##### Table of Contents



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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarter ended June 30, 2001

Commission file number 1-82

PHELPS DODGE CORPORATION

(a New York corporation)



13-1808503

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



2600 North Central Avenue, Phoenix, AZ 85004-3089



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



Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.    Yes  x    No    .
Number of Common Shares outstanding at August 10, 2001: 78,705,035 shares.



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TABLE OF CONTENTS



|                                  |                                                                    |  |  |  |  |  |  | 
|--------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  |  | 
|Part I. Financial Information    
|                                  | Item 1. Financial Statements                                      
|                                  | STATEMENT OF CONSOLIDATED OPERATIONS                              
|                                  | CONSOLIDATED BALANCE SHEET                                        
|                                  | CONSOLIDATED STATEMENT OF CASH FLOWS                              
|                                  | CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS EQUITY             
|                                  | FINANCIAL DATA BY BUSINESS SEGMENT                                
|                                  | NOTES TO CONSOLIDATED FINANCIAL INFORMATION                       
|                                  | REVIEW BY INDEPENDENT ACCOUNTANTS                                 
|Report of Independent Accountants
|                                  | Item 2. Managements Discussion and Analysis                      
|                                  | RESULTS OF OPERATIONS                                             
|                                  | RESULTS OF PHELPS DODGE MINING COMPANY                            
|                                  | RESULTS OF PHELPS DODGE INDUSTRIES                                
|                                  | OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS
|                                  | CHANGES IN FINANCIAL CONDITION                                    
|                                  | Part II. Other Information                                        
|                                  | Item 1. Legal Proceedings                                         
|                                  | Item 4. Submission of Matters to a Vote of Security Holders       
|                                  | Item 6. Exhibits and Reports on Form 8-K                          
|                                  | Signatures                                                        
|                                  | Index to Exhibits                                                 
|EX-12                            
|EX-15                            



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##### Table of Contents



- i -

PHELPS DODGE CORPORATION

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2001

|                              |                                                             |                                                                    |  |    |    | 
|----------------------------- | ----------------------------------------------------------- | ------------------------------------------------------------------ |  | -- | -- | 
|Table of Contents             |                                                             |                                                                    |  |   
|                              |                                                             | Page                                                              
|                              |                                                             |                                                                    |  |   
|Part I. Financial Information |                                                             |                                                                    |  |   
|                             
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|                              |                                                             |                                                                    |  |   
|                             
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|                             
|                             
|                              | Item 1. Financial Statements (unaudited)                    |                                                                    |  |    |   
|                             
|                             
|                             
|                             
|                              |                                                             | Statement of Consolidated Operations                               |  |    | 1  | 
|                             
|                             
|                             
|                             
|                              |                                                             | Consolidated Balance Sheet                                         |  |    | 2  | 
|                             
|                             
|                             
|                             
|                              |                                                             | Consolidated Statement of Cash Flows                               |  |    | 3  | 
|                             
|                             
|                             
|                             
|                              |                                                             | Consolidated Statement of Common Shareholders Equity              |  |    | 4  | 
|                             
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|                              |                                                             | Financial Data by Business Segment                                 |  |    | 5  | 
|                             
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|                              |                                                             | Notes to Consolidated Financial Information                        |  |    | 6  | 
|                             
|                             
|                             
|                             
|                              |                                                             | Review by Independent Accountants                                  |  |    | 12 | 
|                             
|                             
|                             
|                             
|                              |                                                             | Report of Independent Accountants                                  |  |    | 13 | 
|                             
|                             
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|                             
|                              |                                                             |                                                                    |  |   
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|                              | Item 2. Managements Discussion and Analysis                |                                                                    |  |    |   
|                             
|                             
|                             
|                             
|                              |                                                             | Results of Operations                                              |  |    | 14 | 
|                             
|                             
|                             
|                             
|                              |                                                             | Results of Phelps Dodge Mining Company                             |  |    | 15 | 
|                             
|                             
|                             
|                             
|                              |                                                             | Results of Phelps Dodge Industries                                 |  |    | 17 | 
|                             
|                             
|                             
|                             
|                              |                                                             | Other Matters Relating to the Statement of Consolidated Operations |  |    | 18 | 
|                             
|                             
|                             
|                             
|                              |                                                             | Changes in Financial Condition                                     |  |    | 18 | 
|                             
|                             
|                             
|                             
|                              |                                                             |                                                                    |  |   
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|                             
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|                             
|Part II. Other Information    |                                                             |                                                                    |  |   
|                             
|                             
|                             
|                             
|                              |                                                             |                                                                    |  |   
|                             
|                             
|                             
|                             
|                              | Item 1. Legal Proceedings                                   |                                                                    |  | 19 |   
|                             
|                             
|                             
|                             
|                              |                                                             |                                                                    |  |   
|                             
|                             
|                             
|                             
|                              | Item 4. Submission of Matters to a Vote of Security Holders |                                                                    |  | 19 |   
|                             
|                             
|                             
|                             
|                              |                                                             |                                                                    |  |   
|                             
|                             
|                             
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                    |                                                                    |  | 20 |   
|                             
|                             
|                             
|                             
|                              |                                                             |                                                                    |  |   
|                             
|                             
|                             
|                             
|                              | Signatures                                                  |                                                                    |  | 20 |   
|                             
|                             
|                             
|                             
|                              |                                                             |                                                                    |  |   
|                             
|                             
|                             
|                             
|                              | Index to Exhibits                                           |                                                                    |  | 20 |   



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##### Table of Contents



- 1 -

PHELPS DODGE CORPORATION AND SUBSIDIARIES
Part I. Financial Information








Item 1. Financial Statements




STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited; in millions except per share data)


|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | - | -------------- | ----- | ---------------- |  | ------- | ----- | ---- |  | ------- | ------- | - |  | ------- | ------- | -
|                                                                                                                                        |                                                       |   | Second Quarter |       | First Six Months
|                                                                                                                                        |                                                       |   |                |       |                 
|                                                                                                                                        |                                                       |   | 2001           |       | 2000             |  | 2001    |       | 2000
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |     
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Sales and other operating revenues                                                                                                      |                                                       | $ | 1,063.5        |       |                  |  | 1,112.9 |       |      |  | 2,164.2 |         |   |  | 2,232.6 |        
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating costs and expenses                                                                                                            |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cost of products sold                                 |   |                | 897.5 |                  |  |         | 895.2 |      |  |         | 1,831.2 |   |  |         | 1,768.6 |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Depreciation, depletion and amortization              |   |                | 121.3 |                  |  |         | 119.1 |      |  |         | 237.8   |   |  |         | 238.5   |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Selling and general administrative expense            |   |                | 31.5  |                  |  |         | 34.8  |      |  |         | 63.7    |   |  |         | 67.0    |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Exploration and research expense                      |   |                | 17.1  |                  |  |         | 14.4  |      |  |         | 31.9    |   |  |         | 27.2    |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Non-recurring items, net (see Note 2)                 |   |                | 13.3  |                  |  |         | 44.2  |      |  |         | (17.6   | ) |  |         | 46.3    |  
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|                                                                                                                                        |                                                       |   | 1,080.7        |       |                  |  | 1,107.7 |       |      |  | 2,147.0 |         |   |  | 2,147.6 |        
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Operating income (loss)                                                                                                                 |                                                       |   | (17.2          | )     |                  |  | 5.2     |       |      |  | 17.2    |         |   |  | 85.0    |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Interest expense                                      |   |                | (55.5 | )                |  |         | (54.0 | )    |  |         | (108.9  | ) |  |         | (109.4  | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Capitalized interest                                  |   |                |      |                  |  |         | 0.9   |      |  |         | 0.6     |   |  |         | 1.3     |  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Miscellaneous income and expense, net                 |   |                | 10.9  |                  |  |         | 5.0   |      |  |         | 14.6    |   |  |         | 11.4    |  
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|Loss before taxes, minority interests, equity in net earnings (loss)
of affiliated companies and cumulative effect of accounting change |                                                       |   | (61.8          | )     |                  |  | (42.9   | )     |      |  | (76.5   | )       |   |  | (11.7   | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | (Provision) benefit for taxes on income               |   |                | (47.4 | )                |  |         | 5.9   |      |  |         | (14.1   | ) |  |         | (5.3    | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Minority interests in consolidated subsidiaries       |   |                | (1.3  | )                |  |         | (1.5  | )    |  |         | (2.9    | ) |  |         | (2.9    | )
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Equity in net earnings (loss) of affiliated companies |   |                |      |                  |  |         | 0.7   |      |  |         | (0.8    | ) |  |         | 1.5     |  
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|Loss before cumulative effect of accounting change                                                                                      |                                                       |   | (110.5         | )     |                  |  | (37.8   | )     |      |  | (94.3   | )       |   |  | (18.4   | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cumulative effect of accounting change                |   |                |      |                  |  |         |      |      |  |         | (2.0    | ) |  |         |        |  
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|Net loss                                                                                                                                |                                                       | $ | (110.5         | )     |                  |  | (37.8   | )     |      |  | (96.3   | )       |   |  | (18.4   | )      
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Average number of shares outstanding  basic                                                                                            |                                                       |   | 78.5           |       |                  |  | 78.4    |       |      |  | 78.5    |         |   |  | 78.4    |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Basic loss per share before cumulative effect of accounting change                                                                      |                                                       | $ | (1.41          | )     |                  |  | (0.48   | )     |      |  | (1.20   | )       |   |  | (0.23   | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cumulative effect of accounting change                |   |                |      |                  |  |         |      |      |  |         | (0.03   | ) |  |         |        |  
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|Basic loss per share                                                                                                                    |                                                       | $ | (1.41          | )     |                  |  | (0.48   | )     |      |  | (1.23   | )       |   |  | (0.23   | )      
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Average number of shares outstanding  diluted                                                                                          |                                                       |   | 78.5           |       |                  |  | 78.4    |       |      |  | 78.5    |         |   |  | 78.4    |        
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Diluted loss per share before cumulative effect of accounting change                                                                    |                                                       | $ | (1.41          | )     |                  |  | (0.48   | )     |      |  | (1.20   | )       |   |  | (0.23   | )      
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                        | Cumulative effect of accounting change                |   |                |      |                  |  |         |      |      |  |         | (0.03   | ) |  |         |        |  
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        
|Diluted loss per share                                                                                                                  |                                                       | $ | (1.41          | )     |                  |  | (0.48   | )     |      |  | (1.23   | )       |   |  | (0.23   | )      
|                                                                                                                                        |                                                       |   |                |       |                  |  |         |       |      |  |         |         |   |  |         |        

See Notes to Consolidated Financial Information



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##### Table of Contents



- 2 -




CONSOLIDATED BALANCE SHEET

(Unaudited; in millions except share values)

|                                                |                                                                                            |                     |         |          |         |              |         |         |         | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------- | ------- | -------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                |                                                                                            |                     |         | June 30, |         | December 31,
|                                                |                                                                                            |                     |         | 2001     |         | 2000        
|                                                |                                                                                            |                     |         |          |         |             
|                                               
|                                               
|                                               
|                                               
|Assets                                          |                                                                                            |                     |         |          |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Cash and cash equivalents                                                                  |                     | $       | 364.0    |         |              |         | 250.0   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts receivable, net                                                                   |                     |         | 535.3    |         |              |         | 528.7   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Inventories and supplies                                                                   |                     |         | 597.3    |         |              |         | 602.7   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Prepaid expenses and other current assets                                                  |                     |         | 134.2    |         |              |         | 126.2   |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                                |                                                                                            | Current assets      |         |          | 1,630.8 |              |         |         | 1,507.6 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Net property, plant and equipment and other assets                                         |                     |         | 6,178.6  |         |              |         | 6,278.1 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Non-current deferred income taxes                                                          |                     |         | 47.4     |         |              |         | 45.1    |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                                |                                                                                            | $                   | 7,856.8 |          |         |              | 7,830.8 |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|Liabilities                                     |                                                                                            |                     |         |          |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Short-term debt                                                                            |                     | $       | 60.0     |         |              |         | 518.2   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of long-term debt                                                          |                     |         | 369.1    |         |              |         | 206.5   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable and accrued expenses                                                      |                     |         | 647.2    |         |              |         | 669.8   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Income taxes                                                                               |                     |         | 14.7     |         |              |         | 23.4    |        
|                                               
|                                               
|                                               
|                                               
|                                                | Dividends payable                                                                          |                     |         | 9.8      |         |              |         |        |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                                |                                                                                            | Current liabilities |         |          | 1,100.8 |              |         |         | 1,417.9 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Long-term debt                                                                             |                     |         | 2,538.0  |         |              |         | 1,963.0 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred income taxes                                                                      |                     |         | 451.3    |         |              |         | 439.0   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Other liabilities and deferred credits                                                     |                     |         | 815.1    |         |              |         | 814.2   |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                                |                                                                                            |                     | 4,905.2 |          |         |              | 4,634.1 |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|Minority interests in consolidated subsidiaries |                                                                                            |                     | 59.4    |          |         |              | 91.7    |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|Common shareholders equity                     |                                                                                            |                     |         |          |         |              |         |        
|                                               
|                                               
|                                               
|                                               
|                                                | Common shares, par value $6.25; 200.0 shares authorized;
78.7 outstanding in 2001 and 2000 |                     |         | 491.9    |         |              |         | 491.9   |        
|                                               
|                                               
|                                               
|                                               
|                                                | Capital in excess of par value                                                             |                     |         | 1,017.4  |         |              |         | 1,017.7 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Retained earnings                                                                          |                     |         | 1,676.4  |         |              |         | 1,831.7 |        
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated other comprehensive loss                                                       |                     |         | (285.4   | )       |              |         | (226.4  | )      
|                                               
|                                               
|                                               
|                                               
|                                                | Other                                                                                      |                     |         | (8.1     | )       |              |         | (9.9    | )      
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                                |                                                                                            |                     | 2,892.2 |          |         |              | 3,105.0 |        
|                                                |                                                                                            |                     |         |          |         |              |         |        
|                                                |                                                                                            | $                   | 7,856.8 |          |         |              | 7,830.8 |        
|                                                |                                                                                            |                     |         |          |         |              |         |        

See Notes to Consolidated Financial Information.



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##### Table of Contents



- 3 -




CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited; in millions)

|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |        |       |       |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------- | --------------------------------------------------- | ----- | ------------------------- | ------ | ------ | ----- | ----- | ------ | -
|                                                 |                                                                                 |                                                  |                        |                                                     |       | Six Months ended June 30,
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                          
|                                                 |                                                                                 |                                                  |                        |                                                     |       | 2001                      |        | 2000  
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|Operating activities                             |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net loss                                                                        |                                                  | $                      | (96.3                                               | )     |                           |        | (18.4  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                                  |                        |                                                     |       |                           |        |        |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Depreciation, depletion and amortization         |                        |                                                     | 237.8 |                           |        |        | 238.5 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Deferred income taxes                            |                        |                                                     | 7.6   |                           |        |        | 6.8   |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Equity earnings (loss) net of dividends received |                        |                                                     | 1.3   |                           |        |        | (0.4  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Non-recurring items and provisions (see Note 2)  |                        |                                                     | (21.4 | )                         |        |        | 53.5  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Changes in current assets and liabilities:       |                        |                                                     |       |                           |        |        |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Accounts receivable    |                                                     |       | (19.1                     | )      |        |       | (18.4 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Inventories            |                                                     |       | (1.2                      | )      |        |       | 42.2  |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Supplies               |                                                     |       | (0.4                      | )      |        |       | (1.4  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Prepaid expenses       |                                                     |       | (7.5                      | )      |        |       | (7.8  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Deferred income taxes  |                                                     |       | 0.1                       |        |        |       | (0.1  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Interest payable       |                                                     |       | 5.8                       |        |        |       | (12.4 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Other accounts payable |                                                     |       | 0.1                       |        |        |       | (5.4  | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Income taxes           |                                                     |       | (7.9                      | )      |        |       | (21.2 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 |                                                  | Other accrued expenses |                                                     |       | (20.0                     | )      |        |       | (58.2 | )     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                 | Other adjustments, net                           |                        |                                                     | (1.6  | )                         |        |        | (32.8 | )    
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                 |                                                                                 |                                                  |                        | Net cash provided by operating activities           |       |                           | 77.3   |        |       |       | 164.5  |  
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|Investing activities                             |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital outlays                                                                 |                                                  |                        | (146.1                                              | )     |                           |        | (151.9 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Capitalized interest                                                            |                                                  |                        | (0.6                                                | )     |                           |        | (1.1   | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Investment in subsidiaries and other                                            |                                                  |                        | (47.0                                               | )     |                           |        | (12.7  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from asset dispositions and other, net                                 |                                                  |                        | (1.1                                                | )     |                           |        | 149.7  |      
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                 |                                                                                 |                                                  |                        | Net cash used in investing activities               |       |                           | (194.8 | )      |       |       | (16.0  | )
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|Financing activities                             |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Increase in debt                                                                |                                                  |                        | 1,175.2                                             |       |                           |        | 22.0   |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Payment of debt                                                                 |                                                  |                        | (887.2                                              | )     |                           |        | (80.4  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Common dividends                                                                |                                                  |                        | (49.2                                               | )     |                           |        | (78.7  | )    
|                                                
|                                                
|                                                
|                                                
|                                                 | Other, net                                                                      |                                                  |                        | (7.3                                                | )     |                           |        | 0.7    |      
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                 |                                                                                 |                                                  |                        | Net cash provided by (used in) financing activities |       |                           | 231.5  |        |       |       | (136.4 | )
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|Increase in cash and cash equivalents            |                                                                                 |                                                  | 114.0                  |                                                     |       |                           | 12.1   |       
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                 |                                                  | 250.0                  |                                                     |       |                           | 234.2  |       
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at end of period       |                                                                                 | $                                                | 364.0                  |                                                     |       |                           | 246.3  |       
|                                                 |                                                                                 |                                                  |                        |                                                     |       |                           |        |       

See Notes to Consolidated Financial Information.



---



##### Table of Contents



- 4 -




CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS EQUITY

(Unaudited; in millions)

|                             |                               |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |       |        |       |  
|---------------------------- | ----------------------------- | ---------------------------------------------- | -------------------------------------- | - | ------------- | - | ---------- | - | --------- | - | -------- | ---- | ------------- | - | ----------- | ----- | ------ | - | ------------- | - |  | ----- | ----- | --- |  | - | ------- | ----- | ------ | ----- | -
|                             |                               |                                                |                                        |   | Common Shares |   |            |   |           |   |          |      |               |   | Accumulated |       |        |   |               |   |  |       |      
|                             |                               |                                                |                                        |   |               |   | Capital in |   |           |   |          |      | Other         |   |             |       |        |   | Common       
|                             |                               |                                                |                                        |   | Number        |   | At Par     |   | Excess of |   | Retained |      | Comprehensive |   |             |       |        |   | Shareholders'
|                             |                               |                                                |                                        |   | of Shares     |   | Value      |   | Par Value |   | Earnings |      | Income (Loss) |   | Other       |       | Equity
|                             |                               |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |       
|Balance at December 31, 2000 |                               |                                                | 78.7                                   |   |               | $ | 491.9      |   |           | $ | 1,017.7  |      |               | $ | 1,831.7     |       |        |   | ($226.4       | ) |  |       | ($9.9 | )   |  | $ | 3,105.0 |      
|                            
|                            
|                            
|                            
|                             | Stock options exercised       |                                                |                                        |  |               |   |            |  |           |   |          | 0.4  |               |   |             |      |        |   |               |   |  |       |       |     |  |   |         | 0.4   |       
|                            
|                            
|                            
|                            
|                             | Restricted shares issued, net |                                                |                                        |  |               |   |            |  |           |   |          | (0.7 | )             |   |             |      |        |   |               |   |  |       |       | 1.8 |  |   |         | 1.1   |       
|                            
|                            
|                            
|                            
|                             | Dividends on common shares    |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             | (59.0 | )      |   |               |   |  |       |       |     |  |   |         | (59.0 | )     
|                            
|                            
|                            
|                            
|                             | Comprehensive income (loss):  |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |       |       
|                            
|                            
|                            
|                            
|                             |                               | Net loss                                       |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       | (96.3  | ) |               |   |  |       |       |     |  |   |         |       | (96.3  | )    
|                            
|                            
|                            
|                            
|                             |                               | Other comprehensive income (loss),
net of tax: |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |       |        |      
|                            
|                            
|                            
|                            
|                             |                               |                                                | Translation adjustment                 |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  | (46.1 | )     |     |  |   |         |       |        | (46.1 | )
|                            
|                            
|                            
|                            
|                             |                               |                                                | Cumulative effect of
accounting change |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  | (7.1  | )     |     |  |   |         |       |        | (7.1  | )
|                            
|                            
|                            
|                            
|                             |                               |                                                | Net loss on derivative instruments     |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  | (5.9  | )     |     |  |   |         |       |        | (5.9  | )
|                            
|                            
|                            
|                            
|                             |                               |                                                | Unrealized gains on securities         |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  | 0.1   |       |     |  |   |         |       |        | 0.1   |  
|                             |                               |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |      
|                             |                               |                                                | Other comprehensive loss               |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  | (59.0 | )     |     |  |   |         |       |        | (59.0 | )
|                             |                               |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |      
|                             |                               | Comprehensive loss                             |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |       | (155.3 | )    
|                             |                               |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |      
|                            
|                            
|                            
|                            
|Balance at June 30, 2001     |                               |                                                | 78.7                                   |   |               | $ | 491.9      |   |           | $ | 1,017.4  |      |               | $ | 1,676.4     |       |        |   | ($285.4       | ) |  |       | ($8.1 | )   |  | $ | 2,892.2 |      
|                             |                               |                                                |                                        |   |               |   |            |   |           |   |          |      |               |   |             |       |        |   |               |   |  |       |       |     |  |   |         |      

See Notes to Consolidated Financial Information.



---



##### Table of Contents



- 5 -




FINANCIAL DATA BY BUSINESS SEGMENT

(Unaudited; in millions)

|                      |                                          |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |         |         | 
|--------------------- | ---------------------------------------- | ---------------------- |  | ------- | ------- | --------- |  | ------------- | ----- | ----- |  | -------- | ----- | ------------ |  | ----------- | ----- |  |  | ------- | ------- |  |  | ---------- | ------ | - |  | ------- | ------- | 
|                      |                                          |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  | Corporate, |        |   |  |        
|                      |                                          |                        |  |         |         |           |  | PD Industries |       |       |  |          |       | Unallocated  |  |             |       | 
|                      |                                          |                        |  | Phelps  |         |           |  |               |       |       |  | &        |       |              |  |            
|                      |                                          |                        |  | Dodge   |         | Specialty |  | Wire &        |       |       |  |          |       | Segment      |  | Reconciling |       |  |  |        
|                      |                                          |                        |  | Mining  |         | Chemicals |  | Cable         |       | Total |  | Subtotal |       | Eliminations |  | Totals     
|                     
|Second Quarter 2001   |                                          |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |        
|                     
|                     
|                     
|                     
|                      | Sales & other operating revenues:        |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |         |        
|                     
|                     
|                     
|                     
|                      |                                          | Unaffiliated customers |  | $       | 712.9   |           |  |               | 148.0 |       |  |          | 202.6 |              |  |             | 350.6 |  |  |         | 1,063.5 |  |  |            |       |   |  |         | 1,063.5 | 
|                     
|                     
|                     
|                     
|                      |                                          | Intersegment           |  |         | 30.5    |           |  |               |      |       |  |          |      |              |  |             |      |  |  |         | 30.5    |  |  |            | (30.5  | ) |  |         |        | 
|                     
|                     
|                     
|                     
|                      | Depreciation, depletion and amortization |                        |  | (96.2   | )       |           |  | (11.1         | )     |       |  | (12.0    | )     |              |  | (23.1       | )     |  |  | (119.3  | )       |  |  | (2.0       | )      |   |  | (121.3  | )      
|                     
|                     
|                     
|                     
|                      | Non-recurring items, net                 |                        |  | (10.0   | )       |           |  |              |       |       |  | (3.3     | )     |              |  | (3.3        | )     |  |  | (13.3   | )       |  |  |           |        |   |  | (13.3   | )      
|                     
|                     
|                     
|                     
|                      | Operating income (loss)                  |                        |  | (21.3   | )       |           |  | 18.2          |       |       |  | 4.4      |       |              |  | 22.6        |       |  |  | 1.3     |         |  |  | (18.5      | )      |   |  | (17.2   | )      
|                     
|                     
|                     
|                     
|                      | Assets at June 30                        |                        |  | 5,920.2 |         |           |  | 744.3         |       |       |  | 678.5    |       |              |  | 1,422.8     |       |  |  | 7,343.0 |         |  |  | 513.8      |        |   |  | 7,856.8 |        
|                     
|Second Quarter 2000   |                                          |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |        
|                     
|                     
|                     
|                     
|                      | Sales & other operating revenues:        |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |         |        
|                     
|                     
|                     
|                     
|                      |                                          | Unaffiliated customers |  | $       | 753.9   |           |  |               | 150.1 |       |  |          | 208.9 |              |  |             | 359.0 |  |  |         | 1,112.9 |  |  |            |       |   |  |         | 1,112.9 | 
|                     
|                     
|                     
|                     
|                      |                                          | Intersegment           |  |         | 58.2    |           |  |               |      |       |  |          | 1.0   |              |  |             | 1.0   |  |  |         | 59.2    |  |  |            | (59.2  | ) |  |         |        | 
|                     
|                     
|                     
|                     
|                      | Depreciation, depletion and amortization |                        |  | (91.6   | )       |           |  | (11.8         | )     |       |  | (14.2    | )     |              |  | (26.0       | )     |  |  | (117.6  | )       |  |  | (1.5       | )      |   |  | (119.1  | )      
|                     
|                     
|                     
|                     
|                      | Non-recurring items, net                 |                        |  | (5.2    | )       |           |  |              |       |       |  | (39.0    | )     |              |  | (39.0       | )     |  |  | (44.2   | )       |  |  |           |        |   |  | (44.2   | )      
|                     
|                     
|                     
|                     
|                      | Operating income (loss)                  |                        |  | 38.1    |         |           |  | 26.4          |       |       |  | (37.9    | )     |              |  | (11.5       | )     |  |  | 26.6    |         |  |  | (21.4      | )      |   |  | 5.2     |        
|                     
|                     
|                     
|                     
|                      | Assets at June 30                        |                        |  | 6,256.2 |         |           |  | 779.5         |       |       |  | 711.9    |       |              |  | 1,491.4     |       |  |  | 7,747.6 |         |  |  | 225.0      |        |   |  | 7,972.6 |        
|                     
|First Six Months 2001 |                                          |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |        
|                     
|                     
|                     
|                     
|                      | Sales & other operating revenues:        |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |         |        
|                     
|                     
|                     
|                     
|                      |                                          | Unaffiliated customers |  | $       | 1,439.4 |           |  |               | 309.5 |       |  |          | 415.3 |              |  |             | 724.8 |  |  |         | 2,164.2 |  |  |            |       |   |  |         | 2,164.2 | 
|                     
|                     
|                     
|                     
|                      |                                          | Intersegment           |  |         | 88.8    |           |  |               |      |       |  |          |      |              |  |             |      |  |  |         | 88.8    |  |  |            | (88.8  | ) |  |         |        | 
|                     
|                     
|                     
|                     
|                      | Depreciation,
depletion and amortization |                        |  | (188.5  | )       |           |  | (22.6         | )     |       |  | (24.1    | )     |              |  | (46.7       | )     |  |  | (235.2  | )       |  |  | (2.6       | )      |   |  | (237.8  | )      
|                     
|                     
|                     
|                     
|                      | Non-recurring items, net                 |                        |  | (10.0   | )       |           |  |              |       |       |  | (3.3     | )     |              |  | (3.3        | )     |  |  | (13.3   | )       |  |  | 30.9       |        |   |  | 17.6    |        
|                     
|                     
|                     
|                     
|                      | Operating income (loss)                  |                        |  | (26.4   | )       |           |  | 38.4          |       |       |  | 10.9     |       |              |  | 49.3        |       |  |  | 22.9    |         |  |  | (5.7       | )      |   |  | 17.2    |        
|                     
|                     
|                     
|                     
|                      | Assets at June 30                        |                        |  | 5,920.2 |         |           |  | 744.3         |       |       |  | 678.5    |       |              |  | 1,422.8     |       |  |  | 7,343.0 |         |  |  | 513.8      |        |   |  | 7,856.8 |        
|                     
|First Six Months 2000 |                                          |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |        
|                     
|                     
|                     
|                     
|                      | Sales & other operating revenues:        |                        |  |         |         |           |  |               |       |       |  |          |       |              |  |             |       |  |  |         |         |  |  |            |        |   |  |         |        
|                     
|                     
|                     
|                     
|                      |                                          | Unaffiliated customers |  | $       | 1,507.3 |           |  |               | 305.0 |       |  |          | 420.3 |              |  |             | 725.3 |  |  |         | 2,232.6 |  |  |            |       |   |  |         | 2,232.6 | 
|                     
|                     
|                     
|                     
|                      |                                          | Intersegment           |  |         | 118.9   |           |  |               |      |       |  |          | 1.0   |              |  |             | 1.0   |  |  |         | 119.9   |  |  |            | (119.9 | ) |  |         |        | 
|                     
|                     
|                     
|                     
|                      | Depreciation,
depletion and amortization |                        |  | (183.2  | )       |           |  | (23.2         | )     |       |  | (29.3    | )     |              |  | (52.5       | )     |  |  | (235.7  | )       |  |  | (2.8       | )      |   |  | (238.5  | )      
|                     
|                     
|                     
|                     
|                      | Non-recurring items, net                 |                        |  | (5.2    | )       |           |  |              |       |       |  | (41.1    | )     |              |  | (41.1       | )     |  |  | (46.3   | )       |  |  |           |        |   |  | (46.3   | )      
|                     
|                     
|                     
|                     
|                      | Operating income (loss)                  |                        |  | 106.4   |         |           |  | 51.1          |       |       |  | (35.7    | )     |              |  | 15.4        |       |  |  | 121.8   |         |  |  | (36.8      | )      |   |  | 85.0    |        
|                     
|                     
|                     
|                     
|                      | Assets at June 30                        |                        |  | 6,256.2 |         |           |  | 779.5         |       |       |  | 711.9    |       |              |  | 1,491.4     |       |  |  | 7,747.6 |         |  |  | 225.0      |        |   |  | 7,972.6 |        
|                     



---



##### Table of Contents



- 6 -




NOTES TO CONSOLIDATED FINANCIAL INFORMATION

(Unaudited)



|1. |  | General Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The unaudited consolidated financial information presented herein has been
prepared in accordance with the instructions to Form 10-Q and does not
include all of the information and note disclosures required by generally
accepted accounting principles. Therefore, this information should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Phelps Dodge Corporations (the Company, which may
be referred to as Phelps Dodge, the Corporation, we, us or ours) Form 10-K
for the year ended December 31, 2000. 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.
|  
|   |  | The results of operations for the three-month and six-month periods ended
June 30, 2001, are not necessarily indicative of the results to be
expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|2. |  | Restructuring Charges and Non-Recurring Items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | In the second quarter of 2001, we announced a plan to improve operating
income by $30 million in 2001, $100 million in 2002, and $150 million
annually beginning in 2003. These improvements will be achieved through a
restructuring of our professional, administrative and operations support
functions, as well as various other operational improvements. This
restructuring contemplated the elimination of 500 positions. As of June
30, 2001, 480 positions were eliminated. Additionally, we announced and
implemented a layoff of approximately 80 employees at our Tyrone, New
Mexico operation for an indefinite period.                                                                                                   
|  
|   |  | In the second quarter of 2001, net non-recurring items of $7.5 million
were recognized consisting of an $11.3 million restructuring charge
primarily for employee severance and benefit costs associated with the
above-mentioned operational improvement plan. The restructuring charge
was partially offset by a net gain of $3.8 million comprising (i)
additional recoveries associated with settlements reached with several
insurance companies on historic environmental liability claims, net of
fees and expenses, (ii) the write-down of the closed Hopkinsville,
Kentucky, magnet wire facility, and (iii) other net non-recurring items.                                                                                   
|  
|   |  | In the first quarter of 2001, a non-recurring, gain of $30.9 million (net
of fees and expenses) was recognized consisting of recoveries associated
with settlements reached with several insurance companies on historic
environmental liability claims. It is our policy to recognize recoveries
of environmental expenditures or costs from insurance companies or other
parties when they become probable.                                                                                                                                                                                                                                                                                                                          
|  
|   |  | The following schedules summarize the non-recurring items for the second
quarter and six months ended June 30, 2001:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



---

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

|                                       |       |                                              |       |                     |       |       |       |      |       |   |       |       |       |  
|-------------------------------------- | ----- | -------------------------------------------- | ----- | ------------------- | ----- | ----- | ----- | ---- | ----- | - | ----- | ----- | ----- | -
|                                       |       |                                              |       | 2001 Second Quarter
|                                       |       |                                              |       |                    
|Statement of Consolidated              |       | Pre-tax                                      |       | After-tax           |       | Per  
|Operations Line Item                   |       | Earnings                                     |       | Earnings            |       | Share
|                                       |       |                                              |       |                     |       |      
|Non-recurring items, net:              |       |                                              |       |                     |       |       |       |      |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | April 2001 operating income
improvement plan |       | $                   | (11.3 | )     |       |      | (11.3 | ) |       |       | (0.14 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Hopkinsville plant write-down                |       |                     | (3.3  | )     |       |      | (3.3  | ) |       |       | (0.04 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Environmental
insurance recoveries           |       |                     | 7.2   | *     |       |      | 7.2   |   |       |       | 0.09  |  
|                                      
|                                      
|                                      
|                                      
|                                       |       | Other                                        |       |                     | (5.9  | )     |       |      | (5.9  | ) |       |       | (0.08 | )
|                                       |       |                                              |       |                     |       |       |       |      |       |   |       |      
|                                       |       |                                              | (13.3 | )                   |       |       | (13.3 | )    |       |   | (0.17 | )    
|                                       |       |                                              |       |                     |       |       |       |      |       |   |       |      
|Miscellaneous income
and expense, net: |       |                                              |       |                     |       |       |       |      |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | Interest income on
prior years tax refunds  |       |                     | 4.3   |       |       |      | 4.3   |   |       |       | 0.05  |  
|                                      
|                                      
|                                      
|                                      
|                                       |       | Other                                        |       |                     | 1.5   |       |       |      | 1.5   |   |       |       | 0.02  |  
|                                       |       |                                              |       |                     |       |       |       |      |       |   |       |      
|                                       |       |                                              | 5.8   |                     |       |       | 5.8   |      |       |   | 0.07  |      
|                                       |       |                                              |       |                     |       |       |       |      |       |   |       |      
|                                       | Total |                                              | $     | (7.5                | )     |       |       | (7.5 | )     |   |       | (0.10 | )    
|                                       |       |                                              |       |                     |       |       |       |      |       |   |       |      



---



---



##### Table of Contents



- 7 -

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



|                                       |       |                                              |      |                                |       |          |      |       |       |   |      |      |       |  
|-------------------------------------- | ----- | -------------------------------------------- | ---- | ------------------------------ | ----- | -------- | ---- | ----- | ----- | - | ---- | ---- | ----- | -
|                                       |       |                                              |      |                                |       |          |      |       |       |   |     
|                                       |       |                                              |      | Six Months Ended June 30, 2001
|                                       |       |                                              |      |                               
|Statement of Consolidated              |       | Pre-tax                                      |      | After-tax                      |       | Per     
|Operations Line Item                   |       |                                              |      | Earnings                       |       | Earnings |      | Share
|                                       |       |                                              |      |                                |       |         
|Non-recurring items, net:              |       |                                              |      |                                |       |          |      |       |       |   |      |     
|                                      
|                                      
|                                      
|                                      
|                                       |       | April 2001 operating income
improvement plan |      | $                              | (11.3 | )        |      |       | (11.3 | ) |      |      | (0.14 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Hopkinsville plant write-down                |      |                                | (3.3  | )        |      |       | (3.3  | ) |      |      | (0.04 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Environmental
insurance recoveries           |      |                                | 38.1  | *        |      |       | 38.1  |   |      |      | 0.49  |  
|                                      
|                                      
|                                      
|                                      
|                                       |       | Other                                        |      |                                | (5.9  | )        |      |       | (5.9  | ) |      |      | (0.08 | )
|                                       |       |                                              |      |                                |       |          |      |       |       |   |      |     
|                                       |       |                                              | 17.6 |                                |       |          | 17.6 |       |       |   | 0.23 |     
|                                       |       |                                              |      |                                |       |          |      |       |       |   |      |     
|Miscellaneous income
and expense, net: |       |                                              |      |                                |       |          |      |       |       |   |      |     
|                                      
|                                      
|                                      
|                                      
|                                       |       | Interest income on
prior years tax refunds  |      |                                | 4.3   |          |      |       | 4.3   |   |      |      | 0.05  |  
|                                      
|                                      
|                                      
|                                      
|                                       |       | Other                                        |      |                                | 1.5   |          |      |       | 1.5   |   |      |      | 0.02  |  
|                                       |       |                                              |      |                                |       |          |      |       |       |   |      |     
|                                       |       |                                              | 5.8  |                                |       |          | 5.8  |       |       |   | 0.07 |     
|                                       |       |                                              |      |                                |       |          |      |       |       |   |      |     
|                                       |       | Cumulative change in
accounting principle    |      |                                | (2.0  | )        |      |       | (2.0  | ) |      |      | (0.03 | )
|                                       |       |                                              |      |                                |       |          |      |       |       |   |      |     
|                                       | Total |                                              | $    | 21.4                           |       |          |      | 21.4  |       |   |      | 0.27 |      
|                                       |       |                                              |      |                                |       |          |      |       |       |   |      |     



---

|* |  | Net of fees and expenses of $10.5 million for the first six months and
$2.1 million in the second quarter of 2001.
|- |  | ------------------------------------------------------------------------------------------------------------------



---



| |  | In the second quarter of 2000, we announced a plan to reduce operating
costs and restructure operations at our mining and wire and cable
segments. This plan comprised the following actions: (i) curtailing
higher cost production at the Miami copper mine in Arizona and reducing
production at the Henderson molybdenum mine in Colorado; (ii) ceasing
production at two wire and cable plants in Venezuela; (iii) initiating the
closure of a telephone cable operation in El Salvador, and (iv)
recognizing impairment charges for our wire and cable operations in
Austria and the Philippines.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Non-recurring, pre-tax items in the second quarter of 2000 totaled $52.0
million ($42.3 million, or 54 cents per share, after taxes) consisting of
a $41.3 million restructuring charge as mentioned above, ongoing costs
related to the June 30, 1999, wire and cable restructuring plan, and a tax
refund and associated interest resulting from settlement of the Companys
1990 and 1991 income tax audits.                                                                                                                                                                                       
|
| |  | In the 2000 first quarter, our wire and cable segment incurred pre-tax
charges of $2.1 million associated with the 1999 restructuring plan ($1.3
million, or 1 cent per share, after taxes).                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | The following schedules summarize the non-recurring items for the second
quarter and six months ended June 30, 2000:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



---

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

|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |       |       |  
|-------------------------------------- | ----- | ------------------------------------------- | ----- | ------------------- | ----- | ----- | ----- | ----- | ----- | - | ----- | ----- | ----- | -
|                                       |       |                                             |       | 2000 Second Quarter
|                                       |       |                                             |       |                    
|Statement of Consolidated              |       | Pre-tax                                     |       | After-tax           |       | Per  
|Operations Line Item                   |       | Earnings                                    |       | Earnings            |       | Share
|                                       |       |                                             |       |                     |       |      
|                                      
|                                      
|                                      
|                                      
|Cost of products sold:                 |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | Wire and cable working
capital write-downs  |       | $                   | (6.4  | )     |       |       | (6.4  | ) |       |       | (0.08 | )
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                       |       |                                             | (6.4  | )                   |       |       | (6.4  | )     |       |   | (0.08 | )    
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|Non-recurring items, net:              |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | PD Mining curtailments                      |       |                     | (5.2  | )     |       |       | (3.3  | ) |       |       | (0.04 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Wire and cable
closure/impairments          |       |                     | (36.1 | )     |       |       | (33.6 | ) |       |       | (0.43 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Additional June 30, 1999
restructuring      |       |                     | (2.9  | )     |       |       | (1.9  | ) |       |       | (0.02 | )
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                       |       |                                             | (44.2 | )                   |       |       | (38.8 | )     |       |   | (0.49 | )    
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|Miscellaneous income
and expense, net: |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | Interest income on
prior years tax refunds |       |                     | 5.8   |       |       |       | 3.6   |   |       |       | 0.04  |  
|                                      
|                                      
|                                      
|                                      
|                                       |       | Philippines investment
impairment           |       |                     | (7.2  | )     |       |       | (7.2  | ) |       |       | (0.09 | )
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                       |       |                                             | (1.4  | )                   |       |       | (3.6  | )     |       |   | (0.05 | )    
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|Provision for taxes on income:         |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | Income tax refund                           |       |                     |      |       |       |       | 6.5   |   |       |       | 0.08  |  
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                       |       |                                             |      |                     |       |       | 6.5   |       |       |   | 0.08  |      
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       | Total |                                             | $     | (52.0               | )     |       |       | (42.3 | )     |   |       | (0.54 | )    
|                                       |       |                                             |       |                     |       |       |       |       |       |   |       |      



---



---



##### Table of Contents



- 8 -

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



|                                       |       |                                             |       |           |       |       |       |       |       |   |       |       |       |  
|-------------------------------------- | ----- | ------------------------------------------- | ----- | --------- | ----- | ----- | ----- | ----- | ----- | - | ----- | ----- | ----- | -
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                       |       | Six Months Ended June 30, 2000             
|                                       |       |                                            
|Statement of Consolidated              |       | Pre-tax                                     |       | After-tax |       | Per  
|Operations Line Item                   |       | Earnings                                    |       | Earnings  |       | Share
|                                       |       |                                             |       |           |       |      
|Cost of products sold:                 |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | Wire and cable working
capital write-downs  |       | $         | (6.4  | )     |       |       | (6.4  | ) |       |       | (0.08 | )
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                       |       |                                             | (6.4  | )         |       |       | (6.4  | )     |       |   | (0.08 | )    
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|Non-recurring items, net:              |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | PD Mining curtailments                      |       |           | (5.2  | )     |       |       | (3.3  | ) |       |       | (0.04 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Wire and cable
closure/impairments          |       |           | (36.1 | )     |       |       | (33.6 | ) |       |       | (0.43 | )
|                                      
|                                      
|                                      
|                                      
|                                       |       | Additional June 30, 1999
restructuring      |       |           | (5.0  | )     |       |       | (3.2  | ) |       |       | (0.04 | )
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                       |       |                                             | (46.3 | )         |       |       | (40.1 | )     |       |   | (0.51 | )    
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|Miscellaneous income
and expense, net: |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | Interest income on
prior years tax refunds |       |           | 5.8   |       |       |       | 3.6   |   |       |       | 0.04  |  
|                                      
|                                      
|                                      
|                                      
|                                       |       | Philippines investment
impairment           |       |           | (7.2  | )     |       |       | (7.2  | ) |       |       | (0.09 | )
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                       |       |                                             | (1.4  | )         |       |       | (3.6  | )     |       |   | (0.05 | )    
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|Provision for taxes on income:         |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       |       | Income tax refund                           |       |           |      |       |       |       | 6.5   |   |       |       | 0.08  |  
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                       |       |                                             |      |           |       |       | 6.5   |       |       |   | 0.08  |      
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      
|                                      
|                                      
|                                      
|                                      
|                                       | Total |                                             | $     | (54.1     | )     |       | $     | (43.6 | )     |   |       | (0.56 | )    
|                                       |       |                                             |       |           |       |       |       |       |       |   |       |      



---



| |  | On June 30, 1999, we announced a plan to reduce costs and improve
operating performance at all three of our business segments by curtailing
higher-cost copper production, selling a non-core mining unit,
restructuring certain wire and cable assets, and suspending operations of
a carbon black plant.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The following table presents a roll-forward of the liabilities incurred in
connection with the restructuring plans, which were all reflected as
current liabilities in our consolidated balance sheet:                                                                                                    



---

|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|--------------------------------- |  | -------- | ---- | ---------- |  | ------------- | --- | ------- |  | ---------- | ---- | - |  |  | --- | 
|                                  |  |          |      |            |  |               |     |         |  | (Payments/ |      |   |  | 
|                                  |  | 12/31/00 |      | Additions* |  | Deductions)** |     | 6/30/01
|                                  |  |          |      |            |  |               |     |        
|PD Mining:                        |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|Employee Severance
and Relocation |  | $        | 2.0  |            |  |               | 4.1 |         |  |            | (4.1 | ) |  |  | 2.0 | 
|                                 
|                                 
|                                 
|                                 
|Mothballing/Take or
Pay Contracts |  |          | 2.5  |            |  |               |     |         |  |            | (0.5 | ) |  |  | 2.0 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                  |  |          | 4.5  |            |  |               | 4.1 |         |  |            | (4.6 | ) |  |  | 4.0 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|PD Industries:                    |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|Wire and Cable                    |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|Employee Severance
and Relocation |  |          | 0.4  |            |  |               |     |         |  |            | (0.2 | ) |  |  | 0.2 | 
|                                 
|                                 
|                                 
|                                 
|Take or Pay Contracts             |  |          | 2.0  |            |  |               |     |         |  |            | (0.9 | ) |  |  | 1.1 | 
|                                 
|                                 
|                                 
|                                 
|Plant Removal
& Dismantling       |  |          | 3.8  |            |  |               |     |         |  |            | (1.3 | ) |  |  | 2.5 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |          | 6.2  |            |  |               |    |         |  |            | (2.4 | ) |  |  | 3.8 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|Specialty Chemicals               |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|Disposal &
Dismantling            |  |          | 1.3  |            |  |               |     |         |  |            | (1.0 | ) |  |  | 0.3 | 
|                                 
|                                 
|                                 
|                                 
|Environmental                     |  |          | 0.7  |            |  |               |     |         |  |            | (0.1 | ) |  |  | 0.6 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |          | 2.0  |            |  |               |    |         |  |            | (1.1 | ) |  |  | 0.9 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                  |  |          | 8.2  |            |  |               |    |         |  |            | (3.5 | ) |  |  | 4.7 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|Corporate & Other:                |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|Employee Severance
and Relocation |  |          |     |            |  |               | 0.9 |         |  |            | (0.3 | ) |  |  | 0.6 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|                                 
|                                 
|                                 
|                                 
|                                  |  |          |     |            |  |               | 0.9 |         |  |            | (0.3 | ) |  |  | 0.6 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 
|Total                             |  | $        | 12.7 |            |  |               | 5.0 |         |  |            | (8.4 | ) |  |  | 9.3 | 
|                                  |  |          |      |            |  |               |     |         |  |            |      |   |  |  |     | 



---

|*  |  | Additions exclude $6.3 million of pension and other post retirement charges
for the 2001 restructuring, included in long-term liabilities.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|  
|  
|  
|  
|** |  | Of the $8.4 million in payments, $5.8 million relates to payments for the
1999 and 2000 restructuring.                                    



---



|3. |  | Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations and SFAS No. 142, Goodwill and Other Intangible Assets.
With the adoption of SFAS Nos. 141 and 142, business combinations
initiated after June 30, 2001, will be required to be accounted for using
the purchase method and goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. Intangible assets that have finite useful
lives will continue to be amortized over their useful lives, but without
the constraint of the 40 year ceiling. SFAS No. 142 is required to be
adopted by the Company on January 1, 2002.



---



##### Table of Contents



- 9 -



|   |  | We are in the process of
evaluating the effect that SFAS No. 142 will have on our financial
reporting and disclosures and are developing procedures to effect its
implementation. As of June 30, 2001, we had goodwill of $147.7 million,
net of accumulated amortization of $39.4 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | See Note 9 for discussion on adoption of SFAS No. 133 Accounting for
Derivative Instruments and Hedging Activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|4. |  | Environmental Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | As of December 31, 2000, we had a reserve balance of $307.1 million for
estimated future costs associated with environmental matters. During the
first six months of 2001, net spending against that reserve totaled $14.6
million. As of June 30, 2001, the reserve balance was $292.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | We have contingencies regarding environmental, closure and other matters.
For a further discussion of these contingencies, please see our Form 10-K
for the year ended December 31, 2000, and Note 18 to the Consolidated
Financial Statements included therein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|5. |  | Acquisitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | In January 2001, Alcoa Aluminio, S.A. exercised a put option that required
Phelps Dodge or a designee company to acquire the 40 percent minority
interest in Alcoa Fios e Cabos Electricos, S.A., our wire and cable
facility in Brazil, in which we had a 60 percent interest (prior to
acquiring the 40 percent minority interest). The transaction closed in
March 2001. The final settlement price of $44.8 million has been
allocated to goodwill ($13.0 million), fixed assets ($3.2 million), other
net assets ($1.3 million) and minority interests in consolidated
subsidiaries ($27.3 million).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|6. |  | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | On July 6, 2001, the New Mexico Environment Department and the Mining and
Minerals Division of the Energy, Minerals and Natural Resources Department
(the State) publicly released their respective draft permit conditions for
proposed closure and closeout plans for our Chino Mines (Hurley), New
Mexico operation. Draft conditions for our Tyrone operations are
expected in the latter half of August 2001. The Company believes the scope of work in the States
draft permit conditions significantly exceeds that necessary to ensure
environmental protection and public health and safety as required by State
law, and fails to recognize appropriate waiver provisions available under
the New Mexico Mining Act for existing operations. As such, the
reclamation work proposed by the State is significantly greater in scope
than that proposed by the Company and, therefore, the associated costs
estimated by the State of $759 million (assuming use of third-party
contractors) far exceed the Companys estimates of $99 million (assuming
use of third-party contractors), which are based on many years of
technical and engineering studies. Under State law, the Company must
provide financial assurance for the estimated reclamation costs as set
forth in the final plan by December 31, 2001.
|  
|   |  | During August 2001, the State will hold a public hearing and receive
public comments on the draft plans. The Company will continue to explore
all available avenues and processes to obtain reasonable and final closure
and closeout plans that are based on a sound understanding of the
applicable science and regulations, and that consider the specific
characteristics of the sites as required by law.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|7. |  | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is similar to
basic earnings per share except that the denominator is increased to
include the number of additional common shares that would have been
outstanding if the dilutive potential common shares were issued. The
average number of diluted common shares outstanding for the quarter and
six-month period ended June 30, 2001, excludes 0.2 million of restricted
stock issued to employees as these shares were anti-dilutive. The average
number of diluted common shares outstanding for the quarter and six-month
period ended June 30, 2000, excluded 0.3 million of restricted stock
issued to employees and 0.1 million of employee stock options as these
shares were anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                            



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##### Table of Contents



- 10 -



| |  | Stock options excluded from the computation of diluted earnings per share
because option prices exceeded the market value of the Companys stock
were as follows (in millions, except for option price):
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

|                     |  |                |       |                  |  |      |       |      |  |  |       |  |  |  |       | 
|-------------------- |  | -------------- | ----- | ---------------- |  | ---- | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                     |  | Second Quarter |       | First Six Months
|                     |  |                |       |                 
|                     |  | 2001           |       | 2000             |  | 2001 |       | 2000
|                     |  |                |       |                  |  |      |       |     
|Outstanding options  |  |                | 7.8   |                  |  |      | 6.6   |      |  |  | 7.7   |  |  |  | 6.5   | 
|                    
|                    
|                    
|                    
|Average option price |  | $              | 43.74 |                  |  |      | 45.98 |      |  |  | 45.20 |  |  |  | 50.53 | 



---



|8. |  | Provision for Taxes on Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | During the second quarter, the Company revised its 2001 full-year COMEX
copper price outlook to 75 cents per pound from the original forecast of
85 cents per pound for purposes of estimating its 2001 full-year income
tax provision and effective tax rate. Currently, the Companys estimated
income tax expense principally results from taxes on earnings at
international operations that cannot be offset by losses at domestic
operations. As a result of the revised copper price outlook and the
resultant change in the mix of taxes and earnings, the Company is
providing income taxes based on earnings at its international operations
at an effective 31 percent tax rate. Applying the revised effective tax
rate on international earnings retroactively to the 2001 first quarter,
the 2001 second quarter included an additional tax charge of $41.7
million, or 53 cents per share.
|  
|   |  | Our forecast for the average COMEX copper price and other factors will be
reviewed from time to time, which may result in changes to the projected
full-year earnings and associated income tax estimates. Such changes and
estimates may also result in significant adjustments to the effective tax
rate that we recognize in any subsequent period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|9. |  | Accounting for Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | Phelps Dodge does not purchase, hold or sell derivative contracts unless
we have an existing asset, obligation or anticipate a future activity that
is likely to occur and will result in exposing us to market risk. We use
various strategies to manage our market risk, including the use of
derivative contracts to limit, offset or reduce our market exposure.
Derivative instruments are used to manage well-defined commodity price,
foreign exchange and interest rate risks from our primary business
activities.                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | Effective January 1, 2001, Phelps Dodge adopted SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended. The fair
values of outstanding derivative instruments are recorded on the balance
sheet. The adoption of SFAS No. 133 on January 1, 2001, resulted in a
cumulative pre-tax reduction to income of $2.0 million ($2.0 million
after-tax) and a cumulative pre-tax reduction to Other Comprehensive
Income (OCI) of $7.1 million ($7.1 million after-tax).                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | Phelps Dodge evaluates hedge effectiveness by formally measuring, at least
quarterly, the correlation of changes in the fair value or expected future
cash flows of the hedged risk between the hedged item and the hedge
instrument. The ineffective portions are recorded in earnings in the
current period (which were not material in the second quarter or first six
months of 2001). If the hedging relationship ceases to be highly effective
or it becomes probable that an expected transaction will no longer occur,
gains or losses on the derivative are recorded in earnings (none in the
second quarter or first six months of 2001).                                                                                                                                                                                                                                                      
|  
|   |  | Changes in the fair value of derivatives are recorded in current earnings
or in other comprehensive income, depending on whether a derivative is
designated as a fair value or cash flow hedge and the effectiveness of the
hedge. A summary of the derivative instruments we hold follows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | Fair Value Hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | The following hedges qualify as fair value hedges. As a result, the
fair values of derivatives and changes in the fair values of the
underlying hedged items are reported in the balance sheet. Changes in the
fair values of these derivatives and underlying hedged items are recorded
to other income and expense or sales each period and generally offset one
another. There were no existing arrangements that ceased to qualify as a
fair value hedge in the second quarter of 2001.                                                                                                                                                                                                                                                                                                                                                                                                            



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- 11 -



| |  | Copper                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Some of our wire, cathode and rod (collectively, copper) customers request
a fixed sales price instead of the COMEX or London Metal Exchange (LME)
average price in the month of shipment or receipt. As a convenience to
these customers, we enter into copper swap and futures contracts to hedge
the sales in a manner that will allow us to receive the COMEX or LME
average price in the month of shipment or receipt while our customers
receive the agreed upon fixed price. A portion of our copper contracts
did not meet all of the required criteria to be designated as fixed
commitments under SFAS No. 133; therefore, a portion of our copper swap
and futures contracts were not designated as hedging instruments.
|
| |  | Foreign Currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Foreign currency transactions increase our risks because exchange rates
can change between the time agreements are made and the time foreign
currency related transactions are actually settled. One of the ways we
manage these exposures is by entering into forward exchange contracts in
the same currency as the transaction to lock in or minimize the effects of
changes in exchange rates. With regard to foreign currency transactions,
we may hedge or protect transactions for which we have a firm legal
obligation. We do not enter into foreign exchange contracts for
speculative purposes. In the process of protecting our transactions, we
may use a number of offsetting currency contracts.                    
|
| |  | Interest Rates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | During May 2001, we entered into interest rate swap contracts to convert
$900 million of newly closed notes to floating-rate debt in order to take
advantage of lower short-term interest rates currently available. On
August 10, 2001, we unwound these interest rate swap agreements, resulting
in a positive cash flow of $23.2 million. This amount will be amortized
into earnings over the remaining life of the respective notes. We do not
enter into interest rate swap contracts for speculative purposes.                                                                                                                                                                                                              
|
| |  | Cash Flow Hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The following hedges qualify as cash flow hedges. As a result, the fair
values of the derivatives are recorded on the balance sheet. The
effective portion of the changes in the fair values of these derivatives
are recorded in other comprehensive income and are reclassified to cost of
goods sold or interest expense in the period in which earnings are
impacted by the hedged items or in the period that the transaction no
longer qualifies as a cash flow hedge (there were no existing arrangements
that ceased to qualify as a cash flow hedge in the second quarter of
2001).                                                                                                                                     
|
| |  | As of June 30, 2001, we had $13.0 million of accumulated derivative losses
included in OCI. For the six months ended June 30, 2001, we incurred
$16.4 million in net derivative losses and reclassified $10.5 million into
earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Commodities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Phelps Dodge purchases diesel fuel and natural gas to supply our mine
operations. The objective of the energy commodity price protection
program is to minimize the effects of significant upward movement in
energy commodity prices while retaining the opportunity to benefit from
downward price movements. To implement these objectives, we may purchase
and/or sell energy commodity option contracts. We do not purchase or sell
energy commodity options for speculative purposes. In addition to hedging
energy commodities, Phelps Dodge also enters into aluminum swap contracts
to hedge aluminum ingot purchases needed in manufacturing cable contracted
by customers.                                              
|
| |  | Interest Rates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | In some situations, we may enter into interest rate swap contracts to
manage interest expense costs associated with floating-rate debt. We do
not enter into interest rate swap contracts for speculative purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



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##### Table of Contents



- 12 -




REVIEW BY INDEPENDENT ACCOUNTANTS

The financial
information as of June 30, 2001, and for the three-month and six-month
periods ended June 30, 2001 and 2000, included in Part I pursuant to Rule 10-01
of Regulation S-X has been reviewed by PricewaterhouseCoopers LLP
(PricewaterhouseCoopers), the Companys independent accountants, in accordance
with standards established by the American Institute of Certified Public
Accountants. PricewaterhouseCoopers report is included in this quarterly
report.

PricewaterhouseCoopers does not carry out any significant or additional
audit tests 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.



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##### Table of Contents



- 13 -




Report of Independent Accountants

To the Board of Directors and Shareholders
of Phelps Dodge Corporation

We have reviewed the accompanying consolidated balance sheet of Phelps Dodge
Corporation and its subsidiaries as of June 30, 2001, and the related
consolidated statements of operations, for each of the three-month and
six-month periods ended June 30, 2001 and 2000, and the consolidated statement
of cash flows for the six-month periods ended June 30, 2001 and 2000 and
consolidated statement of common shareholders equity for the six-month period
ended June 30, 2001. This financial information is the responsibility of the
Corporations management.

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

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

We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2000, and the related consolidated statements of operations, of cash flows
and of common shareholders equity for the year then ended (not presented
herein), and in our report dated January 24, 2001 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet
information as of December 31, 2000, is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.

PricewaterhouseCoopers LLP
Phoenix, Arizona
July 19, 2001



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##### Table of Contents



- 14 -




Item 2. Managements Discussion and Analysis

The U.S. 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 cannot give assurance that such statements will
prove to be correct. Please refer to the Managements Discussion and Analysis
sections of the Companys report on Form 10-K for the year ended December 31,
2000.




RESULTS OF OPERATIONS

Earnings

The Company had a consolidated loss in the 2001 second quarter of $103.0
million, or $1.31 per share, before restructuring charges and non-recurring
items of $7.5 million, or 10 cents per share, after taxes. Restructuring costs
of $11.3 million associated with the operational improvement plan announced on
April 24, 2001, were partially offset by a net gain of $3.8 million comprising
such items as net recoveries associated with insurance settlements and interest
income on prior years tax refunds. The 2001 second quarter also included an
incremental charge to the income tax provision totaling $41.7 million, or 53
cents per share, to reflect the Companys copper price outlook for the year and
the resultant estimated effective income tax rate. Earnings for the second
quarter of 2000 were $4.5 million, or 6 cents per share, before restructuring
charges and non-recurring items of $52.0 million ($42.3 million, or 54 cents
per share, after taxes). After restructuring charges and non-recurring items,
the 2001 second quarter net loss was $110.5 million, or $1.41 per share,
compared with the 2000 second quarter net loss of $37.8 million, or 48 cents
per share.

Earnings before non-recurring items were lower in the second quarter of
2001 than in the second quarter of 2000 principally as a result of lower copper
prices of approximately $36 million, higher costs associated with the
transition to total mine-for-leach production at our Morenci, Arizona,
operation of approximately $7 million, an incremental charge to the income tax
provision of approximately $42 million and a decrease in our copper rod and
specialty chemicals businesses due to continued economic weakness in North
America of approximately $15 million.

The Company had a
consolidated loss for the six months ended June 30, 2001,
of $117.7 million, or $1.50 cents per share, before a non-recurring net
gain of $21.4 million ($21.4 million or 27 cents per share after taxes).
Earnings for the six months ended June 30, 2000, were $25.2 million, or 32
cents per share, before after-tax, non-recurring charges of $43.6
million, or 56 cents per share as a result of the June 2000 and 1999
Restructuring Plans. After restructuring charges and non-recurring items, the
consolidated loss for the six months ended June 30, 2001, was $96.3 million, or
$1.23 per share, compared with a
consolidated loss of $18.4 million or 23 cents per share in the
corresponding 2000 period.

Earnings before non-recurring items were lower in the first six months of
2001 than in the corresponding 2000 period principally as a result of lower
copper prices of approximately $38 million, higher energy-related costs of
approximately $39 million, combined with the anticipated temporary impact of
lower production volumes and higher costs associated with the transition to
total mine-for-leach production at our Morenci, Arizona, operation of
approximately $20 million and a decrease in our copper rod and Phelps Dodge
Industries businesses due to continued economic weakness in North America of
approximately $17 million.

The COMEX spot price per pound of copper cathode, primarily upon which we
base our selling price, averaged 75 cents in the 2001 second quarter, compared
with 80 cents in the corresponding 2000 period. From July 1 to August 10,
2001, the COMEX price averaged 69 cents per pound, closing at 66 cents on
August 10, 2001.

Any material change in the price we receive for copper, or in our unit
production costs, has a significant effect on our results. Our share of
current annual production is approximately 2.3 billion pounds of copper.
Accordingly, each 1 cent per pound change in our average annual realized copper
price, or in our average annual unit production costs, causes a variation in
annual operating income before taxes of approximately $23 million.

From time to time, we may purchase or sell copper price protection
contracts for a portion of our expected future mine production. We do this to
limit the effects of potential decreases in copper selling prices. We did not
have any outstanding copper price protection contracts on June 30, 2001.



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##### Table of Contents



- 15 -

In the second quarter of 2001, we announced a plan to improve operating
income by $30 million in 2001, $100 million in 2002, and $150 million annually
beginning in 2003. These improvements will be achieved through a restructuring
of our professional, administrative and operations support functions, as well
as various other operational improvements. This restructuring contemplated the
elimination of 500 positions. As of June 30, 2001, 480 positions were
eliminated. Additionally, we announced and implemented a layoff of
approximately 80 employees at our Tyrone, New Mexico operation for an
indefinite period.

Business Segments

Results for 2001 and 2000 can be meaningfully compared by separate
reference to our reporting divisions, Phelps Dodge Mining Company and Phelps
Dodge Industries. Phelps Dodge Mining Company is a business segment that
includes our worldwide copper operations from mining through rod production,
marketing and sales; molybdenum operations from mining through manufacturing,
marketing and sales; other mining operations and investments; and worldwide
mineral exploration and development programs. Phelps Dodge Industries includes
our specialty chemicals segment and our wire and cable segment.




RESULTS OF PHELPS DODGE MINING COMPANY

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



---

|                                                            |                                                |   |                |       |      |  |       |       | 
|----------------------------------------------------------- | ---------------------------------------------- | - | -------------- | ----- | ---- |  | ----- | ----- | 
|                                                            |                                                |   | Second Quarter
|                                                            |                                                |   |               
|                                                            |                                                |   | 2001           |       | 2000
|                                                            |                                                |   |                |       |     
|Copper production (thousand short tons):                    |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Total production                               |   |                | 357.8 |      |  |       | 367.4 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Less minority participants shares*            |   |                | 64.0  |      |  |       | 64.9  | 
|                                                            |                                                |   |                |       |      |  |       |      
|                                                            | Net Phelps Dodge share                         |   |                | 293.8 |      |  |       | 302.5 | 
|                                                            |                                                |   |                |       |      |  |       |      
|                                                            |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|Copper sales (thousand short tons):                         |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Net Phelps Dodge share from own mines          |   |                | 310.3 |      |  |       | 307.8 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Purchased copper                               |   |                | 96.5  |      |  |       | 108.6 | 
|                                                            |                                                |   |                |       |      |  |       |      
|                                                            | Total copper sales                             |   |                | 406.8 |      |  |       | 416.4 | 
|                                                            |                                                |   |                |       |      |  |       |      
|                                                            |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|COMEX:                                                      |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Average spot price per pound  copper
cathodes |   | $              | 0.75  |      |  |       | 0.80  | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|Molybdenum concentrate production
(million pounds)          |                                                |   | 14.5           |       |      |  | 12.5  |      
|                                                           
|                                                           
|                                                           
|                                                           
|Molybdenum sales (million pounds)                           |                                                |   | 14.7           |       |      |  | 15.5  |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|Metals Week:                                                |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Molybdenum oxide price per pound               |   | $              | 2.46  |      |  |       | 2.62  | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | (in millions)                                 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                |       |      |  |       |      
|                                                           
|                                                           
|                                                           
|                                                           
|Sales and other operating revenues
- unaffiliated customers |                                                | $ | 712.9          |       |      |  | 753.9 |      
|                                                           
|                                                           
|                                                           
|                                                           
|Operating income (loss) (A) (B)                             |                                                | $ | (21.3          | )     |      |  | 38.1  |      



---

|                                                            |                                                |   |                  |       |      |  |         |       | 
|----------------------------------------------------------- | ---------------------------------------------- | - | ---------------- | ----- | ---- |  | ------- | ----- | 
|                                                            |                                                |   | First Six Months
|                                                            |                                                |   |                 
|                                                            |                                                |   | 2001             |       | 2000
|                                                            |                                                |   |                  |       |     
|Copper production (thousand short tons):                    |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Total production                               |   |                  | 717.0 |      |  |         | 739.2 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Less minority participants shares*            |   |                  | 129.0 |      |  |         | 132.3 | 
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                            | Net Phelps Dodge share                         |   |                  | 588.0 |      |  |         | 606.9 | 
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|Copper sales (thousand short tons):                         |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Net Phelps Dodge share from own mines          |   |                  | 600.0 |      |  |         | 623.2 | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Purchased copper                               |   |                  | 210.3 |      |  |         | 205.8 | 
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                            | Total copper sales                             |   |                  | 810.3 |      |  |         | 829.0 | 
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|COMEX:                                                      |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Average spot price per pound  copper
cathodes |   | $                | 0.79  |      |  |         | 0.81  | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|Molybdenum concentrate production
(million pounds)          |                                                |   | 29.2             |       |      |  | 25.2    |      
|                                                           
|                                                           
|                                                           
|                                                           
|Molybdenum sales (million pounds)                           |                                                |   | 29.8             |       |      |  | 31.9    |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|Metals Week:                                                |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Molybdenum oxide price per pound               |   | $                | 2.35  |      |  |         | 2.57  | 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | (in millions)                                 
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|Sales and other operating revenues
- unaffiliated customers |                                                | $ | 1,439.4          |       |      |  | 1,507.3 |      
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            |                                                |   |                  |       |      |  |         |      
|                                                           
|                                                           
|                                                           
|                                                           
|Operating income (loss) (A) (B)                             |                                                | $ | (26.4            | )     |      |  | 106.4   |      



---



##### Table of Contents



- 16 -



---

|*   |  | Minority participant interests include (i) a 15 percent undivided
interest in the Morenci, Arizona, copper mining complex held by
Sumitomo Metal Mining Arizona, Inc., (ii) a one-third
partnership interest in Chino Mines Company in New Mexico
held by Heisei Minerals Corporation, (iii) the 20 percent
interest in Candelaria in Chile held by SMMA Candelaria, Inc., a
jointly owned indirect subsidiary of Sumitomo Metal Mining Co.,
Ltd., and Sumitomo Corporation, and (iv) a 49 percent interest in
the El Abra copper mining operation in Chile held by
Corporación Nacional del Cobre de Chile (CODELCO).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|   
|   
|   
|(A) |  | Includes a pre-tax, non-recurring charge of $10.0 million in the
2001 second quarter and the six months ended June 30, for the
operational improvement plan announced April 24, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|   
|   
|   
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|   
|   
|   
|(B) |  | The 2000 second quarter and the six months ended June 30,
includes a pre-tax charge of $5.2 million for the curtailment of
copper and molybdenum mining activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                   



---

PD Mining Sales

PD Mining sales and other operating revenues to unaffiliated customers
decreased by $41.0 million, or 5 percent, in the 2001 second quarter and by
$67.9 million, or 5 percent, in the first six months of 2001 compared with the
corresponding 2000 periods.

The decrease in the second quarter was primarily a result of lower U.S.
and international copper and molybdenum average selling prices of approximately
$44 million. The decrease for the six-month period was primarily the result of
lower U.S. and international copper and molybdenum average selling prices of
approximately $58 million and lower U.S. and international copper sales volumes
of approximately $13 million.

PD Mining Operating Income

PD Mining reported an operating loss of $11.3 million in the 2001 second
quarter before pre-tax, non-recurring charges of $10.0 million for
restructuring charges, compared with operating income of $43.3 million in the
2000 second quarter before pre-tax, non-recurring charges of $5.2 million for
the Miami and Henderson curtailments. For the first six months of 2001, PD
Mining reported an operating loss of $16.4 million before pre-tax,
non-recurring charges, compared with operating income of $111.6 million before
pre-tax, non-recurring charges in the first six months of 2000. The decrease,
compared with the corresponding 2000 periods, reflected lower COMEX copper
prices, higher energy costs and the anticipated temporary effects of
transitioning to total mine-for-leach production at Morenci.

Energy, including electricity, diesel fuel and natural gas, represents a
significant portion of the production costs for our operations. During the
second half of 2000 and through the second quarter of 2001, our Arizona and New
Mexico operations were adversely affected by higher costs for electricity,
diesel fuel and natural gas. However, as a result of the
implementation of our
power cost stabilization plan, announced on March 26, 2001, which includes
expansion of internal generating capacity, alternating production curtailments
at our Tyrone, New Mexico, operation and our Sierrita and Bagdad operations in
Arizona, and curtailments at our Chino, New Mexico, operation, our exposure to
the spot electricity market is not expected to be material and did not have a
significant impact on production costs in the second quarter 2001.

Additionally, to mitigate our exposure to increases in diesel fuel prices,
we initiated a diesel fuel price protection program in December 2000. The
objective of our program is to protect against a significant upward movement in
diesel fuel prices while retaining the opportunity to benefit from any downward
price movement. Option contracts have been purchased as of June 30, 2001, to
protect approximately 38 percent of the projected second half of 2001 diesel
fuel consumption for the Arizona and New Mexico properties.

To mitigate our exposure to further increases in the price of natural gas,
we initiated a natural gas price protection program during the first quarter of
2001. The objective of our program is to protect against a significant upward
movement in natural gas prices while retaining the opportunity to benefit from
any downward price movement. Option contracts have been purchased as of June
30, 2001, to protect approximately 50 percent of the projected July 2001 to
March 2002 Arizona, New Mexico, Connecticut and Texas natural gas consumption.

PD Mining Other Matters

On July 26, 2001, we announced we will not extend the Worker Adjustment
and Retraining Notification (WARN) Act notices that were in effect through
August 9 for approximately 1,065 employees at the Companys Tyrone and Chino
operations in New Mexico. The WARN Act notices initially were issued by the
Company to more than 2,350 employees at its southwestern U.S. operations on
January 25, and extended in late March. A portion of the Chino employees



---



##### Table of Contents



- 17 -

and
the Tyrone workers received extensions of the WARN notices again in late May.

On July 6, 2001, the New Mexico Environment Department and the Mining and
Minerals Division of the Energy, Minerals and Natural Resources Department (the
State) publicly released their respective draft permit conditions for proposed
closure and closeout plans for our Chino Mines (Hurley), New Mexico
operation. Draft conditions for our Tyrone operations are expected in
the latter half of August 2001. The Company believes the scope of work in the States draft permit
conditions significantly exceeds that necessary to ensure environmental
protection and public health and safety as required by State law, and fails to
recognize appropriate waiver provisions available under the New Mexico Mining
Act for existing operations. As such, the reclamation work proposed by the
State is significantly greater in scope than that proposed by the Company and,
therefore, the associated costs estimated by the State of $759 million
(assuming use of third-party contractors) far exceed the Companys estimates of
$99 million (assuming use of third-party contractors), which are based on many
years of technical and engineering studies. Under State law, the Company must
provide financial assurance for the estimated reclamation costs as set forth
in the final plan by December 31, 2001.

During August 2001, the State will hold a public hearing and receive
public comments on the draft plans. The Company will continue to explore all
available avenues and processes to obtain reasonable and final closure and
closeout plans that are based on a sound understanding of the applicable
science and regulations, and that consider the specific characteristics of the
sites as required by law.




RESULTS OF PHELPS DODGE INDUSTRIES

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



---

|                                   |                         |   |                |       |      |  |       |       |  
|---------------------------------- | ----------------------- | - | -------------- | ----- | ---- |  | ----- | ----- | -
|                                   |                         |   | Second Quarter
|                                   |                         |   |               
|                                   |                         |   | 2001           |       | 2000
|                                   |                         |   |                |       |     
|                                   |                         |   | (in millions) 
|Sales and other operating revenues |                         |   |                |       |      |  |       |      
|                                  
|                                  
|                                  
|                                  
|                                   | unaffiliated customers: |   |                |       |      |  |       |       |  
|                                  
|                                  
|                                  
|                                  
|                                   | Specialty chemicals     |   | $              | 148.0 |      |  |       | 150.1 |  
|                                  
|                                  
|                                  
|                                  
|                                   | Wire and cable          |   |                | 202.6 |      |  |       | 208.9 |  
|                                   |                         |   |                |       |      |  |       |      
|                                   |                         | $ | 350.6          |       |      |  | 359.0 |      
|                                   |                         |   |                |       |      |  |       |      
|                                   |                         |   |                |       |      |  |       |      
|                                  
|                                  
|                                  
|                                  
|Operating income (loss):           |                         |   |                |       |      |  |       |      
|                                  
|                                  
|                                  
|                                  
|                                   | Specialty chemicals     |   | $              | 18.2  |      |  |       | 26.4  |  
|                                  
|                                  
|                                  
|                                  
|                                   | Wire and cable*         |   |                | 4.4   |      |  |       | (37.9 | )
|                                   |                         |   |                |       |      |  |       |      
|                                   |                         | $ | 22.6           |       |      |  | (11.5 | )    
|                                   |                         |   |                |       |      |  |       |      

|                                   |                         |   |                  |       |      |  |       |       |  
|---------------------------------- | ----------------------- | - | ---------------- | ----- | ---- |  | ----- | ----- | -
|                                   |                         |   | First Six Months
|                                   |                         |   |                 
|                                   |                         |   | 2001             |       | 2000
|                                   |                         |   |                  |       |     
|                                   |                         |   | (in millions)   
|Sales and other operating revenues |                         |   |                  |       |      |  |       |      
|                                  
|                                  
|                                  
|                                  
|                                   | unaffiliated customers: |   |                  |       |      |  |       |       |  
|                                  
|                                  
|                                  
|                                  
|                                   | Specialty chemicals     |   | $                | 309.5 |      |  |       | 305.0 |  
|                                  
|                                  
|                                  
|                                  
|                                   | Wire and cable          |   |                  | 415.3 |      |  |       | 420.3 |  
|                                   |                         |   |                  |       |      |  |       |      
|                                   |                         | $ | 724.8            |       |      |  | 725.3 |      
|                                   |                         |   |                  |       |      |  |       |      
|Operating income (loss):           |                         |   |                  |       |      |  |       |      
|                                  
|                                  
|                                  
|                                  
|                                   | Specialty chemicals     |   | $                | 38.4  |      |  |       | 51.1  |  
|                                  
|                                  
|                                  
|                                  
|                                   | Wire and cable*         |   |                  | 10.9  |      |  |       | (35.7 | )
|                                   |                         |   |                  |       |      |  |       |      
|                                   |                         | $ | 49.3             |       |      |  | 15.4  |      
|                                   |                         |   |                  |       |      |  |       |      



---

|* |  | Includes a pre-tax, non-recurring charge of $3.3 million in
the 2001 second quarter and six months ended June 30,
to write-down the value of the closed Hopkinsville,
Kentucky, magnet wire facility. The 2000 second quarter
included a pre-tax charge of $45.4 million ($6.4 million in
Cost of products sold and $39.0 million in Non-recurring
items, net) for costs associated with restructuring of
certain wire and cable assets. An additional pre-tax charge
of $2.1 million was recorded in the 2000 first quarter
from the June 30, 1999, restructuring. Another $7.2 million
representing write-down of an equity basis investment in
the Philippines was charged to non-operating expense in
the 2000 second quarter.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents



- 18 -

PD Industries Operating Income

PD Industries reported operating income of $25.9 million in the second
quarter and $52.6 million for the first six months of 2001, before pre-tax
non-recurring charges of $3.3 million for the write-down of the closed
Hopkinsville, Kentucky, magnet wire facility. Operating income in the second
quarter of 2000 was $33.9 million, before non-recurring, pre-tax charges of
$45.4 million for costs associated with the 2000 and 1999 restructuring plans
and $62.9 million for the first six months of 2000, before non-recurring,
pre-tax charges of $47.5 million for costs associated with the restructuring
plans. The decrease from the first six months and second quarter of 2000 was
due to reduced earnings in the specialty chemicals segment primarily as a
result of economic weakness in North America and weaker foreign currencies in
Brazil.




OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS

Provision for Taxes on Income

During the second quarter, the Company revised its 2001 full-year COMEX
copper price outlook to 75 cents per pound from 85 cents per pound for purposes
of estimating its full-year income tax provision. Currently, the Companys
estimated income tax expense principally results from taxes on earnings at
international operations that cannot be offset by losses at domestic
operations. As a result of the revised copper price outlook and the resultant
change in the mix of taxes and earnings, the Company is providing income taxes
based on earnings at its international operations at an effective 31 percent
tax rate. Applying the revised effective tax rate on international earnings
retroactively to the 2001 first quarter, the 2001 second quarter included an
additional tax charge of $41.7 million, or 53 cents per share.

Our forecast for the average COMEX copper price and other factors will be
reviewed from time to time, which may result in changes to the projected
full-year earnings and associated income tax estimates. Such changes and
estimates may also result in significant adjustments to the effective tax rate
that we recognize in any subsequent period.

Exploration and Research and Development Expense

Our exploration and research expense was $17.1 million in the second
quarter and $31.9 million for the first six months of 2001, an increase of $2.7
million and $4.7 million from the corresponding periods in 2000. The increase
primarily was a result of higher mining-related research spending at our process technology facility.

Miscellaneous Income and Expense, Net

Miscellaneous income and expense, net, increased by $5.9 million in the
2001 second quarter compared with the corresponding 2000 period. This change
principally reflected the write-down impairment of our investment in PD
Philippines ($7.2 million) in 2000.




CHANGES IN FINANCIAL CONDITION

Working Capital

During the first six months of 2001, net working capital balances
(excluding cash and cash equivalents and debt) increased $30.7 million,
primarily due to a decrease of $22.6 million in accounts payable and accrued
expenses. This decrease was primarily attributable to the timing of property
tax payments and lower accruals for employee compensation.

Debt

The Companys total debt at June 30, 2001, was $2,967.1 million (50.1
percent debt to total capitalization ratio), compared with $2,687.7 million
(45.7 percent debt to total capitalization ratio) at December 31, 2000.

In May 2001, the Company closed its offering of $625 million in 8 3/4
percent notes due 2011, and $275 million of 9 1/2 percent notes due 2031. The
entire amount of this fixed-rate debt was converted to floating-rate debt with
the use of interest rate swap agreements to take advantage of current market
conditions. The net proceeds were approximately $891 million and were used to
repay corporate short-term borrowings and current maturities of long term debt.
On August 10, 2001, we unwound these interest rate swap agreements, resulting
in a positive cash flow of $23.2 million. This amount will be amortized into
earnings over the remaining life of the respective notes.



---



##### Table of Contents



- 19 -

The increase in debt was partially offset by higher cash balances
resulting from the debt offering proceeds in excess of the pay down of
corporate short-term borrowings and second quarter debt maturities. The
Company is planning to use this additional cash to pay additional current
maturities through the 2002 first quarter.

As of June 30, 2001, the Company had no borrowings against its $1 billion
revolving credit facility.

In order to reduce interest costs and better coordinate debt maturities
with potential growth opportunities, we may, from time to time, repurchase or
refinance our debt securities through open market purchases, privately
negotiated transactions or otherwise. Any such repurchases or refinancings
will depend upon market conditions, our cash availability and requirements, and
the availability of replacement debt or equity financing on acceptable terms.

Capital Expenditures and Investments

Capital expenditures and investments during the first six months of 2001
were $115.2 million for PD Mining, $66.4 million for PD Industries (including
$44.8 million for the contractually obligated acquisition of the remaining 40
percent share of the Companys wire and cable manufacturing operation in
Brazil) and $11.5 million for other Corporate-related activities. Capital
expenditures and investments in the corresponding 2000 period were $114.6
million for PD Mining, $46.1 million for PD Industries (including $19.0 million
for the acquisition of the remaining 40 percent share of the Companys carbon
black manufacturing facility in Hungary) and $3.9 million for other Corporate
related activities. We expect capital expenditures and investments for the
year 2001 to be approximately $235 million for PD Mining, $85 million for PD
Industries, and $30 million for Corporate and Other.

Dividends

On June 8, 2001, the Company paid a regular quarterly dividend of 12.5
cents per share on its common shares for the 2001 second quarter; the amount
paid for the quarter was $9.8 million. The Company reduced its quarterly
dividend by 75 percent to 12.5 cents per share on May 2, 2001. The dividend
reduction will result in net cash savings of approximately $120 million
annually. There were 78.7 million shares outstanding at quarter end.

On June 20, 2001, we declared a dividend of 12.5 cents per common share
for the 2001 third quarter. The third quarter dividend is payable on September
7, 2001, to shareholders of record at the close of business on August 17, 2001.

Other Matters

With the slowdown in the U.S. economy, continued downturn in COMEX copper
prices and higher energy costs, we continue to explore opportunities to reduce
costs and conserve cash. We are continuing to implement quality improvement
programs to increase productivity and reduce costs and we are analyzing the
opportunity of monetizing our copper and carbon black receivables through an
asset securitization in a range of $80 million to $100 million. We may also
consider other asset securitizations, strategic arrangements or alternatives
that may provide for enhanced liquidity.

For a discussion of new accounting standards, please refer to Notes 3 and
9 to the consolidated financial information.




Part II. Other Information




Item 1. Legal Proceedings

On June 14,
2001, the New Mexico Environmental Department (Department),
pursuant to the New Mexico Air Quality Control Act, issued Compliance Orders to
Chino Mines Company and Phelps Dodge Tyrone, Inc. which alleged that the
companies failed to obtain construction permits for the construction of solvent
extraction electrowinning plants in 1987 and 1983, respectively. Both facilities subsequently obtained permits for these
plants. Chino Mines Company and Phelps Dodge Tyrone, Inc. have each filed a
Request for Hearing and Answer with the Department in order to assert their
defenses to the Compliance Order.

On May 30, 2001, the U.S. Department of Justice notified the Company of
alleged violations of the Clean Water Act at the United Verde Mine. The
Company is preparing a response to the Departments allegations.




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

Our annual meeting was held on May 1, 2001. A total of 69,169,441 common
shares, or about 87.87



---



##### Table of Contents



- 20 -

percent of our issued and outstanding common shares,
were represented at the meeting. Set forth below is a description of the
matters voted upon at the meeting and a summary of the voting regarding each
matter:

|                       |  |     |            |          |  |  |         | 
|---------------------- |  | --- | ---------- | -------- |  |  | ------- | 
|                       |  | For |            | Withheld
|                       |  |     |            |         
|Election of Directors: |  |     |            |          |  |  |         | 
|                      
|                      
|                      
|                      
|Paul Hazen             |  |     | 68,790,622 |          |  |  | 378,819 | 
|                      
|                      
|                      
|                      
|Manuel J. Iraola       |  |     | 68,804,384 |          |  |  | 365,057 | 
|                      
|                      
|                      
|                      
|Marie L. Knowles       |  |     | 68,805,260 |          |  |  | 364,181 | 
|                      
|                      
|                      
|                      
|Gordon R. Parker       |  |     | 68,808,975 |          |  |  | 360,466 | 

|                        |  |     |            |         |  |         |         |  |  |  |         | 
|----------------------- |  | --- | ---------- | ------- |  | ------- | ------- |  |  |  | ------- | 
|                        |  | For |            | Against |  | Abstain
|                        |  |     |            |         |  |        
|Appointment
of Auditors |  |     | 68,609,289 |         |  |         | 319,165 |  |  |  | 240,987 | 

There were no broker non-votes included in the results of the election of
directors listed above, or in the appointment of auditors.




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Any exhibits required to be filed by the Company are listed in
the Index to Exhibits.                                                                                  
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | One Form 8-K was filed during the quarter end June 30, 2001, in
regards to the offering of $625 million in 8 3/4 percent notes and
$275 million of 9 1/2 percent notes.




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:  August  14,  2001 | By: | Stanton K. Rideout            
|                         |     |                               
|                         |     | Stanton K. Rideout            
|                        
|                        
|                        
|                        
|                         |     | Vice President and Controller 
|                        
|                        
|                        
|                        
|                         |     | (Principal Accounting Officer)




Index to Exhibits



|4.7 |  | Form of 8 3/4% Note due June 1, 2011, of the Company issued on May 30,
2001, pursuant to the Indenture dated September 22, 1997 (the
Indenture), between the Company and First Union National Bank, as
successor Trustee (incorporated by reference to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on
May 30, 2001 (SEC File No. 1-82)).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|4.8 |  | Form of 9 1/2% Note due June 1, 2031, of the Company issued on May 30,
2001, pursuant to the Indenture dated September 22, 1997 (the
Indenture), between the Company and First Union National Bank, as
successor Trustee (incorporated by reference to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission May
30, 2001 (SEC File No. 1-82)).   
|   
|12  |  | Computation of ratios of total debt to total capitalization.                                                                                                                                                                                                                                                                                                                             
|   
|15  |  | Letter from PricewaterhouseCoopers LLP with respect to unaudited interim
financial information.