales volumes of molybdenum (approximately $6 million).

Operating Income (Loss) for Copper (U.S. and South America) and Molybdenum

In addition to the allocation of revenues, management allocates certain
operating costs, expenses and capital of PDMCs segments that may not be
necessarily reflective of market conditions. We also do not allocate all costs
and expenses applicable to a mine or operation from the division or corporate
offices. Accordingly, the segment information reflects managements
determinations that may not be indicative of actual financial performance of
each segment as if it was an independent entity.

(Unaudited; $ in millions)

|                        |            |   |                |      |      |  |               |      | 
|----------------------- | ---------- | - | -------------- | ---- | ---- |  | ------------- | ---- | 
|                        |            |   |                |     
|                        |            |   | Second Quarter
|                        |            |   |               
|                        |            |   | 2003           |      | 2002
|                        |            |   |                |      |     
|                        |            |   |                |      |      |  | (As Restated)
|U.S. Mining Operations* |            | $ | (2.0           | )    |      |  | 17.5          |     
|South American Mines**  |            |   | 27.4           |      |      |  | 20.2          |     
|Primary Molybdenum      |            |   | 0.4            |      |      |  | 0.5           |     
|                        |            |   |                |      |      |  |               |     
|                        | Total PDMC |   | $              | 25.8 |      |  |               | 38.2 | 
|                        |            |   |                |      |      |  |               |     

(Unaudited; $ in millions)

|                        |            |   |                  |      |      |  |               |      | 
|----------------------- | ---------- | - | ---------------- | ---- | ---- |  | ------------- | ---- | 
|                        |            |   |                  |     
|                        |            |   | Six Months Ended
|                        |            |   | June 30,        
|                        |            |   |                 
|                        |            |   | 2003             |      | 2002
|                        |            |   |                  |      |     
|                        |            |   |                  |      |      |  | (As Restated)
|U.S. Mining Operations* |            | $ | (2.6             | )    |      |  | 17.6          |     
|South American Mines**  |            |   | 63.6             |      |      |  | 47.7          |     
|Primary Molybdenum      |            |   | 0.5              |      |      |  | 0.2           |     
|                        |            |   |                  |      |      |  |               |     
|                        | Total PDMC |   | $                | 61.5 |      |  |               | 65.5 | 
|                        |            |   |                  |      |      |  |               |     



---

|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     
|  

U.S. Mining Operations  Operating Income (Loss)

U.S. Mining Operations reported an operating loss of $2.0 million in the
2003 second quarter, compared with operating income of $17.5 million in the
2002 second quarter including $20.9 million of special, net pre-tax gains.

U.S. Mining Operations reported an operating loss of $2.6 million for the
first six months of



---



##### 



- 43 -

2003, compared with operating income of $17.6 million in
the corresponding 2002 period including $34.7 million of special, net pre-tax
gains. (Refer to the separate discussion of PDMCs segments below for further
detail.)

Note: Supplemental Data

The following table summarizes U.S. Mining Operations special items for
2003 and 2002 and the resultant losses excluding these special items:

(Unaudited; $ in millions)

|                                                 |  |                |      |      |  |               |      |   | 
|------------------------------------------------ |  | -------------- | ---- | ---- |  | ------------- | ---- | - | 
|                                                 |  |                |      |     
|                                                 |  | Second Quarter
|                                                 |  |               
|                                                 |  | 2003           |      | 2002
|                                                 |  |                |      |     
|                                                 |  |                |      |      |  | (As Restated)
|Special, pre-tax items                           |  | $              | (0.5 | )    |  |               | 20.9 |  
|Segment operating losses
excluding special items |  | $              | (1.5 | )    |  |               | (3.4 | )

(Unaudited; $ in millions)

|                                                 |  |                  |      |      |  |  |               |  
|------------------------------------------------ |  | ---------------- | ---- | ---- |  |  | ------------- | -
|                                                 |  |                  |      |     
|                                                 |  | Six Months Ended
|                                                 |  | June 30,        
|                                                 |  |                 
|                                                 |  | 2003             |      | 2002
|                                                 |  |                  |      |     
|                                                 |  |                  |      |      |  |  | (As Restated)
|Special, pre-tax items                           |  | $                | (0.5 | )    |  |  | 34.7          |  
|Segment operating losses
excluding special items |  | $                | (2.1 | )    |  |  | (17.1         | )



---

Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.


Morenci Segment  Operating Income

The Morenci open-pit mine, located in southeastern Arizona, primarily
produces electrowon copper cathode. We own an 85 percent interest in Morenci
and apply the proportional consolidation method of accounting. Operating
income of $4.9 million in the 2003 second quarter decreased $8.0 million
compared with the 2002 second quarter, primarily due to higher cost of copper
production (approximately $8 million) primarily due to higher energy costs.

Operating income of $17.3 million for the first six months of 2003
decreased $7.4 million compared with the corresponding 2002 period, primarily
due to higher cost of copper production (approximately $13 million) primarily
due to higher energy costs; partially offset by higher average copper prices
(approximately $4 million).

Bagdad/Sierrita Segment  Operating Income

Our wholly owned Bagdad and Sierrita open-pit mines, located in northwest
Arizona and near Green Valley, Arizona, respectively, mine copper sulfide and
oxide ores. They produce copper and molybdenum concentrates. Since January
2002, the Bagdad and Sierrita mines have been producing between 50 and 70
percent of their capacity due to the economic environment. The 2003 second
quarter operating income of $18.3 million increased $13.8 million compared with
the 2002 second quarter, primarily due to lower cost of copper production
(approximately $13 million) and higher copper sales volumes (approximately $1
million). The lower cost of copper production of $13 million was primarily due
to higher molybdenum credits resulting from higher molybdenum prices and
volumes (approximately $19 million); partially offset by an unfavorable change
in heap leach and work-in-process inventory ($1 million), and higher
electricity costs (approximately $3 million).

Operating income of $25.0 million for the first six months of 2003
increased $24.8 million compared with the corresponding 2002 period, primarily
due to lower cost of copper production (approximately $25 million) and higher
average copper prices (approximately $2 million). The lower cost of copper
production of $25 million was primarily due to higher molybdenum credits
resulting from higher molybdenum prices and volumes (approximately $28
million), partially offset by higher electricity costs (approximately $4
million).

On April 28, 2003, the Company announced its copper concentrate-leaching
demonstration plant at Bagdad, Arizona, had been commissioned ahead of
schedule. It is now operating at design capacity. The Bagdad plant is the
first commercial facility in the world to use pressure leaching to treat
chalcopyrite concentrates. The new technology should make it more economical
to recover copper from chalcopyrite ores, which accounts for approximately 70
percent of the worlds known copper reserves. Our immediate plans are to
continue in the present mode of operation until the economic viability of the
process is proven. Once we have completed this demonstration, we will be ready
for larger scale commercial application where appropriate.



---



##### 



- 44 -

Miami/Bisbee
Segment  Operating Loss

Our wholly owned Miami open-pit mine, located in Miami, Arizona, produces
electrowon copper cathode. Since January 2002, the Miami mine and refinery
were closed temporarily due to the economic environment. The Bisbee
precipitation operation is located in southern Arizona. The 2003 second
quarter operating loss of $3.1 million decreased $0.7 million compared with the
2002 second quarter, primarily due to lower cost of copper production
(approximately $1 million) resulting from higher production and lower
depreciation expense (approximately $1 million).

The operating loss of $3.8 million for the first six months of 2003
decreased $4.5 million compared with the corresponding 2002 period, primarily
due to lower cost of copper production (approximately $6 million) resulting
from higher production (approximately $4 million) and lower depreciation
expense (approximately $2 million).

Chino/Cobre Segment  Operating Income (Loss)

The Chino open-pit mine, located near Silver City, New Mexico, primarily
mines copper sulfide and oxide ores. We own a two-thirds partnership interest
in Chino and apply the proportional consolidation method of accounting. Since
January 1, 2002, the Chino mine and smelter were closed temporarily; however,
residual leaching has continued. Our wholly owned Cobre mine, which is
adjacent to the Chino mine, has been on care-and-maintenance status since late
1998. The 2003 second quarter operating loss of $2.8 million increased $4.1
million compared with the 2002 second quarter, primarily due to lower copper
sales volumes (approximately $1 million), higher cost of copper production
(approximately $3 million) due to lower production from lower leach solution
grades and flow rates (approximately $2 million) and higher electricity costs
(approximately $1 million).

The operating loss of $4.9 million for the first six months of 2003
increased $11.9 million compared with the corresponding 2002 period, primarily
due to lower copper sales volumes (approximately $4 million), higher cost of
copper production (approximately $7 million) due to lower production from lower
leach solution grades and flow rates (approximately $6 million) and higher
electricity costs (approximately $3 million); partially offset by lower closure
expense (approximately $1 million) and lower operating costs (approximately $1
million).

Tyrone Segment  Operating Income (Loss)

Our wholly owned Tyrone open-pit mine, located near Tyrone, New Mexico,
primarily mines copper oxide ore. It produces electrowon copper cathode. The
2003 second quarter operating loss of $4.5 million increased $5.1 million
compared with the 2002 second quarter, due to higher cost of copper production
(approximately $5 million). The higher cost of copper production included an
unfavorable change in heap leach and work-in-process inventory (approximately
$8 million) and higher depreciation (approximately $1 million); partially
offset by lower closure expense from the adoption of SFAS No. 143
(approximately $3 million).

The operating loss of $8.9 million for the first six months of 2003
increased $7.8 million compared with the corresponding 2002 period, due to
higher cost of copper production (approximately $9 million); partially offset
by higher average copper prices (approximately $1 million). The higher cost of
copper production included an unfavorable change in heap leach and
work-in-process inventory (approximately $19 million); partially offset by
lower costs associated with mine plan changes (approximately $4 million) and
lower closure expense from the adoption of SFAS No. 143 (approximately $6
million).

South American Mines  Operating Income

South American Mines reported operating income in the 2003 second quarter
of $27.4 million, compared with operating income of $20.2 million in the 2002
second quarter.

South American Mines reported operating income of $63.6 million for the
first six months of 2003, compared with operating income of $47.7 million for
the first six months of 2002.

(Refer to the separate discussion of PDMCs segments below for further
detail.)

Candelaria Segment  Operating Income

The Candelaria open-pit mine is located near Copiapó in northern Chile and
produces copper concentrates. We own an 80 percent partnership interest in
Candelaria, a Chilean contractual mining company, and we apply the proportional
consolidation method of accounting. Operating income of $13.6 million in the
2003 second quarter increased $0.4 million compared with the 2002 second
quarter, primarily due to higher average



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##### 



- 45 -

realized prices ($2 million) and lower unit cost of copper production
(approximately $2 million); partially offset by lower copper sales volumes
(approximately $3 million).

Operating income of $36.7 million for the first six months of 2003
increased $3.3 million compared with the corresponding 2002 period, primarily
due to lower cost of copper production ($4 million) resulting from a higher
copper ore grade (approximately $1 million) and lower downstream rates
(approximately $3 million).

Cerro Verde Segment  Operating Income

The Cerro Verde open-pit mine, located near Arequipa, Peru, produces
electrowon copper cathode. We own approximately 82 percent of the common stock
of Cerro Verde, which we fully consolidate and show the minority interest. The
2003 second quarter operating income of $8.6 million increased $1.8 million
from the 2002 second quarter, primarily due to higher average copper prices
(approximately $1 million) and lower cost of copper production (approximately
$1 million) primarily due to higher production.

Operating income of $16.1 million for the first six months of 2003
increased $2.5 million from the corresponding 2002 period, primarily due to
higher average copper prices (approximately $3 million) and higher copper sales
volumes (approximately $1 million); partially offset by higher cost of copper production
(approximately $1 million) primarily due to the change in heap leach and
work-in-process inventory.

El Abra Segment  Operating Income

The El Abra open-pit mine is located in northern Chile and produces
electrowon copper cathode. We own a 51 percent partnership interest in El
Abra, a Chilean contractual mining company, and we apply the proportional
consolidation method of accounting. The remaining 49 percent interest is owned
by Corporación Nacional del Cobre de Chile (CODELCO), a Chilean state-owned
company. The 2003 second quarter operating income of $5.2 million increased
$5.0 million from the 2002 second quarter, primarily due to higher average
copper prices (approximately $3 million) and lower cost of copper production
(approximately $2 million) primarily comprising lower electricity costs
(approximately $1 million).

Operating income of $10.8 million for the first six months of 2003
increased $10.1 million from the corresponding 2002 period, primarily due to
higher average copper prices (approximately $6 million) and lower cost of
copper production (approximately $4 million) primarily comprising a favorable
change in heap leach and work-in-process inventory (approximately $8 million)
and lower energy costs (approximately $2 million); partially offset by higher
depreciation expense (approximately $2 million) and lower production levels
(approximately $2 million).

Primary Molybdenum  Operating Income (Loss)

Primary Molybdenum includes our wholly owned Henderson and Climax
molybdenum mines in Colorado and conversion facilities in the United States and
Europe. Henderson produces high-purity, chemical-grade molybdenum
concentrates, which are further processed into value-added molybdenum chemical
products. Climax is currently on care-and-maintenance status. We expect to
bring Climax into production concurrent with the exhaustion of the Henderson
molybdenum mine reserves for continued long-term primary molybdenum supply for
the chemicals business.

Primary Molybdenum operations reported operating income in the 2003 second
quarter of $0.4 million, compared with operating income of $0.5 million in the
second quarter of 2002. The 2003 second quarter decrease of $0.1 million
primarily was due to higher average molybdenum prices (approximately $24
million), essentially offset by higher mining costs (approximately $3 million),
higher costs of third-party purchases and by-product molybdenum (approximately
$18 million), higher shutdown expenses (approximately $2 million) and higher
marketing costs (approximately $1 million).

Primary Molybdenum operations reported operating income of $0.5 million
for the first six months of 2003, compared with operating income of $0.2
million for the first six months of 2002. The increase of $0.3 million
primarily was due to higher average molybdenum prices (approximately $39
million); offset by higher production costs (approximately $10 million), higher
costs of third-party purchases and by-product molybdenum (approximately $26
million), higher shutdown expenses (approximately $2 million) and lower tolling
profits (approximately $1 million). The higher production costs primarily
resulted from higher mining (approximately $5 million), conversion cost
(approximately $3 million), and energy costs (approximately $1 million).



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##### 



- 46 -

PDMC  Other Matters

We have approximately 700 million to 760 million pounds of curtailed
annual copper production capacity (100 percent basis), depending on near-term
mine plans, that could be brought to market. At the end of the 2003 second
quarter, such capacity approximated 705 million pounds
(660 million pounds, in
the United States and 45 million pounds internationally). This curtailed
capacity is located at eight of our mine sites, all with existing
infrastructures. Approximately 605 million to 665 million pounds of this
curtailed annual capacity is located at our active mine sites and approximately
95 million pounds is located at inactive sites (50 million at Cobre and 45
million at Ojos del Salado).

Any decision to recommence full operations at these sites will depend on
several factors including then-prevailing copper prices, managements
assessment of copper market fundamentals and its estimates of future copper
price trends and the extent to which any such new production is necessary for
the efficient integration of the Companys other copper-producing operations at
that time. Managements assessment of copper market fundamentals will reflect
its judgment about future global economic activity and demand, and its
estimates of the likelihood and timing of curtailed or new projects of
competitors being placed into production. While there is no single copper
price threshold that would necessarily trigger the recommencement of full
operations at any of these sites, management does not expect to recommence
operations until there has been a significant improvement in copper market
fundamentals or a production integration inefficiency that could be alleviated
by such recommencement.

Any material change in the price we receive for copper, or in PDMCs
implied unit cost of copper production, has a significant effect on our
results. Based on expected 2003 annual production of approximately 2.1 billion
pounds of copper, each 1 cent per pound change in the average annual copper
price, or in average annual implied unit cost of copper production, causes a
variation in annual operating income before taxes of approximately $21 million.

Our current annual molybdenum production is approximately 51 million
pounds (approximately 23 million pounds from primary mines and 28 million
pounds from by-product mines). Approximately 70 percent of our molybdenum
contracts are priced based on the average of the previous 30 days of published
prices (i.e., Platts Metals Week, Ryans Notes, or Metal Bulletin), plus
premiums. Accordingly, each $1.00 per pound change in our average annual
realized molybdenum price causes a variation in annual operating income before
taxes of approximately $36 million (subject to any negotiated limitations in
outstanding customer agreements).

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. We did not
have any outstanding copper price protection contracts on June 30, 2003.

PDMC  New Mexico Reclamation

Mining and smelting operations with leaching, tailing ponds, surface
impoundments and other discharging facilities in New Mexico are subject to
regulation under the New Mexico Water Quality Act and the Water Quality Control
Commission (WQCC) Regulations. The Chino, Cobre and Tyrone mines and the
Hidalgo smelter each have obtained multiple discharge permits for their
operations, which specify operational, monitoring and notification
requirements. These permits are issued for five-year terms and require renewal
following the end of each permit term. The WQCC Regulations authorize the New
Mexico Environment Department (NMED), which administers the discharge permit
program, to require the submission of closure plans showing how applicable
discharge permit requirements will be met following closure. Under certain
circumstances, NMED also may require submission and approval of abatement plans
to address the exceedance of applicable water quality standards.

Further, Chino, Cobre, Tyrone and Hidalgo must submit closure plans for
their operations. Hidalgo has an approved closure plan under its discharge
permit. The three mines have submitted closure plans, which have been combined
with closeout plans under the New Mexico Mining Act (NMMA), as discussed below.
The proposed closure plans currently are subject to approval by NMED as part
of separate discharge permits for closure for each of the three operations that
would supplement the existing discharge permits (hereinafter referred to as
closure permits). The proposed closure permits contain a number of permit
conditions that would modify the proposed closure plans. Chino Mines Company
and NMED reached agreement in December 2001 on proposed closure permit
conditions presented at a public hearing in February 2002. On January 23,
2003, NMEDs hearing officer issued a



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##### 



- 47 -

decision approving the closure permit as proposed by NMED and Chino, with
minor changes. NMED issued a permit consistent with the hearing officers
decision on February 24, 2003. An appeal has been filed by a local
environmental group. Phelps Dodge Tyrone, Inc. and NMED were unable to reach
agreement on permit terms before a public hearing held in May 2002, and
presented competing permit proposals. Other parties who participated in the
public hearing presented their own proposals. On March 7, 2003, Tyrone
received the hearing officers decision on its permit, which generally adopted
NMEDs proposal. On April 2, 2003, Tyrone filed an appeal of the hearing
officers decision with WQCC. NMED issued a permit in accordance with the
hearing officers decision on April 8, 2003, which Tyrone also has appealed.
Cobre Mining Company and NMED also have not reached agreement on the terms of a
closure permit. The closure permit for Cobre Mining Company does not require a
public hearing, and may be issued by NMED at any time.

Chino, Cobre and Tyrone also are subject to permit requirements under
NMMA, which was passed in 1993. Following adoption of the New Mexico Mining
Act Rules (NMMAR) in 1994, Chino, Cobre and Tyrone received initial permits as
existing mining operations under NMMAR in 1997. These permits require
revisions to incorporate approved closeout plans, which consist of plans for
reclamation of the mining operations to achieve a self-sustaining ecosystem or
an approved post-mining land use following cessation of operations at a mine.
Existing mining operations may seek a waiver of these reclamation standards for
open pits and waste units based upon a demonstration that achieving these
standards is technically or economically infeasible or environmentally unsound,
as long as measures will be taken to meet air and water quality standards
following closure.

NMMAR originally required approval of a closeout plan for an existing
mining operation by December 31, 1999, based upon an extension granted by the
Director of the Mining and Minerals Division (MMD). NMMAR subsequently was
amended to extend the deadline for closeout plan approval until December 31,
2001, and later to October 1, 2002. NMMAR contains a requirement that NMED
must provide MMD with a determination that a closeout plan meets applicable
environmental standards, including air and water quality standards, before MMD
can approve the closeout plan. NMEDs policy is to issue this determination
after it has issued closure permits for the facility that submits the closeout
plan. In early 2001, Chino, Cobre and Tyrone submitted comprehensive
closure/closeout plans (CCPs) to both NMED and MMD intended to address the
requirements of both the WQCC Regulations and NMMAR. Approval of the CCPs
under NMMAR would require the granting of waivers by MMD as authorized under
NMMAR. The CCPs were the subject of the public hearings before NMED for Chino
and Tyrone, as discussed above.

As of October 1, 2002, NMED had not issued closure permits for Chino,
Cobre or Tyrone. Consequently, as of October 1, 2002, MMD had not approved
closeout permits for these three mines. MMD issued Notices of Violation (NOVs)
to Chino, Cobre and Tyrone because the three mines did not obtain approved
closeout plans by the October 1, 2002, deadline. The NOVs were modified by the
Mining Commission following a public hearing to set new deadlines for closeout
plan approval tied to NMED permit actions. Based on NMEDs permit actions,
closeout plan approval for Chino is now due by September 24, 2003, and the
closeout plan approval date for Tyrone is April 8, 2004. The closeout plan
approval deadline for Cobre will be nine months from the date of NMEDs permit
issuance, which is currently pending.

NMMAR contains specific requirements regarding financial assurance that
must be provided to MMD to assure that sufficient funds would be available to
MMD to carry out the closeout plan in the event of a default by the permittee.
NMED also may require financial assurance under the WQCC Regulations. The
financial assurance requirements are based upon the net present value of
estimated costs to carry out the requirements of the closure permit and the
approved closeout plan, assuming the state would hire a third-party contractor
to conduct the work. Actual reclamation costs may differ significantly from
the costs estimated under the permits due to advances in technology and
reclamation techniques and opportunities to prepare each site for more
efficient reclamation through careful development of the site over time.
Consequently, the estimated costs under the permits are higher than the cost
the Company would be expected to incur if the Company performed the work.

The CCPs submitted in early 2001 contained cost estimates of approximately
$100 million for Chino, $121 million for Tyrone, and $9 million for Cobre,
based upon unescalated and undiscounted capital and operating costs over a
30-year operating period. The closure permit negotiated by NMED and Chino
Mines Company and approved by the NMED hearing officer has an estimated cost of
approximately $394 million, based



---



##### 



- 48 -

upon third-party unescalated and undiscounted capital and operating costs
over a 100-year operating period, including the cost of technical studies
required under the permit. The Companys two-thirds share of NMEDs $394
million estimate is approximately $263 million and our joint venture partners
cost share is approximately $131 million. We estimate total costs for Chino
Mines Company to achieve the closure standards required by NMED to be
approximately $264 million (100 percent basis); that estimate is approximately
one-third lower than the financial assurance cost estimate as a result of the
Companys historical cost advantages, savings from the use of the Companys own
personnel and equipment versus third-party contract costs, and opportunities to
prepare the site for more efficient reclamation. The financial assurance cost
estimate includes approximately $10 million (100 percent basis) of costs the
Company has recognized in environmental reserves. The Companys two-thirds
share of these costs is approximately $176 million and our joint venture
partners cost share is approximately $88 million. At June 30, 2003, and
December 31, 2002, we had accrued approximately $18 million and $8 million,
respectively, (two-thirds basis) for reclamation at Chino. The NMED cost
estimate for Chino is subject to further review, and possible adjustment, by
MMD under NMMAR.

NMED estimated the cost to carry out the requirements of its proposed
closure permits for Tyrone at approximately $440 million, without discounting
or escalation, under NMEDs proposal at the May 2002 hearing; Tyrone estimated
the cost of its proposal at approximately $328 million, without discounting or
escalation over a 100-year operating period. NMED has not yet supplied its
proposed cost estimate for Cobre. The proposed terms of the closure permits
would require additional studies over the five-year term of the permits to
refine the closure plan. The plan requirements and cost estimates may increase
or decrease based upon the results of the studies and other factors, including
changes in technology, completion of some closure and reclamation work, and
inflation.

Based upon NMEDs undiscounted financial assurance cost estimates for the
Tyrone plan of approximately $440 million, and considering the same cost
advantages as indicated in the above discussion regarding Chino, we estimate
the Companys costs to achieve the closure standards under that estimate to be
approximately $288 million for Tyrone. The Company has not obtained approval
from NMED of an estimate of its cost to achieve the closure standards that
would be required by the hearing officers decision. The Companys current
cost estimate for Cobre of approximately $9 million will be updated with the
issuance of the discharge permit. At June 30, 2003, and December 31, 2002, we
had accrued closure costs of approximately $60 million and $27 million,
respectively, at Tyrone and approximately $6 million and $2 million,
respectively, at Cobre.

Following NMEDs issuance of the closure permits, Chino, Cobre and Tyrone
are required to submit proposals for financial assurance based upon the permit
requirements and subject to NMEDs approval. Under the proposed closure permit
terms, the amount of financial assurance may be based upon the net present
value (NPV) of the estimated cost for a third-party to implement the plan,
using discount and escalation rates specified in the permit. These amounts are
expected to be substantially lower than the undiscounted and unescalated cost
estimates. For example, based upon the cost estimate approved by NMED, the
financial assurance amount for Chino could be approximately $191 million. This
amount is based on annual escalation rates of approximately 3.2 percent for
long-term water treatment costs and approximately 3.6 percent for other costs
and discount rates of 5 percent for years one through 12 of the plan and 8
percent for years 13 through 100.

NMMAR requires that financial assurance for a closeout plan be approved
and put in place before MMD can approve the closeout plan. Chino and Tyrone
have provided approximately $56 million and $58 million of financial assurance
in the form of surety bonds, respectively, to NMED under the terms of several
discharge permits. The closure and financial assurance requirements of these
permits have been superseded by the recently issued NMED closure permits.
Consequently, the Company has advised NMED that this financial assurance should
be terminated and replaced by new financial assurance under the terms of the
new closure permits. Chino and Tyrone have submitted financial assurance
proposals in accordance with the schedules under their NMED closure permit
proposing financial assurance primarily in the form of corporate performance
guarantees from the Company. Cobre also has approximately $2 million of
financial assurance in place held jointly by NMED and MMD. Following NMEDs
issuance of the closure permits, and prior to MMDs approval of the closeout
plans, Chino, Tyrone and Cobre will be required to provide substantial amounts
of additional financial assurance to cover the amounts of the approved cost
estimates. Hidalgo currently has provided financial assurance in the amount of
approximately $11 million under its discharge permit.



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##### 



- 49 -

In late May 2003, the Company and the state announced an agreement on a
framework for the Company to provide financial assurance for Chino, Tyrone and
Cobre under both NMMAR and WQCC Regulations. Under this agreement, the Company
will provide financial assurance based upon the NPV of the cost estimates in a
total amount of approximately $484 million. Initially, approximately 70 percent of this
amount will be covered by a corporate performance guarantee. At least $50 million will
be provided in the form of trust funds, increasing to at least $75 million
after five years. The balance will be provided as collateral, including liens
on certain owned parcels of non-mining real estate located in New Mexico. In
addition, the Company will expend at least $30 million on accelerated closure
and reclamation work over the next 10 years. The amount of the guarantee will
be reduced to approximately 64 percent by the amount of accelerated reclamation performed. Finalization of the financial assurance is subject to
completion of the permitting process, including additional public comment and
hearings. MMD also has proposed some changes to NMMAR for consideration by the
Mining Commission, which could affect the final financial assurance package.

RESULTS OF PHELPS DODGE INDUSTRIES

PDI, 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 and our Wire and Cable segment. Our Specialty
Chemicals segment includes Columbian Chemicals Company and its subsidiaries
(Columbian Chemicals or Columbian). Our Wire and Cable segment consists of
three worldwide product line businesses including magnet wire, energy and
telecommunications cables, and specialty conductors.

(Unaudited; $ in millions)

|                                                              |                     |   |                |       |      |  |       |       | 
|------------------------------------------------------------- | ------------------- | - | -------------- | ----- | ---- |  | ----- | ----- | 
|                                                              |                     |   | Second Quarter
|                                                              |                     |   |               
|                                                              |                     |   | 2003           |       | 2002
|                                                              |                     |   |                |       |     
|Sales and other operating revenues
to unaffiliated customers: |                     |   |                |       |      |  |       |      
|                                                              | Specialty Chemicals |   | $              | 166.1 |      |  |       | 140.5 | 
|                                                              | Wire and Cable      |   |                | 154.5 |      |  |       | 181.8 | 
|                                                              |                     |   |                |       |      |  |       |      
|                                                              |                     | $ | 320.6          |       |      |  | 322.3 |      
|                                                              |                     |   |                |       |      |  |       |      
|Operating income:                                             |                     |   |                |       |      |  |       |      
|                                                              | Specialty Chemicals |   | $              | 15.0  |      |  |       | 17.0  | 
|                                                              | Wire and Cable      |   |                | 3.5   |      |  |       | 3.3   | 
|                                                              |                     |   |                |       |      |  |       |      
|                                                              |                     | $ | 18.5           |       |      |  | 20.3  |      
|                                                              |                     |   |                |       |      |  |       |      

(Unaudited; $ in millions)

|                                                              |                     |   |                  |       |      |  |       |       | 
|------------------------------------------------------------- | ------------------- | - | ---------------- | ----- | ---- |  | ----- | ----- | 
|                                                              |                     |   | Six Months Ended
|                                                              |                     |   | June 30,        
|                                                              |                     |   |                 
|                                                              |                     |   | 2003             |       | 2002
|                                                              |                     |   |                  |       |     
|Sales and other operating revenues
to unaffiliated customers: |                     |   |                  |       |      |  |       |      
|                                                              | Specialty Chemicals |   | $                | 328.2 |      |  |       | 269.8 | 
|                                                              | Wire and Cable      |   |                  | 315.4 |      |  |       | 359.3 | 
|                                                              |                     |   |                  |       |      |  |       |      
|                                                              |                     | $ | 643.6            |       |      |  | 629.1 |      
|                                                              |                     |   |                  |       |      |  |       |      
|Operating income:                                             |                     |   |                  |       |      |  |       |      
|                                                              | Specialty Chemicals |   | $                | 29.1  |      |  |       | 30.2  | 
|                                                              | Wire and Cable      |   |                  | 6.9   |      |  |       | 6.1   | 
|                                                              |                     |   |                  |       |      |  |       |      
|                                                              |                     | $ | 36.0             |       |      |  | 36.3  |      
|                                                              |                     |   |                  |       |      |  |       |      



---



##### 



- 50 -

PDI  Sales

PDI reported sales to unaffiliated customers of $320.6 million in the 2003
second quarter, compared with $322.3 million in the 2002 second quarter. The
decrease of $1.7 million was due to lower sales volumes of wire and cable as a
result of reduced demand stemming from continuing global economic uncertainty
(approximately $27 million). This decrease was mostly offset by higher
specialty chemicals sales resulting primarily from higher average unit selling
prices worldwide (approximately $23 million) due to higher feedstock-related
increases.

PDI reported sales to unaffiliated customers of $643.6 million for the
first six months of 2003, compared with $629.1 million in the corresponding
2002 period. The increase of $14.5 million was due to higher specialty
chemicals sales resulting from higher sales volumes (approximately $8 million)
and higher average unit selling prices worldwide (approximately $51 million)
due to general market increases and higher feedstock-related increases. This
increase was partially offset by lower sales volumes of wire and cable as a
result of reduced demand stemming from continuing global economic uncertainty
(approximately $44 million).

PDI  Operating Income

PDI reported operating income of $18.5 million in the 2003 second quarter,
compared with $20.3 million in the 2002 second quarter.

PDI reported operating income of $36.0 million for the first six months of
2003, including a special, net pre-tax gain of $3.2 million, compared with
operating income of $36.3 million in the corresponding 2002 period.

(Refer to the separate discussion of PDIs Specialty Chemicals and Wire
and Cable segments below for further detail.)

Note: Supplemental Data

The following table summarizes PDIs special items for the second quarter
and first six months of 2003 and 2002 and the resultant earnings excluding
these special items:

(Unaudited; $ in millions)

|                                                   |  |                |      |      |  |  |      | 
|-------------------------------------------------- |  | -------------- | ---- | ---- |  |  | ---- | 
|                                                   |  | Second Quarter
|                                                   |  |               
|                                                   |  | 2003           |      | 2002
|                                                   |  |                |      |     
|Operating income                                   |  | $              | 18.5 |      |  |  | 20.3 | 
|Special, pre-tax items                             |  |                |     |      |  |  |     | 
|                                                   |  |                |      |      |  |  |      | 
|Segment operating earnings
excluding special items |  | $              | 18.5 |      |  |  | 20.3 | 
|                                                   |  |                |      |      |  |  |      | 

(Unaudited; $ in millions)

|                                                   |  |                  |      |      |  |  |      | 
|-------------------------------------------------- |  | ---------------- | ---- | ---- |  |  | ---- | 
|                                                   |  | Six Months Ended
|                                                   |  | June 30,        
|                                                   |  |                 
|                                                   |  | 2003             |      | 2002
|                                                   |  |                  |      |     
|Operating income                                   |  | $                | 36.0 |      |  |  | 36.3 | 
|Special, pre-tax items                             |  |                  | 3.2  |      |  |  |     | 
|                                                   |  |                  |      |      |  |  |      | 
|Segment operating earnings
excluding special items |  | $                | 32.8 |      |  |  | 36.3 | 
|                                                   |  |                  |      |      |  |  |      | 



---

Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.


Special items and provisions in operating income were as follows:

(Unaudited; $ in millions)

|                                                     |  |                  |     |      |  |  |   | 
|---------------------------------------------------- |  | ---------------- | --- | ---- |  |  | - | 
|                                                     |  | Six Months Ended
|                                                     |  | June 30,        
|                                                     |  |                 
|                                                     |  | 2003             |     | 2002
|                                                     |  |                  |     |     
|Termination of a foreign
postretirement benefit plan |  | $                | 3.2 |      |  |  |  | 
|                                                     |  |                  |     |      |  |  |   | 



---

Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.




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##### 



- 51 -

Specialty Chemicals  Operating Income

Specialty Chemicals reported operating income in the 2003 second quarter
of $15.0 million, compared with $17.0 million in the 2002 second quarter. The
2003 second quarter decrease of $2.0 million primarily was due to feedstock and
natural gas cost increases, lower sales volumes and the timing of plant
turnarounds (approximately $32 million), partially offset by favorable sales
revenues primarily from higher average unit selling prices worldwide
(approximately $28 million) due to higher feedstock-related increases and Quest
for Zeroimprovements of approximately $1 million.

Specialty Chemicals reported operating income of $29.1 million for the
first six months of 2003 including a special, net pre-tax gain of $3.2 million,
compared with operating income of $30.2 million for the first six months of
2002. The decrease of $1.1 million was minimized due to a special, pre-tax
gain of $3.2 million that resulted from the termination of a foreign
postretirement benefit plan and Quest for Zeroimprovements of approximately $4
million. In addition, feedstock and natural gas cost increases and the timing
of plant turnarounds for specialty chemical operations (approximately $61
million) were mostly offset by favorable sales revenues primarily from higher
average unit selling prices worldwide (approximately $51 million) due to higher
feedstock-related increases.

Note: Supplemental Data

The following table summarizes Specialty Chemicals special items for the
first six months of 2003 and 2002 and the resultant earnings excluding these
special items:

(Unaudited; $ in millions)

|                                                   |  |                  |      |      |  |  |      | 
|-------------------------------------------------- |  | ---------------- | ---- | ---- |  |  | ---- | 
|                                                   |  | Six Months Ended
|                                                   |  | June 30,        
|                                                   |  |                 
|                                                   |  | 2003             |      | 2002
|                                                   |  |                  |      |     
|Special, pre-tax items                             |  | $                | 3.2  |      |  |  |     | 
|Segment operating earnings
excluding special items |  | $                | 25.9 |      |  |  | 30.2 | 



---

Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.


Wire and Cable  Operating Income

Wire and Cable reported operating income in the 2003 second quarter of
$3.5 million, compared with $3.3 million in the 2002 second quarter. Wire and
Cables sales decreased $27.3 million as a result of reduced demand stemming
from continuing global economic uncertainty, and operating costs decreased
$27.5 million including Quest for Zeroimprovements of approximately $1
million. There were no special items in either quarter.

Wire and Cable reported operating income of $6.9 million for the first six
months of 2003, compared with $6.1 million for the first six months of 2002.
Wire and Cables sales decreased $43.9 million as a result of reduced demand
stemming from continuing global economic uncertainty, and operating costs
decreased $44.8 million including Quest for Zeroimprovements of approximately
$4 million. There were no special items in either six months ended June 30,
2003 and 2002.

OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS

Selling and General Administrative Expense

Our selling and general administrative expense increased $6.0 million and
$6.5 million, respectively, for the three- and six-month periods ended June 30,
2003, compared with the corresponding 2002 periods. The increases primarily
resulted from higher legal fees associated with the RAG settlement, SEC reviews
and other legal matters.

Exploration and Research Expense

Our net exploration and research expense was $12.9 million in the 2003
second quarter, compared with $9.2 million in the 2002 second quarter. The
increase primarily resulted from slightly higher PDMC research expense
(approximately $2 million) and exploration expense ($2 million).

Net exploration and research expense was $22.5 million for the first six
months of 2003, compared with $17.9 million in the corresponding 2002 period.
The increase primarily resulted from slightly higher PDMC research expense
(approximately $3 million) and exploration expense (approximately $1 million).



---



##### 



- 52 -

Interest Expense

Interest expense decreased $12.2 million in the 2003 second quarter,
compared with the 2002 second quarter. The decrease in the 2003 second quarter
primarily was attributable to reductions related to the payoff of long-term
debt (approximately $10.0 million) and project financing in 2002 (approximately
$2.8 million).

Interest expense decreased $29.0 million for the first six months of 2003,
compared with the corresponding 2002 period. The decrease was primarily
attributable to reductions related to the payoff of long-term debt
(approximately $23.8 million) and project financing in 2002 (approximately $5.9
million).

Miscellaneous Income (Expense), Net

Miscellaneous income (expense), net, increased $12.6 million in the 2003
second quarter compared with the 2002 second quarter. The increase for the
2003 second quarter resulted primarily from the gain on sale of a cost-basis
wire and cable investment ($6.4 million), mark-to-market benefits on
non-qualified pension plan assets ($4.0 million), and foreign currency exchange
gains ($2.1 million); partially offset by higher shutdown expenses ($1.9
million).

Miscellaneous income (expense), net, increased $11.5 million for the first
six months of 2003 compared with the corresponding 2002 period. The increase
resulted primarily from the gain on sale of a cost-basis wire and cable
investment ($6.4 million), mark-to-market benefits on non-qualified pension
plan assets ($3.5 million), and foreign currency exchange gains ($2.9 million);
partially offset by higher shutdown expenses ($3.8 million).

Benefit (Provisions) for Taxes on Income

The Companys income tax provision for the 2003 second quarter principally
resulted from (i) taxes on earnings at international operations ($12.2 million)
that cannot be offset by losses at domestic operations and (ii) a benefit from
finalizing year-end 2002 estimates in the Companys 2002 U.S. tax return filed
in June 2003 ($4.2 million). The Companys income tax provision for the six
months ended June 30, 2003, primarily comprised the following: (i) taxes on
earnings at international operations ($26.3 million) that cannot be offset by
losses at domestic operations and (ii) a benefit from finalizing year-end 2002
estimates in the Companys 2002 U.S. tax return filed in June 2003 ($4.2
million).

The Companys income tax provision for the 2002 second quarter, primarily
comprised the following: (i) a $21.9 million benefit recognized for the second
quarter 2002 net operating losses that, based on the March enactment of the Job
Creation and Worker Assistance Act of 2002, may be carried back to recover
prior years taxes paid; (ii) a $13.0 million benefit for release of deferred
taxes previously provided with regard to Plateau Mining Corporation; and (iii)
a $4.1 million expense for taxes on earnings at international operations. The
Companys income tax benefit for the six months ended June 30, 2002,
principally comprised the following items: (i) a $38.5 million tax benefit
associated with the carryback of 2001 net operating losses that, based on the
new tax legislation, may also be carried back to recover prior years taxes
paid; (ii) a $34.8 million benefit recognized for the first half of 2002 net
operating losses, based on the new tax legislation; (iii) a $15.8 million
expense for taxes on earnings at international operations; and (iv) a $13.0
million benefit for release of deferred taxes previously provided.

The Company completed its 2002 federal income tax return in June 2003 and
filed for a $67.5 million tax refund, which was received in July 2003.

Cumulative Effect of Accounting Change

On January 1, 2003, we adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. With the adoption of this Statement, we recognize
asset retirement obligations (AROs) as liabilities when incurred, with the
initial measurement at fair value. These liabilities will be accreted to full
value over time through charges to income. In addition, an asset retirement
cost was capitalized as part of the related assets carrying value and will
subsequently be depreciated over the assets useful life. Our AROs consist
primarily of costs associated with mine reclamation and closure activities.
These activities, which tend to be site specific, generally include costs for
earthwork, revegetation, water treatment and demolition. Upon adoption, we
recorded an increase to our closure and reclamation reserve of approximately
$2.5 million, net, an increase to our mining properties assets of approximately
$12.2 million and a cumulative gain of $8.4 million, net of deferred taxes.
For the three and six months ended June 30, 2003, the effect of adopting SFAS
No. 143 decreased loss before cumulative effect of accounting change by
approximately $8 million, or 9 cents per common share, and $11 million, or 12
cents per common share, respectively.



---



##### 



- 53 -

The following table summarizes the balance sheet impact associated with
the adoption of SFAS No. 143:

(Unaudited; $ in millions)

|                                           |                              |   |              |       |          |  |          |      |            |  |        |       | 
|------------------------------------------ | ---------------------------- | - | ------------ | ----- | -------- |  | -------- | ---- | ---------- |  | ------ | ----- | 
|                                           |                              |   |              |       |          |  | SFAS     |      | January 1,
|                                           |                              |   | December 31, |       | No. 143  |  | 2003    
|                                           |                              |   | 2002         |       | Adoption |  | After   
|                                           |                              |   | As
Reported* |       | Impact   |  | Adoption
|                                           |                              |   |              |       |          |  |         
|Mining properties                          |                              | $ | 907.4        |       |          |  | 63.8     | **   |            |  | 971.2  |      
|Mining properties
accumulated
depreciation |                              |   | (197.1       | )     |          |  | (53.2    | )    |            |  | (250.3 | )    
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|                                           | Net mining
properties
assets |   | $            | 710.3 |          |  |          | 10.6 |            |  |        | 720.9 | 
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|Intangibles                                |                              | $ | 439.5        |       |          |  | 3.6      | **   |            |  | 443.1  |      
|Intangibles 
accumulated
amortization     |                              |   | (93.6        | )     |          |  | (2.0     | )    |            |  | (95.6  | )    
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|                                           |                              | $ | 345.9        |       |          |  | 1.6      |      |            |  | 347.5  |      
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      
|Asset retirement
obligation
liability      |                              | $ | 138.6        |       |          |  | 10.4     | ***  |            |  | 149.0  |      
|                                           |                              |   |              |       |          |  |          |      |            |  |        |      



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

The pro formaeffects of the application of SFAS No. 143 as if this
Statement had been adopted on January 1, 2002, are presented below:

(Unaudited; $ in millions except per share data)

|                                                                     |                                 |                                 |       |               |       |  
|-------------------------------------------------------------------- | ------------------------------- | ------------------------------- | ----- | ------------- | ----- | -
|                                                                     |                                 |                                 |       | Three Months 
|                                                                     |                                 |                                 |       | Ended        
|                                                                     |                                 |                                 |       | June 30, 2002
|                                                                     |                                 |                                 |       |              
|Loss before cumulative effect of
accounting change as reported       |                                 | $                               | (34.3 | )            
|Reduced cost of products sold, net
of tax                            |                                 |                                 | 4.5   |              
|Additional depreciation expense,
net of tax benefit                  |                                 |                                 | (0.5  | )            
|                                                                     |                                 |                                 |       |              
|Pro formaloss before cumulative
effect of accounting change          |                                 | $                               | (30.3 | )            
|                                                                     |                                 |                                 |       |              
|Loss per common share before
cumulative effect of accounting
change: |                                 |                                 |       |              
|                                                                     |                                 | Basic and diluted  as reported |       | $             | (0.46 | )
|                                                                     |                                 | Basic and diluted  pro forma   |       | $             | (0.41 | )
|Net loss as reported                                                 |                                 | $                               | (34.3 | )            
|Pro formanet loss                                                    |                                 | $                               | (30.3 | )            
|Loss per common share:                                               |                                 |                                 |       |              
|                                                                     | Basic and diluted  as reported |                                 | $     | (0.46         | )    
|                                                                     | Basic and diluted  pro forma   |                                 | $     | (0.41         | )    

(Unaudited; $ in millions except per share data)

|                                                                     |                                 |                                 |       |                  |       |      |       |       |       |  
|-------------------------------------------------------------------- | ------------------------------- | ------------------------------- | ----- | ---------------- | ----- | ---- | ----- | ----- | ----- | -
|                                                                     |                                 |                                 |       | Six Months Ended
|                                                                     |                                 |                                 |       | June 30,        
|                                                                     |                                 |                                 |       |                 
|                                                                     |                                 |                                 |       | 2003             |       | 2002
|                                                                     |                                 |                                 |       |                  |       |     
|Loss before cumulative effect of
accounting change as reported       |                                 | $                               | (38.6 | )                |       |      | (36.2 | )    
|Reduced cost of products sold, net
of tax                            |                                 |                                 |      |                  |       |      | 9.3   |      
|Additional depreciation expense,
net of tax benefit                  |                                 |                                 |      |                  |       |      | (1.0  | )    
|                                                                     |                                 |                                 |       |                  |       |      |       |      
|Pro formaloss before cumulative
effect of accounting change          |                                 | $                               | (38.6 | )                |       |      | (27.9 | )    
|                                                                     |                                 |                                 |       |                  |       |      |       |      
|Loss per common share before
cumulative effect of accounting
change: |                                 |                                 |       |                  |       |      |       |      
|                                                                     |                                 | Basic and diluted  as reported |       | $                | (0.51 | )    |       |       | (0.48 | )
|                                                                     |                                 | Basic and diluted  pro forma   |       | $                | (0.51 | )    |       |       | (0.38 | )
|Net loss as reported                                                 |                                 | $                               | (30.2 | )                |       |      | (59.1 | )    
|Pro formanet loss                                                    |                                 | $                               | (38.6 | )                |       |      | (50.8 | )    
|Loss per common share:                                               |                                 |                                 |       |                  |       |      |       |      
|                                                                     | Basic and diluted  as reported |                                 | $     | (0.42            | )     |      |       | (0.77 | )    
|                                                                     | Basic and diluted  pro forma   |                                 | $     | (0.51            | )     |      |       | (0.67 | )    



---



##### 



- 54 -

The pro formaasset retirement obligation liability balances as if SFAS
No. 143 had been adopted on January 1, 2002, are as follows:

(Unaudited; $ in millions)

|                                                                   |  |   |       | 
|------------------------------------------------------------------ |  | - | ----- | 
|Pro formaasset retirement obligation
liability  January 1, 2002   |  | $ | 138.1 | 
|Pro formaasset retirement obligation
liability  December 31, 2002 |  | $ | 149.0 | 

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. Under SFAS No. 142, goodwill and intangible assets
that have indefinite useful lives are not amortized, but rather tested at least
annually for impairment. Intangible assets that have finite useful lives will
continue to be amortized over their useful lives. Upon completion of the
transitional impairment tests, the fair value of three of the Companys
international wire and cable reporting units was determined to be less than the
related carrying amount. The resulting impairment loss recognized upon
adoption of SFAS No. 142 in the first quarter of 2002 was $33.0 million,
pre-tax ($22.9 million after-tax), and was recognized as a cumulative effect of
a change in accounting principle.

Subsequently, the Company completed its annual goodwill impairment test as
of December 31, 2002, with no additional impairments. The Company will
continue to test its goodwill annually as of December 31 unless events occur or
circumstances change between annual tests that would more likely than not
reduce the fair value of a reporting unit below its carrying amount.

The changes in the carrying amount of goodwill for the year ended December
31, 2002, and six months ended June 30, 2003, are as follows:

(Unaudited; $ in millions)

|                                                |  |           |       |          |  |       |       |   |  |  |       |  
|----------------------------------------------- |  | --------- | ----- | -------- |  | ----- | ----- | - |  |  | ----- | -
|                                                |  | Specialty |       | Wire and |  |       |       |  
|                                                |  | Chemicals |       | Cable    |  |       |       |  
|                                                |  | Segment   |       | Segment  |  | Total
|                                                |  |           |       |          |  |      
|Balance as of
December 31, 2001                 |  | $         | 88.5  |          |  |       | 54.6  |   |  |  | 143.1 |  
|Impairment losses upon
adoption of SFAS
No. 142 |  |           |      |          |  |       | (33.0 | ) |  |  | (33.0 | )
|Foreign currency translation adjustments        |  |           | (19.4 | )        |  |       |      |   |  |  | (19.4 | )
|                                                |  |           |       |          |  |       |       |   |  |  |       |  
|Balance as of
December 31, 2002                 |  |           | 69.1  |          |  |       | 21.6  |   |  |  | 90.7  |  
|Foreign currency translation adjustments        |  |           | 8.9   |          |  |       |      |   |  |  | 8.9   |  
|                                                |  |           |       |          |  |       |       |   |  |  |       |  
|Balance as of
June 30, 2003                     |  | $         | 78.0  |          |  |       | 21.6  |   |  |  | 99.6  |  
|                                                |  |           |       |          |  |       |       |   |  |  |       |  

CHANGES IN FINANCIAL CONDITION

Working Capital

During the first six months of 2003, net working capital balances
(excluding cash and cash equivalents and debt) increased $102.6 million. This
increase resulted primarily from:



| |  |  | a $101.0 million increase in accounts receivable primarily due
to higher molybdenum sales volumes and realizations (approximately
$18 million), higher rod sales due to seasonal demand patterns
(approximately $22 million), the timing of copper receivable
collections (approximately $14 million), higher Specialty Chemicals
sales volumes and prices (approximately $26 million), higher Wire and
Cable sales volumes (approximately $2 million) and the timing of
their receivable collections (approximately $7 million), and higher
net accounts receivable in the securitization program (approximately
$5 million); and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a $46.2 million decrease in accounts payable and accrued
expenses primarily due to the payment for an historic Cyprus Amax
lawsuit and arbitration award ($48.6 million); partially offset by                                                                                                                                                                                                                                                                                                                                                                                                                                     



---



##### 



- 55 -



| |  |  | a $29.4 million decrease in mill and leach stockpiles and
inventories due to higher copper sales (approximately $22 million),
higher molybdenum sales (approximately $8 million), and lower current
mill and leach stockpiles (approximately $16 million); partially
offset by an increase in Wire and Cables inventory primarily due to
inventories being low at year-end (approximately $15 million); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a $12.6 million increase in accrued income taxes due to higher
foreign taxes.                                                                                                                                                                                                                                                                                                                               

Debt

At June 30, 2003, our total debt was $2,061.1 million, compared with
$2,110.6 million at year-end 2002. Our ratio of debt to total capitalization
was 41.6 percent and 42.3 percent at June 30, 2003, and December 31, 2002,
respectively.

In May 2003, the Company terminated $375 million of fixed-to-floating
interest rate swaps associated with corporate debt maturing in 2005 and 2007.
In the second quarter 2003, we received cash proceeds of $35.9 million; $34.6
million was reflected as a deferred gain on the balance sheet and will be
amortized over the remaining life of the underlying debt using the effective
interest method.

As of June 30, 2003, the Company had no borrowings under its $1 billion
revolving credit facility that is available, provided compliance with covenant
requirements, until its scheduled maturity on May 10, 2005.

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. Under SFAS No. 4, all gains and
losses from extinguishment of debt were required to be aggregated and, if
material, classified as an extraordinary item, net of related income tax
effect. This Statement eliminates SFAS No. 4 and, thus, the exception to
applying Accounting Principles Board (APB) Opinion No. 30 to all gains and
losses related to extinguishments of debt. As a result, gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria in APB No. 30. Applying the provisions of APB No. 30 will
distinguish transactions that are part of an entitys recurring operations from
those that are unusual or infrequent or that meet the criteria for
classification as an extraordinary item. As a result of this Statement being
adopted by the Company on January 1, 2003, we will reclassify the third quarter
2002 extraordinary item for debt extinguishment to recurring operations in our
Form 10-Q filing for the quarter ended September 30, 2003.

Capital Expenditures and Investments

Capital expenditures and investments for the first six months of 2003 were
$37.0 million for PDMC, $16.4 million for PDI and $23.9 million for other
Corporate-related activities. Capital expenditures and investments for the
first six months of 2002 were $38.1 million for PDMC, $9.5 million for PDI and
$3.2 million for other Corporate-related activities. We expect capital
expenditures and investments for the year 2003 to approximate $200 million,
comprising approximately $110 million for PDMC, approximately $60 million for
PDI, and approximately $30 million for Corporate and other. These capital
expenditures and investments are expected to be funded primarily from operating
cash flow and cash reserves.

Dividends

For the first six months of 2003, Phelps Dodge has declared quarterly
dividends of $3.375 per mandatory convertible preferred share amounting to $6.8
million.

Other Matters

Based on recent discussions with the Staff of the Securities and Exchange
Commission regarding the balance sheet classification of certain mining
concessions, primarily mining concessions containing proven and probable ore
reserves and mineralized material at the Companys South American mines, the
Company has reclassified such mining concessions from Property, plant and
equipment, net to Intangible assets. Additionally, previously reported
historical amounts have been reclassified for comparative purposes. Refer to
Note 3 for further discussion.

On July 11, 2003, Phelps Dodge amended its Form S-3 to combine the
outstanding $150 million outstanding shelf registration into a new $750 million
shelf registration. On July 15, 2003, this shelf registration statement was
declared effective by the SEC.



---



##### 



- 56 -

Contractual Obligations

The following tables summarize Phelps Dodges contractual obligations at
June 30, 2003, and the effect such obligations are expected to have on its
liquidity and cash flow in future periods for short-term debt, long-term debt
(including capital lease obligations) and take-or-pay contracts. The following
table, as of June 30, 2003, reflects an update of only the major changes to the
similar table presented in the Companys Form 10-K at December 31, 2002:

Debt and Take-or-Pay Contracts as of June 30, 2003:

(Unaudited; $ in millions)

|                      |  |           |         |        |  |           |       |  |  |  |       | 
|--------------------- |  | --------- | ------- | ------ |  | --------- | ----- |  |  |  | ----- | 
|                      |  | Less Than
|                      |  |          
|                      |  | Total     |         | 1 Year |  | 1-3 Years
|                      |  |           |         |        |  |          
|Short-term debt       |  | $         | 61.5    |        |  |           | 61.5  |  |  |  |      | 
|Long-term debt        |  |           | 1,999.6 |        |  |           | 134.7 |  |  |  | 536.6 | 
|Take-or-pay contracts |  |           | 604.4   |        |  |           | 167.1 |  |  |  | 205.6 | 

|                      |  |           |       |         |  |       |         | 
|--------------------- |  | --------- | ----- | ------- |  | ----- | ------- | 
|                      |  |           |       |         |  | After
|                      |  | 4-5 Years |       | 5 Years
|                      |  |           |       |        
|Short-term debt       |  | $         |      |         |  |       |        | 
|Long-term debt        |  |           | 275.4 |         |  |       | 1,052.9 | 
|Take-or-pay contracts |  |           | 129.2 |         |  |       | 102.5   | 

Our take-or-pay contracts primarily include contracts for electricity
($284.7 million), contracts for petroleum-based feedstock for conversion into
carbon black ($162.7 million), contracts for natural gas ($35.8 million), and
transportation and port fee commitments ($45.6 million). Approximately 81
percent of our take-or-pay electricity obligations are through PD Energy
Services, the legal entity used to manage power for PDMC at generally
fixed-priced arrangements. PD Energy Services has the right and the ability to
resell the electricity as circumstances warrant. Obligations for
petroleum-based feedstock for conversion into carbon black are for specific
quantities, and ultimately will be purchased based upon prevailing market
prices at the time. These petroleum-based products may be re-sold to others if
circumstances warrant. Obligations for natural gas provide for deliveries of
specified volumes, at market-based prices, primarily to our carbon black
operation in Brazil. Transportation obligations total $32.8 million for
exporting cathode produced at El Abra and Cerro Verde and copper in concentrate
at Candelaria and for importing sulfuric acid to El Abra. Our carbon black
facility in the United Kingdom has port fee commitments of $12.8 million.

Guarantees

In November 2002, FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of certain guarantees, a guarantor must recognize a liability for the
fair value of an obligation assumed under the guarantee. FIN 45 also requires
significant new disclosures by guarantors, in both interim and annual financial
statements, about obligations associated with guarantees issued. FIN 45
disclosure requirements were adopted for our year ended December 31, 2002; the
initial recognition and measurement provisions were adopted on a prospective
basis to guarantees issued or modified after December 31, 2002. There were no
such guarantees issued in the first six months of 2003.

Other Items that May Affect Liquidity

New Mexico and Colorados mined-land reclamation laws require financial
assurance covering the future cost of reclamation. In contrast, Arizonas Mine
Land Reclamation Act permits a company to satisfy financial assurance
requirements by demonstrating it has financial strength to fund future
reclamation costs identified in an approved reclamation plan. An
investment-grade bond rating is one of the financial strength tests under the Arizona Act.
Phelps Dodges senior unsecured debt currently carries an
investment-grade albeit at the lowest level in that category.
Additionally, the
Company currently meets another financial strength test in Arizona that is not
ratings dependent.

The cost of surety bonds (the traditional source of financial assurance)
has increased significantly during the past year. Also, many surety companies
are now requiring an increased level of collateral supporting the bonds. If
surety bonds are unavailable, the Company could be required to post other
collateral or possibly cash or cash equivalents directly in support of
financial assurance obligations.

Diesel Fuel and Natural Gas Price Protection Programs

We purchase significant quantities of diesel fuel and natural gas to
operate our facilities as an input to the manufacturing process and as input
for electricity generation and copper refining.



---



##### 



- 57 -

To reduce the Companys exposure to price increases in these energy
products, the Company enters into energy price protection programs. Our diesel
fuel and natural gas price protection programs consist of purchasing a
combination of out-of-the-money (OTM) call option contracts and fixed-price
swaps. The OTM call option contracts give the holder the right, but not the
obligation, to purchase a specific commodity (diesel fuel or natural gas) at a
pre-determined price, or strike price. OTM call options are options that
have a strike price above the current market price for that commodity. Call
options allow the Company to cap the commodity purchase cost at the strike
price of the option while allowing the Company to participate in commodity
price reductions below the strike price. Swaps allow us to establish a fixed
commodity purchase price for delivery during a specific future period.

As of June 30, 2003, our domestic mining diesel fuel price protection
program, which started in 2000, had outstanding diesel fuel option contracts in
place to hedge approximately 32 million gallons of diesel fuel, or 56 percent
of our consumption forecast through September 2004. As of June 30, 2002, our
domestic diesel fuel price protection program had 20.2 million gallons of
diesel fuel hedged. Gains and losses on these hedge transactions were
substantially offset by a similar amount of gain or loss on the underlying
forecast diesel fuel purchases.

As of June 30, 2003, our domestic natural gas price protection program,
which started in 2001, had outstanding natural gas option contracts in place to
hedge approximately 2.2 million decatherms of natural gas, or 63 percent of our
consumption forecast through October 2003. As of June 30, 2002, our domestic
natural gas price protection program had outstanding natural gas option
contracts in place to hedge approximately 2.5 million decatherms of natural
gas. Gains and losses on these hedge transactions were substantially offset by
a similar amount of gain or loss on the underlying forecast natural gas
purchases.

Additionally, as of late July 2003, we had increased our outstanding
natural gas option contracts to hedge approximately 11 million decatherms of
natural gas, representing 72 percent of consumption forecast through December
2004.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes in the Companys market risk during the
first six months of 2003. For additional information on market risk, refer to
pages 51 and 93 through 97 of our report on Form 10-K for the year ended
December 31, 2002.

Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures that
is designed to ensure information required to be disclosed by the Company is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, in a timely manner. Management has
reviewed this system of disclosure controls and procedures within 90 days of
the date hereof, and has concluded that the current system of controls and
procedures is effective.

The Company maintains a system of internal controls and procedures for
financial reporting. Since the date of managements most recent evaluation,
there were no significant changes in internal controls or in other factors that
could significantly affect internal controls.

Part II. Other Information

Item 1. Legal Proceedings

I.     Reference is made to paragraph XIX of Part II, Item 3, Legal
Proceedings, of the Companys Form 10-K for the year ended December 31, 2002.

The Company and Columbian Chemicals Company, together with several other
companies, have been named as defendants in an action entitled Technical
Industries, Inc. v. Cabot Corporation, et al., filed on January 30, 2003, in
the U.S. District Court for the District of Massachusetts, and approximately 12
other actions filed in four U.S. district courts, on behalf of a purported
class of all individuals or entities who purchased carbon black directly from
the defendants from January 30, 1999, to January 30, 2003. The complaints in
these actions, which allege that the defendants fixed the price of carbon black
and engaged in other unlawful activities in violation of the U.S. antitrust
laws, seek treble damages in an unspecified amount and attorneys fees. A
hearing was held on July 25, 2003, before the Judicial Panel on
Multidistrict Litigation on motions to consolidate all these actions in one
court; the Court has not yet ruled on the motion. The Company and Columbian Chemicals Company, together with several
other companies, have also been named in an action entitled Level Construction,
Inc. v. Cabot Corporation, et al., filed in Superior Court of the state of
California for the County of San Francisco



---



##### 



- 58 -

(and three other actions also filed
in other California Superior Courts) on behalf of a purported class or indirect
purchasers of carbon black in the state of California from as early as November
1998 to the present. The complaint alleges similar claims by indirect
purchasers under California state law and seeks treble damages in an
unspecified amount and attorneys fees. The Company believes that all these
claims are without merit and intends to defend the lawsuits vigorously.

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

Our annual meeting was held on May 23, 2003. A total of 78,264,691 common
shares, or about 87.95 percent of our issued and outstanding common shares,
were represented at the meeting. Set forth below is a description of the
matters voted upon at the meeting and a summary of the voting regarding each
matter:

|                       |  |     |            |          |  |  |           | 
|---------------------- |  | --- | ---------- | -------- |  |  | --------- | 
|                       |  | For |            | Withheld
|                       |  |     |            |         
|Election of Directors: |  |     |            |          |  |  |           | 
|Robert N. Burt         |  |     | 76,514,243 |          |  |  | 1,750,447 | 
|Robert D. Krebs        |  |     | 74,441,117 |          |  |  | 3,823,573 | 
|William J. Post        |  |     | 74,112,333 |          |  |  | 4,152,357 | 
|Jack E. Thompson       |  |     | 76,711,151 |          |  |  | 1,553,539 | 
|Jon C. Madonna         |  |     | 74,596,021 |          |  |  | 3,668,669 | 

|                                                            |  |     |            |         |  |         |           |  |  |  |         | 
|----------------------------------------------------------- |  | --- | ---------- | ------- |  | ------- | --------- |  |  |  | ------- | 
|                                                            |  | For |            | Against |  | Abstain
|                                                            |  |     |            |         |  |        
|Approval of the
2003 Stock Option
and Restricted Stock Plan |  |     | 56,649,593 |         |  |         | 6,897,646 |  |  |  | 834,303 | 

There were no broker non-votes included in the results of the election of
directors or the approval of the 2003 Stock Option and Restricted Stock Plan.

The date
of the 2004 annual meeting of shareholders was published in the 2003
Proxy Statement as May 5, 2004. The date has subsequently been
changed from May 5, 2004, to May 28, 2004.

Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Any exhibits required to be filed by the Company are listed in
the Index to Exhibits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | During the quarter ended June 30, 2003, the Company filed the
following Current Reports on Form 8-K: (i) Current Report on Form 8-K
bearing cover date of April 14, 2003, in which the Company reported
under Item 9 and 12 that it had issued a press release announcing the
rescheduling of the Companys annual meeting to May 23, 2003; (ii)
Current Report on Form 8-K bearing cover date of April 15, 2003, in
which the Company reported under Item 7 and 9 that it had furnished
Certifications pursuant to 18 United States Code section 1350, as
enacted by section 906 of the Sarbanes-Oxley Act of 2002; (iii)
Current Report on Form 8-K bearing cover date of April 24, 2003, in
which the Company reported under Item 7 and 9 that it had furnished
Certification pursuant to 18 United States Code section 1350, as
enacted by section 906 of the Sarbanes-Oxley Act of 2002; and (iv)
Current Report on Form 8-K bearing cover date of April 29, 2003, in
which the Company reported under Item 9 and 12 that it had issued a
press release announcing financial results for the quarter ended
March 31, 2003.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                    |  |                                                              |  |                                                              |  |                   
|------------------- |  | ------------------------------------------------------------ |  | ------------------------------------------------------------ |  | ------------------
|                    |  | PHELPS DODGE CORPORATION
        (Corporation or Registrant)
|                   
|                   
|Date: July 28, 2003 |  | By:                                                          |  | /s/                                                          |  | Stanton K. Rideout
|                    |  |                                                              |  |                                                             
|                    |  |                                                              |  |                                                              |  | Stanton K. Rideout
|                    |  |                                                              |  | Vice President and Controller
(Principal Accounting Officer)

Certifications

I, J. Steven Whisler, Chairman, President and Chief Executive Officer, certify
that:



|l. |  | I have reviewed this quarterly report on Form 10-Q of Phelps Dodge
Corporation;
|-- |  | -------------------------------------------------------------------------------
|  



---



##### 



- 59 -



|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

July 28, 2003

/s/ J. Steven Whisler
J. Steven Whisler
Chairman, President and Chief Executive Officer



I, Ramiro G. Peru, Senior Vice President and Chief Financial Officer, certify
that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Phelps Dodge
Corporation;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
enti-
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---



##### 



- 60 -



| |    |  | ties, particularly during the period in which this quarterly report
is being prepared;                                                                                                       
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                      



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

July 28, 2003

/s/ Ramiro G. Peru
Ramiro G. Peru
Senior Vice President and Chief Financial Officer

Index to Exhibits



|10.14 |  | The Corporations 2003 Stock Option and Restricted Stock Plan (the 2003
Plan), and forms of: (i) Stock Option Agreement;
(ii) Supplement A to Stock Option Agreement; (iii) Supplement B to Stock
Option Agreement, (iv) Restricted Stock
Letter Agreement; and (v) Restricted Stock Letter Agreement (cliff vesting), each effective May 23, 2003 (SEC File No. 1-82).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|      |  | Note: Omitted from the filing pursuant to the Instruction to Item 601 (b)
(10) are any actual agreement between the Corporation and certain officers
under the 2003 Plan, which contain subsequently similar provisions to
Exhibit 10.14 above.                                                                                                                        
|     
|11    |  | Computation of per share earnings.                                                                                                                                                                                                                                                                                                                                     
|     
|12    |  | Computation of ratios of total debt to total capitalization.                                                                                                                                                                                                                                                                                                           
|     
|15    |  | Letter from PricewaterhouseCoopers LLP with respect to unaudited interim
financial information.                                                                                                                                                                                                                                                                        
|     
|99.1  |  | Certification of J. Steven Whisler, Chairman, President and Chief
Executive Officer of the Company, pursuant to 18 United States Code
section 1350, as enacted by section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                       
|     
|99.2  |  | Certification of Ramiro G. Peru,
Senior Vice President and Chief Financial
Officer of the Company, pursuant to 18 United States Code section 1350, as
enacted by section 906 of the Sarbanes-Oxley Act of 2002.