##### 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 SEPTEMBER 30, 2006o
    
    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(State of Incorporation)
    
    13-1808503(I.R.S. Employer Identification No.)
 
 
 
 þ o
  þ o o
 o þ




---



##### 



- i - PHELPS DODGE CORPORATION
 Quarterly Report on Form 10-Q
 For the Quarter Ended September 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
    
    
    23Report of Independent Registered Public Accounting Firm
    
    
    23Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsResults of Operations
    
    
    24Results of Phelps Dodge Mining Company
    
    
    28Results of Phelps Dodge Industries
    
    
    47Discontinued Operations
    
    
    48Other Matters Relating to the Consolidated Statement of Income
    
    
    48Changes in Financial Condition; Capitalization
    
    
    50Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    55Item 4. Controls and Procedures
    
    
    55Part II. Other InformationItem 1. Legal Proceedings
    
    
    55Item 1A. Risk Factors
    
    
    56Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56Item 6. Exhibits
    
    
    57Signatures
    
    
    57Index to Exhibits
    
    
    57EX-11EX-12EX-15EX-31EX-32




---



##### Table of Contents



1
 PHELPS DODGE CORPORATION AND SUBSIDIARIES
 
  
 Item 1. Financial Statements
 PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF INCOME
 
 Nine Months EndedThird Quarter
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales and other operating revenues
    
    $
    3,458.3
    
    
    
    2,179.0
    
    
    
    8,675.1
    
    
    
    6,031.5Operating costs and expensesCost of products sold (exclusive of items shown separately below)
    
    
    1,899.4
    
    
    
    1,396.5
    
    
    
    5,171.0
    
    
    
    3,769.7Depreciation, depletion and amortization
    
    
    109.7
    
    
    
    109.5
    
    
    
    324.6
    
    
    
    333.9Selling and general administrative expense
    
    
    42.9
    
    
    
    42.4
    
    
    
    141.5
    
    
    
    118.4Exploration and research expense
    
    
    39.8
    
    
    
    25.3
    
    
    
    103.9
    
    
    
    67.3Special items and provisions, net (see Note 4)
    
    
    32.5
    
    
    
    45.0
    
    
    
    62.6
    
    
    
    481.32,124.3
    
    
    
    1,618.7
    
    
    
    5,803.6
    
    
    
    4,770.6Operating income
    
    
    1,334.0
    
    
    
    560.3
    
    
    
    2,871.5
    
    
    
    1,260.9Interest expense
    
    
    (18.5
    )
    
    
    (17.5
    )
    
    
    (52.6
    )
    
    
    (62.0
    )Capitalized interest
    
    
    17.0
    
    
    
    6.7
    
    
    
    41.2
    
    
    
    9.1Early debt extinguishment costs (see Note 12)
    
    
    
    
    
    
    (54.0
    )
    
    
    
    
    
    
    (54.0
    )Gain on sale of cost-basis investment (see Note 13)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438.4Change in interest gain (see Note 14)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.5Miscellaneous income and expense, net (see Note 16)
    
    
    136.3
    
    
    
    20.0
    
    
    
    196.9
    
    
    
    75.7Income from continuing operations before taxes, minority interests in consolidated
subsidiaries and equity in net earnings (losses) of affiliated companies
    
    
    1,468.8
    
    
    
    515.5
    
    
    
    3,057.0
    
    
    
    1,827.6Provision for taxes on income (see Note 9)
    
    
    (375.3
    )
    
    
    (104.3
    )
    
    
    (823.8
    )
    
    
    (300.4
    )Minority interests in consolidated subsidiaries
    
    
    (206.0
    )
    
    
    (51.6
    )
    
    
    (525.3
    )
    
    
    (116.5
    )Equity in net earnings (losses) of affiliated companies
    
    
    1.6
    
    
    
    0.5
    
    
    
    3.3
    
    
    
    1.9Income from continuing operations
    
    
    889.1
    
    
    
    360.1
    
    
    
    1,711.2
    
    
    
    1,412.6Discontinued operations:Income (loss) from discontinued operations, net of taxes (see Note 3)
    
    
    (1.1
    )
    
    
    6.0
    
    
    
    (17.7
    )
    
    
    22.5Net income
    
    
    888.0
    
    
    
    366.1
    
    
    
    1,693.5
    
    
    
    1,435.1Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6.8
    )Net income applicable to common shares
    
    $
    888.0
    
    
    
    366.1
    
    
    
    1,693.5
    
    
    
    1,428.3Weighted average number of common shares outstanding  basic*
    
    
    202.5
    
    
    
    197.2
    
    
    
    202.3
    
    
    
    193.7Basic earnings per common share:Income from continuing operations
    
    $
    4.39
    
    
    
    1.83
    
    
    
    8.46
    
    
    
    7.26Income (loss) from discontinued operations
    
    
    (0.01
    )
    
    
    0.03
    
    
    
    (0.09
    )
    
    
    0.11Basic earnings per common share
    
    $
    4.38
    
    
    
    1.86
    
    
    
    8.37
    
    
    
    7.37Weighted average number of common shares outstanding  diluted*
    
    
    203.5
    
    
    
    202.7
    
    
    
    203.4
    
    
    
    202.2Diluted earnings per common share:Income from continuing operations
    
    $
    4.37
    
    
    
    1.78
    
    
    
    8.42
    
    
    
    6.99Income (loss) from discontinued operations
    
    
    (0.01
    )
    
    
    0.03
    
    
    
    (0.09
    )
    
    
    0.11Diluted earnings per common share
    
    $
    4.36
    
    
    
    1.81
    
    
    
    8.33
    
    
    
    7.10
 
 *
    
    Refer to Note 15 for discussion of the March 10, 2006, stock split.




---



##### Table of Contents



2 PHELPS DODGE CORPORATION
 
 CONSOLIDATED BALANCE SHEET
 
 September 30,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,086.1
    
    
    
    1,916.7Restricted cash
    
    
    40.1
    
    
    
    20.8Accounts receivable, less allowance for doubtful
accounts (2006 - $7.2; 2005 - $6.9)
    
    
    1,529.9
    
    
    
    1,028.0Mill and leach stockpiles
    
    
    99.9
    
    
    
    36.6Inventories
    
    
    374.0
    
    
    
    329.5Supplies
    
    
    227.1
    
    
    
    199.7Prepaid expenses and other current assets
    
    
    128.9
    
    
    
    83.6Deferred income taxes
    
    
    192.1
    
    
    
    82.0Assets held for sale
    
    
    
    
    
    
    373.8Current assets
    
    
    6,678.1
    
    
    
    4,070.7Investments and long-term receivables
    
    
    192.3
    
    
    
    142.6Property, plant and equipment, net
    
    
    5,370.3
    
    
    
    4,830.9Long-term mill and leach stockpiles
    
    
    176.9
    
    
    
    133.3Deferred income taxes
    
    
    76.9
    
    
    
    99.6Goodwill
    
    
    12.5
    
    
    
    22.3Intangible assets, net
    
    
    7.1
    
    
    
    7.5Long-term assets held for sale
    
    
    
    
    
    
    431.4Trust assets
    
    
    579.2
    
    
    
    258.4Other assets and deferred charges
    
    
    355.8
    
    
    
    361.3$
    13,449.1
    
    
    
    10,358.0LiabilitiesCurrent liabilities:Short-term debt
    
    $
    63.0
    
    
    
    14.3Current portion of long-term debt
    
    
    62.2
    
    
    
    2.5Accounts payable and accrued expenses
    
    
    2,102.9
    
    
    
    1,445.7Accrued income taxes
    
    
    248.0
    
    
    
    23.6Liabilities related to assets held for sale
    
    
    
    
    
    
    123.2Current liabilities
    
    
    2,476.1
    
    
    
    1,609.3Long-term debt
    
    
    796.4
    
    
    
    677.7Deferred income taxes
    
    
    835.1
    
    
    
    558.0Long-term liabilities related to assets held for sale
    
    
    
    
    
    
    61.3Other liabilities and deferred credits
    
    
    1,430.3
    
    
    
    934.25,537.9
    
    
    
    3,840.5Commitments and contingencies (see Notes 6, 7 and 9)Minority interests in consolidated subsidiaries
    
    
    1,427.3
    
    
    
    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
    
    
    1,365.9
    
    
    
    1,998.8Retained earnings**
    
    
    3,937.5
    
    
    
    3,158.8Accumulated other comprehensive loss
    
    
    (94.4
    )
    
    
    (154.5
    )Other
    
    
    
    
    
    
    (36.6
    )6,483.9
    
    
    
    5,601.6$
    13,449.1
    
    
    
    10,358.0
 
 *
    
    Refer to Note 15 for discussion of the March 10, 2006,
stock split.**
    
    Included cumulative effect adjustment credit of $19.8 million for the adoption of EITF Issue No.
04-6 in the 2006 first quarter. Refer to Note 5 for further discussion.




---



##### Table of Contents



3 PHELPS DODGE CORPORATION
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 
 Nine Months EndedSeptember 30,2006
    
    
    2005Operating activitiesNet income
    
    $
    1,693.5
    
    
    
    1,435.1Adjustments to reconcile net income to net cash provided by operating activities:Unrealized losses on copper collars and copper put options
    
    
    1,215.1
    
    
    
    164.5Depreciation, depletion and amortization
    
    
    324.9
    
    
    
    377.3Deferred income tax provision (benefit)
    
    
    145.8
    
    
    
    (3.9
    )Equity in net earnings (losses) of affiliated companies, net of dividends received
    
    
    (1.2
    )
    
    
    0.3Gain on sale of cost-basis investment
    
    
    
    
    
    
    (438.4
    )Change in interest gain
    
    
    
    
    
    
    (159.5
    )Special items and provisions, net
    
    
    62.6
    
    
    
    481.3Early debt extinguishment costs
    
    
    
    
    
    
    54.0Minority interests in consolidated subsidiaries
    
    
    525.7
    
    
    
    117.4Loss on disposition of discontinued operations
    
    
    29.7
    
    
    
    Changes in current assets and liabilities:Accounts receivable
    
    
    (543.4
    )
    
    
    (240.1
    )Repayment of securitized accounts receivable
    
    
    
    
    
    
    (85.0
    )Mill and leach stockpiles
    
    
    (59.2
    )
    
    
    0.5Inventories
    
    
    (34.0
    )
    
    
    (69.4
    )Supplies
    
    
    (28.1
    )
    
    
    (26.1
    )Prepaid expenses and other current assets
    
    
    (50.5
    )
    
    
    (54.6
    )Interest payable
    
    
    9.4
    
    
    
    4.6Other accounts payable
    
    
    35.9
    
    
    
    71.3Accrued income taxes
    
    
    218.8
    
    
    
    (18.4
    )Realized losses on 2005 copper collars
    
    
    (187.2
    )
    
    
    Other accrued expenses
    
    
    14.7
    
    
    
    (0.4
    )Pension plan contributions
    
    
    
    
    
    
    (250.0
    )Other operating, net
    
    
    (46.3
    )
    
    
    (61.4
    )Net cash provided by operating activities
    
    
    3,326.2
    
    
    
    1,299.1Investing activitiesCapital outlays
    
    
    (830.3
    )
    
    
    (392.5
    )Capitalized interest
    
    
    (41.6
    )
    
    
    (9.9
    )Investments in subsidiaries and other, net of cash received
    
    
    0.3
    
    
    
    (11.2
    )Proceeds from the sale of Columbian Chemicals
    
    
    505.6
    
    
    
    Proceeds from the sale of Magnet Wire North American assets
    
    
    136.6
    
    
    
    Proceeds from the sale of HPC
    
    
    49.2
    
    
    
    Proceeds from asset dispositions
    
    
    21.1
    
    
    
    6.2Proceeds from sale of cost-basis investments, net of expenses
    
    
    
    
    
    
    451.6Restricted cash
    
    
    (19.3
    )
    
    
    (89.1
    )Global environmental trust contribution
    
    
    (300.0
    )
    
    
    Other investing, net
    
    
    (0.1
    )
    
    
    (2.3
    )Net cash used in investing activities
    
    
    (478.5
    )
    
    
    (47.2
    )Financing activitiesNet increase (decrease) in short-term debt
    
    
    47.7
    
    
    
    (48.7
    )Proceeds from issuance of debt
    
    
    182.0
    
    
    
    Payment of debt
    
    
    (2.6
    )
    
    
    (313.8
    )Common dividends
    
    
    (934.6
    )
    
    
    (84.8
    )Preferred dividends
    
    
    
    
    
    
    (10.1
    )Minority interest dividends
    
    
    (3.1
    )
    
    
    (28.4
    )Issuance of shares, net
    
    
    25.6
    
    
    
    52.4Debt issue costs
    
    
    (2.7
    )
    
    
    (5.8
    )Proceeds from issuance of Cerro Verde stock, net of expenses
    
    
    
    
    
    
    441.8Other financing, net
    
    
    
    
    
    
    (55.8
    )Net cash used in financing activities
    
    
    (687.7
    )
    
    
    (53.2
    )Effect of exchange rate impact on cash and cash equivalents
    
    
    9.4
    
    
    
    17.4Increase in cash and cash equivalents
    
    
    2,169.4
    
    
    
    1,216.1Cash and cash equivalents at beginning of period
    
    
    1,916.7
    
    
    
    1,200.1Cash and cash equivalents at end of period
    
    $
    4,086.1
    
    
    
    2,416.2




---



##### Table of Contents



4 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
    
    
    0.7
    
    
    
    4.1
    
    
    
    25.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.7Restricted shares issued/cancelled, net,
including tax benefit
    
    
    0.1
    
    
    
    0.7
    
    
    
    13.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14.5Directors stock compensation
    
    
    
    
    
    
    0.1
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5Common shares purchased
    
    
    
    
    
    
    (0.2
    )
    
    
    (2.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.2
    )Dividends on common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (934.6
    )
    
    
    
    
    
    
    
    
    
    
    (934.6
    )Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,693.5
    
    
    
    
    
    
    
    
    
    
    
    1,693.5Other comprehensive income (loss), net of tax:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35.6
    
    
    
    
    
    
    
    35.6Net loss on derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.3
    )
    
    
    
    
    
    
    (5.3
    )Other investment adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20.9
    
    
    
    
    
    
    
    20.9Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.7
    
    
    
    
    
    
    
    8.7Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60.1
    
    
    
    
    
    
    
    60.1Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,753.6Stock split****
    
    
    101.6
    
    
    
    635.1
    
    
    
    (635.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at September 30, 2006
    
    
    204.0
    
    
    $
    1,274.9
    
    
    $
    1,365.9
    
    
    $
    3,937.5
    
    
    $
    (94.4
    )
    
    $
    
    
    
    $
    6,483.9
 
 *
    
    As of September 30, 2006, this balance comprised $136.3 million of cumulative translation
adjustments and $17.5 million of cumulative minimum pension liability adjustments; partially offset
by $0.5 million of cumulative unrealized gains on securities and $58.9 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 March 10, 2006, stock split.




---



##### Table of Contents



5 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
    
    
    MolybdenumThird Quarter 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    1.8
    
    
    
    6.6
    
    
    
    
    
    
    
    289.5
    
    
    
    29.1
    
    
    
    273.3
    
    
    
    442.0Intersegment
    
    
    497.4
    
    
    
    172.6
    
    
    
    241.8
    
    
    
    129.9
    
    
    
    46.1
    
    
    
    40.2
    
    
    
    159.7
    
    
    
    190.0
    
    
    
    Depreciation, depletion and amortization
    
    
    15.4
    
    
    
    6.0
    
    
    
    4.3
    
    
    
    5.9
    
    
    
    3.0
    
    
    
    10.1
    
    
    
    8.5
    
    
    
    30.2
    
    
    
    10.2Operating income (loss) before special items and provisions
    
    
    308.0
    
    
    
    98.1
    
    
    
    163.3
    
    
    
    67.4
    
    
    
    23.0
    
    
    
    250.6
    
    
    
    92.6
    
    
    
    336.4
    
    
    
    100.4Special items and provisions, net
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (6.8
    )
    
    
    (1.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.0Operating income (loss)
    
    
    307.4
    
    
    
    98.1
    
    
    
    163.3
    
    
    
    60.6
    
    
    
    21.2
    
    
    
    250.6
    
    
    
    92.6
    
    
    
    336.4
    
    
    
    107.4Interest income
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    4.6
    
    
    
    2.8
    
    
    
    9.9
    
    
    
    0.2Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.6
    
    
    
    0.4
    
    
    
    Benefit (provision) for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80.7
    )
    
    
    16.7
    
    
    
    (121.2
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34.8
    )
    
    
    (58.3
    )
    
    
    (110.4
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    Assets at September 30
    
    
    1,145.2
    
    
    
    445.4
    
    
    
    330.7
    
    
    
    456.1
    
    
    
    119.1
    
    
    
    1,404.5
    
    
    
    1,636.0
    
    
    
    1,822.1
    
    
    
    938.6Expenditures for segment assets
    
    
    60.6
    
    
    
    6.1
    
    
    
    6.9
    
    
    
    6.3
    
    
    
    4.0
    
    
    
    3.7
    
    
    
    123.2
    
    
    
    3.0
    
    
    
    18.6Third Quarter 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    6.9
    
    
    
    8.2
    
    
    
    
    
    
    
    133.6
    
    
    
    14.2
    
    
    
    78.1
    
    
    
    468.0Intersegment
    
    
    283.0
    
    
    
    180.1
    
    
    
    223.4
    
    
    
    79.1
    
    
    
    31.8
    
    
    
    59.5
    
    
    
    80.1
    
    
    
    80.8
    
    
    
    Depreciation, depletion and amortization
    
    
    15.7
    
    
    
    7.6
    
    
    
    3.5
    
    
    
    5.1
    
    
    
    0.2
    
    
    
    9.6
    
    
    
    7.0
    
    
    
    28.6
    
    
    
    9.7Operating income (loss) before special items and provisions
    
    
    128.2
    
    
    
    112.4
    
    
    
    153.9
    
    
    
    18.6
    
    
    
    3.0
    
    
    
    73.1
    
    
    
    55.8
    
    
    
    52.6
    
    
    
    71.9Special items and provisions, net
    
    
    0.4
    
    
    
    
    
    
    
    (8.6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    128.6
    
    
    
    112.4
    
    
    
    145.3
    
    
    
    18.6
    
    
    
    3.0
    
    
    
    73.1
    
    
    
    55.8
    
    
    
    52.6
    
    
    
    71.9Interest income
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    2.6
    
    
    
    2.6
    
    
    
    0.8
    
    
    
    0.2Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    4.9
    
    
    
    (0.5
    )
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13.0
    )
    
    
    (15.7
    )
    
    
    (18.0
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9.5
    )
    
    
    (23.8
    )
    
    
    (16.6
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Assets at September 30
    
    
    918.3
    
    
    
    446.0
    
    
    
    328.5
    
    
    
    429.8
    
    
    
    73.2
    
    
    
    1,041.4
    
    
    
    913.8
    
    
    
    1,003.2
    
    
    
    934.9Expenditures for segment assets
    
    
    16.1
    
    
    
    10.6
    
    
    
    5.0
    
    
    
    2.9
    
    
    
    2.7
    
    
    
    4.6
    
    
    
    106.7
    
    
    
    6.4
    
    
    
    18.1
 Corporate,Manufac-
    
    
    
    
    
    
    PDMC
    
    
    PDMC
    
    
    PDMC
    
    
    PDI 
    
    
    Other &
    
    
    Discontinuedturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    Subtotal
    
    
    Wire & Cable
    
    
    Eliminations
    
    
    Operations
    
    
    TotalsThird Quarter 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    1,833.7
    
    
    
    219.6
    
    
    
    3,095.6
    
    
    
    47.4
    
    
    
    3,143.0
    
    
    
    315.3
    
    
    
    
    
    
    
    
    
    
    
    3,458.3Intersegment
    
    
    1.4
    
    
    
    1.5
    
    
    
    1,480.6
    
    
    
    (1,480.6
    )
    
    
    
    
    
    
    0.2
    
    
    
    (0.2
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    6.3
    
    
    
    
    
    
    
    99.9
    
    
    
    4.0
    
    
    
    103.9
    
    
    
    3.7
    
    
    
    2.1
    
    
    
    
    
    
    
    109.7Operating income (loss) before special items and provisions
    
    
    (7.7
    )
    
    
    0.3
    
    
    
    1,432.4
    
    
    
    (53.4
    )
    
    
    1,379.0
    
    
    
    22.1
    
    
    
    (34.6
    )
    
    
    
    
    
    
    1,366.5Special items and provisions, net
    
    
    (1.0
    )
    
    
    
    
    
    
    (3.2
    )
    
    
    0.2
    
    
    
    (3.0
    )
    
    
    (7.1
    )
    
    
    (22.4
    )
    
    
    
    
    
    
    (32.5
    )Operating income (loss)
    
    
    (8.7
    )
    
    
    0.3
    
    
    
    1,429.2
    
    
    
    (53.2
    )
    
    
    1,376.0
    
    
    
    15.0
    
    
    
    (57.0
    )
    
    
    
    
    
    
    1,334.0Interest income
    
    
    
    
    
    
    
    
    
    
    18.3
    
    
    
    0.5
    
    
    
    18.8
    
    
    
    0.9
    
    
    
    29.3
    
    
    
    
    
    
    
    49.0Interest expense, net
    
    
    (1.1
    )
    
    
    (0.3
    )
    
    
    9.6
    
    
    
    1.2
    
    
    
    10.8
    
    
    
    (2.4
    )
    
    
    (9.9
    )
    
    
    
    
    
    
    (1.5
    )Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (185.2
    )
    
    
    
    
    
    
    (185.2
    )
    
    
    
    
    
    
    (190.1
    )
    
    
    
    
    
    
    (375.3
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (203.5
    )
    
    
    
    
    
    
    (203.5
    )
    
    
    (2.5
    )
    
    
    
    
    
    
    
    
    
    
    (206.0
    )Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    0.8
    
    
    
    0.5
    
    
    
    
    
    
    
    1.6Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.1
    )
    
    
    (1.1
    )Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    1.0
    
    
    
    1.9
    
    
    
    6.9
    
    
    
    23.5
    
    
    
    
    
    
    
    32.3Assets at September 30
    
    
    932.9
    
    
    
    111.3
    
    
    
    9,341.9
    
    
    
    49.8
    
    
    
    9,391.7
    
    
    
    585.6
    
    
    
    3,471.8
    
    
    
    
    
    
    
    13,449.1Expenditures for segment assets
    
    
    3.4
    
    
    
    
    
    
    
    235.8
    
    
    
    5.0
    
    
    
    240.8
    
    
    
    4.7
    
    
    
    2.4
    
    
    
    
    
    
    
    247.9Third Quarter 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    894.2
    
    
    
    249.2
    
    
    
    1,852.4
    
    
    
    7.3
    
    
    
    1,859.7
    
    
    
    319.3
    
    
    
    
    
    
    
    
    
    
    
    2,179.0Intersegment
    
    
    30.6
    
    
    
    77.3
    
    
    
    1,125.7
    
    
    
    (1,046.6
    )
    
    
    79.1
    
    
    
    0.3
    
    
    
    (79.4
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    11.2
    
    
    
    
    
    
    
    98.2
    
    
    
    2.6
    
    
    
    100.8
    
    
    
    7.0
    
    
    
    1.7
    
    
    
    
    
    
    
    109.5Operating income (loss) before special items and provisions
    
    
    0.2
    
    
    
    2.3
    
    
    
    672.0
    
    
    
    (45.1
    )
    
    
    626.9
    
    
    
    11.2
    
    
    
    (32.8
    )
    
    
    
    
    
    
    605.3Special items and provisions, net
    
    
    0.1
    
    
    
    
    
    
    
    (8.1
    )
    
    
    (0.4
    )
    
    
    (8.5
    )
    
    
    (1.8
    )
    
    
    (34.7
    )
    
    
    
    
    
    
    (45.0
    )Operating income (loss)
    
    
    0.3
    
    
    
    2.3
    
    
    
    663.9
    
    
    
    (45.5
    )
    
    
    618.4
    
    
    
    9.4
    
    
    
    (67.5
    )
    
    
    
    
    
    
    560.3Interest income
    
    
    
    
    
    
    0.1
    
    
    
    7.0
    
    
    
    
    
    
    
    7.0
    
    
    
    0.5
    
    
    
    11.7
    
    
    
    
    
    
    
    19.2Interest expense, net
    
    
    (0.8
    )
    
    
    (0.2
    )
    
    
    3.5
    
    
    
    0.9
    
    
    
    4.4
    
    
    
    (1.9
    )
    
    
    (13.3
    )
    
    
    
    
    
    
    (10.8
    )Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (46.7
    )
    
    
    
    
    
    
    (46.7
    )
    
    
    
    
    
    
    (57.6
    )
    
    
    
    
    
    
    (104.3
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (49.9
    )
    
    
    0.1
    
    
    
    (49.8
    )
    
    
    (1.8
    )
    
    
    
    
    
    
    
    
    
    
    (51.6
    )Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    0.2
    
    
    
    0.5
    
    
    
    
    
    
    
    0.5Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.0
    
    
    
    6.0Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.9
    
    
    
    1.4
    
    
    
    6.4
    
    
    
    23.8
    
    
    
    
    
    
    
    31.6Assets at September 30
    
    
    330.6
    
    
    
    36.7
    
    
    
    6,456.4
    
    
    
    6.6
    
    
    
    6,463.0
    
    
    
    686.9
    
    
    
    2,407.1
    
    
    
    685.0
    
    
    
    10,242.0Expenditures for segment assets
    
    
    5.0
    
    
    
    
    
    
    
    178.1
    
    
    
    24.0
    
    
    
    202.1
    
    
    
    4.7
    
    
    
    5.0
    
    
    
    12.3
    
    
    
    224.1
 
 *
    
    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



6 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
    
    
    MolybdenumNine Months Ended September 30, 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    19.4
    
    
    
    26.3
    
    
    
    
    
    
    
    781.6
    
    
    
    96.1
    
    
    
    692.9
    
    
    
    1,295.6Intersegment
    
    
    884.6
    
    
    
    391.5
    
    
    
    587.7
    
    
    
    256.5
    
    
    
    82.9
    
    
    
    190.1
    
    
    
    394.2
    
    
    
    510.3
    
    
    
    Depreciation, depletion and amortization
    
    
    44.4
    
    
    
    17.6
    
    
    
    12.2
    
    
    
    19.0
    
    
    
    8.9
    
    
    
    31.4
    
    
    
    22.8
    
    
    
    91.1
    
    
    
    31.7Operating income (loss) before special items and provisions
    
    
    393.2
    
    
    
    171.6
    
    
    
    360.4
    
    
    
    72.1
    
    
    
    11.1
    
    
    
    657.3
    
    
    
    327.5
    
    
    
    846.3
    
    
    
    319.1Special items and provisions, net
    
    
    (0.6
    )
    
    
    2.2
    
    
    
    (5.1
    )
    
    
    (16.9
    )
    
    
    (1.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.9Operating income (loss)
    
    
    392.6
    
    
    
    173.8
    
    
    
    355.3
    
    
    
    55.2
    
    
    
    9.3
    
    
    
    657.3
    
    
    
    327.5
    
    
    
    846.3
    
    
    
    326.0Interest income
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    7.3
    
    
    
    6.6
    
    
    
    17.0
    
    
    
    0.7Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    26.7
    
    
    
    1.2
    
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (222.1
    )
    
    
    (11.2
    )
    
    
    (311.8
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84.7
    )
    
    
    (164.2
    )
    
    
    (271.4
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    Assets at September 30
    
    
    1,145.2
    
    
    
    445.4
    
    
    
    330.7
    
    
    
    456.1
    
    
    
    119.1
    
    
    
    1,404.5
    
    
    
    1,636.0
    
    
    
    1,822.1
    
    
    
    938.6Expenditures for segment assets
    
    
    145.1
    
    
    
    18.9
    
    
    
    22.6
    
    
    
    13.2
    
    
    
    14.2
    
    
    
    12.3
    
    
    
    445.1
    
    
    
    14.8
    
    
    
    34.8Nine Months Ended September 30, 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    
    
    
    
    
    
    
    
    12.2
    
    
    
    14.0
    
    
    
    
    
    
    
    356.0
    
    
    
    47.5
    
    
    
    238.5
    
    
    
    1,470.9Intersegment
    
    
    773.3
    
    
    
    526.8
    
    
    
    635.3
    
    
    
    243.6
    
    
    
    94.6
    
    
    
    155.1
    
    
    
    196.2
    
    
    
    233.8
    
    
    
    Depreciation, depletion and amortization
    
    
    46.9
    
    
    
    23.3
    
    
    
    11.2
    
    
    
    15.5
    
    
    
    7.2
    
    
    
    28.8
    
    
    
    20.2
    
    
    
    90.1
    
    
    
    31.6Operating income (loss) before special items and provisions
    
    
    328.9
    
    
    
    313.3
    
    
    
    424.0
    
    
    
    49.2
    
    
    
    7.5
    
    
    
    213.1
    
    
    
    131.4
    
    
    
    160.9
    
    
    
    257.4Special items and provisions, net
    
    
    (0.2
    )
    
    
    
    
    
    
    (8.6
    )
    
    
    (64.5
    )
    
    
    (215.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    328.7
    
    
    
    313.3
    
    
    
    415.4
    
    
    
    (15.3
    )
    
    
    (208.2
    )
    
    
    213.1
    
    
    
    131.4
    
    
    
    160.9
    
    
    
    257.4Interest income
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    4.8
    
    
    
    4.9
    
    
    
    1.2
    
    
    
    0.4Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    6.6
    
    
    
    (5.0
    )
    
    
    Gain on sale of cost-basis investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87.2Change in interest gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.5
    
    
    
    
    
    
    
    Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42.1
    )
    
    
    (11.5
    )
    
    
    (56.4
    )
    
    
    Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25.9
    )
    
    
    (38.8
    )
    
    
    (48.3
    )
    
    
    Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Assets at September 30
    
    
    918.3
    
    
    
    446.0
    
    
    
    328.5
    
    
    
    429.8
    
    
    
    73.2
    
    
    
    1,041.4
    
    
    
    913.8
    
    
    
    1,003.2
    
    
    
    934.9Expenditures for segment assets
    
    
    23.0
    
    
    
    21.9
    
    
    
    11.6
    
    
    
    11.9
    
    
    
    4.5
    
    
    
    12.5
    
    
    
    178.1
    
    
    
    15.8
    
    
    
    25.1
 Corporate,Manufac-
    
    
    
    
    
    
    PDMC
    
    
    PDMC
    
    
    PDMC
    
    
    PDI 
    
    
    Other &
    
    
    Discontinuedturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    Subtotal
    
    
    Wire & Cable
    
    
    Eliminations
    
    
    Operations
    
    
    TotalsNine Months Ended September 30, 2006Sales and other operating revenues:Unaffiliated customers
    
    $
    4,832.5
    
    
    
    (70.2
    )
    
    
    7,674.2
    
    
    
    67.8
    
    
    
    7,742.0
    
    
    
    933.1
    
    
    
    
    
    
    
    
    
    
    
    8,675.1Intersegment
    
    
    93.5
    
    
    
    57.2
    
    
    
    3,448.5
    
    
    
    (3,393.9
    )
    
    
    54.6
    
    
    
    0.5
    
    
    
    (55.1
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    17.7
    
    
    
    
    
    
    
    296.8
    
    
    
    9.9
    
    
    
    306.7
    
    
    
    11.9
    
    
    
    6.0
    
    
    
    
    
    
    
    324.6Operating income (loss) before special items and provisions
    
    
    (0.7
    )
    
    
    8.2
    
    
    
    3,166.1
    
    
    
    (174.6
    )
    
    
    2,991.5
    
    
    
    52.9
    
    
    
    (110.3
    )
    
    
    
    
    
    
    2,934.1Special items and provisions, net
    
    
    (2.2
    )
    
    
    
    
    
    
    (17.5
    )
    
    
    (5.4
    )
    
    
    (22.9
    )
    
    
    (15.8
    )
    
    
    (23.9
    )
    
    
    
    
    
    
    (62.6
    )Operating income (loss)
    
    
    (2.9
    )
    
    
    8.2
    
    
    
    3,148.6
    
    
    
    (180.0
    )
    
    
    2,968.6
    
    
    
    37.1
    
    
    
    (134.2
    )
    
    
    
    
    
    
    2,871.5Interest income
    
    
    
    
    
    
    
    
    
    
    33.9
    
    
    
    1.4
    
    
    
    35.3
    
    
    
    1.7
    
    
    
    68.9
    
    
    
    
    
    
    
    105.9Interest expense, net
    
    
    (3.2
    )
    
    
    (0.5
    )
    
    
    24.3
    
    
    
    3.3
    
    
    
    27.6
    
    
    
    (7.0
    )
    
    
    (32.0
    )
    
    
    
    
    
    
    (11.4
    )Provision for taxes on income
    
    
    
    
    
    
    
    
    
    
    (545.1
    )
    
    
    
    
    
    
    (545.1
    )
    
    
    
    
    
    
    (278.7
    )
    
    
    
    
    
    
    (823.8
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (520.3
    )
    
    
    
    
    
    
    (520.3
    )
    
    
    (5.0
    )
    
    
    
    
    
    
    
    
    
    
    (525.3
    )Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.6
    
    
    
    0.7
    
    
    
    1.1
    
    
    
    1.5
    
    
    
    
    
    
    
    3.3Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17.7
    )
    
    
    (17.7
    )Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    
    1.0
    
    
    
    1.9
    
    
    
    6.9
    
    
    
    23.5
    
    
    
    
    
    
    
    32.3Assets at September 30
    
    
    932.9
    
    
    
    111.3
    
    
    
    9,341.9
    
    
    
    49.8
    
    
    
    9,391.7
    
    
    
    585.6
    
    
    
    3,471.8
    
    
    
    
    
    
    
    13,449.1Expenditures for segment assets
    
    
    9.1
    
    
    
    
    
    
    
    730.1
    
    
    
    65.9
    
    
    
    796.0
    
    
    
    11.4
    
    
    
    13.2
    
    
    
    9.4
    
    
    
    830.0Nine Months Ended September 30, 2005*Sales and other operating revenues:Unaffiliated customers
    
    $
    2,316.6
    
    
    
    687.5
    
    
    
    5,143.2
    
    
    
    19.0
    
    
    
    5,162.2
    
    
    
    869.3
    
    
    
    
    
    
    
    
    
    
    
    6,031.5Intersegment
    
    
    136.4
    
    
    
    195.9
    
    
    
    3,191.0
    
    
    
    (2,990.1
    )
    
    
    200.9
    
    
    
    0.7
    
    
    
    (201.6
    )
    
    
    
    
    
    
    Depreciation, depletion and amortization
    
    
    23.7
    
    
    
    
    
    
    
    298.5
    
    
    
    7.6
    
    
    
    306.1
    
    
    
    22.7
    
    
    
    5.1
    
    
    
    
    
    
    
    333.9Operating income (loss) before special items and provisions
    
    
    11.2
    
    
    
    1.8
    
    
    
    1,898.7
    
    
    
    (95.8
    )
    
    
    1,802.9
    
    
    
    30.0
    
    
    
    (90.7
    )
    
    
    
    
    
    
    1,742.2Special items and provisions, net
    
    
    (148.6
    )
    
    
    
    
    
    
    (437.6
    )
    
    
    8.2
    
    
    
    (429.4
    )
    
    
    (3.3
    )
    
    
    (48.6
    )
    
    
    
    
    
    
    (481.3
    )Operating income (loss)
    
    
    (137.4
    )
    
    
    1.8
    
    
    
    1,461.1
    
    
    
    (87.6
    )
    
    
    1,373.5
    
    
    
    26.7
    
    
    
    (139.3
    )
    
    
    
    
    
    
    1,260.9Interest income
    
    
    
    
    
    
    0.1
    
    
    
    13.1
    
    
    
    0.4
    
    
    
    13.5
    
    
    
    1.2
    
    
    
    22.6
    
    
    
    
    
    
    
    37.3Interest expense, net
    
    
    (2.3
    )
    
    
    (0.7
    )
    
    
    (1.2
    )
    
    
    2.4
    
    
    
    1.2
    
    
    
    (5.8
    )
    
    
    (48.3
    )
    
    
    
    
    
    
    (52.9
    )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
    
    
    
    
    
    
    
    
    
    
    (110.0
    )
    
    
    
    
    
    
    (110.0
    )
    
    
    
    
    
    
    (190.4
    )
    
    
    
    
    
    
    (300.4
    )Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (113.0
    )
    
    
    0.1
    
    
    
    (112.9
    )
    
    
    (3.6
    )
    
    
    
    
    
    
    
    
    
    
    (116.5
    )Equity in net earnings (losses) of affiliated companies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )
    
    
    (0.7
    )
    
    
    1.0
    
    
    
    1.6
    
    
    
    
    
    
    
    1.9Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22.5
    
    
    
    22.5Equity basis investments at September 30
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.9
    
    
    
    1.4
    
    
    
    6.4
    
    
    
    23.8
    
    
    
    
    
    
    
    31.6Assets at September 30
    
    
    330.6
    
    
    
    36.7
    
    
    
    6,456.4
    
    
    
    6.6
    
    
    
    6,463.0
    
    
    
    686.9
    
    
    
    2,407.1
    
    
    
    685.0
    
    
    
    10,242.0Expenditures for segment assets
    
    
    14.4
    
    
    
    
    
    
    
    318.8
    
    
    
    40.3
    
    
    
    359.1
    
    
    
    12.0
    
    
    
    10.0
    
    
    
    22.6
    
    
    
    403.7
 
 *
    
    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



8  
  2005Third QuarterNet income as reported
    
    $
    366.1Deduct:Total compensation cost assuming fair value method for stock options, net of tax
    
    
    (0.5
    )Pro forma net income
    
    $
    365.6Basic earnings per common share:*As reported
    
    $
    1.86Pro forma
    
    $
    1.85Diluted earnings per common share:*As reported
    
    $
    1.81Pro forma
    
    $
    1.80
 
  Nine MonthsEndedSeptember 30, 2005Net income as reported
    
    $
    1,435.1Deduct:Total compensation cost assuming fair value method for stock options, net of tax
    
    
    (2.4
    )Pro forma net income
    
    $
    1,432.7Basic earnings per common share:*As reported
    
    $
    7.37Pro forma
    
    $
    7.36Diluted earnings per common share:*As reported
    
    $
    7.10Pro forma
    
    $
    7.09
 
 *
    
    Earnings per common share for the quarter and nine months ended September 30, 2005, have been
adjusted to reflect the March 10, 2006, stock split. (Refer to Note 15, Shareholders Equity,
for further discussion.) 
  
  Nine Months EndedSeptember 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
    
    
    (658,807
    )
    
    
    26.81Forfeited or expired
    
    
    (38,476
    )
    
    
    45.79Outstanding at September 30, 2006
    
    
    556,891
    
    
    
    44.90Exercisable at September 30, 2006
    
    
    211,461
    
    
    
    22.59
 
 *
    
    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



9  
  Weighted-AverageShares
    
    
    Exercise PricePD Plans2003 Plan
    
    
    14,987
    
    
    $
    43.151998 Plan
    
    
    190,984
    
    
    
    20.711993 Plan
    
    
    5,000
    
    
    
    32.69Cyprus Amax Plans
    
    
    490
    
    
    
    22.23211,461
    
    
    
    22.59
 
    
  Weighted-AverageGrant-DateFair ValueShares
    
    
    PriceOutstanding at December 31, 2005*
    
    
    1,548,734
    
    
    $
    36.62Granted
    
    
    297,440
    
    
    
    78.22Released
    
    
    (122,443
    )
    
    
    26.25Forfeited
    
    
    (172,346
    )
    
    
    38.78Outstanding at September 30, 2006
    
    
    1,551,385
    
    
    
    45.17
 
 *
    
    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



10  
  Third Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    
    
    
    
    180.8Income from discontinued operations before taxes
and loss on disposal
    
    $
    
    
    
    
    10.3Loss on disposal
    
    
    (0.2
    )
    
    
    Provision for taxes on income
    
    
    (0.9
    )
    
    
    (4.3
    )Income (loss) from discontinued operations
    
    $
    (1.1
    )
    
    
    6.0
 
  Nine Months EndedSeptember 30,2006
    
    
    2005Sales and other operating revenues
    
    $
    179.8
    
    
    
    546.4Income from discontinued operations before taxes
and loss on disposal
    
    $
    17.0
    
    
    
    36.5Loss on disposal
    
    
    (29.7
    )
    
    
    Provision for taxes on income
    
    
    (5.0
    )
    
    
    (14.0
    )Income (loss) from discontinued operations
    
    $
    (17.7
    )
    
    
    22.5
 
  Magnet Wire North America
    High Performance Conductors of SC & GA, Inc.
    4. Special Items and Provisions, Net




---



##### Table of Contents



11  
 Nine Months2006
    
    
    EndedThird Quarter
    
    
    September 30, 2006PDMC Environmental provisions, net
    
    $
    (9.9
    )
    
    
    (29.5
    )Environmental insurance recoveries, net
    
    
    (0.1
    )
    
    
    (0.2
    )Historical legal matters
    
    
    7.0
    
    
    
    6.8(3.0
    )
    
    
    (22.9
    )PDI Asset impairment charges
    
    
    (5.6
    )
    
    
    (5.6
    )Dissolution of international wire and cable entity
    
    
    (1.2
    )
    
    
    (1.2
    )Sale of North American magnet wire assets:Loss on disposal
    
    
    (1.2
    )
    
    
    (1.0
    )Transaction and employee-related costs
    
    
    0.6
    
    
    
    (4.1
    )Sale of HPC:Gain (loss) on disposal
    
    
    0.5
    
    
    
    (1.0
    )Transaction and employee-related costs
    
    
    (0.2
    )
    
    
    (2.9
    )(7.1
    )
    
    
    (15.8
    )Corporate and Other Environmental provisions, net
    
    
    (19.5
    )
    
    
    (21.6
    )Environmental insurance recoveries, net
    
    
    0.1
    
    
    
    0.2Asset impairment charges
    
    
    (2.8
    )
    
    
    (2.8
    )Historical legal matters
    
    
    (0.2
    )
    
    
    (0.2
    )Sale of non-core real estate
    
    
    
    
    
    
    0.5(22.4
    )
    
    
    (23.9
    )$
    (32.5
    )
    
    
    (62.6
    )
 
         
 Nine Months2005
    
    
    EndedThird Quarter
    
    
    September 30, 2005PDMC Environmental provisions, net
    
    $
    (8.7
    )
    
    
    (24.4
    )Environmental insurance recoveries, net
    
    
    (0.1
    )
    
    
    (1.2
    )Asset impairment charges
    
    
    
    
    
    
    (419.1
    )Historical legal matters
    
    
    0.3
    
    
    
    15.3(8.5
    )
    
    
    (429.4
    )PDI Environmental provisions, net
    
    
    (0.1
    )
    
    
    (0.1
    )Asset impairment charges
    
    
    (2.0
    )
    
    
    (2.4
    )Restructuring programs/closures
    
    
    0.3
    
    
    
    (0.8
    )(1.8
    )
    
    
    (3.3
    )Corporate and Other Environmental provisions, net
    
    
    (34.4
    )
    
    
    (54.1
    )Environmental insurance recoveries, net
    
    
    0.1
    
    
    
    1.2Historical legal matters
    
    
    (0.4
    )
    
    
    4.3(34.7
    )
    
    
    (48.6
    )$
    (45.0
    )
    
    
    (481.3
    )




---



##### 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.




---



##### Table of Contents



13    5. New Accounting Pronouncements
     de minimis




---



##### Table of Contents



14      6. Environmental, and Reclamation and Closure Matters
   
  Nine Months2006
    
    
    EndedThird Quarter
    
    
    September 30, 2006Balance, beginning of period
    
    $
    366.8
    
    
    
    367.9Additions to reserves*
    
    
    34.4
    
    
    
    61.3Reductions in reserve estimates
    
    
    (1.6
    )
    
    
    (1.6
    )Spending against reserves
    
    
    (22.8
    )
    
    
    (50.8
    )Balance, end of period
    
    $
    376.8
    
    
    
    376.8
 
 *
    
    The quarter and nine months ended September 30, 2006, included $3.3 million and $8.5 million,
respectively, associated with a cash settlement to Phelps Dodge with potentially responsible
parties that was not charged to expense.




---



##### Table of Contents



15    
 
 Nine Months2006
    
    
    EndedThird Quarter
    
    
    September 30, 2006Balance, beginning of period
    
    $
    386.7
    
    
    
    398.4New liabilities during the period
    
    
    1.4
    
    
    
    3.9Accretion expense
    
    
    6.5
    
    
    
    19.6Payments
    
    
    (20.0
    )
    
    
    (45.5
    )Revisions in estimated cash flows
    
    
    
    
    
    
    (1.8
    )Balance, end of period
    
    $
    374.6
    
    
    
    374.6
 
 
 
 Nine Months2006
    
    
    EndedThird Quarter
    
    
    September 30, 2006Gross balance, beginning of period
    
    $
    199.9
    
    
    
    199.2New assets during the period
    
    
    1.4
    
    
    
    3.9Revisions in estimated cash flows
    
    
    
    
    
    
    (1.8
    )Gross balance, end of period
    
    
    201.3
    
    
    
    201.3Less accumulated depreciation,
depletion and amortization
    
    
    97.0
    
    
    
    97.0Balance, end of period
    
    $
    104.3
    
    
    
    104.3
 
   7. Contingencies
 Significant New Mexico Environmental and Reclamation Programs




---



##### Table of Contents



16




---



##### Table of Contents



17  Significant Changes in International Closure and Reclamation Programs
 Sociedad Minera Cerro Verde S.A.A.
   Other
  8. Earnings Per Share
  
  Third Quarter2006
    
    
    2005Basic Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    889.1
    
    
    
    360.1Income (loss) from discontinued operations
    
    
    (1.1
    )
    
    
    6.0Net income applicable to common shares
    
    $
    888.0
    
    
    
    366.1Denominator:Weighted average common shares outstanding*
    
    
    202.5
    
    
    
    197.2Basic earnings per common share:*Income from continuing operations
    
    $
    4.39
    
    
    
    1.83Income (loss) from discontinued operations
    
    
    (0.01
    )
    
    
    0.03Basic earnings per common share
    
    $
    4.38
    
    
    
    1.86Diluted Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    889.1
    
    
    
    360.1Income (loss) from discontinued operations
    
    
    (1.1
    )
    
    
    6.0Net income applicable to common shares
    
    $
    888.0
    
    
    
    366.1Denominator:Weighted average common shares outstanding*
    
    
    202.5
    
    
    
    197.2Weighted average employee stock options*
    
    
    0.2
    
    
    
    0.6Weighted average restricted stock issued to employees*
    
    
    0.8
    
    
    
    0.8Weighted average mandatory convertible preferred shares*
    
    
    
    
    
    
    4.1Total weighted average common shares outstanding*
    
    
    203.5
    
    
    
    202.7Diluted earnings per common share:*Income from continuing operations
    
    $
    4.37
    
    
    
    1.78Income (loss) from discontinued operations
    
    
    (0.01
    )
    
    
    0.03Diluted earnings per common share
    
    $
    4.36
    
    
    
    1.81




---



##### Table of Contents



18 
  Nine Months EndedSeptember 30,2006
    
    
    2005Basic Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    1,711.2
    
    
    
    1,412.6Income (loss) from discontinued operations
    
    
    (17.7
    )
    
    
    22.5Net income
    
    
    1,693.5
    
    
    
    1,435.1Preferred stock dividends
    
    
    
    
    
    
    (6.8
    )Net income applicable to common shares
    
    $
    1,693.5
    
    
    
    1,428.3Denominator:Weighted average common shares outstanding*
    
    
    202.3
    
    
    
    193.7Basic earnings per common share:*Income from continuing operations
    
    $
    8.46
    
    
    
    7.26Income (loss) from discontinued operations
    
    
    (0.09
    )
    
    
    0.11Basic earnings per common share
    
    $
    8.37
    
    
    
    7.37Diluted Earnings Per Common Share ComputationNumerator:Income from continuing operations
    
    $
    1,711.2
    
    
    
    1,412.6Income (loss) from discontinued operations
    
    
    (17.7
    )
    
    
    22.5Net income applicable to common shares
    
    $
    1,693.5
    
    
    
    1,435.1Denominator:Weighted average common shares outstanding*
    
    
    202.3
    
    
    
    193.7Weighted average employee stock options*
    
    
    0.2
    
    
    
    0.8Weighted average restricted stock issued to employees*
    
    
    0.9
    
    
    
    0.8Weighted average mandatory convertible preferred
shares*
    
    
    
    
    
    
    6.9Total weighted average common shares outstanding*
    
    
    203.4
    
    
    
    202.2Diluted earnings per common share:*Income from continuing operations
    
    $
    8.42
    
    
    
    6.99Income (loss) from discontinued operations
    
    
    (0.09
    )
    
    
    0.11Diluted earnings per common share
    
    $
    8.33
    
    
    
    7.10
 
 *
    
    Weighted average shares outstanding and earnings per common share for the quarter and nine
months ended September 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



19  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 third
quarter (A):Intrinsic value component (in millions)
    
    $
    (52
    )
    
    
    (120
    )Time value component (in millions)
    
    $
    
    
    
    
    27Associated pre-tax gains (charges) for the nine months
ended September 30, 2006 (A):Intrinsic value component (in millions)
    
    $
    (669
    )
    
    
    (584
    )Time value component (in millions)
    
    $
    13
    
    
    
    28Copper 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 third quarter
(A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    Associated pre-tax charges for the nine months ended
September 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 $3.105 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 $831 million, primarily reflecting intrinsic
value charges and put option premiums. The 2007 unrealized pre-tax charges resulted from the
2007 LME price average of $3.285 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 $608 million,
consisting of approximately $584 million for the intrinsic value component and approximately
$7 million for the time value component, with the remainder for put option premiums.




---



##### Table of Contents



20  11. Pension and Postretirement Benefits
  
 
 Third Quarter2006
    
    
    2005Service
cost  benefits earned during the period
    
    $
    5.6
    
    
    
    7.1Interest cost on benefit obligation
    
    
    17.5
    
    
    
    18.6Expected return on plan assets
    
    
    (25.9
    )
    
    
    (21.6
    )Amortization of prior service cost
    
    
    0.7
    
    
    
    0.9Amortization of actuarial loss
    
    
    4.4
    
    
    
    3.5Curtailment and special retirement benefits
    
    
    
    
    
    
    0.1Net periodic benefit cost
    
    $
    2.3
    
    
    
    8.6
 
 Nine Months EndedSeptember 30,2006
    
    
    2005Service
cost  benefits earned during the period
    
    $
    16.7
    
    
    
    21.1Interest cost on benefit obligation
    
    
    52.6
    
    
    
    55.9Expected return on plan assets
    
    
    (77.8
    )
    
    
    (64.7
    )Amortization of prior service cost
    
    
    2.0
    
    
    
    2.5Amortization of net actuarial loss
    
    
    13.4
    
    
    
    10.6Curtailment and special retirement benefits
    
    
    0.5
    
    
    
    0.1Net periodic benefit cost
    
    $
    7.4
    
    
    
    25.5
 
 
 
 Third Quarter2006
    
    
    2005Service
cost  benefits earned during the period
    
    $
    0.3
    
    
    
    1.1Interest cost on benefit obligation
    
    
    3.6
    
    
    
    5.1Expected return on plan assets
    
    
    (1.7
    )
    
    
    Amortization of prior service (benefit) cost
    
    
    (0.7
    )
    
    
    0.1Recognized net actuarial (gain) loss
    
    
    (0.2
    )
    
    
    0.3Net periodic benefit cost
    
    $
    1.3
    
    
    
    6.6
 
 Nine Months EndedSeptember 30,2006
    
    
    2005Service
cost  benefits earned during the period
    
    $
    0.9
    
    
    
    3.3Interest cost on benefit obligation
    
    
    10.8
    
    
    
    14.7Expected return on plan assets
    
    
    (5.2
    )
    
    
    (0.1
    )Amortization of prior service (benefit) cost
    
    
    (1.9
    )
    
    
    0.2Recognized net actuarial (gain) loss
    
    
    (0.6
    )
    
    
    0.3Special retirement benefits
    
    
    (0.3
    )
    
    
    Net periodic benefit cost
    
    $
    3.7
    
    
    
    18.4




---



##### Table of Contents



21  12. Debt and Other Financing
      13. Gain on Sale of Cost-Basis Investment
  14. Change in Interest Gain
   15. Shareholders Equity
 Stock Split




---



##### Table of Contents



22  16. Inco Termination Fee




---



##### Table of Contents



23
 
 REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




---



##### Table of Contents



24 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
 RESULTS OF OPERATIONS
 Consolidated Financial Results
      Third Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    3,458.3
    
    
    
    2,179.0Operating income
    
    $
    1,334.0
    
    
    
    560.3Minority interests in consolidated subsidiaries
    
    $
    (206.0
    )
    
    
    (51.6
    )Income from continuing operations
    
    $
    889.1
    
    
    
    360.1Income (loss) from discontinued operations
    
    $
    (1.1
    )
    
    
    6.0Net income
    
    $
    888.0
    
    
    
    366.1Basic earnings per common share:*Income from continuing operations
    
    $
    4.39
    
    
    
    1.83Income from discontinued operations
    
    
    (0.01
    )
    
    
    0.03Basic earnings per common share
    
    $
    4.38
    
    
    
    1.86Diluted earnings per common share:*Income from continuing operations
    
    $
    4.37
    
    
    
    1.78Income from discontinued operations
    
    
    (0.01
    )
    
    
    0.03Diluted earnings per common share
    
    $
    4.36
    
    
    
    1.81
 
 *
    
    Earnings per common share for the 2005 third quarter have been adjusted to reflect the March
10, 2006, stock split. (Refer to Note 15, Shareholders Equity, to our unaudited September 30,
2006, Consolidated Financial Information for further discussion.)




---



##### Table of Contents



25     Nine Months EndedSeptember 30,2006
    
    
    2005Sales and other operating revenues
    
    $
    8,675.1
    
    
    
    6,031.5Operating income
    
    $
    2,871.5
    
    
    
    1,260.9Minority interests in consolidated subsidiaries
    
    $
    (525.3
    )
    
    
    (116.5
    )Income from continuing operations
    
    $
    1,711.2
    
    
    
    1,412.6Income (loss) from discontinued operations
    
    $
    (17.7
    )
    
    
    22.5Net income
    
    $
    1,693.5
    
    
    
    1,435.1Basic earnings per common share:*Income from continuing operations
    
    $
    8.46
    
    
    
    7.26Income (loss) from discontinued operations
    
    
    (0.09
    )
    
    
    0.11Basic earnings per common share
    
    $
    8.37
    
    
    
    7.37Diluted earnings per common share:*Income from continuing operations
    
    $
    8.42
    
    
    
    6.99Income (loss) from discontinued operations
    
    
    (0.09
    )
    
    
    0.11Diluted earnings per common share
    
    $
    8.33
    
    
    
    7.10
 
 *
    
    Earnings per common share for the nine months ended September 30, 2005, have been adjusted to
reflect the March 10, 2006, stock split. (Refer to Note 15, Shareholders Equity, to our
unaudited September 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



26    
  Nine Months EndedThird Quarter
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income
    
    $
    888.0
    
    
    
    366.1
    
    
    
    1,693.5
    
    
    
    1,435.1Special items, net of taxes
    
    
    34.8
    
    
    
    (75.8
    )
    
    
    (19.9
    )
    
    
    150.1Net income excluding special items (after taxes)
    
    $
    853.2
    
    
    
    441.9
    
    
    
    1,713.4
    
    
    
    1,285.0
      Nine Months Ended2006 Third Quarter
    
    
    September 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)
    
    $
    (3.0
    )
    
    
    (2.2
    )
    
    
    (0.01
    )
    
    
    (22.9
    )
    
    
    (17.4
    )
    
    
    (0.08
    )PDI (see Business Segment disclosure)
    
    
    (7.1
    )
    
    
    (7.0
    )
    
    
    (0.04
    )
    
    
    (15.8
    )
    
    
    (16.6
    )
    
    
    (0.09
    )Corporate and Other Environmental provisions, net
    
    
    (19.5
    )
    
    
    (14.8
    )
    
    
    (0.07
    )
    
    
    (21.6
    )
    
    
    (16.4
    )
    
    
    (0.08
    )Environmental insurance recoveries, net
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    Asset impairment charges
    
    
    (2.8
    )
    
    
    (2.1
    )
    
    
    (0.01
    )
    
    
    (2.8
    )
    
    
    (2.1
    )
    
    
    (0.01
    )Historical legal matters
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    Sale of non-core real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    0.4
    
    
    
    (22.4
    )
    
    
    (17.0
    )
    
    
    (0.08
    )
    
    
    (23.9
    )
    
    
    (18.1
    )
    
    
    (0.09
    )Special items and provisions, net (included in operating income)
    
    
    (32.5
    )
    
    
    (26.2
    )
    
    
    (0.13
    )
    
    
    (62.6
    )
    
    
    (52.1
    )
    
    
    (0.26
    )Other non-operating significant items affecting comparability of results:Miscellaneous income and expense, net (A):Inco termination fee, net of expenses
    
    
    82.3
    
    
    
    62.5
    
    
    
    0.31
    
    
    
    82.3
    
    
    
    62.5
    
    
    
    0.31Discontinued operations (B):Loss on disposal of Columbian Chemicals
    
    
    (0.6
    )
    
    
    (1.9
    )
    
    
    (0.01
    )
    
    
    (15.4
    )
    
    
    (16.0
    )
    
    
    (0.08
    )Transaction and employee-related costs
    
    
    0.4
    
    
    
    0.4
    
    
    
    
    
    
    
    (14.3
    )
    
    
    (14.3
    )
    
    
    (0.07
    )(0.2
    )
    
    
    (1.5
    )
    
    
    (0.01
    )
    
    
    (29.7
    )
    
    
    (30.3
    )
    
    
    (0.15
    )$
    49.6
    
    
    
    34.8
    
    
    
    0.17
    
    
    
    (10.0
    )
    
    
    (19.9
    )
    
    
    (0.10
    )
 
 (A)
    
    Miscellaneous income and expense, net, of $136.3 million and $196.9 million, as reflected in
the Consolidated Statement of Income for the quarter and nine months ended September 30, 2006,
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.(B)
    
    Loss from discontinued operations of $1.1 million and $17.7 million, as reflected in the
Consolidated Statement of Income for the quarter and nine months ended September 30, 2006,
respectively, included the operating results of Columbian Chemicals of $0.4 million and $12.6
million, respectively, which have not been separately disclosed as special items. Refer to
Note 3, Divestitures, to our unaudited September 30, 2006, Consolidated Financial Information
for further discussion of special items recorded in discontinued operations for the nine
months ended September 30, 2006.  Inco termination fee.




---



##### Table of Contents



27   Nine Months Ended2005 Third Quarter
    
    
    September 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)
    
    $
    (8.5
    )
    
    
    (6.5
    )
    
    
    (0.03
    )
    
    
    (429.4
    )
    
    
    (328.8
    )
    
    
    (1.63
    )PDI (see Business Segment disclosure)
    
    
    (1.8
    )
    
    
    (1.4
    )
    
    
    (0.01
    )
    
    
    (3.3
    )
    
    
    (2.0
    )
    
    
    (0.01
    )Corporate
and Other Environmental provisions, net
    
    
    (34.4
    )
    
    
    (26.3
    )
    
    
    (0.13
    )
    
    
    (54.1
    )
    
    
    (41.3
    )
    
    
    (0.21
    )Environmental insurance recoveries, net
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    0.9
    
    
    
    0.01Historical legal matters
    
    
    (0.4
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    4.3
    
    
    
    4.1
    
    
    
    0.02(34.7
    )
    
    
    (26.6
    )
    
    
    (0.13
    )
    
    
    (48.6
    )
    
    
    (36.3
    )
    
    
    (0.18
    )Special items and provisions, net (included in operating income)
    
    
    (45.0
    )
    
    
    (34.5
    )
    
    
    (0.17
    )
    
    
    (481.3
    )
    
    
    (367.1
    )
    
    
    (1.82
    )Other non-operating significant items affecting comparability of results:Early debt extinguishment costs
    
    
    (54.0
    )
    
    
    (41.3
    )
    
    
    (0.20
    )
    
    
    (54.0
    )
    
    
    (41.3
    )
    
    
    (0.21
    )Gain on sale of cost-basis investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438.4
    
    
    
    388.0
    
    
    
    1.92Change in interest gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.5
    
    
    
    172.9
    
    
    
    0.86Provision for taxes on income (A):Foreign dividend taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.4
    )
    
    
    (0.01
    )$
    (99.0
    )
    
    
    (75.8
    )
    
    
    (0.37
    )
    
    
    62.6
    
    
    
    150.1
    
    
    
    0.74
 
 *
    
    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 September 30, 2006,
Consolidated Financial Information for further discussion.)(A)
    
    Provision for taxes on income of $300.4 million, as reflected in the Consolidated Statement
of Income for the nine months ended September 30, 2005, 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.  Early debt extinguishment costs.
 Gain on sale of cost-basis investment.
 Change in interest gain.
  Provision for taxes on income.
 Business Divisions




---



##### Table of Contents



28     
 RESULTS OF PHELPS DODGE MINING COMPANY




---



##### Table of Contents



29    Third Quarter2006
    
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    3,143.0
    
    
    
    1,859.7Operating income
    
    $
    1,376.0
    
    
    
    618.4Operating income before special
items and provisions, net
    
    $
    1,379.0
    
    
    
    626.9Minority interests in consolidated subsidiaries (A)
    
    $
    (203.5
    )
    
    
    (49.8
    )Copper production (thousand short tons):Total copper production
    
    
    317.4
    
    
    
    319.5Less undivided interest (B)
    
    
    15.6
    
    
    
    15.3Copper production on a consolidated basis
    
    
    301.8
    
    
    
    304.2Less minority participants shares (A)
    
    
    53.0
    
    
    
    48.0Copper production on a pro rata basis
    
    
    248.8
    
    
    
    256.2Copper sales (thousand short tons):Total copper sales from own mines
    
    
    314.1
    
    
    
    318.7Less undivided interest (B)
    
    
    15.3
    
    
    
    15.3Copper sales from own mines on a
consolidated basis
    
    
    298.8
    
    
    
    303.4Less minority participants shares (A)
    
    
    55.6
    
    
    
    48.3Copper sales from own mines on a
pro rata basis
    
    
    243.2
    
    
    
    255.1Purchased copper
    
    
    97.6
    
    
    
    123.8Total copper sales on a consolidated basis
    
    
    396.4
    
    
    
    427.2LME average spot copper price
per pound  cathodes
    
    $
    3.479
    
    
    
    1.704COMEX average spot copper price
per pound  cathodes
    
    $
    3.539
    
    
    
    1.701Molybdenum production (million pounds)
    
    
    16.5
    
    
    
    16.4Molybdenum sales (million pounds):Net Phelps Dodge share from own mines
    
    
    16.6
    
    
    
    14.8Purchased molybdenum
    
    
    2.3
    
    
    
    2.9Total molybdenum sales
    
    
    18.9
    
    
    
    17.7Metals Week:Molybdenum Dealer Oxide mean
price per pound
    
    $
    26.22
    
    
    
    30.74M-1 price per pound
    
    $
    25.57
    
    
    
    31.85
   Nine Months EndedSeptember 30,2006
    
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    7,742.0
    
    
    
    5,162.2Operating income
    
    $
    2,968.6
    
    
    
    1,373.5Operating income before special
items and provisions, net
    
    $
    2,991.5
    
    
    
    1,802.9Minority interests in consolidated subsidiaries (A)
    
    $
    (520.3
    )
    
    
    (112.9
    )Copper production (thousand short tons):Total copper production
    
    
    959.9
    
    
    
    966.2Less undivided interest (B)
    
    
    45.5
    
    
    
    44.6Copper production on a consolidated basis
    
    
    914.4
    
    
    
    921.6Less minority participants shares (A)
    
    
    159.1
    
    
    
    134.0Copper production on a pro rata basis
    
    
    755.3
    
    
    
    787.6Copper sales (thousand short tons):Total copper sales from own mines
    
    
    960.0
    
    
    
    971.7Less undivided interest (B)
    
    
    45.2
    
    
    
    44.6Copper sales from own mines on a
consolidated basis
    
    
    914.8
    
    
    
    927.1Less minority participants shares (A)
    
    
    160.8
    
    
    
    136.1Copper sales from own mines on a
pro rata basis
    
    
    754.0
    
    
    
    791.0Purchased copper
    
    
    304.3
    
    
    
    295.0Total copper sales on a consolidated basis
    
    
    1,219.1
    
    
    
    1,222.1LME average spot copper price
per pound  cathodes
    
    $
    2.997
    
    
    
    1.575COMEX average spot copper price
per pound  cathodes
    
    $
    3.055
    
    
    
    1.567Molybdenum production (million pounds)
    
    
    51.4
    
    
    
    47.8Molybdenum sales (million pounds):Net Phelps Dodge share from own mines
    
    
    51.3
    
    
    
    45.2Purchased molybdenum
    
    
    6.6
    
    
    
    9.8Total molybdenum sales
    
    
    57.9
    
    
    
    55.0Metals Week:Molybdenum Dealer Oxide mean
price per pound
    
    $
    24.56
    
    
    
    32.44M-1 price per pound
    
    $
    24.50
    
    
    
    32.23
 
 (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.   Third Quarter2006
    
    
    2005Minority participants shares of copper production:Candelaria
    
    
    9.1
    
    
    
    8.3Ojos del Salado
    
    
    1.4
    
    
    
    Cerro Verde
    
    
    12.5
    
    
    
    12.3El Abra
    
    
    30.0
    
    
    
    27.453.0
    
    
    
    48.0




---



##### Table of Contents



30   Nine Months EndedSeptember 30,2006
    
    
    2005Minority participants shares of copper production:Candelaria
    
    
    28.7
    
    
    
    27.2Ojos del Salado
    
    
    4.3
    
    
    
    Cerro Verde
    
    
    36.2
    
    
    
    23.6El Abra
    
    
    89.9
    
    
    
    83.2159.1
    
    
    
    134.0
  Total PDMC Division  Sales
    Total PDMC Division  Operating Income




---



##### Table of Contents



31   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 third quarter (A):Intrinsic value component (in millions)
    
    $
    (52
    )
    
    
    (120
    )Time value component (in millions)
    
    $
    
    
    
    
    27Associated pre-tax gains (charges) for the
nine months ended September 30, 2006 (A):Intrinsic value component (in millions)
    
    $
    (669
    )
    
    
    (584
    )Time value component (in millions)
    
    $
    13
    
    
    
    28Copper 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 third quarter (A):Intrinsic value component (in millions)
    
    $
    
    
    
    
    Time value component (in millions)
    
    $
    
    
    
    
    Associated pre-tax charges for the
nine months ended September 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 $3.105 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 $831 million, reflecting primarily intrinsic
value charges and put option premiums. The 2007 unrealized pre-tax charges resulted from the
2007 LME price average of $3.285 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 $608 million,
consisting of approximately $584 million for the intrinsic value component and approximately
$7 million for the time value component, with the remainder for put option premiums.




---



##### Table of Contents



32     Third Quarter2006
    
    
    2005Environmental provisions, net
    
    $
    (9.9
    )
    
    
    (8.7
    )Environmental insurance recoveries, net
    
    
    (0.1
    )
    
    
    (0.1
    )Historical legal matters
    
    
    7.0
    
    
    
    0.3$
    (3.0
    )
    
    
    (8.5
    )
   Nine Months EndedSeptember 30,2006
    
    
    2005Environmental provisions, net
    
    $
    (29.5
    )
    
    
    (24.4
    )Environmental insurance recoveries, net
    
    
    (0.2
    )
    
    
    (1.2
    )Asset impairment charges
    
    
    
    
    
    
    (419.1
    )Historical legal matters
    
    
    6.8
    
    
    
    15.3$
    (22.9
    )
    
    
    (429.4
    )




---



##### Table of Contents



33 PDMC RESULTS BY REPORTABLE SEGMENTS
    U.S. MinesChino/Morenci
    
    
    Bagdad
    
    
    Sierrita
    
    
    Cobre
    
    
    Tyrone
    
    
    SubtotalThird Quarter 2006Copper production (thousand short tons):Total production
    
    
    103.8
    
    
    
    20.5
    
    
    
    19.9
    
    
    
    20.5
    
    
    
    8.0
    
    
    
    172.7Less undivided interest
    
    
    15.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.6Copper production on a consolidated basis
    
    
    88.2
    
    
    
    20.5
    
    
    
    19.9
    
    
    
    20.5
    
    
    
    8.0
    
    
    
    157.1Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    88.2
    
    
    
    20.5
    
    
    
    19.9
    
    
    
    20.5
    
    
    
    8.0
    
    
    
    157.1Copper sales (thousand short tons):Total copper sales from own mines
    
    
    102.0
    
    
    
    17.5
    
    
    
    17.2
    
    
    
    20.0
    
    
    
    7.9
    
    
    
    164.6Less undivided interest
    
    
    15.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.3Copper sales from own mines on a consolidated basis
    
    
    86.7
    
    
    
    17.5
    
    
    
    17.2
    
    
    
    20.0
    
    
    
    7.9
    
    
    
    149.3Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    86.7
    
    
    
    17.5
    
    
    
    17.2
    
    
    
    20.0
    
    
    
    7.9
    
    
    
    149.3Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    86.7
    
    
    
    17.5
    
    
    
    17.2
    
    
    
    20.0
    
    
    
    7.9
    
    
    
    149.3($ in millions)Operating income (loss)
    
    $
    307.4
    
    
    
    98.1
    
    
    
    163.3
    
    
    
    60.6
    
    
    
    21.2
    
    
    
    650.6Special items and provisions, net
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    (6.8
    )
    
    
    (1.8
    )
    
    
    (9.2
    )Operating income (loss) before special items and provisions, net
    
    $
    308.0
    
    
    
    98.1
    
    
    
    163.3
    
    
    
    67.4
    
    
    
    23.0
    
    
    
    659.8Third Quarter 2005Copper production (thousand short tons):Total production
    
    
    102.1
    
    
    
    25.3
    
    
    
    18.7
    
    
    
    25.6
    
    
    
    9.6
    
    
    
    181.3Less undivided interest
    
    
    15.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.3Copper production on a consolidated basis
    
    
    86.8
    
    
    
    25.3
    
    
    
    18.7
    
    
    
    25.6
    
    
    
    9.6
    
    
    
    166.0Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    86.8
    
    
    
    25.3
    
    
    
    18.7
    
    
    
    25.6
    
    
    
    9.6
    
    
    
    166.0Copper sales (thousand short tons):Total copper sales from own mines
    
    
    102.1
    
    
    
    25.3
    
    
    
    18.6
    
    
    
    25.6
    
    
    
    9.6
    
    
    
    181.2Less undivided interest
    
    
    15.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.3Copper sales from own mines on a consolidated basis
    
    
    86.8
    
    
    
    25.3
    
    
    
    18.6
    
    
    
    25.6
    
    
    
    9.6
    
    
    
    165.9Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    86.8
    
    
    
    25.3
    
    
    
    18.6
    
    
    
    25.6
    
    
    
    9.6
    
    
    
    165.9Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    86.8
    
    
    
    25.3
    
    
    
    18.6
    
    
    
    25.6
    
    
    
    9.6
    
    
    
    165.9($ in millions)Operating income (loss)
    
    $
    128.6
    
    
    
    112.4
    
    
    
    145.3
    
    
    
    18.6
    
    
    
    3.0
    
    
    
    407.9Special items and provisions, net
    
    
    0.4
    
    
    
    
    
    
    
    (8.6
    )
    
    
    
    
    
    
    
    
    
    
    (8.2
    )Operating income (loss) before special items and provisions, net
    
    $
    128.2
    
    
    
    112.4
    
    
    
    153.9
    
    
    
    18.6
    
    
    
    3.0
    
    
    
    416.1




---



##### Table of Contents



34 PDMC RESULTS BY REPORTABLE SEGMENTS
   South American MinesCandelaria/Ojos delSalado
    
    
    Cerro Verde
    
    
    El Abra
    
    
    SubtotalThird Quarter 2006Copper production (thousand short tons):Total production
    
    
    52.6
    
    
    
    27.0
    
    
    
    61.3
    
    
    
    140.9Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    52.6
    
    
    
    27.0
    
    
    
    61.3
    
    
    
    140.9Less minority participants shares
    
    
    10.5
    
    
    
    12.5
    
    
    
    30.0
    
    
    
    53.0Copper production on a pro rata basis
    
    
    42.1
    
    
    
    14.5
    
    
    
    31.3
    
    
    
    87.9Copper sales (thousand short tons):Total copper sales from own mines
    
    
    55.0
    
    
    
    26.8
    
    
    
    65.5
    
    
    
    147.3Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    55.0
    
    
    
    26.8
    
    
    
    65.5
    
    
    
    147.3Less minority participants shares
    
    
    11.0
    
    
    
    12.5
    
    
    
    32.1
    
    
    
    55.6Copper sales from own mines on a pro rata basis
    
    
    44.0
    
    
    
    14.3
    
    
    
    33.4
    
    
    
    91.7Total purchased copper
    
    
    (1.3
    )
    
    
    
    
    
    
    
    
    
    
    (1.3
    )Total copper sales on a consolidated basis
    
    
    53.7
    
    
    
    26.8
    
    
    
    65.5
    
    
    
    146.0($ in millions)Operating income (loss)
    
    $
    250.6
    
    
    
    92.6
    
    
    
    336.4
    
    
    
    679.6Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    250.6
    
    
    
    92.6
    
    
    
    336.4
    
    
    
    679.6Third Quarter 2005Copper production (thousand short tons):Total production
    
    
    52.1
    
    
    
    26.6
    
    
    
    55.8
    
    
    
    134.5Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    52.1
    
    
    
    26.6
    
    
    
    55.8
    
    
    
    134.5Less minority participants shares
    
    
    8.3
    
    
    
    12.3
    
    
    
    27.4
    
    
    
    48.0Copper production on a pro rata basis
    
    
    43.8
    
    
    
    14.3
    
    
    
    28.4
    
    
    
    86.5Copper sales (thousand short tons):Total copper sales from own mines
    
    
    49.9
    
    
    
    26.2
    
    
    
    57.8
    
    
    
    133.9Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    49.9
    
    
    
    26.2
    
    
    
    57.8
    
    
    
    133.9Less minority participants shares
    
    
    7.9
    
    
    
    12.1
    
    
    
    28.3
    
    
    
    48.3Copper sales from own mines on a pro rata basis
    
    
    42.0
    
    
    
    14.1
    
    
    
    29.5
    
    
    
    85.6Total purchased copper
    
    
    9.1
    
    
    
    
    
    
    
    
    
    
    
    9.1Total copper sales on a consolidated basis
    
    
    59.0
    
    
    
    26.2
    
    
    
    57.8
    
    
    
    143.0($ in millions)Operating income (loss)
    
    $
    73.1
    
    
    
    55.8
    
    
    
    52.6
    
    
    
    181.5Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    73.1
    
    
    
    55.8
    
    
    
    52.6
    
    
    
    181.5




---



##### Table of Contents



35 PDMC RESULTS BY REPORTABLE SEGMENTS
   Primary
    
    
    
    
    
    
    
    
    
    
    PDMC
    
    
    
    
    
    
    TotalMolybdenum
    
    
    Manufacturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    PDMCThird Quarter 2006Copper production (thousand short tons):Total production
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    314.5
    
    
    
    2.9
    
    
    
    317.4Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.6
    
    
    
    
    
    
    
    15.6Copper production on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    298.9
    
    
    
    2.9
    
    
    
    301.8Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53.0
    
    
    
    
    
    
    
    53.0Copper production on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    245.9
    
    
    
    2.9
    
    
    
    248.8Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    312.8
    
    
    
    1.3
    
    
    
    314.1Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.3
    
    
    
    
    
    
    
    15.3Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    297.5
    
    
    
    1.3
    
    
    
    298.8Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55.6
    
    
    
    
    
    
    
    55.6Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    241.9
    
    
    
    1.3
    
    
    
    243.2Total purchased copper
    
    
    
    
    
    
    98.9
    
    
    
    
    
    
    
    97.6
    
    
    
    
    
    
    
    97.6Total copper sales on a consolidated basis
    
    
    
    
    
    
    99.8
    
    
    
    
    
    
    
    395.1
    
    
    
    1.3
    
    
    
    396.4Molybdenum production (thousand pounds):Primary  Henderson
    
    
    8,764
    
    
    
    
    
    
    
    
    
    
    
    8,764
    
    
    
    
    
    
    
    8,764By-product:Bagdad
    
    
    2,504
    
    
    
    
    
    
    
    
    
    
    
    2,504
    
    
    
    
    
    
    
    2,504Sierrita
    
    
    5,060
    
    
    
    
    
    
    
    
    
    
    
    5,060
    
    
    
    
    
    
    
    5,060Chino
    
    
    216
    
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    
    
    
    
    216Total molybdenum production
    
    
    16,544
    
    
    
    
    
    
    
    
    
    
    
    16,544
    
    
    
    
    
    
    
    16,544Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    16,630
    
    
    
    
    
    
    
    
    
    
    
    16,630
    
    
    
    
    
    
    
    16,630Purchased molybdenum
    
    
    2,301
    
    
    
    
    
    
    
    
    
    
    
    2,301
    
    
    
    
    
    
    
    2,301Total molybdenum sales
    
    
    18,931
    
    
    
    
    
    
    
    
    
    
    
    18,931
    
    
    
    
    
    
    
    18,931($ in millions)Operating income (loss)
    
    $
    107.4
    
    
    
    (8.7
    )
    
    
    0.3
    
    
    
    1,429.2
    
    
    
    (53.2
    )
    
    
    1,376.0Special items and provisions, net
    
    
    7.0
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (3.2
    )
    
    
    0.2
    
    
    
    (3.0
    )Operating income (loss) before special items and provisions, net
    
    $
    100.4
    
    
    
    (7.7
    )
    
    
    0.3
    
    
    
    1,432.4
    
    
    
    (53.4
    )
    
    
    1,379.0Third Quarter 2005Copper production (thousand short tons):Total production
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    315.7
    
    
    
    3.8
    
    
    
    319.5Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.3
    
    
    
    
    
    
    
    15.3Copper production on a consolidated basis
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    300.4
    
    
    
    3.8
    
    
    
    304.2Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48.0
    
    
    
    
    
    
    
    48.0Copper production on a pro rata basis
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    252.4
    
    
    
    3.8
    
    
    
    256.2Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    315.0
    
    
    
    3.7
    
    
    
    318.7Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15.3
    
    
    
    
    
    
    
    15.3Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    299.7
    
    
    
    3.7
    
    
    
    303.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48.3
    
    
    
    
    
    
    
    48.3Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    251.4
    
    
    
    3.7
    
    
    
    255.1Total purchased copper
    
    
    
    
    
    
    108.5
    
    
    
    6.2
    
    
    
    123.8
    
    
    
    
    
    
    
    123.8Total copper sales on a consolidated basis
    
    
    
    
    
    
    108.4
    
    
    
    6.2
    
    
    
    423.5
    
    
    
    3.7
    
    
    
    427.2Molybdenum production (thousand pounds):Primary  Henderson
    
    
    8,386
    
    
    
    
    
    
    
    
    
    
    
    8,386
    
    
    
    
    
    
    
    8,386By-product:Bagdad
    
    
    2,977
    
    
    
    
    
    
    
    
    
    
    
    2,977
    
    
    
    
    
    
    
    2,977Sierrita
    
    
    4,976
    
    
    
    
    
    
    
    
    
    
    
    4,976
    
    
    
    
    
    
    
    4,976Chino
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    43Total molybdenum production
    
    
    16,382
    
    
    
    
    
    
    
    
    
    
    
    16,382
    
    
    
    
    
    
    
    16,382Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    14,754
    
    
    
    
    
    
    
    
    
    
    
    14,754
    
    
    
    
    
    
    
    14,754Purchased molybdenum
    
    
    2,953
    
    
    
    
    
    
    
    
    
    
    
    2,953
    
    
    
    
    
    
    
    2,953Total molybdenum sales
    
    
    17,707
    
    
    
    
    
    
    
    
    
    
    
    17,707
    
    
    
    
    
    
    
    17,707($ in millions)Operating income (loss)
    
    $
    71.9
    
    
    
    0.3
    
    
    
    2.3
    
    
    
    663.9
    
    
    
    (45.5
    )
    
    
    618.4Special items and provisions, net
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    (8.1
    )
    
    
    (0.4
    )
    
    
    (8.5
    )Operating income (loss) before special items and provisions, net
    
    $
    71.9
    
    
    
    0.2
    
    
    
    2.3
    
    
    
    672.0
    
    
    
    (45.1
    )
    
    
    626.9




---



##### Table of Contents



36 PDMC RESULTS BY REPORTABLE SEGMENTS
    U.S. MinesChino/Morenci
    
    
    Bagdad
    
    
    Sierrita
    
    
    Cobre
    
    
    Tyrone
    
    
    SubtotalNine Months Ended September 30, 2006Copper production (thousand short tons):Total production
    
    
    303.2
    
    
    
    59.6
    
    
    
    60.8
    
    
    
    72.2
    
    
    
    24.2
    
    
    
    520.0Less undivided interest
    
    
    45.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45.5Copper production on a consolidated basis
    
    
    257.7
    
    
    
    59.6
    
    
    
    60.8
    
    
    
    72.2
    
    
    
    24.2
    
    
    
    474.5Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    257.7
    
    
    
    59.6
    
    
    
    60.8
    
    
    
    72.2
    
    
    
    24.2
    
    
    
    474.5Copper sales (thousand short tons):Total copper sales from own mines
    
    
    301.4
    
    
    
    59.2
    
    
    
    60.5
    
    
    
    71.7
    
    
    
    24.1
    
    
    
    516.9Less undivided interest
    
    
    45.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45.2Copper sales from own mines on a consolidated basis
    
    
    256.2
    
    
    
    59.2
    
    
    
    60.5
    
    
    
    71.7
    
    
    
    24.1
    
    
    
    471.7Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    256.2
    
    
    
    59.2
    
    
    
    60.5
    
    
    
    71.7
    
    
    
    24.1
    
    
    
    471.7Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    256.2
    
    
    
    59.2
    
    
    
    60.5
    
    
    
    71.7
    
    
    
    24.1
    
    
    
    471.7($ in millions)Operating income (loss)
    
    $
    392.6
    
    
    
    173.8
    
    
    
    355.3
    
    
    
    55.2
    
    
    
    9.3
    
    
    
    986.2Special items and provisions, net
    
    
    (0.6
    )
    
    
    2.2
    
    
    
    (5.1
    )
    
    
    (16.9
    )
    
    
    (1.8
    )
    
    
    (22.2
    )Operating income (loss) before special items and provisions, net
    
    $
    393.2
    
    
    
    171.6
    
    
    
    360.4
    
    
    
    72.1
    
    
    
    11.1
    
    
    
    1,008.4Nine Months Ended September 30, 2005Copper production (thousand short tons):Total production
    
    
    297.2
    
    
    
    80.3
    
    
    
    60.1
    
    
    
    79.0
    
    
    
    30.9
    
    
    
    547.5Less undivided interest
    
    
    44.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44.6Copper production on a consolidated basis
    
    
    252.6
    
    
    
    80.3
    
    
    
    60.1
    
    
    
    79.0
    
    
    
    30.9
    
    
    
    502.9Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a pro rata basis
    
    
    252.6
    
    
    
    80.3
    
    
    
    60.1
    
    
    
    79.0
    
    
    
    30.9
    
    
    
    502.9Copper sales (thousand short tons):Total copper sales from own mines
    
    
    297.2
    
    
    
    81.6
    
    
    
    61.3
    
    
    
    79.0
    
    
    
    30.9
    
    
    
    550.0Less undivided interest
    
    
    44.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44.6Copper sales from own mines on a consolidated basis
    
    
    252.6
    
    
    
    81.6
    
    
    
    61.3
    
    
    
    79.0
    
    
    
    30.9
    
    
    
    505.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a pro rata basis
    
    
    252.6
    
    
    
    81.6
    
    
    
    61.3
    
    
    
    79.0
    
    
    
    30.9
    
    
    
    505.4Total purchased copper
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total copper sales on a consolidated basis
    
    
    252.6
    
    
    
    81.6
    
    
    
    61.3
    
    
    
    79.0
    
    
    
    30.9
    
    
    
    505.4($ in millions)Operating income (loss)
    
    $
    328.7
    
    
    
    313.3
    
    
    
    415.4
    
    
    
    (15.3
    )
    
    
    (208.2
    )
    
    
    833.9Special items and provisions, net
    
    
    (0.2
    )
    
    
    
    
    
    
    (8.6
    )
    
    
    (64.5
    )
    
    
    (215.7
    )
    
    
    (289.0
    )Operating income (loss) before special items and provisions, net
    
    $
    328.9
    
    
    
    313.3
    
    
    
    424.0
    
    
    
    49.2
    
    
    
    7.5
    
    
    
    1,122.9




---



##### Table of Contents



37 PDMC RESULTS BY REPORTABLE SEGMENTS
   South American MinesCandelaria/Ojos delSalado
    
    
    Cerro Verde
    
    
    El Abra
    
    
    SubtotalNine Months Ended September 30, 2006Copper production (thousand short tons):Total production
    
    
    164.9
    
    
    
    78.1
    
    
    
    183.5
    
    
    
    426.5Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    164.9
    
    
    
    78.1
    
    
    
    183.5
    
    
    
    426.5Less minority participants shares
    
    
    33.0
    
    
    
    36.2
    
    
    
    89.9
    
    
    
    159.1Copper production on a pro rata basis
    
    
    131.9
    
    
    
    41.9
    
    
    
    93.6
    
    
    
    267.4Copper sales (thousand short tons):Total copper sales from own mines
    
    
    165.1
    
    
    
    77.1
    
    
    
    187.7
    
    
    
    429.9Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    165.1
    
    
    
    77.1
    
    
    
    187.7
    
    
    
    429.9Less minority participants shares
    
    
    33.0
    
    
    
    35.8
    
    
    
    92.0
    
    
    
    160.8Copper sales from own mines on a pro rata basis
    
    
    132.1
    
    
    
    41.3
    
    
    
    95.7
    
    
    
    269.1Total purchased copper
    
    
    3.1
    
    
    
    
    
    
    
    
    
    
    
    3.1Total copper sales on a consolidated basis
    
    
    168.2
    
    
    
    77.1
    
    
    
    187.7
    
    
    
    433.0($ in millions)Operating income (loss)
    
    $
    657.3
    
    
    
    327.5
    
    
    
    846.3
    
    
    
    1,831.1Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    657.3
    
    
    
    327.5
    
    
    
    846.3
    
    
    
    1,831.1Nine Months Ended September 30, 2005Copper production (thousand short tons):Total production
    
    
    159.6
    
    
    
    76.6
    
    
    
    169.7
    
    
    
    405.9Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper production on a consolidated basis
    
    
    159.6
    
    
    
    76.6
    
    
    
    169.7
    
    
    
    405.9Less minority participants shares
    
    
    27.2
    
    
    
    23.6
    
    
    
    83.2
    
    
    
    134.0Copper production on a pro rata basis
    
    
    132.4
    
    
    
    53.0
    
    
    
    86.5
    
    
    
    271.9Copper sales (thousand short tons):Total copper sales from own mines
    
    
    158.6
    
    
    
    74.3
    
    
    
    175.3
    
    
    
    408.2Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Copper sales from own mines on a consolidated basis
    
    
    158.6
    
    
    
    74.3
    
    
    
    175.3
    
    
    
    408.2Less minority participants shares
    
    
    27.0
    
    
    
    23.2
    
    
    
    85.9
    
    
    
    136.1Copper sales from own mines on a pro rata basis
    
    
    131.6
    
    
    
    51.1
    
    
    
    89.4
    
    
    
    272.1Total purchased copper
    
    
    15.5
    
    
    
    
    
    
    
    
    
    
    
    15.5Total copper sales on a consolidated basis
    
    
    174.1
    
    
    
    74.3
    
    
    
    175.3
    
    
    
    423.7($ in millions)Operating income (loss)
    
    $
    213.1
    
    
    
    131.4
    
    
    
    160.9
    
    
    
    505.4Special items and provisions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss) before special items and provisions, net
    
    $
    213.1
    
    
    
    131.4
    
    
    
    160.9
    
    
    
    505.4




---



##### Table of Contents



38 PDMC RESULTS BY REPORTABLE SEGMENTS
   Primary
    
    
    
    
    
    
    
    
    
    
    PDMC
    
    
    
    
    
    
    TotalMolybdenum
    
    
    Manufacturing
    
    
    Sales
    
    
    Segments
    
    
    Other
    
    
    PDMCNine Months Ended September 30, 2006Copper production (thousand short tons):Total production
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    950.6
    
    
    
    9.3
    
    
    
    959.9Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45.5
    
    
    
    
    
    
    
    45.5Copper production on a consolidated basis
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    905.1
    
    
    
    9.3
    
    
    
    914.4Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    159.1
    
    
    
    
    
    
    
    159.1Copper production on a pro rata basis
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    746.0
    
    
    
    9.3
    
    
    
    755.3Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    950.9
    
    
    
    9.1
    
    
    
    960.0Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45.2
    
    
    
    
    
    
    
    45.2Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    905.7
    
    
    
    9.1
    
    
    
    914.8Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160.8
    
    
    
    
    
    
    
    160.8Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    744.9
    
    
    
    9.1
    
    
    
    754.0Total purchased copper
    
    
    
    
    
    
    300.6
    
    
    
    0.6
    
    
    
    304.3
    
    
    
    
    
    
    
    304.3Total copper sales on a consolidated basis
    
    
    
    
    
    
    304.7
    
    
    
    0.6
    
    
    
    1,210.0
    
    
    
    9.1
    
    
    
    1,219.1Molybdenum production (thousand pounds):Primary  Henderson
    
    
    27,903
    
    
    
    
    
    
    
    
    
    
    
    27,903
    
    
    
    
    
    
    
    27,903By-product:Bagdad
    
    
    7,722
    
    
    
    
    
    
    
    
    
    
    
    7,722
    
    
    
    
    
    
    
    7,722Sierrita
    
    
    15,033
    
    
    
    
    
    
    
    
    
    
    
    15,033
    
    
    
    
    
    
    
    15,033Chino
    
    
    752
    
    
    
    
    
    
    
    
    
    
    
    752
    
    
    
    
    
    
    
    752Total molybdenum production
    
    
    51,410
    
    
    
    
    
    
    
    
    
    
    
    51,410
    
    
    
    
    
    
    
    51,410Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    51,288
    
    
    
    
    
    
    
    
    
    
    
    51,288
    
    
    
    
    
    
    
    51,288Purchased molybdenum
    
    
    6,627
    
    
    
    
    
    
    
    
    
    
    
    6,627
    
    
    
    
    
    
    
    6,627Total molybdenum sales
    
    
    57,915
    
    
    
    
    
    
    
    
    
    
    
    57,915
    
    
    
    
    
    
    
    57,915($ in millions)Operating income (loss)
    
    $
    326.0
    
    
    
    (2.9
    )
    
    
    8.2
    
    
    
    3,148.6
    
    
    
    (180.0
    )
    
    
    2,968.6Special items and provisions, net
    
    
    6.9
    
    
    
    (2.2
    )
    
    
    
    
    
    
    (17.5
    )
    
    
    (5.4
    )
    
    
    (22.9
    )Operating income (loss) before special items and provisions, net
    
    $
    319.1
    
    
    
    (0.7
    )
    
    
    8.2
    
    
    
    3,166.1
    
    
    
    (174.6
    )
    
    
    2,991.5Nine Months Ended September 30, 2005Copper production (thousand short tons):Total production
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    955.1
    
    
    
    11.1
    
    
    
    966.2Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44.6
    
    
    
    
    
    
    
    44.6Copper production on a consolidated basis
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    910.5
    
    
    
    11.1
    
    
    
    921.6Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134.0
    
    
    
    
    
    
    
    134.0Copper production on a pro rata basis
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    776.5
    
    
    
    11.1
    
    
    
    787.6Copper sales (thousand short tons):Total copper sales from own mines
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    959.9
    
    
    
    11.8
    
    
    
    971.7Less undivided interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44.6
    
    
    
    
    
    
    
    44.6Copper sales from own mines on a consolidated basis
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    915.3
    
    
    
    11.8
    
    
    
    927.1Less minority participants shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136.1
    
    
    
    
    
    
    
    136.1Copper sales from own mines on a pro rata basis
    
    
    
    
    
    
    1.7
    
    
    
    
    
    
    
    779.2
    
    
    
    11.8
    
    
    
    791.0Total purchased copper
    
    
    
    
    
    
    266.1
    
    
    
    13.4
    
    
    
    295.0
    
    
    
    
    
    
    
    295.0Total copper sales on a consolidated basis
    
    
    
    
    
    
    267.8
    
    
    
    13.4
    
    
    
    1,210.3
    
    
    
    11.8
    
    
    
    1,222.1Molybdenum production (thousand pounds):Primary  Henderson
    
    
    25,279
    
    
    
    
    
    
    
    
    
    
    
    25,279
    
    
    
    
    
    
    
    25,279By-product:Bagdad
    
    
    8,496
    
    
    
    
    
    
    
    
    
    
    
    8,496
    
    
    
    
    
    
    
    8,496Sierrita
    
    
    13,610
    
    
    
    
    
    
    
    
    
    
    
    13,610
    
    
    
    
    
    
    
    13,610Chino
    
    
    376
    
    
    
    
    
    
    
    
    
    
    
    376
    
    
    
    
    
    
    
    376Total molybdenum production
    
    
    47,761
    
    
    
    
    
    
    
    
    
    
    
    47,761
    
    
    
    
    
    
    
    47,761Molybdenum sales (thousand pounds):Net Phelps Dodge share from own mines
    
    
    45,184
    
    
    
    
    
    
    
    
    
    
    
    45,184
    
    
    
    
    
    
    
    45,184Purchased molybdenum
    
    
    9,784
    
    
    
    
    
    
    
    
    
    
    
    9,784
    
    
    
    
    
    
    
    9,784Total molybdenum sales
    
    
    54,968
    
    
    
    
    
    
    
    
    
    
    
    54,968
    
    
    
    
    
    
    
    54,968($ in millions)Operating income (loss)
    
    $
    257.4
    
    
    
    (137.4
    )
    
    
    1.8
    
    
    
    1,461.1
    
    
    
    (87.6
    )
    
    
    1,373.5Special items and provisions, net
    
    
    
    
    
    
    (148.6
    )
    
    
    
    
    
    
    (437.6
    )
    
    
    8.2
    
    
    
    (429.4
    )Operating income (loss) before special items and provisions, net
    
    $
    257.4
    
    
    
    11.2
    
    
    
    1.8
    
    
    
    1,898.7
    
    
    
    (95.8
    )
    
    
    1,802.9




---



##### Table of Contents



39 Sales of Copper (U.S. and South America) and Molybdenum
    Third Quarter2006
    
    
    2005U.S. Mining Operations (A)(C):Unaffiliated customers
    
    $
    2,109.1
    
    
    
    1,165.8Intersegment elimination
    
    
    (389.9
    )
    
    
    (220.4
    )1,719.2
    
    
    
    945.4South American Mines (B)(C):Unaffiliated customers
    
    
    591.9
    
    
    
    225.9Intersegment
    
    
    389.9
    
    
    
    220.4981.8
    
    
    
    446.3Primary Molybdenum:Unaffiliated customers
    
    
    442.0
    
    
    
    468.0Intersegment
    
    
    
    
    
    
    442.0
    
    
    
    468.0Total PDMC:Unaffiliated customers
    
    $
    3,143.0
    
    
    
    1,859.7
   Nine Months EndedSeptember 30,2006
    
    
    2005U.S. Mining Operations (A)(C):Unaffiliated customers
    
    $
    4,875.8
    
    
    
    3,049.3Intersegment elimination
    
    
    (1,094.6
    )
    
    
    (585.1
    )3,781.2
    
    
    
    2,464.2South American Mines (B)(C):Unaffiliated customers
    
    
    1,570.6
    
    
    
    642.0Intersegment
    
    
    1,094.6
    
    
    
    585.12,665.2
    
    
    
    1,227.1Primary Molybdenum:Unaffiliated customers
    
    
    1,295.6
    
    
    
    1,470.9Intersegment
    
    
    
    
    
    
    1,295.6
    
    
    
    1,470.9Total PDMC:Unaffiliated customers
    
    $
    7,742.0
    
    
    
    5,162.2
 
 (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 nine months ended September 30, 2006, U.S. Mining Operations were
negatively impacted by net copper pricing adjustments of $145.3 million and $1.2 billion,
respectively, associated with our copper collar and copper put options. For the quarter and
nine months ended September 30, 2005, U.S. Mining Operations were negatively impacted by net
copper pricing adjustments of $24.3 million and $56.2 million, respectively, and South
American Mines were negatively impacted by $50.8 million and $108.3 million, respectively,
associated with our copper collar and copper put options.     Nine Months EndedSeptember 30,2006
    
    
    2005U.S. Mining Operations:Morenci
    
    $
    (651.3
    )
    
    
    (27.8
    )Bagdad
    
    
    (150.5
    )
    
    
    (9.0
    )Sierrita
    
    
    (148.3
    )
    
    
    (6.4
    )Chino
    
    
    (170.6
    )
    
    
    (8.2
    )Tyrone
    
    
    (61.3
    )
    
    
    (3.4
    )Manufacturing
    
    
    (9.6
    )
    
    
    (0.2
    )Other
    
    
    (23.5
    )
    
    
    (1.2
    )(1,215.1
    )
    
    
    (56.2
    )South American Mines:El Abra
    
    
    
    
    
    
    (108.3
    )$
    (1,215.1
    )
    
    
    (164.5
    )
 
 U.S.
Mining Operations  Sales
   South
American Mines Segment  Sales




---



##### Table of Contents



40   Primary
Molybdenum Segment  Sales
   Operating Income for Copper (U.S. and South America) and Molybdenum
      Third Quarter2006
    
    
    2005Segment operating income:U.S. Mining Operations (A)(C)
    
    $
    589.0
    
    
    
    365.0South American Mines (B)(C)
    
    
    679.6
    
    
    
    181.5Primary Molybdenum
    
    
    107.4
    
    
    
    71.9$
    1,376.0
    
    
    
    618.4Special, pre-tax items and provisions:U.S. Mining Operations (A)
    
    $
    (10.0
    )
    
    
    (8.5
    )South American Mines (B)
    
    
    
    
    
    
    Primary Molybdenum
    
    
    7.0
    
    
    
    $
    (3.0
    )
    
    
    (8.5
    )Segment operating income excluding
special items and provisions:U.S. Mining Operations (A)(C)
    
    $
    599.0
    
    
    
    373.5South American Mines (B)(C)
    
    
    679.6
    
    
    
    181.5Primary Molybdenum
    
    
    100.4
    
    
    
    71.9$
    1,379.0
    
    
    
    626.9
   Nine Months EndedSeptember 30,2006
    
    
    2005Segment operating income:U.S. Mining Operations (A)(C)
    
    $
    811.5
    
    
    
    610.7South American Mines (B)(C)
    
    
    1,831.1
    
    
    
    505.4Primary Molybdenum
    
    
    326.0
    
    
    
    257.4$
    2,968.6
    
    
    
    1,373.5Special, pre-tax items and provisions:U.S. Mining Operations (A)
    
    $
    (29.8
    )
    
    
    (429.4
    )South American Mines (B)
    
    
    
    
    
    
    Primary Molybdenum
    
    
    6.9
    
    
    
    $
    (22.9
    )
    
    
    (429.4
    )Segment operating income excluding
special items and provisions:U.S. Mining Operations (A)(C)
    
    $
    841.3
    
    
    
    1,040.1South American Mines (B)(C)
    
    
    1,831.1
    
    
    
    505.4Primary Molybdenum
    
    
    319.1
    
    
    
    257.4$
    2,991.5
    
    
    
    1,802.9
 
 (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 nine months ended September 30, 2006, U.S. Mining Operations were
negatively impacted by net copper pricing adjustments of $145.3 million and $1.2 billion,
respectively, associated with our copper collar and copper put options. For the quarter and
nine months ended September 30, 2005, U.S. Mining Operations were negatively impacted by net
copper pricing adjustments of $24.3 million and $56.2 million, respectively, and South
American Mines were negatively impacted by $50.8 million and $108.3 million, respectively,
associated with our copper collar and copper put options.   U.S.
Mining Operations  Operating Income
   Morenci
Segment  Operating Income




---



##### Table of Contents



41    Bagdad
Segment  Operating Income
    Sierrita
Segment  Operating Income
    Chino/Cobre
Segment  Operating Income




---



##### Table of Contents



42   Tyrone
Segment  Operating Income
    Manufacturing
Segment  Operating Loss
    Sales
Segment  Operating Income
    PDMC
Other  Operating Loss
    South
American Mines  Operating Income
   Candelaria/Ojos
del Salado Segment  Operating Income




---



##### Table of Contents



43    Cerro
Verde Segment  Operating Income
      El Abra Segment  Operating Income




---



##### Table of Contents



44   Primary Molybdenum  Operating Income
    i.e Metals Week Ryans Notes Metal Bulletin i.e.,
   Curtailed Properties




---



##### Table of Contents



45
      PDMC
 Other Matters




---



##### Table of Contents



46     Significant New Mexico Environmental and Reclamation Programs
       Significant Changes in International Closure and Reclamation Programs
 Sociedad Minera Cerro Verde S.A.A.
   Other




---



##### Table of Contents



47   
 RESULTS OF PHELPS DODGE INDUSTRIES
    
  Third Quarter2006
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    315.3
    
    
    
    319.3Operating income
    
    $
    15.0
    
    
    
    9.4Special items and provisions, net
    
    $
    (7.1
    )
    
    
    (1.8
    )Operating income before special
items and provisions, net
    
    $
    22.1
    
    
    
    11.2Minority interests in consolidated subsidiaries
    
    $
    (2.5
    )
    
    
    (1.8
    )
 
  Nine Months EndedSeptember 30,2006
    
    2005Sales and other operating revenues
to unaffiliated customers
    
    $
    933.1
    
    
    
    869.3Operating income
    
    $
    37.1
    
    
    
    26.7Special items and provisions, net
    
    $
    (15.8
    )
    
    
    (3.3
    )Operating income before special
items and provisions, net
    
    $
    52.9
    
    
    
    30.0Minority interests in consolidated subsidiaries
    
    $
    (5.0
    )
    
    
    (3.6
    )
 
 Wire
and Cable  Sales
   Wire
and Cable  Operating Income
     
  Third Quarter2006
    
    
    2005Environmental provisions, net
    
    $
    
    
    
    
    (0.1
    )Asset impairment charges
    
    
    (5.6
    )
    
    
    (2.0
    )Dissolution of international wire and cable entity
    
    
    (1.2
    )
    
    
    Restructuring
programs/closures
    
    
    
    
    
    
    0.3Sale of North American magnet wire assets:Loss on disposal
    
    
    (1.2
    )
    
    
    Transaction and employee-related costs
    
    
    0.6
    
    
    
    Sale of HPC:Gain on disposal
    
    
    0.5
    
    
    
    Transaction and employee-related costs
    
    
    (0.2
    )
    
    
    Special, pre-tax items
    
    $
    (7.1
    )
    
    
    (1.8
    )




---



##### Table of Contents



48 
  Nine Months EndedSeptember 30,2006
    
    
    2005Environmental provisions, net
    
    $
    
    
    
    
    (0.1
    )Asset impairment charges
    
    
    (5.6
    )
    
    
    (2.4
    )Dissolution of international wire and cable entity
    
    
    (1.2
    )
    
    
    Restructuring
programs/closures
    
    
    
    
    
    
    (0.8
    )Sale of North American magnet wire assets:Loss on disposal
    
    
    (1.0
    )
    
    
    Transaction and employee-related costs
    
    
    (4.1
    )
    
    
    Sale of HPC:Loss on disposal
    
    
    (1.0
    )
    
    
    Transaction and employee-related costs
    
    
    (2.9
    )
    
    
    Special, pre-tax items
    
    $
    (15.8
    )
    
    
    (3.3
    )
 
 
 DISCONTINUED OPERATIONS
    
  Third Quarter2006
    
    
    2005Sales and other operating revenues
    
    $
    
    
    
    
    180.8Income from discontinued operations before taxes
and loss on disposal
    
    $
    
    
    
    
    10.3Loss on disposal
    
    
    (0.2
    )
    
    
    Provision for taxes on income
    
    
    (0.9
    )
    
    
    (4.3
    )Income (loss) from discontinued operations
    
    $
    (1.1
    )
    
    
    6.0
 
  Nine Months Ended
September 30,2006
    
    
    2005Sales and other operating revenues
    
    $
    179.8
    
    
    
    546.4Income from discontinued operations before taxes
and loss on disposal
    
    $
    17.0
    
    
    
    36.5Loss on disposal
    
    
    (29.7
    )
    
    
    Provision for taxes on income
    
    
    (5.0
    )
    
    
    (14.0
    )Income (loss) from discontinued operations
    
    $
    (17.7
    )
    
    
    22.5
 
  
 OTHER MATTERS RELATING TO THE CONSOLIDATED STATEMENT OF INCOME
 Cost of Products Sold




---



##### Table of Contents



49 Selling and General Administrative Expense
   Exploration and Research Expense
   Interest Expense, Net
   Early Debt Extinguishment Costs
  Gain on Sale of Cost-Basis Investment
  Change in Interest Gain
   Miscellaneous Income and Expense, Net




---



##### Table of Contents



50 Provision for Taxes on Income
           Minority Interests in Consolidated Subsidiaries
   
 CHANGES IN FINANCIAL CONDITION; CAPITALIZATION
 Cash and Cash Equivalents




---



##### Table of Contents



51  
  September 30,
    
    
    December 31,2006
    
    
    2005U.S. operations:Phelps Dodge*
    
    $
    2,151.2
    
    
    
    1,103.9Minority participants share
    
    
    0.4
    
    
    
    0.42,151.6
    
    
    
    1,104.3International operations:Phelps Dodge**
    
    
    1,252.0
    
    
    
    571.3Minority participants share**
    
    
    722.6
    
    
    
    261.91,974.6
    
    
    
    833.2Total consolidated cash
    
    $
    4,126.2
    
    
    
    1,937.5
 
 *
    
    At September 30, 2006, and December 31, 2005, U.S. operations included restricted cash of
$18.7 million, and $9.4 million, respectively.**
    
    At September 30, 2006, and December 31, 2005, international operations included restricted
cash of $21.4 million and $11.4 million, respectively. At September 30, 2006, and December 31,
2005, $7.0 million and $5.0 million, respectively, of restricted cash was associated with
minority participants shares. 
  Working Capital
  
    
    a $657.2 million increase in accounts payable and accrued expenses due to (i) higher accruals for hedging and price protection
programs (approximately $451 million), mostly associated with mark-to-market adjustments on copper collars, (ii) higher accruals for
capital spending (approximately $71 million), (iii) higher balances for copper cathode and concentrate purchases (approximately $45
million) and (iv) net increases in asset retirement obligations (approximately $38 million) and environmental reserves (approximately $22
million) primarily resulting from the reclassification of the current portion;
    
    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
sale of Columbian ($159.7 million) and the North American magnet wire assets ($90.9 million) in the 2006 first quarter; and
    
    a $224.4 million increase in accrued income taxes primarily due to higher foreign, federal and state income tax provisions
(approximately $680 million) and the reclassification of federal income taxes to prepaid expenses (approximately $48 million); partially
offset by payments, net of refunds (approximately $484 million); partially offset by
    
    a $501.9 million increase in accounts receivable primarily due to higher copper receivables mostly resulting from higher copper prices;
    
    a $110.1 million increase in current deferred tax assets primarily due to the reclassification from non-current deferred income taxes;
    
    a $63.3 million increase in mill and leach stockpiles primarily due to the reclassification of the current portion (approximately $59
million) and the adoption of Emerging Issues Task Force (EITF) Issue No. 04-6, Accounting for Stripping Costs Incurred During Production in the Mining
Industry, (approximately $4 million);
    
    a $45.3 million increase in prepaid expenses and other current assets primarily due to higher prepaid federal income taxes
(approximately $48 million); and
    
    a $44.5 million increase in inventories primarily due to (i) higher purchases at Wire and Cable (approximately $15 million), mostly in
anticipation of increased customer demand and higher copper prices, (ii) an increase in work-in-process inventory levels (approximately $15
million) primarily associated with the Morenci mill restart and
higher inventory of stockpiled mill ore at Candelaria and (iii) the impact
of adopting EITF Issue No. 04-6 (approximately $7 million).
 Capital Expenditures and Investments
   Debt




---



##### Table of Contents



52       Dividends




---



##### Table of Contents



53 Contractual Obligations
  
 
 Less Than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsShort-term debt
    
    $
    63.0
    
    
    
    63.0
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    858.6
    
    
    
    62.2
    
    
    
    52.1
    
    
    
    181.9
    
    
    
    562.4Asset retirement obligations*
    
    
    42.4
    
    
    
    15.6
    
    
    
    14.4
    
    
    
    9.5
    
    
    
    2.9Take-or-pay contracts
    
    
    853.2
    
    
    
    658.7
    
    
    
    129.3
    
    
    
    39.0
    
    
    
    26.2Total contractual cash obligations
    
    $
    1,817.2
    
    
    
    799.5
    
    
    
    195.8
    
    
    
    230.4
    
    
    
    591.5
 
 *
    
    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 September 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 $69 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 $507
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




---



##### Table of Contents



54




---



##### Table of Contents



55    Other
  
 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)




---



##### Table of Contents



56 United
States and the State of Arizona v. Phelps Dodge Sierrita, Inc.
  In re Carbon Black Antitrust Litigation
   
 Item 1A. Risk Factors
  
 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 ProgramsJuly 1-31, 2006
    
    
    10,582
    
    
    $
    83.17
    
    
    
    
    
    
    
    August 1-31, 2006
    
    
    1,405
    
    
    
    89.82
    
    
    
    
    
    
    
    September 1-30, 2006
    
    
    1,718
    
    
    
    92.87
    
    
    
    
    
    
    
    Total
    
    
    13,705
    
    
    
    85.07
    
    
    
    
    
    
    
    
 
 
 *
    
    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.




---



##### Table of Contents



Item 6. Exhibits
  
  Signatures
  PHELPS DODGE CORPORATION
 Date: October 24, 2006
    By:
    /s/ Denise R. DannerDenise R. DannerVice President and Controller
(Principal Accounting Officer) 
 Index to Exhibits
 10.1
    
    Termination Agreement between the Company and Inco Ltd. (dated as of September 5, 2006)
(incorporated by reference to a Form 8-K filed on September 5, 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.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.