Phelps Dodge settles with New Mexico

Vancouver — The world’s second-largest copper miner has reached an agreement with the state of New Mexico over financial assurances required as part of the closure of its Tyrone, Chino and Cobre operations.

Phelps Dodge (PD-N) agreed to provide US$484.1 million in financial assurance in the form of: US$50 million in cash, US$96.8 million in collateral, $30 million for reclamation expenditures; and a US$307.3-million corporate guarantee. The agreement requires the cash component to increase to US$25 million, to a total of US$75 million, within a 5-year period ending July 1, 2008.

Until now, Phelps Dodge had met its financial assurance obligations through surety bonds, but it says the insurance industry no longer makes these bonds economically feasible to support reclamation.

“The state has demanded a stringent package from us, and we have delivered one both parties can support,” says Timothy Snider, president of Phelps Dodge’s mining division. “While the amounts are based on third-party costs and therefore are substantially more than what we anticipated it will cost us to complete the work, we believe it important to resolve the issue and remove the uncertainty it was creating for our business.”

The agreement, which already has the support of the governor, the state’s environmental secretary and the state’s secretary of energy, minerals and natural resources, is still subject to public review.