Phelps Dodge News

Phelps Dodge Corp. has reported a consolidated net income for the 2006 2nd quarter of $471.7 million, or $2.32 per share, & $805.5 million, or $3.96 per share, in the 1st 6 months of 2006. Net income was negatively impacted by after-tax charges of $514.6 million, or $2.53 per share, in the 2006 2nd quarter & $813.0 million, or $4.00 per share, in the 1st 6 months of 2006 for mark-to-market accounting adjustments on 2006 & 2007 copper collars & copper put options that do not qualify for hedge accounting. Net income also included after-tax, net special charges totaling $9.8 million, or 5 cents per share, for the 2006 2nd quarter and $54.7 million, or 27 cents per share, in the 1st 6 months of 2006, & are summarized in Note 1. The after-tax, net special charges for the 1st 6 months of 2006 included the loss recognized from discontinued operations of $28.8 million, or 14 cents per share. By comparison, the company reported net income of $682.3 million, or $3.38 per share, in the 2005 2nd quarter and $1,069.0 million, or $5.29 per share, in the 1st 6 months of 2005. Net income included after-tax, net special gains of $225.8 million, or $1.12 per share, in the 2005 2nd quarter and $225.9 million, or $1.12 per share, in the 1st 6 months of 2005, which are also summarized in Note 1.

J. Steven Whisler, chairman and chief executive officer, said: “We again delivered a strong quarterly operating performance & generated in excess of $1.1 billion of cash flow from operating activities, more than double the prior quarter. The market fundamentals for copper and molybdenum remain strong.

“We have also taken decisive actions on 2 other important initiatives. Earlier this month, we received the air quality permit for our new mine in Safford, Ariz., which allows us to begin construction immediately. This exciting project is expected to produce approximately 240 million pounds of copper annually once we reach full production in the 2nd half of 2008.

“In late June, we announced an agreement for a transformational 3-way combination with 2 other major mining firms, Inco Ltd. & Falconbridge Ltd., to create Phelps Dodge Inco Corporation, North America’s preeminent mining company. Phelps Dodge Inco will be the world’s leading nickel producer & largest publicly traded copper producer, as well as a leading producer of molybdenum & cobalt, & it will have a world-class portfolio of growth projects & exciting exploration opportunities. Based on estimated annual synergies of approx., $900 million, the combination is expected to be immediately accretive to Phelps Dodge’s cash flow and accretive to earnings per share in 2008.”