PHELPS DODGE CORP, DEFC14A, 1999-09-07

PHELPS DODGE CORP
DEFC14A, 1999-09-07
PRIMARY SMELTING & REFINING OF NONFERROUS METALS

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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:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

CYPRUS AMAX MINERALS COMPANY
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(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

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)1 and 0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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

[ ] Fee paid previously with 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:

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

(2) Form, Schedule or Registration Statement No.:

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

(3) Filing Party:

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(4) Date Filed:

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[PHELPS DODGE CORPORATION LOGO]

September 7, 1999

Dear Cyprus Amax Shareholder:

As you probably know, Phelps Dodge Corporation has announced its intention
to make an exchange offer for the outstanding common stock of Cyprus Amax
Minerals Company ("Cyprus Amax") and ASARCO Incorporated ("Asarco"). Our offer
would provide significant premiums to the shareholders of Asarco and Cyprus
Amax, provide a substantial dividend increase and create a more cost-effective
global copper producer with the operating expertise, broad resource base and
financial strength to better serve the interests of all three companies'
employees, customers and communities. Despite the higher market value of the
Phelps Dodge offer, Asarco and Cyprus Amax have refused to meet with us to
discuss this proposed three-way combination. Asarco and Cyprus Amax are instead
soliciting proxies from their shareholders to approve the proposed no-premium
Asarco/Cyprus Amax merger at meetings scheduled to be held on September 30,
1999.

PRESERVE YOUR OPPORTUNITY
TO CONSIDER THE FINANCIALLY SUPERIOR PHELPS DODGE OFFER.

VOTE AGAINST THE PROPOSED ASARCO/CYPRUS AMAX MERGER
BY SIGNING, DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD TODAY.

Under the Phelps Dodge offer, you would receive:

- A SIGNIFICANT PREMIUM FOR YOUR SHARES. Cyprus Amax shareholders would
receive 0.3135 of a share of Phelps Dodge common stock for each share of
Cyprus Amax common stock. That represents a 29% premium for Cyprus Amax
shareholders based on market prices of Phelps Dodge and Cyprus Amax
common stock before our proposal was first publicly announced. This
sizeable premium in effect represents an up-front payment to you for the
substantial cost savings we expect to achieve. Because the exchange ratio
in our offer and merger is fixed, this premium may decrease or increase
based on changes in the market price of the companies' stock.

- A SUBSTANTIAL INCREASE IN DIVIDENDS. Phelps Dodge intends to continue
its current annual cash dividend of $2.00 per share. This would provide a
substantial dividend increase to shareholders of both Asarco and Cyprus
Amax -- equal to 4.1 times the dividend they would receive in the
proposed Asarco/Cyprus Amax merger.

- GREATER UPSIDE POTENTIAL. Cyprus Amax shareholders will enjoy an
opportunity to participate in the greater upside potential resulting from
our proposed combination through ownership of Phelps Dodge common stock,
which has generated substantially better shareholder returns than Asarco
and Cyprus Amax over the past 1, 3, 5, 10 and 15-year periods. Over 1, 3,
5, 10 and 15-year periods, we have delivered total returns, assuming
reinvestment of dividends, to our shareholders of 22%, 13%, 20%, 161% and
1024% in contrast to negative 7%,
<PAGE> 3

negative 16%, negative 27%, negative 20% and 25% for Asarco and negative
26%, negative 22%, negative 40%, negative 26% and 102% for Cyprus Amax.
For purposes of evaluating returns to shareholders, we selected a 15 year
period to show a full copper price cycle from the low or "trough" period
of 1983-1984 to the current trough in copper prices. The 1, 3, 5 and 10
year intervals were selected because these periods are frequently used to
present shareholder returns for financial investments.

IF THE ASARCO/CYPRUS AMAX MERGER IS APPROVED, YOU WILL NOT HAVE THE
OPPORTUNITY TO ACCEPT THE FINANCIALLY SUPERIOR PHELPS DODGE OFFER.

Phelps Dodge has conditioned its offer upon the occurrence of various
events, including (i) the rejection of the proposed Asarco/Cyprus Amax merger,
(ii) the tender of a minimum number of shares of Cyprus Amax common stock
constituting at least a majority of the total number of such shares outstanding,
(iii) the making of Cyprus Amax's "poison pill" shareholder rights plan
inapplicable to our offer, (iv) any supermajority vote applicable to the merger
being satisfied or rendered inapplicable to our offer, (v) approval by the
Phelps Dodge stockholders of the issuance of Phelps Dodge common stock in our
offer, and (vi) the waiting period under the HSR Act having expired or been
terminated.

Our offer -- and our premium price -- is based on the benefits of
integrating all three companies now, not on the chance of a combination at some
unknown future date. Accordingly, a vote by you and your fellow shareholders
AGAINST the proposed Asarco/ Cyprus Amax merger is an important step in ensuring
the success of the Phelps Dodge offer. We urge you to send a strong message to
your directors that they should take all necessary steps to remove all obstacles
to the Phelps Dodge offer and give Cyprus Amax shareholders an opportunity to
decide for themselves whether the Phelps Dodge offer is in their best interests.

THE PHELPS DODGE OFFER CREATES SUPERIOR VALUE

In addition to the substantial immediate financial benefits to Cyprus Amax
shareholders, our proposed combination of Phelps Dodge, Asarco and Cyprus Amax
presents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to excel in all
business cycles. We believe that this three-way combination will provide
superior value creation opportunities, on an ongoing basis, for the shareholders
of all three companies.

We believe that your ability to participate in this value creation, through
your ownership of Phelps Dodge common stock, is an important element of our
offer. Over the past several years, Phelps Dodge's stock price has significantly
outperformed the stock prices of Asarco and Cyprus Amax. While we cannot make
promises about future returns, we believe that our performance record indicates
that we are best equipped to extract value out of the Asarco and Cyprus Amax
assets.

In an effort to provide you -- the owners of Cyprus Amax -- an opportunity
to maximize the value of your investment in Cyprus Amax, Phelps Dodge has
commenced an exchange offer for each outstanding share of common stock of Cyprus
Amax in exchange for common stock of Phelps Dodge in a tax-free transaction.
Enclosed is a copy of the Phelps Dodge Prospectus, dated September 2, 1999,
which sets forth the terms and conditions of the Phelps Dodge offer.

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YOUR VOTE IS ESSENTIAL

IF YOU WANT TO ACCEPT THE PHELPS DODGE OFFER, VOTE AGAINST THE PROPOSED
ASARCO/CYPRUS AMAX MERGER. YOUR VOTE AGAINST THE PROPOSED ASARCO/CYPRUS AMAX
MERGER, WILL NOT OBLIGATE YOU TO ACCEPT, OR TO EXCHANGE YOUR CYPRUS AMAX COMMON
SHARES PURSUANT TO, THE PHELPS DODGE OFFER.

[IF YOU HAVE ALREADY VOTED FOR THE PROPOSED ASARCO/CYPRUS AMAX MERGER, IT'S
NOT TOO LATE TO CHANGE YOUR VOTE BY SIMPLY SIGNING, DATING AND RETURNING THE
GOLD PROXY CARD TODAY IN THE POSTAGE-PAID ENVELOPE. IF THE ASARCO/CYPRUS AMAX
MERGER IS REJECTED, YOU WILL NOT BE PRECLUDED FROM ACCEPTING, OR EXCHANGING YOUR
CYPRUS AMAX COMMON SHARES PURSUANT TO, THE PHELPS DODGE OFFER EVEN IF YOU VOTE
FOR THE PROPOSED ASARCO/CYPRUS AMAX MERGER.

Thank you for your consideration and support.

Sincerely,

/s/ Douglas C. Yearley

Douglas C. Yearley

Chairman and Chief Executive Officer

THE PHELPS DODGE PROXY STATEMENT RELATES SOLELY TO THE SOLICITATION OF
PROXIES WITH RESPECT TO THE PROPOSED ASARCO/CYPRUS AMAX MERGER AND IS NEITHER A
REQUEST FOR THE TENDER OF SHARES OF CYPRUS AMAX COMMON STOCK NOR AN OFFER TO
SELL SHARES OF PHELPS DODGE STOCK. THE PHELPS DODGE OFFER WILL BE MADE ONLY BY
MEANS OF THE PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL WHICH WERE MAILED
TO YOU WITH THIS PROXY STATEMENT.

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IMPORTANT VOTING INFORMATION

Only Asarco Shareholders of record on August 25, 1999 are entitled to vote.

1. If your shares are held in your own name, please sign, date and return
the enclosed GOLD proxy card in the postage-paid envelope provided with
this letter. If your shares are held in the name of a brokerage firm,
bank or other institution, please sign, date and return the GOLD proxy
card to such brokerage firm, bank or other institution in the envelope
provided by that firm.

2. Please be sure your latest dated proxy is a GOLD card voting AGAINST
the approval and adoption of the Asarco/Cyprus Amax merger.

3. If you have already voted for the proposed Asarco/Cyprus Amax merger on
Asarco's WHITE proxy card, it is not too late to change your
vote -- simply sign, date and return the GOLD proxy card. Only your
latest dated proxy will be counted.

If you have any questions or require any assistance in voting your shares,
please contact:

INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022

CALL TOLL-FREE: 1-877-750-5838
Bankers and Brokers Call Collect: (212) 750-5833
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SPECIAL MEETING OF SHAREHOLDERS

OF
CYPRUS AMAX MINERALS COMPANY

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

RELATING TO THE PROPOSED ASARCO/CYPRUS AMAX MERGER

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

PROXY STATEMENT
OF
PHELPS DODGE CORPORATION

This Proxy Statement is furnished by Phelps Dodge Corporation, a New York
corporation ("Phelps Dodge"), in connection with its solicitation of proxies to
be voted at the special meeting of shareholders of Cyprus Amax Minerals Company
("Cyprus Amax") to be held on September 30, 1999 at the World Financial
Center -- North Tower, 250 Vesey Street, New York, New York, at 10:00 a.m. local
time, and at any adjournments, postponements or reschedulings thereof (the
"Special Meeting"). This Proxy Statement is first being mailed to Cyprus Amax
Shareholders (as defined below) on or about September 7, 1999.

On August 11, 1999, in a letter to Mr. Francis R. McAllister, Chairman of
the Board and Chief Executive Officer of ASARCO Incorporated ("Asarco"), and
Milton H. Ward, Chairman, Chief Executive Officer and President of Cyprus Amax,
Phelps Dodge proposed a three-way combination of Phelps Dodge, Asarco and Cyprus
Amax that it believed to be financially superior to the proposed Asarco/Cyprus
Amax Merger. Following the immediate refusal by Messrs. McAllister and Ward to
even discuss this proposal, on August 12, 1999, Phelps Dodge sent a written
proposal detailing the three-way combination to the board of directors of each
company and requesting a response by the close of business of Friday, August 20,
1999. See "Background of the Solicitation -- The August 12 Proposal and Related
Communications" below.

On August 20, 1999, Asarco and Cyprus Amax filed a joint proxy statement/
prospectus in connection with the proposed Asarco/Cyprus Amax Merger, and for
the first time disclosed the terms of their merger agreement. In addition,
Asarco and Cyprus Amax issued a press release announcing that they had set
August 25, 1999 as the record date for determining shareholders entitled to vote
at the shareholder meetings, scheduled for September 30, 1999, to consider
approval of their proposed merger. Asarco and Cyprus Amax also disclosed Phelps
Dodge's August 12, 1999 proposal and announced that they were rejecting it.

During the afternoon of August 20, 1999, Phelps Dodge issued a press
release announcing its revised proposal to acquire Asarco and Cyprus Amax which
offered a higher premium to the Asarco and Cyprus Amax shareholders than the
August 12, 1999 proposal. Phelps Dodge also delivered a letter to the Asarco and
Cyprus Amax boards of directors summarizing the higher premium proposal and
asking to meet with the management of Asarco and Cyprus Amax. On August 25,
1999, Asarco and Cyprus Amax sent a letter to Phelps Dodge stating that they
were prepared to negotiate a three-way

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transaction if such transaction included exchange ratios of 0.4055 shares of
Phelps Dodge common stock for each Cyprus Amax share and 0.5300 shares of Phelps
Dodge common stock for each Asarco share, and met a number of other conditions.

On August 27, 1999, Phelps Dodge publicly announced its intention to
commence an offer (the "Offer") to exchange shares of common stock, par value
$6.25 per share, of Phelps Dodge (the "Phelps Dodge Common Stock") for each
issued and outstanding share of common stock, without par value, of Cyprus Amax
(each, a "Share"), as well as any preferred share purchase rights (the "Rights")
associated with the shares pursuant, to the Cyprus Amax rights agreement (the
"Rights Agreement"). On September 3, 1999, Phelps Dodge commenced the Offer.
Pursuant to the Offer, each Share will be exchanged for 0.3135 of a share of
Phelps Dodge Common Stock. Phelps Dodge intends, as soon as practicable after
consummation of the Offer, to acquire the remaining Shares pursuant to a merger
with Cyprus Amax (the "Merger") in which each outstanding Share not acquired by
Phelps Dodge pursuant to the Offer would be converted into the right to receive
0.3135 of a share of Phelps Dodge Common Stock. The Offer will be made solely
pursuant to a prospectus dated September 2, 1999 (the "Phelps Dodge Prospectus")
and the related Letter of Transmittal which are being mailed separately to
Cyprus Amax Shareholders with this Proxy Statement.

THIS PROXY STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR AN
OFFER WITH RESPECT THERETO. THE OFFER WILL BE MADE ONLY BY MEANS OF THE PHELPS
DODGE PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL WHICH WILL BE SEPARATELY
MAILED TO YOU.

Completion of the Offer and consummation of the Merger is subject to
various conditions, including (i) a condition that the Asarco/Cyprus Amax Merger
is rejected, (ii) the tender of a minimum number of Shares constituting at least
a majority of the total number of Shares outstanding, (iii) the redemption of
the Rights or amendment of the Rights Agreement so as to not be triggered by the
Offer, (iv) any supermajority vote applicable to the merger being satisfied or
rendered inapplicable to the Offer, (v) approval by the Phelps Dodge
stockholders of the issuance of Phelps Dodge Common Stock in the Offer, and (vi)
the waiting period under the HSR Act having expired or been terminated. In order
for the Offer to proceed, the Cyprus Amax board of directors must redeem their
Rights or amend their Rights Agreement to make it inapplicable to the Offer and
the Merger with Phelps Dodge. Alternatively, a court must invalidate the Rights
Agreement. Moreover, the Cyprus Amax board must approve the Offer for purposes
of Section 203 of the DGCL or Phelps Dodge must acquire at least 85% of the
Cyprus Amax Shares in its Offer. In addition, the Cyprus Amax board must approve
the merger with Phelps Dodge for purposes of Article Sixth of the Cyprus Amax
Restated Certificate of Incorporation or Phelps Dodge must acquire at least 75%
of the Cyprus Amax Shares in the Offer. Cyprus Amax Shareholders should read the
enclosed copy of the Phelps Dodge Prospectus, which sets forth in detail the
terms and conditions of the Offer and the Merger.

With the cooperation of Cyprus Amax, Phelps Dodge believes that the Offer
and the Merger could be completed early in the fourth quarter of 1999. Phelps
Dodge believes that it will be able to obtain all necessary regulatory approvals
for the Offer on a basis that will permit it to complete the three-way merger
early in the fourth quarter of 1999. Consequently, the proposed Asarco/Cyprus
Amax Merger offers no significant timing advantage over the Offer and the
Merger. For a complete description of the conditions of

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the Offer and the Merger, see "The Offer -- Conditions of the Offer" in the
enclosed Phelps Dodge Prospectus.

If Asarco and Cyprus Amax do not cooperate and their shareholders approve
the Asarco/Cyprus Amax Merger, Phelps Dodge will withdraw its exchange offers.

If Asarco and Cyprus Amax do not cooperate and the shareholders of either
or both of Asarco and Cyprus Amax do not approve the Asarco/Cyprus Amax Merger,
Phelps Dodge believes that the Asarco and Cyprus Amax boards should at that
point respect the vote of their shareholders and, in accordance with their
fiduciary duties, promptly meet with us to discuss a negotiated transaction
among all three companies. Phelps Dodge will continue to pursue vigorously its
proposed three-way merger.

At the Special Meeting, Cyprus Amax Shareholders of record at the close of
business on August 25, 1999 (the "Record Date") will be voting on whether to
approve and adopt, among other things, the Agreement and Plan of Merger, dated
as of July 15, 1999 (the "Asarco/Cyprus Amax Merger Agreement"), by and among
Asarco, Cyprus Amax, Asarco Cyprus Incorporated, a newly-formed Delaware
corporation ("Asarco Cyprus Incorporated"), and two subsidiaries of Asarco
Cyprus Incorporated, providing for the merger of those subsidiaries with and
into Asarco and Cyprus Amax, respectively, with Asarco and Cyprus Amax each
surviving (the "Asarco/Cyprus Amax Merger"). Under the terms of the
Asarco/Cyprus Amax Merger Agreement, (i) each share of common stock of Asarco
(the "Asarco Shares") would be converted into one share of common stock of
Asarco Cyprus Incorporated ("Asarco Cyprus Incorporated Common Stock"), (ii)
each Share would be converted into 0.765 shares of Asarco Cyprus Incorporated
Common Stock, and (iii) each outstanding share of Cyprus Amax Series A
convertible preferred stock would be converted into one share of Series A
convertible preferred stock of Asarco Cyprus Incorporated (the "Asarco Cyprus
Incorporated Preferred Stock").

PHELPS DODGE URGES YOU TO VOTE AGAINST THE PROPOSED ASARCO/CYPRUS AMAX
MERGER. THIS WILL PRESERVE YOUR OPPORTUNITY TO ACCEPT THE PHELPS DODGE OFFER,
WHICH PHELPS DODGE BELIEVES IS FINANCIALLY SUPERIOR TO THE PROPOSED
ASARCO/CYPRUS AMAX MERGER.

The Cyprus Amax directors have rejected our August 12 proposal and our
higher premium August 20 proposal, have refused to meet with us and accordingly
have prevented the Cyprus Amax Shareholders from realizing the benefits of our
proposal. Instead of sitting down to discuss our proposal, the Cyprus Amax
directors have announced that they determined that if the Asarco/Cyprus Amax
Merger is completed, the resulting company will make a special payment of $5.00
per share to the stockholders of that company. The Cyprus Amax directors also
stated in a letter dated August 25, 1999 that they would only be willing to
negotiate if Phelps Dodge offered an exchange ratio of 0.4055 Phelps Dodge
shares for each Cyprus Amax Share. Phelps Dodge does not believe this proposed
exchanged ratio is a reasonable basis for a transaction. Despite our invitations
to discuss our proposals, however, the Cyprus Amax board of directors has
remained intent on pursuing the proposed Asarco/Cyprus Amax Merger even though
such transaction offers Cyprus Amax Shareholders significantly less value and
far lower dividends.

Cyprus Amax Shareholders will lose the benefits of the Offer if the
proposed Asarco/ Cyprus Amax Merger is approved. Accordingly, if you wish to
preserve your opportunity to accept the Offer, which Phelps Dodge believes is
financially superior to the proposed Asarco/Cyprus Amax Merger, we urge you to
vote AGAINST the proposed Asarco/

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Cyprus Amax Merger. If the Cyprus Amax Shareholders reject the Asarco/Cyprus
Amax Merger, Phelps Dodge believes the Cyprus Amax directors should respect your
vote and take all necessary action in accordance with their fiduciary duties to
allow the Offer to proceed.

IF YOU WANT TO HAVE AN OPPORTUNITY TO CONSIDER AND ACCEPT THE PHELPS DODGE
OFFER, VOTE AGAINST THE APPROVAL AND ADOPTION OF THE ASARCO/CYPRUS AMAX MERGER
BY SIGNING, DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD TODAY. IF THE
ASARCO/CYPRUS AMAX MERGER IS REJECTED, YOU WILL NOT BE PRECLUDED FROM ACCEPTING,
OR EXCHANGING YOUR SHARES PURSUANT TO, THE OFFER, EVEN IF YOU VOTE FOR THE
PROPOSED ASARCO/CYPRUS AMAX MERGER.

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

IMPORTANT

REJECTION OF THE PROPOSED ASARCO/CYPRUS AMAX MERGER BY THE CYPRUS AMAX
SHAREHOLDERS WILL SATISFY ONE OF THE CONDITIONS OF THE PHELPS DODGE OFFER. IF
YOU WANT TO ACCEPT THE PHELPS DODGE OFFER, WE URGE YOU TO PROMPTLY SIGN, DATE
AND MAIL THE ENCLOSED GOLD PROXY TO VOTE AGAINST THE APPROVAL AND ADOPTION OF
THE ASARCO/CYPRUS AMAX MERGER.

REJECTION OF THE PROPOSED ASARCO/CYPRUS AMAX MERGER WILL BE AN IMPORTANT
STEP IN SECURING THE SUCCESS OF THE PHELPS DODGE OFFER.

IF YOU HAVE ALREADY SENT A PROXY TO THE CYPRUS AMAX BOARD OF DIRECTORS, IT
IS NOT TOO LATE TO CHANGE YOUR VOTE. YOU MAY REVOKE THAT PROXY AND VOTE AGAINST
THE APPROVAL AND ADOPTION OF THE ASARCO/CYPRUS AMAX MERGER BY SIGNING, DATING
AND MAILING THE ENCLOSED GOLD PROXY.

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REASONS TO VOTE AGAINST THE PROPOSED ASARCO/CYPRUS AMAX MERGER

Here's why you should vote AGAINST the approval and adoption of the
proposed Asarco/Cyprus Amax Merger:

Phelps Dodge believes that the Offer is financially superior for the Cyprus
Amax Shareholders than either Cyprus Amax remaining independent or Cyprus Amax
completing the proposed Asarco/Cyprus Amax Merger. A summary description of
certain terms of the proposed Asarco/Cyprus Amax Merger appears under
"Background of the Solicitation -- The Asarco/Cyprus Amax Merger."

Advantages of the Offer and the Merger, as compared to the proposed
Asarco/Cyprus Amax Merger, include, among others:

- A SIGNIFICANT PREMIUM FOR YOUR SHARES. Cyprus Amax Shareholders would
receive 0.3135 of a share of Phelps Dodge common stock for each share of
Cyprus Amax common stock. This represents a 29% premium for Cyprus Amax's
shareholders based on market prices of Phelps Dodge and Cyprus Amax
common stock before our proposal was first publicly announced. This
sizeable premium in effect represents an up-front payment to you for the
substantial cost savings we expect to achieve. Because the exchange ratio
in the Offer and Merger is fixed, this premium may decrease or increase
based on changes in the market price of the companies' stock.

- A SUBSTANTIAL INCREASE IN DIVIDENDS. Phelps Dodge intends to continue
its current annual cash dividend of $2.00 per share. This would provide a
substantial dividend increase to shareholders of both Asarco and Cyprus
Amax -- equal to 4.1 times the dividend Cyprus Amax Shareholders would
receive in the proposed Asarco/Cyprus Amax Merger.

- GREATER UPSIDE POTENTIAL. Cyprus Amax Shareholders will enjoy an
opportunity to participate in the greater upside potential resulting from
our proposed combination through ownership of Phelps Dodge common stock,
which has generated substantially better shareholder returns than Asarco
and Cyprus Amax over the past 1, 3, 5, 10 and 15-year periods. Over 1, 3,
5, 10 and 15-year periods, we have delivered total returns, assuming
reinvestment of dividends, to our shareholders of 22%, 13%, 20%, 161% and
1024% in contrast to negative 7%, negative 16%, negative 27%, negative
20% and 25% for Asarco and negative 26%, negative 22%, negative 40%,
negative 26% and 102% for Cyprus Amax. For purposes of evaluating returns
to shareholders, we selected a 15 year period to show a full copper price
cycle from the low or "trough" period of 1983-1984 to the current trough
in copper prices. The 1, 3, 5 and 10 year intervals were selected because
these periods are frequently used to present shareholder returns for
financial investments.

A VOTE AGAINST THE ASARCO/CYPRUS AMAX MERGER AGREEMENT WILL SATISFY ONE OF
THE CONDITIONS OF THE PHELPS DODGE OFFER.

One condition of the Offer is that (i) the Cyprus Amax Shareholders have
voted to reject the Asarco/Cyprus Amax Merger or (ii) the Asarco/Cyprus Amax
Merger Agreement is otherwise terminated. Thus, a vote against the approval of
the Asarco/ Cyprus Amax Merger moves all Cyprus Amax Shareholders closer to
being able to benefit from the Offer. In addition, the Offer is conditioned upon
the satisfaction of other material

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conditions including (i) the tender of a minimum number of Shares constituting
at least a majority of the total number of Shares outstanding, (ii) the
redemption of the Rights or amendment of the Rights Agreement so as to not be
triggered by the Offer, (iii) any supermajority vote applicable to the merger
being satisfied or rendered inapplicable to the Offer, (iv) approval by the
Phelps Dodge stockholders of the issuance of Phelps Dodge Common Stock in the
Offer, and (v) the waiting period under the HSR Act having expired or been
terminated.

A VOTE AGAINST THE ASARCO/CYPRUS AMAX MERGER AGREEMENT SENDS A STRONG
MESSAGE TO THE CYPRUS AMAX DIRECTORS THAT YOU WANT TO PRESERVE YOUR OPPORTUNITY
TO ACCEPT THE OFFER, WHICH PHELPS DODGE BELIEVES IS FINANCIALLY SUPERIOR TO THE
PROPOSED ASARCO/CYPRUS AMAX MERGER.

TO HELP OBTAIN THE MAXIMUM VALUE FOR YOUR SHARES, RETURN YOUR GOLD PROXY
AGAINST THE APPROVAL OF THE ASARCO/CYPRUS AMAX MERGER AGREEMENT.

WE URGE YOU TO SEND THE CYPRUS AMAX DIRECTORS A CLEAR MESSAGE THAT THEY
SHOULD TAKE ALL NECESSARY STEPS TO REMOVE ALL OBSTACLES TO THE OFFER.

Failure to vote against the approval of the proposed Asarco/Cyprus Amax
Merger will not prevent you from tendering your Shares in the Offer, and a vote
against the approval of the proposed Asarco/Cyprus Amax Merger will not obligate
you to tender your Shares in the Offer. However, your vote against the proposed
Asarco/Cyprus Amax Merger will help preserve your opportunity to accept the
Offer.

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BACKGROUND OF THE SOLICITATION

INITIAL CONTACT

In the autumn of 1996, Douglas C. Yearley, Chairman and CEO of Phelps
Dodge, had an informal conversation with Richard de J. Osborne, then Chairman,
Chief Executive Officer and President of Asarco, regarding a possible
combination of the two companies. Mr. Osborne declined to hold discussions on
this subject.

On July 15, 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies into a new company to be called "Asarco Cyprus
Incorporated." According to the press release issued by Asarco and Cyprus Amax,
Cyprus Amax Shareholders would receive 0.765 shares of the combined company for
each of their Cyprus Amax shares, while Asarco shareholders would receive one
share of the combined company for each of their Asarco shares. The combined
company would also have an initial dividend rate of $0.05 per share per quarter,
or $0.20 annually. The transaction was approved by the Boards of Directors of
Asarco and Cyprus Amax, but remains subject to regulatory approvals and
shareholder approvals.

On August 10, 1999, Mr. Yearley telephoned Milton H. Ward, Cyprus Amax's
Chairman, Chief Executive Officer and President, and Francis R. McAllister,
Asarco's Chairman and Chief Executive Officer, to propose a meeting to discuss
the possibility of a three-way combination involving Phelps Dodge, Asarco and
Cyprus Amax. Shortly thereafter, Messrs. Ward and McAllister sent the following
letter to Mr. Yearley:

August 10, 1999
Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue -- 16th Floor
Phoenix, AZ 85004-3014

Dear Doug:

We have discussed your request to meet with us jointly. We would like to
advise you that Cyprus Amax and Asarco are pursuing a combination under a Merger
Agreement dated July 15, 1999. Under the terms of that Agreement we are not at
liberty to have a discussion of the nature you were suggesting earlier today.

Best regards,

<TABLE>
<S> <C>
/s/ MILTON H. WARD /s/ FRANCIS R. MCALLISTER
- --------------------------------------------- ---------------------------------------------
Milton H. Ward Francis R. McAllister
Chairman, Chief Executive Chairman and Chief Executive Officer
Officer and President ASARCO Incorporated
Cyprus Amax Minerals Company
</TABLE>

7
<PAGE> 13

On August 11, 1999, during the late afternoon, Mr. Yearley and J. Steven
Whisler, Phelps Dodge's President and Chief Operating Officer, sent the
following letter to Messrs. McAllister and Ward:

[LETTERHEAD OF PHELPS DODGE CORPORATION]

August 11, 1999

Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038

Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals
9100 East Mineral Circle
Englewood, CO 80112

Dear Frank and Milt:

We are disappointed that you have declined to meet with us. As you know
from our telephone conversations, we have considered your pending business
combination and would like to discuss with you our proposal, described in more
detail below, to combine all three of our companies in a negotiated transaction.

We believe that a three-way combination of Phelps Dodge, Asarco and Cyprus
Amax would create superior shareholder value for the shareholders of Asarco and
Cyprus Amax. A three-way combination, by creating a lower-cost global
competitor, would also benefit the employees and customers of all three
companies. For these reasons, we are approaching you to discuss the concept of a
three-way combination.

We propose that all of the outstanding common stock of both Asarco and
Cyprus Amax be exchanged for Phelps Dodge common stock. The transaction would be
tax-free to your shareholders.

A combination of these businesses would result in cost savings well in
excess of the amounts you have indicated to be achievable through your pending
merger. Preliminarily we estimate that the annual cash cost savings reach at
least $150 million.

We propose to reward your shareholders for these substantial incremental
benefits by offering your shareholders an exchange ratio of 0.3756 Phelps Dodge
common shares for each Asarco common share and 0.2874 Phelps Dodge common shares
for each Cyprus Amax common share. These exchange ratios preserve the relative
economics of your proposed combination and imply premiums of approximately 25%
based on current market prices for Asarco and Cyprus Amax.

8
<PAGE> 14

We believe this proposal creates superior value for your shareholders based
on:

- the sizeable premium we are offering which, in effect, represents
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;

- their opportunity to participate in the ongoing value creation of the
combined company; and

- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in substantial dividend increases for
both Asarco and Cyprus Amax shareholders to 3.76 times the level
contemplated in your pending merger.

Our preference is for a combination of all three companies, which would of
course involve the consent of both Asarco and Cyprus Amax to a modification of
your existing agreement.

Since your merger agreement has not been publicly filed, we have not had
the opportunity to review its terms. Based on your August 10, 1999 letter, it is
unclear to us whether discussions may proceed once you receive a written
proposal such as this letter. In any event, if necessary under your merger
agreement, we request that you grant one another waivers to allow meetings with
us on our proposal which, as discussed below, would be far more favorable to
your shareholders than your proposed merger.

We are confident that the market reaction to a three-way combination would
be positive. In particular we believe the market would recognize:

- the significantly stronger ability of the combined company, relative to
the Asarco/Cyprus Amax combination, to integrate southwest U.S. mining
operations, administrative functions in Chile and Peru and world-wide
exploration and development activities;

- the financial strength of the combined company and ability to create a
world class portfolio of cost competitive mining assets;

- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;

- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;

- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;

- the ability of the combined company to reduce capital expenditures;

- a strong, liquid balance sheet, with excellent access to capital; and

- how all of these factors would build greater shareholder value, on an
ongoing basis, for the shareholders of all three companies.

This is intended to be a confidential proposal which is subject to the
execution of a definitive merger agreement and receipt of customary approvals,
including approval by our respective Boards of Directors and shareholders. We
have conducted in-depth

9
<PAGE> 15

analyses of the proposed three-way combination from a regulatory perspective and
have concluded that it will be possible to obtain the necessary approvals on a
timely basis.

We believe that our proposal is substantially more attractive to your
shareholders than your pending merger. In addition to the sizeable premium we
are offering, your shareholders would participate, through their ongoing Phelps
Dodge common stock ownership, in a larger enterprise with greater realizable
cost savings and synergies, a stronger portfolio of cost competitive assets and
a deep management team with a strong operating record. We have no doubt that
your shareholders will enthusiastically embrace our proposal once they learn of
it.

We have discussed this proposal with our Board, which fully supports it. We
are confident of our ability, with your cooperation, to complete this
transaction as quickly as your proposed two-party Asarco/Cyprus Amax merger.

We are firmly committed to moving forward quickly to consummate this
transaction. As we mentioned, we would be happy to meet with you in New York or
another mutually convenient location to amplify our proposal. In any event, we
would appreciate a response by 5:00 p.m., New York time, on Wednesday, August
18, 1999.

Sincerely,

<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
- --------------------------------------------- ---------------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and Chief Executive Officer President and Chief Operating Officer
</TABLE>

10
<PAGE> 16

THE AUGUST 12 PROPOSAL AND RELATED COMMUNICATIONS

On the morning of August 12, 1999, Messrs. McAllister and Ward telephoned
Mr. Yearley and once again refused to meet to discuss Phelps Dodge's proposal.
That afternoon, Phelps Dodge sent the following letter to the board of directors
of Cyprus Amax (and sent a substantially similar letter to the board of
directors of Asarco):

[LETTERHEAD OF PHELPS DODGE CORPORATION]

August 12, 1999

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 would like to engage in discussions on our proposal to combine Asarco,
Cyprus Amax and Phelps Dodge in a negotiated transaction. Our proposal,
described in more detail in the attached correspondence, is far better for the
shareholders of your company than your pending merger with Cyprus Amax because
of:

- the sizeable premium we are offering which, in effect, represents an
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;

- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in a substantial dividend increase for
Asarco shareholders to more than three times the level contemplated in
your pending merger; and

- their opportunity to participate in the ongoing value creation of the
combined company through the ownership of Phelps Dodge common stock.

In our attached letter of August 11, we proposed specific exchange ratios
of Phelps Dodge shares for Asarco and Cyprus Amax shares. Based on the August 11
closing price of Phelps Dodge, Asarco and Cyprus Amax shares, these ratios
implies premiums of approximately 25% for each of Asarco and Cyprus Amax and
preserved the relative economics of your proposed combination with Cyprus Amax.
We would reiterate our intention on the basis of the current levels of Phelps
Dodge, Asarco and Cyprus Amax share prices to pay premiums of approximately 25%
for Asarco and Cyprus Amax.

and Asarco, respectively. Similarly, over the past five years, Phelps Dodge's
total return has been 20% as compared to -40% for Cyprus Amax and -27% for
Asarco. We are very proud of this strong management and operational track record
over a difficult copper environment.

Thus far, however, your management has refused to listen to, or consider,
our proposal.

On Tuesday afternoon, August 10, 1999, following a meeting of our board of
directors, we spoke by telephone with Messrs. McAllister and Ward to request a
meeting to discuss our proposal. Just a few hours later, we received from them
the attached letter, dated August 10, 1999, advising that under the terms of a
non-public July 15, 1999 Merger Agreement they were "not at liberty" to have
such a discussion.

Since Messrs. McAllister and Ward refused to meet with us, late yesterday
we sent them the enclosed August 11 letter laying out the basic terms of our
proposal and again requesting a meeting.

This morning we received a telephone call from Messrs. McAllister and Ward
again refusing to discuss our proposal.

Although it would have been our preference to communicate through your CEO,
his adamant refusal to meet with us, or even to give our written proposal any
serious consideration, has required that we communicate with you directly. Since
you and Cyprus Amax are the only parties to your merger agreement, and may amend
it or waive its provisions at any time, for management of the two companies to
state that their own agreement prevents such discussions seems a particularly
weak basis for their refusal even to meet with us.

We are making a similar proposal to Asarco. Our willingness to enter into
discussions with each of you is not conditioned on the participation of the
other (assuming this is consistent with any applicable binding contracts).

We are resolute in our determination to complete this transaction with both
companies. We are confident that your shareholders will recognize the superior
benefits of our proposal, and will accept nothing less.

We still strongly prefer to consummate this transaction on a mutually
satisfactory, negotiated basis. Accordingly, we do not plan to disclose our
proposal publicly at this time. Because of the importance of this matter to your
shareholders, we request that you make a commitment, by 5:00 p.m. Friday, August
20, 1999, to meet with us promptly to commence serious negotiations.

Sincerely,

12
<PAGE> 18

THE AUGUST 20 REJECTION AND REVISED PROPOSAL

On August 20, 1999, Asarco and Cyprus Amax filed a joint proxy
statement/prospectus in connection with their proposed merger, and for the first
time publicly disclosed the terms of their merger agreement. In addition, Asarco
and Cyprus Amax issued a press release announcing that they had set August 25,
1999 as the record date for determining shareholders entitled to vote at the
shareholder meetings, scheduled for September 30, 1999, to consider approval of
their proposed merger. Asarco and Cyprus Amax also disclosed Phelps Dodge's
proposal for a three-way business combination and announced that they were
rejecting it. Asarco and Cyprus Amax also revised upward their estimates of
synergies resulting from their proposed two-party merger.

Also on August 20, 1999, Asarco and Cyprus Amax sent the following letter
to Phelps Dodge:

August 20, 1999

Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050

Dear Doug:

We have tried to reach you this morning to convey the response of our
respective Boards and to share with you the attached press release.

Each of our companies has convened its Boards and received thorough
presentations from financial and legal advisors. After full consideration of
your proposal, each Board unanimously decided that it was in the best interests
of its shareholders to pursue the Asarco Cyprus merger. That is what we intend
to do.

<TABLE>
<S> <C>
Sincerely,
/s/ Francis R. McAllister /s/ Milton H. Ward
- -------------------------------------- --------------------------------------
Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
Asarco Incorporated Cyprus Amax Minerals
Company
</TABLE>

During the afternoon of August 20, 1999, Phelps Dodge issued a press
release announcing its revised proposal, describing the material benefits of the
three-way combination and expressing its disappointment that Asarco and Cyprus
Amax had rejected the August 12 proposal. Later that day, Phelps Dodge sent the
following letter to the

13
<PAGE> 19

board of directors of Cyprus Amax (and sent a substantially similar letter to
the board of directors of Asarco) setting forth its revised, higher premium
proposal:

[LETTERHEAD OF PHELPS DODGE CORPORATION]

August 20, 1999

Board of Directors of Cyprus Amax Minerals Company
c/o Mr. 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 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.

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 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 Asarco 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

14
<PAGE> 20

Asarco, while preserving the relative economics of the exchange ratio under your
proposed combination with Asarco.

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 20% and
negative 26% for Asarco and Cyprus Amax, respectively. Similarly, over the past
15 years, Phelps Dodge's total return has been 1024% 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:

- 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;

- the financial strength of the combined company and ability to create a
world class portfolio of cost-competitive mining assets;

- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;

- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;

- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;

- the immediate and substantial accretion to the cash flow of the combined
company resulting from the transaction;

15
<PAGE> 21

- 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;

- the total current annual copper production of the combined Company of 3.8
billion pounds and the total attributable copper reserves of 80 billion
pounds;

- the increased ability of the combined company to compete for world-class
projects;

- the ability of the combined company to reduce capital expenditures;

- the strong, liquid balance sheet of the combined company, with excellent
access to capital; and

- 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 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

16
<PAGE> 22

avenues should that be necessary. We are ready to meet with you or your
management at any time.

Sincerely,

THE AUGUST 25, 1999 COMMUNICATIONS

On August 25, 1999, Asarco and Cyprus Amax issued a press release
announcing that they were including as part of their proposed merger, a special
payment of $5.00 per share to be paid to the stockholders of Asarco Cyprus
Incorporated and would pursue the sale of certain businesses after the proposed
Asarco/Cyprus Amax Merger. The press release also stated that, for 90 days
following the proposed Asarco/Cyprus Amax Merger, the stockholders of Asarco
Cyprus Incorporated will have the right to call a meeting to redeem the rights
plan.

In conjunction with this press release, Asarco and Cyprus Amax also sent
the following letter to Phelps Dodge:

August 25, 1999

Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050

Dear Doug:

We and our respective boards have considered your revised proposal to
acquire our companies. We have the following issues with your proposal:

1. The exchange ratios proposed in your August 20 press release do not
allocate to Cyprus Amax and Asarco holders a fair share of the value
created by uniting their two companies. We are prepared to negotiate a
transaction with Phelps Dodge that would provide our holders with .4055
shares of Phelps Dodge common stock for each Cyprus Amax share, and
.5300 Phelps Dodge shares for each Asarco share.

2. In order for us to proceed with Phelps Dodge, you must make clear that
Phelps Dodge will undertake all actions necessary to secure regulatory
approval for your proposed transaction including any divestiture or
similar action required, and will provide credible assurances that such
regulatory approval will be forthcoming. The statements in your letters
concerning antitrust issues are not sufficient on this point.

3. You have not proposed a form of contract for your transaction. We would
be prepared to proceed on the basis of representations, warranties and
covenants

17
<PAGE> 23

made by Cyprus Amax and Asarco to each other in their merger agreement,
with similar representations, warranties and covenants made by Phelps
Dodge.

4. Your letter did not indicate whether your proposal was subject to due
diligence. A due diligence requirement introduces substantial
uncertainty as to your proposal. We would expect, as part of our effort
to close our pending merger or any potential transaction with you as
quickly as possible, that you would not require any further due
diligence with respect to either Cyprus Amax or Asarco.

We strongly believe that the combination of Cyprus Amax and Asarco, without
the effect of combining further with Phelps Dodge, provides greater value to
Cyprus Amax and Asarco holders than your August 20 proposal, poses fewer
regulatory issues and can be completed more quickly. Accordingly, we will be
proceeding to present that transaction to our stockholders and to closing on
September 30, 1999. We are prepared, however, to negotiate a transaction that
involves all three companies that satisfies all the foregoing requirements. For
your information, we are attaching to this letter a copy of the press release
Asarco and Cyprus Amax issued today concerning our response to Phelps Dodge. We
also want to advise you that apart from this communication, neither party has
waived any of its legal or other rights, or rights or obligations under our
merger agreement.

Sincerely,

<TABLE>
<S> <C>
/s/ FRANCIS R. MCALLISTER /s/ MILTON H. WARD
- --------------------------------------------- ---------------------------------------------
Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
ASARCO Incorporated Cyprus Amax Minerals
Company
</TABLE>

Later during that afternoon, Phelps Dodge issued a press release
acknowledging receipt of the August 25, 1999 letter from Asarco and Cyprus Amax
and reaffirming Phelps Dodge's commitment to complete its proposed three-way
combination, which benefits shareholders of all three companies. In the press
release, Phelps Dodge indicated that the economic aspects of the three-way
merger outlined in Asarco and Cyprus Amax's August 25 letter were totally
unreasonable and would deliver nearly all of the economic value of the three-way
combination to Asarco and Cyprus Amax shareholders. The press release also noted
that neither Asarco nor Cyprus Amax had attempted to meet with Phelps Dodge.

THE AUGUST 27, 1999 COMMUNICATIONS

On August 27, 1999, Phelps Dodge issued a press release announcing its
filing with the Commission of registration materials relating to the exchange
offers for the Asarco and Cyprus Amax common stock and of preliminary proxy
materials to be used to solicit proxies from Asarco and Cyprus Amax shareholders
to vote against the proposed Asarco/Cyprus Amax Merger. Phelps Dodge also
announced that it has commenced litigation against Asarco, Cyprus Amax and their
respective directors for breach of fiduciary duties. See "Certain Litigation."
Phelps Dodge once again affirmed its preference for a negotiated combination
with Asarco and Cyprus Amax and stated that it was ready to begin

18
<PAGE> 24

discussions immediately. In addition, Phelps Dodge announced that it viewed the
September 30 vote as a referendum and that if the Asarco and Cyprus Amax
shareholders approve the Asarco/Cyprus Amax merger, Phelps Dodge will withdraw
its substantial premium proposal and will not bid further.

Also on August 27, 1999, Phelps Dodge sent the following letter to Asarco
and Cyprus Amax:

[LETTERHEAD OF PHELPS DODGE CORPORATION]

August 27, 1999

Mr. Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038

Mr. Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112

Dear Frank and Milt:

We continue to believe that our proposed three-way combination is clearly
superior for your shareholders than your proposed no-premium, two-party
transaction. Our fully priced proposal provides a substantial premium, our $2.00
annual dividend and opportunity for participation in greater upside potential.

In your August 25 letter to us you identified four issues with our
proposal. We are prepared to accept three of your points. On the fourth point,
your demand on exchange ratios, we hope that you will reconsider your
unreasonable position and sit down at the table with us to complete our proposed
three-way combination.

Should you proceed to complete your two-way merger, you will proceed alone
because we will withdraw our substantial premium proposal and will not bid
further. Your September 30 vote will be a referendum on our proposal.

Your proposal on exchange ratios is so unreasonable that its sincerity is
questionable. It seems to be premised on the flawed assumption that since your
combined production would be comparable to Phelps Dodge's, you should be valued
at the same level as Phelps Dodge. Of course, this is clearly not what investors
believe since it is not reflected in the relative market valuations of the three
companies. The simplistic assumption you seem to be making fails to reflect
Phelps Dodge's long track record of making tough management decisions and
delivering significantly greater value to shareholders than either ASARCO or
Cyprus Amax. Over a fifteen-year period we have delivered total returns to
shareholders of 1,024% in contrast to 25% for ASARCO and 102% for Cyprus Amax.

Moreover, based on the information in your August 20 Form S-4 registration
statement, it appears that the conclusions arrived at by your own investment
bankers

19
<PAGE> 25

do not support your exchange ratio demand. The exchange ratios you have demanded
would deliver nearly all of the incremental value to be derived from a three-way
combination to your shareholders and very little to our shareholders. This is,
as you no doubt anticipated, completely unacceptable to us.

In addition, we don't believe that your shareholders will be fooled by the
flawed measures you announced which purport to accommodate the possibility of a
third party transaction during the 90 days following completion of your merger.
None of your public statements address in any meaningful way all of the many
steps that would be necessary to give your shareholders a realistic opportunity
to benefit from an attractive third party proposal. Among the additional matters
that would have to be addressed if you were serious about accommodating third
party transactions would be to eliminate your staggered Board and the highly
unusual management entrenchment arrangements built into your two-party merger
agreement.

Those unusual management-entrenchment provisions guarantee no change in the
roles of the proposed four senior executives of the ASARCO-Cyprus combined
company prior to the 2002 annual meeting except upon a vote of 75% of the Board.
Since management will hold 25% of the Board seats, this effectively requires a
unanimous vote of the non-management directors. Because your Board is divided
into three classes, this means that a buyer of 100% of the outstanding stock of
the ASARCO-Cyprus combined company would not be able to obtain management
control for nearly three years.

Indeed, even in the two aspects of your 90 day proposal for which you try
to take credit, there is confusion, contradiction and unnecessary complexity.
You propose an unspecified shareholder mechanism to redeem your poison pill
which is inevitably more cumbersome than simple Board action. Secondly, we noted
with interest the statement in your August 25 press release that "In addition,
change in control provisions in any employment contracts entered into by the
Company will be waived for that same 90 day period." We were therefore surprised
to read the contradictory statement in the Form 8-K you filed yesterday that:

"The rights and benefits under the existing [change of control]
arrangements with the employees...of each of Cyprus Amax and
ASARCO, however, will remain in full force and effect and will be
unaffected during the 90 days following completion of the business
combination, as will any rights under arrangements entered into
with such employees in substitution for any existing
arrangements."

Frankly, we believe that all of your statements concerning the 90 day
period are no more than a public relations gambit, There is no evidence in your
conduct to date that you have any willingness to pursue transactions that are in
the best interests of your shareholders.

With regard to the three points in your August 25 letter other than the
exchange ratio, we are pleased to confirm that:

- We are prepared to enter into a merger agreement with substantially the
same representations, warranties and covenants as those contained in your
July 15 merger agreement.

- This proposal is not subject to due diligence.

20
<PAGE> 26

- We have studied the regulatory issues carefully and are confident that
all necessary regulatory approvals for our three way combination will be
obtained on a timely basis. We would be pleased to give you strong
contractual assurances on this point.

If you take seriously your fiduciary duty and want to inform yourselves
about a compelling transaction that would be in the best interests of your
shareholders, let's sit down and negotiate. If not, your shareholders will
decide which alternative they prefer on September 30.

Sincerely,

<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
- --------------------------------------------- ---------------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>

THE PHELPS DODGE EXCHANGE OFFER

Phelps Dodge is offering to exchange 0.3135 shares of Phelps Dodge Common
Stock for each outstanding Share. We are making the Offer in order to acquire
control of, and ultimately the entire common equity interest in, Cyprus Amax. We
intend, as soon as possible after consummation of the Offer, to have a
subsidiary of Phelps Dodge merge with Cyprus Amax. In that merger each
outstanding Share (other than Shares held by Cyprus Amax, us or any of our
subsidiaries) would be converted into the right to receive 0.3135 shares of
Phelps Dodge Common Stock. We are also making a separate offer to exchange
0.4098 shares of Phelps Dodge Common Stock for each outstanding share of Asarco
common stock. We expect our proposed transaction to be tax free to you.

The Offer will be subject to the terms and conditions set forth in the
enclosed copy of the Phelps Dodge Prospectus.

THE ASARCO/CYPRUS AMAX MERGER AGREEMENT

On July 15, 1999, Asarco and Cyprus Amax entered into the Asarco/Cyprus
Amax Merger Agreement that provides for two mergers in which each share of
Asarco common stock would be exchanged for a share of common stock of Asarco
Cyprus Incorporated and each share of Cyprus Amax common stock would be
exchanged for 0.765 shares of Asarco Cyprus Incorporated.

The Asarco/Cyprus Amax Merger Agreement must be approved by the
shareholders of both Asarco and Cyprus Amax and is subject to the satisfaction
or waiver of certain other conditions, including obtaining necessary regulatory
approvals. If the Asarco/Cyprus Amax Merger Agreement is not approved by the
requisite vote of the shareholders, the Asarco/Cyprus Amax Merger Agreement will
become terminable at the option of either Asarco or Cyprus Amax. If Cyprus Amax
shareholders do not approve the Asarco/Cyprus Amax Merger Agreement and Asarco
terminates the agreement for these reasons, Cyprus Amax will be required to pay
a termination fee of $45 million to Asarco if Cyprus Amax enters into an
agreement with or consummates a transaction with any other party within 18
months of the date Asarco terminates the agreement. Under the terms of the
Asarco/Cyprus Amax Merger Agreement, Cyprus Amax will not be obligated to pay
this

21
<PAGE> 27

termination fee, however, if Asarco shareholders do not approve the proposed
Asarco/ Cyprus Amax Merger.

The Asarco/Cyprus Amax Merger Agreement purports to restrain both parties,
their directors, officers, employees and representatives from directly or
indirectly soliciting, initiating or encouraging (whether by furnishing
information or otherwise), or taking any other action designed to facilitate any
inquiries or the making of any proposal which constitutes or reasonably could be
expected to lead to any "takeover proposal." A takeover proposal is defined as
any inquiry, proposal or offer, or any improvement, restatement, amendment,
renewal or reiteration of any such inquiry, proposal or offer, from any person
relating to any direct or indirect acquisition of a business or equity
securities of a party or any of its subsidiaries. Asarco and Cyprus Amax have
further agreed that neither of them would participate in any discussions or
negotiations regarding any takeover proposal.

The Asarco/Cyprus Amax Merger Agreement further prohibits the boards of
directors of both companies from withdrawing or modifying their approval or
recommendation of the Asarco/Cyprus Amax Merger. The Asarco and Cyprus Amax
boards may only withdraw their recommendation to approve the Asarco/Cyprus Amax
Merger if they determine in good faith, based on the advice of outside counsel,
that a failure to do so would constitute a breach of fiduciary duties owed by
the board to the company's shareholders.

22
<PAGE> 28

ADVANTAGES OF THE PROPOSED COMBINATION

We believe the combination of Phelps Dodge, Asarco and Cyprus Amax
represents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to excel through
business cycles.

Under the Phelps Dodge offer, you would receive:

- A SIGNIFICANT PREMIUM FOR YOUR SHARES. Cyprus Amax shareholders would
receive 0.3135 of a share of Phelps Dodge common stock for each share of
Cyprus Amax common stock. This represents a 29% premium for Cyprus Amax
shareholders. based on market prices of Phelps Dodge and Cyprus Amax
common stock before our proposal was first publicly announced. This
sizeable premium in effect represents an up-front payment to you for the
substantial cost savings we expect to achieve. Because the exchange ratio
in the Offer and Merger is fixed, this premium may decrease or increase
based on changes in the market price of the companies' stock.

The analyses discussed below include forward looking statements that
involve judgments, assumptions and other uncertainties beyond the control of
Phelps Dodge. As such, there can be no assurance that the cost savings or other
benefits will be realized in the amounts referred to herein and actual cost
savings or other benefits may be more or less than those projected. Such
judgments, assumptions and uncertainties are discussed more fully below.

Phelps Dodge believes that the Cyprus Amax Shareholders, as well as Cyprus
Amax's customers, employees and the communities it serves, would realize
benefits from the Offer and the Merger that are greater than the benefits that
would be realized if Cyprus Amax either remains an independent entity or it
completes the proposed Asarco/Cyprus Amax Merger. Phelps Dodge believes such
greater benefits would be realized through the following operational and
structural synergies:

- ABILITY TO INTEGRATE OPERATIONS. We expect the combined company to have
significantly greater ability to integrate southwest U.S. mining
operations, administrative functions in the U.S., Chile and Peru, and
worldwide exploration and development activities. 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 the full copper price cycle. Following the three-way
combination, the Company will have a broader portfolio of mining
properties than the two-way Asarco/Cyprus Amax combination and will have
integrated administrative functions in the United States, Chile and Peru
and will therefore be able to

23
<PAGE> 29

better manage costs and eliminate duplicative exploration and development
and administrative expenditures.

- ACCRETION TO CASH FLOW. The combination would result in immediate and
substantial accretion to the cash flow of the combined company.

- ACCRETION TO EARNINGS. We expect the combination to result in
significant accretion to earnings per share of the combined company in
the second year, assuming copper prices of $0.80 -- $0.85 per pound.

- SUPERIOR PRODUCTION CAPABILITY. The total annual worldwide copper
production of the combined company would be approximately 3.8 billion
pounds at current levels, with total attributable copper reserves of
approximately 80 billion recoverable pounds.

- SUBSTANTIAL COST SAVINGS. We expect the combined company to achieve
annual cash cost savings of at least $200 million by the end of the
second year after closing, as a result of reductions in overhead,
purchasing, exploration and other expenses. We also expect at least
another $65 million in annual savings from reduced depreciation expenses,
bringing the total annual savings to at least $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 cash
synergy figure of $125 million projected in the proposed Asarco/Cyprus
Amax merger. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper
prices.

Based on public information and Phelps Dodge's experience, Phelps Dodge
expects to achieve the following annual savings:

<TABLE>
<CAPTION>
($ IN MILLIONS)
<S> <C>
SG&A Expenses......................................... $ 85
Exploration Savings................................... 55
Operating Synergies
Reduce Supply Costs................................. 28
Reduce Electric Power Costs......................... 12
Optimize Copper Refining Operations................. 7
Optimize Mill/Leach Mix............................. 7
Integrate Arizona Management Support Services....... 6
----
Total Operating Synergies...................... $ 60
Total Cash Cost Savings............................... $200
</TABLE>

Phelps Dodge's anticipated depreciation savings of $65 million per year was
calculated as follows:

ASSET WRITEDOWN

<TABLE>
<S> <C>
Purchase Price........................................ $2,620.8
Asarco Book Value..................................... 1,458.5
Cyprus Amax Book Value................................ 1,821.0
--------
Asset Writedown....................................... $ -658.7
Life.................................................. 10.0
Implied Depreciation.................................. $ 65.9
========
</TABLE>

24
<PAGE> 30

- MANAGEMENT STRENGTH. The combined company would have a strong and deep
management team, at both the operating and corporate levels, with strong
credibility in the marketplace. Phelps Dodge's management team would have
the opportunity to implement value-based portfolio management. We believe
that Phelps Dodge's management team has the credibility to make the tough
decisions necessary to integrate all three businesses rapidly and to
build sustainable long-term shareholder value.

- PORTFOLIO OF WORLD-CLASS COPPER MINES. The combined company would have a
core portfolio of world-class copper mines, including Morenci, Southern
Peru Copper Corporation, El Abra, Cerro Verde and Candelaria. This core
portfolio would represent more than 50% of the combined company's current
annual production. At current levels, these properties would produce
approximately 2 billion pounds of copper annually, at an average cash
cost of less than $.50 per pound.

- OPERATING LEVERAGE. The combined company would have tremendous operating
leverage, together with enough diversity in other businesses to mitigate
cyclical downturns.

- INCREASED COMPETITIVENESS. The combined company would have increased
ability to compete for world-class projects.

- REDUCED CAPITAL EXPENDITURES. By combining their businesses, Phelps
Dodge, Asarco and Cyprus Amax would be able to reduce maintenance and
growth capital expenditures significantly.

- FINANCIAL STRENGTH. The combined company would have a strong, liquid
balance sheet, with excellent access to capital. The company's financial
strength would give it the ability to create a world-class portfolio of
cost-competitive mining assets.

We believe these factors will provide superior value creation
opportunities, on an ongoing basis, for the shareholders of all three companies.
We believe that your ability to participate in this value creation, through your
ownership of Phelps Dodge Common Stock, is an important element of our Offer.
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 15 years, Phelps Dodge's total return has been 1,024% as
compared to 25% for Asarco and 102% for Cyprus Amax (Cyprus Amax total
return is measured from Cyprus Amax's May 1985 initial public offering).

- Over the past 10 years, Phelps Dodge's total return has been 161% as
compared to negative 20% for Asarco and negative 26% for Cyprus Amax.

- Over the past five years, Phelps Dodge's total return has been 20% as
compared to negative 27% for Asarco and negative 40% for Cyprus Amax.

- Over the past three years, Phelps Dodge's total return has been 13% as
compared to negative 16% for Asarco and negative 22% for Cyprus Amax.

- Over the past one year, Phelps Dodge's total return has been 22% as
compared to negative 7% for Asarco and negative 26% for Cyprus Amax.

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<PAGE> 31

While we cannot make promises about future returns, we believe that our
performance record indicates that we are best equipped to extract value out of
the Asarco and Cyprus Amax assets.

ADVANTAGES OF A COMBINATION OF PHELPS DODGE AND CYPRUS AMAX. Our offers
for Asarco and Cyprus Amax are not conditioned on each other. We believe that
the benefits of a two-way combination of Phelps Dodge with either Asarco or
Cyprus Amax would result in many of the same kinds of benefits that would be
realized in a three-way combination of Phelps Dodge, Asarco and Cyprus Amax,
albeit to a lesser degree.

Because Phelps Dodge was unable to discuss the above analyses with Asarco
and Cyprus Amax and did not have access to substantial information concerning
Asarco's and Cyprus Amax's operations, these analyses were necessarily limited
in scope. In addition, such analyses involve judgments and contain
forward-looking statements with respect to, among other things, normal weather
conditions, future national and regional economic and competitive conditions,
inflation rates, regulatory treatment, future financial market conditions,
interest rates, future business decisions and other uncertainties, which, though
considered reasonable by Phelps Dodge, are beyond Phelps Dodge's control and
difficult to predict. Accordingly, there can be no assurance that these benefits
will be realized, and the actual benefits may vary materially from those set
forth above. In light of the uncertainties inherent in such analyses, the
inclusion of estimated operational and structured synergies and cost savings
herein should not be regarded as a representation by Phelps Dodge or any other
person that such operational and structured synergies and cost savings will be
achieved.

MATERIAL CONTRACTS BETWEEN CYPRUS AMAX AND PHELPS DODGE

Except as set forth herein, neither we nor, to the best of our knowledge,
any of the persons listed in Annex A hereto has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of Cyprus Amax, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies. Except as described herein, there have been no contacts,
negotiations or transactions since January 1, 1996, between us or, to the best
of our knowledge, any of the persons listed in Annex A hereto, on the one hand,
and Cyprus Amax or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, or a tender offer or other acquisition of
securities, an election of directors, or a sale or other transfer of a material
amount of assets. Neither us, nor, to the best of our knowledge, any of the
persons listed in Annex A hereto, has since January 1, 1996 had any transaction
with Cyprus Amax or any of its executive officers, directors or affiliates that
would require disclosure under the rules and regulations of the Commission
applicable to the Offer.

26
<PAGE> 32

CERTAIN LITIGATION

On August 23, 1999, Phelps Dodge, through its directly owned subsidiary CAV
Corporation, sent a written demand to Cyprus Amax for records of its
shareholders, pursuant to Section 220 of the Delaware General Corporation Law.
On August 24, 1999, Phelps Dodge and its directly owned subsidiary AAV
Corporation commenced an action by order to show cause in the Superior Court of
the State of New Jersey, Chancery Division, Mercer County pursuant to N.J.S.A.
14A:5-28 to seek shareholder records from Asarco. This action is captioned
Phelps Dodge Corp. and AAV Corp. v. ASARCO Inc., Docket No. MER-C-81-99. In
connection with this action, Phelps Dodge made an application for summary
injunctive relief. Asarco opposed the application and argument was heard before
Judge Judith Yaskin on August 26, 1999. At the hearing, the court ruled that
shareholder lists and related documents must be made available to Phelps Dodge
and AAV within forty-eight hours after the filing of their preliminary proxy
materials with the Commission.

In addition, Phelps Dodge has commenced actions in the Superior Court of
the State of New Jersey and in the Court of Chancery of the State of Delaware,
against Asarco and Cyprus Amax, and their respective boards of directors for
their breach of fiduciary duties including their refusals to consider, and to
allow the shareholders of both companies to consider, the Phelps Dodge proposal.

In particular, Phelps Dodge alleges that Cyprus Amax and Asarco have
entered into an illegal merger agreement that purports to prohibit the companies
from taking any action or entering into any discussions relating to a takeover
proposal. In light of these provisions of the Asarco/Cyprus Amax Merger
Agreement, Asarco and Cyprus Amax are incapable of evaluating meaningfully the
Phelps Dodge proposal and cannot make informed recommendations to their
shareholders. Phelps Dodge has also challenged the termination or "break up" fee
payable by Asarco in certain circumstances as grossly excessive; that fee
amounts to more than 6% of Asarco's equity value as of July 15, 1999, the date
of the Asarco/Cyprus Amax Merger Agreement. Furthermore, the Asarco/Cyprus Amax
Merger Agreement includes corporate governance provisions that disenfranchise
shareholders by guaranteeing until 2002 the management positions of the chief
executive officers of Asarco and Cyprus Amax unless these provisions are changed
with the approval of 75% of the full board.

The complaints also allege that, in addition to their persistent refusals
to negotiate with Phelps Dodge, Asarco and Cyprus Amax have set their
shareholder meetings and record dates to favor their own merger and have
rewarded management with what Phelps Dodge believes are lavish compensation and
benefit packages. Phelps Dodge believes that these and other efforts undertaken
by the companies amount to an attempt to favor and entrench management at the
expense of shareholders.

Phelps Dodge is seeking injunctive relief to remedy these breaches of duty,
including court orders declaring that the boards of Asarco and Cyprus Amax have
failed to make good faith efforts to obtain information about and adequately
consider the Phelps Dodge proposal and compelling the boards of those two
companies to consider the proposal and remove impediments preventing
consideration of the proposal. Phelps Dodge's preliminary injunction request is
scheduled to be heard by the Delaware Court of Chancery on September 27, 1999.

27
<PAGE> 33

PHELPS DODGE CORPORATION

Phelps Dodge Corporation is among the world's largest producers of copper,
carbon black and magnet wire, and is the world's largest producer of
continuous-cast copper rod. Phelps Dodge comprises two divisions: (i) Phelps
Dodge Mining Company and (ii) Phelps Dodge Industries.

- Phelps Dodge Mining Company is a business segment that includes our
worldwide copper operations from mining through rod production, marketing
and sales, other mining operations and investments, and worldwide mineral
exploration and development programs.

- Phelps Dodge Industries includes our specialty chemicals segment, our
wire and cable segment, and, until they were sold in 1998, our wheel and
rim operations.

In 1998, Phelps Dodge Mining Company produced 874,000 tons of copper for
our account from worldwide mining operations, and an additional 178,700 tons of
copper for the accounts of our minority interest partners. Gold, silver,
molybdenum, copper chemicals and sulfuric acid are by-products of our copper
operations. Production of copper for our own account from our U.S. operations
constituted approximately 33 percent of the copper mined in the United States in
1998. Much of our U.S. cathode copper production, together with additional
copper purchased from others, is used to produce continuous-cast copper rod, the
basic feed for the electrical wire and cable industry.

Our international mining interests include Candelaria, a major copper mine
in Chile, and other operations and investments in Chile and Peru. These
operations produce a variety of metals and minerals including copper, gold,
silver, and zinc. We also explore for metals and minerals throughout the world.

In addition to our mining interests, we produce engineered products
principally for the global energy, telecommunications, transportation and
specialty chemicals sectors through Phelps Dodge Industries. Specialty chemicals
are produced at Columbian Chemicals Company which is among the world's largest
producers of carbon black. Carbon black is a reinforcing agent in natural and
synthetic rubber that increases the service life of tires, hoses, belting and
other products for the rubber industry. We also produce specialty carbon black
for other industrial applications such as pigments for printing, coatings,
plastics and other non-rubber applications.

Our wire and cable segment comprises Phelps Dodge Magnet Wire Company and
its subsidiaries and Phelps Dodge International Corporation and its affiliates.
This segment produces wire and cable products and specialty conductors at U.S.
and international operations. Phelps Dodge Magnet Wire Company produces magnet
wire and other copper products for sale principally to original equipment
manufacturers for use in electrical motors, generators, transformers and other
products. Phelps Dodge International Corporation manufactures telecommunication
and energy cables and specialty conductors.

Our company employed approximately 13,200 people on June 30, 1999.

Phelps Dodge was incorporated under the laws of the State of New York in
1885. Phelps Dodge's corporate headquarters is located at 2600 North Central
Avenue, Phoenix, AZ 85004-3014 and its telephone number is (602) 234-8100.

Phelps Dodge is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission.

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<PAGE> 34

Reports, proxy statements and other information filed by Phelps Dodge with the
Commission may be inspected at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the public reference facilities in the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Phelps Dodge information may be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The Phelps
Dodge Common Stock is listed and traded on the NYSE. Reports, proxy statements
and other information filed by Phelps Dodge and Asarco with the Commission may
be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.

Certain information concerning the directors and executive officers of
Phelps Dodge and other representatives of Phelps Dodge who may solicit proxies
from Cyprus Amax Shareholders is set forth in Annex A hereto. Certain
information concerning the Shares held by the persons described in the preceding
sentence and by Phelps Dodge, and certain transactions between any of them and
Cyprus Amax, is set forth in Annex B hereto.

REVOCATION OF PROXIES

An executed proxy may be revoked at any time prior to its exercise by
submitting another proxy with a later date, by appearing in person at the
Special Meeting and voting or by sending a written, signed, dated revocation
which clearly identifies the proxy being revoked to either (a) Phelps Dodge in
care of Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York,
New York 10022, or (b) the principal executive offices of Cyprus Amax at 9100
East Mineral Circle, Englewood, Colorado 80112. A revocation may be in any
written form validly signed by the record holder as long as it clearly states
that the proxy previously given is no longer effective. Phelps Dodge requests
that a copy of any revocation sent to Cyprus Amax also be sent to Phelps Dodge
in care of Innisfree M&A Incorporated at the above address so that Phelps Dodge
may more accurately determine if and when proxies have been received from the
holders of record on the Record Date of a majority of the Shares then
outstanding.

IF YOU HAVE ALREADY SENT A PROXY CARD TO THE CYPRUS AMAX DIRECTORS, YOU MAY
REVOKE THAT PROXY AND VOTE AGAINST THE APPROVAL OF THE ASARCO/CYPRUS AMAX MERGER
BY SIGNING, DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD. THE LATEST DATED
PROXY IS THE ONLY ONE THAT COUNTS.

VOTING PROCEDURES

Only Cyprus Amax Shareholders of record on the Record Date are eligible to
submit a proxy. Therefore, any Cyprus Amax Shareholder owning Shares held in the
name of a brokerage firm, bank or other institution should sign, date and return
the GOLD proxy card to such brokerage firm, bank or other institution in the
envelope provided by that firm. The accompanying GOLD proxy card will be voted
in accordance with the Cyprus Amax Shareholder's instructions on such GOLD proxy
card.

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<PAGE> 35

Cyprus Amax Shareholders (i) may vote against the approval and adoption of
the Asarco/Cyprus Amax Merger or (ii) may withhold their vote or (iii) may vote
for such approval and adoption by marking the proper box on the GOLD proxy and
signing, dating and returning it promptly in the enclosed postage-paid envelope.
If a Cyprus Amax Shareholder returns a GOLD proxy card that is signed, dated and
not marked, that Cyprus Amax Shareholder will be deemed to have voted against
approval and adoption of the Asarco/Cyprus Amax Merger.

According to the joint proxy statement/prospectus of Asarco/Cyprus Amax
(the "Asarco/Cyprus Amax Joint Proxy Statement") contained in the Registration
Statement on Form S-4 filed by Asarco Cyprus Incorporated with the Commission on
August 20, 1999 (the "Asarco Cyprus Incorporated Registration Statement"), under
the Delaware General Corporation Law (the "DGCL"), the Restated Certificate of
Incorporation, the By-laws of Cyprus Amax and the rules of the NYSE, as
applicable, the approval and adoption of the Asarco/Cyprus Amax Merger require
the affirmative vote of at least a majority of the outstanding Cyprus Amax
Shares entitled to vote at the Cyprus Amax Special Meeting. Approval by the
Asarco shareholders will require the affirmative vote of a majority of all votes
cast by Asarco Shareholders at the Asarco Special Meeting. Please keep in mind
that under the DGCL, the failure to vote, abstentions and broker non-votes will
have the same effect as votes cast against approval and adoption of the
Asarco/Cyprus Amax Merger Agreement.

IF YOU WANT TO BE IN A POSITION TO ACCEPT THE OFFER, VOTE AGAINST THE
ASARCO/CYPRUS AMAX MERGER BY SIGNING, DATING AND RETURNING THE ENCLOSED GOLD
PROXY CARD TODAY.

EXCEPT AS SET FORTH ABOVE, PHELPS DODGE IS NOT AWARE OF ANY PROPOSALS TO BE
BROUGHT BEFORE THE SPECIAL MEETING. SHOULD OTHER PROPOSALS BE BROUGHT BEFORE THE
SPECIAL MEETING, THE PERSONS NAMED ON THE GOLD PROXY CARD WILL ABSTAIN FROM
VOTING ON SUCH PROPOSALS UNLESS SUCH PROPOSALS ADVERSELY AFFECT THE INTERESTS OF
PHELPS DODGE AS DETERMINED BY PHELPS DODGE IN ITS SOLE DISCRETION, IN WHICH
EVENT SUCH PERSONS WILL VOTE ON SUCH PROPOSALS AT THEIR DISCRETION.

DISSENTERS' RIGHTS

According to the Asarco/Cyprus Amax Joint Proxy Statement, under applicable
law, neither Asarco Shareholders nor holders of Cyprus Amax Shares are entitled
to appraisal rights. According to the Asarco/Cyprus Amax Joint Proxy Statement,
under the DGCL, Cyprus Amax preferred stockholders will be entitled to demand
appraisal of their preferred shares and to receive, instead of what Phelps Dodge
offers pursuant to the Merger, an amount that the Delaware Court of Chancery
decides is the "fair value" of the preferred shares.

OWNERSHIP OF SHARES

According to the Asarco/Cyprus Amax Joint Proxy Statement, (i) each Share
is entitled to one vote on the Asarco/Cyprus Amax Merger, (ii) as of August 19,
1999, approximately 90.5 million Shares were outstanding and (iii) the
Asarco/Cyprus Amax Merger Agreement must be approved and adopted by at least a
majority of outstanding Cyprus Amax shares entitled to vote at the Cyprus Amax
Special Meeting.

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<PAGE> 36

For information relating to the ownership of Shares by the current
directors and executive officers of Cyprus Amax, see Annex C hereto. According
to the Asarco/Cyprus Amax Joint Proxy Statement, based on Shares outstanding as
of July 30, 1999, management of Cyprus Amax has no knowledge of any person other
than those listed below who owns beneficially more than 5% of Cyprus Amax Common
Stock.

<TABLE>
<CAPTION>
SHARES OF CYPRUS AMAX
COMMON STOCK PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------ --------------------- --------
<S> <C> <C>
Trimark Investment Management Inc., as Manager
and Trustee of certain mutual funds........... 9,355,200(1) 10.3%
One First Canadian Place, Suite 5600
P.O. Box 487
Toronto, Ontario M5X 1E5, Canada
</TABLE>

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

(1) Trimark Financial Corporation, owner of 100% of the voting equity securities
of Trimark Investment Management Inc., may be deemed to be a beneficial
owner of the shares. Information is provided in reliance upon information
included in Schedule 13G, dated February 1, 1999, filed by Trimark
Investment Management, Inc.

The Asarco/Cyprus Amax Joint Proxy Statement contains additional
information concerning the Shares, beneficial ownership of the Shares by, and
other information concerning, Cyprus Amax directors and officers, compensation
paid to executive officers, and the principal holders of Shares.

THE INFORMATION CONCERNING ASARCO, CYPRUS AMAX AND THE PROPOSED
ASARCO/CYPRUS AMAX MERGER CONTAINED IN THIS PROXY STATEMENT (INCLUDING ANNEX C
HERETO) HAS BEEN TAKEN FROM OR IS BASED UPON DOCUMENTS AND RECORDS ON FILE WITH
THE COMMISSION AND OTHER PUBLICLY AVAILABLE INFORMATION. PHELPS DODGE HAS NO
KNOWLEDGE THAT WOULD INDICATE THAT STATEMENTS RELATING TO ASARCO, CYPRUS AMAX
AND THE PROPOSED ASARCO/CYPRUS AMAX MERGER CONTAINED IN THIS PROXY STATEMENT IN
RELIANCE UPON PUBLICLY AVAILABLE INFORMATION ARE INACCURATE OR INCOMPLETE.
PHELPS DODGE, HOWEVER, HAS NOT BEEN GIVEN ACCESS TO THE BOOKS AND RECORDS OF
CYPRUS AMAX, WAS NOT INVOLVED IN THE PREPARATION OF SUCH INFORMATION AND
STATEMENTS, AND IS NOT IN A POSITION TO VERIFY, OR MAKE ANY REPRESENTATION WITH
RESPECT TO THE ACCURACY OR COMPLETENESS OF, ANY SUCH INFORMATION OR STATEMENTS.

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<PAGE> 37

SOLICITATION OF PROXIES

Proxies will be solicited by mail, telephone, telegraph, telex, telecopy
and advertisement and in person. Solicitation may be made by directors,
executive officers and other representatives of Phelps Dodge. See Annex A hereto
for a listing of such persons.

The entire expense of Phelps Dodge's solicitation of proxies for the
Special Meeting is being borne by Phelps Dodge. Phelps Dodge does not intend to
seek reimbursement of its expenses related to the proxy solicitation from Cyprus
Amax whether or not the proxy solicitation is successful. Phelps Dodge has
retained Innisfree M&A Incorporated to assist and to provide advisory services
in connection with this Proxy Statement for which Innisfree will be paid a fee
of $175,000 and will be reimbursed for reasonable out-of-pocket expenses. Phelps
Dodge will indemnify Innisfree M&A Incorporated against certain liabilities and
expenses in connection with the proxy solicitation, including liabilities under
the federal securities law.

Banks, brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward the solicitation materials to the beneficial owners of
Shares for which they hold of record, and Phelps Dodge will reimburse them for
their reasonable out-of-pocket expenses.

If you have any questions concerning this Proxy Statement or the procedures
to be followed to execute and deliver a proxy, please contact Innisfree M&A
Incorporated at the address or phone number specified below.

WHETHER OR NOT YOU INTEND TO ATTEND THE SPECIAL MEETING, YOUR PROXY AND
PROMPT ACTION ARE IMPORTANT. MAKE YOUR VIEWS CLEAR TO YOUR BOARD OF DIRECTORS BY
SIGNING, DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD TODAY.

PHELPS DODGE CORPORATION

September 7, 1999

INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022

CALL TOLL-FREE: 1-877-750-5838
Bankers and Brokers Call Collect: (212) 750-5833

32
<PAGE> 38

ANNEX A

INFORMATION CONCERNING THE DIRECTORS AND SENIOR
OFFICERS, AND CERTAIN REPRESENTATIVES, OF PHELPS DODGE

The following table sets forth the name and the present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is carried on, of (a)
the Directors and executive officers of Phelps Dodge and (b) certain
representatives of Phelps Dodge who may assist Innisfree M&A Incorporated, the
Solicitation Agent, in soliciting proxies from Asarco Shareholders. Unless
otherwise indicated, the principal business address of each Director or
executive officer of Phelps Dodge, named below is 2600 North Central Avenue,
Phoenix, AZ 85004-3014.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
------------------ ----------------------------------
<S> <C>
</TABLE>

Douglas C. Yearley........... Chairman of the Board and Chief Executive
Officer; Chairman of the Executive Committee;
Member of Finance Committee

J. Steven Whisler............ President and Chief Operating Officer; Director

Manuel J. Iraola............. Senior Vice President, President, Phelps Dodge
Industries; Director

Timothy R. Snider............ Senior Vice President, President, Phelps Dodge
Mining Company

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

David L. Pulatie............. Senior Vice President, Human Resources

S. David Colton.............. Vice President and General Counsel

Paul Hazen................... Chairman of the Audit Committee and Member of
the Compensation and Management Development and
Finance Committees

Marie L. Knowles............. Member of the Audit, Environmental, Health and
Safety Committees

Gordon R. Parker............. Member of the Committee on Directors and the
Finance Committee

Archie W. Dunham............. Member of the Audit, Compensation and Management
Development Committees

William A. Franke............ Chairman of the Finance Committee; Member of the
Executive Committee and the Committee on
Directors

Southwood J. Morcott......... Chairman of the Compensation and Management
Development Committee; Member of the Committee
on Directors and the Environmental, Health and
Safety Committee

Robert N. Burt............... Chairman of the Environmental, Health and Safety
Committee; Member of the Compensation and
Management Development Committee

Robert D. Krebs.............. Chairman of the Committee on Directors; Member
of the Executive Committee and the Audit
Committee

A-1
<PAGE> 39

ANNEX B
SHARES HELD BY PHELPS DODGE OR CERTAIN OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER REPRESENTATIVES AND CERTAIN
TRANSACTIONS BETWEEN ANY OF THEM AND CYPRUS AMAX

As of August 27, 1999, Phelps Dodge was the beneficial owner of an
aggregate of 100 Shares, representing less than 1% of the Shares reported by
Cyprus Amax to be outstanding. The date of the Shares purchased and the average
price paid is set forth below.

<TABLE>
<CAPTION>
DATE OF PURCHASE NO. OF SHARES PRICE PER SHARE
- ---------------- ------------- ---------------
<S> <C> <C>
August 12, 1999 100 $14.25
</TABLE>

Except as disclosed in this Proxy Statement, none of Phelps Dodge, or to
the best knowledge of Phelps Dodge, any of the persons named in Annex A owns any
securities of Cyprus Amax or any subsidiary of Cyprus Amax, beneficially or of
record, has purchased or sold any of such securities within the past two years
or is or was within the past year a party to any contract, arrangement or
understanding with any person with respect to any such securities. Except as
disclosed in this Proxy Statement, to the best knowledge of Phelps Dodge, such
directors, officers, employees and other representatives, none of their
associates beneficially owns, directly or indirectly, any securities of Asarco.

In the ordinary course of its business, Morgan Stanley & Co. Incorporated
("Morgan Stanley") engages in securities trading and brokerage activities and
may trade or otherwise effect transactions in debt or equity securities or
senior loans of Cyprus Amax for its own account and the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities or senior loans. As of August 25, 1999, Morgan Stanley held a
net short position of -19,972 Shares.

Except as disclosed in this Proxy Statement, none of Phelps Dodge, its
directors, officers, employees or other representatives named in Annex A or, to
the best of Phelps Dodge's knowledge, its associates has any arrangement or
understanding with any person (1) with respect to any future employment by
Cyprus Amax or its affiliates or (2) with respect to future transactions to
which Cyprus Amax or any of its affiliates will or may be a party, other than
sales of products and services in the ordinary course of business.

B-1
<PAGE> 40

ANNEX C

SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS OF CYPRUS AMAX

The following table sets forth the beneficial ownership of Cyprus Amax
common stock as of June 30, 1999, except as otherwise noted, by (a) each current
director, (b) the five most highly compensated executive officers of Cyprus Amax
and (c) all directors and executive officers as a group. Unless otherwise
specified, the directors and officers have sole voting and investment power with
respect to these securities. Cyprus Amax currently has Series A convertible
preferred stock issued and outstanding, none of which is beneficially owned by
directors or executive officers.

SHARES OF CYPRUS AMAX COMMON STOCK

<TABLE>
<CAPTION>
ADDITIONAL
SHARES SHARES DEEMED
BENEFICIALLY BENEFICIALLY PERCENT
NAME OWNED(1) OWNED(2) TOTAL OF CLASS
- ---- ------------ ------------- --------- --------
<S> <C> <C> <C> <C>
Milton H. Ward................ 2,030,636 0 2,030,636 2.2%
Linda G. Alvarado............. 9,815 4,843 14,658 (1)
George S. Ansell.............. 8,875(3) 7,080 15,955 (1)
Allen Born(4)................. 55,205 0 55,205 (1)
William C. Bousquette......... 8,500 28,325 36,825 (1)
Thomas V. Falkie.............. 12,000 7,727 19,727 (1)
Ann Maynard Gray.............. 7,650 4,492 12,142 (1)
Rockwell A. Schnabel.......... 30,000 25,831 55,831 (1)
Theodore M. Solso............. 8,000 22,427 30,427 (1)
John H. Stookey............... 8,000 3,800 11,800 (1)
James A. Todd, Jr.(4)......... 44,398 0 44,398 (1)
Billie B. Turner.............. 9,500 12,222 21,722 (1)
Gerald J. Malys............... 381,224(3) 0 381,224 (1)
Jeffery G. Clevenger.......... 317,880(3) 0 317,880 (1)
Garold R. Spindler(5)......... 441,295 0 441,295 (1)
Philip C. Wolf................ 241,204 0 241,204 (1)
All directors and executive
officers as a group (20
persons).................... 4,095,088(3) 116,747 4,211,835 4.7%
</TABLE>

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

(1) All directors and executive officers as a group (20 persons) beneficially
own 4.7% of the outstanding Cyprus Amax common stock, including 2.2%
beneficially owned by Mr. Ward. No other individual director or executive
officer beneficially owns 1% or more of the outstanding Cyprus Amax common
stock.

C-1
<PAGE> 41

(2) Units denominated as Cyprus Amax common stock equivalents held in the
Deferred Compensation Plan for Non-Employee Directors. All of the nine
current non-employee directors elected to participate in the plan during
1999. Units held in the plan by Messrs. Born and Todd were converted to
shares of common stock upon their retirement from the Board (see Note (4)).
The units are rounded to the nearest whole share.

(3) Dr. Ansell shares voting power with respect to 375 shares; Mr. Clevenger
shares voting power with respect to 15,986 shares; and Mr. Malys shares
voting power with respect to 10,000 shares. The total for all directors and
executive officers as a group includes 600 shares for which an executive
officer disclaims beneficial ownership.

(4) Messrs. Born and Todd retired from their positions as directors on May 6,
1999 and the share ownership described above is as of May 6, 1999.

(5) Mr. Spindler left Cyprus Amax on June 30, 1999, in conjunction with the sale
of its U.S. coal assets.

The shares shown in the above table include:

- Shares which certain persons have the rights to acquire within 60 days
through the exercise of stock options issued under the Cyprus Amax Stock
Plan for Non-Employee Directors. These shares include 5,000 shares for
each of Mses. Alvarado and Gray, Drs. Ansell and Falkie, and Messrs.
Bousquette, Schnabel, Solso, Stookey and Turner and 8,000 shares for
Messrs. Born and Todd.

- Shares which certain persons have the rights to acquire within 60 days
through the exercise of stock options issued under the Cyprus Amax
Management Incentive Program. These shares include 1,497,921 for Mr.
Ward; 242,726 for Mr. Malys; 178,200 for Mr. Clevenger; 323,900 for Mr.
Spindler; and 164,706 for Mr. Wolf. The stock options exercisable under
this program and the Cyprus Amax Stock Plan for Non-Employee Directors
total 2,768,549 for all directors and executive officers as a group.

- Shares of restricted stock acquired through the Cyprus Amax Management
Incentive Program and the Cyprus Amax Key Executive Long-Term Incentive
Plan. These shares include 350,000 for Mr. Ward; 120,475 for Mr. Malys;
109,710 for Mr. Clevenger; 73,985 for Mr. Wolf; and 820,230 for all
directors and executive officers as a group. The holders of restricted
shares have the power to vote these shares and receive dividends but do
not have investment power until the shares vest.

- Shares acquired through the employee savings plan for which the trustee
has shared voting and investment power. These shares include 2,995 for
Mr. Ward; 6,189 for Mr. Malys; 4,513 for Mr. Clevenger; 995 for Mr.
Spindler; 2,513 for Mr. Wolf; and 27,498 for all executive officers as a
group. The shares reported are rounded to the nearest whole share.

C-2
<PAGE> 42
PROXY

PROXY SOLICITED BY PHELPS DODGE CORPORATION IN OPPOSITION TO THE PROXY
[SOLICITED BY THE DIRECTORS OF CYPRUS AMAX MINERALS COMPANY]

The undersigned, a holder of record of shares of common stock, without
par value (the "Shares"), of Cyprus Amax Minerals Company, a Delaware
corporation ("Cyprus Amax"), at the close of business on August 25, 1999 (the
"Record Date"), hereby appoints Douglas C. Yearley, J. Steven Whisler and Manuel
J. Iraola, or any of them, the proxy or proxies of the undersigned, each with
full power of substitution, to attend the Special Meeting of Cyprus Amax
Shareholders to be held on September 30, 1999 (and any adjournments,
postponements, continuations or reschedulings thereof), at which holders of
Shares will be voting on, among other things, approval and adoption of the
Agreement and Plan of Merger, dated as of July 15, 1999, by and among Cyprus
Amax, ASARCO Incorporated, a New Jersey corporation ("Asarco"), Asarco Cyprus
Incorporated, a Delaware corporation ("Asarco Cyprus Incorporated"), and two
wholly owned subsidiaries of Asarco Cyprus Incorporated (the "Asarco/Cyprus Amax
Merger Agreement"), providing for the merger of the two wholly owned
subsidiaries with and into Asarco and Cyprus Amax, respectively, with Asarco and
Cyprus Amax each surviving, and to vote as specified in this Proxy all the
Shares which the undersigned would otherwise be entitled to vote if personally
present. The undersigned also directs the Trustees of Cyprus Amax Savings Plan
and Trust, Cyprus Amax Thrift Plan For Bargaining Unit Employees, the Equatorial
Mining North America, Inc. ("Equatorial") 401(k) Profit Sharing Plan, and the
Chemetall Corporation ("Chemetall") Savings Plan (as applicable, with respect to
shares of common stock held for the benefit of the undersigned) to vote in
person or by proxy at such special meeting, all Shares held by or for the
benefit of the undersigned. The Trustee of Equatorial Plan may or may not vote
undirected Shares in the plan, the Trustee of the Chemetall Plan will vote
solely in accordance with written directions of the participants in the plan,
and the Trustees of the remaining plans will vote undirected Shares held by them
in direct proportion to the voting of Shares for which instructions have been
received. The undersigned hereby revokes any previous proxies with respect to
the matters covered in this Proxy.

THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION RECOMMENDS A VOTE
AGAINST APPROVAL AND ADOPTION OF THE ASARCO/CYPRUS AMAX MERGER AGREEMENT AND THE
PROPOSED ASARCO/CYPRUS AMAX TRANSACTION. IF RETURNED CARDS ARE SIGNED BUT NOT
MARKED, THE UNDERSIGNED WILL BE DEEMED TO HAVE VOTED AGAINST APPROVAL AND
ADOPTION OF THE ASARCO/CYPRUS AMAX MERGER AGREEMENT AND THE PROPOSED
ASARCO/CYPRUS AMAX TRANSACTION.

PLEASE SIGN AND DATE ON REVERSE SIDE
<PAGE> 43
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE

THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION RECOMMENDS A VOTE
AGAINST THE PROPOSAL.

PROPOSAL: APPROVAL AND ADOPTION OF THE ASARCO/CYPRUS AMAX MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY

AGAINST FOR ABSTAIN

/ / / / / /

In its discretion, this Proxy is authorized to vote upon such other
business as may properly come before the meeting or any adjournments,
postponements, continuations or reschedulings thereof.

IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT INNISFREE M&A
INCORPORATED AT 1-877-750-5838.

DATE:
--------------------------

--------------------------------
SIGNATURE

--------------------------------
TITLE(S)

Please sign your name exactly as it appears
hereon. When shares are held of record by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
president or authorized officer. If a
partnership name, please sign in partnership
name by authorized person.