SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                 1995 FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1995         Commission file number 1-164
                          -----------------                                -----



                               ASARCO Incorporated
                               -------------------


             (Exact name of registrant as specified in its charter)



         New Jersey                                        13-4924440
-------------------------------                         ------------------
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                         Identification No.)


                     180 Maiden Lane, New York, N. Y. 10038
               --------------------------------------------------
               (Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code       (212) 510-2000
                                                         --------------


           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
           -----------------------------------------------------------

                                                 Name of each exchange on
      Title of each class                            which registered
-------------------------------                  ------------------------
Common Stock, without par value                  New York Stock Exchange

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 check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of February 29, 1996, there were of record 42,630,720 shares of Common Stock,
without par value, outstanding,  and the aggregate market value of the shares of
Common  Stock  (based upon the closing  price of Asarco  Common Stock on the New
York Stock Exchange - Composite  Transactions)  of ASARCO  Incorporated  held by
nonaffiliates was approximately $1.3 billion.

PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE:

Part III:     Proxy  statement in connection  with the Annual Meeting to be held
              on April 24, 1996.
Part IV:      Exhibit index is on pages C1 through C3.



<PAGE>


A1
                                                                                
                                     PART I

Item 1. Business

Asarco,  a New  Jersey  corporation  organized  in 1899,  is one of the  world's
leading producers of nonferrous metals,  principally copper,  lead, zinc, silver
and  molybdenum,  from its own mines and through its 54.0%  interest in Southern
Peru Copper Corporation  (SPCC).  Asarco also produces  specialty  chemicals and
construction  aggregates  and  provides  environmental   services.   Asarco  has
substantial  investments  in two mining  companies:  a 15.1%  interest in M.I.M.
Holdings Limited (MIM) in Australia;  and a 23.6% interest in Grupo Mexico, S.A.
de C.V. (Grupo Mexico).

Asarco and its subsidiaries or associated  companies operate mines in the United
States, Peru, Australia and Mexico.  Asarco and these companies together in 1995
accounted  for about 12% of western  world  mine  production  of copper,  10% of
silver, 21% of lead, 9% of zinc and 13% of molybdenum.

All tonnages are in short tons.  All ounces are troy ounces.  Dollar amounts are
in U.S. dollars unless otherwise indicated.  A$=Australian dollars.  "Asarco" or
"the Company" includes Asarco and subsidiaries.

Reference is made to the following  Financial  Statement  footnotes  included in
this report: Investments in Note 6, and Business Segments in Note 12.

Additional business information follows:

                                 PRIMARY METALS

                         Principal Products and Markets

Copper Business

The  primary  domestic  uses of  copper  are in the  building  and  construction
industry, electrical and electronic products and, to a lesser extent, industrial
machinery and equipment, consumer products and the automotive and transportation
industries. A substantial portion of Asarco's copper sales are made under annual
contracts to industrial users.

Asarco today is the world's fourth largest private sector copper  producer.  The
Company's  domestic  copper  business  includes  the  Mission  and Ray  mines in
Arizona,  copper  smelters in Hayden,  Arizona  and El Paso,  Texas and a copper
refinery  in  Amarillo,  Texas.  Asarco  also owns a 49.9%  interest  in Montana
Resources,  Inc.'s  copper-molybdenum  mine and a 75% interest in a new leaching
and solvent extraction/electrowinning  operation under development at its Silver
Bell mine in Arizona.  At Southern Peru Copper Corporation (SPCC), a 54.0% owned
subsidiary,  copper is produced at the  Toquepala  and  Cuajone  mines,  the Ilo
smelter and the Ilo refinery, all located in the southern part of Peru.

In 1995,  Asarco's beneficial copper production was 898 million pounds, 12% more
than in 1994.  The  growth  in  copper  production  was  principally  due to the
resumption  of full  operations  at the Ray mine and the  increase  in  Asarco's
ownership  in  SPCC.  The Ray  mine  returned  to full  production  in May  1995
following  early  completion  of a  development  program  initiated in July 1994
during which copper  production was reduced.  The Company acquired an additional
10.7% interest in SPCC in April 1995.

Since 1985,  Asarco's  strategy for its copper business has been to transform it
from a predominately custom smelting and refining business to a fully integrated
copper mining  business.  With the  successful  completion  of this  integration
strategy,  the  Company  will focus on  improving  operating  costs,  increasing
production and maximizing the value of its significant ore reserve position.



<PAGE>
A2

Ore reserves are the future of any mining company. The Company has increased its
copper ore reserves by more than 6 times from 10 years ago. Asarco's  beneficial
interest in copper ore  reserves  (exclusive  of its  interests in MIM and Grupo
Mexico)  now totals 3.2 billion  tons  containing  36 billion  pounds of copper.
Development  programs  are  currently  underway  at Mission  and Silver  Bell to
increase  production  from  new  reserves,  and at  SPCC  studies  of  expansion
opportunities to capitalize on its increased ore reserves have begun.

In 1995,  copper prices  remained  strong as demand  continued to exceed supply.
Worldwide  inventories again declined in 1995 following a significant decline in
1994.  Copper  prices  averaged a record $1.35 per pound in 1995 on the New York
Commodity  Exchange  (COMEX)  and $1.33 per pound on the London  Metal  Exchange
(LME).

The price of  molybdenum,  which is mined along with copper at Mission,  Montana
Resources  and  SPCC,  reached  a  10-year  high in 1995 as a result  of  supply
shortages.  Molybdenum is used  principally  in the  manufacture of steel and in
lubricants.  The price of  molybdenum  averaged  $7.42 per pound in 1995 but had
declined to $4.31 by year end. Asarco's  beneficial  production of molybdenum in
1995 was 10 million pounds.


Domestic Copper Operations

The Company's  copper  operations  in the U.S.  established  several  production
records in 1995 including  record total mine  production of 676 million  pounds.
The Ray  mine  had  record  production  following  early  completion  of a major
development  program begun in July 1994. Montana Resources,  the El Paso smelter
and the Amarillo refinery also set copper production records in 1995.

The  accelerated  development  program at Ray which was originally  scheduled to
take 15 months,  was  completed  four  months  early.  The  development  program
provided additional working faces in the mine and restored operating flexibility
lost as a result of the accumulation of water from unusually heavy rains in late
1992 and early 1993. During the program, ore production was curtailed as new and
existing mining  equipment was assigned to mine  development.  Operations at the
older,  higher-cost sections of the Hayden mill were suspended.  Full production
was restored by late May.  During the  curtailment,  a $5 million  modernization
program was initiated at the Hayden mill to increase productivity.

New copper  production  projects now underway at other Arizona mining operations
will further  increase  production  in 1996 and 1997.  At Mission,  declines are
being driven from the bottom of the open-pit mine to permit  underground  mining
of an estimated  5.1 million  tons of ore with an average  copper grade of 2.1%.
This ore reserve is 400 feet below the current Mission pit and is mostly outside
the final  open-pit  mine  plan.  Production  from the  underground  reserve  is
expected to begin in mid-1996 and result in an additional  28 million  pounds of
copper per year.

Construction  of a new solvent  extraction/electrowinning  (SX/EW)  plant at the
Company's Silver Bell mine is now underway.  The plant is expected to produce 36
million  pounds of refined  copper  cathode  per year when  operations  begin in
mid-1997.  Silver  Bell was  Asarco's  first  open-pit  copper  mine  and  began
operation in 1954.  Since mining and milling  operations were suspended in 1984,
the mine has produced a small  amount of leached  precipitate  copper.  In 1995,
production   totaled  7  million  pounds.  The  new  SX/EW  facility  will  cost
approximately  $70 million and is being  developed in partnership  with Mitsui &
Co., Ltd., which purchased a 25% interest in early 1996.

New, larger and more efficient mining equipment is being acquired for use at the
Ray and Mission mines to increase productivity and lower costs. At Mission, five
trucks,  each capable of  transporting  240 tons have  already been  acquired to
replace  smaller trucks now in use. A new  46-cubic-yard  shovel was also put in
service  at  Mission.  Orders  were  placed  for  delivery  in 1996,  for  three
56-cubic-yard  shovels,  capable of loading the 240-ton  trucks in three passes.
Two are for Mission and one is for Ray. The smaller  shovels and trucks replaced
by this new equipment will be used in the new operation at Silver Bell.



<PAGE>
A3

Improvements in preventive  maintenance  programs for shovels,  trucks and other
mining equipment at the Ray mine have increased the operational  availability of
equipment and reduced costs.  Similar programs are now being introduced in other
operating areas.

The El Paso, Texas smelter which utilizes new CONTOP technology  operated at 96%
of design capacity in 1995.  Improvements in operations at El Paso resulted from
modifications  made by the Company to the CONTOP  design in late 1993.  Improved
maintenance practices also contributed to the increased operational availability
of the CONTOP furnace.  Acid plant equipment at El Paso is now being upgraded to
improve throughput and product quality and to lower costs.

In  1995,   ISO-9002   certification  was  extended  to  Amarillo's  copper  rod
manufacturing  process and to its precious metals  electrorefining  process.  In
late 1994, Amarillo had become the first copper refinery in the United States to
receive ISO-9002  certification for its cathode production process. In 1995, the
refinery produced a record 483,365 tons of cathode copper.

At the Santa  Cruz  In-Situ  Copper  Mining  Research  Project  in Casa  Grande,
Arizona,  a pilot SX/EW plant was completed in 1995 following receipt of permits
in late 1994.  Santa Cruz is a joint  venture  50%-owned  with  Freeport-McMoRan
Copper  & Gold  Co.  and  managed  by  Asarco.  The  joint  venture  owns a deep
mineralized  ore deposit  estimated  to contain one billion tons of .55% soluble
copper.  The ore body is too deep to mine from the  surface and too low grade to
be economically mined from underground.  The project,  which has been funded 25%
by the partners and 75% by the U.S. Bureau of Mines,  involves  research into an
alternative  method of recovering  copper from the deep mineralized zone through
injection  and recovery of leach  solutions at the  surface.  The project  could
result  in  a  new,  low-cost  and   environmentally   superior  ore  extraction
technology.  Injection  of leach  solutions  began  early in 1996 and  will,  if
successful,  result  in  production  of  refined  copper  from the  experimental
facility later in the year.

In May  1995,  Asarco  and  the  unions  representing  employees  at five of the
Company's  domestic  copper  properties   ratified  new  three-year   collective
bargaining  agreements six weeks before expiration of the prior agreements.  The
new agreements,  which extend to 1998,  cover 1,900 employees at the Mission and
Silver Bell mines,  the Hayden and El Paso  smelters and the Amarillo  refinery.
Labor and management cooperative programs,  which have been operating since late
1993 at Ray, were extended to all copper  operations in the new labor  contract.
These programs develop  production and spending  targets and job-related  goals,
which are set and monitored  cooperatively by labor and management employees. At
Ray, these programs have resulted in increased production, lower costs, improved
quality control and improved worker health and safety. Also at Ray, in late 1995
a gainsharing program with employees was instituted.


Southern Peru Copper Corporation

As a result of acquiring an additional  10.7 % interest in SPCC in 1995,  Asarco
began consolidating SPCC in its financial  statements effective January 1, 1995.
In November  1995,  SPCC offered to exchange new common  shares for labor shares
issued by its Peruvian  Branch to workers  under prior law in Peru.  These labor
shares,  which  are  traded  on the Lima  Stock  Exchange,  represented  a 17.3%
interest  in  the  Peruvian  Branch  which  comprises  substantially  all of the
operations  of SPCC in Peru.  The offer ended on December 29, 1995 with 80.8% of
the labor shares  tendered.  SPCC now owns 96.7% of the Branch.  Asarco's equity
interest in SPCC is 54.0% and its voting  interest is 61.0%.  Asarco's  economic
interest in the operations of SPCC, net of the remaining  labor share  interest,
is 52.3%.  Asarco owns Class A Common  Stock which is entitled to five votes per
share and the newly  issued  common  shares are  entitled to one vote per share.
Asarco elects 8 of SPCC's 15 directors. The common shares are listed on both the
New York Stock Exchange and the Lima Stock Exchange.



<PAGE>
A4

Economic  conditions in Peru have continued the improvement  begun in 1990. As a
result,  SPCC has been  able to make the  investments  necessary  to  accomplish
operating  improvements which have led to the best operating  performance in its
40 year history.  In 1995,  SPCC produced over 557 million pounds of copper from
its mines and it completed most of the $445 million  modernization and expansion
program begun in 1992. The program  included $65 million for the purchase of the
Ilo  refinery,  privatized  by the Peruvian  government,  $105 million for a new
SX/EW operation,  $120 million for new equipment and $135 million for a new acid
plant  at  the  Ilo  smelter,   a  tailings   impoundment   facility  and  other
environmental projects.

With  the  acquisition  of the Ilo  refinery  in May  1994  SPCC  completed  the
integration of its copper  operations from mining through  production of refined
copper  cathodes.  Investments  are now being made at the  refinery  to increase
refined copper production from the record 216,200 tons produced in 1995.

SPCC's new SX/EW  facility  produces  refined  copper  cathodes  from  solutions
leached  from  mostly low grade ores  stockpiled  at the  Toquepala  and Cuajone
mines.  The plant  began  operation  in  November  and is expected to produce 80
million pounds of copper annually at a very low cost.

A new acid plant at SPCC's Ilo smelter became operational in October.  The plant
is expected to produce  approximately 175,000 tons of sulfuric acid annually and
reduce  emissions from the smelter by 18%. SPCC has also instituted  programs to
further control emissions at the smelter.

An ongoing drilling program has identified  significant  additional ore reserves
at SPCC. Proven and probable ore reserves have been increased 69% to 2.0 billion
tons containing  22.3 billion pounds of copper.  The evaluation of an additional
1.0  billion  tons of  mineralized  material  is  expected  to be  completed  by
mid-1996.

As a  result  of the  additional  ore  reserves,  SPCC has  begun  to study  the
expansion of mining operations at both Toquepala and Cuajone and of smelting and
refining  facilities  at  Ilo.  Such  a  program  is  expected  to  involve  the
modernization  or replacement of the existing  smelter with a new flash smelting
technology which would reduce sulfur emissions to world standards. Any expansion
program will require  significant  capital investment over a number of years and
will be subject to obtaining the required financing.


Lead, Zinc, and Silver Businesses

Asarco is a major  producer of lead and zinc in the U.S.  The  Company  produces
silver as a by-product of its copper, lead and zinc mining operations.  It has a
50%  interest in Silver  Valley  Resources  which is  reopening  its two primary
silver mines.


Lead

The primary  domestic uses of lead are for automotive  and industrial  batteries
and, to a lesser extent,  for lead oxide for glass,  solder and other industrial
uses.  A  substantial  portion of  Asarco's  lead  sales are made  under  annual
contracts to industrial users.

The Company has two different lead businesses,  its Missouri lead operations and
its custom lead smelting operation in Montana.

Asarco's  Missouri lead business  includes two mines and a smelter and refinery.
It is among  the  world's  lowest  cost  producers  of lead.  The West  Fork and
Sweetwater  mines  provide all of the feed for the Glover  smelter and refinery.
Zinc is an important  co-product of the mining  operations and record production
of 23,100 tons of zinc was achieved in 1995. Gainsharing programs with employees
were instituted in 1995 to further enhance  productivity and lower costs.  These
innovative programs share with employees the benefits realized from cost savings
and production improvements identified by joint labor and management teams.



<PAGE>
A5

Asarco's  custom lead  business  includes the East Helena,  Montana  smelter and
Omaha, Nebraska refinery. This business depends upon precious metal-bearing lead
concentrates purchased from mines located in the western United States and Latin
America. Due to low prices for lead, gold and silver,  concentrates have been in
short  supply and the custom  lead  business  has not been  profitable.  At East
Helena,  the  Company  is  making  the  necessary  investments  to meet  current
environmental  standards.  At Omaha,  however,  the Company  concluded  that the
further  investment of an additional  $40 million for  environmental  compliance
could not be  economically  justified and lead refining  operations at the plant
will be terminated in 1996. The Company recorded a $51 million  after-tax charge
to earnings in 1995 related to the closure,  $34.3 million for shutdown and site
remediation costs and $16.7 million to write-off the remaining book value of the
plant.  The Company will, in the future,  sell lead bullion produced at the East
Helena, Montana smelter to refineries located outside of the U.S.

The Company is conducting research on a lead electrowinning  process which could
produce  high  quality  refined  lead from lead  bullion  at lower  capital  and
operating costs. A pilot plant has been built,  but a commercial  technology has
not yet been developed.

The Company has a 60%  interest  in and manages the  Leadville  mine in Colorado
which produces lead, zinc and silver.


Zinc

Zinc is primarily used in the United States to make  galvanized  metal products,
zinc-based  alloys,  brass  products,  zinc  oxide,  rolled  zinc and for  other
industrial  uses.  The  Company's  zinc  production  is  sold  in  the  form  of
concentrates under contracts of one to three years' duration.

The Company mines zinc at four mines near Knoxville, Tennessee and also produces
zinc as a co-product  at its lead mines in Missouri.  The  Tennessee  mines have
low-grade ores by world standards and while  production rates increased in 1995,
the mines operated at a loss at the prevailing zinc price.  Further improvements
in these  operations are expected in 1996 but it will take an improvement in the
zinc market to achieve satisfactory earnings at Tennessee.


Silver

The  principal  uses for  silver  in the  United  States  are for  photographic,
electrical and electronic  products and, to a lesser extent,  brazing alloys and
solder, jewelry, coinage, silverware and catalysts. Silver is sold under monthly
contracts or in spot sales principally to industrial users.

In 1995,  Asarco and Coeur d'Alene Mines Corporation  established  Silver Valley
Resources,  a 50/50 owned company,  to consolidate  both companies' Idaho silver
properties,  including  the Coeur and  Galena  mines.  Silver  Valley  Resources
announced  in early  1996  that it will  reopen  the mines to  capitalize  on an
improving  silver market and increased  ore reserves.  Production  will begin in
June  1996.  Both  mines  have been on  standby  due to low  silver  prices.  An
exploration  program  begun in March  1995  resulted  in a 34%  increase  in ore
reserves  based on contained  silver.  When  production  reaches full  capacity,
Silver Valley Resources  expects to produce about 3 million ounces of silver per
year.

The Company also owns a 75%  interest in the Troy,  Montana  silver-copper  mine
which is currently  on standby.  The Company  plans to restart  Troy  operations
while it develops the nearby Rock Creek  silver-copper  deposit.  The Rock Creek
deposit has been in the permitting  process for nearly nine years. The Troy mine
has remaining  reserves adequate for three years of production and could produce
2.8 million ounces of silver a year.



<PAGE>
A6

In 1995, the Company's beneficial interest in mined silver production was nearly
7.3 million  ounces.  Most of this silver was  produced as a  by-product  of the
Company's copper mining operations.

In August  1995,  the Company sold its 80%  interest in the  Quiruvilca  mine in
northern  Peru to Pan  American  Silver  Corporation  for 500,000  shares of Pan
American  Silver  common  stock,  500,000  warrants  and a royalty  interest  in
Quiruvilca.  Asarco has previously sold other  properties to Pan American Silver
for stock and now owns 9.6% of the company.


Specialty Chemicals and Aggregates

In recent  years  Asarco has sought to develop  businesses  which will provide a
growing source of earnings from non-metals operations.

Enthone-OMI,  a worldwide producer of specialty chemicals,  manufactures coating
systems for plastics and metals. Enthone-OMI's earnings grew by 44% in 1995 to a
record $23.0 million compared with $16.0 million in 1994. Enthone-OMI's strategy
has been to focus on the high-growth  electronics  market,  while  consolidating
operating  facilities,  reducing  operating costs and improving  efficiency.  It
invests  heavily in research and  development.  Enthone-OMI  completed  ISO-9002
registration  of 11 facilities  during the year.  The company also plans a major
expansion of its  operations in Singapore,  which will serve as a technology and
marketing center for the Pacific Rim market.

American  Limestone  Company  produces  construction   aggregates,   ready-mixed
concrete and agricultural limestone.  American Limestone had record earnings for
the third  consecutive  year in 1995 due to  increased  demand for  construction
materials and cost reductions.  Earnings in 1995 were $8.0 million compared with
$7.0 million in 1994.


Exploration

Asarco has an active  international  exploration  effort  which  emphasizes  the
identification  and  acquisition  of defined  reserves and advanced  exploration
projects.  Commodities of principal interest are copper,  gold, silver, lead and
zinc. The investment  climate in many foreign countries where modern exploration
techniques  have not  previously  been used has become  increasingly  favorable.
Approximately  80% of the  exploration  budget is spent  outside  of the  United
States.  During 1995,  exploration  activities  were conducted in Mexico,  Peru,
Chile,  Bolivia and French Guiana.  Expenditures,  including those of SPCC, were
$14.7 million.

Major  exploration  projects  include the Boti gold  prospect  in the  Algamarca
district of northern  Peru and the  evaluation  of the Saint Elie and other gold
prospects in French  Guiana.  At Boti, a large low grade gold  resource has been
discovered  and current  efforts are  directed at finding  zones of better grade
material.  At Saint Elie, the Company is  participating  in a joint venture with
Guyanor  Resources  to evaluate  the source area of large  historic  placer gold
production.  Saint  Elie and four  other  properties  in French  Guiana  will be
drilled in 1996. The Company also conducts copper  exploration in Chile and Peru
and explores for lead and zinc to expand  reserves at its operations in Missouri
and Tennessee.

Following  completion  of a  feasibility  study of the Aginskoe  gold deposit in
Kamchatka,  Russia,  the  Company  sold its 25% share of the  project to Kinross
U.S.A. for $4 million.





<PAGE>
A7

Environment Safety and Health

Asarco recognizes and believes that all operations and activities of the Company
should be conducted  responsibly  and in a manner designed to protect the health
and safety of its  employees,  its  customers,  the public and the  environment.
Asarco's  operations  interact  with  the  environment  daily.  The  Company  is
committed to the responsible management of natural resources.

Providing  employees with a safe workplace is a primary objective of Asarco. The
Company was one of the first in the United States to have an occupational health
program.  Over the years,  Asarco has  developed  a number of  programs  and new
technologies to protect workers and the communities in which we operate. Company
mines have won the  prestigious  Sentinels  of Safety  award  from the  National
Mining  Association  and the Office of Mine Safety three times in the last seven
years. At Asarco's lead smelters and refineries,  employees are working together
to reduce personal  exposures to lead in the work place.  The Company also works
with local  communities to educate residents about the risks to children of lead
exposure and to identify sources of exposure in the community.

A commitment to health,  safety and the environment requires constant attention.
All U.S.  operations are visited by evaluation  teams to review  compliance with
the  Company's  environmental,  safety  and  health  standards.  Over 200 Asarco
employees  have received  specialized  training in order to participate in these
programs.


Associated Company Investments

Asarco holds important  ownership interests in two of the world's largest mining
companies and the Company has recently  undertaken  efforts to improve the value
of these investments for Asarco shareholders.


MIM Holdings Limited

Asarco owns a 15.1% interest in M.I.M.  Holdings  Limited (MIM) of Australia,  a
major producer of copper,  lead, zinc,  silver,  gold and coal. In January 1995,
Asarco  exercised its right to appoint two directors to MIM's board of directors
and has been  actively  working  with  MIM's  board  to  improve  the  Company's
operating  performance and its value to shareholders.  At December 31, 1995, the
value of Asarco's investment in MIM was $336 million or $7.89 per Asarco share.

The MIM board  appointed a new chief  executive  officer in April  1995.  MIM is
divesting  non-core assets,  focusing on improving  performance at its Mount Isa
operations and undertaking new mining projects.

MIM reported a net loss of A$216.1 million in its most recent fiscal year ending
June 30,  1995 due in part to the effects of labor  disruptions  and to abnormal
charges of A$160.4 million mainly related to the write-down of asset values.

MIM is currently developing two major mining projects.  The Bajo de la Alumbrera
copper  gold  mine in  Argentina  is 50%  owned  and is  managed  by  MIM.  When
construction  is completed in late 1997, the mine is expected to produce 198,000
tons of copper and 640,000 ounces of gold per year in concentrates.  MIM is also
developing  the Ernest Henry mine,  which is a copper gold deposit  located near
Mount Isa.  When  completed,  the mine is  expected to produce  105,000  tons of
copper and 120,000 ounces of gold per year in concentrates.

Asarco  received $9.2 million in dividends  from MIM in 1995 and $9.3 million in
1994.



<PAGE>
A8

Grupo Mexico, S.A. de C.V.

Asarco holds a 23.6% interest in Grupo Mexico,  the largest publicly held mining
company in Mexico.  Grupo Mexico owns 13 mines and nine metallurgical plants and
is a major producer of copper,  lead, zinc, silver,  molybdenum and gold. Due to
the higher copper price and benefits from the  devaluation  of the Mexican peso,
Grupo Mexico reported record profits in 1995 of US$561.4 million,  compared with
a loss of US$163.7 million in 1994. Grupo Mexico  benefited  substantially  from
the peso  devaluation  as its sales are in  dollars  and its costs are mainly in
pesos.

Grupo  Mexico pays no dividend  and the  Company  records no earnings  from this
investment.  In order to  realize  current  value for Asarco  shareholders,  the
Company will seek to sell at least part of its holdings. Under a 1994 agreement,
Asarco will be free from  restrictions on the sale of the majority of its shares
in August  1996.  Asarco  holdings in Grupo Mexico are valued at $427 million at
December 31, 1995, or $10.03 per Asarco share.


                                BACKLOG OF ORDERS

Substantially  all of the  Company's  metal  production  is  sold  under  annual
contracts. To the extent not sold under annual contracts, production can be sold
on  commodities  exchanges  or to  merchants  or consumers on a spot sale basis.
Sales values cannot be  determined  until the sale is priced based on prevailing
commodity prices at the time the price is fixed under the terms of the contract.
The backlog for other product classes and services is not material.


                             COMPETITIVE CONDITIONS

In the  United  States  and  abroad,  Asarco  and  its  foreign  nonconsolidated
associated  companies are subject to  competition  from other  nonferrous  metal
producers. Asarco's metal products also compete with other materials,  including
aluminum, stainless steel, plastics, glass and wood.

Competition  in nonferrous  metals is  principally on a price and service basis,
with price being by far the most  important  consideration  when supplies of the
commodities involved are ample. In construction aggregates,  geographic location
of facilities in relation to the point of consumption,  and price are by far the
most important  competitive  factors.  In specialty  chemicals,  Asarco competes
against a  substantial  number of large and small  companies  both in the United
States and overseas.

                                    EMPLOYEES

At December 31, 1995,  Asarco employed about 7,200 persons,  of whom about 3,500
were covered by contracts  with various  unions,  most of which were  affiliated
with the  AFL-CIO.  At December  31,  1995 SPCC  employed  about 5,000  persons,
substantially all of whom were covered by labor contracts.


                                 ENERGY MATTERS

Asarco's energy  requirements are met from a variety of sources,  including fuel
oil, diesel fuel,  gasoline,  natural gas, coke and electric power. Asarco has a
large number of contracts of varying  duration for its energy  needs,  typically
negotiated  on an  individual  basis  from time to time.  Generally,  substitute
sources are available except where  requirements are guaranteed by local utility
companies.  No reductions or interruptions  of any operations  because of energy
shortages were experienced in 1995.



<PAGE>
A9

                    ENVIRONMENTAL, SAFETY AND HEALTH MATTERS

Asarco's operations are subject to environmental  regulation by various federal,
state, local, and foreign  governments.  Asarco's principal  involvement in this
area concerns  compliance by its existing and former operations with federal and
state air and water  quality  and solid and  hazardous  waste  regulations.  The
Company  believes that its operations  are currently in  substantial  compliance
with applicable environmental laws and regulations.

The Company anticipates spending $88.6 million for environmental control capital
expenditures at its operating units in 1996.  Capital  expenditures by Asarco at
its  operating   mines,   smelters  and  refineries  in  order  to  comply  with
environmental  standards  in the past  three  years  have  been  (in  millions):
1995-$92.9;  1994-$22.6;  1993-$21.3.  Recurring costs  associated with managing
hazardous  substances  and  pollution  in ongoing  operations  before  taxes and
depreciation,  but including  interest on  environmental  improvement  bonds and
other debt  incurred  for  environmental  control  facilities,  reduced  pre-tax
earnings by (in millions): 1995-$103; 1994-$88; 1993-$87.

Environmental  matters,  including a  discussion  of the  Company's  reserve for
closed plants and  environmental  costs, are set forth in the  Contingencies and
Litigation Note 8 to the Financial Statements and in Management's Discussion and
Analysis of Operations and Financial  Condition and are  incorporated  herein by
reference.

On March 24, 1995, the  Environmental  Protection Agency ("EPA") issued a Record
of Decision ("ROD") for the Company's Tacoma smelter site in Tacoma, Washington,
under the Comprehensive  Environmental Response,  Compensation and Liability Act
of 1980 ("CERCLA" or "Superfund").  The smelter site is part of the Commencement
Bay Superfund  site.  The ROD calls for  excavation  and disposal of soils,  and
demolition debris in an on-site containment facility, capping of the site with a
low  permeability  cap,  demolition of remaining  buildings,  replacement of the
surface water drainage system and diversion of groundwater and off-site  surface
water.  The  remediation  selected in the ROD is consistent with an agreement in
principle  entered  into between the  Company,  the City of Tacoma,  the Town of
Ruston and the Metropolitan Park District concerning a master redevelopment plan
for the site.  The Company has signed a Consent Decree with EPA to carry out the
ROD.  Finalization  of  the  Consent  Decree  requires  execution  by  the  U.S.
government and court approval.

At Ruston, Washington,  also part of the Commencement Bay Superfund site, on May
2, 1995, a Consent  Decree between the Company and EPA was entered by the United
States  District  Court in Tacoma,  Washington,  pursuant  to which the  Company
agreed to sample and, if necessary,  remediate the residential  area surrounding
the Tacoma smelter site. To date,  approximately  174 homes and 26 rights-of-way
have been remediated.

Also with  respect to the  Commencement  Bay  Superfund  site,  during  1995 the
Company  completed site  stabilization  and demolition  activities at the Tacoma
smelter site which were undertaken pursuant to a May 1992 Consent Decree between
the Company and EPA.

In November 1994, at the Bunker Hill  Superfund  site in Idaho,  the Company and
two other mining companies entered into a Consent Decree with the EPA, which was
approved by the United  States  District  Court.  Pursuant  to the  Decree,  the
companies will remediate  approximately 1,350 residential yards over a period of
approximately seven years. In addition, in 1995 the Company,  along with several
other  potentially  responsible  parties  ("PRPs"),  received a notice  from the
Federal Trustees of their intent to file suit for natural resource damages under
CERCLA.



<PAGE>
A10

On March 15,  1994,  a  citizens'  suit was filed in federal  district  court in
Omaha,  Nebraska claiming the Company was illegally  discharging untreated water
from its Omaha plant without a National Pollution  Discharge  Elimination System
("NPDES")  permit.  The suit sought to enjoin further  discharges from the Omaha
lead  refinery,  penalties  of up  to  $25,000  per  day  for  past  and  future
discharges,  and costs and fees.  On March 31, 1994,  the EPA filed suit against
the Company involving the same allegations. The cases were consolidated in Omaha
federal  district court. On January 5, 1996, the court approved a Consent Decree
entered into between the Company and the Department of Justice.  Pursuant to the
Decree,  the Company has paid a $3.25  million  penalty and an  additional  $1.0
million for various studies and to acquire  properties to maintain or convert to
wetlands.  The Company  also agreed to build a water  treatment  plant under the
Decree  involving an estimated  cost of $4.0 million.  The Decree has terminated
all aspects of the  litigation  except for the fee  application by the citizens'
attorneys.

On March 7, 1995,  the Company  received a Clean Water Act 60-day notice for the
Troy mine from the Land and Water Fund of the  Rockies,  on behalf of its client
the Cabinet  Resource Group (the "Group").  On January 25, 1996, the Group filed
an action in  Federal  District  Court for the  District  of  Montana,  Missoula
Division,  seeking civil penalties and demanding that the Company obtain a Clean
Water Act discharge permit. The Company continues to discuss the matter with the
Group.

In August 1994 at the Leadville  Superfund  site in Colorado,  a Consent  Decree
with the EPA and other potentially responsible parties was entered by the United
States District Court.  The Consent Decree resolved many of the liability issues
at the site.  Final remedy selection must await the issuance of the ROD which is
expected  in 1996.  Prior to 1994 the  Company  had  substantially  completed  a
remediation  program of the Yak drainage tunnel at a cost of approximately $13.7
million.  Remaining  issues at Leadville will not be addressed for several years
when additional studies are completed.

In 1995 at the East Helena Superfund site in Montana,  the Company completed the
remediation  of  approximately  135 residences at a cost of  approximately  $3.0
million.  This brings the total number of properties  remediated to date to 460.
Additional  properties are expected to require remediation,  which together with
proposed community protection  measures,  is estimated to require an expenditure
of $2.0 million over the next five years.

In 1995 at the Globe  proposed  Superfund  site in Denver,  Colorado the Company
completed the  remediation of 74 properties,  including  residences,  commercial
properties and open spaces, at a cost of approximately  $4.1 million pursuant to
a Consent Decree and a settlement of a lawsuit  entered in 1993. This brings the
total number of properties  remediated to date to 232. Remediation has also been
commenced at the plant site itself. Remediation of additional properties and the
plant site will continue for the next several years.

In 1995,  the Company  completed and presented to the  Washington  Department of
Ecology a remedial  investigation  and feasibility study report of the Company's
former  smelter  site  in  Everett,  Washington.  It  is  anticipated  that  the
Department of Ecology will issue a cleanup action plan for the site during 1996.
During 1995,  the Company  continued  the purchase of  residences on or near the
former  smelter  site.  To  date,  the  Company  has  purchased  36  properties.
Litigation  with an adjacent  landowner has been stayed to enable the parties to
share  information and negotiate a settlement of site  responsibility at a later
date.

With respect to a Superfund  site  located in Tar Creek,  Oklahoma for which the
Company  entered  into a  Consent  Decree in 1989 and  settled  with the EPA for
$479,000 for reimbursement of EPA response costs, the Company received a Special
Notice from the EPA on November 17, 1995 invoking the  provisions of the Consent
Decree  permitting  further  remedial  action under  certain  circumstances  and
requesting  that the Company and other PRP's enter into good faith  negotiations
to conduct studies and design remedial actions at the site.



<PAGE>
A11

The Company and certain of its subsidiaries  are cooperating with  environmental
authorities  to undertake  studies of certain  other sites and  remediate  where
necessary.

Prior  to 1995,  the  Company  and  certain  subsidiaries  received  notices  of
potential  liability  pursuant  to  CERCLA  from  the  EPA or  federal  agencies
regarding 14 sites in eight states.  Further, prior to 1995 the Company received
notices  from  state  agencies  regarding  five  other  sites  in  four  states.
Significant  developments  at certain of these sites  during 1995 are  described
above.  Also, the Company has received  notification  of potential  liability or
information  requests from EPA and state agencies  regarding various other sites
where the Company's liability is considered minor.

In 1993, the State of Missouri  Department of Natural  Resources issued a Notice
of Violation and filed a petition in Missouri state court alleging violations of
the NPDES  permit for the  Company's  West Fork Mine.  On February 8, 1996,  the
court  entered  a consent  judgment  resolving  this  matter,  with the  Company
agreeing to pay a civil penalty of $1.7 million and  construct a new  wastewater
treatment facility.

Other environmental matters involving potential civil penalties are as follows:

         1) In 1992,  the United  States  Department of Justice on behalf of the
EPA  notified  the Company that it intends to sue seeking  civil  penalties  for
alleged  violation of the Company's water discharge  permit at the Company's Ray
Complex.  Under the Clean  Water Act,  civil  penalties  may be sought for up to
$25,000 per day for each violation.  The Company is negotiating with EPA and the
Department of Justice to resolve this matter.

         2) In  January  1994,  the  Company  received  a  notice  from  the EPA
regarding  alleged  violations  of the  Resource  Conservation  and Recovery Act
("RCRA") at its smelter in El Paso, Texas. The EPA is seeking a civil penalty of
$140,400.  The  citation  relates to  sand-blasting  material  left on site by a
contractor prior to May 1993. The Company is cooperating with the EPA to resolve
this matter and has demanded that the  Contractor  pay the fine and  remediation
costs.

         3) In July and August 1994, the EPA notified the Montana  Department of
Health and  Environmental  Sciences that it considers the Company's  East Helena
plant to be in violation of the federal Clean Water Act because of  unauthorized
discharges  into a nearby creek.  The Company applied for a NPDES permit in 1994
and is in  discussions  with the EPA and the  State of  Montana  regarding  this
matter.

         4) In 1992 and 1993,  the Company's  Glover,  Missouri lead smelter and
refinery  received  several Notices of Violation for monitored levels of lead in
excess of the ambient air  standard.  Additionally,  the Missouri  Department of
Natural  Resources  ordered the Company to conduct stack testing at the plant to
determine   whether  the  plant  is  in  compliance  with  applicable   emission
regulations.  The Company has investigated  emission levels and has been working
with the  Missouri  Department  of  Natural  Resources  to  develop  a new State
Implementation  Plan ("SIP") for lead.  In January 1995,  the Company's  control
strategy for attainment of the SIP was submitted.  State approval is expected in
mid-1996.  The SIP  will be  implemented  in  1996 at an  estimated  cost of $18
million.

"SIPs"  designed to achieve  compliance  by January 6, 1997 with the EPA ambient
air quality standard for lead of 1.5 micrograms per cubic meter of air have been
developed in each state in which  Asarco has a lead  smelter or refinery.  These
plans will require the  construction  of  additional  controls at Asarco's  East
Helena and Glover (see above)  facilities.  The East Helena SIP was  approved by
the State of  Montana  on August 4, 1995 and has been  submitted  to the EPA for
final approval.

The Company's  Omaha lead  refinery has been issued a complaint  and  compliance
order by the Nebraska Department of Environmental Quality for exceeding the lead
standard.  Asarco proposes to satisfy the ambient air quality standards for lead
at its  Omaha  Plant  by  production  limitations  and  corresponding  emissions
reductions  which  are  anticipated  to be  achieved  by the  cessation  of lead
refining operations.



<PAGE>
A12

The Company is studying means of compliance with RCRA through process changes at
its facilities, where feasible, to manage the wastes not presently excluded from
regulation.   Mine  tailings,   slag  and  slag  tailings  from  primary  copper
processing,  calcium  sulfate  wastewater  treatment  plant  sludge from primary
copper  processing,  and slag from  primary  lead  processing  at the  Company's
operations are excluded from RCRA regulation.  The Company is a party to a court
approved Consent Decree with the Missouri  Department of Natural  Resources,  in
which the Company has agreed to implement  certain  process  changes and conduct
various   sampling  and  testing  plans  to  remain  in  compliance   with  RCRA
requirements at its Glover smelter.

Asarco is subject to federal and state legislation and regulations pertaining to
plant and mine safety and health conditions,  including the Occupational  Safety
and  Health  Act of 1970 and the  federal  Mine  Safety  and Health Act of 1977.
Asarco has made, and is likely to continue to make,  expenditures to comply with
such legislation and regulations.

                              CAUTIONARY STATEMENT

Statements in this report  regarding  expected  commencement  dates of mining or
metal production  operations,  projected  quantities of future metal production,
and anticipated production rates, operating efficiencies, costs and expenditures
are forward-looking statements. Actual results could differ materially depending
upon the availability of materials, equipment, required permits or approvals and
financing, the occurrence of unusual weather or operating conditions, lower than
expected  ore grades or the  failure of  equipment  or  processes  to operate in
accordance with  specifications.  Results of operations are directly affected by
metals prices on commodity exchanges which can be volatile.




<PAGE>
A13

Item 2. Properties

ASARCO Worldwide Operations

METALS

COPPER

MINES(1)
Mission;  Sahuarita, Arizona
Ray; Hayden, Arizona
Silver Bell; Silver Bell, Arizona
Montana Resources; Butte, Montana

SMELTERS AND REFINERIES
Amarillo, Texas (Refinery)
  (Also Selenium, Tellurium)
El Paso, Texas (Smelter)
  (Also Sulfuric Acid)
Hayden, Arizona (Smelter)
  (Also Sulfuric Acid)

SOUTHERN PERU COPPER CORPORATION (1)
Cuajone mine, Peru 
Toquepala mine, Peru
Ilo Smelter and Refinery, Peru


MOLYBDENUM

MINES (1)
Mission; Sahuarita, Arizona
Montana Resources; Butte Montana

SOUTHERN PERU COPPER CORPORATION (1)
Cuajone, Peru
Toquepala, Peru


LEAD

MINES (1)
Leadville; Leadville, Colorado
Sweetwater; Reynolds County, Missouri
West Fork; Reynolds County, Missouri

SMELTERS AND REFINERIES
East Helena, Montana (Smelter)
  (Also Sulfuric Acid)
Glover, Missouri (Smelter, Refinery)
Omaha, Nebraska (Refinery)
  (Also Bismuth)


ZINC

MINES (1)
Coy; Jefferson County, Tennessee
Immel;  Knox County, Tennessee
New Market; Jefferson County, Tennessee
Young;  Jefferson County, Tennessee
Leadville; Leadville, Colorado




<PAGE>
A14

SILVER

MINES (1)
Silver Valley Resources
  Coeur; Wallace, Idaho
  Galena; Wallace, Idaho
Troy(2); Troy, Montana


PRECIOUS METALS REFINERY
Amarillo, Texas
  (Silver and Gold, Palladium and Platinum)


SPECIALTY CHEMICALS
Enthone-OMI
North America
  Long Beach, California
  Bridgeview, Illinois
  West Haven, Connecticut
  Orange, Connecticut
  Warren, Michigan
  Toronto, Canada
  Mexico City, Mexico

Europe
  Barcelona, Spain
  s-Hertogenbosch, Netherlands
  Woking, United Kingdom
  Milan, Italy
  Marne-La-Vallee, France
  Brunn Am Gebirge, Austria
  Erkrath, Germany
  Norrkoping, Sweden
  Geneva, Switzerland

Pacific Rim
  Melbourne, Australia
  Kowloon, Hong Kong
  Singapore
  Shen Zhen, People's Republic
    of China
  Yokohama, Japan
  Taipei, Taiwan


AGGREGATES
American Limestone Company, Inc.
  (Construction Aggregates,
   Concrete, Agricultural Limestone)
  Knoxville, Tennessee
  Tri-Cities, Tennessee
  Nashville, Tennessee
  Abingdon, Virginia


ENVIRONMENTAL SERVICES
Encycle/Texas, Inc.
  Corpus Christi, Texas
Hydrometrics, Inc.
  Helena, Montana




<PAGE>
A15

OTHER

Antimony Oxide
Omaha, Nebraska

High Purity Metals
Denver, Colorado


INVESTMENTS

M.I.M. Holdings Limited (15.1%)
Ten mines and eight metallurgical
  plants in Australia, South America
  and Europe, including:
  Mount Isa, MacArthur River
  Bajo de la Alumbrera
  and Ernest Henry
  (Copper, Lead, Zinc, Silver, Gold,
   Coal, Coke, Oil and Gas)

Grupo Mexico, S.A. de C.V. (23.6%)
Thirteen mines and nine metallurgical
  plants throughout Mexico,
  including: La Caridad and Cananea
  (Copper, Lead, Zinc, Silver, Gold,
  Coal, Coke, Fluorspar, Sulfuric Acid)

(1)   Interest in these mines is shown in Mineral Reserves tables starting
      on page A18
(2)   On standby

(Percent ownership of companies shown in parentheses)




<PAGE>
A16

Southern Peru Copper Corporation

SPCC  operates  two open pit mines  under  concessions  granted by the  Peruvian
government.

Silver Valley Resources

In 1995,  Asarco and Coeur d'Alene Mines Corporation  established  Silver Valley
Resources,  a  corporation  owned 50% by each,  to  consolidate  the  companies'
interest in the Coeur and Galena silver mines in Idaho. While the Coeur mine was
temporarily  shut down in 1991 and the Galena mine was temporarily  shut down in
1992,  both mines will reopen,  with production to begin in June 1996. In Silver
Valley  Resources  (50%),  Asarco has an equity interest in profits or losses in
proportion to the related ownership interest.

Leadville

Leadville (60.0%) is operated by Asarco under a joint venture agreement.  Asarco
and its joint  venture  partner share  operating  results in proportion to their
respective ownership interests,  except that Asarco bears 100% of losses, if any
in excess of cumulative profits generated since October 1991.

Troy

Troy is operated by Asarco under a lease  agreement.  Asarco  retains 75% of net
proceeds after operating expenses but before depletion,  depreciation and income
taxes.  The Troy mine was temporarily  shut down commencing in April 1993 due to
depressed silver prices.

Mission

A portion of the mine is held under  long-term  leases in which the lessors have
retained a royalty interest.

West Fork

A portion  of the mine is held under a  long-term  lease in which the lessor has
retained a royalty interest.

Investments

Grupo Mexico, S.A. de C.V., a 23.6% owned associated company,  operates thirteen
mines under concessions granted by the Mexican government.


<PAGE>
A17

The following production information is provided:

<TABLE>
<CAPTION>
MILLS                                        1995                               1994                               1993
-----                                        ----                               ----                               ----

                                                    Avg Mill                         Avg Mill                            Avg Mill
                                  Ore Milled        Recovery       Ore Milled      Recovery Rate      Ore Milled      Recovery Rate
                                     (000s            Rate         (000s Tons)          (%)          (000s Tons)           (%)
ASARCO                               Tons)            (%)           
                                  ----------        --------       -----------     -------------     -----------      -------------
<S>                             <C>              <C>             <C>              <C>              <C>               <C>

Domestic
  Mission                             14,803            83.6           15,722             81.4            13,973               83.8
  Mission South                        7,346            82.7            7,574             80.6             7,556               79.3
  Hayden
   Concentrator                        8,452            78.4            7,550             80.9             9,807               80.3
  Ray Concentrator                    13,216            82.7           12,143             82.3            11,594               84.6
  Montana Resources                   14,853            88.9           15,202             93.3            16,829               84.1
  Leadville                              219            91.4              223             89.7               219               91.2
  Sweetwater                           1,269            98.1            1,260             98.3             1,148               98.5
  West Fork                            1,005            97.7            1,009             97.8             1,018               98.0
  Tennessee                            3,206            92.6            3,193             92.9             2,850               92.1
  Troy                                     -               -                -                -               668               85.7
Other
  Quiruvilca (a)                         291            82.1              513             84.5               440               84.0
  Wiluna (b)                               -               -                -                -             1,033               83.0

SPCC

Toquepala                             16,937            89.0           15,737             88.8            15,835               87.6
Cuajone                               21,378            84.3           21,688             86.0            21,405               85.1

</TABLE>

Productive Capacity
<TABLE>
<CAPTION>
                                             Defined                                                       Defined
     Smelters                                Capacity (c)           Refineries                             Capacity (c)
                                             ------------           ----------                             ------------
     <S>                                  <C>                       <C>                                    <C>

     Anode Copper (tons)                                            Copper (tons)
       El Paso                                   115,000              Amarillo                                 483,000
       Hayden                                    175,000              Ray (SX-EW)                               40,000
                                                 -------
         Total                                   290,000              Ilo - SPCC (d)                           300,000
     Blister Copper (tons)                                            Toquepala (SX/EW)(d)                      40,000
                                                                                                                ------
       Ilo - SPCC (d)                            300,000                Total                                  863,000

     Lead Bullion (tons)                                            Lead (tons)
       East Helena                                75,000              Omaha                                    132,000
       Glover                                    130,000              Glover                                   130,000
                                                 -------                                                       -------
         Total                                   205,000                Total Lead                             262,000

                                                                    Silver (000s ounces)
                                                                      Amarillo                                  60,000
                                                                    Gold (ounces)
                                                                      Amarillo                                 600,000
</TABLE>

(a)      Asarco sold its 80% interest in Quiruvilca on August 31, 1995.

(b)      Wiluna is owned by  Asarco  Australia  Limited.  The  Company  sold its
         remaining interest in Asarco Australia Limited in January, 1994.

(c)      Asarco's estimate of actual capacity under normal operating  conditions
         with  allowance  for normal  downtime for repairs and  maintenance  and
         based on the  average  metal  content of input  material  for the three
         years  shown.  No  adjustment  is  made  for  shutdowns  or  production
         curtailments due to strikes or air quality emissions restraints.

(d)      Asarco's  beneficial  ownership of SPCC was 43.2%  through  April 1995,
         52.1% through December 1995, and 52.3% effective  December 31, 1995. In
         May 1994 SPCC purchased the Ilo refinery.


<PAGE>
A18

METAL PRODUCTION STATISTICS
<TABLE>
<CAPTION>
COPPER                                                                                   Average
                                                      Associated         Mineral         Mineral            Metal Production
                                         Asarco        Company's         Reserves        Content            Contained Metal
                                        Interest       Interest        (000s tons)         (%)                (000s tons)
                                                                                                              -----------
                                          (%)             (%)            12/31/95        12/31/95      1995         1994        1993
                                          ---             ---            --------        --------      ----         ----        ----
<S>                                  <C>            <C>             <C>                <C>          <C>          <C>          <C>
MINES
Domestic
   Mission                                    100                           500,359            .68    112.3        114.7       117.9
   Ray                                        100                         1,015,700            .62    130.2        107.3       122.7
   Ray (SX/EW)                                100                           198,300            .41     35.1         32.0        36.6
   Montana Resources                         49.9                           517,000            .34     56.4         56.1        47.2
   Silver Bell                             100(a)                           197,500            .39      3.4          3.6         3.6
   Troy                                        75                            11,996            .65        -            -         3.6
                                                                                                      -----        -----       -----
     Total Domestic                                                                                   337.4        313.7       331.6
                                                                                                      -----        -----       -----
SPCC                                      52.3(b)
   Toquepala-sulfide                                                        326,661            .80    128.1        111.8       115.1
                  -leachable                                                662,290            .21      5.0            -           -
   Cuajone-sulfide                                                          967,733            .72    145.5        156.0       150.4
             -leachable                                                      15,324           1.00        -            -           -
Other
   Quiruvilca-Peru                            (c)                                 -              -       .6          1.1         1.0
                                                                                                      -----        -----       -----
     Total                                                                                            279.2        268.9       266.5
                                                                                                      -----        -----       -----
     Total Production                                                                                 616.6        582.6       598.1
                                                                                                      -----        -----       -----
Asarco Beneficial Production
                                                                                                      449.2        402.3       422.4

SMELTERS
   El Paso                                    100                                                     126.5         98.0        91.9
   Hayden                                     100                                                     193.5        200.1       194.2
   SPCC - Ilo                             52.3(b)                                                     317.2        322.1       312.8
                                                                                                      -----        -----       -----
      Total                                                                                           637.2        620.2       598.9
                                                                                                      -----        -----       -----
Asarco Beneficial Production
                                                                                                      478.2        437.2       421.1

REFINERIES
  Amarillo                                    100                                                     483.4        460.6       460.0
  Ray (SX/EW)                                 100                                                      35.1         32.0        36.6
  SPCC - Ilo                              52.3(b)                                                     216.2        122.5           -
      Toquepala (SX/EW)                                                                                 5.0            -           -
                                                                                                      -----        -----       -----
   Total                                                                                              739.7        615.1       496.6
                                                                                                      -----        -----       -----
Asarco Beneficial Production
                                                                                                      628.8        545.5       496.6

ASSOCIATED COMPANIES
MIM                                          15.1
   Mount Isa                                                  100            75,178           3.46    137.9        204.9       173.9
   Ernest Henry                                                51           139,993           1.11        -            -           -
   Bajo de la Alumbrera                                        50           765,003            .51        -            -           -
GRUPO MEXICO                                 23.6                               (d)            (d)
   Base Metal Mines                                           100            75,728            .65     24.7         23.5        22.9
   Mexicana de Cobre                                         96.0           529,200            .53    179.0        178.6       174.6
                    leachable                                               190,700            .25     10.7            -           -
   Mexicana de Cananea                                       76.1         1,316,400            .61     89.5         48.9        84.7
                    leachable                                               628,500            .27     32.2         28.4           -

Asarco's & associated companies' share
of western world mine production
                                                                                                        12%          13%         13%
</TABLE>

(a)   Asarco's  interest in Silver Bell was 100% until February 1996 when Asarco
      sold a 25% interest to Mitsui & Co. Ltd.
(b)   Asarco's beneficial  ownership of SPCC was 43.2% through April 1995, 52.1%
      through December 1995, and 52.3% effective  December 31, 1995. In May 1994
      SPCC purchased the Ilo refinery.
(c)   Asarco sold its 80% interest in Quiruvilca on August 31, 1995.
(d)   Reflects  mineral  reserve data at December  31,  1994,  1995 data not yet
      available.

<PAGE>
A19

METAL PRODUCTION STATISTICS (continued)
<TABLE>
<CAPTION>
LEAD
                                                                                           Average
                                                      Associated         Mineral           Mineral          Metal Production
                                        Asarco        Company's         Reserves           Content           Contained Metal
                                       Interest        Interest        (000s tons)           (%)               (000s tons)
                                                                                                             -----------
                                          (%)            (%)            12/31/95          12/31/95      1995         1994       1993
                                          ---            ---            --------          --------      ----         ----       ----
<S>                                  <C>           <C>              <C>               <C>           <C>          <C>          <C>
MINES
Domestic
   Leadville                                 60                              799              2.82      5.0          4.8         5.4
   Sweetwater                               100                           11,339              4.51     62.2         67.1        69.9
   West Fork                                100                            6,788              5.07     55.0         52.3        53.6
                                                                                                      -----        -----       -----
      Total Domestic                                                                                  122.2        124.2       128.9
Other
   Quiruvilca-Peru                          (a)                                                         3.9          6.9         6.1
                                                                                                      -----        -----       -----
                                                                                                   
      Total                                                                                           126.1        131.1       135.0
                                                                                                      -----        -----       -----

Asarco Beneficial Production
                                                                                                      123.3        127.8       131.1

SMELTERS
   East Helena                              100                                                        63.9         61.7        69.7
   Glover                                   100                                                       135.8        132.7       124.2
                                                                                                      -----        -----       -----
      Total                                                                                           199.7        194.4       193.9
                                                                                                      -----        -----       -----

REFINERIES
   Omaha                                    100                                                        70.4         73.1        73.5
   Glover                                   100                                                       135.8        132.7       124.2
                                                                                                      -----        -----       -----
      Total                                                                                           206.2        205.8       197.7
                                                                                                      -----        -----       -----

ASSOCIATED COMPANIES
MIM                                        15.1
   Mount Isa/Hilton                                          100          31,085              5.70    164.0        209.2       242.6
   McArthur River                                             70          28,660              6.26        -            -           -
GRUPO MEXICO                               23.6                              (b)               (b)
   Base Metal Mines                                          100          75,728              1.20     41.7         48.9        45.2

Asarco's & associated companies'
share of western world mine
production
                                                                                                        21%          21%         22%

</TABLE>

(a) Asarco sold its 80% interest in  Quiruvilca  on August 31, 1995 (b) Reflects
mineral reserve data at December 31, 1994, 1995 data not yet available.



<PAGE>
A20

METAL PRODUCTION STATISTICS (continued)
<TABLE>
<CAPTION>
ZINC
                                     Average
                                                   Associated         Mineral         Mineral            Metal Production
                                     Asarco        Company's         Reserves         Content            Contained Metal
                                    Interest        Interest        (000s tons)         (%)                (000s tons)
                                                                                                           -----------
                                       (%)            (%)            12/31/95        12/31/95        1995        1994         1993
                                       ---            ---            --------        --------        ----        ----         ----
<S>                               <C>           <C>              <C>               <C>           <C>          <C>         <C>
MINES
Domestic
   Leadville                              60                              799          8.66           15.4         15.4         15.3
   Sweetwater                            100                           11,339           .38           12.2          8.9          4.6
   Tennessee                             100                            5,187          3.17           77.1         74.6         61.8
   West Fork                             100                            6,788          1.06           10.9         11.8         12.9
                                                                                                     -----        -----        -----
      Total Domestic                                                                                 115.6        110.7         94.6
Other
   Quiruvilca-Peru                       (a)                                                          12.6         20.6         18.6
                                                                                                     -----        -----        -----
      Total                                                                                          128.2        131.3        113.2
                                                                                                     -----        -----        -----

Asarco Beneficial Production
                                                                                                     119.4        120.5        102.4

ASSOCIATED COMPANIES
MIM                                     15.1
   Mount Isa/Hilton                                       100          31,085          6.36          187.3        281.7        273.2
   McArthur River                                          70          28,660         13.96              -            -            -
GRUPO MEXICO                            23.6                              (b)           (b)
   Base Metal Mines                                       100          75,728          4.20          201.0        205.4        189.8

Asarco's & associated companies'
share of western world mine
production
                                                                                                        9%          11%          10%
------------------------------------------------------------------------------------------------------------------------------------

MOLYBDENUM                                                                                                  (000's pounds)
                                                                                                      1995         1994       1993
                                                                                                      ----         ----       ----

MINES
Domestic
   Mission                               100                          500,359           .02            900            -            -
   Montana Resources                    49.9                          517,000           .03         10,200        7,600        7,200
                                                                                                    ------        -----        -----
       Total Domestic                                                                               11,100        7,600        7,200
                                                                                                    ------        -----        -----

SPCC                                  52.3(c)
   Toquepala                                              100         326,661           .06          3,700        3,000        2,600
   Cuajone                                                100         967,733                        4,300        3,100        3,700
                                                                                                     -----        -----        -----
       Total                                                                                         8,000        6,100        6,300
                                                                                                     -----        -----        -----

Asarco Beneficial Production
                                                                                                    10,000        6,400        6,300

ASSOCIATED COMPANIES
GRUPO MEXICO                            23.6                              (b)           (b)
   Mexicana de Cobre                                     96.0          529,200          .03          8,400        5,800        3,800

Asarco's & associated companies'
share of western world mine
production
                                                                                                       13%          11%          13%
</TABLE>

(a)   Asarco sold its 80% interest in Quiruvilca on August 31, 1995.
(b)   Reflects  mineral  reserve data at December  31,  1994,  1995 data not yet
      available.
(c)   Asarco's beneficial  ownership of SPCC was 43.2% through April 1995, 52.1%
      through December 1995, and 52.3% effective December 31, 1995.


<PAGE>
A21

METAL PRODUCTION STATISTICS (continued)
<TABLE>
<CAPTION>
SILVER
                                                                                         Average
                                                    Associated         Mineral         Mineral            Metal Production
                                          Asarco      Company's         Reserves         Content             Contained Metal
                                         Interest      Interest        (000s tons)      (oz/ton)           (000s troy ounces)
                                            (%)          (%)            12/31/95        12/31/95        1995         1994       1993
                                            ---          ---            --------        --------        ----        ----        ----
<S>                                  <C>             <C>            <C>               <C>           <C>            <C>         <C>
MINES
Domestic
   Silver Valley Resources(a)
                                               50                           1,628         16.90             -            -         -
   Leadville                                   60                             799          2.04           347          381       338
   Mission                                    100                         500,359           .16         2,604        2,355     1,869
   Montana Resources                         49.9                         517,000           .07           680          546       763
   Ray                                        100                       1,015,700             -           839          570       827
   Sweetwater                                 100                          11,339           .10           272          238       159
   Troy                                     75(a)                          11,996          1.42             -            -       812
   West Fork                                  100                           6,788           .30           232          256       251
   Others                                 Various                               -       Various             -            -         5
                                                                                                        -----        -----     -----
      Total Domestic                                                                                    4,974        4,346     5,024

SPCC                                      52.3(b)           100
   Toquepala                                                              326,661                       1,557        1,401     1,400
   Cuajone                                                                967,733                       1,401        1,579     1,413
Other
   Quiruvilca-Peru                            (c)                                                       1,621        2,807     2,468
                                                                                                        -----       ------    ------
      Total                                                                                             9,553       10,133    10,305
                                                                                                        -----       ------    ------

Asarco Beneficial Production
                                                                                                        7,273        7,437     7,468

REFINERIES
   Amarillo                                   100                                                      37,265       36,126    35,666
   SPCC-Ilo                               52.3(b)                                                       2,519        1,210         -
                                                                                                       ------       ------    ------
     Total                                                                                             39,784       37,336    35,666
                                                                                                       ------       ------    ------

Asarco Beneficial Production
                                                                                                       38,522       36,648    35,666


ASSOCIATED COMPANIES
MIM                                          15.1
   Mount Isa/Hilton                                         100            31,085          4.19        13,000       17,001    19,354
   McArthur River                                            70            28,660          1.84             -            -         -
   From Purch Cons                                                                                        605          556       445
GRUPO MEXICO                                 23.6                             (d)           (d)
   Base Metal Mines                                         100            75,728          3.12        10,800       10,690    11,130
   Mexicana de Cobre                                       96.0           529,200                       2,490        2,300     2,120
   Mexicana de Cananea                                     76.1         1,316,400                         550          730       350

Asarco's & associated companies'
share of western world mine
production
                                                                                                          10%          11%       13%
</TABLE>

(a)   Silver Valley Resources and Troy are currently on standby.
(b)   Asarco's beneficial  ownership of SPCC was 43.2% through April 1995, 52.1%
      through December 1995, and 52.3% effective  December 31, 1995. In May 1994
      SPCC purchased the Ilo refinery.
(c)   Asarco sold its 80% interest in Quiruvilca on August 31, 1995.
(d)   Reflects  mineral  reserve data at December  31,  1994,  1995 data not yet
      available.




<PAGE>
A22

All  mineral  reserves  represent  100% of the  reserves  for that  mine and the
percentage ownership of Asarco and associated companies is separately indicated.
All  mineral  reserves  are at December  31,  1995,  except for M.I.M.  Holdings
Limited  which are as of June 30,  1995,  and Grupo Mexico which are at December
31, 1994.  Reserves  are  estimated  quantities  of proven and probable ore that
under present and anticipated conditions may be economically mined and processed
for the extraction of their mineral  content.  The data for MIM and Grupo Mexico
are as published by those companies and supplemental  information to support the
reserves for those  companies has not been reviewed by the U.S.  Securities  and
Exchange Commission.  Controlled mineral deposits include those owned,  directly
or indirectly through  subsidiaries,  partnerships or joint ventures,  optioned,
leased, or held under government concession.

All production  figures represent entire amounts of operations,  including those
under lease, joint venture,  government  concessions or operated by subsidiaries
or associated  companies.  Metal production figures for associated companies are
from mines. Data for MIM are based on its June 30 fiscal year.


Other Operations

The principal  activities  included in the business segment entitled "Other" are
those of Encycle/Texas,  Inc. and Hydrometrics,  Inc., wholly-owned subsidiaries
in the environmental  services  business,  Capco Pipe Company,  Inc. (Capco),  a
wholly-owned  subsidiary that  manufactures  polyvinyl  chloride pipe (PVC), and
asbestos cement pipe, and a zinc oxide operation in Hillsboro, Illinois. None of
these operations constitute a significant portion of the total operations of the
Company. In 1993, Capco permanently shut down its asbestos cement pipe business,
and in 1994, the Company sold its PVC and zinc oxide operations.


Item 3.  Legal Proceedings

Reference  is  made  to  the  Contingencies  and  Litigation  footnote  8 to the
Financial Statements incorporated herein by reference.

The following is additional  information  with respect to the asbestos  personal
injury  litigation.  While no one  personal  injury  action is exactly  like any
other,  the  following  three  pending  lawsuits  are  typical of those in which
employees  of other  companies  allege  death or injury  resulting  from alleged
exposure to asbestos fiber supplied by Lac d'Amiante du Quebec,  Ltee ("LAQ"), a
wholly-owned  subsidiary,  and other suppliers to their employers' manufacturing
operations:

1) In  Pogorzelski,  et al. v. Amtorg Trading  Corporation,  et al.,  Docket No.
L-12274-91,  pending since October 31, 1991 in the Superior Court of New Jersey,
Middlesex  County,  19 primary and 8 secondary  plaintiffs sued LAQ and 25 other
defendants  that  allegedly  supplied  asbestos  fiber  or  asbestos  containing
products to  Johns-Manville's  Manville,  New Jersey  facility  for  substantial
compensatory and punitive damages for death or injuries allegedly resulting from
the  primary  plaintiffs'  exposure to  asbestos  fiber  while  employed at that
facility. The claims of seven of the primary plaintiffs were dismissed as to LAQ
in June 1992.  The  plaintiffs  allege a broad  range of  respiratory  and other
injuries including disabling lung changes, asbestosis, cancer, and mesothelioma.
Liability  is alleged on theories  of strict  liability,  negligence,  breach of
warranty,  misrepresentation,  ultra hazardous activity and conduct, conspiracy,
concert  of  action,  market  share or  enterprise  liability,  and  alternative
liability.  The thrust of the complaint is that the defendants,  individually or
collectively,  failed to warn the primary  plaintiffs  of the  possible  hazards
associated  with  inhalation  of asbestos  fibers  while  working  with or being
exposed to such fibers.



<PAGE>
A23

2) In Darlene  Turner and Patricia  Foret,  Individually  and on Behalf of Their
Father,  Robert Foret, Sr. v. Raymond Plauche,  etc., et al., Case No. 94-13057,
pending  since August 24, 1994 in the Civil  District  Court,  for the Parish of
Orleans  of the State of  Louisiana,  the heirs of Mr.  Foret sued LAQ and three
other defendants that allegedly  supplied asbestos fiber or asbestos  containing
products  to the  National  Gypsum  plant  in New  Orleans,  Louisiana.  A fifth
defendant was an officer of National Gypsum that plaintiffs allege was negligent
in not  providing  Mr.  Foret with a safe  place to work.  The  plaintiffs  seek
substantial compensatory and punitive damages for Mr. Foret's alleged death from
lung cancer and other asbestos-related diseases that allegedly resulted from his
exposure to asbestos fiber while employed at National Gypsum.

3) In Haines v. Aetna Casualty Co., et al., Docket No. L-5918-95,  pending since
July 13, 1995 in the Superior Court of New Jersey,  Camden  County,  one primary
and one secondary  plaintiff  sued LAQ and six other  defendants  that allegedly
supplied asbestos fiber or asbestos containing products to New York Shipbuilding
& Drydock Co., in Chester,  Pennsylvania and Owens-Corning  Fiberglas in Berlin,
New Jersey. The plaintiffs demand substantial  compensatory and punitive damages
for asbestosis allegedly resulting from primary plaintiff's exposure to asbestos
fiber while employed at these facilities.

In addition to these personal  injury lawsuits  arising out of alleged  asbestos
exposure  to  employees  of  other  companies  using  asbestos  fiber  in  their
manufacturing  operations,  included in the asbestos product liability  lawsuits
pending against LAQ and Asarco are numerous lawsuits arising from products (such
as insulation and brake linings)  manufactured by others.  These cases typically
allege a failure  to warn of  possible  health  hazards  associated  with  those
products and proceed on theories  similar to those  asserted in the  Pogorzelski
case.  In many  such  cases  LAQ and  Asarco,  having  never  manufactured  such
products,  have  obtained  dismissals.  Typical of lawsuits in which  plaintiffs
allege asbestos exposure due to products manufactured by others are:

1) Malvaso v.  Owens-Corning  Fiberglas  Corporation,  et al., Index No. 087694,
pending since  September 23, 1994 in the Supreme Court of the State of New York,
Niagara  County,  in which one primary  plaintiff sued Asarco,  LAQ and 23 other
defendants that allegedly supplied asbestos and products  containing asbestos to
his  employers.  The plaintiff  demands  substantial  compensatory  and punitive
damages for injuries allegedly  resulting from exposure to asbestos.  The thrust
of the complaint is similar to the Pogorzelski case.

2) Roger Adkins et al., v. Owens Corning  Fiberglas  Corporation,  et al., Civil
Action Nos.  95-C-3049 to  95-C-3064,  95-C-3138  and  95-C-3139,  pending since
November 3, 1995 in the Circuit Court of Kanawha County, West Virginia, in which
eighteen primary and fourteen secondary plaintiffs sued LAQ, Asarco and 33 other
defendants that allegedly supplied asbestos and products  containing asbestos to
the  primary   plaintiffs'   employers.   The  plaintiffs   demand   substantial
compensatory and punitive damages for injuries allegedly resulting from exposure
to asbestos. The thrust of the complaint is similar to the Pogorzelski case.



<PAGE>
A24

3) Aaron, et al. v. Abex Corporation,  et al., Case No. 94-C2110,  pending since
March 14, 1995 in the District Court of Brazoria  County,  Texas,  23rd Judicial
District,  in which 2700 primary  plaintiffs and 1021 secondary  plaintiffs sued
Asarco, its wholly-owned  subsidiary Capco Pipe Company,  Inc. ("Capco") and 184
other  defendants  that  either  owned the  premises  where some of the  primary
plaintiffs  worked,  or that provided  workers  compensation  or other insurance
coverage to various of the manufacturers named as defendants,  or that allegedly
supplied asbestos and products  containing  asbestos to the primary  plaintiffs'
employers.  The plaintiffs demand substantial  compensatory and punitive damages
for injuries allegedly resulting from their exposure to asbestos.  The thrust of
the complaint is similar to the Pogorzelski case.

The Campbell v. W.R.  Grace and Company,  et al.;  Rettberg v.  Armstrong  World
Industries,  Inc., et al.; Abbott, et al. v. Unidentified Defendants; E. Adkins,
et al. v. 20th Century Glove  Corporation of Texas,  et al.; and Abel, et al. v.
Pittsburgh  Corning  Corporation,  et al., cases described in Item 3 of Asarco's
1994 Form 10-K were settled by LAQ during 1995.  As of December 31, 1995,  Capco
was a defendant in 34 cases brought by 6,767 primary plaintiffs.

In 1991, the Judicial Panel on Multidistrict Litigation transferred all asbestos
cases  pending in  federal  court to the United  States  District  Court for the
Eastern  District of  Pennsylvania  for coordinated  and  consolidated  pretrial
proceedings.  Cases  containing  approximately  one  percent  of  LAQ's  primary
plaintiffs are affected by this action.

During January 1996 LAQ and nine former managerial and supervisory  employees of
Capco  were sued in two  separate  state  court  actions in Alabama by 53 former
Capco  employees  seeking  substantial  compensatory  and  punitive  damages for
personal  injuries  and death caused by alleged  workplace  exposure to asbestos
with alleged liability on theories of product liability and negligence.

On March 3, 1996, Asarco was served with a complaint in a purported class action
filed in state court in West Virginia  that also names as defendants  LAQ and 49
other  companies.  The action is allegedly  brought on behalf of a class of over
50,000  persons who were exposed to asbestos at West Virginia work sites and who
are  allegedly  at  increased  risk of  developing  cancer.  The case  seeks the
establishment  of a medical  monitoring  fund. The Company intends to oppose the
lawsuit.  Additionally,  in June 1995,  Capco was served with a  complaint  in a
purported  class action  filed in Illinois  state court in Cook County that also
names 139 other defendants. The class action is allegedly brought on behalf of a
nationwide  class of persons  claiming to be at an increased  risk of developing
asbestos-related diseases as a result of asbestos exposure. Capco and nearly all
other defendants have moved to dismiss the case.

As of December 31, 1995,  LAQ,  Asarco and Capco have settled or been  dismissed
from a total of approximately 5,370 asbestos personal injury lawsuits brought by
approximately 60,196 primary and approximately 39,244 secondary plaintiffs.

With  respect  to  the  actions  relating  to  asbestos-containing  products  in
structures  reported in the Contingencies and Litigation Note 8 to the Financial
Statements, the following supplemental information is provided:

The three actions currently pending against LAQ,  including actual and purported
class actions, involve colleges and universities and public buildings in cities.
In general these actions seek substantial compensatory and punitive damages.

As of December 31, 1995, LAQ has settled five and been dismissed from another 80
actions  involving  asbestos in  structures.  Asarco has been dismissed from all
twelve actions in which it had been named.



<PAGE>
A25

In 1987, LAQ began litigation  against certain excess  liability  insurers for a
declaration of insurance coverage for its asbestos cases similar to the one that
had been obtained by LAQ against  certain other  insurers in a 1985 court ruling
that held that the comprehensive  continuous theory of coverage applies to those
insurers' policies as regards LAQ's asbestos personal injury and property damage
litigation. Settlements have been reached with certain of these insurers.

In June 1993, the Company was sued by two of its liability  insurance  carriers,
the Insurance  Company of North America and California Union Insurance  Company,
in state court in New Brunswick, New Jersey for a declaration that the insurance
companies have no insurance  obligation for environmental  matters for which the
Company is seeking  coverage.  The insurance  companies  also included  Asarco's
other liability insurers in the lawsuit,  and those insurers have sought similar
declaratory  relief.  Asarco has filed cross  claims and  counterclaims  in this
lawsuit seeking a court declaration that insurance coverage of its environmental
matters does exist.

On February  15,  1994,  Asarco,  two of its  subsidiaries,  and  several  other
defendants  were  sued in an  action in state  court in Duval  County,  Texas by
approximately  320  plaintiffs  seeking  compensatory  and punitive  damages for
personal injuries,  increased risk of disease and medical monitoring, as well as
property  damage,  allegedly  resulting  from exposure to  materials,  including
metals, shipped to a landfill near the plaintiffs' residences. Court approval of
a settlement  reached between the Company and the  approximately  400 plaintiffs
was entered on October 12, 1995.

On  June  17,  1994,  the  Company  and  one of its  wholly-owned  subsidiaries,
Encycle/Texas,  Inc., were sued in state court in Nueces County,  Texas in three
purported class actions on behalf of persons  residing in  neighborhoods  around
the Company's Corpus Christi,  Texas property.  These actions seek  compensatory
and punitive damages for diminution of property values,  annoyance,  loss of use
and enjoyment, loss of income from commercial uses, remediation costs, emotional
distress,  and medical  monitoring due to alleged  contamination  of plaintiffs'
properties by metals emitted from the Corpus Christi  facility.  On December 14,
1994 two additional suits alleging  contamination  of plaintiffs'  properties by
metals emitted by the Corpus Christi facility were filed against the Company and
two of its wholly-owned subsidiaries,  Encycle, Inc. and Encycle/Texas, Inc. and
several other defendants in state court in Duval County,  Texas. In one suit, 20
plaintiffs who resided  and/or owned  property near the Corpus Christi  facility
seek  compensatory  and  punitive  damages for  diminution  in property  values,
personal  injuries,  mental anguish,  lost wages,  medical  expenses and medical
monitoring. In the second suit, two plaintiffs who owned and operated a business
near the Corpus  Christi  facility seek  compensatory  and punitive  damages for
diminution in property value and loss of profits.

On October 8, 1991,  ARCO  Incorporated  ("ARCO") filed suit in federal court in
Montana against Montana Resources and its partners,  including Asarco and one of
its subsidiaries, alleging breach of contract resulting from defendants' failure
to reclaim  contaminated  water in an inactive  mining pit (the Berkeley Pit) at
partnership-owned   property  in  Butte,   Montana.   ARCO's   demands   include
compensation  for study costs under  CERCLA  with  respect to such water,  and a
determination  that  defendants are  responsible for reclamation of the pit. The
defendants  assert  that ARCO is  responsible  for such  CERCLA and  reclamation
costs.

In April 1993,  the State of Texas  notified  the Company  that it and ten other
persons are PRPs with respect to the Col-Tex  Refinery  State  Superfund site in
Mitchell  County,  Texas where the Company stored diesel fuel in the mid-1970's.
In February  1996,  the State of Texas notified the Company that it is no longer
considered a PRP and that it has dismissed this claim. The Company has also been
named as one of several  defendants in twelve  lawsuits filed by or on behalf of
295 persons who have lived or owned  property  near the  Col-Tex  Refinery  site
seeking  compensatory and punitive damages for alleged wrongful death,  personal
injury, and property damage.



<PAGE>
A26

In September  1994, the Company  received notice from the State of Texas that it
is a PRP for the  remediation  of the site of a former  pesticide  manufacturing
plant in Hunt County, Texas. In addition, the Company has been named as one of a
number of  defendants  in six  lawsuits  filed in various  Texas State  District
Courts by or on behalf of approximately 2,200 individuals who live or lived near
the site for compensatory and punitive  damages,  including  damages for alleged
personal  injuries  and  property  damage,  due to alleged  exposure  to arsenic
products  that the Company  sold to the  manufacturer  at the site.  Also in May
1995, the Company was named as a third-party defendant in a suit, pending in the
United  States  District  Court  for  the  Northern   District  of  Texas,   for
contribution under CERCLA and Texas state law involving approximately 15 parties
alleged to be responsible for remediation of a railroad property adjacent to the
site.

In  February  26,  1993,  the Mayor of  Tacna,  Peru  brought a lawsuit  against
Southern  Peru  Limited,  an indirect  subsidiary  of the Company,  seeking $100
million in damages  from  alleged  harmful  disposition  of  tailings,  slag and
smelter  emissions.  On  September  9,  1994,  the  First  Civil  Court of Tacna
dismissed the  complaint.  The plaintiff  appealed and on December 29, 1994, the
Superior  Court of Tacna  reversed the lower  court's  decision and remanded the
case for  further  proceedings.  In March  1995 the trial  court  dismissed  the
complaint on the ground that the plaintiff  lacks  standing to bring the action.
In April 1995 the plaintiff appealed this dismissal.

Reference is made to the lawsuit  against a subsidiary  of Southern  Peru Copper
Corporation ("SPCC"),  the Company and others,  brought in September 1995 by 698
Peruvian  plaintiffs for personal injury and property damage allegedly caused by
the  operations  of a  subsidiary  of SPCC,  reported in the  Contingencies  and
Litigation  Note to the Financial  Statements.  On February 15, 1996  plaintiffs
filed a notice of appeal from the United States District Court order  dismissing
the complaint and from an earlier order of that court denying plaintiffs' motion
to remand the case to state court.

In October 1992,  the owner of a property  leased by a subsidiary of the Company
filed  suit in New  Jersey  state  court in  Essex  County  seeking  declaratory
judgment and compensatory and punitive damages for alleged  contamination of the
property  during the lease term by the subsidiary  and others.  In January 1996,
the  subsidiary of the Company  reached an agreement in principle to settle this
dispute.

In May 1989,  a lawsuit  was filed in state  court in Butte,  Montana by Montana
Mining Properties  ("MMP") which claims to have had a contractual first right of
refusal on the 49.9 percent  interest in the Montana  copper mining  business of
Montana  Resources,  Inc.  that was sold to Asarco in June  1989.  MMP sought an
injunction  and  compensatory  and  punitive  damages  from  Asarco for  alleged
tortious  interference  with its contract with Montana  Resources,  Inc. In June
1994,  the court  granted  summary  judgment in favor of  defendants,  including
Asarco.  On appeal summary judgment was reversed in April 1995, and the case was
remanded for further proceedings against all defendants other than Asarco.

In March 1995 the Company was sued in federal  court in Tacoma,  Washington by a
retirement home with 200 residents and 21 acres of property  seeking damages for
diminution of property  value,  response  costs and  attorneys'  fees.  The suit
contains  allegations  similar  to those  advanced  in the Tacoma  class  action
settled by the Company in January  1995,  and reported on Form 10-K for 1994. It
is the Company's position that the claim is encompassed by the settlement of the
Tacoma class action.



<PAGE>
A27

The  opinion  of  management  regarding  the  outcome of legal  proceedings  and
environmental contingencies,  set forth in the Contingencies and Litigation Note
(Note 8) to the  Financial  Statements,  is based  on  considerations  including
experience  relating to previous court judgments and settlements and remediation
costs and  terms.  The  financial  viability  of other  potentially  responsible
parties has been considered when relevant and no credit has been assumed for any
potential   insurance   recoveries   when   availability  of  insurance  is  not
established.   The  Company   considered  such  factors  in   establishing   its
environmental  reserve in December of 1990 and in determining  modifications  to
its reserve in 1991, 1992, 1993, 1994 and 1995.

See also  Item 1,  "Environmental,  Safety  and  Health  Matters,"  for  further
information  concerning  pending legal or administrative  proceedings  involving
Asarco.


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

None.


<PAGE>
A28

EXECUTIVE OFFICERS OF ASARCO AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
                                                      (As of February 28, 1996)
<TABLE>
<CAPTION>
                                                                                                                       Officer
Name                                      Office and Experience                                                 Age     Since
----                                      ---------------------                                                 ---     -----
<S>                                  <C>               <C>                                                   <C>     <C>

Richard de J. Osborne                     1991-1996    Chairman of the Board, President                          61        1975
                                                         and Chief Executive Officer

Francis R. McAllister                     1993-1996    Executive Vice President, Copper                          53        1978
                                                         Operations
                                          1992-1993    Executive Vice President, Finance
                                                         and Administration and Chief
                                                         Financial Officer
                                          1991-1992    Vice President, Finance and
                                                         Administration and Chief
                                                         Financial Officer

James J. Kerr                             1992-1996    Vice President, Commercial                                65        1991
                                          1991-1992    Vice President, Ore
                                               1991    Vice President-Elders Raw
                                                         Materials Limited

Augustus B. Kinsolving                         1996    Vice President and General Counsel                        56        1983
                                          1991-1995    Vice President, General Counsel
                                                         and Secretary

Kevin R. Morano                           1993-1996    Vice President, Finance and Chief                         42        1993
                                                         Financial Officer
                                          1991-1993    General Manager, Ray Complex
                                               1991    Treasurer

Robert J. Muth                            1991-1996    Vice President, Government and                            62        1977
                                                         Public Affairs

Robert M. Novotny                         1993-1996    Vice President, Lead, Zinc,                               47        1988
                                                         Silver and Mineral Operations
                                          1991-1993    Vice President, Operations

Gerald D. Van Voorhis                     1992-1996    Vice President, Exploration                               57        1992
                                          1991-1992    Vice President-Socorro Mining
                                                         Company

Michael O. Varner                         1993-1996    Vice President, Environmental                             54        1993
                                                         Operations
                                          1992-1993    General Manager, Western Metals
                                          1991-1992    Director, Technical Services

David B. Woodbury                         1993-1996    Vice President, Human Resources                           55        1993
                                          1991-1993    Vice President, Human Resources
                                                         - Ferro Corporation

Robert Ferri                              1995-1996    Secretary                                                 48        1995
                                          1991-1995    Associate General Counsel

William Dowd                              1995-1996    Controller                                                46        1995
                                          1991-1995    Assistant Controller

Thomas J. Findley, Jr.                    1991-1996    Treasurer                                                 48        1991
                                               1991    Director of Management
                                                         Information Services

James L. Wiers                            1991-1996    General Auditor                                           51        1987
</TABLE>


<PAGE>
A29

                                                               PART II
Item 5 - Market for Registrant's Common Stock and Related Stockholder Matters

At December  31,  1995,  there were 8,527  common  stockholders  of record.  The
principal  market for Asarco's Common Stock is the New York Stock Exchange.  The
Stock Exchange symbol for Asarco's common stock is AR. High and low stock prices
and dividends for last two years were:

<TABLE>
<CAPTION>
                                                 1995                                                1994
                                                 ----                                                ----
QUARTERS                    1st        2nd       3rd        4th       Year       1st       2nd        3rd       4th       Year
                            ---        ---       ---        ---       ----       ---       ---        ---       ---       ----
<S>                      <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>

Dividends paid
 per common share               .10      .20        .20        .20        .70      .10        .10       .10        .10       .40

Stock market price:
      High                   30-3/8   31-1/8     36-1/2     35-7/8     36-1/2   27-5/8     30-5/8    34-7/8     33-7/8    34-7/8
      Low                    24-3/8   25-3/8     30-1/4     29-3/8     24-3/8   21-3/8     21-5/8    27-1/2     24-3/4    21-3/8
</TABLE>

Item 6 - Selected Financial Data

FIVE-YEAR SELECTED FINANCIAL AND STATISTICAL DATA
(in millions, except per share and employee data)

<TABLE>
<CAPTION>
                                                        1995(a)          1994              1993              1992           1991
                                                        ----             ----              ----              ----           ----
<S>                                                 <C>             <C>             <C>               <C>              <C>
Consolidated Statement of Earnings
Net sales                                               $3,198          $2,032            $1,736            $1,908         $1,912
Operating income (loss)                                    487(b)           18(c)           (110)(e)           (42)(g)         61(h)
Earnings (loss) before equity earnings and
  cumulative effect of change in accounting
  principles                                               167              16               (98)              (32)            36
Equity earnings                                              2              48                27                 3             10(h)
Net earnings (loss)                                        169              64(d)             16(f)            (83)            46
Net earnings (loss) per share                           $ 4.00          $ 1.53            $ 0.38            $(2.01)        $ 1.12
Dividends to common stockholders per share
                                                        $ 0.70          $ 0.40            $ 0.50            $ 0.80         $ 1.60

Consolidated Statement of Cash Flows
Cash provided from (used for)
 operating activities                                   $  500          $  (10)           $   39           $  106          $   67
Dividends to common stockholders                            30              17                21               33              66
Capital expenditures                                       338              98               112              135             283
Depreciation and depletion                                 119              83                81               87              75

Consolidated Balance Sheet
Total assets                                            $4,327          $3,291            $3,153           $2,946          $2,954
Inventories - replacement cost in excess of LIFO
  inventory costs                                          137             143               114              125             130
Total debt                                               1,122             933               901              869             802
Common stockholders' equity                              1,707           1,517             1,472            1,357           1,475

Common Stock
Common shares outstanding                                 42.6            42.1              41.7             41.5            41.2
Price-high                                             $36-1/2         $34-7/8           $28-5/8          $31-3/8         $30-1/2
     -low                                              $24-3/8         $21-3/8           $16-5/8          $19-7/8         $18-1/4
Book value per common share                             $40.11          $36.04            $35.27           $32.74          $35.75
Price/Earnings ratio                                      8.01           18.65             60.92                -           19.13
Dividends to common stockholders as a percent of
  earnings                                               17.5%           26.2%            133.2%                -          143.2%

Financial Ratios
Current assets to current liabilities                     1.9             1.6               1.5              1.6             1.8
Debt as % of capitalization                              34.1%           38.1%             38.0%            39.0%           35.2%

Employees (at year-end)                                 12,200           8,000             8,500            8,900           9,100
</TABLE>


<PAGE>
A30

Notes to Selected Financial Data

(a)   On April 5, 1995,  the Company  acquired an additional  10.7%  interest in
      SPCC for $116.4  million,  increasing its ownership from 52.3% to 63%. The
      additional  shares acquired enabled the Company to elect a majority of the
      directors of SPCC. As a result, the Company has consolidated the financial
      statements  of  SPCC  in its  financial  statements  based  on  its  52.3%
      ownership,  effective January 1, 1995, and 63% ownership,  effective April
      5, 1995.  The Company  previously  accounted for its investment in SPCC by
      the equity method.
(b)   Includes  a $122.3  pre-tax  charge to add to the  Company's  reserve  for
      environmental matters, to provide for asset impairments and plant closures
      and to writedown certain in-process inventory to net realizable value.
(c)   Includes  a $51.2  pre-tax  charge  to add to the  Company's  reserve  for
      environmental matters and $2.8 of LIFO profits.
(d)   Includes a $58.5  pre-tax  gain from the sale of the  Company's  remaining
      interest in Asarco Australia Limited.
(e)   Includes a $25.6 pre-tax  provision for the valuation of  inventories  and
      additions to reserves for closed plants,  $9.2 of LIFO profits and $8.2 of
      previously unrecognized losses of Nor Peru.
(f)   Includes  $26.4 (net of taxes of $.4) of  previously  unrecognized  equity
      earnings of Southern  Peru Copper Corp.  (SPCC) and $86.3 as the result of
      the cumulative effect of a change in accounting principle at SPCC.
(g)   Includes a $72.4 pre-tax provision for  environmental  matters and a $31.9
      pre-tax provision to reduce the carrying value of certain facilities.
(h)   Includes a $10.6  pre-tax  provision  for  doubtful  accounts for a copper
      customer  receivable.  Effective  the second  quarter of 1991,  MEDIMSA is
      accounted for on the cost basis.

Item  7 -  Management's  Discussion  and  Analysis of  Financial  Condition  and
           Results of Operations

Asarco reported 1995 net earnings of $169.2 million or $4.00 per share including
special after-tax charges of $79.5 million ($122.3 million pre-tax) or $1.87 per
share.  The special  charges  include $51.0 million ($78.5  million  pre-tax) in
connection  with the  termination  of lead refining  operations at the Company's
Omaha, Nebraska refinery, $22.5 million ($34.6 million pre-tax) for additions to
reserves  for costs  associated  with  previously  closed  operations,  and $6.0
million ($9.2 million pre-tax) to write off the value of certain assets.

Net  earnings  in  1994  and  1993  were  $64.0   million  and  $15.6   million,
respectively.  Net earnings in 1994 included an after-tax  gain of $31.9 million
on the sale of Asarco Australia  Limited (Asarco  Australia) and a $30.7 million
after-tax charge to add to the Company's environmental reserves. Net earnings in
1993  included  the   recognition   of  $18.2  million   related  to  previously
unrecognized earnings of the Company's investments in Peru and $86.3 million for
the cumulative effect of a change in accounting  principle resulting from SPCC's
adoption of SFAS No. 109,  "Accounting  for Income  Taxes".  In  addition,  1993
results include an after-tax charge of $10.8 million related to the valuation of
certain   inventories   and   additions  to  reserves  for  closed   plants  and
environmental  matters, an after-tax gain of $7.6 million related to the sale of
a portion of its shares of Asarco  Australia  and the  issuance of new shares by
Asarco  Australia and a $2.8 million charge to reflect an increase in income tax
rates.

As a result of acquiring an  additional  10.7%  interest in Southern Peru Copper
Corporation (SPCC) on April 5, 1995, the Company has consolidated SPCC's results
in its  financial  statements  effective  at the  beginning  of  the  year.  The
Company's  ownership of SPCC was 52.3% at January 1, 1995,  and increased to 63%
effective April 5, 1995. The Company had previously accounted for its investment
in SPCC by the equity  method.  In November  1995,  SPCC offered to exchange new
common  shares for labor shares  issued by its Peruvian  Branch to workers under
prior  law in Peru.  These  labor  shares,  which are  traded on the Lima  Stock
Exchange,  represented a 17.3% interest in the Peruvian  Branch which  comprises
substantially all of the operations of SPCC in Peru. The offer ended on December
29, 1995,  with 80.8% of the labor shares  tendered.  SPCC now owns 96.7% of the
Branch.  The Company's  equity interest in SPCC is 54.0% and its voting interest
is 61.0%. The Company's  beneficial  ownership in the operations of SPCC, net of
the  remaining  labor  shares   interest,   is  52.3%.  The  interest  of  other
shareholders  of SPCC is  recorded  as a minority  interest.  The common  shares
issued in  exchange  for the labor  shares  are  listed on both the New York and
Lima, Peru stock  exchanges.  The Company's  balance sheet at December 31, 1995,
reflects the effect of this transaction.


<PAGE>
A31


In the fourth quarter of 1995,  the Company  decided not to make the $40 million
investment  which  would  have  been  required  to meet  State  and EPA  imposed
environmental  requirements  at its Omaha  refinery.  As a result,  the  Company
expects to terminate  lead  refining  operations  at Omaha in 1996.  The special
charges taken in the fourth quarter  include the write off of the remaining book
value of the assets at Omaha,  a provision  for  severance  and legal  expenses,
expected  cleanup and demolition  costs  associated with the termination of lead
refining  operations,  and the writedown of certain in-process  inventory to net
realizable value.

In the fourth quarter of 1995, the Company  adopted SFAS No. 121 "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets To Be Disposed
Of".  This  statement  requires that  long-lived  assets,  certain  identifiable
intangibles  and goodwill  related to those  assets be reviewed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
the  assets may not be  recoverable.  The  impairment  loss on such  assets,  is
measured  as the amount by which the  carrying  value of the assets  exceeds the
fair value of the assets (less disposal costs,  if  applicable).  In addition to
the write off of the assets of the Omaha refinery ($16.7 million after-tax), the
Company has also  recorded an  after-tax  charge to earnings of $6.0  million in
accordance  with SFAS No. 121 with  respect to the assets of Encycle,  its waste
recycling  subsidiary,  and an obsolete mill. The impairment charge with respect
to Encycle's assets was the result of prior operating losses.

Asarco's  beneficial  interest in 1995 consolidated  copper production was 898.4
million pounds  compared with 804.6 million pounds in 1994.  This 11.7% increase
is primarily  attributable to increased production at the Company's Ray, Arizona
mine and to Asarco's increased  ownership of SPCC. In 1994 the Company curtailed
production  at its  Hayden  mill at the Ray  Complex  and  began an  accelerated
development  program to provide  additional working areas in the mine to replace
those lost due to  accumulated  water from unusual  earlier  storms.  The higher
production in 1995 at the Ray mine was  attributable to the early  completion of
this program in the second quarter.

The Company's  earnings are heavily  influenced by the metals markets.  In 1995,
the copper market  continued the  improvements  begun in 1994.  Worldwide supply
once  again  was  below   consumption  and  market  prices   reflected  a  tight
supply/demand  balance. Lead prices also improved in the second half of the year
reflecting the continued  drawdown of world stocks.  While the supply and demand
balance improved in the zinc and silver markets,  the improvements  have not yet
been reflected in the market price for these commodities.

The  improvement  in earnings in 1995 as compared with 1994 was primarily due to
the higher copper price,  lower unit costs  resulting  from  increased  sales of
copper  mined by the  Company,  the  increased  ownership  of SPCC and  improved
earnings from the Company's specialty chemicals and aggregates businesses.

Net earnings in 1994 as compared  with 1993 improved  principally  due to higher
prices for all major  metals and from higher  equity  earnings of SPCC.  SPCC, a
52.3% owned  equity  investment  of Asarco in 1993 and 1994,  contributed  $44.9
million to the Company's net earnings for 1994 as compared with $26.4 million of
net earnings  before  cumulative  effect of change in  accounting  principles in
1993. Higher metal prices, a $12.4 million after-tax gain on the sale of certain
investments  in Peru and a  reduction  in  Peruvian  income tax rates  benefited
SPCC's earnings in 1994.

In 1993, following  improvements in the economic conditions in Peru, the Company
resumed equity accounting for SPCC and also resumed recording the results of the
Company's 80% owned  subsidiary,  Corporacion  Minera Nor Peru, S.A. (Nor Peru).
Such improvements  included the ratification of a new Peruvian  constitution and
the  successful  completion  of  financing  for SPCC's  capital  program,  which
restored management's influence over its Peruvian operations.  Equity accounting
for SPCC and  consolidation  of Nor Peru had been  suspended in 1988. To reflect
this change,  the Company  recorded  $18.2  million of  previously  unrecognized
earnings relating to the period 1988 through 1993 from its investments in Peru.



<PAGE>
A32

Asset Sales Program
-------------------

In the fourth quarter of 1993, the Company initiated a program to divest certain
non-core businesses.  This program was substantially completed in 1995. In total
the  Company  has  sold 9  businesses  or  operations  and  raised  a  total  of
approximately  $185  million  in  cash.  The  program  included  the sale of its
interests in Nor Peru, Asarco Australia,  its PVC pipe, zinc oxide and Lone Star
Lead Construction businesses.

In the third  quarter  of 1995,  the  Company  recorded  a pre-tax  loss of $4.0
million  on the sale of its stock in Nor Peru,  which  owned  and  operated  the
Quiruvilca  mine in the northern part of Peru and the sale of its Lone Star Lead
Construction  business.  In addition, in the fourth quarter of 1995, the Company
sold its interest in two exploration  projects,  Aquarius in Canada and Aginskoe
in Kamchatka,  Russia, for approximately  $11.8 million,  and recorded a pre-tax
loss of $.9 million ($.6 million after-tax) on the sales.

In January 1994,  the Company sold its remaining  45.3%  interest  (66.5 million
shares) in Asarco Australia,  a gold mining and exploration  company,  for $79.5
million  which  resulted  in a  pre-tax  gain of $58.5  million  ($31.9  million
after-tax). In August 1993, the Company sold a 9.9% interest in Asarco Australia
for $13.8  million  which  resulted  in a pre-tax  gain of $10.3  million  ($5.4
million  after-tax) and in September 1993, Asarco Australia offered 13.3 million
shares of previously unissued common stock to the public,  resulting in net cash
proceeds of A$16.4 million.  As a result of this share  issuance,  the Company's
ownership  was reduced to 45.3% and a $3.3 million  pre-tax  gain ($2.2  million
after-tax) was recognized as the shares were sold at a price  exceeding the book
value per share of the Company's interest in Asarco Australia.  From an original
investment  of $4  million  in  exploration  at Asarco  Australia,  the  Company
received  more  than  $106  million  of cash.  The  reduction  of the  Company's
investment in Asarco  Australia had the effect of reducing sales by $20 million,
cost of sales by $17 million,  and depreciation and depletion by $2 million from
1993 to 1994.

In 1994 the Company sold its PVC pipe and zinc oxide  businesses  and closed its
asbestos pipe business. Sales and cost of sales were each reduced by $80 million
from 1993 to 1994, reflecting these divestitures.

Sales:  Sales in 1995 were $3,197.8  million,  compared with $2,031.8 million in
1994 and $1,736.4  million in 1993. The increase in 1995 mainly reflected $881.5
million due to the  consolidation  of SPCC,  $285.4 million due to higher copper
prices and  increased  specialty  chemicals  sales  offset by lower copper sales
volumes.  The  decline in 1995  copper  sales  volume  from 1994 is due to lower
quantities of copper purchased by the Company for resale to satisfy  contractual
commitments,  partially offset by increased copper production from the Company's
own mines.  In 1994,  higher  prices for all major metals  accounted  for $297.1
million of the  increase  in sales from 1993.  Higher  copper  sales  volume and
higher  specialty  chemicals  sales were  offset by the impact of asset sales in
1994.


Price/volume data:
<TABLE>
<CAPTION>
    Average Metal Prices                                             1995               1994               1993
    --------------------                                             ----               ----               ----
    <S>                                                   <C>                <C>                <C>

    Copper (per pound - COMEX)                                    $  1.35           $   1.07             $   .85
    Copper (per pound - LME)                                         1.33               1.05                 .87
    Lead (per pound - LME)                                            .29                .25                 .18
    Silver (per ounce - Handy & Harman)                              5.19               5.28                4.30
    Zinc (per pound - LME) (1)                                        .47                .45                 .44
    Molybdenum (per pound - Metals
                   Week Dealer Oxide)(1)                             7.42               4.50                2.28

</TABLE>



<PAGE>
A33

<TABLE>
<CAPTION>
    Metal Sales Volume                                               1995               1994               1993
    ------------------                                               ----               ----               ----
    <S>                                                   <C>                <C>                <C>
    Copper     (tons)
      Asarco                                                       503,400            539,400             528,100
      SPCC(2)                                                      323,300            326,600             306,700
      Consolidated(3)                                              826,700            539,400             528,100

      Asarco Beneficial Interest                                   666,200            680,300             660,500

    Lead       (tons)
      Asarco                                                       197,000            198,500             211,500

    Silver     (000s ounces)
      Asarco                                                        38,086             33,320              32,754
      SPCC(2)                                                        3,761              3,184               3,347
      Consolidated(3)                                               41,847             33,320              32,754

      Asarco Beneficial Interest                                    39,987             34,694              34,199

    Zinc       (tons)(1)
      Asarco                                                       120,115            132,705             118,648

      Asarco Beneficial Interest                                   111,564            122,435             107,156

    Molybdenum (tons)(1)
      Asarco                                                         2,843              1,845               1,776
      SPCC(2)                                                        4,201              2,848               3,402
      Consolidated(3)                                                7,044              1,845               1,776

      Asarco Beneficial Interest                                     5,033              3,075               3,245
</TABLE>

(1)      The  Company's  zinc and  molybdenum  production is sold in the form of
         concentrates.  Volume  represents  tons of zinc  and  molybdenum  metal
         contained in those concentrates.

(2)      SPCC presented at 100%.  Asarco  Beneficial  Interest amounts shown for
         1994 and 1993 are based on Asarco's 52.3% equity ownership of SPCC. The
         minority  interests in SPCC represented by labor shares in its Peruvian
         Branch  resulted  in Asarco  having a  beneficial  interest  in SPCC of
         43.2%.  Effective  April 5, 1995,  Asarco's  equity  ownership  of SPCC
         increased  to 63% and  its  beneficial  interest  increased  to  52.1%.
         Effective  December 31,  1995,  Asarco's  equity  ownership of SPCC was
         54.0% and its beneficial  interest was 52.3%  reflecting the effects of
         SPCC's completed labor share exchange offer.

(3)      Asarco consolidated SPCC in its financial  statements  effective at the
         beginning of 1995. Consolidated sales volume for 1994 and 1993 does not
         include SPCC.

Substantially  all of the  Company's  copper and lead  production  is sold under
annual contracts. To the extent not sold under annual contracts,  production can
be sold on  commodity  exchanges  or to  merchants  or  consumers on a spot sale
basis.  The Company's zinc production is sold in the form of concentrates  under
contracts of one to two years duration.  Silver is sold under monthly  contracts
or in spot sales.  Except for some  consolidated  subsidiaries,  primarily SPCC,
sales  prices are based on the average of  prevailing  commodity  prices for the
scheduled month of delivery or shipment according to the terms of the contracts.
SPCC  revenues  represent the invoiced  value of products  shipped to customers.
Price  estimates  used  for   provisionally   priced   shipments  are  based  on
management's  judgment of the current price level which is susceptible to change
during the settlement period.



<PAGE>
A34

Depending on the metal market fundamentals and other conditions, the Company may
enter into forward sales or purchase  options to reduce or eliminate the risk of
metal  price  declines  on its  anticipated  future  production.  Forward  sales
establish  a selling  price for future  production  at the time they are entered
into,  thereby  eliminating  the risk of declining  prices but also  eliminating
potential  gains  on price  increases.  Put  options  purchased  by the  Company
establish  a minimum  price for the  production  covered by such put options and
permit the Company to participate in price  increases  above the strike price of
such put options.  At December 31, 1995, the Company had copper put options with
an  average  strike  price of 98.8  cents per  pound  covering  160,469  tons or
approximately 47% of Asarco's expected 1996 domestic copper production. The cost
of  acquiring  these puts was $5.7  million.  Copper put options with an average
strike  price of $1.00 per pound  covering  19,511 tons or  approximately  6% of
Asarco's  expected 1997 domestic  copper  production  were acquired at a cost of
$1.1  million.  The cost of the put  options is  amortized  during the period in
which the options are exercisable.

In addition,  at December 31, 1995,  SPCC had copper put options with an average
strike price of 95.8 cents per pound covering 129,218 tons or approximately  40%
of its expected  1996 copper  production.  The cost of acquiring  these puts was
$3.2 million.

The pre-tax earnings effect of the Company's derivative and anticipatory hedging
activities,  net of  transaction  costs,  was a loss of $5.6 million in 1995 and
gains of $5.7 million and $19.2 million in 1994 and 1993, respectively.  In 1993
the Company  hedged all of its  anticipated  zinc mine  production at an average
price of 55 cents per pound resulting in a gain of $15.5 million.

Cost of  Products  and  Services:  Cost of  products  and  services in 1995 were
$2,330.3  million compared with $1,780.3 million in 1994 and $1,637.3 million in
1993. The increase in 1995 reflected $421.1 million due to the  consolidation of
SPCC and higher specialty chemicals costs due to increased sales volumes and the
writedown of certain  in-process  inventory to net realizable  value  associated
with the termination of lead refining  operations at Omaha.  The higher price of
outside  copper  purchases in 1995 was  partially  offset by the lower volume of
such copper purchases as a result of an increase in sales of copper mined by the
Company.  The increase in 1994 over 1993 was caused principally by higher volume
and price of refined copper  purchases to meet customer  demand and higher costs
in specialty chemicals due to increased sales volume.  These cost increases were
partially  offset by  reduced  operating  costs and by lower  costs due to asset
sales. The Company's cost for purchased  refined copper  approximates the market
price at which it is sold.  Previously  unrecognized  losses of Nor Peru of $8.2
million are included in cost of products and services in 1993.

Other  Expenses:  Selling,  administrative  and other costs  increased  by $51.7
million in 1995 after having decreased by $9.1 million in 1994. The increase was
primarily due to the  consolidation  of SPCC and higher selling expenses related
to the  specialty  chemicals  business.  The decrease in 1994 was  principally a
result of cost reduction  programs.  Also included in 1994 is a recovery of $4.0
million  from the  settlement  of  litigation  related to a bad debt  previously
written off in 1991.  Depreciation  and  depletion  expense  increased  by $35.7
million in 1995 primarily due to the consolidation of SPCC.

Nonoperating  Items:  Interest expense  increased by $29.4 million in 1995 after
having  increased by $5.2 million in 1994. The increase in 1995 reflected  $13.9
million due to the  consolidation  of SPCC,  higher debt  outstanding and higher
interest rates on short term borrowing.  Lower capitalized  interest as a result
of the  completion  of the El  Paso  modernization  program  in  1994  increased
interest  expense by $2.8 million in 1994.  The remaining  increase in 1994 is a
result of a higher level of borrowing.

Other  income  in  1995  reflects  an  increase  of  $16.1  million  due  to the
consolidation  of SPCC and a  pre-tax  loss of $4.0  million  on the sale of the
Company's stock in Nor Peru, which owned and operated the Quiruvilca mine in the
northern part of Peru and the sale of its Lone Star Lead Construction  business.
Included in other income are  dividends  from SPCC and MIM Holdings as described
in Note 3 to the  Financial  Statements.  The  increase  in  minority  interests
reflects the consolidation of SPCC.



<PAGE>
A35

Taxes on Income:  The Company's  effective tax rate was lower than the statutory
rate primarily because of deductions for percentage  depletion and the dividends
received deduction which are permitted for tax purposes.  The effective tax rate
was higher in 1995 primarily due to the consolidation of SPCC. Taxes in 1994 and
1993 were  affected by a higher  gain for tax  purposes on the sale of shares of
Asarco Australia,  as a result of providing taxes on earnings previously treated
as permanently reinvested while Asarco Australia was a consolidated  subsidiary.
The tax benefit in 1993  resulted  principally  from an  operating  loss and the
effect of adoption by SPCC of SFAS No. 109.  Net  operating  loss  carryforwards
have reduced the Company's  deferred tax liability by $191.8 million at December
31, 1995. The Company believes that these  carryforwards,  which expire in years
2006 through 2010,  will reduce future  federal income taxes  otherwise  payable
and,  if  necessary,   the  Company  could  implement   available  tax  planning
strategies,  including the sale of certain assets, to realize the tax benefit of
the carryforwards.

Equity in Earnings of Nonconsolidated  Associated Companies:  Equity earnings in
1994 and 1993 are  principally  from SPCC.  SPCC  contributed  $44.9  million of
after-tax  equity  earnings in 1994.  Concurrent  with the  resumption of equity
accounting  for the  Company's  interest  in SPCC,  the Company  recorded  $26.4
million after-tax in 1993 of previously unrecognized net earnings from the years
1988 through 1993. The Company has consolidated the financial statements of SPCC
in its financial statements effective January 1, 1995.

Cash Flows - Operating  Activities:  Net cash provided from operating activities
was $499.9 million in 1995 compared with net cash used for operating  activities
of $9.8 million in 1994 and net cash provided from operating activities of $38.9
million in 1993. The  improvement in 1995 from 1994 reflected the  consolidation
of SPCC and higher  earnings  partially  offset by an  increase in cash used for
closed  plants and  environmental  matters,  primarily at the  Company's  former
Tacoma, Washington smelter.

The change in net cash  provided  from (used for)  operating  activities in 1994
from 1993 was  principally  due to the  effect of higher  metal  prices on trade
receivables  and  inventories  partially  offset by trade  payable  financing on
outside material purchases.

Cash Flows - Investing  Activities:  Net cash used for investing  activities was
$296.8 million in 1995,  compared with $3.1 million in 1994 and $75.9 million in
1993.  The  increase  in 1995  capital  spending  reflected  the  effects of the
consolidation  of SPCC which had  spending  of $183  million.  Spending on major
projects  in 1995  included  $77.0  million  for the  construction  of a solvent
extraction/electrowinning   (SX/EW)   facility   at  SPCC's   Toquepala   mining
operations,  $36.3  million  for the  construction  of a sulfuric  acid plant at
SPCC's Ilo, smelting facility and $28.4 million in mine development costs at the
Company's  Ray and Mission  copper mines.  In addition,  the  acquisition  of an
additional 10.7% interest in SPCC for $116.4 million was partially offset by the
cash  effect of  consolidating  SPCC's  opening  cash  balance.  The  release of
restricted  cash of $60.5 million in 1995  represents  the withdrawal by SPCC of
funds deposited with the Central Reserve Bank of Peru,  pursuant to an agreement
with the  government  of Peru,  under  which SPCC agreed to use such funds in an
investment program over five years from 1992 through 1996. Capital  expenditures
in 1993 include $23.8 million for the  completion of the El Paso copper  smelter
modernization  begun  in 1990  at a total  cost  of  $102.3  million,  including
capitalized interest of $9.6 million. The Company's planned capital expenditures
in 1996 are estimated to be about $260 million.

The Company adopted SFAS No. 115,  "Accounting  for Certain  Investments in Debt
and Equity Securities" in 1993, which increased  stockholders'  equity by $112.7
million after-tax in 1993. The adjustment to stockholders' equity was reduced by
$21.1 million  after-tax to $91.6 million in 1994 and increased by $40.0 million
after-tax to $131.6 million in 1995  principally to reflect the changes in value
of the  Company's  available-for-sale  securities.  Proceeds  and  purchases  of
available-for-sale  securities principally represent the investment portfolio of
Geominerals Insurance Company,  Ltd., a wholly-owned  subsidiary,  which for the
most part is reinvested by purchasing additional securities.

Proceeds of $79.5  million in 1994 and $13.8  million in 1993,  from the sale of
Asarco Australia are included in "Sale of securities, investments and property".



<PAGE>
A36

In early 1996,  the Company began  construction  of a new SX/EW  facility at its
Silver Bell mine in Arizona.  The SX/EW  facility  will  produce  18,000 tons of
copper cathode per year using leach mining  techniques.  The cost of the project
is estimated at $70 million with an estimated  construction period of 18 months.
The project is being  developed in partnership  with Mitsui & Co.,  Ltd.,  which
purchased a 25%  interest  in Silver  Bell in early 1996.  The Company has a 75%
interest and will be the manager and operator for the project.

Liquidity and Capital Resources: The Company has two revolving credit agreements
that  permit  borrowings  of up to $670  million.  At  December  31,  1995,  the
Company's  debt as a  percentage  of total  capitalization  (the  total of debt,
minority interests and equity) was 34.1%, compared with 38.1% at the end of 1994
and 38.0% at the end of 1993.  Consolidated debt at the end of 1995 was $1,121.9
million,  compared with $933.1 million in 1994 and $900.5 million in 1993.  Debt
has increased $93.9 million due to the  consolidation of SPCC and $116.4 million
due  to the  purchase  of an  additional  10.7%  interest  in  SPCC.  Additional
indebtedness  permitted  under  the  terms of the  Company's  credit  agreements
totaled  $401  million  at the end of 1995,  $330  million  available  under the
revolving credit loan agreements and $71 million from additional debt financing.

In the  second  quarter  of  1995,  the  Company  sold  $150  million  of 8 1/2%
debentures  due May 1, 2025. The sale was made under an Asarco  universal  shelf
registration statement filed with the U.S. Securities and Exchange Commission in
October,  1994,  for up to $300  million of  securities.  The  Company  used the
proceeds  to repay  revolving  credit  bank  borrowings.  Borrowings  under  the
revolving  credit  agreements  were used to fund the  purchase of an  additional
10.7% interest in SPCC on April 5, 1995, and for general corporate purposes.

Debt securities in the amount of $250 million were issued in 1993 including $100
million of 7 3/8% Notes due in 2003,  $100 million of 7 7/8%  Debentures  due in
2013 and $50 million of 7% Notes due in 2001. Proceeds of these debt issues were
used to reduce borrowings under the Company's revolving credit loan agreements.

Financing activities in 1995 also include a $15 million 5 year bank term loan at
a rate of 6.8% used  primarily to prepay $13.5  million of the  Company's 8 3/4%
pollution  control  revenue  bonds at par value  plus a premium  of 1.5%,  a net
repayment of $49.2  million of the  Company's  revolving  credit and  short-term
loans,  the  prepayment  by  SPCC of  $77.0  million,  substantially  all of the
outstanding balance,  under its $115 million credit facility,  and the borrowing
of $35 million under a loan agreement with the Export- Import Bank of the United
States  at a fixed  interest  rate of 6.43%  for use in its  capital  investment
program.  Financing  activities  in the  first  quarter  of 1994,  included  the
prepayment of the  Company's 9 3/4% Sinking Fund  Debentures at par value plus a
premium of .9%.

The Company's  consolidated  cash position at December 31, 1995 includes  $219.6
million of cash held by SPCC.  The  Company  expects  that it will meet its cash
requirements in 1996 and beyond from internally  generated  funds,  cash on hand
and from  borrowings  under its revolving  credit  agreements or from additional
debt or equity financing.

Dividends and Capital Stock:  The Company paid dividends to common  stockholders
of $29.6 million, or 70 cents per share, in 1995, $16.8 million, or 40 cents per
share,  in 1994 and $20.8 million,  or 50 cents per share, in 1993. In addition,
SPCC paid  dividends of $33.8 million to minority  interests in 1995. At the end
of 1995,  the Company  had  42,571,000  common  shares  issued and  outstanding,
compared with 42,102,000 at the end of 1994 and 41,718,000 at the end of 1993.

Closed Facilities and Environmental Matters: During 1995, the reserve for closed
plants and  environmental  matters  was  increased  by $69.9  million  for costs
associated  with  previously  closed  facilities  and  the  termination  of lead
refining at the Company's Omaha, Nebraska refinery. During 1994, the reserve for
environmental  matters was increased by $51.2 million for ongoing evaluations of
environmental costs and to accommodate resolutions reached at a number of sites,
particularly at Asarco's former smelter in Tacoma, Washington.



<PAGE>
A37

At December 31, 1995,  the reserve for closed  plant and  environmental  matters
totaled $115.5 million. Net cash expenditures charged to these reserves were $77
million  in  1995,  $45  million  in  1994  and  $44  million  in  1993.  Future
environmental  related  expenditures  cannot  be  reliably  determined  in  many
circumstances  due to the  early  stages  of  investigation,  the  uncertainties
relating to specific  remediation methods and costs, the possible  participation
of other potentially  responsible  parties and changing  environmental  laws and
interpretations.  It is the  opinion  of  Management  that the  outcome of these
environmental  matters  will  not  materially  adversely  affect  the  financial
position of Asarco and its consolidated  subsidiaries.  However,  it is possible
that  future  environmental  contingencies  could  have  a  material  effect  on
quarterly or annual operating  results when they are resolved in future periods.
This opinion is based on considerations including experience related to previous
court judgments and settlements and remediation  costs and terms.  The financial
viability of other  potentially  responsible  parties has been  considered  when
relevant and no credit has been assumed for any potential  insurance  recoveries
when the availability of insurance has not been determined.

Accounting Matters: The Financial Accounting Standards Board issued SFAS No. 123
"Accounting  for  Stock-Based  Compensation"  in October  1995.  The  Company is
currently  assessing the impact of this  statement,  which will be effective for
financial  statements issued for fiscal years beginning after December 15, 1995.
The Company has a choice of adopting the  accounting  provisions of SFAS No. 123
or continuing its current accounting with additional disclosure required.




<PAGE>
A38

Item 8 - Financial Statements and Supplementary Data

                               ASARCO Incorporated
                                and Subsidiaries
                       CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
For the years ended December 31,                                         1995                   1994                1993
                                                                         ----                   ----                ----
(in thousands, except per share amounts)
<S>                                                             <C>                  <C>                   <C>

Sales of products and services                                        $ 3,197,753           $ 2,031,846          $ 1,736,358
                                                                      -----------           -----------          -----------

Operating costs and expenses:
 Cost of products and services                                          2,330,268             1,780,332            1,637,266
 Selling, administrative and other                                        130,871                79,136               88,249
 Depreciation and depletion                                               118,827                83,097               80,641
 Research and exploration                                                  25,881                19,775               20,871
 Provision for asset impairments and plant closures                        45,564                     -               13,156
 Provision for environmental matters                                       59,200                51,205                6,241
                                                                        ---------             ---------            ---------
Total operating costs and expenses                                      2,710,611             2,013,545            1,846,424
                                                                        ---------             ---------            ---------

Operating income (loss)                                                   487,142                18,301             (110,066)
Interest expense                                                          (91,954)              (62,529)             (57,321)
Other income                                                               24,136                12,281               19,961
Gain from sale by Asarco Australia
 of capital stock                                                               -                     -                3,270
Gain on sale of Asarco Australia                                                -                58,512               10,286
                                                                         --------              --------             --------
Earnings (loss) before taxes, minority interests, 
 equity earnings and cumulative effect of change in
 accounting principles                                                    419,324                26,565             (133,870)
Taxes on income (benefit)                                                 122,465                 9,375              (36,503)
                                                                         --------               -------            ---------

Earnings (loss) before minority interests, equity
 earnings and cumulative effect of change in accounting
 principles                                                               296,859                17,190              (97,367)
Minority interests in net earnings of consolidated
  subsidiaries                                                           (129,543)                 (809)                (693)
Equity in earnings of nonconsolidated associated companies,
  net of taxes of $451 in 1995, $4,863 in 1994 and $406
  in  1993                                                                  1,837                47,653               27,384
                                                                       ----------            ----------           ----------
Earnings (loss) before cumulative effect of change in
  accounting principles                                                   169,153                64,034              (70,676)
Cumulative effect of change in accounting principles                            -                     -               86,295
                                                                      -----------            ----------           ----------
Net earnings                                                          $   169,153            $   64,034           $   15,619
                                                                      ===========            ==========           ==========

Per share amounts:
Earnings (loss) before cumulative effect of change in
  accounting principles                                               $      4.00            $     1.53           $    (1.70)
Cumulative effect of change in accounting principles                            -                     -                 2.08
                                                                      -----------            ----------           ----------
Net earnings                                                          $      4.00            $     1.53           $     0.38
                                                                      ===========            ==========           ==========

Dividends to common stockholders                                      $      0.70            $     0.40           $     0.50
Weighted average number of shares outstanding                              42,326                41,905               41,594

</TABLE>

The accompanying notes are an integral part of these financial statements.



<PAGE>
A39
                               ASARCO Incorporated
                                and Subsidiaries
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
At December 31,                                                                        1995                1994
                                                                                       ----                ----
(in thousands)
<S>                                                                        <C>                  <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                       $   238,400         $    18,321
  Marketable securities                                                                42,493                   -
  Accounts receivable:
     Trade, net of allowance for doubtful accounts of $7,409 and $6,249               456,955             355,666
     Other                                                                             57,413              28,058
  Inventories                                                                         360,861             299,148
  Other assets                                                                         60,480              46,124
                                                                                  -----------          ----------
     Total current assets                                                           1,216,602             747,317
                                                                                  -----------          ----------
Investments:
  Cost and available-for-sale                                                         822,152             751,888
  Equity                                                                               61,758             391,489
                                                                                  -----------          ----------
     Total investments                                                                883,910           1,143,377
                                                                                  -----------          ----------
Property, net                                                                       2,110,266           1,305,499
Intangible and other assets, net                                                      115,945              94,832
                                                                                  -----------         -----------
        Total Assets                                                              $ 4,326,723         $ 3,291,025
                                                                                  ===========         ===========
LIABILITIES
Current liabilities:
  Bank loans                                                                      $    29,451         $     5,125
  Current portion of long-term debt                                                    29,826              13,330
  Accounts payable:
     Trade                                                                            273,027             253,114
     Other                                                                             56,950              43,869
  Salaries and wages                                                                   33,815              20,159
  Taxes on income                                                                     103,282              43,152
  Reserve for closed plant and environmental matters                                   53,042              55,946
  Other current liabilities                                                            72,254              30,838
                                                                                   ----------           ---------
     Total current liabilities                                                        651,647             465,533
                                                                                   ----------           ---------
Long-term debt                                                                      1,062,588             914,601
Deferred income taxes                                                                 211,270             156,450
Reserve for closed plant and environmental matters                                     62,484              66,458
Postretirement benefit obligation                                                      95,125              95,186
Other liabilities and reserves                                                         72,225              72,967
                                                                                   ----------           ---------
     Total non-current liabilities                                                  1,503,692           1,305,662
                                                                                   ----------           ---------
Contingencies

MINORITY INTERESTS                                                                    463,900               2,443
                                                                                   ----------           ---------
PREFERRED STOCKHOLDERS' EQUITY
Authorized - 10,000,000 shares without par value; none issued                               -                   -
COMMON STOCKHOLDERS' EQUITY
Authorized - 80,000,000 common shares without par value: Issued shares:
    1995 and 1994 - 45,039,878                                                        679,991             679,991
Unrealized gain on securities reported at fair value, net of tax                      131,600              91,627
Retained earnings                                                                     976,107             853,169
Treasury stock (at cost) - common shares 1995 - 2,469,125;
    1994 - 2,937,788                                                                  (80,214)           (107,400)
                                                                                  -----------          ----------
        Total Common Stockholders' Equity                                           1,707,484           1,517,387
                                                                                  -----------          ----------
        Total Liabilities, Minority Interests, Preferred and Common
              Stockholders' Equity                                                $ 4,326,723         $ 3,291,025
                                                                                  ===========         ===========

</TABLE>
The accompanying notes are an integral part of these financial statements.


<PAGE>
A40

                               ASARCO Incorporated
                                and Subsidiaries
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,                                                     1995              1994               1993
                                                                                     ----              ----               ----
(in thousands)
<S>                                                                            <C>               <C>                <C>

OPERATING ACTIVITIES
Net earnings                                                                        $ 169,153          $  64,034         $  15,619
Adjustments to reconcile net earnings to net cash provided from (used for)
  operating activities:
  Depreciation and depletion                                                          118,827             83,097            80,641
  Provision (benefit) for deferred income taxes                                            97             10,084           (19,639)
  Treasury stock used for employee benefits                                             4,775              5,964             4,743
  Undistributed equity earnings                                                          (460)           (38,214)          (26,114)
  Net (gain) loss on sale of investments and property                                   4,124            (59,837)          (18,823)
  Cumulative effect of change in accounting principles                                      -                  -           (86,295)
  Provision for asset impairment                                                       34,864                  -                 -
  Increase (decrease) in reserves for closed plant
    and environmental matters                                                          (6,878)             6,301           (24,856)
  Minority interests                                                                  129,543                809               693
  Cash provided  from (used for)  operating  assets and  liabilities,
    net of the consolidation of SPCC:
      Accounts receivable                                                             (36,867)           (70,673)           21,765
      Inventories                                                                      48,842            (53,171)           37,462
      Accounts payable and accrued liabilities                                         19,671             45,584            42,231
      Other operating assets and liabilities                                           19,724             (6,174)           10,747
      Foreign currency transaction (gains) losses                                      (5,536)             2,369               687
                                                                                    ---------          ---------          --------

Net cash provided from (used for) operating
 activities                                                                           499,879             (9,827)           38,861
                                                                                    ---------          ---------          --------

INVESTING ACTIVITIES
Capital expenditures                                                                 (337,831)           (98,464)         (112,315)
Sale of securities, investments and property                                            9,966             94,808           176,024
Sale of available-for-sale securities                                                  20,953            177,264                 -
Proceeds from held-to-maturity investments                                             76,877                  -                 -
Purchase of available-for-sale securities                                             (23,203)          (175,712)                -
Purchase of held-to-maturity investments                                              (76,375)                 -                 -
Purchase of investments                                                                (4,513)              (959)         (139,592)
Release of restricted cash                                                             60,450                  -                 -
Acquisition of additional interest in SPCC                                           (116,444)                 -                 -
Consolidation of the opening cash balance of SPCC                                      93,348                  -                 -
                                                                                    ---------           --------         --------- 

Net cash used for investing activities                                               (296,772)            (3,063)          (75,883)
                                                                                    ---------           --------         ---------

FINANCING ACTIVITIES
Debt incurred                                                                         234,449            115,058           387,788
Debt repaid                                                                          (162,892)           (82,752)         (349,371)
Net treasury stock transactions                                                         6,754              4,418               321
Dividends to minority interests                                                       (33,828)                 -                 -
Dividends to common stockholders                                                      (29,645)           (16,765)          (20,792)
                                                                                     --------           --------          --------
Net cash provided from financing activities                                            14,838             19,959            17,946
Effect of exchange rate changes on cash                                                 2,134             (1,248)           (1,672)
                                                                                     --------           --------          --------
Increase (decrease) in cash and cash equivalents                                      220,079              5,821           (20,748)
Cash and cash equivalents at beginning of year                                         18,321             12,500            33,248
                                                                                    ---------          ---------         ---------
Cash and cash equivalents at end of year                                            $ 238,400          $  18,321         $  12,500
                                                                                    =========          =========         =========

</TABLE>
The accompanying notes are an integral part of these financial statements.



<PAGE>
A41

                               ASARCO Incorporated
                                and Subsidiaries
                      CONSOLIDATED STATEMENT OF CHANGES IN
                           COMMON STOCKHOLDERS' EQUITY
                                    <TABLE>
<CAPTION>
For the years ended December 31,                                         1995                 1994                 1993
                                                                         ----                 ----                 ----
(in thousands)
<S>                                                            <C>                  <C>                  <C>

COMMON STOCK
Balance at beginning and end of year
  45,039,878 shares                                                     $ 679,991           $  679,991           $  679,991
                                                                        ---------           ----------           ----------

UNREALIZED GAIN ON SECURITIES REPORTED
  AT FAIR VALUE
Balance at beginning of year                                               91,627              112,729                    -
At adoption of SFAS No. 115                                                     -                    -              112,729
Net increase (decrease) in fair value                                      39,973              (21,102)                   -
                                                                        ---------            ---------             --------
Balance at end of year                                                    131,600               91,627              112,729
                                                                        ---------            ---------             --------

RETAINED EARNINGS
Balance at beginning of year                                              853,169              808,143              821,072
Net earnings                                                              169,153               64,034               15,619
Dividends to common stockholders                                          (29,645)             (16,765)             (20,792)
Treasury stock issued at less than cost                                   (15,656)             (11,484)              (9,243)
Foreign currency adjustment                                                  (914)               9,241                1,487
                                                                        ---------            ---------            ---------
Balance at end of year                                                    976,107              853,169              808,143
                                                                        ---------            ---------            ---------

TREASURY STOCK
Balance at beginning of year                                             (107,400)            (129,265)            (143,570)
Purchased                                                                  (1,130)                (245)                (127)
Used for corporate purposes                                                28,316               22,110               14,432
                                                                        ---------            ---------            ---------
Balance at end of year                                                    (80,214)            (107,400)            (129,265)
                                                                        ---------            ---------            ---------
  1995 - 2,469,125 shares;
  1994 - 2,937,788 shares;
  1993 - 3,321,478 shares

TOTAL COMMON STOCKHOLDERS' EQUITY                                      $1,707,484           $1,517,387           $1,471,598
                                                                       ==========           ==========           ==========

</TABLE>

The accompanying notes are an integral part of these financial statements.



<PAGE>
A42

ASARCO Incorporated and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1) Summary of Significant Accounting Policies

Principles of  Consolidation:  The consolidated  financial  statements of Asarco
Incorporated and Subsidiaries (the Company) include all significant wholly-owned
and  majority-owned  subsidiaries.   Investments  over  which  the  Company  has
significant  influence but does not have voting control are accounted for by the
equity method.  Certain prior year amounts have been  reclassified to conform to
the current year's presentation.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Cash Equivalents:  Cash equivalents include all highly liquid investments with a
maturity of three months or less, when purchased.

Marketable  securities:  Marketable securities include liquid investments with a
maturity of more than three  months,  when  purchased,  and are carried at cost,
which approximates market.

Inventories:  Company-owned metals processed by domestic smelters and refineries
are valued at the lower of last-in,  first-out  (LIFO) cost or market.  Southern
Peru Copper  Corporation  (SPCC)  in-process and refined metal  inventories  are
valued at the lower of average cost or market.  All other inventories are valued
at the lower of first-in, first-out (FIFO) or average cost or market.

Property:  Assets  are  valued at cost or net  realizable  value.  In the fourth
quarter of 1995, the Company adopted SFAS No. 121 "Accounting for the Impairment
of  Long-Lived  Assets  and for  Long-Lived  Assets  To Be  Disposed  Of".  This
statement requires that long-lived assets, certain identifiable  intangibles and
goodwill  related to those assets be reviewed for impairment  whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be recoverable. The impairment loss on such assets, as well as long-lived assets
and  certain  identifiable  intangibles  to be  disposed  of, is measured as the
amount by which the carrying  value of the assets  exceeds the fair value of the
assets.

The Company evaluates the carrying value of assets based on undiscounted  future
cash flows and for its metals segment also considers expected metal prices based
on historical metal prices and price trends.

Betterments, renewals, costs of bringing new mineral properties into production,
and the cost of major development  programs at existing mines are capitalized as
mineral land. Maintenance,  repairs, development costs to maintain production at
existing  mines,  and gains or losses on assets retired or sold are reflected in
earnings as incurred.  Plant assets are depreciated  over their estimated useful
lives, generally by the units-of-production  method.  Depreciation and depletion
of mine assets are computed  generally by the  units-of-production  method using
proven and probable ore reserves.  SPCC computes  depreciation  on its buildings
and equipment using the  straight-line  method over estimated lives from 5 to 40
years, or the estimated life of the mine, if shorter.

Goodwill  is  amortized  over the  mine  life up to a  maximum  of 40 years on a
units-of-production  basis  or over  40  years  on a  straight-line  basis,  for
non-mining assets.



<PAGE>
A43


Revenue  Recognition:  Substantially  all  of  the  Company's  copper  and  lead
production is sold under annual  contracts.  To the extent not sold under annual
contracts,  production  can be sold on  commodity  exchanges  or to merchants or
consumers on a spot sale basis.  The  Company's  zinc  production is sold in the
form of concentrates  under  contracts of one to two years  duration.  Silver is
sold under  monthly  contracts  or in spot sales.  Except for some  consolidated
subsidiaries,  primarily  SPCC,  revenue is  recognized  based on the average of
prevailing  commodity  prices for the  scheduled  month of  delivery or shipment
according to the terms of the  contracts.  SPCC revenues  represent the invoiced
value of products shipped to customers.  Price estimates used for  provisionally
priced  shipments are based on management's  judgment of the current price level
which is susceptible to change during the settlement period.

Hedging  Programs:  The Company does not acquire or issue  derivative  financial
instruments  for trading  purposes.  Depending on the market  fundamentals  of a
metal and other conditions, the Company may enter into forward sales or purchase
put or call options to reduce or eliminate  the risk of metal price  declines on
its  anticipated  future  production.  The cost of  options  is  amortized  on a
straight-line basis during the period in which the options are exercisable.  The
Company  also uses futures  contracts to hedge the effect of price  changes on a
portion of the metals it sells. Gains and losses on hedge contracts are reported
as a component of the underlying transaction.

The Company may enter into interest rate swap  agreements to limit the effect of
increases in the interest rates on any floating rate debt. The  differential  is
accrued as interest rates change and is recorded in interest expense.

Exploration:  Tangible and  intangible  costs incurred in the search for mineral
properties are charged against earnings when incurred.

Taxes on Income:  Deferred  income taxes reflect the future tax  consequences of
differences  between the tax bases of assets and liabilities and their financial
reporting  amounts at each year end.  No U.S.  deferred  income  taxes have been
provided for the income tax liability which would be incurred on repatriation of
the undistributed  earnings of the Company's  consolidated  foreign subsidiaries
and the undistributed earnings of SPCC prior to 1993 because the Company intends
indefinitely  to reinvest  these  earnings  outside the United  States.  General
business credits are accounted for by the flow-through method.

Subsidiary  Stock Issuance:  Gains or losses arising from the sale of previously
unissued  shares to an unrelated  party by a subsidiary  are  recognized  in net
earnings to the extent that the net book value of the shares owned by the parent
after the sale exceeds or is lower than the net book value per share immediately
prior to the sale of the shares by the subsidiary.

Impact of New Accounting  Standard:  The Financial  Accounting  Standards  Board
issued SFAS No. 123 "Accounting for Stock-Based  Compensation"  in October 1995.
The Company is currently  assessing the impact of this statement,  which will be
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 1995.  In  accordance  with this  pronouncement,  the Company has a
choice of adopting the  accounting  provisions of SFAS No. 123 or continuing its
current accounting with additional disclosure required.




<PAGE>
A44

(2) Interest in Southern Peru Copper Corporation:

Acquisition of Additional Interest:

On April 5, 1995, the Company  acquired an additional 10.7% interest in SPCC for
$116.4  million,  increasing  its  ownership  from 52.3% to 63%. The  additional
shares  acquired  enabled the Company to elect a majority  of the  directors  of
SPCC. As a result, the Company has consolidated the financial statements of SPCC
in its financial  statements based on its 52.3% ownership,  effective January 1,
1995,  and 63%  ownership,  effective  April 5,  1995.  The  Company  previously
accounted for its investment in SPCC by the equity method.  The  acquisition has
been accounted for as a purchase  transaction.  The excess of the purchase price
over the Company's  interest in the net book value of SPCC  attributable  to the
shares  acquired  of $46.4  million is  estimated  to be  assigned to proven and
probable  sulfide  reserves,   proven  and  probable   leachable   reserves  and
mineralized material and is amortized based on production.

The  table  below  summarizes   unaudited  pro  forma  consolidated  results  of
operations  of Asarco for the years ended  December 31, 1995 and 1994,  assuming
that Asarco had acquired an additional 10.7% of the outstanding stock of SPCC on
January 1, 1995 and  January  1, 1994,  respectively.  The  unaudited  pro forma
financial  information is based on  management's  estimates and  assumptions and
does not purport to represent the results that  actually  would have occurred if
the acquisition had, in fact, been completed on the dates assumed.

<TABLE>
<CAPTION>
          Pro Forma Results of Operations:
          (in millions, except per share amounts)                                    1995           1994
                                                                                     ----           ----
          <S>                                                                   <C>            <C>

          Sales of products and services                                            $3,197.8       $2,700.6
          Net earnings                                                                $172.2          $67.3
          Net earnings per common share                                                $4.07          $1.61
</TABLE>

Common Share Exchange Offer:

On December 29, 1995, SPCC completed an offer to exchange its common stock,  par
value of $0.01 per share, for any and all labor shares of the Peruvian Branch of
SPCC.  These  labor  shares,  which  are  traded  on the  Lima  stock  exchange,
represented   a  17.3%   interest  in  the  Peruvian   Branch  which   comprises
substantially  all of the operations of SPCC in Peru. The offer allowed  holders
of the labor shares in the Branch to exchange four Series-1 Labor shares or five
Series-2 Labor shares for one share of common stock.  Common shares are entitled
to one vote per share. In connection with the offering the Company exchanged its
shares for Class A shares  which are  entitled  to five  votes per  share.  As a
result of this transaction, Asarco's equity interest in SPCC has been reduced to
approximately  54.0%. The Company's economic interest in the assets of SPCC, net
of the remaining  labor share  interest,  is 52.3%.  The common shares issued in
exchange  for the labor  shares are  listed on both the New York and Lima,  Peru
stock exchanges.

The exchange of common  shares for labor shares was  accounted  for by SPCC as a
purchase of a minority  interest.  The value of the common  stock  issued in the
exchange  (based on the average per share trading  value for the three  business
days ending  January 9, 1996) plus issuance costs exceeded the carrying value of
the minority interests  acquired by $82.0 million,  net of tax. This increase in
value is  estimated  to be  assigned  by SPCC to  proven  and  probable  sulfide
reserves,  proven and probable leachable  reserves and mineralized  material and
will be amortized  based on production.  Asarco's share of the increase in value
($30.4 million, net of tax) has been eliminated in consolidation.  The Company's
balance sheet at December 31, 1995, reflects the effect of this transaction.




<PAGE>
A45

(3) Other Income
<TABLE>
<CAPTION>
For the years ended December 31,                                  1995              1994             1993
                                                                  ----              ----             ----
(in millions)
<S>                                                          <C>              <C>               <C>

Dividend income                                                    $  9.2          $  9.4           $ 17.8
Interest income                                                      16.5             2.5              2.0
Other                                                               (1.6)              .4               .2
                                                                   ------          ------           ------
  Total                                                            $ 24.1          $ 12.3           $ 20.0
                                                                   ======          ======           ======
</TABLE>

(4) Taxes on Income

Certain  subsidiaries  that  have  been  consolidated  for  financial  reporting
purposes,  principally SPCC, are not includible in Asarco's consolidated federal
income tax return.  The following  tables  combine the separate  provisions  for
income taxes that have been determined for each company, in accordance with SFAS
No. 109:

Earnings (loss) before taxes on income and minority interests is as follows:
<TABLE>
<CAPTION>
For the years ended December 31,                                     1995              1994             1993
                                                                     ----              ----             ----
(in millions)
<S>                                                         <C>               <C>              <C>
Domestic operations                                                $  24.7         $  (39.7)         $ (129.9)
Foreign operations                                                   396.9            118.8             110.1
                                                                   -------          --------         ---------
Total                                                              $ 421.6         $   79.1          $  (19.8)
                                                                   =======          ========         =========
</TABLE>

Tax Expense (Benefit):

The components of the provision (benefit) for taxes on income are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,                                         1995          1994          1993
                                                                         ----          ----          ----
(in millions)
<S>                                                                <C>           <C>           <C>
U.S. Federal:
  Current                                                               $  4.1        $ (0.3)      $(20.7)
  Deferred                                                                (3.1)         10.1        (19.6)
                                                                         -----         -----        ------
U.S. Federal                                                               1.0           9.8        (40.3)
                                                                         -----         -----        ------
Foreign and State:
  Current                                                                118.7           4.4          4.2
  Deferred                                                                 3.2             -            -
                                                                        ------        ------       ------
Foreign and state                                                        121.9           4.4          4.2
                                                                        ------        ------       ------
Total income tax                                                        $122.9        $ 14.2       $(36.1)
                                                                        ======        ======       ======
</TABLE>

Total taxes paid (refunded)  were: 1995 - $65.8 million;  1994-$(11.2)  million;
1993-$(3.1) million.

Reconciliation of Statutory Income Tax Rate:

<TABLE>
<CAPTION>
For the years ended December 31,                                                1995          1994            1993
                                                                                ----          ----            ----
<S>                                                                      <C>            <C>            <C>
U.S. statutory income tax rate (benefit)                                        35.0%          35.0%         (35.0%)
Adjustment for entities for which no U.S. tax
  is required                                                                   (0.3)          (0.6)          17.2
Percentage depletion                                                           (12.3)         (13.1)         (12.1)
Undistributed equity earnings of SPCC permanently invested                         -              -         (183.4)
Dividends from non-includible subsidiaries                                      11.0              -              -
Dividends received deduction                                                    (8.8)         (17.8)         (21.0)
Foreign taxes                                                                   28.3            4.4           15.4
Foreign tax credit                                                             (25.2)             -              -
Effect of increase in statutory tax rate on deferred tax liability                 -              -           15.6
Effect of net operating loss on foreign tax credits previously
    recognized                                                                     -              -           13.6
Excess of tax over book gain on sale of shares                                     -            8.0            6.1
Other                                                                            1.5            2.1            1.3
                                                                               -----          -----        --------
Effective income tax rate (benefit)                                            29.2%          18.0%         (182.3%)
                                                                               =====          =====        ========
</TABLE>


<PAGE>
A46

Temporary  differences and carryforwards which give rise to deferred tax assets,
liabilities and related valuation allowances are as follows:

Deferred Tax Assets (Liabilities)

<TABLE>
<CAPTION>
  At December 31,                                                                       1995               1994
                                                                                        ----               ----
  (in millions)
  <S>                                                                          <C>               <C>
  Current:
  Reserve for closed plant and environmental matters                                  $  12.3            $  20.5
  Inventories                                                                            13.7                8.9
  Other                                                                                   4.6                3.8
                                                                                      -------            -------
  Net deferred tax asset                                                              $  30.6            $  33.2
                                                                                      -------            -------

  Noncurrent:
  Tax effect of regular net operating losses                                          $ 191.8            $ 156.2
  Reserve for closed plant and environmental matters                                     27.2               21.2
  Postretirement benefit obligation                                                      33.3               33.3
  Alternative minimum tax credit carryforwards                                           12.3                6.8
  Foreign tax credit carryforwards                                                       87.3                6.7
  Previously taxed income                                                                 5.3                5.3
  Capitalized leases                                                                     29.1               32.2
  Pension obligation                                                                    (15.7)             (11.6)
  Property, plant and equipment                                                        (271.1)            (211.1)
  Investments - Grupo Mexico/MEDIMSA                                                   (137.2)             (93.8)
  Investments - MIM                                                                     (84.8)            (109.1)
  Other                                                                                   4.3               14.2
  Valuation allowance for deferred tax assets                                           (93.1)              (6.7)
                                                                                     --------           --------
  Net deferred tax liability                                                           (211.3)            (156.4)
                                                                                     --------           --------
  Total net deferred tax liability                                                    $(180.7)           $(123.2)
                                                                                     ========           ========
</TABLE>

At December  31,  1995,  the Company had $548.1  million of net  operating  loss
carryforwards  which  expire,  if unused,  in years 2006  through 2010 and $12.3
million of alternative  minimum tax credits ($5.8 million related to SPCC) which
are not subject to expiration.  The Company believes that, except as to the SPCC
credits,  these  carryforwards will be available to reduce future federal income
tax  liabilities  and has  recorded  the tax benefit of these  carryforwards  as
noncurrent  deferred tax assets.  The Company's net operating loss carryforwards
for state purposes are not significant and, therefore, have not been recorded as
deferred tax assets.

At December 31, 1995, the foreign tax credit  carryforwards  available to reduce
possible future U.S. income taxes amounted to  approximately  $87.3 million,  of
which  $80.8  million is  available  solely to SPCC and $6.5  million  solely to
Asarco.  Of the $87.3  million,  $15.8  million  expires in 1996,  $20.5 million
expires in 1998,  $24.9 million  expires in 1999,  and $26.1 million  expires in
2000.  Because of both the expiration dates and the rules governing the order in
which such  credits are taken,  it is  unlikely  that these  excess  foreign tax
credits will be utilized.  Accordingly, the Company has not recorded the benefit
of any foreign tax credit carryforwards.

The increase in the  valuation  allowance of $86.4  million from 1994 to 1995 is
primarily  attributable to the generation of foreign tax credits and alternative
minimum tax credits by SPCC.

U.S.  deferred tax liabilities  have not been provided on  approximately  $257.6
million  in 1995  ($251.9  million  in 1994  and  $267.0  million  in  1993)  of
undistributed  earnings of foreign  subsidiaries and nonconsolidated  associated
companies more than 50% owned,  because assets  representing  those earnings are
permanently  invested.  It is not  practicable to determine the amount of income
taxes that would be payable  upon  remittance  of assets  that  represent  those
earnings.  The amount of foreign  withholding  taxes that would be payable  upon
remittance of assets that represent  those earnings would be  approximately  $.5
million in 1995 ($.3 million in 1994 and $2.8 million in 1993).


<PAGE>
A47

(5) Inventories
<TABLE>
<CAPTION>
At December 31,                                                                     1995             1994
                                                                                    ----             ----
(in millions)
<S>                                                                        <C>               <C>
Inventories of smelters and refineries at lower of LIFO cost or market           $  12.9           $  12.5
Provisional cost of metals received from suppliers for which prices have
     not yet been fixed                                                             34.0              78.5
Mine inventories at lower of FIFO cost or market                                   111.1             119.8
Metal inventory at lower of average cost or market                                  35.2                 -
Materials and supplies at lower of average cost or market                          139.1              65.9
Other                                                                               28.6              22.4
                                                                                 -------          --------
         Total                                                                   $ 360.9          $  299.1
                                                                                 =======          ========
</TABLE>

Replacement cost exceeds inventories valued at LIFO cost by approximately $136.8
million in 1995 (1994-$143.2 million).  Liquidation of LIFO inventories resulted
in  pre-tax  earnings  of $.7  million  in 1995,  $2.8  million in 1994 and $9.2
million in 1993.

(6) Investments

The Company has  substantial  interests  in  associated  companies in Mexico and
Australia,  which are  engaged  principally  in mining,  smelting  and  refining
nonferrous  metals.  These  companies  are Grupo Mexico,  S.A.,  de C.V.  (Grupo
Mexico) and M.I.M.  Holdings  Limited (MIM). As discussed in Note 2, the Company
is  consolidating  the  financial  results of SPCC in its  financial  statements
effective January 1, 1995.

Grupo Mexico: In August 1994, the Company exchanged its 28.3% interest in Mexico
Desarrollo Industrial Minero S.A., de C.V. (MEDIMSA) for a 23.6% interest in the
publicly traded Grupo Mexico,  the assets of which are substantially the same as
MEDIMSA.  As part of the  restructuring,  the Company granted a 7-year option to
purchase part of its Grupo Mexico shares  aggregating  8.2% of Grupo Mexico at a
price of U.S.  $1.40  per  share  and  agreed  not to sell the  majority  of its
remaining  shares  until  August  1996 or until  an  international  offering  of
additional  shares is  completed by Grupo  Mexico.  The Company has the right to
participate  for up to 7.8% of the  690  million  total  shares  outstanding  at
December 31, 1995, to the extent there is in an international  offering by Grupo
Mexico.  The Company  accounts  for its  investment  in Grupo Mexico by the cost
method of  accounting  because it has little  influence  over the  operating and
financial activities of Grupo Mexico. The restriction on 104.2 million shares of
the   Company's   investment  in  Grupo  Mexico  will  expire  in  August  1996.
Accordingly,  these shares are accounted for as available-for-sale securities in
the December 31, 1995, financial statements.

SPCC: In 1988, the Company changed from the equity method of accounting for SPCC
to the cost method.  This change  followed the  deterioration  in the economy of
Peru, inflation and level of foreign exchange reserves, the economic uncertainty
for  the  near  term  outlook  and  the  foreign  exchange  restrictions  on the
remittance  of profits  then in place.  In  addition,  the Company  discontinued
consolidating  its interest in Corporacion  Minera Nor Peru, S.A. (Nor Peru) for
similar reasons. In 1993,  conditions stabilized and improved to the point where
the  Company  was able to reassert  influence  and act without the  governmental
oversight that previously  existed.  Economic and political  conditions improved
significantly  as indicated by the  ratification of a new constitution by voters
in Peru in October 1993 and the successful completion in December 1993 of SPCC's
financing of its then $445 million  capital  program.  Therefore,  in the fourth
quarter of 1993,  the Company  resumed  equity  accounting  and  recorded  $26.4
million  of  previously  unrecognized  equity  earnings  for  SPCC  and  resumed
consolidation  of Nor Peru by recording $8.2 million of previously  unrecognized
losses.



<PAGE>
A48

Effective  January 1, 1993,  SPCC adopted SFAS No. 109,  "Accounting  for Income
Taxes"  which  increased  retained  earnings as of January 1, 1993,  and reduced
deferred tax  liabilities  by $165 million.  Asarco's  share was $86.3  million,
which is reported as the cumulative effect of a change in accounting  principle.
See Note 2 for discussion of consolidation of SPCC effective January 1, 1995. In
the third quarter of 1995, the Company sold its interest in Nor Peru.

Asarco Australia Limited (Asarco Australia):  In August 1993, the Company sold a
9.9% interest in Asarco  Australia,  a gold mining subsidiary for $13.8 million.
The sale resulted in a pre-tax gain of  approximately  $10.3 million and reduced
the Company's  interest in Asarco  Australia to 49.8%. As a result of this sale,
the Company began to account for its  investment in Asarco  Australia  using the
equity method.  In September 1993,  Asarco Australia offered 13.3 million shares
of  previously  unissued  common  stock  to the  public,  resulting  in net cash
proceeds of 16.4 million Australian dollars. As a result of this share issuance,
the Company's ownership interest was reduced to 45.3% and a $3.3 million pre-tax
gain was recognized as the shares were sold at a price  exceeding the book value
per share of the Company's  investment.  In January  1994,  the Company sold its
remaining  45.3%  interest (66.5 million  shares) in Asarco  Australia for $79.5
million, which resulted in a pre-tax gain of $58.5 million.


Investment in Associated Companies
(in millions - U.S. dollars)
<TABLE>
<CAPTION>
    At December 31, 1995                                              MIM                  Grupo Mexico
    --------------------                                              ---                  ------------
    <S>                                                     <C>                       <C>

    Method of Accounting                                                  (a)                     (b)

    Asarco's Ownership                                                  15.1%                   23.6%
    Shares held                                                         243.0                   162.6
    Asarco's Carrying Value                                            $335.8                  $427.0

    Dividends to Asarco
    1995                                                               $  9.2                       -
    1994                                                                  9.3                       -
    1993                                                                  8.3                       -
</TABLE>

(a)   Investment classified as  available-for-sale  security under SFAS No. 115,
      and is reported at fair value,  including unrealized gain of $69.1 million
      before  deferred taxes of $24.1 million.  The unrealized  gain is based on
      the December 29, 1995,  closing market price of MIM's shares on the Sydney
      (Australia) Stock Exchange and is not necessarily indicative of the amount
      that may be realized in the event of a sale.

(b)   Under the terms of the agreement  with Grupo Mexico,  of the 162.6 million
      shares which the Company owns,  56.3 million  shares are  restricted as to
      their sale and therefore are carried at cost. The remaining  106.3 million
      shares, 2.1 million unrestricted shares and 104.2 million shares, on which
      restrictions  expire in August 1996, are classified as  available-for-sale
      and are  reported at fair value,  which  includes  an  unrealized  gain of
      $127.8 million before deferred taxes of $44.7 million. The unrealized gain
      is based on the December 29, 1995, closing market price of Grupo Mexico on
      the Mexican Stock Exchange, adjusted for the effect of the restrictions on
      sale, and is not necessarily  indicative of an amount that may be realized
      in the event of a sale.

Financial information is provided for SPCC, a significant  subsidiary previously
accounted  for by the equity  method.  Information  is not shown for 1995 as the
Company  has  consolidated  the  financial  results  of  SPCC  in its  financial
statements effective January 1, 1995.



<PAGE>
A49

<TABLE>
<CAPTION>
    Financial Position of SPCC
    (in millions - U.S. dollars)
    <S>                                                                       <C>
    At December 31,                                                                            1994
    ---------------                                                                            ----
    Current assets                                                                          $ 365.0
    Property-net                                                                              522.9
    Other assets                                                                               80.6
                                                                                            -------
       Total assets                                                                         $ 968.5
                                                                                            -------

    Current liabilities                                                                     $ 118.7
    Long-term debt                                                                            114.1
    Other liabilities                                                                          14.9
    Deferred Peruvian income taxes                                                              6.2
    Minority interests                                                                         79.8
                                                                                            -------
       Total liabilities                                                                      333.7
    Stockholders' equity                                                                      634.8
       Total liabilities and stockholders' equity                                           $ 968.5
                                                                                            -------


    For the Years Ended                                                                 December 31,
    Net Sales 100%                                                                       U.S. GAAP
    1994                                                                                $  701.7
    1993                                                                                547.5(a)

    Net Earnings 100%
    1994                                                                                $   91.2
    1993                                                                                194.2(b)

    Equity Earnings Reported by Asarco
    1994                                                                                $   48.3
    1993                                                                                112.7(c)

    Dividends to Asarco
    1994                                                                                $   11.2
    1993                                                                                  9.4(d)

</TABLE>

(a) Certain  items were  reclassified  in SPCC's 1993  financial  statements  to
    conform to 1994 classifications.
(b) Includes $165 million relating to the adoption of SFAS No. 109.
(c) Includes $26.4 million of previously  unrecognized equity earnings and $86.3
    million (Asarco's share) relating to the adoption of SFAS No. 109.
(d) Dividends received in 1993, prior to the resumption of equity accounting for
    SPCC by Asarco, were recorded as dividend income.

Available-for-sale securities reported as a component of stockholders' equity:

In accordance with the provisions of SFAS No. 115, available-for-sale securities
are carried at fair value.  Unrealized  gains of $131.6 million (net of deferred
taxes of $70.9 million) at December 31, 1995,  compared with unrealized gains of
$91.6 million (net of deferred taxes of $49.4 million) at December 31, 1994, are
included as a component of stockholders' equity.

<TABLE>
<CAPTION>
At December 31,                                              1995                                  1994
                                                             ----                                  ----
(in millions)                                       Equity           Debt           Equity            Debt
                                                    ------           ----           ------            ----
<S>                                          <C>               <C>              <C>             <C>

Amortized Cost/Cost basis                           $537.3          $ 28.9          $273.7            $ 40.8
Unrealized holding gains                             201.4             1.1           143.0                 -
Unrealized holding losses                                -               -               -              (2.0)
                                                    ------          ------          ------            ------
Fair Value                                          $738.7          $ 30.0          $416.7            $ 38.8
                                                    ======          ======          ======            ======
</TABLE>


<PAGE>
A50

The gross  realized  losses on  available-for-sale  securities  in 1995 were $.3
million  as  compared  with  gross  realized  losses of $1.0  million  and gross
realized  gains of $.2 million in 1994.  The net increase in unrealized  holding
gains and losses excluding realized gains and losses in stockholders' equity was
$61.2 million in 1995 as compared with a decrease of $31.6 million in 1994.  The
debt  securities  have maturity  dates ranging from 1996 to 2019 at December 31,
1995,  and from 1995 to 2017 at December 31,  1994.  The average cost method has
been used to determine the realized gain or loss on securities sold.


(7) Property

<TABLE>
<CAPTION>
At December 31,                                                      1995                  1994
                                                                     ----                  ----
(in millions)
<S>                                                      <C>                   <C>
Buildings and equipment                                         $  3,401.3            $  1,990.0
Capital leases-equipment                                             122.6                 122.8
Mineral land                                                         606.8                 320.2
Land, other than mineral                                              72.4                  70.0
Other                                                                  6.1                   6.1
                                                                ----------             ---------
  Total property                                                   4,209.2               2,509.1
Accumulated depreciation                                          (2,098.9)             (1,203.6)
                                                                ----------            ----------
  Property, net                                                 $  2,110.3            $  1,305.5
                                                                ==========            ==========
</TABLE>

Accumulated  depreciation  applicable to  capitalized  leases  amounted to $62.0
million in 1995 and $51.7 million in 1994.

In 1993,  the Company  recorded a pre-tax charge of $13.2 million to provide for
the closure and sale of a secondary metals processing plant, a zinc oxide plant,
and its pipe business.

SFAS No.  121-  Accounting  for the  Impairment  of  Long-Lived  Assets  and for
Long-Lived Assets To Be Disposed Of:

In the fourth quarter of 1995, the Company  adopted SFAS No. 121 "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets To Be Disposed
Of".  This  statement  requires that  long-lived  assets,  certain  identifiable
intangibles  and goodwill  related to those  assets be reviewed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable.  The impairment loss on such assets,  as well
as long-lived assets and certain identifiable  intangibles to be disposed of, is
measured  as the amount by which the  carrying  value of the assets  exceeds the
fair value of the assets (less disposal costs, if applicable).

The Company plans to terminate lead refining  operations at its Omaha,  Nebraska
plant in 1996 because it will not make the substantial investment which would be
required to meet state and U.S. EPA imposed  environmental  requirements  at its
Omaha plant. As a result of the decision to terminate lead refining at the Omaha
plant,  the  Company  has  recorded  a pre-tax  charge of $25.6  million,  which
represents the total carrying value of the net property of the Omaha refinery at
December 31, 1995.

The Company has also  recorded a pre-tax  charge to earnings of $9.2  million in
accordance  with SFAS No. 121 with respect to the assets at its waste  recycling
subsidiary  in  Corpus  Christi,  Texas  (Encycle)  and an  obsolete  mill.  The
impairment loss on Encycle's assets was the result of prior operating losses.


(8) Contingencies and Litigation

The Company is a defendant in lawsuits in Arizona  brought by Indian  tribes and
some other Arizona water users  contesting the right of the Company and numerous
other individuals and entities to use water and, in some cases,  seeking damages
for  water  usage  and   contamination  of  ground  water.  The  lawsuits  could
potentially  affect  the  Company's  use of  water at its Ray  Complex,  Mission
Complex and other Arizona operations.


<PAGE>
A51

The  Company  and  certain  subsidiaries  are  defendants  in  twelve  class and
non-class  lawsuits  in Texas  seeking  substantial  compensatory  and  punitive
damages for personal injury and  contamination  of property  allegedly caused by
present and former  operations,  primarily  in Texas,  and product  sales of the
Company and its subsidiaries.

The Company and two  subsidiaries,  at December 31, 1995,  are defendants in 992
lawsuits  brought  by 10,752  primary  and 7,724  secondary  plaintiffs  seeking
substantial  actual and punitive  damages for personal injury or death allegedly
caused by  exposure  to  asbestos,  as well as three  lawsuits  for  removal  or
containment of asbestos-containing products in structures. One of these lawsuits
alleges a class  action  claim on behalf of a wide class of persons  who are not
yet known to have  asbestos  related  injuries.  In  addition,  the  Company and
certain  subsidiaries  are defendants in product  liability  lawsuits  involving
various other  products,  including  metals.

A  subsidiary  of  SPCC,  the  Company,   other  present  and  former  corporate
shareholders  of  the  subsidiary  of  SPCC  and  certain  other  companies  are
defendants in a lawsuit in U.S. District Court in Corpus Christi,  Texas brought
in September 1995 by 698 Peruvian plaintiffs seeking damages for personal injury
and property damage allegedly  caused by the operations of SPCC's  subsidiary in
Peru.  Plaintiffs  have filed a notice of appeal from the United States District
Court order  dismissing  the  complaint  and from an earlier order of that court
denying plaintiffs' motion to remand the case to state court.

The Company and  certain of its  subsidiaries  have  received  notices  from the
United States Environmental  Protection Agency (EPA) that they and in most cases
numerous  other  parties  are  potentially   responsible  to  remediate  alleged
hazardous   substance   releases  at  certain  sites  under  the   Comprehensive
Environmental  Response,  Compensation  and  Liability  Act of 1980  (CERCLA  or
Superfund).  In  addition,  the  Company  and  certain of its  subsidiaries  are
defendants in lawsuits brought under CERCLA or state laws which seek substantial
damages and  remediation.  Remedial action is being undertaken by the Company at
some of the sites.

In  connection  with the sites  referred  to above,  as well as at other  closed
plants and sites where the Company is working with the EPA and state agencies to
resolve environmental  issues, the Company has made reasonable estimates,  where
possible,  of the extent and cost of necessary remedial action and damages. As a
result  of  feasibility  studies,  public  hearings,   engineering  studies  and
discussions  with the EPA and  similar  state  agencies,  for sites  where it is
probable  that  liability  has been  incurred  and the  amount of cost  could be
reasonably estimated,  the Company recorded charges to earnings in 1995 of $59.2
million and in 1994 of $51.2 million. In addition, the Company recorded a charge
to earnings  of $10.7  million  related to legal and other costs  related to the
termination of lead refining at its Omaha,  Nebraska plant.  Reserves for closed
plants and environmental  matters total $115.5 million at December 31, 1995. The
Company  anticipates that  expenditures  relating to these reserves will be made
over the next several  years.  Net cash  expenditures  charged to these reserves
were $76.8 million in 1995, $44.7 million in 1994 and $44.3 million in 1993.

Future environmental  related expenditures cannot be reliably determined in many
circumstances  due to the  early  stages  of  investigation,  the  uncertainties
relating to specific  remediation methods and costs, the possible  participation
of other potentially  responsible  parties and changing  environmental  laws and
interpretations.  It is the opinion of management  that the outcome of the legal
proceedings and environmental  contingencies  mentioned, and other miscellaneous
litigation and proceedings now pending, will not materially adversely affect the
financial position of Asarco and its consolidated  subsidiaries.  However, it is
possible that litigation and environmental  contingencies  could have a material
effect on  quarterly  or annual  operating  results,  when they are  resolved in
future periods.  This opinion is based on  considerations  including  experience
related to previous court judgments and  settlements  and remediation  costs and
terms. The financial viability of other potentially responsible parties has been
considered  when  relevant  and no credit  has been  assumed  for any  potential
insurance recoveries when the availability of insurance has not been determined.



<PAGE>
A52

(9) Debt and Available Credit Facilities

<TABLE>
<CAPTION>
Long-Term Debt
At December 31,                                                                      1995             1994
                                                                                     ----             ----
(in millions)
<S>                                                                            <C>               <C>
Revolving credits                                                                   $  340.0          $ 410.0
Pollution control bonds, 1995/2006 - rates from
   7 1/8% to 8.9%                                                                      156.3            170.4
Capital lease obligations, 1995/2006 - rates from
   7.3% to 12.0%                                                                        85.0             93.9
7% Notes due 2001                                                                       50.0             50.0
7 3/8% Notes due 2003                                                                   99.5             99.4
7 7/8% Debentures due 2013                                                              99.7             99.7
8 1/2% Debentures due 2025                                                             148.9                -
6.43% EXIM Bank credit agreement                                                        32.1                -
9.5% CAF credit agreement                                                               43.2                -
6.8% term loan due 2000                                                                 15.0                -
Other                                                                                   22.7              4.5
                                                                                    --------          -------
Total debt                                                                           1,092.4            927.9
   Less current portion                                                                 29.8             13.3
                                                                                    --------          -------
      Long-term debt                                                                $1,062.6          $ 914.6
                                                                                    ========          =======
</TABLE>

Interest paid by the Company (excluding  amounts  capitalized of $3.3 million in
1995,  $0.9 million in 1994 and $4.0 million in 1993) was $89.2 million in 1995,
$61.9 million in 1994 and $51.1 million in 1993.

Maturities of debt  instruments and future minimum payments under capital leases
are as follows:
<TABLE>
<CAPTION>
At December 31,                                     Debt Instruments                 Capital Leases
                                                    ----------------                 --------------
(in millions)
<S>                                         <C>                                <C>
1996                                                       $   19.8                      $  16.8
1997                                                           20.3                         18.6
1998                                                          226.1                         18.4
1999                                                          173.5                         16.5
2000                                                           30.9                         27.6
Thereafter                                                    536.8                         11.9
   Less interest                                                  -                        (24.8)
                                                           --------                      -------
                                                           $1,007.4                      $  85.0
                                                           ========                      =======
</TABLE>

In April 1995, the Company issued $150 million face amount of 8 1/2%  Debentures
due in May 2025. In July 1995,  the Company  entered into a term loan  agreement
for $15 million  maturing in August  2000.  Concurrent  with the term loan,  the
Company  entered into a five year  interest rate swap  agreement  resulting in a
fixed interest rate of 6.8% on the principal  amount.  Proceeds of the loan were
used primarily to prepay $13.5 million of 8 3/4% pollution control revenue bonds
at par value plus a premium of 1.5% in the third  quarter of 1995.  The  Company
also engaged in interest rate swap  agreements in July 1995 resulting in a fixed
interest  rate of 6.6% on $100 million of its  revolving  credit  loans.  In the
first quarter of 1994, the Company prepaid its 9 3/4% Sinking Fund Debentures at
par value plus a premium of .9%, using a portion of the proceeds of the 7% Notes
issued in December 1993.

The Company has two revolving credit  agreements that permit borrowings of up to
$670.0 million,  of which $330.0 million was available at December 31, 1995. One
facility for $350 million  expires in April 1999 and the other facility for $320
million expires in March 1998. The borrowings bear interest based on LIBOR,  the
CD or the prime rate,  and averaged  6.3% at December  31, 1995.  Rates may vary
based upon the Company's debt rating. A facility fee of .2% per annum is payable
on the full amount of the $350 million  facility.  A commitment  fee of 1/4% per
annum is payable on the unused portion of the $320 million facility.

Under  the most  restrictive  terms of the debt  agreements,  the  Company  must
maintain  a tangible  net  worth,  as  defined,  of at least $1 billion  and the
percentage of current assets to current liabilities,  as defined, cannot be less
than 125%.  Tangible  net worth,  as defined,  was $1.6  billion at December 31,
1995, and the percentage of current assets to current  liabilities,  as defined,
was 157%.


<PAGE>
A53


The weighted average interest rate on short term borrowings was 6.9% at December
31, 1995, and 10.1% at December 31, 1994.

(10) Stockholders' Equity

The Company  purchased 34,729 of its common shares in 1995 (9,250 shares in 1994
and 5,393 shares in 1993).  In 1995,  503,392 common shares  (392,940  shares in
1994 and  256,620  shares in 1993) were used for  employee  benefit  plans.  The
effect on the  calculations  of net earnings  per common share of the  Company's
common stock equivalents (shares under option) was insignificant.

Retained earnings at December 31, 1995 includes undistributed earnings of $438.1
million for  investments in 50% or less owned  entities  previously or currently
accounted  for by the equity  method.  Retained  earnings has been  increased by
cumulative  foreign  currency  adjustments  of $9.9 million at December 31, 1995
($10.8 million in 1994, $1.6 million in 1993). In 1994, a charge of $2.2 million
was  recognized  in  determining  the gain from  cumulative  unrealized  foreign
currency adjustments on the sale of the Company's interest in Asarco Australia.

Stock Options: The Company has two stockholder-approved plans, a Stock Incentive
Plan and a Stock Option Plan. The Stock Incentive Plan replaced the Stock Option
Plan.  No  additional  options  will be granted  under the Stock Option Plan and
unexpired  options  continue to be governed by, and exercised  under,  the Stock
Option Plan. The Stock  Incentive Plan provides for the granting of nonqualified
or incentive stock options, as defined, under the Internal Revenue Code of 1986,
as amended,  as well as for the award of restricted stock and bonuses payable in
stock.  The price at which options may be granted under the Stock Incentive Plan
shall not be less than 100% of the fair market  value of the Common Stock on the
date of grant  in the case of  incentive  stock  options,  or 50% in the case of
other options. In general, options expire after 10 years and are not exercisable
for six months from the date of grant.

The authorized  number of shares under the Stock  Incentive Plan is 2,000,000 of
which 300,000 shares may be awarded as restricted  stock.  At December 31, 1995,
769,326 shares  (1,019,850  shares - December 31, 1994) are available for future
grants under the Stock Incentive Plan. Stock option activity over the past three
years under the Stock  Incentive  Plan and Stock  Option Plan is  summarized  as
follows:

<TABLE>
<CAPTION>
                                                                                               Option Price
                                                                Number of shares            (range per share)
       Outstanding at
       <S>                                                  <C>                        <C>
         January 1, 1993                                              933,586                   $20.57 to $38.13
       Granted                                                        186,500                   $18.00 to $26.13
       Exercised                                                         (900)                  $22.31 to $22.31
       Canceled or expired                                            (98,200)                  $20.57 to $38.13
                                                                   ----------

       Outstanding at
         January 1, 1994                                            1,020,986                   $18.00 to $33.19
       Granted                                                        234,600                   $23.75 to $23.75
       Exercised                                                     (304,070)                  $18.00 to $28.94
       Canceled or expired                                            (71,400)                  $22.31 to $33.19
                                                                   ----------

       Outstanding at
         January 1, 1995                                              880,116                   $20.57 to $29.38
       Granted                                                        216,200                   $26.63 to $32.57
       Exercised                                                     (304,321)                  $20.57 to $29.19
       Canceled or expired                                             (9,026)                  $21.94 to $29.19
                                                                   ----------

       Outstanding (781,869 exercisable)at December 31,
          1995                                                        782,969                   $20.57 to $32.57
                                                                    =========

</TABLE>


<PAGE>
A54

In 1989, the Company  adopted a Shareholder  Rights plan and declared a dividend
of one Right for each of its  common  shares.  In  certain  circumstances,  if a
person or group becomes the beneficial  owner of 15% or more of the  outstanding
common shares, with certain exceptions, these rights vest and entitle the holder
to certain  share  purchase  rights.  In  connection  with the Rights  dividend,
800,000  shares of Junior  Participating  Preferred  Stock were  authorized  for
issuance upon exercise of the Rights.


(11) Benefit Plans

The Company  maintains  several  noncontributory,  defined benefit pension plans
covering  substantially all domestic employees.  Benefits for salaried plans are
based on  salary  and years of  service.  Hourly  plans are based on  negotiated
benefits and years of service.

The Company's funding policy is to contribute amounts to the plans sufficient to
meet the  minimum  funding  requirements  set forth in the  Employee  Retirement
Income Security Act of 1974,  plus such additional  amounts as may be deductible
for income tax  purposes.  Plan assets are invested  principally  in  commingled
stock funds and securities issued by the United States.

Net pension costs consist of the following:

<TABLE>
<CAPTION>
For the years ended December 31,                                              1995           1994           1993
                                                                              ----           ----           ----
(in millions)
 <S>                                                                      <C>            <C>            <C>
Service cost                                                                    $ 6.3         $  8.5          $ 7.2
Interest cost on projected benefit obligations                                    9.8            8.8            7.9
Actual return on plan assets                                                    (30.8)           0.5           (8.1)
Net amortization and deferral                                                    21.0           (7.6)           1.6
                                                                                -----         ------          -----
Net pension costs                                                               $ 6.3         $ 10.2          $ 8.6
                                                                                =====         ======          =====
</TABLE>

The  actuarial  present value of benefit  obligations  and funded status for the
Company's plans were as follows:

<TABLE>
<CAPTION>
At December 31,                                                               1995                         1994
(in millions)                                                   Assets exceed     Accum. benefits     Assets exceed
                                                                    accum.             exceed             accum.
                                                                   benefits          assets (a)          benefits
<S>                                                           <C>                 <C>               <C>
Assets and obligations:
   Vested benefit obligation                                        $ 121.8             $ 5.2             $  85.9
   Nonvested benefits                                                   7.6               0.5                 4.9
                                                                    -------             -----              ------
   Accumulated benefit obligation                                     129.4               5.7                90.8
                                                                    =======             =====              ======

Projected benefit obligation                                          158.1               7.1               109.8
Less, Plan assets at fair value                                       142.0               4.4               101.4
                                                                    -------             -----              ------
   Funded status of plan                                              (16.1)             (2.7)               (8.4)
Items not yet recognized in earnings:
   Prior service cost                                                  13.5              (0.1)                9.0
   Initial net plan obligation                                          1.2               2.3                 1.5
   Effect of changes in assumptions and actuarial gains and
       losses                                                          18.8               0.5                 5.7
   Minimum liability                                                      -               1.4                   -
                                                                    -------             -----             -------
Pension asset (liability) reflected in consolidated balance
     sheet                                                          $  17.4             $ 1.4             $   7.8
                                                                    =======             =====             =======

Actuarial assumptions:

Discount rate                                                          7.0%              7.0%               8.75%
Expected long-term rate of return on plan assets                      10.0%              8.0%               10.0%
Expected annual salary increases                                       4.0%              4.0%                4.0%

</TABLE>

(a)  Plans maintained by SPCC.




<PAGE>
A55

Postretirement benefits:

Noncontributory postretirement health care coverage under the Asarco Health Plan
is provided to  substantially  all retirees not  eligible for  Medicare.  A cost
sharing Medicare supplement plan is available for retired salaried employees and
life insurance coverage is provided to substantially all retirees.

The following sets forth the plan's status  reconciled with amounts  reported in
the Consolidated Balance Sheet:

<TABLE>
<CAPTION>
At December 31,                                                                                  1995          1994
                                                                                                 ----          ----
(in millions)
<S>                                                                                        <C>            <C>
Accumulated postretirement benefit obligation (APBO):
    Retirees                                                                                   $ 67.9         $ 57.7
    Fully eligible active plan participants                                                      17.8           15.0
    Other plan participants                                                                      35.7           29.3
                                                                                               ------         ------
Total APBO                                                                                      121.4          102.0
Item not yet recognized in earnings:
  Effect of changes in assumptions and actuarial gains and losses                               (26.3)          (6.8)
                                                                                               ------         ------
       Postretirement benefit obligation                                                       $ 95.1         $ 95.2
                                                                                               ======         ======
</TABLE>

Net periodic postretirement benefit costs include the following:
<TABLE>
<CAPTION>
For the years ended December 31,                                                   1995            1994           1993
                                                                                   ----            ----           ----
(in millions)
<S>                                                                            <C>             <C>             <C>
Service cost                                                                     $  2.4           $  3.1        $   2.2
Interest cost                                                                       8.5              7.8            7.9
Amortization of loss                                                                  -              1.5              -
                                                                                 ------           ------        -------
        Net periodic postretirement benefit costs                                $ 10.9           $ 12.4        $  10.1
                                                                                 ======           ======        =======
</TABLE>

The annual  assumed rate of increase in the per capita cost of covered  benefits
(i.e.,  health  cost  trend  rate)  is 7% for 1996 and is  assumed  to  decrease
gradually  to 5% by 1999 and remain at that level  thereafter.  The health  care
cost trend rate assumption has a significant effect on the amounts reported. For
example,  increasing  the assumed health care cost trend rates by one percentage
point  in each  year  would  increase  the  accumulated  postretirement  benefit
obligation  at  December  31,  1995,  by $7.8  million,  and  the  net  periodic
postretirement benefit costs for 1995 by $1.0 million. The discount rate used in
determining the accumulated postretirement benefit obligation was 7% at December
31, 1995, (8.75%-1994). The plans are unfunded.


(12) Business Segments

The Company operates  principally in the nonferrous  metals industry,  involving
mining, smelting, refining and selling of copper, silver and lead and the mining
of ore containing zinc and molybdenum which is sold as concentrates. The Company
also  produces  specialty  chemicals  for the  metals  plating  and  electronics
industries and aggregates  comprising  limestone,  sand and gravel.  The caption
"Other"  includes  the  Company's   polyvinyl  chloride  pipe  and  cement  pipe
businesses and its environmental  services operations.  The cement pipe business
was shutdown in 1993 and the polyvinyl chloride pipe business was sold in 1994.

General  corporate  administrative  expenses  are  allocated  among the segments
generally in proportion to their operating  expenses.  Exploration  expenses are
attributable to the metals segment,  while research expenses are attributable to
metals and specialty  chemicals.  Identifiable assets are those directly used in
the  operations  of each  segment.  Corporate  assets are  principally  cash and
investments.  Export  sales from the  United  States to  unaffiliated  customers
principally  in Europe and the Pacific Rim were $366.2  million in 1995,  $280.2
million  in 1994 and  $278.3  million in 1993.  There can be no  assurance  that
operations and assets of the Company and  nonconsolidated  associated  companies
that are subject to the jurisdiction of foreign  governments may not be affected
adversely by future actions by such governments.



<PAGE>
A56
Metal Sales, excluding intersegment sales
<TABLE>
<CAPTION>
For the years ended December 31,                                        1995            1994            1993
                                                                        ----            ----            ----
(in millions)
<S>                                                              <C>             <C>             <C>
Copper                                                                $ 2,170         $ 1,164        $   917
Silver                                                                    216             175            138
Lead                                                                      126             113             87
Other                                                                     304             223            196
                                                                      -------         -------        -------
                                                                      $ 2,816         $ 1,675        $ 1,338
                                                                      =======         =======        =======

Business Segments and Lines of Business

For the years ended December 31,                                        1995(a)       1994            1993
                                                                        ----          ----            ----
(in millions)
Sales
  Metals                                                              $ 2,816         $ 1,675         $ 1,338
  Specialty Chemicals                                                     309             278             251
  Aggregates                                                               44              43              37
  Other                                                                    29              36             110
                                                                      -------         -------         -------
Total                                                                 $ 3,198         $ 2,032         $ 1,736
                                                                      =======         =======         =======
Domestic                                                                2,137           1,867           1,586
Foreign - Peru                                                            882               -               -
        - Other                                                           179             165             150
Operating Income (Loss) (b), (c), (d), (e)
  Metals                                                               $  486         $    (9)         $  (97)
  Specialty Chemicals                                                      19              14               4
  Aggregates                                                                8               7               7
  Other                                                                   (26)              6             (24)
                                                                       ------         -------         -------
Total                                                                  $  487         $    18          $ (110)
                                                                       ======         =======         =======
Domestic                                                                  106              17            (101)
Foreign - Peru                                                            378               -               -
        - Other                                                             3               1              (9)

Equity in results of nonconsolidated associated companies:
  Metals                                                              $    (2)         $    -           $   -
  Specialty Chemicals                                                       4               2               3
  Corporate                                                                 -              46              24
                                                                       ------         -------           -----
Total                                                                  $    2         $    48           $  27
                                                                       ======         =======           =====

Identifiable Assets
  Metals                                                               $ 3,098        $ 1,820         $ 1,679
  Specialty Chemicals (f)                                                  266            247             231
  Aggregates                                                                32             32              30
  Other                                                                     44             43             112
  Corporate                                                                887          1,149           1,100
                                                                       -------        -------         -------
Total                                                                  $ 4,327        $ 3,291         $ 3,152
                                                                       =======        =======         =======
Domestic                                                                 2,867          3,097           2,981
Foreign - Peru                                                           1,280              -               -
        - Other                                                            180            194             171

Depreciation and Depletion
  Metals                                                               $   112        $    77         $    71
  Specialty Chemicals                                                        4              3               5
  Aggregates                                                                 2              2               2
  Corporate and Other                                                        1              1               3
                                                                       -------        -------         -------
Total                                                                  $   119        $    83         $    81
                                                                       =======        =======         =======
Capital Expenditures
  Metals                                                               $   317        $    87         $   103
  Specialty Chemicals                                                        4              3               2
  Aggregates                                                                 3              2               3
  Corporate and other                                                       14              6               4
                                                                       -------        -------         -------
Total                                                                  $   338        $    98         $   112
                                                                       =======        =======         =======
</TABLE>


<PAGE>
A57

(a)    Includes  consolidation of SPCC effective January 1, 1995. See Note 2 for
       further details.
(b)    Includes  provision  for  environmental  matters  of  $40.2  Metals,  $.9
       Specialty Chemicals,  $18.1 Other in 1995 and $53.4 Metals, $.2 Specialty
       Chemicals, $(2.4) Other in 1994.
(c)    Includes  provision  for asset  impairments  and plant  closures of $37.4
       Metals and $8.2 Other in 1995.
(d)    Includes  LIFO  profits in the "Metals"  segment of $.7 in 1995,  $2.8 in
       1994 and $9.2 in 1993.
(e)    Includes in 1993 $8.2 in  previously  unconsolidated  losses for Nor Peru
       (Metals),  and $25.6 related to the valuation of certain  inventories and
       additions to closed plants and reserves,  principally  for assets planned
       for disposition ($8.3 Metals, $17.3 Other).
(f)    Includes vertically integrated equity investments of $58.3 in 1995, $55.5
       in 1994 and $48.8 in 1993.

(13) Financial Instruments

Derivative Contracts:  Depending on the market fundamentals of a metal and other
conditions,  the Company may enter into  forward  sales or purchase  put or call
options  to  reduce  or  eliminate  the  risk of  metal  price  declines  on its
anticipated future production.

Put options  purchased  by the Company  establish a minimum  sales price for the
production  covered by such put options and permit the Company to participate in
price  increases  above the strike  price of such put  options.  At December 31,
1995,  the Company had copper put options  with an average  strike price of 98.8
cents per pound,  covering  160,469  tons or  approximately  47% of its expected
domestic  copper  production  for 1996 at a cost of $5.7 million and put options
with an  average  strike  price of $1.00  per  pound,  covering  19,511  tons or
approximately 6% of its expected  domestic copper  production for 1997 at a cost
of $1.1 million.  The cost of the put options is amortized  during the period in
which the options are exercisable.

In addition,  at December 31, 1995,  SPCC had copper put options with an average
strike price of 95.8 cents per pound covering 129,218 tons or approximately  40%
of its expected copper production for 1996. The cost of acquiring these puts was
$3.2 million.

Forward sales  establish a selling price for future  production at the time they
are entered  into,  thereby  eliminating  the risk of declining  prices but also
eliminating potential gains on price increases if not bought back. Synthetic put
options are  established  by entering into a forward sale and  purchasing a call
option  for the same  quantity  of the  relevant  metal and for the time  period
relating to such forward sale. The forward sale establishes a minimum price that
will be realized,  while the call option  permits the Company to  participate in
price increases.



<PAGE>
A58

The pre-tax earnings effect of the Company's derivative and anticipatory hedging
activities, net of transaction costs, are as follows:

<TABLE>
<CAPTION>
                                                     Hedging Gains (Losses)
   For the years ending December 31,                          1995               1994                1993
                                                              ----               ----                ----
   (in millions)
   <S>                                                  <C>                <C>                <C>
   Metal
   -----
   Copper                                                     $ (5.7)             $  3.2              $  3.0
   Zinc                                                         (0.1)                1.8                15.5
   Silver                                                        0.5                 0.7                 0.7
   Lead                                                         (0.3)                  -                   -
                                                             -------              ------              ------
     Net Gain (Loss)                                          $ (5.6)             $  5.7              $ 19.2
                                                             =======              ======              ======
</TABLE>

At December 31, 1995 and 1994, there were no deferred hedging profits or losses.
At December 31, 1993,  deferred  profits on copper and silver  hedging were $3.0
million and $.2 million,  respectively,  which were  subsequently  recognized in
1994 as the anticipated production was sold.

In addition,  the Company  enters into interest  rate swap  agreements to manage
exposure to  fluctuations  in interest  rates.  Interest rate swaps  establish a
fixed rate for the  Company on a specified  amount of  floating  rate debt for a
specific  period,  thereby  eliminating  risks  associated with  fluctuations in
interest  rates.  During 1995, the Company  entered into three swap  agreements,
expiring 1998 to 2000, with an aggregate notional amount of $115.0 million.  The
effect of these  agreements  is to limit the interest  rate  exposure to 6.6% on
$100  million  of the  Company's  revolving  credit  loans  and  6.8% on its $15
million, 5 year term loan. As a result of these swap agreements interest expense
was increased by $0.2 million in 1995.

The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>
At December 31,                                                    1995                             1994
(in millions)                                             Carrying           Fair          Carrying         Fair
                                                            Value           Value           Value           Value
                   <S>                                 <C>              <C>             <C>             <C>
Assets:
Cash and cash equivalents                                   $  238.4        $  238.4         $  18.3        $  18.3

Marketable securities - held to maturity                    $   42.5        $   42.5               -              -

Copper put options                                          $   10.0        $    6.5         $   4.6        $   0.2

Investments:
  Available-for-sale securities                             $  768.7        $  768.7         $ 455.5        $ 455.5
  Restricted investment in Grupo Mexico                         50.2             (a)           294.5            (a)
  Other                                                          3.3             (b)             1.9            (b)
                                                            --------        --------         -------        -------
     Total investments                                      $  822.2        $  768.7         $ 751.9        $ 455.5
                                                            ========        ========         =======        =======

Liabilities:
Long-term debt (excluding capital lease obligations)        $1,007.4        $1,044.6         $ 834.0        $ 825.4

Interest rate swaps                                                -        $    3.3               -              -
</TABLE>

(a)    At December 31,  1995,  56.3  million  (160.5  million in 1994) shares of
       Asarco's investment in Grupo Mexico had restrictions  limiting their sale
       for a period of more  than one year.  Accordingly,  the  Company  has not
       determined the fair value of such securities.
(b)    No fair value was available for these  investments  as they  represent an
       interest in companies whose stock is not publicly traded. Accordingly, it
       is not practicable to determine the fair value of such securities.



<PAGE>
A59

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and cash equivalents:  The carrying amount  approximates fair value because
of the short maturity of those instruments.

Marketable  securities:  The  carrying  amount  and fair value are  reported  at
amortized cost since these securities are to be held to maturity.

Put Options: Fair value is an estimate based on relevant market information such
as:  volatility  of similar  options,  future prices and the  contracted  strike
price.

Available-for-sale  securities:  Fair value is based on quoted  market prices in
accordance with SFAS No. 115.

Long-term  debt:  The fair value of the  Company's  long-term  debt is estimated
based on the quoted market prices for the same or similar issues or the carrying
value is used where a market price is unavailable.

Interest rate swaps: Fair value is based on quoted market prices.


Unaudited Quarterly Data
(in millions, except per share data)
<TABLE>
<CAPTION>
                                        1995                                                 1994
                                        ----                                                 ----
QUARTERS           1st       2nd       3rd      4th(a)      Total      1st(b)      2nd        3rd      4th(c)     Total
                   ===       ===       ===      ======      =====      ======      ===        ===      ======     =====
<S>             <C>       <C>       <C>        <C>       <C>         <C>        <C>       <C>         <C>       <C>

Sales              $791.0    $787.5    $819.7     $799.6    $3,197.8     $442.9   $487.8      $513.0     $588.1    $2,031.8

Operating
 income (loss)     $151.2    $137.4    $166.6     $ 31.9    $  487.1     $ (5.8)  $  1.0      $(30.9)    $ 54.0    $   18.3

Net earnings       $ 65.7    $ 56.4    $ 58.3     $(11.2)   $  169.2     $ 26.6   $  5.3      $(16.1)    $ 48.2    $   64.0
(loss)

Net earnings
 (loss) per        $ 1.56    $ 1.34    $ 1.38     $ (.27)   $   4.00     $  .64   $  .13      $ (.39)    $ 1.15    $   1.53
 share
</TABLE>

(a)   Includes $79.5 after-tax charges,  $122.3 pre-tax, to add to the Company's
      reserve for  environmental  matters,  to provide for asset impairments and
      plant  closures  and to provide for the  writedown  of certain  in-process
      inventory to net realizable value.
(b)   Includes  a  $31.9  after-tax  gain,  $58.5  pre-tax,  on the  sale of the
      Company's remaining interest in Asarco Australia Limited.
(c)   Includes a $30.7 after-tax charge,  $45.5 pre-tax, to add to the Company's
      reserve for environmental matters.



<PAGE>
A60

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of ASARCO Incorporated

We  have  audited  the  accompanying   consolidated  balance  sheets  of  ASARCO
Incorporated  and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated   statements  of  earnings,  cash  flows,  and  changes  in  common
stockholders'  equity for each of the three years in the period  ended  December
31, 1995.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the  consolidated   financial   position  of  ASARCO
Incorporated  and  Subsidiaries  as of  December  31,  1995  and  1994,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity  with generally
accepted accounting principles.

As  discussed  in  Note 6 to the  financial  statements,  Southern  Peru  Copper
Corporation  changed its method of accounting  for income taxes as of January 1,
1993.


COOPERS & LYBRAND L.L.P.

1301 Avenue of The Americas
New York, New York
January 30, 1996




<PAGE>
A61

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure.
None

                                    PART III

Items 10, 11, 12 and 13.

Reference is made to Executive Officers of Asarco and Business Experience During
the Past Five  Years on page A28.  Information  in  response  to the  disclosure
requirements  specified by these items  appears  under the captions and pages of
the 1996 Proxy Statement indicated below:

<TABLE>
<CAPTION>
                                                                                                      Proxy Statement
                                                                                                           Pages
Item      Required Information                        Proxy Statement Section
<S>       <C>                                         <C>                                            <C>

10.       Directors and Executive                     Election of Directors
            Officers                                                                                           2-5
11.       Executive Compensation                      Executive Compensation
                                                        through Option Exercises
                                                        and Fiscal Year-End
                                                        Values                                               11-13
                                                      Retirement Plans through
                                                        Employment Agreements                                14-16
12.       Security Ownership                          Security Ownership of Certain
                                                        Beneficial Owners through 
                                                        Common Stock Equivalents                               5-7
13.       Certain Relationships and Related           Certain Transactions                                      16
             Transactions.
</TABLE>



The information referred to above is incorporated herein by reference.



<PAGE>
A62

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)  The following documents are filed as part of this report:

         1. Financial Statements

                The following  financial  statements of ASARCO  Incorporated and
its  subsidiaries  are included at the indicated pages of the document as stated
below:

<TABLE>
<CAPTION>
                                                                                                 Form 10-K
                                                                                                   Pages
<S>                <C>                                                                          <C>
                   Consolidated Statement of Earnings for the years
                     ended December 31, 1995, 1994 and 1993                                             A38

                   Consolidated Balance Sheet at December 31,
                     1995 and 1994                                                                      A39

                   Consolidated Statement of Cash Flows for the
                     years ended December 31, 1995, 1994 and 1993                                       A40

                   Consolidated Statement of Changes in Common
                     Stockholders' Equity for the years ended
                     December 31, 1995, 1994 and 1993                                                   A41

                   Notes to Financial Statements                                                    A42-A59

                   Report of Independent Accountants                                                    A60



         2.     Financial Statement Schedules

                                                                                                  Form 10-K
                                                                                                      Pages
                   Schedule II - Valuation and qualifying
                       accounts                                                                       B1-B3

</TABLE>

Schedules other than those listed above are omitted, as they are not required or
are not  applicable,  or the  required  information  is shown  in the  financial
statements or notes  thereto.  Columns  omitted from  schedules  filed have been
omitted because the information is not applicable. Any other information omitted
from schedules filed has been omitted due to immateriality.




<PAGE>
A63

         3. Exhibits

                Exhibit
                  No.

                   3.    Certificate of Incorporation and By-Laws

                  (a)    Certificate of  Incorporation - restated,  filed May 4,
                         1970

                  (b)    Certificate   of  Amendment  to  the   Certificate   of
                         Incorporation effective April 23, 1975

                  (c)    Certificate    of   Amendment   of    Certificate    of
                         Incorporation executed April 14, 1981

                  (d)    Certificate of Amendment of Restated Certificate of
                         Incorporation filed on May 6, 1985

                  (e)    Certificate    of   Amendment   of    Certificate    of
                         Incorporation filed July 21, 1986

                  (f)    Certificate of Amendment of Restated Certificate of
                         Incorporation, as amended filed April 22, 1987

                  (g)    Statement of  Cancellation  filed July 31, 1987 whereby
                         155,000 shares of Series A Cumulative  Preferred  Stock
                         and 862,500  shares of $9.00  Convertible  Exchangeable
                         Preferred Stock were cancelled

                  (h)    Statement  of  Cancellation  filed  November  20,  1987
                         whereby   1,026,900   shares  of  Series  A  Cumulative
                         Preferred Stock were cancelled

                  (i)    Statement  of  Cancellation  filed  December  18,  1987
                         whereby   1,250,000   shares  of  Series  B  Cumulative
                         Convertible Preferred Stock were cancelled

                  (j)    Statement of  Cancellation  filed March 3, 1988 whereby
                         27,000  shares of Series A Cumulative  Preferred  Stock
                         were cancelled

                  (k)    Certificate  of  Amendment of Restated  Certificate  of
                         Incorporation, as amended, filed August 7, 1989

                  (l)    By-Laws as last amended on June 26, 1991

                  4.     Instruments  defining  the rights of security  holders,
                         including indentures

                  (a)    There  are  currently   various  separate   indentures,
                         agreements or similar instruments under which long-term
                         debt of Asarco is currently outstanding. The Registrant
                         hereby  agrees  to  furnish  to  the  Commission,  upon
                         request,  a copy of any of the instruments which define
                         the  rights of holders of  long-term  debt  securities.
                         None of the outstanding instruments represent long-term
                         debt securities in excess of 10% of the total assets of
                         Asarco as of December 31, 1995

                  (b)    Form of  Rights  Agreement  dated as of July 26,  1989,
                         between the Company and First  Chicago Trust Company of
                         New  York,  as Rights  Agent,  defining  the  rights of
                         shareholders  under a July  1989  Shareholders'  Rights
                         plan and dividend declaration

                  (c)    Rights  Agreement  Amendment  dated as of September 24,
                         1992,  between the Company and The Bank of New York, as
                         Successor  Rights  Agent  under  the  Rights  Agreement
                         listed above



<PAGE>
A64

                  (d)    Second Rights Agreement  Amendment dated as of February
                         23, 1995,  between the Company and The Bank of New York
                         deleting  certain special  conditions  relating to MIM.
                         The effect of the amendment is to apply to MIM the same
                         percentage ownership conditions (15%) that apply to all
                         other shareholders.

                  (e)    Indenture  Agreement  dated  as of  February  1,  1993,
                         between  the  Company and  Bankers  Trust  Company,  as
                         Trustee,  covering  the  issuance  of  debt  securities
                         registered  by the  Company in April 1992 not to exceed
                         $250 million

                  (f)    Indenture  Agreement  dated  as  of  October  1,  1994,
                         between  the  Company and  Chemical  Bank,  as Trustee,
                         covering the issuance of debt securities  registered by
                         the Company in October 1994 not to exceed $300 million

                10.      Material Contracts

                  (a)    Stock Option Plan as amended through November 30, 1994

                  (b)    Form of Employment  Agreement  entered into in 1985, as
                         amended in March and April 1989,  among the Company and
                         currently  12  of  its  executive  officers,  including
                         Messrs. R. de J. Osborne, F.R. McAllister, K.R. Morano,
                         R.M. Novotny and R.J. Muth

                  (c)    Deferred  Fee Plan for  Directors,  as amended  through
                         January 26, 1994

                  (d)    Supplemental  Pension  Plan for  Designated  Mid-Career
                         Officers, as amended through January 25, 1995

                  (e)    Retirement Plan for Non-Employee  Directors, as amended
                         through January 25, 1995.  Effective December 31, 1995,
                         the Company  terminated the plan for current and future
                         directors.

                  (f)    Directors' Stock Award Plan, as amended through January
                         27, 1993

                  (g)    Stock   Incentive   Plan   adopted  by  the   Company's
                         Shareholders  on April 25, 1990 and as amended  through
                         November 29, 1995

                  (h)    Directors' Deferred Payment Plan, effective October 25,
                         1995

                  11.    Statement re Computation of Earnings Per Share

                  21.    Subsidiaries of the Registrant

                  23.    Report  of   Independent   Accountants   on   Financial
                         Statement   Schedules   and   Consent  of   Independent
                         Accountants

         The  exhibits  listed as 10(a)  through  (h)  above are the  management
         contracts or compensatory  plans or  arrangements  required to be filed
         pursuant to Item 14(c) of Form 10-K.

(b)      Reports  of Form 8-K  filed in the  fourth  quarter  of 1995 and  first
         quarter of 1996: None

(c)      Exhibits - The  exhibits  to this Form 10-K are  listed on the  Exhibit
         Index on pages C1 through  C3.  Copies of the  following  exhibits  are
         filed with this Form 10-K:
           10(g)  Stock Incentive Plan
           10(h)  Director's Deferred Payment Plan
           11.    Statement re Computation of Earnings Per Share
           21.    Subsidiaries of the Registrant
           23.    Report  of  Independent  Accountants  on  Financial  Statement
                  Schedules and Consent of Independent  Accountants are included
                  in page A66 of this Annual Report on Form 10-K.

<PAGE>
A65

Copies of exhibits may be acquired upon written request to the Treasurer and the
payment of processing and mailing costs.


Individual  financial  statements of subsidiaries and 50%-or-less  owned persons
accounted for by the equity method have been omitted  because such  subsidiaries
and 50%-or-less owned persons considered in the aggregate as a single subsidiary
would not constitute a significant subsidiary.




<PAGE>
A66

Item 14
Exhibit 23

                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULES



To the Board of Directors and
  Stockholders of ASARCO Incorporated


Our report on the consolidated  financial  statements of ASARCO Incorporated and
Subsidiaries has been included in this Form 10-K on page A60. In connection with
our  audits of such  financial  statements,  we have also  audited  the  related
financial  statement  schedules which appear on pages B1 through B3 of this Form
10-K.

In our  opinion,  the  financial  statement  schedules  referred to above,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
present  fairly,  in all  material  respects,  the  information  required  to be
included therein.


                                                      COOPERS & LYBRAND L.L.P.



New York, New York
January 30, 1996



                       CONSENT OF INDEPENDENT ACCOUNTANTS


We consent to the  incorporation by reference in the  Prospectuses  constituting
part of the  Registration  Statements  on  Form  S-3  (File  Nos.  33-45631  and
33-55993)  and Form S-8 (File Nos.  2-83782,  2-67732  and  33-34606)  of ASARCO
Incorporated  of  our  report  dated  January  30,  1996,  on our  audit  of the
consolidated financial statements of Asarco Incorporated and Subsidiaries, which
report  appears  on page A60 of this  Annual  Report on Form  10-K.  Our  report
includes  an  explanatory   paragraph   that  describes   Southern  Peru  Copper
Corporation's  change in method of accounting for income taxes.  We also consent
to the  incorporation  by  reference  of our report on the  financial  statement
schedules, which appears above.

We also  consent to the  reference  to our Firm as  experts in the  Prospectuses
referred to in the preceding paragraph only insofar as such reference relates to
our report  appearing on page A60 of this Annual  Report on Form 10-K and to our
report on the financial statement schedules which appears above.


                                                     COOPERS & LYBRAND L.L.P.


New York, New York
March 19, 1996


<PAGE>
A67

                                                           SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date: February 28, 1996

                                                ASARCO Incorporated
                                                    (Registrant)


                                                By /s/ Richard de J. Osborne
                                                --------------------------------
                                                (Richard de J. Osborne, Chairman
                                                   of the Board, Chief Executive
                                                   Officer and President)


Pursuant to requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
(a)          Principal Executive Officer:
<S>          <C>                                                               <C>
             /s/ Richard de J. Osborne      Chairman of the Board
             -------------------------
             (Richard de J. Osborne)

(b)          Principal Financial Officer:

             /s/ Kevin R. Morano            Vice President and
             -------------------
             (Kevin R. Morano)                Chief Financial Officer

(c)          Principal Accounting Officer:

             /s/ William Dowd                 Controller
             ----------------
             (William Dowd)

(d)          Directors:

             /s/ Richard de J. Osborne                                         /s/ Willard C. Butcher
             -------------------------                                         ----------------------
             (Richard de J. Osborne)                                           (Willard C. Butcher)

             /s/ James C. Cotting                                              /s/ David C. Garfield
             --------------------                                              ---------------------
             (James C. Cotting)                                                (David C. Garfield)

             /s/ E. Gordon Gee                                                 /s/ Harry Holiday, Jr.
             -----------------                                                 ----------------------
             (E. Gordon Gee)                                                   (Harry Holiday, Jr.)

             /s/ James W. Kinnear III                                          /s/ Francis R. McAllister
             ------------------------                                          -------------------------
             (James W. Kinnear III)                                            (Francis R. McAllister)

             /s/ Martha T. Muse                                                /s/ Michael T. Nelligan
             ------------------                                                -----------------------
             (Martha T. Muse)                                                  (Michael T. Nelligan)

             /s/ John D. Ong                                                   /s/ James Wood
             ---------------                                                   --------------                      
             (John D. Ong)                                                     (James Wood)



</TABLE>

Date: February 28, 1996


<PAGE>
B1


                               ASARCO Incorporated

                                AND SUBSIDIARIES
                 Schedule II - Valuation and Qualifying Accounts
                                FOR THE YEAR 1995
                                 (in thousands)
<TABLE>
<CAPTION>

        Column A             Column B                         Column C                              Column D              Column E
        --------             --------                         --------                              --------              --------

                                                              Additions                            Deductions
                                                              ---------                            ---------- 
 <S>                      <C>             <C>              <C>             <C>           <C>               <C>          <C>
                                             Charged to
                            Balance at     costs/expenses                     Charged                                    Balance at
                             beginning     or (credited)                     to other                                      end of
Description                  of period       to income       Description     accounts      Descriptions       Amount       period
-----------                  ---------       ---------       -----------     --------      ------------       ------       ------

                                                                                         Accounts and
                                                                                         notes written
Deducted from assets                                                                     off, net of
   on Balance Sheet:                                                                     recoveries             $1,125

                                                                                         
                                                                                         Foreign currency
Allowance for                                                                            translation      
     doubtful accounts:        $6,249          $2,189                                    adjustment              $(96)      $7,409
                               ======          ======                                                            =====      ======

                                                           Net amount
                                                           transferred
                                                           from
Current portion of                                         noncurrent
     reserves for closed                                   reserve for
     plants and                                            closed plants                 Current charges
     environmental                                         and                           to
     matters                  $55,946                      matters            $73,874    reserves              $76,778     $53,042
                              =======                                         =======                          =======     =======

Non-current portion of
     reserves for closed                                                                 Net amount
     plants and                                                                          transferred to
     environmental                                                                       current
     matters                  $66,458         $69,900                                    liabilities           $73,874     $62,484
                              =======         =======                                                          =======     =======

Included in caption
     "Other liabilities
     and reserves" on
     Balance Sheet
     Other                    $28,435                                                                                      $26,018
                              =======                                                                                      =======

</TABLE>


<PAGE>
B2

                               ASARCO Incorporated
                                AND SUBSIDIARIES
                 Schedule II - Valuation and Qualifying Accounts
                                FOR THE YEAR 1994
                                 (in thousands)
<TABLE>
<CAPTION>
        Column A             Column B                         Column C                             Column D               Column E
        --------             --------                         --------                             --------               --------

                                                              Additions                           Deductions
                                                              ---------                           ----------
 <S>                      <C>             <C>              <C>             <C>          <C>                <C>          <C>
                                             Charged to
                            Balance at     costs/expenses                    Charged                                     Balance at
                             beginning     or (credited)                     to other                                      end of
Description                  of period       to income       Description     accounts      Descriptions       Amount       period
-----------                  ---------       ---------       -----------     --------      ------------       ------       ------

                                                                                        Accounts and
                                                                                        notes written
Deducted from assets                                                                    off, net of
   on Balance Sheet:                                                                    recoveries            $1,197

                                                                                        
                                                                                        Foreign currency
Allowance for doubtful                                                                  translation
     accounts:                  $4,579           $2,525                                 adjustment            $(342)        $6,249
                                ======           ======                                                       ======        ======

                                                           Net amount
                                                           transferred
                                                           from
Current portion of                                         noncurrent
     reserves for closed                                   reserve for
     plants and                                            closed plants                Current charges
     environmental                                         and environmental            to reserves
     matters                   $46,409                     matters            $54,441                        $44,904       $55,946
                               =======                                        =======                        =======       =======
                                                           

Non-current portion of
     reserves for closed                                                                Net amount
     plants and                                                                         transferred to
     environmental                                                                      current
     matters                   $69,694          $51,205                                 liabilities          $54,441       $66,458
                               =======          =======                                                      =======       =======

Included in caption
     "Other liabilities
     and reserves" on
     Balance Sheet
     Other                     $28,451                                                                                     $28,435
                               =======                                                                                     =======

</TABLE>


<PAGE>
B3

                               ASARCO Incorporated
                                AND SUBSIDIARIES
                 Schedule II - Valuation and Qualifying Accounts
                                FOR THE YEAR 1993
                                 (in thousands)
<TABLE>
<CAPTION>
        Column A             Column B                         Column C                             Column D               Column E
        --------             --------                         --------                             --------               --------

                                                              Additions                           Deductions
                                                              ---------                           ----------
<S>                       <C>             <C>              <C>             <C>          <C>                <C>          <C>
                                             Charged to
                            Balance at     costs/expenses                   Charged to                                     Balance
                           beginning of    or (credited)                      other                                       at end of
Description                   period         to income       Description     accounts      Descriptions        Amount      period
-----------                   ------         ---------       -----------     --------      ------------        ------      ------

                                                                                        Accounts and
                                                                                        notes written
Deducted from assets                                                                    off, net of
   on Balance Sheet:                                                                    recoveries             $2,161

                                                                                        Net amount
Allowance for doubtful                                                                  transferred to
     accounts:                   $4,232           $2,901                                Other Assets             $393        $4,579
                                 ======           ======                                                         ====        ======

                                                           Net amount
                                                           transferred
Current portion of                                         from
     reserves for closed                                   noncurrent reserve
     plants and                                            for closed plants            Current charges
     environmental                                         and environmental            to 
     matters                    $39,997                    matters           $50,665    reserves             $44,253       $46,409
                                =======                                      =======                         =======       =======
                                  
                                                           

Non-current portion of
     reserves for closed                                                                Net amount
     plants and                                                                         transferred to
     environmental                                                                      current
     matters                   $100,962          $19,397                                liabilities           $50,665       $69,694
                               ========          =======                                                      =======       =======

Included in caption
     "Other Liabilities and
     Reserves" on Balance
     Sheet
     Other                      $34,165                                                                                     $28,451
                                =======                                                                                     =======
</TABLE>


<PAGE>
C1


                               ASARCO Incorporated
                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit                                                                                                    Indexed
  No.                              Description                                                             on Page
-------                            -----------                                                             -------
<S>           <C>                                                                                        <C>

3.            Certificate of Incorporation and By-Laws

              (a)    Certificate of Incorporation - restated,  filed May 4, 1970
                     (Filed as an Exhibit to the Company's 1980 Annual Report on
                     Form 10-K and incorporated herein by reference)

              (b)    Certificate   of   Amendment   to   the    Certificate   of
                     Incorporation effective April 23, 1975 (Filed as an Exhibit
                     to the  Company's  1980  Annual  Report  on Form  10-K  and
                     incorporated herein by reference)

              (c)    Certificate of Amendment of  Certificate  of  Incorporation
                     executed  April  14,  1981  (Filed  as an  Exhibit  to  the
                     Post-Effective  Amendment No. 8 to  Registration  Statement
                     No. 2-47616,  filed April 30, 1981 and incorporated  herein
                     by reference)

              (d)    Certificate   of  Amendment  of  Restated   Certificate  of
                     Incorporation  filed on May 6, 1985 (Filed as an Exhibit to
                     the Company's Quarterly Report on Form 10-Q for the quarter
                     ended March 31, 1985 and incorporated herein by reference)

              (e)    Certificate of Amendment of  Certificate  of  Incorporation
                     filed July 21, 1986  (Filed as an Exhibit to the  Company's
                     Quarterly  Report on Form 10-Q for the  quarter  ended June
                     30, 1986 and incorporated herein by reference)

              (f)    Certificate   of  Amendment  of  Restated   Certificate  of
                     Incorporation, as amended filed April 22, 1987 (Filed as an
                     Exhibit to the  Company's  1987 Annual  Report on Form 10-K
                     and incorporated herein by reference)

              (g)    Statement  of  Cancellation  filed  July 31,  1987  whereby
                     155,000 shares of Series A Cumulative  Preferred  Stock and
                     862,500 shares of $9.00 Convertible  Exchangeable Preferred
                     Stock were cancelled  (Filed as an Exhibit to the Company's
                     1987 Annual Report on Form 10-K and incorporated  herein by
                     reference)

              (h)    Statement of  Cancellation  filed November 20, 1987 whereby
                     1,026,900  shares of Series A  Cumulative  Preferred  Stock
                     were  cancelled  (Filed as an Exhibit to the Company's 1987
                     Annual  Report  on Form  10-K and  incorporated  herein  by
                     reference)

              (i)    Statement of  Cancellation  filed December 18, 1987 whereby
                     1,250,000   shares  of  Series  B  Cumulative   Convertible
                     Preferred Stock were cancelled  (Filed as an Exhibit to the
                     Company's 1987 Annual Report on Form 10-K and  incorporated
                     herein by reference)

</TABLE>


<PAGE>
C2


                               ASARCO Incorporated
                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit                                                                                                     Indexed
  No.                                                Description                                            on Page
<S>           <C>                                                                                        <C>

              (j)    Statement  of  Cancellation  filed  March 3,  1988  whereby
                     27,000 shares of Series A Cumulative  Preferred  Stock were
                     cancelled (Filed as an Exhibit to the Company's 1987 Annual
                     Report on Form 10-K and incorporated herein by reference)

              (k)    Certificate   of  Amendment  of  Restated   Certificate  of
                     Incorporation,  as amended,  filed August 7, 1989 (Filed as
                     an Exhibit to the Company's  Quarterly  Report on Form 10-Q
                     for the quarter ended June 30, 1989 and incorporated herein
                     by reference)

              (l)    By-Laws as last amended on June 26, 1991
                     (Filed as an Exhibit to the Company's 1991 Annual Report on
                     Form 10-K and incorporated herein by reference.)

4.                   Instruments   defining  the  rights  of  security  holders,
                     including indentures

              (a)    There are currently various separate indentures, agreements
                     or similar instruments under which long-term debt of Asarco
                     is currently  outstanding.  The Registrant hereby agrees to
                     furnish to the Commission,  upon request,  a copy of any of
                     the  instruments  which  define  the  rights of  holders of
                     long-term  debt   securities.   None  of  the   outstanding
                     instruments  represent  long-term debt securities in excess
                     of 10% of the total  assets of  Asarco as of  December  31,
                     1995

              (b)    Form of Rights Agreement dated as of July 26, 1989, between
                     the Company and First Chicago Trust Company of New York, as
                     Rights Agent,  defining the rights of shareholders  under a
                     July   1989   Shareholders'   Rights   plan  and   dividend
                     declaration (Filed as an Exhibit to the Company's report on
                     Form 8-K filed on July 28, 1989 and incorporated  herein by
                     reference)

              (c)    Rights Agreement  Amendment dated as of September 24, 1992,
                     between the Company and The Bank of New York,  as Successor
                     Rights Agent under the Rights Agreement listed above (Filed
                     as an Exhibit to the  Company's  1992 Annual Report on Form
                     10-K and incorporated herein by reference)

              (d)    Second Rights Agreement  Amendment dated as of February 23,
                     1995,  between  the Company and The Bank of New York (Filed
                     as an Exhibit to the Company's  report on Form 8-K filed on
                     February 24, 1995, and incorporated herein by reference)

              (e)    Indenture  Agreement  dated as of February 1, 1993  between
                     the Company and Bankers Trust Company, as Trustee, covering
                     the issuance of debt  securities  registered by the Company
                     in April  1992,  not to exceed  $250  million  (Filed as an
                     Exhibit to the  Company's  1992 Annual  Report on form 10-K
                     and incorporated herein by reference)

</TABLE>


<PAGE>
C3

                               ASARCO Incorporated
                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit                                                                                                     Indexed
  No.                                                Description                                            on Page
<S>           <C>                                                                                        <C>

              (f)    Indenture agreement dated as of October 1, 1994 between the
                     Company and Chemical Bank, as Trustee covering the issuance
                     of debt  securities  registered  by the  Company in October
                     1994,  not to exceed $300  million  (Filed as an Exhibit to
                     the Company's  registration  statement on Form S-3 filed on
                     October 12, 1994, and incorporated herein by reference)

10.           Material Contracts

              (a)    Stock  Option  Plan as last  amended on  November  30, 1994
                     (Filed as an Exhibit to the Company's 1994 Annual Report on
                     Form 10-K and incorporated herein by reference)

              (b)    Form of  Employment  Agreement  entered  into in  1985,  as
                     amended  in March and April  1989,  among the  Company  and
                     currently 12 of its executive  officers,  including Messrs.
                     R.  de J.  Osborne,  F.R.  McAllister,  K.R.  Morano,  R.M.
                     Novotny and R.J. Muth (Filed as an Exhibit to the Company's
                     Quarterly  Report on Form 10-Q for the  quarter  ended June
                     30, 1989 and incorporated herein by reference)

              (c)    Deferred Fee Plan for Directors, as amended through January
                     26, 1994 (Filed as an Exhibit to the Company's  1993 Annual
                     Report on Form 10-K and incorporated herein by reference)

              (d)    Supplemental   Pension  Plan  for   Designated   Mid-Career
                     Officers,  as amended through January 25, 1995 (Filed as an
                     Exhibit to the  Company's  1994 Annual  Report on Form 10-K
                     and incorporated herein by reference)

              (e)    Retirement  Plan for  Non-Employee  Directors,  as  amended
                     through January 25, 1995.  Effective December 31, 1995, the
                     Company   terminated   the  plan  for  current  and  future
                     directors.  (Filed  as an  Exhibit  to the  Company's  1994
                     Annual  Report  on Form  10-K and  incorporated  herein  by
                     reference)

              (f)    Directors' Stock Award Plan, as amended through January 27,
                     1993  (Filed as an Exhibit  to the  Company's  1992  Annual
                     Report on Form 10-K and incorporated herein by reference)

              (g)    Stock Incentive Plan adopted by the Company's  Shareholders
                     on April 25,  1990,  as last amended on November 29, 1995                               C9-C16 
                    
              (h)    Director's  Deferred  Payment Plan,  effective  October 25,
                     1995                                                                                   C17-C21

11.           Statement re Computation of Earnings Per Share                                                  C4

21.           Subsidiaries of the Registrant                                                                 C5-C8

23.           Report of Independent Accountants on Financial Statement Schedules
              and Consent of Independent Accountants are included on page A66 of
              this Annual Report on Form 10-K.
</TABLE>
Report on Form 11-K  relating  to the Savings  Plan for  Salaried  Employees  of
ASARCO  Incorporated and Participating  Subsidiaries is to be filed by amendment
on Form 10-K/A.

Copies of exhibits may be acquired upon written request to the Treasurer and the
payment of processing and mailing costs.


<PAGE>
C4


Exhibit 11 Statement re Computation of Earnings per Share


This calculation is submitted in accordance with regulation S-K item 601(b)(11).


Fully Diluted Earnings per Common Share
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                   For the years ended December 31,

                                                                                1995              1994             1993
                                                                                ----              ----             ----
<S>                                                                       <C>               <C>               <C>
Net earnings (loss) applicable to common stock before cumulative
    effects of changes in accounting principles                                 $169,153           $64,034         $(70,676)
      Cumulative effect of changes in accounting principles                            -                 -           86,295
                                                                                --------           -------         --------
Net earnings (loss) applicable to common stock                                  $169,153           $64,034         $ 15,619
                                                                                ========           =======         ========


Weighted average number of common shares outstanding                              42,326            41,905           41,594
      Shares issuable from assumed excercise of Stock Options                        132                91                7
                                                                                 -------           -------          -------
Weighted average number of common shares outstanding, as adjusted
                                                                                  42,458            41,996           41,601
                                                                                 =======           =======          =======

Fully diluted earnings per share:
    Net earnings (loss) applicable to common stock before cumulative
      effects of changes in accounting principles                                  $3.98             $1.52          $ (1.70)
         Cumulative effect of changes in accounting principles                         -                 -             2.08
                                                                                  ------            ------          -------
    Net earnings (loss) applicable to common stock                                 $3.98             $1.52          $   .38
                                                                                   =====             =====          =======

Primary earnings per share:
    Net earnings (loss) applicable to common stock before cumulative
      effect of changes in accounting principles                                   $4.00             $1.53          $ (1.70)
         Cumulative effect of changes in accounting principles                         -                 -             2.08
                                                                                   -----             -----          -------
    Net earnings (loss) applicable to common stock                                 $4.00             $1.53          $   .38
                                                                                   =====             =====          =======

</TABLE>


<PAGE>
C5
<TABLE>
<CAPTION>
                                                                                                Percentage of
                                                                                              voting securities           Key to
                                                                                                owned or other            notes
                                        Name of Company                                        bases of control           below
<S>      <C>                                                                             <C>                           <C>

         PARENTS:  None

         Registrant:  ASARCO Incorporated                                                                                  (A)

         SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES:

1        Air Resources Corporation (Delaware)                                              100.0                           (A)
2        Alta Mining and Development Company (Utah)                                         62.4                           (C)
3        American Limestone Company, Inc. (Delaware)                                       100.0                           (A)
4        American Smelting and Refining Company (New Jersey)                               100.0                           (C)
5        AR Mexican Explorations Inc. (Delaware)                                           100.0                           (A)
6           Compania Minera Real de Las Lomas, S.A. de C.V. (Mexico)                           100.0                       (A)
7           Minera San Bernardo, S.A. de C.V. (Mexico)                                         100.0                       (A)
8           Minera Santa Regina, S.A. de C.V. (Mexico)                                         100.0                       (A)
9        AR Mexican Holdings, Inc. (Delaware)                                              100.0                           (A)
10          AR Specialty Chemicals, S. A. de C.V. (Mexico)                                     100.0                       (A)
11            Enthone-OMI de Mexico S.A. de C.V. (Mexico)                                           100.0                  (A)
12              Rafco Kemicals S.A. de C.V. (Mexico) (See 48)                                            17.0            (B) (E)
13       AR Silver Bell, Inc. (Delaware)                                                   100.0                           (A)
14          Silver Bell Mining, L.L.C. (Delaware)                                               75.0                       (C)
15       AR Montana Corporation (Delaware)                                                 100.0                           (A)
16       Asarco Arizona, Inc. (Delaware)                                                   100.0                           (A)
17       Asarco Australian Holdings, Inc. (Delaware)                                       100.0                           (A)
18          M.I.M. Holdings Limited (Australia)                                                 15.1                     (B) (E)
19       Asarco (Delaware) Incorporated (Delaware)                                         100.0                           (A)
20          Grupo Mexico, S.A. de C.V. (Mexico) (See 28 & 100)                                   2.4                     (B) (E)
21       Asarco Exploration Company, Inc. (New York)                                       100.0                           (A)
22          ASARCO Guyane Francaise S.A.R.L.                                               100.0                           (A)
23       Asarco Exploration Company of Canada, Limited
           (Canada)                                                                        100.0                           (A)
24       Asarco Finance Limited (Bermuda)                                                  100.0                           (C)
25       Asarco International Corporation (Delaware)                                       100.0                           (A)
26       Asarco International Corp. FSC (Virgin Islands)                                   100.0                           (A)
27       Asarco de Mexico (Delaware) Inc.                                                  100.0                           (A)
28          Grupo Mexico, S.A. de C.V. (Mexico) (See 20 & 100)                                   0.09                    (B) (E)
29       Asarco Oil and Gas Company, Inc. (New York)                                       100.0                           (A)
30       Asarco Peruvian Exploration Company (Delaware)                                    100.0                           (A)
31       ASARCO Santa Cruz, Inc. (Delaware)                                                100.0                           (A)
32          Covington Land Company (Delaware)                                                  100.0                       (A)
33          CP Water Company (Arizona)                                                          50.0                       (A)
34       Asarco Trans-Ural Company (Delaware)                                              100.0                           (A)
35          Asarco Aginskoe, Inc. (Delaware)                                                   100.0                       (A)
36       BioTrace Laboratories, Incorporated (Utah)                                        100.0                           (A)
37       Bridgeview Management Company, Inc. (New Jersey)                                  100.0                           (A)
38       Compania Minera Asarco, S.A. (Chile)                                              100.0                           (A)
39       Copper Basin Railway, Inc. (Delaware)                                              45.0                         (B) (D)
40       Domestic Realty Company, Inc. (Montana)                                           100.0                           (A)
41       Encycle, Inc. (Delaware)                                                          100.0                           (A)
42          Hydrometrics, Inc. (Delaware)                                                      100.0                       (A)
43          Encycle/Texas, Inc. (Delaware)                                                     100.0                       (A)
44       Enthone, Incorporated (New York)                                                  100.0                           (A)
45          Ionic International Inc. (Michigan)                                                100.0                       (A)
46          Meltex, Inc. (Japan)                                                                16.25                    (B) (D)
47            Enthone-OMI (Singapore) Pte. Ltd. (Singapore)                                           8.0                  (A)
            (See 92)
48          Rafco Kemicals, S.A. de C.V. (Mexico) (See 12)                                      34.0                     (B) (E)
49       Enthone-OMI, Inc. (Delaware)                                                      100.0                           (A)
</TABLE>


<PAGE>
C6


Form 10-K

Item 14.    (c) Exhibit 21    Subsidiaries of the Registrant

<TABLE>
<CAPTION>
                                                                                               Percentage of
                                                                                             voting securities           Key to
                                                                                               owned or other            notes
                                        Name of Company                                       bases of control           below
<S>      <C>                                                                            <C>                           <C>


         SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES, cont'd:


50        Ebara-Udylite Co., Ltd. (Japan)                                                      45.0                     (B) (D)
51        Electroplating Engineers of Japan Ltd. (Japan)                                       25.0                     (B) (D)
         (See 82)
52            Alpha Metals of Japan (Japan)                                                         50.0                (B) (D)
53            Electroplating Engineers S.A. (Switzerland)                                           24.0                (B) (D)
             (see 55)
54          Enthone-OMI (Benelux) B.V. (The Netherlands)                                      100.0                       (A)
55            Electroplating Engineers S.A. (Switzerland)                                           20.0                (B) (D)
             (see 53)
56            Enthone-OMI (France) S.A. (France) (See 60)                                           28.5                  (A)
57          Enthone-OMI (Canada) Inc. (Ontario, Canada)                                       100.0                       (A)
58          Enthone-OMI (Deutschland)GmbH (Germany)                                            75.0                       (A)
59           IMASA B.V. (The Netherlands)                                                     100.0                       (A)
60          Enthone-OMI (France) S.A. (France) (See 56)                                        71.5                       (A)
61          Enthone-OMI Holdings (U.K.) Ltd. (United                                       82.41                          (A)
           Kingdom) (see 75)
62            AMZA Ltd. (Israel)                                                                    33.3                (B) (D)
63            Enthone-OMI Marketing (Europe) Ltd. (United                                          100.0                  (A)
              Kingdom)
64            Enthone-OMI (U.K.) Limited (United Kingdom)                                     100.0                       (A)
65            L.P.W. Chemie GmbH (Germany)                                                          49.0                (B) (D)
66              Blasberg Oberflaechentechnik GmbH (Germany)                                            100.0              (A)
67              Galvano Production Chemie GmbH (Germany)                                               100.0              (A)
68              Nihon LPW K.K. (Japan)                                                                   5.0            (B) (E)
69          Enthone-OMI (Hong Kong) Company Limited (Hong                                       5.5                       (A)
           Kong) (See 89)
70          Enthone-OMI (Italia) S.p.A. (Italy) (See 76)                                       51.6                       (A)
71          Enthone-OMI K.K. (Japan)                                                          100.0                       (A)
72          Enthone-OMI (Sverige) A.B. (Sweden)                                               100.0                       (A)
73              IMASA Kemi A.B. (Sweden)                                                      100.0                       (A)
74          Finima S.A. (France)                                                              100.0                       (A)
75           Enthone-OMI Holdings (U.K.) Ltd. (United                                            17.59                    (A)
             Kingdom) (See 61)
76            Enthone-OMI (Italia) S.p.A. (Italy) (See 70)                                          48.4                  (A)
77            Imasa A.G. (Switzerland)                                                              40.0                (B) (D)
78            Internacional de Manufacturas Asociadas, S.A.                                        100.0                  (A)
             (Spain)
79              Walmanick S.A. (Spain)                                                                   4.7            (B) (E)
80              Westbridge S.A. (Spain)                                                                  4.7            (B) (E)
81          OMI Holding S.A. (Switzerland)                                                    100.0                       (A)
82            Electroplating Engineers of Japan Ltd. (Japan)                                        25.0                (B) (D)
             (See 51)
83            Enthone-OMI (Suisse) S.A. (Switzerland)                                              100.0                  (A)
84          OMI International Corporation (Delaware)                                          100.0                       (A)
85            Enthone-OMI (Australia) Pty. Ltd. (Victoria,                                         100.0                  (A)
              Australia)
86            Enthone-OMI (Austria) GmbH (Austria)                                                 100.0                  (A)
87            Enthone-OMI (Espana) S.A. (Spain)                                                    100.0                  (A)
</TABLE>


<PAGE>
C7


Form 10-K

Item 14.    (c) Exhibit 21    Subsidiaries of the Registrant
<TABLE>
<CAPTION>
                                                                                               Percentage of
                                                                                             voting securities           Key to
                                                                                               owned or other            notes
                                        Name of Company                                       bases of control           below
<S>      <C>                                                                            <C>                           <C>

         SUBSIDIARIES AND OTHER ASSOCIATED COMPANIES, cont'd:


88            Enthone-OMI (Europe) Corporation (Delaware)                                          100.0                  (A)
89            Enthone-OMI (Hong Kong) Company Limited (Hong                                         94.5                  (A)
            Kong) (See 69)
90              Hua-Mei Electroplating Technology Company Ltd.                                          45.0            (B) (D)
              (People's Rep.of China)
91              Hua-Mei (Tianjin) Electroplating Technology                                             45.0            (B) (D)
                 Company, Ltd.
92            Enthone-OMI (Singapore) Pte. Ltd. (Singapore)                                         60.0                  (A)
              (See 47)
93              Enthone-OMI (Malaysia) SDN BHD (Malaysia)                                              100.0              (A)
94       Federal Mining and Smelting Company (Idaho)                                      100.0                           (A)
95       Federated Metals Canada Limited (Canada)                                         100.0                           (A)
96          Federated Genco Limited (Canada)                                                   60.0                     (B) (D)
97       Federated Metals Corporation (New York)                                          100.0                           (A)
98          Lone Star Lead Construction Corp. (New York).                                     100.0                       (C)
99       Geominerals Insurance Company, Ltd. (Bermuda)                                    100.0                           (A)
100      Grupo Mexico, S.A. de C.V. (Mexico) (See 20 & 28)                                 21.1                         (B) (E)
101      Lac d'Amiante du Quebec, Ltee (Delaware)                                         100.0                           (A)
102         LAQ Canada, Ltd. (Delaware)                                                            100.0                  (A)
103      Mines Trading Company Limited (United Kingdom)                                   100.0                           (A)
104      Mining Development Company (Delaware)                                            100.0                           (A)
105         Puya Raymondi Empresa Minera S.A. (Bolivia)                                        70.0                       (A)
106      Minto Explorations Ltd. (British Columbia)                                        32.1
107      Mission Exploration Company (Delaware)                                           100.0                           (A)
108           Lesarco, Inc. (Phillipines)                                                      30.0
109      NCBR, Inc. (Delaware)                                                            100.0                           (A)
110      Neptune Mining Company (Delaware)                                                 52.2                         (B) (D)
111      Northern Peru Mining Corporation (Delaware)                                      100.0                           (A)
112      Silver Valley Resources Corporation (Delaware)                                    50.0                           (A)
113      Southern Peru Copper Corporation (Delaware)                                       54.0                           (A)
114         Southern Peru Limited (Delaware)                                              100.0                           (A)
115      The International Metal Company (New York)                                       100.0                           (A)
116      Tulipan Company, Inc. (Delaware)                                                  63.0                         (B) (E)

</TABLE>


<PAGE>
C8

                                      NOTES

(A)Included in financial statements of Registrant and consolidated  subsidiaries
at December 31, 1995, filed as part of this Form 10-K.

(B)Excluded   from   financial   statements  of  Registrant   and   consolidated
subsidiaries  filed as part of this Form  10-K,  except to the  extent  noted in
Notes D and E. These companies are not in the aggregate considered significant.


(C)Inactive, having no assets or liabilities.


(D)Carried  on the  equity  method.  None  of the  50%-or-less  owned  companies
constitutes a significant subsidiary.


(E)M.I.M. and Grupo Mexico are carried on the cost method.  Effective January 1,
1995,  Asarco  consolidated  the  financial  results  of SPCC  in its  financial
statements. Previously, SPCC was accounted for under the equity method.



<PAGE>
C9

                                  Exhibit 10(g)

                               ASARCO INCORPORATED

                              STOCK INCENTIVE PLAN
                      as last amended on November 29, 1995


 1.      Purpose

         The purpose of this Stock  Incentive  Plan (the  "Plan") is to increase
         the  interest of the  executive  and other key  salaried  employees  of
         ASARCO  Incorporated  (the  "Company") and of its  subsidiaries  in the
         Company's   business  through  the  added  incentive   created  by  the
         opportunity afforded for stock ownership under the Plan. Such ownership
         will provide such  employees with a further stake in the future welfare
         of the Company,  and encourage  them to remain with the Company and its
         subsidiaries.  It  is  also  expected  that  the  Plan  will  encourage
         qualified  persons to seek and accept  employment  with the Company and
         its subsidiaries.  Pursuant to the Plan, such employees will be offered
         the  opportunity  to acquire common stock through the grant of options,
         the award of restricted stock under the Plan,  bonuses payable in stock
         or a combination thereof.

         As used herein,  the term "subsidiary" shall mean any present or future
         corporation  which  is or would be a  "subsidiary  corporation"  of the
         Company as the term is defined in Section 425 of the  Internal  Revenue
         Code of 1986, as amended from time to time (the  "Code").  In the Plan,
         whenever  the  context so  indicates,  the  singular  or plural and the
         masculine or feminine shall each be deemed to include the others.

 2.      Administration of the Plan

         The Plan shall be administered  by the  Organization  and  Compensation
         Committee (the "Committee") as appointed from time to time by the Board
         of Directors of the Company,  which Committee shall consist of not less
         than three (3) members of such Board of Directors: none of such members
         of the  Committee  shall be eligible  to be granted  options or awarded
         restricted  stock or receive bonuses payable in stock under the Plan or
         shall have been so eligible within one year prior to appointment.

         In   administering   the  Plan,  the  Committee  may  adopt  rules  and
         regulations for carrying out the Plan. The  interpretation and decision
         with  regard  to any  question  arising  under  the  Plan  made  by the
         Committee shall be final and conclusive on all employees of the Company
         and its  subsidiaries  participating  or eligible to participate in the
         Plan. The Committee may consult with counsel,  who may be of counsel to
         the Company,  and shall not incur any liability for any action taken in
         good faith in reliance upon the advice of counsel.  The Committee shall
         determine the employees to whom, and the time or times at which, grants
         or awards  shall be made and the number of shares to be included in the
         grants  or  awards.  Grants  of  options  or stock or other  awards  to
         individuals  selected  by the  Committee  will  become  effective  upon
         execution  and delivery by the Company of the  documents  setting forth
         the terms of the options or awards. Within the limitations of the Plan,
         the number of shares  for which  options  will be granted  from time to
         time and the periods for which the options will be outstanding  will be
         determined by the Committee. The Board of Directors of the Company may,
         by resolution, establish procedures to be followed by the Committee.



<PAGE>
C10

 3.      Shares of Stock Subject to the Plan

         The total  number of shares that may be  optioned or awarded  under the
         Plan is  2,000,000  shares  of the no par  value  common  stock  of the
         Company (the "Common  Stock") of which 300,000 shares may be awarded as
         restricted stock,  except that said numbers of shares shall be adjusted
         as  provided  in  Paragraph  13 of the Plan.  Any shares  subject to an
         option which for any reason  expires,  is relinquished or is terminated
         unexercised  and any  restricted  stock which is forfeited may again be
         optioned or awarded under the Plan.  Shares  subject to the Plan may be
         either  authorized  but unissued  shares  (which will not be subject to
         pre-emptive  rights) or shares that were once  issued and  subsequently
         reacquired by the Company.

 4.      Eligibility

         Key  salaried  employees,  including  officers,  of the Company and its
         subsidiaries (but excluding  non-employee  Directors as well as members
         of the  Committee)  are  eligible  to be granted  options  and  awarded
         restricted  stock under the Plan and to have their  bonuses  payable in
         stock. The employees who shall receive awards or options under the Plan
         shall  be  selected  from  time to time by the  Committee,  in its sole
         discretion,  from  among  those  eligible,  which  may  be  based  upon
         information furnished to the Committee by the Company's management, and
         the Committee shall determine,  in its sole  discretion,  the number of
         shares  to be  covered  by the  award or  awards  and by the  option or
         options granted to each such employee selected.

 5.      Duration of the Plan

         No award or option may be granted  under the Plan after April 24, 2000,
         but awards or options theretofore granted may extend beyond that date.

 6.      Terms and Conditions of Stock Options

         All options  granted  under this Plan shall be either  Incentive  Stock
         Options as defined  in section  422A of the Code or options  other than
         Incentive  Stock Options.  Each such option shall be subject to all the
         applicable  provisions of the Plan,  including the following  terms and
         conditions,  and to such other terms and  conditions  not  inconsistent
         therewith as the Committee shall determine.

        (a)       The  option  price  per  share  shall  be  determined  by  the
                  Committee.  However,  (i)  in  the  case  of  Incentive  Stock
                  Options,  the option  price shall not be less than 100% of the
                  fair market  value at the time the  Incentive  Stock Option is
                  granted  and  (ii) in the case of other  options,  the  option
                  price shall not be less than 50% of the fair  market  value at
                  the time such other  option is granted.  The fair market value
                  shall be the mean of the high  and low  sales  prices  for the
                  Common  Stock as reported on the  Composite  Tape for New York
                  Stock  Exchange  issues  for the day on which  the  option  is
                  granted or, if there is no sale of the shares  reported on the
                  Composite Tape on the date the option is granted,  then on the
                  next  preceding  day  on  which  there  was  such a  sale,  or
                  alternatively the mean of the bid and asked prices reported on
                  the Composite  Tape at the close of the market on the date the
                  option was granted shall be deemed to be the fair market value
                  of the  shares.  In the event that the method for  determining
                  the fair  market  value  of the  shares  provided  for in this
                  Paragraph 6(a) shall not be practicable,  then the fair market
                  value per share shall be determined  by such other  reasonable
                  method as the Committee  shall, in its discretion,  select and
                  apply at the time of grant of the option concerned.

         (b)      Each Incentive  Stock Option shall be  exercisable  during and
                  over such  period  ending not later  than ten  years,  or such
                  later date as may be allowable  under the Code,  from the date
                  it was granted,  as may be  determined  by the  Committee  and
                  stated in the option.  Each other option shall be  exercisable
                  during  and  over  such  period  as may be  determined  by the
                  Committee and stated in the option.



<PAGE>
C11

         (c)      Unless  otherwise  provided in the option,  no option shall be
                  exercisable within six months from the date of the granting of
                  the option, except as provided in Paragraph 13 of the Plan.

         (d)      Each option shall state whether it will or will not be treated
                  as an Incentive Stock Option.

         (e)      Each option may be exercised by giving  written  notice to the
                  Company specifying the number of shares to be purchased, which
                  shall be accompanied  by payment in full including  applicable
                  taxes,  if any.  Payment,  except as  provided  in the option,
                  shall be (i) in cash, or (ii) in shares of Common Stock of the
                  Company already owned by the optionee (the value of such stock
                  shall be its fair  market  value  on the date of  exercise  as
                  determined  under Paragraph  6(a)),  (iii) by a combination of
                  cash  and  shares  of  Common  Stock of the  Company,  (iv) in
                  accordance with a cashless exercise program under which either
                  (A) if so  instructed  by the  optionee,  shares may be issued
                  directly to the  optionee's  broker or dealer upon  receipt of
                  the purchase  price in cash from the broker or dealer,  or (B)
                  shares may be issued by the Company to an optionee's broker or
                  dealer  in   consideration   of  such   broker's  or  dealer's
                  irrevocable  commitment  to pay to the Company that portion of
                  the proceeds from the sale of such shares that is equal to the
                  exercise  price of the option(s)  relating to such shares,  or
                  (v) in such other manner as permitted by the  Committee at the
                  time of grant or thereafter. No optionee shall have any rights
                  to dividends or other rights of a shareholder  with respect to
                  shares subject to his option until he has given written notice
                  of exercise of his option and paid in full for such shares.

         (f)      Notwithstanding the foregoing,  the Committee may, in its sole
                  discretion,   grant  to  a  grantee  of  an  option   (whether
                  outstanding on April 25, 1990 or granted thereafter) the right
                  (hereinafter  referred to as a "stock appreciation  right") to
                  elect,  in the manner  described  below, in lieu of exercising
                  his option for all or a portion of the shares  covered by such
                  option, to relinquish his option with respect to any or all of
                  such shares and to receive from the Company a payment having a
                  value equal to the amount by which (a) the fair  market  value
                  of a share  of  Common  Stock  on the  date of such  election,
                  multiplied  by the  number of  shares as to which the  grantee
                  shall have made such election,  exceeds (b) the total purchase
                  price for that  number of  shares  of Common  Stock  under the
                  terms of such  option.  A grantee  who makes such an  election
                  shall receive  payment at the sole discretion of the Committee
                  (i) in cash equal to such excess; or (ii) in the nearest whole
                  number  of shares of  Common  Stock of the  Company  having an
                  aggregate  value  which is not  greater  than the cash  amount
                  calculated  in (i) above;  or (iii) a  combination  of (i) and
                  (ii) above. A stock  appreciation  right may be exercised only
                  when the  amount  described  in (a) above  exceeds  the amount
                  described  in  (b)  above.   An  election  to  exercise  stock
                  appreciation  rights  shall be deemed to have been made on the
                  day  written  notice  of  such  election,   addressed  to  the
                  Committee,  is received at the Company's offices at 180 Maiden
                  Lane,  New York,  New York 10038.  In the case of exercises of
                  stock appreciation  rights the fair market value of a share of
                  Common  Stock on any date shall be the closing  sale price for
                  such date as reported on the Composite Tape for New York Stock
                  Exchange issues. An option or any portion thereof with respect
                  to  which  a  grantee  has  elected  to  exercise   the  stock
                  appreciation  rights  described  above shall be surrendered to
                  the   Company  and  such  option   shall   thereafter   remain
                  exercisable  according  to its terms only with  respect to the
                  number  of  shares   as  to  which  it  would   otherwise   be
                  exercisable,  less the number of shares with  respect to which
                  stock appreciation rights have been exercised.  The grant of a
                  stock  appreciation  right shall be  evidenced by such form of
                  agreement  as  the  Committee  may  prescribe.  The  agreement
                  evidencing  stock  appreciation  rights  shall be personal and
                  will provide that they will not be transferable by the grantee
                  otherwise than by will or the laws of descent and distribution
                  and that they will be exercisable,  during the lifetime of the
                  grantee, only by him.
<PAGE>
C12

         (g)      An option  may be  execised  only if at all times  during  the
                  period  beginning  with the date of the granting of the option
                  and ending on the date of such  exercise,  the  grantee was an
                  employee of either the Company or of a parent or subsidiary of
                  the Company or of another  corporation  referred to in Section
                  422A(a)(2) of the Code,  unless such continuous  employment is
                  terminated  by  such  employer,   or  by  retirement  under  a
                  retirement  plan of the Company or a subsidiary,  or otherwise
                  terminated with the written  consent of the employer.  If such
                  continuous employment is so terminated, the option may also be
                  exercised  within a period to be  provided in the option or by
                  agreement  with the  grantee of an option not to exceed  three
                  years after such termination of continuous employment,  but in
                  no event later than the termination date of the option. If the
                  grantee should die at any time when the option, or any portion
                  thereof,  shall be  exercisable  by him,  the  option  will be
                  exercisable  within a period  provided for in the option or by
                  agreement  with the grantee of the  option,  not to exceed the
                  three  years  next  succeeding  his  death,  by the  person or
                  persons to whom his rights  under the option shall have passed
                  by will or by the laws of descent and distribution,  but in no
                  event at a date later than the termination of the option.

         (h)      The  option by its terms  shall be  personal  and shall not be
                  transferable by the optionee  otherwise than by will or by the
                  laws of descent and  distribution.  During the  lifetime of an
                  optionee, the option shall be exercisable only by him.

         (i)      Notwithstanding  any intent to grant  Incentive Stock Options,
                  an option  granted will not be considered  an Incentive  Stock
                  Option  to the  extent  that  it  together  with  any  earlier
                  Incentive  Stock  Options  permits the  exercise for the first
                  time in any  calendar  year of more than  $100,000 in value of
                  Common Stock (determined at the time of grant).

         (j)      The Committee  may, but need not,  require such  consideration
                  from an optionee at the time of granting an option as it shall
                  determine,   either  in  lieu  of,  or  in  addition  to,  the
                  limitations on exercisability provided in Paragraph 6(c).

         (k)      The  Committee may impose such  restrictions  on the resale of
                  Common Stock  received by officers upon exercise of options or
                  stock  appreciation  rights as may be necessary to comply with
                  Rule  16b-3  under  the  Securities  Exchange  Act of  1934 or
                  comparable successor rules.

 7.      Terms and Conditions of Restricted Stock Awards

         The  14,200   outstanding  shares  of  restricted  stock  issued  under
         agreements  dated  as of June  28,  1989  under  authorizations  by the
         Committee and Board of Directors on that date,  shall be deemed to have
         been  issued  under  this  Plan and shall be  subject  to the terms and
         provisions of the Plan.  All awards of restricted  stock under the Plan
         shall  be  subject  to all  the  applicable  provisions  of  the  Plan,
         including the following terms and  conditions,  and to such other terms
         and  conditions  not  inconsistent  therewith,  as the Committee  shall
         determine.

         (a)      Awards of restricted stock may be in addition to or in lieu of
                  option grants.

         (b)      During a period set by the Committee at the time of each award
                  of restricted stock (the "restriction  period"), the recipient
                  shall not be permitted to sell,  transfer,  pledge,  or assign
                  the shares of restricted stock; except that such shares may be
                  used,  if the award  permits,  to pay the option  price of any
                  option  granted  under the Plan  provided  an equal  number of
                  shares   delivered  to  the  optionee  shall  carry  the  same
                  restrictions as the shares so used.



<PAGE>
C13

         (c)      Shares  of   restricted   stock  shall   become  free  of  all
                  restrictions   if  the  recipient   dies  or  his   employment
                  terminates by reason of permanent disability, as determined by
                  the  Committee,  during the  restriction  period  and,  to the
                  extent set by the Committee at the time of the award or later,
                  if the  recipient  retires  under  a  retirement  plan  of the
                  Company or a subsidiary during such period.  The Committee may
                  require medical  evidence of permanent  disability,  including
                  medical  examinations  by  physicians  selected  by it. If the
                  Committee   determines   that  any  such   recipient   is  not
                  permanently  disabled or that a retiree's  restricted stock is
                  not to become free of restrictions,  the restricted stock held
                  by  either  such  recipient,  as the  case  may be,  shall  be
                  forfeited and revert to the Company.

         (d)      Shares of  restricted  stock shall be forfeited  and revert to
                  the Company upon the  recipient's  termination  of  employment
                  during the restriction period for any reason other than death,
                  permanent  disability  or,  to the  extent  determined  by the
                  Committee,  retirement  under a retirement plan of the Company
                  or a  subsidiary  except to the extent the  Committee,  at its
                  sole  discretion,  finds that such forfeiture  might not be in
                  the best interest of the Company and, therefore, waives all or
                  part of the  application  of this  provision to the restricted
                  stock held by such recipient.
         (e)      Each  recipient of shares of restricted  stock  hereunder may,
                  but need not,  be issued  one or more  stock  certificates  in
                  respect of such shares of restricted stock. Stock certificates
                  for shares of restricted stock shall be registered in the name
                  of the  recipient  but  shall be  appropriately  legended  and
                  returned  to the  Company by the  recipient,  together  with a
                  stock  power,  endorsed  in  blank  by the  recipient.  As the
                  Committee, in its discretion, may deem appropriate, in lieu of
                  the  issuance  of  certificates  for any shares of  restricted
                  stock during the applicable restriction period, a "book entry"
                  (i.e.,  a  computerized  or manual  entry)  may be made in the
                  records of the Company,  or its designated  agent, to evidence
                  the ownership of such shares of  restricted  stock in the name
                  of the  applicable  recipient.  Such records of the Company or
                  such agent shall,  absent  manifest  error,  be binding on all
                  recipients of  restricted  stock  hereunder.  The recipient of
                  shares  of  restricted  stock  hereunder,  whether  issued  in
                  certificated  or  book-entry  form,  shall be entitled to vote
                  such shares of  restricted  stock and shall be entitled to all
                  dividends  paid thereon,  except that dividends paid in Common
                  Stock or other  property  shall  also be  subject  to the same
                  restrictions.

         (f)      Restricted   stock  shall   become   free  of  the   foregoing
                  restrictions  upon  expiration of the  applicable  restriction
                  period and the Company shall deliver Common Stock certificates
                  evidencing such stock.

 8.      Bonuses Payable in Stock

         In  lieu  of  cash  bonuses   otherwise  payable  under  the  Company's
         compensation  practices to  employees  eligible to  participate  in the
         Plan, the Committee,  in its sole  discretion,  may determine that such
         bonuses  shall be  payable  in stock or partly  in stock and  partly in
         cash.  Such bonuses shall be in  consideration  of services  previously
         performed and as an incentive  toward future services and shall consist
         of shares of Common Stock free of any restrictions imposed by the Plan.
         The  number of shares of Common  Stock  payable in lieu of an amount of
         each bonus  otherwise  payable  shall be  determined  by dividing  such
         amount by the fair  market  value of one  share of Common  Stock on the
         date the  bonus is  payable,  with  fair  market  value  determined  in
         accordance with Paragraph 6(a).



<PAGE>
C14

 9.      Limited Rights

         Any  option  granted  under  the Plan  may,  at the  discretion  of the
         Committee,  at the time of grant or  thereafter  contain  provision for
         limited  rights,   as  described  herein.  A  limited  right  shall  be
         exercisable  upon the occurrence of an event specified in the option as
         an  exercise  event,  and  shall  expire  thirty  (30)  days  after the
         occurrence  of  such  event.   Exercise  events  may  include,  at  the
         discretion   of  the   Committee   and  as  specified  in  the  option,
         consummation  of a tender or exchange offer for shares of the Company's
         Common Stock  outstanding at the  commencement of such offer or a proxy
         contest  the result of which is the  replacement  of a majority  of the
         members of the  Company's  Board of  Directors,  or  consummation  of a
         merger or  reorganization  of the Company in which the Company does not
         survive or in which the  shareholders  of the Company  receive stock or
         securities  of  another  corporation  or  cash,  or  a  liquidation  or
         dissolution  of the Company or other  similar  events.  Limited  rights
         shall permit  optionees to receive in cash for each share covered by an
         option,  without regard to the date on which the option otherwise would
         be exercisable,  either (i) the highest market price per share that the
         Company's Common Stock traded as reported on the Composite Tape for New
         York Stock Exchange issues for the sixty days immediately preceding the
         exercise  event or (ii) if provided by the Committee in its  discretion
         at the time of grant,  the  highest  market  price  per share  that the
         Company's Common Stock traded as reported on the Composite Tape for New
         York Stock  Exchange  issues on the date of  exercise,  less the option
         price per share  specified  in the  option.  In the event the  exercise
         event is  consummation  of a tender or  exchange  offer,  the value per
         share set by the offeror shall be  substituted  for the highest  market
         price  per share  provided  in clause  (i) in the  preceding  sentence.
         Limited rights shall not extend the exercise  period of any option and,
         to the extent  exercised,  shall  reduce  the shares of Company  Common
         Stock  available under the Plan and the shares of such Stock covered by
         the options to which the limited rights relate.

10.      Transfer, Leave of Absence

         For the purpose of the Plan:  (a) a transfer  of an  employee  from the
         Company to a  subsidiary,  or vice  versa,  or from one  subsidiary  to
         another, and (b) a leave of absence,  duly authorized in writing by the
         Company  or  a  subsidiary,  shall  not  be  deemed  a  termination  of
         employment.

11.      Rights of Employees

         (a)      No person  shall  have any  rights  or  claims  under the Plan
                  except in accordance with the provisions of the Plan.

         (b)      Nothing  contained  in the Plan  shall be  deemed  to give any
                  employee  the  right  to be  retained  in the  service  of the
                  Company or its subsidiaries.

12.      Tax Withholding Obligations

         (a)      The payment of taxes,  if any,  upon the exercise of an option
                  pursuant  to  Paragraph  6(e)  or a stock  appreciation  right
                  pursuant to  Paragraph  6(f),  shall be in cash at the time of
                  exercise or on the applicable tax date under Section 83 of the
                  Code, if later; provided, however, tax withholding obligations
                  may be  met  by the  withholding  of  Common  Stock  otherwise
                  deliverable to the optionee pursuant to procedures approved by
                  the Committee.



<PAGE>
C15

         (b)      Recipients of restricted stock, pursuant to Paragraph 7, shall
                  be required to pay taxes to the Company upon the expiration of
                  restriction  periods or such earlier dates as elected pursuant
                  to Section 83 of the Code; provided,  however, tax withholding
                  obligations  may be met by the  withholding  of  Common  Stock
                  otherwise  deliverable to the recipient pursuant to procedures
                  approved by the  Committee.  In no event shall Common Stock be
                  delivered  to any awardee  until he has paid to the Company in
                  cash the amount of tax  required to be withheld by the Company
                  or has elected to have his withholding  obligations met by the
                  withholding of Common Stock in accordance  with the procedures
                  approved  by  the  Committee  or  otherwise  entered  into  an
                  agreement satisfactory to the Company providing for payment of
                  withholding tax.

         (c)      The Company shall  withhold  from any cash bonus  described in
                  Paragraph  8, an  amount  of cash  sufficient  to meet its tax
                  withholding obligations.

13.      Changes in Capital

         Upon  changes in the Common  Stock by a stock  dividend,  stock  split,
         reverse split,  subdivision,  recapitalization,  merger,  consolidation
         (whether or not the Company is a surviving corporation), combination or
         exchange of shares,  separation,  reorganization  or  liquidation,  the
         number and class of shares  available  under the Plan as to which stock
         options and  restricted  stock may be awarded,  the number and class or
         shares  under  each  option  and the  option  price per share  shall be
         correspondingly adjusted by the Committee,  such adjustments to be made
         in the case of  outstanding  options  without change in the total price
         applicable to such options. If a transaction shall occur or be proposed
         which the Committee in its sole  discretion  determines  may materially
         adversely  affect  the  market  value of the  Common  Stock  after such
         transaction,   the  Committee  may,  (i)  cancel  all  restrictions  on
         restricted stock previously  awarded to recipients under the Plan, (ii)
         accelerate  the time of  exercise so that all stock  options  which are
         outstanding shall become immediately exercisable in full without regard
         to any limitations of time or amount otherwise contained in the Plan or
         the options  and/or (iii)  determine that the options shall be adjusted
         and make such  adjustments by substituting  for Common Stock subject to
         options,  stock or  other  securities  as may be  issuable  by  another
         corporation in the  transaction  if such stock or other  securities are
         publicly traded or, if such stock or other  securities are not publicly
         traded,  by substituting  stock or other  securities of an affiliate of
         such corporation if the stock or other securities of such affiliate are
         publicly traded, in which event the aggregate option price shall remain
         the same and the amount of shares or other securities subject to option
         shall be the amount of shares or other securities which could have been
         purchased on the closing date or  expiration  date of such  transaction
         with the proceeds which would have been received by the optionee if the
         option  had  been  exercised  in  full  prior  to such  transaction  or
         expiration  date and the optionee had  exchanged  all of such shares in
         the  transaction.  No  optionee  shall  have any right to  prevent  the
         consummation  of any of the  foregoing  acts  affecting  the  number of
         shares  available  to  the  optionee.   Notwithstanding  the  foregoing
         adjustments  any changes to Incentive  Stock Options shall,  unless the
         Committee  determines  otherwise,  only be effective to the extent such
         adjustments  or changes do not adversely  affect the tax status of such
         option.

14.      Use of Proceeds

         Proceeds from the sale of shares pursuant to options granted under this
         Plan shall constitute general funds of the Company.

15.      Amendments

         The  Board of  Directors  may  amend,  alter or  discontinue  the Plan,
         including without  limitation any amendment  considered to be advisable
         by reason of  changes  to the Code,  but no  amendment,  alteration  or
         discontinuation  shall be made  which  would  impair  the rights of any
         holder  of an  award  of  restricted  stock or  option  or stock  bonus
         theretofore  granted,  without  his  consent,  or  which,  without  the
         approval of the shareholders, would:



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C16

         (a)      except as is provided in  Paragraph  13 of the Plan,  increase
                  the total  number of shares  reserved  for the  purpose of the
                  Plan;

         (b)      except as is provided in  Paragraphs  6(f) and 13 of the Plan,
                  decrease the option price of an Incentive Stock Option to less
                  than 100% of the fair market value on the date of the granting
                  of the option; or

         (c)      extend the duration of the Plan.

The  Committee  may amend the terms of any award of  restricted  stock or option
theretofore granted, retroactively or prospectively, but no such amendment shall
impair the rights of any holder without his consent.



<PAGE>
C17

                                  Exhibit 10(h)


                               ASARCO Incorporated

                        DIRECTORS' DEFERRED PAYMENT PLAN
                            Adopted October 25, 1995



         Section  1.   Effective   Date.   The  effective  date  of  the  ASARCO
Incorporated Directors' Deferred Payment Plan (the "Plan"), is October 25, 1995.

         Section  2.  Eligibility.  Any  Director  of ASARCO  Incorporated  (the
"Company")  elected to the Board of Directors  after October 25, 1995 and who is
not an  employee of the Company is  eligible  to  participate  in the Plan.  The
following  transitional  provisions  shall apply to participation in the Plan by
the  Company's  Directors  elected prior to October 25, 1995 who are not Company
employees.

                  2.1      Directors  with ten or more years of Board service as
                           of the date hereof  shall  continue to be eligible to
                           receive   benefits  under  the  ASARCO   Incorporated
                           Retirement  Plan  for  Non-Employee   Directors  (the
                           "Directors'  Retirement Plan").  Such Directors shall
                           not  participate  in the Plan except as to the amount
                           of any  credits  to the  Plan  reallocated  from  the
                           Directors'  Retirement  Plan  pursuant to Section 2.4
                           below.

                  2.2      Directors  with at least five years but less than ten
                           years of Board service as of the date hereof shall be
                           eligible to accrue benefits under the Plan commencing
                           January  1,  1996  until  December  31 of the year in
                           which  they  attain   their   tenth   Board   service
                           anniversary  date,  or such  earlier or later date as
                           would cause the sum of such Director's credited years
                           of service under the Directors'  Retirement Plan plus
                           months of  credited  service  under the Plan to equal
                           ten  full  years of  service.  Such  Directors  shall
                           continue to be eligible to accrue  benefits under the
                           Directors'   Retirement   Plan  to  the  extent  such
                           benefits are accrued for benefit computation purposes
                           as  of  December   31,  1995,   and  may   reallocate
                           Directors'  Retirement  Plan  benefits  to this  Plan
                           pursuant to Section 2.4 below.

                  2.3      Directors  with less than five years of Board service
                           as of  December  31,  1995  shall  receive an initial
                           credit  under  the Plan  equal to 75  percent  of the
                           current annual cash retainer for Directors  times the
                           number of years (rounded to the nearest  quarter of a
                           year) of Board service as of December 31, 1995.  Such
                           Directors  shall  thereafter  be  eligible to receive
                           benefits  under the Plan through  their tenth year of
                           Board service (that is, until their tenth anniversary
                           date).  Such Directors  shall not be eligible for any
                           benefits under the Directors' Retirement Plan.



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C18

                  2.4      All  directors  who would have vested  benefits as of
                           December  31,  1995 under the  Directors'  Retirement
                           Plan (at least five years of Board  service)  will be
                           entitled  to  reallocate  to  their  account  in  the
                           Deferred Payment Plan by an election made on or prior
                           to December  31, 1995 the lump-sum  present  value of
                           their  accrued  pension  benefit as of  December  31,
                           1995.  For purposes of computing the lump sum present
                           value of accrued  pension  benefits at  December  31,
                           1995 and to discount such amount if it is reallocated
                           to the  Deferred  Payment  Plan prior to December 31,
                           1995,  a discount  rate of 6 percent  per annum,  the
                           10-year  Treasury  bill  interest  yield  rate  as in
                           effect on October 25, 1995 will be used.

                           Any such  election,  once made,  shall  terminate  an
                           electing  director's  benefits  under the  Directors'
                           Retirement Plan.

                  2.5      Directors who commence  Board service after  December
                           31, 1995 shall be eligible to receive  benefits under
                           the Plan  through  their tenth year of Board  service
                           (that is, until their tenth anniversary date).

         Section 3. Deferred Payment  Account.  A deferred payment account shall
be established for each eligible Director. Each such Director's deferred payment
account  shall  consist of a stock  equivalent  subaccount  and, if the Director
elects to participate in the U.S.  Treasury bond equivalent  described  below, a
bond equivalent subaccount.

         Section 4. Amount of Deferral. The Company shall credit an amount equal
to 75 percent of a Director's annual cash retainer  (currently  $17,250 which is
75 percent of $23,000) to the  participant's  deferred  payment  account.  These
credits will be made at the time of each quarterly  payment made of a Director's
annual cash retainer for years beginning January 1, 1996.

         Section  5.  Time of  Credit.  Credits  to the  participant's  deferred
payment accounts shall be made by the Company on each date when the Company pays
the Director's  annual cash retainer.  Amounts  reallocated  from the Directors'
Retirement Plan to this Plan pursuant to Section 2.4 hereof shall be credited to
the Director's  account on the date the Director's  election is made pursuant to
Section 2.4.

         Section 6.  Stock  Election.  At least 50  percent  of each  Director's
deferred payment account shall be credited to the stock equivalent subaccount. A
Director may elect in writing  that  additional  amounts,  in  increments  of 25
percent,  of the  deferred  payment  account  shall  be  credited  to his  stock
equivalent subaccount.

         An election by a Director  under this Section 6 must be received by the
Company  prior to January 1 of the calendar year during which the election is to
be effective and shall be irrevocable  for the entire year.  Such election shall
remain in effect for  subsequent  years unless changed prior to the January 1 of
any such subsequent  year. If no such election is made,  amounts credited to the
deferred  payment account shall be allocated 100 percent to the stock equivalent
subaccount.

         A  bookkeeping  entry  shall be made on the  number of whole  shares of
Company  Common Stock which could be purchased at "fair market value" as defined
below  in this  Section  with  the  amount  credited  to such  stock  equivalent
subaccount  on the date as of which such  credit is made except that for amounts
reallocated to this Plan from the Directors'  Retirement  Plan, such fair market
value shall be  determined at the average of the high and low prices on New York
Stock Exchange - Composite  Transactions on the date of the Director's  election
pursuant to Section 2.4.

         The stock equivalent subaccount also shall be credited on each dividend
payment date with a bookkeeping  entry indicating the number of additional whole
shares  which could be  purchased  with the  dividend  on the shares  previously
credited to the stock equivalent subaccount.



<PAGE>
C19

         Any  deferred  payment  amounts  which are  insufficient  to permit the
crediting of a whole share of Company  Common Stock and any amounts  which would
represent cash dividends on Company Common Stock credited to a stock  equivalent
subaccount  shall be carried as a cash balance  bookkeeping  entry in such stock
subaccount.  At such time as the cash  balance  equals at least the fair  market
value of one share of Company Common Stock, the cash balance  bookkeeping  entry
shall be  converted  to an entry  representing  the number of  additional  whole
shares of Company  Common  Stock which could be  purchased  at fair market value
with such balance.  No interest  shall be credited on any such stock  equivalent
subaccount cash balance.

         For  purposes  of this  Section  6, "fair  market  value" of a share of
Company  Common  Stock  shall  mean the  average of the high and low prices of a
single share of Company  Common Stock as reported by the Wall Street Journal for
New York Stock  Exchange - Composite  Trading for each of the five  trading days
next preceding the day as of which such value is to be determined.

         No  election  may be made  to have  amounts  previously  credited  to a
Director's  bond  equivalent  subaccount  credited  instead  to his or her stock
equivalent  subaccount,  and no election may be made to have amounts  previously
credited to a Director's stock equivalent  subaccount credited instead to a bond
equivalent subaccount except that a Director who has elected pursuant to Section
9 or Section 12 to receive annual installments may, at least six months prior to
the date  such  payments  would  commence  or at least six  months  prior to the
effective date of election elect to transfer on the date such payments  commence
the fair market  value of the entire  stock  equivalent  subaccount  to the bond
equivalent subaccount.  Following retirement,  a Director may, by written notice
at least 30 days prior to any annual installment payment date, elect to transfer
any entire  remaining  balance in the stock  equivalent  subaccount  to the bond
equivalent subaccount.

         The stock equivalent subaccounts shall be adjusted to reflect any stock
split, stock dividend, recapitalization,  merger, consolidation,  reorganization
or other similar change in the Company's Common Stock.

         Section 7. Bond Equivalent Subaccount.  Each bond equivalent subaccount
will be credited with interest from the date of initial  credit until payment as
follows.  The bond  equivalent  subaccount  will be  credited at the end of each
calendar  quarter  with  interest  at the  yield  rate  for U.S.  Treasury  debt
obligations with a 10-year maturity  effective for the last business day in each
quarter. Amounts so credited will be added to the balance in such subaccount.

         Section  8.  Value of  Deferred  Payment  Accounts.  The  value of each
participant's  deferred  payment  account  shall  include  the  amount  which is
credited to a Director's bond equivalent  subaccount,  the interest  credited on
such  amount  pursuant  to Section 7, the value of any shares of Company  Common
Stock  credited  to the  Director's  stock  equivalent  subaccount  and the cash
balance  credited to such stock equivalent  subaccount,  all with respect to the
amount deferred pursuant to Section 4 and the amount,  if any,  reallocated from
the  Directors'  Retirement  Plan pursuant to Section 2.4, and less any payments
made under Section 9.

         Section  9.   Payment  of  Deferred   Compensation.   The  value  of  a
participant's  bond equivalent  subaccount and stock equivalent account shall be
payable solely in cash. All payments of a  participant's  deferred  compensation
account shall be made in a lump sum or in annual installments in accordance with
an election made by the  participant.  In all cases payment shall be made on the
date of termination of services as a Director unless payment on the next January
15 or annual installments are elected.

         If a lump sum payment is elected,  the participant shall have the right
to elect at least one year prior to the year of payment that all or part of such
lump sum  payment  shall be made on the  January 15 next  following  the year on
which such lump sum payment would otherwise occur.



<PAGE>
C20

         If annual  installments  are elected,  such  payments  shall be made in
accordance  with the  participant's  election.  The amount of the first  payment
attributable to the bond equivalent  subaccount shall be a fraction of the value
of the participant's bond equivalent  subaccount,  the numerator of which is one
and the  denominator of which is the total number of installments  elected,  and
the  amount  of  each  subsequent  payment  shall  be a  fraction  of the  value
(including interest earned) on the date preceding each subsequent  payment,  the
numerator  of which is one and the  denominator  of which is the total number of
installments elected minus the number of installments previously paid.

         The amount of the first payment  attributable  to the stock  equivalent
subaccount  shall  be a  fraction  of  the  value  of  the  participant's  stock
equivalent  subaccount (based upon the fair market value of the stock determined
under  Section 6 plus any cash  balance),  the numerator of which is one and the
denominator of which is the number of  installments  elected,  and the amount of
each  subsequent  payment shall be a fraction of the  redetermined  value of the
participant's stock equivalent subaccount, the numerator of which is one and the
denominator  of which is the total  number  of  installments  elected  minus the
number of installments previously paid.

         If one lump sum payment is elected,  such payment  shall be made on the
date designated in accordance with the participant's election.

         Section  10.  Changes  in  Election.  At least  one  year  prior to the
calendar year in which  payments would  otherwise  commence,  a participant  may
request the Company, subject to the discretion of the Company, (i) to change his
or her  election  with  respect  to the  time  of  payments  of his or her  bond
equivalent  subaccount and/or (ii) to change his or her election with respect to
the time of payments of his or her stock  equivalent  subaccount  in  connection
with his or her retirement or termination as a Director,  provided, that no such
change may  accelerate  the time of the  initial  payment  date of any  deferred
amount.

         Section 11.  Designation of Beneficiary.  A participant may designate a
beneficiary by giving written notice to the Company. Attention: Secretary. If no
beneficiary is designated,  the beneficiary will be the participant's estate. If
more than one beneficiary  statement has been filed, the beneficiary  designated
in the  statement  bearing  the  most  recent  date  will be  deemed  the  valid
beneficiary.

         Section 12.  Death of  Participant  or  Beneficiary.  In the event of a
participant's  death before he or she has received all of the deferred  payments
to  which  he or she is  entitled  hereunder,  the  value  of the  participant's
deferred  payment account shall be paid to the estate or designated  beneficiary
of the deceased  participant  in one lump sum on the first January 15 or July 15
following  such date of death,  or as soon as  reasonably  possible  after  such
January 15 or July 15, unless the  participant  has elected to continue  without
change the schedule for payment of benefits.

         If the distribution is to be made to a beneficiary and such beneficiary
dies before such distribution has been made, the amount of the distribution will
be paid to the estate of the beneficiary in one lump sum.

         Section  13.   Participant's   Rights  Unsecured.   The  right  of  any
participant  to  receive  payments  under the  provisions  of the Plan  shall be
contractual in nature only, however, the Company reserves the right to establish
a trust to provide an alternative source of benefit payments under the Plan, the
assets  of  which  shall be  subject  to the  claims  of the  Company's  general
creditors in the event of bankruptcy or insolvency  only. Any payments paid from
such trust shall reduce the amount of benefits owed by the Company.

         Section  14.   Statement  of  Account.   Statements  will  be  sent  to
participants  by the end of  February  of each  year as to the  value  of  their
deferred payment accounts as of the end of December of the preceding year.



<PAGE>
C21

         Section 15. Assignability. No right to receive payments hereunder shall
be transferable or assignable by a participant or beneficiary, except by will or
by the laws of descent and distribution.

         Section  16.  Participation  in Other  Plans.  Nothing in the Plan will
affect any right which a participant  may otherwise  have to  participate in any
other retirement plan or agreement which the Company may have now or hereafter.

         Section 17.  Amendment.  This Plan may at any time or from time to time
be amended,  modified or terminated by the Board of Directors of the Company. No
amendment,   modification  or  termination  shall,  without  the  consent  of  a
participant, adversely affect such participant's balances in his or her deferred
payment account.

         Section 18.  Governing  Law.  This  Agreement  shall be governed by and
construed in accordance with the laws of the State of New York.