Phelps Dodge Corporation

Phelps Dodge Establishes Trusts to Fund Environmental, Retiree Obligations

December 14, 2005

PHOENIX – Phelps Dodge Corp. (NYSE:PD) today announced that its board of directors has approved establishing and funding the following trusts:

A trust dedicated to help fund Phelps Dodge’s global environmental reclamation and remediation activities. The company will make an initial contribution of $400 million to the environmental trust during the first quarter of 2006.

Two trusts, one dedicated to funding postretirement medical obligations and the other dedicated to funding postretirement life insurance obligations, for eligible U.S. employees and retirees. These trusts are being established in association with certain employee benefit plans sponsored by Phelps Dodge. They will constitute Voluntary Employees’ Beneficiary Association (VEBA) trusts under section 501(c)(9) of the Internal Revenue Code. The trusts will help provide assurance to participants in these plans that Phelps Dodge will continue to have funds available to meet its obligations under the covered retiree medical and life insurance programs. The trusts will not reduce retiree contribution obligations that help fund these benefits and will not guarantee that retiree contribution obligations will not increase in the future. The company plans to contribute approximately $200 million to these trusts during December 2005 and early 2006.

“This action by the board supports one of four stated priorities for our cash, namely, to strengthen our balance sheet and improve our financial flexibility,” said J. Steven Whisler, chairman and chief executive officer. “Funding these trusts is a prudent and responsible use of the cash expected to come from the sales of Columbian Chemicals Co. and Phelps Dodge Magnet Wire’s North American assets. The trusts allow us to meet important societal and employee obligations regardless of the point in the copper cycle, and will remove investor uncertainties regarding them.”

“As previously disclosed, the company intends to maintain a solid investment-grade credit rating throughout the copper cycle, keep a debt-to-capitalization ratio of less than 25 percent and retain sufficient cash balances to maintain Phelps Dodge’s financial flexibility and to ensure appropriate funding of its growth and asset improvement projects. We will continue to maintain financial discipline by focusing on our four priorities for cash in the context of our capital structure and potential strategic opportunities, with the objective of increasing long-term shareholder value.”

Phelps Dodge Corp. is one of the world’s leading producers of copper and molybdenum, the largest producer of molybdenum-based chemicals and continuous-cast copper rod, and among the leading producers of magnet wire and carbon black. The company and its two divisions, Phelps Dodge Mining Co. and Phelps Dodge Industries, employ approximately 15,500 people worldwide.