##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM  TO
 COMMISSION FILE NUMBER: 1-82
 PHELPS DODGE CORPORATION
  New York
    
    13-1808503(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 
 
 
 þ o
  þ o o
 o þ




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##### 



PHELPS DODGE CORPORATION
 Quarterly Report on Form 10-Q
 For the Quarter Ended June 30, 2006
 Table of Contents
 PagePart I. Financial InformationItem 1. Financial Statements (unaudited)Consolidated Statement of Income
    
    
    1Consolidated Balance Sheet
    
    
    2Consolidated Statement of Cash Flows
    
    
    3Consolidated Statement of Shareholders Equity
    
    
    4Financial Data by Business Segment
    
    
    5Notes to Consolidated Financial Information
    
    
    7Review by Independent Registered Public Accounting Firm
    
    
    22Report of Independent Registered Public Accounting Firm
    
    
    22Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsResults of Operations
    
    
    23Results of Phelps Dodge Mining Company
    
    
    27Results of Phelps Dodge Industries
    
    
    45Discontinued Operations
    
    
    46Other Matters Relating to the Consolidated Statement of Income
    
    
    47Changes in Financial Condition; Capitalization
    
    
    49Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    54Item 4. Controls and Procedures
    
    
    54Part II. Other InformationItem 1. Legal Proceedings
    
    
    54Item 1A. Risk Factors
    
    
    54Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    55Item 4. Submission of Matters to a Vote of Security Holders
    
    
    56Item 6. Exhibits
    
    
    56Signatures
    
    
    56Index to Exhibits
    
    
    56Exhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 10.5Exhibit 10.6Exhibit 10.7Exhibit 10.8Exhibit 11Exhibit 12Exhibit 15Exhibit 31Exhibit 32




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##### Table of Contents



PHELPS DODGE CORPORATION AND SUBSIDIARIES
 
  
 Item 1. Financial Statements
 PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF INCOME
   Six Months EndedSecond Quarter
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales and other operating revenues
    
    $
    2,992.2
    
    
    
    1,966.0
    
    
    
    5,216.8
    
    
    
    3,852.5Operating costs and expensesCost of products sold (exclusive of items shown separately below)
    
    
    1,824.2
    
    
    
    1,191.9
    
    
    
    3,271.6
    
    
    
    2,373.2Depreciation, depletion and amortization
    
    
    107.9
    
    
    
    112.6
    
    
    
    214.9
    
    
    
    224.4Selling and general administrative expense
    
    
    49.7
    
    
    
    34.5
    
    
    
    98.6
    
    
    
    76.0Exploration and research expense
    
    
    34.2
    
    
    
    25.0
    
    
    
    64.1
    
    
    
    42.0Special items and provisions, net (see Note 4)
    
    
    12.9
    
    
    
    437.2
    
    
    
    30.1
    
    
    
    436.32,028.9
    
    
    
    1,801.2
    
    
    
    3,679.3
    
    
    
    3,151.9Operating income
    
    
    963.3
    
    
    
    164.8
    
    
    
    1,537.5
    
    
    
    700.6Interest expense
    
    
    (18.3
    )
    
    
    (22.0
    )
    
    
    (34.1
    )
    
    
    (44.5
    )Capitalized interest
    
    
    13.8
    
    
    
    1.8
    
    
    
    24.2
    
    
    
    2.4Gain on sale of cost-basis investment (see Note 13)
    
    
    
    
    
    
    438.4
    
    
    
    
    
    
    
    438.4Change in interest gain (see Note 14)
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    159.5Miscellaneous income and expense, net
    
    
    26.3
    
    
    
    40.2
    
    
    
    60.6
    
    
    
    55.7Income from continuing operations before taxes, minority interests in consolidated
subsidiaries and equity in net earnings (losses) of affiliated companies
    
    
    985.1
    
    
    
    782.7
    
    
    
    1,588.2
    
    
    
    1,312.1Provision for taxes on income (see Note 9)
    
    
    (312.7
    )
    
    
    (70.0
    )
    
    
    (448.5
    )
    
    
    (196.1
    )Minority interests in consolidated subsidiaries
    
    
    (202.1
    )
    
    
    (38.3
    )
    
    
    (319.3
    )
    
    
    (64.9
    )Equity in net earnings (losses) of affiliated companies
    
    
    1.1
    
    
    
    0.7
    
    
    
    1.7
    
    
    
    1.4Income from continuing operations
    
    
    471.4
    
    
    
    675.1
    
    
    
    822.1
    
    
    
    1,052.5Discontinued operations:Income (loss) from discontinued operations, net of taxes (see Note 3)
    
    
    0.3
    
    
    
    7.2
    
    
    
    (16.6
    )
    
    
    16.5Net income
    
    
    471.7
    
    
    
    682.3
    
    
    
    805.5
    
    
    
    1,069.0Preferred stock dividends
    
    
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    (6.8
    )Net income applicable to common shares
    
    $
    471.7
    
    
    
    678.9
    
    
    
    805.5
    
    
    
    1,062.2Weighted average number of common shares outstanding  basic*
    
    
    202.4
    
    
    
    192.4
    
    
    
    202.2
    
    
    
    191.9Basic earnings per common share:Income from continuing operations
    
    $
    2.33
    
    
    
    3.49
    
    
    
    4.06
    
    
    
    5.45Income (loss) from discontinued operations
    
    
    
    
    
    
    0.04
    
    
    
    (0.08
    )
    
    
    0.08Basic earnings per common share
    
    $
    2.33
    
    
    
    3.53
    
    
    
    3.98
    
    
    
    5.53Weighted average number of common shares outstanding  diluted*
    
    
    203.5
    
    
    
    202.1
    
    
    
    203.3
    
    
    
    201.9Diluted earnings per common share:Income from continuing operations
    
    $
    2.32
    
    
    
    3.34
    
    
    
    4.04
    
    
    
    5.21Income (loss) from discontinued operations
    
    
    
    
    
    
    0.04
    
    
    
    (0.08
    )
    
    
    0.08Diluted earnings per common share
    
    $
    2.32
    
    
    
    3.38
    
    
    
    3.96
    
    
    
    5.29
 
 *
    
    Refer to Note 15 for discussion of 2006 first quarter stock split.




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##### Table of Contents



PHELPS DODGE CORPORATION
 
 CONSOLIDATED BALANCE SHEET
   June 30,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,632.3
    
    
    
    1,916.7Restricted cash
    
    
    23.8
    
    
    
    20.8Accounts receivable, less allowance for doubtful
accounts (2006 - $7.0; 2005 - $6.9)
    
    
    1,592.2
    
    
    
    1,028.0Mill and leach stockpiles
    
    
    77.9
    
    
    
    36.6Inventories
    
    
    372.4
    
    
    
    329.5Supplies
    
    
    213.7
    
    
    
    199.7Prepaid expenses and other current assets
    
    
    225.8
    
    
    
    83.6Deferred income taxes
    
    
    93.4
    
    
    
    82.0Assets held for sale
    
    
    
    
    
    
    373.8Current assets
    
    
    5,231.5
    
    
    
    4,070.7Investments and long-term receivables
    
    
    198.5
    
    
    
    142.6Property, plant and equipment, net
    
    
    5,175.5
    
    
    
    4,830.9Long-term mill and leach stockpiles
    
    
    184.1
    
    
    
    133.3Deferred income taxes
    
    
    69.5
    
    
    
    99.6Goodwill
    
    
    12.5
    
    
    
    22.3Intangible assets, net
    
    
    7.3
    
    
    
    7.5Long-term assets held for sale
    
    
    
    
    
    
    431.4Trust assets
    
    
    567.6
    
    
    
    258.4Other assets and deferred charges
    
    
    359.1
    
    
    
    361.3$
    11,805.6
    
    
    
    10,358.0LiabilitiesCurrent liabilities:Short-term debt
    
    $
    61.3
    
    
    
    14.3Current portion of long-term debt
    
    
    62.5
    
    
    
    2.5Accounts payable and accrued expenses
    
    
    1,898.6
    
    
    
    1,445.7Dividends payable
    
    
    40.8
    
    
    
    Accrued income taxes
    
    
    143.5
    
    
    
    23.6Liabilities related to assets held for sale
    
    
    
    
    
    
    123.2Current liabilities
    
    
    2,206.7
    
    
    
    1,609.3Long-term debt
    
    
    704.4
    
    
    
    677.7Deferred income taxes
    
    
    711.9
    
    
    
    558.0Long-term liabilities related to assets held for sale
    
    
    
    
    
    
    61.3Other liabilities and deferred credits
    
    
    1,378.0
    
    
    
    934.25,001.0
    
    
    
    3,840.5Commitments and contingencies (see Notes 6, 7 and 9)Minority interests in consolidated subsidiaries
    
    
    1,218.5
    
    
    
    915.9Shareholders equity*Common shares, par value $6.25; 300.0 shares authorized;
204.0 outstanding (2005 - 203.2) after deducting 16.0 shares
(2005 - 16.7) held in treasury, at cost
    
    
    1,274.9
    
    
    
    635.1Capital in excess of par value
    
    
    1,359.9
    
    
    
    1,998.8Retained earnings**
    
    
    3,049.5
    
    
    
    3,158.8Accumulated other comprehensive loss
    
    
    (98.2
    )
    
    
    (154.5
    )Other
    
    
    
    
    
    
    (36.6
    )5,586.1
    
    
    
    5,601.6$
    11,805.6
    
    
    
    10,358.0
 
 *
    
    Refer to Note 15 for discussion of 2006 first quarter stock split.**
    
    Includes cumulative effect adjustment of $19.8 million for the
adoption of EITF Issue No. 04-6. Refer to Note 5 for further discussion.




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##### Table of Contents



PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
   Six Months EndedJune 30,2006
    
    
    2005Operating activitiesNet income
    
    $
    805.5
    
    
    
    1,069.0Adjustments to reconcile net income to net cash provided by operating activities:Unrealized losses on copper collars and copper put options
    
    
    1,069.8
    
    
    
    89.4Depreciation, depletion and amortization
    
    
    215.2
    
    
    
    256.4Deferred income tax provision (benefit)
    
    
    121.1
    
    
    
    (54.0
    )Equity in net earnings (losses) of affiliated companies, net of dividends received
    
    
    (0.1
    )
    
    
    0.5Gain on sale of cost-basis investment
    
    
    
    
    
    
    (438.4
    )Change in interest gain
    
    
    
    
    
    
    (159.5
    )Special items and provisions, net
    
    
    30.1
    
    
    
    436.3Minority interests in consolidated subsidiaries
    
    
    319.7
    
    
    
    65.5Loss on disposition of discontinued operations
    
    
    29.5
    
    
    
    Changes in current assets and liabilities:Accounts receivable
    
    
    (596.1
    )
    
    
    (144.0
    )Repayment of securitized accounts receivable
    
    
    
    
    
    
    (85.0
    )Mill and leach stockpiles
    
    
    (37.2
    )
    
    
    (1.8
    )Inventories
    
    
    (34.0
    )
    
    
    (41.7
    )Supplies
    
    
    (14.6
    )
    
    
    (20.3
    )Prepaid expenses and other current assets
    
    
    (143.5
    )
    
    
    (27.3
    )Interest payable
    
    
    2.0
    
    
    
    1.2Other accounts payable
    
    
    16.7
    
    
    
    23.0Accrued income taxes
    
    
    113.7
    
    
    
    73.8Realized losses on 2005 copper collars
    
    
    (187.2
    )
    
    
    Other accrued expenses
    
    
    (40.2
    )
    
    
    (65.5
    )Other operating, net
    
    
    (25.3
    )
    
    
    (32.9
    )Net cash provided by operating activities
    
    
    1,645.1
    
    
    
    944.7Investing activitiesCapital outlays
    
    
    (582.3
    )
    
    
    (179.5
    )Capitalized interest
    
    
    (24.6
    )
    
    
    (2.9
    )Investments in subsidiaries and other
    
    
    0.2
    
    
    
    (0.1
    )Proceeds from the sale of Columbian Chemicals
    
    
    514.4
    
    
    
    Proceeds from the sale of Magnet Wire North American assets
    
    
    135.3
    
    
    
    Proceeds from the sale of HPC
    
    
    46.3
    
    
    
    Proceeds from asset dispositions
    
    
    16.3
    
    
    
    4.6Proceeds from sale of cost-basis investments
    
    
    
    
    
    
    451.6Restricted cash
    
    
    (3.0
    )
    
    
    (168.3
    )Global environmental trust contribution
    
    
    (300.0
    )
    
    
    Other investing, net
    
    
    (2.9
    )
    
    
    (1.6
    )Net cash provided by (used in) investing activities
    
    
    (200.3
    )
    
    
    103.8Financing activitiesNet increase (decrease) in short-term debt
    
    
    46.3
    
    
    
    (48.3
    )Proceeds from issuance of debt
    
    
    90.0
    
    
    
    Payment of debt
    
    
    (2.6
    )
    
    
    (3.0
    )Common dividends
    
    
    (893.8
    )
    
    
    (48.3
    )Preferred dividends
    
    
    
    
    
    
    (6.8
    )Minority interest dividends
    
    
    (2.8
    )
    
    
    (28.2
    )Issuance of shares, net
    
    
    26.3
    
    
    
    33.2Debt issue costs
    
    
    (2.6
    )
    
    
    (0.7
    )Proceeds from issuance of Cerro Verde stock
    
    
    
    
    
    
    441.8Net cash provided by (used in) financing activities
    
    
    (739.2
    )
    
    
    339.7Effect of exchange rate impact on cash and cash equivalents
    
    
    10.0
    
    
    
    7.3Increase in cash and cash equivalents
    
    
    715.6
    
    
    
    1,395.5Cash and cash equivalents at beginning of period
    
    
    1,916.7
    
    
    
    1,200.1Cash and cash equivalents at end of period
    
    $
    2,632.3
    
    
    
    2,595.6




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##### Table of Contents



PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
   AccumulatedCommon Shares
    
    
    Capital in
    
    
    
    
    
    
    OtherNumber
    
    
    At Par
    
    
    Excess of
    
    
    Retained
    
    
    Comprehensive
    
    
    
    
    
    
    Shareholdersof Shares
    
    
    Value
    
    
    Par Value
    
    
    Earnings
    
    
    Income (Loss)*
    
    
    Other
    
    
    EquityBalance at December 31, 2005
    
    
    101.6
    
    
    $
    635.1
    
    
    $
    1,998.8
    
    
    $
    3,158.8
    
    
    $
    (154.5
    )
    
    $
    (36.6
    )
    
    $
    5,601.6Cumulative effect adjustment**
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.8
    
    
    
    
    
    
    
    
    
    
    
    19.8Transition adjustment***
    
    
    
    
    
    
    
    
    
    
    (36.6
    )
    
    
    
    
    
    
    
    
    
    
    36.6
    
    
    
    Stock options exercised including tax benefit
    
    
    0.6
    
    
    
    3.9
    
    
    
    23.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27.8Restricted shares issued/cancelled, net,
including tax benefit
    
    
    0.2
    
    
    
    0.8
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.4Directors stock compensation
    
    
    
    
    
    
    0.1
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5Common shares purchased
    
    
    
    
    
    
    (0.1
    )
    
    
    (1.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.2
    )Dividends on common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (934.6
    )
    
    
    
    
    
    
    
    
    
    
    (934.6
    )Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    805.5
    
    
    
    
    
    
    
    
    
    
    
    805.5Other comprehensive income (loss), net of tax:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33.7
    
    
    
    
    
    
    
    33.7Net loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4.8
    )
    
    
    
    
    
    
    (4.8
    )Other investment adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18.5
    
    
    
    
    
    
    
    18.5Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.7
    
    
    
    
    
    
    
    8.7Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56.3
    
    
    
    
    
    
    
    56.3Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    861.8Stock split****
    
    
    101.6
    
    
    
    635.1
    
    
    
    (635.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at June 30, 2006
    
    
    204.0
    
    
    $
    1,274.9
    
    
    $
    1,359.9
    
    
    $
    3,049.5
    
    
    $
    (98.2
    )
    
    $
    
    
    
    $
    5,586.1
 
 *
    
    As of June 30, 2006, this balance comprised $138.2 million of
cumulative translation adjustments and $17.5 million of cumulative
minimum pension liability adjustments; partially offset by $1.0
million of cumulative unrealized gains on securities and $56.5
million of cumulative unrealized gains on derivative instruments.**
    
    Refer to Note 5 for discussion of adoption of EITF Issue No. 04-6.***
    
    Refer to Note 2 for discussion of adoption of SFAS No. 123-R.****
    
    Refer to Note 15 for discussion of the 2006 first quarter stock split.




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##### Table of Contents



PHELPS DODGE CORPORATION
 
 FINANCIAL DATA BY BUSINESS SEGMENT
   U.S. Mines
    
    South American MinesChino/
    
    
    
    
    
    Candelaria/
    
    
    
    
    
    
    
    
    
    PrimaryMorenci
    
    Bagdad
    
    Sierrita
    
    Cobre
    
    Tyrone
    
    Ojos del Salado
    
    Cerro Verde
    
    El Abra
    
    MolybdenumSecond Quarter 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    15.8
    
    
    
    15.0
    
    
    
    
    
    
    
    263.6
    
    
    
    37.0
    
    
    
    254.9
    
    
    
    433.3Intersegment
    
    
    211.1
    
    
    
    110.8
    
    
    
    161.7
    
    
    
    63.0
    
    
    
    19.4
    
    
    
    128.4
    
    
    
    169.7
    
    
    
    183.8
    
    
    
    Depreciation, depletion and amortization
    
    
    14.8
    
    
    
    6.0
    
    
    
    4.0
    
    
    
    6.4
    
    
    
    2.9
    
    
    
    10.6
    
    
    
    7.2
    
    
    
    30.7
    
    
    
    10.8Operating income (loss) before special
items and provisions
    
    
    48.8
    
    
    
    39.6
    
    
    
    95.4
    
    
    
    9.0
    
    
    
    (4.1
    )
    
    
    261.7
    
    
    
    165.0
    
    
    
    331.1
    
    
    
    112.8Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    (3.8
    )
    
    
    (6.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    48.8
    
    
    
    39.6
    
    
    
    91.6
    
    
    
    2.8
    
    
    
    (4.1
    )
    
    
    261.7
    
    
    
    165.0
    
    
    
    331.1
    
    
    
    112.8Interest income
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    1.8
    
    
    
    1.8
    
    
    
    5.0
    
    
    
    0.2Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.3
    
    
    
    0.4
    
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96.2
    )
    
    
    (30.8
    )
    
    
    (131.0
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33.0
    )
    
    
    (67.7
    )
    
    
    (101.0
    )
    
    
    Equity in net earnings (losses) of affiliated
companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    Assets at June 30
    
    
    1,072.0
    
    
    
    442.1
    
    
    
    324.4
    
    
    
    458.1
    
    
    
    114.7
    
    
    
    1,226.2
    
    
    
    1,424.2
    
    
    
    1,474.6
    
    
    
    910.9Expenditures for segment assets
    
    
    48.0
    
    
    
    3.9
    
    
    
    7.4
    
    
    
    4.3
    
    
    
    5.3
    
    
    
    4.7
    
    
    
    159.3
    
    
    
    2.4
    
    
    
    8.6Second Quarter 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    4.9
    
    
    
    5.8
    
    
    
    
    
    
    
    100.5
    
    
    
    16.8
    
    
    
    88.2
    
    
    
    526.1Intersegment
    
    
    263.3
    
    
    
    190.2
    
    
    
    204.0
    
    
    
    78.8
    
    
    
    32.7
    
    
    
    63.6
    
    
    
    64.5
    
    
    
    72.4
    
    
    
    Depreciation, depletion and amortization
    
    
    16.1
    
    
    
    7.9
    
    
    
    3.8
    
    
    
    5.1
    
    
    
    3.0
    
    
    
    9.3
    
    
    
    7.3
    
    
    
    28.1
    
    
    
    13.0Operating income (loss) before special
items and provisions
    
    
    114.5
    
    
    
    116.5
    
    
    
    135.6
    
    
    
    12.9
    
    
    
    3.2
    
    
    
    64.6
    
    
    
    39.6
    
    
    
    63.8
    
    
    
    98.9Special items and provisions, net
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (63.9
    )
    
    
    (211.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    114.2
    
    
    
    116.5
    
    
    
    135.6
    
    
    
    (51.0
    )
    
    
    (208.3
    )
    
    
    64.6
    
    
    
    39.6
    
    
    
    63.8
    
    
    
    98.9Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    1.4
    
    
    
    1.5
    
    
    
    0.4
    
    
    
    0.1Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    1.4
    
    
    
    (2.2
    )
    
    
    Gain on sale of cost-basis investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87.2Change in interest gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10.8
    )
    
    
    11.0
    
    
    
    (23.8
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9.8
    )
    
    
    (9.3
    )
    
    
    (18.4
    )
    
    
    Equity in net earnings (losses) of affiliated
companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Assets at June 30
    
    
    914.9
    
    
    
    440.6
    
    
    
    322.1
    
    
    
    421.6
    
    
    
    51.1
    
    
    
    964.2
    
    
    
    884.1
    
    
    
    1,059.1
    
    
    
    904.8Expenditures for segment assets
    
    
    10.8
    
    
    
    6.2
    
    
    
    3.7
    
    
    
    4.2
    
    
    
    1.3
    
    
    
    4.0
    
    
    
    41.7
    
    
    
    7.4
    
    
    
    5.3
 Corporate,Manufac-
    
    
    
    
    
    PDMC
    
    PDMC
    
    PDMC
    
    PDI 
    
    PDMC
    
    Discontinuedturing
    
    Sales
    
    Segments
    
    Other
    
    Subtotal
    
    Wire & Cable
    
    Eliminations
    
    Operations
    
    TotalsSecond Quarter 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    1,804.0
    
    
    
    (141.8
    )
    
    
    2,681.8
    
    
    
    13.7
    
    
    
    2,695.5
    
    
    
    296.7
    
    
    
    
    
    
    
    
    
    
    
    2,992.2Intersegment
    
    
    51.5
    
    
    
    1.6
    
    
    
    1,101.0
    
    
    
    (1,101.0
    )
    
    
    
    
    
    
    0.2
    
    
    
    (0.2
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    6.1
    
    
    
    
    
    
    
    99.5
    
    
    
    3.1
    
    
    
    102.6
    
    
    
    3.4
    
    
    
    1.9
    
    
    
    
    
    
    
    107.9Operating income (loss) before special
items and provisions
    
    
    1.3
    
    
    
    6.1
    
    
    
    1,066.7
    
    
    
    (68.4
    )
    
    
    998.3
    
    
    
    16.8
    
    
    
    (38.9
    )
    
    
    
    
    
    
    976.2Special items and provisions, net
    
    
    (1.1
    )
    
    
    
    
    
    
    (11.1
    )
    
    
    (1.2
    )
    
    
    (12.3
    )
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (12.9
    )Operating income (loss)
    
    
    0.2
    
    
    
    6.1
    
    
    
    1,055.6
    
    
    
    (69.6
    )
    
    
    986.0
    
    
    
    16.8
    
    
    
    (39.5
    )
    
    
    
    
    
    
    963.3Interest income
    
    
    
    
    
    
    
    
    
    
    9.6
    
    
    
    0.4
    
    
    
    10.0
    
    
    
    0.4
    
    
    
    22.1
    
    
    
    
    
    
    
    32.5Interest expense, net
    
    
    (1.0
    )
    
    
    (0.1
    )
    
    
    8.6
    
    
    
    1.0
    
    
    
    9.6
    
    
    
    (2.9
    )
    
    
    (11.2
    )
    
    
    
    
    
    
    (4.5
    )Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (258.0
    )
    
    
    
    
    
    
    (258.0
    )
    
    
    
    
    
    
    (54.7
    )
    
    
    
    
    
    
    (312.7
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (201.7
    )
    
    
    
    
    
    
    (201.7
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    (202.1
    )Equity in net earnings (losses) of affiliated
companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    0.6
    
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    1.1Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    0.3Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    1.1
    
    
    
    1.9
    
    
    
    6.3
    
    
    
    23.5
    
    
    
    
    
    
    
    31.7Assets at June 30
    
    
    927.8
    
    
    
    153.2
    
    
    
    8,528.2
    
    
    
    (39.8
    )
    
    
    8,488.4
    
    
    
    563.1
    
    
    
    2,754.1
    
    
    
    
    
    
    
    11,805.6Expenditures for segment assets
    
    
    1.7
    
    
    
    
    
    
    
    245.6
    
    
    
    36.9
    
    
    
    282.5
    
    
    
    4.0
    
    
    
    3.9
    
    
    
    
    
    
    
    290.4Second Quarter 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    747.4
    
    
    
    188.4
    
    
    
    1,678.1
    
    
    
    6.3
    
    
    
    1,684.4
    
    
    
    281.6
    
    
    
    
    
    
    
    
    
    
    
    1,966.0Intersegment
    
    
    47.9
    
    
    
    64.8
    
    
    
    1,082.2
    
    
    
    (1,015.6
    )
    
    
    66.6
    
    
    
    0.2
    
    
    
    (66.8
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    6.9
    
    
    
    
    
    
    
    100.5
    
    
    
    2.8
    
    
    
    103.3
    
    
    
    7.6
    
    
    
    1.7
    
    
    
    
    
    
    
    112.6Operating income (loss) before special
items and provisions
    
    
    6.8
    
    
    
    3.3
    
    
    
    659.7
    
    
    
    (40.0
    )
    
    
    619.7
    
    
    
    7.2
    
    
    
    (24.9
    )
    
    
    
    
    
    
    602.0Special items and provisions, net
    
    
    (148.7
    )
    
    
    
    
    
    
    (424.4
    )
    
    
    9.4
    
    
    
    (415.0
    )
    
    
    (1.9
    )
    
    
    (20.3
    )
    
    
    
    
    
    
    (437.2
    )Operating income (loss)
    
    
    (141.9
    )
    
    
    3.3
    
    
    
    235.3
    
    
    
    (30.6
    )
    
    
    204.7
    
    
    
    5.3
    
    
    
    (45.2
    )
    
    
    
    
    
    
    164.8Interest income
    
    
    
    
    
    
    
    
    
    
    3.8
    
    
    
    0.3
    
    
    
    4.1
    
    
    
    0.5
    
    
    
    7.4
    
    
    
    
    
    
    
    12.0Interest expense, net
    
    
    (0.7
    )
    
    
    (0.2
    )
    
    
    (1.6
    )
    
    
    0.7
    
    
    
    (0.9
    )
    
    
    (1.9
    )
    
    
    (17.4
    )
    
    
    
    
    
    
    (20.2
    )Gain on sale of cost-basis investment
    
    
    
    
    
    
    
    
    
    
    87.2
    
    
    
    351.2
    
    
    
    438.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438.4Change in interest gain
    
    
    
    
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.5Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (23.6
    )
    
    
    
    
    
    
    (23.6
    )
    
    
    
    
    
    
    (46.4
    )
    
    
    
    
    
    
    (70.0
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (37.5
    )
    
    
    
    
    
    
    (37.5
    )
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    (38.3
    )Equity in net earnings (losses) of affiliated
companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.6
    
    
    
    
    
    
    
    0.7Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.2
    
    
    
    7.2Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    1.0
    
    
    
    1.5
    
    
    
    5.9
    
    
    
    24.1
    
    
    
    
    
    
    
    31.5Assets at June 30
    
    
    314.8
    
    
    
    31.4
    
    
    
    6,308.7
    
    
    
    (8.8
    )
    
    
    6,299.9
    
    
    
    649.9
    
    
    
    2,438.7
    
    
    
    670.4
    
    
    
    10,058.9Expenditures for segment assets
    
    
    4.5
    
    
    
    
    
    
    
    89.1
    
    
    
    7.6
    
    
    
    96.7
    
    
    
    4.4
    
    
    
    4.5
    
    
    
    5.7
    
    
    
    111.3
 
 *
    
    In the 2005 fourth quarter, the Company reassessed its reportable
segments considering the increase in copper and molybdenum prices.
Based upon our assessment, we are no longer separately disclosing
Miami/Bisbee as an individual reportable segment. Segment
information for 2005 has been revised to conform to the 2006
presentation.




---



##### Table of Contents



PHELPS DODGE CORPORATION
 FINANCIAL DATA BY BUSINESS SEGMENT
   U.S. Mines
    
    South American MinesChino/
    
    
    
    
    
    Candelaria/
    
    
    
    
    
    
    
    
    
    PrimaryMorenci
    
    Bagdad
    
    Sierrita
    
    Cobre
    
    Tyrone
    
    Ojos del Salado
    
    Cerro Verde
    
    El Abra
    
    MolybdenumSix Months Ended June 30, 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    17.6
    
    
    
    19.7
    
    
    
    
    
    
    
    492.1
    
    
    
    67.0
    
    
    
    419.6
    
    
    
    853.6Intersegment
    
    
    387.2
    
    
    
    218.9
    
    
    
    345.9
    
    
    
    126.6
    
    
    
    36.8
    
    
    
    149.9
    
    
    
    234.5
    
    
    
    320.3
    
    
    
    Depreciation, depletion and amortization
    
    
    29.0
    
    
    
    11.6
    
    
    
    7.9
    
    
    
    13.1
    
    
    
    5.9
    
    
    
    21.3
    
    
    
    14.3
    
    
    
    60.9
    
    
    
    21.5Operating income (loss) before special
items and provisions
    
    
    85.2
    
    
    
    73.5
    
    
    
    197.1
    
    
    
    4.7
    
    
    
    (11.9
    )
    
    
    406.7
    
    
    
    234.9
    
    
    
    509.9
    
    
    
    218.7Special items and provisions, net
    
    
    
    
    
    
    2.2
    
    
    
    (5.1
    )
    
    
    (10.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Operating income (loss)
    
    
    85.2
    
    
    
    75.7
    
    
    
    192.0
    
    
    
    (5.4
    )
    
    
    (11.9
    )
    
    
    406.7
    
    
    
    234.9
    
    
    
    509.9
    
    
    
    218.6Interest income
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    2.7
    
    
    
    3.8
    
    
    
    7.1
    
    
    
    0.5Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    16.1
    
    
    
    0.8
    
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141.4
    )
    
    
    (27.9
    )
    
    
    (190.6
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49.9
    )
    
    
    (105.9
    )
    
    
    (161.0
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    Assets at June 30
    
    
    1,072.0
    
    
    
    442.1
    
    
    
    324.4
    
    
    
    458.1
    
    
    
    114.7
    
    
    
    1,226.2
    
    
    
    1,424.2
    
    
    
    1,474.6
    
    
    
    910.9Expenditures for segment assets
    
    
    84.5
    
    
    
    12.8
    
    
    
    15.7
    
    
    
    6.9
    
    
    
    10.2
    
    
    
    8.6
    
    
    
    321.9
    
    
    
    11.8
    
    
    
    16.2Six Months Ended June 30, 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    5.3
    
    
    
    5.8
    
    
    
    
    
    
    
    222.4
    
    
    
    33.3
    
    
    
    160.4
    
    
    
    1,002.9Intersegment
    
    
    490.3
    
    
    
    346.7
    
    
    
    411.9
    
    
    
    164.5
    
    
    
    62.8
    
    
    
    95.6
    
    
    
    116.1
    
    
    
    153.0
    
    
    
    Depreciation, depletion and amortization
    
    
    31.2
    
    
    
    15.7
    
    
    
    7.7
    
    
    
    10.4
    
    
    
    7.0
    
    
    
    19.2
    
    
    
    13.2
    
    
    
    61.5
    
    
    
    21.9Operating income (loss) before special
items and provisions
    
    
    200.7
    
    
    
    200.9
    
    
    
    270.1
    
    
    
    30.6
    
    
    
    4.5
    
    
    
    140.0
    
    
    
    75.6
    
    
    
    108.3
    
    
    
    185.5Special items and provisions, net
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (64.5
    )
    
    
    (215.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    200.1
    
    
    
    200.9
    
    
    
    270.1
    
    
    
    (33.9
    )
    
    
    (211.2
    )
    
    
    140.0
    
    
    
    75.6
    
    
    
    108.3
    
    
    
    185.5Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    2.2
    
    
    
    2.3
    
    
    
    0.4
    
    
    
    0.2Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    1.7
    
    
    
    (4.5
    )
    
    
    Gain on sale of cost-basis investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87.2Change in interest gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29.1
    )
    
    
    4.2
    
    
    
    (38.4
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.4
    )
    
    
    (15.0
    )
    
    
    (31.7
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Assets at June 30
    
    
    914.9
    
    
    
    440.6
    
    
    
    322.1
    
    
    
    421.6
    
    
    
    51.1
    
    
    
    964.2
    
    
    
    884.1
    
    
    
    1,059.1
    
    
    
    904.8Expenditures for segment assets
    
    
    6.9
    
    
    
    11.3
    
    
    
    6.6
    
    
    
    9.0
    
    
    
    1.8
    
    
    
    7.9
    
    
    
    71.4
    
    
    
    9.4
    
    
    
    7.0
 Corporate,Manufac-
    
    
    
    
    
    PDMC
    
    PDMC
    
    PDMC
    
    PDI 
    
    Other &
    
    Discontinuedturing
    
    Sales
    
    Segments
    
    Other
    
    Subtotal
    
    Wire & Cable
    
    Eliminations
    
    Operations
    
    TotalsSix Months Ended June 30, 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    2,998.8
    
    
    
    (289.8
    )
    
    
    4,578.6
    
    
    
    20.4
    
    
    
    4,599.0
    
    
    
    617.8
    
    
    
    
    
    
    
    
    
    
    
    5,216.8Intersegment
    
    
    92.1
    
    
    
    55.7
    
    
    
    1,967.9
    
    
    
    (1,913.3
    )
    
    
    54.6
    
    
    
    0.3
    
    
    
    (54.9
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    11.4
    
    
    
    
    
    
    
    196.9
    
    
    
    5.9
    
    
    
    202.8
    
    
    
    8.2
    
    
    
    3.9
    
    
    
    
    
    
    
    214.9Operating income (loss) before special
items and provisions
    
    
    7.0
    
    
    
    7.9
    
    
    
    1,733.7
    
    
    
    (121.2
    )
    
    
    1,612.5
    
    
    
    30.8
    
    
    
    (75.7
    )
    
    
    
    
    
    
    1,567.6Special items and provisions, net
    
    
    (1.2
    )
    
    
    
    
    
    
    (14.3
    )
    
    
    (5.6
    )
    
    
    (19.9
    )
    
    
    (8.7
    )
    
    
    (1.5
    )
    
    
    
    
    
    
    (30.1
    )Operating income (loss)
    
    
    5.8
    
    
    
    7.9
    
    
    
    1,719.4
    
    
    
    (126.8
    )
    
    
    1,592.6
    
    
    
    22.1
    
    
    
    (77.2
    )
    
    
    
    
    
    
    1,537.5Interest income
    
    
    
    
    
    
    
    
    
    
    15.6
    
    
    
    0.9
    
    
    
    16.5
    
    
    
    0.8
    
    
    
    39.6
    
    
    
    
    
    
    
    56.9Interest expense, net
    
    
    (2.1
    )
    
    
    (0.2
    )
    
    
    14.7
    
    
    
    2.1
    
    
    
    16.8
    
    
    
    (4.6
    )
    
    
    (22.1
    )
    
    
    
    
    
    
    (9.9
    )Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (359.9
    )
    
    
    
    
    
    
    (359.9
    )
    
    
    
    
    
    
    (88.6
    )
    
    
    
    
    
    
    (448.5
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (316.8
    )
    
    
    
    
    
    
    (316.8
    )
    
    
    (2.5
    )
    
    
    
    
    
    
    
    
    
    
    (319.3
    )Equity in net earnings (losses) of affiliated
companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    1.0
    
    
    
    
    
    
    
    1.7Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.6
    )
    
    
    (16.6
    )Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    1.1
    
    
    
    1.9
    
    
    
    6.3
    
    
    
    23.5
    
    
    
    
    
    
    
    31.7Assets at June 30
    
    
    927.8
    
    
    
    153.2
    
    
    
    8,528.2
    
    
    
    (39.8
    )
    
    
    8,488.4
    
    
    
    563.1
    
    
    
    2,754.1
    
    
    
    
    
    
    
    11,805.6Expenditures for segment assets
    
    
    5.7
    
    
    
    
    
    
    
    494.3
    
    
    
    60.9
    
    
    
    555.2
    
    
    
    6.7
    
    
    
    10.8
    
    
    
    9.4
    
    
    
    582.1Six Months Ended June 30, 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    1,422.4
    
    
    
    438.3
    
    
    
    3,290.8
    
    
    
    11.7
    
    
    
    3,302.5
    
    
    
    550.0
    
    
    
    
    
    
    
    
    
    
    
    3,852.5Intersegment
    
    
    105.8
    
    
    
    118.6
    
    
    
    2,065.3
    
    
    
    (1,943.5
    )
    
    
    121.8
    
    
    
    0.4
    
    
    
    (122.2
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    12.5
    
    
    
    
    
    
    
    200.3
    
    
    
    5.0
    
    
    
    205.3
    
    
    
    15.7
    
    
    
    3.4
    
    
    
    
    
    
    
    224.4Operating income (loss) before special
items and provisions
    
    
    11.0
    
    
    
    (0.5
    )
    
    
    1,226.7
    
    
    
    (50.7
    )
    
    
    1,176.0
    
    
    
    18.8
    
    
    
    (57.9
    )
    
    
    
    
    
    
    1,136.9Special items and provisions, net
    
    
    (148.7
    )
    
    
    
    
    
    
    (429.5
    )
    
    
    8.6
    
    
    
    (420.9
    )
    
    
    (1.5
    )
    
    
    (13.9
    )
    
    
    
    
    
    
    (436.3
    )Operating income (loss)
    
    
    (137.7
    )
    
    
    (0.5
    )
    
    
    797.2
    
    
    
    (42.1
    )
    
    
    755.1
    
    
    
    17.3
    
    
    
    (71.8
    )
    
    
    
    
    
    
    700.6Interest income
    
    
    
    
    
    
    
    
    
    
    6.1
    
    
    
    0.4
    
    
    
    6.5
    
    
    
    0.7
    
    
    
    10.9
    
    
    
    
    
    
    
    18.1Interest expense, net
    
    
    (1.5
    )
    
    
    (0.5
    )
    
    
    (4.7
    )
    
    
    1.5
    
    
    
    (3.2
    )
    
    
    (3.9
    )
    
    
    (35.0
    )
    
    
    
    
    
    
    (42.1
    )Gain on sale of cost-basis investment
    
    
    
    
    
    
    
    
    
    
    87.2
    
    
    
    351.2
    
    
    
    438.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438.4Change in interest gain
    
    
    
    
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.5Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (63.3
    )
    
    
    
    
    
    
    (63.3
    )
    
    
    
    
    
    
    (132.8
    )
    
    
    
    
    
    
    (196.1
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (63.1
    )
    
    
    
    
    
    
    (63.1
    )
    
    
    (1.8
    )
    
    
    
    
    
    
    
    
    
    
    (64.9
    )Equity in net earnings (losses) of affiliated
companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    (0.5
    )
    
    
    0.8
    
    
    
    1.1
    
    
    
    
    
    
    
    1.4Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16.5
    
    
    
    16.5Equity basis investments at June 30
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    1.0
    
    
    
    1.5
    
    
    
    5.9
    
    
    
    24.1
    
    
    
    
    
    
    
    31.5Assets at June 30
    
    
    314.8
    
    
    
    31.4
    
    
    
    6,308.7
    
    
    
    (8.8
    )
    
    
    6,299.9
    
    
    
    649.9
    
    
    
    2,438.7
    
    
    
    670.4
    
    
    
    10,058.9Expenditures for segment assets
    
    
    9.4
    
    
    
    
    
    
    
    140.7
    
    
    
    16.3
    
    
    
    157.0
    
    
    
    7.3
    
    
    
    5.0
    
    
    
    10.3
    
    
    
    179.6
 
 *
    
    In the 2005 fourth quarter, the Company reassessed its reportable
segments considering the increase in copper and molybdenum prices.
Based upon our assessment, we are no longer separately disclosing
Miami/Bisbee as an individual reportable segment. Segment
information for 2005 has been revised to conform to the 2006
presentation.




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL INFORMATION
  1. General Information
       2. Share-Based Compensation




---



##### Table of Contents



2005Second QuarterNet income as reported
    
    $
    682.3Deduct:Total compensation cost assuming fair value
method for stock options, net of tax
    
    
    (1.0
    )Pro forma net income
    
    $
    681.3Basic earnings per common share:*As reported
    
    $
    3.53Pro forma
    
    $
    3.52Diluted earnings per common share:*As reported
    
    $
    3.38Pro forma
    
    $
    3.37
   Six MonthsEndedJune 30, 2005Net income as reported
    
    $
    1,069.0Deduct:Total compensation cost assuming fair value
method for stock options, net of tax
    
    
    (1.9
    )Pro forma net income
    
    $
    1,067.1Basic earnings per common share:*As reported
    
    $
    5.53Pro forma
    
    $
    5.52Diluted earnings per common share:*As reported
    
    $
    5.29Pro forma
    
    $
    5.29
  *
    
    Earnings per common share for the quarter and six months ended June 30, 2005, have been
adjusted to reflect the March 10, 2006, stock split. (Refer to Note 15, Shareholders Equity,
for further discussion.)     Six Months EndedJune 30,2006
    
    2005Expected dividend yield
    
    
    0.95
    %
    
    
    1.04
    %Expected stock price volatility
    
    
    37.34
    %
    
    
    39.83
    %Risk-free interest rate
    
    
    4.48
    %
    
    
    3.76
    %Expected life of options
    
    5 years
    
    5 years
          Weighted-AverageShares
    
    
    Exercise PriceOutstanding at December 31, 2005*
    
    
    1,111,174
    
    
    $
    29.82Granted
    
    
    143,000
    
    
    
    79.00Exercised
    
    
    (632,735
    )
    
    
    26.88Forfeited or expired
    
    
    (38,476
    )
    
    
    45.79Outstanding at June 30, 2006
    
    
    582,963
    
    
    
    44.02Exercisable at June 30, 2006
    
    
    237,533
    
    
    
    22.96
  *
    
    Outstanding shares and the weighted-average exercise price at December 31, 2005, have been
adjusted to reflect the March 10, 2006, stock split. (Refer to Note 15, Shareholders Equity,
for further discussion.)




---



##### Table of Contents



Weighted-AverageShares
    
    
    Exercise PricePD Plans2003 Plan
    
    
    14,987
    
    
    $
    43.151998 Plan
    
    
    200,984
    
    
    
    21.021993 Plan
    
    
    5,000
    
    
    
    32.691989 Directors Stock Option Plan
    
    
    16,072
    
    
    
    24.14Cyprus Amax Plans
    
    
    490
    
    
    
    22.23237,533
    
    
    
    22.96
       Weighted-AverageGrant-DateFair ValueShares
    
    
    PriceOutstanding at December 31, 2005*
    
    
    1,548,734
    
    
    $
    36.62Granted
    
    
    297,440
    
    
    
    78.22Released
    
    
    (49,295
    )
    
    
    33.55Forfeited or expired
    
    
    (156,446
    )
    
    
    37.60Outstanding at June 30, 2006
    
    
    1,640,433
    
    
    
    44.16
  *
    
    Outstanding shares and the weighted-average grant-date fair value price at December 31, 2005,
have been adjusted to reflect the March 10, 2006, stock split. (Refer to Note 15,
Shareholders Equity for further discussion.)      3. Divestitures
 Columbian Chemicals Company




---



##### Table of Contents



Second Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    
    
    
    
    185.6Income from discontinued operations
before loss on disposal
    
    $
    
    
    
    
    11.8Provision for taxes on income
    
    
    0.3
    
    
    
    (4.6
    )Income from discontinued operations
    
    $
    0.3
    
    
    
    7.2
   Six Months EndedJune 30,2006
    
    
    2005Sales and other operating revenues
    
    $
    179.8
    
    
    
    365.6Income from discontinued operations
before loss on disposal
    
    $
    17.0
    
    
    
    26.2Loss on disposal
    
    
    (29.5
    )
    
    
    Provision for taxes on income
    
    
    (4.1
    )
    
    
    (9.7
    )Income (loss) from discontinued operations
    
    $
    (16.6
    )
    
    
    16.5
   Magnet Wire North America
    High Performance Conductors of SC & GA, Inc.
    4. Special Items and Provisions, Net




---



##### Table of Contents



Six Months2006
    
    
    EndedSecond Quarter
    
    
    June 30, 2006PDMC Environmental provisions, net
    
    $
    (12.2
    )
    
    
    (19.6
    )Environmental insurance recoveries, net
    
    
    (0.1
    )
    
    
    (0.1
    )Historical legal matters
    
    
    
    
    
    
    (0.2
    )(12.3
    )
    
    
    (19.9
    )PDI Sale of North American magnet wire assets:Gain on disposal
    
    
    
    
    
    
    0.2Transaction and employee-related costs
    
    
    
    
    
    
    (4.7
    )Sale of HPC:Loss on disposal
    
    
    
    
    
    
    (1.5
    )Transaction and employee-related costs
    
    
    
    
    
    
    (2.7
    )
    
    
    
    (8.7
    )Corporate and Other Environmental provisions, net
    
    
    (0.7
    )
    
    
    (2.1
    )Environmental insurance recoveries, net
    
    
    0.1
    
    
    
    0.1Sale of non-core real estate
    
    
    
    
    
    
    0.5(0.6
    )
    
    
    (1.5
    )$
    (12.9
    )
    
    
    (30.1
    )
       Six Months2005
    
    
    EndedSecond Quarter
    
    
    June 30, 2005PDMC Asset impairment charges
    
    $
    (419.1
    )
    
    
    (419.1
    )Environmental provisions, net
    
    
    (10.4
    )
    
    
    (15.7
    )Environmental insurance recoveries, net
    
    
    (0.5
    )
    
    
    (1.1
    )Historical legal matters
    
    
    15.0
    
    
    
    15.0(415.0
    )
    
    
    (420.9
    )PDI Restructuring programs/closures
    
    
    (1.5
    )
    
    
    (1.1
    )Asset impairment charges
    
    
    (0.4
    )
    
    
    (0.4
    )(1.9
    )
    
    
    (1.5
    )Corporate and Other Environmental provisions, net
    
    
    (20.7
    )
    
    
    (19.7
    )Environmental insurance recoveries, net
    
    
    0.5
    
    
    
    1.1Historical legal matters
    
    
    (0.1
    )
    
    
    4.7(20.3
    )
    
    
    (13.9
    )$
    (437.2
    )
    
    
    (436.3
    )




---



##### Table of Contents



12     June2004
    
    2005
    
    ReductionLeach ore (in million tons)
    
    
    275
    
    
    
    242
    
    
    
    33Grade
    
    
    0.31
    %
    
    
    0.31
    %
    
    
    Saleable copper (in million pounds)
    
    
    1,073
    
    
    
    918
    
    
    
    1552004
    
    2005
    
    IncreaseDelivered acid costs:Per ton*
    
    $
    31
    
    
    
    51
    
    
    
    20In millions
    
    $
    61
    
    
    
    90
    
    
    
    29
  *
    
    Represents the blended cost of internally sourced acid and acid obtained from third-party
sources.       5. New Accounting Pronouncements




---



##### Table of Contents



13 de minimis
        6. Environmental, and Reclamation and Closure Matters




---



##### Table of Contents



14     Six Months2006
    
    
    EndedSecond Quarter
    
    
    June 30, 2006Balance, beginning of period
    
    $
    363.2
    
    
    
    367.9Additions to reserves*
    
    
    16.8
    
    
    
    26.9Reductions in reserve estimates
    
    
    
    
    
    
    Spending against reserves
    
    
    (13.2
    )
    
    
    (28.0
    )Balance, end of period
    
    $
    366.8
    
    
    
    366.8
  *
    
    The six months ended June 30, 2006, included $5.2 million associated with a cash settlement
to Phelps Dodge with potentially responsible parties that was not charged to expense.        
 Six Months2006
    
    
    EndedSecond Quarter
    
    

June 30, 2006Balance, beginning of period
    
    $
    394.3
    
    
    
    398.4New liabilities during the period
    
    
    1.4
    
    
    
    2.5Accretion expense
    
    
    6.5
    
    
    
    13.1Payments
    
    
    (15.5
    )
    
    
    (25.5
    )Revisions in estimated cash flows
    
    
    
    
    
    
    (1.8
    )Balance, end of period
    
    $
    386.7
    
    
    
    386.7
   
 Six Months2006
    
    
    EndedSecond Quarter
    
    
    June 30, 2006Gross balance, beginning of period
    
    $
    198.5
    
    
    
    199.2New assets during the period
    
    
    1.4
    
    
    
    2.5Revisions in estimated cash flows
    
    
    
    
    
    
    (1.8
    )Gross balance, end of period
    
    
    199.9
    
    
    
    199.9Less accumulated depreciation,
depletion and amortization
    
    
    93.6
    
    
    
    93.6Balance, end of period
    
    $
    106.3
    
    
    
    106.3




---



##### Table of Contents



15  7. Contingencies
 Significant New Mexico Environmental and Reclamation Programs




---



##### Table of Contents



16    Significant Changes in International Closure and Reclamation Programs
 Sociedad Minera Cerro Verde S.A.A.
   Other




---



##### Table of Contents



17 8. Earnings Per Share
    Second Quarter2006
    
    
    2005Basic Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    471.4
    
    
    
    675.1Income from discontinued operations
    
    
    0.3
    
    
    
    7.2Net income
    
    
    471.7
    
    
    
    682.3Preferred stock dividends
    
    
    
    
    
    
    (3.4
    )Net income applicable to common shares
    
    $
    471.7
    
    
    
    678.9Denominator:Weighted average common shares outstanding*
    
    
    202.4
    
    
    
    192.4Basic earnings per common share:*Income from continuing operations
    
    $
    2.33
    
    
    
    3.49Income from discontinued operations
    
    
    
    
    
    
    0.04Basic earnings per common share
    
    $
    2.33
    
    
    
    3.53Diluted Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    471.4
    
    
    
    675.1Income from discontinued operations
    
    
    0.3
    
    
    
    7.2Net income
    
    
    471.7
    
    
    
    682.3Preferred stock dividends
    
    
    
    
    
    
    Net income applicable to common shares
    
    $
    471.7
    
    
    
    682.3Denominator:Weighted average common shares outstanding*
    
    
    202.4
    
    
    
    192.4Weighted average employee stock options*
    
    
    0.2
    
    
    
    0.7Weighted average restricted stock issued to employees*
    
    
    0.9
    
    
    
    0.7Weighted average mandatory convertible
preferred shares*
    
    
    
    
    
    
    8.3Total weighted average common shares outstanding*
    
    
    203.5
    
    
    
    202.1Diluted earnings per common share:*Income from continuing operations
    
    $
    2.32
    
    
    
    3.34Income from discontinued operations
    
    
    
    
    
    
    0.04Diluted earnings per common share
    
    $
    2.32
    
    
    
    3.38
   Six Months EndedJune 30,2006
    
    
    2005Basic Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    822.1
    
    
    
    1,052.5Income (loss) from discontinued operations
    
    
    (16.6
    )
    
    
    16.5Net income
    
    
    805.5
    
    
    
    1,069.0Preferred stock dividends
    
    
    
    
    
    
    (6.8
    )Net income applicable to common shares
    
    $
    805.5
    
    
    
    1,062.2Denominator:Weighted average common shares outstanding*
    
    
    202.2
    
    
    
    191.9Basic earnings per common share:*Income from continuing operations
    
    $
    4.06
    
    
    
    5.45Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.08Basic earnings per common share
    
    $
    3.98
    
    
    
    5.53Diluted Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    822.1
    
    
    
    1,052.5Income (loss) from discontinued operations
    
    
    (16.6
    )
    
    
    16.5Net income
    
    
    805.5
    
    
    
    1,069.0Preferred stock dividends
    
    
    
    
    
    
    Net income applicable to common shares
    
    $
    805.5
    
    
    
    1,069.0Denominator:Weighted average common shares outstanding*
    
    
    202.2
    
    
    
    191.9Weighted average employee stock options*
    
    
    0.3
    
    
    
    0.9Weighted average restricted stock issued to employees*
    
    
    0.8
    
    
    
    0.8Weighted average mandatory convertible
preferred shares*
    
    
    
    
    
    
    8.3Total weighted average common shares outstanding*
    
    
    203.3
    
    
    
    201.9Diluted earnings per common share:*Income from continuing operations
    
    $
    4.04
    
    
    
    5.21Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.08Diluted earnings per common share
    
    $
    3.96
    
    
    
    5.29
 
 *
    
    Weighted average shares outstanding and earnings per common share for the quarter and six
months ended June 30, 2005, have been adjusted to reflect the March 10, 2006, stock split.
(Refer to Note 15, Shareholders Equity, for further discussion.) 
 9. Provision for Taxes on Income




---



##### Table of Contents



10. Accounting for Derivative Instruments and Hedging Activities
      2006
    
    
    2007Copper Collars:Pounds of zero-premium copper collars
purchased (in millions)
    
    
    564
    
    
    
    486Average LME put strike price (floor) per pound
    
    $
    0.954
    
    
    
    0.950Annual average LME call strike
price (ceiling) per pound
    
    $
    1.632
    
    
    
    2.002Associated pre-tax gains (charges) for the
2006 second quarter (A):Intrinsic value component (in millions)
    
    $
    (365
    )
    
    
    (354
    )Time value component (in millions)
    
    $
    
    
    
    
    42Associated pre-tax gains (charges) for the
six months ended June 30, 2006 (A):Intrinsic value component (in millions)
    
    $
    (617
    )
    
    
    (464
    )Time value component (in millions)
    
    $
    13
    
    
    
    1Copper Put Options:Pounds of copper put options purchased (in millions)
    
    
    564
    
    
    
    730Average LME put strike price per pound
    
    $
    0.950
    
    
    
    0.950Premium cost per pound
    
    $
    0.020
    
    
    
    0.023Associated pre-tax charges for the
2006 second quarter (A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    Associated pre-tax charges for the
six months ended June 30, 2006 (A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    (3
    )




---



##### Table of Contents





19 
 (A)
    
    The 2006 unrealized pre-tax charges resulted from the 2006 LME price average of $3.033 per
pound exceeding the $1.632 per pound ceiling of our 2006 zero-premium copper collars. The
cumulative pre-tax charges for our 2006 copper collars and copper put options, including
amounts recognized in 2005, were approximately $779 million, primarily reflecting intrinsic
value charges and put option premiums. The 2007 unrealized pre-tax charges resulted from the
2007 LME price average of $3.041 per pound exceeding the $2.002 per pound ceiling of our 2007
zero-premium copper collars. The cumulative pre-tax charges for our 2007 copper collars and
copper put options, including amounts recognized in 2005, were approximately $514 million,
consisting of approximately $464 million for the intrinsic value component and approximately
$33 million for the time value component, with the remainder for put option premiums.      11.
Pension and Postretirement Benefits
   
 Second Quarter2006
    
    
    2005Service cost  benefits earned during the period
    
    $
    5.5
    
    
    
    7.0Interest cost on benefit obligation
    
    
    17.6
    
    
    
    18.6Expected return on plan assets
    
    
    (26.0
    )
    
    
    (21.5
    )Amortization of prior service cost
    
    
    0.7
    
    
    
    0.8Amortization of actuarial loss
    
    
    4.5
    
    
    
    3.5Net periodic benefit cost
    
    $
    2.3
    
    
    
    8.4
  Six Months EndedJune 30,2006
    
    
    2005Service cost  benefits earned during the period
    
    $
    11.1
    
    
    
    14.0Interest cost on benefit obligation
    
    
    35.1
    
    
    
    37.3Expected return on plan assets
    
    
    (51.9
    )
    
    
    (43.1
    )Amortization of prior service cost
    
    
    1.3
    
    
    
    1.6Amortization of net actuarial loss
    
    
    9.0
    
    
    
    7.1Special retirement benefits
    
    
    0.5
    
    
    
    Net periodic benefit cost
    
    $
    5.1
    
    
    
    16.9
   
 Second Quarter2006
    
    
    2005Service cost  benefits earned during the period
    
    $
    0.3
    
    
    
    1.1Interest cost on benefit obligation
    
    
    3.6
    
    
    
    4.8Expected return on plan assets
    
    
    (1.7
    )
    
    
    (0.1
    )Amortization of prior service cost
    
    
    (0.6
    )
    
    
    0.1Recognized net actuarial loss
    
    
    (0.2
    )
    
    
    Net periodic benefit cost
    
    $
    1.4
    
    
    
    5.9
  Six Months EndedJune 30,2006
    
    
    2005Service cost  benefits earned during the period
    
    $
    0.6
    
    
    
    2.2Interest cost on benefit obligation
    
    
    7.2
    
    
    
    9.6Expected return on plan assets
    
    
    (3.5
    )
    
    
    (0.1
    )Amortization of prior service cost
    
    
    (1.2
    )
    
    
    0.1Recognized net actuarial loss
    
    
    (0.4
    )
    
    
    Special retirement benefits
    
    
    (0.3
    )
    
    
    Net periodic benefit cost
    
    $
    2.4
    
    
    
    11.8




---



##### Table of Contents



20     12. Debt and Other Financing
    13. Gain on Sale of Cost-Basis Investment
  14. Change in Interest Gain




---



##### Table of Contents



21 15. Shareholders Equity
 Stock Split
 16.
Inco/Falconbridge Merger




---



##### Table of Contents



22 
 REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




---



##### Table of Contents



23 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
 RESULTS OF OPERATIONS
 Consolidated Financial Results
      Second Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    2,992.2
    
    
    
    1,966.0Operating income
    
    $
    963.3
    
    
    
    164.8Minority interests in consolidated subsidiaries
    
    $
    (202.1
    )
    
    
    (38.3
    )Income from continuing operations
    
    $
    471.4
    
    
    
    675.1Income from discontinued operations
    
    $
    0.3
    
    
    
    7.2Net income
    
    $
    471.7
    
    
    
    682.3Basic earnings per common share:*Income from continuing operations
    
    $
    2.33
    
    
    
    3.49Income from discontinued operations
    
    
    
    
    
    
    0.04Basic earnings per common share
    
    $
    2.33
    
    
    
    3.53Diluted earnings per common share:*Income from continuing operations
    
    $
    2.32
    
    
    
    3.34Income from discontinued operations
    
    
    
    
    
    
    0.04Diluted earnings per common share
    
    $
    2.32
    
    
    
    3.38
 
 *
    
    Earnings per common share for the 2005 second quarter have been adjusted to reflect the March
10, 2006, stock split. (Refer to Note 15, Shareholders Equity, to our unaudited June 30,
2006, Consolidated Financial Information for further discussion.)




---



##### Table of Contents



24    Six Months EndedJune 30,2006
    
    
    2005Sales and other operating revenues
    
    $
    5,216.8
    
    
    
    3,852.5Operating income
    
    $
    1,537.5
    
    
    
    700.6Minority interests in consolidated subsidiaries
    
    $
    (319.3
    )
    
    
    (64.9
    )Income from continuing operations
    
    $
    822.1
    
    
    
    1,052.5Income (loss) from discontinued operations
    
    $
    (16.6
    )
    
    
    16.5Net income
    
    $
    805.5
    
    
    
    1,069.0Basic earnings per common share:*Income from continuing operations
    
    $
    4.06
    
    
    
    5.45Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.08Basic earnings per common share
    
    $
    3.98
    
    
    
    5.53Diluted earnings per common share:*Income from continuing operations
    
    $
    4.04
    
    
    
    5.21Income (loss) from discontinued operations
    
    
    (0.08
    )
    
    
    0.08Diluted earnings per common share
    
    $
    3.96
    
    
    
    5.29
 
 *
    
    Earnings per common share for the six months ended June 30, 2005, have been adjusted to
reflect the March 10, 2006, stock split. (Refer to Note 15, Shareholders Equity, to our
unaudited June 30, 2006, Consolidated Financial Information for further discussion.)    Special Items, Net of Taxes (Includes Special Items and Provisions, Net in Operating Income and
Other Non-Operating Significant Items Affecting Comparability of Results)




---



##### Table of Contents



25     Second Quarter2006
    
    
    2005Net income
    
    $
    471.7
    
    
    
    682.3Special items, net of taxes
    
    
    (9.8
    )
    
    
    225.8Net income excluding special items (after taxes)
    
    $
    481.5
    
    
    
    456.5
   Six Months EndedJune 30,2006
    
    
    2005Net income
    
    $
    805.5
    
    
    
    1,069.0Special items, net of taxes
    
    
    (54.7
    )
    
    
    225.9Net income excluding special items (after taxes)
    
    $
    860.2
    
    
    
    843.1
      Six Months Ended2006 Second Quarter
    
    
    June 30, 2006$/Share
    
    
    
    
    
    
    
    
    
    
    $/ShareConsolidated Statement of Income Line Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-tax
    
    
    Pre-tax
    
    
    After-tax
    
    
    After-taxSpecial items and provisions, net (included in operating income):PDMC (see Business Segment disclosure)
    
    $
    (12.3
    )
    
    
    (9.4
    )
    
    
    (0.05
    )
    
    
    (19.9
    )
    
    
    (15.2
    )
    
    
    (0.07
    )PDI (see Business Segment disclosure)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8.7
    )
    
    
    (9.6
    )
    
    
    (0.05
    )Corporate
and Other Environmental provisions, net
    
    
    (0.7
    )
    
    
    (0.5
    )
    
    
    
    
    
    
    (2.1
    )
    
    
    (1.6
    )
    
    
    (0.01
    )Environmental insurance recoveries, net
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    Sale of non-core real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.4
    
    
    
    (0.6
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (1.5
    )
    
    
    (1.1
    )
    
    
    (0.01
    )Special items and provisions, net (included in operating income)
    
    
    (12.9
    )
    
    
    (9.8
    )
    
    
    (0.05
    )
    
    
    (30.1
    )
    
    
    (25.9
    )
    
    
    (0.13
    )Other non-operating significant items affecting comparability of results:Discontinued operations (A):Loss on disposal of Columbian Chemicals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14.8
    )
    
    
    (14.1
    )
    
    
    (0.07
    )Transaction and employee-related costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14.7
    )
    
    
    (14.7
    )
    
    
    (0.07
    )
    
    
    
    
    
    
    
    
    
    
    
    (29.5
    )
    
    
    (28.8
    )
    
    
    (0.14
    )$
    (12.9
    )
    
    
    (9.8
    )
    
    
    (0.05
    )
    
    
    (59.6
    )
    
    
    (54.7
    )
    
    
    (0.27
    )
 
 (A)
    
    Loss from discontinued operations of $16.6 million, as reflected in the Consolidated
Statement of Income for the six months ended June 30, 2006,
included the operating results of
Columbian Chemicals of $12.2 million that have not been separately disclosed as special items.
Refer to Note 3, Divestitures, to our unaudited June 30, 2006, Consolidated Financial
Information for further discussion of special items recorded in discontinued operations for
the six months ended June 30, 2006.






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##### Table of Contents



26   Six Months Ended2005 Second Quarter

    
    
    June 30, 2005$/Share
    
    
    
    
    
    
    
    
    
    
    $/ShareConsolidated Statement of Income Line Item
    
    Pre-tax
    
    
    After-tax
    
    
    After-tax*
    
    
    Pre-tax
    
    
    After-tax
    
    
    After-tax*Special items and provisions, net (included in operating income):PDMC (see Business Segment disclosure)
    
    $
    (415.0
    )
    
    
    (317.8
    )
    
    
    (1.57
    )
    
    
    (420.9
    )
    
    
    (322.3
    )
    
    
    (1.60
    )PDI (see Business Segment disclosure)
    
    
    (1.9
    )
    
    
    (1.4
    )
    
    
    (0.01
    )
    
    
    (1.5
    )
    
    
    (0.6
    )
    
    
    Corporate
and Other Environmental provisions, net
    
    
    (20.7
    )
    
    
    (15.7
    )
    
    
    (0.08
    )
    
    
    (19.7
    )
    
    
    (15.0
    )
    
    
    (0.07
    )Environmental insurance recoveries, net
    
    
    0.5
    
    
    
    0.4
    
    
    
    
    
    
    
    1.1
    
    
    
    0.9
    
    
    
    Historical legal matters
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    4.7
    
    
    
    4.4
    
    
    
    0.02(20.3
    )
    
    
    (15.4
    )
    
    
    (0.08
    )
    
    
    (13.9
    )
    
    
    (9.7
    )
    
    
    (0.05
    )Special items and provisions, net (included in operating income)
    
    
    (437.2
    )
    
    
    (334.6
    )
    
    
    (1.66
    )
    
    
    (436.3
    )
    
    
    (332.6
    )
    
    
    (1.65
    )Other non-operating significant items affecting comparability of results:Gain on sale of cost-basis investment
    
    
    438.4
    
    
    
    388.0
    
    
    
    1.92
    
    
    
    438.4
    
    
    
    388.0
    
    
    
    1.92Change in interest gain
    
    
    159.5
    
    
    
    172.9
    
    
    
    0.86
    
    
    
    159.5
    
    
    
    172.9
    
    
    
    0.86Provision for taxes on income (A):Foreign dividend taxes
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    (2.4
    )
    
    
    (0.01
    )$
    160.7
    
    
    
    225.8
    
    
    
    1.12
    
    
    
    161.6
    
    
    
    225.9
    
    
    
    1.12
 
 *
    
    After-tax per common share amounts have been adjusted to reflect the March 10, 2006, stock
split. (Refer to Note 15, Shareholders Equity, to our unaudited June 30, 2006, Consolidated
Financial Information for further discussion.)(A)
    
    Provision for taxes on income of $70.0 million and $196.1 million, as reflected in the
Consolidated Statement of Income for the quarter and six months ended June 30, 2005,
respectively, included other amounts that have not been separately disclosed as special items,
as these amounts are typical and representative of the normal course of the Companys business
in a given period.  Gain
on sale of cost-basis investment.
 Change
in interest gain.
  Provision
for taxes on income.
 Business Divisions




---



##### Table of Contents



27    
 RESULTS OF PHELPS DODGE MINING COMPANY




---



##### Table of Contents



28    Second Quarter2006
    
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    2,695.5
    
    
    
    1,684.4Operating income
    
    $
    986.0
    
    
    
    204.7Operating income before special
items and provisions, net
    
    $
    998.3
    
    
    
    619.7Minority interests in consolidated subsidiaries (A)
    
    $
    (201.7
    )
    
    
    (37.5
    )Copper production (thousand short tons):Total copper production
    
    
    324.2
    
    
    
    321.7Less undivided interest (B)
    
    
    15.8
    
    
    
    15.5Copper production on a consolidated basis
    
    
    308.4
    
    
    
    306.2Less minority participants shares (A)
    
    
    53.1
    
    
    
    42.5Copper production on a pro rata basis
    
    
    255.3
    
    
    
    263.7Copper sales (thousand short tons):Total copper sales from own mines
    
    
    327.3
    
    
    
    328.0Less undivided interest (B)
    
    
    15.8
    
    
    
    15.5Copper sales from own mines on a
consolidated basis
    
    
    311.5
    
    
    
    312.5Less minority participants shares (A)
    
    
    54.7
    
    
    
    44.0Copper sales from own mines on a
pro rata basis
    
    
    256.8
    
    
    
    268.5Purchased copper
    
    
    109.6
    
    
    
    78.6Total copper sales on a consolidated basis
    
    
    421.1
    
    
    
    391.1LME average spot copper price
per pound  cathodes
    
    $
    3.271
    
    
    
    1.537COMEX average spot copper price
per pound  cathodes
    
    $
    3.375
    
    
    
    1.532Molybdenum production (million pounds)
    
    
    17.7
    
    
    
    16.7Molybdenum sales (million pounds):Net Phelps Dodge share from own mines
    
    
    17.8
    
    
    
    15.5Purchased molybdenum
    
    
    2.1
    
    
    
    3.2Total molybdenum sales
    
    
    19.9
    
    
    
    18.7Metals Week:Molybdenum Dealer Oxide mean
price per pound
    
    $
    24.55
    
    
    
    35.27M-1 price per pound
    
    $
    23.77
    
    
    
    34.43
   Six Months EndedJune 30,2006
    
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    4,599.0
    
    
    
    3,302.5Operating income
    
    $
    1,592.6
    
    
    
    755.1Operating income before special
items and provisions, net
    
    $
    1,612.5
    
    
    
    1,176.0Minority interests in consolidated subsidiaries (A)
    
    $
    (316.8
    )
    
    
    (63.1
    )Copper production (thousand short tons):Total copper production
    
    
    642.5
    
    
    
    646.7Less undivided interest (B)
    
    
    29.9
    
    
    
    29.3Copper production on a consolidated basis
    
    
    612.6
    
    
    
    617.4Less minority participants shares (A)
    
    
    106.1
    
    
    
    86.0Copper production on a pro rata basis
    
    
    506.5
    
    
    
    531.4Copper sales (thousand short tons):Total copper sales from own mines
    
    
    645.9
    
    
    
    653.0Less undivided interest (B)
    
    
    29.9
    
    
    
    29.3Copper sales from own mines on a
consolidated basis
    
    
    616.0
    
    
    
    623.7Less minority participants shares (A)
    
    
    105.2
    
    
    
    87.8Copper sales from own mines on a
pro rata basis
    
    
    510.8
    
    
    
    535.9Purchased copper
    
    
    206.7
    
    
    
    171.2Total copper sales on a consolidated basis
    
    
    822.7
    
    
    
    794.9LME average spot copper price
per pound  cathodes
    
    $
    2.756
    
    
    
    1.510COMEX average spot copper price
per pound  cathodes
    
    $
    2.814
    
    
    
    1.500Molybdenum production (million pounds)
    
    
    34.9
    
    
    
    31.4Molybdenum sales (million pounds):Net Phelps Dodge share from own mines
    
    
    34.7
    
    
    
    30.4Purchased molybdenum
    
    
    4.3
    
    
    
    6.9Total molybdenum sales
    
    
    39.0
    
    
    
    37.3Metals Week:Molybdenum Dealer Oxide mean
price per pound
    
    $
    23.73
    
    
    
    33.29M-1 price per pound
    
    $
    23.96
    
    
    
    32.42
 
 (A)
    
    Minority participant interests include (i) a 20 percent partnership interest in Candelaria in
Chile owned by SMMA Candelaria, Inc., Sumitomo Metal Mining Co., Ltd. and Sumitomo
Corporation, (ii) a 49 percent partnership interest in the El Abra copper mining operation in
Chile held by Corporación Nacional del Cobre de Chile, (iii) a 17.5 percent equity interest
through May 31, 2005, and a 46.4 percent equity interest beginning June 1, 2005, in the Cerro
Verde copper mining operation in Peru held by SMM Cerro Verde Netherlands B.V. and Compañía de
Minas Buenaventura S.A.A., and (iv) a 20 percent equity interest beginning December 23, 2005,
in the Ojos del Salado copper mining operation in Chile held by SMMA Candelaria, Inc.(B)
    
    Represents a 15 percent undivided interest in Morenci, Arizona, copper mining complex held by
Sumitomo Metal Mining Arizona, Inc.   Second Quarter2006
    
    
    2005Minority participants shares of copper production:Candelaria
    
    
    9.4
    
    
    
    8.6Ojos del Salado
    
    
    1.4
    
    
    
    Cerro Verde
    
    
    12.1
    
    
    
    7.1El Abra
    
    
    30.2
    
    
    
    26.853.1
    
    
    
    42.5




---



##### Table of Contents



Six Months EndedJune 30,2006
    
    
    2005Minority participants shares of copper production:Candelaria
    
    
    19.6
    
    
    
    18.9Ojos del Salado
    
    
    2.9
    
    
    
    Cerro Verde
    
    
    23.7
    
    
    
    11.3El Abra
    
    
    59.9
    
    
    
    55.8106.1
    
    
    
    86.0
  Total
PDMC Division  Sales
    Total
PDMC Division  Operating Income




---



##### Table of Contents



30    i.e.
     2006
    
    2007Copper Collars:Pounds of zero-premium copper collars
purchased (in millions)
    
    
    564
    
    
    
    486Average LME put strike price (floor) per pound
    
    $
    0.954
    
    
    
    0.950Annual average LME call strike
price (ceiling) per pound
    
    $
    1.632
    
    
    
    2.002Associated pre-tax gains (charges) for the
2006 second quarter (A):Intrinsic value component (in millions)
    
    $
    (365
    )
    
    
    (354
    )Time value component (in millions)
    
    $
    
    
    
    
    42Associated pre-tax gains (charges) for the
six months ended June 30, 2006 (A):Intrinsic value component (in millions)
    
    $
    (617
    )
    
    
    (464
    )Time value component (in millions)
    
    $
    13
    
    
    
    1Copper Put Options:Pounds of copper put options purchased (in millions)
    
    
    564
    
    
    
    730Average LME put strike price per pound
    
    $
    0.950
    
    
    
    0.950Premium cost per pound
    
    $
    0.020
    
    
    
    0.023Associated pre-tax charges for the
2006 second quarter (A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    Associated pre-tax charges for the
six months ended June 30, 2006 (A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    (3
    )
 
 (A)
    
    The 2006 unrealized pre-tax charges resulted from the 2006 LME price average of $3.033 per
pound exceeding the $1.632 per pound ceiling of our 2006 zero-premium copper collars. The
cumulative pre-tax charges for our 2006 copper collars and copper put options, including
amounts recognized in 2005, were approximately $779 million, reflecting primarily intrinsic
value charges and put option premiums. The 2007 unrealized pre-tax charges resulted from the
2007 LME price average of $3.041 per pound exceeding the $2.002 per pound ceiling of our 2007
zero-premium copper collars. The cumulative pre-tax charges for our 2007 copper collars and
copper put options, including amounts recognized in 2005, were approximately $514 million,
consisting of approximately $464 million for the intrinsic value component and approximately
$33 million for the time value component, with the remainder for put option premiums.




---



##### Table of Contents



31      Second Quarter2006
    
    
    2005Asset impairment charges
    
    $
    
    
    
    
    (419.1
    )Environmental provisions, net
    
    
    (12.2
    )
    
    
    (10.4
    )Environmental insurance recoveries, net
    
    
    (0.1
    )
    
    
    (0.5
    )Historical legal matters
    
    
    
    
    
    
    15.0$
    (12.3
    )
    
    
    (415.0
    )
   Six Months EndedJune 30,2006
    
    
    2005Asset impairment charges
    
    $
    
    
    
    
    (419.1
    )Environmental provisions, net
    
    
    (19.6
    )
    
    
    (15.7
    )Environmental insurance recoveries, net
    
    
    (0.1
    )
    
    
    (1.1
    )Historical legal matters
    
    
    (0.2
    )
    
    
    15.0$
    (19.9
    )
    
    
    (420.9
    )




---



##### Table of Contents



32 PDMC
RESULTS BY REPORTABLE SEGMENTS
    U.S. MinesChino/Morenci
    
    
    Bagdad
    
    
    Sierrita
    
    
    Cobre
    
    
    Tyrone
    
    
    SubtotalSecond Quarter 2006Copper production (thousand short tons):Total production
    
    
    105.5
    
    
    
    20.1
    
    
    
    19.2
    
    
    
    24.9
    
    
    
    8.3
    
    
    
    178.0Less undivided interest
    
    
    15.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.8Copper production on a consolidated basis
    
    
    89.7
    
    
    
    20.1
    
    
    
    19.2
    
    
    
    24.9
    
    
    
    8.3
    
    
    
    162.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    89.7
    
    
    
    20.1
    
    
    
    19.2
    
    
    
    24.9
    
    
    
    8.3
    
    
    
    162.2Copper sales (thousand short tons):Total copper sales from own mines
    
    
    105.5
    
    
    
    20.0
    
    
    
    19.1
    
    
    
    24.9
    
    
    
    8.3
    
    
    
    177.8Less undivided interest
    
    
    15.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.8Copper sales from own mines on a consolidated basis
    
    
    89.7
    
    
    
    20.0
    
    
    
    19.1
    
    
    
    24.9
    
    
    
    8.3
    
    
    
    162.0Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    89.7
    
    
    
    20.0
    
    
    
    19.1
    
    
    
    24.9
    
    
    
    8.3
    
    
    
    162.0Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    89.7
    
    
    
    20.0
    
    
    
    19.1
    
    
    
    24.9
    
    
    
    8.3
    
    
    
    162.0($ in millions)Operating income (loss)
    
    $
    48.8
    
    
    
    39.6
    
    
    
    91.6
    
    
    
    2.8
    
    
    
    (4.1
    )
    
    
    178.7Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    (3.8
    )
    
    
    (6.2
    )
    
    
    
    
    
    
    (10.0
    )Operating income (loss) before special items and provisions, net
    
    $
    48.8
    
    
    
    39.6
    
    
    
    95.4
    
    
    
    9.0
    
    
    
    (4.1
    )
    
    
    188.7Second Quarter 2005Copper production (thousand short tons):Total production
    
    
    103.0
    
    
    
    27.1
    
    
    
    19.9
    
    
    
    24.7
    
    
    
    10.9
    
    
    
    185.6Less undivided interest
    
    
    15.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.5Copper production on a consolidated basis
    
    
    87.5
    
    
    
    27.1
    
    
    
    19.9
    
    
    
    24.7
    
    
    
    10.9
    
    
    
    170.1Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    87.5
    
    
    
    27.1
    
    
    
    19.9
    
    
    
    24.7
    
    
    
    10.9
    
    
    
    170.1Copper sales (thousand short tons):Total copper sales from own mines
    
    
    103.0
    
    
    
    27.2
    
    
    
    20.1
    
    
    
    24.7
    
    
    
    10.9
    
    
    
    185.9Less undivided interest
    
    
    15.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.5Copper sales from own mines on a consolidated basis
    
    
    87.5
    
    
    
    27.2
    
    
    
    20.1
    
    
    
    24.7
    
    
    
    10.9
    
    
    
    170.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    87.5
    
    
    
    27.2
    
    
    
    20.1
    
    
    
    24.7
    
    
    
    10.9
    
    
    
    170.4Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    87.5
    
    
    
    27.2
    
    
    
    20.1
    
    
    
    24.7
    
    
    
    10.9
    
    
    
    170.4($ in millions)Operating income (loss)
    
    $
    114.2
    
    
    
    116.5
    
    
    
    135.6
    
    
    
    (51.0
    )
    
    
    (208.3
    )
    
    
    107.0Special items and provisions, net
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    (63.9
    )
    
    
    (211.5
    )
    
    
    (275.7
    )Operating income (loss) before special items and provisions, net
    
    $
    114.5
    
    
    
    116.5
    
    
    
    135.6
    
    
    
    12.9
    
    
    
    3.2
    
    
    
    382.7




---



##### Table of Contents



33 PDMC RESULTS BY REPORTABLE SEGMENTS
   South American MinesCandelaria/Ojos delSalado
    
    
    Cerro Verde
    
    
    El Abra
    
    
    SubtotalSecond Quarter 2006Copper production (thousand short tons):Total production
    
    
    53.8
    
    
    
    26.0
    
    
    
    61.6
    
    
    
    141.4Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    53.8
    
    
    
    26.0
    
    
    
    61.6
    
    
    
    141.4Less minority participants shares
    
    
    10.8
    
    
    
    12.1
    
    
    
    30.2
    
    
    
    53.1Copper production on a pro rata basis
    
    
    43.0
    
    
    
    13.9
    
    
    
    31.4
    
    
    
    88.3Copper sales (thousand short tons):Total copper sales from own mines
    
    
    53.3
    
    
    
    31.1
    
    
    
    60.5
    
    
    
    144.9Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    53.3
    
    
    
    31.1
    
    
    
    60.5
    
    
    
    144.9Less minority participants shares
    
    
    10.6
    
    
    
    14.4
    
    
    
    29.7
    
    
    
    54.7Copper sales from own mines on a pro rata basis
    
    
    42.7
    
    
    
    16.7
    
    
    
    30.8
    
    
    
    90.2Total purchased copper
    
    
    4.4
    
    
    
    
    
    
    
    
    
    
    
    4.4Total copper sales on a consolidated basis
    
    
    57.7
    
    
    
    31.1
    
    
    
    60.5
    
    
    
    149.3($ in millions)Operating income (loss)
    
    $
    261.7
    
    
    
    165.0
    
    
    
    331.1
    
    
    
    757.8Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    261.7
    
    
    
    165.0
    
    
    
    331.1
    
    
    
    757.8Second Quarter 2005Copper production (thousand short tons):Total production
    
    
    50.2
    
    
    
    26.1
    
    
    
    54.8
    
    
    
    131.1Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    50.2
    
    
    
    26.1
    
    
    
    54.8
    
    
    
    131.1Less minority participants shares
    
    
    8.6
    
    
    
    7.1
    
    
    
    26.8
    
    
    
    42.5Copper production on a pro rata basis
    
    
    41.6
    
    
    
    19.0
    
    
    
    28.0
    
    
    
    88.6Copper sales (thousand short tons):Total copper sales from own mines
    
    
    55.9
    
    
    
    25.8
    
    
    
    55.3
    
    
    
    137.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    55.9
    
    
    
    25.8
    
    
    
    55.3
    
    
    
    137.0Less minority participants shares
    
    
    9.7
    
    
    
    7.2
    
    
    
    27.1
    
    
    
    44.0Copper sales from own mines on a pro rata basis
    
    
    46.2
    
    
    
    18.6
    
    
    
    28.2
    
    
    
    93.0Total purchased copper
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    3.2Total copper sales on a consolidated basis
    
    
    59.1
    
    
    
    25.8
    
    
    
    55.3
    
    
    
    140.2($ in millions)Operating income (loss)
    
    $
    64.6
    
    
    
    39.6
    
    
    
    63.8
    
    
    
    168.0Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    64.6
    
    
    
    39.6
    
    
    
    63.8
    
    
    
    168.0




---



##### Table of Contents



34 PDMC RESULTS BY REPORTABLE SEGMENTS
   Primary
    
    
    
    
    
    
    
    
    
    
    PDMC
    
    
    
    
    
    
    TotalMolybdenum
    
    
    Manufacturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    PDMCSecond Quarter 2006Copper production (thousand short tons):Total production
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    321.2
    
    
    
    3.0
    
    
    
    324.2Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.8
    
    
    
    
    
    
    
    15.8Copper production on a consolidated basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    305.4
    
    
    
    3.0
    
    
    
    308.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53.1
    
    
    
    
    
    
    
    53.1Copper production on a pro rata basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    252.3
    
    
    
    3.0
    
    
    
    255.3Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    324.5
    
    
    
    2.8
    
    
    
    327.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.8
    
    
    
    
    
    
    
    15.8Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    308.7
    
    
    
    2.8
    
    
    
    311.5Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54.7
    
    
    
    
    
    
    
    54.7Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    254.0
    
    
    
    2.8
    
    
    
    256.8Total purchased copper
    
    
    
    
    
    
    105.2
    
    
    
    
    
    
    
    109.6
    
    
    
    
    
    
    
    109.6Total copper sales on a consolidated basis
    
    
    
    
    
    
    107.0
    
    
    
    
    
    
    
    418.3
    
    
    
    2.8
    
    
    
    421.1Molybdenum production (thousand pounds):Primary  Henderson
    
    
    9,784
    
    
    
    
    
    
    
    
    
    
    
    9,784
    
    
    
    
    
    
    
    9,784By-product:Bagdad
    
    
    2,711
    
    
    
    
    
    
    
    
    
    
    
    2,711
    
    
    
    
    
    
    
    2,711Sierrita
    
    
    4,850
    
    
    
    
    
    
    
    
    
    
    
    4,850
    
    
    
    
    
    
    
    4,850Chino
    
    
    345
    
    
    
    
    
    
    
    
    
    
    
    345
    
    
    
    
    
    
    
    345Total molybdenum production
    
    
    17,690
    
    
    
    
    
    
    
    
    
    
    
    17,690
    
    
    
    
    
    
    
    17,690Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    17,755
    
    
    
    
    
    
    
    
    
    
    
    17,755
    
    
    
    
    
    
    
    17,755Purchased molybdenum
    
    
    2,131
    
    
    
    
    
    
    
    
    
    
    
    2,131
    
    
    
    
    
    
    
    2,131Total molybdenum sales
    
    
    19,886
    
    
    
    
    
    
    
    
    
    
    
    19,886
    
    
    
    
    
    
    
    19,886($ in millions)Operating income (loss)
    
    $
    112.8
    
    
    
    0.2
    
    
    
    6.1
    
    
    
    1,055.6
    
    
    
    (69.6
    )
    
    
    986.0Special items and provisions, net
    
    
    
    
    
    
    (1.1
    )
    
    
    
    
    
    
    (11.1
    )
    
    
    (1.2
    )
    
    
    (12.3
    )Operating income (loss) before special items and provisions, net
    
    $
    112.8
    
    
    
    1.3
    
    
    
    6.1
    
    
    
    1,066.7
    
    
    
    (68.4
    )
    
    
    998.3Second Quarter 2005Copper production (thousand short tons):Total production
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    317.6
    
    
    
    4.1
    
    
    
    321.7Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.5
    
    
    
    
    
    
    
    15.5Copper production on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    302.1
    
    
    
    4.1
    
    
    
    306.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42.5
    
    
    
    
    
    
    
    42.5Copper production on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    259.6
    
    
    
    4.1
    
    
    
    263.7Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    323.8
    
    
    
    4.2
    
    
    
    328.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.5
    
    
    
    
    
    
    
    15.5Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    308.3
    
    
    
    4.2
    
    
    
    312.5Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44.0
    
    
    
    
    
    
    
    44.0Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    264.3
    
    
    
    4.2
    
    
    
    268.5Total purchased copper
    
    
    
    
    
    
    75.2
    
    
    
    0.2
    
    
    
    78.6
    
    
    
    
    
    
    
    78.6Total copper sales on a consolidated basis
    
    
    
    
    
    
    76.1
    
    
    
    0.2
    
    
    
    386.9
    
    
    
    4.2
    
    
    
    391.1Molybdenum production (thousand pounds):Primary  Henderson
    
    
    9,040
    
    
    
    
    
    
    
    
    
    
    
    9,040
    
    
    
    
    
    
    
    9,040By-product:Bagdad
    
    
    3,162
    
    
    
    
    
    
    
    
    
    
    
    3,162
    
    
    
    
    
    
    
    3,162Sierrita
    
    
    4,162
    
    
    
    
    
    
    
    
    
    
    
    4,162
    
    
    
    
    
    
    
    4,162Chino
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    300Total molybdenum production
    
    
    16,664
    
    
    
    
    
    
    
    
    
    
    
    16,664
    
    
    
    
    
    
    
    16,664Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    15,497
    
    
    
    
    
    
    
    
    
    
    
    15,497
    
    
    
    
    
    
    
    15,497Purchased molybdenum
    
    
    3,169
    
    
    
    
    
    
    
    
    
    
    
    3,169
    
    
    
    
    
    
    
    3,169Total molybdenum sales
    
    
    18,666
    
    
    
    
    
    
    
    
    
    
    
    18,666
    
    
    
    
    
    
    
    18,666($ in millions)Operating income (loss)
    
    $
    98.9
    
    
    
    (141.9
    )
    
    
    3.3
    
    
    
    235.3
    
    
    
    (30.6
    )
    
    
    204.7Special items and provisions, net
    
    
    
    
    
    
    (148.7
    )
    
    
    
    
    
    
    (424.4
    )
    
    
    9.4
    
    
    
    (415.0
    )Operating income (loss) before special items and provisions, net
    
    $
    98.9
    
    
    
    6.8
    
    
    
    3.3
    
    
    
    659.7
    
    
    
    (40.0
    )
    
    
    619.7




---



##### Table of Contents



35 PDMC RESULTS BY REPORTABLE SEGMENTS
    U.S. MinesMorenci
    
    
    Bagdad
    
    
    Sierrita
    
    

Chino/Cobre
    
    
    Tyrone
    
    
    SubtotalSix months ended June 30, 2006Copper production (thousand short tons):Total production
    
    
    199.4
    
    
    
    39.1
    
    
    
    40.9
    
    
    
    51.7
    
    
    
    16.2
    
    
    
    347.3Less undivided interest
    
    
    29.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.9Copper production on a consolidated basis
    
    
    169.5
    
    
    
    39.1
    
    
    
    40.9
    
    
    
    51.7
    
    
    
    16.2
    
    
    
    317.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    169.5
    
    
    
    39.1
    
    
    
    40.9
    
    
    
    51.7
    
    
    
    16.2
    
    
    
    317.4Copper sales (thousand short tons):Total copper sales from own mines
    
    
    199.4
    
    
    
    41.7
    
    
    
    43.3
    
    
    
    51.7
    
    
    
    16.2
    
    
    
    352.3Less undivided interest
    
    
    29.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.9Copper sales from own mines on a consolidated basis
    
    
    169.5
    
    
    
    41.7
    
    
    
    43.3
    
    
    
    51.7
    
    
    
    16.2
    
    
    
    322.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    169.5
    
    
    
    41.7
    
    
    
    43.3
    
    
    
    51.7
    
    
    
    16.2
    
    
    
    322.4Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    169.5
    
    
    
    41.7
    
    
    
    43.3
    
    
    
    51.7
    
    
    
    16.2
    
    
    
    322.4($ in millions)Operating income (loss)
    
    $
    85.2
    
    
    
    75.7
    
    
    
    192.0
    
    
    
    (5.4
    )
    
    
    (11.9
    )
    
    
    335.6Special items and provisions, net
    
    
    
    
    
    
    2.2
    
    
    
    (5.1
    )
    
    
    (10.1
    )
    
    
    
    
    
    
    (13.0
    )Operating income (loss) before special items and provisions, net
    
    $
    85.2
    
    
    
    73.5
    
    
    
    197.1
    
    
    
    4.7
    
    
    
    (11.9
    )
    
    
    348.6Six months ended June 30, 2005Copper production (thousand short tons):Total production
    
    
    195.1
    
    
    
    55.0
    
    
    
    41.4
    
    
    
    53.4
    
    
    
    21.3
    
    
    
    366.2Less undivided interest
    
    
    29.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.3Copper production on a consolidated basis
    
    
    165.8
    
    
    
    55.0
    
    
    
    41.4
    
    
    
    53.4
    
    
    
    21.3
    
    
    
    336.9Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    165.8
    
    
    
    55.0
    
    
    
    41.4
    
    
    
    53.4
    
    
    
    21.3
    
    
    
    336.9Copper sales (thousand short tons):Total copper sales from own mines
    
    
    195.1
    
    
    
    56.3
    
    
    
    42.7
    
    
    
    53.4
    
    
    
    21.3
    
    
    
    368.8Less undivided interest
    
    
    29.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.3Copper sales from own mines on a consolidated basis
    
    
    165.8
    
    
    
    56.3
    
    
    
    42.7
    
    
    
    53.4
    
    
    
    21.3
    
    
    
    339.5Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    165.8
    
    
    
    56.3
    
    
    
    42.7
    
    
    
    53.4
    
    
    
    21.3
    
    
    
    339.5Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    165.8
    
    
    
    56.3
    
    
    
    42.7
    
    
    
    53.4
    
    
    
    21.3
    
    
    
    339.5($ in millions)Operating income (loss)
    
    $
    200.1
    
    
    
    200.9
    
    
    
    270.1
    
    
    
    (33.9
    )
    
    
    (211.2
    )
    
    
    426.0Special items and provisions, net
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (64.5
    )
    
    
    (215.7
    )
    
    
    (280.8
    )Operating income (loss) before special items and provisions, net
    
    $
    200.7
    
    
    
    200.9
    
    
    
    270.1
    
    
    
    30.6
    
    
    
    4.5
    
    
    
    706.8




---



##### Table of Contents



36 PDMC RESULTS BY REPORTABLE SEGMENTS
   South American MinesCandelaria/ Ojosdel Salado
    
    
    Cerro Verde
    
    
    El Abra
    
    
    SubtotalSix months ended June 30, 2006Copper production (thousand short tons):Total production
    
    
    112.3
    
    
    
    51.1
    
    
    
    122.2
    
    
    
    285.6Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    112.3
    
    
    
    51.1
    
    
    
    122.2
    
    
    
    285.6Less minority participants shares
    
    
    22.5
    
    
    
    23.7
    
    
    
    59.9
    
    
    
    106.1Copper production on a pro rata basis
    
    
    89.8
    
    
    
    27.4
    
    
    
    62.3
    
    
    
    179.5Copper sales (thousand short tons):Total copper sales from own mines
    
    
    110.1
    
    
    
    50.3
    
    
    
    122.2
    
    
    
    282.6Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    110.1
    
    
    
    50.3
    
    
    
    122.2
    
    
    
    282.6Less minority participants shares
    
    
    22.0
    
    
    
    23.3
    
    
    
    59.9
    
    
    
    105.2Copper sales from own mines on a pro rata basis
    
    
    88.1
    
    
    
    27.0
    
    
    
    62.3
    
    
    
    177.4Total purchased copper
    
    
    4.4
    
    
    
    
    
    
    
    
    
    
    
    4.4Total copper sales on a consolidated basis
    
    
    114.5
    
    
    
    50.3
    
    
    
    122.2
    
    
    
    287.0($ in millions)Operating income (loss)
    
    $
    406.7
    
    
    
    234.9
    
    
    
    509.9
    
    
    
    1,151.5Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    406.7
    
    
    
    234.9
    
    
    
    509.9
    
    
    
    1,151.5Six months ended June 30, 2005Copper production (thousand short tons):Total production
    
    
    107.5
    
    
    
    50.0
    
    
    
    113.9
    
    
    
    271.4Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    107.5
    
    
    
    50.0
    
    
    
    113.9
    
    
    
    271.4Less minority participants shares
    
    
    18.9
    
    
    
    11.3
    
    
    
    55.8
    
    
    
    86.0Copper production on a pro rata basis
    
    
    88.6
    
    
    
    38.7
    
    
    
    58.1
    
    
    
    185.4Copper sales (thousand short tons):Total copper sales from own mines
    
    
    108.7
    
    
    
    48.1
    
    
    
    117.5
    
    
    
    274.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    108.7
    
    
    
    48.1
    
    
    
    117.5
    
    
    
    274.3Less minority participants shares
    
    
    19.1
    
    
    
    11.1
    
    
    
    57.6
    
    
    
    87.8Copper sales from own mines on a pro rata basis
    
    
    89.6
    
    
    
    37.0
    
    
    
    59.9
    
    
    
    186.5Total purchased copper
    
    
    6.4
    
    
    
    
    
    
    
    
    
    
    
    6.4Total copper sales on a consolidated basis
    
    
    115.1
    
    
    
    48.1
    
    
    
    117.5
    
    
    
    280.7($ in millions)Operating income (loss)
    
    $
    140.0
    
    
    
    75.6
    
    
    
    108.3
    
    
    
    323.9Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    140.0
    
    
    
    75.6
    
    
    
    108.3
    
    
    
    323.9




---



##### Table of Contents



37 PDMC RESULTS BY REPORTABLE SEGMENTS
   Primary
    
    
    
    
    
    
    
    
    
    
    PDMC
    
    
    
    
    
    
    TotalMolybdenum
    
    
    Manufacturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    PDMCSix months ended June 30, 2006Copper production (thousand short tons):Total production
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    636.1
    
    
    
    6.4
    
    
    
    642.5Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.9
    
    
    
    
    
    
    
    29.9Copper production on a consolidated basis
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    606.2
    
    
    
    6.4
    
    
    
    612.6Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106.1
    
    
    
    
    
    
    
    106.1Copper production on a pro rata basis
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    500.1
    
    
    
    6.4
    
    
    
    506.5Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    638.1
    
    
    
    7.8
    
    
    
    645.9Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.9
    
    
    
    
    
    
    
    29.9Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    608.2
    
    
    
    7.8
    
    
    
    616.0Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105.2
    
    
    
    
    
    
    
    105.2Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    3.2
    
    
    
    
    
    
    
    503.0
    
    
    
    7.8
    
    
    
    510.8Total purchased copper
    
    
    
    
    
    
    201.7
    
    
    
    0.6
    
    
    
    206.7
    
    
    
    
    
    
    
    206.7Total copper sales on a consolidated basis
    
    
    
    
    
    
    204.9
    
    
    
    0.6
    
    
    
    814.9
    
    
    
    7.8
    
    
    
    822.7Molybdenum production (thousand pounds):Primary  Henderson
    
    
    19,139
    
    
    
    
    
    
    
    
    
    
    
    19,139
    
    
    
    
    
    
    
    19,139By-product:Bagdad
    
    
    5,218
    
    
    
    
    
    
    
    
    
    
    
    5,218
    
    
    
    
    
    
    
    5,218Sierrita
    
    
    9,973
    
    
    
    
    
    
    
    
    
    
    
    9,973
    
    
    
    
    
    
    
    9,973Chino
    
    
    536
    
    
    
    
    
    
    
    
    
    
    
    536
    
    
    
    
    
    
    
    536Total molybdenum production
    
    
    34,866
    
    
    
    
    
    
    
    
    
    
    
    34,866
    
    
    
    
    
    
    
    34,866Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    34,658
    
    
    
    
    
    
    
    
    
    
    
    34,658
    
    
    
    
    
    
    
    34,658Purchased molybdenum
    
    
    4,326
    
    
    
    
    
    
    
    
    
    
    
    4,326
    
    
    
    
    
    
    
    4,326Total molybdenum sales
    
    
    38,984
    
    
    
    
    
    
    
    
    
    
    
    38,984
    
    
    
    
    
    
    
    38,984($ in millions)Operating income (loss)
    
    $
    218.6
    
    
    
    5.8
    
    
    
    7.9
    
    
    
    1,719.4
    
    
    
    (126.8
    )
    
    
    1,592.6Special items and provisions, net
    
    
    (0.1
    )
    
    
    (1.2
    )
    
    
    
    
    
    
    (14.3
    )
    
    
    (5.6
    )
    
    
    (19.9
    )Operating income (loss) before special items and provisions, net
    
    $
    218.7
    
    
    
    7.0
    
    
    
    7.9
    
    
    
    1,733.7
    
    
    
    (121.2
    )
    
    
    1,612.5Six months ended June 30, 2005Copper production (thousand short tons):Total production
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    639.4
    
    
    
    7.3
    
    
    
    646.7Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.3
    
    
    
    
    
    
    
    29.3Copper production on a consolidated basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    610.1
    
    
    
    7.3
    
    
    
    617.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86.0
    
    
    
    
    
    
    
    86.0Copper production on a pro rata basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    524.1
    
    
    
    7.3
    
    
    
    531.4Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    644.9
    
    
    
    8.1
    
    
    
    653.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.3
    
    
    
    
    
    
    
    29.3Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    615.6
    
    
    
    8.1
    
    
    
    623.7Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87.8
    
    
    
    
    
    
    
    87.8Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    1.8
    
    
    
    
    
    
    
    527.8
    
    
    
    8.1
    
    
    
    535.9Total purchased copper
    
    
    
    
    
    
    157.6
    
    
    
    7.2
    
    
    
    171.2
    
    
    
    
    
    
    
    171.2Total copper sales on a consolidated basis
    
    
    
    
    
    
    159.4
    
    
    
    7.2
    
    
    
    786.8
    
    
    
    8.1
    
    
    
    794.9Molybdenum production (thousand pounds):Primary  Henderson
    
    
    16,893
    
    
    
    
    
    
    
    
    
    
    
    16,893
    
    
    
    
    
    
    
    16,893By-product:Bagdad
    
    
    5,519
    
    
    
    
    
    
    
    
    
    
    
    5,519
    
    
    
    
    
    
    
    5,519Sierrita
    
    
    8,634
    
    
    
    
    
    
    
    
    
    
    
    8,634
    
    
    
    
    
    
    
    8,634Chino
    
    
    333
    
    
    
    
    
    
    
    
    
    
    
    333
    
    
    
    
    
    
    
    333Total molybdenum production
    
    
    31,379
    
    
    
    
    
    
    
    
    
    
    
    31,379
    
    
    
    
    
    
    
    31,379Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    30,430
    
    
    
    
    
    
    
    
    
    
    
    30,430
    
    
    
    
    
    
    
    30,430Purchased molybdenum
    
    
    6,831
    
    
    
    
    
    
    
    
    
    
    
    6,831
    
    
    
    
    
    
    
    6,831Total molybdenum sales
    
    
    37,261
    
    
    
    
    
    
    
    
    
    
    
    37,261
    
    
    
    
    
    
    
    37,261($ in millions)Operating income (loss)
    
    $
    185.5
    
    
    
    (137.7
    )
    
    
    (0.5
    )
    
    
    797.2
    
    
    
    (42.1
    )
    
    
    755.1Special items and provisions, net
    
    
    
    
    
    
    (148.7
    )
    
    
    
    
    
    
    (429.5
    )
    
    
    8.6
    
    
    
    (420.9
    )Operating income (loss) before special items and provisions, net
    
    $
    185.5
    
    
    
    11.0
    
    
    
    (0.5
    )
    
    
    1,226.7
    
    
    
    (50.7
    )
    
    
    1,176.0




---



##### Table of Contents



38 Sales of Copper (U.S. and South America) and Molybdenum
    Second Quarter2006
    
    
    2005U.S. Mining
Operations (A)(C):Unaffiliated customers
    
    $
    1,706.7
    
    
    
    952.8Intersegment elimination
    
    
    (481.9
    )
    
    
    (200.5
    )1,224.8
    
    
    
    752.3South
American Mines (B)(C):Unaffiliated customers
    
    
    555.5
    
    
    
    205.5Intersegment
    
    
    481.9
    
    
    
    200.51,037.4
    
    
    
    406.0Primary
Molybdenum:Unaffiliated customers
    
    
    433.3
    
    
    
    526.1Intersegment
    
    
    
    
    
    
    433.3
    
    
    
    526.1Total PDMC:Unaffiliated customers
    
    $
    2,695.5
    
    
    
    1,684.4
   Six Months EndedJune 30,2006
    
    
    2005U.S. Mining
Operations (A)(C):Unaffiliated customers
    
    $
    2,766.7
    
    
    
    1,883.5Intersegment elimination
    
    
    (704.7
    )
    
    
    (364.7
    )2,062.0
    
    
    
    1,518.8South
American Mines (B)(C):Unaffiliated customers
    
    
    978.7
    
    
    
    416.1Intersegment
    
    
    704.7
    
    
    
    364.71,683.4
    
    
    
    780.8Primary
Molybdenum:Unaffiliated customers
    
    
    853.6
    
    
    
    1,002.9Intersegment
    
    
    
    
    
    
    853.6
    
    
    
    1,002.9Total PDMC:Unaffiliated customers
    
    $
    4,599.0
    
    
    
    3,302.5
 
 (A)
    
    U.S. Mining Operations comprised the following reportable segments: Morenci, Bagdad,
Sierrita, Chino/Cobre, Tyrone, Manufacturing and Sales, along with other mining activities.(B)
    
    South American Mines comprised the following segments: Candelaria/Ojos del Salado, Cerro
Verde and El Abra.(C)
    
    For the quarter and six months ended June 30, 2006, U.S. Mining Operations were negatively
impacted by net copper pricing adjustments of $677.2 million and $1,069.8 million,
respectively, associated with our copper collar and copper put options. For the quarter and
six months ended June 30, 2005, U.S. Mining Operations were negatively impacted by net copper
pricing adjustments of $18.3 million and $31.9 million, respectively, and South American Mines
were negatively impacted by $16.1 million and $57.5 million, respectively, associated with our
copper collar and copper put options.     Second Quarter2006
    
    
    2005U.S. Mining Operations:Morenci
    
    $
    (365.9
    )
    
    
    (9.2
    )Bagdad
    
    
    (85.0
    )
    
    
    (2.9
    )Sierrita
    
    
    (77.6
    )
    
    
    (2.0
    )Chino
    
    
    (96.6
    )
    
    
    (2.5
    )Tyrone
    
    
    (34.3
    )
    
    
    (1.2
    )Manufacturing
    
    
    (3.9
    )
    
    
    (0.1
    )Other
    
    
    (13.9
    )
    
    
    (0.4
    )(677.2
    )
    
    
    (18.3
    )South American Mines:El Abra
    
    
    
    
    
    
    (16.1
    )$
    (677.2
    )
    
    
    (34.4
    )
   Six Months EndedJune 30,2006
    
    
    2005U.S. Mining Operations:Morenci
    
    $
    (556.1
    )
    
    
    (15.3
    )Bagdad
    
    
    (136.8
    )
    
    
    (5.2
    )Sierrita
    
    
    (135.3
    )
    
    
    (3.8
    )Chino
    
    
    (157.6
    )
    
    
    (4.7
    )Tyrone
    
    
    (53.1
    )
    
    
    (2.0
    )Manufacturing
    
    
    (5.4
    )
    
    
    (0.2
    )Other
    
    
    (25.5
    )
    
    
    (0.7
    )(1,069.8
    )
    
    
    (31.9
    )South American Mines:El Abra
    
    
    
    
    
    
    (57.5
    )$
    (1,069.8
    )
    
    
    (89.4
    )
  U.S.
Mining Operations  Sales




---



##### Table of Contents



South American Mines Segment  Sales
   Primary Molybdenum Segment  Sales
   Operating Income (Loss) for Copper (U.S. and South America) and Molybdenum
      Second Quarter2006
    
    
    2005Segment operating income (loss):U.S. Mining Operations (A)(C)
    
    $
    115.4
    
    
    
    (62.2
    )South American Mines (B)(C)
    
    
    757.8
    
    
    
    168.0Primary Molybdenum
    
    
    112.8
    
    
    
    98.9$
    986.0
    
    
    
    204.7Special, pre-tax items and provisions:U.S. Mining Operations (A)
    
    $
    (12.3
    )
    
    
    (415.0
    )South American Mines (B)
    
    
    
    
    
    
    Primary Molybdenum
    
    
    
    
    
    
    $
    (12.3
    )
    
    
    (415.0
    )Segment operating income excluding
special items and provisions:U.S. Mining Operations (A)(C)
    
    $
    127.7
    
    
    
    352.8South American Mines (B)(C)
    
    
    757.8
    
    
    
    168.0Primary Molybdenum
    
    
    112.8
    
    
    
    98.9$
    998.3
    
    
    
    619.7
   Six Months EndedJune 30,2006
    
    
    2005Segment operating income:U.S. Mining Operations (A)(C)
    
    $
    222.5
    
    
    
    245.7South American Mines (B)(C)
    
    
    1,151.5
    
    
    
    323.9Primary Molybdenum
    
    
    218.6
    
    
    
    185.5$
    1,592.6
    
    
    
    755.1Special, pre-tax items and provisions:U.S. Mining Operations (A)
    
    $
    (19.8
    )
    
    
    (420.9
    )South American Mines (B)
    
    
    
    
    
    
    Primary Molybdenum
    
    
    (0.1
    )
    
    
    $
    (19.9
    )
    
    
    (420.9
    )Segment operating income excluding
special items and provisions:U.S. Mining Operations (A)(C)
    
    $
    242.3
    
    
    
    666.6South American Mines (B)(C)
    
    
    1,151.5
    
    
    
    323.9Primary Molybdenum
    
    
    218.7
    
    
    
    185.5$
    1,612.5
    
    
    
    1,176.0
 
 (A)
    
    U.S. Mining Operations comprised the following reportable segments: Morenci, Bagdad,
Sierrita, Chino/Cobre, Tyrone, Manufacturing and Sales, along with other mining activities.(B)
    
    South American Mines comprised the following segments: Candelaria/Ojos del Salado, Cerro
Verde and El Abra.(C)
    
    For the quarter and six months ended June 30, 2006, U.S. Mining Operations were negatively
impacted by net copper pricing adjustments of $677.2 million and $1,069.8 million,
respectively, associated with our copper collar and copper put options. For the quarter and
six months ended June 30, 2005, U.S. Mining Operations were negatively impacted by net copper
pricing adjustments of $18.3 million and $31.9 million, respectively, and South American Mines
were negatively impacted by $16.1 million and $57.5 million, respectively, associated with our
copper collar and copper put options.




---



##### Table of Contents



40 U.S. Mining Operations  Operating Income
   Morenci Segment  Operating Income
     Bagdad Segment  Operating Income
    Sierrita Segment  Operating Income




---



##### Table of Contents



41  Chino/Cobre Segment  Operating Income (Loss)
    Tyrone Segment  Operating Loss
    Manufacturing
Segment  Operating Income (Loss)
    Sales Segment  Operating Income (Loss)
    PDMC Other  Operating Loss




---



##### Table of Contents



42  South American Mines  Operating Income
   Candelaria/Ojos del Salado Segment  Operating Income
    Cerro Verde Segment  Operating Income




---



##### Table of Contents



43  El Abra Segment  Operating Income
    Primary Molybdenum  Operating Income
    i.e Metals Week Ryans Notes Metal Bulletin i.e.,
   Curtailed Properties




---



##### Table of Contents



44       PDMC  Other Matters




---



##### Table of Contents



45 Significant New Mexico Environmental and Reclamation Programs
       Significant Changes in International Closure and Reclamation Programs
 Sociedad Minera Cerro Verde S.A.A.
   Other
   
 RESULTS OF PHELPS DODGE INDUSTRIES




---



##### Table of Contents



46    Second Quarter2006
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    296.7
    
    
    
    281.6Operating income
    
    $
    16.8
    
    
    
    5.3Special items and provisions, net
    
    $
    
    
    
    
    (1.9
    )Operating income before special
items and provisions, net
    
    $
    16.8
    
    
    
    7.2Minority interests in consolidated subsidiaries
    
    $
    (0.4
    )
    
    
    (0.8
    )
   Six Months EndedJune 30,2006
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    617.8
    
    
    
    550.0Operating income
    
    $
    22.1
    
    
    
    17.3Special items and provisions, net
    
    $
    (8.7
    )
    
    
    (1.5
    )Operating income before special
items and provisions, net
    
    $
    30.8
    
    
    
    18.8Minority interests in consolidated subsidiaries
    
    $
    (2.5
    )
    
    
    (1.8
    )
  Wire and Cable  Sales
   Wire and Cable  Operating Income
       Second Quarter2006
    
    
    2005Restructuring programs/closures
    
    $
    
    
    
    
    (1.5
    )Asset impairment charges
    
    
    
    
    
    
    (0.4
    )Special, pre-tax items
    
    $
    
    
    
    
    (1.9
    )
   Six Months EndedJune 30,2006
    
    
    2005Sale of North American magnet wire assets:Gain on disposal
    
    $
    0.2
    
    
    
    Transaction and employee-related costs
    
    
    (4.7
    )
    
    
    Sale of HPC:Loss on disposal
    
    
    (1.5
    )
    
    
    Transaction and employee-related costs
    
    
    (2.7
    )
    
    
    Restructuring programs/closures
    
    
    
    
    
    
    (1.1
    )Asset impairment charges
    
    
    
    
    
    
    (0.4
    )Special, pre-tax items
    
    $
    (8.7
    )
    
    
    (1.5
    )
     
 DISCONTINUED OPERATIONS




---



##### Table of Contents



47      Second Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    
    
    
    
    185.6Income from discontinued operations
before loss on disposal
    
    $
    
    
    
    
    11.8Provision for taxes on income
    
    
    0.3
    
    
    
    (4.6
    )Income from discontinued operations
    
    $
    0.3
    
    
    
    7.2
   Six Months EndedJune 30,2006
    
    
    2005Sales and other operating revenues
    
    $
    179.8
    
    
    
    365.6Income from discontinued operations
before loss on disposal
    
    $
    17.0
    
    
    
    26.2Loss on disposal
    
    
    (29.5
    )
    
    
    Provision for taxes on income
    
    
    (4.1
    )
    
    
    (9.7
    )Income (loss) from discontinued operations
    
    $
    (16.6
    )
    
    
    16.5
   
 OTHER MATTERS RELATING TO THE CONSOLIDATED STATEMENT OF INCOME
 Cost of Products Sold
   Selling and General Administrative Expense
   Exploration and Research Expense
   Interest Expense, Net




---



##### Table of Contents



48   Gain on Sale of Cost-Basis Investment
  Change in Interest Gain
   Miscellaneous Income and Expense, Net
   Provision for Taxes on Income




---



##### Table of Contents



49   Minority Interests in Consolidated Subsidiaries
   
 CHANGES IN FINANCIAL CONDITION; CAPITALIZATION
 Cash and Cash Equivalents
     June 30,
    
    
    December 31,2006
    
    
    2005U.S. operations:Phelps Dodge*
    
    $
    1,464.5
    
    
    
    1,103.9Minority participants share
    
    
    0.4
    
    
    
    0.41,464.9
    
    
    
    1,104.3International operations:Phelps Dodge**
    
    
    732.3
    
    
    
    571.3Minority participants share**
    
    
    458.9
    
    
    
    261.91,191.2
    
    
    
    833.2Total consolidated cash
    
    $
    2,656.1
    
    
    
    1,937.5
  *
    
    At June 30, 2006, and December 31, 2005, U.S. operations included restricted cash of $18.8
million, and $9.4 million, respectively.**
    
    At June 30, 2006, and December 31, 2005, international operations included restricted cash of
$5.0 million and $11.4 million, respectively. At December 31, 2005, $5.0 million of restricted
cash was associated with minority participants shares.   Working Capital
  
    
    a $452.9 million increase in accounts payable and accrued
expenses mostly due to higher accruals for hedging and price
protection programs (approximately $417 million) mostly
associated with mark-to-market adjustments on copper collars
and higher balances for copper cathode and concentrate
purchases (approximately $58 million);
    
    a $250.6 million net decrease in assets held for sale and
liabilities related to assets held for sale due to the
completion of the sales of both Columbian ($159.7 million) and
the North American magnet wire assets ($90.9 million) in the
2006 first quarter; and
    
    a $119.9 million increase in accrued income taxes
primarily due to higher foreign, federal and state income tax
provisions (approximately $328 million) and prepaid
federal income taxes (approximately $94 million); partially
offset by payments, net of refunds (approximately $275
million); partially offset by
    
    a $564.2 million increase in accounts receivable
primarily due to copper receivables mostly resulting from
higher copper prices (approximately $569 million);
    
    a $142.2 million increase in prepaid expenses and other
current assets primarily due to higher prepaid federal income
taxes (approximately $94 million), fair value adjustments
associated with derivatives (approximately $21 million), an
increase in deferred charges associated with the proposed
Inco/Falconbridge merger (approximately $15 million) and
timing of payments for insurance (approximately $14 million);




---



##### Table of Contents



50 
    
    a $42.9 million increase in inventories primarily due to
(i) higher purchases at Wire and Cable (approximately $23
million) mostly in anticipation of increased customer demand
and higher copper prices, (ii) an increase associated with the
Morenci mill restart (approximately $8 million) and (iii) the
impact of adopting Emerging Issues Task Force (EITF) Issue No.
04-6, Accounting for Stripping Costs Incurred During
Production in the Mining Industry (approximately $7 million);
and
    
    a $41.3 million increase in mill and leach stockpiles
primarily due to the reclassification of the current portion
(approximately $37 million) and the adoption of EITF Issue No.
04-6 (approximately $4 million).
 Capital Expenditures and Investments
   Debt
     Dividends




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##### Table of Contents



51 Contractual Obligations
   
 Less Than
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 YearsShort-term debt
    
    $
    61.3
    
    
    
    61.3
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    766.9
    
    
    
    62.5
    
    
    
    22.2
    
    
    
    158.9
    
    
    
    523.3Scheduled interest payment obligations*
    
    
    1,103.1
    
    
    
    58.2
    
    
    
    127.7
    
    
    
    129.6
    
    
    
    787.6Asset retirement obligations**
    
    
    54.7
    
    
    
    23.7
    
    
    
    16.7
    
    
    
    9.7
    
    
    
    4.6Take-or-pay contracts
    
    
    1,060.9
    
    
    
    871.5
    
    
    
    127.0
    
    
    
    38.8
    
    
    
    23.6Total contractual cash obligations
    
    $
    3,046.9
    
    
    
    1,077.2
    
    
    
    293.6
    
    
    
    337.0
    
    
    
    1,339.1
  *
    
    Scheduled interest payment obligations were calculated using stated coupon rates for fixed
debt and interest rates applicable at June 30, 2006, for variable rate debt.**
    
    Asset retirement obligations only include our estimated contractual cash payments associated
with reclamation activities at certain sites for which our costs are estimable and the timing
of payments is reasonably determinable as of June 30, 2006. The timing and the amount of these
payments could change as a result of changes in regulatory requirements, changes in scope of
reclamation activities and as actual reclamation spending occurs. The table excludes remaining
cash payments of approximately $73 million that are expected to be incurred in connection with
accelerating certain closure projects, which are in the Companys discretion. Additionally, we
have also excluded estimated payments for reclamation activities that are expected to occur
after five years and the associated trust assets of approximately $498 million that have been
dedicated to funding these reclamation activities because the majority of these cash flows are
expected to occur over an extended period of time and are dependent upon the timing of the end
of the mine life, which is subject to revision.
    Guarantees
  Other Items that May Affect Liquidity




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53     de minimis
  Inco/Falconbridge
Merger




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54     
 Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 Part
II. Other Information
 
 Item 1.
Legal Proceedings
  Phelps Dodge Tyrone, Inc. v. New Mexico Water Quality Control Commission
(WQCC)
  In Re Carbon Black Antitrust Litigation
   
 Item 1A.
Risk Factors




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55  Our
proposed merger with Inco Ltd. and, if applicable, Falconbridge Ltd.
raises a number of risks.
   
 Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    (c) Total Number of
    
    (d) Maximum Number (orShares (or Units)
    
    Approximate Dollar Value)(a) Total Number
    
    (b) Average Price
    
    Purchased as Part of
    
    of Shares (or Units) That Mayof Shares (or Units)
    
    Paid Per
    
    Publicly Announced
    
    Yet Be Purchased UnderPeriod
    
    Purchased*
    
    Share (or Unit)
    
    Plans or Programs
    
    the Plans or ProgramsApril 1-30, 2006
    
    
    167
    
    
    $
    83.62
    
    
    
    
    
    
    
    May 1-31, 2006
    
    
    449
    
    
    
    87.47
    
    
    
    
    
    
    
    June 1-30, 2006
    
    
    1,188
    
    
    
    82.47
    
    
    
    
    
    
    
    Total
    
    
    1,804
    
    
    
    83.82
    
    
    
    
    
    
    
    
  *
    
    This category includes shares repurchased under the Companys applicable stock option and
restricted stock plans (Plans) and its non-qualified supplemental savings plan (SSP). Through
the Plans, the Company repurchases shares to satisfy tax obligations on restricted stock
awards, and in the SSP, the Company repurchases shares as a result of changes in investment
elections by plan participants.




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56 
 Item 4.
Submission of Matters to a Vote of Security Holders
   For
    
    
    WithheldElection of Directors:Charles C. Krulak
    
    
    172,871,158
    
    
    
    1,483,208Dustan E. McCoy
    
    
    172,896,127
    
    
    
    1,458,239William J. Post
    
    
    168,286,932
    
    
    
    6,067,434Martin H. Richenhagen
    
    
    172,906,595
    
    
    
    1,447,771Jack E. Thompson
    
    
    172,860,779
    
    
    
    1,493,587
 For
    
    
    Against
    
    
    AbstainShareholder Proposals:Approval of the Phelps Dodge
Corporation 2007 Directors
Stock Unit Plan
    
    
    165,574,272
    
    
    
    7,641,657
    
    
    
    1,138,437Ratification of the appointment
of independent registered
public accountants
    
    
    172,353,332
    
    
    
    987,587
    
    
    
    1,013,497
    
 Item 6.
Exhibits
  
  Signatures
   PHELPS DODGE CORPORATION
 Date: July 26, 2006
    By:
    /s/ Denise R. DannerDenise R. DannerVice President and Controller
(Principal Accounting Officer) 
 Index to Exhibits
 10.1
    
    Phelps Dodge Corporation 2007 Directors Stock Unit Plan effective January 1, 2007, as
approved by the Companys shareholders on May 26, 2006 (incorporated by reference to Appendix
A of the Companys 2006 definitive Proxy Statement filed April 13, 2006 (SEC File No. 1-82)).10.2
    
    Form of First Amendment to the Change of Control Agreements entered into between the Company
and four of its named executive officers and other members of its senior management team.10.3
    
    First Amendment (dated as of June 24, 2006) to the Change of Control Agreement entered into
between the Company and Arthur R. Miele, dated as of January 1, 2003.10.4
    
    Form of First Amendment to the Change of Control Agreements entered into between the Company
and a second group of the Companys key management personnel.10.5
    
    Form of First Amendment to each of the various Stock Option Agreements entered into between
the Company and its named executive officers and other members of its
senior management team.10.6
    
    Form of First Amendment to each of the various Stock Option Agreements entered into between
the Company and a second group of the Companys key management personnel.10.7
    
    Form of First Amendment to each of the various Restricted Stock Award Agreements entered into
between the Company and its named executive officers and other members of its senior
management team.10.8
    
    Form of First Amendment to each of the various Restricted Stock Award Agreements entered into
between the Company and a second group of the Companys key management personnel.10.9
    
    Combination Agreement between the Company and Inco Ltd. (dated as of June 25, 2006)
(incorporated by reference to a Form 8-K filed on July 17, 2006 (SEC File No. 1-82)).10.10
    
    Waiver and Amendment to Combination Agreement between the Company and Inco Ltd. (dated as of
July 16, 2006) (incorporated by reference to a Form 8-K filed on July 17, 2006) (SEC File No.
1-82).11
    
    Computation of per share earnings.12
    
    Computation of ratios of total debt to total capitalization.15
    
    Letter from PricewaterhouseCoopers LLP with respect to unaudited interim financial
information.




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57 31
    
    Certifications of J. Steven Whisler, Chairman and Chief Executive Officer of the Company,
and Ramiro G. Peru, Executive Vice President and Chief Financial Officer of the Company,
pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002.32
    
    Certifications of J. Steven Whisler, Chairman and Chief Executive Officer of the Company,
and Ramiro G. Peru, Executive Vice President and Chief Financial Officer of the Company,
pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002.