##### Table of Contents



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 March 31, 2005 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 þ      No o. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 in
the Exchange Act).
Yes þ      No o. Number of Common Shares
outstanding at April 27, 2005: 96,882,340 shares.




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- i - PHELPS DODGE CORPORATION Quarterly Report on Form 10-Q For the Quarter Ended March 31, 2005 Table of Contents  
 PagePart I. Financial InformationItem 1. Financial Statements (unaudited)Statement of Consolidated Operations
    
    
    1Consolidated Balance Sheet
    
    
    2Consolidated Statement of Cash Flows
    
    
    3Consolidated Statement of Shareholders Equity
    
    
    4Financial Data by Business Segment
    
    
    5Notes to Consolidated Financial Information
    
    
    6Review by Independent Registered Public Accounting Firm
    
    
    18Report of Independent Registered Public Accounting Firm
    
    
    18Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsResults of Operations
    
    
    19Results of Phelps Dodge Mining Company
    
    
    22Results of Phelps Dodge Industries
    
    
    36Other Matters Relating to the Statement of Consolidated Operations
    
    
    37Changes in Financial Condition
    
    
    38Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    43Part II. Other InformationItem 1. Legal Proceedings
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 6. Exhibits
    
    
    46Signatures
    
    
    46Index to Exhibits
    
    
    47Exhibit 4.1Exhibit 11Exhibit 12Exhibit 15Exhibit 31Exhibit 32




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##### Table of Contents



- 1 - PHELPS DODGE CORPORATION AND SUBSIDIARIES 
  
 Item 1. Financial Statements PHELPS DODGE CORPORATION 
 STATEMENT OF CONSOLIDATED OPERATIONS
 First Quarter2005
    
    
    2004Sales and other operating revenues
    
    $
    2,066.5
    
    
    
    1,597.0Operating costs and expensesCost of products sold (exclusive of items shown separately below)
    
    
    1,322.9
    
    
    
    1,098.4Depreciation, depletion and amortization
    
    
    129.4
    
    
    
    124.9Selling and general administrative expense
    
    
    47.3
    
    
    
    38.5Exploration and research expense
    
    
    18.8
    
    
    
    13.6Special items and provisions, net (see Note 3)
    
    
    (0.9
    )
    
    
    6.81,517.5
    
    
    
    1,282.2Operating income
    
    
    549.0
    
    
    
    314.8Interest expense
    
    
    (23.7
    )
    
    
    (39.0
    )Capitalized interest
    
    
    0.8
    
    
    
    0.1Early debt extinguishment costs
    
    
    
    
    
    
    (22.4
    )Miscellaneous income and expense, net
    
    
    18.1
    
    
    
    2.2Income before taxes, minority interests in consolidated subsidiaries and
equity in net earnings (losses) of affiliated companies
    
    
    544.2
    
    
    
    255.7Provision for taxes on income
    
    
    (131.2
    )
    
    
    (6.2
    )Minority interests in consolidated subsidiaries
    
    
    (27.0
    )
    
    
    (63.6
    )Equity in net earnings (losses) of affiliated companies
    
    
    0.7
    
    
    
    (0.2
    )Net income
    
    
    386.7
    
    
    
    185.7Preferred stock dividends
    
    
    (3.4
    )
    
    
    (3.4
    )Net income applicable to common shares
    
    $
    383.3
    
    
    
    182.3Weighted average number of common shares outstanding  basic
    
    
    95.7
    
    
    
    91.7Basic earnings per common share
    
    $
    4.00
    
    
    
    1.99Weighted average number of common shares outstanding  diluted
    
    
    100.9
    
    
    
    97.9Diluted earnings per common share
    
    $
    3.83
    
    
    
    1.90
 See Notes to Consolidated Financial Information.




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##### Table of Contents



- 2 - PHELPS DODGE CORPORATION 
 CONSOLIDATED BALANCE SHEET
 
 March 31,
    
    
    December 31,2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,398.0
    
    
    
    1,200.1Accounts receivable, less allowance for doubtful
accounts (2005 - $16.4; 2004 - $17.4)
    
    
    978.1
    
    
    
    761.5Mill and leach stockpiles
    
    
    28.0
    
    
    
    26.2Inventories
    
    
    406.7
    
    
    
    392.1Supplies
    
    
    200.1
    
    
    
    192.7Prepaid expenses and other current assets
    
    
    63.5
    
    
    
    46.0Deferred income taxes
    
    
    44.5
    
    
    
    43.1Current assets
    
    
    3,118.9
    
    
    
    2,661.7Investments and long-term receivables
    
    
    135.5
    
    
    
    120.7Property, plant and equipment, net
    
    
    5,285.5
    
    
    
    5,318.9Long-term mill and leach stockpiles
    
    
    132.0
    
    
    
    131.0Deferred income taxes
    
    
    47.2
    
    
    
    61.8Goodwill
    
    
    103.5
    
    
    
    103.5Intangible assets, net
    
    
    5.3
    
    
    
    5.3Other assets and deferred charges
    
    
    195.3
    
    
    
    191.2$
    9,023.2
    
    
    
    8,594.1LiabilitiesCurrent liabilities:Short-term debt
    
    $
    30.3
    
    
    
    78.8Current portion of long-term debt
    
    
    45.8
    
    
    
    45.9Accounts payable and accrued expenses
    
    
    961.1
    
    
    
    972.1Dividends payable
    
    
    3.4
    
    
    
    3.4Accrued income taxes
    
    
    104.7
    
    
    
    67.8Current liabilities
    
    
    1,145.3
    
    
    
    1,168.0Long-term debt
    
    
    970.7
    
    
    
    972.2Deferred income taxes
    
    
    457.4
    
    
    
    448.4Other liabilities and deferred credits
    
    
    1,115.5
    
    
    
    1,107.33,688.9
    
    
    
    3,695.9Commitments and contingencies (see Notes 5, 6 and 8)Minority interests in consolidated subsidiaries
    
    
    581.8
    
    
    
    555.1Shareholders equityCommon shares, par value $6.25; 200.0 shares authorized;
96.8 outstanding (2004 - 95.9) after deducting 9.0 shares
(2004 - 9.9) held in treasury, at cost
    
    
    605.1
    
    
    
    599.5Cumulative preferred shares, par value $1.00; 6.0 shares authorized;
2.0 outstanding in 2005 and 2004
    
    
    2.0
    
    
    
    2.0Capital in excess of par value
    
    
    1,961.4
    
    
    
    1,906.4Retained earnings
    
    
    2,599.2
    
    
    
    2,239.9Accumulated other comprehensive loss
    
    
    (377.4
    )
    
    
    (384.2
    )Other
    
    
    (37.8
    )
    
    
    (20.5
    )4,752.5
    
    
    
    4,343.1$
    9,023.2
    
    
    
    8,594.1
 See Notes to Consolidated Financial Information.




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##### Table of Contents



- 3 - PHELPS DODGE CORPORATION 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 
 Three Months EndedMarch 31,2005
    
    
    2004Operating activitiesNet income
    
    $
    386.7
    
    
    
    185.7Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation, depletion and amortization
    
    
    129.4
    
    
    
    124.9Deferred income tax provision
    
    
    24.4
    
    
    
    (32.3
    )Equity in net earnings (losses) of affiliated companies,
net of dividends received
    
    
    (0.1
    )
    
    
    1.3Special items and provisions
    
    
    (0.9
    )
    
    
    11.3Early debt extinguishment costs
    
    
    
    
    
    
    22.4Minority interests in consolidated subsidiaries
    
    
    27.0
    
    
    
    63.6Changes in current assets and liabilities:Accounts receivable
    
    
    (137.0
    )
    
    
    (216.3
    )Sale (repayment) of securitized accounts receivable
    
    
    (85.0
    )
    
    
    Mill and leach stockpiles
    
    
    (1.8
    )
    
    
    5.1Inventories
    
    
    (17.3
    )
    
    
    9.4Supplies
    
    
    (8.0
    )
    
    
    (1.3
    )Prepaid expenses
    
    
    (17.7
    )
    
    
    (25.3
    )Interest payable
    
    
    15.2
    
    
    
    20.0Other accounts payable
    
    
    (2.8
    )
    
    
    67.5Accrued income taxes
    
    
    38.0
    
    
    
    29.2Other accrued expenses
    
    
    (30.1
    )
    
    
    (8.1
    )Other operating, net
    
    
    (5.9
    )
    
    
    (0.5
    )Net cash provided by operating activities
    
    
    314.1
    
    
    
    256.6Investing activitiesCapital outlays
    
    
    (68.2
    )
    
    
    (46.5
    )Capitalized interest
    
    
    (0.8
    )
    
    
    (0.1
    )Investments in subsidiaries and other,
net of cash received and acquired
    
    
    (0.1
    )
    
    
    (0.2
    )Proceeds from asset dispositions
    
    
    1.2
    
    
    
    1.1Other investing, net
    
    
    (3.2
    )
    
    
    3.3Net cash used in investing activities
    
    
    (71.1
    )
    
    
    (42.4
    )Financing activitiesProceeds from issuance of debt
    
    
    
    
    
    
    149.8Payment of debt
    
    
    (49.0
    )
    
    
    (499.2
    )Common dividends
    
    
    (24.0
    )
    
    
    Preferred dividends
    
    
    (3.4
    )
    
    
    (3.4
    )Issuance of shares, net
    
    
    31.3
    
    
    
    151.6Debt issue costs
    
    
    
    
    
    
    (1.6
    )Other financing, net
    
    
    
    
    
    
    (38.4
    )Net cash used in financing activities
    
    
    (45.1
    )
    
    
    (241.2
    )Increase (decrease) in cash and cash equivalents
    
    
    197.9
    
    
    
    (27.0
    )Increase at beginning of 2004 from fully consolidating
El Abra and Candelaria
    
    
    
    
    
    
    28.3Cash and cash equivalents at beginning of period
    
    
    1,200.1
    
    
    
    683.8Cash and cash equivalents at end of period
    
    $
    1,398.0
    
    
    
    685.1
 See Notes to Consolidated Financial Information.




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##### Table of Contents



- 4 - PHELPS DODGE CORPORATION 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 
 AccumulatedCommon Shares
    
    
    Preferred Shares
    
    
    Capital in
    
    
    
    
    
    
    OtherNumber
    
    
    At Par
    
    
    Number
    
    
    At Par
    
    
    Excess of
    
    
    Retained
    
    
    Comprehensive
    
    
    
    
    
    
    Shareholdersof Shares
    
    
    Value
    
    
    of Shares
    
    
    Value
    
    
    Par Value
    
    
    Earnings
    
    
    Loss*
    
    
    Other
    
    
    EquityBalance at December 31, 2004
    
    
    95.9
    
    
    $
    599.5
    
    
    
    2.0
    
    
    $
    2.0
    
    
    $
    1,906.4
    
    
    $
    2,239.9
    
    
    $
    (384.2
    )
    
    $
    (20.5
    )
    
    $
    4,343.1Stock options exercised
    
    
    0.7
    
    
    
    4.4
    
    
    
    
    
    
    
    
    
    
    
    37.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41.8Restricted shares issued/cancelled, net
    
    
    0.2
    
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    18.6
    
    
    
    
    
    
    
    
    
    
    
    (17.3
    )
    
    
    2.6Common shares purchased
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.1
    )Dividends on preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    
    
    
    
    (3.4
    )Dividends on common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24.0
    )
    
    
    
    
    
    
    
    
    
    
    (24.0
    )Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386.7
    
    
    
    
    
    
    
    
    
    
    
    386.7Other comprehensive income (loss), net of tax:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9.5
    )
    
    
    
    
    
    
    (9.5
    )Net gain on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    1.0Other investment adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    0.5Unrealized gains on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    3.0Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.8
    
    
    
    
    
    
    
    11.8Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.8
    
    
    
    
    
    
    
    6.8Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    393.5Balance at March 31, 2005
    
    
    96.8
    
    
    $
    605.1
    
    
    
    2.0
    
    
    $
    2.0
    
    
    $
    1,961.4
    
    
    $
    2,599.2
    
    
    $
    (377.4
    )
    
    $
    (37.8
    )
    
    $
    4,752.5
   *
    
    As of March 31, 2005, this balance comprised $(217.8) million of
cumulative minimum pension liability adjustments, $(181.3) million of
cumulative translation adjustments and $(0.2) million of cumulative
other investment adjustments; partially offset by $19.8 million of
cumulative unrealized gains on securities and
$2.1 million of cumulative unrealized gains on derivative instruments. See Notes to Consolidated Financial Information.




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##### Table of Contents



- 5 - PHELPS DODGE CORPORATION 
 FINANCIAL DATA BY BUSINESS SEGMENT
 
 U.S. Mines
    
    
    South American MinesCandelaria/Miami/
    
    
    Chino/
    
    
    
    
    
    
    Ojos del
    
    
    Cerro
    
    
    
    
    
    
    PrimaryMorenci
    
    
    Bagdad
    
    
    Sierrita
    
    
    Bisbee
    
    
    Cobre
    
    
    Tyrone
    
    
    Salado
    
    
    Verde
    
    
    El Abra
    
    
    MolybdenumFirst Quarter 2005Sales and
other operating    revenues:Unaffiliated customers
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121.9
    
    
    
    16.5
    
    
    
    72.2
    
    
    
    476.8Intersegment
    
    
    227.0
    
    
    
    156.5
    
    
    
    207.9
    
    
    
    9.5
    
    
    
    85.7
    
    
    
    30.1
    
    
    
    32.0
    
    
    
    51.6
    
    
    
    80.6
    
    
    
    Depreciation, depletion and amortization
    
    
    15.1
    
    
    
    7.8
    
    
    
    3.9
    
    
    
    0.9
    
    
    
    5.3
    
    
    
    4.0
    
    
    
    9.9
    
    
    
    5.9
    
    
    
    33.4
    
    
    
    8.9Operating income (loss) before special
items and provisions
    
    
    86.2
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    1.1
    
    
    
    17.7
    
    
    
    1.3
    
    
    
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    86.6Special items and provisions
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    (4.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    85.9
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    1.1
    
    
    
    17.1
    
    
    
    (2.9
    )
    
    
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    86.6Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    
    
    
    
    0.1Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.3
    )
    
    
    Benefit (provision) for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18.3
    )
    
    
    (6.8
    )
    
    
    (14.6
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.6
    )
    
    
    (5.7
    )
    
    
    (13.3
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Assets at March 31
    
    
    921.7
    
    
    
    437.3
    
    
    
    318.6
    
    
    
    101.0
    
    
    
    482.9
    
    
    
    225.4
    
    
    
    953.8
    
    
    
    560.1
    
    
    
    964.5
    
    
    
    876.3Expenditures for segment assets
    
    
    (3.9
    )
    
    
    5.1
    
    
    
    2.9
    
    
    
    (0.1
    )
    
    
    4.8
    
    
    
    0.5
    
    
    
    3.9
    
    
    
    29.7
    
    
    
    2.0
    
    
    
    1.7First Quarter 2004*Sales and other operating revenues:Unaffiliated customers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    86.3
    
    
    
    16.6
    
    
    
    99.2
    
    
    
    150.0Intersegment
    
    
    210.9
    
    
    
    80.3
    
    
    
    90.5
    
    
    
    8.8
    
    
    
    36.7
    
    
    
    27.5
    
    
    
    72.4
    
    
    
    51.6
    
    
    
    74.3
    
    
    
    Depreciation, depletion and amortization
    
    
    18.1
    
    
    
    5.9
    
    
    
    3.3
    
    
    
    1.2
    
    
    
    2.5
    
    
    
    3.0
    
    
    
    13.1
    
    
    
    8.2
    
    
    
    31.6
    
    
    
    7.3Operating income (loss) before special
items and provisions
    
    
    77.9
    
    
    
    24.9
    
    
    
    30.0
    
    
    
    (0.7
    )
    
    
    15.0
    
    
    
    2.4
    
    
    
    68.8
    
    
    
    37.8
    
    
    
    74.6
    
    
    
    15.6Special items and provisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    77.9
    
    
    
    24.9
    
    
    
    30.0
    
    
    
    (0.7
    )
    
    
    15.0
    
    
    
    2.4
    
    
    
    68.8
    
    
    
    37.8
    
    
    
    74.6
    
    
    
    15.6Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    0.4
    
    
    
    0.1
    
    
    
    
    
    
    
    Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.7
    )
    
    
    (1.4
    )
    
    
    (4.5
    )
    
    
    Benefit (provision) for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19.5
    )
    
    
    (13.3
    )
    
    
    30.9
    
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8.9
    )
    
    
    (4.9
    )
    
    
    (49.5
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Assets at March 31
    
    
    990.9
    
    
    
    432.1
    
    
    
    299.1
    
    
    
    108.1
    
    
    
    422.2
    
    
    
    162.3
    
    
    
    922.9
    
    
    
    464.5
    
    
    
    1,070.4
    
    
    
    795.3Expenditures for segment assets
    
    
    3.6
    
    
    
    1.7
    
    
    
    2.8
    
    
    
    
    
    
    
    0.9
    
    
    
    0.3
    
    
    
    5.0
    
    
    
    0.9
    
    
    
    1.4
    
    
    
    2.3
 PDMC
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Corporate,Manufac-
    
    
    
    
    
    
    PDMC
    
    
    
    
    
    
    Elimi-
    
    
    PDMC
    
    
    Specialty
    
    
    Wire &
    
    
    PDI
    
    
    Other &turing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    nations
    
    
    Subtotal
    
    
    Chemicals
    
    
    Cable
    
    
    Subtotal
    
    
    Eliminations
    
    
    TotalsFirst Quarter 2005Sales and other operating revenues:Unaffiliated customers
    
    
    675.0
    
    
    
    249.9
    
    
    
    1,612.7
    
    
    
    5.4
    
    
    
    
    
    
    
    1,618.1
    
    
    
    180.0
    
    
    
    268.4
    
    
    
    448.4
    
    
    
    
    
    
    
    2,066.5Intersegment
    
    
    57.9
    
    
    
    53.8
    
    
    
    992.6
    
    
    
    19.1
    
    
    
    (956.5
    )
    
    
    55.2
    
    
    
    
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    (55.4
    )
    
    
    Depreciation, depletion and amortization
    
    
    5.6
    
    
    
    
    
    
    
    100.7
    
    
    
    1.3
    
    
    
    
    
    
    
    102.0
    
    
    
    17.6
    
    
    
    8.1
    
    
    
    25.7
    
    
    
    1.7
    
    
    
    129.4Operating income (loss) before special
items and provisions
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    568.1
    
    
    
    (11.8
    )
    
    
    
    
    
    
    556.3
    
    
    
    13.2
    
    
    
    11.6
    
    
    
    24.8
    
    
    
    (33.0
    )
    
    
    548.1Special items and provisions
    
    
    
    
    
    
    
    
    
    
    (5.1
    )
    
    
    (0.8
    )
    
    
    
    
    
    
    (5.9
    )
    
    
    
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    6.4
    
    
    
    0.9Operating income (loss)
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    563.0
    
    
    
    (12.6
    )
    
    
    
    
    
    
    550.4
    
    
    
    13.2
    
    
    
    12.0
    
    
    
    25.2
    
    
    
    (26.6
    )
    
    
    549.0Interest income
    
    
    
    
    
    
    
    
    
    
    2.3
    
    
    
    0.9
    
    
    
    (0.8
    )
    
    
    2.4
    
    
    
    3.5
    
    
    
    0.2
    
    
    
    3.7
    
    
    
    3.4
    
    
    
    9.5Interest expense
    
    
    (0.8
    )
    
    
    (0.3
    )
    
    
    (3.4
    )
    
    
    
    
    
    
    0.8
    
    
    
    (2.6
    )
    
    
    (3.6
    )
    
    
    (2.0
    )
    
    
    (5.6
    )
    
    
    (15.5
    )
    
    
    (23.7
    )Benefit (provision) for taxes on income
    
    
    
    
    
    
    
    
    
    
    (39.7
    )
    
    
    
    
    
    
    
    
    
    
    (39.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91.5
    )
    
    
    (131.2
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (25.6
    )
    
    
    
    
    
    
    
    
    
    
    (25.6
    )
    
    
    (0.4
    )
    
    
    (1.0
    )
    
    
    (1.4
    )
    
    
    
    
    
    
    (27.0
    )Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    0.7
    
    
    
    0.7
    
    
    
    0.5
    
    
    
    0.7Equity basis investments
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    0.2
    
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    6.5
    
    
    
    6.5
    
    
    
    24.2
    
    
    
    32.2Assets at March 31
    
    
    503.4
    
    
    
    23.9
    
    
    
    6,368.9
    
    
    
    1,303.7
    
    
    
    (1,404.1
    )
    
    
    6,268.5
    
    
    
    825.1
    
    
    
    641.1
    
    
    
    1,466.2
    
    
    
    1,288.5
    
    
    
    9,023.2Expenditures for segment assets
    
    
    4.9
    
    
    
    
    
    
    
    51.5
    
    
    
    8.9
    
    
    
    (0.1
    )
    
    
    60.3
    
    
    
    4.6
    
    
    
    2.9
    
    
    
    7.5
    
    
    
    0.5
    
    
    
    68.3First Quarter 2004*Sales and other operating revenues:Unaffiliated customers
    
    
    602.1
    
    
    
    255.1
    
    
    
    1,209.4
    
    
    
    5.1
    
    
    
    
    
    
    
    1,214.5
    
    
    
    163.9
    
    
    
    218.6
    
    
    
    382.5
    
    
    
    
    
    
    
    1,597.0Intersegment
    
    
    55.9
    
    
    
    51.6
    
    
    
    760.5
    
    
    
    16.1
    
    
    
    (721.2
    )
    
    
    55.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55.4
    )
    
    
    Depreciation, depletion and amortization
    
    
    5.2
    
    
    
    
    
    
    
    99.4
    
    
    
    1.1
    
    
    
    
    
    
    
    100.5
    
    
    
    13.1
    
    
    
    9.0
    
    
    
    22.1
    
    
    
    2.3
    
    
    
    124.9Operating income (loss) before special
items and provisions
    
    
    4.1
    
    
    
    (0.3
    )
    
    
    350.1
    
    
    
    (19.9
    )
    
    
    
    
    
    
    330.2
    
    
    
    11.2
    
    
    
    4.1
    
    
    
    15.3
    
    
    
    (23.9
    )
    
    
    321.6Special items and provisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.8
    )
    
    
    (1.8
    )
    
    
    (5.0
    )
    
    
    (6.8
    )Operating income (loss)
    
    
    4.1
    
    
    
    (0.3
    )
    
    
    350.1
    
    
    
    (19.9
    )
    
    
    
    
    
    
    330.2
    
    
    
    11.2
    
    
    
    2.3
    
    
    
    13.5
    
    
    
    (28.9
    )
    
    
    314.8Interest income
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    1.3
    
    
    
    (1.0
    )
    
    
    1.1
    
    
    
    2.1
    
    
    
    0.3
    
    
    
    2.4
    
    
    
    0.7
    
    
    
    4.2Interest expense
    
    
    (1.0
    )
    
    
    (0.1
    )
    
    
    (10.7
    )
    
    
    
    
    
    
    1.0
    
    
    
    (9.7
    )
    
    
    (3.9
    )
    
    
    (1.0
    )
    
    
    (4.9
    )
    
    
    (24.4
    )
    
    
    (39.0
    )Benefit (provision) for taxes on income
    
    
    
    
    
    
    
    
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    (1.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.3
    )
    
    
    (6.2
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (63.3
    )
    
    
    0.2
    
    
    
    
    
    
    
    (63.1
    )
    
    
    (0.1
    )
    
    
    (0.4
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    (63.6
    )Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.6
    
    
    
    (0.2
    )Equity basis investments
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    6.1
    
    
    
    6.1
    
    
    
    24.4
    
    
    
    32.0Assets at March 31
    
    
    519.9
    
    
    
    22.2
    
    
    
    6,209.9
    
    
    
    1,267.6
    
    
    
    (1,445.0
    )
    
    
    6,032.5
    
    
    
    759.8
    
    
    
    574.4
    
    
    
    1,334.2
    
    
    
    648.5
    
    
    
    8,015.2Expenditures for segment assets
    
    
    3.1
    
    
    
    
    
    
    
    22.0
    
    
    
    6.5
    
    
    
    (0.5
    )
    
    
    28.0
    
    
    
    2.3
    
    
    
    6.6
    
    
    
    8.9
    
    
    
    9.8
    
    
    
    46.7
   *
    
    In the 2004 fourth quarter, the Company reassessed its reportable segments.
The reassessment considered the significant increase in copper and molybdenum
prices. Based on our assessment, we are separately disclosing Bagdad,
Sierrita, Manufacturing and Sales as individual reportable segments, whereas,
in 2004 Bagdad and Sierrita, and Manufacturing and Sales were aggregated.
Segment information for 2004 has been revised to conform with the 2005
presentation.




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##### Table of Contents



- 6 - 
 NOTES TO CONSOLIDATED FINANCIALINFORMATION
(Unaudited)  1.
    General InformationThe 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 U.S. generally accepted accounting principles
(GAAP). 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, 2004. 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.In accordance with FASB Interpretation No. 46, Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51, (FIN 46) and the revised Interpretation (FIN 46-R),
beginning January 1, 2004, we fully consolidated the results of operations for the El Abra
and Candelaria mines in Chile, in which we hold 51 percent and 80 percent partnership
interests, respectively, with the interest held by our minority shareholders reported as
minority interests in consolidated subsidiaries in our Consolidated Balance Sheet and
Statement of Consolidated Operations. Other investments in undivided interests and
unincorporated mining joint ventures that are limited to the extraction of minerals are
accounted for using the proportional consolidation method. These investments include the
Morenci mine, located in Arizona, in which we hold an 85 percent undivided interest.
Interest in other majority-owned subsidiaries are reported using the full consolidation
method; the Consolidated Financial Statements include 100 percent of the assets and
liabilities of these subsidiaries and the ownership interests of minority participants are
recorded as minority interests in consolidated subsidiaries. All material intercompany
balances and transactions are eliminated.Our business consists of two divisions, Phelps Dodge Mining Company (PDMC) and Phelps Dodge
Industries (PDI). The results of operations for the three-month period ended March 31,
2005, are not necessarily indicative of the results to be expected for the full year.2.
    Stock CompensationWe account for our stock option plans by measuring compensation cost using the
intrinsic-value-based method presented by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. No compensation
cost has been reflected in consolidated net income, 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 income and earnings per common
share as if we had applied the fair value recognition provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, to
compensation cost.   (Unaudited; $ in millions except per share data) First Quarter2005
    
    
    2004Net income as reported
    
    $
    386.7
    
    
    
    185.7Deduct:Total compensation cost
determined under fair value
based method for all awards,
net of tax
    
    
    (0.9
    )
    
    
    (1.7
    )Pro forma net income
    
    $
    385.8
    
    
    
    184.0Earnings per common shareBasic  as reported
    
    $
    4.00
    
    
    
    1.99Basic  pro forma
    
    $
    3.99
    
    
    
    1.97Earnings per common shareDiluted  as reported
    
    $
    3.83
    
    
    
    1.90Diluted  pro forma
    
    $
    3.83
    
    
    
    1.88
    3.
    Special Items and ProvisionsSpecial items and provisions are unpredictable and atypical of the Companys
operations in a given period. This supplemental information is not a substitute for any
U.S. GAAP measure and should




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##### Table of Contents



- 7 -  be evaluated within the context of our U.S. GAAP results. The
tax impacts of the special items were determined at the marginal effective tax rate of the
appropriate taxing jurisdiction, including provision for a valuation allowance, if
warranted. (All references to per share earnings or losses are based on diluted earnings or
losses per share.) Note: Supplemental Data The following schedule summarizes the special items and provisions for the quarter ended
March 31, 2005:   (Unaudited; $ in millions except per share amounts) Statement of Consolidated
    
    
    
    
    
    
    
    
    
    $/ShareOperations Line Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-taxSpecial items and provisions, net:PDMC Environmental provisions,
net
    
    $
    (5.3
    )
    
    
    (4.0
    )
    
    
    (0.04
    )Environmental insurance
recoveries, net
    
    
    (0.6
    )
    
    
    (0.5
    )
    
    
    (5.9
    )
    
    
    (4.5
    )
    
    
    (0.04
    )PDI Wire and Cable restructuring
programs/closures
    
    
    0.4
    
    
    
    0.8
    
    
    
    0.01Corporate and Other Environmental provisions,
net
    
    
    1.0
    
    
    
    0.7
    
    
    
    0.01Environmental insurance
recoveries, net
    
    
    0.6
    
    
    
    0.5
    
    
    
    Historical legal matters
    
    
    4.8
    
    
    
    4.5
    
    
    
    0.046.4
    
    
    
    5.7
    
    
    
    0.050.9
    
    
    
    2.0
    
    
    
    0.02Provision for taxes on income:Foreign dividend tax
    
    
    
    
    
    
    (1.9
    )
    
    
    (0.02
    )$
    0.9
    
    
    
    0.1
    
    
    
    
   A net charge for environmental provisions of $4.3 million ($3.3 million after-tax) was
recognized for closed facilities and closed portions of operating facilities. (Refer to
Note 5, Environmental and Reclamation, and Closure Matters, for further discussion of
environmental matters.) A gain of $4.8 million ($4.5 million after-tax) was recognized for legal matters. This
included a $3.6 million adjustment (before and after taxes) related to an historical Cyprus
Amax Minerals Company lawsuit and a net settlement of $1.2 million ($0.9 million after-tax)
reached with one of our insurance carriers associated with potential future legal matters. A tax charge of $1.9 million was recognized for U.S. taxes expected to be incurred with
respect to dividends anticipated to be received from certain South American operations in
2005. Note: Supplemental Data The following schedule summarizes the special items and provisions for the quarter ended
March 31, 2004:   (Unaudited; $ in millions except per share amounts) Statement of Consolidated
    
    
    
    
    
    
    
    
    
    $/ShareOperations Line Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-taxSpecial items and provisions, net:PDI Restructuring program
    
    $
    (1.7
    )
    
    
    (1.1
    )
    
    
    (0.01
    )Environmental provisions,
net
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (1.8
    )
    
    
    (1.2
    )
    
    
    (0.01
    )Corporate and Other Environmental provisions,
net
    
    
    (4.6
    )
    
    
    (3.5
    )
    
    
    (0.04
    )Historical legal matters
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    (5.0
    )
    
    
    (3.9
    )
    
    
    (0.04
    )(6.8
    )
    
    
    (5.1
    )
    
    
    (0.05
    )Interest expense:Texas franchise tax matter
    
    
    (0.9
    )
    
    
    (0.7
    )
    
    
    (0.01
    )Early debt extinguishment
costs
    
    
    (22.4
    )
    
    
    (17.6
    )
    
    
    (0.18
    )Miscellaneous income and
expense, net:Cost-basis investment
write-down
    
    
    (3.6
    )
    
    
    (2.7
    )
    
    
    (0.03
    )Benefit for taxes on income:Reversal of El Abra deferred
tax asset valuation
allowance
    
    
    
    
    
    
    30.8
    
    
    
    0.31Minority interests in
consolidated subsidiaries:Reversal of El Abra deferred
tax asset valuation
allowance
    
    
    
    
    
    
    (15.1
    )
    
    
    (0.15
    )$
    (33.7
    )
    
    
    (10.4
    )
    
    
    (0.11
    )
   In January 2004, Phelps Dodge Magnet Wire announced plans to consolidate its North
American manufacturing operations to reduce costs and strengthen its
com-




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##### Table of Contents



- 8 - petitiveness in the
global marketplace, which resulted in the closure of its manufacturing plant in El Paso,
Texas. (Refer to the Companys Form 10-K for the year ended December 31, 2004, for
additional discussion.) In the 2004 third quarter, Phelps Dodge Magnet Wire entered into a strategic partnership
with Schwering und Hasse Elektrodaht Ltd. in Germany to produce our product at their Ludge,
Germany, facility. This action resulted in the closure of the PD Austria facility. (Refer
to the Companys Form 10-K for the year ended December 31, 2004, for additional discussion.) The following schedule presents a roll-forward from December 31, 2004, of the liabilities
incurred in connection with the 2004 restructuring programs, which were reflected as current
liabilities in our Consolidated Balance Sheet:   (Unaudited; $ in millions) Re-Addi-
    
    
    assess-
    
    
    Pay-12/31/04
    
    
    tions*
    
    
    ments
    
    
    ments
    
    
    3/31/05PDI Wire and Cable
Employee
severance
    
    
    
    
    
    $
    1.2
    
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.7
    )
    
    
    0.3Plant removal
and
dismantling**
    
    
    
    
    
    
    0.4
    
    
    
    1.2
    
    
    
    (0.2
    )
    
    
    (1.1
    )
    
    
    0.3Take-or-pay
Contracts
    
    
    
    
    
    
    0.7
    
    
    
    0.2
    
    
    
    
    
    
    
    (0.3
    )
    
    
    0.6$
    2.3
    
    
    
    1.4
    
    
    
    (0.4
    )
    
    
    (2.1
    )
    
    
    1.2
   *
    
    Additions excluded $0.6 million of gains for miscellaneous sale of equipment and other
closure adjustments.**
    
    Costs were charged to expense as incurred.    PDIs Wire and Cable segment reassessments related to adjustments of its 2004 third
quarter restructuring program.4.
    New Accounting PronouncementsIn March 2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 47, Accounting for Conditional Asset Retirement
Obligationsan interpretation of FASB
Statement No. 143 (FIN 47). FIN 47 clarifies the term conditional asset retirement
obligation as used in SFAS No. 143, Accounting for Asset Retirement Obligations, and
requires an entity to recognize a liability for the fair value of a conditional asset
retirement obligation if the fair value can be reasonably estimated. Any uncertainty about
the amount and/or timing of future settlement of a conditional asset retirement obligation
should be factored into the measurement of the liability when sufficient information exists.
FIN 47 also clarifies when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. FIN 47 is effective for fiscal
years ending after December 15, 2005. The Company is currently determining the impact of
FIN 47 on its financial reporting and disclosures.At the March 2005 meeting, the Emerging Issues Task Force (EITF) of FASB discussed EITF
Issue No. 04-6, Accounting for Stripping Costs Incurred during Production in the Mining
Industry, and reached a consensus that stripping costs incurred during the production phase
of a mine are variable production costs that should be included in the cost of inventory
produced during the period. At its March 30, 2005 meeting, the FASB ratified this
consensus. The consensus on this Issue is effective for the first reporting period in
fiscal years beginning after December 15, 2005. The Company is currently determining the
impact of EITF Issue No. 04-6 on its financial reporting and disclosures.In December 2004, FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS No.
123-R), which amends SFAS No. 123, to require companies to recognize, in their financial
statements, the cost of employee services received in exchange for equity instruments
issued, and liabilities incurred, to employees in share-based payment transactions, such as
employee stock options and similar awards. On April 14, 2005, the Securities and Exchange
Commission delayed the effective date to annual periods, rather than interim periods,
beginning after June 15, 2005. We have evaluated SFAS No. 123-R and determined that
adoption of this Statement
will not have a material impact on our financial reporting and disclosures. Upon adoption
of this Statement, the modified prospective application will be utilized to account for
share-based payment transactions.




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##### Table of Contents



- 9 -  In December 2004, FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, an Amendment
of APB Opinion No. 29, Accounting for Nonmonetary Transactions. SFAS No. 153 eliminates
the exception from fair value measurement for nonmonetary exchanges of similar productive
assets in paragraph 21(b) of APB Opinion No. 29 and replaces it with an exception for
exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary
exchange has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. This Statement is effective for fiscal
years beginning after June 15, 2005. The adoption of SFAS No. 153 is not expected to have a
material impact on our financial reporting and disclosures.In December 2004, FASB issued FASB Staff Position (FSP) No. FAS 109-1, Application of FASB
Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004, and FSP No. FAS 109-2,
Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004, to address the accounting implications associated
with the American Jobs Creation Act of 2004 (the Act), enacted in October 2004. FSP No. FAS
109-1 clarifies how to apply SFAS No. 109 to the new laws tax deduction for income
attributable to qualified domestic production activities. The staff proposal would require
that the deduction be accounted for as a special deduction in the period earned, not as a
tax-rate reduction. FSP No. FAS 109-2 provides guidance with respect to recording the
potential impact of the repatriation provisions of the Act on a companys income tax expense
and deferred tax liability. FSP No. FAS 109-2 states that an enterprise is permitted time
beyond the financial reporting period of enactment to evaluate the effect of the Act on its
plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No.
109. (Refer to Note 8, Provision for Taxes on Income, for further discussion of the impact
of the Act.)In November 2004, FASB issued SFAS No. 151, Inventory Costs, an Amendment of ARB No. 43,
Chapter 4. SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight,
handling costs and wasted materials (spoilage) should be recognized as current-period
charges and requires the allocation of fixed production overhead to inventory based on the
normal capacity of the production facilities. The guidance in this Statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005. The
adoption of this Statement is not expected to have a material impact on our financial
reporting and disclosures.5.
    Environmental, and Reclamation and Closure MattersAs of December 31, 2004, environmental reserves totaled $303.6 million for estimated future
costs associated with environmental matters at closed facilities and closed portions of
certain operating facilities. During the 2005 first quarter, we had a $4.3 million net
increase in the reserve estimate ($5.9 million of additions and $1.6 million of reductions),
offset by $10.1 million of spending against the reserve. As of March 31, 2005,
environmental reserves totaled $297.8 million.The site currently considered to be most significant is the Pinal Creek site near Miami,
Arizona, where $109.9 million remained in the environmental reserve at March 31, 2005.
Phelps Dodge Miami, Inc. and the other members of the Pinal Creek Group (PCG) settled their
contribution claims against one defendant in April 2005, which will result in cancellation
of the Phase I trial. While the terms of the settlement are confidential, the proceeds of
the settlement will be used to address remediation at the Pinal Creek site. The Phase II
trial, which will allocate liability, has not been scheduled.At March 31, 2005, the cost range for reasonably possible outcomes for all reservable sites
(including Pinal Creeks estimate of $106 million to $213 million) was estimated to be from $264 million to $562
million (of which approximately $298 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




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##### Table of Contents



- 10 - Company for
those sites, but for which there is a reasonably possible likelihood of an environmental
remediation liability. At March 31, 2005, the cost range for reasonably possible outcomes
for all such sites was estimated to be from $3 million to $17 million. The liabilities
arising from potential environmental obligations that have not been reserved at this time
may be material to the operating results of any single quarter or year in the future.
Management, however, believes the liability arising from potential environmental obligations
is not likely to have a material adverse effect on the Companys liquidity or financial
position as such obligations could be satisfied over a period of years. We recognize asset retirement obligations (AROs) as liabilities when incurred, with initial
measurement at fair value. These liabilities are accreted to full value over time through
charges to income. In addition, asset retirement costs (ARCs) are capitalized as part of
the related assets carrying value and are depreciated primarily on a units-of-production
basis over the assets useful life. Reclamation costs for future disturbances are
recognized as an ARO and as a related ARC in the period incurred. The Companys cost
estimates are reflected on a third-party cost basis and comply with the Companys legal
obligation to retire intangible long-lived assets as defined by SFAS No. 143, Accounting
for Asset Retirement Obligations. These cost estimates may differ from financial assurance
cost estimates due to a variety of factors, including obtaining updated cost estimates for
reclamation activities, the timing of reclamation activities, changes in the scope of
reclamation activities and the exclusion of certain costs not accounted for under SFAS No.
143. The following tables summarize our asset retirement obligations and asset retirement cost
activities for the 2005 first quarter:   Asset Retirement Obligations
(Unaudited; $ in millions) Balance, beginning of period
    
    $
    275.2New liabilities during the period
    
    
    0.9Accretion expense
    
    
    5.4Payments
    
    
    (6.6
    )Revisions in estimated cash flows
    
    
    17.9Foreign currency translation adjustments
    
    
    (0.2
    )Balance, end of period
    
    $
    292.6
     Asset Retirement Cost
(Unaudited; $ in millions) Gross balance, beginning of period
    
    $
    196.3New assets during the period
    
    
    0.9Revisions in estimated cash flows
    
    
    17.9Foreign currency translation adjustments
    
    
    (0.2
    )Gross balance, end of period
    
    
    214.9Less accumulated depreciation, depletion
and amortization
    
    
    74.4Balance, end of period
    
    $
    140.5
   In the first quarter 2005, we revised our estimated cash flows for the Tyrone mine
($16.9 million, discounted). The revision recognized adjusted timing of reclamation
activities for an inactive portion of the tailing operations as a result of receiving a
permit modification from the Mining and Minerals Division (MMD) of the New Mexico Energy,
Minerals and Natural Resources Department in March 2005, coupled with obtaining new cost
estimates to perform the closure activities. We also revised our estimated cash flows for
the Cobre mine ($1.0 million, discounted) for timing and cost estimate changes resulting
from MMD issuing a permit revision approving the closeout plan in March 2005. We have estimated our share of the total cost of AROs, including anticipated future
disturbances, at approximately $1.3 billion (unescalated, undiscounted and on a third-party
cost basis), leaving approximately $1.0 billion 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, and as actual reclamation spend
ing occurs. ARO activities and expenditures




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- 11 -  generally are made over an extended period of time
commencing near the end of a mines life; however, certain reclamation activities could be
accelerated if they are determined to be economically beneficial.6.
    ContingenciesSignificant New Mexico Closure and Reclamation ProgramsBackgroundThe Companys New Mexico operations, Chino Mines Company (Chino), Phelps Dodge Tyrone, Inc.
(Tyrone), Cobre Mining Company (Cobre) and Phelps Dodge Hidalgo, Inc. (Hidalgo), each are
subject to regulation under the New Mexico Water Quality Act and the Water Quality Control
Commission (WQCC) regulations adopted under that Act. The New Mexico Environment Department
(NMED) has required each of these operations to submit closure plans for approval. The
closure plans must describe the measures to be taken to prevent groundwater quality
standards from being exceeded following closure of the discharging facilities and to abate
any groundwater or surface water contamination.Chino, Tyrone and Cobre are also subject to regulation under the New Mexico Mining Act (the
Mining Act), which was enacted in 1993, and the Mining Act Rules, which are administered by
MMD. Under
the Mining Act, Chino, Tyrone and Cobre are required to submit and obtain approval of
closeout plans describing the reclamation to be performed following closure of the mines or
portions of the mines.Financial assurance is required to ensure that funding will be available to perform both the
closure plans and the closeout plans if the operator is not able to perform the work
required by the plans. The amount of financial assurance is based upon the estimated cost
for a third party to complete the work specified in the plans, including any long-term
operation and maintenance, such as operation of water treatment systems. NMED and MMD
calculate the required amount of financial assurance using a net present value (NPV)
method, based upon approved discount and escalation rates, when the closure plan and/or
closeout plan require performance over a long period of time.The Companys cost estimates to perform the work itself (internal cost basis) generally are
substantially lower than the cost estimates used for financial assurance due to the
Companys historical cost advantages, savings from the use of the Companys own personnel
and equipment as opposed to third-party contractor costs, and opportunities to prepare the
site for more efficient reclamation as mining progresses.Chino Mines CompanyNMED issued Chinos closure permit on February 24, 2003. The closure permit was appealed by
a third party. WQCC dismissed the appeal, and that dismissal was appealed to the New Mexico
Court of Appeals. If the dismissal is not upheld, WQCC could hold a public hearing on
Chinos closure permit.MMD issued a permit revision approving Chinos closeout plan, subject to conditions, on
December 18, 2003. MMDs permit revision was not appealed. The third-party cost estimate
is approximately $395 million (undiscounted and unescalated) over the 100-year period of the
closure and closeout plans. Chino has provided financial assurance to NMED and MMD for
approximately $192 million (NPV basis), including a trust fund
initially funded in the amount of approximately $64 million and a third-party performance guarantee for approximately $128
million provided by Phelps Dodge. The guarantee is subject to a financial test that, in
part, requires Phelps Dodge to maintain an investment-grade rating on its senior unsecured
debt. Phelps Dodges senior unsecured debt currently carries an investment-grade rating.The terms of the NMED and MMD permits require Chino to conduct supplemental studies
concerning closure and closeout, including a feasibility study. The terms of the NMED
permit also require Chino to prepare and submit an abatement plan. Chino is complying with
those requirements. The studies and abatement plan are due to be submitted to NMED before
an application for renewal of the closure permit is due in August 2007. Changes to




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- 12 -  the closure permit, which could increase or decrease the estimated cost of closure and closeout,
will be considered when the permit is renewed. The permits also contain requirements and a
schedule for Chino to commence closure and reclamation of inactive portions of the
operations, subject to Chinos ability to seek standby status for portions of the
operations anticipated to resume operation in the future.The Company estimates its cost, on an internal cost basis, to perform the requirements of
the approved Chino closure and closeout permits to be approximately $293 million
(undiscounted and unescalated) over the 100-year period of the closure and closeout plans.
That estimate is lower than the estimated cost used as the basis for the financial assurance
amount due to the factors discussed above, and reflects our internal cost estimate. Our
cost estimate, on a third-party cost basis, used to determine the fair value of our closure
and closeout accrual for SFAS No. 143 was approximately $393 million (undiscounted and
unescalated). This cost estimate excludes approximately $2 million of net environmental
costs from the financial assurance cost estimate that are primarily not within the scope of
SFAS No. 143. At March 31, 2005 and December 31, 2004, we had accrued approximately $53
million and $52 million, respectively, for closure and closeout at Chino.In December 1994, Chino entered into an Administrative Order on Consent (AOC) with NMED.
The AOC requires Chino to perform a Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) quality investigation of environmental impacts and potential risks to
human health and the environment associated with portions of the Chino property affected by
historical mining operations. The remedial investigations began in 1995 and are still under way, although
substantial portions of the remedial investigations are near completion. The Company
expects that some remediation will be required, although no feasibility studies have yet
been completed. NMED has not yet issued a record of decision regarding any remediation that
may be required under the AOC. The Companys estimated cost for all aspects of the AOC, as
of March 31, 2005, is $22.5 million. In addition to work under the AOC, Chino is continuing
ongoing projects to control blowing dust from tailing impoundments at an estimated cost of
$4.8 million. Chino initiated work on excavating and removing copper-bearing material from

an area known as Lake One for copper recovery in existing leach stockpiles at the mine.
The Companys estimated cost, as of March 31, 2005, for the remaining work at Lake One is
$0.9 million. The Companys aggregate environmental reserve for liability under the Chino
AOC, the interim work on the tailing impoundments and Lake One, as described above, is $28.2
million at March 31, 2005.Phelps Dodge Tyrone, Inc.NMED issued Tyrones closure permit on April 8, 2003. Tyrone appealed to the WQCC, which
upheld NMEDs permit conditions. Tyrone has appealed the WQCCs decision to the New Mexico
Court of Appeals.MMD issued a permit revision approving Tyrones closeout plan, subject to conditions, on
April 12, 2004. MMDs permit revision was not appealed. The third-party cost estimate is
approximately $439 million (undiscounted and unescalated) over the 100-year period of the
closure and closeout plans. Tyrone has provided financial assurance to NMED and MMD for
approximately $271 million (NPV basis). The financial assurance includes a trust fund
initially funded in the amount of approximately $17 million, to increase to approximately
$27 million over five years, a letter of credit for approximately $6 million, a surety bond
for approximately $58 million, and a third-party performance guarantee for approximately
$190 million provided by Phelps Dodge. Tyrone expects to replace both the letter of credit
and the surety bond with other collateral approved by MMD and NMED over the next few months.
The guarantee is subject to a financial test that, in part, requires Phelps Dodge to
maintain an investment-grade rating on its senior unsecured debt. Phelps Dodges senior
unsecured debt currently carries an investment-grade rating.The terms of the NMED and MMD permits require Tyrone to conduct supplemental studies
concerning closure and closeout plans, including a feasibility study. The




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##### Table of Contents



- 13 -  terms of the NMED permit also require Tyrone to prepare and submit an abatement plan. Tyrone is complying
with those requirements. The studies and abatement plan are due to be submitted to NMED
before an application for renewal of the closure permit is due in October 2007. Changes to
the closure permit, which could increase or decrease the estimated cost of closure and
closeout, will be considered when the permit is renewed. The permits also contain
requirements and a schedule for Tyrone to commence closure and reclamation of inactive
portions of the operations, subject to Tyrones ability to seek standby status for
portions of the operations anticipated to resume operation in the future.During 2004, Tyrone commenced certain closure activities with the mining of the 1C Stockpile
and placement of re-mined material on existing leach stockpiles for recovery of residual
copper. Through March 31, 2005, approximately $18 million has been spent on the 1C
Stockpile removal action. Once removal activities are completed in 2005, the remaining
material will be graded and capped to meet stipulated closure requirements. Tyrone also
initiated planning for accelerated reclamation of tailing impoundments located within the
Mangas Valley, with initial earthwork commencing in November 2004. The project is expected
to be completed in 2008. Additionally, as of March 31, 2005, Tyrone substantially completed
the reclamation of the Burro Mountain tailing area at an approximate cost of $1 million.The Company estimates its costs, on an internal cost basis, to perform the requirements of
Tyrones closure and closeout permits to be approximately $297 million (undiscounted and
unescalated) over the 100-year period of the closure and closeout plans. That estimate does
not yet reflect the deduction of costs for work performed in 2004 through March 31, 2005,
and is lower than the estimated cost used as the basis for the financial assurance amount
due to the factors discussed above. Our cost estimate, on a third-party cost basis, used to
determine the fair value of our closure and closeout accrual for SFAS No. 143 was
approximately $458 million (undiscounted and unescalated). This cost
estimate includes approximately $19 million of net costs in addition to the financial
assurance cost estimate that primarily relate to an increased scope of work for the
tailings, stockpiles and other projects, and updated estimates for actual closure
expenditures. At March 31, 2005 and December 31, 2004, we had accrued approximately $115
million and $99 million, respectively, for closure and closeout at Tyrone.Cobre Mining CompanyNMED issued Cobres closure permit on December 10, 2004. On March 3, 2005, MMD issued a
permit revision approving Cobres closeout plan, subject to conditions. The third-party
cost estimate is approximately $45 million (undiscounted and unescalated) over the 100-year
period of the closure and closeout plans. Cobre has provided financial assurance to NMED
and MMD for approximately $29 million (NPV basis). The financial assurance includes a trust
fund initially funded in the amount of at least $1 million, to increase to $3 million over
five years, real estate collateral for approximately $8 million, and a third-party
performance guarantee for approximately $20 million provided by Phelps Dodge.The terms of the NMED and MMD permits require Cobre to conduct supplemental studies
concerning closure and closeout, including a feasibility study. Cobre is complying with
those requirements. The terms of the NMED permit also require Cobre to prepare and submit
an abatement plan. The studies and abatement plan are due to be submitted to NMED before an
application to renew the closure permit is due in 2009. Changes to the closure permit,
which could increase or decrease the estimated cost of closure and closeout, will be
considered when the permit is renewed. The permits also contain requirements and a schedule
for Cobre to commence closure and reclamation of inactive portions of the operations,
subject to Cobres ability to seek standby status for portions of the operations
anticipated to resume operation in the future.The Company estimates its costs, on an internal cost basis, to perform the requirements of
Cobres closure and closeout permits to be approximately $39 million (undiscounted and
unescalated) over the 100-year period of the closure and




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- 14 -  closeout plans. That estimate is lower than the estimated cost used as the basis for the financial assurance amount due to
the factors discussed above. Our cost estimate, on a third-party cost basis, used to
determine the fair value of our closure and closeout accrual for SFAS No. 143 was
approximately $46 million (undiscounted and unescalated). This cost estimate includes
approximately $1 million of costs in addition to the financial assurance cost estimate that
primarily relates to construction of test plots for stockpile studies. At March 31, 2005
and December 31, 2004, we had accrued approximately $8 million and $7 million, respectively,
for closure and closeout at Cobre.Phelps Dodge Hidalgo, Inc.Hidalgo obtained approval of a closure plan under a discharge permit issued by NMED in 2000.
In accordance with the permit, Hidalgo provided financial assurance to NMED in the form of
surety bonds for approximately $11 million. Since obtaining approval of the closure plan,
Hidalgo has completed the closure of a former wastewater evaporation pond by construction of
a soil cap approved by NMED. The discharge permit under which the closure plan was approved
also requires corrective action for contaminated groundwater near the smelters closed
former wastewater evaporation pond. Impacted groundwater is pumped from a series of wells,
treated in a neutralization facility, and discharged to a series of lined impoundments or to
an irrigation system. The discharge permit requires a comprehensive groundwater study to
characterize groundwater at the site. NMED could require future enhancement of the system
based upon the results of the ongoing study. A discharge permit renewal application was
submitted in February 2005. As part of this permit process, Hidalgo and NMED will update
the closure plan. Hidalgo is not subject to the Mining Act and, consequently, does not
require a closeout plan. Our cost estimate used to determine the fair value of our
reclamation accrual was approximately $7 million (undiscounted and unescalated). At both
March 31, 2005, and December 31, 2004, we had accrued approximately $4 million for closure
at Hidalgo.7.
    Earnings Per ShareBasic earnings per share are computed by dividing net income available to common shares by
the weighted average number of common shares outstanding for the period. Diluted earnings
per share are computed similarly to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have been outstanding
if potentially dilutive common shares had been issued, and the numerator excludes preferred
dividends. Restricted stock is unvested; accordingly, these shares are included only in the
computation of diluted earnings per share as they are contingent only upon vesting.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.   (Unaudited; $ in millions except per share data) First Quarter2005
    
    
    2004Basic Earnings Per Share ComputationNumerator:Net income
    
    $
    386.7
    
    
    
    185.7Preferred stock dividends
    
    
    (3.4
    )
    
    
    (3.4
    )Net income applicable to
common shares
    
    $
    383.3
    
    
    
    182.3Denominator:Weighted average common
shares outstanding
    
    
    95.7
    
    
    
    91.7Basic earnings per common
share
    
    $
    4.00
    
    
    
    1.99Diluted Earnings Per Share ComputationNumerator:Net income
    
    $
    386.7
    
    
    
    185.7Denominator:Weighted average common
shares outstanding
    
    
    95.7
    
    
    
    91.7Weighted average employee
stock options
    
    
    0.6
    
    
    
    1.6Weighted average restricted
stock issued to employees
    
    
    0.4
    
    
    
    0.4Weighted average mandatory
convertible preferred
shares
    
    
    4.2
    
    
    
    4.2Total weighted
average common
shares outstanding
    
    
    100.9
    
    
    
    97.9Diluted earnings per common
share
    
    $
    3.83
    
    
    
    1.90




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- 15 -  8.
    Provision for Taxes on IncomeThe Companys income tax provision for the 2005 first quarter resulted from taxes on
earnings at international operations ($48.3 million), including recognition of valuation
allowances ($0.4 million), and taxes on earnings at U.S. operations ($82.9 million),
including benefits from the release of valuation allowances ($21.3 million). The release of
the domestic valuation allowances was attributable to the utilization of net operating
losses (NOLs) and other tax credits.The Companys income tax provision for the 2004 first quarter resulted from taxes on
earnings at international operations ($36.9 million), including benefits from the net
release of valuation allowances ($24.5 million), and taxes on earnings at U.S. operations
($0.1 million), including benefits from the release of valuation allowances ($24.3 million);
partially offset by the reversal of the valuation allowance associated with deferred tax
assets that were expected to be realized after 2004 at our 51 percent-owned El Abra copper
mine ($30.8 million).The recent enactment of the American Jobs Creation Act of 2004 (the Act) has caused us to
begin the process of reevaluating our current policy with respect to the repatriation of
foreign earnings. The Act provides an effective U.S. federal tax rate of 5.25 percent on
certain foreign earnings repatriated during a one-year period (2005 for Phelps Dodge), but
also results in the loss of any foreign tax credits associated with these earnings. The
maximum amount of the Companys foreign earnings that qualify for this one-time deduction is
approximately $638 million. At the present time, other than the amount provided for
dividends expected to be received in 2005 from certain South American operations, we do not
have enough information to determine whether and to what extent we might repatriate foreign
earnings or the related income tax effect of such repatriation. We expect to finalize our
assessment by the end of the 2005 third quarter at which time any tax impact would be
recognized.  9.
    Accounting for Derivative Financial
Instruments and Hedging ActivitiesThe Company does not purchase, hold or sell derivative financial contracts unless we have an
existing asset or obligation or we anticipate a future activity that is likely to occur and
will result in exposing 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
financial 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 valuations provided by third parties or widely
published market closing prices at period end. Refer to Managements Discussion and
Analysis of Financial Condition and Results of Operations and Note 21, Derivative Financial
Instruments 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, 2004, for
further discussion of our derivative instruments.Phelps Dodge entered into a program to protect a portion of Phelps Dodges share of expected
2006 global production by purchasing zero-cost copper collars (approximately 564 million
pounds) and copper put options (approximately 564 million pounds). The copper collars have
an average LME put strike price (floor) of 95.4 cents per pound (settled against the monthly
average LME price) and an average LME call strike price (ceiling) of $1.632 per pound
(settled against an annual average LME price). The copper put options establish a floor
price of 95.0 cents per pound (settled against the monthly average LME price). The put
options were purchased for a 2 cents per pound premium. Phelps Dodge entered into the
program as insurance to provide cash flows adequate to meet cash costs of production,
principal and interest expense, and to sustain capital requirements.During the second half of 2004, Phelps Dodge entered into programs to purchase zero-cost
copper collars on approximately




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##### Table of Contents



- 16 -  94 percent of El Abras expected 2005 total production
(approximately 452 million pounds) and 10 percent of PDMCs expected remaining 2005
consolidated production (approximately 198 million pounds). The copper collars at El Abra
have an average LME put strike price (floor) of $1.00 per pound (settled against the monthly
average LME price) and an average LME call strike price (ceiling) of $1.376 per pound
(settled against an annual average LME price). The copper collars on PDMCs expected
remaining consolidated production have an average LME put strike price (floor) of 94.3 cents
per pound (settled against the monthly average LME price) and an average LME call strike
price (ceiling) of $1.40 per pound (settled against an annual average LME price).Transactions under these copper price protection programs do not qualify as hedges for SFAS
No. 133 hedge accounting treatment and will be adjusted to fair market value each reporting
period with the offset recorded in earnings. At March 31, 2005, as a result of market
prices ($1.468 per pound) exceeding the ceiling of our 2005 zero-cost collars ($1.376 per
pound for El Abra and $1.40 per pound for PDMC), we recorded unrealized losses for our
zero-cost collar programs of approximately $42 million for El Abra and $14 million for a
small portion of PDMCs remaining production. El Abra entered into its program in order to
ensure a copper price sufficient to provide the necessary cash to repay its short-term
borrowings arising from the 2004 fourth quarter prepayment of its senior debt obligations,
repay sponsor support and to ensure financial flexibility. The other program covers a small
portion of PDMCs remaining production ensuring a minimum copper price for the restarted
Chino facility to operate comfortably throughout 2005.The actual impact of our 2005 zero-cost collar program will not be fully determinable until
the maturity of the collars at year-end. The unrealized losses for our 2005 zero-cost
collars were based on a projected full year average LME futures price (including actual
monthly average LME prices for the 2005 first quarter) at March 31, 2005, compared with the
average LME call protection price per pound of $1.376 for El Abra and $1.40 for a small
portion of PDMCs remaining production. The average LME price differences per pound were
multiplied by the annual contract amounts of approximately 650 million pounds combined.During the quarter ended March 31, 2005, we reclassified approximately $0.2 million of other
comprehensive gains to the Statement of Consolidated Operations, primarily as a result of
diesel fuel options. For the first quarter 2004, $1.6 million of other comprehensive losses
was reclassified to the
Statement of Consolidated Operations, principally as a result of our floating-to-fixed
interest rate swaps.10.
    Pension and Postretirement BenefitsThe following tables present the components of net periodic benefit cost for pension
benefits and postretirement benefits for the quarters ended March 31, 2005 and 2004:   Pension Benefits
(Unaudited; $ in millions) First Quarter2005
    
    
    2004Service cost
    
    $
    7.0
    
    
    
    5.9Interest cost
    
    
    18.7
    
    
    
    17.9Expected return on plan assets
    
    
    (21.6
    )
    
    
    (20.9
    )Amortization of prior service cost
    
    
    0.8
    
    
    
    0.9Amortization of actuarial loss
    
    
    3.6
    
    
    
    0.8Curtailment and special
retirement benefits
    
    
    
    
    
    
    0.5Net periodic benefit cost
    
    $
    8.5
    
    
    
    5.1
     Postretirement Benefits
(Unaudited; $ in millions) First Quarter2005
    
    
    2004Service cost
    
    $
    1.1
    
    
    
    1.4Interest cost
    
    
    4.8
    
    
    
    5.8Expected return on plan assets
    
    
    
    
    
    
    (0.1
    )Amortization of prior service cost
    
    
    
    
    
    
    0.3Amortization of actuarial gain
    
    
    
    
    
    
    (0.1
    )Net periodic benefit cost
    
    $
    5.9
    
    
    
    7.3
    Our pension expense in the 2005 first quarter was $8.5 million, compared with $5.1
million in the 2004 first quarter. The increase of $3.4 million was primarily due to an
increase in service costs ($1.1 million) resulting from the effect of a 50-basis point
reduction in the discount rate and




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##### Table of Contents



- 17 -  amortization of actuarial loss ($2.8 million) resulting
from an increase in benefit liability, the reduction in the deferred asset losses and
actuarial losses; partially offset by an increase in expected return on plan assets ($0.7
million) and the absence of special retirement benefits ($0.5 million).Our postretirement expense in the 2005 first quarter was $5.9 million, compared with $7.3
million in the 2004 first quarter. The decrease of $1.4 million was primarily due to a
decrease in interest costs ($1.0 million) resulting from a decrease in benefit liability due
to the plan amendment associated with employee life insurance, the federal subsidy
associated with The Medicare Prescription Drug, Improvement and Modernization Act of 2003,
and actuarial gains.11.
    Debt and Other FinancingOn April 1, 2005, the Company amended the agreement for its $1.1 billion revolving credit
facility, extending its maturity to April 20, 2010, and slightly modifying its fee
structure. The facility is to be used for general corporate purposes. The agreement
permits borrowings of up to $1.1 billion, with a $300 million sub-limit for letters of
credit. This agreement provides for a facility fee (currently 12.5 basis points) ranging
from 8 basis points to 20 basis points (depending on the Companys public debt rating) on
total commitments. Under the agreement, interest is payable at a variable rate based on the
agent banks prime rate or at a fixed rate based on LIBOR or fixed rates offered
independently by the several lenders, for maturities of up to 360 days. In addition, if
utilization exceeds one-third of total commitments there is a utilization fee ranging from
10 basis points to 25 basis points (depending on
the Companys public debt rating). Fees for letters of credit (currently 50 basis points)
range from 27 basis points to 80 basis points (depending on the Companys public debt
rating) on letters of credit issued, plus a 12.5 basis point issuance fee. The agreement
requires the Company to maintain a minimum EBITDA (as defined in the agreement) to interest
ratio of 2.25 on a rolling four-quarter basis, and limits consolidated indebtedness to 55
percent of total consolidated capitalization (as defined in the
agreement).
At March 31, 2005, there was approximately $75 million of letters of credit issued under the
new revolver. Total availability under the revolving credit facility at March 31, 2005,
amounted to approximately $1,025 million, of which approximately $225 million could be used
for additional letters of credit.On April 15, 2005, the Company filed a $400 million shelf registration statement with the
Securities and Exchange Commission on Form S-3. We currently have outstanding $600 million
under a shelf registration statement that was declared effective on July 15, 2003. We are
planning to combine the two registration statements into a new $1 billion shelf
registration. The shelf registration provides flexibility to efficiently access capital
markets should financial circumstances warrant.12.
    Shareholders EquitySeries A Mandatory Convertible Preferred StockEach 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 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 based on the average closing price of the 20-day period preceding the
conversion date. Each share of Series A Stock is non-voting and entitled to a liquidation
preference of $100 plus any accrued but unpaid dividends. At March 31, 2005, there were 2.0
million shares of cumulative preferred stock outstanding; 6.0 million shares are authorized
with a par value of $1.00 each.Stock Options ExercisedDuring the 2005 first quarter, 0.7 million stock options were exercised for Phelps Dodge
common shares, for which Phelps Dodge received approximately $32.4 million.




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##### Table of Contents



- 18 -   
 REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial information as of March 31, 2005, and for the three-month periods ended March
31, 2005 and 2004, included in Part I pursuant to Rule 10-01 of Regulation S-X has been reviewed by
PricewaterhouseCoopers LLP (PricewaterhouseCoopers), the Companys independent registered public
accounting firm, in accordance with standards of the Public Company Accounting Oversight Board
(United States). PricewaterhouseCoopers report is included below. 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. 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 March 31, 2005, and the related consolidated statements of operations and of
cash flows for the three-month periods ended March 31, 2005 and 2004
and the consolidated
statement of shareholders equity for the three-month period ended March 31, 2005. This interim
financial information is the responsibility of the Companys management. We conducted our review in accordance with the standards of the Public Company Accounting Oversight
Board (United States). 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 the
standards of the Public Company Accounting Oversight Board, 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. We have previously audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet as of December 31, 2004, and the
related consolidated statements of operations, of cash flows, and of shareholders equity for the
year then ended, managements assessment of the effectiveness of the Companys internal control
over financial reporting as of December 31, 2004 and the effectiveness of the Companys internal
control over financial reporting as of December 31, 2004; and in our report dated March 7, 2005, we
expressed unqualified opinions thereon. The consolidated financial statements and managements
assessment of the effectiveness of internal control over financial reporting referred to above are
not presented herein. In our opinion, the information set forth in the accompanying consolidated
balance sheet information as of December 31, 2004, 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
April 27, 2005




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##### Table of Contents



- 19 - 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations 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. Please refer to Managements Discussion
and Analysis of Financial Condition and Results of Operations in the Companys report on Form 10-K
for the year ended December 31, 2004, for a further discussion of such risks and uncertainties, our
operations, and our critical accounting policies. Please refer to Note 1 of the Notes to
Consolidated Financial Information in this report for a discussion of our consolidation policy. 
 RESULTS OF OPERATIONS Consolidated Financial Results   (Unaudited; $ in millions except per share data) First Quarter2005
    
    
    2004Sales and other operating
revenues
    
    $
    2,066.5
    
    
    
    1,597.0Operating income
    
    $
    549.0
    
    
    
    314.8Minority interests in consolidated
subsidiaries
    
    $
    (27.0
    )
    
    
    (63.6
    )Net income
    
    $
    386.7
    
    
    
    185.7Basic earnings per
common share
    
    $
    4.00
    
    
    
    1.99Diluted earnings per
common share
    
    $
    3.83
    
    
    
    1.90
   In the 2005 first quarter, the Company had consolidated net income of $386.7 million, or
$3.83 per common share, including special, net gains of $0.1 million after-tax. (All references to
per share earnings or losses are based on diluted earnings or losses per share.) In the 2004 first
quarter, consolidated net income was $185.7 million, or $1.90 per common share, including special,
net charges of $10.4 million, or 11 cents per common share, after taxes. Consolidated
net income increased $201.0 million in the 2005 first quarter compared with
the corresponding 2004 period. The increase primarily included the
effects of (i) higher copper
prices (approximately $96 million), including premiums and copper pricing adjustments, (ii) higher
molybdenum earnings, including earnings from primary molybdenum mines (approximately $71 million)
and by-product molybdenum contribution (approximately $160 million), (iii) lower interest expense,
including the absence of early debt extinguishment costs (approximately $38 million), (iv) lower
minority interests in consolidated subsidiaries (approximately $37 million), (v) higher PDI
earnings (approximately $12 million), and (vi) a gain on sale of exploration properties
(approximately $11 million). These were partially offset by higher copper production costs
(approximately $110 million), excluding by-product molybdenum credits and a higher tax provision
(approximately $125 million) due to higher earnings. Special Items and Provisions Throughout Managements Discussion and Analysis of Financial Condition and Results of
Operations there is disclosure and discussion of what management believes to be special items and
provisions. 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 and provisions. 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. The tax impacts of the special items were determined at the
marginal effective tax rate of the appropriate taxing jurisdiction, including provision for
valuation allowance, if warranted. Any supplemental information references to earnings, losses or
results excluding special items or before special items is a non-GAAP measure that may not be
comparable to similarly titled measures reported by other companies.




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##### Table of Contents



- 20 - Note: Supplemental Data The following table summarizes consolidated net income, special items and provisions, and the
resultant earnings excluding these special items and provisions for the quarters ended March 31,
2005 and 2004:   (Unaudited; $ in millions) First Quarter2005
    
    
    2004Net income
    
    $
    386.7
    
    
    
    185.7Special items and provisions,
net of taxes
    
    
    0.1
    
    
    
    (10.4
    )Earnings excluding special items
and provisions (after taxes)
    
    $
    386.6
    
    
    
    196.1




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##### Table of Contents



- 21 - Note: Supplemental Data The following schedules summarize the special items and provisions for the quarters ended
March 31, 2005 and 2004:   (Unaudited; $ in millions except per share data) 2005 First Quarter
    
    
    2004 First Quarter$/share
    
    
    
    
    
    
    
    
    
    
    $/shareStatement of Consolidated Operations Line Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-tax
    
    
    Pre-tax
    
    
    After-tax
    
    
    After-taxSpecial items and provisions, net:PDMC (see Business Segment disclosure)
    
    $
    (5.9
    )
    
    
    (4.5
    )
    
    
    (0.04
    )
    
    
    
    
    
    
    
    
    
    
    PDI (see Business Segment disclosure)
    
    
    0.4
    
    
    
    0.8
    
    
    
    0.01
    
    
    
    (1.8
    )
    
    
    (1.2
    )
    
    
    (0.01
    )Corporate and Other -Environmental provisions, net
    
    
    1.0
    
    
    
    0.7
    
    
    
    0.01
    
    
    
    (4.6
    )
    
    
    (3.5
    )
    
    
    (0.04
    )Environmental insurance recoveries, net
    
    
    0.6
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Historical legal matters
    
    
    4.8
    
    
    
    4.5
    
    
    
    0.04
    
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    6.4
    
    
    
    5.7
    
    
    
    0.05
    
    
    
    (5.0
    )
    
    
    (3.9
    )
    
    
    (0.04
    )0.9
    
    
    
    2.0
    
    
    
    0.02
    
    
    
    (6.8
    )
    
    
    (5.1
    )
    
    
    (0.05
    )Interest expense:Texas franchise tax matter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.9
    )
    
    
    (0.7
    )
    
    
    (0.01
    )Early debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22.4
    )
    
    
    (17.6
    )
    
    
    (0.18
    )Miscellaneous income and expense, net:Cost-basis investment write-down
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.6
    )
    
    
    (2.7
    )
    
    
    (0.03
    )Benefit (provision) for taxes on income:Foreign dividend tax
    
    
    
    
    
    
    (1.9
    )
    
    
    (0.02
    )
    
    
    
    
    
    
    
    
    
    
    Reversal of El Abra deferred tax asset valuation allowance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30.8
    
    
    
    0.31
    
    
    
    (1.9
    )
    
    
    (0.02
    )
    
    
    
    
    
    
    30.8
    
    
    
    0.31Minority interests in consolidated subsidiaries:Reversal of El Abra deferred tax asset valuation allowance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15.1
    )
    
    
    (0.15
    )$
    0.9
    
    
    
    0.1
    
    
    
    
    
    
    
    (33.7
    )
    
    
    (10.4
    )
    
    
    (0.11
    )




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##### Table of Contents



- 22 - Business Divisions Results for 2005 and 2004 can be meaningfully compared by separate reference to our reporting
divisions, Phelps Dodge Mining Company (PDMC) and Phelps Dodge Industries (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, technology and project
development programs. PDI, our manufacturing division, produces engineered products principally
for the global energy, transportation and specialty chemical sector. PDI includes our Specialty
Chemicals segment and our Wire and Cable segment. The Company is continuing to explore strategic
alternatives for PDI that may include potential subsidiary sales, selective asset sales,
restructurings, joint ventures and mergers, or, alternatively, retention and selective growth. We
are actively working with advisors and interested parties to select the alternatives we believe
will provide the best benefit for our shareholders. Significant events and transactions have
occurred within each segment that, 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 includes 12 reportable segments and other mining activities. In the 2004 fourth quarter,
the Company reassessed its reportable segments. The reassessment considered the significant
increase in copper and molybdenum prices. Based upon our assessment, we are separately disclosing
Bagdad, Sierrita, Manufacturing and Sales as individual reportable segments, whereas, in the 2004
first quarter, Bagdad and Sierrita, and Manufacturing and Sales were aggregated. In accordance
with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, segment
information for 2004 has been revised to conform with the 2005 presentation. PDMC has six reportable copper production segments in the United States (Morenci, Bagdad,
Sierrita, Miami/Bisbee, Chino/Cobre and Tyrone) and three reportable copper production segments in
South America (Candelaria/Ojos del Salado, Cerro Verde and El Abra). These segments include
open-pit mining, underground mining, sulfide ore concentrating, leaching, solution extraction and
electrowinning. In addition, the Candelaria/Ojos del Salado, Bagdad, Sierrita and Chino/Cobre
segments produce gold and silver. The Bagdad, Sierrita and Chino mines produce molybdenum and
rhenium as by-products. The Manufacturing segment consists of conversion facilities including our smelters, refineries
and rod mills. The Manufacturing segment processes copper produced at our mining operations and
copper purchased from others into copper anode, cathode and rod. 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 Sales segment functions as an agent to sell copper from our copper production and
manufacturing segments. It also purchases and sells any copper not sold by our South American
mines to third parties. Copper is sold to others primarily as rod, cathode or concentrate, and as
rod to PDIs Wire and Cable segment. The Primary Molybdenum segment consists of the Henderson and Climax mines, related conversion
facilities and a technology center. This segment is an integrated producer of molybdenum, with
mining, roasting and processing facilities producing high-purity, molybdenum-based chemicals,
molybdenum metal powder 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. It also includes a technology center that directs its primary activities at
developing, marketing and selling new engineered products and applications.




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##### Table of Contents



- 23 - Major operating and financial results of PDMC for the quarters ended March 31, 2005 and 2004,
are illustrated in the following table:   (Unaudited; $ in millions except per pound amounts) First Quarter2005
    
    
    2004Sales and other operating revenues
to unaffiliated customers
    
    $
    1,618.1
    
    
    
    1,214.5Operating income
    
    $
    550.4
    
    
    
    330.2Operating income before special
items and provisions
    
    $
    556.3
    
    
    
    330.2Minority interests in consolidated
subsidiaries
    
    $
    (25.6
    )
    
    
    (63.1
    )Copper production (thousand short tons):Total copper production
    
    
    325.0
    
    
    
    317.6Less undivided interest (A)
    
    
    13.8
    
    
    
    15.4Copper production on a
consolidated basis
    
    
    311.2
    
    
    
    302.2Less minority participants shares (B)
    
    
    39.3
    
    
    
    41.9Copper production on a pro rata basis
    
    
    271.9
    
    
    
    260.3Copper sales (thousand short tons):Total copper sales from own mines
    
    
    325.0
    
    
    
    323.3Less undivided interest (A)
    
    
    13.8
    
    
    
    15.4Copper sales from own mines on
a consolidated basis
    
    
    311.2
    
    
    
    307.9Less minority participants shares (B)
    
    
    39.9
    
    
    
    41.8Copper sales from own mines on
a pro rata basis
    
    
    271.3
    
    
    
    266.1Purchased copper (thousand short tons)
    
    
    92.6
    
    
    
    115.1Total copper sales on a
consolidated basis
    
    
    403.8
    
    
    
    423.0LME average spot copper price
per pound  cathodes
    
    $
    1.482
    
    
    
    1.239COMEX average spot copper price
per pound  cathodes
    
    $
    1.468
    
    
    
    1.231Molybdenum production (million pounds)
    
    
    14.7
    
    
    
    13.5Molybdenum sales (million pounds):Net Phelps Dodge share
from own mines
    
    
    14.9
    
    
    
    15.2Purchased molybdenum
    
    
    3.7
    
    
    
    3.4Total molybdenum sales
    
    
    18.6
    
    
    
    18.6Metals Week:Molybdenum Dealer Oxide
mean price per pound
    
    $
    31.31
    
    
    
    8.27
     (A)
    
    Represents a 15 percent undivided interest in Morenci, Arizona, copper mining complex held by
Sumitomo Metal Mining Arizona, Inc.(B)
    
    Minority participant interests include (i) 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 (ii) a 49 percent partnership interest in the
El Abra copper mining operation in Chile held by Corporación Nacional del Cobre de Chile
(CODELCO).   (thousand short tons) First Quarter2005
    
    
    2004Minority participants shares:Candelaria
    
    
    10.3
    
    
    
    11.1El Abra
    
    
    29.0
    
    
    
    30.839.3
    
    
    
    41.9
   Total PDMC Division  Sales PDMCs sales and other operating revenues to unaffiliated customers increased $403.6 million,
or 33 percent, in the 2005 first quarter compared with the 2004 first quarter. The increase
reflected higher average molybdenum realizations (approximately $320 million) and higher average
copper realizations (approximately $131 million); partially offset by lower copper sales volumes
(approximately $39 million). Total PDMC  Operating Income PDMC reported operating income of $550.4 million in the 2005 first quarter, including special,
net pre-tax charges of $5.9 million, compared with operating income of $330.2 million in the 2004
first quarter. The increase in operating income of $220.2 million, or 67 percent, primarily
included the effects of (i) higher copper prices (approximately $96 million), including premiums
and copper pricing adjustments, (ii) higher molybdenum earnings, including earnings from primary
molybdenum mines (approximately $71 million) and by-product molybdenum contribution (approximately
$160 million) primarily due to higher prices, and (iii) higher precious metals credits
(approximately $6 million). These were partially offset by higher copper production costs
(approximately $110 million). The higher copper production costs (excluding by-product molybdenum
credits) were primarily due to (i) higher energy costs (approximately $21 million), (ii) higher
mining and milling costs due generally to higher mining rates, repairs and maintenance and the
operational impacts of unusually heavy rainfall in the southwest United States (approximately $70
million), and (iii) higher smelting, refining and freight costs (approximately $33 million). For both 2005 and 2004, the higher average copper prices including premiums reflected improved
copper fundamentals and an improved economic environment.




---



##### Table of Contents



- 24 - The New York Commodity Exchange (COMEX) spot price per pound of copper cathode, primarily upon
which we base our U.S. sales, averaged $1.468 and $1.231 in the first quarters of 2005 and 2004,
respectively. The LME spot price per pound of copper cathode, primarily upon which we base our
international sales, averaged $1.482 and $1.239 in the first quarters of 2005 and 2004,
respectively. Certain of PDMCs sales agreements provide for provisional pricing based on either COMEX or
LME (as specified in the contract) when shipped. Final settlement is based on the average
applicable price for a specified future period (quotational period or QP), generally from one to
three months after arrival at the customers facility. PDMC records revenues upon passage of title
using the forward rate in place for the QP. For accounting purposes, these revenues are adjusted
to fair value through earnings each period until the date of final copper pricing. At March 31,
2005, approximately 226.6 million pounds of copper sales were provisionally priced at an average of
$1.5252 per pound with final QP periods of April to August 2005. Candelaria accounted for
approximately 69 percent of the outstanding provisionally priced sales at March 31, 2005. In 2004, Phelps Dodge entered into copper swap contracts to hedge provisionally priced sales
exposure in a manner designed to allow us to receive the average LME price for the month of
shipment while our Candelaria customers receive the QP price they requested (i.e., one to three
months after month of arrival at the customers facility). These hedge contracts are in accordance
with our Copper Quotational Period Swap Program discussed in Note 21, Derivative Financial
Instruments and Fair Value of Financial Instruments, of the Companys Form 10-K for the year ended
December 31, 2004. As of April 20, 2005, we completed our copper swap contracts for approximately
71 percent of Candelarias provisionally priced copper sales outstanding at March 31, 2005, at an
average of $1.44 per pound. This program is expected to substantially alleviate the volatility
that provisionally priced copper sales could have on our revenues. Phelps Dodge entered into a program to protect a portion of Phelps Dodges share of expected
2006 global production by purchasing zero-cost copper collars (approximately 564 million pounds)
and copper put options (approximately 564 million pounds). The copper collars have an average LME
put strike price (floor) of 95.4 cents per pound (settled against the monthly average LME price)
and an average LME call strike price (ceiling) of $1.632 per pound (settled against an annual
average LME price). The copper put options establish a floor price of 95.0 cents per pound
(settled against the monthly average LME price). The put options were purchased for a 2 cents per
pound premium. Phelps Dodge entered into the program as insurance to provide cash flows adequate
to meet cash costs of production, principal and interest expense, and to sustain capital
requirements. During the second half of 2004, Phelps Dodge entered into programs to purchase zero-cost
copper collars on approximately 94 percent of El Abras expected 2005 total production
(approximately 452 million pounds) and 10 percent of PDMCs expected remaining 2005 consolidated
production (approximately 198 million pounds). The copper collars at El Abra have an average LME
put strike price (floor) of $1.00 per pound (settled against the monthly average LME price) and an
average LME call strike price (ceiling) of $1.376 per pound (settled against an annual average LME
price). The copper collars on PDMCs expected remaining consolidated production have an average
LME put strike price (floor) of 94.3 cents per pound (settled against the monthly average LME
price) and an average LME call strike price (ceiling) of $1.40 per pound (settled against an annual
average LME price). Transactions under these copper price protection programs do not qualify as hedges for SFAS
No. 133 hedge accounting treatment and will be adjusted to fair market value each reporting period
with the offset recorded in earnings. At March 31, 2005, as a result of market prices ($1.468 per
pound) exceeding the ceiling of our 2005 zero-cost collars ($1.376 per pound for El Abra and $1.40
per pound for PDMC), we recorded unrealized losses for our zero-cost collar programs of
approximately $42 million for El Abra and $14 million for a small portion of PDMCs remaining
production. El Abra entered into its program in order to ensure a copper price sufficient to
provide the necessary cash to repay its short-term borrowings arising from the 2004 fourth quarter
prepayment of its senior debt obligations, repay sponsor support and to ensure financial
flexibility. The other program covers a small portion of PDMCs remaining production ensuring a
minimum copper price for the restarted Chino facility to operate comfortably throughout 2005. The actual impact of our 2005 zero-cost collar program will not be fully determinable until
the maturity of the collars at year-end. The unrealized losses for our 2005 zero-cost collars were
based on a projected full year average LME fu-




---



##### Table of Contents



- 25 - tures price (including actual monthly average LME
prices for the 2005 first quarter) at March 31, 2005, compared with the average LME call protection
price per pound of $1.376 for El Abra and
$1.40 for a small portion of PDMCs remaining production. The average LME price differences
per pound were multiplied by the annual contract amounts of approximately 650 million pounds
combined. Each 1 cent per pound increase in the full year 2005 monthly average LME future price
above that projected as of March 31, 2005, will decrease operating income by approximately $6.5
million. Each 1 cent per pound decrease in the full-year 2005 monthly average LME future price
from that projected as of March 31, 2005, will increase operating income by approximately $6.5
million, except that there would be no incremental effect for average prices between $1.00 per
pound and $1.376 per pound for El Abra and between 94.3 cents per pound and $1.40 per pound for a
small portion of PDMCs remaining production. Note: Supplemental Data The following table summarizes PDMCs special items and provisions in operating income for the
quarter ended March 31, 2005:   (Unaudited; $ in millions) First Quarter 2005U.S.
    
    
    South
    
    
    PrimaryMining
    
    
    American
    
    
    Molyb-Operations
    
    
    Mines
    
    
    denumEnvironmental
provisions, net
    
    $
    (5.3
    )
    
    
    
    
    
    
    Environmental
insurance
recoveries, net
    
    
    (0.6
    )
    
    
    
    
    
    
    $
    (5.9
    )
    
    
    
    
    
    
    
   Note: Our non-GAAP measure of special items may not be comparable to similarly titled measures
reported by other companies.




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##### Table of Contents



- 26 - PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)  The following tables summarize, on a segment basis, production and sales statistics, operating income (loss), special items and provisions, net, and operating income (loss) excluding special items and provisions for the quarters ended March 31, 2005 and 2004: U.S. MinesMiami/
    
    
    Chino/Morenci
    
    
    Bagdad
    
    
    Sierrita
    
    
    Bisbee
    
    
    Cobre
    
    
    Tyrone
    
    
    SubtotalFirst Quarter 2005Copper production (thousand short tons):Total production
    
    
    92.1
    
    
    
    27.9
    
    
    
    21.5
    
    
    
    2.6
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    183.2Less undivided interest
    
    
    13.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8Copper production on a consolidated basis
    
    
    78.3
    
    
    
    27.9
    
    
    
    21.5
    
    
    
    2.6
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    169.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    78.3
    
    
    
    27.9
    
    
    
    21.5
    
    
    
    2.6
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    169.4Copper sales (thousand short tons):Total copper sales from own mines
    
    
    92.1
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    3.3
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    186.2Less undivided interest
    
    
    13.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8Copper sales from own mines on a consolidated basis
    
    
    78.3
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    3.3
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    172.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    78.3
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    3.3
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    172.4Total purchased copper (thousand short tons)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    78.3
    
    
    
    29.1
    
    
    
    22.6
    
    
    
    3.3
    
    
    
    28.7
    
    
    
    10.4
    
    
    
    172.4($ in millions)Operating income (loss)
    
    $
    85.9
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    1.1
    
    
    
    17.1
    
    
    
    (2.9
    )
    
    
    320.1Special items and provisions, net
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    (4.2
    )
    
    
    (5.1
    )Operating income (loss) excluding special items and provisions
    
    $
    86.2
    
    
    
    84.4
    
    
    
    134.5
    
    
    
    1.1
    
    
    
    17.7
    
    
    
    1.3
    
    
    
    325.2First Quarter 2004Copper production (thousand short tons):Total production
    
    
    102.3
    
    
    
    24.7
    
    
    
    18.0
    
    
    
    2.3
    
    
    
    15.2
    
    
    
    11.2
    
    
    
    173.7Less undivided interest
    
    
    15.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.4Copper production on a consolidated basis
    
    
    86.9
    
    
    
    24.7
    
    
    
    18.0
    
    
    
    2.3
    
    
    
    15.2
    
    
    
    11.2
    
    
    
    158.3Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    86.9
    
    
    
    24.7
    
    
    
    18.0
    
    
    
    2.3
    
    
    
    15.2
    
    
    
    11.2
    
    
    
    158.3Copper sales (thousand short tons):Total copper sales from own mines
    
    
    102.3
    
    
    
    27.0
    
    
    
    20.1
    
    
    
    3.7
    
    
    
    15.2
    
    
    
    11.2
    
    
    
    179.5Less undivided interest
    
    
    15.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.4Copper sales from own mines on a consolidated basis
    
    
    86.9
    
    
    
    27.0
    
    
    
    20.1
    
    
    
    3.7
    
    
    
    15.2
    
    
    
    11.2
    
    
    
    164.1Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    86.9
    
    
    
    27.0
    
    
    
    20.1
    
    
    
    3.7
    
    
    
    15.2
    
    
    
    11.2
    
    
    
    164.1Total purchased copper (thousand short tons)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    86.9
    
    
    
    27.0
    
    
    
    20.1
    
    
    
    3.7
    
    
    
    15.2
    
    
    
    11.2
    
    
    
    164.1($ in millions)Operating income (loss)
    
    $
    77.9
    
    
    
    24.9
    
    
    
    30.0
    
    
    
    (0.7
    )
    
    
    15.0
    
    
    
    2.4
    
    
    
    149.5Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) excluding special items and provisions
    
    $
    77.9
    
    
    
    24.9
    
    
    
    30.0
    
    
    
    (0.7
    )
    
    
    15.0
    
    
    
    2.4

    
    
    
    149.5
 Refer to segment discussion on pages 30 through 34. 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 page 30 for further discussion.)




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##### Table of Contents



- 27 - PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)  South American MinesCandelaria/Ojos delSalado
    
    
    Cerro Verde
    
    
    El Abra
    
    
    SubtotalFirst Quarter 2005Copper production (thousand short tons):Total production
    
    
    57.3
    
    
    
    23.9
    
    
    
    59.1
    
    
    
    140.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    57.3
    
    
    
    23.9
    
    
    
    59.1
    
    
    
    140.3Less minority participants shares
    
    
    10.3
    
    
    
    
    
    
    
    29.0
    
    
    
    39.3Copper production on a pro rata basis
    
    
    47.0
    
    
    
    23.9
    
    
    
    30.1
    
    
    
    101.0Copper sales (thousand short tons):Total copper sales from own mines
    
    
    52.8
    
    
    
    22.3
    
    
    
    62.2
    
    
    
    137.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    52.8
    
    
    
    22.3
    
    
    
    62.2
    
    
    
    137.3Less minority participants shares
    
    
    9.4
    
    
    
    
    
    
    
    30.5
    
    
    
    39.9Copper sales from own mines on a pro rata basis
    
    
    43.4
    
    
    
    22.3
    
    
    
    31.7
    
    
    
    97.4Total purchased copper (thousand short tons)
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    3.2Total copper sales on a consolidated basis
    
    
    56.0
    
    
    
    22.3
    
    
    
    62.2
    
    
    
    140.5($ in millions)Operating income (loss)
    
    $
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    155.9Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) excluding special items and provisions
    
    $
    75.4
    
    
    
    36.0
    
    
    
    44.5
    
    
    
    155.9First Quarter 2004Copper production (thousand short tons):Total production
    
    
    55.5
    
    
    
    25.2
    
    
    
    62.9
    
    
    
    143.6Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    55.5
    
    
    
    25.2
    
    
    
    62.9
    
    
    
    143.6Less minority participants shares
    
    
    11.1
    
    
    
    
    
    
    
    30.8
    
    
    
    41.9Copper production on a pro rata basis
    
    
    44.4
    
    
    
    25.2
    
    
    
    32.1
    
    
    
    101.7Copper sales (thousand short tons):Total copper sales from own mines
    
    
    54.8
    
    
    
    25.6
    
    
    
    63.1
    
    
    
    143.5Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    54.8
    
    
    
    25.6
    
    
    
    63.1
    
    
    
    143.5Less minority participants shares
    
    
    10.9
    
    
    
    
    
    
    
    30.9
    
    
    
    41.8Copper sales from own mines on a pro rata basis
    
    
    43.9
    
    
    
    25.6
    
    
    
    32.2
    
    
    
    101.7Total purchased copper (thousand short tons)
    
    
    10.9
    
    
    
    
    
    
    
    
    
    
    
    10.9Total copper sales on a consolidated basis
    
    
    65.7
    
    
    
    25.6
    
    
    
    63.1
    
    
    
    154.4($ in millions)Operating income (loss)
    
    $
    68.8
    
    
    
    37.8
    
    
    
    74.6
    
    
    
    181.2Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) excluding special items and provisions
    
    $
    68.8
    
    
    
    37.8
    
    
    
    74.6
    
    
    
    181.2
 Refer to segment discussion on pages 30 through 34. 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 page 30 for further discussion.)




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##### Table of Contents



- 28 - PHELPS DODGE CORPORATION
PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)  Primary
    
    
    
    
    
    
    
    
    
    
    PDMCMolybdenum
    
    
    Manufacturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    Total PDMCFirst Quarter 2005Copper production (thousand short tons):Total production
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    324.4
    
    
    
    0.6
    
    
    
    325.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8
    
    
    
    
    
    
    
    13.8Copper production on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    310.6
    
    
    
    0.6
    
    
    
    311.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39.3
    
    
    
    
    
    
    
    39.3Copper production on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    271.3
    
    
    
    0.6
    
    
    
    271.9Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    324.4
    
    
    
    0.6
    
    
    
    325.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.8
    
    
    
    
    
    
    
    13.8Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    310.6
    
    
    
    0.6
    
    
    
    311.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39.9
    
    
    
    
    
    
    
    39.9Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    270.7
    
    
    
    0.6
    
    
    
    271.3Total purchased copper (thousand short tons)
    
    
    
    
    
    
    82.4
    
    
    
    7.0
    
    
    
    92.6
    
    
    
    
    
    
    
    92.6Total copper sales on a consolidated basis
    
    
    
    
    
    
    83.3
    
    
    
    7.0
    
    
    
    403.2
    
    
    
    0.6
    
    
    
    403.8Molybdenum production (thousand pounds):Primary - Henderson
    
    
    7,853
    
    
    
    
    
    
    
    
    
    
    
    7,853
    
    
    
    
    
    
    
    7,853By-product
    
    
    6,862
    
    
    
    
    
    
    
    
    
    
    
    6,862
    
    
    
    
    
    
    
    6,862Total production
    
    
    14,715
    
    
    
    
    
    
    
    
    
    
    
    14,715
    
    
    
    
    
    
    
    14,715Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    14,933
    
    
    
    
    
    
    
    
    
    
    
    14,933
    
    
    
    
    
    
    
    14,933Purchased molybdenum
    
    
    3,662
    
    
    
    
    
    
    
    
    
    
    
    3,662
    
    
    
    
    
    
    
    3,662Total molybdenum sales
    
    
    18,595
    
    
    
    
    
    
    
    
    
    
    
    18,595
    
    
    
    
    
    
    
    18,595($ in millions)Operating income (loss)
    
    $
    86.6
    
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    563.0
    
    
    
    (12.6
    )
    
    
    550.4Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.1
    )
    
    
    (0.8
    )
    
    
    (5.9
    )Operating income (loss) excluding special items and provisions
    
    $
    86.6
    
    
    
    4.2
    
    
    
    (3.8
    )
    
    
    568.1
    
    
    
    (11.8
    )
    
    
    556.3
 Refer to segment discussion on pages 30 through 34. 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 page 30 for further discussion.)




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##### Table of Contents



- 29 - PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)  Primary
    
    
    
    
    
    
    
    
    
    
    PDMCMolybdenum
    
    
    Manufacturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    Total PDMCFirst Quarter 2004Copper production (thousand short tons):Total production
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    317.6
    
    
    
    
    
    
    
    317.6Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.4
    
    
    
    
    
    
    
    15.4Copper production on a consolidated basis
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    302.2
    
    
    
    
    
    
    
    302.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41.9
    
    
    
    
    
    
    
    41.9Copper production on a pro rata basis
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    260.3
    
    
    
    
    
    
    
    260.3Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    323.3
    
    
    
    
    
    
    
    323.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.4
    
    
    
    
    
    
    
    15.4Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    307.9
    
    
    
    
    
    
    
    307.9Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41.8
    
    
    

    
    
    
    
    41.8Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    266.1
    
    
    
    
    
    
    
    266.1Total purchased copper (thousand short tons)
    
    
    
    
    
    
    103.7
    
    
    
    0.5
    
    
    
    115.1
    
    
    
    
    
    
    
    115.1Total copper sales on a consolidated basis
    
    
    
    
    
    
    104.0
    
    
    
    0.5
    
    
    
    423.0
    
    
    
    
    
    
    
    423.0Molybdenum production (thousand pounds):Primary - Henderson
    
    
    6,456
    
    
    
    
    
    
    
    
    
    
    
    6,456
    
    
    
    
    
    
    
    6,456By-product
    
    
    7,019
    
    
    
    
    
    
    
    
    
    
    
    7,019
    
    
    
    
    
    
    
    7,019Total production
    
    
    13,475
    
    
    
    
    
    
    
    
    
    
    
    13,475
    
    
    
    
    
    
    
    13,475Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    15,157
    
    
    
    
    
    
    
    
    
    
    
    15,157
    
    
    
    
    
    
    
    15,157Purchased molybdenum
    
    
    3,424
    
    
    
    
    
    
    
    
    
    
    
    3,424
    
    
    
    
    
    
    
    3,424Total molybdenum sales
    
    
    18,581
    
    
    
    
    
    
    
    
    
    
    
    18,581
    
    
    
    
    
    
    
    18,581($ in millions)Operating income (loss)
    
    $
    15.6
    
    
    
    4.1
    
    
    
    (0.3
    )
    
    
    350.1
    
    
    
    (19.9
    )
    
    
    330.2Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) excluding special items and provisions
    
    $
    15.6
    
    
    
    4.1
    
    
    
    (0.3
    )
    
    
    350.1
    
    
    
    (19.9
    )
    
    
    330.2
 Refer to segment discussion on pages 30 through 34. 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 page 30 for further discussion).




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- 30 - Sales of Copper (U.S. and South America) and Molybdenum The Manufacturing and Sales segments are 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. Mine segments with the Manufacturing and Sales segments, along with other mining
activities. The Sales segment purchases and sells any copper not sold by the South American mines
to third parties. In the 2005 first quarter, the South American mines sold approximately 44
percent of their copper to the Sales segment, compared with approximately 50 percent in the 2004
first quarter. 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 segments.   (Unaudited; $ in millions) First Quarter2005
    
    
    2004U.S. Mining Operations*Unaffiliated customers
    
    $
    930.7
    
    
    
    862.4Intersegment elimination
    
    
    (164.2
    )
    
    
    (198.3
    )766.5
    
    
    
    664.1South American Mines**Unaffiliated customers
    
    
    210.6
    
    
    
    202.1Intersegment
    
    
    164.2
    
    
    
    198.3374.8
    
    
    
    400.4Primary MolybdenumUnaffiliated customers
    
    
    476.8
    
    
    
    150.0Intersegment
    
    
    
    
    
    
    476.8
    
    
    
    150.0Total PDMCUnaffiliated customers
    
    $
    1,618.1
    
    
    
    1,214.5
     *
    U.S. Mining Operations comprised the following reportable segments: Morenci, Bagdad,
Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and Sales, along with other mining
activities.**
    South American Mines comprised the following segments: Candelaria/Ojos del Salado, Cerro
Verde and El Abra. U.S. Mines, Manufacturing, Sales Segments and Other  Sales Sales and other operating revenues by U.S. Mining Operations increased $102.4 million, or 15
percent, in the 2005 first quarter compared with the 2004 first quarter. This increase was
primarily due to higher realized average copper prices (approximately $115 million); partially
offset by lower copper sales volumes (approximately $5 million), lower precious metal sales
(approximately $7 million) and higher treatment and refining allowances resulting from sales
volumes (approximately $4 million). South American Mines Segments  Sales South American Mines sales and other operating revenues decreased $25.6 million, or 6 percent,
in the 2005 first quarter compared with the 2004 first quarter. This decrease was primarily due to
lower copper sales volumes (approximately $35 million) and higher treatment and refining allowances
resulting from sales volumes (approximately $13 million); partially offset by higher realized
copper prices (approximately $16 million) and higher precious metal sales (approximately $6
million). Primary Molybdenum Segment  Sales Primary Molybdenum sales and other operating revenues to unaffiliated customers increased
$326.8 million, or 218 percent, in the 2005 first quarter compared with the 2004 first quarter.
This increase primarily was due to higher average molybdenum realizations (approximately $320
million) and higher molybdenum tolling revenue (approximately $5 million). Operating Income 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 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 determinations that
may not be indicative of actual financial performance of each segment as if it was an independent
entity.




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- 31 - Note: Supplemental Data The following tables summarize PDMCs operating income, special items and provisions, and the
resultant earnings excluding these special items and provisions for the quarters ended March 31,
2005 and 2004:   (Unaudited; $ in millions) First Quarter2005
    
    
    2004Segment operating income:U.S. Mining Operations*
    
    $
    307.9
    
    
    
    133.4South American Mines**
    
    
    155.9
    
    
    
    181.2Primary Molybdenum
    
    
    86.6
    
    
    
    15.6$
    550.4
    
    
    
    330.2Special, pre-tax items and provisions:U.S. Mining Operations*
    
    $
    (5.9
    )
    
    
    South American Mines**
    
    
    
    
    
    
    Primary Molybdenum
    
    
    
    
    
    
    $
    (5.9
    )
    
    
    Segment operating income
excluding special items and provisions:U.S. Mining Operations*
    
    $
    313.8
    
    
    
    133.4South American Mines**
    
    
    155.9
    
    
    
    181.2Primary Molybdenum
    
    
    86.6
    
    
    
    15.6$
    556.3
    
    
    
    330.2
     *
    U.S. Mining Operations comprised the following
reportable segments: Morenci, Bagdad, Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone,
Manufacturing and Sales, along with other mining activities.**
    South American Mines comprised the following segments: Candelaria/Ojos del Salado, Cerro
Verde and El Abra. Note: Our non-GAAP measure of special items and provisions may not be comparable to similarly
titled measures reported by other companies.   U.S. Mines  Operating Income U.S. Mining Operations reported operating income of $307.9 million including special, net
charges of $5.9 million in the 2005 first quarter, compared with operating income of $133.4 million
in the 2004 first quarter. (Refer to the separate discussion of PDMCs segments below for further
detail.) Morenci Segment  Operating Income The Morenci open-pit mine, located in southeastern Arizona, primarily produces electrowon
copper cathodes. We own an 85 percent undivided interest in Morenci and apply the proportional
consolidation method of accounting. Operating income of $85.9 million for the 2005 first quarter increased $8.0 million compared
with the 2004 first quarter primarily due to higher average copper prices (approximately $37
million); partially offset by lower sales volume (approximately $21 million) and higher cost of
copper production (approximately $10 million). Higher cost of copper production was primarily due
to higher operating and repair costs due to weather-related events and higher supply costs
(approximately $13 million), higher energy costs (approximately $3 million) and higher cathode
freight costs (approximately $3 million); partially offset by a decrease in work-in-process
inventories (approximately $6 million) and lower depreciation expense (approximately $3 million). Bagdad Segment  Operating Income Our wholly owned Bagdad open-pit mine, located in northwest Arizona, produces copper and
molybdenum concentrates and electrowon copper cathodes. Operating income of $84.4 million for the 2005 first quarter increased $59.5 million compared
with the 2004 first quarter primarily due to lower cost of copper production (approximately $39
million), higher average copper prices (approximately $14 million) and higher sales volume
(approximately $5 million). Lower cost of copper production was primarily due to higher molybdenum
by-product credits resulting from higher average prices and volumes (approximately $58 million);
partially offset by higher production costs (approximately $19 million). The higher production
costs were primarily due to higher mining and milling rates (approximately $11 million) associated
with the ramp-up of capacity, smelting and refining costs resulting from higher concentrate
production volume (approximately $6 million), and mitigation of damage and additional costs
necessitated by record rainfall (approximately $3 million).




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##### Table of Contents



- 32 - Sierrita Segment  Operating Income Our wholly owned Sierrita open-pit mine, located near Green Valley, Arizona, produces copper
concentrates, electrowon copper cathodes and molybdenum products. Operating income of $134.5 million for the 2005 first quarter increased $104.5 million
compared with the 2004 first quarter primarily due to lower cost of copper production
(approximately $87 million), higher average copper prices (approximately $11 million) and higher
sales volumes (approximately $6 million). Lower cost of copper production was primarily due to
higher molybdenum by-product credits (approximately $100 million); partially offset by higher
mining and milling rates associated with the ramp-up of capacity (approximately $6 million),
smelting and refining costs related to higher concentrate production volume (approximately $2
million), and costs associated with increased copper cathode production volume (approximately $2
million). Miami/Bisbee Segment  Operating Income (Loss) Our wholly owned Miami open-pit mine, located in Miami, Arizona, produces electrowon copper
cathodes. The Companys interest in the Copreco venture that operates the water treatment/copper
recovery facility in Bisbee, located in southern Arizona, is accounted for on an equity basis. Operating income of $1.1 million for the 2005 first quarter increased $1.8 million compared
with the 2004 first quarter primarily due to higher average copper prices (approximately $2
million). Chino/Cobre Segment  Operating Income The Chino open-pit mine, located near Silver City, New Mexico, produces electrowon copper
cathodes and copper concentrates. The segment also includes our wholly owned Cobre mine, which is
adjacent to the Chino mine. Our Cobre mine is on care-and-maintenance status with the exception
of certain, limited mining activities. Operating income of $17.1 million for the 2005 first quarter increased $2.1 million compared
with the 2004 first quarter primarily due to higher sales volumes (approximately $32 million) and
higher average copper prices (approximately $14 million); mostly offset by higher mining and
milling costs resulting from the restart of milling operations and ramp-up of mining operations
including increased stripping (approximately $26 million), higher smelting and refining costs
related to increased concentrate production (approximately $10 million), and the impact of changes
in work-in-process inventories (approximately $8 million). Tyrone Segment  Operating Income (Loss) Our wholly owned Tyrone open-pit mine, located near Tyrone, New Mexico, produces electrowon
copper cathodes. An operating loss of $2.9 million for the 2005 first quarter was unfavorable by $5.3 million
compared with the 2004 first quarter primarily due to higher environmental accruals (approximately
$5 million), higher mining costs due to more tons mined (approximately $3 million) and lower sales
volumes (approximately $2 million); partially offset by the effect of higher average copper prices
(approximately $5 million). Manufacturing Segment  Operating Income The Manufacturing segment reported operating income of $4.2 million in the 2005 first quarter,
compared with a 2004 first quarter operating income of $4.1 million. The increase of $0.1 million
was primarily due to higher smelting and rod revenues ($4.2 million) resulting from higher tons
processed through the smelter and higher rod premiums; offset by costs of $4.0 million associated
with a fire at our Norwich rod mill on January 7, 2005. Our other rod mills increased production
to compensate for this production loss, and full production resumed in late January 2005. Sales Segment  Operating Loss The Sales segment reported an operating loss of $3.8 million in the 2005 first quarter,
compared with a 2004 first quarter operating loss of $0.3 million. The increase of $3.5 million in
operating losses was primarily due to premiums paid as part of our copper price protection program. South American Mines  Operating Income South American Mines reported operating income in the 2005 first quarter of $155.9 million,
compared with operating income of $181.2 million in the 2004 first quarter. (Refer to the separate
discussion of PDMCs segments below for further detail.)




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- 33 - Candelaria/Ojos del Salado Segment  Operating Income The Candelaria open-pit mine, located near Copiapó in northern Chile, produces copper
concentrates. The segment also includes the wholly owned, nearby Ojos del Salado underground mines
that produce copper concentrates. We own an 80 percent partnership interest in Candelaria, a
Chilean contractual mining company, which we fully consolidate (and report minority interest). Operating income of $75.4 million in the 2005 first quarter increased $6.6 million compared
with the 2004 first quarter primarily due to higher average copper prices (approximately $24
million); partially offset by higher cost of copper production (approximately $16 million). Higher
cost of copper production was primarily due to the ramp-up of production at Ojos del Salado
(approximately $9 million), higher price participation costs associated with the smelting and
refining of Candelaria concentrates (approximately $2 million), higher fuel costs (approximately $2
million) and higher supply costs (approximately $4 million). Cerro Verde Segment  Operating Income The Cerro Verde open-pit mine, located near Arequipa, Peru, produces electrowon copper
cathodes. We own 82.5 percent of the common stock of Cerro Verde, which we fully consolidate (and
report minority interest). In the first quarter of 2005, Phelps Dodge executed definitive
agreements permitting Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation, known collectively
as Sumitomo, to acquire an equity position of between 21 percent and 24.99 percent in Cerro Verde.
Pursuant to the agreements, Compañia de Minas Buenaventura S.A. (Buenaventura) also will increase
its ownership position from 9.2 percent to as much as 20 percent. Under the agreements, Phelps
Dodge will maintain a majority interest in Cerro Verde. Final ownership percentages are dependent
upon the decisions of various minority shareholders who own shares of Cerro Verde through the Lima
Stock Exchange to participate in the capital increase transaction contemplated by the agreements.
(Refer to PDMC  Other Matters on page 35 for additional discussion.) Operating income of $36.0 million for the 2005 first quarter decreased $1.8 million compared
with the 2004 first quarter primarily due to lower sales volume (approximately $6 million), and
higher mining repair/maintenance costs and fuel costs (approximately $5 million); partially offset
by higher average copper prices (approximately $9 million). On October 11, 2004, the Phelps Dodge board of directors announced conditional approval of an
$850 million expansion of the Cerro Verde mine. In early February 2005, the board unconditionally
approved proceeding with project development simultaneously with the financing efforts. (Refer to
PDMC  Other Matters on page 35 for additional discussion of the Cerro Verde mine expansion.) El Abra Segment  Operating Income The El Abra open-pit mine, located in northern Chile, produces electrowon copper cathodes. We
own a 51 percent partnership interest in El Abra, a Chilean contractual mining company, and the
remaining 49 percent interest is owned by Corporación Nacional del Cobre de Chile (CODELCO), a
Chilean state-owned company. We fully consolidate El Abra (and report minority interest). Operating income of $44.5 million for the 2005 first quarter decreased $30.1 million compared
with the 2004 first quarter primarily due to higher average copper prices being offset by
mark-to-market adjustments on collars (approximately $18 million); higher production costs
(approximately $5 million) primarily due to higher acid, diesel fuel and contracted services; and
lower sales volumes (approximately $6 million). Average copper prices benefited from higher LME
prices (approximately $24 million), but were offset by the mark-to-market effects of copper collars
related to 2005 production (approximately $42 million). Primary Molybdenum  Operating Income 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. The Climax mine 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.
Nonetheless, we continue to evaluate short-and mid-term production opportunities for the Climax
mine based on market conditions and projects as well as manage the
facility in a manner




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##### Table of Contents



- 34 - that allows its production to commence in a timely and efficient manner. Operating income of $86.6 million in the 2005 first quarter increased $71.0 million compared
with the 2004 first quarter primarily due to higher average molybdenum prices (approximately $320
million) and higher tolling revenue due to volume and price (approximately $5 million); partially
offset by higher cost of molybdenum purchased from third parties as well as by-product molybdenum
purchased from certain of our U.S. copper operations (approximately $241 million), higher
production costs (approximately $11 million) and shutdown expenses (approximately $1 million).
Higher production costs resulted primarily from increased volumes and included higher labor and
maintenance costs (approximately $5 million), conversion costs (approximately $4 million), higher
outside service costs (approximately $2 million), higher tolling costs due to increased volume
(approximately $2 million), freight and warehousing costs (approximately $2 million), energy costs
(approximately $1 million) and depreciation expense (approximately $1 million); partially offset by
decreased cost of material drawn from inventory ($6 million). 2004 Recommencement of Previously Curtailed Properties In January 2004, we resumed production at certain of our previously curtailed properties.
This decision was based on the rapid increase in copper prices, our view of market fundamentals for
copper and molybdenum over the next several years, and our internal concentrate and sulfuric acid
balance. The actual production ramp-ups and timing occurred as follows:  
    Our Bagdad mine in Arizona began increasing production in January 2004 and resumed
producing at full capacity in the 2004 second quarter.
    Our Sierrita mine in Arizona began increasing production in January 2004 and resumed
producing at full capacity in the 2004 fourth quarter.
    Our Chino mine in New Mexico began increasing production in the 2003 fourth quarter as
it resumed full mine-for-leach operations. The Chino milling operation increased to
approximately 80 percent of capacity in the 2004 third quarter, which better balances our
concentrate and acid production in the southwest.
    Our Ojos del Salado mine in Chile, which had been curtailed since 1998, resumed
underground mining and milling operations during the 2004 second quarter.
    Our Miami smelter in Arizona resumed operating at full capacity in the 2004 second
quarter.Including the effect of the above-mentioned recommencements, we expect our pro rata share of
copper production in 2005 to be 2.3 billion pounds (2.7 billion pounds on a consolidated basis);
our 2005 molybdenum production is expected to total 65 million pounds. Even though we remain very optimistic about the strong copper and molybdenum markets, we will
remain disciplined with our production profile. We will continue to configure our operations so
that we can quickly respond to both positive and negative market demand and price swings. At March 31, 2005, excluding the Morenci mill, we had approximately 200 million to 250 million
pounds of curtailed annual copper production capacity (both our share and 100 percent basis), that
could be brought to market depending on equipment availability and near-term mine plans within one
to three years. This curtailed capacity is located at our U.S. mine sites, all with existing
infrastructures. However, additional mining equipment may be required at a cost of approximately
$150 million to $250 million. This reflects an increase over previously disclosed amounts
primarily due to certain shovels and haul trucks being moved to other current operating locations
to maximize the efficiency of our equipment and as a result of mine plan changes. We have additional sources of copper that could be developed; however, such additional sources
would require the development of greenfield projects or major brownfield expansions that would
involve much greater capital expenditures and far longer lead-times than would be the case for
facilities on care-and-maintenance status. The capital expenditures required to develop such
additional production capacity include the costs of necessary infrastructure and would be
substantial. In addition, significant lead-time would be required for permitting and construction. Any material change in the price we receive for copper, or in PDMCs cost of copper
production, has a significant effect on our results. Based on expected 2005 annual production of




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- 35 - approximately 2.7 billion pounds of copper, each 1 cent per pound change in the average annual
copper price, or in average annual cost of copper production, causes a variation in annual
operating income before taxes and adjustment for minority interest of approximately $27 million. Our expected 2005 molybdenum production is approximately 65 million pounds (approximately 32
million pounds from primary mines and 33 million pounds from
by-product mines). Approximately 70
percent of our molybdenum sales are priced based on published prices (i.e., Platts Metals Week,
Ryans Notes, or Metal Bulletin), plus premiums. The majority of these sales use the average of
the previous 30 days (i.e., price quotation period is the month prior to shipment, or M-1). The
other sales generally have pricing that is either based on a fixed price or adjusts within certain
price ranges. Based upon the assumption that approximately 70 percent of our molybdenum sales,
depending on customer and product mix at the time, adjust based on the underlying published prices,
each $1.00 per pound change in our average annual realized molybdenum price causes a variation in
annual operating income before taxes of approximately $45 million. PDMC  Other Matters On October 11, 2004, the Phelps Dodge board of directors announced conditional approval of an
$850 million expansion of the Cerro Verde mine near Arequipa, Peru. Final approval was contingent
upon obtaining financing and obtaining certain key permits and government approvals. The required
permits and approvals were obtained in the 2004 fourth quarter, and in early February 2005, the
board unconditionally approved proceeding with project development simultaneously with the
financing efforts. We expect to finalize financing arrangements during 2005. At present, Phelps Dodge owns 82.5 percent of the outstanding shares of Cerro Verde.
Buenaventura, a publicly traded Peruvian mining concern, owns 9.2 percent of the outstanding
shares, and the remainder is publicly traded on the Lima Stock Exchange. In March 2005, Phelps
Dodge executed definitive agreements permitting Sumitomo to acquire an equity position of between
21 percent and 24.99 percent in Cerro Verde. Pursuant to the agreements, Buenaventura also will
increase its ownership position from 9.2 percent to as much as 20 percent. The agreements formalize a previously announced agreement in principle among Phelps Dodge,
Sumitomo and Buenaventura. Under the agreements, Phelps Dodge will maintain a majority interest in
Cerro Verde. Final ownership percentages are dependent upon the decisions of various minority
shareholders who own shares of Cerro Verde through the Lima Stock Exchange to participate in the
capital increase transaction contemplated by the agreements. The transaction will be accomplished
through a general capital increase process by Cerro Verde and is subject to customary closing
conditions. The new capital invested by Sumitomo, Buenaventura and the other shareholders is expected to
total up to approximately $440 million, depending upon the extent of participation by Buenaventura
and other shareholders, and will be used as partial financing of the expansion, as discussed below. The expansion, which will be financed with a combination of Cerro Verde cash (including cash
from the issuance of shares) and new project debt, permits the mining of a primary sulfide ore body
beneath the leachable ore body currently in production. Through the expansion, approximately 1.4
billion tons of sulfide ore reserves averaging 0.49 percent copper and 0.02 percent molybdenum will
be processed through a new concentrator. Processing of the sulfide ore is expected to begin in
late 2006 and the expanded production rate should be achieved in the first half of 2007. The
current copper production at Cerro Verde is approximately 100,000 tons per year. After completion
of the expansion, copper production will initially approximate 300,000 tons per year. Additionally, Sumitomo has agreed in principle to purchase a 20 percent interest in Ojos del
Salado for approximately $25 million, including exploration properties and interests in the Punta
del Cobre exploration district. This transaction is expected to close in the first half of 2005.
Phelps Dodge will continue to retain a majority interest in the operation. In mid-2004, the Bureau of Land Management (BLM) issued its Record of Decision supporting a
land exchange with Phelps Dodge. On April 13, 2005, the U.S. Department of the Interior affirmed
the BLMs Record of Decision supporting a land exchange with the Company. This action allows us to
continue to push forward
development of the proposed copper mining operation near Safford, Arizona. The proposed
project includes development of the Dos Pobres and San Juan copper ore bodies, about eight miles
north of Safford in southeastern Arizona.




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- 36 - Significant New Mexico Environmental and Reclamation Programs The Companys New Mexico operations, Chino Mines Company (Chino), Phelps Dodge Tyrone, Inc.
(Tyrone), Cobre Mining Company (Cobre) and Phelps Dodge Hidalgo, Inc. (Hidalgo), each are subject
to regulation under the New Mexico Water Quality Act and the Water Quality Control Commission
(WQCC) regulations adopted under that Act. The New Mexico Environment Department (NMED) has
required each of these operations to submit closure plans for approval. The closure plans must
describe the measures to be taken to prevent groundwater quality standards from being exceeded
following closure of the discharging facilities and to abate any groundwater or surface water
contamination. Chino, Tyrone and Cobre are also subject to regulation under the New Mexico Mining Act (the
Mining Act), which was enacted in 1993, and the Mining Act Rules, which are administered by the
Mining and Minerals Division (MMD) of the New Mexico Energy, Minerals and Natural Resources
Department. Under the Mining Act, Chino, Tyrone and Cobre are required to submit and obtain
approval of closeout plans describing the reclamation to be performed following closure of the
mines or portions of the mines. Financial assurance is required to ensure that funding will be available to perform both the
closure plans and the closeout plans if the operator is not able to perform the work required by
the plans. The amount of financial assurance is based upon the estimated cost for a third party to
complete the work specified in the plans, including any long-term operation and maintenance, such
as operation of water treatment systems. NMED and MMD calculate the required amount of financial
assurance using a net present value (NPV) method, based upon approved discount and escalation
rates, when the closure plan and/or closeout plan require performance over a long period of time. The Companys cost estimates to perform the work itself (internal cost basis) generally are
substantially lower than the cost estimates used for financial assurance due to the Companys
historical cost advantages, savings from the use of the Companys own personnel and equipment as
opposed to third-party contractor costs, and opportunities to prepare the site for more efficient
reclamation as mining progresses. Refer to Note 6, Contingencies, to our unaudited March 31, 2005, Consolidated Financial
Information, for additional discussion of significant New Mexico Environmental and Reclamation
Programs. 
 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 cables and specialty conductors. The Company is continuing to explore strategic
alternatives for PDI that may include potential subsidiary sales, selective asset sales,
restructurings, joint ventures and mergers, or, alternatively, retention and selective growth. We
are actively working with advisors and interested parties to select the alternatives we believe
will provide the best benefit for our shareholders.    First Quarter2005
    
    
    2004Sales and other operating revenues
to unaffiliated customers:Specialty Chemicals
    
    $
    180.0
    
    
    
    163.9Wire and Cable
    
    
    268.4
    
    
    
    218.6$
    448.4
    
    
    
    382.5Operating income:Specialty Chemicals
    
    $
    13.2
    
    
    
    11.2Wire and Cable
    
    
    12.0
    
    
    
    2.3$
    25.2
    
    
    
    13.5
 
 PDI  Sales PDI reported sales to unaffiliated customers of $448.4 million in the 2005 first quarter,
compared with sales of $382.5 million in the 2004 first quarter. The increase of $65.9 million was
due to higher Wire and Cable sales that increased $49.8 million primarily as a result of increased
demand and metal prices for energy cables and building wire in the international markets
(approximately $49 million). Additionally, Specialty Chemicals sales increased $16.1 million
primarily as a result of foreign exchange impacts (approximately $10




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- 37 - million) and improved pricing
primarily due to the pass-through of higher feedstock oil costs to customers and negotiated price
increases in North America (approximately $6 million). PDI  Operating Income PDI reported operating income of $25.2 million in the 2005 first quarter including special,
net pre-tax gains of $0.4 million, compared with operating income of $13.5 million in the 2004
first quarter including special, net pre-tax charges of $1.8 million. (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 operating income, special items and provisions, and the
resultant earnings excluding these special items and provisions for the quarters ended March 31,
2005 and 2004:    First Quarter2005
    
    
    2004Operating income
    
    $
    25.2
    
    
    
    13.5Special, pre-tax items and
provisions, net
    
    
    0.4
    
    
    
    (1.8
    )Segment operating income
excluding special items
and provisions
    
    $
    24.8
    
    
    
    15.3
    
 Note: Supplemental Data The following table summarizes PDIs special items and provisions, all of which related to
Wire and Cable, in operating income for the quarters ended March 31, 2005 and 2004:    First Quarter2005
    
    
    2004Restructuring programs/closures
    
    $
    0.4
    
    
    
    (1.7
    )Environmental provisions, net
    
    
    
    
    
    
    (0.1
    )$
    0.4
    
    
    
    (1.8
    )
 
 Specialty Chemicals  Operating Income Specialty Chemicals reported operating income of $13.2 million in the 2005 first quarter,
compared with operating income of $11.2 million in the 2004 first quarter. Operating income increased $2.0 million compared with the 2004 first quarter primarily due to
improved margins reflecting higher prices (approximately $8 million); partially offset by higher
costs associated with accelerated depreciation (approximately $5 million) for 2004 operational
restructuring activities. Wire and Cable  Operating Income Wire and Cable reported operating income of $12.0 million including special, net pre-tax gains
of $0.4 million in the 2005 first quarter, compared with operating income of $2.3 million including
special, net pre-tax charges of $1.8 million in the 2004 first quarter. Operating income increased $9.7 million compared with the 2004 first quarter primarily due to
improved margins and higher sales volumes for energy cables and building wire in the international
markets (approximately $6 million), the impact of higher special, net pre-tax gains ($2.2 million),
and lower depreciation expense (approximately $1 million) primarily associated with its magnet wire
restructuring plan. 
 OTHER MATTERS RELATING TO THE
STATEMENT OF CONSOLIDATED OPERATIONS Cost of Products Sold Cost of products sold was $1,322.9 million for the 2005 first quarter, compared with $1,098.4
million for the 2004 first quarter. The increase of $224.5 million was attributable to an increase
in copper and molybdenum production costs (approximately $139 million  see segment discussions on
pages 31 to 34), higher costs of molybdenum purchased from third parties (approximately $81
million) and increases at our Wire and Cable segment for third-party raw material purchases and
higher sales volumes (approximately $19 million); partially offset by lower purchased cathode and
concentrate (approximately $33 million) due to lower volumes.




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- 38 - Selling and General Administrative Expense Selling and general administrative expense was $47.3 million in the 2005 first quarter,
compared with $38.5 million in the 2004 first quarter. The increase of $8.8 million primarily
resulted from a contribution to the Phelps Dodge Foundation ($6 million) to fund charitable
contributions. Exploration and Research Expense Our net exploration and research expense was $18.8 million for the 2005 first quarter,
compared with $13.6 million in the 2004 first quarter. The increase of $5.2 million primarily
resulted from higher PDMC research expense (approximately $5 million) due to increased project
development work at the Process Technology Center in Safford, Arizona. Interest Expense We reported interest expense, net of capitalized interest, of $22.9 million in the 2005 first
quarter, compared with $38.9 million in the 2004 first quarter. The decrease of $16.0 million
primarily was attributable to net reductions associated with the repayment of long-term debt during
2004 (approximately $17 million). Early Debt Extinguishment Costs In March 2004, the Company redeemed its 8.375 percent debentures due in 2023. These
debentures had a book value of approximately $149 million and were redeemed for a total of $152.7
million, plus accrued interest. This resulted in a 2004 first quarter special, pre-tax charge of
$3.9 million ($3.1 million after-tax) for early debt extinguishment costs, including purchase premiums. In March 2004, the Company completed tender offers for its 6.625 percent Notes due in 2005 and
its 7.375 percent Notes due in 2007. The tender offers resulted in the retirement of long-term
debt with a book value of approximately $305 million, which resulted in a 2004 first quarter
special, pre-tax charge of $18.5 million ($14.5 million after-tax) for early debt extinguishment
costs, including purchase premiums. Miscellaneous Income and Expense, Net Miscellaneous income and expense, net was $18.1 million in the 2005 first quarter, compared
with $2.2 million in the 2004 first quarter. The increase of $15.9 million resulted primarily from
higher dividend income ($10.9 million), which was primarily from SPCC, and higher interest income
($5.3 million). Provision for Taxes on Income The Companys income tax provision for the 2005 first quarter resulted from taxes on earnings
at international operations ($48.3 million), including recognition of valuation allowances ($0.4
million), and taxes on earnings at U.S. operations ($82.9 million), including benefits from the
release of valuation allowances ($21.3 million). The release of the domestic valuation allowances
was attributable to the utilization of net operating losses (NOLs) and other tax credits. The Companys income tax provision for the 2004 first quarter resulted from taxes on earnings
at international operations ($36.9 million), including benefits from the release of valuation
allowances ($24.5 million), and taxes on earnings at U.S. operations ($0.1 million), including
benefits from the release of valuation allowances ($24.3 million); partially offset by the reversal
of the valuation allowance associated with deferred tax assets that were expected to be realized
after 2004 at our 51 percent-owned El Abra copper mine ($30.8 million). 
 CHANGES IN FINANCIAL CONDITION Working Capital During the 2005 first quarter, net working capital balances (excluding cash and cash
equivalents and debt) increased $233.4 million. This net increase resulted primarily from:  
    a $216.6 million increase in accounts receivable primarily due to higher copper
prices and sales volumes (approximately $202 million), repayment of securitization
program (approximately $85 million), and higher molybdenum sales volumes and prices
(approximately $43 million); partially offset by a decrease associated with the timing
of collections (approximately $113 million);




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- 39 -  
    a $17.5 million increase in prepaid expenses and other current assets primarily due
to timing of payments for insurance (approximately $11 million) and the timing of major
activities (approximately $5 million) for the Cerro Verde sulfide project;
    a $14.6 million increase in inventories primarily due to higher purchases at Wire
and Cable in anticipation of increased sales volumes (approximately $20 million);
    an $11.0 million decrease in accounts payable and accrued expenses primarily
resulting from payments for employee incentive and variable compensation plans
(approximately $50 million), timing of payments (approximately $26 million), and lower
accruals primarily for settlement of legal matters (approximately $17 million);
partially offset by higher mark-to-market adjustments primarily on copper collars
(approximately $48 million), higher cathode and concentrate purchases (approximately
$19 million) and net increases in asset retirement obligation costs (approximately $13
million); partially offset by
    a $36.9 million increase in accrued income taxes primarily due to higher foreign and
federal income tax provisions (approximately $107 million); partially offset by
payments, net of refunds (approximately $58 million) and a tax benefit associated with
stock options (approximately $10 million). Cash and Cash Equivalents We manage our cash on a global basis and maintain cash at our international operations to fund
local operating needs, fulfill local debt requirements and, in some cases, fund local growth
opportunities or lend cash to other international operations. At March 31, 2005, approximately 42
percent of the Companys $1,398.0 million of cash was held at international operations. Should the
current favorable copper and molybdenum price environment continue for the foreseeable future, it
is likely that our operations will continue to generate significant cash flows and cash balances. Capital Expenditures and Investments Capital expenditures and investments in subsidiaries for the 2005 first quarter totaled $68.3
million including $60.3 million for PDMC, $7.5 million for PDI and $0.5 million for other
corporate-related activities. Capital expenditures and investments in subsidiaries for the
corresponding 2004 period totaled $46.7 million including $28.0 million for PDMC, $8.9 million for
PDI and $9.8 million for other corporate-related activities. Capital expenditures and investments
in subsidiaries for the year 2005 are expected to be approximately $750 million to $850 million
including approximately $690 million for PDMC, approximately $75 million for PDI, and approximately
$25 million for other corporate-related activities. The increase from the $317.3 million in 2004
is primarily due to the $400 million Cerro Verde expects to spend on its expansion project in 2005,
approximately $25 million for our share of the construction costs for the Luna power plant, and $10
million for expansion of our magnet wire plant in China. These capital expenditures and
investments are expected to be funded primarily from operating cash flows and cash reserves. The
2005 capital expenditures for the Cerro Verde expansion project will be funded by the cash proceeds
expected to be received from its equity partners, with the remainder of the project expenditures
being funded by Cerro Verde cash reserves, project financing and operating cash flows. Debt At March 31, 2005, our total debt was $1,046.8 million, compared with $1,096.9 million at
December 31, 2004. The $50.1 million decrease in total debt from December 31, 2004, was primarily
due to a net decrease in short-term borrowings (approximately $48.5 million) primarily at El Abra.
Our ratio of debt to total capitalization was 16.4 percent at March 31, 2005, compared with 18.3
percent at December 31, 2004. On April 1, 2005, the Company amended the agreement for its $1.1 billion revolving credit
facility, extending its maturity to April 20, 2010, and slightly modifying its fee structure. The
facility is to be used for general corporate purposes. The agreement permits borrowings of up to
$1.1 billion, with a $300 million sub-limit for letters of credit. This agreement provides for a
facility fee (currently 12.5 basis points) ranging from 8 basis points to 20 basis points
(depending on the Companys public debt rating) on total commitments. Under the agreement,
interest is payable at a variable rate based on the agent
banks prime rate or at a fixed rate based on LIBOR or fixed rates of-




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- 40 - fered independently by
the several lenders, for maturities of up to 360 days. In addition, if utilization exceeds
one-third of total commitments there is a utilization fee ranging from 10 basis points to 25 basis
points (depending on the Companys public debt rating). Fees for letters of credit (currently 50
basis points) range from 27 basis points to 80 basis points (depending on the Companys public debt
rating) on letters of credit issued, plus a 12.5 basis point issuance fee. The agreement requires
the Company to maintain a minimum EBITDA (as defined in the agreement) to interest ratio of 2.25 on
a rolling four-quarter basis, and limits consolidated indebtedness to 55 percent of total
consolidated capitalization (as defined in the agreement). At March 31, 2005, there was
approximately $75 million of letters of credit issued under the new revolver. Total availability
under the revolving credit facility at March 31, 2005, amounted to approximately $1,025 million, of
which approximately $225 million could be used for additional letters of credit. Dividends On March 4, 2005, Phelps Dodge paid a regular quarterly dividend of 25 cents per common share
for the 2005 first quarter; the amount for the quarter was $24.0 million. On April 6, 2005, Phelps
Dodge declared a regular quarterly dividend of 25 cents per common share for the 2005 second
quarter to be paid on June 3, 2005, to common shareholders of record at the close of business on
May 16, 2005. On February 15, 2005, Phelps Dodge paid a regular quarterly dividend of $1.6875 per mandatory
convertible preferred share; the amount for the quarter was $3.4 million. On February 2, 2005,
Phelps Dodge declared a quarterly dividend of $1.6875 per mandatory convertible preferred share to
be paid on May 16, 2005, to preferred shareholders of record at the close of business on April 1,
2005. Contractual Obligations The following table summarizes Phelps Dodges contractual obligations at March 31, 2005, and
the effect such obligations are expected to have on its liquidity and cash flow in future periods.
The following table, as of March 31, 2005, reflects an update of only the major changes to the
similar table presented in the Companys Form 10-K at December 31, 2004:    Less ThanTotal
    
    
    1 Year
    
    
    1-3 YearsShort-term debt
    
    $
    30.3
    
    
    
    30.3
    
    
    
    Long-term debt
    
    
    1,016.5
    
    
    
    45.8
    
    
    
    99.3Scheduled interest
payment obligations*
    
    
    1,188.8
    
    
    
    77.2
    
    
    
    152.9Asset retirement
obligations**
    
    
    78.0
    
    
    
    35.7
    
    
    
    21.5Take-or-pay contracts
    
    
    532.9
    
    
    
    215.7
    
    
    
    193.6
 After4-5 Years
    
    
    5 YearsShort-term debt
    
    $
    
    
    
    
    Long-term debt
    
    
    24.5
    
    
    
    846.9Scheduled interest payment
obligations*
    
    
    139.9
    
    
    
    818.8Asset retirement
obligations**
    
    
    11.4
    
    
    
    9.4Take-or-pay contracts
    
    
    48.9
    
    
    
    74.7
   *
    Scheduled interest payment obligations were calculated using stated coupon rates for
fixed debt and interest rates applicable at March 31, 2005, for variable rate debt.**
    Asset retirement obligations only included our estimated contractual cash payments associated
with accelerating reclamation activities at certain sites for which our costs are estimable
and the timing of payments is reasonably determinable as of March 31, 2005. The timing and
the amount of these payments could change as a result of changes in regulatory requirements,
changes in scope of reclamation activities and as actual reclamation spending occurs.
Additionally, we have excluded payments for reclamation activities that are expected to occur
after five years that are either not estimable and/or for which the timing is not determinable
because the majority of these cash flows are expected to occur over an extended period of time
commencing near the end of the mine life. 
 Our take-or-pay contracts primarily include contracts for electricity (approximately $130
million), contracts for petroleum-based feedstock for conversion into carbon black (approximately
$153 million), transportation and port fee commitments (approximately $86 million), contracts for
copper anode for deliveries of specified volumes at market-based prices to our
El Paso refinery (approximately $60 million), contracts for natural




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- 41 - gas (approximately $24
million), contracts for sulfuric acid for deliveries of specified volumes based primarily on
negotiated rates to El Abra (approximately $19 million), oxygen obligations for deliveries of
specified volumes at fixed prices to Bagdad (approximately $10 million) and contracts for other
supplies and services (approximately $51 million) of which approximately $30 million was associated
with the expansion of the Cerro Verde mine. Approximately 69 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 due to our carbon black operations in Brazil. Transportation
obligations total approximately $68 million primarily for El Abra sulfuric acid freight
arrangements. Our carbon black facility in the United Kingdom has port fee commitments of
approximately $12 million over approximately 44 years. Our copper mine in Peru has port fee
commitments of approximately $6 million over approximately 21 years. Guarantees FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (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. Phelps Dodge Corporation as a guarantor is involved in
financial guarantees (including option guarantees and indirect guarantees of the indebtedness of
others) and certain indemnity obligations. Refer to Note 19, Guarantees, of the Companys Form
10-K for the year ended December 31, 2004, for additional discussion regarding our financial
guarantee and indemnity obligations. As of March 31, 2005, there have been no significant changes
in our financial guarantee obligations and no liabilities recorded in connection with our
guarantees that existed as of December 31, 2004. Additionally, there were no guarantees issued in
the 2005 first quarter that had a material impact on our consolidated financial statements. Other Items that May Affect Liquidity On April 15, 2005, the Company filed a $400 million shelf registration statement with the
Securities and Exchange Commission on Form S-3. We currently have outstanding $600 million under a
shelf registration statement that was declared effective on July 15, 2003. We are planning to
combine the two registration statements into a new $1 billion shelf registration. The shelf
registration provides flexibility to efficiently access capital markets should financial
circumstances warrant. On March 24, 2005, Moodys Investors Service upgraded Phelps Dodges senior unsecured ratings
to Baa2 from Baa3 (stable outlook). On February 9, 2005, Standard and Poors Rating Services raised Phelps Dodges senior
unsecured debt rating from BBB- (positive outlook) to BBB (positive outlook). S&P also raised the
Companys commercial paper (short-term) rating from A3 to A2. 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 rating. Additionally, the Company currently meets another
financial strength test in Arizona that is not ratings dependent. For New Mexico, financial assurance may be provided in several forms, including third-party
performance guarantees, collateral bonds, surety bonds, letters of credit and trust funds. Based
upon current permit terms and agreements with the state of New Mexico, up to 70 percent of the
financial assurance for Chino, Tyrone and Cobre may be provided in the form of third-party
performance guarantees. Under the Mining Act Rules and the terms of the guarantees, certain
financial soundness tests must be met by the guarantor. A publicly traded company may satisfy
these financial tests by showing that its senior unsecured debt rating is investment grade and that
it meets certain requirements regarding assets in relation to the required amount of financial
assurance. Phelps Dodge has provided
performance guarantees for a portion of the financial assurance required for Chino, Tyrone and
Cobre. Phelps




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- 42 - Dodges senior unsecured debt currently carries an investment-grade rating. If the
Companys bond rating falls below investment-grade, unless a different financial soundness test is
met, the New Mexico mining operations that have a performance guarantee for a portion of their
financial assurance would be required to supply financial assurance in another form. The cost of surety bonds (the traditional source of financial assurance) has increased
significantly in recent years. Also, many surety companies are now requiring an increased level of
collateral supporting the bonds. If surety bonds are unavailable at commercially reasonable terms,
the Company could be required to post other collateral or possibly cash or cash equivalents
directly in support of financial assurance obligations. The Company maintains a program whereby it has the ability to sell on a continuous basis an
undivided interest in certain eligible accounts receivable. PD Receivables, LLC, a wholly owned,
special purpose, bankruptcy-remote subsidiary was formed for the sole purpose of buying and selling
receivables generated by the Company and is consolidated with the operations of the Company. PD
Receivables, LLC is permitted to receive advances of up to $90 million for the sale of such
undivided interest. The transactions are accounted for as a sale of receivables under the
provisions of SFAS No. 140, Accounting for the Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities  a replacement of FASB Statement No. 125. On January 20, 2005, we
repaid the outstanding balance on the program of $85 million that was advanced under the
Receivables Facility. The program remains in place on an undrawn basis. On June 24, 2004, the Executive Branch of the Peruvian government approved legislation
incorporating a royalty on mining activities. However, it is not clear what, if any, effect the new royalty law will have on
operations at Cerro Verde. In December 2004, the Chilean government proposed legislation that, if approved, would impose
an additional 5 percent tax on the operational margin generated in Chile as defined in the proposed
legislation. Any potential impact on Phelps Dodge cannot be reasonably predicted at this time. As of March 31, 2005, we owned a 14.0 percent interest in Southern Peru Copper Corporation
(SPCC), which operated two open-pit copper mines, two concentrators, an SX/EW operation, a smelter
and a refinery in Peru. On October 21, 2004, SPCC announced it had executed a merger agreement
with Americas Mining Corporation (AMC), a subsidiary of Grupo Mexico, the largest shareholder of
SPCC. On April 1, 2005, this merger was completed and AMC sold its 99.15 percent shareholding in
its subsidiary, Minera Mexico, S.A. de C.V. to SPCC, in return for 67.2 million shares of SPCC. As
a result of the merger, Phelps Dodges interest in SPCC was diluted to approximately 7.6 percent. On April 4, 2005, the Company entered into a Registration Rights Agreement with SPCC, AMC,
Cerro Trading Company, Inc. (Cerro) and SPC Investors, L.L.C. (SPC Investors). The Registration
Rights Agreement contemplates that SPCC will file as promptly as practicable, and in any event will
use its reasonable best efforts to file by April 29, 2005, a shelf registration statement covering
the resale of all SPCC common stock held by Phelps Dodge, Cerro, and SPC Investors. In general,
during the first six months following the effective date of the Registration Statement, Phelps
Dodge will only be permitted to sell its common stock in SPCC through underwritten offerings
sponsored by SPCC, and SPCC will not be permitted to conduct primary offerings of its common stock.
During the following six-month period, Phelps Dodge can sell additional shares subject to monthly
volume-based selling restrictions. On October 22, 2004, President Bush signed the American Jobs Creation Act of 2004 (the Act).
We currently are considering the impact of the Act on our practice of reinvesting the earnings of
our foreign subsidiaries. The Act provides an effective U.S. federal tax rate of 5.25 percent on
certain foreign earnings repatriated during a one-year period (2005 for Phelps Dodge), but also
results in the loss of any foreign tax credits associated with these earnings. The maximum amount
of the Companys foreign earnings that qualify for this one-time deduction is approximately $638
million. At the present time, other than the amount provided for dividends
expected to be received in 2005 from certain South American operations, we do not have enough
information to determine whether and to what extent we might repatriate foreign earnings or the
related income tax effect of such repatriation. We expect to finalize our as-




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- 43 - sessment by the end of
the 2005 third quarter at which time any tax impact would be recognized. Diesel Fuel and Natural Gas Price Protection Programs We purchase significant quantities of diesel fuel and natural gas to operate our facilities
and as inputs to the manufacturing process, electricity generation and copper refining. To reduce the Companys exposure to price increases in these energy products, the Company
enters into energy price protection programs for our North American and Chilean operations. Our
diesel fuel and natural gas price protection programs consist of purchasing a combination of diesel
fuel and natural gas call option contracts and fixed-price swaps. The call option contracts give
the holder the right, but not the obligation, to purchase a specific commodity at a pre-determined
price, or strike price. Call options allow the Company to cap the commodity purchase cost at the
strike price of the option while allowing the Company the ability to purchase the commodity at a
lower cost when market prices are lower than the strike price. Fixed-price swaps allow us to
establish a fixed commodity purchase price for delivery during a specific hedge period. Our diesel fuel price protection program began in North America in 2000 and expanded to our
Chilean mining operations in 2003. At March 31, 2005, we had outstanding diesel fuel option
contracts in place to hedge approximately 15.9 million gallons of diesel fuel through June 2005.
As of March 31, 2004, our diesel fuel price protection program had 37.9 million gallons of diesel
fuel hedged. Gains and losses on these hedge transactions were substantially offset by a similar
amount of loss or gain on the underlying diesel fuel purchases. As of March 31, 2005, our natural gas price protection program, which started in 2001, had
outstanding natural gas option contracts in place to hedge approximately 1.8 million decatherms of
natural gas through June 2005. As of March 31, 2004, our natural gas price protection program had
outstanding natural gas option contracts in place to hedge approximately 5.7 million decatherms of
natural gas. Gains on these hedge transactions were substantially offset by a similar amount of
loss on the underlying energy purchases. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the Companys market risk during the quarter ended
March 31, 2005. For additional information on market risk, refer to pages 41 through 43 and 78
through 83 of our report on Form 10-K for the year ended December 31, 2004. 
 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. An evaluation of the effectiveness of this system of disclosure controls and procedures was
performed under the supervision and with the participation of the Companys management, including
the Companys chief executive officer and chief financial officer, as of the end of the period
covered by this report. Based upon this evaluation, the Companys management, including the
Companys chief executive officer and chief financial officer, concluded that the current system of
controls and procedures is effective. Changes in Internal Control Over Financial Reporting The Companys management, including the Companys chief executive officer and chief financial
officer, has evaluated the Companys internal control over financial reporting to determine whether
any changes occurred during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial reporting.
Based on that evaluation, there has been no such change in the Companys internal control over
financial reporting that occurred during the first fiscal quarter.




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- 44 - 
 Part II. Other Information 
 Item 1. Legal Proceedings I. Reference is made to paragraph IV of Part I, Item 3, Legal Proceedings, of the
Companys Form 10-K for the year ended December 31, 2004. Phelps Dodge Miami, Inc. and the other members of the Pinal Creek Group (PCG) settled their
contribution claims against one defendant in April 2005, which will result in cancellation of the
Phase I trial. While the terms of the settlement are confidential, the proceeds of the settlement
will be used to address remediation at the Pinal Creek site. The Phase II trial, which will
allocate liability, has not been scheduled. II. Reference is made to paragraph VI of Part I, Item 3, Legal Proceedings, of the Companys
Form 10-K for the year ended December 31, 2004. On March 3, 2005, Chino Mines Company (Chino), Phelps Dodge Tyrone, Inc. (Tyrone) and Cobre
Mining Company (Cobre) each entered into settlement agreements with the Mining and Minerals
Division (MMD) of the New Mexico Energy, Minerals and Natural Resources Department to resolve
Notices of Violation (NOVs) issued by MMD on October 18, 2002, to Chino, Tyrone and Cobre under the
New Mexico Mining Act Rules (NMMAR). The NOVs, as subsequently modified by the New Mexico Mining
Commission, established schedules for Chino, Tyrone and Cobre to obtain approval of closeout plans
under the NMMAR. MMD approved closeout plans for Chino on December 18, 2003, for Tyrone on April
12, 2004, and for Cobre on March 3, 2005. The settlement agreements resolved the issue of
potential penalty assessments for the NOVs. To settle potential penalty claims, Chino and Tyrone
agreed to donate $50,000 each to a fund administered by MMD for abandoned mine reclamation. In
addition, Chino and Tyrone agreed to donate $125,000 each toward funding of a public project under
the auspices of the Energy, Minerals and Natural Resources Department. Cobre settled potential
penalty claims by agreeing to accelerate payments totaling $900,000 into the trust fund established
for a portion of Cobres financial assurance. All of the required donations and payments were made
in the first quarter of 2005. 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. 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. III. Reference is made to paragraph XI of Part I, Item 3, Legal Proceedings, of the Companys
Form 10-K for the year ended December 31, 2004. Similar class actions are pending 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 six other states 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, and the defendants have been granted leave to take an
interlocutory appeal. The motion to dismiss an action in Tennessee was granted in part and denied
in part; defendants have moved for leave to appeal. The plaintiff in another case in Tennessee
(brought on behalf of purchasers in 23 states and the District of Columbia) voluntarily dismissed
that case.




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##### Table of Contents



- 45 - 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (e) Issuer Purchases of Equity Securities The following table sets forth information with respect to shares of common stock of the
Company purchased by the Company during the three months ended March 31, 2005:   (c) Total Number of
    
    
    (d) Maximum Number (orShares (or Units)
    
    
    Approximate Dollar Value)(a) Total Number
    
    
    (b) Average Price
    
    
    Purchased as Part of
    
    
    of Shares (or Units) That Mayof Shares (or Units)
    
    
    Paid Per
    
    
    Publicly Announced
    
    
    Yet Be Purchased UnderPeriod
    
    Purchased*
    
    
    Share (or Unit)
    
    
    Plans or Programs
    
    
    the Plans or ProgramsJanuary 1-31, 2005
    
    
    350
    
    
    $
    99.46
    
    
    
    
    
    
    
    February 1-28, 2005
    
    
    11,431
    
    
    
    95.70
    
    
    
    
    
    
    
    March 1-31, 2005
    
    
    1,611
    
    
    
    101.48
    
    
    
    
    
    
    
    Total
    
    
    13,392
    
    
    $
    96.49
    
    
    
    
    
    
    
    
 
   *
    The shares shown have been repurchased under the Companys applicable restricted stock plans
(Plans) and its non-qualified supplemental savings plan (SSP). Through the Plans, certain
employees may elect to satisfy their tax obligations on restricted stock awards by having the
Company withhold a portion of their shares of restricted stock. Additionally, the Company
repurchases shares in the SSP as a result of changes in investment elections by plan
participants.




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##### Table of Contents



- 46 - 
 Item 6. Exhibits Exhibits required to be filed by the Company are listed in the Index to Exhibits. 
 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:
    April 29, 2005By:
    /s/ Denise R. DannerDenise R. DannerVice President and Controller(Principal Accounting Officer)




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##### Table of Contents



- 47 - 
 Index to Exhibits  4.1
    Amendment No. 1 to the Credit Agreement dated April 1, 2005 among the Company, the Lenders
parties thereto, the book manager and syndication agents named therein, and Citibank, N.A. as
administrative agent for the Lenders.10.1
    Registration Rights Agreement, dated as of March 31, 2005, made and entered into by and
between Cerro Trading Company, Inc., SPC Investors, L.L.C., Phelps Dodge Corporation, Phelps
Dodge Overseas Capital Corporation, Climax Molybdenum B.V., Southern Peru Copper Corporation
and Americas Mining Corporation (incorporated by reference to Exhibit 10.1 of the Companys
Form 8-K filed April 8, 2005 (SEC File No. 1-82)).10.2
    Participation Agreement, dated as of March 16, 2005, among Phelps Dodge Corporation, Cyprus
Amax Minerals Company, a Delaware corporation, Cyprus Metals Company, a Delaware corporation,
Cyprus Climax Metals Company, a Delaware corporation, Sumitomo Corporation, a Japanese
corporation, Summit Global Management, B.V., a Dutch corporation, Sumitomo Metal Mining Co.,
Ltd., a Japanese corporation, Compañia de Minas Buenaventura S.A.A., a Peruvian sociedad
anonima abierta, and Sociedad Minera Cerro Verde S.A.A., a Peruvian sociedad anonima abierta
(incorporated by reference to Exhibit 10.1 of the Companys Form 8-K filed March 22, 2005 (SEC
File No. 1-82)).10.3
    Guarantee, dated as of March 16, 2005, among the Company, Sumitomo Corporation, a Japanese
corporation, and Sumitomo Metal Mining Co., Ltd., a Japanese corporation (incorporated by
reference to Exhibit 10.2 of the Companys Form 8-K filed March 22, 2005 (SEC File No. 1-82)).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.31
    Certifications of J. Steven Whisler, Chairman and Chief Executive Officer of the Company, and
Ramiro G. Peru, Executive Vice President and Chief Financial Officer of the Company, pursuant
to Rule 13a-14(a) of the Exchange Act, as enacted by Section 906 of the Sarbanes-Oxley Act of
2002.32
    Certifications of J. Steven Whisler, Chairman and Chief Executive Officer of the Company, and
Ramiro G. Peru, Executive 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.