Freeport-McMoRan Acquiring Phelps Dodge

Freeport-McMoRan Copper & Gold Inc. and Phelps Dodge Corp. announced that they have signed a definitive merger agreement under which FCX will acquire Phelps Dodge for about $25.9 billion in cash and stock, creating the world’s largest publicly traded copper company.

The combined company will be a new industry leader with large, long-lived, geographically diverse assets and significant proven and probable reserves of copper, gold and molybdenum. The company’s increased scale of operations, management depth and strengthened cash flow will provide an improved platform to capitalize on growth opportunities in the global market.

The combined company will be the largest North American-based mining company. The combined company will represent one of the most geographically diversified portfolios of operating, expansion and growth projects in the copper mining industry.

James Moffett, FCX’s chairman, said: "This transaction combines two leading mining companies to form a strong industry leader at a time when we see significant long-term opportunities in our industry. FCX has been built through our exploration and development capabilities, and we will focus on aggressively pursuing opportunities in the extensive Phelps Dodge asset portfolio."

Richard Adkerson, FCX’s president and CEO, said: "This acquisition is financially compelling for FCX shareholders, who will benefit from significant cash flow accretion, lower cost of capital, and improved geographic and asset diversification. The new FCX will continue to invest in future growth opportunities with high rates of return and will aggressively seek to reduce debt incurred in the acquisition using the substantial free cash flow generated from the combined business."

The boards of directors of FCX and Phelps Dodge have each unanimously approved the terms of the agreement and have recommended that their shareholders approve the transaction. The transaction is subject to the approval of the shareholders of FCX and Phelps Dodge, receipt of regulatory approvals and customary closing conditions. The transaction is expected to close at the end of the first quarter of 2007.

The combined company will benefit from long-lived reserves totaling 75 billion pounds of copper, 41 million ounces of gold and 1.9 billion pounds of molybdenum, net of minority interests.

The combined company is expected to generate strong cash flows, enabling significant debt reduction. For the year 2006, the two companies are expected to generate estimated combined operating cash flows totaling $6.5 billion.

FCX expects the transaction to be immediately accretive to FCX’s earnings and cash flow.

The combined company will have significant high potential exploration rights in copper regions around the world, including FCX’s existing prospective acreage in Papua, Indonesia, and Phelps Dodge’s opportunities at its Tenke concession, the U.S. and South America, as well as Phelps Dodge’s portfolio of exciting exploration targets. FCX will continue its longstanding focus on adding value through exploration.

The combination of FCX’s and Phelps Dodge’s proven management and best practices in open pit and underground mining will facilitate the sharing of expertise to optimize operations across the asset base. Phelps Dodge’s unique mining and processing technology provides opportunities to be applied to optimize metal production at Grasberg.

James Moffett, chairman of FCX, will continue as chairman. Richard C. Adkerson, CEO of FCX, will serve as CEO of the combined company. Upon completion of the transaction, J. Steven Whisler, chairman and chief executive officer of Phelps Dodge, is expected to retire after more than 30 years of service to Phelps Dodge.

Timothy R. Snider will be chief operating officer of the combined company, Ramiro G. Peru will be chief financial officer and Kathleen L. Quirk will be chief investment officer. Mark J. Johnson will continue as chief operating officer of FCX’s Indonesian operations and Michael J. Arnold will continue in his executive management role, including serving as chief financial and administrative officer of FCX’s Indonesian operations.