SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                 1998 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, 1998       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 26, 1999, there were of record 39,669,569 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 $0.6 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 28, 1999.
Part IV:    Exhibit index is on pages C1 through C3.
                                   

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                                      A-1


                                     PART I

Item 1. Business

Asarco,  a New  Jersey  corporation  organized  in 1899,  is one of the  world's
leading  producers  of copper and has  developed  one of the largest  copper ore
reserve positions in the industry.  Asarco also produces specialty chemicals and
aggregates.  The Company's copper business includes integrated mining,  smelting
and  refining  operations  in North  America and in Peru through its 54.3% owned
subsidiary, Southern Peru Copper Corporation.  Enthone-OMI, Inc., a wholly owned
subsidiary,  operates  a  worldwide  specialty  chemicals  business  focused  on
functional  and  decorative  coatings for the  electronics  and metal  finishing
industries.  American  Limestone  Company,  a wholly owned subsidiary,  produces
construction  aggregates,  ready-mixed concrete and agricultural limestone.  The
Company also operates a custom lead smelting business, a silver mining business,
a zinc mining  business and a specialty  metals  business.  Asarco owns Encycle,
Inc.,  which  operates  a  waste  recycling   facility  and   Hydrometrics,   an
environmental consulting and construction firm.

In this  report all  tonnages  are in short  tons.  All ounces are troy  ounces.
Dollar amounts are in U.S. dollars unless otherwise indicated.  "Asarco" or "the
Company" includes Asarco and subsidiaries. "Southern Peru Copper Corporation" or
"SPCC" includes that Company's subsidiaries.

Reference is made to the following  Financial  Statement  Notes included in this
report: Investments in Note 6, and Business Segments in Note 13.


                              CAUTIONARY STATEMENT

Forward-looking  statements  in this  report  and in  other  Company  statements
include  statements  regarding  expected  commencement  dates of mining or metal
production   operations,   projected  quantities  of  future  metal  production,
anticipated production rates, operating efficiencies,  costs and expenditures as
well as projected  demand or supply for the Company's  products.  Actual results
could differ  materially  depending upon factors  including the  availability of
materials,   equipment,   required  permits  or  approvals  and  financing,  the
occurrence of unusual weather or operating  conditions,  lower than expected ore
grades,  the failure of equipment or  processes  to operate in  accordance  with
specifications,  labor relations,  environmental  risks as well as political and
economic risk  associated  with foreign  operations.  Results of operations  are
directly affected by metals prices on commodity exchanges which can be volatile.

Additional business information follows:

                         PRINCIPAL PRODUCTS AND MARKETS
COPPER

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.


Overview

Asarco is one of the world's  leading  producers  of copper.  In 1998,  Asarco's
beneficial  interest in copper mine production was 1.0 billion pounds or 4.9% of
Western World copper mine production.

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                                      A-2



Asarco's  copper  business  includes its integrated  copper  operations in North
America,  which  accounted for 65% of its beneficial  production in 1998, and an
integrated copper business in Peru conducted through its 54.3%-owned subsidiary,
Southern Peru Copper  Corporation  (SPCC).  The North American  copper  business
includes  the  Mission  and Ray mines in  Arizona;  a copper  smelter in Hayden,
Arizona;  a copper smelter in El Paso,  Texas and a copper refinery in Amarillo,
Texas.  Operations  at the El Paso smelter were  suspended in February  1999 for
three  years.  Asarco  also owns a 49.9%  interest in Montana  Resources'  (MRI)
copper-molybdenum  mine in Butte, Montana, and a 75% interest in the Silver Bell
copper mine in Arizona.  The Company's  Peruvian  copper  business,  operated by
SPCC,  includes the  Toquepala  and Cuajone  mines,  the Ilo smelter and the Ilo
refinery, all located in the southern part of Peru.

The Company's  production of copper in 1998 was 5% above the 1997  production of
978 million  pounds.  In North America,  a full year of production at the Silver
Bell mine,  which began  operations in July 1997, and the  introduction of a new
acid cure  process  at the Ray mine  solvent  extraction/electrowinning  (SX/EW)
operation,  led to a 34.6  million  pound  increase  in  low-cost  SX/EW  copper
production,  up nearly  40% over the prior  year.  Greater  tons of ore  milled,
higher ore grades and improved  recoveries in the sulfide operations at Mission,
Ray and Montana Resources contributed to the increased 1998 production.

In Peru,  production  was lower as production  at the Toquepala  SX/EW plant was
more than  offset by the  impact of lower  copper  grades and  disruptions,  now
overcome, accompanying the integration of the new, expanded mill at Cuajone.

Copper anode production at the El Paso smelter was above 1997 levels as a result
of process  improvements  while production at the Hayden smelter was below 1997,
as planned,  due to the  biannual  maintenance  shutdown.  Increased  production
capacity at El Paso  required  the purchase of  concentrates  for the smelter to
operate  efficiently.  In early 1999,  the Company  suspended  operations  for a
three-year  period at El Paso as current  market terms for smelting and refining
fell  to  levels  making  such  purchases  unremunerative.   These  same  market
conditions allowed the Company to sell its own concentrate production, which had
been treated at El Paso, on favorable terms. During the suspension, El Paso will
be  maintained  so that it may be returned to full  operation  at the end of the
three-year period.

The Company's  beneficial interest in refined copper production declined in 1998
by 40.3 million pounds,  principally as a result of shortages of scrap copper to
feed the Amarillo refinery. Full utilization of the increased capacity at SPCC's
Ilo refinery and the SX/EW production increases could not fully offset the lower
Amarillo  production.  The  suspension of operations at El Paso will result in a
further curtailment at Amarillo of an additional 160 million pounds of copper in
1999.

Low-Cost Copper Expansion

The  Company  is  taking  advantage  of its  large  ore  reserve  base to expand
production  of low-cost  copper in North America and Peru.  Asarco's  beneficial
interest in the production of mined copper of more than 1 billion pounds in 1998
will  increase  another 10% in 1999.  In doing so, the Company is shifting  from
higher-cost  sulfide  production  to  lower-cost  SX/EW and  lower-cost  sulfide
production.  Cash costs benefited significantly from these and other programs in
1998.  Asarco's  consolidated  cash cost of producing  copper in 1998 dropped to
under 65 cents per pound.

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                                      A-3




Asarco's Ray Complex in Arizona  produced almost 335 million pounds of copper in
1998,  of which 91 million  pounds came from its SX/EW  operations.  Total SX/EW
production  at Ray  increased  as a result  of  using  new  leaching  technology
involving  higher  acid  concentrations  in the leach  dumps.  The new  leaching
process  provides  both a quicker  leach cycle and higher  copper  recovery.  An
expansion of the tankhouse,  currently underway,  will increase SX/EW production
an  additional 12 million  pounds,  starting in mid-1999.  Asarco's  total SX/EW
production  at Ray then  will have  grown 45% from 1996  levels to more than 100
million  pounds  of  copper  annually  at a cash  cost of less than 50 cents per
pound.

The Company's  Silver Bell mine produced over 40 million  pounds of SX/EW copper
in 1998, 17.5% above design  capacity.  Asarco expects to maintain Silver Bell's
SX/EW  production  levels at an annual rate of 40 million pounds and a cash cost
of less than 50 cents per pound.

New loading and hauling equipment at Mission increased equipment availability by
14%,  reduced  maintenance  costs by 17% and reduced waste haulage costs by 11%.
This  equipment  has  reduced  costs at Mission by $9.5  million  per year.  New
equipment at Mission includes a large overland  conveyor system designed to move
58 million tons of waste per year. Asarco's Mission Complex produced 255 million
pounds of copper in 1998.

New drilling,  loading and hauling  equipment added in late 1997 and during 1998
at Ray,  Cuajone and  Toquepala  have  provided  similar  benefits.  Delivery of
additional similar equipment is scheduled for 1999 and 2000.

Modernization  of the Hayden  smelter's  gas  handling  system  and the  process
control system was completed in 1998. These improvements are expected to further
increase production rates and reduce operating costs.

An expansion program at SPCC's Cuajone mine, which started up in late 1998, will
add 130  million  pounds  of  copper  per year  from  that  mine.  Total  copper
production at Cuajone,  starting in 1999,  will  increase to 446 million  pounds
from the 1998 total of 316 million pounds.

SPCC has launched a new project to add 26 million pounds of SX/EW  production at
its Toquepala leach dumps.  Low-cost SX/EW  operations at SPCC's  Toquepala mine
produced 104 million pounds of refined cathode in 1998, 30% above the 80 million
pound design capacity.  The expansion project,  costing $48 million and expected
to be  completed  by the end of 1999,  will  bring  total  SX/EW  production  at
Toquepala to 124 million pounds, at a cash cost of less than 40 cents per pound.

SPCC also is  proceeding  with plans to  modernize  and expand its Ilo  smelter,
increasing smelter capacity by 10% to 1.25 million tons of concentrates to match
SPCC's expanded mine output. When the $875 million project is complete,  the Ilo
plant will be one of the world's  largest,  most modern  smelters,  with planned
sulfur capture  exceeding 99%. SPCC also is expanding  refined copper production
at its Ilo refinery.  Annual production of refined cathode increased 17% in 1997
and increased an additional 6% to more than 543 million pounds in 1998.


Cost-Reduction Programs

The  Company's  strategy  has been to lower costs for  existing  production  and
increase  production  of lower  cost  copper to reduce the  Company's  breakeven
costs.  A  company-wide  cost  reduction  program was instituted in late 1997 to
respond to lower metal prices.  At Southern Peru Copper a similar  program began
in the second  quarter of 1998.  The programs  include  reductions in personnel,
general and administrative  expenses and purchased services and supplies as well
as equipment upgrades, and other operating improvements.  Further cost reduction
programs were undertaken in early 1999.

<PAGE>
                                      A-4




The Company announced late in 1998 a three-year  suspension of operations at the
El Paso copper smelter. The suspension and sale of the Company's concentrates at
favorable terms should further reduce North American copper  production costs in
1999.

Ore Reserves

One of the strengths of Asarco's copper business is its large copper ore reserve
position which including mineralized material at SPCC totals 5.4 billion tons at
the end of 1998.  The  Company's  beneficial  interest in its ore reserve is 3.6
billion tons containing 39.2 billion pounds of copper.  Ore reserves are the key
to a mining company's future and Asarco's position, which represents a composite
operating mine life of 37 years at current  production rates, is one of the best
in the industry.


Copper Market

Demand for copper in 1998 set a new record for the 13th straight  year,  growing
by just under 1% over the 1997 level.  While copper consumption in Asia declined
12.5%,  that  decline was more than  offset by growth of 6.1% in North  America,
Europe and the rest of the Western World.

The Company  expects  demand  growth to  accelerate in 1999 and 2000 as economic
activity in Southeast  Asia  recovers  from the recent  recession  affecting the
region.

Excess supplies of copper  concentrates,  which were accumulated during a period
of smelting  capacity shortage in 1995 and 1996, have now been processed and the
resulting  copper began reaching  market in 1997 and 1998.  This material,  when
added to current mine and scrap production created a supply surplus.

Based on the  Company's  current  analysis  of supply  and  demand  the  Company
estimates  that this  current  surplus  will shift to a deficit in late 1999 and
2000.  This  shift  should  bring  about an  improvement  in the  copper  market
fundamentals and sentiment.

In 1998,  the copper price  declined to an 11 year low. The loss reported by the
Company in 1998 reflects the low copper prices which existed throughout 1998.


SPECIALTY CHEMICALS

Enthone-OMI,  Inc. is a  worldwide  supplier of  proprietary  chemicals  used to
produce  functional  and  decorative  coatings  on metals and  plastics  for the
electronics and metal finishing industries.

Enthone-OMI's  worldwide  operations include 14 manufacturing  sites, 6 research
facilities and 19 major sales and distribution  centers.  Enthone-OMI's  pre-tax
profit increased 5.1% to $30.9 million in 1998,  before a non-recurring  pre-tax
charge of $1.8 million in connection  with a cost  reduction  program.  Sales at
Enthone-OMI  have  grown from $98  million  in 1988 to $351  million in 1998 and
earnings  have  increased  from $3.0 million in 1988 to $30.9 million in 1998, a
compound growth rate of 26%.

Asarco's  involvement in the specialty chemicals business started more than four
decades ago with the  acquisition of Enthone,  Inc., a small,  regional  company
based in New  Haven,  Connecticut.  For thirty  years,  Enthone's  efforts  were
focused  in  the  United  States.   Overseas  activities  were  handled  through
licensees.  In 1988, Asarco began the investment program which has significantly
expanded the business through the acquisition of OMI  International.  In 1989 it
acquired  the  Imasa  Group  in  Europe.   Enthone-OMI   has  since  made  eight

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                                      A-5


acquisitions  including  acquisition  of the  minority  interest in  Enthone-OMI
(Singapore)  in 1995,  and an  additional  interest  in a joint  venture  in the
Peoples Republic of China in 1997.  Enthone-OMI has also acquired Industrias Oxy
Metal,  S.A.,  a  Mexican  specialty  chemicals  business,  STS,  a small  Swiss
specialty  chemicals  company,  and Blasberg  Oberflachentechnik  GmbH, a German
specialty   chemicals   company.   In  1998,   Enthone-OMI   acquired   Deutsche
Oberflachentechnik GmbH (DOT), another German specialty chemicals company. DOT's
product  line  complements  Enthone-OMI's  existing  business  and  expands  its
presence in Germany,  the largest  market in Europe.  The  acquisition  provides
Enthone-OMI new technology which can be marketed elsewhere in the world.

Enthone-OMI  has also grown  internally by investing in research and product and
market  development.  These acquisitions and investments have made Enthone-OMI a
global leader in the specialty chemicals business.

Technical   innovation  and  marketing   effectiveness   were  the  key  factors
contributing  to a fifth  consecutive  year of  record  sales and  earnings  for
Enthone-OMI  in 1998.  One such recent  innovation  includes use of  Enthone-OMI
technology by semi-conductor  chip  manufacturers to produce copper circuitry on
computer  chip surfaces to increase the current  carrying  capacity and speed of
the chips.

Also  contributing to the Company's growth was a strong global market acceptance
for  high  performance  coatings  for  printed  circuit  boards  and  electronic
components,  new products providing improved corrosion resistance for automotive
components, and advanced technology for manufacturing semi-conductor chips.

All  of   Enthone-OMI's   facilities  are  ISO  9001  or  9002  certified.   The
s'Hertogenbosch, Netherlands and Norrkoping, Sweden facilities were the first to
receive ISO 14001 certification for environmental management systems.


AGGREGATES

American  Limestone Company,  a wholly owned subsidiary,  produces  construction
aggregates,  ready-mixed  concrete and agricultural  limestone.  It has 20 sales
locations in Tennessee and Virginia.  Products are sold in Tennessee,  Virginia,
Kentucky, North Carolina and South Carolina.

Construction  aggregates  are  the  Company's  principal  product.  Construction
aggregates  make up more than 80% of the content of asphalt  paving and over 90%
of concrete.  Nationally,  highway construction accounts for 40% of construction
aggregate sales.

The  Transportation  Equity Act for the 21st Century (TEA-21) was passed in 1998
and extends through 2003.  TEA-21 authorizes a total of $217 billion for highway
and mass transit  programs for the period  1998-2003,  including $42 billion for
mass transit programs and $175 billion for highways. It should positively affect
the markets for American Limestone's products.

American  Limestone  increased  sales by 4.4% in 1998  and  recorded  its  fifth
consecutive  year of record  earnings  with  pre-tax  profits of $14.6  million.
American  Limestone's earnings have grown at a compound annual growth rate of 9%
since 1988.


OTHER METALS

Asarco  owns a 50%  interest in Silver  Valley  Resources,  Inc.  which owns and
operates the Coeur and Galena mines in Wallace,  Idaho.  Mining  resumed in 1996
after  a  five-year  standby  period  when a  development  program  successfully
identified additional higher-grade silver reserves.

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                                      A-6


The Company also owns a 75% interest in the Troy,  Montana  silver-copper  mine,
which currently is on standby.  The Company plans to restart Troy in conjunction
with the  development of the nearby Rock Creek  silver-copper  deposit which has
been in the  permitting  process  since 1987. In 1997,  the Company  submitted a
draft supplemental environmental impact statement for Rock Creek.

The Company operates four zinc mines near Knoxville, Tennessee. It also produced
zinc as a  co-product  at its Black  Cloud  mine in  Leadville,  Colorado.  Zinc
production in 1998 in Tennessee increased 9.2% over 1997. New Market, one of the
four Tennessee mines, has been on standby since 1996.

Suspension of  operations  at the Leadville  mine was announced in January 1999.
Leadville had produced  lead,  zinc and silver since 1971.  The depletion of ore
reserves  forced  closure of the mine.  The Company is continuing an exploration
program seeking new ore reserves.

The Company  operates a specialty  metals business at its Globe Plant in Denver,
Colorado.  The  Company  completed  the  transformation  of  the  business  from
processing  of  intracompany  materials  into  a  stand-alone  specialty  metals
operation in 1996.  Profitability of the Globe Plant,  which produces  litharge,
bismuth compounds and high-purity  metals,  declined in 1998 due to curtailments
in gold  exploration  activity  which is a major  consumer of litharge  used for
assaying.

The East Helena, Montana lead smelter is Asarco's only remaining custom smelting
facility. Lead bullion produced at East Helena is now sold to refineries located
outside  the  United  States.  The  Company  permanently  closed  its Omaha lead
refinery in 1997.  The Company  continues to work with the City of Omaha and the
State of Nebraska to convert the former plant site into a park.  The custom lead
business depends on the availability of precious metal-bearing lead concentrates
from United States and South  American  mines.  The East Helena  smelter was not
profitable  in 1998.  Work  rule  changes  and  process  improvements  are being
implemented at East Helena to improve its results.


EXPLORATION

Asarco's exploration program is focused on the identification and acquisition of
advanced  gold,  copper and silver  projects.  In 1998,  the Company spent $15.9
million on its mineral  exploration  program.  Over 80% of expenditures  were on
projects outside the United States,  principally in French Guiana,  Chile, Peru,
Bolivia  and  Australia.  Work in the  United  States  was  mostly  directed  at
identifying additional reserves at the Company's operating properties.

In French  Guiana,  Asarco has  interests in five project  areas with known gold
anomalies.  Drilling  at  the  Company's  100%-owned  Camp  Caiman  project  has
identified a  near-surface  gold deposit within a  five-mile-long,  gold-in-soil
anomaly  associated with a major structural zone. A resource of 9.4 million tons
of ore with a grade of 0.12  ounces  of gold per ton has been  identified.  This
resource contains 1.1 million ounces of gold. Gold mineralization at Camp Caiman
is open-ended and the drilling program is continuing.

To assist the Company in meeting its environmental  and social  responsibilities
in the Camp Caiman project, an expert,  independent  advisory committee has been
created.  The committee  includes people with  recognized  expertise in tropical
rain forest  environments.  The  committee  is providing  independent  advice on
environmental  and  social  issues  associated  with the  Company's  exploration
activities  and  preliminary  mine  planning.  As a result of this  advice,  the
Company has modified a number of its exploration techniques.

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                                      A-7


The Company continues to work on its promising  projects at Camp Caiman and at a
silver project in Bolivia.  Much of its current exploration effort is focused on
copper prospects in Chile and Peru.

ENVIRONMENT, SAFETY AND HEALTH

Environment

Environmental protection is one of Asarco's principal operating objectives.  The
Company has made and will continue to make substantial  investments to deal with
environmental issues associated with historical operations. The Company has also
established  formal policies and codified  practices and procedures to enable it
to consistently and predictably meet today's environmental standards.

The Company has adopted a comprehensive  Environmental  Management System (EMS).
This system integrates  environmental  management  procedures into the operating
management systems of the Company. Under EMS, Company facilities will be audited
regularly to assure  conformity  with EMS  requirements,  employees will receive
annual  environmental  training and practices have been  established to meet the
environmental standards required at each of the Company's operations.

In early 1998, an agreement was reached with the U.S.  Environmental  Protection
Agency to establish a voluntary compliance framework for most of the past issues
at the Company's copper and lead mining,  smelting and refining facilities.  The
agreement  provides for capital  projects  estimated at $61.5 million at the Ray
mine and East Helena  smelter.  The largest  project,  $55.0 million to be spent
over six years, provides for the extension of an existing tunnel at the Ray mine
which diverts Mineral Creek around the Ray mine workings.  The project will have
a positive  effect on future  operations as well as on the  environment.  Asarco
also paid  penalties  of $6.4  million  to  resolve  past  disputed  issues  and
committed to meet certain milestones in the implementation of EMS.

Asarco is also active in remediating former operating  properties in cooperation
with state and federal  government  agencies.  Asarco is working  with the local
communities  in Omaha,  Nebraska and Tacoma,  Washington to transform its former
industrial sites into parks and new commercial  centers.  A number of properties
owned by the  Company,  including  sites in Perth Amboy and Newark,  New Jersey,
have been  remediated  and  developed for use as  commercial  centers.  In 1998,
Asarco spent $67 million on remediation work at its historic sites.

Safety and Health

The  safety  and  health of its  employees  is one of  Asarco's  most  important
operating objectives. A Corporate Safety and Health Policy Review Committee sets
safety  standards  for  each  unit's  operations,   monitors  performance,   and
administers recognition programs.  Beginning in 1997, a portion of each salaried
operating  employee's  incentive  compensation has been directly linked to their
respective operating unit's safety and health performance.

In 1998,  there  were 4% fewer lost work day  injuries  in the  Company's  North
American  mines and plants.  Likewise,  programs at the Company's  operations in
Peru were successful in improving  safety  performance  there by 9.8%. While the
programs in place have improved safety performance,  management will continue to
focus  attention  on safety  and  health  issues  and will  continue  to use the
Company's extensive training,  education and recognition  programs with the goal
of creating an accident-free workplace.

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                                      A-8


                                BACKLOG OF ORDERS

Most of the Company's  copper is sold as refined metal under annual contracts or
on a spot sale basis.  The balance of the  Company's  copper and all of its zinc
production are sold in the form of concentrates  under contracts of one to three
years  duration.  Silver and gold are sold under  monthly  contracts  or in spot
sales.  Revenue  is  recognized  primarily  in the month  product  is shipped to
customers  based on prices  provided in sales  contracts.  When the price is not
determinable at the time of shipment to customers,  revenue is recognized  based
on prices  prevailing  at the time of  shipment  with  final  pricing  generally
occurring within three months of shipment.  Revenues with respect to these sales
are adjusted in the period of settlement to reflect final pricing and in periods
prior to  settlement  to reflect  any decline in market  prices  which may occur
between shipment and settlement.

                             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.  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, 1998,  Asarco excluding SPCC,  employed about 6,500 persons,  of
whom about 3,400 were covered by contracts  with various  unions,  most of which
were affiliated with the AFL-CIO. At December 31, 1998 SPCC employed about 4,600
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 1998.


                    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.

<PAGE>
                                      A-9


The Company anticipates  spending $36 million for environmental  control capital
expenditures at its operating units in 1999.  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):
1998-$38; 1997-$68; 1996-$71. Recurring costs associated with managing hazardous
substances and environmental issues in ongoing operations, including interest on
environmental  improvement  bonds  and other  debt  incurred  for  environmental
control    facilities,    reduced    pre-tax    earnings   by   (in   millions):
1998-$99;1997-$113;1996-$113.

The  Company  is  studying  means  of  compliance  with  the  federal  Resources
Conservation  and Recovery Act (RCRA) through process changes at its facilities,
where  feasible,  to manage  the  wastes  not  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.

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

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. See also Item 3, Legal Proceedings, for a discussion of environmental
proceedings.

<PAGE>
                                      A-10


Item 2. Properties

ASARCO Worldwide

METALS

COPPER MINES (1)
Mission;  Sahuarita, Arizona
Montana Resources; Butte, Montana
Ray; Hayden, Arizona
Silver Bell; Silver Bell, Arizona
Minto; Yukon Territory, Canada
Cuajone; Peru
Toquepala; Peru


COPPER PLANTS  Amarillo,  Texas  (Refinery) El Paso, Texas (Smelter) (2) Hayden,
Arizona (Smelter) Ray; Hayden, Arizona (SX/EW) Silver Bell; Arizona (SX/EW) Ilo;
Peru (Smelter, Refinery) Toquepala; Peru (SX/EW)


LEAD MINES (1)
Leadville; Leadville, Colorado (3)


LEAD PLANTS
East Helena, Montana (Smelter)


ZINC MINES
Coy; Jefferson County, Tennessee
Immel;  Knox County, Tennessee
New Market; Jefferson County, Tennessee (2)
Young;  Jefferson County, Tennessee
Leadville; Leadville, Colorado (3)


SILVER MINES (1)
Silver Valley Resources; Wallace, Idaho
Troy; Troy, Montana (2)
Leadville; Leadville, Colorado (3)
Mission; Sahuarita, Arizona
Ray; Hayden, Arizona
Montana Resources; Butte, Montana
Cuajone; Peru
Toquepala; Peru


SILVER AND GOLD PLANTS
Amarillo, Texas (Refinery)
Ilo, Peru (Refinery)

<PAGE>
                                      A-11


MOLYBDENUM MINES (1)
Montana Resources; Butte, Montana
Cuajone; Peru
Toquepala; Peru


Specialty Chemicals
Enthone-OMI
North America
  West Haven, Connecticut
  Bridgeview, Illinois
  Orange, Connecticut
  Warren, Michigan
  Toronto, Canada
  Mexico City, Mexico

Europe
  Barcelona, Spain
  s-Hertogenbosch, Netherlands
  Woking, United Kingdom
  Milan, Italy
  Marne-La-Vallee, France
  Luien, Austria
  Solingen, Germany
  (Other, Germany)
  Norrkoping, Sweden
  Geneva, Switzerland

Asia
  Melbourne, Australia
  Tsuen Wan, Hong Kong
  Singapore
  Shen Zhen, People's Republic
    of China
  Yokohama, Japan
  Taipei, Taiwan
  Punang, West Malaysia


AGGREGATES
American Limestone Company, Inc.
  Knoxville, Tennessee
  Tri-Cities, Tennessee
  Nashville, Tennessee
  Abingdon, Virginia


Environmental Services
Encycle/Texas, Inc.
  Corpus Christi, Texas
Hydrometrics, Inc.
  Helena, Montana


Other

Specialty Metals
Denver, Colorado

<PAGE>
                                      A-12


INVESTMENTS

Grupo Mexico, S.A. de C.V. (8.2% ownership)
Thirteen mines, nine metallurgical
  plants throughout Mexico,
  including: La Caridad and Cananea
  (Copper, Lead, Zinc, Silver, Gold,
  Coal, Coke, Fluorspar, Sulfuric Acid)

(1) Beneficial  interest for these  operations is shown in the Mineral  Reserves
tables starting on page A19.

(2) On standby. The El Paso smelter is on standby effective March 1999.

(3) Closed as of January 31, 1999.

<PAGE>
                                      A-13


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.  The Coeur mine began
production in May 1996 and the Galena mine began production in June 1997. Asarco
has an  equity  interest  in  Silver  Valley  Resources  profits  or  losses  in
proportion to the 50% related ownership interest.

Silver Bell

In 1996, Asarco and Mitsui & Co. Ltd., established Silver Bell L.L.C., a limited
liability  corporation  owned  75% by Asarco  and 25% by  Mitsui & Co.  Asarco's
interest in Silver Bell L.L.C.  profits and losses is in  proportion  to its 75%
related ownership interest.

Leadville

Leadville 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.  Asarco closed its Black
Cloud lead-zinc mine in Leadville, Colorado as of January 31, 1999.

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.


Investments

In 1997,  Asarco sold all of its  unrestricted  shares of Grupo Mexico,  S.A. de
C.V.,  which operates  thirteen mines under  concessions  granted by the Mexican
government.  Asarco  currently  owns 8.2% of Grupo Mexico,  all of which a third
party has an option to purchase at a fixed price expiring in August 2001.

<PAGE>
                                      A-14


The following production information is provided:
<TABLE>
<CAPTION>

MILL PRODUCTION                            1998                           1997                             1996
---------------                            ----                           ----                             ----
                                Ore Milled      Avg Mill      Ore Milled        Avg Mill      Ore Milled        Avg Mill
                                  (000s         Recovery         (000s          Recovery         (000s          Recovery
                                  Tons)           Rate           Tons)            Rate           Tons)            Rate
                                                   (%)                            (%)                              (%)
                              --------------- -------------- -------------- --------------- -------------- ------------------
<S>                                <C>              <C>          <C>               <C>          <C>                  <C> 
North America
  Mission                          14,754           81.9         14,822            83.8         15,192             85.9
  Mission South                     7,343           83.4          7,341            83.0          7,616             82.5
  Hayden
   Concentrator                     9,404           81.8          8,295            80.8          8,975             81.5
  Ray
   Concentrator                     9,665           85.9         11,223            82.3         12,687             82.4
  Montana
   Resources                       19,306           85.4         15,219            89.8         15,990             87.2
  Leadville (a)                       202           91.7            202            88.6            131             95.1
  Sweetwater (b)                      955           98.5          1,403            98.4          1,271             98.3
  West Fork (b)                       681           96.8          1,025            96.8          1,007             97.2
  Tennessee                         2,271           91.8          2,173            91.4          2,823             92.4

Peru (c)
  Toquepala                        18,011           85.7         18,998            87.9         18,609             84.2
  Cuajone                          21,699           80.4         21,719            87.0         21,249             81.7


Productive Capacity (d)
<CAPTION>
                                      Defined                                                               Defined
   Smelters                           Capacity           Refineries                                         Capacity
   --------                           --------           ----------                                         --------
<S>                                       <C>                <C>                                              <C>  
   Anode Copper (tons)                                   Copper (tons)
                                                         North America
  
     El Paso                              115,000          Amarillo                                          483,000
     Hayden                               218,000          Ray (SX-EW)                                        45,000
                                          -------
       Total                              333,000          Silver Bell, L.L.C. (SX-EW)                        18,000
                                                         Peru (c)
                                                           Ilo                                               270,000
   Blister Copper(tons)                                    Toquepala (SX/EW)                                  50,000
                                                             Total                                           866,000
   Peru (c)
     Ilo                                  320,000        Silver (000s ounces)
                                                           Amarillo                                           60,000
   Lead Bullion (tons)                                   Gold (ounces)
     East Helena                           75,000          Amarillo                                          600,000

<FN>

(a)      Asarco closed its Black Cloud mine in Leadville, Colorado as of January
         31, 1999.

(b)      Asarco sold its Missouri Lead Division on September 1, 1998.

(c)      Asarco  consolidated  SPCC  effective  January  1, 1995.  The  minority
         interest in SPCC,  represented by Labor Shares in its Peruvian  Branch,
         results in Asarco having a beneficial  interest  which is less than its
         equity interest in SPCC. Asarco's beneficial interest in SPCC was 53.2%
         at December  1998,  53.0% at December 1997 and 52.6% at December  1996.
         (See Note 2 of the Financial Statements)

(d)      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.
</FN>
</TABLE>

<PAGE>
                                      A-15


<TABLE>

METAL PRODUCTION STATISTICS
<CAPTION>

COPPER                                                 Mineral         Average
                                                       Reserves        Mineral                    Metal Production
                                         Asarco         (000s          Content                    Contained Metal
                                          Int.           Tons)           (%)                       (000s Pounds)
                                                                                 ---------------------------------------------------
                                           (%)         12/31/98       12/31/98          1998            1997             1996
                                          -----        --------       --------          ----            ----             ----
<S>                                           <C>         <C>               <C>          <C>             <C>               <C>     
MINES
North America
  
   Mission Complex                            100         494,557           .70          255,100         252,300           261,200
   Ray                                        100         951,016           .60          244,100         230,700           273,200
   Ray leachable                              100         177,546           .45           90,700          73,400            70,200
   Montana Resources                         49.9         514,470           .32           98,400          91,400           104,800
   Silver Bell L.L.C.                       75(a)         169,857           .38           42,300          19,300             4,800
   Troy (b)                                    75          12,000           .64                -               -                 -
   Minto                                     86.7           7,176          2.13                -               -                 -
                                                                                  --------------------------------------------------
     Total North America                                                                 730,600         667,100           714,200
                                                                                  --------------------------------------------------
Peru (c)
   Toquepala-sulfide                      53.2(d)         295,285           .83          246,800         246,800           252,900
          -leachable                      53.2(d)         725,006           .19           93,700          87,900            88,600
   Cuajone-sulfide                        53.2(d)       1,400,632           .64          315,600         340,600           332,000
          -leachable                      53.2(d)          68,739           .49           10,300          10,200             4,600
                                                                                 ---------------------------------------------------
    Total Peru                                                                           666,400         685,500           678,100
                                                                                 ---------------------------------------------------
    Total Production                                                                   1,397,000       1,352,600         1,392,300
                                                                                  --------------------------------------------------
Asarco Beneficial Production
                                                                                       1,025,200         978,300         1,015,900
                                                                                  --------------------------------------------------

SMELTERS
North America
   El Paso (b)                                100                                        256,300         239,500           230,000
   Hayden                                     100                                        381,800         423,900           429,800
Peru
   Ilo                                    53.2(d)                                        647,800         638,700           633,600
                                                                                  --------------------------------------------------
    Total Production                                                                   1,285,900       1,302,100         1,293,400
                                                                                  --------------------------------------------------
Asarco Beneficial Production
                                                                                         982,700       1,001,900           991,800
                                                                                  --------------------------------------------------

REFINERIES
North America
  Amarillo                                    100                                        887,000         984,600           945,600
  Ray (SX/EW)                                 100                                         90,700          73,400            70,200
  Silver Bell L.L.C. (SX/EW)                75(a)                                         42,300          18,200                 -
Peru
  Ilo                                     53.2(d)                                        543,400         513,300           439,600
  Toquepala (SX/EW)                       53.2(d)                                        104,000          98,100            93,200
                                                                                  --------------------------------------------------
   Total Production                                                                    1,667,400       1,687,600         1,548,600
                                                                                  --------------------------------------------------
Asarco Beneficial Production
                                                                                       1,353,900       1,394,200         1,295,000
                                                                                  --------------------------------------------------
<FN>

(a)      Asarco's  interest  in Silver  Bell was 100% until  February  1996 when
         Asarco  sold a 25%  interest to Mitsui & Co.,  Ltd.  Silver Bell L.L.C.
         commenced SX/EW operations in July 1997.

(b)      Troy is currently on standby.  The El Paso smelter is on standby
         effective March 1999.

(c)      In  addition to the proven and  probable  ore  reserves,  SPCC is
         evaluating  539  million  tons of  mineralized  material  with an
         average copper grade of 0.62%.

(d)      Asarco  consolidated  SPCC  effective  January  1, 1995.  The  minority
         interest in SPCC,  represented by Labor Shares in its Peruvian  Branch,
         results in Asarco having a beneficial  interest  which is less than its
         equity interest in SPCC. Asarco's beneficial interest in SPCC was 53.2%
         at December  1998,53.0%  at December  1997 and 52.6% at December  1996.
         (See Note 2 of the Financial Statements)
</FN>
</TABLE>

<PAGE>
                                      A-16


<TABLE>

METAL PRODUCTION STATISTICS (continued)

LEAD
<CAPTION>
                                                            Mineral       Average
                                                            Reserves      Mineral                    Metal Production
                                               Asarco     (000s Tons)     Content                     Contained Metal
                                                Int.                        (%)                        (000s Pounds)
                                                                                     -----------------------------------------------
                                                (%)         12/31/98      12/31/98       1998           1997           1996
                                            --------------------------------------------------------------------------------------
<S>                                                 <C>           <C>          <C>          <C>            <C>             <C>  
MINES

   Leadville (a)                                    100           323          3.49         7,800          9,500           6,500
   Sweetwater (b)                                   100                                    83,100        113,900         106,900
   West Fork (b)                                    100                                    66,300        107,600         107,100
                                                                                     ---------------------------------------------
      Total Production                                                                    157,200        231,000         220,500
                                                                                     ---------------------------------------------

Asarco Beneficial Production (a)
                                                                                          157,200        231,000         217,900
                                                                                     ---------------------------------------------

SMELTERS
   East Helena                                      100                                   134,500        116,600         124,900
   Glover (b)                                       100                                   162,300        254,200         243,300
                                                                                     ---------------------------------------------
      Total Production                                                                    296,800        370,800         368,200
                                                                                     ---------------------------------------------

REFINERIES
   Omaha (c)                                        100                                         -              -          51,400
   Glover (b)                                       100                                   162,300        254,200         243,300
                                                                                     ---------------------------------------------
      Total Production                                                                    162,300        254,200         294,700
                                                                                     ---------------------------------------------

<FN>

(a)  Asarco closed its Black Cloud mine in Leadville, Colorado as of January 31,
     1999. 1996 beneficial  production  reflects Asarco's beneficial interest in
     Leadville at 60.3%.

(b)  Asarco sold its Missouri Lead Division on September 1, 1998.

(c)  Asarco ceased refining lead at its Omaha, Nebraska refinery in June 1996.
</FN>
</TABLE>

<PAGE>
                                      A-17


<TABLE>

METAL PRODUCTION STATISTICS (continued)
<CAPTION>

                                                        Mineral        Average
                                                       Reserves        Mineral               Metal Production
                                           Asarco     (000s Tons)      Content                Contained Metal
                                            Int.                         (%)                   (000s Pounds)
                                                                                ---------------------------------------
ZINC                                        (%)         12/31/98       12/31/98       1998         1997          1996
                                      --------------------------------------------------------------------------
<S>                                           <C>             <C>       <C>          <C>          <C>           <C>   
MINES

   Leadville (a)                              100             323       12.19        25,800       23,600        18,300
   Sweetwater (b)                             100                                     1,500        2,700        13,800
   West Fork (b)                              100                                    16,600       14,700        14,400
   Tennessee                                  100           5,562        3.08       114,600      104,900       132,700
                                                                                ---------------------------------------
      Total Production                                                              158,500      145,900       179,200
                                                                                ---------------------------------------

Asarco Beneficial Production(a)                                                     158,500      145,900       171,900
                                                                                ---------------------------------------




MOLYBDENUM                                                                         1998         1997          1996
                                                                                ---------------------------------------

MINES
North America
   Mission                                    100         494,557         .02             -            -           847
   Montana Resources                         49.9         514,470         .03         9,932       10,257        10,966
                                                                                ---------------------------------------
       Total North America                                                            9,932       10,257        11,813
                                                                                ---------------------------------------

Peru (d)
   Toquepala                              53.2(c)         295,285         .04         6,039        6,066         4,483
   Cuajone                                53.2(c)       1,400,632         .02         3,520        3,329         4,257
                                                                                ---------------------------------------
       Total Peru                                                                     9,559        9,395         8,740
                                                                                ---------------------------------------
Total Production                                                                     19,491       19,652        20,553
                                                                                ---------------------------------------

Asarco Beneficial Production                                                         10,041       10,080        10,900
                                                                                ---------------------------------------
<FN>

(a)      Asarco closed its Black Cloud mine in Leadville, Colorado as of January
         31, 1999.  1996  beneficial  production  reflects  Asarco's  beneficial
         interest in Leadville at 60.3%.

(b)      Asarco sold its Missouri Lead Division on September 1, 1998.

(c)      Asarco  consolidated  SPCC  effective  January  1, 1995.  The  minority
         interest in SPCC,  represented by Labor Shares in its Peruvian  Branch,
         results in Asarco having a beneficial  interest  which is less than its
         equity interest in SPCC. Asarco's beneficial interest in SPCC was 53.2%
         at December 1998, 53.0% at December 1997 and 52.6% at December 1996.

(d)      In  addition  to  the  proven  and  probable  ore  reserves,  SPCC  is
         evaluating  539 million tons of  mineralized  material with an average
         molybdenum grade of 0.03%.
</FN>
</TABLE>

<PAGE>
                                      A-18


<TABLE>

METAL PRODUCTION STATISTICS (continued)
<CAPTION>

SILVER
                                                               Mineral       Average
                                                              Reserves       Mineral                Metal Production
                                                  Asarco     (000s Tons)     Content                Contained Metal
                                                   Int.                      (oz/Ton)              (000s troy ounces)
                                                                                        -----------------------------------------
                                                   (%)        12/31/98       12/31/98       1998          1997          1996
                                               ----------------------------------------------------------------------------------
<S>                                                    <C>         <C>          <C>            <C>           <C>          <C>  
MINES
North America
   Silver Valley Resources                             50          1,790        17.50          3,560         3,436        1,651
   Leadville (a)                                      100            323         2.77            283           250          176
   Mission                                            100        494,557          .17          2,551         2,169        1,981
   Montana Resources                                 49.9        514,470          .07          1,038           858          822
   Ray                                                100                                        659           424          480
   Sweetwater (b)                                     100                                         55            83          176
   West Fork (b)                                      100                                        162           171          175
   Troy (c)                                            75         12,000         1.42              -             -            -
   Minto                                             86.7          7,176          .27              -             -            -
                                                                                        -----------------------------------------
      Total North America                                                                      8,308         7,391        5,461

Peru
   Toquepala                                      53.2(d)                                      1,422         1,474        1,412
   Cuajone                                        53.2(d)                                      1,468         1,671        1,685
                                                                                        -----------------------------------------
      Total Peru                                                                               2,890         3,145        3,097
                                                                                        -----------------------------------------
Other
   San Bartolome                                      100          9,700         5.10              -             -            -
                                                                                        -----------------------------------------
Total Production                                                                              11,198        10,536        8,558
                                                                                        -----------------------------------------

Asarco Beneficial Production                                                                   7,546         6,901        5,778
                                                                                        -----------------------------------------

REFINERIES
North America
   Amarillo                                           100                                     23,594        20,330       30,842
Peru
   Ilo                                            53.2(d)                                      2,735         2,462        2,218
                                                                                        -----------------------------------------
     Total Production                                                                         26,329        22,792       33,060
                                                                                        -----------------------------------------

Asarco Beneficial Production                                                                  25,049        21,629       32,004
<FN>
                                                                                        -----------------------------------------

(a)      Asarco  closed  its Black  Cloud  mine in  Leadville,  Colorado  as of
         January 31, 1999.

(b)      Asarco sold its Missouri Lead Division on September 1, 1998.

(c)      Troy is currently on standby.

(d)      Asarco  consolidated  SPCC  effective  January  1, 1995.  The  minority
         interest in SPCC,  represented by Labor Shares in its Peruvian  Branch,
         results in Asarco having a beneficial  interest  which is less than its
         equity interest in SPCC. Asarco's beneficial interest in SPCC was 53.2%
         at December 1998, 53.0% at December 1997 and 52.6% at December 1996.

</FN>
</TABLE>

<PAGE>
                                      A-19


All  mineral  reserves  represent  100% of the  reserves  for that  mine and the
percentage ownership of Asarco is separately indicated. All mineral reserves are
at December 31, 1998.  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.  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.

Other Operations

The principal  activities  included in the business segment entitled "All Other"
are  those  of  Encycle/Texas,   Inc.  and  Hydrometrics,   Inc.,   wholly-owned
subsidiaries  in  the  environmental   services  business,  a  specialty  metals
business, and income and expenses associated with facilities previously operated
by the Company.  None of these operations  constitutes a significant  portion of
the total operations of the Company.

Item 3.  Legal Proceedings

Reference is made to the  Contingencies  and Litigation  Note 8 to the Financial
Statements incorporated herein by reference.  The following is additional detail
with respect to the litigation referred to in Note 8.

Environmental

In March 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,
demolition of remaining  buildings,  replacement  of the surface water  drainage
system,  and diversion of  groundwater  and off-site  surface  water.  A Consent
Decree  between the Company and the EPA to carry out the ROD was approved by the
United States District Court in 1997. Remediation pursuant to the Consent Decree
is proceeding.

At  Ruston,  Washington,  an area  which is also  part of the  Commencement  Bay
Superfund  site,  in 1995,  a Consent  Decree  between  the  Company and EPA was
approved 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 575 residential
and  right-of-way  properties  have been  remediated.  The Company is  currently
working with EPA on a proposed plan for the  remediation of off-shore  sediments
in this area. Remaining issues at the Commencement Bay Superfund site, which has
hundreds of potentially  responsible parties (PRPs), will not be addressed until
additional studies are completed.

In 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. The companies have remediated approximately
1,421 residential properties as well as other areas, commercial properties,  and
rights of way. Remediation of additional yards and other properties continues.

In 1996, the United States  government filed an action in United States District
Court in Boise,  Idaho,  against the Company  and three other  mining  companies
under CERCLA and the federal Clean Water Act (CWA) for alleged natural  resource
damages to the Coeur d'Alene River Basin in Idaho. The government  contends that
the  defendants  are liable for damages to natural  resources  in a 1,500 square

<PAGE>
                                      A-20


mile area caused by mining and related activities that they and others undertook
over  approximately  the period  between the  mid-1800s and the  mid-1960s.  The
action also seeks a declaration  that  defendants are liable for  restoration of
the area. The Company  believes,  and has been advised by outside legal counsel,
that it has strong legal  defenses to the lawsuit.  In 1996, the court granted a
motion to consolidate  this case with a prior similar lawsuit filed by the Coeur
d'Alene  Tribe.  In 1997, the United States filed a motion to add to the lawsuit
several companies,  including certain  subsidiaries of the Company. In 1998, the
EPA commenced a Remedial Investigation/Feasibility Study to assist in developing
a comprehensive remediation plan for the Coeur d'Alene River Basin. In 1998, the
court  rejected the  government's  position  that its  evaluation  of injury and
restoration plan must be upheld unless the administrative  record shows it to be
arbitrary and capricious or otherwise not in accordance with law.

In 1997, the Nebraska  Department of  Environmental  Quality approved a Remedial
Action Work Plan  submitted  by the Company for  remediation  of the site of the
Company's former Omaha, Nebraska, lead refinery,  which had suspended operations
in June 1996.
Demolition of the plant  buildings and  remediation  activities will continue in
1999.

In 1994, at the Leadville Superfund site in Colorado,  a Consent Decree with the
EPA and other potentially  responsible parties was approved 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 1999.  Remaining  issues at Leadville  will not be  addressed  until
additional studies are completed.

In 1998, at the East Helena Superfund site in Montana, the Company completed the
remediation of approximately 14 residences and other community properties.  This
brings the total number of residential and other  properties  remediated to date
to 578. Additional properties are expected to require remediation.

Pursuant to a Unilateral  Administrative  Order issued in 1996,  the Company and
the other PRPs are  implementing  the  remedy  specified  in the 1994  Record of
Decision of the Mine Operable Unit of the Butte, Montana, Superfund site.

In 1998, at the Globe proposed Superfund site in Denver,  Colorado,  the Company
completed the remediation of approximately 118 properties, including residences,
commercial  properties,  and open spaces  pursuant to a Consent  Decree with the
State of Colorado and a settlement of a lawsuit reached in 1993. This brings the
total  number  of  properties  remediated  through  1998 to  approximately  671.
Remediation has also started at the plant site itself. Remediation of additional
non-residential 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  (Ecology) a remedial  investigation and feasibility study report of the
Company's  former smelter site in Everett,  Washington.  In early 1997,  Ecology
issued an  Enforcement  Order to the  Company  pursuant  to which the Company is
performing  additional  studies and other  activities  at the site.  Ecology has
proposed  issuance of an expensive and costly  remediation  plan in 1999 and has
stated its  intention  that Asarco  will carry out or pay for the plan.  In July
1998,  the Company  filed suit in state court in  Thurston  County,  Washington,
challenging on  constitutional  and other grounds the  applicability  of certain
state  environmental laws to alleged  obligations of the Company to remediate or
pay for the  remediation  plan.  Also in 1998,  the County of Snohomish  filed a
lawsuit in state court in Snohomish County, Washington,  seeking damages for the
cost of  remediating  certain  county-owned  property  located  near the  former
smelter  site.  This case has been  removed by the  Company to federal  court in
Seattle.

Pursuant to a 1997  Administrative  Consent Order,  the Company is investigating
and will  remediate as necessary  residential  areas and the former zinc smelter
that a subsidiary of the Company  operated prior to 1964 at the Circle  Smelting
site in Beckemeyer, Illinois.

<PAGE>
                                      A-21


In 1997, the Company entered into an Administrative  Order on Consent to conduct
an Engineering  Evaluation/Cost  Analysis  (EE/CA) for the portal discharge from
the Company's  former Gem mine in the Coeur D'Alene River Basin in Idaho,  which
drains to a  tributary  of the Coeur  d'Alene  River.  The Company has agreed to
implement the remedy selected by the EE/CA process.

On January 23, 1998,  the Company,  the United States  Department of Justice and
EPA signed multi-region  voluntary agreements covering many environmental issues
affecting the Company's United States operations. Two consent decrees containing
the  agreements  were filed in the United  States  District  Courts in  Phoenix,
Arizona,  and Helena,  Montana,  and approved by those  courts in May 1998.  The
agreements include a commitment to undertake capital  expenditures over a period
of six years  estimated  at $61.5  million,  principally  at the  Company's  Ray
complex,  and  cover  a  number  of  operational  changes  to  resolve  disputed
compliance issues at the Company's Ray mine and East Helena smelter. The Company
agreed to  undertake  an  environmental  remediation  investigation  at its East
Helena  plant over a period of two years or more and  subsequently  to undertake
such remediation  programs as are identified by the  investigation's  results. A
significant  aspect  of  the  agreements  is an  Asarco-initiated  Environmental
Management  System,  which  combines  operational  and  environmental   systems,
policies and practices. The Company paid penalties of $6.4 million applicable to
past  issues at Ray and East  Helena  without  an  admission  of  wrongdoing  or
liability.

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

In addition to the sites described above,  the Company and certain  subsidiaries
received notices of potential  liability  pursuant to CERCLA and various similar
state laws from the EPA or other federal and state agencies  regarding  numerous
other sites.  At certain of those sites the Company's  liability  will likely be
minor.

In 1997,  the Company  also  received  notices from EPA  regarding  alleged RCRA
violations at the Company's  Encycle/Texas facility and the CWA at the Tennessee
Mines facilities; [discussions with EPA and a state agency are ongoing.]

In 1997,  the Company was sued in United States  District Court in Nebraska in a
purported  class action.  The complaint was brought on behalf of various classes
comprised of in excess of 80,000  individuals  living or owning  property within
approximately five miles of the Company's former Omaha plant. The action asserts
claims of trespass, nuisance,  negligence,  strict liability, unjust enrichment,
medical monitoring,  and under CERCLA due to the alleged  contamination of soils
by  airborne  releases  from the  plant,  and  seeks  compensatory  damages  for
diminution in property value and loss of use, punitive damages, a declaration of
liability for future response costs, and creation of a medical  monitoring fund.
In  December  1998,  the  lawsuit  was  dismissed  for  lack of  subject  matter
jurisdiction. In January 1999, plaintiffs filed an amended complaint, with leave
of court, which amended complaint is being challenged by the Company.

In 1997, the Company was sued in state court in Denver, Colorado, in a purported
class action brought on behalf of property owners and other persons  residing in
approximately  300 homes located  within one mile of the Company's  Globe plant.
The action asserts claims of trespass, private nuisance,  negligence, and strict
liability allegedly due to the contamination of properties by emissions from the
plant, and seeks compensatory  damages for diminution in property value and loss
of use, as well as punitive  damages.  In December 1998, the court certified the
lawsuit to proceed as a class action.

<PAGE>
                                      A-22


At the Company's East Helena , Montana,  plant the government  alleges that from
1991 to 1994 the Company  violated the CWA by discharging  metals in waste water
to the  public  sewer in  violation  of  categorical  pre-treatment  limits.  In
separate lawsuits filed in 1998, both EPA and the Company have asked the federal
court in Helena, Montana to resolve this dispute.

In 1996,  a citizens'  suit was  brought  against  the  Company  alleging  water
discharge  permit  violations  under  the  CWA  and  violations  of  RCRA at the
Company's Omaha,  Nebraska,  lead refinery.  The Company is cooperating with the
Nebraska  Department of  Environmental  Quality and voluntarily  remediating the
site  and,  therefore,  believes  that  the  lawsuit  is  without  merit  and is
vigorously defending it.

In 1998, the Company  received a "60-day notice" under the federal Clean Air Act
on behalf of a Hayden,  Arizona,  resident and a local environmental  group. The
notice  states the senders'  intent to commence a civil action in United  States
District  Court for the  District  of Arizona  for civil  penalties  for alleged
violations of the Act at the Company's Hayden smelter.

In 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. In 1996, the
suit was dismissed on the grounds that plaintiffs  claims were barred by lack of
subject matter  jurisdiction,  lack of actual and substantial damages, or by the
applicable  statute of  limitations.  The ruling was  affirmed on appeal in 1998
concluding the litigation.

Texas Litigation

In 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.  In 1994, two additional suits
alleging  contamination  of  plaintiffs'  properties by metals  emitted from 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 this one suit, 290
plaintiffs who resided and 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 of
property value and loss of profits.

In 1993,  the State of Texas notified the Company that it and ten others persons
are Potentially  Responsible Parties (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 1996, the State of Texas notified the Company that it
is  no  longer   considered  a  PRP  and  that  it  has  dismissed  this  claim.
Nevertheless, the Company has also been named as one of several defendants in 14
lawsuits  filed by or on behalf of  approximately  372 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.  In
1997,  the  Company  was  dismissed  from  three  of  those  lawsuits  involving
approximately 170 individuals.

In 1994,  the Company  received  notice from the State of Texas that it is a PRP
for remediation of the site of a former  pesticide  manufacturing  plant in Hunt
County,  Texas,  owned and  operated  by a former  customer of the  Company.  In
addition,  the Company has been named as one of a number of  defendants  in nine

<PAGE>
                                      A-23


lawsuits  filed in various  Texas state courts by or on behalf of  approximately
2,281  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.  The  bankruptcy  filing  of the owner of the  former
pesticide  plant has resulted in all of these  actions  being removed to federal
court and  transferred  to the United  States  District  Court for the  Northern
District  of Texas.  Also,  in 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 1997, the Company and five other  defendants,  mostly metal  companies,  were
sued in state court in El Paso County,  Texas, by approximately  360 plaintiffs,
including  approximately 200 minors,  seeking  compensatory and punitive damages
for alleged  personal  injury,  death,  and property damage resulting from toxic
chemical  discharges  into  the  air,  water,  and  soil  from  the  defendants'
facilities in El Paso.

In 1996,  a lawsuit  was filed in state  court in San  Patricio  County,  Texas,
against  Asarco and two of its  wholly-owned  subsidiaries,  Encycle,  Inc.  and
Encycle/Texas Inc., and ten other defendants by approximately 679 plaintiffs who
allegedly own property and reside near a landfill in Sinton,  Texas.  Plaintiffs
seek  compensatory  and punitive damages for personal injury and property damage
allegedly  caused by defendants'  disposal of toxic and hazardous  wastes at the
landfill.  In 1997,  a similar  lawsuit  was  filed on  behalf of 23  additional
plaintiffs.  The  landfill  at issue is the same one that was the  subject  of a
previous  lawsuit in Duval County,  Texas,  by nearby  residents,  settlement of
which was reported on Form 10-K for 1995. In return for a settlement  payment, a
co-defendant has agreed to indemnify the Company,  and its subsidiaries  against
any judgment in these cases.

Product Litigation

The Company and two  subsidiaries,  as of December 31, 1998,  are  defendants in
1,126  asbestos  personal  injury  lawsuits  brought by 10,321 primary and 4,588
secondary plaintiffs. In certain of these lawsuits,  against the Company and its
wholly-owned  subsidiary Lac d'Amiante du Quebec,  Ltee (LAQ),  plaintiffs , who
are employees of other companies,  allege death or injury resulting from alleged
exposure  to  asbestos  fiber  supplied  by LAQ and  other  suppliers  to  their
employers'  manufacturing  operations.  The  plaintiffs  allege a broad range of
respiratory and other injuries,  including  disabling lung changes,  asbestosis,
cancer,  and  mesothelioma,  and typically allege 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 litigation is that the defendants
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.

In other such asbestos  lawsuits  plaintiffs claim exposure to asbestos 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 cases
alleging exposure to LAQ fiber. In many such cases LAQ and Asarco,  having never
manufactured such products, have obtained dismissals.

Such asbestos  cases also include,  as of December 31, 1998, 25 cases brought by
4,147  primary  plaintiffs  against Capco Pipe Company,  Inc.  (Capco),  another
wholly-owned subsidiary of the Company.

In 1991, the Judicial Panel on Multidistrict Litigation transferred all asbestos
cases pending in federal court to a  multi-district  litigation (MDL 875) in the

<PAGE>
                                      A-24


United  States  District  Court for the  Eastern  District of  Pennsylvania  for
coordinated and consolidated  pretrial  proceedings.  Cases containing less than
one percent of LAQ's primary plaintiffs are affected by this action.

In 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 injuries and death
allegedly  caused by  workplace  exposure  to  asbestos  on  theories of product
liability  and  negligence.  Since  that time,  eight  additional  former  Capco
employees have been added to the litigation as plaintiffs and Capco was added as
a  defendant  with  respect to one  plaintiff  not  alleged to have been a Capco
employee.  LAQ settled the claims of three plaintiffs in 1998. Also in 1998, LAQ
and nine  former  managerial  and  supervisory  employees  of Capco were sued in
another  Alabama  state court  action by five  former  Capco  employees  seeking
substantial  compensatory and punitive damages for injuries  allegedly caused by
workplace exposure to asbestos.  This action was brought under the same theories
set forth in the earlier Capco plant worker cases.

In 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 case was subsequently removed to
federal court by three of the defendants  and was thereafter  transferred to MDL
875. In 1998,  LAQ and Asarco were named in a purported  class  action  filed in
state  court in  Charleston,  West  Virginia,  against 69  asbestos  and tobacco
entities.  The complaint seeks compensatory and punitive damages and requests an
order  certifying a class on behalf of persons having claims for personal injury
or death arising from exposure to asbestos fibers and cigarette  smoke. In 1998,
Asarco  was  served  by  defendant  Owens-Corning  with a writ to join  over 360
additional  defendants,  including LAQ and Asarco, in a medical monitoring class
action filed in 1996 in Pennsylvania state court.

As of December 31, 1998, LAQ,  Asarco,  and Capco have settled or been dismissed
from a total of approximately 9,821 asbestos personal injury lawsuits brought by
approximately 106,246 primary and 60,273 secondary plaintiffs.

Other Litigation

In 1993,  the Company was sued by two of its liability  insurers,  the Insurance
Company of North America and California Union Insurance Company,  in state court
in New  Brunswick,  New Jersey,  for a  declaration  that the  insurers  have no
insurance obligation for environmental  matters for which the Company is seeking
coverage.  The  plaintiff  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. The Company has settled with certain of these insurers,  and
in January 1997 summary judgment dismissing Asarco's claims was granted in favor
of most other insurers.  The litigation  continues as to the remaining  insurers
and the Company has appealed the granting of summary judgment.

In 1998, the Company received citations from the federal Occupational Safety and
Health Administration  alleging safety and health violations at its East Helena,
Montana, plant. Total proposed penalties are $247,000. The Company has contested
some of the allegations and has reached a partial settlement on certain issues.

<PAGE>
                                      A-25


Opinion of Management

The  opinion  of  management  regarding  the  outcome of legal  proceedings  and
environmental contingencies,  set forth in the Contingencies and Litigation 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 not deemed  probable.  The Company  considered  such
factors in  establishing  its  environmental  reserve in December of 1990 and in
determining modifications to its reserve thereafter.



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

None.

<PAGE>
                                      A-26


<TABLE>

EXECUTIVE OFFICERS OF ASARCO AND BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
                                                       (As of February 26, 1999)

<CAPTION>
                                                                                                               Officer
Name                            Office and Experience                                               Age         Since
----                            ---------------------                                               ---         -----

<S>                        <C>         <C>                                                          <C>          <C> 
Richard de J. Osborne      1998-1999  Chairman of the Board and Chief                               64           1975
                                          Executive Officer                           
                           1994-1998  Chairman of the Board, President and
                                      Chief Executive Officer

Francis R. McAllister      1998-1999  President and Chief Operating Officer                         56           1978
                           1994-1998  Executive Vice President, Copper
                                          Operations

Kevin R. Morano            1998-1999  Executive Vice President and                                  45           1993
                                          Chief Financial Officer         
                           1994-1998  Vice President, Finance and Chief
                                          Financial Officer


Augustus B. Kinsolving     1996-1999  Vice President and General Counsel                            59           1983
                           1994-1995  Vice President, General Counsel
                                          and Secretary

Robert J. Muth             1994-1999  Vice President, Government and                                65           1977
                                          Public Affairs

William L. Paul            1997-1999  Vice President, Commercial                                    48           1996
                           1994-1996  Manager, Omaha Plant

Gerald D. Van Voorhis      1994-1999  Vice President, Exploration                                   60           1992

Michael O. Varner          1994-1999  Vice President, Environmental                                 57           1993
                                          Operations

David B. Woodbury          1994-1999  Vice President, Human Resources                               58           1993

Robert Ferri               1995-1999  Secretary                                                     51           1995
                           1994-1995  Associate General Counsel

Christopher F. Schultz     1997-1999  Treasurer                                                     47           1997
                           1994-1997  Assistant Treasurer

William Dowd               1995-1999  Controller                                                    49           1995
                           1994-1995  Assistant Controller

James L. Wiers             1994-1999  General Auditor                                               54           1987

</TABLE>

<PAGE>
                                      A-27


                                                                PART II

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

At December  31,  1998,  there were 7,054  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>
                                                1998                                                   1997
                       ------------------------------------------------------  -----------------------------------------------------
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          .20        .20        .20        .10       .70          .20        .20       .20       .20       .80

Stock market price:
      High              26 11/16    27 1/2     23 3/4       23      27 1/2       32 1/2     32 1/4      34      31 7/8       34
      Low                20 7/8     21 1/2    15 15/16    15 1/16   15 1/16      25 1/8     26 1/2      30      21 3/4     21 3/4
</TABLE>

Item 6 - Selected Financial Data
<TABLE>
<CAPTION>

                FIVE-YEAR SELECTED FINANCIAL AND STATISTICAL DATA
(in millions, except per share and employee data)
                                                       1998           1997           1996           1995(f)        1994
                                                       ----           ----           ----           -------        ----
<S>                                                <C>            <C>            <C>            <C>            <C>                  
Consolidated Statement of Earnings
Sales ..........................................   $  2,233       $  2,721       $  2,717       $  3,198       $  2,032
Operating income (loss) ........................       (118)(a)        275(b)         303(d)         487(g)          18(h)
Earnings (loss) before minority interests
                                                       (104)           234            226            299             65
Minority interests .............................        (27)           (91)           (88)          (130)            (1)
Net earnings (loss) ............................       (131)           143(c)         138(e)         169             64(i)
Per common share:
  Net earnings (loss) - Basic ..................   $  (3.29)      $   3.42       $   3.24       $   4.00       $   1.53
  Net earnings (loss) - Diluted ................   $  (3.29)      $   3.42       $   3.23       $   3.98       $   1.52
Dividends to common stockholders ...............   $   0.70       $   0.80       $   0.80       $   0.70       $   0.40
Consolidated Statement of Cash Flows
Cash provided from (used for)
 operating activities ..........................   $     62       $    321       $    267       $    489       $    (10)
Dividends to common stockholders ...............         28             34             34             30             17
Capital expenditures ...........................        371            322            286            338             98
Depreciation and depletion .....................        145            131            119            119             83
Consolidated Balance Sheet
                                                                                                               
Total assets ...................................   $  4,024       $  4,110       $  4,120       $  4,327       $  3,291
Inventories - replacement cost in excess of LIFO
  inventory costs ..............................         74             86            115            137            143
Total cash and marketable securities ...........        216            416            193            281             18
Long-term debt .................................      1,015            850            759          1,063            915
Common stockholders' equity ....................      1,525          1,694          1,737          1,707          1,517
Common Stock
                                                                                                               
Common shares outstanding ......................       39.7           39.7           42.8           42.6           42.1
Price-high .....................................   $ 27 1/2       $     34        $35 7/8        $36 1/2        $34 7/8
     -low ......................................   $15 1/16        $21 3/4        $23 3/4        $24 3/8        $21 3/8
Book value per common share ....................   $  38.45       $  42.71       $  40.56       $  40.11       $  36.04
Price/Earnings ratio ...........................       --             6.56           7.68           8.01          18.65
Dividends to common stockholders as a percent of
  earnings .....................................       --             23.4%          24.7%          17.5%          26.2%
Financial Ratios
Current assets to current liabilities
                                                        1.9            2.3            1.8            1.9            1.6
Debt as a % of capitalization ..................       33.7%          28.3%          26.7%          34.1%          38.1%
Debt as a % of capitalization, net
 of excess cash ................................       30.0%          20.2%          24.1%          32.1%          38.1%
Employees (at year-end) ........................     11,100         11,800         11,800         12,200          8,000

<PAGE>
                                      A-28


<FN>

Notes to Five-Year Selected Financial and Statistical Data

(a)  Includes charges in the first quarter of $20.0 to reflect the effect of the
     sale of the Missouri  Lead Division and $10.0 related to SPCC's $30 million
     cost reduction program. The fourth quarter includes charges of $9.5 for the
     three year  suspension of operations at the Company's  copper smelter in El
     Paso,  Texas, $9.8 to write down the book value and provide for the closure
     costs of the Company's Black Cloud  lead-zinc mine in Leadville,  Colorado,
     $10.9 for the  transfer  of SPCC's  ownership  of the Ilo  townsite  to its
     worker  occupants and the city of Ilo, Peru, and $7.7 to increase  reserves
     for  certain  employee  benefit  plans and for  severance  and other  costs
     related to the Company's  cost reduction  program.  The fourth quarter also
     includes a charge of $33.2 ($54.0 in charges offset by $20.8 in anticipated
     insurance and other  recoveries) to increase reserves for closed plants and
     environmental matters.

(b)  Environmental  charges of $22.1 in 1997 includes  third quarter  charges of
     $30.0 offset entirely by anticipated insurance recoveries.

(c)  Includes a $47.6  after-tax gain ($73.3 pre-tax) from the sale of shares of
     Grupo Mexico.

(d)  Includes  a $15.0  charge  ($67.7 in charges  offset by $52.7 in  insurance
     settlements  and other  recoveries)  for  closed  plant  and  environmental
     matters.

(e)  Includes  a $39.0  after-tax  gain  ($60.1  pre-tax)  from  the sale of the
     Company's  remaining  interest  in MIM  and a $7.2  after-tax  gain  ($11.1
     pre-tax)  from the sale of a 25%  interest  in the  Company's  Silver  Bell
     project.

(f)  On April 5, 1995,  the Company  acquired an  additional  10.7%  interest in
     Southern Peru Copper Corporation (SPCC) for $116.4 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 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.

(g)  Includes a $139.4 charge to add to the  Company's  reserve for closed plant
     and  environmental  matters,  to provide  for asset  impairments  and plant
     closures and to write down certain  in-process  inventory to net realizable
     value.

(h)  Includes a $65.5 pre-tax charge to add to the Company's  reserve for closed
     plant and environmental matters.

(i)  Includes  a $31.9  after-tax  gain  ($58.5  pre-tax)  from  the sale of the
     Company's remaining interest in Asarco Australia Limited.
</FN>
</TABLE>

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

1998 was a  difficult  year for  Asarco.  However,  despite  its poor  financial
results the Company was successful in improving its cost structure and operating
efficiency and made progress on several of its important strategic objectives.

The Company reported a net loss for 1998 of $130.6 million,  or $3.29 per share.
Results for 1998 include  after-tax  charges totaling $60.7 million or $1.53 per
share,   principally  for  asset  write-downs,   an  increase  in  reserves  for
environmental liabilities and severance and employee benefit costs.

Net  earnings  in  1997  and  1996  were  $143.4  million  and  $138.3  million,
respectively.  Results for 1997 included  after-tax gains totaling $47.6 million
($73.3 million  pre-tax),  or $1.13 per share,  from the sale of shares of Grupo
Mexico,  S.A. de C.V. (Grupo Mexico),  Mexico's largest mining company.  Results
for 1996 included an after-tax  gain of $39.0 million  ($60.1  million  pre-tax)
from the sale of the  Company's  interest  in MIM  Holdings  Limited  (MIM),  an
Australian  based  mining  company,  and a $7.2  million  after-tax  gain ($11.1
million  pre-tax) from the sale of a 25% interest in the  Company's  Silver Bell
project.

<PAGE>
                                      A-29



The  Company's  earnings are heavily  influenced by the prices for its metals as
established on United States and  international  commodity  exchanges.  The loss
reported by the Company in 1998  reflects the low copper  prices  which  existed
throughout 1998.

In 1998,  the copper price  declined to an 11 year low. In response to the lower
prices, the Company initiated a cost reduction program which has been successful
in reducing costs and mitigating  part of the effect of low copper prices on the
Company's  operating results.  Southern Peru Copper Corporation  (SPCC), a 54.3%
owned subsidiary,  also instituted a similar cost reduction  program.  Both cost
reduction  programs included staff  reductions,  operational  improvements,  and
reductions in purchased services.

In the fourth quarter of 1998, the Company  announced a three year suspension of
operations at its copper smelter located in El Paso, Texas. Increased production
capacity at El Paso had required the purchase of concentrates for the smelter to
operate  efficiently.  Current  market terms for  smelting and refining  fell to
levels making such purchases unremunerative.  The lower terms were the result of
a  worldwide  shortage of copper  concentrates,  particularly  in the  southwest
United States.  These same market conditions allowed the Company to sell its own
concentrate  production,  which would have been treated at El Paso, on favorable
terms for a three year period. During the suspension, El Paso will be maintained
so that it may be  returned  to full  operations  at the end of the  three  year
period. The workforce will be reduced by approximately 370 employees as a result
of the suspension.

In January 1999, the Company  announced the closure of its Black Cloud lead-zinc
mine in Leadville, Colorado due to the depletion of ore reserves. The Company is
continuing an  exploration  program at Leadville  seeking new ore reserves.  The
closure resulted in the termination of approximately 100 employees.  The Company
wrote down its  investment  in the mine and accrued  closure costs in the fourth
quarter of 1998.

Included among the Company's important achievements in 1998 were:

o    In the fourth quarter of 1997, the Company announced the  implementation of
     a Company wide cost reduction  program designed to improve annual operating
     results by $50 million.  SPCC instituted its own $30 million cost reduction
     program in the first quarter of 1998.  These programs are estimated to have
     benefited the Company's 1998 pre-tax results by approximately $72 million.

o    The Company's  beneficial  interest in mined copper  production grew nearly
     5.0% to one billion pounds.  At the same time, the Company reduced its cash
     cost of producing  copper by almost 5 cents per pound in 1998 to just under
     65 cents.

o    The Company's North American copper operations  increased the production of
     low-cost  solvent  extraction/electrowinning  (SX/EW) copper by nearly 40%.
     Use of a new leaching  technology  at the Company's Ray Mine in Arizona led
     to a 24% increase in its SX/EW production.  The balance of the increase was
     attributable to a full year's  production at the Company's 75% owned Silver
     Bell SX/EW facility which commenced operations in mid-1997.

o    In September  1998, the Company sold its Missouri Lead Division  (MLD),  an
     integrated  lead mining  business.  The  Company  realized in excess of $55
     million  from the sale and retains a royalty  interest  in the  properties.
     MLD's ore  reserves  were  limited and  presented  little  opportunity  for
     expansion. The sale enabled the Company to concentrate its resources on its
     core businesses.

<PAGE>
                                      A-30


o    Profits at Enthone-OMI,  the Company's  specialty  chemicals  business grew
     5.0% in 1998 to $30.9 million. In addition,  Enthone-OMI  acquired Deutsche
     Oberflachentechnik  GmbH  (DOT)  in  April  1998.  The  acquisition,  which
     benefited earnings in 1998,  significantly expands Enthone-OMI's  marketing
     and technology position in the important German specialty chemicals market.

o    American  Limestone,  through  which the Company  conducts  its  aggregates
     business,  had a 5.8%  increase  in  profits  in  1998  to  $14.6  million,
     representing American Limestone's fifth year in a row of record profits.

o    SPCC substantially completed the $245 million expansion of the Cuajone mine
     in the fourth  quarter of 1998.  The  concentrator  now has the capacity to
     treat 96,000 tons of ore per day. The expansion will add 130 million pounds
     of copper production annually.


Sales:  Sales were $2.2 billion in 1998 and $2.7  billion in 1997 and 1996.  The
decrease in sales in 1998 is due to the reduction in metal  prices,  principally
copper.  Higher copper,  specialty  chemicals and aggregates  sales volumes were
offset by lower  refined lead sales  volumes due to the sale of MLD in the third
quarter of 1998. In 1997, sales reflect higher copper,  specialty  chemicals and
aggregates  sales  volumes  offset by the lower metal prices in 1997 compared to
1996 and lower lead and silver sales volumes due to the  termination of refining
operations at the Omaha, Nebraska refinery in June 1996.
<TABLE>

Price/volume data:
<CAPTION>

  Average Metal Prices                       1998        1997        1996
  --------------------                       ----        ----        ----

<S>                                      <C>         <C>         <C>     
Copper (per pound - COMEX) ........      $   0.75    $   1.04    $   1.06
Copper (per pound - LME) ..........          0.75        1.03        1.04
Lead (per pound - LME) ............          0.24        0.28        0.35
Silver (per ounce - Handy & Harman)          5.53        4.89        5.18
Zinc (per pound - LME) ............          0.46        0.60        0.47
Molybdenum (per pound - Metals
               Week Dealer Oxide) .          3.31        4.18        3.61

</TABLE>

<PAGE>
                                      A-31


<TABLE>
<CAPTION>


  Metal Sales Volume (1)(2)            1998         1997          1996
  -------------------------            ----         ----          ----
<S>                                 <C>          <C>           <C> 
Copper...  (000s pounds)
  Asarco ...................        1,188,800    1,113,300     1,103,700
  SPCC .....................          752,100      744,000       694,300
                                    ---------     ---------    ---------
  Consolidated .............        1,940,900    1,857,300     1,798,000

  Asarco Beneficial Interest        1,578,300    1,502,800     1,467,500

Lead ...   (000s pounds)
  Asarco ...................          159,400      255,000       295,800

Silver ..  (000s ounces)
  Asarco ...................           16,263       19,350        26,955
  SPCC .....................            3,288        3,086         3,110
                                    ---------    ---------     ---------
  Consolidated .............           19,551       22,436        30,065

  Asarco Beneficial Interest           18,013       20,978        28,584

Zinc .......(000s pounds) (3)
  Asarco ...................          151,200      146,000       200,500

Molybdenum (000s pounds) (3)
  Asarco ...................            4,950        5,346         6,470
  SPCC .....................            9,677        9,398         8,813
                                    ---------    ---------     ---------
  Consolidated .............           14,627       14,744        15,283

  Asarco Beneficial Interest           10,096       10,307        11,088
<FN>

         (1)      SPCC presented at 100%. The Company's  equity interest in SPCC
                  at December  31, 1998 was 54.3% and 54.1% at December 31, 1997
                  and 1996 and its voting interest was 63.1%, 63.1% and 62.6% at
                  December 31, 1998, 1997 and 1996, respectively.  The Company's
                  beneficial economic interest in the operations of SPCC, net of
                  the  remaining  labor shares  interest,  was 53.2%,  53.0% and
                  52.6% at December 31, 1998, 1997 and 1996, respectively.

         (2)      Effective  February 1996,  Asarco's  beneficial  interest in
                  Silver Bell L.L.C. is 75%.

         (3)      The Company's  zinc and  molybdenum  production is sold in the
                  form of  concentrates.  Volume  represents  pounds of zinc and
                  molybdenum metal contained in those concentrates.
</FN>
</TABLE>

Most of the Company's  copper is sold as refined metal under annual contracts or
on a spot sale basis.  The balance of the  Company's  copper and all of its zinc
production are sold in the form of concentrates  under contracts of one to three
years  duration.  Silver and gold are sold under  monthly  contracts  or in spot
sales.  Revenue  is  recognized  primarily  in the month  product  is shipped to
customers  based on prices  provided in sales  contracts.  When the price is not
determinable at the time of shipment to customers,  revenue is recognized  based
on prices  prevailing  at the time of  shipment  with  final  pricing  generally
occurring within three months of shipment.  Revenues with respect to these sales
are adjusted in the period of settlement to reflect final pricing and in periods
prior to  settlement  to reflect  any decline in market  prices  which may occur
between shipment and settlement.

<PAGE>
                                      A-32


Derivative  Instruments:  The Company uses derivative  instruments to manage its
exposure to market risk from changes in commodity prices,  interest rates or the
value of its assets and liabilities. Derivative instruments which are designated
as hedges must be deemed  effective  at reducing  the risk  associated  with the
exposure  being hedged and must be designated as a hedge at the inception of the
contract.

HEDGING:

Metal  Futures  Contracts:  The majority of the Company's  activities  involving
metal  futures  contracts  are  designed  to match  the price  realized  for the
Company's  metal  production as close as possible to the average  monthly market
price during the month the Company makes shipments to customers. Sales contracts
with  customers  may  provide  for  pricing  in a month  other than the month of
shipment.  For instance,  in cases where pricing is established in a month later
than the month of shipment,  the Company will sell forward an equivalent  amount
of metal to the month that the price with the customer is established.  The gain
or loss on these forward contracts is offset with a lower or higher price on the
customer  invoice.  Metal futures  contracts are also used to hedge the price of
metals  purchased  by the Company  from third  parties.  Gains and losses on the
liquidation  of futures  contracts  are  included  in  earnings at the same time
revenue from the related sale transactions are recognized.

At December 31, 1998 and 1997, the Company's  aggregate  metal futures  contract
positions were as follows:

(in thousands)
<TABLE>
<CAPTION>
                                                       Notional      Unrealized
                                         Weight         Values       Gain (Loss)
                                         ------         ------       -----------
<S>                                      <C>            <C>             <C>                                     
1998
Copper (pounds) ...............          71,860         $48,207         $ 1,457
Silver (ounces) ...............           5,630         $28,078         $  (184)
Gold ..(ounces) ...............              32         $ 9,374         $   206
Lead ..(pounds) ...............           3,362         $   742         $   (13)

1997
Copper (pounds) ...............          74,950         $60,180         $ 2,194
Silver (ounces) ...............           4,300         $23,664         $(2,085)
Gold . (ounces) ...............              15         $ 4,320         $    (3)
Lead ..(pounds) ...............          23,698         $ 6,914         $  (838)
</TABLE>

In the preceding table notional values  represent the purchase or sales price of
the metal under  contract.  The unrealized gain or loss, if any, is the increase
or decrease in the value of the contract as of the date indicated.

In the event of a  hypothetical  10  percent  unfavorable  change in the  metals
prices on the Company's  December 31, 1998 positions,  the Company would incur a
loss of $2.8 million  including  the  unrealized  gain or loss  displayed in the
table  above.   However,   any  such  additional  loss  would  be  offset  by  a
corresponding  gain on the related  customer  contracts being hedged.  Since the
notional value  displayed in the table above  represents the absolute sum of all
outstanding  futures  contracts,  it is not an  accurate  measure of risk to the
Company from these transactions.

Price  Protection:  Depending  on the market  fundamentals  of a metal and other
conditions, the Company may purchase put options or create synthetic put options
to reduce or eliminate the risk of metal price  declines below the option strike
price on a portion of its anticipated future  production.  Synthetic put options
consist of a call option and a forward sale of the same quantity of metal. These
put options  establish a minimum sales price for the production  covered by such
put options and permit the Company to participate in price  increases  above the
option price.  The cost of options is amortized on a straight-line  basis during

<PAGE>
                                      A-33


the  period  in  which  the  options  are  exercisable.  Depending  upon  market
conditions, the Company may either sell options it holds or exercise the options
at  maturity.  Gains or losses  from the sale or  exercise  of  options,  net of
unamortized  acquisition  costs,  are  recognized  in the  period  in which  the
underlying  production  is sold.  Earnings  include  gains from option sales and
exercises,  primarily related to copper, of $11.0 million in 1998, $25.8 million
in 1997 and $27.1 million in 1996.

At December 31, 1998, the Company did not hold any put options.

Fuel Swaps:  The Company may enter into fuel swap agreements to limit the effect
of increases in fuel prices on its production  costs. A fuel swap  establishes a
fixed price for the quantity of fuel covered by the  agreement.  The  difference
between the published  price for fuel and the price  established in the contract
for the  month  covered  by the swap is  recognized  as a  component  of cost of
products and services. As of December 31, 1998 and 1997, the Company had entered
into the following fuel swap agreements:
<TABLE>
<CAPTION>
                                                                       
                                                                       Weighted
                                                                       Average
                                                   Quantity            Contract 
Fuel Type                          Period          (Barrels)            Price
---------                          ------          ---------            -----
<S>                                <C>               <C>                <C>   
1998

Residual Oil ............         1/99-9/99         1,095,000         $    9.84
Diesel Fuel .............         1/99-9/99           564,000         $   15.35

1997
Residual Oil ............        1/98-12/98           540,000         $   13.57
Diesel Fuel .............        1/98-12/98           200,500         $   21.17
</TABLE>

In the event of a hypothetical 10 percent  decrease in the respective oil prices
on the  Company's  December 31, 1998  positions,  the Company would incur higher
production  costs of  approximately  $3.4 million over the life of the contracts
than it would have incurred had the exposure not been hedged.

Interest Rate Swaps: The Company may enter into interest rate swap agreements to
limit the effect of interest rates on any floating rate debt.  The  differential
to be paid or received as interest rates change is recorded in interest expense.
During 1995, the Company entered into three swap  agreements,  expiring  between
1998 and 2000, with an aggregate notional amount of $115.0 million. During 1998,
two of the  interest  rate swaps  with an  aggregate  notional  amount of $100.0
million expired.  At December 31, 1998, the effect of the one remaining interest
rate swap  agreement  with an aggregate  notional  amount of $15.0 million is to
limit the interest rate exposure on its $15.0 million, 5 year term loan to 6.8%.
Interest  expense would have been lower by $0.4 million in 1998, $0.6 million in
1997 and $0.7 million in 1996 had the Company not hedged its exposure.

In the event of a hypothetical  decrease of 1% in the prevailing  interest rate,
the Company would incur higher interest  expense of  approximately  $0.3 million
over the  remaining  life of the  contract  than it would have  incurred had the
exposure not been hedged.

TRADING:

Price protection  programs utilizing synthetic puts may be implemented in steps.
In cases where the step  approach is used,  the  Company's  objective is to take
advantage of current  market  conditions  to minimize its cost of the  synthetic
put.  Until a synthetic put is  completed,  any calls not matched with a forward
sale are considered trading activities and are marked to market with the gain or
loss, if any,  recorded in earnings.  Earnings include losses of $0.2 million in

<PAGE>
                                      A-34


1998 and  gains of $0.5  million  in 1997  from  the  sale or  exercise  of call
options.  Earnings  also include  losses of $1.9 million in 1998,  gains of $3.6
million  in  1997  and  losses  of $0.1  million  in 1996  from  mark to  market
adjustments. At December 31, 1998, the Company did not hold any call options.

The Company may hold positions in the metals futures markets for metals which it
produces but which are not related to any  specific  sales to  customers.  These
contracts are  considered  trading  activities and are marked to market with the
gain or loss, if any, recorded in earnings.  At December 31, 1998 and 1997, such
futures positions were not material.

Cost of Products and Services: Cost of products and services was $2.0 billion in
1998 and $2.1 billion in 1997 and 1996.  In 1998,  cost of products and services
includes  a $9.5  million  provision  for costs  associated  with the three year
suspension of operations at the Company's copper smelter in El Paso, Texas, $9.3
million  for  the  closure  of the  Company's  Black  Cloud  lead-zinc  mine  in
Leadville,  Colorado,  $1.1 million for the transfer of SPCC's  ownership of the
Ilo  townsite  to its  worker  occupants  and the city of Ilo,  Peru,  and $13.3
million  to  increase  reserves  for  certain  employee  benefit  plans  and for
severance  and other  costs in  connection  with the  Company's  cost  reduction
programs. In addition,  1998 reflects a decrease in costs due to the sale of MLD
in the  third  quarter  of 1998 and  lower  production  costs as a result of the
Company's  cost  reduction   programs  partially  offset  by  increased  copper,
specialty chemicals and aggregates sales volume.

In 1997,  cost of products and services  reflects higher sales volumes of copper
produced from  purchased  concentrates  at SPCC,  higher power costs at SPCC and
increased  specialty  chemicals and  aggregates  sales  volumes  offset by lower
purchases  of refined  copper to meet  customer  commitments  and lower lead and
silver  sales  volumes  due to the  termination  of refining  operations  at the
Company's Omaha, Nebraska refinery in June 1996.

Cost of products and services was reduced by $1.6 million in 1998, $16.7 million
in 1997 and $5.3 million in 1996 as a result of the  liquidation of a portion of
the  Company's  LIFO  inventories,  principally  as a  result  of  the  sale  or
disposition of operations.

As a  result  of  its  $1  billion  expansion  program,  SPCC's  electric  power
requirements   will  increase   significantly   requiring  the  construction  of
substantial  additional generating capacity. In the second quarter of 1997, SPCC
sold its existing  power plant to an independent  power  company.  In connection
with the sale, a power purchase  agreement was also completed,  under which SPCC
agreed  to  purchase  its  power  needs  for the next  twenty  years.  Under the
agreement,  SPCC's  cost of power will  increase  somewhat  from its 1996 level,
however,  SPCC will avoid the  significant  capital  expenditures  that would be
required to meet the needs of expanded operations.

Other Expenses:  Selling,  administrative and other expenses were $144.3 million
in 1998,  $137.7 million in 1997, and $132.8 million in 1996. The year over year
increases are primarily  due to an increase in selling  expenses  related to the
specialty  chemicals  business,  partially  offset by a reduction  in  corporate
administrative costs.

Depreciation and depletion expense was $144.6 million in 1998, $130.8 million in
1997, and $118.6 million in 1996. In 1998, the higher  depreciation is primarily
related  to the use of the  additional  mine  equipment  which  was  part of the
expansion of the Cuajone mine in Peru. The increase in 1997 over 1996 reflects a
full  year's  depreciation  of the  sulfuric  acid plant and  additional  assets
related to the Cuajone and Toquepala  mines in Peru,  and the SX/EW  facility at
the Company's 75% owned Silver Bell mine in Arizona,  which commenced operations
in July 1997.

<PAGE>
                                      A-35


Research and  exploration  expense was $27.0  million in 1998,  $43.2 million in
1997 and $37.6 million in 1996.  The reduction in 1998 reflects  lower  spending
for domestic and foreign  exploration  as part of the Company's  cost  reduction
program,  and the  capitalization  of expenses  in 1998 with  respect to certain
identified  mineral  resources.  The  higher  spending  levels  in 1997 and 1996
reflect exploration expenditures on projects in French Guiana, Peru and Chile.

Asset  dispositions and impairments  include $20.0 million to reflect the effect
of the sale of MLD,  $0.5 million to write down the property  value of the Black
Cloud lead-zinc mine in Leadville, Colorado and $9.8 million for the transfer of
SPCC's  ownership  of the Ilo townsite to its worker  occupants  and the city of
Ilo, Peru.

The Company  applies the American  Institute of  Certified  Public  Accountants'
Statement of Position 96-1, "Environmental  Remediation Liabilities" (SOP 96-1),
which provides  authoritative  accounting  guidance with regard to  recognizing,
measuring and  disclosing  environmental  liabilities.  Environmental  and other
closed plant  charges,  including mine  reclamation  costs for active and closed
properties, were $42.1 million in 1998 ($62.9 million in charges offset by $20.8
million in anticipated  insurance and other  recoveries),  $22.1 million in 1997
($52.3 million in charges  offset by $30.2 million in anticipated  insurance and
other recoveries), and $16.7 million in 1996 ($69.4 million in charges offset by
$52.7 million in anticipated  insurance and other  recoveries)  including  $10.0
million for the effect of the initial application of SOP 96-1.

Nonoperating Items: Interest expense was $67.8 million in 1998, $74.2 million in
1997 and $76.4 million in 1996. In 1998, interest expense reflects the Company's
lower borrowing rates on floating rate debt. The decrease in 1997 reflects lower
average  borrowings  due to the use of proceeds  from the sale of the  Company's
interest  in MIM in the second  quarter of 1996 and the sales of shares of Grupo
Mexico in the second and third quarters of 1997.

Other income was $28.8 million in 1998,  $33.8 million in 1997 and $29.1 million
in 1996. The decrease in 1998 reflects lower equity  earnings from Silver Valley
Resources, a 50% owned equity investment,  and lower interest income,  partially
offset by an insurance recovery in Peru. The increase in 1997 from 1996 reflects
a dividend from Grupo Mexico and higher equity earnings, principally from Silver
Valley Resources.

Taxes on Income:  The  Company's  effective tax rate is lower than the statutory
rate  primarily  because of the  percentage  depletion  and  dividends  received
deductions which are permitted for U.S. tax purposes. The effective tax rate was
lower in 1997 compared with 1998  principally due to tax incentives  approved by
the  Government  of Peru in 1997 in  connection  with the  expansion  of  SPCC's
Cuajone mine.  The Company's tax expense  includes  substantial  foreign  taxes,
primarily attributable to SPCC's Peruvian Branch. Subject to certain limitations
these  taxes have been  applied as credits  to reduce  U.S.  federal  income tax
otherwise due.

As of December 31, 1998,  the Company's  recorded  benefit for tax net operating
loss  carryforwards  was $200.8  million.  The Company  believes that it is more
likely than not that these  carryforwards,  which  expire in years 2008  through
2018, will reduce future federal income taxes otherwise payable.

Cash Flows - Operating  Activities:  Net cash provided from operating activities
was $62.3  million  in 1998  compared  with  $321.3  million  in 1997 and $267.3
million  in 1996.  The  decrease  in 1998  from 1997 is  primarily  due to lower
earnings as a result of lower copper prices partially offset by the cash savings
from the Company's cost reduction programs.

<PAGE>
                                      A-36



The  increase  in 1997 from 1996 is  primarily  a result of cash  provided  from
operating  assets  and  liabilities   which  reflects  a  decrease  in  accounts
receivable  due to the decline in copper  prices during the final months of 1997
and  proceeds  received  from  insurance  settlements  related to  environmental
liabilities.

In 1996, other cash used for operating assets and liabilities  included payments
by SPCC in 1996 of income  taxes and  workers'  participation  accrued  in 1995.
These uses of cash were  partially  offset by proceeds  received from  insurance
settlements related to environmental matters.

Cash Flows - Investing  Activities:  Net cash used for investing  activities was
$188.1  million in 1998,  compared with $167.3 million in 1997 and cash provided
of $93.8 million in 1996. The increase in capital  expenditures in 1998 reflects
the expansion  project at the Cuajone mine.  Other investing  activities in 1998
include  proceeds from  held-to-maturity  securities at SPCC,  proceeds from the
sale of the Company's MLD partially  offset by the  acquisition  of DOT in April
1998.

The increase in capital  expenditures  in 1997 from 1996  reflects the expansion
project  at the  Cuajone  mine.  Other  investing  activities  in 1997  included
proceeds of $322.5  million from the sales of shares of Grupo  Mexico  partially
offset by the investment of the proceeds from the SPCC  financing  activities in
held-to-maturity investments.

Other investing activities in 1996 included the sale of MIM stock, the sale of a
25%  interest  in the  Company's  Silver Bell  project,  and  proceeds  from the
maturity of held-to-maturity investments, primarily at SPCC.

The  Company's  planned  capital  expenditures  in  1999  are  estimated  to  be
approximately  $375 million.  Included in 1999 are  expenditures  related to the
modernization  and  expansion  of SPCC's  Ilo  smelter,  expansion  of the SX/EW
facility at Toquepala and completion of the Cuajone mine expansion.

Liquidity and Capital  Resources:  At December 31, 1998, the Company's debt as a
percentage of total  capitalization  (the total of debt,  minority interests and
equity) was 33.7%,  compared  with 28.3% at the end of 1997 and 26.7% at the end
of 1996.  Consolidated debt at the end of 1998, including the debt of SPCC, none
of which is guaranteed  by Asarco,  was $1,047.6  million,  compared with $878.9
million in 1997 and $814.3 million in 1996.  Additional  indebtedness  permitted
under the terms of the Company's most  restrictive  covenants was $560.4 million
at December  31,  1998.  In addition,  under the most  restrictive  covenants of
SPCC's loan agreements,  SPCC would have been permitted additional  indebtedness
of $874.4 million at December 31, 1998.

The  increase  in debt in 1998  reflects  the  Company's  partial  usage  of its
revolving  credit line.  Debt  includes the private  placement by SPCC of $150.0
million of Secured Export Notes in the United States and  international  markets
and the sale by SPCC of $50.0  million of 8.25% bonds due 2004 to  investors  in
Peru during  1997.  The Secured  Export  Notes which were issued with an average
maturity of seven  years and a final  maturity in 2007 were priced at par with a
coupon rate of 7.9%.

The Company has two revolving credit  agreements that permit borrowings of up to
$800 million of which $150 million was drawn at December 31, 1998.  One facility
for $300  million  expires in May 2003 and the other  facility  for $500 million
expires in May 2002. The borrowings bear interest based on LIBOR, the CD rate or
the prime rate.

Under the most  restrictive  terms of the credit  agreements,  the Company  must
maintain a tangible net worth, as defined, of at least $1 billion.  Tangible net
worth, as defined, was $1.5 billion at December 31, 1998.

<PAGE>
                                      A-37


In January 1998,  the Company  completed a refinancing  of three tax exempt debt
issues  and called for the  redemption  of the  existing  bonds.  The  aggregate
principal  amount of the  refinancing  was $132.8  million.  The  refinancing is
expected to reduce the Company's  annual  interest costs by  approximately  $3.3
million.  In October 1998, the Company  completed a refunding of tax exempt debt
of $22.2  million,  which was due to expire in December  1998.  The terms of the
refunding  extend the maturity of the debt to 2018 at an interest  rate of 5.6%.
In November  1998, the Company sold a new tax exempt debt issue of $34.8 million
with a coupon rate of 5.85% maturing in 2033.

In 1997, SPCC entered into a $600 million,  seven-year  credit  agreement with a
group of international financial institutions.  The agreement consists of a $400
million term loan facility and a $200 million  revolving  credit  facility.  The
interest  rate  during  the  first  three  years of the  agreement  on any loans
outstanding  is LIBOR  plus  1.75% per annum for term loans and LIBOR plus 2.00%
for  revolving  credit  loans.  No  amounts  have been  drawn by SPCC under this
agreement as of December 31, 1998.  SPCC's loan agreements are not guaranteed by
Asarco.  The  funds  raised  in 1997,  the loan  facility  of $600  million  and
internally  generated  funds are expected to provide the Company with sufficient
resources to complete the $1 billion expansion program at SPCC.

Some of SPCC's financing agreements contain covenants which limit the payment of
dividends to  stockholders.  Under the most restrictive  covenant,  SPCC may pay
dividends to stockholders  equal to 50% of its net income for any fiscal quarter
as long as such  dividends  are  paid  by June 30 of the  following  year.  As a
result,  at December 31, 1998,  $588.4 million of SPCC's net assets  included in
the  Company's  consolidated  net  assets  are  unavailable  for the  payment of
dividends.

Financing  activities in 1997 included the  repurchase of 3.3 million  shares of
the Company's stock for  approximately  $100 million which reduced the number of
outstanding shares by approximately 7.7% to slightly under 40 million shares.

The Company has on file with the Securities and Exchange  Commission a universal
shelf registration  statement covering the future issuance of up to $300 million
in equity and debt  securities.  The  Company  has no  immediate  plans to issue
securities  and the  registration  is intended  to provide the Company  with the
flexibility to access the capital markets when appropriate.

The Company's  cash and  marketable  securities at December 31, 1998 were $215.8
million  including $198.1 million held by SPCC. The Company expects that it will
meet its cash  requirements in 1999 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 $27.8 million, or 70 cents per share, in 1998, $33.6 million, or 80 cents per
share,  in 1997 and $34.2 million,  or 80 cents per share, in 1996. In addition,
SPCC paid  dividends  to  minority  interests  of $19.5  million in 1998,  $49.4
million in 1997 and $58.3 million in 1996.  At the end of 1998,  the Company had
39,652,000 common shares issued and outstanding, compared with 39,663,000 at the
end of 1997 and 42,824,000 at the end of 1996.

Closed  Plants  and  Environmental  Matters:  Reserves  for  closed  plants  and
environmental  matters,  including accrued mine reclamation costs for active and
closed  properties,  totaled  $144.4  million and $146.6 million at December 31,
1998 and 1997, respectively.  The Company anticipates that expenditures relating
to  these  reserves  will  be  made  over  the  next  several  years.  Net  cash
expenditures against these reserves were $67.2 million in 1998, $57.4 million in
1997, and $55.6 million in 1996.

<PAGE>
                                      A-38


On January 23, 1998,  the Company,  the United States  Department of Justice and
EPA announced the signing of a multi-region voluntary agreement covering a broad
range of  environmental  issues  affecting  most of the Company's  United States
operations.  The two consent  decrees  containing  the  agreement  were filed in
United States District Courts in Phoenix,  Arizona and Helena,  Montana and have
been  approved  by both courts  subsequent  to public  comment.  Pursuant to the
agreement,  which  resolves  numerous  issues  that were  being  negotiated  and
litigated  separately,  the Company has paid $6.4 million in penalties  and will
undertake capital construction  projects estimated at $61.5 million, to be spent
over six years.

Impact of New Accounting  Standards:  In March 1998,  the American  Institute of
Certified Public  Accountants'  Accounting  Standards Executive Committee issued
Statement of Position  No. 98-1  "Accounting  for the Cost of Computer  Software
Developed or Obtained for Internal Use." This  statement  which is effective for
fiscal years beginning after December 15, 1998,  provides guidance on accounting
for the costs of computer software  developed or obtained for internal use. This
statement will not have a material impact on the Company's financial statements.

In June 1998,  the  Financial  Accounting  Standards  Board  issued SFAS No. 133
"Accounting for Derivative  Instruments and Hedging  Activities." This statement
which is effective for fiscal years beginning  after June 15, 1999,  establishes
accounting  and  reporting  standards  for  derivative  instruments  and hedging
activities. The Company is currently assessing the impact of this statement.

Year 2000:  The Company has  implemented  a three phase  program to identify and
resolve Year 2000 (Y2K) issues  related to the integrity and  reliability of its
computerized  information  systems as well as computer  systems  embedded in its
production  processes.  Phase one of the  Company's  program  which  involved an
assessment of Y2K compliance of the Company's  computerized  information systems
and embedded  computer  systems has been completed.  In phase two of the program
the Company is modifying or replacing all non-compliant  systems. As of December
31, 1998,  approximately  95% of the Company's systems and 60% of SPCC's systems
have been tested and are Y2K compliant with the remainder  expected to be tested
and be Y2K  compliant by the second  quarter of 1999.  The Company  continues to
test these systems where appropriate.

As of December 31,  1998,  the Company had spent  approximately  $1.9 million in
addition to its normal internal information  technology costs in connection with
its Y2K program.  The Company expects to incur  additional costs of $1.1 million
including  its  beneficial  interest in SPCC's costs to complete  phases two and
three of the program.

Under the third phase of the program the Company has sent  detailed  information
requests  to  its  principal  customers,  suppliers  and  service  providers  to
determine  the status of their Y2K  compliance.  As of December  31,  1998,  the
Company received  confirmations  from approximately 68% indicating that they are
or will be Y2K  compliant.  The Company  expects to have further  communications
with those who have not responded or have indicated further work was required to
achieve  Y2K  compliance.  The third  phase of the  program  is  expected  to be
completed  in the first  quarter  of 1999.  SPCC has sent  surveys  to its major
customers,  suppliers  and service  providers  and also expects to complete this
phase of its program in the first quarter of 1999.

<PAGE>
                                      A-39


Among other  things,  the Company's  operations  depend on the  availability  of
utility services,  principally electricity, and reliable performance by domestic
and international  transportation  services. A substantial  disruption in any of
these  services  due to  providers  of these  services  failing to  achieve  Y2K
compliance would have an adverse impact on the Company's financial results,  the
significance of which would depend on the length and severity of the disruption.
The  Company  is  currently   identifying   alternatives  and  will  complete  a
contingency plan for each of its principal operations by March 1999. The purpose
of the contingency plan is to identify possible alternatives which could be used
in the event of a disruption in the delivery of essential  goods or services and
to minimize the effect of such a disruption.

The above estimates and conclusions contain  forward-looking  statements and are
based on  management's  best  estimate of future  events.  Actual  results could
differ  materially  depending on the availability of resources and the Company's
ability to identify and correct all Y2K issues.

Cautionary  Statement:  Forward-looking  statements  in this report and in other
Company statements include statements  regarding expected  commencement dates of
mining or metal  production  operations,  projected  quantities  of future metal
production,  anticipated  production rates,  operating  efficiencies,  costs and
expenditures as well as projected  demand or supply for the Company's  products.
Actual  results could differ  materially  depending  upon factors  including the
availability  of  materials,   equipment,  required  permits  or  approvals  and
financing, the occurrence of unusual weather or operating conditions, lower than
expected  ore  grades,  the  failure of  equipment  or  processes  to operate in
accordance with specifications,  labor relations, environmental risks as well as
political  and economic  risk  associated  with foreign  operations.  Results of
operations are directly  affected by metals prices on commodity  exchanges which
can be volatile.

<PAGE>
                                      A-40


<TABLE>
<CAPTION>


Item 8 - Financial Statements and Supplementary Data

                               ASARCO Incorporated
                                and Subsidiaries
                       CONSOLIDATED STATEMENT OF EARNINGS

(in thousands, except per share amounts)

For the years ended December 31,                                         1998                     1997                   1996
                                                                         ----                     ----                   ----

<S>                                                                   <C>                      <C>                    <C>       
Sales of products and services                                        $2,233,068               $2,721,048             $2,716,784
                                                             ----------------------- ----------------------- ----------------------

Operating costs and expenses:
 Cost of products and services                                         1,962,790                2,112,640              2,107,701
 Selling, administrative and other                                       144,324                  137,657                132,779
 Depreciation and depletion                                              144,636                  130,802                118,569
 Research and exploration                                                 26,954                   43,186                 37,609
 Asset dispositions and impairments                                       30,298                        -                      -
 Environmental and other closed plant charges, net of
    recoveries                                                            42,123                   22,074                 16,687
                                                             ----------------------- ----------------------- ----------------------
Total operating costs and expenses                                     2,351,125                2,446,359              2,413,345
                                                             ----------------------- ----------------------- ----------------------

Operating income (loss)                                                 (118,057)                 274,689                303,439
Interest expense                                                         (67,787)                 (74,247)               (76,442)
Other income                                                              28,847                   33,845                 29,084
Gain on sale of investments and other interests
                                                                               -                   73,281                 71,158
                                                             ----------------------- ----------------------- ----------------------
Earnings (loss) before taxes on income and minority
  interests                                                             (156,997)                 307,568                327,239
Taxes on income (benefit)                                                (53,016)                  73,571                100,572
                                                             ----------------------- ----------------------- ----------------------

Earnings (loss) before minority interests                                                                     
                                                                        (103,981)                 233,997                226,667
Minority interests in net earnings of consolidated
  subsidiaries                                                           (26,659)                 (90,605)               (88,331)
                                                             ======================= ======================= ======================
Net earnings (loss)                                                    $(130,640)               $ 143,392              $ 138,336
                                                             ======================= ======================= ======================

Per share amounts:
  Net earnings (loss):
   Basic                                                                  $(3.29)                   $3.42                  $3.24 
   Diluted                                                                $(3.29)                   $3.42                  $3.23

  Dividends to common stockholders                                        $ 0.70                    $0.80                  $0.80

  Weighted average common shares outstanding:
   Basic                                                                  39,655                   41,903                 42,711
   Diluted                                                                39,655                   41,976                 42,769

</TABLE>

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

<PAGE>
                                      A-41


<TABLE>


                               ASARCO Incorporated
                                and Subsidiaries
                           CONSOLIDATED BALANCE SHEET
<CAPTION>
(Dollars in thousands)
At December 31,                                                                        1998                   1997
                                                                                       ----                   ----
<S>                                                                                <C>                    <C>                    
Current assets:
  Cash and cash equivalents                                                        $  193,048             $  210,559
  Marketable securities                                                                22,705                205,317
  Accounts receivable:
     Trade, net of allowance for doubtful accounts of $9,275 and $8,121
                                                                                      340,916                375,904
   Other                                                                               68,876                 71,062
  Inventories                                                                         352,411                362,119
  Other assets                                                                        104,809                 74,967
                                                                                   -----------------------------------------
     Total current assets                                                           1,082,765              1,299,928
                                                                                   -----------------------------------------
Investments:
  Available-for-sale and other at cost                                                121,532                126,843
  Equity method                                                                        64,465                 61,337
                                                                                   -----------------------------------------
     Total investments                                                                185,997                188,180
                                                                                   -----------------------------------------

Property, net                                                                       2,526,567              2,418,810
Other assets including intangibles, net                                               228,480                203,484
                                                                                   -----------------------------------------
        Total Assets                                                               $4,023,809             $4,110,402
                                                                                   =========================================
LIABILITIES
Current liabilities:
  Bank loans                                                                       $    4,963             $      204
  Current portion of long-term debt                                                    27,676                 28,712
  Accounts payable:
     Trade                                                                            265,912                289,234
     Other                                                                             70,589                 63,605
  Salaries and wages                                                                   27,268                 35,788
  Taxes on income                                                                      84,007                 62,565
  Reserve for closed plant and environmental matters                                   53,394                 44,164
  Other                                                                                47,611                 49,534
                                                                                   -----------------------------------------
     Total current liabilities                                                        581,420                573,806
                                                                                   -----------------------------------------

Long-term debt                                                                      1,014,942                849,991
Deferred income taxes                                                                  56,045                118,289
Reserve for closed plant and environmental matters                                     90,985                102,432
Postretirement benefit obligation                                                     108,741                104,491
Other liabilities and reserves                                                        113,754                133,609
                                                                                   -----------------------------------------
     Total non-current liabilities                                                  1,384,467              1,308,812
                                                                                   -----------------------------------------

Contingencies (Footnote 8)

MINORITY INTERESTS                                                                    533,329                533,911
                                                                                   -----------------------------------------

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: 1998 and 1997 - 45,039,878                                    679,991                679,991
Accumulated other comprehensive income (loss), net
  of tax                                                                               (6,989)                 3,389
Retained earnings                                                                   1,009,626              1,168,064
Treasury stock (at cost) - common shares 1998 - 5,388,155; 1997 - 5,377,339
                                                                                     (158,035)              (157,571)
                                                                                   -----------------------------------------
     Total common stockholders' equity                                              1,524,593              1,693,873
                                                                                   =========================================
        Total Liabilities, Minority Interests,
         Preferred and Common Stockholders' Equity                                 $4,023,809             $4,110,402
                                                                                   =========================================
</TABLE>

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

<PAGE>
                                      A-42


<TABLE>



                                                     ASARCO Incorporated
                                                      and Subsidiaries
                                            CONSOLIDATED STATEMENT OF CASH FLOWS

<CAPTION>


(Dollars in thousands)

For the years ended December 31,                                                             1998            1997            1996
                                                                                             ----            ----            ----
<S>                                                                                       <C>             <C>             <C>      
OPERATING ACTIVITIES
Net earnings (loss) ............................................................          $(130,640)      $ 143,392       $ 138,336
Adjustments to reconcile net earnings (loss) to net cash provided from (used
  for) operating activities:
  Depreciation and depletion ...................................................            144,636         130,802         118,569
  Provision (benefit) for deferred income taxes ................................            (73,373)        (12,074)         26,302
  Treasury stock used for employee benefits ....................................              1,603           3,272           5,707
  Undistributed equity (earnings) losses .......................................              1,348          (3,934)           (438)
  Net (gain) loss on asset dispositions and
    impairments ................................................................             30,460         (69,671)        (72,321)
  Increase (decrease) in reserves for closed plant
    and environmental matters ..................................................             (2,217)         (6,268)         12,807
  Minority interests ...........................................................             26,659          90,605          88,331
  Cash provided from (used for) operating assets and liabilities:
      Accounts receivable ......................................................             37,475          88,416         (27,200)
      Inventories ..............................................................              9,735          19,376         (23,742)
      Accounts payable and accrued liabilities .................................                363         (87,981)         49,193
      Other operating assets and liabilities ...................................             12,959          27,527         (41,527)
      Foreign currency transaction (gains) losses ..............................              3,266          (2,196)         (6,739)
                                                                                          ---------       ---------       ---------
Net cash provided from operating activities ....................................             62,274         321,266         267,278
                                                                                          ---------       ---------       ---------

INVESTING ACTIVITIES
Capital expenditures ...........................................................           (370,782)       (322,436)       (286,474)
Sale of property and businesses ................................................             50,638          47,426          20,109
Purchase of cost investments and businesses ....................................            (40,195)        (12,650)         (5,800)
Sale of available-for-sale securities ..........................................             65,462         417,831         371,058
Purchase of available-for-sale securities ......................................            (75,865)        (93,945)        (46,513)
Proceeds from held-to-maturity investments .....................................            245,246           1,036          42,455
Purchase of held-to-maturity investments .......................................            (62,634)       (204,590)         (1,002)
                                                                                          ---------       ---------       ---------
Net cash provided from (used for) investing activities
                                                                                           (188,130)       (167,328)         93,833
                                                                                          ---------       ---------       ---------

FINANCING ACTIVITIES
Debt incurred ..................................................................            523,478         283,024          53,303
Debt repaid ....................................................................           (355,371)       (218,184)       (360,847)
Escrow deposits(withdrawals)on long-term loans .................................              2,311         (15,364)        (10,064)
Treasury stock transactions ....................................................             (2,103)        (99,561)          1,146
Purchase of minority interests .................................................             (5,688)         (7,272)         (5,280)
Distributions to minority interests ............................................            (21,519)        (49,417)        (58,295)
Contributions from minority interests ..........................................               --             1,863           4,000
Dividends paid to common stockholders ..........................................            (27,758)        (33,604)        (34,174)
                                                                                          ---------       ---------       ---------
Net cash provided from (used for) financing activities
                                                                                            113,350        (138,515)       (410,211)
Effect of exchange rate changes on cash ........................................             (5,005)          2,728           3,108
                                                                                          ---------       ---------       ---------
Increase (decrease) in cash and cash equivalents ...............................            (17,511)         18,151         (45,992)
Cash and cash equivalents at beginning of year .................................            210,559         192,408         238,400
                                                                                          =========       =========       =========
Cash and cash equivalents at end of year .......................................          $ 193,048       $ 210,559       $ 192,408
                                                                                          =========       =========       =========
</TABLE>

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

<PAGE>
                                      A-43


<TABLE>

                                                     ASARCO Incorporated
                                                      and Subsidiaries
                                            CONSOLIDATED STATEMENT OF CHANGES IN
                                                 COMMON STOCKHOLDERS' EQUITY 
                                                  AND COMPREHENSIVE INCOME

<CAPTION>
(Dollars in thousands)

For the years ended December 31,                                                  1998                 1997                 1996
--------------------------------                                                  ----                 ----                 ----
                                                                     
<S>                                                                                <C>                 <C>                 <C>    
Common stock
Balance at beginning and end of year
  45,039,878 shares                                                           $  679,991           $  679,991           $  679,991

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Balance at beginning of year                                                       3,389               59,960              141,496
Current period change                                                            (10,378)             (56,571)             (81,536)
                                                                         ------------------- -------------------- ------------------
Balance at end of year                                                            (6,989)               3,389               59,960
                                                                         ------------------- -------------------- ----------------- 
Retained earnings
Balance at beginning of year                                                   1,168,064            1,062,542              966,193
Net earnings (loss)                                                             (130,640)             143,392              138,336
Dividends paid to common stockholders                                            (27,758)             (33,604)             (34,174)
Treasury stock issued at less than cost                                              (40)              (4,266)              (7,813)
                                                                         ------------------- -------------------- ------------------
Balance at end of year                                                         1,009,626            1,168,064            1,062,542
                                                                         ------------------- -------------------- ------------------

Treasury stock
Balance at beginning of year                                                    (157,571)             (65,548)             (80,214)
Purchased                                                                         (2,517)            (101,366)                (568)
Used for corporate purposes                                                        2,053                9,343               15,234
                                                                         ------------------- -------------------- ------------------
Balance at end of year                                                          (158,035)            (157,571)             (65,548)
                                                                         ------------------- -------------------- ------------------
  1998 - 5,388,155 shares
  1997 - 5,377,339 shares
  1996 - 2,216,015 shares

Total common stockholders' equity                                             $1,524,593           $1,693,873           $1,736,945
                                                                         =================== ==================== ==================


------------------------------------------------------------------------------------------------------------------------------------


NET EARNINGS (LOSS)                                                           $ (130,640)          $  143,392           $  138,336

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments                                            (193)             (11,914)              (6,247)
Unrealized gains(losses)on securities:
   Unrealized holding gains(losses)
    arising during period                                                         (5,444)               7,230              (56,891)
   Tax (expense) benefit                                                           1,906               (2,530)              19,912

   Less: reclassification of gains
    to net earnings (loss)                                                        10,226               75,934               58,938
   Tax expense                                                                    (3,579)             (26,577)             (20,628)
                                                                         =================== ==================== ==================

COMPREHENSIVE INCOME (LOSS)                                                   $ (141,018)          $   86,821           $   56,800
                                                                         =================== ==================== ==================
</TABLE>

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

<PAGE>
                                      A-44


                      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   include  all  wholly-owned  and  significant
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 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  short-term  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 accordance with
SFAS No.  121,  "Accounting  for the  Impairment  of  Long-Lived  Assets and for
Long-Lived  Assets To Be Disposed Of," the Company  reviews  long-lived  assets,
certain  identifiable  intangibles  and  goodwill  related  to those  assets for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount of the assets may not be  recoverable.  Any 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 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, normal development costs 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 up to 40  years  on a  straight-line  basis,  for
non-mining assets.

<PAGE>
                                      A-45


Revenue Recognition: Most of the Company's copper is sold as refined metal under
annual  contracts or on a spot sale basis.  The balance of the Company's  copper
and all of its  zinc  production  are  sold in the  form of  concentrates  under
contracts of one to three years duration. Silver and gold are sold under monthly
contracts or in spot sales. Revenue is recognized primarily in the month product
is shipped to customers  based on prices provided in sales  contracts.  When the
price is not  determinable  at the time of  shipment  to  customers,  revenue is
recognized based on prices prevailing at the time of shipment with final pricing
generally  occurring  within three months of shipment.  Revenues with respect to
these sales are adjusted in the period of  settlement  to reflect  final pricing
and in periods prior to settlement to reflect any decline in market prices which
may occur between shipment and settlement.

Hedging  Activities:  Derivative  instruments  may be used to manage exposure to
market risk from changes in commodity prices, interest rates or the value of the
Company's assets and liabilities. Derivative instruments which are designated as
hedges  must be  deemed  effective  at  reducing  the risk  associated  with the
exposure  being hedged and must be designated as a hedge at the inception of the
contract.

The Company may purchase put options or create  synthetic  put options to reduce
or eliminate the risk of metal price declines below the option strike price on a
portion of its anticipated future  production.  The cost of options is amortized
on a straight-line basis during the period in which the options are exercisable.
Gains or  losses  from the  sale or  exercise  of  options,  net of  unamortized
acquisition  costs, are recognized in the period in which the underlying  hedged
production is sold. 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
futures contracts are reported as a component of the underlying transaction.

Trading Activities:  Derivative  instruments that do not meet the criteria to be
designated as hedges are considered  trading activities and are marked to market
with the related adjustments recorded in net earnings.

Swap Agreements:  Interest rate swap agreements limit the effect of increases in
interest rates on floating rate debt. The differential to be paid or received as
interest rates change under any such agreement is recorded in interest  expense.
Diesel fuel swap agreements limit the effect of increases in the price of diesel
fuel.  The  differential  to be paid or received as diesel fuel prices change is
recorded as a component of cost of sales.

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

Environmental  Remediation Costs: The Company provides for costs associated with
environmental   remediation   obligations  when  such  costs  are  probable  and
reasonably  estimable and generally not later than completion of the remediation
feasibility  study.  Such accruals are adjusted as new  information  develops or
circumstances  change  and  are  not  discounted.  Recoveries  of  environmental
remediation costs from other parties are recorded as assets when the recovery is
deemed probable. The Company applies Statement of Position 96-1,  "Environmental
Remediation  Liabilities"  (SOP 96-1) which provides  authoritative  guidance on
specific  accounting  issues  in  connection  with  recognizing,  measuring  and
disclosing environmental remediation liabilities.

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.

<PAGE>
                                      A-46


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.

Stock Based Compensation:  The Company applies the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."

Impact of New Accounting  Standards:  In March 1998,  the American  Institute of
Certified Public  Accountants'  Accounting  Standards Executive Committee issued
Statement of Position No. 98-1  "Accounting  for the Costs of Computer  Software
Developed or Obtained for Internal Use." This  statement  which is effective for
fiscal years beginning after December 15, 1998,  provides guidance on accounting
for the costs of computer software  developed or obtained for internal use. This
statement will not have a material impact on the Company's financial statements.

In June 1998,  the  Financial  Accounting  Standards  Board  issued SFAS No. 133
"Accounting for Derivative  Instruments and Hedging  Activities." This statement
which is effective for fiscal years beginning  after June 15, 1999,  establishes
accounting  and  reporting  standards  for  derivative  instruments  and hedging
activities. The Company is currently assessing the impact of this statement.


(2) Interest in Southern Peru Copper Corporation

Included in Consolidated Financial Statements:

On April 5,  1995,  the  Company  acquired a 10.7%  interest  in SPCC for $116.4
million,  increasing  its ownership from 52.3% to 63.0%.  The additional  shares
acquired  enabled the Company to elect a majority of the directors of SPCC. As a
result, the Company  consolidated SPCC in its financial  statements based on its
52.3% ownership, effective January 1, 1995, and 63.0% ownership, effective April
5, 1995.  The Company  previously  accounted  for its  investment in SPCC by the
equity method.

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 of SPCC for  Class A shares  which are  entitled  to five  votes per
share.  As a result of this  transaction,  Asarco's  equity interest in SPCC was
reduced to  approximately  54.0%,  the  Company's  economic  interest in the net
assets of SPCC,  net of the  remaining  labor share  interest  was 52.3% and the
Company's  voting  interest in SPCC was 61.0% at December 31,  1995.  The common
shares  issued in exchange  for the labor shares are listed on both the New York
Stock Exchange and Lima Stock Exchange.  The exchange of common shares for labor
shares was accounted for by SPCC as a purchase of a minority interest.

<PAGE>
                                      A-47


The Company's  equity  interest in SPCC was 54.3% at December 31, 1998 and 54.1%
at December 31, 1997 and 1996 and its voting interest was 63.1%, 63.1% and 62.6%
at December 31, 1998,  1997 and 1996,  respectively.  The  Company's  beneficial
economic  interest in the operations of SPCC, net of the remaining  labor shares
interest,  was  53.2%,  53.0% and 52.6% at  December  31,  1998,  1997 and 1996,
respectively.

<TABLE>

(3) Other Income (Expense) 
<CAPTION>

For the years ended December 31,                              1998              1997             1996
                                                              ----              ----             ----
(in millions)
<S>                                                          <C>               <C>               <C>   
Interest income                                              $ 18.1            $ 20.7           $ 20.0
Equity earnings                                                 4.2               8.9              4.5
Dividends from investments                                      2.6               5.4              5.3
Insurance recovery-SPCC                                         5.3                 -                -
Other                                                          (1.4)             (1.2)            (0.7)
                                                        ================= ================= ================
  Total                                                      $ 28.8            $ 33.8           $ 29.1
                                                        ================= ================= ================
</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 were:
<TABLE>
<CAPTION>

For the years ended December 31,                              1998              1997             1996
                                                              ----              ----             ----
(in millions)
<S>                                                          <C>                <C>              <C>    
Domestic operations                                        $ (258.8)          $  42.9          $  40.3
Foreign operations                                            101.8             264.7            286.9
                                                        =====================================================
Total                                                      $ (157.0)          $ 307.6          $ 327.2
                                                        =====================================================
</TABLE>

Tax Expense (Benefit):

The components of the provision (benefit) for taxes on income were:
<TABLE>
<CAPTION>

For the years ended December 31,                              1998              1997             1996
                                                              ----              ----             ----
(in millions)
<S>                                                          <C>               <C>              <C>  
U.S. Federal:
 
  Current                                                    $  2.7            $ 24.4           $  3.4
  Deferred                                                    (87.7)             (4.8)            14.5
                                                             -------------------------------------------
U.S. Federal                                                  (85.0)             19.6             17.9
                                                             -------------------------------------------
Foreign and State:
  Current                                                      17.7              61.3             70.9
  Deferred                                                     14.3              (7.3)            11.8
                                                             -------------------------------------------
Foreign and State                                              32.0              54.0             82.7
                                                             ===========================================
Total income tax                                             $(53.0)           $ 73.6           $100.6
                                                             ===========================================
</TABLE>
<PAGE>
                                      A-48


Total taxes paid were: 1998 - $19.1 million; 1997 - $54.2 million; 1996 - $134.4
million.
<TABLE>

Reconciliation of Statutory Income Tax Rate:
<CAPTION>

For the years ended December 31,                              1998              1997             1996
                                                             -----              ----             ----
<S>                                                          <C>              <C>               <C>  
U.S. statutory income tax rate                                (35.0%)            35.0%            35.0%
Adjustment for entities for which no U.S. tax
  is required                                                  (5.2)             (2.3)            (1.1)
Percentage depletion                                           (5.8)             (9.5)            (9.6)
Dividends from non-includible subsidiaries                      6.6              11.4             10.4
Dividends received deduction                                   (5.3)             (9.4)            (8.5)
Foreign taxes                                                  19.4              16.9             24.6
Foreign tax credit                                            (10.6)            (13.5)           (20.5)
Reversal of taxes previously accrued                              -              (2.1)               -
Other                                                           2.1              (2.6)             0.4
                                                          ---------------------------------------------
Effective income tax rate                                     (33.8%)            23.9%            30.7%
                                                          =============================================
</TABLE>

Deferred Tax Assets (Liabilities):

Temporary  differences and carryforwards which give rise to deferred tax assets,
liabilities and related valuation allowances were:
<TABLE>
<CAPTION>
 At December 31,                                                           1998           1997
                                                                           ----           ----
 (in millions)
<S>                                                                      <C>            <C>     
 Current:
 Reserve for closed plant and environmental matters                      $  15.2        $   7.2
 Inventories                                                                 6.0            5.3
 Other                                                                      13.0            6.6
                                                                     ---------------------------------
 Net deferred tax asset                                                  $  34.2        $  19.1
                                                                     ---------------------------------

 Noncurrent:
 Tax effect of regular net operating losses                              $ 200.8        $ 119.0
 Reserve for closed plant and environmental matters                          9.2           22.2
 Postretirement benefit obligation                                          38.1           36.6
 Alternative minimum tax credit carryforwards                               23.7           39.8
 Foreign tax credit carryforwards                                           23.4           26.1
 Previously taxed income                                                     7.3            6.1
 Capitalized leases                                                         16.3           21.1
 Pension obligation                                                        (15.8)         (17.5)
 Property, plant and equipment                                            (306.7)        (314.1)
 Investments - Grupo Mexico                                                (12.8)         (12.8)
 Other                                                                      (3.9)          (7.2)
 Valuation allowance for deferred tax assets                               (35.6)         (37.6)
                                                                     ---------------------------------
 Net deferred tax liability                                                (56.0)        (118.3)
                                                                     ---------------------------------
 Total net deferred tax liability                                        $ (21.8)       $ (99.2)
                                                                     =================================
</TABLE>

At December  31,  1998,  the Company had $573.7  million of net  operating  loss
carryforwards  which  expire,  if unused,  in years 2008  through 2018 and $23.7
million of alternative  minimum tax credits ($12.2 million  available  solely to
SPCC) which are not subject to expiration.  The net operating loss carryforwards
are  available  solely to Asarco and not to SPCC.  The  Company  believes  that,
except for the SPCC credits, it is more likely than not that these carryforwards
will be available to reduce future  federal income tax  liabilities.  Management
can and would implement tax planning  strategies to prevent these  carryforwards
from expiring. After recording the benefit of these carryforwards,  Asarco has a
net  deferred  tax asset of $33.1  million  at  December  31,  1998.  SPCC has a
separate  deferred tax liability of $54.9  million,  resulting in a consolidated
net deferred tax liability of $21.8  million.  The Company's net operating  loss
carryforwards  for state purposes are not significant and,  therefore,  have not
been recorded as deferred tax assets.
<PAGE>
                                      A-49


At December 31, 1998, the foreign tax credit  carryforwards  available to reduce
possible  future U.S.  income  taxes  amounted to  approximately  $23.4  million
(available  solely to SPCC) all of which  expire  in 2000.  Because  of both the
expiration  dates and the rules  governing  the order in which such  credits are
applied,  it is unlikely  that these  foreign tax credit  carryforwards  will be
utilized.  Accordingly,  the Company has recorded a valuation  allowance for the
full amount of its foreign tax credit carryforwards.

The  decrease in the  valuation  allowance  of $2.0 million from 1997 to 1998 is
attributable to the utilization of foreign tax credits by SPCC in 1998.

In 1997, the Government of Peru approved a reinvestment  allowance for a program
of SPCC to expand the Cuajone mine.  The  reinvestment  allowance  provided SPCC
with  tax  incentives  in  Peru  and,  as a  result,  certain  U.S.  tax  credit
carryforwards, for which no benefit had previously been recorded, were realized.
The  reduction  in the  effective  tax  rate  as a  result  of the  reinvestment
allowance for the twelve months ended  December 31, 1997,  lowered  consolidated
tax  expense  by  approximately  $14.7  million.  Pursuant  to the  reinvestment
allowance  SPCC has received tax deductions in Peru in amounts equal to the cost
of the qualifying property  (approximately $245 million). As qualifying property
is acquired,  the financial  statement carrying value of the qualifying property
is reduced to reflect the benefit  associated  with the  reinvestment  allowance
(approximately  $73  million).  As a result,  financial  statement  depreciation
expense related to the qualifying  property will be reduced over its useful life
(approximately 15 years).

U.S.  deferred tax liabilities  have not been provided on  approximately  $283.3
million  in 1998  ($272.0  million  in 1997  and  $270.8  million  in  1996)  of
undistributed  earnings of foreign  subsidiaries and  nonconsolidated  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 is approximately $1.8 million in 1998 ($1.2
million in 1997 and $1.2 million in 1996).


(5) Inventories
<TABLE>
<CAPTION>

At December 31,                                                                      1998            1997
                                                                                     ----            ----
<S>                                                                                <C>             <C>   
(in millions)
Inventories of smelters and refineries at lower of 
 
    LIFO cost or market                                                            $   2.3         $   2.2
Provisional cost of metals received from suppliers
    for which prices have not yet been fixed                                          57.9            56.7
Mine inventories at lower of FIFO cost or market                                      93.5            88.9
Metal inventory at lower of average cost or market                                    39.5            45.6
Materials and supplies at lower of average cost or market
                                                                                     124.9           138.2
Other                                                                                 34.3            30.5
                                                                              ================ ===============
         Total                                                                     $ 352.4         $ 362.1
                                                                              ================ ===============
</TABLE>

Replacement cost exceeds  inventories valued at LIFO cost by approximately $74.0
million in 1998 (1997-$86.4  million).  Liquidation of LIFO inventories resulted
in pre-tax  earnings  of $1.6  million in 1998,  $16.7  million in 1997 and $5.3
million in 1996.

<PAGE>
                                      A-50


(6) Investments

In 1997 the Company  sold 106.3  million  shares of Grupo Mexico for proceeds of
$322.5  million,  resulting in a pre-tax gain of $73.3  million  ($47.6  million
after-tax).  A third party has an option to purchase the remaining  Grupo Mexico
shares  owned by the  Company for $78.9  million or $1.40 per share.  This fixed
price option  expires in August  2001.  These shares are carried on the books of
the Company at $50.2 million.

In accordance with the provisions of SFAS No. 115, available-for-sale securities
are carried at fair value. Unrealized gains at December 31, 1998 of $1.5 million
(net of deferred taxes of $0.7 million), compared with unrealized gains of $11.6
million  (net of deferred  taxes of $6.3  million) at December  31,  1997,  were
included as a component of accumulated comprehensive income.

The  amortized  cost,  gross  unrealized  gains and  losses,  and fair  value of
investment  securities  available-for-sale  and other at cost investments are as
follows:
<TABLE>
<CAPTION>

At December 31,                                                     Gross Unrealized Holding
(in millions)                                         Cost          Gains           (Losses)            Fair Value
1998
<S>                                                <C>             <C>               <C>                   <C>    
Available-for-sale:
  Equity securities                                $  41.4         $   3.5           $ (1.5)               $  43.4
  Debt securities                                     24.4             0.3             (0.1)                  24.6
Cost investments:
  Grupo Mexico                                        50.2               -                -                   50.2
  Other                                                3.3               -                -                    3.3
                                              ---------------- ---------------- ---------------- ----------------------    
Total                                              $ 119.3         $   3.8           $ (1.6)               $ 121.5
                                              ================ ================ ================ ======================

1997
Available-for-sale:
  Equity securities                                $  25.3         $  18.0           $ (0.5)               $  42.8
  Debt securities                                     30.3             0.4                -                   30.7
Cost investments:
  Grupo Mexico                                        50.2               -                -                   50.2
  Other                                                3.1               -                -                    3.1
                                              ---------------- ---------------- ---------------- ---------------------- 
Total                                              $ 108.9         $  18.4           $ (0.5)               $ 126.8
                                              ================ ================ ================ ======================
</TABLE>

Gross  realized  gains  on  available-for-sale  securities  in 1998  were  $10.2
million,  compared with gross  realized gains of $76.0 million in 1997 and gross
realized  gains of $60.1 million and losses of $1.1 million in 1996. At December
31, 1998, the debt securities have maturity dates ranging from 2000 to 2028. The
average  cost method has been used to  determine  the  realized  gain or loss on
securities sold.

(7) Property
<TABLE>
<CAPTION>

At December 31,                                                       1998                  1997
                                                                      ----                  ----
(in millions)
<S>                                                               <C>                   <C>      
Buildings and equipment                                           $ 3,744.0             $ 3,682.1
Capital leases-equipment                                              124.2                 123.7
Mineral land                                                          845.0                 781.7
Land, other than mineral                                               70.5                  70.4
Other                                                                   6.1                   6.2
                                                          --------------------- ---------------------
  Total property                                                    4,789.8               4,664.1
Accumulated depreciation                                           (2,263.2)             (2,245.3)
                                                          ===================== =====================
  Property, net                                                   $ 2,526.6             $ 2,418.8
                                                          ===================== =====================

</TABLE>

<PAGE>
                                      A-51


Accumulated  depreciation  applicable to  capitalized  leases  amounted to $90.3
million in 1998 and $81.6 million in 1997.

In the first  quarter of 1998 the Company  recorded a charge of $20.0 million to
write down the book  value of the  Company's  Missouri  Lead  Division  (MLD) in
accordance  with the provisions of Statement of Financial  Accounting  Standards
(SFAS) No. 121. The provision  reflects the effect of the sale of MLD, which was
concluded in September  1998, on the carrying  value of the assets.  The Company
realized  approximately  $55.0  million  in cash as a result  of the  sale,  and
retains a royalty  interest in the property.  In the fourth quarter of 1998, the
Company  recorded a charge of $0.5 million in  accordance  with SFAS No.121 with
respect to the assets of its Black Cloud lead-zinc mine in Leadville,  Colorado,
due to the  depletion  of its ore  reserves,  and also  recorded a $9.8  million
charge for the  transfer of SPCC's  ownership  of the Ilo townsite to its worker
occupants and the city of Ilo, Peru.


(8) Contingencies and Litigation

Environmental Litigation and Related Matters

In  connection  with the matters  referred to below,  as well as at other closed
plants and sites where the Company is working with federal and state agencies to
resolve  environmental  issues,  the Company accrues for losses when such losses
are  probable  and  reasonably  estimable.  Such  accruals  are  adjusted as new
information  develops or  circumstances  change and are not  discounted to their
present  value.  Recoveries of  environmental  remediation  costs from insurance
carriers and other parties are recorded as assets when the recoveries are deemed
probable.

Reserves for closed plants and environmental matters, including mine reclamation
costs for active and closed  properties,  totaled $144.4 million at December 31,
1998 and $146.6 at December 31, 1997. The Company  anticipates that expenditures
relating to these  reserves will be made over the next several  years.  Net cash
expenditures against these reserves were $67.2 million in 1998, $57.4 million in
1997, and $55.6 million in 1996, respectively.

The effect on pre-tax earnings of  environmental  and other closed plant charges
was $42.1 million in 1998 ($62.9  million in charges  offset by $20.8 million in
anticipated  insurance  and other  recoveries),  $22.1  million  in 1997  ($52.3
million in charges  offset by $30.2 million in  anticipated  insurance and other
recoveries), and $16.7 million in 1996 ($69.4 million offset by $52.7 million in
anticipated  insurance  and other  recoveries)  including  $10.0 million for the
effect of the initial  application of the American Institute of Certified Public
Accountants'   Statement   of   Position   96-1,   "Environmental    Remediation
Liabilities".

In 1997,  separate  class actions were  commenced  against the Company in Omaha,
Nebraska, and in Denver, Colorado, seeking compensatory and punitive damages for
alleged contamination of properties by emissions from the Company's former Omaha
plant and the Globe plant in Denver.

In March 1996,  the United  States  government  filed an action in United States
District  Court in Boise,  Idaho,  against the  Company  and three other  mining
companies  under the  Comprehensive  Environmental  Response,  Compensation  and
Liability Act of 1980 (CERCLA or Superfund)  and the federal Clean Water Act for
alleged natural  resource damage to the Coeur d'Alene River Basin in Idaho.  The
government  contends  that the  defendants  are  liable  for  damages to natural
resources  in a 1,500  square mile area caused by mining and related  activities
that they and others  undertook  over the period  between the  mid-1800s and the
mid-1960s.  The action also seeks a declaration  that  defendants are liable for
restoration of the area. The Company  believes,  and has been advised by outside
legal counsel,  that it has strong legal  defenses to the lawsuit.  In 1996, the
court granted a motion to consolidate  this case with a prior,  similar  lawsuit

<PAGE>
                                      A-52


filed by the Coeur  d'Alene  Tribe.  In 1998,  the United  States  Environmental
Protection Agency (EPA) commenced a remedial investigation and feasibility study
of the Coeur d'Alene River Basin.

The Company and certain of its  subsidiaries  have received notices from EPA and
the United  States  Forest  Service that they and in most cases  numerous  other
parties are potentially  responsible to remediate  alleged  hazardous  substance
releases at certain sites under CERCLA. In addition,  the Company and certain of
its  subsidiaries  are defendants in lawsuits brought under CERCLA or state laws
that  seek  substantial  damages  and  remediation.  Remedial  action  is  being
undertaken by the Company at some of the sites.

Product Litigation

The Company and two  subsidiaries,  as of December 31, 1998,  are  defendants in
1,126 lawsuits brought by 10,321 primary and 4,588 secondary  plaintiffs seeking
substantial  actual and punitive  damages for personal injury or death allegedly
caused by exposure to  asbestos.  Three of these  lawsuits are  purported  class
actions,  two of which are  allegedly  brought on behalf of persons  who are not
known to have  asbestos-related  injury.  The third is  purportedly  brought  on
behalf of  persons  suing both  tobacco-related  and  asbestos-related  entities
claiming  damages for personal injury or death arising from exposure to asbestos
and  cigarette  smoke.  In addition,  the Company and certain  subsidiaries  are
defendants in product  liability  lawsuits  involving  various  other  products,
including metals.

Other Litigation

The  Company is a  defendant  in  lawsuits  in  Arizona,  the  earliest of which
commenced in 1975,  involving the United  States,  Native  Americans,  and 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 alleged contamination of ground water. The lawsuits could affect
the  Company's  use of water at its Ray  Complex,  Mission  Complex,  and  other
Arizona operations.

The Company and certain  subsidiaries  are  defendants in four  purported  class
actions and thirteen  other lawsuits in Texas seeking  substantial  compensatory
and punitive damages for personal injury and contamination of property allegedly
caused by  present  and  former  operations  in Texas and  product  sales of the
Company and its subsidiaries.  Most of the cases name additional corporations as
defendants.

Opinion of Management

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.  Similarly,  due to the  uncertainty  of the  outcome  of court
proceedings,  future  expenditures  related  to  litigation  cannot be  reliably
determined.  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 recovery when not deemed probable.

<PAGE>
                                      A-53


(9) Debt and Available Credit Facilities
<TABLE>
<CAPTION>

Long-Term Debt
At December 31,                                                       1998              1997
                                                                      ----              ----
(in millions)
<S>                                                                <C>              <C>    
Revolving credit agreements                                        $  150.0         $     -
Pollution control bonds, 1998/2033 - rates from
   5.6% to 8.9%                                                       189.8            155.0
Capital lease obligations, 1998/2007 - rates from
   7.3% to 12.0%                                                       48.3             61.8
7.0% Notes due 2001                                                    50.0             50.0
7.375% Notes due 2003                                                  99.7             99.7
7.875% Debentures due 2013                                             99.7             99.7
8.50%  Debentures due 2025                                            149.0            149.0
6.8% term loan due 2000                                                15.0             15.0
6.43% EXIM Bank credit agreement                                       14.6             20.4
CAF credit agreement - 8.9%                                            19.6             27.5
7.9% Secured Export Notes due 2007                                    150.0            150.0
8.25% Bonds due 2004                                                   50.0             50.0
Other                                                                   6.9              0.6
                                                              ------------------ ----------------
Total debt                                                          1,042.6            878.7
   Less current portion                                                27.7             28.7
                                                              ------------------ ----------------
      Long-term debt                                               $1,014.9         $  850.0
                                                              ================== ================
</TABLE>

Interest paid by the Company (excluding amounts  capitalized of $12.5 million in
1998,  $5.5 million in 1997 and $2.8 million in 1996) was $70.9 million in 1998,
$74.4 million in 1997 and $78.1 million in 1996.

Maturities of debt instruments and future minimum payments under capital leases
are:
<TABLE>
<CAPTION>

At December 31,                                       Debt Instruments                 Capital Leases
                                                      ----------------                 --------------
(in millions)

<S>                                                             <C>                             <C>   
1999                                                          $  14.4                           $ 16.6
2000                                                             44.4                             27.6
2001                                                             74.3                              4.3
2002                                                            103.9                              2.6
2003                                                            185.2                              1.4
Thereafter                                                      572.1                              3.6
   Less interest                                                    -                             (7.8)
                                              ---------------------------------  ---------------------------
    Total                                                     $ 994.3                           $ 48.3
                                              ================================== ===========================
</TABLE>

The Company has two revolving credit  agreements that permit borrowings of up to
$800 million, of which $150 million was drawn at December 31, 1998. One facility
for $300  million  expires in May 2003 and the other  facility  for $500 million
expires in May 2002. The borrowings bear interest based on LIBOR, the CD rate or
the prime rate.  Rates may vary based upon the Company's  debt rating.  Facility
fees  are  payable  on the full  amount  of the $300  million  and $500  million
revolving credit agreements at 0.2% and 0.175% per annum, respectively.

Under the most  restrictive  terms of the credit  agreements,  the Company  must
maintain a tangible net worth, as defined, of at least $1 billion.  Tangible net
worth, as defined, was $1.5 billion at December 31, 1998. In accordance with the
most  restrictive  covenants of these  agreements,  additional  indebtedness  of
$560.4 million would have been permitted as of December 31, 1998.

In April 1997, SPCC entered into a $600 million seven-year credit agreement with
a group of international  financial  institutions.  The agreement  consists of a
$400 million term loan facility and a $200 million  revolving  credit  facility.
The  interest  rate during the first three years of the  agreement  on any loans
outstanding  is LIBOR  plus  1.75% per annum for term loans and LIBOR plus 2.00%
<PAGE>
                                      A-54


for revolving credit loans. A commitment fee of 0.5% per annum is payable on the
undrawn  portion of the facility.  No amounts have been drawn by SPCC under this
agreement  as of December  31,  1998.  Under the most  restrictive  covenants of
SPCC's loan  agreements,  additional  indebtedness  of $874.4 million would have
been permitted as of December 31, 1998.

In May 1997,  SPCC privately  placed $150 million of Secured Export Notes in the
United States and international markets. These notes were issued with an average
maturity of seven years and a final maturity in 2007 and were priced at par with
a coupon rate of 7.9%. In addition,  in June 1997 SPCC sold $50 million of 8.25%
bonds due June 2004 to investors in Peru.

Some of SPCC's financing agreements contain covenants which limit the payment of
dividends to  stockholders.  Under the most restrictive  covenant,  SPCC may pay
dividends to stockholders  equal to 50% of its net income for any fiscal quarter
as long as such  dividends  are  paid  by June 30 of the  following  year.  As a
result,  at December 31, 1998,  $588.4 million of SPCC's net assets  included in
the Company's consolidated net assets are unavailable for payment of dividends.

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 rate of 6.8% on
the principal amount.

In January 1998,  the Company  completed a refinancing  of three tax exempt debt
issues  and called for the  redemption  of the  existing  bonds.  The  aggregate
principal  amount of the  refinancing  was $132.8  million.  The  refinancing is
expected to reduce the Company's  annual  interest costs by  approximately  $3.3
million.  In October 1998, the Company  completed a refunding of tax exempt debt
of $22.2  million,  which was due to expire in December  1998.  The terms of the
refunding  extend the maturity of the debt to 2018 at an interest  rate of 5.6%.
In November  1998,  the  Company  completed a new tax exempt debt issue of $34.8
million with a coupon rate of 5.85% maturing in 2033.

Consolidated  debt  includes the debt of SPCC,  none of which is  guaranteed  by
Asarco.

The weighted average interest rate on short term borrowings was 6.0% at December
31, 1998 and 7.4% at December 31, 1997.

(10)  Commitments

The  Company  has  entered  into  several  sale-leaseback  agreements  of mining
equipment and has options to purchase this  equipment.  The options are at fixed
prices  prior  to  expiration  of the  leases  and at  fair  market  value  upon
expiration. The leasebacks have been accounted for as operating leases.

The book  value and  associated  depreciation  of the  equipment  sold have been
removed from the Company's  property  accounts.  Any profit on the sale has been
deferred and will be amortized  into net  earnings in  proportion  to the rental
charged over the lease term.

<PAGE>
                                      A-55


Minimum future rental  payments  under  non-cancelable  operating  leases having
remaining terms in excess of 1 year as of December 31, 1998 for each of the next
5 years and in the aggregate are:
<TABLE>
<CAPTION>

Year                                                                     Amount (in millions)
----                                                                     --------------------

<S>                                                                             <C>   
1999                                                                            $ 24.7
2000                                                                              23.5
2001                                                                              22.4
2002                                                                              19.9
2003                                                                              19.6
Thereafter                                                                       102.7
                                                                --------------------------------------
  Total                                                                         $212.8
                                                                ======================================
                                                                
</TABLE>

Total rental expense was $24.3 million in 1998,  $14.6 million in 1997 and $13.3
million in 1996.

As a  result  of  its  $1  billion  expansion  program,  SPCC's  electric  power
requirements   will  increase   significantly   requiring  the  construction  of
substantial  additional generating capacity. In the second quarter of 1997, SPCC
sold its existing  power plant to an independent  power  company.  In connection
with the sale, a power purchase  agreement was also completed,  under which SPCC
agreed to purchase its power needs for the next twenty years.

(11) Stockholders' Equity

The Company  purchased 21,031 of its common shares in 1998 (3,371,618  shares in
1997 and 17,364 shares in 1996).  In 1998,  10,314 common shares (210,294 shares
in 1997 and 270,474 shares in 1996) were used for employee benefit plans.

Retained earnings at December 31, 1998 includes  undistributed earnings of $19.5
million for  investments in 50% or less owned  entities  previously or currently
accounted for by the equity method.

Accumulated other comprehensive income balances were as follows:

<TABLE>
<CAPTION>
                                                                       Foreign currency             Accumulated other
                                           Unrealized gain                translation                 comprehensive
(in thousands)                              on securities                 adjustments                 income (loss)
                                     ---------------------------- ---------------------------- -----------------------------
<S>                                             <C>                          <C>                           <C>     
December 31, 1998

Beginning balance                               $ 11,654                     $ (8,265)                     $  3,389
Current period change                            (10,185)                        (193)                      (10,378)
                                     ============================ ============================ =============================
Ending balance                                  $  1,469                     $ (8,458)                     $ (6,989)
                                     ============================ ============================ =============================

December 31, 1997
Beginning balance                               $ 56,311                     $  3,649                      $ 59,960
Current period change                            (44,657)                     (11,914)                      (56,571)
                                     ============================ ============================ =============================
Ending balance                                  $ 11,654                     $ (8,265)                     $  3,389
                                     ============================ ============================ =============================

December 31, 1996
Beginning balance                               $131,600                     $  9,896                      $141,496
Current period change                            (75,289)                      (6,247)                      (81,536)
                                     ============================ ============================ =============================
Ending balance                                  $ 56,311                     $  3,649                      $ 59,960
                                     ============================ ============================ =============================
</TABLE>

Stock Options:  The Company has three stockholder approved plans, the 1996 Stock
Incentive  Plan, a Stock  Incentive  Plan prior to 1996 and a Stock Option Plan.
The 1996 Stock  Incentive Plan replaced the prior Stock  Incentive Plan which in
turn had  replaced the Stock  Option  Plan.  Future  options can only be granted
under the 1996 Stock Incentive Plan.  Unexpired options issued under prior plans
will continue to be governed by, and  exercised  under the Stock Option Plan and
the Stock  Incentive  Plan.  The 1996  Stock  Incentive  Plan  provides  for the

<PAGE>
                                      A-56


granting of  nonqualified  stock options,  Incentive  Stock Options,  as defined
under the Internal Revenue Code of 1986, as amended,  as well as limited rights,
restricted stock,  bonuses or other  compensation  payable in stock, other stock
based awards and dividend equivalents. The price at which options may be granted
under  the 1996  Stock  Incentive  Plan  shall not be less than 100% of the fair
market  value of the Common  Stock,  on the date of grant.  In general,  options
expire  after 10 years and are not  exercisable  for six months from the date of
grant.  Compensation  cost charged against  earnings for restricted stock awards
under the above plans was $1.0  million in 1998,  $1.0  million in 1997 and $1.1
million in 1996. Retained earnings have been reduced by $6.9 million at December
31, 1998 ($8.4 million at December 31, 1997) for unearned  compensation  related
to restricted stock awards.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly,  no compensation cost has been recognized for awards under the 1996
Stock  Incentive  Plan.  If  compensation  cost  for the  Company's  1996  Stock
Incentive Plan had been determined based on the fair value at the grant date for
awards in 1998,  1997, and 1996  consistent with the provisions of SFAS No. 123,
the Company's net earnings and earnings per share would have been reduced to the
pro forma amounts indicated below:

<TABLE>
<CAPTION>

(in millions, except per share amounts)                                          1998             1997              1996
                                                                                 ----             ----              ----

<S>                                                                             <C>              <C>              <C>    
Net earnings (loss) - as reported                                               $(130.6)         $ 143.4          $ 138.3
Net earnings (loss) - pro forma                                                 $(132.9)         $ 141.0          $ 136.7
Earnings (loss) per share (Basic)-as reported                                   $ (3.29)         $  3.42          $ 3.24
Earnings (loss) per share (Diluted)-as reported                                 $ (3.29)         $  3.42          $ 3.23
Earnings (loss) per share (Basic)- pro forma                                    $ (3.35)         $  3.36          $ 3.20
Earnings (loss) per share (Diluted)- pro forma                                  $ (3.35)         $  3.36          $ 3.20

For purposes of computing  earnings per share,  basic and diluted,  the dilutive
effect of stock options on common shares outstanding is as follows:

Weighted Average Common Shares Outstanding:                                      1998             1997             1996
                                                                                 ----             ----             ----
(in millions)
  Basic                                                                           39.6             41.9            42.7
  Dilutive effect of stock options                                                  -               0.1             0.1

                                                                      ------------------ --------------- ----------------

  Diluted                                                                         39.6             42.0            42.8
                                                                      ================== =============== ================
</TABLE>

The fair value of each option  grant is  estimated  on the date of grant using a
Black-Scholes  option-pricing  model  with the  following  assumptions  used for
grants in 1998:  dividend  yield of 3.2%  (2.9% - 1997,  2.6% - 1996);  expected
volatility  of 33.0% (29.2% - 1997,  28.4% - 1996);  risk-free  interest rate of
5.63% (6.5% - 1997,  5.43% - 1996); and expected lives of 7.1 years in 1998, 7.0
in 1997 and 6.9 in 1996.

The total number of shares that may be optioned or awarded  under the 1996 Stock
Incentive  Plan is 317,845  shares as of December 31, 1998,  (478,165  shares at
December  31,  1997)  plus an  additional  number of shares on January 1 of each
calendar year for the 10 year duration of the 1996 Stock Incentive Plan equal to
one percent of the number of shares of the Company's common stock outstanding on


<PAGE>
                                      A-57


the  immediately   preceding   December  31.  The  weighted  average   remaining
contractual  life of stock options  outstanding  as of December 31, 1998 was 6.7
years. Stock option activity over the past three years under the Stock Incentive
Plan and Stock Option Plan was:
<TABLE>
<CAPTION>

                                                                      Weighted
                                                  Number of           Average               Option Price
                                                    Shares             Price              (range per share)
<S>                                               <C>                <C>                 <C>       <C>   
Outstanding at

  January 1, 1996                                   782,969            $26.60             $20.57 to $32.57
Granted                                             253,000            $31.20             $31.13 to $34.38
Exercised                                           (39,306)           $26.01             $20.57 to $29.19
Canceled or expired                                  (6,300)           $25.85             $20.57 to $31.13
                                          ---------------------

Outstanding and
  exercisable at
  January 1, 1997                                   990,363            $27.81             $22.31 to $34.38
Granted                                             370,450            $27.49             $27.50 to $31.97
Exercised                                           (71,815)           $26.47             $22.31 to $29.19
Canceled or expired                                 (24,600)           $27.14             $22.31 to $31.13
                                          ---------------------

Outstanding at
  January 1, 1998
  (1,259,398 exercisable)                         1,264,398            $27.88             $22.31 to $34.38
Granted                                             507,925            $21.67             $19.94 to $26.84
Exercised                                           (17,394)           $23.80             $22.31 to $26.13
Canceled or expired                                 (33,680)           $26.64             $21.58 to $31.13
                                          ---------------------

Outstanding at
 December 31, 1998
  (1,607,154 exercisable)                         1,721,249            $26.12             $19.94 to $34.38
</TABLE>

In 1989, the Company adopted a Shareholder  Rights Plan, which expires on August
7, 1999, and declared a dividend of one Right for each of its common shares.  In
January 1998, the Company  adopted a new  Shareholder  Rights Plan, with certain
minor  modifications,  for an  additional  ten year  period  effective  upon the
earlier of the  expiration of the existing  Rights Plan or the redemption of the
existing  Rights.  In certain  circumstances,  if a person or group  becomes the
beneficial owner of 15% or more of the outstanding  common shares,  with certain
expectations, 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.


(12) Benefit Plans

Pension benefits:

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 tax deductible  amounts as may
be advisable under the  circumstances.  Plan assets are invested  principally in
commingled stock funds,  mutual funds and securities issued by the United States
Government.

<PAGE>
                                      A-58


The components of net periodic benefit costs are as follows:
<TABLE>
<CAPTION>

For the years ended December 31,                                                1998           1997           1996
                                                                                ----           ----           ----
(in millions)
<S>                                                                         <C>            <C>            <C>     
Service cost                                                                $    9.7       $    9.1       $    8.6
Interest cost                                                                   14.0           12.6           11.0
Expected return on plan assets                                                 (20.2)         (17.0)         (13.9)
Amortization of prior service cost                                               2.3            2.2            1.6
Amortization of transitional obligation                                          0.5            0.5            0.5
Recognized actuarial loss                                                          -            0.3            0.7
                                                                        --------------- -------------- ---------------
  Net periodic benefit cost                                                 $    6.3       $    7.7       $    8.5
                                                                         ============== ============== ===============
</TABLE>

The change in benefit  obligation and plan assets and a reconciliation of funded
status are as follows:
<TABLE>
<CAPTION>

At December 31,                                                                       1998             1997
                                                                                      ----             ----
(in millions)
<S>                                                                                <C>              <C>    
Change in Benefit Obligation

Projected benefit obligation at beginning of year                                  $ 202.9          $ 181.3
  Service cost                                                                         9.7              9.1
  Interest cost                                                                       14.0             12.6
  Plan amendments                                                                      1.1              3.1
  Benefits paid                                                                       (5.9)            (7.0)
  Actuarial loss                                                                       0.8              3.8
                                                                               --------------------------------
Projected benefit obligation at end of year                                        $ 222.6          $ 202.9
                                                                               ================================

Change in Plan Assets
Fair value of plan assets at beginning of year                                     $ 226.3          $ 178.1
  Actual return on plan assets                                                        37.2             41.5
  Plan amendment                                                                       -                2.5
  Employer contributions                                                               1.5             11.7
  Benefits paid                                                                       (5.9)            (7.0)
  Administrative expenses                                                             (1.0)            (0.5)
                                                                               --------------------------------
Fair value of plan assets at end of year                                           $ 258.1          $ 226.3
                                                                               ================================

Reconciliation of Funded Status
  Funded status                                                                    $  35.5          $  23.4
  Unrecognized actuarial gain                                                        (27.1)           (11.9)
  Unrecognized transition obligation                                                   1.9              2.4
  Unrecognized prior service cost                                                     15.2             16.4
                                                                               ================================
   Net amount of asset reflected in consolidated
     balance sheet                                                                 $  25.5          $  30.3
                                                                               ================================

Weighted Average Assumptions
  Discount rate                                                                        7.0%             7.0%
  Expected long-term rate of return on plan
  assets                                                                              10.0%            10.0%
  Rate of compensation increase                                                        4.0%             4.0%
</TABLE>

Postretirement benefits:

Noncontributory postretirement health care coverage under the Asarco Health Plan
is provided to substantially all U.S. 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.

<PAGE>
                                      A-59


The components of net periodic benefit costs are as follows:
<TABLE>
<CAPTION>

For the years ended December 31,                                               1998              1997            1996
                                                                               -----             ----            ----
(in millions)

<S>                                                                          <C>               <C>               <C>   
Service cost                                                                 $   3.5           $   3.6           $  3.5
Interest cost                                                                    8.6               8.2              8.1
Amortization of prior service cost                                              (0.1)              0.1              0.1
Recognized actuarial loss                                                        1.4               1.2              1.3
                                                                       ====================================================
 Net periodic benefit cost                                                   $  13.4           $  13.1           $ 13.0
                                                                       ====================================================
</TABLE>

The change in benefit  obligation and plan assets and a reconciliation of funded
status are as follows:
<TABLE>
<CAPTION>

At December 31,                                                        1998               1997
                                                                       ----               ----
(in millions)
Change in Benefit Obligation
<S>                                                                 <C>                <C>    
Benefit obligation at beginning of year                             $ 124.4            $ 122.7
  Service cost                                                          3.5                3.6
  Interest cost                                                         8.6                8.2
  Plan amendments                                                      (1.7)               0.7
  Benefits paid                                                        (8.9)              (8.0)
  Actuarial (gain) loss                                                 5.3               (2.8)
                                                              =====================================
Benefit obligation at end of year                                   $ 131.2            $ 124.4
                                                              =====================================

Reconciliation of Funded Status
  Funded status                                                     $(131.2)           $(124.4)
  Unrecognized actuarial loss                                          23.5               19.3
  Unrecognized prior service cost                                      (1.0)               0.6
                                                              -------------------------------------
   Postretirement benefit obligation reflected in
   consolidated balance sheet                                       $(108.7)           $(104.5)
                                                              =====================================

Weighted Average Assumptions
  Discount rate                                                         7.0%               7.0%
  Expected long-term rate of return on plan assets                       N/A                N/A
  Rate of compensation increase                                         4.0%               4.0%
</TABLE>

The annual  assumed rate of increase in the per capita cost of covered  benefits
(i.e.,  health  care  cost  trend  rate)  is  assumed  to be 5.0%  in  1999  and
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  would   increase   the   accumulated
postretirement  benefit obligation by $12.5 million and the service and interest
cost components of net periodic postretirement benefit costs by $1.4 million for
1998.  Decreasing  the assumed  health  care cost trend rates by one  percentage
point  in each  year  would  decrease  the  accumulated  postretirement  benefit
obligation  and  the  service  and  interest  cost  components  of net  periodic
postretirement  benefit  costs  for  1998 by  $11.2  million  and  $1.2  million
respectively.   The  discount   rate  used  in   determining   the   accumulated
postretirement  benefit  obligation  was 7% at December  31, 1998 and 1997.  The
plans are unfunded.

Employee Savings Plan:

The Company  maintains  employee savings plans for salaried and hourly employees
which permit employees to make contributions by payroll  deductions  pursuant to
section 401(k) of the Internal  Revenue Code. The Company matches  contributions
up to 3% of  compensation.  In connection with the required match, the Company's
contributions  charged against  earnings were $4.6 million in 1998, $4.6 million
in 1997 and $4.5 million in 1996.

<PAGE>
                                      A-60


(13) Business Segments

The Company  applies SFAS No. 131,  "Disclosure  About Segments of an Enterprise
and Related  Information."  This statement  establishes  standards for reporting
information about operating segments and related  disclosures about products and
services,  geographic  areas, and major customers.  Prior year amounts have been
restated to conform to the current year presentation.

The Company's copper segment includes  integrated mining,  smelting and refining
operations in North America and in Peru,  through its subsidiary,  Southern Peru
Copper  Corporation.  The  Company's  lead,  zinc and  precious  metals  segment
consists of a fully  integrated  lead  business in  Missouri,  which was sold in
September 1998, a custom lead smelting business,  a silver mining business and a
zinc mining business.

Enthone-OMI,   a  wholly-owned  subsidiary,   operates  a  world-wide  specialty
chemicals  business  focused  on  functional  and  decorative  coatings  for the
electronics  and metal  finishing  industries.  American  Limestone  Company,  a
wholly-owned subsidiary, produces construction aggregates.

The  Company  also  maintains  an  active  exploration  effort  focused  on  the
identification  and acquisition of advanced gold, copper and silver  exploration
projects.  The segment labeled "All Other" includes  environmental  services,  a
specialty  metals business,  and income and expenses  associated with facilities
previously  operated by the  Company.  The  Company's  reportable  segments  are
separately  managed strategic  business units that offer different  products and
services.

The  accounting  policies  of the  segments  are  described  in the  summary  of
significant accounting policies. The Company evaluates segment performance based
on operating  income or loss plus the equity in the net earnings of  investments
accounted  for  by  the  equity  method  attributable  to  each  segment,  where
applicable.  Corporate and general  administrative  expenses are allocated among
the segments generally in proportion to operating expenses.  Identifiable assets
are those directly used in the operations of each segment. Unallocated corporate
assets are principally cash, marketable securities,  and investments.  There can
be no  assurance  that  operations  and  assets of the  Company  subject  to the
jurisdiction  of foreign  governments  will not be affected  adversely by future
actions by such governments.
<TABLE>
<CAPTION>

Business Segments - Sales

For the years ended December 31,                                      1998           1997            1996
(in millions)
<S>                                                                 <C>            <C>             <C>                     
By Reportable Segment

  Copper                                                            $1,576         $2,022          $1,968
  Lead, Zinc & Precious Metals                                         238            304             357
  Specialty Chemicals                                                  351            324             319
  Aggregates                                                            57             54              47
  All Other                                                             11             17              26
                                                              --------------- -------------- ---------------
Total                                                               $2,233         $2,721          $2,717
                                                              =============== ============== ===============

By Country (a)
  United States                                                     $1,226         $1,501          $1,529
  Japan                                                                155            219             245
  United Kingdom                                                       139            146             153
  Italy                                                                134            166             147
  Germany                                                              100             77              54
  The Netherlands                                                       79            109             122
  Foreign - Other                                                      400            503             467
                                                              --------------- -------------- ---------------
Total                                                               $2,233         $2,721          $2,717
                                                              =============== ============== ===============
<PAGE>
                                      A-61


<FN>

(a)      Revenues are attributed to countries based on location of customer.
</FN>
</TABLE>
<TABLE>

Business Segments - Earnings
<CAPTION>

For the years ended December 31,                                      1998            1997           1996
(in millions)
<S>                                                                  <C>              <C>            <C>            
                           
By Reportable Segment (a),(b)

  Copper (c)                                                         $ (31)           $315           $326
  Lead, Zinc & Precious Metals (d)                                     (63)            (15)           (11)
  Specialty Chemicals(e)                                                29              29             24
  Aggregates                                                            15              14             10
  Exploration                                                          (17)            (32)           (27)
  All Other (f)                                                        (47)            (27)           (14)
                                                                 --------------- -------------- ---------------
Total                                                                $(114)           $284           $308
  Interest and other                                                   (39)             33             23
  Less:  Equity Earnings                                                (4)             (9)            (4)
                                                                 =============== ============== ===============
Earnings before taxes on income and minority
  interests                                                          $(157)           $308           $327
                                                                 --------------- -------------- ---------------
Depreciation and Depletion
  Copper                                                             $ 124            $108           $ 99
  Lead, Zinc & Precious Metals                                          11              17             14
  Specialty Chemicals                                                    4               3              3
  Aggregates                                                             3               3              2
  All Other                                                              3               -              1
                                                                 --------------- -------------- ---------------
Total                                                                $ 145            $131           $119
                                                                 =============== ============== ===============

Equity in results of non-consolidated companies
  Copper                                                             $   1            $  1           $  1
  Lead, Zinc & Precious Metals                                           -               3             (1)
  Specialty Chemicals                                                    3               5              4     
                                                                 --------------- -------------- ---------------
Total                                                                $   4            $  9           $  4
                                                                 =============== ============== ===============
<FN>

(a)       LIFO profits of $1.6,  $16.7 and $5.3 were reported in the Lead, Zinc,
          and Precious Metals segment for 1998, 1997 and 1996 respectively.

(b)       Includes equity in the net earnings of investees  accounted for by the
          equity method.

(c)       1998 includes special non-recurring charges of $9.5 in connection with
          the three  year  suspension  of  operations  at the  Company's  copper
          smelter in El Paso,  Texas,  $10.9  associated  with the  transfer  of
          SPCC's  ownership of the Ilo townsite to its worker  occupants and the
          City of Ilo,  $10.0 in severance  costs  related to SPCC's $30 million
          cost reduction program, and $4.7 in connection with the Company's cost
          reduction  program and an increase  in reserves  for certain  employee
          benefit plans.

(d)       1998  includes a charge of $20.0 to reflect  the sale of MLD,  special
          non-recurring charges of $9.8 to write down the book value and provide
          for closure  costs for the  Company's  Black Cloud  lead-zinc  mine in
          Leadville,  Colorado and $1.7 in connection  with the  Company's  cost
          reduction  program and an increase  in reserves  for certain  employee
          benefit plans.

(e)       1998 includes special  non-recurring  charges of $1.8 for severance in
          connection with the Company's cost reduction program.

(f)       The All Other  segment  includes  a charge of $32.7 in 1998 for closed
          plants and environmental matters.
</FN>
</TABLE>
<PAGE>
                                      A-62



<TABLE>

Business Segments - Identifiable Assets
<CAPTION>

For the years ended December 31,                                 1998           1997            1996
                                                                 ----           ----            ----
(in millions)
<S>                                                           <C>            <C>             <C>    
By Reportable Segment

  Copper                                                      $ 2,979        $ 3,009         $ 2,810
  Lead, Zinc & Precious Metals                                    344            427             401
  Specialty Chemicals                                             335            263             272
  Aggregates                                                       36             32              32
  Exploration                                                      21             15              11
  All Other                                                       159            153             123
                                                         --------------- -------------- ---------------
Total Reportable Segments                                     $ 3,874        $ 3,899         $ 3,649
Unallocated corporate assets                                      150            211             471
                                                         --------------- -------------- --------------
Total                                                         $ 4,024        $ 4,110         $ 4,120
                                                         =============== ============== ===============

Long-Lived Assets
  United States                                               $ 1,499        $ 1,547         $ 1,820
  Peru                                                          1,060            919             872
  Foreign - Other                                                 154            142              84
                                                         --------------- -------------- ---------------
Total                                                         $ 2,713        $ 2,608         $ 2,776
                                                         =============== ============== ===============

Equity Method Investments
  Copper                                                      $     2        $     2         $     2
  Lead, Zinc & Precious Metals                                      9              9               5
  Specialty Chemicals                                              53             50              53
                                                         --------------- -------------- ---------------
Total                                                         $    64        $    61         $    60
                                                         =============== ============== ===============

Capital Expenditures
  Copper                                                      $   349        $   295         $   233
  Lead, Zinc & Precious Metals                                      6             18              42
  Specialty Chemicals                                               5              4               7
  Aggregates                                                        4              3               3
  All Other                                                         7              2               1
                                                         --------------- -------------- ---------------
Total                                                         $   371        $   322         $   286
                                                         =============== ============== ===============
</TABLE>

(14) Financial Instruments

Derivative  Instruments:  The Company uses derivative  instruments to manage its
exposure to market risk from changes in commodity prices,  interest rates or the
value of its assets and liabilities. Derivative instruments which are designated
as hedges must be deemed  effective  at reducing  the risk  associated  with the
exposure  being hedged and must be designated as a hedge at the inception of the
contract.

HEDGING:

Metal  Futures  Contracts:  The majority of the Company's  activities  involving
metal  futures  contracts  are  designed  to match  the price  realized  for the
Company's  metal  production as close as possible to the average  monthly market
price during the month the Company makes shipments to customers. Sales contracts
with  customers  may  provide  for  pricing  in a month  other than the month of
shipment.  For instance,  in cases where pricing is established in a month later
than the month of shipment,  the Company will sell forward an equivalent  amount
of metal to the month that the price with the customer is established.  The gain
or loss on these forward contracts is offset with a lower or higher price on the
customer  invoice.  Metal futures  contracts are also used to hedge the price of
metals  purchased  by the Company  from third  parties.  Gains and losses on the
liquidation  of futures  contracts  are  included  in  earnings at the same time
revenue from the related sale transactions are recognized.

<PAGE>
                                      A-63


At December 31, 1998 and 1997, the Company's  aggregate  metal futures  contract
positions were as follows:
<TABLE>
<CAPTION>

(in thousands)
                                                                    Notional            Unrealized
                                         Weight                      Values             Gain (Loss)
                                 ------------------------ --------------------------- -----------------------
1998
<S>                                       <C>                       <C>                 <C>    
Copper (pounds)                           71,860                    $ 48,207            $ 1,457
Silver (ounces)                            5,630                    $ 28,078            $  (184)
Gold   (ounces)                               32                      $9,374            $   206
Lead   (pounds)                            3,362                       $ 742            $   (13)

1997
Copper (pounds)                           74,950                    $ 60,180            $ 2,194
Silver (ounces)                            4,300                    $ 23,664            $(2,085)
Gold   (ounces)                               15                      $4,320            $    (3)
Lead   (pounds)                           23,698                      $6,914            $  (838)
</TABLE>

In the preceding table notional values  represent the purchase or sales price of
the metal under  contract.  The unrealized gain or loss, if any, is the increase
or decrease in the value of the contract as of the date indicated.

Price  Protection:  Depending  on the market  fundamentals  of a metal and other
conditions, the Company may purchase put options or create synthetic put options
to reduce or eliminate the risk of metal price  declines below the option strike
price on a portion of its anticipated future  production.  Synthetic put options
consist of a call option and a forward sale of the same quantity of metal. These
put options  establish a minimum sales price for the production  covered by such
put options and permit the Company to participate in price  increases  above the
option price.  The cost of options is amortized on a straight-line  basis during
the  period  in  which  the  options  are  exercisable.  Depending  upon  market
conditions, the Company may either sell options it holds or exercise the options
at  maturity.  Gains or losses  from the sale or  exercise  of  options,  net of
unamortized  acquisition  costs,  are  recognized  in the  period  in which  the
underlying  production  is sold.  Earnings  include  gains from option sales and
exercises,  primarily related to copper, of $11.0 million in 1998, $25.8 million
in 1997 and $27.1 million in 1996.

At December 31, 1998, the Company did not hold any put options.

Fuel Swaps:  The Company may enter into fuel swap agreements to limit the effect
of increases in fuel prices on its production  costs. A fuel swap  establishes a
fixed price for the quantity of fuel covered by the  agreement.  The  difference
between the published  price for fuel and the price  established in the contract
for the  month  covered  by the swap is  recognized  as a  component  of cost of
products and services. As of December 31, 1998 and 1997, the Company had entered
into the following fuel swap agreements:
<TABLE>
<CAPTION>

                                                                                                   Weighted Average
                                                                                                       Contract
                                                                                Quantity                 Price
Fuel Type                                                Period                (Barrels)
------------------------------------------------ ----------------------- ----------------------- ----------------------

1998
<S>                                                      <C>                     <C>                       <C>   
Residual Oil                                             1/99-9/99               1,095,000                 $ 9.84
Diesel Fuel                                              1/99-9/99                 564,000                 $15.35

1997
Residual Oil                                            1/98-12/98                 540,000                 $13.57
Diesel Fuel                                             1/98-12/98                 200,500                 $21.17

</TABLE>

<PAGE>
                                      A-64


Interest Rate Swaps: The Company may enter into interest rate swap agreements to
limit the effect of interest rates on any floating rate debt.  The  differential
to be paid or received as interest rates change is recorded in interest expense.
During 1995, the Company entered into three swap  agreements,  expiring  between
1998 and 2000, with an aggregate notional amount of $115.0 million. During 1998,
two of the  interest  rate swaps  with an  aggregate  notional  amount of $100.0
million expired.  At December 31, 1998, the effect of the one remaining interest
rate swap  agreement  with an aggregate  notional  amount of $15.0 million is to
limit the interest rate exposure on its $15.0 million, 5 year term loan to 6.8%.
Interest  expense would have been lower by $0.4 million in 1998, $0.6 million in
1997 and $0.7 million in 1996 had the Company not hedged its exposure.

TRADING:

Price protection  programs utilizing synthetic puts may be implemented in steps.
In cases where the step  approach is used,  the  Company's  objective is to take
advantage of current  market  conditions  to minimize its cost of the  synthetic
put.  Until a synthetic put is  completed,  any calls not matched with a forward
sale are considered trading activities and are marked to market with the gain or
loss, if any,  recorded in earnings.  Earnings include losses of $0.2 million in
1998 and  gains of $0.5  million  in 1997  from  the  sale or  exercise  of call
options.  Earnings  also include  losses of $1.9 million in 1998,  gains of $3.6
million  in  1997  and  losses  of $0.1  million  in 1996  from  mark to  market
adjustments. At December 31, 1998, the Company did not hold any call options.

The Company may hold positions in the metals futures markets for metals which it
produces but which are not related to any  specific  sales to  customers.  These
contracts are  considered  trading  activities and are marked to market with the
gain or loss, if any, recorded in earnings.  At December 31, 1998 and 1997, such
futures positions were not material.

The estimated fair values of the Company's financial instruments are:
<TABLE>
<CAPTION>

At December 31,                                                        1998                                 1997
(in millions)                                                Carrying         Fair                Carrying          Fair
                                                              Value           Value                 Value           Value
<S>                                                           <C>             <C>                   <C>             <C>       

Assets:

Cash and cash equivalents                                     $193.0          $193.0                $ 210.6         $ 210.6

Marketable securities - held to maturity
                                                              $ 22.7          $ 22.7                $ 205.3         $ 205.3

Put options                                                      -               -                  $   1.3         $  14.3

Call options                                                     -               -                  $   0.4         $   0.4

Fuel Swap Agreements                                             -            $ (1.6)                   -           $  (0.5)

Futures Contracts                                                -            $  1.5                    -           $  (0.7)

Investments:
  Available-for-sale securities                               $ 68.0          $ 68.0                $  73.5         $  73.5
  Restricted investment in Grupo Mexico (a)
                                                              $ 50.2          $ 78.9                $  50.2         $  78.9
  Other                                                       $  3.3             (b)                $   3.1           (b)

Liabilities:
Long-term debt (excluding capital lease obligations)
                                                              $994.3          $960.3                $ 816.9         $ 848.3

Interest rate swaps                                              -            $ (0.3)                   -          $  (0.6)

<PAGE>
                                      A-65


<FN>

(a)    At December 31, 1998 and 1997,  56.3 million  shares of Grupo Mexico were
       subject to a fixed price option which limits the sale of the shares for a
       period of more than one year.  The fair value  shown is  estimated  to be
       equal to the exercise price of the option.

(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.
</FN>
</TABLE>

The following  methods and  assumptions  were used to estimate the fair value of
each type of financial instrument:

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

Marketable  securities:  The  carrying  amount  and fair value are  reported  at
amortized cost, which approximates market, since these securities are short term
liquid investments.

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

Available-for-sale  securities,  interest  rate  and  fuel  swaps,  and  futures
contracts: Fair value is based on quoted market prices.

Long-term debt: The fair value is based on the quoted market prices for the same
or similar issues.
<TABLE>

Unaudited Quarterly Data
(in millions, except per share data)
<CAPTION>

                                             1998                                                 1997
                                             ----                                                 ----
QUARTERS            1st(b)(c)    2nd        3rd      4th(d)(e)    Total      1st     2nd(f)(g)   3rd(h)(i)   4th      Total
                   =============================================================================================================

<S>                  <C>        <C>        <C>         <C>        <C>        <C>       <C>        <C>        <C>       <C>     
Sales (a)            $614.5     $571.1     $545.6      $501.8     $2,233.1   $715.6    $741.0     $661.3     $603.1    $2,721.0

Operating
Income               $(29.7)    $(2.8)     $6.4        $(91.8)    $(118.1)   $106.0    $96.5      $ 53.6     $18.6     $274.7

Net earnings         $(31.8)    $(14.5)    $(15.6)     $(68.7)    $(130.6)   $40.6     $51.9      $ 45.8     $5.1      $143.4

Dividends paid                                                                                                          
Per common share     $0.20      $0.20      $0.20       $0.10      $0.70      $0.20     $0.20      $0.20      $0.20     $0.80
Stock market
 Price:
  High               $26 11/16  $27 1/2    $23 3/4     $23        $27 1/2    $32 1/2   $32 1/4    $34        $31 7/8   $34
  Low                $20 7/8    $21 1/2    $15 15/16   $15 1/16   $15 1/16   $25 1/8   $26 1/2    $30        $21 3/4   $21 3/4
Net earnings per
 share:
  Basic              $(0.80)    $(0.37)    $(0.39)     $(1.73)    $(3.29)    $0.95     $1.21      $1.10      $0.13     $3.42
  Diluted            $(0.80)    $(0.37)    $(0.39)     $(1.73)    $(3.29)    $0.94     $1.20      $1.09      $0.13     $3.42

<FN>

(a)       Sales  and cost of sales  reflect  a $19.0  and  $31.1  decrease  from
          amounts previously reported in the first quarter and second quarter of
          1998,  respectively.  These  adjustments  had no effect  on  operating
          income or net earnings.

(b)       Includes a $10.0  pre-tax  charge  related to SPCC's $30 million  cost
          reduction program.

(c)       Includes a $20.0  pre-tax  charge  related to the sale of the Missouri
          Lead Division.

<PAGE>
                                      A-66


(d)       Includes  a $9.5  pre-tax  charge  for the three  year  suspension  of
          operations at the Company's  copper smelter in El Paso,  Texas, a $9.8
          pre-tax  charge  to write  down the book  value  and  provide  for the
          closure  costs  of  the  Company's   Black  Cloud  lead-zinc  mine  in
          Leadville, Colorado, a $10.9 pre-tax charge for the transfer of SPCC's
          ownership of the Ilo townsite to its worker  occupants and the city of
          Ilo, Peru, and a $7.7 pre-tax charge to increase  reserves for certain
          employee benefit plans and for severance and other costs in connection
          with the Company's cost reduction program.

(e)       Includes a $33.2 pre-tax  charge ($54.0 in charges  offset by $20.8 in
          anticipated  insurance and other recoveries) to increase the Company's
          reserves for environmental remediation costs.

(f)       Includes a $13.4  after-tax gain,  $20.7 pre-tax,  on the sale of 43.4
          million shares of Grupo Mexico.

(g)       Includes  a $10.3  after-tax  gain,  $15.9  pre-tax,  as a  result  of
          liquidation of LIFO inventories.

(h)       Includes a $34.2  after-tax  gain,  $52.6 pre-tax,  on the sale of the
          Company's remaining unrestricted shares in Grupo Mexico.

(i)       Includes a $30.0 pre-tax charge to increase  reserves for closed plant
          and environmental  matters,  offset entirely by anticipated  insurance
          settlements.
</FN>
</TABLE>

Metals Price Sensitivity

Assuming that expected metal production and sales are achieved,  tax and royalty
rates are  unchanged,  that the number of shares  outstanding  is unchanged  and
giving no effect to results of other  business  segments,  hedging  programs  or
changes  in the costs of  production,  metal  price  sensitivity  factors  would
indicate the following  estimated  change in earnings per share  resulting  from
metal  price  changes  in  1999.  Estimates  are  based on 39.7  million  shares
outstanding.

<TABLE>
<CAPTION>

                                              Copper            Zinc           Silver        Molybdenum

<S>                                         <C>              <C>              <C>             <C>   
Change in Metal Price                       1(cent)/lb.      1(cent)/lb.      $1/oz           $1/lb.
Annual Change in Earnings per Share         17.2(cent)       1.2(cent)        10.9(cent)      15.8(cent)

</TABLE>

<PAGE>
                                      A-67


REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of ASARCO Incorporated

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated   statements  of  earnings,   cash  flows  and  changes  in  common
stockholders'  equity and  comprehensive  income present fairly, in all material
respects,  the  financial  position  of  ASARCO  Incorporated  and  subsidiaries
(collectively  the  "Company") at December 31, 1998 and 1997, and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles.  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 of these statements in
accordance with generally accepted auditing standards which 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,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.



PricewaterhouseCoopers LLP
New York, New York
January 26, 1999

<PAGE>
                                      A-68


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 A26.  Information  in  response  to the  disclosure
requirements  specified by these items  appears  under the captions and pages of
the 1999 Proxy Statement indicated below:
<TABLE>
<CAPTION>

                                                                                     
                                                                                     Proxy Statement  
Item    Required Information        Proxy Statement Section                              Pages

<S>     <C>                         <C>                                                  <C> 
10.     Directors and Executive     Election of Directors                                 2 - 5
          Officers

11.     Executive Compensation      Committee Report on Executive Compensation
                                      through Option Exercises
                                      and Fiscal Year-End Values                         10 - 16
                                    Retirement Plans through
                                      Employment Agreements                              18 - 20

12.     Security Ownership          Security Ownership of Certain Beneficial
                                        Owners through Common Stock Equivalents           6 - 9
                                                                                          
13.     Certain Relationships
          Related Transactions      Certain Transactions                                   20



The information referred to above is incorporated herein by reference.

</TABLE>



<PAGE>
                                      A-69


                                     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>
               Consolidated Statement of Earnings for the years
                 ended December 31, 1998, 1997 and 1996                                                A40

               Consolidated Balance Sheet at December 31,
                 1998 and 1997                                                                         A41

               Consolidated Statement of Cash Flows for the
                 years ended December 31, 1998, 1997 and 1996                                          A42

               Consolidated  Statement of Changes in Common Stockholders' Equity
                 and Comprehensive Income for the years ended December 31, 1998,
                 1997 and 1996                                                                         A43

               Notes to Financial Statements                                                         A44-A66

               Report of Independent Accountants                                                       A67



         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>
                                      A-70


3. Exhibits

        Exhibit
          No.
          ---
           3.  Certificate of Incorporation and By-Laws

           (a)  Certificate of Incorporation - restated, filed June 26, 1998

           (b)  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, 1998

           (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>
                                      A-71


           (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)      Form of  Rights  Agreement  dated as of  January  28,  1998,
                    between  the  Company  and the Bank of New  York,  as Rights
                    Agent,  defining the rights of shareholders  under a January
                    1998 Shareholders' Rights plan and dividend declaration. The
                    effect of the 1998  Rights plan is to extend the 1989 Rights
                    plan, which expires in 1999.

           (f)      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

           (g)      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 Amended  Employment  Agreement  dated  February 26, 1997,
               between the Company and currently 11 of its  executive  officers,
               including  Messrs.  R. de J.  Osborne,  F. R.  McAllister,  K. R.
               Morano, R. J. Muth and A. B. Kinsolving

          (c)  Deferred Fee Plan for  Directors,  as amended  through  April 29,
               1998

          (d)  Directors'  Deferred  Payment Plan, as amended  through April 29,
               1998

          (e)  Retirement Plan for  Non-Employee  Directors,  as amended through
               January  28,  1998.  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)  Supplemental Pension Plan for Designated  Mid-Career Officers, as
               amended through April 29, 1998

          (i)  Incentive  Compensation  Plan  for  Senior  Officers,   effective
               January 1, 1996

          (j)  1996 Stock Incentive Plan, effective April 24, 1996

          (k)  Compensation Deferral Plan, as amended through April 29, 1998

          (l)  Supplemental Retirement Plan as amended through April 29,1998

          (m)  Consulting Agreement between the Company and Mr. R. de J. Osborne
               dated November 24, 1998

          11.  Statement re Computation of Earnings Per Share

          12.  Statement re Computation of Ratios

          21.  Subsidiaries of the Registrant

          23.  Consent of Independent Accountants

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

(b)      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(c) Deferred Fee Plan for Directors

         10(d) Supplemental Pension Plan for Designated Mid-Career Officers

         10(h) Directors' Deferred Payment Plan

         10(k) Compensation Deferral Plan

         10(l) Supplemental Retirement Plan

         10(m)Consulting Agreement between the Company and Mr. R. de J. Osborne
           
         11.  Statement re Computation of Earnings Per Share

         12.  Statement re Computation of Ratios

         21.  Subsidiaries of the Registrant

         23.  Consent of  Independent  Accountants  is  included on page A72 of
              this Annual Report on Form 10-K.

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>
                                      A-72


                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE



To the Board of Directors and
  Stockholders of ASARCO Incorporated

Our audits of the consolidated  financial  statements  referred to in our report
dated January 26, 1999  appearing in this Form 10-K on page A67 also included an
audit of the financial  statement  schedule which appears on pages B1 through B3
of this Form 10-K. In our opinion,  this financial  statement  schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.



PricewaterhouseCoopers LLP
New York, New York
January 26, 1999



Item 14
Exhibit 23


                       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,  33-55993
and 333-02359) and Form S-8 (File Nos. 2-83782,  2-67732,  33-34606,  333-16875,
333-18083, and 333-46181) of ASARCO Incorporated of our report dated January 26,
1999,  on  our  audit  of  the  consolidated   financial  statements  of  Asarco
Incorporated and  subsidiaries,  which report appears on page A67 of this Annual
Report on Form 10-K.  We also consent to the  incorporation  by reference of our
report on our audit of the financial statement schedule, 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 A67 of this Annual  Report on Form 10-K and to our
report on the financial statement schedule which appears above.



PricewaterhouseCoopers LLP
New York, New York
March 10, 1999

<PAGE>
                                      A-73


                                   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 26, 1999

                                              ASARCO Incorporated
                                              (Registrant)


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

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.

 a)    Principal Executive Officer:

       /s/ Richard de J. Osborne              Chairman of the Board
       (Richard de J. Osborne)

(b)    Principal Financial Officer:

       /s/ Kevin R. Morano                    Executive 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/ Vincent A. Calarco                 /s/ James C. Cotting
       (Vincent A. Calarco)                   (James C. Cotting)

       /s/ David C. Garfield                  /s/ E. Gordon Gee
       (David C. Garfield)                    (E. Gordon Gee)

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

       /s/ Kevin R. Morano                    /s/ Martha T. Muse
       (Kevin R. Morano)                      (Martha T. Muse)

       /s/ Michael T. Nelligan                /s/ John D. Ong
       (Michael T. Nelligan)                  (John D. Ong)

       /s/ Manuel T. Pacheco                  /s/ James Wood
       (Manuel T. Pacheco)                    (James Wood)


Date: February 26, 1999

<PAGE>
                                      B-1


<TABLE>
                               ASARCO Incorporated
                                AND SUBSIDIARIES
                 Schedule II - Valuation and Qualifying Accounts
                                FOR THE YEAR 1998
                                 (in thousands)
<CAPTION>

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

                                                              Additions                               Deductions
                                       --------------------------------------------------------------------------
                                        Charged to
                         Balance at     costs/expenses                      Charged                                   Balance at
                         beginning      or (credited)                       to other                                  end of
Description              of period      to income        Description        accounts   Description      Amount        period
-----------              ---------      ---------        -----------        --------   -----------      ------        ------
<S>                      <C>             <C>             <C>                 <C>          <C>             <C>         <C>    
                                                                                        Accounts and               
                                                                                        notes written                    
Deducted from assets                                                                    off, net of
   on Balance Sheet:                                                                    recoveries      $1,236

Allowance for                                            Opening                        Foreign     
   doubtful accounts                                     balance from                   currency
                                                         acquisition                    translation
                          $8,121          $1,503         of new units        $739       adjustment      $(148)        $9,275
                          ======          ======                             =====                      ======        ======

                                                         Net amount
                                                         transferred
                                                         from noncurrent   
Current portion                                          reserve for
of reserves for                                          closed plants                                
closed plants and                                        and                            Current
  environmental                                          environmental                  charges to
     matters             $44,164                         matters              $76,430   reserves        $67,200       $53,394
                         =======                                              =======                   =======       =======

Non-current portion
   of reserves for                                                                      Net amount
   closed plants an                                                                     transferred 
   environmental                                                                        to current
     matters            $102,432          $64,983                                       liabilities     $76,430       $90,985
                        ========          =======                                                        =======       =======

Included in caption
   "Other liabilities                                                                   Charges
   and reserves" on                                      Increase in                    against the 
   Balance Sheet                                         the reserve for                reserve for
    Other               $43,757           $16,219        Major Repairs                  Major Repairs   $6,929        $53,047
                        =======           ========                                                       =======       =======

</TABLE>

<PAGE>
                                      B-2


<TABLE>

                               ASARCO Incorporated
                                AND SUBSIDIARIES
                 Schedule II - Valuation and Qualifying Accounts
                                FOR THE YEAR 1997
                                 (in thousands)
<CAPTION>

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

                                                              Additions                               Deductions
                                        ------------------------------------------------------------------------
                                        Charged to
                         Balance at     costs/expenses or                   Charged                                   Balance at
                         beginning     (credited)                           to other                                  end of
Description              of period      to income        Description        accounts   Description      Amount        period
-----------              ---------      ---------        -----------        --------   -----------      ------        ------
<S>                      <C>             <C>             <C>                 <C>          <C>             <C>         <C>  
                                                                                        Accounts and 
                                                                                        notes written 
Deducted from assets                                                                    off, net of
   on Balance Sheet:                                                                    recoveries      $1,432

                                                                                        Foreign
Allowance for                                                                           currency
  doubtful accounts                                                                     translation
                          $8,129         $1,921                                         adjustment      $497          $8,121
                          ======         ======                                                         ====            ======

                                                         Net amount 
                                                         transferred from 
                                                         noncurrent
Current portion of                                       reserve for
  reserves for closed                                    closed plants
  plants and                                             and                            Current
  environmental                                          environmental                  charges to
  matters                 $38,762                        matters              $62,799   reserves        $57,397       $44,164
                          =======                                             =======                   =======       =======

Non-current portion 
  of reserves for                                                                       Net amount
  closed plants and                                                                     transferred to
  environmental                                                                         current
  matters                 $112,342       $52,889                                        liabilities     $62,799       $102,432
                          ========       =======                                                        =======       ========

                                                                       
 
Included in caption
"Other liabilities                                                                      Charges
and reserves" on                                                                        against the
Balance Sheet                                            Increase in the                reserve
 -------------                                           reserve for                    for
   Other                  $36,938        $7,590          Major Repairs                  Major Repairs   $771          $43,757
                          =======        ======                                                         ====          =======
</TABLE>

<PAGE>
                                      B-3


<TABLE>

                               ASARCO Incorporated
                                AND SUBSIDIARIES
                 Schedule II - Valuation and Qualifying Accounts
                                FOR THE YEAR 1996
                                 (in thousands)
<CAPTION>

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

                                                                     Additions                        Deductions
                                        --------------------------------------------------------------------------------------------

                                        Charged to
                         Balance at     costs/expenses                      Charged                                   Balance at 
                         beginning      or (credited)                       to other                                  end of      
Description              of period      to income        Description        accounts   Description      Amount        period
-----------              ---------       ---------       -----------        --------   -----------      ------        ------
<S>                      <C>             <C>             <C>                 <C>          <C>             <C>         <C>  
                                                                                        Accounts and 
                                                                                        notes written 
Deducted from assets                                                                    off, net of               
on Balance Sheet:                                                                       recoveries      $1,151
                                                                                                         ===== 

Allowance for                                                                           Foreign 
   doubtful accounts                                                                    currency        
                                                                                        translation
                          $7,409         $1,993                                         adjustment      $122          $8,129
                          ======          =====                                                         ====          ======
                                                         Net amount
                                                         transferred
                                                         from noncurrent 
Current portion of                                       reserve for 
   reserves for                                          closed plants                  
   closed plants and                                     and                            Current
   environmental                                         environmental                  charges to
   matters                $53,437                        matters              $40,910   reserves        $55,585       $38,762
                          =======                                             =======                   =======       =======

Non-current portion
   of reserves for                                                                      Net amount
   closed plants and                                                                    transferred to
   environmental                                                                        current
   matters                $83,129        $70,123                                        liabilities     $40,910       $112,342
                          =======        =======                                                        =======       ========

Included in caption
  "Other liabilities                                                                    Charges 
  and reserves" on                                       Increase in the                against the
  Balance Sheet                                          reserve for                    reserve for
  Other                   $26,018        $13,774         Major Repairs                  Major Repairs   $2,854        $36,938
                          =======        =======                                                        ======        =======

</TABLE>

<PAGE>
                                      C-1


<TABLE>
<CAPTION>

                               ASARCO Incorporated
                                  EXHIBIT INDEX


Exhibit                                                                                     Indexed
  No.                       Description                                                     on Page
<S>     <C>                                                                                  <C>

3.   Certificate of Incorporation and By-Laws

          (a)  Certificate  of  Incorporation  -  restated,  filed June 26, 1998
               (Filed as an Exhibit to the Company's Report on Form 10-Q for the
               quarter ended June 30, 1998 and incorporated herein by reference)

          (b)  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, 1998

          (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)  Form of Rights  Agreement  dated as of January 28, 1998,  between
               the Company and The Bank of New York, as Rights  Agent,  defining
               the rights of  shareholders'  under a January 1998  Stockholders'
               Rights plan and dividend  declaration (filed as an Exhibit to the
               Company's  Form 8-K  filed on March  2,  1998,  and  incorporated
               herein by reference)
</TABLE>

<PAGE>
                                      C-2



<TABLE>

                               ASARCO Incorporated
<CAPTION>
                                  EXHIBIT INDEX

Exhibit                                                                                     Indexed
  No.                       Description                                                     on Page
<S>     <C>                                                                                  <C>

          (f)  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)

          (g)  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 Amended  Employment  Agreement  dated  February 26, 1997,
               between the Company and currently 11 of its  executive  officers,
               including Messrs. R. de J. Osborne, F.R. McAllister,  K.R. Morano
               and A.B.  Kinsolving  (Filed as an Exhibit to the Company's  1996
               Annual Report on Form 10-K and incorporated herein by reference)

          (c)  Deferred Fee Plan for  Directors,  as amended  through  April 29,
               1998                                                                         C9-C14
                                                                                                              
          (d)  Director's  Deferred  Payment Plan, as amended  through April 29,
               1998                                                                         C15-C20
                                                                                                             
          (e)  Retirement Plan for  Non-Employee  Directors,  as amended through
               January  28,  1998.  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
               (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 (Filed as an
               Exhibit  to the  Company's  1995  Annual  Report on Form 10-K and
               incorporated herein by reference)

          (h)  Supplemental Pension Plan for Designated  Mid-Career Officers, as
               amended through April 29, 1998                                               C21-C28

          (i)  Incentive  Compensation  Plan  for  Senior  Officers,   effective
               January 1, 1996 (Filed on Exhibit B to the  Company's  1996 Proxy
               Statement  filed on March  12,  1996 and  incorporated  herein by
               reference)


</TABLE>

<PAGE>
                                      C-3



<TABLE>

                               ASARCO Incorporated
                                  EXHIBIT INDEX
<CAPTION>

Exhibit                                                                                     Indexed    
  No.                       Description                                                     on Page
<S>     <C>                                                                                  <C>
          (j)  1996 Stock Incentive Plan,  effective April 24, 1996 (Filed as an
               Exhibit to the Company's Registration Statement on Form S-8 filed
               on December 17, 1996, and incorporated herein by reference)

          (k)  Compensation  Deferral  Plan,  as amended  through April 29, 1998            C29-C35              

          (l)  Supplemental  Retirement  Plan, as amended through April 29, 1998            C36-C41               

          (m)  Consulting Agreement between the Company and Mr. R. de J. Osborne            C42-C43
               dated November 24, 1998 

11.       Statement re Computation of Earnings Per Share                                    C4

12.       Statement re Computation of Ratios                                                C5

21.       Subsidiaries of the Registrant                                                    C6-C8

23.       Consent of  Independent  Accountants is included on page A72 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>
                                      C-4


Exhibit 11 Statement re Computation of Earnings per Share


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


Diluted Earnings per Common Share
(in thousands, except per share amounts)
<CAPTION>

                                                                                 For the years ended December 31,

                                                                                  1998              1997            1996
                                                                            ------------------ --------------- ----------------

<S>                                                                             <C>               <C>              <C>     
Net earnings (loss) applicable to common stock                                  $(130,640)        $143,392         $138,336
                                                                            ================== =============== ================


Weighted average number of common shares outstanding
                                                                                   39,655          41,903           42,711
      Shares issuable from assumed exercise of Stock Options
                                                                                        -              73               58
                                                                            ================== =============== ================
Weighted average number of common shares outstanding, as adjusted
                                                                                   39,655          41,976           42,769
                                                                            ================== =============== ================

Diluted earnings per share:
    Net earnings (loss) applicable to common stock                                 $(3.29)           $3.42            $3.23
                                                                            ================== =============== ================

Basic earnings per share:
    Net earnings (loss) applicable to common stock                                 $(3.29)           $3.42            $3.24
                                                                            ================== =============== ================

</TABLE>


<PAGE>
                                      C-5


Exhibit 12 Statement re Computation of  Consolidated  Ratio of Earnings to Fixed
Charges and Combined Fixed Charges and Preferred Share Dividend Requirements
<TABLE>

<CAPTION>

                                                      1998          1997           1996           1995          1994
                                                      ----          ----           ----           ----          ----
                                                                             (Dollars in thousands)

<S>                                                  <C>            <C>            <C>            <C>           <C>     
NET EARNINGS (LOSS)                                  $(130,640)     $143,392       $138,336       $169,153      $ 64,034
  Adjustments
    Taxes (benefit)on Income                           (53,561)       72,356         99,924        122,465         9,375
     Equity Earnings, Net of
          Taxes                                         (3,619)       (7,706)        (3,837)        (1,837)      (47,653)
     Dividends received from
       non-consolidated
       companies                                         5,512         5,209          4,047          1,828        14,301
     Total Fixed Charges                                88,385        84,972         83,553         99,516        66,377
     Interest Capitalized                              (12,530)       (5,515)        (2,839)        (3,256)         (869)
     Capitalized Interest Amortized                      1,547         2,113          2,274          2,949         1,727
     Minority interest                                  26,659        90,605         88,331        129,543           809
                                                     ---------      --------       --------       --------      --------
EARNINGS (LOSS)                                      $ (78,247)     $385,426       $409,789       $520,361      $108,101
                                                     ==========     ========       ========       ========      ========
FIXED CHARGES
     Interest Expense                                $  67,787      $ 74,247       $ 76,442       $ 91,954      $ 62,529
     Interest Capitalized                               12,530         5,515          2,839          3,256           869
     Imputed Interest Expense                            8,068         5,210          4,272          4,306         2,979
                                                     ---------      --------       --------       --------      --------
TOTAL FIXED CHARGES                                  $  88,385      $ 84,972       $ 83,553       $ 99,516      $ 66,377
                                                     =========      ========       ========       ========      ========
Ratio of Earnings to Fixed Charges                       (a)           4.5             4.9            5.2           1.6
                                                     =========      ========       ========       ========      ========
<FN>

(a)  For the year ended 1998 earnings were  insufficient  to cover fixed charges
     by $166,632.

</FN>
</TABLE>

<PAGE>
                                      C-6


Item 14.     (c) Exhibit 21    Subsidiaries of the Registrant
<TABLE>
<CAPTION>

                                                                                                Percentage of
                                                                                                voting securities
                                                                                                owned or other
                                      Name of Company                                           bases of control
                                      ---------------                                           ----------------

PARENTS:  None

Registrant:  ASARCO Incorporated

CONSOLIDATED SUBSIDIARIES:

<S>                                                                                                       <C>  
Air Resources Corporation (Delaware)                                                                      100.0
American Limestone Company, Inc. (Delaware)                                                               100.0
AR Mexican Explorations Inc. (Delaware)                                                                   100.0
   Minera San Bernardo, S.A. de C.V. (Mexico)                                                             100.0
AR Mexican Holdings, Inc. (Delaware)                                                                      100.0
   AR Specialty Chemicals, S. A. de C.V. (Mexico)                                                         100.0
     Enthone-OMI de Mexico S.A. de C.V. (Mexico)                                                          100.0
AR Silver Bell, Inc. (Delaware)                                                                           100.0
   Silver Bell Mining, L.L.C. (Delaware)                                                                   75.0
AR Montana Corporation (Delaware)                                                                         100.0
  Montana Resources (Montana Partnership)                                                                  49.9
Asarco Arizona, Inc. (Delaware)                                                                           100.0
Asarco Exploration Company, Inc. (New York)                                                               100.0
   Asarco Guiane Francaise S.A.R.L.                                                                       100.0
   Empresa Minera Manquiri S.R.L. (Bolivia)                                                                50.0
Asarco Exploration Company of Canada, Limited (Canada)                                                    100.0
Asarco International Corporation (Delaware)                                                               100.0
Asarco International Corp. FSC (Virgin Islands)                                                           100.0
Asarco Oil and Gas Company, Inc. (New York)                                                               100.0
Asarco Peruvian Exploration Company (Delaware)                                                            100.0
ASARCO Santa Cruz, Inc. (Delaware)                                                                        100.0
   Covington Land Company (Delaware)                                                                      100.0
   CP Water Company (Arizona)                                                                             100.0
Bridgeview Management Company, Inc. (New Jersey)                                                          100.0
Compania Minera Asarco, S.A. (Chile)                                                                      100.0
Domestic Realty Company, Inc. (Montana)                                                                   100.0
Encycle, Inc. (Delaware)                                                                                  100.0
   Hydrometrics, Inc. (Delaware)                                                                          100.0
    Compania Hydrometrics de Mexico S.A. de C.V.                                                          100.0
   Encycle/Texas, Inc. (Delaware)                                                                         100.0
Enthone, Incorporated (New York)                                                                          100.0
Enthone-OMI, Inc. (Delaware)                                                                              100.0
 Enthone-OMI (Australia) Pty. Ltd. (Victoria, Australia)                                                  100.0
 Enthone-OMI Holding GmbH (Austria)                                                                       100.0
 Enthone-OMI (Benelux) B.V. (The Netherlands)                                                             100.0
   Enthone-OMI (Austria) GmbH                                                                             100.0
     Enthone-OMI (France) S.A. (France)                                                                    28.5
    Enthone-OMI Holdings (Deutschland)GmbH (Germany)                                                      100.0
    Deutsche Oberflachentichnik GmbH (Germany)                                                            100.0
      DOT Rechenzentrum GmbH (Germany)                                                                    100.0
      L.P.W. Benelux B.V. (Netherlands)                                                                   100.0
      L.P.W. Chemie GmbH (Germany)                                                                         51.0
      Blasberg Oberflachentechnik GmbH (Germany)                                                          100.0
        Blasberg GTL Service and Vertriebs GmbH (Germany)                                                 100.0
      Blasberg Ytteknik AB (Sweden)                                                                       100.0
      Galvano Production Chemie GmbH (Germany)                                                            100.0

</TABLE>

<PAGE>
                                      C-7


Form 10-K
<TABLE>

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

                                                                                                Percentage of
                                                                                                voting securities
                                                                                                owned or other
                                      Name of Company                                           bases of control
                                      ---------------                                           ----------------


CONSOLIDATED SUBSIDIARIES


<S>                                                                                                          <C> 
       L.P.W.  France  SARL  (France)                                                                        95.0
       Riedel  Oberflachentichnik  GmbH (Germany)                                                           100.0
      L.P.W.  Oberflachentichnik  Sp.z.o.o.  (Poland)                                                       100.0
      Nihon  LPW K.K.  (Japan)                                                                               30.0
      Wunsch  Chemie  GmbH  (Germany)                                                                       100.0
     Enthone-OMI  (Italia)  S.A.R.L.   (Italy)                                                               51.6
     Enthone-OMI  Holdings (Europe) S.A.S.  (France)                                                        100.0
      Enthone-OMI (Italia) S.A.R.L.  (Italy)                                                                 48.4
      Internacional de Manufacturas  Asociadas S.A (Spain)                                                  100.0
      Imasa A.G.  (Switzerland)                                                                              40.0
      Enthone-OMI  Holdings  (U.K.) Ltd.  (United Kingdom)                                                   17.6
        AMZA  Ltd.  (Israel)                                                                                 33.3
        Enthone-OMI  (U.K.)Limited (United  Kingdom)                                                        100.0
      Enthone-OMI  (Sverige)  A.B.  (Sweden)                                                                100.0
     Enthone-OMI  Finance  N.V.(Netherlands   Antilles)                                                     100.0
 Enthone-OMI (Canada) Inc.  (Ontario,  Canada)                                                              100.0
     IMASA B.V. (The  Netherlands)                                                                          100.0
 Enthone-OMI  (Hong  Kong)  Company  Limited  (Hong  Kong)                                                    5.5
 Enthone-OMI  K.K.  (Japan)                                                                                 100.0
     IMASA  Kemi  A.B.   (Sweden)                                                                           100.0
 Enthone-OMI  Holdings  (U.K) Ltd.  (United  Kingdom)                                                        82.4
 OMI Holdings S.A.  (Switzerland)                                                                           100.0
     Electroplating  Engineers  of  Japan  Ltd. (Japan)                                                      25.0
     Enthone-OMI  (Suisse)  S.A.   (Switzerland)                                                            100.0 
 OMI International  Corporation  (Delaware)                                                                 100.0
     Enthone-OMI (Espana) S.A (Spain)                                                                       100.0
     Enthone-OMI  (Europe)  Corporation   (Delaware)                                                        100.0
     Enthone-OMI  (Hong Kong)  Company  Limited  (Hong  Kong)                                                94.5
      Hua-Mei Electroplating Technology Company, Ltd. (China)                                                51.0
 Hua-Mei (Tianjin) Electroplating  Technology Company, Ltd.                                                  51.0
     Enthone-OMI  (Singapore) Pte.Ltd.  (Singapore)                                                          98.4
      Enthone-OMI (Malaysia) Sdn. Bhd. (Malaysia)                                                           100.0
 Federated  Metals Canada Limited (Canada)                                                                  100.0
 Federated Metals Corporation  (New York)                                                                   100.0
 Geominerals  Insurance  Company,  Ltd. (Bermuda)                                                           100.0
 Lac d'Amiante du Quebec,  Ltee  (Delaware)                                                                 100.0
   LAQ Canada,  Ltd.  (Delaware)                                                                            100.0
 Mining Development  Company (Delaware)                                                                     100.0
   Empresa Minera Manquiri S.R.L. (Bolivia)                                                                  50.0
 Minto Explorations Ltd. (British  Columbia)                                                                 55.8
 Mission  Exploration  Company (Delaware)                                                                   100.0
    Lesarco,  Inc.  (Phillipines)                                                                            30.0
 NCBR, Inc.  (Delaware)                                                                                     100.0
 Northern Peru Mining Corporation (Delaware)                                                                100.0

</TABLE>

<PAGE>
                                      C-8


Form 10-K


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

<CAPTION>

                                                                                                Percentage of
                                                                                                voting securities
                                                                                                owned or other
                                      Name of Company                                           bases of control
                                      ---------------                                           ----------------

CONSOLIDATED SUBSIDIARIES


<S>                                                                                                          <C> 
Silver Valley Resources Corporation (Delaware)                                                               50.0
Southern Peru Copper Corporation (Delaware)                                                                  63.1
       Fomenta, S.A. (Peru)                                                                                  99.5
       Pegasus Travels, S.A. (Peru)                                                                          90.0
       Logistics Services Incorporated (Delaware)                                                           100.0
         LSI-Peru, S.A. (Peru)                                                                               98.2
       Multimines Corporation (Delaware)                                                                    100.0
       Multimines Insurance Company, Ltd. (Bermuda)                                                         100.0
       Recursos e Inversiones Andinas, S.A. (Peru)                                                           91.0
         Compania Minera Los Tolmos, S.A. (Peru)                                                             98.1
The International Metal Company (New York)                                                                  100.0
Tulipan Company, Inc. (Delaware)                                                                             63.0


</TABLE>


Not included in this listing are  subsidiaries  which in the aggregate would not
constitute a significant subsidiary.

<PAGE>
                                      C-9


                                  Exhibit 10(C)

                               ASARCO Incorporated


                         DEFERRED FEE PLAN FOR DIRECTORS

                 (As amended and restated as of April 29, 1998)


Section 1. Effective Date. The effective date of the Plan as originally  adopted
is  January  1,  1982.  The  effective  date of the Plan as hereby  amended  and
restated is April 29, 1998.

Section 2.  Definitions.

1.   Board. The Board of Directors of ASARCO Incorporated.

2.   Company. ASARCO Incorporated.

3.   Deferral Amounts. All compensation deferred by a Director under the Plan.

4.   Deemed  Retirement  Date. May 1 of the calendar year in which a Participant
     reaches his Normal Retirement Date. 

5.   Director. Any individual serving as a member of the Board.

6.   Fair Market Value.  As to Company  stock,  Fair Market Value 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  as of the first  trading  day  coincident  with or next
     following the day as of which such value is to be determined.

7.   Investment  Manager.  The  Investment  Company  selected by the Company for
     deemed  investment  of all Deferral  Amounts  allocated to a  Participant's
     Investment Subaccount.

8.   Investment  Subaccount.  A deemed investment in those mutual funds,  except
     the Asarco Common Stock Fund, available under the Company's Savings Plan.

9.   Normal Retirement Date. Normal Retirement Date for a Director as defined in
     the  corporate  by-laws,  currently  the  date  of the  Annual  Meeting  of
     Stockholders next following the Director's 72nd birthday.

10.  Participant.  Any eligible  Director or former  Director with a Participant
     Account balance.

11.  Participant  Account.  A bookkeeping  account  established in the financial
     records of the Company for each Participant.  Participant  accounts consist
     of an Asarco Stock  Subaccount  and an Investment  Subaccount.  Participant
     Accounts are credited with a  Participant's  Deferral  Amounts,  and deemed
     investment  earnings  or  losses  arising  therefrom  based on  Participant
     elections pursuant to Sections 4 and 5.

12.  Asarco  Stock  Subaccount.   A  phantom  Asarco  stock  equivalent  account
     consisting of deemed whole shares of ASARCO  Incorporated  common stock and
     cash.

Section 3. Eligibility.  Any Non-employee Director is eligible to participate in
the Plan.

<PAGE>
                                      C-10


Section  4.  Participation.  To become a  Participant,  a  Director  must file a
written election to defer either 50 percent or 100 percent of cash  compensation
payable by reason of service on the Board.  An amount equal to the  compensation
deferred will be credited to the  Participant's  Participant  Account as soon as
practicable after the date such compensation is otherwise payable.

         An election  to  participate  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.  Notwithstanding  the  foregoing,  a
Director may elect to become a Participant  in the Plan for the calendar year in
which he first  becomes  eligible by filing a written  election  to  participate
within  30 days of  becoming  eligible.  The  election  will be  effective  on a
prospective basis and only as to remuneration not yet earned.

        An election shall remain in effect for  subsequent  years unless amended
or terminated in writing prior to January 1 of any subsequent  year. An election
can be revoked or  withdrawn at any time with respect to amounts to be earned in
years subsequent to the date of revocation or withdrawal.

Section  5.  Deemed  Investment   Provisions.   The  Company  will  establish  a
Participant Account for each Participant.  Each Participant Account will have an
Asarco Stock  Subaccount  and/or an Investment  Subaccount.  A Participant  must
allocate his Deferral  Amounts,  in increments of 25 percent,  to one or both of
the Subaccounts.

(a)  Deferral Amounts Allocated to Asarco Stock Subaccounts

      1) A  Participant's  Asarco Stock  Subaccount  shall be deemed invested in
      accordance  with the  Participant's  election  in whole  shares of Company
      common  stock  which  could be  purchased  at Fair  Market  Value with the
      Deferral  Amounts  credited to a Participant's  Asarco Stock Subaccount on
      the last business day of each calendar quarter.

      2) The Stock  Subaccount  also shall be credited with a bookkeeping  entry
      indicating the number of additional  whole shares which could be purchased
      at Fair Market Value with any dividends  payable on the deemed shares held
      in the Asarco Stock  Subaccount  on the day such  dividends are payable to
      shareholders of Company common stock.

      3) Any amounts that are  insufficient  to permit the  crediting of a whole
      share  of  Company  common  stock  shall  be  carried  as a  cash  balance
      bookkeeping entry in such Stock Subaccount. On any date on which new funds
      are  available  for deemed  investment  in Company stock (either due to an
      additional  deferral or the  availability of deemed  dividends),  the cash
      amount will be added to any such other  funds,  and the maximum  number of
      whole  shares that could be  purchased at Fair Market Value will be deemed
      invested.  The remaining amount, if any, will be held as cash. No interest
      shall be credited on any such Stock Subaccount cash balance.

      4) The Asarco  Stock  Subaccount  shall be  adjusted  to reflect any stock
      split,   stock   dividend,   recapitalization,    merger,   consolidation,
      reorganization or other similar change in the Company's common stock.

(b)  Deferral Amounts Allocated to Investment  Subaccounts 1) At the time of the
     election to participate in the Plan, the Participant  must elect in writing
     to  have  any  Deferral  Amounts  allocated  to his  Investment  Subaccount
     invested,  in increments of 5%, in one or more of the  investment  funds as
     are provided  under the Asarco  Savings  Plan,  except,  however,  that the
     Asarco  Common Stock Fund shall not be  available  as a deemed  investment.
     Said election must total one hundred percent (100%) of his Deferral Amounts
     allocated to the Investment Subaccount.

<PAGE>
                                      C-11


      2) A  Participant's  Investment  Subaccount  shall be deemed  invested  in
      accordance with the  Participant's  election.  The  Participant's  account
      shall be credited  with  deemed  earnings,  gains,  losses,  expenses  and
      changes in the fair market value of such  Participant's  account as if the
      Company had followed such investment designations.

      3)Each  Participant  may  elect  that  his  future  Investment  Subaccount
      deferrals  be  deemed  invested  in  a  proportion   different  from  that
      previously elected.  Such new election shall be prospective only and shall
      be made in accordance  with paragraph  (B)(2).  Any changes in such deemed
      investments  must be in accordance  with rules, if any, as are established
      by the Company or the Investment Manager.

      4) Consistent with this Section 5, each  Participant may elect in writing,
      that a whole percentage (no less than 5%) or specific dollar amount of his
      deemed  investment in any fund available  under the Investment  Subaccount
      may be transferred to any other fund available  thereunder.  Such election
      will be prospective  only and will be permitted in accordance  with rules,
      if any, as shall be established by the Company or the Investment Manager.

Section  6.  Transfers.  No  election  may be made to  have  amounts  previously
credited  to a  Participant's  Investment  Subaccount  transferred  to his Stock
Subaccount.  Amounts previously credited to a Participant's Stock Subaccount may
not be transferred to his Investment Subaccount,  except on or after the earlier
in time of (a) one year  prior to  Normal  Retirement  Date,  or (b) the  actual
retirement date.

Section 7.  Payment of Deferred Compensation.

(a)  Retirement  at Normal  Retirement  Date A  Participant  who  retires at his
     Normal  Retirement  Date will receive the entire  value of his  Participant
     Account in cash on January 15 of the year following the year of retirement.

(b)  Termination  at  Other  than  Normal  Retirement  Date  A  Participant  who
     terminates  service as a Director  at a date other than  Normal  Retirement
     Date will  receive the entire value of his  Participant  Account in cash on
     the 15th day of the 13th month following the date of termination.

(c)  Further Deferral Notwithstanding (a) and (b) of this section, a Participant
     may elect to further defer  receipt of all or a portion of his  Participant
     Account  for a period of up to 10 years  from the  earlier  to occur of the
     Deemed Retirement Date or, if applicable, the date of termination. In order
     to defer a payment of benefits  under the Plan, a  Participant  must file a
     written election at least one year in advance of the date that a payment of
     benefits under the Plan would  otherwise be made. The Participant may elect
     to receive the amount  deferred in a single cash  payment or in annual cash
     installments.  Any further elections to defer the receipt of benefits under
     the  Plan  must  also be filed at  least  one year  prior to the  scheduled
     payment  date.  Acceleration  of any  benefits  deferred  pursuant  to this
     paragraph  can only be made by filing a request  for  payment  at least one
     year in advance of the requested accelerated payment date.

(d)  Financial  Hardship of Participants At any time a Participant may request a
     payment of all or a portion of the value of his Participant Account. Such a
     request  shall be  approved  by the  Company  only upon a finding  that the
     Participant  has suffered a severe  financial  hardship  which has resulted
     from events beyond the Participant's  control ("Hardship Event"),  and only
     in the amount reasonably  needed to satisfy such Hardship Event.  Whether a
     Hardship Event has occurred shall be determined in accordance with Treasury
     Regulation  Sections 1.457- 2(h)(4) and (5). In the event such a payment is
     approved,  payment  of all or a  portion  of the  value of the  Participant
     Account shall be made as soon as practicable to the Participant.
<PAGE>
                                      C-12


(e)  Other  Withdrawals  Absent a Hardship  Event or adequate  prior  notice (in
     accordance  with paragraph (c) above),  a request for a payment of all or a
     portion of the value of a Participant  Account may be made by a Participant
     subject  to a 6%  penalty of the  amount of the  requested  payment,  which
     penalty  shall  be  deducted  from the  requested  payment.  The  requested
     payment,  less such penalty,  shall be paid in cash in a single lump sum as
     soon as practicable after the requested payment date.

Section 8.  Designation of Beneficiary.

(a)  A Participant  may designate a beneficiary  by giving written notice to the
     Company.  If no  beneficiary  is designated,  the  beneficiary  will be the
     Participant's  estate.  If more  than one  beneficiary  statement  has been
     filed, the beneficiary or beneficiaries designated in the statement bearing
     the most recent date will be deemed the valid beneficiary.

(b)  In the event of a  Participant's  death  before he has  received all of the
     benefits to which he is entitled hereunder,  the value of the Participant's
     Participant  Account shall be paid to the estate or designated  beneficiary
     of the  deceased  Participant  in one cash lump sum as soon as  practicable
     after the first January 15 or July 15 following such date of death,  unless
     the  Participant  has elected to continue  without  change the schedule for
     payment  of  benefits,  in  which  case  the  beneficiary  shall  have  the
     investment  choices  provided  under  Section  5(b)  for  the  time  of the
     deferral.

(c)  If a 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 9.  Participant's  Rights  Unsecured.  The right of any  Participant  to
receive benefits under the provisions of the Plan shall be contractual in nature
only;  however,  the amounts of such benefits may be held in a trust, the assets
of which shall be subject to the claims of the Company's  general creditors only
in the event of bankruptcy or insolvency. Any amounts paid to a Participant from
such trust shall reduce the amount of benefits owed by the Company.

Section  10.  Assignability.  No right to receive  payments  hereunder  shall be
transferable or assignable by a Participant or beneficiary.

Section 11.  Participation in Other Plans.  Nothing in this 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 12.  Discretion of Company and Board.  Any decision made or action taken
by the  Company  or by  the  Board  arising  out of or in  connection  with  the
construction,  administration,  interpretation  and effect of the Plan shall lie
within the absolute  discretion of the Company or the Board, as the case may be,
and shall be final, conclusive and binding upon all persons.

<PAGE>
                                      C-13


Section 13.  Change of Control.

(a)  Notwithstanding  any other provision of this Plan, in the event of a Change
     of Control (as defined  below),  no person that is not a Participant in the
     Plan immediately prior to such Change of Control shall be permitted to be a
     Participant under the Plan following such Change of Control. Upon and after
     a Change of Control,  this Plan may not be amended,  modified or terminated
     if any such amendment,  modification or termination  would adversely affect
     any accrued  benefits of a Participant or his or her rights with respect to
     such accrued benefits in the Plan, unless any such amendment,  modification
     or termination is consented to in writing by all such Participants.  Upon a
     Change  of  Control,  payment  of all of the  value of any and all  amounts
     accrued  to the  Participant  hereunder  shall  be  made  to a  Participant
     immediately.  For purposes of  calculating  such payment,  a  Participant's
     Investment  Subaccount  and/or Stock  Subaccount  shall be valued as of the
     date of the Change of Control.

(b)  Participants who were receiving  annual  installment  payments  pursuant to
     Section 7 as of January 28, 1998,  who did not consent to the provisions of
     this Section 13 within sixty (60) days of the date of notice of the January
     28th amendment  shall continue to receive  annual  installment  payments as
     elected pursuant to Section 7 hereof following a Change of Control.

(c)  For  purposes of this Plan,  a "Change of Control"  shall be deemed to have
     occurred if:

     (1) any "person",  as such term is used in Sections  13(d) and 14(d) of the
     Securities  Exchange Act of 1934,  as amended (the  "Exchange  Act") (other
     than the Company,  any trustee or other fiduciary holding  securities under
     an employee benefit plan of the Company, or any company owned,  directly or
     indirectly,  by the stockholders of the Company in  substantially  the same
     proportions as their ownership of the stock of the Company),  is or becomes
     the  "beneficial  owner" (as defined in Rule 13d-3 under the Exchange Act),
     directly or indirectly,  of securities of the Company  representing  either
     31% or more of the voting  power of all  classes  of  capital  stock of the
     Company or 33-1/3% or more of the then outstanding common stock without par
     value, of the Company;

     (2) the following individuals cease for any reason to constitute a majority
     of the number of  Directors  then  serving:  individuals  who,  on the date
     hereof,  constitute  the  Board of  Directors  of the  Company  and any new
     Director  (other than a Director  whose initial  assumption of office is in
     connection with an actual or threatened election contest, including but not
     limited to a consent solicitation, relating to the election of Directors of
     the  Company)  whose  appointment  or election by the Board of Directors or
     nomination  for  election by the  Company's  stockholders  was  approved or
     recommended  by a vote of at least two thirds (2/3) of the  Directors  then
     still in office  who  either  were  Directors  on the date  hereof or whose
     appointment  or election or  nomination  for  election  was  previously  so
     approved or recommended;

     (3) the  stockholders of the Company approve a merger or  consolidation  of
     the Company or any direct or indirect  subsidiary  of the Company  with any
     other company,  other than (i) a merger or consolidation which would result
     in the voting  securities  of the  Company  outstanding  immediately  prior
     thereto  continuing to represent (either by remaining  outstanding or being
     converted  into voting  securities  of the  surviving  entity or any parent
     thereof)  more  than  50% of  the  combined  voting  power  of  the  voting
     securities of the Company or such  surviving  entity or any parent  thereof
     outstanding immediately after such merger or consolidation or (ii) a merger
     or consolidation  effected to implement a  recapitalization  of the Company
     (or similar  transaction) in which no "person" (as defined herein) acquires
     more  than  50%  of  the  combined  voting  power  of  the  Company's  then
     outstanding securities; or

<PAGE>
                                      C-14


     (4) the stockholders of the Company approve a plan of complete  liquidation
     of the Company or an agreement for the sale or  disposition  by the Company
     of all or substantially all of the Company's assets.

Section  14.  Amendment.  This  Plan  may at any  time or  from  time to time be
amended,  modified or terminated by the Board.  No  amendment,  modification  or
termination shall,  without the consent of a Participant,  adversely affect such
Participant's accruals in his Participant Account.

Section 15.  Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

     IN WITNESS  WHEREOF,  the Company has caused this Amendment to its Deferred
Fee Plan for  Directors to be duly  adopted and executed by its duly  authorized
officers and its corporate seal affixed hereto on the 29th day of April, 1998.

                                                   ASARCO Incorporated



                                                   By: /s/D.B. Woodbury
                                                   Vice President

Attest:


/s/C.D. Gonzalez
Assistant Secretary

[SEAL]

<PAGE>
                                      C-15



                                  Exhibit 10(d)

                               ASARCO Incorporated

                        DIRECTORS' DEFERRED PAYMENT PLAN

                 (As amended and restated as of April 29, 1998)



Section  1. -  Effective  Date.  The  effective  date of the Plan as  originally
adopted is October 25, 1995.  The effective  date of the Plan as hereby  amended
and restated is April 29, 1998.

Section 2. - Definitions.

1.   Accrual  Amounts.  All amounts  accrued for the benefit of a Director under
     the Plan.

2.   Board. The Board of Directors of ASARCO Incorporated.

3.   Company. ASARCO Incorporated.

4.   Deemed  Retirement  Date. May 1 of the calendar year a participant  reaches
     his Normal Retirement Date. 

5.   Director. Any individual serving as a member of the Board.

6.   Fair Market Value.  As to Company  stock,  Fair Market Value 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  as of the first  trading  day  coincident  with or next
     following the day as of which such value is to be determined.

7.   Investment  Manager.  The  Investment  Company  selected by the Company for
     deemed  investment  of all Accrual  Amounts  allocated  to a  Participant's
     Investment Subaccount.

8.   Investment  Subaccount.  A deemed investment in those mutual funds,  except
     the Asarco Common Stock Fund, available under the Company's Savings Plan.

9.   Normal Retirement Date. Normal retirement date for a Director as defined in
     the  corporate  by-laws,  currently  the  date  of the  Annual  Meeting  of
     Stockholders next following the Director's 72nd birthday.

10.  Participant.  Any eligible  Director or former  Director with a Participant
     Account balance.

11.  Participant  Account.  A bookkeeping  account  established in the financial
     records of the Company for each Participant.  Participant  accounts consist
     of an Asarco Stock  Subaccount  and an Investment  Subaccount.  Participant
     Accounts are credited  with a  Participant's  Accrual  Amounts,  and deemed
     investment  earnings  or  losses  arising  therefrom  based on  Participant
     elections pursuant to Sections 4 and 5.

12.  Asarco  Stock  Subaccount.   A  phantom  Asarco  stock  equivalent  account
     consisting of deemed whole shares of ASARCO  Incorporated  common stock and
     cash.

Section 3. - Eligibility. All non-employee Directors who are either: (a) elected
to the Board of Directors of ASARCO  Incorporated  after October 25, 1995 or (b)
who have not yet  reached  the tenth  anniversary  of their  election as of that
date, are Participants in the Plan.
<PAGE>
                                      C-16


     Non-employee Directors with five or more years of service as of October 25,
1995 are eligible to transfer  benefits  accrued  under the ASARCO  Incorporated
Retirement  Plan for  Non-Employee  Directors (the Directors'  Retirement  Plan)
pursuant to transitional rules as provided in the Plan as originally adopted.

Section 4. - Accrual of  Benefits.  Each  eligible  Participant  shall  accrue a
benefit  equal to 75  percent  of the cash  retainer  paid to  Directors  by the
Company. Benefits will accrue on the last business day of each calendar quarter.
Each Participant will accrue benefits under the Plan for a maximum of ten years.
The accrual of benefits  under the Plan by Directors who accrued  benefits under
the  Directors'  Retirement  Plan will be  reduced  by one year for each year of
credited service under the Directors' Retirement Plan.

     At least 50 percent of all Accrual  Amounts shall be credited to the Asarco
Stock  Subaccount.  A Director may elect in writing to have the remainder of his
Accrual Amounts credited,  in additional increments of 25 percent, to either (a)
his Asarco  Stock  Subaccount,  or (b) an  Investment  Subaccount,  as described
below.

     An  election  by a Director  under this  Section 4 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.  If no election is
made,  Accrual  Amounts  shall be  allocated  100  percent to the  Asarco  Stock
Subaccount.  An election  shall  remain in effect for  subsequent  years  unless
changed prior to the January 1 of any such subsequent year.

Section  5. -  Deemed  Investment  Provisions.  The  Company  will  establish  a
Participant Account for each Participant.  A Participant's  Accrual Amounts will
be  deemed  invested  in  the  Asarco  Stock  Subaccount,  and if  elected,  the
Investment Subaccount, in accordance with his election under Section 4.

a) Accrual Amounts Allocated to Asarco Stock Subaccounts

     (1) A  Participant's  Asarco Stock  Subaccount  shall be deemed invested in
     accordance  with the  Participant's  election  in whole  shares of  Company
     common stock which could be purchased at Fair Market Value with the Accrual
     Amounts  credited to a  Participant's  Asarco Stock  Subaccount on the last
     business day of each calendar quarter.

     (2) The Asarco Stock  Subaccount  also shall be credited with a bookkeeping
     entry  indicating  the number of  additional  whole  shares  which could be
     purchased  at Fair Market  Value with any  dividends  payable on the deemed
     shares held in the Asarco Stock  Subaccount  on the day such  dividends are
     payable to shareholders of Company common stock.

     (3) Any amounts that are  insufficient  to permit the  crediting of a whole
     share  of  Company  common  stock  shall  be  carried  as  a  cash  balance
     bookkeeping entry in such Asarco Stock Subaccount. On any date on which new
     funds are available  for deemed  investment in Company stock (either due to
     an additional  deferral or the availability of deemed dividends),  the cash
     amount will be added to any such other  funds,  and the  maximum  number of
     whole  shares that could be  purchased  at Fair Market Value will be deemed
     invested.  The remaining  amount, if any, will be held as cash. No interest
     shall be credited on any such Asarco Stock Subaccount cash balance.

     (4) The Asarco  Stock  Subaccount  shall be  adjusted  to reflect any stock
     split,   stock   dividend,    recapitalization,    merger,   consolidation,
     reorganization or other similar change in the Company's common stock.


<PAGE>
                                      C-17


b) Accrual Amounts Allocated to Investment Subaccounts
     
     (1) At the time of the election to participate in the Plan, the Participant
     must  elect  in  writing  to have  any  Accrual  Amounts  allocated  to his
     Investment  Subaccount invested, in increments of 5%, in one or more of the
     investment  funds as are provided  under the Asarco  Savings Plan,  except,
     however,  that the Asarco  Common  Stock Fund shall not be  available  as a
     deemed  investment.  Said election must total one hundred percent (100%) of
     his Accrual Amounts allocated to the Investment Subaccount.

     (2) A  Participant's  Investment  Subaccount  shall be deemed  invested  in
     accordance with the Participant's election. The Participant's account shall
     be credited with deemed earnings,  gains,  losses,  expenses and changes in
     the fair market value of such  Participant's  account as if the Company had
     followed such investment designations.

     (3) Each  Participant  may  elect  that his  future  Investment  Subaccount
     deferrals be deemed invested in a proportion different from that previously
     elected.  Such new election shall be prospective  only and shall be made in
     accordance with paragraph  (b)(2).  Any changes in such deemed  investments
     must be in accordance with rules, if any, as are established by the Company
     or the Investment Manager.

     (4) Consistent with this Section 5, each  Participant may elect in writing,
     that a whole  percentage (no less than 5%) or specific dollar amount of his
     deemed investment in any fund available under the Investment Subaccount may
     be transferred to any other fund available  thereunder.  Such election will
     be prospective only and will be permitted in accordance with rules, if any,
     as shall be established by the Company or the Investment Manager.

Section  6.  Transfers.  No  election  may be made to  have  amounts  previously
credited to a  Participant's  Investment  Subaccount  transferred  to his Asarco
Stock Subaccount.  Amounts previously  credited to a Participant's  Asarco Stock
Subaccount may not be transferred  to his  Investment  Subaccount,  except on or
after the earlier in time of (a) one year prior to normal  retirement  date,  or
(b) the actual retirement date.

Section 7. - Payment of Deferred Compensation.

(a)  Retirement  at Normal  Retirement  Date A  Participant  who  retires at his
     Normal  Retirement  Date will receive the entire  value of his  Participant
     Account in cash on January 15 of the year following the year of retirement.

(b)  Termination  at  Other  than  Normal  Retirement  Date  A  Participant  who
     terminates  service as a Director  at a date other than  Normal  Retirement
     Date will  receive the entire value of his  Participant  Account in cash on
     the 15th day of the 13th month following the date of termination.

(c)  Further Deferral Notwithstanding (a) and (b) of this section, a Participant
     may elect to further defer  receipt of all or a portion of his  Participant
     Account  for a period of up to 10 years  from the  earlier  to occur of the
     Deemed Retirement Date or, if applicable, the date of termination. In order
     to defer a payment of benefits  under the Plan, a  Participant  must file a
     written election at least one year in advance of the date that a payment of
     benefits under the Plan would  otherwise be made. The Participant may elect
     to receive the amount  deferred in a single cash  payment or in annual cash
     installments.  Any further elections to defer the receipt of benefits under
     the  Plan  must  also be filed at  least  one year  prior to the  scheduled
     payment  date.  Acceleration  of any  benefits  deferred  pursuant  to this
     paragraph  can only be made by filing a request  for  payment  at least one
     year in advance of the requested accelerated payment date.


<PAGE>
                                      C-18


(d)  Financial  Hardship of Participants At any time a Participant may request a
     payment of all or a portion of the value of his Participant Account. Such a
     request  shall be  approved  by the  Company  only upon a finding  that the
     Participant  has suffered a severe  financial  hardship  which has resulted
     from events beyond the Participant's  control ("Hardship Event"),  and only
     in the amount reasonably  needed to satisfy such Hardship Event.  Whether a
     Hardship Event has occurred shall be determined in accordance with Treasury
     Regulation  Sections 1.457- 2(h)(4) and (5). In the event such a payment is
     approved,  payment  of all or a  portion  of the  value of the  Participant
     Account shall be made as soon as practicable to the Participant.

(e)  Other  Withdrawals  Absent a Hardship  Event or adequate  prior  notice (in
     accordance  with paragraph (c) above),  a request for a payment of all or a
     portion of the value of a Participant  Account may be made by a Participant
     subject  to a 6%  penalty of the  amount of the  requested  payment,  which
     penalty  shall  be  deducted  from the  requested  payment.  The  requested
     payment,  less such penalty,  shall be paid in cash in a single lump sum as
     soon as practicable after the requested payment date.

Section 8. - Designation of Beneficiary.

     (a) A Participant  may designate a beneficiary  by giving written notice to
     the Company.  If no beneficiary is designated,  the beneficiary will be the
     Participant's  estate.  If more  than one  beneficiary  statement  has been
     filed, the beneficiary or beneficiaries designated in the statement bearing
     the most recent date will be deemed the valid beneficiary.

     (b) In the event of a Participant's death before he has received all of the
     benefits to which he is entitled hereunder,  the value of the Participant's
     Participant  Account shall be paid to the estate or designated  beneficiary
     of the  deceased  Participant  in one cash lump sum as soon as  practicable
     after the first January 15 or July 15 following such date of death,  unless
     the  Participant  has elected to continue  without  change the schedule for
     payment  of  benefits,  in  which  case  the  beneficiary  shall  have  the
     investment  choices  provided  under  Section  5(b)  for  the  time  of the
     deferral.

     (c) 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 9. -  Participant's  Rights  Unsecured.  The right of any Participant to
receive  future   installments  under  the  provisions  of  the  Plan  shall  be
contractual in nature only;  however,  the amounts of such  installments  may be
held in a trust,  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
installment paid from such trust shall reduce the amount of benefits owed by the
Company.

Section 10. -  Assignability.  No right to receive  payments  hereunder shall be
transferable or assignable by a Participant or beneficiary.

Section 11. - Participation in Other Plans. Nothing in this 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 12. - Discretion of Company and Board. Any decision made or action taken
by the  Company  or by  the  Board  arising  out of or in  connection  with  the
construction,  administration,  interpretation  and effect of the Plan shall lie
within the absolute  discretion of the Company or the Board, as the case may be,
and shall be final, conclusive and binding upon all persons.

<PAGE>
                                      C-19


Section 13. - Change of Control.

(a)  Notwithstanding  any other provision of this Plan, in the event of a Change
of Control (as defined  below),  no person that is not a Participant in the Plan
immediately  prior  to  such  Change  of  Control  shall  be  permitted  to be a
Participant  under the Plan following  such Change of Control.  Upon and after a
Change of Control,  this Plan may not be amended,  modified or terminated if any
such amendment,  modification or termination  would adversely affect any accrued
benefits  of a  Participant  or his or her rights with  respect to such  accrued
benefits in the Plan, unless any such amendment,  modification or termination is
consented  to in writing  by all such  Participants.  Upon a Change of  Control,
payment of all of the value of any and all  amounts  accrued to the  Participant
hereunder  shall  be  made  to  a  Participant  immediately.   For  purposes  of
calculating such payment,  a Participant's  Investment  Subaccount and/or Asarco
Stock Subaccount shall be valued as of the date of the Change of Control.

(b)  Participants  who were receiving annual  installment  payments  pursuant to
Section 7 as of January 28, 1998,  who did not consent to the provisions of this
Section  13 within  sixty  (60) days of the date of notice of the  January  28th
amendment  shall  continue  to receive  annual  installment  payments as elected
pursuant to Section 7 hereof following a Change of Control.

(c) For  purposes of this Plan,  a "Change of  Control"  shall be deemed to have
occurred if:

          (1) any "Person",  as such term is used in Sections 12(d) and 13(d) of
          the Securities  Exchange Act of 1934, as amended (the "Exchange  Act")
          (other  than the  Company,  any  trustee  or other  fiduciary  holding
          securities  under an  employee  benefit  plan of the  Company,  or any
          company owned,  directly or  indirectly,  by the  stockholders  of the
          Company in  substantially  the same  proportions as their ownership of
          the stock of the Company),  is or becomes the  "beneficial  owner" (as
          defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
          of  securities of the Company  representing  either 31% or more of the
          voting power of all classes of capital stock of the Company or 33-1/3%
          or more of the then outstanding common stock without par value, of the
          Company;

          (2) the  following  individuals  cease for any reason to  constitute a
          majority of the number of Directors then serving:  individuals who, on
          the date hereof,  constitute the Board of Directors of the Company and
          any new Director  (other than a Director  whose initial  assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent  solicitation,  relating to the
          election of Directors of the Company) whose appointment or election by
          the Board of Directors  or  nomination  for election by the  Company's
          stockholders  was  approved or  recommended  by a vote of at least two
          thirds  (2/3) of the  Directors  then still in office who either  were
          Directors  on the date  hereof or whose  appointment  or  election  or
          nomination for election was previously so approved or recommended;

          (3) the  stockholders of the Company approve a merger or consolidation
          of the  Company or any direct or  indirect  subsidiary  of the Company
          with any other company, other than (i) a merger or consolidation which
          would  result in the  voting  securities  of the  Company  outstanding
          immediately prior thereto continuing to represent (either by remaining
          outstanding or being converted into voting securities of the surviving
          entity or any parent  thereof)  more than 50% of the  combined  voting
          power of the voting securities of the Company or such surviving entity
          or any parent  thereof  outstanding  immediately  after such merger or
          consolidation or (ii) a merger or consolidation  effected to implement
          a recapitalization of the Company (or similar transaction) in which no
          "person" (as defined  herein)  acquires  more than 50% of the combined
          voting power of the Company's then outstanding securities; or

<PAGE>
                                      C-20


          (4)  the  stockholders  of the  Company  approve  a plan  of  complete
          liquidation of the Company or an agreement for the sale or disposition
          by the Company of all or substantially all of the Company's assets.

Section  14. -  Amendment.  This  Plan  may at any time or from  time to time be
amended,  modified or terminated by the Board.  No  amendment,  modification  or
termination shall,  without the consent of a Participant,  adversely affect such
Participant's accruals in his Participant Account.

Section 15. - Governing Law. This  Agreement  shall be governed by and construed
in accordance with the laws of the State of New York.



               IN WITNESS WHEREOF,  the Company has caused this Amendment to its
          Directors'  Deferred  Payment  Plan to be duly adopted and executed by
          its duly authorized  officers and its corporate seal affixed hereto on
          the 29th day of April, 1998.

                                                   ASARCO Incorporated




                                                   By: /s/ D.B. Woodbury
                                                   Vice President
Attest:



/s/ C.D. Gonzalez
Assistant Secretary

[SEAL]

<PAGE>
                                      C-21


                                  Exhibit 10(h)

                               ASARCO Incorporated

                            SUPPLEMENTAL PENSION PLAN

                       FOR DESIGNATED MID-CAREER OFFICERS

                       (As amended through April 29, 1998)


     WHEREAS,  the Organization and Compensation  Committee (the "Committee") of
the Board of Directors of ASARCO  Incorporated  (the  "Company" or "Asarco") has
been advised by its independent compensation consultants that executive officers
who join or have joined the Company in  mid-career,  and  subsequently  serve as
vice  president  or  higher  rank  for ten or more  years,  usually  do not have
sufficient  time before  retirement to accrue  benefits under  existing  pension
plans of the Company  adequate to their needs or  appropriate  to reflect  their
experience or employment  responsibilities,  and that a supplemental  retirement
benefits plan for such persons should be adopted to remove these inequities,  to
encourage the continued association of these executives with the Company, and to
assure that the Company is able to attract and retain  executives  with valuable
prior experience; and

     WHEREAS,  the Committee has  recommended  the adoption of, and the Board of
Directors   has  approved  and  decided  to  adopt,   the  ASARCO   Incorporated
Supplemental  Pension Plan for  Designated  Mid-Career  Officers (the "Plan") to
permit the Company to provide  supplemental  retirement benefits to key officers
identified  by the Committee who  otherwise  would receive  retirement  benefits
which would not reflect their experience prior to employment with the Company or
would not be appropriate for the position of responsibility which they hold with
the Company.

     NOW,  THEREFORE,  the Company hereby adopts the Plan effective November 24,
1987.

1.   DEFINITIONS.

          1.1  Benefit  Commencement  Date.  Except as provided in Sections 3.1,
               3.3 and 6, the date on which benefits  commence under the Pension
               Plan.

          1.2  Board. The Board of Directors of ASARCO Incorporated.

          1.3  Company. ASARCO Incorporated.

          1.4  Compensation.  Compensation shall be as defined under the Pension
               Plan.

          1.5  Committee.  The Organization  and  Compensation  Committee of the
               Board  or any  individual  or  individuals  to whom it  delegates
               authority.

          1.6  Disability.  Permanent  and total  disability  as  defined in the
               Pension Plan.

          1.7  Executive.  An  officer  of the  Company  holding  a rank of Vice
               President  or higher who is  determined  by the  Committee in its
               sole  discretion  to be a person who when first  employed  by the
               Company  already had prior  business or  professional  experience
               which was  valuable to the Company and  relevant to the  position
               for which he was  employed.  This term  shall  also  include  the
               Executive's  spouse in the event benefit  payments,  as described
               hereinafter,  have commenced  under the Plan to such spouse.  The
               terms Executive or Participant  shall have identical  meanings in
               this Plan.

<PAGE>
                                      C-22


          1.8  Final  Compensation  Rate.  The  average  of  the  sixty  highest
               consecutive  monthly amounts of the  Executive's  Compensation in
               the  one  hundred  twenty  months  preceding  his  retirement  or
               termination of employment prior to age 65.

          1.9  Pension Plan. The Retirement  Benefit Plan for Salaried Employees
               of ASARCO Incorporated.

          1.10 Primary  Insurance  Amount.  The  Executive's  Primary  Insurance
               Amount for social security  purposes,  determined on the basis of
               the  Executive's  actual  compensation  with  respect to years of
               employment with the Company. With respect to years of employment,
               if any, prior to employment with the Company, the Committee shall
               estimate  the  Executive's  income  that is  treated as wages for
               purposes  of  the  Social   Security  Act.  If  the   Executive's
               employment  with the Company is  terminated  prior to age 65, for
               years  following  termination of employment,  it shall be assumed
               for purposes of calculating the Primary Insurance Amount that the
               Executive  earns  compensation  so as to  accrue  maximum  Social
               Security benefits.

2.   SUPPLEMENTAL  BENEFIT.  All  supplemental  benefits under the Plan shall be
     determined according to this Section 2.

          2.1  Net  Annual  Benefit.  The base  annual  benefit  payable  to the
               Executive on or after age 65 shall be determined  by  multiplying
               his  annualized  Final  Compensation  Rate  by  0.55  (fifty-five
               percent).  This  amount  shall be  reduced  by the sum of (i) the
               annual  amount  of  any  benefits   accrued  as  of  the  Benefit
               Commencement  Date (other than benefits  attributable  to pre- or
               post-tax  contributions made by the Executive) which are payable,
               which  have  been  paid  or  which  will  become  payable  to the
               Executive  from any  defined  benefit,  money  purchase  or other
               pension   benefit  plan  (whether   qualified  or   nonqualified)
               maintained by the Company or any other employer at any time, (ii)
               the annual amount of any benefits payable,  paid or to be paid on
               account of Disability  under a plan  maintained by the Company or
               any other  employer  at any time,  and (iii) his  annual  Primary
               Insurance  Amount.  In the event the Executive  has received,  is
               receiving,  or is scheduled to receive benefits from another such
               pension or  disability  plan in any form other than a single life
               annuity  (including  a  single  sum  distribution  or a  variable
               annuity)  or at a time other than when  benefits  commence  under
               this Plan,  the benefits to be taken into  account  under (i) and
               (ii) above shall be determined in good faith by the Company based
               on actuarial  assumptions and factors  reasonably  utilized under
               the  Pension  Plan  as of the  date of  determination,  or to the
               extent  such  factors  or  assumptions   do  not   contemplate  a
               particular situation which arises under this Plan, based upon the
               factors applied by the Pension Benefit  Guaranty  Corporation for
               purposes  of  determining  the  present  value of  benefits  upon
               termination of a plan with insufficient assets. In the event of a
               controversy  concerning the calculation of benefits  described in
               (i) or (ii) above,  the Committee  shall in good faith  determine
               the amount of  benefits  pursuant  to Section 5 of the Plan.  The
               benefit  remaining  after this  reduction  shall  constitute  the
               Executive's Net Annual Benefit.

          2.2  Form and Timing of Payment.

               (a) Except as otherwise  provided  herein,  the benefit  shall be
               payable to the Executive in a lump sum,  payable on January 15 of
               the year immediately following the Benefit Commencement Date, and
               calculated  as set forth in Section 2.3. In the event of a Change
               of Control  (as defined  below) the  benefit  shall be payable as

<PAGE>
                                      C-23


               soon as practicable  following the Change of Control and the lump
               sum shall be calculated as set forth in Sections 2.3 and 6 below.

               (b) An Executive may elect prior to the Benefit Commencement Date
               to defer (for a period not to exceed  twenty  (20)  years) all or
               part (but not less than  $50,000) of a lump sum payment under the
               Plan (the  "Deferral  Amount") to a future date or to convert the
               Deferral  Amount to a series of scheduled  installments.  Such an
               election  must be made at least  twelve (12) months  prior to the
               date payment  would be made under Section  2.2(a),  except in the
               event of termination  by reason of Disability,  in which case the
               election   may  be  made  at  any  time  prior  to  the   Benefit
               Commencement  Date.  Any such  election may be changed,  provided
               that no such change  shall be given  effect  unless it is made in
               writing at least  twelve (12) months  prior to the date  benefits
               under the Plan are payable.  The Deferral  Amount shall be deemed
               invested  in  accordance  with  an  election  to be  made  by the
               Executive under rules  established by the Committee.  The Company
               will attempt to follow the Executive's elections, but will not be
               required  to  do  so.   Regardless  of  whether  the  Executive's
               elections  are  followed,  the Deferral  Amount shall be credited
               with deemed earnings,  gains, losses, expenses and changes in the
               fair market value of such  Deferral  Amount as if the Company had
               followed such investment designations.

               (c) The  election  of a  deemed  investment  option  is the  sole
               responsibility  of each Executive.  Neither the Company,  nor the
               Committee,  nor any trustee of any trust that may be  established
               in connection with the Plan are authorized or permitted to advise
               (or shall have any liability  with respect to) an Executive as to
               the  election  of any option or the manner in which his  Deferral
               Amount shall be deemed to be invested.

               (d)  All  deemed   investments  of  Deferral  Amounts   including
               provisions  for transfers  among  investment  vehicles will be in
               accordance with rules established by the Committee.

               (e)  Notwithstanding  paragraphs (a) and (b) above,  an Executive
               may elect in writing  to receive  single  life  annuity  payments
               under the Plan at approximately  the same time as payments are to
               be made to the Executive under the Pension Plan. Such an election
               must be made at least  twelve  (12)  months  prior to the Benefit
               Commencement  Date,  except in the event of termination by reason
               of Disability,  in which case the election may be made at anytime
               prior to the Benefit  Commencement Date. Any such election may be
               changed,  provided  that no such  change  shall be  given  effect
               unless it is made in writing at least twelve (12) months prior to
               the Benefit Commencement Date.

               (f) At any time subsequent to an Executive's Benefit Commencement
               Date,  an  Executive  who made an  election  pursuant  to Section
               2.2(b) may  request a payment of all or a portion of the value of
               his  Deferral  Amount not yet  payable.  Such a request  shall be
               approved by the Committee  only upon a finding that the Executive
               has suffered a severe financial  hardship which has resulted from
               events beyond the Executive's  control  ("Hardship  Event"),  and
               only in the amount  reasonably  needed to satisfy  such  Hardship
               Event.  Whether a Hardship Event has occurred shall be determined
               in accordance with Treasury Regulation Sections 1.457-2(h)(4) and
               (5).  In the event  such a payment  is  approved,  payment of the
               approved amount from the Deferral Amount shall be made in cash in
               a single lump sum as soon as practicable to the Executive.

<PAGE>
                                      C-24


               (g) At any time subsequent to an Executive's Benefit Commencement
               Date,  an  Executive  who made an  election  pursuant  to Section
               2.2(b) may elect the  acceleration of payment of all or a portion
               of the value of any Deferral  Amount not yet payable subject to a
               6%  penalty of the amount  accelerated.  Payment of such  amount,
               less such penalty  (which shall be  forfeited),  shall be paid in
               cash in a single lump sum as soon as practicable.

               (h) Notwithstanding  the foregoing,  subsequent to an Executive's
               Benefit  Commencement Date, an Executive who has made an election
               pursuant  to Section  2.2(b) may file an  election  to amend such
               prior  election  as to the time or amount of any  payment due and
               payable at least 12 months  subsequent to such amendment,  and to
               change the form of such  payments,  provided no such election may
               accelerate  any payment to a date earlier than 12 months from the
               date of filing the election. The amended form of payment may be a
               single sum  payment of any amounts  not yet due and  payable,  or
               annual  installments  of  any  such  amounts,  or  a  combination
               thereof,  provided no payments  may be extended  for more than 20
               years following the Executive's Benefit Commencement Date.

               (i) Upon the death of an  Executive  who has  elected  an annuity
               form of payment pursuant to Section 2.2(e) above, the Executive's
               surviving  spouse,  if  any,  at the  date of  death  ("Surviving
               Spouse") shall receive 50% of the Net Annual Benefit described in
               Section 2.1 above and as adjusted as provided in Section  3.3, if
               applicable, for life.

               (j) Upon the  death of an  Executive  in all  other  events,  the
               Executive's  Surviving Spouse,  shall receive any benefits due to
               the Executive  under this Plan as adjusted as provided in Section
               3.3, at the same time as provided  under  paragraphs  (a) and (b)
               above.  In such case,  the  surviving  spouse shall have the same
               rights as are provided to the Eligible  Employee pursuant to this
               Section  2.  If  the  Executive  has  no  Surviving  Spouse,  any
               remaining  benefits  payable shall be paid as soon as practicable
               in a single sum to his beneficiary, or if none, to his estate.

          2.3  Calculation  of Lump Sum. The amount of the lump sum described in
          Section  2.2(a)  shall be the present  value of the  benefits  payable
          under  the  Plan,   determined  by  using  the   following   actuarial
          assumptions  for the  Executive  (and spouse if married at the date of
          determination):

               (a)  Discount  Rate.  The  discount  rate used in  computing  the
               present value of benefits  payable under the Plan is the yield on
               10-year treasury notes on the Benefit  Commencement Date, or if a
               legal holiday,  the first business day immediately  following the
               Benefit Commencement Date. However, at any time during a thirteen
               month  period  ending with the  Benefit  Commencement  Date,  the
               Executive may designate an alternative date ("Alternative  Date")
               for fixing the interest  rate used to calculate the present value
               of the lump sum distribution. The designation must be in writing,
               and the date designated must be within seven calendar days of the
               date the designation is received by the Company.  The designation
               of the  discount  rate,  once made,  may not be  changed  for any
               reason. Notwithstanding the foregoing,

<PAGE>
                                      C-25


               if  an  Executive  designates  an  Alternative  Date  under  this
               subsection  in  contemplation  of commencing  benefits  under the
               Pension  Plan,  such   designation   will  survive  a  subsequent
               postponement  of the  commencement  of benefits under the Pension
               Plan by such  Executive,  except  that,  if the yield on  10-year
               treasury notes on the Benefit Commencement Date is higher than on
               the Alternative Date, the yield on the Benefit  Commencement Date
               will be used.

               (b)  Mortality  Table.  The  Mortality  Table  used  will be that
               contained in U.S. Internal Revenue Service Revenue Ruling 95-6 or
               any  succeeding  Revenue  Ruling  issued by the Internal  Revenue
               Service for use in applying  the  provisions  of sections 415 and
               417(e) of the Internal Revenue Code.

          2.4 Eligibility for Benefit.  Except as provided under Section 3.3 and
          Section 6 no benefit shall be payable unless the Executive  shall have
          been in the employ of the  Company as a Vice  President  or officer of
          higher  rank  for a  period  of at  least  10  years  on  his  Benefit
          Commencement Date.

3.   TERMINATION  OF  EMPLOYMENT  PRIOR TO AGE 65. If the  Executive  terminates
     employment  prior to age 65, for any reason,  his rights and benefits under
     the Plan will be determined in accordance with this Section 3.

          3.1 Benefit  Commencement.  The Benefit  Commencement Date shall be as
          defined in Section 1 (and the  Executive  shall have no right to elect
          any other date); provided, however, that at the option of the Company,
          the Company may require  that the Benefit  Commencement  Date shall be
          the last day of the  month in which  the  Executive  reaches  his 65th
          birthday,  if later than the date benefits  would  otherwise  commence
          hereunder.  The option  provided  to the Company  herein  shall not be
          exercised unreasonably or in bad faith.

          3.2 Benefit  Adjustment.  If the Executive  terminates prior to age 65
          for reasons  other than death or  Disability,  his Net Annual  Benefit
          shall be reduced by 33/100 of one percent (0.0033) for each month such
          termination precedes the month in which he attains age 65.

          3.3 Death and Disability.  If the employment of the Executive with the
          Company terminates prior to age 65 but after completion of at least 10
          years service with the Company,  whether or not as an officer,  due to
          reason of  Disability,  the  Executive  will be eligible for immediate
          commencement of benefit payments as provided in Section 2. Further, no
          reduction in Net Annual Benefits will be made under Section 3.2 above.
          If the employment of the Executive with the Company  terminates  prior
          to age 65 but after  completion  of at least 10 years service with the
          Company,  whether or not as an officer,  for the reason of death,  the
          Executive's   Surviving   Spouse  shall  be  eligible  for   immediate
          commencement  of a Net Annual Benefit equal to 50% of the  Executive's
          Net Annual  Benefit as provided  in Section 2.2 above,  except that if
          the spouse is more than 60 months  younger  than the  Executive,  such
          spouse's  Net Annual  Benefit  shall be reduced by 1/12 of 1% for each
          full month by which the spouse is more than 60 months younger than the
          Executive;  provided,  however, that in determining the amount of such
          survivor  benefit,  no reduction shall be made pursuant to Section 3.2
          for the early commencement of benefits; and further provided, however,
          such benefits shall be paid in accordance with Section 2.2 above.

          3.4  Company  Consent.  Except for  termination  of  employment  under
          Section  3.3 above or in the event of a Change of Control  (as defined
          below), if the Executive  voluntarily  terminates  employment with the
          Company  prior to age 65 without the express,  written  consent of the
          Company,  all rights of the  Executive  to  benefits  hereunder  shall
          thereupon  terminate;  it  being  understood  that if the  Executive's
          employment  is  terminated  at  the  Company's  request,  no  benefits
          hereunder shall be forfeited pursuant to this Section 3.4.


<PAGE>
                                      C-26


4.   INDEMNIFICATION.  The Company shall pay any and all legal fees and expenses
     incurred by the  Executive in seeking to obtain or enforce any rights under
     the Plan,  provided  that the  Executive  is  successful  in  obtaining  or
     enforcing such rights.

5.   ADMINISTRATION.  Issues  relating  to the  administration  of the  Plan and
     payment of benefits  thereunder  shall be  determined  in good faith by the
     Committee pursuant to the terms of the Plan.

6.   CHANGE OF CONTROL.
         
          (a)  Notwithstanding any other provision of this Plan, in the event of
          a Change of  Control  (as  defined  below),  no  person  that is not a
          Participant  in the Plan  immediately  prior to such Change of Control
          shall be permitted to be a Participant  under the Plan  following such
          Change of Control.  Upon and after a Change of Control,  this Plan may
          not  be  amended,  modified  or  terminated  if  any  such  amendment,
          modification  or  termination   would  adversely  affect  any  accrued
          benefits of a  Participant  or his or her rights with  respect to such
          accrued benefit in the Plan,  unless any such amendment,  modification
          or  termination  is consented to in writing by all such  Participants.
          Upon a Change of Control, benefits under the Plan shall vest at a rate
          of ten  percent  (10%)  for each year the  Executive  served as a Vice
          President or higher  (prorated for partial years) and the requirements
          of Sections 2.4, 3.1 and 3.4 shall be deemed waived.  Upon a Change of
          Control,  the value of the benefits  payable to an Executive under the
          Plan will be  determined  assuming,  for purposes of applying  Section
          3.2,  that  the  Executive  terminated  on the date of the  Change  of
          Control at age 55 or his actual age, if older,  and shall be paid in a
          single cash lump sum to the  Executive  immediately,  provided that in
          the case of an  Executive  who has not  attained  age 55,  such amount
          shall be discounted to reflect the  commencement  of benefits prior to
          age 55 using the assumptions provided in Section 2.3.

          (b) For purposes of this Plan,  a "Change of Control"  shall be deemed
          to have occurred if:

               (1) any  "person",  as such  term is used in  Sections  13(d) and
          14(d)  of  the  Securities  Exchange  Act of  1934,  as  amended  (the
          "Exchange  Act")  (other  than  the  Company,  any  trustee  or  other
          fiduciary  holding  securities  under an employee  benefit plan of the
          Company,  or  any  company  owned,  directly  or  indirectly,  by  the
          stockholders of the Company in  substantially  the same proportions as
          their  ownership  of the  stock of the  Company),  is or  becomes  the
          "beneficial  owner" (as defined in Rule 13d-3 under the Exchange Act),
          directly or  indirectly,  of  securities  of the Company  representing
          either 31% or more of the voting power of all classes of capital stock
          of the Company or 33-1/3% or more of the then outstanding common stock
          without par value, of the Company;

<PAGE>
                                      C-27


               (2) the following  individuals cease for any reason to constitute
          a majority of the number of directors then serving:  individuals  who,
          on the date hereof,  constitute  the Board of Directors of the Company
          and any new director  (other than a director whose initial  assumption
          of office is in  connection  with an  actual  or  threatened  election
          contest, including but not limited to a consent solicitation, relating
          to the  election of directors of the  Company)  whose  appointment  or
          election by the Board of Directors or  nomination  for election by the
          Company's  stockholders  was approved or  recommended  by a vote of at
          least two  thirds  (2/3) of the  directors  then  still in office  who
          either  were  directors  on April  29,  1998 or whose  appointment  or
          election or  nomination  for  election was  previously  so approved or
          recommended;

               (3)  the   stockholders  of  the  Company  approve  a  merger  or
          consolidation  of the Company or any direct or indirect  subsidiary of
          the  Company  with any  other  company,  other  than  (i) a merger  or
          consolidation  which  would  result in the  voting  securities  of the
          Company outstanding  immediately prior thereto continuing to represent
          (either  by  remaining  outstanding  or being  converted  into  voting
          securities  of the surviving  entity or any parent  thereof) more than
          50% of the  combined  voting  power of the  voting  securities  of the
          Company or such  surviving  entity or any parent  thereof  outstanding
          immediately  after such  merger or  consolidation  or (ii) a merger or
          consolidation  effected to implement a recapitalization of the Company
          (or  similar  transaction)  in which no "person"  (as defined  herein)
          acquires  more than 50% of the combined  voting power of the Company's
          then outstanding securities; or

               (4) the  stockholders  of the Company  approve a plan of complete
          liquidation of the Company or an agreement for the sale or disposition
          by the Company of all or substantially all of the Company's assets.

7.   AMENDMENT.  The Plan may not be terminated  or amended  except by action of
     the  Board,  and may not be  amended to  terminate  or reduce or  adversely
     affect benefits of any Executive then participating in the Plan without the
     approval of such Executive.

8.   FORFEITURE.  No  forfeiture  provisions  contained  herein shall  survive a
     Change of Control.

9.   GOVERNING LAW; BINDING EFFECT. The Plan shall be governed and construed and
     enforceable  in  accordance  with the laws of the State of New York. If the
     Company is consolidated or merged with or into another  corporation,  or if
     another entity purchases all, or substantially  all of the Company's assets
     the  surviving  or acquiring  corporation  shall  succeed to the  Company's
     rights and obligations  under the Plan. The Plan shall inure to the benefit
     of,  and  shall  be  enforceable  by,  the  Executive's  personal  or legal
     representatives,  executors,  administrators,  successors, heirs, devisees,
     and legatees.

10.  NATURE OF OBLIGATIONS.  The Company's obligations to pay benefits under the
     Plan shall be  contractual  in nature  only;  however,  the amounts of such
     payments  may be held in a trust,  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 benefit paid from such trust shall reduce the amount
     of benefits owed by the Company.

11.  NOTICE.  Any  notice or filing  required  or  permitted  to be given to the
     Company shall be  sufficient if in writing and hand  delivered or when sent
     by  Registered or Certified  mail to the  principal  office of the Company,
     directed to the  attention of the  Secretary of the Company.  Any notice to
     the Executive  must be in writing and is effective  when  delivered or when
     mailed by Registered or Certified mail, return receipt  requested,  postage
     prepaid to the Executive or his personal  representatives at his last known
     address.

<PAGE>
                                      C-28


12.  EMPLOYMENT.  Nothing  contained in the Plan nor any action taken  hereunder
     shall be  construed  as a contract  guaranteeing  the  Executive  continued
     status as an employee.  Further,  if the Executive  has  committed  willful
     misconduct  in  office  materially  injurious  to the  Company  or has been
     convicted of a felony  relating to conduct in office  affecting the Company
     constituting willful violation of criminal law, any rights of the Executive
     under the Plan may be terminated by action of the Committee.

13.  VALIDITY. In the event any provision of this Plan is held invalid, void, or
     unenforceable,  the same shall not  affect in any  respect  whatsoever  the
     validity of any other  provision of this Plan.  Recipients in pay status as
     of January  28,  1998,  who did not consent to the  amendment  to the Plan,
     effective January 28, 1998, within sixty (60) days of the date of notice of
     the amendment  shall continue to receive  benefits in the event of a Change
     of  Control  under the  terms of the Plan in  effect on the date  preceding
     January 28, 1998.

14.  ASSIGNMENT.  The  Executive  may  not  assign,  alienate,   anticipate,  or
     otherwise  encumber any rights,  duties or amounts which he may be entitled
     to receive under the Plan.

15.  PROTECTIVE PROVISIONS. The Executive shall cooperate in good faith with the
     Company in furnishing any and all information  reasonably  requested by the
     Company in order to determine and  facilitate  benefit  payments  under the
     Plan.

16.  GENDER,  SINGULAR AND PLURAL.  All pronouns in any variations thereof shall
     be deemed to refer to the  masculine  or  feminine  as the  identity of the
     person or persons may require. As the context may require, the singular may
     be read as the plural and the plural as the singular.

17.  CAPTIONS.  The captions to the sections and  paragraphs of the Plan are for
     convenience  of reference  only and shall not control or affect the meaning
     or construction of any of its provisions.




     IN WITNESS  WHEREOF,  the Plan, as amended through April 29, 1998, has been
adopted by the Company upon the recommendation of the Committee and the approval
of its Board of Directors.

                                                   ASARCO Incorporated



                                                   By: /s/K. R. Morano
                                                   Executive Vice President

Attest:



/s/C. D. Gonzalez
Assistant Secretary

[SEAL]

<PAGE>
                                      C-29



                                  Exhibit 10(k)

                               ASARCO Incorporated

                           Compensation Deferral Plan

                 (As Amended and Restated as of April 29, 1998)


Section 1 - Effective Date.
The effective  date of the Plan as originally  adopted is February 1, 1995.  The
effective date of the Plan as hereby amended and restated is April 29, 1998.

Section 2 - Definitions.

1)   Board. - the Board of Directors of ASARCO Incorporated

2)   Code. - the Internal Revenue Code of 1986, as amended

3)   Committee.  - the Organization  and Compensation  Committee of the Board or
     any  individual  or  individuals  to  whom  authority  has  been  delegated
     hereunder by the Organization and Compensation Committee.

4)   Company.  - ASARCO  Incorporated and any subsidiary of ASARCO  Incorporated
     that has adopted the Plan

5)   Deferral  Amounts.  - a Participant's  Salary Deferral  Amounts,  Incentive
     Compensation  Deferral  Amounts,  Employer  Provided  Benefit,  and Special
     Incentive Compensation Awards

6)   Director. - any individual serving as a member of the Board

7)   Incentive  Compensation  Plan - the Incentive  Compensation Plan for Exempt
     Salaried Employees of ASARCO Incorporated
  
8)   Incentive  Plan - the Incentive  Compensation  Plan for Senior  Officers of
     ASARCO Incorporated

9)   Participant  - an  Eligible  Employee,  as  defined in Section 3, who has a
     valid election in effect under the Plan

10)  Participant  Account - A bookkeeping  account  established in the financial
     records of the Company to record the Deferral Amounts and deemed investment
     earnings  or  losses  arising  therefrom  based  on  Participant  elections
     pursuant to Section 5.

11)  Retirement  -  Retirement  under the  Retirement  Benefit Plan for Salaried
     Employees of ASARCO Incorporated.

12)  Savings  Plan -  Savings  Plan of  ASARCO  Incorporated  and  Participating
     Subsidiaries

Section 3 - Eligibility.

a)   Salary Deferral For purposes of salary deferral,  any employee  eligible to
     participate in the Savings Plan who:

     1)   had  compensation  from the Company of at least $80,000 (or such other
          greater   limit   as   may   be   established   under   Code   Section
          414(q)(1)(B)(1)) (the "HCE Limit") for the calendar year preceding the
          year for which the election is effective, or

     2)   has an  annualized  base salary equal to or greater than the HCE Limit
          for the year for which the election is effective  shall be  considered
          an "Eligible Employee".

<PAGE>
                                      C-30


b)   Incentive  Compensation  Deferral  For  purposes of  deferrals of incentive
     compensation  received  under  the  Incentive  Compensation  Plan  and  the
     Incentive  Plan  ("Incentive  Compensation  Awards"),  any exempt  salaried
     employee of the Company who meets the compensation  requirements of Section
     3(a)(1) or 3 (a) (2) above, shall be considered an "Eligible Employee".

Section 4 - Participation.

a)   Election to Defer

     1)   Salary  Deferral.  To  become a  Participant  in the  salary  deferral
          component  of the Plan for a  particular  calendar  year,  an Eligible
          Employee must elect,  prior to the beginning of such calendar year, to
          defer  receipt of a percentage  of his base annual salary to be earned
          during the  succeeding  calendar  year.  Such an election  shall be in
          writing on forms  prescribed by the  Committee,  and shall include the
          percentage  of base  annual  salary to be  deferred.  A  Participant's
          election  to  defer  with  respect  to  a  calendar  year  under  this
          subsection (a)(1) shall continue in effect for all subsequent calendar
          years until changed in accordance  with subsection (d). An employee of
          the Company who becomes an Eligible  Employee  during a calendar  year
          may elect to become a Participant in the Salary Deferral  component of
          the Plan for such  calendar  year by electing to defer a percentage of
          his base annual  salary (in  accordance  with Section  4(b)) within 30
          days of becoming an Eligible Employee.  The election will be effective
          on a prospective  basis  beginning with the payroll period that occurs
          as soon  as  administratively  practicable  following  receipt  of the
          election by the Committee.

     2)   Incentive  Compensation  Deferral.  To  become  a  participant  in the
          Incentive Compensation Deferral component of the Plan for a particular
          calendar year, an Eligible Employee must elect, prior to the beginning
          of such calendar year, to defer receipt of an amount not to exceed 100
          percent  of his  Incentive  Compensation  Award,  payable  during  the
          calendar year to which the election relates. Such an election shall be
          in writing  on forms  prescribed  by the  Committee.  A  Participant's
          election  to  defer  with  respect  to  a  calendar  year  under  this
          subsection (a)(2) shall continue in effect for all subsequent calendar
          years until changed in accordance with subsection (d).

b)   Deferral Amount

     1)   Salary  Deferral.  A Participant who meets the requirements of Section
          4(a)(1) for a calendar  year may elect to have the  following  amounts
          (the  "Salary  Deferral  Amount")  credited  to his  account  for such
          calendar year or portion thereof during which an election is effective
          (the "Deferral Period"):

          a)   the  product of (i) the  Participant's  elected  salary  deferral
               contribution  percentage  under  this  Plan  (not to  exceed  the
               maximum contribution percentage permitted under the Savings Plan)
               and (ii) the lesser of the  Participant's  base annual salary for
               such year or the Compensation  Limit (as defined below);  reduced
               by the  maximum  contribution  permitted  for highly  compensated
               employees under the Savings Plan due to the  limitations  imposed
               by Code Section  401(k)(3) or by the plan  administrator  for the
               Savings Plan for such calendar year; and

          b)   the Participant's elected salary deferral contribution percentage
               under the  Savings  Plan as in effect on  January 1 of such year,
               multiplied by the  Participant's  base annual salary in excess of
               the Code Section  401(a)(17) limit, as adjusted from time to time
               ($160,000 in 1999) (the "Compensation Limit"); provided, however,
               that the total amount of Salary  Deferrals  under this subsection
               cannot exceed the maximum contribution  percentage as may then be
               permitted under the Savings Plan.

<PAGE>
                                      C-31


     2)   Incentive   Compensation  Deferral.  The  amount  of  a  Participant's
          incentive  compensation  deferral  for a Deferral  Period shall be any
          whole dollar  amount or whole  percent of his  Incentive  Compensation
          Award payable  during the calendar year as elected by the  Participant
          (the "Incentive Compensation Deferral Amount"). In the event the award
          payable is less than the dollar amount specified in the  Participant's
          election,  the full amount of the award shall be deferred  (subject to
          Section 15).

     3)   Employer Provided Benefit.  With respect to each Deferral Period,  the
          Company shall make a deemed matching contribution equal to 50% of each
          Participant's  Salary  Deferral  Amount  (each  such  deemed  matching
          contribution, an "Employer Provided Benefit"); provided, however, that
          no  Participant's   Employer   Provided  Benefit  with  respect  to  a
          particular   year  may   exceed   the  amount  by  which  3%  of  such
          Participant's   base  salary  for  such  year   exceeds  the  matching
          contribution made by the Company on the Participant's behalf under the
          Savings Plan for such year.

     4)   Special  Incentive  Awards.  Notwithstanding  anything to the contrary
          herein, the Committee, in its discretion,  may provide for any amounts
          awarded to a  Participant  by the Board or the  Committee as a special
          incentive award under the Incentive  Compensation  Plan to be deferred
          pursuant  to the terms of this Plan and  credited  to a  Participant's
          Account,  subject to the terms and  limitations of the award ("Special
          Incentive Awards").

c)   Irrevocability  of Election  Subject to the provisions of subsection (d) of
     this Section 4, a deferral election hereunder shall be irrevocable.

d)   Change of Election A Participant may change prior elections with respect to
     Salary  Deferral or Incentive  Compensation  Deferral once in each calendar
     year.  Changes shall be in writing,  on forms  prescribed by the Committee.
     Such change of election  shall first be  effective  for the  calendar  year
     beginning after the date the change is received by the Committee.

Section 5 - Deemed Investment Provisions.

(a)  At the time of the election to  participate  in the Plan,  the  Participant
     must elect in writing to have his  Deferral  Amounts  deemed  invested,  in
     increments  of no less than 5%, in one or more of the  investment  funds as
     are  provided  under the Savings  Plan,  except;  however,  that the Asarco
     Common  Stock  Fund shall not be  available  as a deemed  investment.  Said
     election must total one hundred percent (100%) of his Deferral Amounts.

(b)  The  Participant  Accounts shall be credited with deemed  earnings,  gains,
     losses,  expenses and changes in the fair market value of such  Participant
     Accounts as if the Company had followed such investment designations.

(c)  Each  Participant may elect in writing that his future Deferral  Amounts be
     deemed invested in a proportion different from that previously elected, but
     the new election shall be prospective  only and shall be made in accordance
     with  paragraph  (b)  of  this  Section  5.  Any  changes  in  such  deemed
     investments must be in accordance with rules, if any, as are established by
     the Committee.

(d)  The election of a deemed  investment  option is the sole  responsibility of
     each Participant.  Neither the Company, nor the Committee,  nor any trustee
     of any  trust  that  may be  established  in  connection  with the Plan are
     authorized or permitted to advise (or shall have any liability with respect
     to) a  Participant  as to the election of any option or the manner in which
     his Deferral  Amounts shall be deemed to be invested.

<PAGE>
                                      C-32


e)   Consistent with this Section 5, each Participant may elect in writing, that
     a whole  percentage  (no less  than 5%) or  specific  dollar  amount of his
     deemed  investment  in any  fund  may be  transferred  to  any  other  fund
     available under the Plan.  Such election will be prospective  only and will
     be permitted in accordance  with rules,  if any, as are  established by the
     Committee.

Section 6 - Value and Payment of Benefits.

a)   Payment of Benefits

     Each Participant shall receive the value of his Participant Account in cash
     on January 15 of the year  following the year of the  Participant's  normal
     Retirement from the Company.  If a Participant  terminates service with the
     Company  prior  to  qualifying  for  normal  Retirement,  the  value of his
     Participant Account will be distributed in cash on the 15th day of the 13th
     month  following  the date of  termination  (subject to Section 15). In the
     event of the  death of a  Participant  before  receiving  the  value of his
     Participant Account,  such distribution shall be paid to his beneficiary or
     beneficiaries designated pursuant to Section 7 as soon as practicable under
     the Plan.

b)   Further  Deferral

     Notwithstanding  subsection (a) of this section,  a Participant who retires
     from the Company,  and who at the time of  retirement  has a balance in his
     Participant's  Account  of at least  $50,000,  may elect to  further  defer
     receipt of all or a portion of his Participant  Account,  but not less than
     $50,000 for a period of up to 20 years from his date of retirement from the
     Company.  To defer a payment of benefits under the Plan, a Participant must
     file a  written  election  at least  one year in  advance  of the date that
     payment of benefits under the Plan would otherwise be made. The Participant
     may elect to receive the amount  deferred  in a single  cash  payment or in
     annual cash  installments.  Any further  elections  to defer the receipt of
     benefits  under the Plan must also be filed at least one year  prior to the
     scheduled  payment date.  Acceleration of any benefits deferred pursuant to
     this  paragraph  can be made by filing a request  for  payment at least one
     year in advance of the  requested  accelerated  payment  date. 

c) Financial Hardship of  Participants
 
     Except as may  otherwise  be provided  by the terms of a Special  Incentive
     Award, at any time prior to commencement of payment of benefits pursuant to
     paragraph (b) of this Section 6, a Participant may request a payment of all
     or a portion of the value of his Participant Account.  Such a request shall
     be approved by the Committee only upon a finding that the  Participant  has
     suffered a severe financial  hardship which has resulted from events beyond
     the  Participant's  control  ("Hardship  Event"),  and  only in the  amount
     reasonably needed to satisfy such Hardship Event.  Whether a Hardship Event
     has occurred  shall be determined in  accordance  with Treasury  Regulation
     Sections  1.457-  2(h)(4) and (5). In the event such a payment is approved,
     payment of all or a portion of the value of the  Participant  Account shall
     be made as soon as practicable to the Participant.

d)   Other  Withdrawals

     Absent a  Hardship  Event or  adequate  prior  notice (in  accordance  with
     paragraph  (b)  above),  a request for a payment of all or a portion of the
     value of a Participant Account may be made by a Participant subject to a 6%
     penalty of the amount of the  requested  payment,  which  penalty  shall be
     deducted  from the requested  payment.  The  requested  payment,  less such
     penalty,  shall be paid in cash in a single lump sum as soon as practicable
     after the requested payment date.

<PAGE>
                                      C-33


Section 7 - Designation of Beneficiary.

A Participant may designate one or more  beneficiaries  by giving written notice
to  the  Committee.  If no  beneficiary  is  so  designated,  the  Participant's
beneficiary  will be the  Participant's  estate.  If more  than one  beneficiary
statement  has been filed the  beneficiary  or  beneficiaries  designated in the
statement bearing the most recent date will be deemed the valid beneficiary.

Section 8 - Participant's Rights Unsecured.

The right of any  Participant  to receive  benefits  under the provisions of the
Plan shall be contractual in nature only; however,  the amounts of such benefits
may be held in a trust,  the  assets of which  shall be subject to the claims of
the Company's  general  creditors only in the event of bankruptcy or insolvency.
Any amounts  paid to a  Participant  from such trust shall  reduce the amount of
benefits owed by the Company.

Section 9 - Participation in Other Plans.

Nothing in this 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 10 - Non-Alienation of Benefits.

No right to receive payments  hereunder shall be transferable or assignable by a
Participant or beneficiary.

Section 11 - Administration of the Plan.

The Plan shall be  administered  by the Committee.  The Committee shall construe
and  interpret  the Plan and may  adopt  rules  and  regulations  governing  the
administration  of the Plan, as well as exercise any duties and powers conferred
on it by the  terms of the Plan.  The  Committee  shall  act by vote or  written
consent of a majority  of its members or  otherwise  as in  accordance  with its
general procedures as in effect from time to time.

Section 12 - Amendment or Termination of the Plan.

This  Plan  may at any  time or  from  time to  time  be  amended,  modified  or
terminated  by the Board.  No  amendment,  modification  or  termination  shall,
without  the  consent of a  Participant,  adversely  affect  such  Participant's
accruals in his Participant Account.

Section 13 - No Entitlement to Awards or Right of Continued Employment.

Neither the establishment of the Plan nor the payment of any benefits  hereunder
nor any action of the Company,  a subsidiary  of the Company,  or the  Committee
shall be held or  construed  to confer  upon any  person  any legal  right to be
awarded any amounts under the Incentive Plan or the Incentive  Compensation Plan
or to continue in the employ of the Company or a subsidiary of the Company.  The
Company  and its  subsidiaries  expressly  reserve  the right to  discharge  any
Participant whenever the interest of any such company in its sole discretion may
so require without  liability to such company or the Committee  except as to any
rights which may be expressly conferred upon such Participant under the Plan.

Section 14 - Discretion of Company, Committee, and Board.

Any decision  made or action taken by the Company or by the  Committee or by the
Board arising out of or in  connection  with the  construction,  administration,
interpretation  and effect of the Plan shall lie within the absolute  discretion
of the Company,  the  Committee  or the Board,  as the case may be, and shall be
final, conclusive and binding upon all persons.

<PAGE>
                                      C-34


Section 15 - Tax Withholding.

There shall be deducted  from all deferrals or payments made under this Plan the
amount of any taxes  required  to be withheld by any  Federal,  state,  local or
foreign government, including any employment taxes required to be withheld under
Code Section 3121(v).  The Participants and their  beneficiaries,  distributees,
and  personal  representatives  will bear any and all Federal,  foreign,  state,
local or other income or other taxes imposed on amounts paid under the Plan, and
the Company may take  whatever  actions are  necessary and proper to satisfy all
obligations of such persons for payment of all such taxes.

Section 16 - Change of Control.

a)   Notwithstanding  any other provision of this Plan, in the event of a Change
     of Control (as defined  below),  no person that is not a Participant in the
     Plan immediately prior to such Change of Control shall be permitted to be a
     Participant under the Plan following such Change of Control. Upon and after
     a Change of Control,  this Plan may not be amended,  modified or terminated
     if any such amendment,  modification or termination  would adversely affect
     any accrued  benefits of a Participant or his or her rights with respect to
     such accrued benefits in the Plan, unless any such amendment,  modification
     or termination is consented to in writing by all such Participants.  Upon a
     Change of Control,  payment of all of the value of a  Participant  Account,
     including any Special Incentive Award component  thereof,  shall be made to
     the Participant immediately in a single cash lump sum without penalty . For
     purposes  of  this  Section  16  the  term  "Company"   shall  mean  ASARCO
     Incorporated.

b)   For  purposes of this Plan,  a "Change of Control"  shall be deemed to have
     occurred if:

     1)   any "person",  as such term is used in Sections 13(d) and 14(d) of the
          Securities  Exchange  Act of 1934,  as amended  (the  "Exchange  Act")
          (other  than the  Company,  any  trustee  or other  fiduciary  holding
          securities  under an  employee  benefit  plan of the  Company,  or any
          company owned,  directly or  indirectly,  by the  stockholders  of the
          Company in  substantially  the same  proportions as their ownership of
          the stock of the Company),  is or becomes the  "beneficial  owner" (as
          defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
          of  securities of the Company  representing  either 31% or more of the
          voting power of all classes of capital stock of the Company or 33-1/3%
          or more of the then  outstanding  common stock,  without par value, of
          the Company;

     2)   the  following  individuals  cease  for any  reason  to  constitute  a
          majority of the number of Directors then serving:  individuals who, on
          the date hereof,  constitute the Board of Directors of the Company and
          any new director  (other than a Director  whose initial  assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent  solicitation,  relating to the
          election of Directors of the Company) whose appointment or election by
          the Board of Directors  or  nomination  for election by the  Company's
          stockholders  was  approved  or  recommended  by a  vote  of at  least
          two-thirds (2/3) of the Directors then still in office who either were
          Directors  on the date  hereof or whose  appointment  or  election  or
          nomination for election was previously so approved or recommended;

     3)   the  stockholders of the Company approve a merger or  consolidation of
          the Company or any direct or indirect  subsidiary  of the Company with
          any other  company,  other  than (i) a merger or  consolidation  which
          would  result in the  voting  securities  of the  Company  outstanding
          immediately prior thereto continuing to represent (either by remaining
          outstanding or being converted into voting securities of the surviving
          entity or any parent  thereof)  more than 50% of the  combined  voting
          power of the voting securities of the Company or such surviving entity
          or  parent  thereof  outstanding  immediately  after  such  merger  or
          consolidation or (ii) a merger or consolidation  effected to implement
          a recapitalization of the Company (or similar transaction) in which no
          "person" (as defined  herein)  acquires  more than 50% of the combined
          voting power of the Company's then outstanding securities; or

<PAGE>
                                      C-35


     4)   the stockholders of the Company approve a plan of complete liquidation
          of the  Company or an  agreement  for the sale or  disposition  by the
          Company of all or substantially all of the Company's assets.

Section 17 - Severability.

In the event any provision of this Plan would serve to invalidate the Plan, that
provision  shall be deemed to be null and void,  and the Plan shall be construed
as if it did not contain the particular provision that would make it invalid.

Section 18 - Governing Law; Binding Effect; Miscellaneous.

The Plan shall be governed and construed and  enforceable in accordance with the
laws of the State of New York, except as superseded by applicable Federal law.

Where  appearing in the Plan,  the  masculine  gender shall include the feminine
gender.


          IN WITNESS  WHEREOF,  the Company  has caused the ASARCO  Incorporated
     Compensation  Deferral  Plan to be duly  adopted  and  executed by its duly
     authorized  officers and its corporate  seal affixed  hereon as of the 29th
     day of April, 1998.


ATTEST:                                            ASARCO Incorporated


                                                   By: _/s/D.B. Woodbury
                                                               Vice President


Attest:
/s/C.D. Gonzalez
  Assistant Secretary

[SEAL]
<PAGE>
                                      C-36


                                  Exhibit 10(l)

                               ASARCO Incorporated

                          SUPPLEMENTAL RETIREMENT PLAN

                 (As amended and restated as of April 29, 1998)


Section 1.  Effective Date.

The  effective  date  of  the  Supplemental  Retirement  Plan  (the  "Plan")  as
originally  adopted is February  27,  1976.  The  effective  date of the Plan as
hereby amended and restated is April 29, 1998.

Section 2.  Definitions.

1.   Benefits. The amount calculated under Section 4 for each Eligible Employee.

2.   Benefit  Commencement  Date.  Except as  provided  in Section  14, the date
     benefits commence under the Pension Plan.

3.   Board. The Board of Directors of ASARCO Incorporated.

4.   Code. The Internal Revenue Code of 1986, as amended.

5.   Committee.  The Organization and Compensation Committee of the Board or any
     individual or individuals to whom it delegates authority.

6.   Company. ASARCO Incorporated.

7.   Deferral Amount. Any Benefit amount, including earnings thereon, receipt of
     which is deferred under Section 7.

8.   Disability. Permanent and total disability as defined in the Pension Plan.

9.   Eligible  Employee.  Any  employee  who meets the  eligibility  criteria of
     Section 3.

10.  Investment  Manager.  The  investment  company  selected by the Company for
     deemed investment of deferred benefits.

11.  Pension Plan. The Retirement  Benefit Plan for Salaried Employees of ASARCO
     Incorporated.

Section 3.  Eligibility.

All  salaried  employees  of  the  Company  or of  any  subsidiary  specifically
designated by the Company,  whose retirement  benefits payable under the Pension
Plan, are reduced:

          (i) due to the benefit limitations of Section 415 of the Code; or

          (ii) due to the  requirement  of Section  401(a)(17)  of the Code that
          compensation  in excess of the limit in effect for a  particular  year
          thereunder may not be taken into account for Pension Plan purposes; or

          (iii)due to participation in any Company plan or program that provides
          for elective  pre-tax  deferrals  (the  reductions  under this Section
          3(i), (ii), and (iii)  hereinafter  collectively  referred to as "Code
          Reductions")

<PAGE>
                                      C-37


shall be eligible as to Benefits under this Plan.

Section 4.  Calculation of Benefits.

The Company will pay or cause to be paid to each Eligible  Employee or surviving
spouse of such Eligible  Employee (as defined in the Pension Plan),  as the case
may be, who  receives  payment  under the  Pension  Plan (for  purposes  of this
section 4 each a "Recipient"),  a Benefit which is equivalent to the excess,  if
any, of

          (i) the amount such  Recipient  would have received  under the Pension
          Plan for each calendar year, taking into account all provisions of the
          Pension  Plan  in  effect  and  applicable  from  time  to time to the
          Recipient, except for the Code Reductions; over

          (ii) the amount the Recipient is entitled to receive under the Pension
          Plan for such year, taking into account the Code Reductions.

Section 5.  Payment of Benefits.

(a) Except as otherwise  provided herein,  Benefits under the Plan shall be paid
in a lump sum, in cash,  on January 15th of the year  immediately  following the
year of the Eligible Employee's Benefit Commencement Date.

(b) An Eligible Employee may elect to receive annuity payments under the Plan in
the same form and at  approximately  the same time as payments are to be made to
the Eligible  Employee under the Pension Plan.  Such an election must be made in
writing at least  twelve (12) months  prior to the  Benefit  Commencement  Date,
except in the event of termination by reason of "Disability",  in which case the
election may be made at any time prior to the date of  termination.  An election
under this subsection may be amended at any time provided that no such amendment
shall be given  effect  unless it is made in writing at least twelve (12) months
prior to the Benefit Commencement Date.

Section 6.  Death of Employee.

Upon the death of an Eligible Employee:

          (i) Who has  elected an annuity  form of payment  pursuant  to Section
          5(b), the Eligible Employee's beneficiary under the Pension Plan shall
          receive the Benefit  described in Section 4 above, if any, in the same
          form and  approximately  at the same time as payments are made to such
          beneficiary under the Pension Plan.

          (ii) Who has not  elected  an  annuity  form of  payment  pursuant  to
          Section 5(b), the Eligible Employee's  surviving spouse, if any, shall
          receive any Benefits at the same time as provided in Section 5, except
          a valid  election  under  Section  7 shall  survive  the  death of the
          Eligible  Employee.  In such case, the surviving spouse shall have the
          same  rights as are  provided  to the  Eligible  Employee  pursuant to
          Section 7 below except that further  deferrals  will not be permitted.
          If there is no surviving  spouse,  the amount payable pursuant to this
          subsection  shall be paid as soon as  practicable in a lump sum to the
          Eligible Employee's beneficiary, or if none, to his estate.

Section 7.  Deferral of Benefit Payments.

(a) If the value of the  Benefits  payable to an  Eligible  Employee is at least
$50,000, an Eligible Employee may elect at least twelve (12) months prior to the
date Benefits  will be paid under  Section  5(a), to defer,  for a period not to
exceed twenty (20) years from the Benefit Commencement Date, the Deferral Amount

<PAGE>
                                      C-38


to a future date or to provide for the payment of a Deferral  Amount in a series
of scheduled installments.  Any election made pursuant to this subsection may be
amended, provided that no such amendment shall be given effect unless it is made
in writing at least twelve (12) months prior to the date Benefits under the Plan
are payable,  except in the event of  termination  by reason of  Disability,  in
which  case  the  election  may  be  made  at any  time  prior  to  the  Benefit
Commencement  Date.  Any such  election  may be changed,  provided  that no such
change shall be given  effect  unless it is made in writing at least twelve (12)
months prior to the date benefits under the Plan are payable.

(b) At any  time  subsequent  to the  Benefit  Commencement  Date,  an  Eligible
Employee  who made an election  pursuant to Section  7(a) and who has suffered a
severe  financial  hardship  which has resulted  from events beyond the Eligible
Employee's control ("Hardship Event"), may request a payment of all or a portion
of the value of his Deferral Amount which is not yet payable.  If such a request
shall be approved by the  Committee  payment of all or a portion of the value of
the  Deferral  Amount  shall  be made in cash in a  single  lump  sum as soon as
practicable to the Eligible  Employee but only in an amount reasonably needed to
satisfy such  Hardship  Event.  Whether a Hardship  Event has occurred  shall be
determined in accordance  with Treasury  Regulation  Sections 1.457- 2(h)(4) and
(5).

(c) At any  time  subsequent  to the  Benefit  Commencement  Date,  an  Eligible
Employee  who  made  an  election   pursuant  to  Section  7(a)  may  elect  the
acceleration  of payment of all or a portion of the value of the Deferral Amount
not yet payable  subject to a 6% penalty of the amount  accelerated.  Payment of
such amount, less such penalty (which shall be forfeited), shall be paid in cash
in a single lump sum as soon as practicable after the requested payment date.

(d) At any  time  subsequent  to the  Benefit  Commencement  Date,  an  Eligible
Employee who has made an election  pursuant to Section 7(a) may file an election
to amend such prior  election  affecting  any amount  payable at least 12 months
subsequent  to such  amendment,  provided no such  election may  accelerate  any
payment to a date earlier than 12 months from the date of amendment. The amended
form of payment  may be a single  sum  payment  of any  amounts  not yet due and
payable or annual  installments of any such amounts,  or a combination  thereof,
provided no payments may be extended  longer than the time  specified in Section
7(a).

Section 8.  Investment of Deferral Amounts.

(a) Any Deferral  Amount shall be deemed invested in accordance with an election
to be made by the Eligible Employee in such investment  vehicles as are provided
under rules established by the Committee. The Company will attempt to follow the
Eligible Employee's elections,  but will not be required to do so. Regardless of
whether the Eligible  Employee's  elections  are followed,  the Deferral  Amount
shall be credited with deemed earnings,  gains, losses, expenses, and changes in
the fair market  value of such  Deferral  Amount as if the Company had  followed
such  investment  designations.  All  elections,  amendments to  elections,  and
provisions for transfers among  investment  vehicles shall be in accordance with
rules, if any, as shall be established by the Committee.

(b) The election of a deemed  investment  option is the sole  responsibility  of
each Eligible  Employee.  Neither Asarco, nor the Committee that administers the
Plan, nor any trustee of any trust that may be  established  in connection  with
the Plan are authorized or permitted to advise (or shall have any liability with
respect to) an Eligible  Employee as to the election of any option or the manner
in which his Deferral Amount shall be deemed to be invested.

<PAGE>
                                      C-39


Section 9.  Value of Benefits.

The  amount of the lump sum  referred  to in Section  5(a) shall be the  present
value of the  Benefit  amount  determined  under  Section 4 (after  taking  into
account,  if  applicable,  any  reductions  as set forth in the Pension  Plan to
reflect  the  commencement  of payments  prior to age 65) by  assuming  that the
Eligible  Employee has elected a single life annuity  under the Pension Plan and
by using the following actuarial assumptions:

(a) Discount  Rate.  The discount  rate used in computing  the present  value of
benefits  payable under the Plan is the yield on 10-year  treasury  notes on the
Eligible Employee's Benefit  Commencement Date, or if a legal holiday, the first
business day immediately  following the Benefit  Commencement Date.  However, at
any time during a thirteen  month  period  ending with the Benefit  Commencement
Date,  an Eligible  Employee may  designate an  alternative  date for fixing the
interest  rate (the  "Alternative  Date") used to calculate the present value of
the  lump  sum  distribution.  The  designation  must  be in  writing,  and  the
Alternative  Date must be within seven calendar days of the date the designation
is received by the Company.  The designation of the Alternative  Date for fixing
the interest rate, once made, may not be changed for any reason. Notwithstanding
the foregoing, if an Eligible Employee designates an Alternative Date under this
subsection in contemplation of commencing  benefits under the Pension Plan, such
designation  will  survive a  subsequent  postponement  of the  commencement  of
benefits under the Pension Plan by such Eligible  Employee,  except that, if the
yield on 10-year treasury notes on the Benefit  Commencement Date is higher than
on the  Alternative  Date,  the yield on the Benefit  Commencement  Date will be
used.

(b) Mortality  Table.  The Mortality  Table used will be that  contained in U.S.
Internal  Revenue Service  Revenue Ruling 95-6 or any succeeding  Revenue Ruling
issued by the Internal  Revenue  Service for use in applying the  provisions  of
Sections 415 and 417(e) of the Internal Revenue Code.

Section 10.  Employee's Rights Unsecured.

The right of any Eligible  Employee to receive  benefits under the provisions of
the Plan shall be  contractual  in nature  only;  however,  the  amounts of such
benefits  may be held in a trust,  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 amounts  paid from such trust shall  reduce the amount of
benefits owed by the Company.

Section 11.  Assignability.

No right or interest of the Eligible  Employee  under this Plan shall be subject
to voluntary or involuntary alienation, assignment or transfer of any kind.

Section 12.  Participation in Other Plans.

Nothing  in this Plan will  affect  any right  which an  Eligible  Employee  may
otherwise have to participate in any other retirement plan, or agreement,  which
the Company may have now or hereafter.

Section 13.  Discretion of Company and Board.

Any decision  made or action taken by the Company or by the Board arising out of
or in connection  with the  construction,  administration,  interpretation,  and
effect of the Plan shall lie within the  absolute  discretion  of the Company or
the Board,  as the case may be, and shall be final,  conclusive and binding upon
all persons.

Section 14.  Change of Control.

(a)  Notwithstanding  any other provision of this Plan, in the event of a Change
of Control  (as  defined  below),  no person  that is not an  Eligible  Employee
immediately prior to such Change of Control shall be permitted to be an Eligible
<PAGE>
                                      C-40


Employee  under the Plan  following  such  Change of  Control.  Upon and after a
Change of Control,  this Plan may not be amended,  modified or terminated if any
such amendment,  modification or termination  would adversely affect any accrued
benefits  of an  Eligible  Employee  or his or her rights  with  respect to such
accrued  benefits  in the  Plan,  unless  any such  amendment,  modification  or
termination is consented to in writing by all Eligible Employees.  Upon a Change
of Control,  payment of all of the value of any and all  amounts  accrued to the
Eligible Employees hereunder shall be made to Eligible Employees  immediately in
a single cash lump sum  calculated  using the Discount Rate and Mortality  Table
set forth in Section 9. For  purposes  of this  Section 14,  benefits  under the
Pension  Plan for  employees  who have not  attained  age 55 shall be the amount
determined  under the  Pension  Plan  payable as a vested  deferred  benefit (as
defined in the Pension  Plan) at age 55 after  taking into  account the discount
for  commencement  of payment  before age 55 using the actuarial  assumptions in
Section 9.

(b)  For  purposes of this Plan,  a "Change of Control"  shall be deemed to have
     occurred if:

          (1) any "person",  as such term is used in Sections 12(d) and 13(d) of
          the Securities  Exchange Act of 1934, as amended (the "Exchange  Act")
          (other  than the  Company,  any  trustee  or other  fiduciary  holding
          securities  under an  employee  benefit  plan of the  Company,  or any
          company owned,  directly or  indirectly,  by the  stockholders  of the
          Company in  substantially  the same  proportions as their ownership of
          the stock of the Company),  is or becomes the  "beneficial  owner" (as
          defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
          of  securities of the Company  representing  either 31% or more of the
          voting power of all classes of capital stock of the Company or 33-1/3%
          or more of the then outstanding common stock without par value, of the
          Company;  

          (2) the  following  individuals  cease for any reason to  constitute a
          majority of the number of Directors then serving:  individuals who, on
          the date hereof,  constitute the Board of Directors of the Company and
          any new Director  (other than a Director  whose initial  assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent  solicitation,  relating to the
          election of Directors of the Company) whose appointment or election by
          the Board of Directors  or  nomination  for election by the  Company's
          stockholders  was  approved or  recommended  by a vote of at least two
          thirds  (2/3) of the  Directors  then still in office who either  were
          Directors  on the date  hereof or whose  appointment  or  election  or
          nomination for election was previously so approved or recommended;

          (3) the  stockholders of the Company approve a merger or consolidation
          of the  Company or any direct or  indirect  subsidiary  of the Company
          with any other company, other than (i) a merger or consolidation which
          would  result in the  voting  securities  of the  Company  outstanding
          immediately prior thereto continuing to represent (either by remaining
          outstanding or being converted into voting securities of the surviving
          entity or any parent  thereof)  more than 50% of the  combined  voting
          power of the voting securities of the Company or such surviving entity
          or any parent  thereof  outstanding  immediately  after such merger or
          consolidation or (ii) a merger or consolidation  effected to implement
          a recapitalization of the Company (or similar transaction) in which no
          "person" (as defined  herein)  acquires  more than 50% of the combined
          voting power of the Company's then outstanding securities; or

          (4)  the  stockholders  of the  Company  approve  a plan  of  complete
          liquidation of the Company or an agreement for the sale or disposition
          by the Company of all or substantially all of the Company's assets.

Section 15.  Designation of Investment Manager.

(a) If the total  value of an Eligible  Employee's  Deferral  Amounts  under the
Plan,  the  ASARCO  Incorporated   Supplemental   Pension  Plan  for  Designated
Mid-Career  Officers,  and the ASARCO  Incorporated  Compensation  Deferral Plan
(collectively the "Plans") exceeds $3 million,  the Eligible Employee may file a

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                                      C-41


request with the Committee that the entire value of his Benefits under the Plans
be managed by an investment  manager to be designated by the Eligible  Employee.
Such request may be made at any time,  however,  it may only be effective  after
the Eligible  Employee has retired or  otherwise  commences to receive  benefits
under the Pension Plan.

(b)  Approval  of any such  request by an  Eligible  Employee  to  designate  an
investment  manager under this Section 15 shall be at the sole discretion of the
Committee and, if approved, all fees related to all investment services provided
by the  designated  investment  manager  will be deducted  from the value of the
Eligible Employee's  accounts.  The Eligible Employee designating the investment
manager will be solely responsible for the actions of the designated  investment
manager and neither the Company, nor the Committee, nor any trustee of any trust
that  may  be  established   in  connection   with  the  Plans  shall  have  any
responsibility  for, or liability  with  respect to,  review or oversight of the
performance of the designated investment manager.

Section 16.  Severability.

The  provisions  of  this  Plan  shall  be  severable,  and if any  one or  more
provisions shall be considered or held to be invalid or unenforceable,  or shall
result in a portion of the Plan being treated as a pension plan under Title I of
ERISA, the remaining provisions shall continue to be valid and enforceable.

Section 17.  Cost to be Borne by Subsidiary.

If any payment under this Plan is to be made to an Eligible  Employee on account
of any  employee's  service for a subsidiary  of the  Company,  the cost of such
payment shall be borne in such  proportions  as the Company and such  subsidiary
shall determine.

Section 18.  Amendment.

This  Plan  may at  any  time  or  from  time  to  time  be  amended,  modified,
discontinued  or  terminated  by the Board if,  in its sole  discretion,  such a
change is deemed necessary and desirable.

Section 19.  Governing Law.

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

          IN WITNESS  WHEREOF,  the  Company has caused  this  Amendment  to its
          Supplemental  Retirement  Plan to be duly  adopted and executed by its
          duly authorized  officers and its corporate seal affixed hereto on the
          29th day of April, 1998.


                                                   ASARCO Incorporated


                                                   By: /s/ K.R. Morano
                                                   Executive Vice President

Attest:



/s/ C.D. Gonzalez
Assistant Secretary

[SEAL]
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                                      C-42



                                  Exhibit 10(m)

                               ASARCO Incorporated

        CONSULTING AGREEMENT BETWEEN THE COMPANY AND MR. R. de J. OSBORNE

                            (dated November 24, 1998)


F.R. McAllister
President & COO



Mr. Richard de J. Osborne
Chairman & Cheif Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038

Dear Dick:

In accordance with the Company's  retirement  policy for its officers,  you will
retire as Chairman of the Board and CEO effective April 30, 1999. The purpose of
this letter is to set forth the terms and conditions of our  relationship  after
your  retirement.  Please  signify  your  agreement by signing this letter where
indicated below and returning it to me. The enclosed copy is for your records.

1. Consulting  Arrangement.  To ensure a smooth  transition in the leadership of
the  Company,  you  will,  during  the  one-year  period  commencing  with  your
retirement, provide consulting services to the Company from time to time, as may
reasonably  be  requested  by the  then  Chairman  of the  Board  and CEO or his
designee,  with  respect to  matters of  corporate  governance,  Latin  American
affairs and metal  market  analysis.  The  Company  may request you  continue to
provide  these  services  for one  additional  year,  under  the same  terms and
conditions.

In consideration of these services, the Company will pay you a consulting fee of
$4,500 per day or any  portion of a day with the minimum of 23  consulting  days
per  year,  beginning  the first day of the  month  following  your  retirement.
Payments toward minimum fee will be made, as necessary, quarterly. You will also
be reimbursed for reasonable out-of-pocket expenses incurred by you with respect
to such services in accordance with the Company's expense  reimbursement policy.
Consulting  fees which in the  aggregate  exceed the  minimum  fee,  and expense
reimbursements  will be paid to you within 30 days after you submit a  statement
to the  Company  setting  forth the  date(s)  on which you  provided  consulting
services to the  Company  during the  previous  quarter,  and your  reimbursable
expenses for the previous month.

2. Directorship. The Company will use its reasonable best efforts to ensure that
you remain a director of the Company and the Southern Peru Copper Company during
the two-year period commencing with your retirement. As a non-employee director,
you  will  be  entitled  to  compensation  and  benefits  under  the  plans  and
arrangements  maintained by the Company and Southern Peru Copper,  respectively,
for their non-employee directors generally.

3.  Retiree  Benefits.   You  and  your  eligible  dependents  may  continue  to
participate in the Company's medical plan,  prescription drug plan, dental plan,
and vision plan, on the same basis as other participants.  The annual premium to
be paid  for  such  participation  is  $3,630  beginning  with  the date of your
retirement,  to be paid quarterly as a deduction from other payments due, and to
be adjusted  annually  based upon the  Company's  per capita  salaried flex plan
experience.  Benefits to which you and your dependents are or may be entitled to
will be determined  and provided in accordance  with the terms and conditions of
the Company's  applicable benefit plans. For the medical plan, you have selected
the level 1 program.

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                                      C-43


4. Office and Support  Staff.  The Company will provide you with an office (with
furnishings  and  other  appointments)  of  a  type  and  size  and  secretarial
assistance of a type and extent  provided by the Company to its vice  presidents
generally. This office will be at the Company's offices in New York City, or, if
the  Company  relocates  outside of New York  City,  at such  other,  comparable
location  in New York  City as may be  mutually  acceptable.  For so long as you
maintain  this  office,  the  Company  will (a) pay for your  membership  in one
luncheon club, (b) upon your request  provide you with the reasonable use of the
Company car and  driver,  to the extent  available  and (c) provide you with (i)
relevant business and industry publications, (ii) a cellular telephone and (iii)
a personal computer and peripherals.

It is understood the Company will, at its cost and expense, deliver your current
office furniture,  computer and personal effects to you at a location in the New
York City area specified by you.

5. Americas  Society.  So long as the Company  maintains  its  membership in the
Council of the  Americas  and you are a director of the  Americas  Society,  the
Company will maintain its  membership  in the Americas  Society and will pay the
contributions  in conjunction  with the annual Americas tour by the Board of the
Americas Society.

6.  Confidentiality.  During the course of providing  consulting services to the
Company,  you will  have  access to  confidential  information  relating  to the
Company and its affiliates.  You agree to treat all Confidential  Information as
proprietary.

7.  Miscellaneous.  This agreement is personal to you and your retiree  benefits
under paragraph 3 may only be assigned to your spouse. This agreement is binding
on the Company, and its successors and assignees.

This agreement supersedes any previous  understandings or agreement,  written or
otherwise,  regarding  the  subject  matter  hereof  and may only be  amended in
writing.

The terms of this  agreement  will be  constructed  according to the laws of the
State of New York without regard to the conflict of laws provision thereof.

                                                   Regards,


                                                   /s/ Francis R. McAllister  
                                                   Francis R. McAllister


Agreed to:



By:/s/Richard de J. Osborne
         Richard de J. Osborne



Date:    11/24/98

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