Filed by Freeport-McMoRan Copper & Gold Inc.
pursuant to Rule 425 under the
Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 of
the Securities Exchange Act of 1934
Subject Company: Phelps Dodge Corporation
Commission File No.: 001-00082
Cautionary Statement Regarding Forward-Looking Statements
This document contains certain forward-looking statements about FCX and Phelps Dodge. When used in this
document, the words “anticipates”, “may”, “can”, “believes”, “expects”, “projects”, “intends”, “likely”, “will”, “to
be” and any similar expressions and any other statements that are not historical facts, in each case as they relate to
FCX or Phelps Dodge, the management of either such company or the transaction are intended to identify those
assertions as forward-looking statements. In making any of those statements, the person making them believes that
its expectations are based on reasonable assumptions. However, any such statement may be influenced by factors
that could cause actual outcomes and results to be materially different from those projected or anticipated. These
forward-looking statements are subject to numerous risks and uncertainties. There are various important factors that
could cause actual results to differ materially from those in any such forward-looking statements, many of which are
beyond the control of FCX and Phelps Dodge, including macroeconomic conditions and general industry conditions
such as the competitive environment of the mining industry, unanticipated mining, milling and other processing
problems, accidents that lead to personal injury or property damage, persistent commodity price reductions, changes
in political, social or economic circumstances in areas where FCX and Phelps Dodge operate, variances in ore
grades, labor relations, adverse weather conditions, the speculative nature of mineral exploration, fluctuations in
interest rates and other adverse financial market conditions, regulatory and litigation matters and risks, changes in
tax and other laws, the risk that a condition to closing of the transaction may not be satisfied, the risk that a
regulatory approval that may be required for the transaction is not obtained or is obtained subject to conditions that
are not anticipated and other risks to consummation of the transaction. The actual results or performance by FCX or
Phelps Dodge, and issues relating to the transaction, could differ materially from those expressed in, or implied by,
any forward-looking statements relating to those matters. Accordingly, no assurances can be given that any of the
events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact
they will have on the results of operations or financial condition of FCX or Phelps Dodge, the combined company or
the transaction. Except as required by law, we are under no obligation, and expressly disclaim any obligation, to
update, alter or otherwise revise any forward-looking statement, whether written or oral, that may be made from
time to time, whether as a result of new information, future events or otherwise.
Important Information for Investors and Stockholders
FCX and Phelps Dodge filed a definitive joint proxy statement/prospectus with the SEC in connection with the proposed merger. FCX and Phelps Dodge urge investors and stockholders to read the definitive joint proxy
statement/prospectus and any other relevant documents filed by either party with the SEC because they contain important information.
Investors and stockholders are able to obtain the definitive joint proxy statement/prospectus and other documents filed with the SEC free of charge at the website maintained by the SEC at www.sec.gov. In addition, documents
filed with the SEC by FCX are available free of charge on the investor relations portion of the FCX website at http://www.fcx.com. Documents filed with the SEC by Phelps Dodge are available free of charge on the investor relations portion of the
Phelps Dodge website at www.phelpsdodge.com.
FCX, and certain of its directors and executive officers are participants in the solicitation of proxies from the stockholders of FCX in connection with the merger. Information concerning the interests of FCX’s
directors and
executive officers in FCX is set forth in the definitive joint proxy statement/prospectus filed with the SEC. Phelps Dodge, and certain of its directors and executive officers may be deemed to be participants in the
solicitation of proxies from its shareholders in connection with the merger. Information concerning the interests of Phelps Dodge’s directors and executive officers in Phelps Dodge is set forth in the definitive joint proxy statement/prospectus
filed with the SEC.
Other information regarding the direct and indirect interests, by security holdings or otherwise, of the participants are described in the definitive joint proxy statement/prospectus relating to the merger. Investors and
stockholders can obtain more detailed information regarding the direct and indirect interests of FCX’s and Phelps Dodge’s directors and executive officers in the merger by reading the definitive joint proxy statement/prospectus.
2
FCX's Acquisition of
Phelps Dodge
Lender Presentation
February 27, 2007
1
|
 |
Cautionary Statement Regarding Forward-Looking Statements
This document contains certain forward-looking statements about FCX and Phelps
Dodge. When used in this document, the words "anticipates", "may", "can",
"believes", "expects", "projects", "intends", "likely", "will", "to be" and any
similar expressions and any other statements that are not historical facts, in
each case as they relate to FCX or Phelps Dodge, the management of either such
company or the transaction are intended to identify those assertions as
forward-looking statements. In making any of those statements, the person making
them believes that its expectations are based on reasonable assumptions.
However, any such statement may be influenced by factors that could cause actual
outcomes and results to be materially different from those projected or
anticipated. These forward-looking statements are subject to numerous risks and
uncertainties. There are various important factors that could cause actual
results to differ materially from those in any such forward-looking statements,
many of which are beyond the control of FCX and Phelps Dodge, including
macroeconomic conditions and general industry conditions such as the competitive
environment of the mining industry, unanticipated mining, milling and other
processing problems, accidents that lead to personal injury or property damage,
persistent commodity price reductions, changes in political, social or economic
circumstances in areas where FCX and Phelps Dodge operate, variances in ore
grades, labor relations, adverse weather conditions, the speculative nature of
mineral exploration, fluctuations in interest rates and other adverse financial
market conditions, regulatory and litigation matters and risks, changes in tax
and other laws, the risk that a condition to closing of the transaction may not
be satisfied, the risk that a regulatory approval that may be required for the
transaction is not obtained or is obtained subject to conditions that are not
anticipated and other risks to consummation of the transaction. The actual
results or performance by FCX or Phelps Dodge, and issues relating to the
transaction, could differ materially from those expressed in, or implied by, any
forward-looking statements relating to those matters. Accordingly, no assurances
can be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what impact they
will have on the results of operations or financial condition of FCX or Phelps
Dodge, the combined company or the transaction. Except as required by law, we
are under no obligation, and expressly disclaim any obligation, to update, alter
or otherwise revise any forward-looking statement, whether written or oral, that
may be made from time to time, whether as a result of new information, future
events or otherwise.
www.fcx.com
2
|
 |
Important Information for Investors and Stockholders
FCX and Phelps Dodge filed a joint proxy statement/prospectus with the
Securities and Exchange Commission (SEC) in connection with the proposed merger.
FCX and Phelps Dodge urge investors and stockholders to read the definitive
joint proxy statement/prospectus and any other relevant documents filed by
either party with the SEC because they contain important information.
Investors and stockholders may obtain the joint proxy statement/prospectus and
other documents filed with the SEC free of charge at the website maintained by
the SEC at www.sec.gov. In addition, documents filed with the SEC by FCX will be
available free of charge on the investor relations portion of the FCX website at
www.fcx.com. Documents filed with the SEC by Phelps Dodge will be available free
of charge on the investor relations portion of the Phelps Dodge website at
www.phelpsdodge.com. FCX and certain of its directors and executive officers are
participants in the solicitation of proxies from the stockholders of FCX in
connection with the merger. Information concerning the interests of FCX's
directors and executive officers in FCX is set forth in the joint proxy
statement/prospectus filed with the SEC. Phelps Dodge and certain of its
directors and executive officers may be deemed to be participants in the
solicitation of proxies from its shareholders in connection with the merger.
Information concerning the interests of Phelps Dodge's directors and executive
officers in Phelps Dodge is set forth in the joint proxy statement/prospectus
filed with the SEC. Other information regarding the direct and indirect
interests, by security holdings or otherwise, of the participants is described
in the definitive joint proxy statement/prospectus relating to the merger.
Investors and stockholders can obtain more detailed information regarding the
direct and indirect interests of FCX's and Phelps Dodge's directors and
executive officers in the merger by reading the definitive joint proxy
statement/prospectus.
3
|
 |
Transaction Overview
4
|
 |
Transaction Overview
>> Announced Transaction on November 19, 2006
>> Positive Market Response
o Size, Scale, Diversity
>> Transaction Subject to Regulatory and FCX/PD Shareholder Approval
o Material Regulatory Approval Received
>> Shareholder Votes Set for March 14, 2007
>> Transaction Expected to Close on March 19, 2007
5
|
 |
Transaction Highlights
>> Creates World's Premier Publicly Traded Copper Company
>> Leading North American-based Metals and Mining Investment
>> World Class, Long-lived, Geographically Diverse Operations
>> Significant Exploration Potential and Management Track Record of Adding Value
Through Exploration
>> Strong Cash Flows and Pro Forma Financial Strength
>> Operating and Development Expertise
>> Attractive Project Pipeline Supports Growing Production Profile
6
|
 |
Sources/Uses Expected at Closing
(US$ billions)
Sources Uses
------- ----
Existing Cash $2.5 Cash Consideration $18.0
Term A Proceeds 2.5 Fees & Expenses 0.5
Term B Proceeds 7.5 -----
Senior Notes Proceeds 6.0 Total Uses $18.5
-----
Total Sources $18.5
Pro Forma Cash & Credit Availability
Cash in U.S. $1.0
Cash in Foreign Subs 2.3
Less L/C's, Cash Collateral (0.3)
----
Total Cash $3.0
Revolver 1.5
----
Total Availability $4.5
7
|
 |
Business Overview
8
|
 |
World's Leading Public Copper Company
Top 10 Copper Producers (2006E)
Pro forma FCX is poised to take advantage of favorable industry fundamentals
____________________
Source: Brook Hunt 4Q Report. Rankings based on net equity ownership.
(1) Xstrata shown pro forma the acquisition of Falconbridge
9
|
 |
Premier North American Mining Company
Enterprise Value
(US$ billions)
---------
Source: Public filings, prices as of February 23, 2007
Pro forma FCX based on closing share price of $59.91, pro forma 358 million
diluted shares outstanding, net debt and minority interest as of December 31,
2006 and debt incurred through the transaction
10
|
 |
Combination of FCX and Phelps Dodge
2006 Revenue (US$ billions)
2006 EBITDA (US$ billions)
2006 Consolidated Copper Sales (billion lbs)
Enterprise Value (US$ billions) (1)
---------
(1) As of February 23, 2007
(2) Includes approximately 540 mm lbs for minority interests; excludes purchased copper
11
|
 |
Enhanced Diversification
2006 Mining Revenue by Commodity
2006 Mining Revenue by Geography
Pro forma for the transaction, approximately 60% of production will come from
investment grade countries
12
|
 |
Strong Management Track Record
>> Leader in Safety and Environmental Excellence
>> World Class Open Pit and Underground Mining Expertise
>> Global Leader in Mining and Processing Technologies
>> Established Exploration and Development Expertise
>> Proven Project Management Expertise
13
|
 |
The
Right
Time
14
|
 |
*LME and Comex, excluding Shanghai stocks, producer, consumer and merchant
stocks.
Industry Analysts Copper Price Forecasts
2007 2008
---- ----
Reuters Survey (1) $2.81 $2.35
CRU $2.48 $1.64
Brook Hunt $2.50 $1.95
Bloomsbury $2.53 $2.55
"Street" $2.75 $2.30
Forward Curve $2.59 $2.68
(1) 45 Commodity Strategists as of January 15, 2007
(2) Excludes actuals for January and February 2007 which averaged $2.59/lb and
$2.58/lb, respectively
15
|
 |
Positive Long-Term Fundamentals
>> The Combination of Strong Fundamentals Has Created Extremely Attractive Market Conditions for the Copper Industry
>> Supply is Unlikely to Increase Meaningfully
|X| Absence of Mega-development Projects in the Pipeline
|X| Potential for Further Supply Disruptions
>> China Continues to Lead Strong Demand Growth
>> 60% of Today's Mines Deplete or Go Underground by 2021
>> New Mines Taking Longer to Build
Supply/Demand Forecast*
2007 2008
---------------------- ---------------------------
Brook Hunt CRU Brook Hunt CRU
Supply 18.7 18.3 19.6 19.4
Demand 18.2 18.2 18.9 18.9
------ ---- ---- ---- ----
Market Balance 0.5 0.1 0.7 0.5
China Demand Growth 8.0% 9.0% 7.0% 8.5%
16
|
 |
World Class Discoveries Are Extremely Rare
Recoverable Copper Reserves 2006E Copper Production
Phelps Dodge's Tenke Fungurume is believed to be largest undeveloped,
high-grade copper/cobalt project in the world today
17
|
 |
The
Right
Assets
Morenci, North America Cerro Verde, Peru Sierrita, North America
18
|
 |
Geographically Diverse, Long-Lived Asset Base
Net
Consolidated interest
Reserves 12/31/06
Copper (billion lbs) 93.6 77.2
Molybdenum (billion lbs) 2.0 1.8
Gold (million ozs) 42.4 38.3
Average Production Volumes (2007-2009)
Copper (billion lbs) 4.4 3.6
Molybdenum (million lbs) 77 74
Gold (million ozs) 1.9 1.7
Implied Reserve Life (years)
Copper 21 21
Molybdenum 25 25
Gold 22 22
Mineralized Material(1)
Ore (million metric tons) 9,972 9,341
average % copper 0.38 0.37
average g/t gold 0.06 0.06
(1) Geologic resources (i.e. Mineralized Material) are not included in
reserves. The geologic resources will not qualify as reserves until
comprehensive engineering studies establish their economic feasibility.
Accordingly, no assurance can be given that the estimated resources and
mineralization will become proven and probable reserves.
19
|
 |
North America
10 Mines in North America
Morenci (85%)
Reserves -------------
Cu 24.8 billion lbs Major Projects
Mo 1.7 billion lbs >> Mill Restart and Concentrate Leach Project
>> $210 Million Aggregate Capital Cost
Production >> In Operation Mid-2007
Cu 1.6 billion lbs >> Adds 115MM lbs Cu/year Aggregate and Enhances Cost Profile
Mo 69 million lbs
Safford (100%)
Mine Life 16 Years
>> SX/EW Project
>> $550 Million Capital Cost
>> Production in 1H 2008
>> 240MM lbs Cu/year
>> Substantial District Potential (Lone Star)
(1) Reserves and annual production net to pro forma FCX. Reserves as of
December 31, 2006. Mine life based on implied reserve life as of 12/31/06
reserves and 2007-2009 average production. Cu operations: Morenci (85%),
Sierrita (100%), Bagdad (100%), Chino/Cobre (100%), Tyrone (100%), and
Miami (100%) Cu development: Safford (100%) Primary Mo: Henderson (100%)
and Climax (100%) with feasibility study expected on Climax in 2007
20
|
 |
South America
Peru
Cerro Verde (53.6%) (1) Major Projects
Reserves
Cu 8.3 billion lbs >> Major Project With Conventional Concentrator
Mo 0.1 billion lbs >> Aggregate $850MM Project Completed in 4Q06
>> Ramp-up to Full Production in 1H07
Cu Production 380 million lbs >> Adds 430MM lbs Cu/year Aggregate
Mine Life 37 years
Chile
El Abra (51%) (1) >> Large Sulfide Mineral Deposit Underlying Current Oxide Pit
Cu Reserves 2.9 billion lbs >> Extends Mine Life Through 2021 With Sulfide Cu Production Beginning in 2010
Production 190 million lbs >> Adds 325MM lbs Cu/year Aggregate
Mine Life 19 years
Candelaria/
Ojos del Salado (80%) (1)
Cu Reserves 3.5 billion lbs
Production 340 million lbs
Mine Life 15 years
(1) Reflects net interest in properties; production figures are average annual
estimates for 2007 - 2009
21
|
 |
Indonesia - Grasberg
Grasberg (90.64%) (1) Development Projects
Reserves >> DOZ Expansions (50K t/d & 80K t/d)
Cu 35.2 billion lbs >> Big Gossan Development
Au 37.2 million ozs >> Common Infrastructure Project
Ag 116 million ozs >> Development of Grasberg Underground & Balance of Mineral District Reserves
>> Significant Exploration Potential
Production
Cu 1.1 billion lbs
Au 1.6 million ozs
Ag 3.1 million ozs
Mine Life 34 years
(1) Reflects net interest in properties; production figures are average annual
estimates for 2007 - 2009
22
|
 |
Africa - Democratic Republic of Congo
Tenke Fungurume (1)
(57.75%) Development Projects Reserves
Cu 2.6 billion lbs >> Feasibility Study Approved 4Q06
Co 0.3 billion lbs >> Oxide Leach Operation
>> $650MM Capital Cost
>> Aggregate Production of 250MM lbs Cu/year; 18 MM lbs Co/Year in First
10 Years
>> Potential Expansions
(1) Reflects net interest in properties
23
|
 |
Significant Exploration Potential
Papua, Indonesia
>> Rights to 2.2 Million Acres
>> Highly Prospective Exploration Areas Provide Opportunities to Continue to Add to our Long-lived Reserves
Tenke Fungurume,
Democratic Republic of Congo
>> Believed to be Largest Undeveloped, High Grade Copper/Cobalt Project in the World Today
>> Less Than Half of 600-square-mile Concession Explored; Cumulative Strike Length Greater Than 80 Kilometers
>> Start-up: Late 2008 to Early 2009
>> ~$650 Million Aggregate Capital and Related Project Expenditures
24
|
 |
Proven Technical Expertise
Pro forma FCX will be a world leader
>> Open pit mining
>> SX/EW production technology
>> Block cave underground mining
>> Copper concentrate leaching
(1) Smelting and refining production capacity shown on a 100% basis (2) FCX's
share approximates 62,000 metric tons per year (3) Miami Refinery permanently
shut down
25
|
 |
The
Right
Company
26
|
 |
Pro Forma FCX -- Growing Sales Profile
Copper Sales (billion lbs) Gold Sales (million ozs)
Note: Consolidated copper sales include Note: Consolidated gold sales include
approximately 540 mm lbs in 2006, 700 mm approximately 185 k oz in 2006,
lbs in 2007, 740 mm lbs in 2008 and 195 k oz in 2007, 170 k oz in 2008
810 mm lbs in 2009 for minority and 220 k oz in 2009 for minority interest
interest; excludes purchased copper
27
|
 |
EBITDA and Cash Flow at Various Copper Prices
Average Annual EBITDA 2007-2009
($500 Gold & $15 Molybdenum)
Average Annual Operating Cash Flow 2007-2009
($500 Gold & $15 Molybdenum)
Note: Each $50/oz change in gold approximates $90 million to EBITDA and $50
million to operating cash flow; each $2.00/lb of molybdenum equates to
$100 million to EBITDA and $80 million to operating cash flow
EBITDA equals operating income plus depreciation, depletion, and
amortization; Operating cash flow shown after merger adjustments
28
|
 |
Sensitivity to Commodity Prices
Annual Financial Impact
-----------------------
Change EBITDA Operating
Cash Flow
(in millions)
Copper: -/+ $0.20/lb $800 $500
Molybdenum: -/+ $2.00/lb $100 $80
Gold: -/+ $50/ounce $90 $50
Note: Annual financial impact based on estimated average annual production
for 2007-2009
29
|
 |
Pro Forma Capital Expenditures
30
|
 |
Capitalization Table
(US$ billions)
December 31, 2006 Pro Forma Capitalization
Amount %
Cash, Cash Equivalents and Restricted Investments $3.4 --
New Revolver(1) $0.0 0.0%
New Sr. Secured Term Loan A 2.5 9.0%
New Sr. Secured Term Loan B 7.5 27.0%
New Sr. Unsecured Notes 6.0 21.6%
Existing Debt 1.6 5.8%
Total Debt(2) $17.6 63.3%
Total Stockholders' Equity $10.2 36.7%
Total Book Capitalization $27.8 100.0%
Credit Statistics
Debt / EBITDA(3) 2.3x
EBITDA(3) / Interest(4) 5.6x
Debt / Capitalization 63.3%
---------
(1) New Revolver consists of $1.0 billion Revolving Credit Facility
available to Freeport and $0.5 billion Amended and Restated Revolving
Credit Facility available to Freeport and PT-FI
(2) Pro forma total debt as of December 31, 2006 is based on book values.
Total debt as calculated in the pro forma financial statements is based on
Phelps Dodge's fair market value of debt
(3) Based on year end December 31, 2006 pro forma EBITDA of $7.8 billion
(4) Based on year end December 31, 2006 pro forma net interest of $1.4
billion
31
|
 |
Significant Debt Reduction
Year-End Net Debt at Varying Copper Prices
---------
Note: Sensivity assumes $15 Molybdenum and $500 Gold; EBITDA equals operating
income plus depreciation, depletion, and amortization
32
|
 |
Financial Policy
o FCX is Committed to Maintaining a Strong Financial Position
o Debt Reduction Top Priority
o Continuation of Positive Copper Markets is Expected to Provide
Substantial Cash Flows That Will Enable the Combined Company to
Achieve Significant Near-term Debt Reduction
o Subject to Market Conditions, Considering Equity Offering Shortly
Following Completion of Transaction
o Consideration of Asset Sales
o FCX Anticipates Continuing Regular Annual Common Dividend of
$1.25 per Share
33
|
 |
Syndication Summary
34
|
 |
Transaction Timetable
Financing
-------------------------------------------------------------------------------
Date Event
-------------------------------------------------------------------------------
February 20, 2007 Materials posted to IntraLinks
February 27, 2007 Lender Meeting
March 8, 2007 Credit Agreement posted to IntraLinks
March 9, 2007 Commitments due
March 13, 2007 Lender comments due to Credit Agreement
March 19, 2007 Closing
-------------------------------------------------------------------------------
35
|
 |
Summary of Proposed Terms for Senior Secured Credit Facilities
Borrower Freeport-McMoRan Copper & Gold Inc. ("FCX" or the "Company")
--------------------------------------------------------------------------------------
Facilities Overview Facilities Amount Maturity Undrawn Drawn (LIBOR +)
----------------------------------------------------------------
Revolving Credit
Facility1,2 $1,500 mm 5 years 37.5 bps 150 bps
Term Loan A1 $2,500 mm 5 years NA 150 bps
Term Loan B $7,500 mm 7 years NA 175 bps
----------------------------------------------------------------
1 Subject to a ratings based grid
2 Comprised of new $1.0 billion revolving credit facility available
to Freeport and Amended and Restated $500.0 million Revolving
Credit Facility available to Freeport and PT-FI
--------------------------------------------------------------------------------------
Amortization 10% per annum on Term Loan A with remainder as a bullet at maturity
1% per annum on Term Loan B with remainder as a bullet at maturity
--------------------------------------------------------------------------------------
Collateral/Guarantees The Credit Facilities will be guaranteed by domestic subsidiaries
subject to certain exceptions for subsidiaries with restrictions
in their organizational documents. FCX and each Guarantor
will pledge the stock of their subsidiaries subject to
certain exceptions including international subsidiaries and
restrictions in organizational documents
--------------------------------------------------------------------------------------
Financial Covenants: Senior Secured Debt/EBITDA and Total Debt/EBITDA. Except at the
time of any incurrence of indebtedness, compliance with the
financial covenants will not be required so long as the
Revolving Credit Facility is undrawn
36
|
 |
FCX's Acquisition of
Phelps Dodge
-------------------------------------------------------------------------------
Lender Presentation
February 27, 2007
37
|
 |