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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q



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



For the quarter ended March 31, 2003

Commission file number 1-82



PHELPS DODGE CORPORATION

(a New York corporation)



13-1808503

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

One North Central Avenue, Phoenix, AZ 85004

Registrants telephone number: (602) 366-8100

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [   ].

Indicate by a check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes [X] No [   ].

Number of Common Shares outstanding
at May 9, 2003: 88,986,243 shares.



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TABLE OF CONTENTS



|                           |                                                                   |                                                                    |  |  |  |  |  | 
|-------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|                           | STATEMENT OF CONSOLIDATED OPERATIONS                             
|                           | CONSOLIDATED BALANCE SHEET                                       
|                           | CONSOLIDATED STATEMENT OF CASH FLOWS                             
|                           | CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY                   
|                           | FINANCIAL DATA BY BUSINESS SEGMENT                               
|                           | NOTES TO CONSOLIDATED FINANCIAL INFORMATION                      
|                           | REVIEW BY INDEPENDENT ACCOUNTANTS                                
|                           |                                                                   | Report of Independent Accountants                                 
|                           | Item 2. Managements Discussion and Analysis                     
|                           |                                                                   | RESULTS OF OPERATIONS                                             
|                           |                                                                   | RESULTS OF PHELPS DODGE MINING COMPANY                            
|                           |                                                                   | RESULTS OF PHELPS DODGE INDUSTRIES                                
|                           |                                                                   | OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS
|                           |                                                                   | CHANGES IN FINANCIAL CONDITION                                    
|                           | Item 3. Quantitative and Qualitative Disclosure About Market Risk
|                           | Item 4. Controls and Procedures                                  
|Part II. Other Information
|                           | Item 1. Legal Proceedings                                        
|                           | Item 6. Exhibits and Reports on Form 8-K                         
|                           | Signatures                                                       
|                           | Certifications                                                   
|                           | Index to Exhibits                                                
|EX-11                     
|EX-12                     
|EX-15                     
|EX-99.1                   
|EX-99.2                   



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##### Table of Contents



-i-

PHELPS DODGE CORPORATIONQuarterly Report on Form 10-Q

For the Quarter Ended March 31, 2003

Table of Contents

|                              |                                                                   |                                                                    |  |      |    | 
|----------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------ |  | ---- | -- | 
|                              |                                                                   |                                                                    |  | Page
|                              |                                                                   |                                                                    |  |     
|Part I. Financial Information |                                                                   |                                                                    |  |     
|                              | Item 1. Financial Statements (unaudited)                          |                                                                    |  |      |   
|                              |                                                                   | Statement of Consolidated Operations                               |  |      | 1  | 
|                              |                                                                   | Consolidated Balance Sheet                                         |  |      | 2  | 
|                              |                                                                   | Consolidated Statement of Cash Flows                               |  |      | 3  | 
|                              |                                                                   | Consolidated Statement of Shareholders Equity                     |  |      | 4  | 
|                              |                                                                   | Financial Data by Business Segment                                 |  |      | 5  | 
|                              |                                                                   | Notes to Consolidated Financial Information                        |  |      | 6  | 
|                              |                                                                   | Review by Independent Accountants                                  |  |      | 19 | 
|                              |                                                                   | Report of Independent Accountants                                  |  |      | 20 | 
|                              | Item 2. Managements Discussion and Analysis                      |                                                                    |  |      |   
|                              |                                                                   | Results of Operations                                              |  |      | 21 | 
|                              |                                                                   | Results of Phelps Dodge Mining Company                             |  |      | 24 | 
|                              |                                                                   | Results of Phelps Dodge Industries                                 |  |      | 37 | 
|                              |                                                                   | Other Matters Relating to the Statement of Consolidated Operations |  |      | 39 | 
|                              |                                                                   | Changes in Financial Condition                                     |  |      | 40 | 
|                              | Item 3. Quantitative and Qualitative Disclosure About Market Risk |                                                                    |  | 42   |   
|                              | Item 4. Controls and Procedures                                   |                                                                    |  | 42   |   
|Part II. Other Information    |                                                                   |                                                                    |  |     
|                              | Item 1. Legal Proceedings                                         |                                                                    |  | 43   |   
|                              | Item 6. Exhibits and Reports on Form 8-K                          |                                                                    |  | 43   |   
|                              | Signatures                                                        |                                                                    |  | 43   |   
|                              | Certifications                                                    |                                                                    |  | 43   |   
|                              | Index to Exhibits                                                 |                                                                    |  | 45   |   



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-1-

PHELPS DODGE CORPORATION AND SUBSIDIARIES
Part I. Financial Information

Item 1. Financial Statements




STATEMENT OF CONSOLIDATED OPERATIONS

(Unaudited; in millions except per share data)


|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |       |  
|-------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | - | ------------- | ----- | ---- |  | -------------- | ----- | -
|                                                                                                                                 |                                                                                        |   | First Quarter
|                                                                                                                                 |                                                                                        |   |              
|                                                                                                                                 |                                                                                        |   | 2003          |       | 2002
|                                                                                                                                 |                                                                                        |   |               |       |     
|                                                                                                                                 |                                                                                        |   |               |       |      |  | (As Restated)*
|Sales and other operating revenues                                                                                               |                                                                                        | $ | 978.0         |       |      |  | 918.5          |      
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Operating costs and expenses                                                                                                     |                                                                                        |   |               |       |      |  |                |      
|                                                                                                                                 | Cost of products sold (exclusive of items shown separately below)                      |   |               | 807.3 |      |  |                | 765.8 |  
|                                                                                                                                 | Depreciation, depletion and amortization                                               |   |               | 101.6 |      |  |                | 102.9 |  
|                                                                                                                                 | Selling and general administrative expense                                             |   |               | 32.7  |      |  |                | 32.2  |  
|                                                                                                                                 | Exploration and research expense                                                       |   |               | 9.6   |      |  |                | 8.7   |  
|                                                                                                                                 | Special items and provisions, net (see Note 4)                                         |   |               | (1.9  | )    |  |                | (3.8  | )
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|                                                                                                                                 |                                                                                        |   | 949.3         |       |      |  | 905.8          |      
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Operating income                                                                                                                 |                                                                                        |   | 28.7          |       |      |  | 12.7           |      
|                                                                                                                                 | Interest expense                                                                       |   |               | (36.0 | )    |  |                | (52.8 | )
|                                                                                                                                 | Capitalized interest                                                                   |   |               | 0.1   |      |  |                |      |  
|                                                                                                                                 | Miscellaneous income (expense), net                                                    |   |               | 0.9   |      |  |                | 2.0   |  
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Loss before taxes, minority interests, equity in net earnings of
affiliated companies and cumulative effect of accounting change |                                                                                        |   | (6.3          | )     |      |  | (38.1          | )    
|                                                                                                                                 | Benefit (provision) for taxes on income (see Note 9)                                   |   |               | (15.4 | )    |  |                | 37.0  |  
|                                                                                                                                 | Minority interests in consolidated subsidiaries                                        |   |               | (2.1  | )    |  |                | (1.3  | )
|                                                                                                                                 | Equity in net earnings of affiliated companies                                         |   |               | 0.4   |      |  |                | 0.5   |  
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Loss before cumulative effect of accounting change                                                                               |                                                                                        |   | (23.4         | )     |      |  | (1.9           | )    
|                                                                                                                                 | Cumulative effect of accounting change, net of tax of $(1.3) in 2003 and $10.1 in 2002 |   |               | 8.4   |      |  |                | (22.9 | )
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Net loss                                                                                                                         |                                                                                        | $ | (15.0         | )     |      |  | (24.8          | )    
|                                                                                                                                 | Preferred stock dividends                                                              |   |               | (3.4  | )    |  |                |      |  
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Loss applicable to common shares                                                                                                 |                                                                                        | $ | (18.4         | )     |      |  | (24.8          | )    
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Average number of common shares outstanding  basic                                                                              |                                                                                        |   | 88.6          |       |      |  | 78.5           |      
|                                                                                                                                
|Basic loss per common share before cumulative effect of accounting change                                                        |                                                                                        | $ | (0.30         | )     |      |  | (0.03          | )    
|                                                                                                                                 | Cumulative effect of accounting change                                                 |   |               | 0.09  |      |  |                | (0.29 | )
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Basic loss per common share                                                                                                      |                                                                                        | $ | (0.21         | )     |      |  | (0.32          | )    
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Average number of common shares outstanding  diluted                                                                            |                                                                                        |   | 88.6          |       |      |  | 78.5           |      
|                                                                                                                                
|Diluted loss per common share before cumulative effect of accounting change                                                      |                                                                                        | $ | (0.30         | )     |      |  | (0.03          | )    
|                                                                                                                                 | Cumulative effect of accounting change                                                 |   |               | 0.09  |      |  |                | (0.29 | )
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      
|Diluted loss per common share**                                                                                                  |                                                                                        | $ | (0.21         | )     |      |  | (0.32          | )    
|                                                                                                                                 |                                                                                        |   |               |       |      |  |                |      



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|*  |  | Refer to Note 2 to Consolidated Financial Information.                                                                                                                                                                 
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Diluted loss per share would have been anti-dilutive if based on fully diluted shares adjusted to reflect the assumed conversion of
mandatory convertible preferred shares to common shares and stock option exercises.

See Notes to Consolidated Financial Information



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##### Table of Contents



-2-




CONSOLIDATED BALANCE SHEET

(Unaudited; in millions except per share prices)


|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |         |         | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                |                                                                                                                |                                                                                        |         | March 31, |         | December 31,
|                                                |                                                                                                                |                                                                                        |         | 2003      |         | 2002        
|                                                |                                                                                                                |                                                                                        |         |           |         |             
|Assets                                          |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                | Current assets:                                                                                                |                                                                                        |         |           |         |              |         |         |        
|                                                |                                                                                                                | Cash and cash equivalents                                                              |         | $         | 312.7   |              |         |         | 349.8   | 
|                                                |                                                                                                                | Accounts receivable, less allowance for doubtful
accounts (2003 - $16.4; 2002 - $14.1) |         |           | 458.0   |              |         |         | 391.1   | 
|                                                |                                                                                                                | Mill and leach stockpiles                                                              |         |           | 48.9    |              |         |         | 48.9    | 
|                                                |                                                                                                                | Inventories                                                                            |         |           | 391.2   |              |         |         | 398.5   | 
|                                                |                                                                                                                | Supplies                                                                               |         |           | 141.4   |              |         |         | 142.8   | 
|                                                |                                                                                                                | Prepaid expenses and other current assets                                              |         |           | 30.9    |              |         |         | 26.5    | 
|                                                |                                                                                                                | Deferred income taxes                                                                  |         |           | 71.1    |              |         |         | 70.6    | 
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                |                                                                                                                | Current assets                                                                         |         |           | 1,454.2 |              |         |         | 1,428.2 | 
|                                                | Investments and long-term receivables                                                                          |                                                                                        |         | 135.2     |         |              |         | 132.3   |        
|                                                | Property, plant and equipment, net                                                                             |                                                                                        |         | 5,095.5   |         |              |         | 5,159.6 |        
|                                                | Long-term mill and leach stockpiles                                                                            |                                                                                        |         | 64.1      |         |              |         | 64.3    |        
|                                                | Deferred income taxes                                                                                          |                                                                                        |         | 10.3      |         |              |         | 11.0    |        
|                                                | Goodwill                                                                                                       |                                                                                        |         | 92.5      |         |              |         | 90.7    |        
|                                                | Other assets and deferred charges                                                                              |                                                                                        |         | 144.3     |         |              |         | 142.9   |        
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                |                                                                                                                | $                                                                                      | 6,996.1 |           |         |              | 7,029.0 |        
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|Liabilities                                     |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                | Current liabilities:                                                                                           |                                                                                        |         |           |         |              |         |         |        
|                                                |                                                                                                                | Short-term debt                                                                        |         | $         | 41.2    |              |         |         | 35.2    | 
|                                                |                                                                                                                | Current portion of long-term debt                                                      |         |           | 128.6   |              |         |         | 127.0   | 
|                                                |                                                                                                                | Accounts payable and accrued expenses                                                  |         |           | 580.2   |              |         |         | 609.1   | 
|                                                |                                                                                                                | Dividends payable                                                                      |         |           | 3.4     |              |         |         | 3.4     | 
|                                                |                                                                                                                | Accrued income taxes                                                                   |         |           | 21.4    |              |         |         | 9.4     | 
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                |                                                                                                                | Current liabilities                                                                    |         |           | 774.8   |              |         |         | 784.1   | 
|                                                | Long-term debt                                                                                                 |                                                                                        |         | 1,935.4   |         |              |         | 1,948.4 |        
|                                                | Deferred income taxes                                                                                          |                                                                                        |         | 431.9     |         |              |         | 430.8   |        
|                                                | Other liabilities and deferred credits                                                                         |                                                                                        |         | 986.9     |         |              |         | 986.8   |        
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                |                                                                                                                |                                                                                        | 4,129.0 |           |         |              | 4,150.1 |        
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|Minority interests in consolidated subsidiaries |                                                                                                                |                                                                                        | 66.9    |           |         |              | 65.3    |        
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|Shareholders equity                            |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                | Common shares, par value $6.25; 200.0 shares authorized; 89.0 outstanding in 2003 and 88.9 outstanding in 2002 |                                                                                        |         | 556.2     |         |              |         | 555.6   |        
|                                                | Cumulative preferred shares, par value $1.00; 6.0 shares authorized;                                           |                                                                                        |         |           |         |              |         |         |        
|                                                |                                                                                                                | 2.0 outstanding in 2003 and 2002                                                       |         |           | 2.0     |              |         |         | 2.0     | 
|                                                | Capital in excess of par value                                                                                 |                                                                                        |         | 1,554.5   |         |              |         | 1,552.1 |        
|                                                | Retained earnings                                                                                              |                                                                                        |         | 1,154.9   |         |              |         | 1,173.3 |        
|                                                | Accumulated other comprehensive loss                                                                           |                                                                                        |         | (454.5    | )       |              |         | (458.5  | )      
|                                                | Other                                                                                                          |                                                                                        |         | (12.9     | )       |              |         | (10.9   | )      
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                |                                                                                                                |                                                                                        | 2,800.2 |           |         |              | 2,813.6 |        
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        
|                                                |                                                                                                                | $                                                                                      | 6,996.1 |           |         |              | 7,029.0 |        
|                                                |                                                                                                                |                                                                                        |         |           |         |              |         |        

See Notes to Consolidated Financial Information



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##### Table of Contents



-3-




CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited; in millions)


|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |       |                |       |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------------------- | ----- | ------------------ | ----- | ----- | ----- | -------------- | ----- | -
|                                                 |                                                                                 |                                            |                                           |       | Three Months Ended
|                                                 |                                                                                 |                                            |                                           |       | March 31,         
|                                                 |                                                                                 |                                            |                                           |       |                   
|                                                 |                                                                                 |                                            |                                           |       | 2003               |       | 2002 
|                                                 |                                                                                 |                                            |                                           |       |                    |       |      
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |       | (As Restated)*
|Operating activities                             |                                                                                 |                                            |                                           |       |                    |       |       |      
|                                                 | Net loss                                                                        |                                            | $                                         | (15.0 | )                  |       |       | (24.8 | )             
|                                                 | Adjustments to reconcile net loss to net cash
provided by operating activities: |                                            |                                           |       |                    |       |       |       |               
|                                                 |                                                                                 | Depreciation, depletion and amortization   |                                           |       | 101.6              |       |       |       | 102.9          |      
|                                                 |                                                                                 | Deferred income taxes                      |                                           |       | 1.2                |       |       |       | 0.6            |      
|                                                 |                                                                                 | Equity earnings, net of dividends received |                                           |       | 0.2                |       |       |       | (0.5           | )    
|                                                 |                                                                                 | Special items and provisions               |                                           |       | (1.9               | )     |       |       | (3.3           | )    
|                                                 |                                                                                 | Cumulative effect of accounting change     |                                           |       | (9.7               | )     |       |       | 33.0           |      
|                                                 |                                                                                 | Changes in current assets and liabilities: |                                           |       |                    |       |       |       |                |      
|                                                 |                                                                                 |                                            | Accounts receivable                       |       |                    | (65.1 | )     |       |                | (50.4 | )
|                                                 |                                                                                 |                                            | Proceeds from sale of accounts receivable |       |                    | (2.4  | )     |       |                | 4.7   |  
|                                                 |                                                                                 |                                            | Inventories                               |       |                    | 8.1   |       |       |                | 34.9  |  
|                                                 |                                                                                 |                                            | Supplies                                  |       |                    | 1.7   |       |       |                | (1.4  | )
|                                                 |                                                                                 |                                            | Prepaid expenses                          |       |                    | (4.5  | )     |       |                | (10.7 | )
|                                                 |                                                                                 |                                            | Interest payable                          |       |                    | 25.7  |       |       |                | 43.3  |  
|                                                 |                                                                                 |                                            | Other accounts payable                    |       |                    | 13.3  |       |       |                | (50.4 | )
|                                                 |                                                                                 |                                            | Accrued income taxes                      |       |                    | 12.9  |       |       |                | 2.9   |  
|                                                 |                                                                                 |                                            | Other accrued expenses                    |       |                    | (69.5 | )     |       |                | (27.3 | )
|                                                 |                                                                                 | Other adjustments, net                     |                                           |       | 9.4                |       |       |       | 56.7           |      
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      
|                                                 |                                                                                 |                                            | Net cash provided by operating activities |       |                    | 6.0   |       |       |                | 110.2 |  
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      
|Investing activities                             |                                                                                 |                                            |                                           |       |                    |       |       |      
|                                                 | Capital outlays                                                                 |                                            |                                           | (26.9 | )                  |       |       | (21.4 | )             
|                                                 | Capitalized interest                                                            |                                            |                                           | (0.1  | )                  |       |       |      |               
|                                                 | Investment in subsidiaries, net of cash received                                |                                            |                                           | (0.4  | )                  |       |       | (1.4  | )             
|                                                 | Proceeds from asset dispositions                                                |                                            |                                           | 0.1   |                    |       |       | 1.2   |               
|                                                 | Other investing                                                                 |                                            |                                           | (0.7  | )                  |       |       | (2.6  | )             
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      
|                                                 |                                                                                 |                                            | Net cash used in investing activities     |       |                    | (28.0 | )     |       |                | (24.2 | )
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      
|Financing activities                             |                                                                                 |                                            |                                           |       |                    |       |       |      
|                                                 | Proceeds from issuance of debt                                                  |                                            |                                           | 8.8   |                    |       |       | 6.8   |               
|                                                 | Payment of debt                                                                 |                                            |                                           | (20.3 | )                  |       |       | (24.3 | )             
|                                                 | Preferred dividends                                                             |                                            |                                           | (3.4  | )                  |       |       |      |               
|                                                 | Other, net                                                                      |                                            |                                           | (0.2  | )                  |       |       | (1.1  | )             
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      
|                                                 |                                                                                 |                                            | Net cash used in financing activities     |       |                    | (15.1 | )     |       |                | (18.6 | )
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      
|(Decrease) increase in cash and cash equivalents |                                                                                 |                                            | (37.1                                     | )     |                    |       | 67.4  |      
|Cash and cash equivalents at beginning of period |                                                                                 |                                            | 349.8                                     |       |                    |       | 386.9 |      
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      
|Cash and cash equivalents at end of period       |                                                                                 | $                                          | 312.7                                     |       |                    |       | 454.3 |      
|                                                 |                                                                                 |                                            |                                           |       |                    |       |       |      



---

|* |  | Refer to Note 2 to Consolidated Financial Information.
|- |  | ------------------------------------------------------

See Notes to Consolidated Financial Information



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##### Table of Contents



-4-




CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

(Unaudited; in millions)


|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      |       |      |  
|---------------------------- | --------------------------------------- | ---------------------------------------------- | ---------------------------------- | --- | ------------- | - | ---------------- | --- | ---------- |  | ------ |  | --------- | - | -------- |  | ------------- | - | ------- | --- | ------ | - | ------------- | ---- | ----- | - | ------ | - |  | ---- | ----- | ---- | - | - | ------- | ---- | ----- | ---- | -
|                             |                                         |                                                |                                    |     | Common Shares |   | Preferred Shares |     |            |  |        |  |           |   |          |  | Accumulated   |   |         |     |        |   |               |      |      
|                             |                                         |                                                |                                    |     |               |   |                  |     | Capital in |  |        |  |           |   | Other    |  |               |   |         |     |        |   |              
|                             |                                         |                                                |                                    |     | Number        |   | At Par           |     | Number     |  | At Par |  | Excess of |   | Retained |  | Comprehensive |   |         |     |        |   | Shareholders'
|                             |                                         |                                                |                                    |     | of Shares     |   | Value            |     | of Shares  |  | Value  |  | Par Value |   | Earnings |  | Income (Loss) |   | Other   |     | Equity
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |       
|Balance at December 31, 2002 |                                         |                                                | 88.9                               |     |               | $ | 555.6            |     |            |  | 2.0    |  |           | $ | 2.0      |  |               | $ | 1,552.1 |     |        | $ | 1,173.3       |      |       | $ | (458.5 | ) |  | $    | (10.9 | )    |   | $ | 2,813.6 |     
|                             | Restricted shares issued/cancelled, net |                                                |                                    | 0.1 |               |   |                  | 0.6 |            |  |        |  |           |   |          |  |               |   |         | 2.4 |        |   |               |      |       |   |        |   |  |      |       | (2.0 | ) |   |         | 1.0  |      
|                             | Dividends on preferred shares           |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               | (3.4 | )     |   |        |   |  |      |       |      |   |   |         | (3.4 | )    
|                             | Comprehensive income (loss):            |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      |      
|                             |                                         | Net loss                                       |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      | (15.0 | ) |        |   |  |      |       |      |   |   |         |      | (15.0 | )   
|                             |                                         | Other comprehensive income (loss), net of tax: |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      |       |     
|                             |                                         |                                                | Translation adjustment             |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | 6.4  |       |      |   |   |         |      |       | 6.4  |  
|                             |                                         |                                                | Net loss on derivative instruments |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | (2.5 | )     |      |   |   |         |      |       | (2.5 | )
|                             |                                         |                                                | Other investment adjustments       |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | (0.2 | )     |      |   |   |         |      |       | (0.2 | )
|                             |                                         |                                                | Unrealized gains on securities     |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | 0.3  |       |      |   |   |         |      |       | 0.3  |  
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     
|                             |                                         |                                                | Other comprehensive income         |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  | 4.0  |       |      |   |   |         |      |       | 4.0  |  
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     
|                             |                                         | Comprehensive loss                             |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |      | (11.0 | )   
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     
|Balance at March 31, 2003    |                                         |                                                | 89.0                               |     |               | $ | 556.2            |     |            |  | 2.0    |  |           | $ | 2.0      |  |               | $ | 1,554.5 |     |        | $ | 1,154.9       |      |       | $ | (454.5 | ) |  | $    | (12.9 | )    |   | $ | 2,800.2 |     
|                             |                                         |                                                |                                    |     |               |   |                  |     |            |  |        |  |           |   |          |  |               |   |         |     |        |   |               |      |       |   |        |   |  |      |       |      |   |   |         |     

See Notes to Consolidated Financial Information



---



##### Table of Contents



-5-




FINANCIAL DATA BY BUSINESS SEGMENT

(Unaudited; in millions)


|                                                            |                        |  |            |       |                      |  |         |      |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |      | 
|----------------------------------------------------------- | ---------------------- |  | ---------- | ----- | -------------------- |  | ------- | ---- | ------ |  | ------ | --- | ---------- |  | ----- | ---- | ------- |  | ---------- | ---- | ----- |  | ----- | ---- |  |  | ------- | ---- |  |  | ----- | ---- |  |  | ----- | ---- | 
|                                                            |                        |  | U.S. Mines |       | South American Mines |  |         |      |       
|                                                            |                        |  |            |       |                      |  |         |      |       
|                                                            |                        |  |            |       |                      |  | Bagdad/ |      | Miami/ |  | Chino/ |     |            |  |       |      |         |  |            |      | Cerro |  |       |      |  |  | Primary
|                                                            |                        |  | Morenci    |       | Sierrita             |  | Bisbee  |      | Cobre  |  | Tyrone |     | Candelaria |  | Verde |      | El Abra |  | Molybdenum
|                                                            |                        |  |            |       |                      |  |         |      |        |  |        |     |            |  |       |      |         |  |           
|First Quarter 2003                                          |                        |  |            |       |                      |  |         |      |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|Sales & other operating revenues:                           |                        |  |            |       |                      |  |         |      |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|                                                            | Unaffiliated customers |  |            |      |                      |  |         |     |        |  |        |    |            |  |       | 0.1  |         |  |            |     |       |  |       | 59.2 |  |  |         | 9.9  |  |  |       | 31.5 |  |  |       | 75.9 | 
|                                                            | Intersegment           |  |            | 136.2 |                      |  |         | 95.4 |        |  |        | 9.0 |            |  |       | 9.4  |         |  |            | 26.7 |       |  |       | 23.5 |  |  |         | 27.2 |  |  |       | 21.0 |  |  |       |     | 
|Depreciation, depletion and amortization                    |                        |  | 18.7       |       |                      |  | 7.3     |      |        |  | 1.9    |     |            |  | 2.0   |      |         |  | 3.3        |      |       |  | 10.8  |      |  |  | 7.3     |      |  |  | 14.5  |      |  |  | 6.1   |     
|Operating income (loss) before special
items and provisions |                        |  | 12.4       |       |                      |  | 6.7     |      |        |  | (0.7   | )   |            |  | (2.1  | )    |         |  | (4.4       | )    |       |  | 23.1  |      |  |  | 7.5     |      |  |  | 5.6   |      |  |  | 0.1   |     
|Special items and provisions                                |                        |  |           |       |                      |  |        |      |        |  |       |     |            |  |      |      |         |  |           |      |       |  |      |      |  |  |        |      |  |  |      |      |  |  |      |     
|Operating income (loss)                                     |                        |  | 12.4       |       |                      |  | 6.7     |      |        |  | (0.7   | )   |            |  | (2.1  | )    |         |  | (4.4       | )    |       |  | 23.1  |      |  |  | 7.5     |      |  |  | 5.6   |      |  |  | 0.1   |     
|Assets at March 31                                          |                        |  | 1,076.5    |       |                      |  | 762.7   |      |        |  | 119.8  |     |            |  | 292.2 |      |         |  | 149.8      |      |       |  | 660.4 |      |  |  | 432.6   |      |  |  | 549.7 |      |  |  | 787.2 |     
|Expenditures for segment assets                             |                        |  | 6.1        |       |                      |  | 6.2     |      |        |  |       |     |            |  | 1.0   |      |         |  | 0.2        |      |       |  | 0.6   |      |  |  | 1.0     |      |  |  | 0.2   |      |  |  | 2.5   |     
|                                                           
|First Quarter 2002 (as restated)                            |                        |  |            |       |                      |  |         |      |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|Sales & other operating revenues:                           |                        |  |            |       |                      |  |         |      |        |  |        |     |            |  |       |      |         |  |            |      |       |  |       |      |  |  |         |      |  |  |       |      |  |  |       |     
|                                                            | Unaffiliated customers |  |            |      |                      |  |         |     |        |  |        |    |            |  |       | 0.2  |         |  |            |     |       |  |       | 47.8 |  |  |         | 8.5  |  |  |       | 37.8 |  |  |       | 61.3 | 
|                                                            | Intersegment           |  |            | 130.5 |                      |  |         | 99.5 |        |  |        | 9.5 |            |  |       | 21.9 |         |  |            | 24.3 |       |  |       | 19.3 |  |  |         | 24.8 |  |  |       | 17.8 |  |  |       |     | 
|Depreciation, depletion and amortization                    |                        |  | 19.5       |       |                      |  | 6.6     |      |        |  | 1.3    |     |            |  | 3.1   |      |         |  | 3.0        |      |       |  | 10.0  |      |  |  | 7.4     |      |  |  | 16.5  |      |  |  | 5.5   |     
|Operating income (loss) before special
items and provisions |                        |  | 11.8       |       |                      |  | (4.3    | )    |        |  | (4.5   | )   |            |  | 5.7   |      |         |  | (1.7       | )    |       |  | 20.2  |      |  |  | 6.8     |      |  |  | 0.5   |      |  |  | (0.3  | )   
|Special items and provisions                                |                        |  |           |       |                      |  |        |      |        |  |       |     |            |  |      |      |         |  |           |      |       |  |      |      |  |  |        |      |  |  |      |      |  |  |      |     
|Operating income (loss)                                     |                        |  | 11.8       |       |                      |  | (4.3    | )    |        |  | (4.5   | )   |            |  | 5.7   |      |         |  | (1.7       | )    |       |  | 20.2  |      |  |  | 6.8     |      |  |  | 0.5   |      |  |  | (0.3  | )   
|Assets at March 31                                          |                        |  | 1,141.3    |       |                      |  | 761.3   |      |        |  | 124.9  |     |            |  | 413.3 |      |         |  | 141.7      |      |       |  | 670.7 |      |  |  | 457.5   |      |  |  | 557.6 |      |  |  | 797.4 |     
|Expenditures for segment assets                             |                        |  | 1.7        |       |                      |  | 7.6     |      |        |  |       |     |            |  | 0.1   |      |         |  | 0.1        |      |       |  | 0.4   |      |  |  | 2.2     |      |  |  | 1.5   |      |  |  | 1.9   |     

|                                                            |                        |  |            |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |       | 
|----------------------------------------------------------- | ---------------------- |  | ---------- | ----- | ------ |  | ------- | ---- | -------- |  | --------- | ------ | ------ |  | -------- | ----- | ------- |  | ------ | ----- |  |  | ----- | ----- |  |  | ------- | ----- |  |  | ---------- | ----- | - |  | ------- | ----- | 
|                                                            |                        |  |            |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  | Corporate, |       |   |  |        
|                                                            |                        |  | Manufactur |       |        |  |         |      | PDMC     |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  | Other & |       |  |  |           
|                                                            |                        |  | -ing and   |       | Other  |  | Elimi-  |      | PDMC     |  | Specialty |        | Wire & |  | PDI      |       | Elimi-  |  |        |       | 
|                                                            |                        |  | Sales      |       | Mining |  | nations |      | Subtotal |  | Chemicals |        | Cable  |  | Subtotal |       | nations |  | Totals
|                                                            |                        |  |            |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |       
|First Quarter 2003                                          |                        |  |            |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|Sales & other operating revenues:                           |                        |  |            |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|                                                            | Unaffiliated customers |  |            | 473.4 |        |  |         | 5.0  |          |  |           |       |        |  |          | 655.0 |         |  |        | 162.1 |  |  |       | 160.9 |  |  |         | 323.0 |  |  |            |      |   |  |         | 978.0 | 
|                                                            | Intersegment           |  |            | 85.3  |        |  |         | 16.3 |          |  |           | (420.0 | )      |  |          | 30.0  |         |  |        |      |  |  |       |      |  |  |         |      |  |  |            | (30.0 | ) |  |         |      | 
|Depreciation, depletion and amortization                    |                        |  | 4.2        |       |        |  | 1.1     |      |          |  |          |        |        |  | 77.2     |       |         |  | 11.0   |       |  |  | 8.9   |       |  |  | 19.9    |       |  |  | 4.5        |       |   |  | 101.6   |      
|Operating income (loss) before special
items and provisions |                        |  | 8.5        |       |        |  | (21.0   | )    |          |  |          |        |        |  | 35.7     |       |         |  | 10.9   |       |  |  | 3.4   |       |  |  | 14.3    |       |  |  | (23.2      | )     |   |  | 26.8    |      
|Special items and provisions                                |                        |  |           |       |        |  |        |      |          |  |          |        |        |  |         |       |         |  | 3.2    |       |  |  |      |       |  |  | 3.2     |       |  |  | (1.3       | )     |   |  | 1.9     |      
|Operating income (loss)                                     |                        |  | 8.5        |       |        |  | (21.0   | )    |          |  |          |        |        |  | 35.7     |       |         |  | 14.1   |       |  |  | 3.4   |       |  |  | 17.5    |       |  |  | (24.5      | )     |   |  | 28.7    |      
|Assets at March 31                                          |                        |  | 486.3      |       |        |  | 1,511.2 |      |          |  | (1,617.6  | )      |        |  | 5,210.8  |       |         |  | 708.3  |       |  |  | 525.1 |       |  |  | 1,233.4 |       |  |  | 551.9      |       |   |  | 6,996.1 |      
|Expenditures for segment assets                             |                        |  | 1.6        |       |        |  | 0.5     |      |          |  |          |        |        |  | 19.9     |       |         |  | 3.8    |       |  |  | 2.6   |       |  |  | 6.4     |       |  |  | 1.0        |       |   |  | 27.3    |      
|                                                           
|First Quarter 2002 (as restated)                            |                        |  |            |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|Sales & other operating revenues:                           |                        |  |            |       |        |  |         |      |          |  |           |        |        |  |          |       |         |  |        |       |  |  |       |       |  |  |         |       |  |  |            |       |   |  |         |      
|                                                            | Unaffiliated customers |  |            | 453.7 |        |  |         | 2.4  |          |  |           |       |        |  |          | 611.7 |         |  |        | 129.3 |  |  |       | 177.5 |  |  |         | 306.8 |  |  |            |      |   |  |         | 918.5 | 
|                                                            | Intersegment           |  |            | 96.2  |        |  |         | 15.7 |          |  |           | (422.5 | )      |  |          | 37.0  |         |  |        |      |  |  |       | 0.2   |  |  |         | 0.2   |  |  |            | (37.2 | ) |  |         |      | 
|Depreciation, depletion and amortization                    |                        |  | 6.0        |       |        |  | 0.8     |      |          |  |          |        |        |  | 79.7     |       |         |  | 10.5   |       |  |  | 10.7  |       |  |  | 21.2    |       |  |  | 2.0        |       |   |  | 102.9   |      
|Operating income (loss) before special
items and provisions |                        |  | (1.7       | )     |        |  | (19.0   | )    |          |  |          |        |        |  | 13.5     |       |         |  | 13.2   |       |  |  | 2.8   |       |  |  | 16.0    |       |  |  | (20.6      | )     |   |  | 8.9     |      
|Special items and provisions                                |                        |  |           |       |        |  | 13.8    |      |          |  |          |        |        |  | 13.8     |       |         |  |       |       |  |  |      |       |  |  |        |       |  |  | (10.0      | )     |   |  | 3.8     |      
|Operating income (loss)                                     |                        |  | (1.7       | )     |        |  | (5.2    | )    |          |  |          |        |        |  | 27.3     |       |         |  | 13.2   |       |  |  | 2.8   |       |  |  | 16.0    |       |  |  | (30.6      | )     |   |  | 12.7    |      
|Assets at March 31                                          |                        |  | 507.7      |       |        |  | 1,726.1 |      |          |  | (1,788.1  | )      |        |  | 5,511.4  |       |         |  | 674.1  |       |  |  | 601.5 |       |  |  | 1,275.6 |       |  |  | 754.2      |       |   |  | 7,541.2 |      
|Expenditures for segment assets                             |                        |  | 1.5        |       |        |  | 0.4     |      |          |  |          |        |        |  | 17.4     |       |         |  | 2.0    |       |  |  | 1.7   |       |  |  | 3.7     |       |  |  | 1.7        |       |   |  | 22.8    |      





---



##### Table of Contents



-6-




NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)

1.              General Information



| |  |  | The unaudited consolidated financial information of Phelps Dodge
Corporation (the Company, which may be referred to as Phelps Dodge, PD,
we, us or ours) presented herein has been prepared in accordance with the
instructions to Form 10-Q and does not include all of the information and
note disclosures required by generally accepted accounting principles.
Therefore, this information should be read in conjunction with the
consolidated financial statements and notes thereto included in our Form
10-K for the year ended December 31, 2002. This information reflects all
adjustments that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods reported. Our business
consists of two divisions, Phelps Dodge Mining Company (PDMC) and Phelps
Dodge Industries (PDI).
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The results of operations for the three-month period ended March 31, 2003,
are not necessarily indicative of the results to be expected for the full
year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

2.              Restatements



| |  |  | As discussed in Note 1, Summary of Significant Accounting Policies, and
Note 22, Restatement of Consolidated Financial Statements, in the
Companys Form 10-K for the year ended December 31, 2002, we identified
certain accounting matters in the fourth quarter of 2002 that required
restatement of our December 31, 2001 and 2000, Consolidated Financial
Statements and our financial statements for the quarterly periods ended
March 31, 2001, through September 30, 2002. Additionally, our
presentation of reportable segment information for PDMC for the quarter
ended March 31, 2002, has been revised to reflect additional segments.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Following is a summary of selected unaudited quarterly financial data, as
restated for the quarter ended March 31, 2002:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|                                                                                      |  |                    |       |         |  |          |      |  |  |   |       |  
|------------------------------------------------------------------------------------- |  | ------------------ | ----- | ------- |  | -------- | ---- |  |  | - | ----- | -
|(Unaudited; $ in millions except per share data)                                      |  |                    |       |         |  |          |      |  |  |  
|                                                                                     
|                                                                                      |  | First Quarter 2002
|                                                                                      |  |                   
|                                                                                      |  |                    |       |         |  | (1)(2)   |      |  |  |  
|                                                                                      |  |                    |       |         |  | (3)(4)   |      |  |  |  
|                                                                                      |  | As                 |       | (5)     |  |          |      | 
|                                                                                      |  | Previously         |       | Adjust- |  | As      
|                                                                                      |  | Reported           |       | ments   |  | Restated
|                                                                                      |  |                    |       |         |  |         
|Sales and other operating
revenues                                                    |  | $                  | 918.5 |         |  |          |     |  |  | $ | 918.5 |  
|Operating income                                                                      |  |                    | 7.0   |         |  |          | 5.7  |  |  |   | 12.7  |  
|Loss before cumulative
effect of accounting
change                                    |  |                    | (4.8  | )       |  |          | 2.9  |  |  |   | (1.9  | )
|Net loss                                                                              |  |                    | (27.7 | )       |  |          | 2.9  |  |  |   | (24.8 | )
|Basic and diluted loss per
common share before
cumulative effect of
accounting change |  |                    | (0.06 | )       |  |          | 0.03 |  |  |   | (0.03 | )
|Basic and diluted loss per
common share                                               |  |                    | (0.35 | )       |  |          | 0.03 |  |  |   | (0.32 | )



|(1) |  | To adjust the units-of-production depreciation rate calculation for
PDMCs mining, smelting and refining operations. This change reduced our
depreciation and amortization expense and increased our operating income
by $2.7 million in the first quarter of 2002. Additionally, this change
decreased our net loss by $2.2 million, or 3 cents per common share, in
the first quarter of 2002.                                                                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | To adjust the acquired reclamation obligations assumed in the Cyprus Amax
Minerals Company acquisition. This change increased our cost of products
sold and decreased our operating income by $0.9 million in the first
quarter of 2002. Additionally, this change increased our net loss by $0.8
million, or 1 cent per common share, in the first quarter of 2002.                                                                                                    
|   
|(3) |  | To adjust the estimated reclamation obligation at our Tyrone mine in 2002
to exclude mineralized material from the determination of the unit
reclamation and closure
accrual rate. This change increased our cost of products sold and decreased
our operating income and increased our net loss by $2.1 million, or 3 cents
per common share, in the first quarter of 2002.                                                                                            
|   
|(4) |  | To capitalize costs associated with material in mill and leach stockpiles
and the consequent in-process material being converted to salable copper
products, which were stated at lower of cost or market. This change
decreased our cost of products sold and increased our operating income by
$6.0 million in the first quarter of 2002. Additionally, this change
decreased our net loss by $5.6 million, or 7 cents per common share, in
the first quarter of 2002.
|   
|(5) |  | In 2001, a deferred tax asset valuation allowance of $57.9 million
associated with our El Abra copper mine in Chile was established. The
adjustment to the deferred tax asset caused an increase to our net loss by
$2.0 million, or 3 cents per common share, in the first quarter of 2002.                                                                                                                                                                            





---



##### Table of Contents



-7-

3.              Stock Compensation



| |  |  | We account for our stock option plans by measuring compensation cost using
the intrinsic-value-based method presented by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. No compensation cost is reflected in
consolidated net loss, as all options granted under the plans had an
exercise price equal to the market value of the underlying common stock on
the date of the grant. The following table presents the effect on net
loss and loss per common share as if we had applied the fair value
recognition provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based
Compensation, to compensation cost.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                             |                                                                                             |   |               |       |                |  |       |       |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------- | - | ------------- | ----- | -------------- |  | ----- | ----- | -
|(Unaudited; $ in millions except per share data)             |                                                                                             |   |               |       |                | 
|                                                            
|                                                             |                                                                                             |   | First Quarter
|                                                             |                                                                                             |   |              
|                                                             |                                                                                             |   | 2003          |       | 2002          
|                                                             |                                                                                             |   |         |       |         
|                                                             |                                                                                             |   |               |       | (As Restated)*
|Net loss as reported                                         |                                                                                             | $ | (15.0         | )     |                |  | (24.8 | )    
|Deduct:                                                      |                                                                                             |   |               |       |                |  |       |      
|                                                             | Total compensation cost
determined under fair value
based method for all awards,
net of tax |   |               | (3.2  | )              |  |       | (3.8  | )
|                                                             |                                                                                             |   |               |       |                |  |       |      
|Pro forma net loss                                           |                                                                                             | $ | (18.2         | )     |                |  | (28.6 | )    
|                                                             |                                                                                             |   |               |       |                |  |       |      
|Loss
per common share                                        |                                                                                             |   |               |       |                |  |       |      
|                                                             | Basic  as reported                                                                         |   | $             | (0.21 | )              |  |       | (0.32 | )
|                                                             | Basic
 pro forma                                                                           |   | $             | (0.24 | )              |  |       | (0.36 | )
|Loss
per common share
Diluted  as reported                  |                                                                                             | $ | (0.21         | )     |                |  | (0.32 | )    
|                                                             | Diluted
 pro forma                                                                         |   | $             | (0.24 | )              |  |       | (0.36 | )
|                                                            
|*     Refer
to Note 2, Restatements, for further discussion.

4.              Special Items and Provisions



| |  |  | Special items and provisions are unpredictable and atypical of the
Companys operations in a given period. This supplemental information is
not a substitute for any U.S. generally accepted accounting principles
(GAAP) measure and should be evaluated within the context of our U.S. GAAP
results.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note: Supplemental Data



| |  |  | The following schedule summarizes the special items and provisions for the
quarter ended March 31, 2003:
| |  |  | --------------------------------------------------------------------------------------------------------

|                                                                 |                                                      |          |      |           |   |           |     |      |   |  |      |       |  
|---------------------------------------------------------------- | ---------------------------------------------------- | -------- | ---- | --------- | - | --------- | --- | ---- | - |  | ---- | ----- | -
|(Unaudited;
gains (losses) in millions except per share amounts)
|                                                                
|Statement of Consolidated                                        |                                                      | Pre-tax  |      | After-tax |   | $/Share  
|Operations Line Item                                             |                                                      | Earnings |      | Earnings  |   | After-tax
|                                                                 |                                                      |          |      |           |   |          
|Special items and provisions, net:                               |                                                      |          |      |           |   |           |     |      |   |  |      |      
|                                                                 | PDI
                                                |          |      |           |   |           |     |      |   |  |      |       |  
|                                                                 | Termination of a foreign
postretirement benefit
plan |          | $    | 3.2       |   |           |     | 2.4  |   |  |      | 0.03  |  
|                                                                 |                                                      |          |      |           |   |           |     |      |   |  |      |      
|                                                                 | Corporate
and Other                                 |          |      |           |   |           |     |      |   |  |      |       |  
|                                                                 | Environmental provisions                             |          |      | (1.3      | ) |           |     | (1.3 | ) |  |      | (0.01 | )
|                                                                 |                                                      |          |      |           |   |           |     |      |   |  |      |      
|                                                                 |                                                      |          | 1.9  |           |   |           | 1.1 |      |   |  | 0.02 |      
|                                                                 |                                                      |          |      |           |   |           |     |      |   |  |      |      
|Cumulative effect of
accounting change                           |                                                      |          | 9.7  |           |   |           | 8.4 |      |   |  | 0.09 |      
|                                                                 |                                                      |          |      |           |   |           |     |      |   |  |      |      
|                                                                 |                                                      | $        | 11.6 |           |   |           | 9.5 |      |   |  | 0.11 |      
|                                                                 |                                                      |          |      |           |   |           |     |      |   |  |      |      



| |  |  | In the 2003 first quarter, a special, net pre-tax gain of $11.6 million
was recognized consisting of (i) a pre-tax gain of $9.7 million ($8.4
million after-tax) for the cumulative effect of an accounting change
(refer to Note 5, Accounting Standards, for further discussion); (ii) a
$1.3 million charge (before and after taxes) for environmental provisions
(refer to Note 6, Environmental, and Reclamation and Closure Matters); and
a $3.2 million gain ($2.4 million after-tax) from the termination of a
foreign postretirement benefit plan.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---



##### Table of Contents



-8-

Note: Supplemental Data



| |  |  | The following schedule summarizes the special items and provisions for the
quarter ended March 31, 2002:
| |  |  | --------------------------------------------------------------------------------------------------------
|

|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |   |       |  
|---------------------------------------------------------------- | --------------------- | ------------------------------------------------- | ----- | --------- | ----- | --------- | ----- | - | ----- | - | ----- | - | ----- | -
|(Unaudited; gains (losses) in millions except per share amounts)
|                                                                
|Statement of Consolidated                                        |                       | Pre-tax                                           |       | After-tax |       | $/Share  
|Operations Line Item                                             |                       | Earnings                                          |       | Earnings  |       | After-tax
|                                                                 |                       |                                                   |       |           |       |          
|Special items and provisions, net:                               |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|                                                                 | PDMC
                |                                                   |       |           |       |           |       |   |       |   |       |   |      
|                                                                 |                       | Environmental insurance
recoveries, net           |       | $         | 13.8  |           |       |   | 11.2  |   |       |   | 0.14  |  
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|                                                                 | Corporate and Other  |                                                   |       |           |       |           |       |   |       |   |       |   |      
|                                                                 |                       | Environmental provisions                          |       |           | (12.1 | )         |       |   | (12.1 | ) |       |   | (0.15 | )
|                                                                 |                       | Environmental insurance
recoveries, net           |       |           | 2.1   |           |       |   | 1.9   |   |       |   | 0.02  |  
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|                                                                 |                       |                                                   | (10.0 | )         |       |           | (10.2 | ) |       |   | (0.13 | )
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|                                                                 |                       |                                                   | 3.8   |           |       |           | 1.0   |   |       |   | 0.01  |  
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|Miscellaneous income (expense), net:                             |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|                                                                 |                       | Cost investment
write-downs                       |       |           | (0.5  | )         |       |   | (0.4  | ) |       |   |      |  
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|Benefit (provision) for taxes
on income:                         |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|                                                                 |                       | Tax benefit for 2001
net operating loss
carryback |       |           |      |           |       |   | 38.5  |   |       |   | 0.49  |  
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|Cumulative effect of
accounting change                           |                       |                                                   | (33.0 | )         |       |           | (22.9 | ) |       |   | (0.29 | )
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  
|                                                                 |                       | $                                                 | (29.7 | )         |       |           | 16.2  |   |       |   | 0.21  |  
|                                                                 |                       |                                                   |       |           |       |           |       |   |       |   |       |  



| |  |  | In the 2002 first quarter, a special, net pre-tax loss of $29.7 million
was recognized consisting of (i) pre-tax charges of $33.0 million ($22.9
million after-tax) for the cumulative effect of an accounting change
(refer to Note 5, Accounting Standards, for further discussion); (ii) a
$12.1 million charge (before and after taxes) for environmental
provisions; (iii) a $0.5 million write-off ($0.4 million after-tax) of a
cost basis investment; and (iv) a $15.9 million gain ($13.1 million
after-tax), net of fees and expenses, from recoveries associated with
insurance settlements reached with companies on historic environmental
claims. In addition, the 2002 first quarter included a tax benefit of
$38.5 million for net operating loss carrybacks prior to 2002 resulting
from U.S. tax legislation enacted in that period (refer to Note 9, Benefit
(Provision) for Taxes on Income).
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In September 2002, we announced the temporary closure of two U.S. wire and
cable plants and other actions to improve efficiencies and consolidate
certain wire and cable operations. Refer to the Companys Form 10-K for
the year ended December 31, 2002, for additional discussion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | The following schedule presents a roll-forward from December 31, 2002, of
the liabilities incurred in connection with the September 2002
restructuring program, which were reflected as current liabilities in our
consolidated balance sheet:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|

|                           |                |                    |  |          |     |          |  |         |      |   |  |  |     | 
|-------------------------- | -------------- | ------------------ |  | -------- | --- | -------- |  | ------- | ---- | - |  |  | --- | 
|(Unaudited; $ in millions)
|                          
|                           |                |                    |  | 12/31/02 |     | Payments |  | 3/31/03
|                           |                |                    |  |          |     |         
|PDI                       |                |                    |  |          |     |          |  |         |      |   |  | 
|                           | Wire and Cable |                    |  |          |     |          |  |         |      |   |  |  |    
|                           |                | Employee severance |  | $        | 1.3 |          |  |         | (0.9 | ) |  |  | 0.4 | 
|                           |                |                    |  |          |     |          |  |         |      |   |  | 



| |  |  | In the second quarter of 2001, we announced a restructuring of our
professional, administrative and operational support functions, as well as
various other operational improvement initiatives. Additionally, in the
second quarter of 2000 and 1999, we announced plans to reduce operating
costs and restructure operations at our PDMC division and our Wire and
Cable segment. Refer to the Companys Form 10-K for the year ended
December 31, 2002, for additional discussion.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---



##### Table of Contents



-9-



| |  |  | The following schedules present a roll-forward from December 31, 2002 and
2001, of the liabilities incurred in connection with the 2001
restructuring programs, which were reflected as current liabilities in our
consolidated balance sheet:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|                        |                 |                                   |          |   |          |  |         |   |      |   |   |  |   |  | 
|----------------------- | --------------- | --------------------------------- | -------- | - | -------- |  | ------- | - | ---- | - | - |  | - |  | 
|                        |                 |                                   | 12/31/02 |   | Payments |  | 3/31/03
|                        |                 |                                   |          |   |          |  |        
|PDMC
                  |                 |                                   |          |   |          |  |         |   |      |   |   | 
|U.S. Mines              |                 |                                   |          |   |          |  |         |   |      |   |   | 
|                        | Morenci         |                                   |          |   |          |  |         |   |      |   |   |  |  
|                        |                 | Employee severance                |          | $ | 0.1      |  |         |   | (0.1 | ) |   |  |  | 
|                        |                 |                                   |          |   |          |  |         |   |      |   |   | 
|                        | Bagdad/Sierrita |                                   |          |   |          |  |         |   |      |   |   |  |  
|                        |                 | Mothballing/take-or-pay contracts |          |   | 0.2      |  |         |   | (0.2 | ) |   |  |  | 
|                        |                 |                                   |          |   |          |  |         |   |      |   |   | 
|                        | Miami/Bisbee    |                                   |          |   |          |  |         |   |      |   |   |  |  
|                        |                 | Mothballing/take-or-pay contracts |          |   | 0.1      |  |         |   | (0.1 | ) |   |  |  | 
|                        |                 |                                   |          |   |          |  |         |   |      |   |   | 
|                        | Chino/Cobre     |                                   |          |   |          |  |         |   |      |   |   |  |  
|                        |                 | Employee severance                |          |   | 0.1      |  |         |   | (0.1 | ) |   |  |  | 
|                        |                 |                                   |          |   |          |  |         |   |      |   |   | 
|                        |                 |                                   | 0.5      |   |          |  | (0.5    | ) |      |   |  | 
|                        |                 |                                   |          |   |          |  |         |   |      |   |   | 
|Manufacturing and Sales |                 |                                   |          |   |          |  |         |   |      |   |   | 
|                        |                 | Employee severance                |          |   | 0.1      |  |         |   | (0.1 | ) |   |  |  | 
|                        |                 |                                   |          |   |          |  |         |   |      |   |   | 
|                        |                 | $                                 | 0.6      |   |          |  | (0.6    | ) |      |   |  | 
|                        |                 |                                   |          |   |          |  |         |   |      |   |   | 

(Unaudited; $ in millions)

|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|----------------------- | --------------- | --------------------------------- | ---- | -------- | --- | -------- | ---- | ------- | ---- | - | ---- |  | --- |  | 
|                        |                 |                                   |      | 12/31/01 |     | Payments |      | 3/31/02
|                        |                 |                                   |      |          |     |          |      |        
|PDMC                   |                 |                                   |      |          |     |          |      |         |      |   |      | 
|U.S. Mines              |                 |                                   |      |          |     |          |      |         |      |   |      | 
|                        | Morenci         |                                   |      |          |     |          |      |         |      |   |      |  |    
|                        |                 | Employee severance                |      | $        | 0.3 |          |      |         | (0.3 | ) |      |  |    | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        | Bagdad/Sierrita |                                   |      |          |     |          |      |         |      |   |      |  |    
|                        |                 | Employee severance                |      |          | 3.5 |          |      |         | (1.3 | ) |      |  | 2.2 | 
|                        |                 | Mothballing/take-or-pay contracts |      |          | 3.1 |          |      |         |     |   |      |  | 3.1 | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        |                 |                                   | 6.6  |          |     |          | (1.3 | )       |      |   | 5.3  | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        | Miami/Bisbee    |                                   |      |          |     |          |      |         |      |   |      |  |    
|                        |                 | Employee severance                |      |          | 1.8 |          |      |         | (0.8 | ) |      |  | 1.0 | 
|                        |                 | Mothballing/take-or-pay contracts |      |          | 1.0 |          |      |         | (0.2 | ) |      |  | 0.8 | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        |                 |                                   | 2.8  |          |     |          | (1.0 | )       |      |   | 1.8  | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        | Chino/Cobre     |                                   |      |          |     |          |      |         |      |   |      |  |    
|                        |                 | Employee severance                |      |          | 1.2 |          |      |         | (0.2 | ) |      |  | 1.0 | 
|                        |                 | Mothballing/take-or-pay contracts |      |          | 0.2 |          |      |         | (0.1 | ) |      |  | 0.1 | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        |                 |                                   | 1.4  |          |     |          | (0.3 | )       |      |   | 1.1  | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        | Tyrone          |                                   |      |          |     |          |      |         |      |   |      |  |    
|                        |                 | Employee severance                |      |          | 0.2 |          |      |         | (0.2 | ) |      |  |    | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        |                 |                                   | 11.3 |          |     |          | (3.1 | )       |      |   | 8.2  | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|Manufacturing and Sales |                 |                                   |      |          |     |          |      |         |      |   |      | 
|                        |                 | Employee
severance                |      |          | 1.4 |          |      |         | (0.3 | ) |      |  | 1.1 | 
|                        |                 | Mothballing/take-or-pay contracts |      |          | 4.1 |          |      |         | (2.1 | ) |      |  | 2.0 | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        |                 |                                   | 5.5  |          |     |          | (2.4 | )       |      |   | 3.1  | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|Primary Molybdenum      |                 |                                   |      |          |     |          |      |         |      |   |      | 
|                        |                 | Employee severance                |      |          | 0.1 |          |      |         | (0.1 | ) |      |  |    | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|Other Mining            |                 |                                   |      |          |     |          |      |         |      |   |      | 
|                        |                 | Employee severance                |      |          | 0.8 |          |      |         | (0.4 | ) |      |  | 0.4 | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      |  |     |  | 
|                        |                 | $                                 | 17.7 |          |     |          | (6.0 | )       |      |   | 11.7 | 
|                        |                 |                                   |      |          |     |          |      |         |      |   |      | 





---



##### Table of Contents



-10-

|                    |  |                          |          |  |          |  |         |   |      |   |      |  |     |  | 
|------------------- |  | ------------------------ | -------- |  | -------- |  | ------- | - | ---- | - | ---- |  | --- |  | 
|                    |  |                          | 12/31/01 |  | Payments |  | 3/31/02
|                    |  |                          |          |  |          |  |        
|PDI
               |  |                          |          |  |          |  |         |   |      |   |      | 
|Specialty Chemicals |  |                          |          |  |          |  |         |   |      |   |      | 
|                    |  | Disposal and
dismantling |          |  | 0.5      |  |         |   |     |   |      |  | 0.5 | 
|                    |  | Employee
severance       |          |  | 0.8      |  |         |   | (0.4 | ) |      |  | 0.4 | 
|                    |  |                          |          |  |          |  |         |   |      |   |      |  |     |  | 
|                    |  |                          | 1.3      |  |          |  | (0.4    | ) |      |   | 0.9  | 
|                    |  |                          |          |  |          |  |         |   |      |   |      |  |     |  | 
|                    |  | $                        | 19.0     |  |          |  | (6.4    | ) |      |   | 12.6 | 
|                    |  |                          |          |  |          |  |         |   |      |   |      | 



| |  |  | The following schedules present a roll-forward from December 31, 2002 and
2001, of the liabilities incurred in connection with the June 2000
restructuring program, which were reflected as current liabilities in our
consolidated balance sheet:
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Unaudited; $ in millions)

|
|
|
|
|
|
|
|
|

(Unaudited; $ in millions)

|               |  |                               |  |          |     |           |  |         |      |   |  |  |     | 
|-------------- |  | ----------------------------- |  | -------- | --- | --------- |  | ------- | ---- | - |  |  | --- | 
|               |  |                               |  |          |     | Reassess- |  |         |      |  
|               |  |                               |  | 12/31/01 |     | ments     |  | 3/31/02
|               |  |                               |  |          |     |           |  |        
|PDI
          |  |                               |  |          |     |           |  |         |      |   |  | 
|Wire and Cable |  |                               |  |          |     |           |  |         |      |   |  | 
|               |  | Plant removal and
dismantling |  | $        | 1.9 |           |  |         | (0.2 | ) |  |  | 1.7 | 
|               |  |                               |  |          |     |           |  |         |      |   |  |  |     | 



| |  |  | PDIs Wire and Cable segment reassessment related to a non-cash deduction
associated with the devaluation of Venezuelan currency.                                                                                                                 
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The following schedules present a roll-forward from December 31, 2002 and
2001, of the liabilities incurred in connection with the June 1999
restructuring program, which were reflected as current liabilities in our
consolidated balance sheet:

(Unaudited; $ in millions)

|               |                                   |  |          |     |          |     |         |   |  |   |  |     |  |     | 
|-------------- | --------------------------------- |  | -------- | --- | -------- | --- | ------- | - |  | - |  | --- |  | --- | 
|               |                                   |  | 12/31/02 |     | Payments |     | 3/31/03
|               |                                   |  |          |     |          |     |         |   | 
|PDMC
         |                                   |  |          |     |          |     |         |   |  |   |  |    
|Other Mining   |                                   |  |          |     |          |     |         |   |  |   |  |    
|               | Mothballing/take-or-pay
contracts |  | $        | 0.6 |          |     |         |  |  |   |  | 0.6 | 
|               |                                   |  |          |     |          |     |         |   |  |   |  |     |  |     | 
|PDI
          |                                   |  |          |     |          |     |         |   |  |   |  |    
|Wire and Cable |                                   |  |          |     |          |     |         |   |  |   |  |    
|               | Take-or-pay
contracts             |  |          | 1.0 |          |     |         |  |  |   |  | 1.0 | 
|               |                                   |  |          |     |          |     |         |   |  |   |  |     |  |     | 
|               |                                   |  |          |     | $        | 1.6 |         |   |  |  |  |     |  | 1.6 | 
|               |                                   |  |          |     |          |     |         |   |  |   |  |     |  |     | 

(Unaudited; $ in millions)

|                    |  |                                   |          |   |          |  |         |   |      |   |     |  |     |  | 
|------------------- |  | --------------------------------- | -------- | - | -------- |  | ------- | - | ---- | - | --- |  | --- |  | 
|                    |  |                                   | 12/31/01 |   | Payments |  | 3/31/02
|                    |  |                                   |          |   |          |  |         |   |     
|PDMC
              |  |                                   |          |   |          |  |         |   |      |   |     | 
|Other Mining        |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  | Employee
severance                |          | $ | 0.2      |  |         |   | (0.1 | ) |     |  | 0.1 | 
|                    |  | Mothballing/take-or-pay
contracts |          |   | 1.4      |  |         |   | (0.3 | ) |     |  | 1.1 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  |                                   | 1.6      |   |          |  | (0.4    | ) |      |   | 1.2 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 
|PDI
               |  |                                   |          |   |          |  |         |   |      |   |     | 
|Specialty Chemicals |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  | Disposal and
dismantling          |          |   | 0.3      |  |         |   |     |   |     |  | 0.3 | 
|                    |  | Environmental                     |          |   | 0.6      |  |         |   |     |   |     |  | 0.6 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  |                                   | 0.9      |   |          |  |        |   |      |   | 0.9 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 
|Wire
and Cable      |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  | Take-or-pay
contracts             |          |   | 1.1      |  |         |   |     |   |     |  | 1.1 | 
|                    |  | Plant removal and
dismantling     |          |   | 0.2      |  |         |   |     |   |     |  | 0.2 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  |                                   | 1.3      |   |          |  |        |   |      |   | 1.3 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  |                                   | 2.2      |   |          |  |        |   |      |   | 2.2 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 
|                    |  | $                                 | 3.8      |   |          |  | (0.4    | ) |      |   | 3.4 | 
|                    |  |                                   |          |   |          |  |         |   |      |   |     | 





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|5. |  | Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On January 1, 2003, we adopted SFAS No. 143, Accounting for Asset Retirement Obligations. With the
adoption of this Statement, we recognize asset retirement obligations
(AROs) as liabilities when incurred, with the initial measurement at fair
value. These liabilities will be accreted to full value over time through
charges to income. In addition, an asset retirement cost was capitalized
as part of the related assets carrying value and will subsequently be
allocated to expense over the assets useful life. Our AROs consist
primarily of costs associated with mine reclamation and closure
activities. These activities, which tend to be site specific, generally
include costs for earthwork, revegetation, water treatment and demolition.
Upon adoption, we recorded a pre-tax cumulative effect of a change in
accounting principle of $9.7 million credit to income ($8.4 million
after-tax). In the first quarter 2003, the effect of adopting SFAS No.
143 decreased loss before cumulative effect of accounting change by
approximately $3 million, or 4 cents per common share.
|  
|   |  | The following table summarizes the balance sheet impact associated with
the adoption of SFAS No. 143:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                           |                              |   |              |         |          |  |          |      |            |  |         |         | 
|------------------------------------------ | ---------------------------- | - | ------------ | ------- | -------- |  | -------- | ---- | ---------- |  | ------- | ------- | 
|(Unaudited; $ in millions)                 |                              |   |              |         |          |  |          |      |            |  |         |        
|                                           |                              |   |              |         |          |  | SFAS     |      | January 1,
|                                           |                              |   | December 31, |         | No. 143  |  | 2003    
|                                           |                              |   | 2002         |         | Adoption |  | After   
|                                           |                              |   | As Reported  |         | Impact   |  | Adoption
|                                           |                              |   |              |         |          |  |         
|Mining properties                          |                              | $ | 1,361.4      |         |          |  | 67.4     | *    |            |  | 1,428.8 |        
|Mining properties
accumulated depreciation |                              |   | (122.4       | )       |          |  | (55.2    | )    |            |  | (177.6  | )      
|                                           |                              |   |              |         |          |  |          |      |            |  |         |        
|                                           | Net mining
properties assets |   | $            | 1,239.0 |          |  |          | 12.2 |            |  |         | 1,251.2 | 
|                                           |                              |   |              |         |          |  |          |      |            |  |         |        
|                                          
|Asset retirement
obligation
liability      |                              | $ | 138.6        |         |          |  | 10.4     | **   |            |  | 149.0   |        
|                                           |                              |   |              |         |          |  |          |      |            |  |         |        



| | *  | Amount includes $91.5 million of additions related to recording an asset
retirement cost, offset by $24.1 million to reclassify amounts recognized
as ore reserves in purchase accounting.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | ** | Amount consists of $2.5 million of liabilities recognized at adoption and
$7.9 million of reclassifications related to closure obligations from
other liabilities at adoption.            



| |  | The pro formaeffects of the application of SFAS No. 143 as if this
Statement had been adopted on January 1, 2002, are presented below:
| |  | --------------------------------------------------------------------------------------------------------------------------------------

|                                                                              |                                 |   |               |       |      |  |       |       |  
|----------------------------------------------------------------------------- | ------------------------------- | - | ------------- | ----- | ---- |  | ----- | ----- | -
|(Unaudited;
$ in millions except per share data)                             
|                                                                             
|                                                                              |                                 |   | First Quarter
|                                                                              |                                 |   |              
|                                                                              |                                 |   | 2003          |       | 2002
|                                                                              |                                 |   |               |       |     
|Loss before cumulative effect of
accounting change as reported                |                                 | $ | (23.4         | )     |      |  | (1.9  | )    
|Reduced cost of products sold, net
of tax benefit (accretion expense)         |                                 |   |              |       |      |  | 5.3   |      
|Additional depreciation expense,
net of tax provision                         |                                 |   |              |       |      |  | (0.6  | )    
|                                                                              |                                 |   |               |       |      |  |       |      
|Pro
formaincome (loss) before cumulative
effect of accounting change          |                                 | $ | (23.4         | )     |      |  | 2.8   |      
|                                                                              |                                 |   |               |       |      |  |       |      
|Income (loss) per common share
before cumulative effect of
accounting change: |                                 |   |               |       |      |  |       |      
|                                                                              | Basic and diluted  as reported |   | $             | (0.30 | )    |  |       | (0.03 | )
|                                                                              | Basic and diluted  pro forma   |   | $             | (0.30 | )    |  |       | 0.03  |  
|Net loss as reported                                                          |                                 | $ | (15.0         | )     |      |  | (24.8 | )    
|Pro formanet loss                                                             |                                 | $ | (23.4         | )     |      |  | (20.1 | )    
|                                                                             
|Loss per common share:                                                        |                                 |   |               |       |      |  |       |      
|                                                                              | Basic and diluted  as reported |   | $             | (0.21 | )    |  |       | (0.32 | )
|                                                                              | Basic and diluted  pro forma   |   | $             | (0.30 | )    |  |       | (0.26 | )



| |  | The pro formaasset retirement obligation liability balances as if SFAS
No. 143 had been adopted on January 1, 2002, are as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------

|                                                                   |  |   |       | 
|------------------------------------------------------------------ |  | - | ----- | 
|(Unaudited; $ in millions)                                        
|                                                                  
|Pro formaasset retirement obligation
liability  January 1, 2002   |  | $ | 138.1 | 
|Pro formaasset retirement obligation
liability  December 31, 2002 |  | $ | 149.0 | 



| |  | Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. Under SFAS No. 142, goodwill and intangible
assets that have indefinite useful lives are not amortized, but rather
tested at least annually for impairment. Intangible assets that have
finite useful lives will continue to be amortized over their useful lives.
Upon completion of the transitional impairment tests, the fair value of
three of the Companys international wire and cable reporting units was
determined to be less than the related carrying amount. The resulting
impairment loss recognized upon adoption of SFAS No. 142 in the first
quarter of 2002 was $33.0 million, pre-tax
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | ($22.9 million after-tax), and
was recognized as a cumulative effect of a change in accounting principle.                                                                                                                                                                                                                                                                                      
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Subsequently, the Company completed its annual goodwill impairment test as
of December 31, 2002, with no additional impairments. The Company will
continue to test its goodwill annually on a consistent measurement date
unless events occur or circumstances change between annual tests that
would more likely than not reduce the fair value of a reporting unit below
its carrying amount.
|
| |  | The changes in the carrying amount of goodwill for the year ended December
31, 2002, and quarter ended March 31, 2003, were as follows:                                                                                                                                                                                                                                                        

|                                                     |  |           |       |          |  |       |       |   |  |  |       |  
|---------------------------------------------------- |  | --------- | ----- | -------- |  | ----- | ----- | - |  |  | ----- | -
|(Unaudited; $ in millions)                           |  |           |       |          |  |       |       |   |  |  |       |  
|                                                     |  | Specialty |       | Wire and |  |       |       |  
|                                                     |  | Chemicals |       | Cable    |  |       |       |  
|                                                     |  | Segment   |       | Segment  |  | Total
|                                                     |  |           |       |          |  |      
|Balance as of
December 31, 2001                      |  | $         | 88.5  |          |  |       | 54.6  |   |  |  | 143.1 |  
|Goodwill acquired
during period                      |  |           |      |          |  |       |      |   |  |  |      |  
|Impairment losses upon
adoption of SFAS
No. 142      |  |           |      |          |  |       | (33.0 | ) |  |  | (33.0 | )
|Goodwill included in
the disposal of a
business unit |  |           |      |          |  |       |      |   |  |  |      |  
|Foreign currency exchange adjustments                |  |           | (19.4 | )        |  |       |      |   |  |  | (19.4 | )
|                                                     |  |           |   |          |  |       |   |   |  |  |   |  
|Balance as of
December 31, 2002                      |  |           | 69.1  |          |  |       | 21.6  |   |  |  | 90.7  |  
|Goodwill acquired
during period                      |  |           |      |          |  |       |      |   |  |  |      |  
|Impairment losses                                    |  |           |      |          |  |       |      |   |  |  |      |  
|Goodwill included in
the disposal of a
business unit |  |           |      |          |  |       |      |   |  |  |      |  
|Foreign currency exchange adjustments                |  |           | 1.8   |          |  |       |      |   |  |  | 1.8   |  
|                                                     |  |           |   |          |  |       |   |   |  |  |   |  
|Balance as of
March 31, 2003                         |  | $         | 70.9  |          |  |       | 21.6  |   |  |  | 92.5  |  
|                                                     |  |           |       |          |  |       |       |   |  |  |       |  



| |  | In August 2001, the Financial Accounting Standard Board (FASB) issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This Statement supersedes SFAS No. 121 and the accounting and reporting
provisions of Accounting Principles Board (APB) Opinion No. 30, and also
amends Accounting Research Bulletin (ARB) No. 51. This Statement requires
that one accounting model be used for long-lived assets to be disposed of
by sale, whether previously held and used or newly acquired, and broadens
the presentation of discontinued operations to include more disposal
transactions. This Statement was adopted by the Company on January 1,
2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In April 2002, FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. Under SFAS No. 4, all gains and losses from extinguishment
of debt were required to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. This Statement
eliminates SFAS No. 4 and, thus, the exception to applying APB No. 30 to
all gains and losses related to extinguishments of debt. As a result,
gains and losses from extinguishment of debt should be classified as
extraordinary items only if they meet the criteria in APB No. 30.
Applying the provisions of APB No. 30 will distinguish transactions that
are part of an entitys recurring operations from those that are unusual
or infrequent or that meet the criteria for classification as an
extraordinary item. Under SFAS No. 13, the required accounting treatment
of certain lease modifications that have economic effects similar to
sale-leaseback transactions was inconsistent with the required accounting
treatment for sale-leaseback transactions. This Statement amends SFAS No.
13 to require that those lease modifications be accounted for in the same
manner as sale-leaseback transactions. This Statement was adopted by the
Company on January 1, 2003. As a result of this Statement being
adopted, we will reclassify  the third quarter 2002 extraordinary item
for debt extinguishment to recurring operations in our Form 10-Q
filing for the quarter ended September 30, 2003.
|
| |  | In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between this Statement and EITF
94-3 relates to its re-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



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-13-



|   |  | quirements for recognition of a liability for a cost
associated with an exit or disposal activity. This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under EITF 94-3, a liability
was recognized at the date of an entitys commitment to an exit plan.
This Statement is effective for exit or disposal activities initiated
after December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In November 2002, FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of certain guarantees, a guarantor must recognize a liability for
the fair value of an obligation assumed under the guarantee. FIN 45 also
requires significant new disclosures by guarantors, in both interim and
annual financial statements, about obligations associated with guarantees
issued. FIN 45 disclosure requirements were adopted for our year ended
December 31, 2002; the initial recognition and measurement provisions were
adopted on a prospective basis to guarantees issued or modified after
December 31, 2002. There were no such guarantees issued or modified in
the first quarter of 2003.                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | In December 2002, FASB issued SFAS No. 148, Accounting for Stock Based
Compensation  Transition and Disclosure  an Amendment of SFAS No. 123.
The Statement amends SFAS No. 123, Accounting for Stock-Based
Compensation, and provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. This Statement also amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures
in both annual and interim financial statements about the method of
stock-based employee compensation and the effect of the method used on
reported results. This Statement was effective for fiscal years ending
after December 15, 2002. The Company adopted this Statement in regards to
disclosure provisions for the year ended December 31, 2002, and has
provided the interim information in Note 3, Stock Compensation.                                                                                                                                                                                                                                                                                           
|  
|   |  | In January 2003, FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46) to
clarify when a company should consolidate in its financial statements the
assets, liabilities and activities of a variable interest entity. FIN 46
provides general guidance as to the definition of a variable interest
entity and requires a variable interest entity to be consolidated if a
company absorbs the majority of the variable interest entitys expected
losses, or is entitled to receive a majority of the variable interest
entitys residual returns, or both. FIN 46 is effective immediately for
all new variable interest entities created after January 31, 2003. For
variable interest entities created before February 1, 2003, the
consolidation provisions of FIN 46 must be applied for the first interim
or annual reporting period beginning after June 15, 2003. The disclosure
provisions of FIN 46 apply to financial statements issued after January
31, 2003, regardless of when the variable interest entity was established.
The adoption of FIN 46 did not have a material impact on the Companys
financial reporting and disclosures.
|  
|   |  | In April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. In particular, this Statement clarifies
under what circumstances a contract with an initial net investment meets
the characteristic of a derivative and when a derivative contains a
financing component that warrants special reporting in the statement of
cash flows. This Statement is generally effective for contracts entered
into or modified after June 30, 2003. We are currently analyzing the
impact of adoption of SFAS No. 149 on our financial reporting and
disclosures.                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|6. |  | Environmental, and Reclamation and Closure Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | As of December 31, 2002, we had a reserve balance of $305.9 million for
estimated future costs associated with environmental matters at closed
facilities and closed portions of certain operating facili-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



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| |  | ties. During
the first three months of 2003, we had a $5.2 million net decrease in the
reserve estimate ($1.3 million of additions and $6.5 million of reclassification to asset retirement
obligation liability) and $3.8 million of spending against the reserve.
As of March 31, 2003, the reserve balance was $296.9 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The sites for which Phelps Dodge has received a notice of potential
liability or an information request that currently are considered to be
significant are the Pinal Creek site near Miami, Arizona; the Laurel Hill
site at Maspeth, New York; the former American Zinc and Chemical site in
Langeloth, Pennsylvania; and the Cyprus Tohono site near Casa Grande,
Arizona. At March 31, 2003, the cost range for reasonably possible
outcomes for all reservable remediation sites was estimated to be from
$268 million to $522 million of which approximately $297 million has been
reserved.                                                                                                                                                                                                                                       
|
| |  | Phelps Dodge has a number of sites that are not the subject of an
environmental reserve because it is not probable that a successful claim
will be made against the Company for those sites, but for which there is a
reasonably possible likelihood of an environmental remediation liability.
As of March 31, 2003, the cost range for reasonably possible outcomes for
all such sites was estimated to be from $4 million to $37 million. The
liabilities arising from potential environmental obligations that have not
been reserved at this time may be material to the operating results of a
single quarter or year in the future. Management, however, believes the
liability arising from potential environmental obligations is not likely
to have a material adverse effect on the Companys liquidity or financial
position.
|
| |  | On January 1, 2003, we adopted SFAS No. 143 (refer to Note 5, Accounting
Standards, for further discussion). The following table summarizes our
asset retirement obligation liability as of March 31, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                 |  |   |       |  
|------------------------------------------------ |  | - | ----- | -
|(Unaudited; $ in millions)                       |  |   |       |  
|                                                 |  |   |       |  
|Balance, December 31, 2002                       |  | $ | 138.6 |  
|Liability recorded upon adoption
of SFAS No. 143 |  |   | 10.4  |  
|Accretion expense                                |  |   | 3.4   |  
|Payments                                         |  |   | (0.4  | )
|                                                 |  |   |       |  
|Balance, March 31, 2003                          |  | $ | 152.0 |  
|                                                 |  |   |       |  



|   |  | We have estimated the total cost of asset retirement obligations at
approximately $983 million (unescalated, undiscounted and on a third-party
cost basis), leaving approximately $831 million remaining to be accreted
over time. These aggregate costs may increase or decrease materially in
the future as a result of changes in regulations, technology, mine plans
or other factors. Asset retirement obligation activities and expenditures
generally are made over a number of years or potentially greater periods
commencing near the end of the mine life.                                                                                                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|7. |  | Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | Significant New Mexico Closure and Reclamation Programs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | Mining and smelting operations with leaching, tailing ponds, surface
impoundments and other discharging facilities in New Mexico are subject to
regulation under the New Mexico Water Quality Act and the Water Quality
Control Commission (WQCC) Regulations. The Chino, Cobre and Tyrone mines
and the Hidalgo smelter each have obtained multiple discharge permits for
their operations, which specify operational, monitoring and notification
requirements. These permits are issued for five-year terms and require
renewal following the end of each permit term. The WQCC Regulations
authorize the New Mexico Environment Department (NMED), which administers
the discharge permit program, to require the submission of closure plans
showing how applicable discharge permit requirements will be met following
closure. Under certain circumstances, NMED also may require submis-



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-15-



| |  | sion
and approval of abatement plans to address the exceedance of applicable
water quality standards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Further, Chino, Cobre, Tyrone and Hidalgo must submit closure plans for
their operations. Hidalgo has an approved closure plan under its
discharge permit. The three mines have submitted closure plans, which
have been combined with closeout plans under the New Mexico Mining Act
(NMMA), as discussed below. The proposed closure plans currently are
subject to approval by NMED as part of separate discharge permits for
closure for each of the three operations that would supplement the
existing discharge permits (hereinafter referred to as closure permits). The proposed closure permits
contain a number of permit conditions that would modify the proposed
closure plans. Chino Mines Company and NMED reached agreement in December
2001 on proposed closure permit conditions presented at a public hearing
in February 2002. On January 23, 2003, NMEDs hearing officer issued a
decision approving the closure permit as proposed by NMED and Chino, with
minor changes. NMED issued a permit consistent with the hearing officers
decision on February 24, 2003. An appeal has been filed by a local
environmental group. Phelps Dodge Tyrone, Inc. and NMED were unable to
reach agreement on permit terms before a public hearing held in May 2002,
and presented competing permit proposals. Other parties who participated
in the public hearing presented their own proposals. On March 7, 2003,
Tyrone received the hearing officers decision on its permit, which
generally adopted NMEDs proposal. On April 2, 2003, Tyrone filed an
appeal of the hearing officers decision with the WQCC. NMED issued a
permit in accordance with the hearing officers decision on April 8, 2003,
which Tyrone also has appealed. Cobre Mining Company and NMED also have
not reached agreement on the terms of a closure permit. The closure
permit for Cobre Mining Company does not require a public hearing, and may
be issued by NMED at any time.
|
| |  | Chino, Cobre and Tyrone also are subject to permit requirements under
NMMA, which was passed in 1993. Following adoption of the New Mexico
Mining Act Rules (NMMAR) in 1994, Chino, Cobre and Tyrone received initial
permits as existing mining operations under NMMAR in 1997. These permits
require revisions to incorporate approved closeout plans, which consist of
plans for reclamation of the mining operations to achieve a
self-sustaining ecosystem or an approved post-mining land use following
cessation of operations at a mine. Existing mining operations may seek a
waiver of these reclamation standards for open pits and waste units based
upon a demonstration that achieving these standards is technically or
economically infeasible or environmentally unsound, as long as measures
will be taken to meet air and water quality standards following closure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | NMMAR originally required approval of a closeout plan for an existing
mining operation by December 31, 1999, based upon an extension granted by
the Director of the Mining and Minerals Division (MMD). NMMAR
subsequently was amended to extend the deadline for closeout plan approval
until December 31, 2001, and later to October 1, 2002. NMMAR contains a
requirement that NMED must provide MMD with a determination that a
closeout plan meets applicable environmental standards, including air and
water quality standards, before MMD can approve the closeout plan. NMEDs
policy is to issue this determination after it has issued closure permits
for the facility that submits the closeout plan. In early 2001, Chino,
Cobre and Tyrone submitted comprehensive closure/closeout plans (CCPs)
to both NMED and MMD intended to address the requirements of both the WQCC
Regulations and NMMAR. Approval of the CCPs under NMMAR would require the
granting of waivers by MMD as authorized under NMMAR. The CCPs were the
subject of the public hearings before NMED for Chino and Tyrone, as
discussed above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | As of October 1, 2002, NMED had not issued closure permits for Chino,
Cobre or Tyrone. Consequently, as of October 1, 2002, MMD had not
approved closeout permits for these three mines. MMD issued Notices of
Violation (NOVs) to Chino, Cobre and Tyrone because the three mines did
not obtain approved closeout plans by the October 1, 2002, deadline. The
NOVs were modified by the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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| |  | Mining Commission following a public hearing to
set new deadlines for closeout plan approval tied to NMED permit actions.
Based on NMEDs permit actions, closeout plan approval for Chino is now
due by September 24, 2003, and the closeout plan approval date for Tyrone
is April 8, 2004. The closeout plan approval deadline for Cobre will be
nine months from the date of NMEDs permit issuance, which is currently
pending.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | NMMAR contains specific requirements regarding financial assurance that
must be provided to MMD to assure that sufficient funds would be available
to MMD to carry out the closeout plan in the event of a default by the
permittee. NMED also may require financial assurance under the WQCC Regulations. The financial
assurance requirements are based upon the net present value of estimated
costs to carry out the requirements of the closure permit and the approved
closeout plan, assuming the state would hire a third-party contractor to
conduct the work. Actual reclamation costs may differ significantly from
the costs estimated under the permits due to advances in technology and
reclamation techniques and opportunities to prepare each site for more
efficient reclamation through careful development of the site over time.
Consequently, the estimated costs under the permits are higher than the
cost the Company would be expected to incur if the Company performed the
work.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | The CCPs submitted in early 2001 contained cost estimates of approximately
$100 million for Chino, $121 million for Tyrone, and $9 million for Cobre,
based upon unescalated and undiscounted capital and operating costs over a
30-year operating period. The closure permit negotiated by NMED and Chino
Mines Company and approved by the NMED hearing officer has an estimated
cost of approximately $394 million, based upon third-party unescalated and
undiscounted capital and operating costs over a 100-year operating period,
including the cost of technical studies required under the permit. The
Companys two-thirds share of NMEDs $394 million estimate is
approximately $263 million and our joint venture partners cost share is
approximately $131 million. We estimate total costs for Chino Mines
Company to achieve the closure standards required by NMED to be
approximately $264 million (100 percent basis); that estimate is
approximately one-third lower than the financial assurance cost estimate
as a result of the Companys historical cost advantages, savings from the
use of the Companys own personnel and equipment versus third-party
contract costs, and opportunities to prepare the site for more efficient
reclamation. The financial assurance cost estimate includes approximately
$10 million (100 percent basis) of costs the Company has recognized in
environmental reserves. The Companys two-thirds share of these costs is
approximately $176 million and our joint venture partners cost share is
approximately $88 million. At March 31, 2003, and December 31, 2002, we
had accrued approximately $17 million and $8 million, respectively,
(two-thirds basis) for reclamation at Chino. The NMED cost estimate for
Chino is subject to further review, and possible adjustment, by MMD under
NMMAR.
|
| |  | NMED estimated the cost to carry out the requirements of its proposed
closure permits for Tyrone at approximately $440 million, without
discounting or escalation, under NMEDs proposal at the May 2002 hearing;
Tyrone estimated the cost of its proposal at approximately $328 million,
without discounting or escalation over a 100-year operating period. NMED
has not yet supplied its proposed cost estimate for Cobre. The proposed
terms of the closure permits would require additional studies over the
five-year term of the permits to refine the closure plan. The plan
requirements and cost estimates may increase or decrease based upon the
results of the studies and other factors, including changes in technology,
completion of some closure and reclamation work, and inflation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Based upon NMEDs undiscounted financial assurance cost estimates for the
Tyrone plan of approximately $440 million, and considering the same cost
advantages as indicated in the above discussion regarding Chino, we
estimate the Companys costs to achieve the closure standards under that
estimate to be approximately $288 million for Tyrone. The Company has not
obtained approval from NMED of an estimate of its cost to achieve the
closure standards that would                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



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|   |  | be required by the hearing officers
decision. The Companys current cost estimate for Cobre of approximately
$9 million will be updated with the issuance of the discharge permit. At
March 31, 2003, and December 31, 2002, we had accrued closure costs of
approximately $38 million and $27 million, respectively, at Tyrone and
approximately $6 million and $2 million, respectively, at Cobre.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Following NMEDs issuance of the closure permits, Chino, Cobre and Tyrone
are required to submit proposals for financial assurance based upon the
permit requirements and subject to NMEDs approval. Under the proposed
closure permit terms, the amount of financial assurance may be based upon the net present value of the estimated cost for a
third-party to implement the plan, using discount and escalation rates
specified in the permit. These amounts are expected to be substantially
lower than the undiscounted and unescalated cost estimates. For example,
based upon the cost estimate approved by NMED, the financial assurance
amount for Chino could be approximately $191 million. This amount is
based on annual escalation rates of approximately 3.2 percent for
long-term water treatment costs and approximately 3.6 percent for other
costs and discount rates of 5 percent for years one through 12 of the plan
and 8 percent for years 13 through 100.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | NMMAR requires that financial assurance for a closeout plan be approved
and put in place before MMD can approve the closeout plan. Chino and
Tyrone have provided approximately $56 million and $58 million of financial
assurance in the form of surety bonds, respectively, to NMED under the
terms of several discharge permits. The closure and financial assurance
requirements of these permits have been superseded by the recently issued
NMED closure permits. Consequently, the Company has advised NMED that
this financial assurance should be terminated and replaced by new
financial assurance under the terms of the new closure permits. Chino has
submitted a financial assurance proposal in accordance with the schedule
under its NMED closure permit proposing financial assurance primarily in
the form of a corporate performance guarantee from the Company. The
Company continues to work with the state to finalize appropriate terms and
conditions for financial assurance. Cobre also has approximately $2
million of financial assurance in place held jointly by NMED and MMD.
Following NMEDs issuance of the closure permits, and prior to MMDs
approval of the closeout plans, Chino, Tyrone and Cobre will be required
to provide substantial amounts of additional financial assurance to cover
the amounts of the approved cost estimates. Hidalgo currently has
provided financial assurance in the amount of approximately $11 million
under its discharge permit.
|  
|   |  | Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | At our Morenci mine in Arizona, we have a venture agreement dated February
7, 1986, with our business partner, Sumitomo, that includes a put/call
option guarantee clause. We hold an 85 percent undivided interest in the
Morenci complex. Under certain limited circumstances associated with a
change in control or continuing breach of agreement, our partner has the
right to sell its 15 percent share to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | Likewise, under certain limited circumstances associated with change in
control or continuing breach of agreement, the Company has the right to
acquire our business partners 15 percent share of the venture.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | The exercise price is calculated as specified in the agreement. As of
December 31, 2002, and March 31, 2003, the exercise price was
approximately $112 million, which is substantially less than the estimated
fair value of that 15 percent interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|8. |  | Earnings (Loss) Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | Basic earnings (loss) per share is computed by dividing net income (loss)
available to common shares by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is computed
in a similar manner except that the denominator is increased to include
the incremental number of common shares that would have been outstanding
assuming the conversion of mandatory convertible preferred shares, the
exercise of stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



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-18-



| |  | where the exercise prices were less than the
average market price of the Companys common shares during the period, and
the number of unvested restricted shares, but all of the foregoing only to
the extent that the related impacts are not anti-dilutive. Additionally,
dividends on mandatory convertible preferred shares that were deducted in
arriving at net income (loss) available to common shares are added back to
the numerator as a result of the assumed conversion of such preferred
shares.     
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | As a result of the net loss experienced during the three-month period
ended March 31, 2003, the number of incremental common shares relating to
the assumed conversion of the mandatory convertible preferred shares (5.0
million), and unvested restricted stock (0.2 million) and stock
options (0.1 million) issued to employees were excluded from
the calculation as the related impacts were anti-dilutive.                                                                                                  
|
| |  | As a result of the net loss experienced during the three-month period
ended March 31, 2002, the number of incremental common shares relating to
unvested restricted stock (0.2 million) and stock options
(0.1 million) issued to employees were excluded from the calculation
as the related impacts were anti-dilutive.                                                                                                                                                                                          
|
| |  | Finally, common shares relating to stock options where the exercise prices
exceeded the average market price of the Companys common shares during
the period were also excluded from the diluted earnings per share
calculation as the related impact was anti-dilutive. Incremental shares
relating to these options totaled 8.6 million shares at an average
exercise price of $55.48 for the first quarter of 2003 and 7.5 million
shares at an average exercise price of $61.64 for the first quarter of
2002.

|                                                 |                               |                                              |   |               |       |      |  |                |       |  
|------------------------------------------------ | ----------------------------- | -------------------------------------------- | - | ------------- | ----- | ---- |  | -------------- | ----- | -
|(Unaudited;
$ in millions except per share data)
|                                                 |                               |                                              |   | First Quarter
|                                                 |                               |                                              |   |              
|                                                 |                               |                                              |   | 2003          |       | 2002
|                                                 |                               |                                              |   |               |       |     
|                                                 |                               |                                              |   |               |       |      |  | (As Restated)*
|Basic Earnings (Loss) Per Share
Computation      |                               |                                              |   |               |       |      |  |               
|                                                 | Numerator:                    |                                              |   |               |       |      |  |                |      
|                                                 |                               | Net loss                                     |   | $             | (15.0 | )    |  |                | (24.8 | )
|                                                 |                               | Preferred stock dividends                    |   |               | (3.4  | )    |  |                |      |  
|                                                 |                               |                                              |   |               |       |      |  |               
|                                                 |                               | Net loss applicable
to common shares         |   |               | (18.4 | )    |  |                | (24.8 | )
|                                                 | Denominator:                  |                                              |   |               |       |      |  |                |      
|                                                 |                               | Weighted average common
shares outstanding   |   |               | 88.6  |      |  |                | 78.5  |  
|                                                 |                               |                                              |   |               |       |      |  |               
|                                                 | Basic loss per
common share   |                                              | $ | (0.21         | )     |      |  | (0.32          | )    
|                                                 |                               |                                              |   |               |       |      |  |               
|Diluted Earnings (Loss) Per Share
Computation    |                               |                                              |   |               |       |      |  |               
|                                                 | Numerator:                    |                                              |   |               |       |      |  |                |      
|                                                 |                               | Net loss                                     |   | $             | (15.0 | )    |  |                | (24.8 | )
|                                                 | Denominator:                  |                                              |   |               |       |      |  |                |      
|                                                 |                               | Weighted average common
shares outstanding** |   |               | 88.6  |      |  |                | 78.5  |  
|                                                 |                               |                                              |   |               |       |      |  |               
|                                                 | Diluted loss per
common share |                                              | $ | (0.21         | )     |      |  | (0.32          | )    
|                                                 |                               |                                              |   |               |       |      |  |               

| | *  |  | Refer to Note 2, Restatements, for
further discussion.                                                       
| | -- |  | -------------------------------------------------------------------------------------------------------------
|
| | ** |  | Excludes mandatory convertible preferred shares and unvested restricted
stock due tothe anti-dilutive impact.



|9.  |  | Benefit (Provision) for Taxes on Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Companys income tax provision for the 2003 first quarter principally
resulted from taxes on earnings at international operations ($14.9
million) that cannot be offset by losses at domestic operations.                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | The Companys income tax benefit for the 2002 first quarter primarily
comprised the following: (i) a $38.5 million tax benefit associated with the carryback of 2001 net operating losses
resulting from the March enactment of the Job Creation and Worker
Assistance Act of 2002; (ii) a $12.9 million benefit recognized for first
quarter 2002 net operating losses that, based on the new tax legislation,
may also be carried back to recover prior years taxes paid; and (iii) a
$14.4 million expense for taxes on earnings at international operations.
|   
|10. |  | Accounting for Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | The Company does not purchase, hold or sell derivative contracts unless we
have an existing asset, obligation or anticipate a                                                                                                                                                                                                                                                                                                                                                                                                                                    



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##### Table of Contents



-19-



| |  | future activity that is
likely to occur and will expose us to market risk. We do not enter into
any contracts for speculative purposes. We use various strategies to
manage our market risk, including the use of derivative contracts to
limit, offset or reduce our market exposure. Derivative instruments are
used to manage well-defined commodity price, energy, foreign exchange and
interest rate risks from our primary business activities. The fair values
of our derivative instruments are based on quoted market prices for
similar instruments at period end. Refer to Managements Discussion and
Analysis and Note 20, Derivative Financial Instruments Held for Purposes
Other Than Trading and Fair Value of Financial Instruments, to the
Consolidated Financial Statements included in the Companys Form 10-K for
the year ended December 31, 2002, for a discussion on our derivative
instruments.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | During the quarters ended March 31, 2003 and 2002, we reclassified
approximately $2.4 million and $3.6 million, respectively, of other
comprehensive losses to the statement of consolidated operations,
principally as a result of our floating-to-fixed interest rate swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|11. |  | Shareholders Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Series A Mandatory Convertible Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | Each share of Series A Mandatory Convertible Preferred Stock (Series A
Stock) is convertible into 2.083 shares of Common Stock, subject to
certain adjustments, at any time prior to August 15, 2005, and is entitled
to an annual dividend of $6.75, paid quarterly. On August 15, 2005, each
Series A Stock will automatically convert, subject to certain adjustments,
into between 2.083 and 2.5 shares of Common Stock depending on the
then-current market price of our Common Stock. Each share of Series A
Stock is non-voting and entitled to a liquidation preference of $100 plus
any accrued but unpaid dividends. There were 6 million authorized shares
and 2 million outstanding shares of Series A Stock at March 31, 2003.




REVIEW BY INDEPENDENT ACCOUNTANTS

The financial information as of March 31, 2003, and for the three-month
periods ended March 31, 2003 and 2002, included in Part I pursuant to Rule
10-01 of Regulation S-X has been reviewed by PricewaterhouseCoopers LLP
(PricewaterhouseCoopers), the Companys independent accountants, in accordance
with standards established by the American Institute of Certified Public
Accountants. PricewaterhouseCoopers report is included in this quarterly
report.

PricewaterhouseCoopers does not carry out any significant or additional
procedures beyond those that would have been necessary if its report had not
been included in this quarterly report. Accordingly, such report is not a
report or part of a registration statement within the meaning of Sections 7
and 11 of the Securities Act of 1933 and the liability provisions of Section 11
of such Act do not apply.



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##### Table of Contents



-20-




Report of Independent Accountants

To the Board of Directors and Shareholders
of Phelps Dodge Corporation

We have reviewed the accompanying consolidated balance sheet of Phelps Dodge
Corporation and its subsidiaries as of March 31, 2003, and the related
consolidated statements of operations, of cash flows and of shareholders
equity for each of the three-month periods ended March 31, 2003 and 2002. This
interim financial information is the responsibility of the Companys
management.

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

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

As described in Note 2 to the consolidated interim financial information, the
Company restated its consolidated interim financial information for the quarter
ended March 31, 2002.

We previously audited in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2002, and the related consolidated statements of operations, of cash flows
and of shareholders equity for the year then ended (not presented herein), and
in our report dated April 3, 2003 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet information as of December 31,
2002, is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
April 25, 2003





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##### Table of Contents



-21-




Item 2. Managements Discussion and Analysis

The United States securities laws provide a safe harbor for certain
forward-looking statements. This quarterly report contains forward-looking
statements that express expectations of future events or results. All
statements based on future expectations rather than historical facts are
forward-looking statements that involve a number of risks and uncertainties,
and Phelps Dodge Corporation (the Company, which may be referred to as Phelps
Dodge, PD, we, us or ours) cannot give assurance that such statements will
prove to be correct. Our business consists of two divisions, Phelps
Dodge Mining Company (PDMC) and Phelps Dodge Industries (PDI). Refer to Managements Discussion and Analysis in
the Companys report on Form 10-K for the year ended December 31, 2002, for a
further discussion of such risks and uncertainties, our operations, and our
critical accounting policies. Additionally, refer to Note 5, Accounting
Standards, to our unaudited March 31, 2003, Consolidated Financial Information
for a discussion on the adoption of Statement of Financial Accounting (SFAS)
No. 143.

Restatements

As discussed in Note 2, Restatements, in this Form 10-Q for the quarter
ended March 31, 2003, certain accounting matters were identified in the fourth
quarter of 2002 that required restatement of our December 31, 2001 and 2000,
Consolidated Financial Statements and our financial statements for the
quarterly periods ended March 31, 2001, through September 30, 2002. The
adjustments for the first quarter of 2002 increased operating income by $5.7
million and decreased net loss by $2.9 million, or 3 cents per
common share.

Additionally, our presentation of reportable segment information for PDMC
for the quarter ended March 31, 2002, has been revised to reflect additional
segments.




RESULTS OF OPERATIONS

Consolidated Financial Results

|                                                                                       |  |               |       |      |  |               |       |  
|-------------------------------------------------------------------------------------- |  | ------------- | ----- | ---- |  | ------------- | ----- | -
|(Unaudited; $ in millions except per share amounts)                                    |  |               |       |      |  |               |       |  
|                                                                                       |  | First Quarter
|                                                                                       |  |              
|                                                                                       |  | 2003          |       | 2002
|                                                                                       |  |               |       |     
|                                                                                       |  |               |       |      |  | (As Restated)
|Sales and other operating revenues                                                     |  | $             | 978.0 |      |  |               | 918.5 |  
|Operating income                                                                       |  | $             | 28.7  |      |  |               | 12.7  |  
|Loss before cumulative effect
of accounting change                                     |  | $             | (23.4 | )    |  |               | (1.9  | )
|Cumulative effect of
accounting change                                                 |  |               | 8.4   |      |  |               | (22.9 | )
|                                                                                       |  |               |       |      |  |               |       |  
|Net loss                                                                               |  | $             | (15.0 | )    |  |               | (24.8 | )
|                                                                                       |  |               |       |      |  |               |       |  
|Loss before cumulative effect of
accounting change per common
share, basic and diluted |  | $             | (0.30 | )    |  |               | (0.03 | )
|Cumulative effect of
accounting change                                                 |  |               | 0.09  |      |  |               | (0.29 | )
|                                                                                       |  |               |       |      |  |               |       |  
|Net loss per common
share, basic and diluted                                           |  | $             | (0.21 | )    |  |               | (0.32 | )
|                                                                                       |  |               |       |      |  |               |       |  

The Company had a consolidated loss in the 2003 first quarter of $15.0
million, or 21 cents per common share, including a special, net gain of $9.5
million, or 11 cents per common share, after taxes. In the 2002 first quarter,
the consolidated loss was $24.8 million, or 32 cents per common share,
including a special, net gain of $16.2 million, or 21 cents per common share,
after taxes.

The $9.8 million decrease in consolidated loss in the 2003 first quarter
compared with the corresponding 2002 period primarily was due to a higher
cumulative income effect of accounting change ($31.3 million), higher copper
prices (approximately $26 million), and lower interest expense ($16.8 million);
partially offset by a slightly higher implied unit cost of copper production as
defined on page 25 (approximately $4 million) and a higher tax provision ($52.4
million) resulting primarily from the absence of the effect of 2002 tax
legislation.





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##### Table of Contents



-22-

Special Items

Throughout Managements Discussion and Analysis there is disclosure and
discussion of what management believes to be special items. We view special
items as unpredictable and atypical of our operations in the period. We
believe consistent identification, disclosure and discussion of such items,
both favorable and unfavorable, provide additional information to assess the
quality of our performance and our earnings or losses. This supplemental
information is not a substitute for any U.S. generally accepted accounting
principles (GAAP) measure and should be evaluated within the context of our
U.S. GAAP results. Any supplemental information references to earnings, losses
or results excluding special items or before special items, our non-GAAP
measure of items, may not be comparable to similarly titled measures reported
by other companies.

Note: Supplemental Data

|                                             |  |               |       |      |  |               |       |  
|-------------------------------------------- |  | ------------- | ----- | ---- |  | ------------- | ----- | -
|(Unaudited; $ in millions)                   |  |               |       |      |  |               |       |  
|                                             |  | First Quarter
|                                             |  |              
|                                             |  | 2003          |       | 2002
|                                             |  |               |       |     
|                                             |  |               |       |      |  | (As Restated)
|                                             |  |               |       |      |  |               |       |  
|Special items, net of taxes                  |  | $             | 9.5   |      |  |               | 16.2  |  
|Losses excluding special
items (after taxes) |  | $             | (24.5 | )    |  |               | (41.0 | )





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##### Table of Contents



-23-

Note: Supplemental Data

The following schedules summarize the special items and provisions for the
quarters ended March 31, 2003 and 2002:

|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |       |  
|---------------------------------------------------------------- | -------------------------------------------------------------- | --------------------------------------- | ---- | ------------------ | ---- | --------- | ---- | --------- | ---- | -------- | ----- | --------- | ----- | --------- | ----- | ----- | ----- | - | ----- | ---- | ----- | - | ----- | ---- | ----- | -
|(Unaudited; gains (losses) in millions except per share amounts) |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |     
|                                                                 |                                                                | 2003 First Quarter                      |      | 2002 First Quarter
|                                                                 |                                                                |                                         |      |                    |      |          
|                                                                 |                                                                |                                         |      | Pre-tax            |      | After-tax |      | $/share   |      | Pre-tax  |       | After-tax |       | $/share  
|                                                                 |                                                                |                                         |      | Earnings           |      | Earnings  |      | After-tax |      | Earnings |       | Earnings  |       | After-tax
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |          
|Special items and provisions, net:                               |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |     
|                                                                 | PDMC (see Business Segment disclosure)                         |                                         | $    |                   |      |           |      |          |      |          |       |          |       |           |       | 13.8  |       |   |       | 11.2 |       |   |       | 0.14 |      
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|                                                                 | PDI (see Business Segment disclosure)                          |                                         |      | 3.2                |      |           |      | 2.4       |      |          |       | 0.03      |       |           |       |      |       |   |       |     |       |   |       |     |      
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|                                                                 | Corporate and Other                                           |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|                                                                 |                                                                | Environmental provisions                |      |                    | (1.3 | )         |      |           | (1.3 | )        |       |           | (0.01 | )         |       |       | (12.1 | ) |       |      | (12.1 | ) |       |      | (0.15 | )
|                                                                 |                                                                | Environmental insurance recoveries, net |      |                    |     |           |      |           |     |          |       |           |      |           |       |       | 2.1   |   |       |      | 1.9   |   |       |      | 0.02  |  
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|                                                                 |                                                                |                                         | (1.3 | )                  |      |           | (1.3 | )         |      |          | (0.01 | )         |       |           | (10.0 | )     |       |   | (10.2 | )    |       |   | (0.13 | )   
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|                                                                 |                                                                |                                         | 1.9  |                    |      |           | 1.1  |           |      |          | 0.02  |           |       |           | 3.8   |       |       |   | 1.0   |      |       |   | 0.01  |     
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|Miscellaneous
income (expense), net:                             |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |     
|                                                                 | Cost investment write-downs                                    |                                         |      |                   |      |           |      |          |      |          |       |          |       |           |       | (0.5  | )     |   |       | (0.4 | )     |   |       |     |      
|Benefit (provision) for taxes on income:                         |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |     
|                                                                 | Tax
benefit for 2001 net operating loss carryback
(see Note 9) |                                         |      |                   |      |           |      |          |      |          |       |          |       |           |       |      |       |   |       | 38.5 |       |   |       | 0.49 |      
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|Cumulative effect of accounting change (see Note 5)              |                                                                |                                         | 9.7  |                    |      |           | 8.4  |           |      |          | 0.09  |           |       |           | (33.0 | )     |       |   | (22.9 | )    |       |   | (0.29 | )   
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      
|                                                                 | Total                                                          |                                         | $    | 11.6               |      |           |      | 9.5       |      |          |       | 0.11      |       |           |       | (29.7 | )     |   |       | 16.2 |       |   |       | 0.21 |      
|                                                                 |                                                                |                                         |      |                    |      |           |      |           |      |          |       |           |       |           |       |       |       |   |       |      |       |   |       |      |      

Quest for ZeroOperational Improvement Program

Phelps Dodge announced in October 2001 that it was commencing Quest for
Zero, a comprehensive, lean-production program, designed to, among other
things, improve operating income by a targeted $250 million annually. Quest
for Zeroencompasses both the October 2001 program and the $150 million cost
improvement program announced in May 2001. The Companys goal is to achieve
these combined annual operating income improvements of $400 million by the end
of 2003 when compared with the results that were then expected for 2001.

In order
to achieve the full $400 million target, PDMC chartered business improvement teams to drive performance improvement
projects and best practices. The elimination of variance and waste are key
factors in this process, coupled with the rapid transfer of best practices to
all business units. On a quarterly basis, we document improvement successes,
failures and potential projects yet to be implemented. New project ideas are
generated at internal conferences where statistical analysis tools are utilized
on current performance data to identify improvement opportunities. Improvement
projects are prioritized and implemented accordingly. Key elements of the plan
going forward include six-sigma quality programs, technology innovations,
global procurement strategies and improved operating practices.

During the 2003 first quarter, we achieved $79 million (an annual run rate
of approximately $315 million) in improvements, bringing total improvements
since the program was announced to $345 million.

We believe we will meet our $400 million annual run rate by year-end 2003.
We have experienced a leveling off of the rate of improvement due to the
increased challenge that comes with multi-year improvement projects as we begin
to tackle more difficult initiatives; unforeseen costs including higher energy,
pension and medical costs, and higher administrative costs and professional
fees; and our Companys decision to emphasize growth-oriented projects. Hence,
achieving this objective may require additional time.





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##### Table of Contents



-24-

The following is a reconciliation of improvement dollars:

|                           |            |   |                    |    | 
|-------------------------- | ---------- | - | ------------------ | -- | 
|(Unaudited; $ in millions) |            |   |                    |   
|                           |            |   | First Quarter 2003
|                           |            |   |                   
|U.S. Mining Operations*    |            | $ | 56                 |   
|South American Mines**     |            |   | 11                 |   
|Primary Molybdenum         |            |   | 3                  |   
|                           |            |   |                    |   
|                           | Total PDMC |   |                    | 70 | 
|                           |            |   |                    |   
|Specialty Chemicals        |            |   | 4                  |   
|Wire and Cable             |            |   | 5                  |   
|                           |            |   |                    |   
|                           | Total PDI  |   |                    | 9  | 
|                           |            |   |                    |   
|Total Quest for Zero       |            | $ | 79                 |   
|                           |            |   |                    |   



---

|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     

Business Divisions

Results for 2003 and 2002 can be meaningfully compared by separate
reference to our reporting divisions, PDMC and PDI. PDMC is a business division that includes our
worldwide copper operations from mining through rod production, marketing and
sales; molybdenum operations from mining through manufacturing, marketing and
sales; other mining operations and investments; and worldwide mineral
exploration and development programs. PDMC comprises
11 reportable segments. PDI, our manufacturing division,
produces engineered products principally for the global energy,
telecommunications, transportation and specialty chemicals sectors. PDI includes our Specialty Chemicals
segment and our Wire and Cable segment. Significant events and transactions
have occurred within each segment which, as indicated in the separate
discussions presented below, are material to an understanding of the particular
years results and to a comparison with results of the other periods.




RESULTS OF PHELPS DODGE MINING COMPANY

PDMC is our international business division that comprises our vertically
integrated copper operations from mining through rod production, primary
molybdenum operations through conversion, marketing and sales, and worldwide
exploration. PDMC comprises 11 reportable segments.

Our copper mines comprise five reportable segments in the United States
(Morenci, Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre and Tyrone) and three
reportable segments in South America (Candelaria, Cerro Verde and El Abra).
These segments include open-pit mining, sulfide ore concentrating and
electrowinning. In addition, some of these produce gold and silver, and the
Bagdad and Sierrita mines also produce molybdenum and rhenium as by-products.

The Manufacturing and Sales segment consists of conversion facilities
including our smelters, refineries and rod mills, as well as sales and
marketing. The Manufacturing and Sales segment sells copper to others
primarily as rod, cathode or concentrate, and as rod to our Wire and Cable
segment. In addition, at times it smelts and refines copper and produces
copper rod for customers on a toll basis. Toll arrangements require the
tolling customer to deliver appropriate copper-bearing material to our
facilities, which we then process into a product that is returned to the
customer. The customer pays PDMC for processing its material into the
specified products.

The Primary Molybdenum segment consists of the Henderson and Climax mines
and related conversion facilities. This segment is an integrated producer of
molybdenum, with mining, roasting and processing facilities producing
high-purity, molybdenum-based chemical and metallurgical products. In
addition, at times it roasts and/or processes material on a toll basis. Toll
arrangements require the tolling customer to deliver appropriate
molybdenum-bearing material to our facilities, which we then process into a
product that is returned to the customer. The customer pays PDMC for
processing its material into the specified products.

Other Mining includes our worldwide mineral exploration and development
programs, a process technology center that directs its activities at improving
existing processes and developing new cost-competitive technologies, and other
ancillary operations.





---



##### Table of Contents



-25-

|                                                             |                                        |   |               |       |      |  |               |       | 
|------------------------------------------------------------ | -------------------------------------- | - | ------------- | ----- | ---- |  | ------------- | ----- | 
|(Unaudited; $ in millions except per pound amounts)          |                                        |   |               |       |      |  |               |      
|                                                             |                                        |   | First Quarter
|                                                             |                                        |   |              
|                                                             |                                        |   | 2003          |       | 2002
|                                                             |                                        |   |               |       |     
|                                                             |                                        |   |               |       |      |  | (As Restated)
|Sales and other operating revenues
to unaffiliated customers |                                        | $ | 655.0         |       |      |  | 611.7         |      
|Operating income                                             |                                        | $ | 35.7          |       |      |  | 27.3          |      
|Copper production (thousand short tons):                     |                                        |   |               |       |      |  |               |      
|                                                             | Total production                       |   |               | 317.2 |      |  |               | 321.9 | 
|                                                             | Less minority participants shares (A) |   |               | 56.8  |      |  |               | 64.7  | 
|                                                             |                                        |   |               |       |      |  |               |      
|                                                             | Net Phelps Dodge share                 |   |               | 260.4 |      |  |               | 257.2 | 
|                                                             |                                        |   |               |       |      |  |               |      
|Copper sales (thousand short tons):                          |                                        |   |               |       |      |  |               |      
|                                                             | Net Phelps Dodge share
from own mines  |   |               | 263.8 |      |  |               | 268.5 | 
|                                                             | Purchased copper                       |   |               | 93.7  |      |  |               | 97.4  | 
|                                                             |                                        |   |               |       |      |  |               |      
|                                                             | Total copper sales                     |   |               | 357.5 |      |  |               | 365.9 | 
|                                                             |                                        |   |               |       |      |  |               |      
|LME average spot copper price
per pound  cathodes           |                                        | $ | 0.755         |       |      |  | 0.705         |      
|COMEX average spot copper price
per pound  cathodes         |                                        | $ | 0.760         |       |      |  | 0.721         |      
|Implied unit cost of
copper production                       |                                        | $ | 0.687         |       |      |  | 0.680         |      
|Implied cash unit cost of
copper production                  |                                        | $ | 0.536         |       |      |  | 0.518         |      
|Molybdenum production (million pounds)                       |                                        |   | 11.5          |       |      |  | 10.6          |      
|Molybdenum sales (million pounds):                           |                                        |   |               |       |      |  |               |      
|                                                             | Net Phelps Dodge share
from own mines  |   |               | 13.8  |      |  |               | 12.8  | 
|                                                             | Purchased molybdenum                   |   |               | 1.5   |      |  |               | 2.6   | 
|                                                             |                                        |   |               |       |      |  |               |      
|                                                             | Total molybdenum sales                 |   |               | 15.3  |      |  |               | 15.4  | 
|                                                             |                                        |   |               |       |      |  |               |      
|Metals Week:                                                 |                                        |   |               |       |      |  |               |      
|Molybdenum oxide price per pound                             |                                        | $ | 4.06          |       |      |  | 2.74          |      



---

|(A) |  | Minority participant interests include (i) a 15 percent undivided
interest in Morenci, Arizona, copper mining complex held by Sumitomo Metal
Mining Arizona, Inc., (ii) a one-third partnership interest in Chino Mines
Company in New Mexico held by Heisei Minerals Corporation, (iii) a 20
percent partnership interest in Candelaria in Chile held by SMMA
Candelaria, Inc., a jointly owned indirect subsidiary of Sumitomo Metal
Mining Co., Ltd., and Sumitomo Corporation, and (iv) a 49 percent
partnership interest in the El Abra copper mining operation in Chile held
by Corporación Nacional del Cobre de Chile (CODELCO).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note: Supplemental Data

Implied unit cost of copper production measures the all-in cost of
each pound of copper produced by PDMC. As the title indicates, this measure is
the cost implied by the market price of copper (i.e., London Metal Exchange
average spot) for a given period versus PDMCs operating income (loss) for the
same period.

There is no established common standard for calculating unit production
costs in the copper industry. PDMCs implied unit production costs indicator
(which is based on readily accessible, publicly disclosed data) acts as a proxy
to enable investors to follow and interpret cost trends over historical
periods.

PDMC calculates its all-in operating margin per pound of copper sold by
dividing its operating income (loss) excluding special items by the total
pounds of copper sold from its own mines for its own account (as disclosed in
the table above). This results in an all-in operating margin (i.e., inclusive
of cost of products sold; depreciation, depletion and amortization; selling and
general administrative expense; and exploration and research expense for the
segments operations) that is compared to the market price of copper to render
an implied cost of copper production. Following is the calculation of implied
unit cost of copper production for the quarters ended March 31, 2003 and 2002:

|                                                    |                              |   |               |      |      |  |               |      | 
|--------------------------------------------------- | ---------------------------- | - | ------------- | ---- | ---- |  | ------------- | ---- | 
|(Unaudited; $ in millions except per pound amounts) |                              |   |               |      |      |  |               |     
|                                                    |                              |   | First Quarter
|                                                    |                              |   |              
|                                                    |                              |   | 2003          |      | 2002
|                                                    |                              |   |               |      |     
|                                                    |                              |   |               |      |      |  | (As Restated)
|PDMC implied unit cost of
copper production         |                              |   |               |      |      |  |               |     
|                                                    | Operating income             |   | $             | 35.7 |      |  |               | 27.3 | 
|                                                    | Less special operating items |   |               |     |      |  |               | 13.8 | 
|                                                    |                              |   |               |      |      |  |               |     
|Operating income excluding
special items            |                              | $ | 35.7          |      |      |  | 13.5          |     
|                                                    |                              |   |               |      |      |  |               |      | 
|Copper sales from own mines 
million pounds        |                              |   | 527.6         |      |      |  | 537.0         |     
|Operating margin  per
pound of copper sold         |                              | $ | 0.068         |      |      |  | 0.025         |     
|LME average spot copper price
per pound  cathodes  |                              | $ | 0.755         |      |      |  | 0.705         |     
|Implied unit cost of copper
production per pound    |                              | $ | 0.687         |      |      |  | 0.680         |     



| |  | Note: Our measure of implied unit cost of copper production may not be
comparable to similarly titled measures reported by other companies.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------





---



##### Table of Contents



-26-

Total PDMC Division  Sales

PDMCs sales and other operating revenues to unaffiliated customers
increased $43.3 million, or 7 percent, in the 2003 first quarter compared with
the 2002 first quarter. The increase reflected higher average copper prices
(approximately $31 million), and higher average molybdenum prices
(approximately $15 million); partially offset by lower sales volumes
(approximately $6 million) associated with lower market demand.

Total PDMC  Operating Income (Loss)

PDMC reported operating income of $35.7 million in the 2003 first quarter,
compared with operating income of $27.3 million in the 2002 first quarter,
including a special, net pre-tax gain of $13.8 million. The increase in
operating income primarily reflected higher copper prices (approximately $26
million), partially offset by a higher implied unit cost of copper production
(approximately $4 million) and lower pre-tax special gains ($13.8 million).

The New York Commodity Exchange (COMEX) spot price per pound of copper
cathode, primarily upon which we base our U.S. sales, averaged 76.0 cents and
72.1 cents in the first quarters of 2003 and 2002, respectively. The London
Metal Exchange (LME) spot price per pound of copper cathode, primarily upon
which we base our international sales, averaged 75.5 cents and 70.5 cents in
the first quarters of 2003 and 2002, respectively.

The implied full and cash unit cost of copper production for the first
quarter of 2003 increased 0.7 cent per pound and 1.8 cents per pound,
respectively, compared with the corresponding 2002 period. The increases in
both full and cash unit cost of copper production were attributable to a 1.8
cents per pound net increase in energy costs, a 0.7 cent per pound net increase
in stockpiles and inventory changes and 0.5 cent per pound increase for net
copper pricing adjustments; partially offset by 1.2 cents per pound of other
items primarily due to higher molybdenum earnings. Partially offsetting the
increase in full unit cost of copper production was a 1.1 cents per pound
decrease in non-cash depreciation and closure costs.

Note: Supplemental Data

The following table summarizes PDMCs special items for the quarters ended
March 31, 2003 and 2002, and the resultant earnings (losses) excluding these
special items.

|                                                         |                         |  |               |      |      |  |               |       |  
|-------------------------------------------------------- | ----------------------- |  | ------------- | ---- | ---- |  | ------------- | ----- | -
|(Unaudited; $ in millions)                               |                         |  |               |      |      |  |               |      
|                                                         |                         |  | First Quarter
|                                                         |                         |  |              
|                                                         |                         |  | 2003          |      | 2002
|                                                         |                         |  |               |      |     
|                                                         |                         |  |               |      |      |  | (As Restated)
|Special, pre-tax items:                                  |                         |  |               |      |      |  |               |      
|                                                         | U.S. Mining Operations* |  | $             |     |      |  |               | 13.8  |  
|                                                         | South American Mines**  |  |               |     |      |  |               |      |  
|                                                         | Primary Molybdenum      |  |               |     |      |  |               |      |  
|                                                         |                         |  |               |      |      |  |               |      
|                                                         |                         |  |              |      |      |  | 13.8          |      
|                                                         |                         |  |               |      |      |  |               |      
|Segment operating income (loss)
excluding special items: |                         |  |               |      |      |  |               |      
|                                                         | U.S. Mining Operations* |  | $             | (0.6 | )    |  |               | (13.7 | )
|                                                         | South American Mines**  |  |               | 36.2 |      |  |               | 27.5  |  
|                                                         | Primary Molybdenum      |  |               | 0.1  |      |  |               | (0.3  | )
|                                                         |                         |  |               |      |      |  |               |      
|                                                         |                         |  | 35.7          |      |      |  | 13.5          |      
|                                                         |                         |  |               |      |      |  |               |      



|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     
|  

Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.

Note: Supplemental Data

Special, pre-tax items and provisions in operating income (loss) were as
follows:

|                                        |  |                    |      |          |  |         |   |  |  |  |   | 
|--------------------------------------- |  | ------------------ | ---- | -------- |  | ------- | - |  |  |  | - | 
|(Unaudited; $ in millions)              |  |                    |      |          |  |         |   |  |  |  |   | 
|                                        |  | First Quarter 2002
|                                        |  |                   
|                                        |  | U.S.               |      | South    |  | Primary
|                                        |  | Mining             |      | American |  | Molyb- 
|                                        |  | Operations         |      | Mines    |  | denum  
|                                        |  |                    |      |          |  |        
|Environmental insurance
recoveries, net |  | $                  | 13.8 |          |  |         |  |  |  |  |  | 
|                                        |  |                    |      |          |  |         |   |  |  |  |   | 





---



##### Table of Contents



-27-

PDMC Results by Reportable Segments

The following tables summarize, on a segment basis, the production and
sales statistics and the operating income (loss) and special items and
provisions for the first quarter of 2003 and 2002. Additionally, our
presentation of reportable segment information for PDMC for the quarter ended
March 31, 2002, has been revised to reflect additional segments.





---



##### Table of Contents



-28-

PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |       | 
|---------------------------------------- | ------------------------------------- | - | ---------- | ----- | --------------- |  | ------------ | ---- | ----------- |  | ------ | --- | -------- |  | ---- | ---- |  |  | ---- | ---- |  |  | ---- | ----- | 
|                                         |                                       |   | U.S. Mines
|                                         |                                       |   |           
|                                         |                                       |   | Morenci    |       | Bagdad/Sierrita |  | Miami/Bisbee |      | Chino/Cobre |  | Tyrone |     | Subtotal
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |         
|First Quarter 2003                       |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total production                      |   |            | 103.5 |                 |  |              | 42.7 |             |  |        | 5.4 |          |  |      | 8.4  |  |  |      | 17.1 |  |  |      | 177.1 | 
|                                         | Less minority participants shares    |   |            | 15.5  |                 |  |              |     |             |  |        |    |          |  |      | 2.8  |  |  |      |     |  |  |      | 18.3  | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |            | 88.0  |                 |  |              | 42.7 |             |  |        | 5.4 |          |  |      | 5.6  |  |  |      | 17.1 |  |  |      | 158.8 | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |            | 88.0  |                 |  |              | 44.1 |             |  |        | 5.8 |          |  |      | 5.6  |  |  |      | 17.1 |  |  |      | 160.6 | 
|                                         | Purchased copper                      |   |            |      |                 |  |              |     |             |  |        |    |          |  |      |     |  |  |      |     |  |  |      |      | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total copper sales                    |   |            | 88.0  |                 |  |              | 44.1 |             |  |        | 5.8 |          |  |      | 5.6  |  |  |      | 17.1 |  |  |      | 160.6 | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|($ in millions)                          |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 12.4       |       |                 |  | 6.7          |      |             |  | (0.7   | )   |          |  | (2.1 | )    |  |  | (4.4 | )    |  |  | 11.9 |      
|Special items and provisions             |                                       | $ |           |       |                 |  |             |      |             |  |       |     |          |  |     |      |  |  |     |      |  |  |     |      
|                                        
|First Quarter 2002 (as restated)         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total production                      |   |            | 101.5 |                 |  |              | 38.1 |             |  |        | 2.0 |          |  |      | 18.3 |  |  |      | 16.1 |  |  |      | 176.0 | 
|                                         | Less minority participants shares    |   |            | 15.2  |                 |  |              |     |             |  |        |    |          |  |      | 6.1  |  |  |      |     |  |  |      | 21.3  | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |            | 86.3  |                 |  |              | 38.1 |             |  |        | 2.0 |          |  |      | 12.2 |  |  |      | 16.1 |  |  |      | 154.7 | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |            | 86.3  |                 |  |              | 52.7 |             |  |        | 6.3 |          |  |      | 12.2 |  |  |      | 16.1 |  |  |      | 173.6 | 
|                                         | Purchased copper                      |   |            |      |                 |  |              |     |             |  |        |    |          |  |      |     |  |  |      |     |  |  |      |      | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|                                         | Total copper sales                    |   |            | 86.3  |                 |  |              | 52.7 |             |  |        | 6.3 |          |  |      | 12.2 |  |  |      | 16.1 |  |  |      | 173.6 | 
|                                         |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|($ in millions)                          |                                       |   |            |       |                 |  |              |      |             |  |        |     |          |  |      |      |  |  |      |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 11.8       |       |                 |  | (4.3         | )    |             |  | (4.5   | )   |          |  | 5.7  |      |  |  | (1.7 | )    |  |  | 7.0  |      
|Special items and provisions             |                                       | $ |           |       |                 |  |             |      |             |  |       |     |          |  |     |      |  |  |     |      |  |  |     |      



| |  | Refer to segment discussion on pages 31 through 34.                                                                                                                                                                                                        
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally, certain costs are not
allocated to the reportable segments. (Refer to pages 31 and 32 for further discussion.)





---



##### Table of Contents



-29-

PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |       | 
|---------------------------------------- | ------------------------------------- | - | -------------------- | ---- | ----------- |  | ------- | ---- | -------- |  | --- | ---- |  |  | ---- | ----- | 
|                                         |                                       |   | South American Mines
|                                         |                                       |   |                     
|                                         |                                       |   | Candelaria           |      | Cerro Verde |  | El Abra |      | Subtotal
|                                         |                                       |   |                      |      |             |  |         |      |         
|First Quarter 2003                       |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total production                      |   |                      | 60.0 |             |  |         | 24.6 |          |  |     | 53.1 |  |  |      | 137.7 | 
|                                         | Less minority participants shares    |   |                      | 12.0 |             |  |         |     |          |  |     | 26.0 |  |  |      | 38.0  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |                      | 48.0 |             |  |         | 24.6 |          |  |     | 27.1 |  |  |      | 99.7  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |                      | 49.1 |             |  |         | 24.6 |          |  |     | 27.5 |  |  |      | 101.2 | 
|                                         | Purchased copper                      |   |                      | 9.7  |             |  |         |     |          |  |     | 5.8  |  |  |      | 15.5  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total copper sales                    |   |                      | 58.8 |             |  |         | 24.6 |          |  |     | 33.3 |  |  |      | 116.7 | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|($ in millions)                          |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 23.1                 |      |             |  | 7.5     |      |          |  | 5.6 |      |  |  | 36.2 |      
|Special items and provisions             |                                       | $ |                     |      |             |  |        |      |          |  |    |      |  |  |     |      
|                                        
|First Quarter 2002 (as restated)         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper production (thousand short tons): |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total production                      |   |                      | 57.7 |             |  |         | 22.9 |          |  |     | 64.9 |  |  |      | 145.5 | 
|                                         | Less minority participants shares    |   |                      | 11.5 |             |  |         |     |          |  |     | 31.8 |  |  |      | 43.3  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share                |   |                      | 46.2 |             |  |         | 22.9 |          |  |     | 33.1 |  |  |      | 102.2 | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Copper sales (thousand short tons):      |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Net Phelps Dodge share from own mines |   |                      | 41.4 |             |  |         | 23.1 |          |  |     | 30.1 |  |  |      | 94.6  | 
|                                         | Purchased copper                      |   |                      | 10.1 |             |  |         |     |          |  |     | 8.5  |  |  |      | 18.6  | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|                                         | Total copper sales                    |   |                      | 51.5 |             |  |         | 23.1 |          |  |     | 38.6 |  |  |      | 113.2 | 
|                                         |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|($ in millions)                          |                                       |   |                      |      |             |  |         |      |          |  |     |      |  |  |      |      
|Operating income (loss)                  |                                       | $ | 20.2                 |      |             |  | 6.8     |      |          |  | 0.5 |      |  |  | 27.5 |      
|Special items and provisions             |                                       | $ |                     |      |             |  |        |      |          |  |    |      |  |  |     |      



| |  | Refer to segment discussion on pages 31 through 34.                                                                                                                                                                                                        
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions.
Additionally, certain costs are not allocated to the reportable segments. (Refer to pages 31 and 32 for further discussion.)





---



##### Table of Contents



-30-

PDMC RESULTS BY REPORTABLE SEGMENTS
(Unaudited)

|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |        |        |        | 
|---------------------------------------- | ------------------------------------- | ---------------------- | ---------------------- | ------ | ---------- | ------ | ------------- | ---- | ------------ | - | ----- | - | ----- | - | ---- | ------ | ------ | ------ | 
|                                         |                                       |                        |                        |        | Primary    |        | Manufacturing |      |              |   |       |   | Total
|                                         |                                       |                        |                        |        | Molybdenum |        | and Sales     |      | Other Mining |   | PDMC 
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |      
|First Quarter 2003                       |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Copper production (thousand short tons): |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Total production                      |                        |                        |       |            |        |               | 2.4  |              |   |       |  |       |   |      | 317.2  |       
|                                         | Less minority participants shares    |                        |                        |       |            |        |               | 0.5  |              |   |       |  |       |   |      | 56.8   |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Net Phelps Dodge share                |                        |                        |       |            |        |               | 1.9  |              |   |       |  |       |   |      | 260.4  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Copper sales (thousand short tons):      |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Net Phelps Dodge share from own mines |                        |                        |       |            |        |               | 2.0  |              |   |       |  |       |   |      | 263.8  |       
|                                         | Purchased copper                      |                        |                        |       |            |        |               | 78.2 |              |   |       |  |       |   |      | 93.7   |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Total copper sales                    |                        |                        |       |            |        |               | 80.2 |              |   |       |  |       |   |      | 357.5  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Molybdenum production (thousand pounds): |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Primary  Henderson                   |                        |                        | 4,839  |            |        |               |     |              |   |       |  |       |   |      | 4,839  |       
|                                         | By-product                            |                        |                        | 6,664  |            |        |               |     |              |   |       |  |       |   |      | 6,664  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         |                                       |                        | Total production       |        |            | 11,503 |               |      |              |  |       |   |       |  |      |        |        | 11,503 | 
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Molybdenum sales (thousand pounds):      |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Net Phelps Dodge share from own mines |                        |                        | 13,782 |            |        |               |     |              |   |       |  |       |   |      | 13,782 |       
|                                         | Purchased molybdenum                  |                        |                        | 1,480  |            |        |               |     |              |   |       |  |       |   |      | 1,480  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         |                                       |                        | Total molybdenum sales |        |            | 15,262 |               |      |              |  |       |   |       |  |      |        |        | 15,262 | 
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|($ in millions)                          |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Operating income (loss)                  |                                       | $                      | 0.1                    |        |            |        | 8.5           |      |              |   | (21.0 | ) |       |   | 35.7 |       
|Special items and provisions             |                                       | $                      |                       |        |            |        |              |      |              |   |      |   |       |   |     |       
|                                        
|First Quarter 2002 (as restated)         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Copper production (thousand short tons): |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Total production                      |                        |                        |       |            |        |               | 0.4  |              |   |       |  |       |   |      | 321.9  |       
|                                         | Less minority participants shares    |                        |                        |       |            |        |               | 0.1  |              |   |       |  |       |   |      | 64.7   |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Net Phelps Dodge share                |                        |                        |       |            |        |               | 0.3  |              |   |       |  |       |   |      | 257.2  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Copper sales (thousand short tons):      |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Net Phelps Dodge share from own mines |                        |                        |       |            |        |               | 0.3  |              |   |       |  |       |   |      | 268.5  |       
|                                         | Purchased copper                      |                        |                        |       |            |        |               | 78.8 |              |   |       |  |       |   |      | 97.4   |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Total copper sales                    |                        |                        |       |            |        |               | 79.1 |              |   |       |  |       |   |      | 365.9  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Molybdenum production (thousand pounds): |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Primary  Henderson                   |                        |                        | 4,336  |            |        |               |     |              |   |       |  |       |   |      | 4,336  |       
|                                         | By-product                            |                        |                        | 6,290  |            |        |               |     |              |   |       |  |       |   |      | 6,290  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         |                                       |                        | Total production       |        |            | 10,626 |               |      |              |  |       |   |       |  |      |        |        | 10,626 | 
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Molybdenum sales (thousand pounds):      |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         | Net Phelps Dodge share from own mines |                        |                        | 12,795 |            |        |               |     |              |   |       |  |       |   |      | 12,795 |       
|                                         | Purchased molybdenum                  |                        |                        | 2,621  |            |        |               |     |              |   |       |  |       |   |      | 2,621  |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|                                         |                                       | Total molybdenum sales |                        |        | 15,416     |        |               |      |             |   |       |   |      |   |      |        | 15,416 |       
|                                         |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|($ in millions)                          |                                       |                        |                        |        |            |        |               |      |              |   |       |   |       |   |      |       
|Operating income (loss)                  |                                       | $                      | (0.3                   | )      |            |        | (1.7          | )    |              |   | (5.2  | ) |       |   | 27.3 |       
|Special items and provisions             |                                       | $                      |                       |        |            |        |              |      |              |   | 13.8  |   |       |   | 13.8 |       



| |  | Refer to segment discussion on pages 31 through 34.                                                                                                                                                                                                        
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Revenues, operating costs and expenses of PDMCs segments include allocations that may not be reflective of market conditions. Additionally,
certain costs are not allocated to the reportable segments. (Refer to pages 31 and 32 for further discussion.)





---



##### Table of Contents



-31-

Sales of Copper (U.S. and South America) and Molybdenum

The Manufacturing and Sales segment is responsible for selling all copper
produced at the U.S. mines. Intersegment revenues of the individual U.S. mines
represent an internal allocation based on PDMCs sales to unaffiliated
customers. Therefore, the following discussion and analysis combines the U.S.
Mines and Other Mining segments with the Manufacturing and Sales segment.
Additionally, the South American Mines sold approximately 40 percent of their
copper to the Manufacturing and Sales segment in each of the first quarters of
2003 and 2002. Intersegment sales by the South American Mines are based upon
arms-length prices at the time of the sale. Intersegment sales of any
individual mine may not be reflective of the actual prices PDMC ultimately
receives due to a variety of factors including additional processing, timing of
sales to unaffiliated customers, and transportation premiums. These sales are
reflected in the Manufacturing and Sales segment.

|                           |                          |  |               |       |      |  |       |       |  
|-------------------------- | ------------------------ |  | ------------- | ----- | ---- |  | ----- | ----- | -
|(Unaudited; $ in millions) |                          |  |               |       |      |  |       |      
|                           |                          |  | First Quarter
|                           |                          |  |              
|                           |                          |  | 2003          |       | 2002
|                           |                          |  |               |       |     
|U.S. Mining Operations*    |                          |  |               |       |      |  |       |      
|                           | Unaffiliated customers   |  | $             | 478.5 |      |  |       | 456.3 |  
|                           | Intersegment elimination |  |               | (71.7 | )    |  |       | (61.9 | )
|                           |                          |  |               |       |      |  |       |      
|                           |                          |  | 406.8         |       |      |  | 394.4 |      
|                           |                          |  |               |       |      |  |       |      
|South American Mines**     |                          |  |               |       |      |  |       |      
|                           | Unaffiliated customers   |  |               | 100.6 |      |  |       | 94.1  |  
|                           | Intersegment             |  |               | 71.7  |      |  |       | 61.9  |  
|                           |                          |  |               |       |      |  |       |      
|                           |                          |  | 172.3         |       |      |  | 156.0 |      
|                           |                          |  |               |       |      |  |       |      
|Primary Molybdenum         |                          |  |               |       |      |  |       |      
|                           | Unaffiliated customers   |  |               | 75.9  |      |  |       | 61.3  |  
|                           | Intersegment             |  |               |      |      |  |       |      |  
|                           |                          |  |               |       |      |  |       |      
|                           |                          |  | 75.9          |       |      |  | 61.3  |      
|                           |                          |  |               |       |      |  |       |      
|Total PDMC                 |                          |  |               |       |      |  |       |      
|                           | Unaffiliated customers   |  | $             | 655.0 |      |  |       | 611.7 |  
|                           |                          |  |               |       |      |  |       |      



|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     

U.S.
Mines, Other Mining and Manufacturing and Sales Segments  Sales

Sales and other operating revenues to unaffiliated customers by U.S.
Mines, Other Mining and Manufacturing and Sales increased $22.2 million, or 5
percent, in the 2003 first quarter, compared with the 2002 first quarter. This
increase was primarily due to higher average copper prices (approximately $29
million), partially offset by lower copper sales volumes (approximately $10
million).

South American Mines Segments  Sales

South American Mines sales and other operating revenues to unaffiliated
customers increased $6.5 million, or 7 percent, in the 2003 first quarter,
compared with the 2002 first quarter. This increase was primarily due to
higher sales volumes of copper (approximately $4 million) and higher realized
copper prices (approximately $2 million).

Primary Molybdenum Segment  Sales

Primary Molybdenum sales and other operating revenues to unaffiliated
customers increased $14.6 million, or 24 percent, in the 2003 first quarter,
compared with the 2002 first quarter. This increase was primarily due to
higher average molybdenum prices (approximately $15 million).





---



##### Table of Contents



-32-

Operating Income (Loss) for Copper (U.S. and South America) and Molybdenum

In addition to the allocation of revenues, management allocates certain
operating costs, expenses and capital of PDMCs segments that may not be
necessarily reflective of market conditions. We also do not allocate all costs
and expenses applicable to a mine or operation from the division or corporate
offices. Accordingly, the segment information reflects management
determinations that may not be indicative of actual financial performance of
each segment as if it was an independent entity.

|                           |            |   |               |      |      |  |               |      | 
|-------------------------- | ---------- | - | ------------- | ---- | ---- |  | ------------- | ---- | 
|(Unaudited; $ in millions) |            |   |               |      |      |  |               |     
|                           |            |   | First Quarter
|                           |            |   |              
|                           |            |   | 2003          |      | 2002
|                           |            |   |               |      |     
|                           |            |   |               |      |      |  | (As Restated)
|U.S. Mining Operations*    |            | $ | (0.6          | )    |      |  | 0.1           |     
|South American Mines**     |            |   | 36.2          |      |      |  | 27.5          |     
|Primary Molybdenum         |            |   | 0.1           |      |      |  | (0.3          | )   
|                           |            |   |               |      |      |  |               |     
|                           | Total PDMC |   | $             | 35.7 |      |  |               | 27.3 | 
|                           |            |   |               |      |      |  |               |     



|*  |  | U.S. Mining Operations combines the following segments: Morenci,
Bagdad/Sierrita, Miami/Bisbee, Chino/Cobre, Tyrone, Manufacturing and
Sales, and Other Mining.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | South American Mines combines the following segments: Candelaria, Cerro
Verde and El Abra.                                                                     

U.S. Mining Operations  Operating Income (Loss)

U.S. Mining Operations reported an operating loss of $0.6 million in the
2003 first quarter, compared with operating income of $0.1 million in the 2002
first quarter including $13.8 million of special, net pre-tax gains. (Refer to
the separate discussion of PDMCs segments below for further detail.)

Note: Supplemental Data

The following table summarizes U.S. Mining Operations special items for
2003 and 2002 and the resultant losses excluding these special
items:

|                                                 |  |               |      |      |  |               |       |  
|------------------------------------------------ |  | ------------- | ---- | ---- |  | ------------- | ----- | -
|(Unaudited; $ in millions)                       |  |               |      |      |  |               |       |  
|                                                 |  | First Quarter
|                                                 |  |              
|                                                 |  | 2003          |      | 2002
|                                                 |  |               |      |     
|                                                 |  |               |      |      |  | (As Restated)
|Special, pre-tax items                           |  | $             |     |      |  |               | 13.8  |  
|Segment operating losses
excluding special items |  | $             | (0.6 | )    |  |               | (13.7 | )



| |  | Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.
| |  | ---------------------------------------------------------------------------------------------------------------------------

Morenci Segment  Operating Income

The Morenci open-pit mine, located in southeastern Arizona, primarily
produces electrowon copper cathodes. We own an 85 percent interest in Morenci
and apply the proportional consolidation method of accounting. Operating
income of $12.4 million in the 2003 first quarter increased $0.6 million
compared with the 2002 first quarter, primarily due to higher average copper
prices (approximately $4 million) and a property insurance recovery
(approximately $1 million); partially offset by higher cost of copper
production (approximately $4 million) primarily due to higher energy costs.

Bagdad/Sierrita Segment  Operating Income (Loss)

Our wholly owned Bagdad and Sierrita open-pit mines, located in northwest
Arizona and near Green Valley, Arizona, respectively, mine copper sulfide and
oxide ores. They produce copper and molybdenum concentrates. The 2003 first
quarter operating income of $6.7 million increased $11.0 million compared with
the 2002 first quarter, primarily due to lower cost of copper production
(approximately $8 million) and higher average copper prices (approximately $2
million). Lower cost of copper production of $8 million was primarily due to
higher molybdenum credits resulting from higher molybdenum prices
(approximately $9 million).

On April 28, 2003, the Company announced its copper concentrate-leaching
demonstration plant at Bagdad, Arizona, had been com-





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-33-

missioned ahead of schedule. It is now operating at design capacity.

The Bagdad plant is the first commercial facility in the world to use
pressure leaching to treat chalcopyrite concentrates. This represents a major
step forward in copper-extraction technology. The new technology should make
it more economical to recover copper from chalcopyrite ores, which
accounts for
approximately 70 percent of the worlds known copper reserves. The process
involves leaching chalcopyrite concentrates in a pressure leach vessel. The
resulting copper-containing solutions are blended with lower-grade stockpile
leach solutions and subsequently processed by solution extraction and
electrowinning. Our immediate plans are to continue in the present mode of
operation until the economic viability of the process is proven. Once we have
completed this demonstration, we will be ready for larger scale commercial
application where appropriate.

Miami/Bisbee Segment  Operating
Loss

Our wholly owned Miami open-pit mine, located in Miami, Arizona, produces
electrowon copper cathode. The Bisbee precipitation operation is located in
southern Arizona. The 2003 first quarter operating loss of $0.7 million
decreased $3.8 million compared with the 2002 first quarter, primarily due to
lower cost of copper production (approximately $4 million) resulting from
higher production (approximately $2 million) and lower depreciation expense
(approximately $2 million).

Chino/Cobre Segment  Operating
Income (Loss)

The Chino open-pit mine, located near Silver City, New Mexico, primarily
mines copper sulfide and oxide ores. We own a two-thirds partnership interest
in Chino and apply the proportional consolidation method of accounting. Our
wholly owned Cobre mine, which is adjacent to the Chino mine, is on
care-and-maintenance status. The 2003 first quarter operating loss of $2.1
million increased $7.8 million compared with the 2002 first quarter, primarily
due to lower copper sales volumes (approximately $3 million) and higher cost of
copper production (approximately $3 million) due to lower production from lower
leach solution grades and flow rates.

Tyrone Segment  Operating Loss

Our wholly owned Tyrone open-pit mine, located near Tyrone, New Mexico,
primarily mines copper oxide ore. It produces electrowon copper cathode. The
2003 first quarter operating loss of $4.4 million increased $2.7 million
compared with the 2002 first quarter, due to higher cost of copper production
(approximately $3 million) and lower copper sales volumes (approximately $1
million), partially offset by higher average copper prices (approximately $1
million). Higher cost of copper production of approximately $3 million included an
unfavorable change in heap leach and work-in-process inventory (approximately
$12 million); partially offset by lower costs associated with mine plan changes
(approximately $5 million) and lower closure expense from the adoption of SFAS
No. 143 (approximately $3 million).

South American Mines  Operating Income

South American Mines reported operating income in the 2003 first quarter
of $36.2 million, compared with operating income of $27.5 million in the 2002
first quarter. (Refer to the separate discussion of PDMCs segments below for
further detail.)

Candelaria Segment  Operating Income

The Candelaria open-pit mine is located near Copiapó in northern Chile and
produces copper concentrates. We own an 80 percent partnership interest in
Candelaria, a Chilean contractual mining company, and we apply the proportional
consolidation method of accounting. Operating income of $23.1 million in the
2003 first quarter increased $2.9 million compared with the 2002 first quarter,
primarily due to higher copper sales volumes (approximately $3 million).

Cerro Verde Segment  Operating
Income

The Cerro Verde open-pit mine, located near Arequipa, Peru, produces
copper cathode. We own approximately 82 percent of the common stock of Cerro
Verde, which we fully consolidate and show the minority interest. The 2003
first quarter operating income of $7.5 million increased $0.7 million from the
2002 first quarter, primarily due to higher average copper prices
(approximately $2 million); partially offset by higher cost of copper
production (approximately $1 million) primarily due to the change in heap leach
and work-in-process inventory.

El Abra Segment  Operating Income

The El Abra open-pit mine is located in northern Chile and produces copper
cathodes.





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We own a 51 percent partnership
interest in El Abra, a Chilean contractual mining company, and we apply the proportional
consolidation method of accounting. The remaining 49 percent interest is owned
by Corporación Nacional del Cobre de Chile (CODELCO), a Chilean state-owned
company. The 2003 first quarter operating income of $5.6 million increased
$5.1 million from the 2002 first quarter, primarily due to higher average
copper prices (approximately $3 million) and lower cost of copper production
(approximately $2 million) primarily comprising a favorable change in heap
leach and work-in-process inventory (approximately $4 million); partially
offset by higher depreciation expense (approximately $1 million).

Primary Molybdenum  Operating Income (Loss)

Primary Molybdenum includes our wholly owned Henderson and Climax
molybdenum mines in Colorado and conversion facilities in the United States and
Europe. Henderson produces high-purity, chemical-grade molybdenum
concentrates, which are further processed into value-added molybdenum chemical
products. Climax is currently on care-and-maintenance status. We expect to
bring Climax into production concurrent with the exhaustion of the Henderson
molybdenum mine reserves for continued long-term primary molybdenum supply for
the chemicals business.

Primary Molybdenum operations reported operating income in the 2003 first
quarter of $0.1 million, compared with an operating loss of $0.3 million in the
first quarter of 2002. The 2003 first quarter increase of $0.4 million
primarily was due to higher average molybdenum prices (approximately $15
million) essentially offset by higher costs, including internal
by-product production costs (approximately $2 million), higher costs of
purchased molybdenum (approximately $11 million) and lower tolling profits
(approximately $1 million).

PDMC  Other Matters

We have approximately 760 million pounds of annual copper production
capacity (100 percent basis) that could be brought to the market with minimal
lead-time (715 million pounds in the United States and 45 million pounds
internationally). This curtailed capacity is located at eight of our mine
sites, all with existing infrastructures. Approximately 665 million pounds of
this curtailed annual capacity is located at our active mine sites and
approximately 95 million pounds is located at inactive sites (50 million at
Cobre and 45 million at Ojos del Salado).

Any decision to recommence full operations at these sites will depend on
several factors including then-prevailing copper prices, managements
assessment of copper market fundamentals and its estimates of future copper
price trends and the extent to which any such new production is necessary for
the efficient integration of the Companys other copper-producing operations at
that time. Managements assessment of copper market fundamentals will reflect
its judgment about future global economic activity and demand, and its
estimates of the likelihood and timing of curtailed or new projects of
competitors being placed into production. While there is no single copper
price threshold that would necessarily trigger the recommencement of full
operations at any of these sites, management does not expect to recommence
operations until there has been a significant improvement in copper market
fundamentals or a production integration inefficiency that could be alleviated
by such recommencement.

Any material change in the price we receive for copper, or in PDMCs
implied unit cost of copper production, has a significant effect on our
results. Based on expected 2003 annual production of approximately 2.1 billion
pounds of copper, each 1 cent per pound change in the average annual copper
price, or in average annual implied unit cost of copper production, causes a
variation in annual operating income before taxes of approximately $21 million.

Our current annual molybdenum production is approximately 45 million
pounds (approximately 20 million pounds from primary mines and 25 million
pounds from by-product mines). Approximately 70 percent of our molybdenum
contracts are priced based on the average of the previous 30 days of published
prices (i.e., Platts Metals Week, Ryans Notes, or Metal Bulletin) for
molybdenum oxide, plus premiums. Accordingly, each $1.00 per pound change in
our average annual realized molybdenum price causes a variation in annual
operating income before taxes of approximately $32 million (subject to any
negotiated limitations in outstanding customer agreements).

From time to time, we may purchase or sell copper price protection
contracts for a portion of our expected future mine production. We do this to
limit the effects of potential decreases in copper selling prices. We did not
have any outstanding copper price protection contracts on March 31, 2003.





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PDMC  New Mexico Reclamation

Mining and smelting operations with leaching, tailing ponds, surface
impoundments and other discharging facilities in New Mexico are subject to
regulation under the New Mexico Water Quality Act and the Water Quality Control
Commission (WQCC) Regulations. The Chino, Cobre and Tyrone mines and the
Hidalgo smelter each have obtained multiple discharge permits for their
operations, which specify operational, monitoring and notification
requirements. These permits are issued for five-year terms and require renewal
following the end of each permit term. The WQCC Regulations authorize the New
Mexico Environment Department (NMED), which administers the discharge permit
program, to require the submission of closure plans showing how applicable
discharge permit requirements will be met following closure. Under certain
circumstances, NMED also may require submission and approval of abatement plans
to address the exceedance of applicable water quality standards.

Further, Chino, Cobre, Tyrone and Hidalgo must submit closure plans for
their operations. Hidalgo has an approved closure plan under its discharge
permit. The three mines have submitted closure plans, which have been combined
with closeout plans under the New Mexico Mining Act (NMMA), as discussed below.
The proposed closure plans currently are subject to approval by NMED as part
of separate discharge permits for closure for each of the three operations that
would supplement the existing discharge permits (hereinafter referred to as
closure permits). The proposed closure permits contain a number of permit
conditions that would modify the proposed closure plans. Chino Mines Company
and NMED reached agreement in December 2001 on proposed closure permit
conditions presented at a public hearing in February 2002. On January 23,
2003, NMEDs hearing officer issued a decision approving the closure permit as
proposed by NMED and Chino, with minor changes. NMED issued a permit
consistent with the hearing officers decision on February 24, 2003. An appeal
has been filed by a local environmental group. Phelps Dodge Tyrone, Inc. and
NMED were unable to reach agreement on permit terms before a public hearing
held in May 2002, and presented competing permit proposals. Other parties who
participated in the public hearing presented their own proposals. On March 7,
2003, Tyrone received the hearing officers decision on its permit, which
generally adopted NMEDs proposal. On April 2, 2003, Tyrone filed an appeal of
the hearing officers decision with the WQCC. NMED issued a permit in
accordance with the hearing officers decision on April 8, 2003, which Tyrone
also has appealed. Cobre Mining Company and NMED also have not reached
agreement on the terms of a closure permit. The closure permit for Cobre
Mining Company does not require a public hearing, and may be issued by NMED at
any time.

Chino, Cobre and Tyrone also are subject to permit requirements under
NMMA, which was passed in 1993. Following adoption of the New Mexico Mining
Act Rules (NMMAR) in 1994, Chino, Cobre and Tyrone received initial permits as
existing mining operations under NMMAR in 1997. These permits require
revisions to incorporate approved closeout plans, which consist of plans for
reclamation of the mining operations to achieve a self-sustaining ecosystem or
an approved post-mining land use following cessation of operations at a mine.
Existing mining operations may seek a waiver of these reclamation standards for
open pits and waste units based upon a demonstration that achieving these
standards is technically or economically infeasible or environmentally unsound,
as long as measures will be taken to meet air and water quality standards
following closure.

NMMAR originally required approval of a closeout plan for an existing
mining operation by December 31, 1999, based upon an extension granted by the
Director of the Mining and Minerals Division (MMD). NMMAR subsequently was
amended to extend the deadline for closeout plan approval until December 31,
2001, and later to October 1, 2002. NMMAR contains a requirement that NMED
must provide MMD with a determination that a closeout plan meets applicable
environmental standards, including air and water quality standards, before MMD
can approve the closeout plan. NMEDs policy is to issue this determination
after it has issued closure permits for the facility that submits the closeout
plan. In early 2001, Chino, Cobre and Tyrone submitted comprehensive
closure/closeout plans (CCPs) to both NMED and MMD intended to address the
requirements of both the WQCC Regulations and NMMAR. Approval of the CCPs
under NMMAR would require the granting of waivers by MMD as authorized under
NMMAR. The CCPs were the subject of the public hearings before NMED for Chino
and Tyrone, as discussed above.

As of October 1, 2002, NMED had not issued closure permits for Chino,
Cobre or Tyrone. Consequently, as of October 1, 2002, MMD had not approved
closeout permits for these three mines. MMD issued Notices of Violation (NOVs)
to Chino, Cobre and Tyrone because the three mines did not obtain approved
closeout plans by





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-36-

the October 1, 2002, deadline. The NOVs were modified by the Mining
Commission following a public hearing to set new deadlines for closeout plan
approval tied to NMED permit actions. Based on NMEDs permit actions, closeout
plan approval for Chino is now due by September 24, 2003, and the closeout plan
approval date for Tyrone is April 8, 2004. The closeout plan approval deadline
for Cobre will be nine months from the date of NMEDs permit issuance, which is
currently pending.

NMMAR contains specific requirements regarding financial assurance that
must be provided to MMD to assure that sufficient funds would be available to
MMD to carry out the closeout plan in the event of a default by the permittee.
NMED also may require financial assurance under the WQCC Regulations. The
financial assurance requirements are based upon the net present value of
estimated costs to carry out the requirements of the closure permit and the
approved closeout plan, assuming the state would hire a third-party contractor
to conduct the work. Actual reclamation costs may differ significantly from
the costs estimated under the permits due to advances in technology and
reclamation techniques and opportunities to prepare each site for more
efficient reclamation through careful development of the site over time.
Consequently, the estimated costs under the permits are higher than the cost
the Company would be expected to incur if the Company performed the work.

The CCPs submitted in early 2001 contained cost estimates of approximately
$100 million for Chino, $121 million for Tyrone, and $9 million for Cobre,
based upon unescalated and undiscounted capital and operating costs over a
30-year operating period. The closure permit negotiated by NMED and Chino
Mines Company and approved by the NMED hearing officer has an estimated cost of
approximately $394 million, based upon third-party unescalated and undiscounted
capital and operating costs over a 100-year operating period, including the
cost of technical studies required under the permit. The Companys two-thirds
share of NMEDs $394 million estimate is approximately $263 million and our
joint venture partners cost share is approximately $131 million. We estimate
total costs for Chino Mines Company to achieve the closure standards required
by NMED to be approximately $264 million (100 percent basis); that estimate is
approximately one-third lower than the financial assurance cost estimate as a
result of the Companys historical cost advantages, savings from the use of the
Companys own personnel and equipment versus third-party contract costs, and
opportunities to prepare the site for more efficient reclamation. The
financial assurance cost estimate includes approximately $10 million (100
percent basis) of costs the Company has recognized in environmental reserves.
The Companys two-thirds share of these costs is approximately
$176 million and
our joint venture partners cost share is approximately $88 million. At March
31, 2003, and December 31, 2002, we had accrued approximately $17 million and
$8 million, respectively, (two-thirds basis) for reclamation at Chino. The NMED
cost estimate for Chino is subject to further review, and possible adjustment,
by MMD under NMMAR.

NMED estimated the cost to carry out the requirements of its proposed
closure permits for Tyrone at approximately $440 million, without discounting
or escalation, under NMEDs proposal at the May 2002 hearing; Tyrone estimated
the cost of its proposal at approximately $328 million, without discounting or
escalation over a 100-year operating period. NMED has not yet supplied its
proposed cost estimate for Cobre. The proposed terms of the closure permits
would require additional studies over the five-year term of the permits to
refine the closure plan. The plan requirements and cost estimates may increase
or decrease based upon the results of the studies and other factors, including
changes in technology, completion of some closure and reclamation work, and
inflation.

Based upon NMEDs undiscounted financial assurance cost estimates for the
Tyrone plan of approximately $440 million, and considering the same cost
advantages as indicated in the above discussion regarding Chino, we estimate
the Companys costs to achieve the closure standards under that estimate to be
approximately $288 million for Tyrone. The Company has not obtained approval
from NMED of an estimate of its cost to achieve the closure standards that
would be required by the hearing officers decision. The Companys current
cost estimate for Cobre of approximately $9 million will be updated with the
issuance of the discharge permit. At March 31, 2003, and December 31, 2002, we
had accrued closure costs of approximately $38 million and $27 million,
respectively, at Tyrone and approximately $6 million and $2 million,
respectively, at Cobre.

Following NMEDs issuance of the closure permits, Chino, Cobre and Tyrone
are required to submit proposals for financial assurance based upon the permit
requirements and subject to NMEDs approval. Under the proposed closure permit
terms, the amount of financial assurance may be based upon the net present
value of the estimated cost for a third-party to implement the





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-37-

plan, using discount and escalation rates specified in the permit. These
amounts are expected to be substantially lower than the undiscounted and
unescalated cost estimates. For example, based upon the cost estimate approved
by NMED, the financial assurance amount for Chino could be approximately $191
million. This amount is based on annual escalation rates of approximately 3.2
percent for long-term water treatment costs and approximately 3.6 percent for
other costs and discount rates of 5 percent for years one through 12 of the
plan and 8 percent for years 13 through 100.

NMMAR requires that financial assurance for a closeout plan be approved
and put in place before MMD can approve the closeout plan. Chino and Tyrone
have provided approximately $56 million and $58 million of
financial assurance in the form of surety bonds, respectively, to NMED under the terms of several discharge permits. The
closure and financial assurance requirements of these permits have been
superseded by the recently issued NMED closure permits. Consequently, the
Company has advised NMED that this financial assurance should be terminated and
replaced by new financial assurance under the terms of the new closure permits.
Chino has submitted a financial assurance proposal in accordance with the
schedule under its NMED closure permit proposing financial assurance primarily
in the form of a corporate performance guarantee from the Company. The Company
continues to work with the state to finalize appropriate terms and conditions
for financial assurance. Cobre also has approximately $2 million of financial
assurance in place held jointly by NMED and MMD. Following NMEDs issuance of
the closure permits, and prior to MMDs approval of the closeout plans, Chino,
Tyrone and Cobre will be required to provide substantial amounts of additional
financial assurance to cover the amounts of the approved cost estimates.
Hidalgo currently has provided financial assurance in the amount of
approximately $11 million under its discharge permit.




RESULTS OF PHELPS DODGE INDUSTRIES

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

|                                                              |                     |   |               |       |      |  |       |       | 
|------------------------------------------------------------- | ------------------- | - | ------------- | ----- | ---- |  | ----- | ----- | 
|(Unaudited; $ in millions)                                    |                     |   |               |       |      |  |       |      
|                                                              |                     |   | First Quarter
|                                                              |                     |   |              
|                                                              |                     |   | 2003          |       | 2002
|                                                              |                     |   |               |       |     
|Sales and other operating revenues
to unaffiliated customers: |                     |   |               |       |      |  |       |      
|                                                              | Specialty Chemicals |   | $             | 162.1 |      |  |       | 129.3 | 
|                                                              | Wire and Cable      |   |               | 160.9 |      |  |       | 177.5 | 
|                                                              |                     |   |               |       |      |  |       |      
|                                                              |                     | $ | 323.0         |       |      |  | 306.8 |      
|                                                              |                     |   |               |       |      |  |       |       | 
|Operating income:                                             |                     |   |               |       |      |  |       |      
|                                                              | Specialty Chemicals |   | $             | 14.1  |      |  |       | 13.2  | 
|                                                              | Wire and Cable      |   |               | 3.4   |      |  |       | 2.8   | 
|                                                              |                     |   |               |       |      |  |       |      
|                                                              |                     | $ | 17.5          |       |      |  | 16.0  |      
|                                                              |                     |   |               |       |      |  |       |       | 

PDI  Sales

PDI reported sales to unaffiliated customers of $323.0 million in the 2003
first quarter, compared with sales of $306.8 million in the 2002 first quarter.
The increase of $16.2 million in PDIs sales in the first quarter compared
with the corresponding 2002 period was due to higher specialty chemicals sales
resulting primarily from higher sales volumes (approximately $9 million) and
higher average unit selling prices worldwide (approximately $23 million) due to
general market increases and higher feedstock related increases. This increase
was partially offset by lower sales volumes of wire and cable as a result of
reduced demand stemming from continuing global economic uncertainty
(approximately $17 million).





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-38-

PDI  Operating Income

PDI reported operating income of $17.5 million in the 2003 first quarter,
including a special, net pre-tax gain of $3.2 million, compared with operating
income of $16.0 million in the 2002 first quarter. (Refer to the separate
discussion of PDIs Specialty Chemicals and Wire and Cable segments below for
further detail.)

Note: Supplemental Data

The following table summarizes PDIs special items for the first quarters
of 2003 and 2002 and the resultant earnings excluding these special items:

|                                                                                                                            |  |               |      |      |  |  |      | 
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---- | ---- |  |  | ---- | 
|(Unaudited; $ in millions)                                                                                                  |  |               |      |      |  |  |      | 
|                                                                                                                            |  | First Quarter
|                                                                                                                            |  |              
|                                                                                                                            |  | 2003          |      | 2002
|                                                                                                                            |  |               |      |     
|Operating income                                                                                                            |  | $             | 17.5 |      |  |  | 16.0 | 
|Special, pre-tax items                                                                                                      |  |               | 3.2  |      |  |  |     | 
|                                                                                                                            |  |               |      |      |  |  |      | 
|Segment operating earnings
excluding special items                                                                          |  | $             | 14.3 |      |  |  | 16.0 | 
|                                                                                                                            |  |               |      |      |  |  |      | 
|                                                                                                                            | 
|Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.

Special items and provisions in operating income were as follows:

|                                                     |  |               |     |      |  |  |   | 
|---------------------------------------------------- |  | ------------- | --- | ---- |  |  | - | 
|(Unaudited; $ in millions)                           |  |               |     |      |  |  |   | 
|                                                     |  | First Quarter
|                                                     |  |              
|                                                     |  | 2003          |     | 2002
|                                                     |  |               |     |     
|Termination of a foreign
postretirement benefit plan |  | $             | 3.2 |      |  |  |  | 
|                                                     |  |               |     |      |  |  |   | 

Specialty Chemicals  Operating Income

Specialty Chemicals reported operating income in the 2003 first quarter of
$14.1 million including a special, net pre-tax gain of $3.2 million, compared
with operating income of $13.2 million in the 2002 first quarter.

The 2003 first quarter increase in operating income of $0.9 million
compared with the 2002 first quarter was primarily due to a special, pre-tax
gain of $3.2 million that resulted from the termination of a foreign
postretirement benefit plan. In addition, higher specialty chemicals sales
volumes (approximately $7 million), predominately in the tire and mechanical
rubber goods markets in North America and Europe, were more than offset by lower margins
for specialty chemical operations (approximately $9 million) primarily due to
the continued and significant escalation of feedstock costs.

Note: Supplemental Data

The following table summarizes Specialty Chemicals special items for the
first quarters of 2003 and 2002 and the resultant earnings excluding these
special items:

|                                                   |  |               |      |      |  |  |      | 
|-------------------------------------------------- |  | ------------- | ---- | ---- |  |  | ---- | 
|(Unaudited; $ in millions)                         |  |               |      |      |  |  |      | 
|                                                   |  | First Quarter
|                                                   |  |              
|                                                   |  | 2003          |      | 2002
|                                                   |  |               |      |     
|Special, pre-tax items                             |  | $             | 3.2  |      |  |  |     | 
|Segment operating earnings
excluding special items |  | $             | 10.9 |      |  |  | 13.2 | 



| |  | Note: Our non-GAAP measure of special items may not be comparable to similarly
titled measures reported by other companies.
| |  | ---------------------------------------------------------------------------------------------------------------------------

Wire and Cable  Operating Income

Wire and Cable reported operating income in the 2003 first quarter of $3.4
million, compared with operating income of $2.8 million in the 2002 first
quarter. Wire and Cables sales decreased $16.6 million as a result of reduced
demand stemming from continuing global economic uncertainty, and operating
costs decreased $17.4 million. There were no special items in either quarter.





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OTHER MATTERS RELATING TO THE STATEMENT OF CONSOLIDATED OPERATIONS

Exploration and Research Expense

Our net exploration and research expense was $9.6 million in the 2003
first quarter, compared with $8.7 million in the 2002 first quarter. The
increase primarily resulted from slightly higher PDMC research expense
(approximately $1 million).

Interest Expense

Interest expense decreased $16.8 million in the 2003 first quarter,
compared with the 2002 first quarter. The decrease in the 2003 first quarter
primarily was attributable to reductions related to the payoff of long-term
debt (approximately $14 million) and project financing in 2002 (approximately
$1 million). Lower floating interest rates also contributed to the reductions
(approximately $1 million).

Miscellaneous Income (Expense), Net

Miscellaneous income (expense), net, decreased $1.1 million in the 2003
first quarter, compared with the 2002 first quarter. The decrease for the 2003
first quarter resulted primarily from lower interest income ($0.9 million) and
higher shutdown expenses ($1.9 million); partially offset by higher dividends
received ($0.9 million) and foreign currency exchange gains ($0.8 million).

Benefit (Provision) for Taxes on Income

The Companys income tax provision for the 2003 first quarter principally
resulted from taxes on earnings at international operations ($14.9 million)
that cannot be offset by losses at domestic operations.

The Companys income tax benefit for the 2002 first quarter primarily
comprised the following: (i) a $38.5 million tax benefit associated with the carryback of 2001 net operating losses
resulting from the March enactment of the Job Creation and Worker Assistance
Act of 2002; (ii) a $12.9 million benefit recognized for first quarter 2002 net
operating losses that, based on the new tax legislation, may also be carried
back to recover prior years taxes paid; and (iii) a $14.4 million expense for
taxes on earnings at international operations.

Cumulative Effect of Accounting Change

On January 1, 2003, we adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. With the adoption of this Statement, we recognize
asset retirement obligations (AROs) as liabilities when incurred, with the
initial measurement at fair value. These liabilities will be accreted to full
value over time through charges to income. In addition, an asset retirement
cost was capitalized as part of the related assets carrying value and will
subsequently be allocated to expense over the assets useful life. Our AROs
consist primarily of costs associated with mine reclamation and closure
activities. These activities, which tend to be site specific, generally
include costs for earthwork, revegetation, water treatment and demolition.
Upon adoption, we recorded a pre-tax cumulative effect of a change in
accounting principle of $9.7 million credit to income ($8.4 million after-tax).
In the first quarter 2003, the effect of adopting SFAS No. 143 decreased loss
before cumulative effect of accounting change by approximately $3 million, or 4
cents per common share.

The following table summarizes the balance sheet impact associated with
the adoption of SFAS No. 143:

|                                           |                              |   |              |         |          |  |          |      |            |  |         |         | 
|------------------------------------------ | ---------------------------- | - | ------------ | ------- | -------- |  | -------- | ---- | ---------- |  | ------- | ------- | 
|(Unaudited; $ in millions)                 |                              |   |              |         |          |  |          |      |            |  |         |        
|                                           |                              |   |              |         |          |  | SFAS     |      | January 1,
|                                           |                              |   | December 31, |         | No. 143  |  | 2003    
|                                           |                              |   | 2002         |         | Adoption |  | After   
|                                           |                              |   | As Reported  |         | Impact   |  | Adoption
|                                           |                              |   |              |         |          |  |         
|Mining properties                          |                              | $ | 1,361.4      |         |          |  | 67.4     | *    |            |  | 1,428.8 |        
|Mining properties
accumulated
depreciation |                              |   | (122.4       | )       |          |  | (55.2    | )    |            |  | (177.6  | )      
|                                           |                              |   |              |         |          |  |          |      |            |  |         |        
|                                           | Net mining
properties
assets |   | $            | 1,239.0 |          |  |          | 12.2 |            |  |         | 1,251.2 | 
|                                           |                              |   |              |         |          |  |          |      |            |  |         |        
|Asset retirement
obligation
liability      |                              | $ | 138.6        |         |          |  | 10.4     | **   |            |  | 149.0   |        
|                                           |                              |   |              |         |          |  |          |      |            |  |         |        



|*  |  | Amount includes $91.5 million of additions related to recording an asset
retirement cost, offset by $24.1 million to reclassify amounts recognized
as ore reserves in purchase accounting.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|** |  | Amount consists of $2.5 million of liabilities recognized at adoption and
$7.9 million of reclassifications related to closure obligations from
other liabilities at adoption.            





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##### Table of Contents



-40-

The pro formaeffects of the application of SFAS No. 143 as if this
Statement had been adopted on January 1, 2002, are presented below:

|                                                                              |                                 |   |               |       |      |  |       |       |  
|----------------------------------------------------------------------------- | ------------------------------- | - | ------------- | ----- | ---- |  | ----- | ----- | -
|(Unaudited; $ in millions except per share data)                             
|                                                                              |                                 |   | First Quarter
|                                                                              |                                 |   |              
|                                                                              |                                 |   | 2003          |       | 2002
|                                                                              |                                 |   |               |       |     
|Loss before cumulative effect of
accounting change as reported                |                                 | $ | (23.4         | )     |      |  | (1.9  | )    
|Reduced cost of products sold, net
of tax benefit (accretion expense)         |                                 |   |              |       |      |  | 5.3   |      
|Additional depreciation expense,
net of tax provision                         |                                 |   |              |       |      |  | (0.6  | )    
|                                                                              |                                 |   |               |       |      |  |       |      
|Pro formaincome (loss) before cumulative
effect of accounting change          |                                 | $ | (23.4         | )     |      |  | 2.8   |      
|                                                                              |                                 |   |               |       |      |  |       |      
|Income (loss) per common share
before cumulative effect of
accounting change: |                                 |   |               |       |      |  |       |      
|                                                                              | Basic and diluted  as reported |   | $             | (0.30 | )    |  |       | (0.03 | )
|                                                                              | Basic and diluted  pro forma   |   | $             | (0.30 | )    |  |       | 0.03  |  
|Net loss as reported                                                          |                                 | $ | (15.0         | )     |      |  | (24.8 | )    
|Pro formanet loss                                                             |                                 | $ | (23.4         | )     |      |  | (20.1 | )    
|                                                                              |                                 |  
|Loss per common share:                                                        |                                 |   |               |       |      |  |       |      
|                                                                              | Basic and diluted  as reported |   | $             | (0.21 | )    |  |       | (0.32 | )
|                                                                              | Basic and diluted  pro forma   |   | $             | (0.30 | )    |  |       | (0.26 | )

The pro formaasset retirement obligation liability balances as if SFAS
No. 143 had been adopted on January 1, 2002, are as follows:

|                                                                   |  |   |       | 
|------------------------------------------------------------------ |  | - | ----- | 
|(Unaudited; $ in millions)                                        
|                                                                  
|Pro formaasset retirement obligation
liability  January 1, 2002   |  | $ | 138.1 | 
|Pro formaasset retirement obligation
liability  December 31, 2002 |  | $ | 149.0 | 

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. Under SFAS No. 142, goodwill and intangible assets
that have indefinite useful lives are not amortized, but rather tested at least
annually for impairment. Intangible assets that have finite useful lives will
continue to be amortized over their useful lives. Upon completion of the
transitional impairment tests, the fair value of three of the Companys
international wire and cable reporting units was determined to be less than the
related carrying amount. The resulting impairment loss recognized upon
adoption of SFAS No. 142 in the first quarter of 2002 was $33.0 million,
pre-tax ($22.9 million after-tax), and was recognized as a cumulative effect of
a change in accounting principle.

Subsequently, the Company completed its annual goodwill impairment test as
of December 31, 2002, with no additional impairments. The Company will
continue to test its goodwill annually on a consistent measurement date unless
events occur or circumstances change between annual tests that would more
likely than not reduce the fair value of a reporting unit below its carrying
amount.

The changes in the carrying amount of goodwill for the year ended December
31, 2002, and quarter ended March 31, 2003, are as follows:

|                                                     |  |           |       |          |  |       |       |   |  |  |       |  
|---------------------------------------------------- |  | --------- | ----- | -------- |  | ----- | ----- | - |  |  | ----- | -
|(Unaudited; $ in millions)                           |  |           |       |          |  |       |       |   |  |  |       |  
|                                                     |  | Specialty |       | Wire and |  |       |       |  
|                                                     |  | Chemicals |       | Cable    |  |       |       |  
|                                                     |  | Segment   |       | Segment  |  | Total
|                                                     |  |           |       |          |  |      
|Balance as of
December 31, 2001                      |  | $         | 88.5  |          |  |       | 54.6  |   |  |  | 143.1 |  
|Goodwill acquired
during period                      |  |           |      |          |  |       |      |   |  |  |      |  
|Impairment losses upon
adoption of SFAS
No. 142      |  |           |      |          |  |       | (33.0 | ) |  |  | (33.0 | )
|Goodwill included in
the disposal of a
business unit |  |           |      |          |  |       |      |   |  |  |      |  
|Foreign currency exchange adjustments                |  |           | (19.4 | )        |  |       |      |   |  |  | (19.4 | )
|                                                     |  |           |       |          |  |       |       |   |  |  |       |  
|Balance as of
December 31, 2002                      |  |           | 69.1  |          |  |       | 21.6  |   |  |  | 90.7  |  
|Goodwill acquired
during period                      |  |           |      |          |  |       |      |   |  |  |      |  
|Impairment losses                                    |  |           |      |          |  |       |      |   |  |  |      |  
|Goodwill included in
the disposal of a
business unit |  |           |      |          |  |       |      |   |  |  |      |  
|Foreign currency exchange adjustments                |  |           | 1.8   |          |  |       |      |   |  |  | 1.8   |  
|                                                     |  |           |       |          |  |       |       |   |  |  |       |  
|Balance as of
March 31, 2003                         |  | $         | 70.9  |          |  |       | 21.6  |   |  |  | 92.5  |  
|                                                     |  |           |       |          |  |       |       |   |  |  |       |  




CHANGES IN FINANCIAL CONDITION

Working Capital

During the first quarter of 2003, net working capital balances (excluding
cash and cash equivalents and debt) increased $80.0 million. This increase
resulted primarily from:



| |  |  | a $66.9 million increase in accounts receivable primarily due
to higher molybdenum sales volumes (approximately $15 million), the
timing of copper receivable collections (approximately $10 million),
higher Specialty Chemicals sales volumes and prices (approximately
$21 million),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents



-41-



| |  |  | higher Wire and Cable sales volumes (approximately $8
million) and the timing of their receivable collections
(approximately $8 million); and
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|

| |  |  | a $28.9 million decrease in accounts payable and accrued
expenses primarily due to the payment for an historic Cyprus Amax
lawsuit and arbitration award ($48.6 million), partially offset by
higher accrued interest ($25.7 million) for debt in which semi-annual
payments are made in the second and fourth quarters; partially offset
by
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a $12.0 million increase in accrued income taxes due to higher
foreign taxes.                                                                                                                                                                                                                                                               

Debt

At March 31, 2003, our total debt was $2,105.2 million, compared with
$2,110.6 million at year-end 2002. Our ratio of debt to total capitalization
was 42.3 percent at March 31, 2003, and December 31, 2002.

As of March 31, 2003, the Company had no borrowings under its $1 billion
revolving credit facility that is available, provided compliance with covenant
requirements, until its scheduled maturity on May 10, 2005.

In April
2002, Financial Accounting Standards Board (FASB) issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. Under SFAS No. 4, all gains and losses from extinguishment of
debt were required to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. This Statement
eliminates SFAS No. 4 and, thus, the exception to applying Accounting
Principles Board (APB) Opinion No. 30 to all gains and losses related to
extinguishments of debt. As a result, gains and losses from extinguishment of
debt should be classified as extraordinary items only if they meet the criteria
in APB No. 30. Applying the provisions of APB No. 30 will distinguish
transactions that are part of an entitys recurring operations from those that
are unusual or infrequent or that meet the criteria for classification as an
extraordinary item. As a result of this Statement being adopted by the Company
on January 1, 2003, we will reclassify the third quarter 2002 extraordinary
item for debt extinguishment to recurring operations in our Form 10-Q filing
for the quarter ended September 30, 2003.

Capital Expenditures and Investments

Capital expenditures and investments during the 2003 first quarter were
$19.9 million for PDMC, $6.4 million for PDI and $1.0 million for other
Corporate-related activities. Capital expenditures and investments in the
corresponding 2002 period were $17.4 million for PDMC, $3.7 million for PDI and
$1.7 million for other Corporate-related activities. We expect capital
expenditures and investments for the year 2003 to approximate $200 million,
comprising approximately $110 million for PDMC, approximately $65 million for
PDI, and approximately $25 million for Corporate and other. These capital
expenditures and investments are expected to be funded primarily from operating
cash flow and cash reserves.

Dividends

On March 31, 2003, Phelps Dodge declared a quarterly dividend of $1.6875
per mandatory convertible preferred share, to be paid on May 15, 2003.

Contractual Obligations

The following tables summarize Phelps Dodges contractual obligations at
March 31, 2003, and the effect such obligations are expected to have on its
liquidity and cash flow in future periods for short-term debt, long-term debt
(including capital lease obligations) and take-or-pay contracts. The following
table, as of March 31, 2003, reflects an update of only the major changes to
the similar table presented in the Companys Form 10-K at December 31, 2002:

Debt and Take-or-Pay Contracts as of March 31, 2003:

|                           |  |       |         |        |  |           |       |  |  |  |       | 
|-------------------------- |  | ----- | ------- | ------ |  | --------- | ----- |  |  |  | ----- | 
|(Unaudited; $ in millions) |  |       |         |        |  |           |       |  |  |  |       | 
|                           |  |       |         |        |  | Less Than |       |  |  | 
|                           |  | Total |         | 1 Year |  | 1-3 Years
|                           |  |       |         |        |  |          
|Short-term debt            |  | $     | 41.2    |        |  |           | 41.2  |  |  |  |      | 
|Long-term debt             |  |       | 2,064.0 |        |  |           | 128.6 |  |  |  | 548.0 | 
|Take-or-pay contracts      |  |       | 582.3   |        |  |           | 145.4 |  |  |  | 203.4 | 

|                      |  |           |       |         |  |       |         | 
|--------------------- |  | --------- | ----- | ------- |  | ----- | ------- | 
|                      |  |           |       |         |  | After
|                      |  | 4-5 Years |       | 5 Years
|                      |  |           |       |        
|Short-term debt       |  | $         |      |         |  |       |        | 
|Long-term debt        |  |           | 327.2 |         |  |       | 1,060.2 | 
|Take-or-pay contracts |  |           | 125.6 |         |  |       | 107.9   | 





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##### Table of Contents



-42-

Our take-or-pay contracts primarily include contracts for electricity
($294.1 million), contracts for petroleum-based feedstock for conversion into
carbon black ($166.4 million), and transportation and port fee commitments
($50.9 million). Approximately 81 percent of our take-or-pay electricity
obligations are through PD Energy Services, the legal entity used to manage
power for PDMC at generally fixed-priced arrangements. PD Energy Services has the
right and the ability to resell the electricity as circumstances warrant.
Obligations for petroleum-based feedstock for conversion into carbon black are
for specific quantities, and ultimately will be purchased based upon prevailing
market prices at the time. These petroleum-based products may be re-sold to
others if circumstances warrant. Transportation obligations total $36.7
million for exporting cathode produced at El Abra and copper in concentrate at
Candelaria and for importing sulfuric acid to El Abra. Our carbon black
facility in the United Kingdom has port fee commitments of $14.2 million.

Guarantees

In November 2002, FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires that upon
issuance of certain guarantees, a guarantor must recognize a liability for the
fair value of an obligation assumed under the guarantee. FIN 45 also requires
significant new disclosures by guarantors, in both interim and annual financial
statements, about obligations associated with guarantees issued. FIN 45
disclosure requirements were adopted for our year ended December 31, 2002; the
initial recognition and measurement provisions were adopted on a prospective
basis to guarantees issued or modified after December 31, 2002. There were no
such guarantees issued in the first quarter of 2003.

Other Items that May Affect Liquidity

New Mexico and Colorados mined-land reclamation laws require financial
assurance covering reclamation cost. In contrast, Arizonas Mine Land
Reclamation Act permits a company to satisfy financial assurance requirements
by demonstrating it has financial strength to fund reclamation costs identified
in an approved reclamation plan. An investment grade bond rating is one of the
financial strength tests under the Arizona Act. Phelps Dodge presently has a
credit rating one level above non-investment grade; however, it remains on
Negative Outlook. If a downgrade occurs, the Company currently also meets
another financial strength test that is not ratings dependent.

The cost of surety bonds (the traditional source of financial assurance)
has increased significantly during the past year. Also, many surety companies
are now requiring an increased level of collateral supporting the bonds. If
surety bonds are unavailable, the Company could be required to post other
collateral or possibly cash or cash equivalents directly in support of
financial assurance obligations.




Item 3. Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes in the Companys market risk during
the quarter ended March 31, 2003. For additional information on market risk,
refer to pages 51 and 93 through 97 of our report on Form 10-K for the year
ended December 31, 2002.




Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures that
is designed to ensure information required to be disclosed by the Company is
accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer,
in a timely manner. Management has
reviewed this system of disclosure controls and procedures within 90 days of
the date hereof, and has concluded that the current system of controls and
procedures is effective.

The Company maintains a system of internal controls and procedures for
financial reporting. Since the date of managements most recent evaluation,
there were no significant changes in internal controls or in other factors that
could significantly affect internal controls.





---



##### Table of Contents



-43-




Part II. Other Information




Item 1. Legal Proceedings

I.     Reference is made to paragraph XIX of Part II, Item 3, Legal
Proceedings, of the Companys Form 10-K for the year ended December 31, 2002.

The Company and Columbian Chemicals Company have also been served in the
case entitled Synaflex Rubber Products Company v. Cabot Corporation et al,
which was filed in USDC in New Jersey. We are also aware of four additional
cases, two of which have been filed in federal court in New Jersey and two in
Massachusetts, which we have not been served. The defendants in these
proceedings (including the Company) have filed a Motion with the Panel for
Multi-district Litigation to consolidate all of these cases in a single court.




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Any exhibits required to be filed by the Company are listed in
the Index to Exhibits.
| | --- |  | -------------------------------------------------------------------------------------
|
| | (b) |  | No reports on Form 8-K were filed by us during the quarter
ended March 31, 2003.     




Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                   |  |                                                      |  |                                                                                                        
|------------------ |  | ---------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------
|                   |  | PHELPS DODGE CORPORATION
(Corporation or Registrant)
|                   |  |                                                      |  |                                                                                                        
|                   |  |                                                      |  |                                                                                                        
|Date: May 13, 2003 |  | By:                                                  |  | /s/ Stanton K. Rideout

Stanton K. Rideout
Vice President and Controller
(Principal Accounting Officer)




Certifications

I, J. Steven Whisler, Chairman, President and Chief Executive Officer, certify
that:



|l. |  | I have reviewed this quarterly report on Form 10-Q of Phelps Dodge
Corporation;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        





---



##### Table of Contents



-44-



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

May 13, 2003

/s/ J. Steven Whisler
J. Steven Whisler
Chairman, President and Chief Executive Officer



I, Ramiro G. Peru, Senior Vice President and Chief Financial Officer, certify
that:



|l. |  | I have reviewed this quarterly report on Form 10-Q of Phelps Dodge
Corporation;                                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

May 13, 2003

/s/ Ramiro G. Peru
Ramiro G. Peru
Senior Vice President and Chief Financial Officer





---



##### Table of Contents



-45-




Index to Exhibits

|     |  |                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                                 
|     |  |                                                                                                                                                                                                                 
|99.1 |  | Certification of J. Steven Whisler, Chairman, President and Chief
Executive Officer of the Company, pursuant to 18 United States Code
section 1350, as enacted by section 906 of the Sarbanes-Oxley Act of 2002.
|     |  |                                                                                                                                                                                                                 
|99.2 |  | Certification of Ramiro G. Peru, Chairman, President and Chief Executive
Officer of the Company, pursuant to 18 United States Code section 1350, as
enacted by section 906 of the Sarbanes-Oxley Act of 2002.