SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ ] Filed by a Party other than the Registrant [ X ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
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[X] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Asarco Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Phelps Dodge Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
------------------------
3) Filing Party:
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4) Date Filed:
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Notes:
<PAGE>
FOR IMMEDIATE RELEASE
Contacts:
INVESTORS MEDIA
Phelps Dodge Phelps Dodge
Thomas M. Foster Susan M. Suver
(602) 234-8139 (602) 234-8003
Gregory W. Stevens
(602) 234-8166
Arthur Schmidt & Associates, Inc. Sard Verbinnen & Co
Martin Zausner/Alan Weinstein/Joan George Sard/David Reno/Debbie Miller
Harper (212) 687-8080
(212) 953-5555
PHELPS DODGE SENDS LETTERS TO ASARCO AND CYPRUS AMAX BOARDS
------------------------------------------------------------
PHOENIX, AZ, August 20, 1999 - Phelps Dodge Corporation (NYSE: PD) today
sent the following letters to the Boards of Directors of Asarco Incorporated
(NYSE:AR) and Cyprus Amax Minerals Company (NYSE: CYM):
Board of Directors of ASARCO Incorporated
c/o Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Gentlemen:
We are disappointed in your response to our proposed three-way
combination of Asarco, Cyprus Amax and Phelps Dodge. As you know, we have on
three recent occasions requested the opportunity to discuss our proposal, which
we believe would be far superior to your shareholders than your proposed
combination with Cyprus Amax.
1
<PAGE>
We are particularly disappointed that instead of accepting our previous
requests to meet to discuss our proposal to acquire Asarco for a substantial
premium, you chose today to announce unilaterally our interest in acquiring
Asarco and Cyprus Amax and to reject our proposal in favor of your no-premium
merger proposal with Cyprus Amax. This appears consistent with the manner in
which you have chosen to treat your own shareholders by announcing just today,
at the same time you first disclosed the terms of your July 15 merger agreement,
that the record date for your shareholder vote on the no- premium merger with
Cyprus Amax would be August 25. Since trades after today will settle after
August 25, this effectively precluded any significant trading in the market on
an informed basis before the determination of shareholders eligible to vote at
your meeting.
In light of your unilateral announcement, we have no other choice than
to publicly announce our proposal to enter into a business combination with
Asarco and Cyprus Amax, so that share owners of all three companies are fully
informed.
Terms of our Proposal
We propose a business combination of Phelps Dodge and Asarco pursuant to
which all of the outstanding common stock of Asarco would be exchanged for
Phelps Dodge common stock at an exchange ratio of 0.4098 Phelps Dodge common
shares for each Asarco common share. We are also independently proposing to
Cyprus Amax a business combination of Phelps Dodge and Cyprus Amax pursuant to
which all of the outstanding common stock of Cyprus Amax would be exchanged for
Phelps Dodge common stock at an exchange ratio of 0.3135 Phelps Dodge common
shares for each Cyprus Amax common share. Based on share prices for the three
companies' common shares before trading was halted this morning, these ratios
imply a premium of approximately 30% for Asarco and a premium of approximately
29% for Cyprus Amax, while preserving the relative economics of the exchange
ratio under your proposed combination with Cyprus Amax.
Following the combination, we plan to continue the current $2.00 per
share Phelps Dodge common dividend. This would result in a substantial dividend
increase for Asarco shareholders to 4.1 times the dividend contemplated in your
proposed merger with Cyprus Amax.
Our proposed transaction would be tax-free for your shareholders. In
addition, through their ownership of Phelps Dodge common stock, your
shareholders would continue to participate in the ongoing value creation of the
combined company. Although we prefer a transaction involving all three
companies, we are prepared to enter
2
<PAGE>
into a negotiated business combination with either Asarco or Cyprus Amax,
regardless of whether the other company is willing to proceed on a negotiated
basis.
We believe that consideration in the form of Phelps Dodge common stock
should be particularly attractive to your shareholders. Over the past several
years Phelps Dodge's stock price has significantly outperformed the stock prices
of Asarco and Cyprus Amax. As a result of Phelps Dodge's higher dividend, the
level of outperformance is even greater when viewed on the basis of the total
return to shareholders assuming reinvestment of dividends. Over the past 10
years Phelps Dodge's total return has been 161% as compared to negative 20% and
negative 26% for Asarco and Cyprus Amax, respectively. Similarly, over the past
15 years, Phelps Dodge's total return has been 1,024% as compared to 25% for
Asarco and 102% for Cyprus Amax. We are very proud of this strong management and
operational track record over a difficult copper environment.
The Combined Company
We believe that our proposal presents a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with enhanced
flexibility to deliver superior results in all business cycles. Our proposal
would create a much stronger company than would your proposed merger with Cyprus
Amax through:
o the significantly stronger ability of the combined company, relative
to the Asarco-Cyprus Amax combination, to integrate southwestern U.S.
mining operations, administrative functions in the U.S., Chile and
Peru, and worldwide exploration and development activities;
o the financial strength of the combined company and ability to create
a world class portfolio of cost-competitive mining assets;
o a strong and deep management team, at both the operating and
corporate levels, with strong credibility in the marketplace;
o the ability to eliminate substantial overhead, exploration,
purchasing and other expenses through the consolidation;
o the tremendous operating leverage of the combined company, together
with enough diversity in other businesses to mitigate cyclical
downturns;
o the immediate and substantial accretion to the cash flow of the
combined company resulting from the transaction;
3
<PAGE>
o the significant accretion to earnings per share of the combined
company beginning in the second year after closing, based on the
current portfolio of the combined companies and analysts' estimates
of copper prices of $0.80 to $0.85 per pound in 2001;
o the total current annual copper production of the combined company of
3.8 billion pounds and attributable copper reserves of 80 billion
pounds;
o the increased ability of the combined company to compete for
world-class projects;
o the ability of the combined company to reduce capital expenditures;
o the strong, liquid balance sheet of the combined company, with
excellent access to capital; and
o the way all of these factors would build greater shareholder value,
on an ongoing basis, for the shareholders of all three companies.
Through the measures described above we estimate that in a three-way
combination we could achieve approximately $200 million in annual cash cost
savings, fully phased in by the end of the second year after closing of the
transaction. In addition, we expect lower depreciation of approximately $65
million annually, bringing total estimated annual savings to approximately $265
million. These cost savings are based on public information and our expectation
that we can deliver at least $75 million in incremental savings above the new
cash synergy figure of $125 million that you have projected in the proposed
Asarco-Cyprus Amax combination. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper prices.
Following the combination, we would expect to operate all properties in
accordance with Phelps Dodge's disciplined management approach. This means that
each property would be run on a basis intended to earn in excess of the cost of
capital over a full copper price cycle. We believe that Phelps Dodge's
management team has the credibility to make the tough decisions necessary to
rapidly integrate all three businesses and to create value for shareholders.
A three-way combination, by creating a more efficient global competitor,
would also benefit the employees and customers of all three companies. We have
conducted an in-depth analysis of the three-way combination from a regulatory
perspective and have concluded that it will be possible to obtain the necessary
approvals on a timely basis.
4
<PAGE>
Our Board of Directors has authorized this proposal and we are
resolutely committed to its consummation. We are confident that your
shareholders will find our proposal to be a unique and compelling opportunity.
We continue to prefer to proceed on a mutually satisfactory, negotiated basis
but are prepared to pursue all other avenues should that be necessary. We are
ready to meet with you or your management at any time.
Sincerely,
/s/ D.C. Yearley /s/ J. Steven Whistler
- ----------------------------------- -------------------------------------
Chairman and President and
Chief Executive Officer Chief Operating Officer
5
<PAGE>
Board of Directors of Cyprus Amax Minerals Company
c/o Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Ladies and Gentlemen:
We are disappointed in your response to our proposed three-way
combination of Cyprus Amax, Asarco and Phelps Dodge. As you know, we have
on three recent occasions requested the opportunity to discuss our proposal,
which we believe would be far superior to your shareholders than your
proposed combination with Asarco.
We are particularly disappointed that instead of accepting our
previous requests to meet to discuss our proposal to acquire Cyprus Amax for
a substantial premium, you chose today to announce unilaterally our interest
in acquiring Cyprus Amax and Asarco and to reject our proposal in favor of
your no-premium merger proposal with Asarco. This appears consistent with
the manner in which you have chosen to treat your own shareholders by
announcing just today, at the same time you first disclosed the terms of
your July 15 merger agreement, that the record date for your shareholder
vote on the no-premium merger with Asarco would be August 25. Since trades
after today will settle after August 25, this effectively precluded any
significant trading in the market on an informed basis before the
determination of shareholders eligible to vote at your meeting.
In light of your unilateral announcement, we have no other
choice than to publicly announce our proposal to enter into a business
combination with Cyprus Amax and Asarco, so that share owners of all three
companies are fully informed.
Terms of our Proposal
We propose a business combination of Phelps Dodge and Cyprus
Amax pursuant to which all of the outstanding common stock of Cyprus Amax
would be exchanged for Phelps Dodge common stock at an exchange ratio of
0.3135 Phelps Dodge common shares for each Cyprus Amax common share. We are
also independently proposing to Asarco a business combination of Phelps
Dodge and Asarco pursuant to which all of the outstanding common stock of
Asarco would be exchanged for Phelps Dodge common stock at an exchange ratio
of 0.4098 Phelps Dodge common shares for each Asarco common share. Based on
share prices for the three companies' common shares before trading was
halted this morning, these ratios imply a premium of approximately 29% for
Cyprus Amax and a premium of approximately 30% for Asarco, while preserving
the relative economics of the exchange ratio under your proposed combination
with Asarco.
6
<PAGE>
Following the combination, we plan to continue the current $2.00
per share Phelps Dodge common dividend. This would result in a substantial
dividend increase for Cyprus Amax shareholders to 4.1 times the dividend
contemplated in your proposed merger with Asarco.
Our proposed transaction would be tax-free for your
shareholders. In addition, through their ownership of Phelps Dodge common
stock, your shareholders would continue to participate in the ongoing value
creation of the combined company. Although we prefer a transaction
involving all three companies, we are prepared to enter into a negotiated
business combination with either Cyprus Amax or Asarco, regardless of
whether the other company is willing to proceed on a negotiated basis.
We believe that consideration in the form of Phelps Dodge common
stock should be particularly attractive to your shareholders. Over the past
several years Phelps Dodge's stock price has significantly outperformed the
stock prices of Cyprus Amax and Asarco. As a result of Phelps Dodge's
higher dividend, the level of outperformance is even greater when viewed on
the basis of the total return to shareholders assuming reinvestment of
dividends. Over the past 10 years Phelps Dodge's total return has been 161%
as compared to negative 26% and negative 20% for Cyprus Amax and Asarco,
respectively. Similarly, over the past 15 years, Phelps Dodge's total
return has been 1,024% as compared to 102% for Cyprus Amax and 25% for
Asarco. We are very proud of this strong management and operational track
record over a difficult copper environment.
The Combined Company
We believe that our proposal presents a unique opportunity to
create a large, resource-rich portfolio of lower-cost global copper assets
with enhanced flexibility to deliver superior results in all business
cycles. Our proposal would create a much stronger company than would your
proposed merger with Asarco through:
o the significantly stronger ability of the combined company,
relative to the Cyprus Amax-Asarco combination, to integrate
southwestern U.S. mining operations, administrative functions
in the U.S., Chile and Peru, and worldwide exploration and
development activities;
o the financial strength of the combined company and ability to
create a world class portfolio of cost-competitive mining
assets;
o a strong and deep management team, at both the operating and
corporate levels, with strong credibility in the marketplace;
7
<PAGE>
o the ability to eliminate substantial overhead, exploration,
purchasing and other expenses through the consolidation;
o the tremendous operating leverage of the combined company,
together with enough diversity in other businesses to mitigate
cyclical downturns;
o the immediate and substantial accretion to the cash flow of
the combined company resulting from the transaction;
o the significant accretion to earnings per share of the
combined company beginning in the second year after closing,
based on the current portfolio of the combined companies and
analysts' estimates of copper prices of $0.80 to $0.85 per
pound in 2001;
o the total current annual copper production of the combined
company of 3.8 billion pounds and attributable copper reserves
of 80 billion pounds;
o the increased ability of the combined company to compete for
world-class projects;
o the ability of the combined company to reduce capital
expenditures;
o the strong, liquid balance sheet of the combined company, with
excellent access to capital; and
o the way all of these factors would build greater shareholder
value, on an ongoing basis, for the shareholders of all three
companies.
Through the measures described above we estimate that in a
three-way combination we could achieve approximately $200 million in annual
cash cost savings, fully phased in by the end of the second year after
closing of the transaction. In addition, we expect lower depreciation of
approximately $65 million annually, bringing total estimated annual savings
to approximately $265 million. These cost savings are based on public
information and our expectation that we can deliver at least $75 million in
incremental savings above the new cash synergy figure of $125 million that
you have projected in the proposed Cyprus Amax-Asarco combination. This
does not include any cost savings from the rationalization of high-cost
production during periods of low copper prices.
Following the combination, we would expect to operate all
properties in accordance with Phelps Dodge's disciplined management
approach. This means that each property would be run on a basis intended to
earn in excess of the cost of capital over a full copper price cycle. We
believe that Phelps Dodge's management team has the credibility to make
8
<PAGE>
the tough decisions necessary to rapidly integrate all three businesses and to
create value for shareholders.
A three-way combination, by creating a more efficient global
competitor, would also benefit the employees and customers of all three
companies. We have conducted an in-depth analysis of the three-way
combination from a regulatory perspective and have concluded that it will be
possible to obtain the necessary approvals on a timely basis.
Our Board of Directors has authorized this proposal and we are
resolutely committed to its consummation. We are confident that your
shareholders will find our proposal to be a unique and compelling
opportunity. We continue to prefer to proceed on a mutually satisfactory,
negotiated basis but are prepared to pursue all other avenues should that be
necessary. We are ready to meet with you or your management at any time.
Sincerely,
/s/ D.C. Yearley /s/ J. Steven Whistler
- --------------------------------- ------------------------------------
Chairman and President and
Chief Executive Officer Chief Operating Officer
9
<PAGE>
PHELPS DODGE
CORPORATION
AUGUST 20, 1999
PHELPS DODGE CORPORATION
<PAGE>
PHELPS DODGE CORPORATION
Forward-Looking Statements
These slides include "forward-looking statements" that express expectations of
future events or results. All statements based on future expectations rather
than on historical facts are forward-looking statements that involve a number of
risks and uncertainties, and the company cannot give assurance that such
statements will prove to be correct. Please refer to the Management's Discussion
and Analysis section of the company's report on Form 10-K for the year ended
December 31, 1998.
2
<PAGE>
PHELPS DODGE/
Asarco/Cyprus Amax
Combination
PHELPS DODGE CORPORATION
3
<PAGE>
PHELPS DODGE CORPORATION
Rationale For Three-Way Combination
- --------------------------------------------------------------------------------
o Unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets
o Industry need for consolidation, improved productivity and cost
efficiencies
o Ability to optimize operations and achieve cost savings
o Opportunity for value-based portfolio management
4
<PAGE>
PHELPS DODGE CORPORATION
Rationale For Three-Way Combination
- --------------------------------------------------------------------------------
o Greater flexibility to excel across business cycles
o Increased ability to compete for world-class projects
o Strong, liquid balance sheet; excellent access to capital
o Enhanced value for shareholders of all three companies
o Phelps Dodge's demonstrated track record of delivering superior
returns
5
<PAGE>
PHELPS DODGE CORPORATION
Summary of Phelps Dodge's
Proposals
- --------------------------------------------------------------------------------
o Terms: Fixed exchange ratio
0.4098 Phelps Dodge shares
per Asarco share
0.3135 Phelps Dodge shares
per Cyprus Amax share
Neither proposal conditioned on the other
o Value: $24.05 per share
$18.40 per Cyprus Amax share
o Current Premium 30% per Asarco share
29% per Cyprus Amax share
Note: Valuations/premiums based on share prices before trading was
halted for these stocks on the morning of 8/20/99: $58.69
Phelps Dodge; $18.50 Asarco; $14.25 Cyprus Amax; maintains
Asarco/Cyprus Amax announced exchange ratio of 0.765
6
<PAGE>
PHELPS DODGE CORPORATION
Transaction Overview
- --------------------------------------------------------------------------------
o Cash Flow: Significantly accretive in Year One
o Earnings: Accretive in Year Two*
o Cash Cost Savings: $200 million annually
o Tax Free: Yes
o Accounting: Purchase Accounting
o Non-Cash Savings: $65 million annual reduction in depreciation expense
*Based on current portfolio and analysts' estimates of copper prices
of $0.80 - $0.85 per pound in 2001.
7
<PAGE>
PHELPS DODGE CORPORATION
Substantial Cost Savings
- --------------------------------------------------------------------------------
(In $ Millions)
Annual Savings
SG&A Reductions $ 85
Integration of Operations 60
Exploration Savings 55
----
Cash Cost Savings $200
Lower Depreciation $ 65
Total Savings $265
Note: All estimates are based on public information and Phelps Dodge
experience
8
<PAGE>
PHELPS DODGE CORPORATION
Phelps Dodge's Proposals Provide Superior Value
- --------------------------------------------------------------------------------
o Immediate and substantial premiums
o Opportunity to participate in combined upside
- $200 million of cash cost savings achieved within 2 years
- Significantly greater synergies than Asarco/Cyprus Amax deal
o Significant dividend increases
- Phelps Dodge's current $2.00 dividend
- 4.1X dividend level in proposed Asarco/Cyprus Amax merger
o Experience and discipline in portfolio management
o Strong and liquid balance sheet
o Enhanced stock liquidity
o Proven track record of Phelps Dodge's management team
9
<PAGE>
PHELPS DODGE CORPORATION
Phelps Dodge's Commitment To Transactions
- --------------------------------------------------------------------------------
o Committed to completing value-enhancing transaction
o Phelps Dodge will act quickly to consummate the transaction
o Would prefer a negotiated transaction
o Phelps Dodge is prepared to take all necessary steps
o Confident of obtaining regulatory approvals
o Confident that proposals to Asarco and Cyprus Amax shareholders
represent a unique and compelling opportunity
10
<PAGE>
PHELPS DODGE CORPORATION
Resource-Rich,
Cost-Competitive
- --------------------------------------------------------------------------------
o Current production levels = 3.8 billion pounds
o Target CASH production cost = less than $0.50 per pound
o Target FULL production cost = less than $0.60 per pound
o Core portfolio of world-class copper mines represents more than 50% of
current annual production
- Morenci, SPCC, El Abra, Cerro Verde, Candelaria
- 2.0 billion pounds at average cash cost of less than $0.50 per pound
o Will review non-core assets
11
<PAGE>
PHELPS DODGE CORPORATION
Key Statistics
- --------------------------------------------------------------------------------
Phelps Cyprus Pro
Dodge Asarco Amax Forma
------- ------- ------ -----
(BN of pounds)
Current Production* 1.7 1.0 1.0 3.8
(BN of pounds)
Copper Reserves* (12/31/98) 29.0 28.3 20.0 80.0
- --------------------------------------------------------------------------------
($ BN)
Assets (6/30/99) $4.9 $4.0 $4.7 $12.0
Debt (6/30/99) $1.1 $1.1 $2.1 $3.2
Cash (6/30/99) $0.1 $0.1 $1.3 $0.5
($ per share, annually)
Dividend $2.00 $0.20 $0.20 $2.00
* Beneficial share
12
<PAGE>
PHELPS DODGE CORPORATION
Beneficial Copper
Production/Cash Cost Profile
- --------------------------------------------------------------------------------
[GRAPHICAL DISPLAY OMITTED]
[This graph presents cash cost, in cents per pound, and aggregate
copper production, in billions of pounds of: El Abra, Cerro Verde,
Silver Bell, Candelaria, SPCC, Morenci, Chino, Tyrone, Bagdad, Miami,
Montana Resources, Sierrita, Mission, and Ray mines]
Source: Brook Hunt; modified 1999 EST
13
<PAGE>
PHELPS DODGE CORPORATION
Phelps Dodge
Management Philosophy
- --------------------------------------------------------------------------------
o Shareholder-oriented
o Proven track record of delivering shareholder value
o Low-cost production is a necessity
o Every property must earn in excess of its cost of capital over
the copper cycle
o Strong management and operating leadership
- Not afraid to make tough decisions
14
<PAGE>
PHELPS DODGE CORPORATION
Superior Shareholder Returns
Last 15 Years
- --------------------------------------------------------------------------------
[GRAPHICAL DISPLAY OMITTED]
This graph displays the total return on the common stock of Phelps Dodge
(1024%), Cyprus Amax (102%) and Asarco (25%) over the past 15 years using a base
date of August 10, 1994.
Source: Morgan Stanley Dean Witter
Note: Cyprus Amax returns measured from 5/85 IPO.
15
<PAGE>
PHELPS DODGE CORPORATION
Total Returns Comparison
Through August 11, 1999
- --------------------------------------------------------------------------------
1 3 5 10 15
Year Years Years Years Years
------ ------- ------- ------- -------
Phelps Dodge 20% 13% 20% 161% 1024%
Asarco (7) (16) (27) (20) 25
Cyprus Amax 26 (22) (40) (26) 102
S&P 500 23% 107% 213% 369%* 687%**
S&P Metals 36 (22) (16) 25* 124**
Source: Morgan Stanley Dean Witter Note: Dividends reinvested
* S&P 500 and S&P
Metals are from
1/1/90
**Without dividend
reinvestment
16
<PAGE>
PHELPS DODGE CORPORATION
Phelps Dodge's Integration Plan
- --------------------------------------------------------------------------------
o Integrate worldwide operations
- Administrative functions in United States
- Administrative functions in Chile and Peru
- Mining operations in southwestern United States
- Worldwide exploration and development activities
o Reduce operating expenses
o Realize additional efficiencies in exploration
o In addition, opportunities to reduce capital expenditures
o Achieve $200 million in annual cash cost savings
17
<PAGE>
PHELPS DODGE CORPORATION
Summary of Cash Cost Savings
- --------------------------------------------------------------------------------
(In $ Millions)
SG&A Expense $85
Exploration 55
---
Operating Synergies
Reduce Supply Costs ..................................28
Reducee Electric Power Costs .........................12
Optimize Copper Refining Operations....................7
Optimize Mill/Leach Mix................................7
Integrate Arizona Management and Support Services......6
---
Total Cash Cost Operating Synergies 60
---
Total Cash Cost Savings $200
Note: All estimates are based on public information and Phelps Dodge experience
18
<PAGE>
PHELPS DODGE CORPORATION
Financial Strength and Operating Flexibility
- --------------------------------------------------------------------------------
o Strong, liquid balance sheet
o Debt to capital ratio of 40%
- Target reduction to near 30% within 3 years
- Intention to review non-core assets
o Strong cash flow generation
o Cost-competitive throughout the business cycle
o Poised to prosper in better copper pricing environment
19
<PAGE>
PHELPS DODGE CORPORATION
Summary
- --------------------------------------------------------------------------------
o Unique opportunity
o Significant cost savings
o Value-based portfolio management
o Proven Phelps Dodge track record
o Strong resolve to complete transaction
Superior Value Creation
20
