SCHEDULE 14A INFORMATION
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the Securities Exchange Act of 1934
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JOINT FILING BY:
ASARCO INCORPORATED and CYPRUS AMAX MINERALS COMPANY
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
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As filed with the Commission on September 9, 1999
ASARCO Incorporated [LOGO] CYPRUS AMAX
Minerals Company
[PHOTOGRAPH OF TOQUEPALA] [PHOTOGRAPH OF EL ABRA]
Toquepala El Abra
INVESTOR
PRESENTATION
September 1999
[PHOTOGRAPH OF CUAJONE] [PHOTOGRAPH OF CERRO VERDE]
Cuajone Cerro Verde
ASARCO CYPRUS MERGER
. Merger of Equals
. Exchange of Shares
- 0.765 Share of Asarco Cyprus for Each Cyprus Amax Share
- 1.000 Share of Asarco Cyprus for Each Asarco Share
. Post Merger Ownership
- Cyprus Amax Common Shareholders Own 63.5%
- Asarco Shareholders Own 36.5%
. Cash Payment of $5.00 Per Asarco Cyprus Share After Closing
. Shareholder Vote September 30
.
.
2
ASARCO CYPRUS MERGER
. $5.00 Cash Payment to Shareholders on Completion of Merger
- Immediate Value to Shareholders
- Focuses Attention on Underlying Value of Merger
. Drop Takeover Defenses - 90 Days Post Merger
- Disarm Rights Plan
- No Change in Control in New Employment Contracts
. Pursue Sale of Non-Core Businesses - $1 Billion Value Including:
- Specialty Chemical Business
- Kinross Gold
- Australian Coal
. Confident of Achieving $275 Million in Synergies/Rationalization Benefits
.
3
RE-RATING OF ASARCO CYPRUS
Asarco Cyprus Phelps Dodge
------------- ------------
Market Capitalization* $2.4 Billion $3.5 Billion
Pounds of Production 2.0 Billion 1.6 Billion
Equity Value Per
Pound Produced $1.17 $2.24
- Opportunity For Re-Rating of Asarco Cyprus
- Asarco Cyprus Merger Provides Greater Potential
for Growth in Shareholder Value
* Common Stock Price As of 8/20/99
4
ASARCO CYPRUS VS. PHELPS DODGE
(Selected Statistics) Asarco Phelps AC share of
Cyprus Dodge AC & PD
------ ------ ------------
1999 (E) Production (Million Lbs.) 2,055 1,551 57%
12/98 Copper Reserves (Billion Lbs.) 62 40 61%
Cash Costs (cents/Lb.) 0.50 0.54 55%
Low Cost Mines 4 1 80%
Copper Margin (@ 80cents)($ Millions) 617 403 60%
Synergies ($ Millions) 275 300 92%
Cash $1.4 B $144 M 91%
5
Beneficial Copper Production Cash Cost Profile
[Bar graph depicting beneficial copper production cash cost
profile, with figures approximated, for Cyprus Amax: El Abra (cash
cost: 37 cents per pound; copper production: .250 billion pounds),
Cerro Verde (48 cents; .100 billion pounds), Bagdad (67 cents; .225
billion pounds), Miami (68 cents; .190 billion pounds), Sierrita (71
cents; .250 billion pounds); for Asarco: Silver Bell (49 cents; .025
billion pounds), SPCC (51 cents; .500 billion pounds) , MRI (70 cents;
.035 billion pounds), Mission (73 cents; .250 billion pounds), Ray (74
cents; .260 billion pounds); for Phelps Dodge: Candelaria (50 cents;
.325 billion pounds), Morenci (55 cents; .900 billion pounds), Chino
(63 cents; .200 billion pounds), Tyrone (64 cents; .200 billion
pounds). Measured in cash cost (cents per pound) against copper
production (billion pounds).]
Source: Phelps Dodge - Brook Hunt, modified 1999 EST
6
MERGER COST SAVINGS PROJECTIONS
($ millions, except per share)
Asarco Phelps
Cyprus Dodge
-------- -------
Administration $ 50 $ 85
Purchasing/Operations 50 60
Other 25 55
Rationalization 75 75
-------- -------
Subtotal Cash 200 275
Exploration Adjustment - (40)
-------- -------
Adjusted Cash 200 235
Accounting Benefit 75* 65
-------- -------
Total Pretax 275 300
Contribution 92% 8%
Per Share (after tax) $1.85
Anticipated Market Value Impact ($/Share) $11.33 - $13.76
*Based on Stock Price of $18.00 (AR) at Proxy Date (8/20/99)
7
COST SAVING ACTIONS
Examples of Cost Savings (In Millions)
Administration $50.0
Consolidate Offices
Eliminate 170 Positions
Eliminate Duplicate Expenses
Eliminate Exploration Duplicate Activities
Purchasing 50.0
Leverage Commodity Purchases
Reduce Warehouse Inventory
Logistics
Operating Best Practices 25.0 +
Haul Truck Load Factor Optimization
Cascade Leaching
In-House Fabrication of Starter Sheets
Converter Maintenance and Scheduling
Minimization of Revert Generation
Crusher Maintenance and Practices
Throughput and Recovery Optimization
Rationalization 75.0
Mine Plan Changes at Mission and Ray
8
HISTORICAL TRADING VALUES OF SELECTED COPPER EQUITIES
[Chart depicting relative trading values of Cyprus Amax,
ASARCO, and Phelps Dodge, during the period between
January 1 and July 14. Base value assumption: Cyprus - 10.000;
Asarco - 15.125; Phelps - 50.875.]
9
HISTORICAL TRADING VALUES OF SELECTED COPPER EQUITIES
[Chart depicting relative trading values of Cyprus Amax,
ASARCO, and Phelps Dodge, during the period between
July 14 and August 19. Base value assumption: Cyprus - 13.938;
ASARCO - 19.000; Phelps - 66.438.]
10
ASARCO CYPRUS REDUCED CASH COSTS
[Bar graph depicting cash costs, measured by cents per pound,
for each of Cyprus Amax and Asarco for 1996 (72 cents for Cyprus Amax,
69 cents for Asarco), 1997 (63 cents for Cyprus Amax, 69 cents for
Asarco), 1998 (56 cents for Cyprus Amax, 64 cents for Asarco), and
1999(E) (50 cents for Cyprus Amax, 60 cents for Asarco), and for Asarco
Cyprus combined for 2001(E) (50 cents).]
11
ASARCO CYPRUS MERGER
. World's Largest Publicly Traded Copper Company
. Strong Management
. Global Presence With Portfolio of World Class Properties
. Low Costs With Excellent Potential For Additional Reductions
. Accretive to Shareholders
. $875 Million in Cash and $1 Billion Plus in Other Sources of Liquidity
. Pipeline of Growth Projects
. Increased Shareholder Liquidity
12
ASARCO CYPRUS MERGER
. Asarco Cyprus Merger Creates Greater Value
Opportunity for Shareholders
. Merger Captures Benefits and Provides Immediate Value
. Merger is Best Value for Asarco and Cyprus Shareholders
. Moving Ahead With Merger
. Expect Equity Market to Re-Rate Share Price
13
ASARCO CYPRUS - WORLD LEADER IN COPPER
- ------------------------------------ ---------------------------------
Contained Copper Reserves - 12/31/98 1998 Copper Beneficial Production
- ------------------------------------ ---------------------------------
[Bar graph depicting, at 12/31/98, [Bar graph depicting 1998 copper
contained copper reserves, measured beneficial production, measured
in billion pounds for CYM & AR (62), in million pounds, for CYM & AR
Rio Tinto (56), BHP Copper (55), (1968), BHP Copper (1929), Rio
FCX (49), Phelps (40), GM (39), Tinto (1792), Phelps (1748), FCX
AR (37), Antofagasta (28), SPC (26), (1479), AR (1025), CYM (965), MIM
CYM (25), Rio Algoim (12), MIM (9).] (784), GM (760), SPC (666),
Antofagasta (563), Rio Algoim
(379).]
Source: Brook Hunt
14
ASARCO Incorporated [LOGO] CYPRUS AMAX
Minerals Company
Additional Information
MERGER OBJECTIVES
. Become Low Cost Copper Producer:
$0.50 Per Pound Cash Cost
- Earnings Breakeven: Less Than $0.65 Per Pound Copper Price
- Generate Substantial Cash Flow
. $750 Million EBITDA ($0.80 Copper, $3.00 Molybdenum) After Sale of
Non-Core Businesses
16
MERGER OBJECTIVES
. $275 Million ($1.85/share) in Annual Synergies, Cost Savings, and
Rationalization Benefits
- Obtain Significant Operating Efficiencies
- Achieve Purchasing Savings
- Reduce Administrative Costs Through Consolidation and Closures
- Employ Best Practices of Two Strong Operators
. Quest 21 / AMS Process Management Systems
- Retain Strongest Managers
17
MERGER OBJECTIVES
. $275 Million ($1.85/share) in Annual Synergies, Cost Savings, and
Rationalization Benefits
- Cash Cost Savings to Generate $125 Million Annually ($0.84/Share by 2001)
- Benefits of Purchase Accounting to Generate $75 million Annually
($0.50/share)
- Cost Savings of $75 Million From Production Rationalization During Periods
of Low Prices
- Maintain Limited Exploration Program
18
MERGER OBJECTIVES
. Enhance Liquidity and Financial Flexibility
- Cash of $875 Million After $5.00 Per Share Cash Payment
- Net Debt to Capital of 41.3% (net of cash)
- Sale of Non-Core Businesses - $1 Billion Value
- Net Debt to Capital of 25.5% (net of cash) After Sales
. Realize Immediate Value for Shareholders
- Earnings and Cash Flow Accretive
- Increase Trading Liquidity
- Synergies Should Cause Market Re-Rating of Asarco Cyprus Shares
. Asarco and Cyprus Shareholders Realize 100% of Synergy Benefits
19
VALUE OF SYNERGIES
.
. Merger Gives Asarco and Cyprus Shareholders 100% of Synergies
.
. Phelps Dodge Proposal Takes 57% of Synergies for Their Shareholders
20
MERGER OBJECTIVES
. Become the World's Largest Publicly-Traded Copper Company
.
- Highly Focused, High Quality Copper/Moly Producer
- 2 Billion Pounds of Annual Copper Production
- 62 Billion Pounds of Reserves
- World's Largest Molybdenum Producer
- Significant Inventory of Future Development Projects
21
NORTH AMERICAN OPERATIONS
[Map of United States and more detailed map of Arizona,
indicating locations of mines, smelters, and refineries.]
22
SOUTH AMERICA OPERATIONS
[Map of South America and more detailed map of Peru and Chile,
indicating locations of mines, smelters, and refineries.]
23
1998 COMBINED MINE PRODUCTION
In Millions of Lbs.
Sulfide SX-EW Total
------- ----- -----
North America 919 362 1,281
South America 300 387 687
--- --- ---
Total 1,219 749 1,968
24
ASARCO CYPRUS MANAGEMENT
. Key Cyprus Amax Achievements
- Implemented Quest 21
- Lowered Copper Costs by 21 cents Per Pound
- Reduced Employment at Continuing Operations by 28%
- Increased Production Per Employee by 44%
- Consolidated Moly Operations
- Focused Strategy: Sold Lithium and Coal; Merged Amax Gold
- Successful Development and Startups of El Abra, Cerro Verde
- Reduced Corporate Overhead Expense by 35%
- Transformed from Coal Company to Focused Low Cost Metals Company
25
ASARCO CYPRUS MANAGEMENT
. Focused Strategy to Realize Shareholder Value
. Key Asarco Achievements
- Expanded Low Cost SX-EW - SPCC, Silver Bell, Ray
- Expanded Low Cost Sulfide - SPCC, Cuajone
- Acquired Controlling Interest in Low Cost SPCC
- Reduced Cash Cost $0.14 per pound
- Assets Disposals of $825 Million
- Implemented AMS Process Management System
- Transformed From Custom Smelter and Refiner to Focused Low Cost Copper and
Specialty Chemicals Company
26
ASARCO Incorporated [LOGO] CYPRUS AMAX
Minerals Company
Financial Profile
ASARCO CYPRUS BALANCE SHEET
(In millions)
Pro-Forma Pro-Forma
$5 Cash Payment for Asset Sales
---------------- ----------------
Total Assets $7,624 $7,592
Total Cash and Marketable Securities 878 1,878
Total Debt and Capital Lease Obligations 2,863 2,863
Total Shareholders' Equity 2,262 2,329
Book Value Per Common Share $18.61 $19.22
Total Debt to Capital 50.4% 49.8%
Total Debt to Capital, Net of Cash 41.3% 25.5%
28
ASARCO CYPRUS NON-COPPER ASSET VALUES
Specialty Chemicals
Cyprus Australia Coal
Kinross Gold (30% Interest)
Grupo Mexico Shares ($79 Million Value)
Other Non-Core Assets
Estimated Value - $1 Billion Plus
29
ASARCO CYPRUS CAPITAL EXPENDITURES
[Bar graph depicting Asarco Cyprus Capital Expenditures,
in millions of dollars, excluding SPCC, for 1997 (529),
1998(340), 1999(E)(303), 2000(E)(257).]
. Major Projects Completed
. Capital Requirements at Reasonable Levels Going Forward
30
SOUTHERN PERU CAPITAL EXPENDITURES
[Bar graph depicting Southern Peru Capital Expenditures,
in millions of dollars, for 1997(184), 1998(259),
1999(E)(255), 2000(E)(276).]
. Financing in Place
31
[LOGO] CYPRUS AMAX ASARCO NEWS
MINERALS COMPANY
FOR IMMEDIATE RELEASE
CYPRUS AMAX AND ASARCO BOARDS REJECT
PHELPS DODGE EXCHANGE OFFERS
URGE SHAREHOLDERS TO VOTE FOR
ASARCO CYPRUS MERGER ON SEPTEMBER 30
DENVER, CO., and NEW YORK, NY, September 8, 1999 - Cyprus Amax Minerals Company
(NYSE:CYM) and ASARCO Incorporated (NYSE:AR) today announced that their
respective Boards of Directors unanimously rejected Phelps Dodge's exchange
offers to their shareholders as inadequate and not in the best interests of
their shareholders. The Boards also unanimously recommended that their
shareholders reject the exchange offers and not tender their shares, and
unanimously reaffirmed that the terms of the Asarco Cyprus business combination
are fair to, and in the best interests of, their shareholders.
In their recommendations to their shareholders, the Cyprus Amax and Asarco
Boards cited, among other things:
* The advantages to the shareholders of becoming shareholders in Asarco
Cyprus, including, that they retain 100% of the $275 million of annual
savings created by the combination.
* The Phelps Dodge exchange offers are inadequate and fail to compensate
Cyprus Amax and Asarco shareholders for their relative contribution to
a three-way combination with Phelps Dodge.
* The opinion, rendered on September 8, 1999, of their respective
financial advisors that the consideration offered to the shareholders
is inadequate to such holders from a financial point of view.
* The special $5.00 per share cash payment to the stockholders of Asarco
Cyprus immediately following the combination provides them with
immediate and significant value.
* A three-way combination raises substantial issues under the antitrust
laws. The Boards noted that the Phelps Dodge exchange offers are
conditioned on the expiration of the Hart-Scott antitrust waiting
period but Phelps Dodge has not even filed the required notification
yet. In contrast, the applicable waiting period for the Asarco Cyprus
combination has already expired.
* The highly conditional nature of the Phelps Dodge exchange offers,
including with respect to antitrust regulatory approval and Phelps
Dodge's own stockholder approval which is not being sought until after
the Cyprus Amax and Asarco September 30 shareholder meeting date.
Accordingly, each Board recommends to its shareholders that they do not tender
their shares to Phelps Dodge and strongly urges them to vote in favor of the
Asarco Cyprus combination on September 30.
Milton H. Ward, Chairman and Chief Executive Officer of Cyprus Amax and Francis
R. McAllister, Chairman and Chief Executive Officer of Asarco, speaking together
said, "It is absolutely clear from Phelps Dodge's actions over the course of the
last few weeks that it is trying to coerce Cyprus Amax and Asarco shareholders
into a situation that is not in their best interests. First, Phelps Dodge's
opportunistic and inadequate exchange offers do not give our shareholders their
fair ownership interest in the combined entity. Second, a three-way combination
with Phelps Dodge raises substantial antitrust issues that Phelps Dodge has not
yet
begun to address. Third, Phelps Dodge has never offered any persuasive reason
why it would walk away if our shareholders approve our two-way combination, if
in fact Phelps Dodge is sincere in wanting to merge with both companies."
Messrs. Ward and McAllister went on to say that "The Boards of Cyprus Amax and
Asarco are committed to achieving the best value for their shareholders and will
not sacrifice their shareholders' interest for Phelps Dodge's own agenda, which
is to maximize value for Phelps Dodge and its shareholders. It is for this
reason that we strongly recommend shareholders vote for the Asarco Cyprus
transaction on September 30."
Cyprus Amax and Asarco also announced today that they were each filing with the
Securities and Exchange Commission, and will mail to their shareholders, a
Solicitation/Recommendation Statement on Schedule 14D-9 setting forth the
Board's formal recommendation with respect to the Phelps Dodge exchange offer
and the reasons for the recommendation. Additional information with respect to
each Board's decision to recommend that shareholders reject the Phelps Dodge
offer is contained in the Schedule 14D-9.
Actual results may vary materially from any forward-looking statement the
companies make. Refer to the cautionary statement risk factors contained in
Cyprus Amax's and Asarco's 1998 Form 10K's.