##### 



EXHIBIT 4.1 EXECUTION COPY AMENDMENT NO. 1 TO THE CREDIT AGREEMENT Dated as of April 1, 2005 AMENDMENT NO. 1 TO THE CREDIT AGREEMENT among PHELPS DODGE CORPORATION, a New York corporation
(the Borrower), the banks, financial institutions and other institutional lenders parties to the
Credit Agreement referred to below (collectively, the Lenders) and CITIBANK, N.A., as agent (the
Agent) for the Lenders, hereby agree as follows: PRELIMINARY STATEMENTS (1) The Borrower, the Lenders and the Agent have entered into a Credit Agreement dated as of
April 20, 2004 (the Credit Agreement). Capitalized terms not otherwise defined in this Amendment
shall have the same meanings as specified in the Credit Agreement. (2) The Borrower and the Lenders have agreed to amend the Credit Agreement as hereinafter set
forth herein. SECTION 1. Amendments to the Credit Agreement. The Credit Agreement is, effective as of the
date of this Amendment and subject to the satisfaction of the conditions precedent set forth in
Section 2, hereby amended as follows: (a) Section 1.01 is amended by deleting the definitions of Applicable Margin, Applicable
Percentage, Applicable Utilization Fee, Principal Domestic Subsidiary and Termination Date
set forth therein and replacing them, respectively, with the following new definitions thereof: Applicable Margin means as of any date, a percentage per annum determined by
reference to the Public Debt Rating in effect on such date as set forth below: Public Debt Rating
    
    
    Applicable Margin for
    
    
    Applicable Margin forS&P/Moodys
    
    
    Base Rate Advances
    
    
    Eurodollar Rate AdvancesLevel 1
A- or A3 or above
    
    
    0.000%
    
    
    0.270%Level 2
BBB+ or Baa1
    
    
    0.000%
    
    
    0.400%Level 3
BBB or Baa2
    
    
    0.000%
    
    
    0.500%Level 4
BBB- or Baa3
    
    
    0.000%
    
    
    0.600%Level 5
Lower than Level 4
    
    
    0.000%
    
    
    0.800%




---



##### 



Applicable Percentage means, as of any date a percentage per annum determined by reference
to the Public Debt Rating in effect on such date as set forth below: Public Debt Rating
    
    
    ApplicableS&P/Moodys
    
    
    PercentageLevel 1
A- or A3 or above
    
    
    0.080%Level 2
BBB+ or Baa1
    
    
    0.100%Level 3
BBB or Baa2
    
    
    0.125%Level 4
BBB- or Baa3
    
    
    0.150%Level 5
Lower than Level 4
    
    
    0.200%
 Applicable Utilization Fee means, as of any date that the sum of the aggregate principal
amount of the Advances plus the Available Amount of all Letters of Credit exceeds 33% of the
aggregate Commitments, a percentage per annum determined by reference to the Public Debt Rating in
effect on such date as set forth below: Public Debt Rating
    
    
    ApplicableS&P/Moodys
    
    
    Utilization FeeLevel 1
A- or A3 or above
    
    
    0.100%Level 2
BBB+ or Baa1
    
    
    0.125%Level 3
BBB or Baa2
    
    
    0.125%Level 4
BBB- or Baa3
    
    
    0.125%Level 5
Lower than Level 4
    
    
    0.250%
 Principal Domestic Subsidiary means each of the Subsidiaries designated as a Principal
Domestic Subsidiary on Schedule II attached hereto for so long as such Person is a Subsidiary of
the Borrower. Termination Date means the earlier of (a) April 20, 2010 and (b) the date of
termination in whole of the Commitments pursuant to Section 2.06 or 6.01. (b) Section 4.01(b) is amended by deleting the date December 31, 2003 and substituting
therefor the date December 31, 2004. (c) Schedule IV to the Credit Agreement is deleted in its entirety and replaced with Schedule
I to this Amendment. 2




---



##### 



SECTION 2. Conditions of Effectiveness. This Amendment shall become effective as of the
date first above written (the Amendment Effective Date) when and only if: (a) The Agent shall have received counterparts of this Amendment executed
by the Borrower and all of the Lenders or, as to any of the Lenders, advice
satisfactory to the Agent that such Lender has executed this Amendment. (b) The Agent shall have received on or before the Amendment Effective Date the
following, each dated such date and (unless otherwise specified below) in form and
substance satisfactory to the Agent: (i) Certified copies of the resolutions of the Board of Directors of the Borrower (or
an authorized committee thereof) approving the substance of this Amendment, and of all
documents evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Amendment. (ii) A certificate of the Secretary or an Assistant Secretary of the Borrower
certifying the names and true signatures of the officers of the Borrower authorized to
sign this Amendment. (iii) Favorable opinions of (A) Assistant General Counsel and Secretary to the
Borrower substantially in the form of Exhibit D-1 to the Credit Agreement but with such
modifications as are required to address the Credit Agreement, as amended hereby and (B)
Debevoise and Plimpton LLP, counsel to the Borrower, substantially in the form of Exhibit
D-2 to the Credit Agreement but with such modifications as are required to address the
Credit Agreement, as amended hereby, and as to such other matters as any Lender through
the Agent may reasonably request. (c) On the Amendment Effective Date, the following statements shall be true and the Agent
shall have received for the account of each Lender a certificate signed by a duly authorized
officer of the Borrower, dated the Amendment Effective Date, stating that: (i) The representations and warranties contained in Section 4.01 of the Credit
Agreement, as amended hereby, are correct on and as of the Amendment Effective
Date, and (ii) No event has occurred and is continuing that constitutes a Default. SECTION 3. Reference to and Effect on the Credit Agreement and the Notes. (a) On and after the
effectiveness of this Amendment, each reference in the Credit Agreement to this Agreement,
hereunder, hereof or words of like import referring to the Credit Agreement, and each reference
in the Notes to the Credit Agreement, thereunder, thereof or words of like import referring
to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this
Amendment. (b) The Credit Agreement and the Notes, as specifically amended by this Amendment, are and
shall continue to be in full force and effect and are hereby in all respects ratified and
confirmed. 3




---



##### 



(c) The execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver or any right, power or remedy of any Lender or the
Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. SECTION 4. Costs and Expenses. The Borrower agrees to pay on demand all reasonable
out-of-pocket costs and expenses of the Agent in connection with the preparation, execution,
delivery and administration, modification and amendment of this Amendment and the other documents
to be delivered hereunder (including, without limitation, the reasonable and documented fees and
expenses of counsel for the Agent with respect hereto and thereto) in accordance with the terms of
Section 8.04 of the Credit Agreement. SECTION 5. Execution in Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 6. Governing Law. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their
respective officers thereunto duly authorized, as of the date first above written. THE BORROWER PHELPS DODGE CORPORATIONBy
    
    / s / Ramiro G. PeruTitle: Executive Vice President andChief Financial OfficerCITIBANK, N.A.,as Agent and as a LenderBy
    
    / s / Wajeeh FaheemTitle: Vice PresidentTHE BANK OF TOKYO-MITSUBISHI TRUST COMPANYBy
    
    / s / P. ShahTitle: Vice PresidentJPMORGAN CHASE BANK, N.A.By
    
    / s / Peter S. PredunTitle: Vice President
 4




---



##### 



THE BANK OF NOVA SCOTIABy
    
    / s / Mark SparrowTitle: DirectorWACHOVIA BANK, NATIONAL ASSOCIATIONBy
    
    / s / David L. DriggersTitle: Managing DirectorTHE ROYAL BANK OF SCOTLAND PLCBy
    
    / s / D. W. WilliamsTitle: Senior DirectorABN AMRO BANK, N.V.By
    
    / s / James L. MoyesTitle: Managing DirectorBy
    
    / s / John D. ReedTitle: DirectorMORGAN STANLEY BANKBy
    
    / s / Daniel TwengeTitle: Vice PresidentAUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITEDBy
    
    / s / John W. WadeTitle: DirectorKBC BANK, N.V.By
    
    / s / Eric RaskinTitle: Vice PresidentBy
    
    / s / Robert SnaufferTitle: First Vice PresidentROYAL BANK OF CANADABy
    
    / s / Dustin CravenTitle: Attorney-in-Fact
 5




---



##### 



WELLS FARGO BANK NATIONAL ASSOCIATIONBy
    
    / s / Ling LiTitle: Vice PresidentBANK OF AMERICA, N.A.By
    
    / s / David McCauleyTitle: Vice PresidentCALYON NEW YORK BRANCHBy
    
    / s / Samuel ShermanTitle: DirectorBy
    
    / s / James GuideraTitle: Managing DirectorMIZUHO CORPORATE BANK, LTD.By
    
    / s / Raymond VenturaTitle: Senior Vice PresidentTHE NORTHERN TRUST COMPANYBy
    
    / s / John BrazzaleTitle: Vice President
 6




---



##### 



Schedule IV - Litigation I. We are a member of several trade associations that, from time to time, initiate legal
proceedings challenging administrative regulations or court decisions that the membership considers
to be improper and potentially adverse to their business interests. These legal proceedings are
conducted in the name of the trade associations, and the members of the trade association are not
parties, named or otherwise. II. Arizona water regulations, water rights adjudications and other related water cases. A. General
Background. Arizona surface water law is based on the doctrine of
prior appropriation (first in time, first in right). Surface water rights in Arizona are
usufructuary rights, and as such the water right holder is granted only the right to use public
waters for a statutorily defined beneficial use, at a designated location. Groundwater in Arizona
is governed by the doctrine of reasonable use. Arizona has initiated two water rights adjudications
in order to quantify and prioritize all of the surface water rights and water right claims to two
of the states river systems and sources. Groundwater is not subject to the adjudication; however,
wells may be adjudicated to the extent that they are found to produce or impact appropriable
surface water. The two adjudication cases that could potentially impact Phelps Dodges surface
water rights and claims (including some wells) are entitled In Re The General Adjudication of
All Rights to Use Water in the Little Colorado Water System and Source, Arizona Superior Court,
Apache County, Cause No. 6417 filed on or about February 17,1978 and In Re The General
Adjudication of All Rights to Use Water in the Gila River System and Source, Arizona Superior
Court, Maricopa County, Cause Nos. W-l (Salt), W-2 (Verde), W-3 (Upper Gila), W-4 (San Pedro),
(consolidated) filed on February 17,1978. The major parties in addition to Phelps Dodge in the Gila
River adjudication are: Gila Valley Irrigation District, the San Carlos Irrigation and Drainage
District, the state of Arizona, the San Carlos Apache Tribe, the Gila River Indian Community, and
the United States on behalf of those Tribes, on its own behalf, and on the behalf of the White
Mountain Apache Tribe, Ft. McDowell Mohave-Apache Indian Community, Salt River Pima-Maricopa Indian
Community and the Payson Community of Yavapai Apache Indians. The major parties in addition to
Phelps Dodge in the Little Colorado adjudication are: the state of Arizona, the Salt River Project,
Arizona Public Service Company, the Navajo Nation, the Hopi Indian Tribe, the San Juan Southern
Paiute Tribe and the United States on behalf of those Indian Tribes, on its own behalf, and on
behalf of the White Mountain Apache Tribe. Phelps Dodge has four active mining operations in Arizona: Morenci, Miami, Sierrita and
Bagdad. Each operation requires water for mining and all related support facilities. With the
exception of Bagdad, each operation is located in a watershed within an ongoing surface water
adjudication. Each operation has sufficient water claims to cover its operational demands. In many
instances, the water supply may come from a variety of possible sources. The potential impact of
the surface water adjudications on each active operation is discussed below.




---



##### 



B. Operations. Morenci. The Morenci operation is located in eastern Arizona. Morenci water is
supplied by a combination of sources, including decreed surface water rights in the San
Francisco River, Chase Creek and Eagle Creek drainages, groundwater from the Upper Eagle
Creek wellfield, and Central Arizona Project (CAP) water leased from the San Carlos Apache
Tribe and delivered to Morenci via exchange through the Black River Pump Station. Phelps
Dodge has filed Statements of Claimants in the adjudication for each of its water sources
for Morenci except the CAP water. Phelps Dodges decreed water rights are subject to the Gila River adjudication and
potentially could be impacted. Although the purpose of the adjudication is to determine only
surface water rights, wells such as those in the Upper Eagle Creek wellfield may be subject
to the Gila River adjudication, but only to the extent those wells may be determined to
capture or impact appropriable surface water. The CAP water provided via exchange is not
subject to any state adjudication process. The CAP lease became effective as of January
1,1999, and has a 50-year term. Miami. The Miami operation obtains water from a number of sources in the Salt
River watershed. Statements of Claimants have been filed in connection with these water
sources, each of which is subject to the adjudication and could be potentially impacted.
Miami currently holds a CAP subcontract, although CAP water is not currently used at the
operation. CAP water is not subject to adjudication; however, an exchange agreement has been
executed to allow the delivery of this water to the Miami operation. Sierrita. The Sierrita operation is located in the Santa Cruz River watershed.
The water for the operation is groundwater. The wells that supply the water may be subject
to the Gila River adjudication only to the extent that such wells are determined to be
pumping or impacting appropriable surface water. Phelps Dodge has filed Statements of
Claimants in the adjudication for these water sources in case any are later determined to
produce or impact appropriable surface water. In 1980, the Arizona legislature enacted the
Arizona Groundwater Code. The Code established Active Management Areas (AMAs) in several
groundwater basins, including the Santa Cruz Groundwater Basin. The groundwater at this
operation is subject to regulation under the Tucson AMA. Bagdad. The Bagdad operation is located in the Bill Williams River watershed.
The water supply includes claims to both surface water and groundwater. There is not an
active adjudication proceeding in this watershed; however, the legal precedent set in the
active adjudications regarding the determination of whether water pumped from wells is
treated as surface water or groundwater may impact the use of water from some wells. C. Other Arizona Mining Properties. The potential impact of the ongoing
adjudication on other mining properties is discussed below. Safford. Water for the planned future operation at Safford may come from a
combination of sources. Wells that supply groundwater may be used and those wells will be
subject to the adjudication only to the extent that such wells are determined to be pumping
or impacting appropriable surface water. CAP water may also be considered for use at the
operation some time in the future. CAP water is not subject to adjudication; 2




---



##### 



however, an exchange agreement will need to be negotiated in order to deliver the water. The
implementation of such an exchange will require approval of the Globe Equity Court as well as
environmental reviews and related agency approvals. Ajo. The potential water supply for Ajo is groundwater. The wells that supply the
water may be subject to the Gila River adjudication to the extent that such wells are determined to
be pumping or impacting appropriable surface water. Phelps Dodge has filed a Statement of Claimant
in the adjudication for these water sources in case any are later determined to produce or impact
appropriable surface water. Bisbee. The potential water supply for Bisbee is groundwater. The wells that supply
the water may be subject to the Gila River adjudication to the extent that such wells are
determined to be pumping or impacting appropriable surface water. Phelps Dodge has filed a
Statement of Claimant in the adjudication for these water sources in case any are later determined
to produce or impact appropriable surface water. D. Water Settlements. 1. Gila River Indian Community Water Settlement. On May 4, 1998, Phelps Dodge executed a settlement agreement with the Gila River Indian
Community (the Community) that resolves the issues between Phelps Dodge and the Community pertinent
to the Gila River adjudication. Since that time, comprehensive settlement negotiations with users
all along the Gila River have been initiated. Phelps Dodges settlement with the Community is now
included in the comprehensive settlement. Federal legislation authorizing the settlement was passed
in December 2004. The final enforceability date, however, will not occur until certain provisions
in the associated agreements are met. The parties have until December 31, 2007, to meet their
obligations for the settlement to become enforceable. 2. San Carlos Apache Tribe. In 1997, issues of dispute arose between Phelps Dodge and the San Carlos Apache Tribe (the
Tribe) regarding Phelps Dodges use and occupancy of the Black River Pump Station, which delivers
water to the Morenci operation. In May 1997, Phelps Dodge reached an agreement with the Tribe, and
subsequently federal legislation (Pub. L. No. 105-18, 5003, 111 stat. 158,181-87) was adopted. The
legislation prescribes arrangements intended to ensure a future supply of water for the Morenci
mining complex in exchange for certain payments by Phelps Dodge. The legislation does not address
any potential claims by the Tribe relating to Phelps Dodges historical occupancy and operation of
Phelps Dodge facilities on the Tribes Reservation, but does require that any such claims be
brought, if at all, exclusively in federal district court. As of this writing, no such claims have
been filed. The 1997 legislation required that the Company and the Tribe enter a lease for the delivery of
CAP water through the Black River Pump Station to Morenci on or
before December 31, 1998. In the
event a lease was not signed, the legislation expressly 3




---



##### 



provided that
the legislation would become the lease. On January 24, 2002, a lease
between the San Carlos Apache Tribe, Phelps Dodge and the United States was executed
(effective as of January 1,1999) in accordance with that legislation. On the same date, and
in accordance with the legislation, an Exchange Agreement between the San Carlos Apache
Tribe, the United States and the Salt River Project Water Users Association was executed
and subsequently approved by Phelps Dodge. Since that date, CAP water has been delivered to
Morenci. Phelps Dodge has not reached a settlement with the Tribe on general water issues
and Phelps Dodge water claims within the Gila River adjudication are still subject to
litigation with the Tribe and other parties. E. Other Related Cases. The following proceedings involving water
rights adjudications are pending in the U.S. District Court of Arizona: (i) On June 29,1988, the Gila River Indian Community filed a
complaint-in-intervention in United States v. Gila Valley Irrigation District,
et al.,and Globe Equity No. 59 (D. Ariz.). The underlying action was
initiated by the United States in 1925 to determine conflicting claims to water
rights in certain portions of the Gila River watershed. Although Phelps Dodge was
named and served as a defendant in that action, Phelps Dodge was dismissed without
prejudice as a defendant in March 1935. In June 1935, the Court entered a decree
setting forth the water rights of numerous parties, but not Phelps Dodges. The
Court retained, and still has, jurisdiction of the case. The
complaint-in-intervention does not name Phelps Dodge as a defendant, however, it
does name the Gila Valley Irrigation District as a defendant. Therefore, the
complaint-in-intervention could affect the approximately 3,000 acre-feet of water
that Phelps Dodge has the right to divert annually from Eagle Creek, Chase Creek or
the San Francisco River pursuant to Phelps Dodges decreed rights and an agreement
between Phelps Dodge and the Gila Valley Irrigation District. During 1997 and 1998, Phelps Dodge purchased farmlands with associated water
rights that are the subject of this litigation. As a result, Phelps Dodge has been
named and served as a party in this case. The lands and associated water rights are
not currently used in connection with any Phelps Dodge mining operation. Phelps Dodges Miami operation (formerly named Cyprus Miami Mining Corporation)
was named and served as a defendant in this action in 1989. These proceedings may
affect water rights associated with former Cyprus Miami lands in the Gila River
watershed. (ii) Prior to January 1,1983, various Indian tribes filed several suits in
the U.S. District Court for the District of Arizona claiming prior and paramount
rights to use waters, which at present are being used by many water users, including
Phelps Dodge, and claiming damages for prior use in derogation of their allegedly
paramount rights. These federal proceedings have been stayed pending state court
adjudication. 4




---



##### 



(iii) Cyprus Sierrita Corporations predecessor in interest was a defendant
in United States, et al. v. City of Tucson, et al., No. CIV 75-39 (D.
Ariz.). This is a consolidation of several actions seeking a declaration of the
rights of the United States, the Papago Indian Tribe (now known as the Tohono
Oodham Nation), and individual allottees of the Tohono Oodham Nation, to surface
water and groundwater in the Santa Cruz River watershed; damages from the
defendants use of surface water and groundwater from the watershed in derogation of
those rights; and injunctive relief. Congress in 1982 enacted the Southern Arizona
Water Rights Settlement Act, which was intended to resolve the water right claims of
the Tohono Oodham Nation and its member allottees relating to the San Xavier
Reservation and the Schuk Toak District of the Sells Papago Reservation. The
allottees contested the validity of the Act and contended that the Court could not
dismiss the litigation without their consent. This prompted additional litigation,
and eventually culminated in settlement negotiations. The Court suspended most
aspects of the litigation to enable the parties to negotiate a settlement with the
allottees. The Courts recent attention has been devoted to the composition of
appropriate classes of allottees and identification of class representatives, so
that any settlement that is reached would bind the allottees. It is anticipated that
a settlement and authorizing legislation would conclude all litigation on behalf of
the Tohono Oodham Nation, its allottee members, and the United States as Trustee
for the nation and its allottee members, relating to water rights. Federal
legislation has been passed authorizing a settlement. The parties have until
December 31, 2007, to finalize the agreements and meet certain obligations for the
settlement to become enforceable. The outcome of this dispute could impact water
right claims associated with the acquired Cyprus operations at Sierrita, and
miscellaneous former Cyprus land holdings in the Santa Cruz River watershed. III.
On October 1, 1997, the U.S. Environmental Protection Agency (EPA) issued a Notice of
Violation (NOV) to Cyprus Amaxs (now the Companys) Sierrita operations in southeastern Arizona.
The NOV alleged certain emission standards and permitting violations associated with the molybdenum
roasting facility at Sierrita. On September 6, 2000, EPA also issued an NOV to Phelps Dodge Sierrita
for alleged violations of Prevention of Significant Deterioration permitting requirements, and New
Source Performance Standards under the federal Clean Air Act. The Company and the EPA reached a
settlement of the issues raised in the NOVs. The settlement agreement was embodied in a consent
decree, which, along with a formal complaint, was lodged with the United States District Court for
the District of Arizona on June 21, 2004, United States and State of Arizona v. Phelps Dodge
Sierrita, Inc., No. CIV 04-312 TUC FRZ, and entered by the
Court on August 12, 2004. The state
of Arizona joined in the complaint and consent decree, although it did not join in most of the
allegations made by EPA. Without admitting any of the allegations, the Company agreed to pay a
civil penalty totaling $1.4 million to be divided between the United States and the state of
Arizona. The Company also agreed to undertake certain monitoring and permitting actions, including
continuous emissions monitoring at the molybdenum roasting facility. IV. The Pinal Creek site was listed under the Arizona Department of Environmental Qualitys
Water Quality Assurance Revolving Fund program in 1989 for contamination in the 5




---



##### 



shallow alluvial aquifers
within the Pinal Creek drainage near Miami, Arizona. Since that time,
environmental remediation has been performed by members of the Pinal Creek Group (PCG), comprising
Phelps Dodge Miami, Inc. (a wholly owned subsidiary of the Company) and two other companies. In
1998, the District Court approved a Consent Decree between the PCG members and the state of Arizona
resolving all matters related to an enforcement action contemplated by the state of Arizona against
the PCG members with respect to the groundwater matter. The Consent Decree committed Phelps Dodge
Miami, Inc. and the other PCG members to complete the remediation work outlined in the Consent
Decree. That work continues at this time pursuant to the Consent Decree and consistent with state
law and the National Contingency Plan prepared by EPA under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA). Phelps Dodge Miami, Inc. and the other members of the PCG are pursuing contribution litigation
against three other parties involved with the site. At least two of the three defendants now have
admitted direct liability as responsible parties. The first phase of the case has been assigned a
trial date in June 2005. Phelps Dodge Miami, Inc. also asserted claims against certain past
insurance carriers. As of November 2002, all of the carriers have settled or had their liability
adjudicated. One carrier unsuccessfully appealed the judgment against it and then settled in
October 2004. In addition, a dispute between one dissenting PCG member and Phelps Dodge Miami, Inc. and the
other PCG member was filed in Superior Court in 2002. The settlement of that litigation in
September 2004 included an amendment of the PCG agreement. Approximately $111 million remained in the Companys Pinal Creek remediation reserve at
December 31, 2004. While significant recoveries may be achieved in the contribution litigation, the
Company cannot reasonably estimate the amount and, therefore, has not taken potential recoveries
into consideration in the recorded reserve. V. The Companys wholly owned subsidiary, Cyprus Amax Minerals Company (Cyprus), was the
plaintiff in an action entitled Cyprus Amax Minerals Company v. Asarco Incorporated. No. 99
CIV 11198 (LMM), which was filed on November 9, 1999, in the U.S. District Court for the Southern
District of New York. The action arose out of the merger agreement between Cyprus and Asarco dated
as of July 15, 1999 (the merger agreement). The complaint alleged, among other things, that Asarco
breached the merger agreement and a subsequent agreement by soliciting an alternative takeover
proposal for Asarco from another company. Cyprus sought, among other things, compensatory damages
of not less than $90 million. Asarco moved for summary judgment on all of Cyprus claims on November 10, 2003. That motion
was granted on October 14, 2004, in favor of Asarco. VI. On
October 18, 2002, the Mining and Minerals Division (MMD) of the New Mexico Energy,
Minerals and Natural Resources Department issued NOVs under the New Mexico Mining Act Rules (NMMAR)
to Chino Mines Company (Chino), Phelps Dodge Tyrone, Inc. (Tyrone) and Cobre Mining Company
(Cobre). The NOVs allege that Chino, Tyrone and Cobre failed to obtain approval of closeout plans
as required by NMMAR by October 1, 2002. A 6




---



##### 



closeout plan under NMMAR consists of a plan for reclamation of a mining operation following
cessation of operations and financial assurance sufficient for MMD to complete the closeout plan if
the operator defaults. The NOVs would have established schedules requiring that the alleged
violations be abated by April 20, 2003, for Chino, June 30, 2003, for Cobre and September 30, 2003,
for Tyrone. The NOVs did not assess civil penalties, but reserved the right to assess penalties in
the future in accordance with the penalty assessment procedures in NMMAR. The NOVs further stated
that if the alleged violations were not abated by the dates set in the NOVs, MMD would issue
cessation orders in accordance with NMMAR requiring that mining operations cease until the
alleged violation is abated. On November 1, 2002, Chino, Tyrone and Cobre each filed Petitions for
Review of the NOVs with the New Mexico Mining Commission (Commission). The Petitions for Review
contended that closeout plan approval was not possible by
October 1, 2002, because of delays by the
New Mexico Environment Department (NMED) in issuing discharge permits for closure and issuing
determinations that the closeout plans for Chino, Tyrone and Cobre are expected to achieve
compliance with environmental standards, including compliance with water quality standards. The
Petitions requested that the NOVs be vacated or, in the alternative, that different dates be set
for abatement of the alleged violations that allow a reasonable period of time after NMED issues
its discharge permits to obtain approval of the closeout plans. The Commission held a public
hearing on December 13-14, 2002, on the Petitions for Review. The Commission upheld the NOVs but
modified the period for abatement for each mine to run from the dates when NMED issues the
discharge permits for closure for the mines. Under the modified NOVs, Chino, Cobre and Tyrone will
have seven, nine and 12 months, respectively, after NMED issues their closure permits to obtain
approval of their closeout plans. NMED
issued Chinos closure permit on February 24, 2003. Since the closure permit was issued,
Chino has engaged in discussions to resolve the amount and form of financial assurance required by
NMED and MMD and the details of the closeout plan approval by MMD. To allow additional time to
finalize applicable documentation and to hold a public hearing as required under the Mining Act,
MMD issued orders extending the deadline for Chinos closeout
plan approval to December 19, 2003.
MMD approved Chinos closeout plan on December 18, 2003. Chinos closure permit has been appealed
by third parties to the Water Quality Control Commission (WQCC). Chino filed a motion to dismiss
the appeal due to the failure to follow required procedures, which was granted by the WQCC. The
WQCCs decision has been appealed to the New Mexico Court of Appeals. NMED
issued Tyrones closure permit on April 8, 2003, and Tyrones closeout plan was approved
by MMD on April 12, 2004. On July 12, 2004, Tyrone filed an appeal of a decision by the WQCC
affirming the conditions of Tyrones closure permit to the New Mexico Court of Appeals. Tyrone is
complying with the requirements of the closure permit pending the outcome of the appeal. NMED
issued Cobres closure permit on December 10, 2004. MMD held a public hearing on February
3, 2005, and is expected to take action on the plan in the first quarter of 2005. 7




---



##### 



VII. Since approximately 1990, Phelps Dodge or its subsidiaries have been named as a defendant
in a number of product liability or premises lawsuits brought by electricians and other skilled
tradesmen or contractors claiming injury from exposure to asbestos found in limited lines of
electrical wire products produced or marketed many years ago, or from asbestos at certain Phelps
Dodge properties. Phelps Dodge presently believes its liability, if any, in these matters will not
have a material adverse effect, either individually or in the aggregate, upon its business,
financial condition, liquidity, results of operations or cash flow. There can be no assurance;
however, that future developments will not alter this conclusion. VIII. On September 30, 2002, Columbian Chemicals Company, a subsidiary of the Company,
received an administrative complaint from EPA for alleged violations of the Clean Air Act at its El
Dorado, Arkansas, carbon black plant. On April 19, 2004, Columbian signed a Consent Agreement and
First Order (Consent) resolving this matter. The Consent requires Columbian to pay a civil penalty
of $39,300 and fund a Supplement Environmental Project in the amount of $75,700 for a total
settlement amount of $115,000. IX. On November 7, 2002, the United Kingdom Environment Agency (Agency) issued an
enforcement notice to Columbian Chemicals Companys Sevalco plant in the United Kingdom. This
notice followed Sevalcos disclosure to the Agency in October 2002 that Sevalco had discovered
irregularities in its effluent discharge reports, and requires the plant to implement procedures to
ensure that discharges satisfy permit limits and are properly reported. At a hearing in
Magistrates Court in Bristol, England, on November 15, 2004, Sevalco pled guilty to six charges
concerning the alleged submission of incorrect data to the Agency and operation of a process not in
accordance with its operating permit. The magistrates referred the case to Crowns Court for
sentencing. At the hearing in Crowns Court on December 8, 2004, the Court imposed a fine of 40,000
pounds per offense plus Agencys costs of 70,000 pounds for a total fine of 310,000 pounds
(approximately U.S. $598,000), which Sevalco has paid. X. In November 2002, Columbian Chemicals Company was contacted by U.S. and European
antitrust authorities regarding a joint investigation they initiated into alleged price fixing in
the carbon black industry. European antitrust authorities reviewed documents at three of Columbian
Chemicals facilities in Europe, and U.S. authorities contacted Columbian Chemicals headquarters
in Marietta, Georgia, but have not requested documents or other information. XI. The Company and Columbian Chemicals Company, together with several other companies,
were named as defendants in an action entitled Technical Industries, Inc. v. Cabot Corporation,
et al., No. CIV 03-10191 WGY, filed on January 30, 2003, in the U.S. District Court in Boston,
Massachusetts, and 14 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 since
January 1999. The Judicial Panel on Multidistrict Litigation consolidated all of these actions in
the U.S. District Court for the District of Massachusetts under the caption In Re Carbon Black
Antitrust Litigation. The consolidated amended complaint filed in these actions does not name
the Company as a defendant. The consolidated amended complaint, which alleges that the defendants
fixed the prices of carbon black and engaged in other unlawful activities in violation of the U.S.
antitrust laws, seeks treble damages in an unspecified amount 8




---



##### 



and attorneys fees. Columbian Chemicals Company and other defendants filed a motion to dismiss the
consolidated amended complaint for failure to state a claim. The plaintiffs have filed a motion for
class certification. The court has denied the motion to dismiss and has certified a class that
includes all direct purchasers of carbon black in the United States from January 30, 1999 through
January 18, 2005. Discovery is ongoing. Similar class actions have been filed in state courts in California, North Carolina, Florida,
Kansas, New Jersey, South Dakota and Tennessee on behalf of indirect purchasers of carbon black in
those and 17 other states and the District of Columbia alleging violations of state antitrust and
deceptive trade practices laws. Columbian has also received a demand for relief on behalf of
indirect purchasers in Massachusetts, but no lawsuit has been filed in state court. In the class
action filed in state court in North Carolina, the court granted the defendants motion to dismiss
and the plaintiff dropped his appeal of the decision, so that case has been dismissed. The court in
the New Jersey action denied a motion to dismiss; the defendants have filed a motion for leave to
take an interlocutory appeal. The Company believes the claims are without merit and intends to defend the lawsuits
vigorously. XII. In November 2002, EPA issued a unilateral administrative order (UAO) under CERCLA to
the Companys wholly owned subsidiary, Western Nuclear, Inc., and two other companies, Kerr McGee
Corporation and Fremont Lumber Company (collectively, the PRPs) requiring the companies to perform
certain remedial design (RD) and remedial action (RA) work at the White King/Lucky Lass Uranium
Mines site near Lakeview, Oregon. The PRPs do not believe the UAO was lawfully issued because EPA
failed to recognize the joint responsibility of the U.S. government under applicable laws and to
perform non-discretionary duties to ensure federal government responsibility for remediating the
site prior to issuance of the UAO. The PRPs notified the EPA of their intent to sue and obtain,
among other things, a judicial determination of the illegality of the UAO. The PRPs voluntarily commenced and undertook the RD work (but not RA work) required by the
UAO, and advised the EPA of their position and progress. From January 2003 through July 2003, the
PRPs and EPA exchanged letters expressing their respective positions concerning the validity of the
UAO. On July 31, 2003, the EPA rejected the PRPs position, notifying them that penalties are
accruing for the alleged violations of the UAO and that the purported penalties through the end of
July 2003 total approximately $5.2 million. On September 19, 2003, the PRPs served a complaint on the Acting Administrator of the EPA,
which seeks to have the federal district court of Oregon declare the UAO unlawful for failure to
comply with the requirement under CERCLA to ensure federal government participation in remedying
the site. Fremont Lumber Company, et al. v. Horinko, No. 03-CV-1073-AS (D. Ore.). On
December 15, 2003, EPA answered the complaint and denied the PRPs allegations of non-compliance
with CERCLA. On January 12, 2004, EPA filed a complaint against the PRPs seeking to enforce the
PRPs compliance with the UAO and to recover administrative penalties and response costs
incurred at the site. The cases have been consolidated and the litigation has been stayed until
March 2005. The PRPs and EPA have commenced discussions in an effort to settle all outstanding
issues. 9