Southern Copper
Annual Report 2004

Plain-text annual report

CONTENTS OPERATING HIGHLIGHTS MAIN SPCC STATISTICAL DATA LETTER TO THE SHAREHOLDERS PRODUCTION STATISTICS FIVE-YEAR SELECTED FINANCIAL AND STATISTICAL DATA FIVE-YEAR EXPANSION AND MODERNIZATION PROGRAM EXPLORATION COMMUNITY OUTREACH RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 DIVIDENDS AND CAPITAL STOCK ENVIRONMENTAL AFFAIRS GENERAL INFORMATION DESCRIPTION OF OPERATIONS AND DEVELOPMENT Cover page: Preparing explosive for blasting at Toquepala mine MEMBERS OF THE BOARD OF DIRECTORS 02 05 06 10 11 12 14 14 16 18 19 23 56 1. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Operating highlights (tons) Operating area or plant Toquepala Total material moved (000’s) Ore milled (000’s) Concentrate produced Copper in concentrate Molybdenum produced Cuajone Total material moved (000’s) Ore milled (000’s) Concentrate produced Copper in concentrate Molybdenum produced 2. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S SX/EW Treated solutions (thousands of cubic meters) Cathodes produced Smelter Concentrates smelted Blister produced Refinery Cathodes produced Total Cu SPCC Total Cu SPCC (000’s of pounds) Total Mo R: Production records 2004 115,120 R 21,807 R 580,110 R 160,852 R 6,004 R 101,265 29,319 752,941 R 194,389 R 4,657 45,903 R 42,125 1,213,030 R 320,722 280,679 387,870 R 855,106 R 10,661 R 2003 105,242 21,208 505,236 142,373 4,153 97,471 29,798 710,004 184,528 4,867 43,604 47,756 1,182,870 314,920 284,006 366,890 808,853 9,020 Copper Reserves Unit Toquepala Sulfides Leachable Cuajone Sulfides Leachable 2004 2003 MINERAL RESERVES (000’s TONS) DECEMBER 31, 2004 AVERAGE COPPER CONTENT (%) DECEMBER 31, 2004 597,817 1,732,229 1,093,883 57,348 0.73 0.18 0.64 0.40 3. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Anode casting at the Ilo Refinery 4. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Tailings disposal at Quebrada Honda Dam Main SPCC Statistical Data Productivity Tons of copper per employee Copper Sales Thousands of tons SX/EW Production Thousands of tons 93 92 97 105 109 354.183 370.643 365.433 375.160 392.083 56.065 54.428 52.854 47.756 42.145 120 100 80 60 40 20 400 350 300 250 200 150 100 50 60 50 40 30 20 10 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Copper Production Thousands of tons Refinery Production Thousands of tons 340.665 342.264 346.486 374.656 387.870 264.743 277.260 281.669 284.006 280.679 400 350 300 250 200 150 100 50 300 250 200 150 100 50 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 5. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Letter to the Shareholders of Americas Mining Corporation (AMC), the holding of Southern Peru foresees the investment projects it carries On behalf of Southern Peru’s Board of Directors, we want Grupo Mexico engaged in mining operations. After eight out will further consolidate its position among the main to express our gratitude to the workers and employees 2004 was an outstanding year for Southern Peru Cop- growth also resulted from higher mined ore grades and to estimates, the pre-feasibility study will continue dur- months of comprehensive work, the Special Committee producers of metals worldwide, therefore signaling a for their effort and dedication, to our clients for their per Corporation (SPCC). In addition to the substantial recoveries in 2004. ing 2005. of Disinterested Directors advised the Board to accept positive economic return for our shareholders, a contri- trust and loyalty, and to you, our shareholders, for your rise in the price of metals produced by the Company, the offer. The proposal was approved by a majority of bution for the relevant countries and their communities, long-term support. SPCC’s output and sales reached unprecedented levels. Greater output at Cuajone mine in 2004 also resulted Southern Peru launched major projects in 2004, such as the Board and, once authorized by the relevant regulat- and a benefit for SPCC workers. The production of copper, molybdenum, and silver in- from higher ore grades in 2004 and improved recovery the one related with the Leaching Dums Project, where ing authorities, the shareholders will vote on the matter creased 6.06%, 17.79%, and 6.0%, respectively, as in grinding that resulted in 752,941 tons of concentrate, conveyor belts will be replaced with haulage trucks to during the first quarter of 2005. compared to 2003. Company products sold (copper, also an unprecedented production level. SX/EW cop- transport minerals at the Toquepala mine. Construction molybdenum, silver) also increased 115%. per output decreased 12.4 million pounds due to lower works are scheduled to conclude in June 2005. grades in the pregnant leaching solutions (PLS). The Price hikes were outstanding during 2004 as compared smelter also attained a new record by smelting 1,213,030 Also in 2004, as part of the Environmental Compliance to the previous year. Average price of products was: tons of concentrate. copper, $1.30 per pound, that is, 60% higher than in and Management Program agreed with the government of Peru, SPCC began to upgrade the Ilo smelter. The up- 2003; molybdenum, $16.21 per pound, a 300% in- Net income was an outstanding item in 2004: it reached graded smelter will use Australian Isasmelt technology to crease; silver, $6.68 per ounce, as compared to $4.87 $597 million, or 400% higher than in 2003. Operating process 1.2 million tons of copper annually, with anodes in 2003. cash cost per pound of copper decreased from $0.399 as the final product instead of the blister bars produced at to $0.046 due mainly to high price of molybdenum, a present. Sulfur capture will be of the order of 95%, well With respect to 2004 production, mined copper totaled by-product of copper mining. over the standards required by environmental regulations 876 million pounds in 2004. Higher copper output at in force. The smelter upgrading is the largest environ- SPCC resulted mainly from expanded production at the At present, SPCC has mining operations in Peru, Mexico mental project undertaken by our Company in Peru, and Toquepala mine and higher treated volumes after pro- and Chile, with beds to be explored that might increase once it is completed, it will mean the conclusion of SPCC’s cessing capacity increased at the concentration plant. the Company’s reserves and future profile. SPCC also environmental commitments in the country. The Toquepala concentration plant produced 580,111 maintained its prospecting program in all of Peru, mainly tons of concentrate, a new production record. Further- in the south, focusing in the finding of copper and gold SPCC continued its globalization efforts during 2004. The more, Toquepala mine also produced more molybdenum: resources. With respect to Los Chancas project, the drill- Board of Directors appointed a special committee to ana- output increased from 4,153 tons to 6,004 tons. This ing program was maintained during 2004 and, according lyze the proposal to acquire Minera Mexico, a subsidiary 6. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S GERMÁN LARREA MOTA-VELASCO Chairman of the Board OSCAR GONZÁLEZ ROCHA President and Chief Executive Officer 7. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 8. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Large flotation cells at Cuajone Concentrator 9. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Five-year Production Statistics Southern Peru Copper Corporation and Subsidiaries Five-year Selected Financial and Statístical Data Southern Peru Copper Corporation and Subsidiaries Copper production 2004 2003 2002 2001 2000 Mines (copper content in thousands of pounds) Toquepala Cuajone SX/EW Total mines Smelter (copper content in thousands of pounds) SPCC concentrates Purchased concentrates Total smelter Refineries (thousands of pounds of copper) Ilo SX/EW Total refineries Copper sales (thousands of pounds) Refined In blister In concentrates SX/EW Rod Total sales of copper Molybdenum (thousands of pounds of concentrate content) Mines Toquepala Cuajone Total produced Sales of molybdenum in concentrate Silver (thousands of ounces) Smelter (in blister) Ilo SPCC concentrates Refinery Ilo Sales of silver Refined In blister In concentrates Total sales of silver 354,618 428,553 92,869 876,040 707,071 - 707,701 618,790 92,869 711,659 498,535 65,442 63,294 79,832 157,292 864,395 13,237 10,267 23,504 23,503 4,523 3,823 3,820 414 364 4,598 313,878 406,814 105,283 825,975 687,727 6,552 694,279 626,126 105,283 731,409 625,266 61,863 35,586 104,371 - 827,086 9,156 10,731 19,887 19,953 4,270 3,599 3,615 365 212 4,192 276,513 370,834 116,524 763,871 632,910 64,836 697,746 620,974 116,524 737,498 621,197 68,619 - 115,826 - 805,642 9,292 9,049 18,341 18,178 3,710 3,661 3,645 389 - 4,034 270,619 363,951 119,993 754,563 636,845 86,801 723,646 611,254 119,993 731,247 612,138 84,302 - 120,688 - 817,128 9,035 9,377 18,412 18,511 3,829 3,452 3,498 453 - 3,951 232,886 394,548 123,602 751,036 606,965 45,267 652,232 583,658 123,602 707,260 582,724 57,775 17,083 123,258 - 780,840 8,243 7,638 15,881 16,043 4,188 3,343 3,454 411 220 3,975 10. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S For the years ended December 31, (in millions, except per share and employee data) Consolidated statement of earnings Net sales Operating costs and expenses (1) Operating income Minority interest of investment shares in income of Peruvian branch Extraordinary loss Net earnings Per share amount Net earnings - Basic and diluted Dividends paid Consolidated balance sheet Total assets Cash and marketable securities Total debt Stockholder’s equity Consolidated statement of cash flows Cash provided from operating activities Dividend paid Capital expenditures Depreciation & depletion Capital stock Common shares outstanding NYSE Price – high Price – low Class A common shares outstanding Book value per share P/E ratio Financial ratios Current assets to current liabilities Debt as % of capitalization Employees (at year end) 2004 2003 2002 2001 2000 $ 1,703 787 916 5 - 597 $ $ $ 7.23 2.39 $ 2,597 591 289 1,712 717 191 172 78 14.1 $ 54.10 $ 26.53 65.9 $ 21.40 6.53 $ $ $ $ $ $ $ $ $ 798 581 217 1 - 119 1.49 0.57 1,931 295 349 1,315 191 45 50 74 14.1 48.85 14.42 65.9 16.44 31.65 $ $ $ $ $ $ $ $ $ 665 546 119 1 (9) 61 0.76 0.36 1,752 148 299 1,241 130 21 77 68 14.1 15.54 10.82 65.9 15.71 20.67 $ $ $ $ 658 568 89 1 (2) 47 0.58 0.36 $ 1,823 213 396 1,209 $ $ $ $ 151 29 117 76 14.1 15.10 8.42 65.9 15.12 26.07 $ $ 711 561 150 2 - 93 $ $ 1.16 0.34 $ 1,771 149 347 1,192 $ 161 27 113 77 14.1 $ 16-7/16 $ 11.00 65.9 $ 14.90 12.84 2.2 14.4% 3,544 2.5 20.9% 3,566 3.1 19.3% 3,575 1.9 24.5% 3,726 3.3 22.4% 3,682 11. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Notes to Five-year Selected Financial and Statistical Data: (1) Includes provision for worker’s participation of $78.8 million, $16.8 million, $8.9 million, $5.9 million and $12.1 million in the years ended December 31, 2004, 2003, 2002, 2001 and 2000. 12. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S EXPANSION AND MODERNIZATION PROGRAM a fixed crusher at the exit of the mine, 6.5 km of conveyors ready on their way to the field. Earth movement works On the other hand, it is being developed the Engineer- to the plant, purchases for the power substation started conclude in 2005 to define the method that will be used In reference to the Expansion and Modernization downstream to the south dumps and a system of stacking that done in collaboration with Mine Operations concluded ing for the Construction of the New PLS Dams Project, during the third quarter of 2004 and the works for such in tailings disposal in Toquepala and Cuajone in the next Program announced in previous years, we continued their will allow to place leachable ore in dumps of low height (no after moving 1.4 million cubic meters to the large ditch this project is complementary with the Leaching Dumps power substation, at the end of 2004. It is estimated that 35 years. implementation: more than 30-50m). The ore size will be such that all of ith will and work to prepare the platform for equipment assembly Project, given that, throughout the increase of the new the works will be completed by July 2006. pass through the 9-inch mesh. The annual treatment capacity started. Civil work for the crusher facility has accomplished dumps, new collection dams are required because during In 2004 we did the engineering studies and procure- In Toquepala, engineering was concluded and the construction will be 50.2 million metric tons of leachable ore. 88% progress. By year end, electromechanical assembly the construction of the new dumps a moment will arrive The Location Studies for Tailings Disposal continued with ment for a new Copper Filter and ancillary equipment for of the Leaching Dumps Project began. This project consists started and should conclude by June 2005, to then start where the deposited mineral would cover current PLS evaluations to replace the conventional tailings treatment operations. Civil work started in December and the new in the replacement of the carriage of leachable ore through As of December 2004, 70% of the Project had already with commissioning and startup tests before building the dams, located in the Quebrada Toquepala. This Project systems using cyclones with others like state of the art filter should start operating in the second quarter 2005. truck by conveyor belts, which will require the installation of been completed with the main pieces of equipment al- ramp to start laying down the mineral for leaching. also includes pumping stations and PLS conveyance pipes flocculants and double cyclones. Studies and tests should Progress so far has reached 51%. 13. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Mill Site sunset at Cuajone Concentrator The Ilo Smelter Modernization Project. The new smelter Towards the end of 2004, contractors were chosen for community environment. Resources would be 27.1 million southern area and is particularly involved in the sustain- proving water use, and promoted planting of oat for will use an Isasmelt furnace and two rotatory furnaces the Ocean Water Intake and for Underground Services. tons with an average of 0.89 Au grams per ton and 13.0 able development and wellbeing of the people of Tacna cattle feed. In Tarata, construction of a nursery is under to skim matte from slag in the fusion stage, the con- Construction is expected to conclude in June 2006, with Ag grams per ton. A drilling program of 2,500 m. has and Moquegua, where it promotes and directly conducts way to support fruit growing, and we are also providing verter stage will be done in four Peirce Smith converters commissioning and startup commencing one month been planned for 2005. SPCC has a 44.245% share in the social investment initiatives in the neighboring communi- training for other local produce. In Locumba, Sama and 15 feet of diameter by 35 feet long, three of which will later. The new Smelter should become operational in Tantahuatay Proyect. ties. These initiatives take place in jointly managed efforts Ite valleys, works focused on irrigation infrastructure be refurbished and one will be new; also, a new anode November 2006 to allow us meeting our Environmental with various public agencies and the people themselves. and business management training. In Huaytire, a new plant, a new acid plant and a new oxygen plant will be Conformance and Management Program (PAMA) ahead As part of the comprehensive exploration plans within SPCC is also deeply committed to fulfill its social responsi- study on pasture productivity will determine the conve- installed, as well as other auxiliary facilities. of the January 2007 deadline. the Peruvian territory for 2005, a program of 15,000 bility principles. Its social responsibility philosophy directs nience of introducing cultivated grasses. To determine Processing capacity will be 1.2 million tons of concen- EXPLORATION exploration prospects, considering porphyry copper sys- environment in its role as facilitator of socioeconomic de- ated the extension and strength of pastures. trated copper per year. Levels of SO2 collection will During 2004, the Company completed the final phase of tems and epithermal gold systems. velopment. Southern Peru is a good corporate, social and reach 95%, a level which exceeds the environmental Los Chancas Project diamond drilling program with a total environmentally responsible neighbor, an approach that • Livestock: We continued to provide support to sheep legislation in force. The final product of the new of 10,400 meters. Second phase of metallurgical test was We actually have in Peru direct control of 131,831.59 was fulfilled in its co-participatory projects. breeding, sustainable vicuna breeding, enhanced cat- smelter will be anodes instead of the blister currently also completed during the year. Process for estimation of hectares of mining properties. tle livestock raising, and dairy processing. A cattle arti- produced. probable and proved mineral reserves has begun and pre- In 2004, SPCC carried out the following main projects: ficial insemination and stabling program was launched. feasibility studies will soon start. Analysis at this point in- In Chile, during 2004, the Company initiated explora- In Torata, we started a veterinarian assistance plan. In meters of diamond drilling will be executed in different the Company’s community outreach to the geographical the condition of pastures, an agristologic census evalu- 14. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S In 2004, Fluor started developing the engineering dicate resources amounting to 200 million tons with values tion work on the acquired mining properties executing • Water management. Phase V of the Chilligua Canal con- Suches Huaytire we continued improving alpaca breed- and procurement, and has reached 66% progress. of 1.0% copper, 0.07% Mo, and 0.12 Au grams per ton. diamond drilling programs in two prospects located in cluded in Torata Valley in Moquegua. Small irrigation in- ing. In Tacalaya, Candarave, we started alpaca breed- Purchase orders were placed for the main pieces of the III Region, which are being explored for copper-gold. frastructure improvements were made in four valley areas. ing and control of sarcocystosis in domestic camelids. equipment taking the longest time for manufacturing. We are exploring a porphyry copper system in the We will continue our exploration program extending our The Water Users Board in Torata received our logistic and In Higuerani, Ilabaya, Tacna, we started a guinea pig Also starting in the third quarter, Fluor will start the south of Peru, which is in its evaluation stage. We have work to the I Region. technical support. In Candarave, Tacna, we built the Mari- breeder’s pilot program. The communities engaged Project’s construction management. Site preparation completed a diamond drilling program of 21,792 meters sol Water Divide to benefit the Cairani, Huanuara, Canda- in these activities are provided ongoing technical as- for the new plants has already started and is 70% and plan to continue an additional program of 20,000 The Company owns 35,258 hectares of mining rights rave and Quilahuani districts. In Higuerani we improved sistance in health and animal husbandry. Arondaya, complete. Demolition, reinforcement and foundation meters in order to determine the existing resource. within the I and III Regions in Chile. the canals and installed advanced irrigation systems. in Cuajone, started a program to support subsistence work for the new anode plant is 35% complete. Work animal husbandry to improve camelid, sheep and goat at the anodes plant is expected to conclude in the third No drilling program was executed in the Tantahuatay COMMUNITY OUTREACH • Agriculture: In Candarave we assisted potato and garlic farming by providing veterinarian training to young lo- quarter 2005. Proyect. All efforts were oriented to social issues and Southern Peru is a major economic engine in Peru’s seed areas, continued enhancing alfalfa fields by im- cal residents. 15. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S State of the art GPS system in use at drilling • Marketing: In Candarave, we contributed to organiz- study was completed in the Sama river in Yarascay, molybdenum, and a significant hike in the price of copper ing and providing the equipment for a meat marketing in Tacna, to determine the feasibility of building a and molybdenum. association of farmers who receive training and tech- reservoir. nical assistance from SPCC technical experts. Man- Price of copper during 2004 in the London Metal Ex- agement so far has proven successful and the farm- • Other activities: In Candarave and Torata we fostered change (LME) and the New York Commodity Exchange ers own a refrigerated truck and two fully equipped the organization of agricultural fairs. (COMEX) was of 130 and 129 cents per pound of copper facilities, one in Toquepala and another in Cuajone. In respectively, compared to 81 cents in 2003. Torata, construction of a Stockpiling Center is under The Social Responsibility program achieved highly way. In Higuerani, a channel was created for directly satisfactory results in 2004, thanks to our technicians The recent surge in the price of molybdenum has had a marketing guinea pigs from farms to the Toquepala sharing the neighboring communities’ daily activities. significant effect on the Company´s traditional calcula- soup kitchens. This allowed for leveraging their strengths, setting pri- tion of cash cost and comparisons between periods. Ac- ority needs, identifying and mitigating deficiencies, and cordingly, the Company is presenting cash costs with and • Basic infrastructure: Colocaya river in Ilabaya was generally contributing to improved living standards. Our without the inclusion of all revenues from byproducts. canalized and levees built along its banks. Oconchay company was therefore able to efficiently manage its When calculating operating cash, SPCC excludes cost in Ilabaya and Nuevo Camilaca in Candarave were relations with the environment around it. depreciation, amortization and depletion, exploration, 16. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S breeding area, sleeping enclosures, breeding modules RESULTS OF OPERATIONS FOR THE recurring nature. for mating and fenced fields will provide advanced YEARS ENDED DECEMBER 31, pasture management. 2004, 2003 AND 2002 • Capacity building: Torata started a pilot project for diluted earnings of $7.46 per share, compared to net capacity building in schools and production organi- earnings of $119.2 million or diluted earnings of $1.49 zations. per share in 2003, and $60.6 million or diluted earnings SPCC reported 2004 net earnings of $596.8 million or • Large projects: A pre-feasibility study of the water flow in the Callazas river in Candarave will deter- The improvement in the Company´ s results for 2004 is mine a likely dam construction, while a sediments due mainly to a production increase of mined copper and of $0.76 per share in 2002. Cathodes dispatch at the SWEW Plant in Toquepala “Net sales of Southern Peru were $1,715.9 million in 2004, the highest sales in the past five years.” The Company´s operating cash cost, as defined, for the three years ended December 31, is as follows: Cash cost per pound of copper produced (without byproduct revenue) 2004 2003 2002 (in cents per pound) 4.5 68.3 39.9 58.1 45.6 57.8 Net Sales: Net sales in 2004 were $1,715.9 million, compared with $798.4 million in 2003 and $664.6 million in 2002. Sales increased in 2004 by $917.5 million, a 114.9% increase over the previous year, mainly due to higher copper and molybdenum sales and higher sales of the Company´ s byproduct metals, molybdenum and silver. Prices: Sales prices for the Company´s metals are established principally by reference to prices quoted in the London Metal Exchange (LME), the New York Commodity Exchange (COMEX) or published in Platt´s Metals Week, for dealer oxide aver- age prices for molybdenum. connected to the power grid. In the Huaytire alpaca workers´ participation provisions and items of a non- Cash cost per pound of copper produced 17. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S “By the end of 2003, thirty-one of PAMA proyects were already completed, including all commitments related to the Company’s operations in Cuajone and Toquepala.” Cathodes washing at the SWEW Plant in Toquepala Cathodes handling at the SWEW Plant in Toquepala Price/Volume data Average Metal Prices Copper (per pound – LME) Copper (per pound – COMEX) Molybdenum (per pound) Silver (per ounce – COMEX) Sales volume (in thousands) Copper (pounds) Molybdenum (pounds) (1) Silver (ounces) 18. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S (1) The Company’s molybdenum production is sold as concentrates. Volume represents pounds of molybdenum contained in concentrates. 2004 2003 2002 $ $ $ $ 1.30 1.29 16.21 6.68 $ $ $ $ 0.81 0.81 5.32 4.89 $ $ $ $ 0.71 0.72 3.77 4.60 DIVIDENDS AND CAPITAL STOCK The Company paid dividends to stockholders of $191.4 million or $2.39 per share in 2004, compared to $45.4 million or $0.57 million per share in 2003, and $28.7 million (including $7.2 million used by the Company to honor an overdue receivable) or $0.36 per share in 2002. 864,395 23,503 4,597 827,086 19,953 4,192 Distributions to the investment shares minority interest were $1.5 million, $0.4 million and $0.3 million in 2004, 805,642 2003 and 2002, respectively. 18,178 4,034 On January 31, 2005, a transaction dividend of $1.25 per common share, totaling $103.4 million, was declared payable March 1, 2005. The Company´ s dividend policy continues to be re- erations (smelter and refinery) are audited three times a established by the government, and (2) identify areas af- viewed during the Board of Directors´ meetings, taking year, and the operations at the Toquepala and Cuajone fected by inactive operations which needed remediation. into consideration the current intensive capital invest- mines, twice a year at each mine. The Company has not ment program, including the smelter modernization, incurred in material breach of environmental laws and By the end of 2003, 31 of such projects were already and the expected future cash flow generated from regulations. operations. completed, including all PAMA commitments related to the Company’s operations in Cuajone and Toquepala. ENVIRONMENTAL AFFAIRS Environmental Compliance and Management Program smelter operations. The primary areas of environmental The Company’s activities are subject to Peruvian laws (known by its Spanish acronym, PAMA) to the Peruvian concern are: (1) Smelter reverberatory slag eroded from and regulations. The Peruvian government, through its government. A thorough third party environmental audit the slag deposits up until 1994, and (2) Atmospheric As part of these regulations, SPCC submitted in 1996 the The three pending PAMA projects are related to the Ilo Ministry of Energy and Mines (MEM), conducts seven was conducted in order to elaborate the PAMA. The Emissions from the Ilo smelter. annual audits of SPCC’s mining and metallurgical opera- PAMA covered all current operations that did not have an tions. Through these environmental audits, all matters approved environmental impact study at the time. SPCC’s The slag remediation program is progressing as sched- related to environmental commitments, compliance PAMA was approved in January 1997 and contains 34 uled and should be completed by 2007. Once the pro- with legal requirements, as well as atmospheric emis- mitigation measures and projects necessary to: (1) adapt gram is completed, no environmental risks are foreseen sions and effluent monitoring are reviewed. The Ilo op- the existing operations to the environmental standards regarding this issue. 19. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Regarding the smelter emissions, the third phase The Company has sufficient funds at hand to com- The law was amended on May 28, 2004. The amended of the Ilo smelter modernization has started and mence the project, but significant additional funds will law, as published, announced a requirement for exist- is scheduled for completion by 2007. In July 2003, be necessary for its completion. The Company has an ing mining operations to present the MEM with a Mine the Company awarded Fluor/Xstrata the contract to approved Peruvian bond program of $750 million, of Closure Plan, within one year, or before October 15, provide the technology and basic engineering for the which $199 million have been issued. There can be 2004. Since the regulations have not been approved, The third phase of the Ilo smelter modernization has started and is scheduled to be completed by 2007. expansion and modernization of the Ilo smelter. The no assurance that the entire Ilo smelter project can be on October 15, 2004, SPCC submitted the MEM a no- selected proposal meets SPCC’s requirements, i.e., us- financed with Peruvian resources. The Company plans tice stating that based on current legislation the Com- ing proven technology (ISASMELT from Australia) and to finance the portion of the cost that is not financed in pany was unable to make a reasonable estimate of its complying with the current environmental regulations. Peru with funds from operations or by placing additional closure obligation. It is expected that final regulations It is estimated that the construction of the project financing in the international market. detailing requirements will be published by the second sees significant environmental capital expenditures in will be completed before January 2007, the deadline quarter of 2005, and the Company will be required 2005. Approximately $171 million have been budgeted established in the PAMA. This represents the largest Two major remediation projects were identified in the to submit its Mine Closure Plan thereafter. The law for the smelter project in 2005. capital investment project for SPCC. The cost of the PAMA. One related to the old tailings conveyance and requires companies to provide financial guarantees to project was previously estimated to exceed $600 mil- disposal sites, and the other, to the smelter reverberato- insure that remediation programs are completed. The lion. The new estimated cost to complete this project ry slag mentioned above. Environmental commitments Company anticipates that, when in force, this law will is $320 million. regarding the tailings remediation have been fulfilled, increase its asset retirement obligations and require and the slag program has an 88% completion, as re- future expenditures and amortizations over the life of Since 1995, and while this project is under construc- ported by the government auditors. In the foreseeable the mine to satisfy its requirements. The liability for tion, SPCC is applying an emissions curtail program that future, the only reclamation/remediation plans concur- these asset retirement obligations cannot be presently has allowed it to comply with the annual SO2 air qual- rent with operations are the ones already included in measured, or reasonably estimated, based on the pro- ity standard (established by the MEM in 1996) in the the PAMA. densely populated areas whithin the city of Ilo, and has posed generalities of this law. The Company is study- ing the impact of the law on its results, but it cannot been able to reduce breaches to the 24-hr air quality On October 14, 2003, the Peruvian Congress published reasonably estimate the effect until final regulations standard for the year 2004 to four episodes. Once the a new law announcing future closure and remediation are published. modernized smelter starts operating, no environmental obligations for the mining industry. On March 14, risks are foreseen regarding this issue. 2004, the Peruvian Ministry of Energy and Mines Environmental capital expenditures for the period (MEM) published proposed regulations for this law. 2000-2004 exceeded $81 million. The Company fore- 21. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 20. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Skilled personnel working at the Maintenance Workshops and mines 22. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Ball mills at Cuajone Concentrator GENERAL INFORMATION, DESCRIPTION OF OPERATIONS AND DEVELOPMENT INFORMATION RELATED TO INCORPORATION the Toquepala mine since 1960 and the Cuajone mine AND INSCRIPTION IN THE PUBLIC REGISTRY since 1976, both in southern Peru’s Andes highlands, SPCC is a business entity incorporated according to the approximately 612 miles southeast of Lima, in the de- laws of the State of Delaware, United States of America. partments of Tacna and Moquegua, respectively. It also It operates in Peru through a branch, established under operates a smelter and refinery located west of the mines public instrument certified by Public Notary from Lima, on the Pacific Ocean coast, close to the city of Ilo, depart- Dr. Ricardo Fernandini Arana, on the 6th of November, ment of Moquegua. 1954. By public instrument dated April 6, 1998, certified by Public Notary from Lima, Dr. Carlos A. Sotomayor SPCC, one of Peru’s leading companies, is among the Bernós, the Company complied with the provisions 10 largest private-sector copper mining firms in the of Law Nº 26887, the General Corporation Law, and world. was recorded under Electronic Record Nº 3025091 for Business Entities, Registration Office in Lima and Callao SPCC, indirectly, is part of Grupo México, S.A. de C.V., (previously, Entry N° 384 of Record N° 2447, Mining owner of 100% of Americas Mining Corporation (AMC). Individuals and Corporations Registry, Public Mining AMC in turn owns 100% of Southern Peru Holdings II In- Registry). corporated, which holds 54.2% of Southern Peru Copper Corporation’s shares. The purpose of Grupo México S.A. See also “Brief historical review of the Company’s incor- de C.V.’s companies comprises mining and rail transpor- poration”. tation activities. Brief description: Southern Peru Copper Corporation The Group related to SPCC operations includes the fol- (SPCC) is an integrated copper producer. It has operated lowing subsidiaries: 23. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Name of Company % (*) Grupo México, S.A. de C. V. RAILROAD ACTIVITIES: Infraestructura y Transportes México, S.A. de C.V. Grupo Ferroviario Mexicano MINING ACTIVITIES: Grupo Minera México Internacional, S.A. de C.V. Americas Mining Corporation (AMC) Minera México, S. A. de C. V. Industrial Minera México, S.A. de C. V. Mexicana de Cobre, S.A. de C. V. Mexicana de Cananea, S.A. de C. V. ASARCO, Incorporated SPHC II, Incorporated SOUTHERN PERU COPPER CORPORATION (SPCC) Southern Peru Limited Logistics Services Incorporated (LSI) Global Natural Resources, Inc. Multimines Corporation Multimines Insurance Company, Ltd. SOUTHERN PERU COPPER CORPORATION, SUCURSAL DEL PERU Compañía Minera Los Tolmos S.A. Southern Peru Copper Corporation, Agencia Chile Location Inscription in the RPMV México 99.99 74.00 99.99 100.00 99.14 98.12 94.59 98.49 100.00 100.00 54.20 100.00 100.00 100.00 100.00 100.00 82.40 100.00 100.00 Mexico Mexico Mexico USA Mexico Mexico Mexico Mexico USA USA USA USA USA USA USA Bermuda Peru Peru Chile X1 X2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 24. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S NOTES: 1.- Common Shares 2.- Labor Shares CORPORATE CAPITAL AND COMMON STOCK Corporate Capital and Common Stock The authorized number of shares are: Issued an Paid-in Capital: Class A Common shares Common Shares outstanding Nominal Value of Common Shares Shares 100,000,000 65,900,833 14,116,952 US$ 0.01 Total number and percentage of shares Shares Interest Southern Peru Holdings Corporation (*) Cerro Trading Company, Inc.. (*) Phelps Dodge Overseas Capital Corporation (*) Common Shares Total 43,348,949 11,378,088 11,173,796 14,116,952 80,017,785 63.1% 16.6% 16.3% 4.0% 100.0% (*) Class A common shares are entitled to five votes per share. Common shares are entitled to one vote per share. Based on Report N° 547-2002-EM/DGM/DPDM, dated November 6th, 2002, the “Director General de Minería” authorized the expansion of the Toquepala Concentrator to a capacity of 60,000 MT/Day. 2. Botiflaca Concentrator in Cuajone: Authorized by Directorial Resolution No. 150-81-EM/DCM, dated August 14, 1981, which approved the operation of the Cuajone Concentrator. The resolution granted 56 hectares of surface land. Based on Report No. 266-99-EM/DGM/DPDM, dat- ed July 20, 1999, the “Director General de Minería” authorized the expansion of the Cuajone Concentra- tor to a 87,000-Metric Ton/Day throughput. 3. Toquepala Leaching Plant (SX/EW): Authorized by Directorial Resolution No. 166-96-EM/DGM, dated AUTHORIZATIONS OBTAINED FOR THE ares of surface land and authorized a throughput of May 7, 1996, which approved the operation of the DEVELOPMENT OF BUSINESS 39,000 Metric Tons/Day. Toquepala SX/EW plant. The resolution granted 60 hectares of surface land and authorized a throughput 1. Toquepala Concentrator: Authorized by Directorial Based on Report No. 413-97-EM/DGM/DPDM dated of 11,850 Tons/Day. Resolution No. 455-91-EM/DGM/DCM, dated July July 7, 1997, the “Director General de Minería” au- 5, 1991, which approved the operation of the Toque- thorized the expansion of the Toquepala Concentra- Based on Report No. 663-98-EM/DGM/DPDM, pala Concentrator. The resolution granted 240 hect- tor to a 43,000-Metric Ton/Day throughput. dated November 10, 1998, the “Director General de 25. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Minería” authorized the expansion of the Toquepala Based on Report No. 506-98-EM/DGM/DPDM, separating sand and other materials from the co- of Delaware, United States of America, under the name Nº 3025091 for business entities, Registry Office of Lima which are accounted for as expenses paid in advance. By SX/EW Plant to a 18,737-Metric Ton/Day throughput. dated September 2, 1998, the “Director General de quina using sea water washing screens. of Southern Peru Copper Corporation (SPCC). In 1954, and Callao (formerly, Entry N° 384 under Record N° virtue of this rebate, SPCC is entitled to credit the any IGV Minería” authorized the expansion of the Ilo Cop- SPCC established a branch in Peru to carry out mining 2447, Mining Individuals and Business Entities of the amount against its Peruvian tax obligations or to receive 4. Cuajone Leaching Plant (LX/EW): Authorized by Direc- per Refinery to a capacity of 658 Metric Tons/Day DESCRIPTION OF OPERATIONS AND activities in this country. Public Mining Registry). a rebate. torial Resolution No.155-96-EM/DGM, dated May 6, throughput of blister copper. DEVELOPMENT REGARDING THE 1996, which approved the operation of the Cuajone ISSUING ENTITY On September 7, 1995, Southern Peru Copper Holding INFORMATION ABOUT PLANS AND GENERIC DESCRIPTION OF MAIN ASSETS leaching plant. The resolution granted 400 hect- Based on Report N° 080-2002-EM-DGM/DPDM, Company was incorporated, also in accordance with the INVESTMENT POLICIES ares of surface land and authorized a throughput dated March 13th, 2002, the “Director General de PURPOSE laws of the State of Delaware, with the purpose of acting See “Expansion and Modernization Program” on page 12. TOQUEPALA of 2,100 Tons/Day. Minería” authorized the expansion of the Ilo Cop- The purpose of Southern Peru Copper Corporation (SPCC) as a holding company of 100% of Southern Peru Copper 1. The Toquepala Production Unit comprises three per Refinery to a capacity of 800 MT/Day. is to engage in activities allowed by the laws of the State Corporation’s shares (SPCC). By the end of 1995, SPCC SPECIAL RELATIONSHIPS BETWEEN ISSUER Economic Administrative Units: TOQUEPALA 1 5. Ilo Smelter: Authorized (definitely) by Directorial of Delaware. Its main activity is to extract, mill, concen- changed its name to Southern Peru Limited, and South- AND THE STATE comprising 30 mining claims over a 7988 hectare Resolution No. 0078-69-EM/DGM, dated August 7. Sulfuric Acid Plant: Authorized by Directorial trate, smelt, treat, prepare for market, manufacture, sell, ern Peru Copper Holding Company changed its name to On November 20th, 1996, SPCC and the Peruvian gov- surface. SIMARRONA, including 14 mining claims 21, 1969, which approved the operation of the Ilo Resolution No. 024-96 -EM/DGM, dated January exchange and, in general, to produce and negotiate the Southern Peru Copper Corporation. ernment (Ministry of Energy and Mines) signed a contract over 7800 hectares, and TOTORAL, with 18 Smelter. The resolution authorized a production of 19, 1996, the “Director General de Minería” au- sale of copper, gold, silver, lead, zinc, iron and any other that will remain effective until the year 2010 and which mining claims distributed over 7320 hectares. In 400 Short Tons/Day of blister copper. thorized the operation of the sulfuric acid plant at class of minerals and materials or other materials, effects Both companies agreed, effective December 31, 1998, guarantees tax stability and the availability of foreign addition, the Toquepala Production Unit owns 35 Based on Report No. 204-2000-EM-DGM-DPDM, on Report No. 313-98-EM/DGM/DPDM, dated explore, exploit, sample, examine, investigate, recognize, with Southern Peru Limited, the former absorbing the the operation of the SX/EW plant at Toquepala and the above Economic Administrative Units. Overall, the dated June 20, 2000, the “Director General de Min- May 18, 1998, the “Director General de Minería” locate, appraise, buy, sell, exchange, etc., mining conces- latter and with SPCC assuming all assets and liabilities, Solvent Extraction (SX) operation in Cuajone. Also, on Toquepala Production Unit holds 97 mining claims a production rate of 472 Metric Tons/Day. Based and goods of any nature or description; as well as to to the merger of Southern Peru Copper Corporation currency to exchange the Branch’s earnings related to mining claims over 23,244 hectares outside the ería” authorized the expansion of the Ilo Smelter authorized the expansion of the Ilo Sulfuric Acid sions and mining deposits. SPCC belongs to the CIUU including the branch in Peru. This merger did not imply April 18th, 1995, SPCC and the Peruvian Government over 46,353 hectares. to a 3,100-Metric Ton/Day throughput of copper Plant to a capacity of 300,000 Metric Tons/Year 1320 group. any modification to the participation percentages in (CONITE) signed a contract that guarantees the avail- concentrates. production. the equity stock or the Patrimony Participation Account ability of foreign currency, free remittance of dividends 2. “Toquepala Concentrator” Beneficiation Plant, with 6. Ilo Refinery: Authorized by Report No. 056-94-EM/ 8. “Coquina Wash Plant and Sea shell Concentrates,” of the Ilo Smelter. DGM/DRDM, dated May 27, 1994, the “Director authorized to operate by Directorial Resolution Nº BRIEF HISTORICAL REVIEW THE COMPANY’S Mining activities in Peru are carried out under the name 1 Primary Crusher, 2 Secondary Crushers, 4 Tertiary Crushers, 8 Bar Mills, 24 Ball Mills, 8 Ball Mills for General de Minería” authorized the operation of 110-93-EM/DGM dated August 3, 1993. The plant INCORPORATION of Southern Peru Copper Corporation, abbreviated as SPCC’s tax credit revenues in Peru derive from the general Re-crushing, 1 control milling system, sections 3 the Ilo Copper Refinery at a 190,000 Metric Ton/ processes 2068 MT/day of raw material (coquina) The Company was incorporated on December 12, 1952, Southern Peru or the initials SPCC, through its branch sales tax (IGV) paid on the acquisition of capital goods and 4, as well as 4 OK-100 Flotation Cells, 3 OK-50 Day throughput of blister copper. recovered from nearby mines. Seashell is produced fifty-two years ago, according to the Laws of the State in Peru. The branch is registered under Electronic Record and other goods and services used in its operations, Flotation Cells, 13 Column Cells and 4 130m3 Flota- The term of duration of the Company is indefinite. (investment stock), which remained unchanged. abroad, among other guarantees related to the acid plant Milling capacity of 60,000 tons per day, consists of 27. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 26. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S tion Cells , 24 Flotation Cells WEMCO with a capacity new tailing distributor tank which replaced the each, and 4 Wabco trucks with a capacity of 109 send the solution to the SX/EW Plant. The plant has 3 13. Oxygen Plant with a production capacity of 100,000 of 42.5m3, 1 Track tractor CAT D10-R, 2 Komatsu existing tank; enlargement of the pumping house, tons each. lines of SX, each with a nominal capacity of 1,068 m3 tons per year (average 272 x day). wheel tractors and a recycled water pipe line. 1 pump of recover water, 1 transformer of 33/40 / h of pregnant solution and 162 electrowinning cells MVA, 138/38 Kv., DCS system. 9. 2 4100A Shovels with a capacity of 66 tons, 1 arranged in two lines: one with 122 cell and the other 14. “Coquina” Plant with a seashell production capacity 3. 22 trucks with a capacity of 218 tons each. 11 trucks with a capacity of 181 tons each. 12 trucks with a CUAJONE 2800XPB Shovel with a capacity of 49 tons, 1 2100BL Shovel with a capacity of 21 tons, 1 Le capacity of 109 tons each. 6. The Cuajone Production Unit comprises two Eco- Tourneau 1800 front-end loader with a capacity of with 40. ILO of 200,000 tons per year. 15. Burnt Lime Plant with a capacity of 80,000 tons per nomic Administrative Units: CUAJONE 1, comprising 38 tons, 2 120A electric drills, 1 100XP electric drill, 10. “Ilo Smelter” with a smelting capacity of 1,120,000 year, 1 Dust extraction system, 1 16v industrial en- 4. 2 4100A shovels with a capacity of 66 tons (43 m3), 23 mining claims over 7390 hectares; and CO- 4 front-end loaders 966 of 3.8 m3 capacity, 3 front- tons of concentrate per year. It has 2 reverberatory gine with DDEC. 4 2100BL shovels with a capacity of 21 tons (11.4 COTEA, with 15 mining claims over 7711 hectares. end loaders 950 of 3.1 m3 capacity, 3 front-end furnaces, 7 Peirce-Smith converters, 1 “El Teniente” m3), 1 495BI shovel with a capacity of 66 tons (43 Additionally the Cuajone Production Unit has claims loaders 988 of 6.1 m3 capacity, and 1 wheel tractor Modified Converter and 2 casting wheels. OTHERS m3), 1 56 yd3 dipper, 1 120A electric drill, 2 100XP for mining 20,093 hectares outside the above two Komatsu. electric drills, 1 49RIII rotary drill. 1 front-end loader Economic Administrative Units. Overall, the Cuajone 992d, 1 Komatsu wheel tractor. Production Unit comprises 70 mining claims over a OTHER 11. “Ilo Refinery” – Anode Plant: 2 Basculant Maerz Ov- tween Toquepala, Cuajone and Ilo, with 30 locomotives, ens, each with a 400-MT capacity, 1 casting wheel 256 dump cars, 92 flat cars, 254 boxcars, 8 closed boxcars, Industrial railroad to haul concentrates and supplies be- total 35,194-hectare surface. One SX/EW plant in Toquepala and one SX plant in (70 MT / hour) – Electrolitic Plant with a 280,000 11 closed hopper-type cars, 34 open hopper-type cars, 31 5. Additionally, new equipment for the concentrator Cuajone. The SX Cuajone plant has 1 primary jaw crusher MT / year capacity (Catodes), 926 commercial cells various tank wagons, 23 sulfuric acid tanks, 5 patrol cars, had been incorporated with the expansion and 7. “Cuajone Concentrator” Beneficiation Plant with and 1 secondary cone crusher with a capacity of 4,300 and 52 starting cells. – Precious Metals Plant with 1 17 dump cars, 1 front-end loader CAT 966G, used for modernization: 1 secondary crusher, 2 tertiary Milling capacity of 87,000 tons per day, consisting tons per day to process Cuajone’s oxides. In addition, 1 Wenmec Selenium Reactor, 2 cupel furnace, 22 silver maintenance components and equipment transportation, crushers, enlargement of the ore milled deposit, 1 of 1 primary crusher, 3 secondary crushers, 7 tertiary agglomeration mill, 1 front-end loader, and 3 109-ton refining cells and 1 hydrometallurgical system for a new mobile system of classification and shell loading, 1 tripper car, 1 ball mill 6.4 x 10.2 m, 2 cells of 130 crushers, 10 ball mills, 4 ball mills for re-crushing, 1 trucks for agglomerated ore hauling to the leach dumps. gold recovery. m3 y 4 of 60 m3 for flotation rougher, 4 pre-classi- vertical mill, as well as 30 OK-100 flotation cells, 6 Copper in solution produced in Cuajone is sent to To- track tractor D9R for handling slag, 1 console DCS for the acid plant and reverberator furnace, 1 power factor trans- fier cyclones, 1 cell of cleaning, 1 cell scavenger of column cells, 28 Wemco flotation cells, 48 Denver quepala through an 8” pipe laid alongside the Cuajone 12. Sulfuric Acid Plant with production capacity of former equipment, oil heater, COEN, and 1 dragshovel for 60 m3, 1 line of 24 cells for cleaning and re-clean- flotation cells, 1 truck Volvo FM12, and recycled wa- - Toquepala railroad track. 300,000 tons per year (average 1,000 x day). smelter, 1 south bar casting system. ing, 6 cells of 2.8 m3 changing the existing line of ter pipelines. 14 cells to 2 lines of 10 cells each one for molybde- The Toquepala lant has 2 spray systems: 1 for the south num plant, 1 pressure filter for copper concentrate, 8. 18 Dresser 830E trucks with a capacity of 218 tons dump and 1 for the northwest dump, and 4 pregnant 1 thickener high-rate of 43 meters of diameter, 1 each, 8 Cat 793C trucks with a capacity of 218 tons solution ponds, each with its own pumping system to 28. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 29. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S EMPLOYEES As of December 31st Staff Employees Workers Total COMMON SHARES OUTSTANDING Participation Less than 1% Between 1% - 5% Between 5% - 10% More than 10% Total INVESTMENT SHARES OR LABOR SHARES Participation Less than 1% Between 1% - 5% Between 5% - 10% More than 10% Total 2004 723 1,081 1,740 3,544 Shares 2,738 - - 3 2,741 Shares 2,490 - - 2 2,492 30. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 2003 726 1,089 1,751 3,566 2002 724 1,075 1,776 3,575 2001 765 1,116 1,845 3,726 2000 744 1,047 1,891 3,682 Percent of Shares 4.1% 0.0% 0.0% 95.9% 100.0% Percent of Shares 4.1% 0.0% 0.0% 95.9% 100.0% Principles of Corporate Governance GENERAL MANAGEMENT RESOLUTIONS 096-2003-EF/94.11 I. SECTION ONE PRINCIPLE 1. Agendas should not include general points. The issues to be discussed must be specified, and each topic will be discussed independently for easier analysis and to prevent addressing jointly issues about which there may be various view - points. (Principle I.C.1, second paragraph) 2. The place for holding the General Meetings will be determined in advance for easier shareholder atten- dance. (Principle I.C.1, third paragraph) COMPLIANCE REASONS FOR THE CHOSEN OPTION 0 1 2 3 4 X The Board’s and Shareholders’ agendas will list and identify in detail the issues for debate. The agenda is sent in advance to each shareholder or Board member including background or supporting information. Each topic is reviewed and addressed independently. X The Corporation will make it as easy as possible for shareholders to attend the General Meetings called for in advance. A letter sent to all shareholders will request voting at the General Meetings. The meeting will take place at the location where most of the issued shares are represented. 31. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S PRINCIPLE 3. Shareholders will be able to include within rea- sonable limits issues for debate in the General Meetings. Issues so introduced will address corporate con- cerns and fall within the Meeting’s legal and statutory jurisdiction. The Board will not reject these requests without providing the shareholder a reasonable cause. (Principle I.C.2) 4. Bylaws should not limit shareholders entitled to participate in the General Meeting from being repre- sented by a person designated by them. (Principle I.C.4.i). 5. Companies issuing investment grade or other non voting shares should give their stockholders the op- tion to exchange them for ordinary voting shares or to offer this option at the time of issuance. (Principle II.A.1, third paragraph) 32. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S COMPLIANCE 0 1 2 3 4 X REASONS FOR THE CHOSEN OPTION PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION The Company will announces its General Meetings with due anticipation so shareholders can introduce new issues for debate in the agenda. Procedures will be enforced to ensure the issues for debate relate to corporate concerns and fall within the company’s legal and statutory jurisdic- tion. Company bylaws determine the mechanisms giving each shareholder the option to propose candidates to a Board position. X Corporate bylaws do not limit participation, representa- tion or voting rights. X At the end of 1995, the company exchanged investment grade stock for ordinary shares. At present, investment grade shares owned by third parties account for 0.7% of SPCC’s total equity. 6. The number of elected board members should al- low providing an independent judgment on issues involving a conflict of interest. Shareholders without control may also be called to participate in these debates. Independent Board members are chosen for their professional reputation and are not related to the company’s management or its main shareholders. (Principle II.B) The term “relationship” is defined in the Regula- tions on Indirect Ownership, Relations and Economic Group approved by CONASEV Resolution 722-97-EF/94.10 and its subsequent general rules. Main shareholders are individuals or corporations who own five percent (5%) or more of the issuing company’s capital stock. 0 1 2 3 4 X The Board will sit three independent members who will crucially take part in the decisions involving conflict of interests. X SPCC’s independent board members are renowned inter- national professional executives, unrelated to the major- ity stockholder. Independent Board members comply with the regulations approved by the Securities and Exchange Commission (SEC) similar to CONASEV’s to qualify as independent directors. 33. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S COMPLIANCE 0 1 2 3 4 X PRINCIPLE 7. Although independent audits provide financial opinion, they may also provide specialized reports or opinion on accounting inspections, operative audits, systems audits, project evaluations, cost system assessments or introductions, tax audits, portfolio assessment, valuations for asset adjustments, portfolio evaluations, inventories and other special services. Different auditors should perform these assessments or, if performed by the same auditors, their indepen- dence of opinion should not be affected. The com- pany will disclose all the audits and special reports prepared by the auditor. All services provided by the auditing firm or indepen- dent auditor will be disclosed, with specific mention of their percentage in the total services provided and the latter’s share in the auditing company’s or inde- pendent auditor’s revenues. (Principle IV.C, second, third and fourth paragraphs) 34. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S REASONS FOR THE CHOSEN OPTION PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION All accounting or financial studies and audits must be ap- proved by SPCC’s Audit Committee who evaluate in detail the involved costs and subject matter. The corporation will favor retaining independent third party auditors bear- ing no relation to the Company for performing financial audits as an indirect control practice and in compliance with the United States Sabarnes-Oxley Act. Operational, computer system, tax, project feasibility, process evaluation or introduction, asset valuation and other audits have been performed in recent years. 8. Requests for information filed by individual share- holders, investors in general, and stakeholders in relation to the company will be filed with the office and/or company official specially designated for that purpose. (Principle IV.D.2) 0 1 2 3 4 X Our Company honors these requests through the Con- trol and Finance Directorate officials who are in charge of relationships with shareholders, investors and other groups. 9. Doubts concerning the confidential nature of the in- X The Company has in place an internal procedure to de- formation requested by shareholders or stakeholders will be properly addressed. The corresponding crite- ria will be adopted by the Board and confirmed by the General Meeting, and included in the company’s bylaws or internal regulations. However, disclosure of information will not jeopardize the company’s competitive standing nor affect the normal conduct of the company’s business. (Principle IV.D.3) termine confidentiality levels for corporate information. This procedure implies a certain degree of sensitivity to the Company’s information. A review of each particular case determines the likely impact on SPCC’s competitive position. In view that SPCC is a corporation organized under the regulations of the State of Delaware, United States of America, its bylaws are not required to include this prin- ciple, which is instead regulated by management. 10. The company will hire an internal auditor. The inter- X The Company has in place an Independent Audit area nal auditor will discharge his functions with profes- sional independence from the company retaining its services, and guided by the principles of diligence, loyalty and reserve that the company requires from that operates independently from other functional areas in our corporation. It direclty reports to the Executive President, and the Company’s Audit Committee. 35. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION its Board and Management. (Principle IV.F, first paragraph) 0 1 2 3 4 The Company has prepared a Code of Conduct and Eth- ics and Internal SPCC Conduct Regulations dealing with Major Events, Reserved Information and other Communi- cations. These regulations were approved by the Board of Directors and apply also to our Internal Audit Manage- ment Office. 13. The Board will perform certain key functions, namely: Evaluate senior management’s and Board mem- bers’ compensation, and ensuring the procedure for appointing Board members will be both formal and transparent. (Principle V.D.3) 0 1 2 3 4 X The number of Board members and their appointment are clearly set forth in the Company’s bylaws. A formal procedure is in place to appoint and decide the Board’s allowance. To this end, the Board has created the Appointments/Corporate Governance Committee. 11. The Board will perform certain key functions, X The Board approves the corporation’s development namely: Evaluating, approving and guiding the corporation’s strategy; determining the company’s main action plans, risk follow-up, monitoring and management policies; design its annual budgets and business plans, and monitor their implementation; oversee the company’s main expenses, investments, acquisitions and sales. (Principle V.D.1) 36. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S strategy, objectives, annual goals and action plans. Every quarter the Board reviews the Company’s progress in meeting its objectives, although Management performs this function on a daily and monthly basis. Every year, the Board approves the expenditures budget and operation expenses, and the capital investments for operations and projects alike. 14. The Board will perform certain key functions, X The Company’s Code of Conduct and Ethics establishes namely: Monitor and follow up likely conflicts of interest be- tween management, Board members and sharehold- ers, including fraud in using corporate assets and abuse in transactions amongst stakeholders. (Principle V.D.4) the guidelines to address conflicts of interest. In addition, likely conflicts of interest or transactions amongst stakeholders are reported by Management to the Board’s Audit Committee, which in turn will evaluate and monitor them, and report to the Board on 37. 12. The Board will perform certain key functions, X The Chairman of the Board, in coordination with Man- namely: Screening, monitoring and, if needed, replacing se- nior management and fix their remuneration. (Principle V.D.2) agement or the Compensations Committee, will establish 15. The Board will perform certain key functions, X The Board meets this requirement fully through its de- the remuneration of senior management and evaluate their performance. If appropriate, it will take the mea- sures aimed at replacing them with professionals with the competencies needed to manage the Corporation. namely: To ensure the Company’s accounting system and financial statements are independently audited, and that the appropriate control systems–in particular tailed monitoring of the status and appropriateness of the Company’s accounting systems and Financial State- ments. these eventual conflicts. The Committee has in place a procedure for filing complaints open to any shareholder, worker or stakeholder group wishing to use it. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION 0 1 2 3 4 The Board members sitting in the Audit Committee pe- 18. The Board may create special bodies to fit the 0 1 2 3 4 X its financial and non-financial management sys- tems–are in place and conform to the law. (Principle V.D.5) riodically advise on the appointment of the independent auditors and constantly assess the risks to which our Company may be exposed. Management is in charge of establishing an internal control system. SPCC’s General Shareholders’ Meeting annually approves or rejects the appointed Independent Auditors. company’s needs and size, in particular as concerns the audit function. Additionally, these special bodies may concern themselves with functions relating to appointments, remunerations, control and planning, among others. These special bodies will be organized within the Board to support its role, and will preferably include independent directors who may thus make impartial decisions about matters where conflicts of interest may emerge. (Principle V.E.1) 16. The Board will perform certain key functions, X In the past, the Board has occasionally introduced or sug- namely: Monitor the soundness of the company’s governance practices and introducing the required changes. (Principle V.D.6) gested the General Meeting to approve changes to the Company’s governance bodies. All these changes have contributed to enhancing good practices and transpar- ency in corporate governance at SPCC. 17. The Board will perform certain key functions, X The Chief Executive Officer and the Board have approved namely: Monitoring the company’s information policy. (Principle V.D.7) the Company’s information policy. It seeks to provide shareholders, workers and stakeholders complete infor- mation about SPCC’s operations and its economic re- sults. This policy is available at www.southernperu.com 38. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S The Board has set up several committees that perform special functions. They include the Audit Committee, sit- ting independent Board members who are responsible for appointments, establishing remuneration of the indepen- dent auditors, and control and planning. Specialized committees mostly sit independent Board members and discharge their roles particularly in situa- tions involving potential conflicts of interest. These special Committees include: (i) Executive Commit- tee, (ii) Audit Committee, (iii) Compensation Committee, (iv) Share Incentive Plan Committee, (v) Appointment Committee, (vi) Corporate Governance Committee, (vii) Special Committee for Divested Board Members and (viii) Trust Committee for the ERISA United States Plan. 39. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 19. The number of Board members of a company should X The Board sits professionals from various fields with vast ensure a diversity of viewpoints so decisions are the result of appropriate debate, with due consideration paid to the best interest of both the corporation and its shareholders. (Principle V.E.3) knowledge of the mining, metallurgical and commercial fields. This setup provides a diversity of viewpoints and opinions when making corporate decisions. Independent Board members contribute to these decisions. PRINCIPLE 20. Information referred to issues for debate at each meeting will be made available to Board members sufficiently in advance to allow their review, unless it concerns strategic matters requiring confidentiality. In this latter case, it will be necessary to put in place the mechanisms Board members need to properly evalu- ate the issues at hand. (Principle V.F, second paragraph) 21. The Board will follow clearly defined policies when retaining specialized advice services needed by the company to ensure appropriate decision-making. (Principle V.F, third paragraph) 22. New Board members will be informed of their pow- ers and responsibilities, and about the company’s structure of organization and characteristics. (Principle V.H.1) 40. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S COMPLIANCE 0 1 2 3 4 X REASONS FOR THE CHOSEN OPTION PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION Information discussed by the Board is properly document- ed and sent to Board members seven days before their meeting or earlier to permit a detailed review. Corporate staff is available to the Board to address their concerns about the reported information. 23. Procedures must be in place for the Board to elect one or more substitute members, should there be no alternate Board members already and one or more Board positions are declared vacant, so the cor- responding terms are completed, unless otherwise determined in the company bylaws. (Principle V.H.3) 0 1 2 3 4 X Corporate bylaws include a clear procedure to fill vacant Board positions. The number of Board members is kept at a level that allows meeting good corporate governance needs and provide ad- equate knowledge needed in SPCC’s mining operations. 24. The functions of the Chairman of the Board, and X These functions are defined in the corporation’s bylaws, X When deemed appropriate, the Board will approve at its sole discretion, the hiring of specialized companies to provide advice on the best course of action to be fol- lowed when making major decisions. X All Board members have been instructed about their powers and responsibilities. In addition, they were explained the Company’s organizational structure and characteristics. The Company has carried out induction programs on the Company’s operations for the members of the Board. those performed by the Executive President and the General Manager’s as required, will be clearly stated in the company’s bylaws or internal regulations, in order to prevent duplicate functions and likely conflicts. (Principle V.1, first paragraph) its internal policies and job descriptions that clearly dif- ferentiate the attributions under each such position. 25. The company’s organizational structure shall avoid X These powers and attributions are clearly defined in concentrating functions, attributions and respon- sibilities on the Chairman of the Board, the Chief Executive Officer, the General Manager and other company senior management officials, as the case may be. (Principle V.I, second paragraph) SPCC’s bylaws and by Management. The Board and Man- agement have avoided concentrating decision-making in these positions by establishing limits to their attributions and responsibilities. 41. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S PRINCIPLE COMPLIANCE REASONS FOR THE CHOSEN OPTION To date, there are no loans with other companies that Stock Exchange and the Lima Stock Exchange, and are interest rate equivalent to Libor + 3.00%. In July and De- 0 1 2 3 4 compromise more than 10% of SPCC’s property. entitled to one vote per share. cember 2000, the Company placed $30 millions and $20 millions in corporate bonds; both issues mature in 2007 26. It seems advisable management receives compensa- X Part of management’s compensation is linked to the ADMINISTRATIVE, JUDICIAL OR Along with the exchange of labor shares, the holders of and generate a nominal interest rate of 8.75%. ECONOMIC RELATIONS WITH OTHER COMPANIES DUE TO LOANS THAT COMMIT MORE THAN 10% OF THE STOCKHOLDER’S EQUITY OF THE ISSUING ENTITY tion that is at least partly determined by the compa- ny’s results, so as to ensure they meet the goal of maximizing value for the company’s shareholders. (Principle V.I.5.) 42. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Mineral transfer hopper in Cuajone corporation’s results through a profit sharing and perfor- ARBITRATION PROCEEDINGS common shares of the Company exchanged their shares mance bonds program. for class A common shares, with the right to five votes In January 2005, the Company opened a credit line worth LITIGATION: See Note to Consolidated Financial State- per share. ments. US$200 million with a group of banks syndicated by Ci- tibank. On January 27, 2005, the Company paid US$150 The class A common shares and the common shares have million to repay bonds worth that amount issued in 2001, CHANGES OF THOSE RESPONSIBLE FOR a nominal value of $0.01 per share. 2002 and 2003. In addition disbursements for US$20 THE PREPARATION AND REVISION OF THE millions and US$30 millions were made as prepayment FINANCIAL INFORMATION CORPORATE BONDS: on the balance of prior bond issues. The new credit line José N. Chirinos acts as Director of Comptroller and Fi- In November 2001, the Company was authorized by was opened for 5 years at LIBOR plus 1.25% on the first nance, and Marco A. García acts as Finance Manager. CONASEV to increase the $200 million program, approved year; the spread will start increasing on the third year, INFORMATION RELATED TO STOCK EXCHANGED 2003, the Company placed $25 millions in corporate bonds amortization will start on the third loan year. The Com- IN THE STOCK MARKET with a face value of $1,000 each, with investors in Peru. pany will pay bondholders a 1% or US$2 million penalty in 2000, to $750 million; as part of this program, on April, and will increase 0.125% every year thereafter. Principal This issue matures in 2010 and has a floating interest rate on advance repayment. Common Stock: equivalent to Libor + 2.375%. In addition, on May, 2003, On November 29, 1995, the Company offered to ex- the Company placed $25 million in corporate bonds with As of December 31, 2004, $199.0 millions out of the change the recently issued common shares for all and any a face value of $1,000 each, with investors in Peru; this $750-million program have already been issued. labor shares of the Peruvian Branch of the Company, at a issue matures in 2010 and has a floating interest equiva- ratio of one common share per four S-1 shares and one lent to Libor + 2.3125%. On February 2002, the Company In the month of June 1997, the Company placed $50 mil- common share per five S-2 shares. The exchange expired placed $25.9 million in corporate bonds; this issue ma- lions in corporate bonds with the same face value and on December 29, 1995, with 80.8% of the total labor tures in 2012 and has a floating interest rate equivalent to the same market as the issues mentioned in the previ- outstanding stock exchanged for 11,479,667 common Libor + 3.00%. On December 2001, the Company placed ous paragraph. Nominal interest rate was set at 8.01% shares. These common shares are quoted in New York 73.1 millions; this issue matures in 2011 and has a floating (8.25% effective), and will mature in June of 2004. 43. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S In all cases, corporate bonds were placed at par value and interests are paid quarterly starting from the date of issue. The Company has the option to redeem all or part of the issue ac- cording to the following chart. Par Mnemonic Period Open Close Low High Average Issue $30.0 million $20.0 million $73.1 million $25.9 million $25.0 million $25.0 million Froml Year 4 Year 4 Any time Any time From month 18 From month 18 Amount $10 million $10 million No minimum No minimum No minimum No minimum Conditions To be determined To be determined Requirements At least with a 30 day notice At least with a 30 day notice Par value plus premium At least with a 10 day notice Par value plus premium At least with a 10 day notice At least with a 10 day notice At least with a 10 day notice QUOTATIONS OF CORPORATE BONDS ISSUED BY SOUTHERN PERU PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 PCU1BC12 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 112.18 112.36 112.18 112.36 112.24 107.03 107.03 107.03 107.03 107.03 Mnemonic Period Open Close Low High Average Mnemonic Period Open Close Low High Average 97.50 111.18 97.50 111.18 97.50 111.18 97.50 111.18 97.50 111.18 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 PCU1BC11 44. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 PCU1BC21 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 101.00 101.00 101.00 101.00 101.00 45. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S  Mnemonic Period Open Close Low High Average Mnemonic 108.00 109.25 108.00 109.25 108.63 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 PCU1BC22 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 Mnemonic Period Open Close Low High Average PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 PCU1BC32 Open 100.15 Close 100.15 Low 100.15 High 100.15 Average 100.15 102.83 102.82 102.83 102.83 102.83 Period 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 96.11 98.12 96.11 98.12 97.11 `PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 PCU1BC31 46. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 47. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Trucks at the dumping zone in Cuajone Mining operations, detail MONTLY QUOTATIONS 2004 COMMON SHARES, MONTHLY STOCK PRICES 2003 LIMA STOCK EXCHANGE ISIM CODE: US8436111046 SYMBOL: PCU 48. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Period 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 Open $ 48.30 $ 41.60 $ 39.40 $ 40.60 $ 28.76 $ 31.80 $ 41.00 $ 39.50 $ 43.50 $ 52.35 $ 45.00 $ 47.65 Close $ 43.00 $ 38.97 $ 40.86 $ 28.90 $ 30.95 $ 41.00 $ 39.50 $ 44.05 $ 51.90 $ 43.45 $ 47.91 $ 46.70 Low $ 41.97 $ 37.60 $ 36.00 $ 28.10 $ 26.50 $ 29.90 $ 36.40 $ 36.43 $ 43.50 $ 42.20 $ 44.05 $ 43.87 High $ 50.80 $ 43.22 $ 40.86 $ 41.70 $ 32.50 $ 41.00 $ 41.75 $ 44.05 $ 52.00 $ 55.00 $ 48.50 $ 47.65 Average $ 47.27 $ 40.09 $ 38.57 $ 35.91 $ 28.78 $ 38.93 $ 40.60 $ 39.89 $ 47.00 $ 46.60 $ 46.14 $ 45.66 COMMON SHARES MONTHLY STOCK PRICES 2003 NEW YORK STOCK EXCHANGE SYMBOL: PCU Period 200401 200402 200403 200404 200405 200406 200407 200408 200409 200410 200411 200412 Open $ 49.10 $ 40.76 $ 40.00 $ 40.45 $ 28.60 $ 31.70 $ 41.10 $ 39.40 $ 44.20 $ 52.84 $ 43.98 $ 47.19 Close $ 43.90 $ 37.80 $ 40.45 $ 29.03 $ 31.18 $ 41.33 $ 39.13 $ 44.50 $ 51.66 $ 43.18 $ 47.52 $ 47.21 Low $ 42.20 $ 37.80 $ 36.16 $ 28.55 $ 26.53 $ 30.00 $ 36.41 $ 36.16 $ 43.55 $ 42.15 $ 43.98 $ 43.41 High $ 50.50 $ 42.20 $ 40.45 $ 41.85 $ 31.80 $ 41.33 $ 41.86 $ 44.50 $ 51.66 $ 54.10 $ 48.16 $ 47.59 Average $ 47.63 $ 39.98 $ 38.03 $ 36.19 $ 28.98 $ 35.24 $ 39.71 $ 39.69 $ 46.23 $ 48.02 $ 46.28 $ 46.05 49. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S MANAGEMENT years. Mr. Carrillo Gamboa has extensive business companies: Empresas ICA Sociedad Controladora, tration from the Instituto Tecnológico y de Estudios Director of Grupo Mexico since May 2002. Director ASARCO Incorporated from November 1999 to Sep- experience and has served or currently serves on S.A. de C.V. since 2001, Cementos Holcim-Apasco, Superiores de Monterrey. of ASARCO Incorporated from November 1999 to tember 2001. Members of the Board of Directors as of Decem- the boards of many prestigious Mexican businesses S.A. de C.V. since 2002, Grupo Modelo, S.A. de C.V. August 2003. ber 31, 2003 and charitable organizations. He is Chairman of the since 2002, Kimberly-Clark de México, S.A. de C.V. 4.- XAVIER GARCÍA DE QUEVEDO TOPETE. 8.- ARMANDO ORTEGA. Director of SPCC since 1.- GERMÁN LARREA MOTA-VELASCO. Chairman Board of Cementos Apasco, S.A. de C.V. (cement since 2002, San Luis Corporacion, S.A. de C.V. since Director of SPCC since November 1999. President 6.- HAROLD HANDELSMAN. Director of SPCC since August 2002. Legal Vice-President and Secretary of the Board since December 1999, Chief Executive company). In 1957 and 1958, he worked for the 2002, The Mexico Fund, Inc. since 2002, and Grupo of Minera México, S.A. de C.V. since September 1, August 2002. Executive Vice-President and General of SPCC since April 25, 2002, has been General Officer from December 1999 to October 2004, and Internal Revenue Service of the Ministry of Finance Mexico, S.A. de C.V. since 2003. Of these compa- 2001, Managing Director of Grupo Ferroviario Mexi- Counselor of The Pritzker Organization LLC, a private Counselor since October 2003. Previously, he was Director of SPCC since November 1999. Chairman of and Public Credit of Mexico. On August 15, 1960, he nies, only two are public companies: The Mexico cano, S.A. de C.V. and Ferrocarril Mexicano, S.A. de investment firm, since 1998. Mr. Handelsman has Assistant Secretary of the Company from July 25, the Board of Directors, President and Chief Execu- entered Teléfonos de Mexico as Head of the Financial Fund Inc., and Empresas ICA Sociedad Controladora, C.V. from December 1997 to December 1999. Direc- also been a Senior Executive Officer of the Hyatt Cor- 2001 to April 25, 2002, and Assistant Secretary of tive Officer of Grupo Mexico (holding). Chairman of Studies Department, was appointed Secretary of the S.A. de C.V. Mr. Carrillo Gamboa has a law degree tor General of Exploration and Development at Gru- poration since 1978, currently serving as Senior Vice- Asarco Incorporated until August 2003. General the Board of Directors and Chief Executive Officer of Board of Directors in February 1962, Executive Vice from the Autonomous National University of Mexico, po Mexico, SA. de C.V. from 1994 to 1997, Alternate President, Secretary and General Counselor, and is Counselor of Grupo Mexico since May 2001, and, Grupo Minero Mexico (mining division) since 1994, President in February 1967, and President on June attended a continuous legal education program at Director of Grupo México from 1998 to April 2002, Director of First Health Group Corp. (a managed care previously, its Assistant Secretary. He headed the and of Grupo Ferroviario Mexicano (railroad divi- 30, 1975, a position he held until his retirement on Georgetown University Law School, and practiced at Director of Grupo México since April 2002, Director organization) and a number of private corporations. International Trade Practices Unit of the Ministry of sion), since 1997. Chairman of the Board and Chief June 30, 1987. From July 1987 to February 1989 the World Bank. of ASARCO Incorporated from November 1999 to He received a B.A. degree from Amherst College in Economy of Mexico with the rank of Deputy Vice- Executive Officer of Empresarios Industriales de he was Mexico’s Ambassador to Canada. Mr. Car- August 2003 and its President from January 2000 to 1968 and a J.D. degree from Columbia University in Minister from 1997 to May 2001, and was negotia- Mexico (holding), since 1992. Previously Executive rillo is a director of the following companies: Grupo 3. JAIME FERNANDO COLLAZO GONZÁLEZ. September 1, 2001. 1973. tor for international matters for said Ministry from 50. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Vice Chairman of Grupo Mexico and member of the Modelo, S.A. de C.V. (beer brewing), Kimberly-Clark Director, Vice-President, Finance and Chief Financial 1998 to May 2001. Board of Directors since 1981. Chairman and Chief de México, S.A. de C.V. (consumer products), San Officer of SPCC since April 28, 2004. Managing 5.- OSCAR GONZÁLEZ ROCHA. Chief Executive Of- 7.- GENARO LARREA MOTA-VELASCO. Com- Executive Officer of ASARCO Incorporated from No- Luis Corporación, S.A. de C.V. (automotive parts), Director of Grupo Mexico, S.A. de C.V. since March ficer of SPCC since October 2004 and its President mercial Vice-President of SPCC from December 1999 9.- LUIS MIGUEL PALOMINO BONILLA. Director vember 1999 to August 2003, and its President from Empresas ICA Sociedad Controladora, S.A. de C.V. 2004. Managing partner of Administration and Busi- since December 1999. He has also been Director of until April 2002, and Director since November 1999. of SPCC since March 19, 2004. Principal and senior November 1999 to January 2000. (construction), Grupo México, S.A. de C.V., and the ness Consulting, S.C. (a business consulting firm) SPCC since November 1999. Previously, he was Gen- Commercial Managing Director of Grupo Mexico consultant of Proconsulta International, Maryland (a Mexico Fund, Inc. (NYSE – mxf), a nondiversified from 1999 to 2003. Previously, he held several posi- eral Director and Chief Operating Officer of SPCC from 1994 to August 30, 2001, and Director from financial consulting firm) since 2003. Previously he 2.- EMILIO CARRILLO GAMBOA. Director of SPCC closed-end management investment company. He is tions with IBM de Mexico, S.A., the last one being from December 1999 to October 20, 2004, Manag- 1994 to date. He was Director of ASARCO Incorpo- was First Vice-President and Chief Economist, Latin since May 30, 2003. A prominent lawyer in Mexico, member of the Valuation, Contract Review and Ap- Vice-President and Chief Financial Officer, prior to ing Director for Mexicana de Cobre, S.A. de C.V. rated from November 1999 to August 2003, and America for Merrill Lynch Pierce Fenner & Smith, he has been a partner of the law firm Bufete Carrillo pointment and Corporate Governance Committees his retirement in 1998. He holds a Bachelor’s degree from 1986 to 1999, and for Mexicana de Cananea, President of ASARCO Incorporated from September New York (investment banking) from 2000 to 2002. Gamboa, S. C., specializing in corporate, financial, of the Mexico Fund. Mr. Carrillo is also a member in Administration from Universidad Tecnológica de S.A. de C.V. from 1990 to 1999. Alternate Director 1, 2001 until October 2003. Previously he was Direc- Chief Executive Officer, Senior Country and Equity commercial, and public utility issues, for the last five of the Audit Committee of SPCC and the following México and a Master’s degree in Business Adminis- of Grupo Mexico from 1988 until April 2002 and tor, Vice-President and Chief Commercial Officer of Analyst at Merrill Lynch, Peru (investment banking) 51. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S from 1995 to 2000. He held various distinguished Master’s Degree in Business Administration from the transport, tourism, and housing projects, since No- EXECUTIVE OFFICERS positions with banks and financial institutions as Business Administration Graduate School for Central vember 2001. Held various distinguished positions in economist, financial advisor and analyst. He has a America (INCAE). He has also attended the corpo- the Mexican government, the last one being that of GERMÁN LARREA MOTA-VELASCO LUIS ECHEVARRÍA S.S. Assistant Secretary of the Company’s Audit Committee, are independent of management and financially literate in accordance with the qualifications of the NYSE and the Securities and PhD in finance from the Wharton School of the Uni- rate finance program at Harvard University. Secretary of Communication and Transportation from Chairman of the Board ERNESTO DURÁN TRINIDAD Exchange Commission (“SEC”), as such qualifications are versity of Pennsylvania, Philadelphia, and graduated 1995 to 2000. While holding that position, he was Comptroller interpreted by the Company’s Board of Directors in its from the Economics Program of the University of the 11.- JUAN REBOLLEDO GOUT. Director of SPCC also Chairman of the Board of Directors of the Mexi- OSCAR GONZÁLEZ ROCHA business judgment. Pacific, Lima, Peru. since May 30, 2003. He has been International can-owned companies in the sector, and member of President and Chief Executive Officer NEXT OF KIN 10.- GILBERTO PEREZALONSO CIFUENTES. Direc- was Undersecretary of Foreign Affairs of Mexico Ruiz holds a bachelor’s degree in business adminis- JAIME FERNANDO COLLAZO GONZÁLEZ Board of the Company, and Genaro Larrea Mota-Velasco, lationship of affinity and/or consanguinity exists among Vice-President of Grupo Mexico since 2001. He the Board of Directors of development banks. Mr. Messrs. Germán Larrea Mota-Velasco, Chairman of the To the best of the Company’s knowledge, no other re- tor of the Company and Member of the Board since from 1994 to 2000, and Deputy Chief of Staff to tration from the Anahuac University of Mexico City, 2002. Treasurer of Asociación Vamos México A.C., the President of Mexico from 1993 to 1994. Previ- and an MBA degree from Northwestern University of consultant to the Presidency of Grupo Televisa S.A., ously, he was Assistant to the President of Mexico Chicago. and member of its Board and Executive Committee (1989-1993), Director of the National Institute for since 1998. From 1980 until February 1998, he held the Historical Studies of the Mexican Revolution of various positions with Grupo Cifra, S.A. de C.V., the Secretariat of Government (1985-1988), Dean the last position being that of General Director of of Graduate Studies at the National Autonomous Administration and Finance. From 1998 until April University of México, Political Science Department 2001, Executive Vice-President of Administration (1984-1985), and professor of said university (1981- and Finance of Grupo Televisa S.A. He is also mem- 1983). Mr. Rebolledo holds a law degree from the ber of the Investment Committee of IBM de Mexico, National Autonomous University of Mexico, an MA Member of the Advisory Council of Banco Nacional in philosophy from Tulane University, and an LLM de Mexico, S.A. de C.V., and member of the Board from Harvard Law School. and of the investment committee of Afore Banamex Aegon, Siefore Banamex No. 1, Gigante S.A. de C.V., 12.- CARLOS RUIZ SACRISTÁN. Director of SPCC International Center for Human Development, Costa since February 12, 2004. Owner and managing part- Rica and Masnegocio Co. S. de R.L. de C.V. He has a ner of Proyectos Estrategicos Integrales, a Mexican law degree from the Iberoamerican University and a investment banking firm specialized in agricultural, 52. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S Vice-President, Finance and Chief Financial Officer MARIO VINAGERAS Vice-President, Commercial REMIGIO MARTÍNEZ Vice-President, Exploration VIDAL MUHECH Vice-President, Projects a Director of the Company, are brothers or kindred in the other members of the Board, and between them second degree of consanguinity. and the Executive Officers of Southern Peru Copper A company of which more than 50% of the voting power Corporation. is held by a single entity, a “controlled company”, need SPECIAL COMMITTEES OF THE BOARD not comply with the requirements of the New York Stock SPCC’S BOARD OF DIRECTORS HAS ORGA- Exchange (“NYSE”) corporate governance rules requiring NIZED THE FOLLOWING SPECIAL COMMITTEES: a majority of independent directors and independent 1) Executive Committee, sitting five members who compensation and nomination/corporate governance substitute for the Board when sessions or decisions committees. SPCC is a controlled company as defined are required concerning urgent matters, or which the by the rules of the NYSE. Grupo Mexico owns indirectly Board would have expressly delegated its mandate. 54.2% of the stock of the Company (63.1%, consider- ARMANDO ORTEGA ing Class A common shares are entitled to five votes per 2) Audit Committee, sitting three independent Board Vice-President, Legal, General Counsel and Secretary share.) The Company has taken advantage of the excep- members who are knowledgeable in accounting JOSÉ N. CHIRINOS the NYSE. The Board of Directors of the Company de- assist the Board in monitoring (i) the quality and Treasurer and Assistant of Comptrollerr termined that Messrs. Luis Miguel Palomino Bonilla, Gil- integrity of the Company’s financial statements; (ii) tions to comply with the corporate governance rules of and financial matters. Its main purpose is to (a) berto Perezalonso, and Emilio Carrillo, the three members the qualifications and independence of the indepen- 53. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S dent auditors;(iii) the appropriate performance of recommend the approval of the Company’s good ANNUAL MEETING DIVIDEND REINVESTMENT PROGRAM OTHER CORPORATE INFORMATION FORM 10 -K. CERTIFICATION IS REQUIRED BY the internal audit function; and (iv) the Company’s governance principles, and overseeing the evaluation The annual stockholders meeting of Southern Peru Cop- SPCC stockholders can have their dividends automatically For other information on the corporation or to obtain ad- THE NEW YORK STOCK EXCHANGE. compliance with legal and regulatory provisions; and of the Board’s and Management’s performance. per Corporation will be held on Thursday, April 29, 2005 reinvested in SPCC common shares. SPCC pays all admin- ditional copies of the annual report, contact the Corpo- Many of the Securities and Exchange Commission infor- (b) prepare the report for the affidavit statement. at 17:00 PM, Mexico City time, at Avenida Baja Califor- istrative and brokerage fees. This plan is administered by rate Communications Department at our headquarters. mation requirements are contained in this 2000 Annual 7) The Special Committee for Divested Board Members nia Nº 200, Fifth Floor, Colonia Roma Sur, Mexico City, The Bank of New York. For more information, contact The Report. A copy of SPCC’s 2000 Form 10-K (excluding ex- 3) Compensations Committee, comprising four Board sits four Board members who are independent from Mexico. Bank of New York at 800/524-4458. SOUTHERN PERU COPPER CORPORATION hibits) will be available after May 1, 2001, upon request members, its principal objective is to evaluate and the Corporation’s main shareholders and are desig- 2575 E. Camelback Rd., Suite 500, Phoenix, AZ 85016, to the Corporate Communications Department. establish the remunerations of senior officials and nated to evaluate the announced merger between a CORPORATE OFFICES STOCK EXCHANGE LISTING U.S.A., Phone: (602) 977-6500, Fax: (602) 977-6700. key employees at the Company and its subsidiaries, company subsidiary and a Grupo México subsidiary, 2575 E. Camelback Rd., Suite 500, The principal markets for SPCC’s Common Stock are the NYSE Symbol: PCU. and eventual raises in remuneration. its main shareholder. Phoenix, AZ 85016, U.S.A., Phone: (602) 977-6595, New York Stock Exchange and the Lima Stock Exchange. SPCC’s Common Stock symbol is PCU on both the NYSE Avenida Caminos del Inca 171 (B-2), Chacarilla del Es- violation of the corporate governance standards of the The Company has filed with the NYSE the 2004 certifica- tion that the Chief Executive Officer is unaware of any 4) Share Incentive Plan, consisting of three independent 8) Administrative Committee Designated by the Board Fax: (602) 977-6700. and the Lima Stock Exchange. tanque, Santiago de Surco – Lima 33 - Peru./ Lima Stock NYSE. The Company has also filed with the SEC the certi- Board members who are knowledgeable in ac- for (Employee Retirement Income Security Act Exchange Symbol: PCU. fications required under Section 302 of the Sarbanes-Ox- counting and financial matters. Their objective is to – ERISA - USA) Benefits Plans. The Vice-President Avenida Caminos del Inca No. 171, OTHERS ley Act of 2002, as exhibits to the 2003 Annual Report on determine compensation schemes for senior officials for Finance and Chief Financial Officer is the Board- Chacarilla del Estanque, Santiago de Surco, The Branch in Peru has issued, in accordance with Pe- Web Page: www.southernperu.com Form 10-K. The Company anticipates filing, on a timely and key employees at the Company through awards appointed Trustee for the Company’s Benefits Plans Lima 33, Peru ruvian law, ‘investment shares’ (formerly named labor Email address: spcc@southernperu.com.pe basis, the 2005 NYSE certification and the Section 302 54. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S of ordinary Company stock as a way to improve subject to US regulations, including ERISA. This Phone (511) 372-1414, Ext. 3211, management of corporate affairs and create a link Officer will appoint an Administrative Committee Fax (511) 372-0062 between their interest and that of the shareholders. sitting four management members whose purpose is to administrate and manage those plans and to over- TRANSFER AGENT, REGISTRAR AND 5) Designations Committee, sitting four members of see the performance of the trust agents and others STOCKHOLDER SERVICES the Board who propose and evaluate candidates to charged with investing the plans’ monies. The Bank of New York represent the Company’s common stockholders. 101 Barclay Street 6) Corporate Governance Committee. Its four Board Total remuneration of Board and Administration members Phone 800/524-4458 ADMINISTRATION AND BOARD INCOME New York, NY 10286 members have as their principal role to advise the in relation to the Company´s gross income is 0.41%. Board on its functions and needs, develop and shares) that are quoted in the Lima Stock Exchange under symbols S-1 and S-2. Transfer Agent, registrar and stock- holders services are provided by Banco de Credito of Peru at Avenida Centenario 156, La Molina, Lima 12, Peru. Phone 51 (1) 348-5999, Fax 511-349-0592. certifications as exhibits to the 2004 Annual Report on Form 10-K. 55. N O I T A R O P R O C R E P P O C U R E P N R E H T U O S MEMBERS OF THE BOARD OF DIRECTORS JAIME FERNANDO COLLAZO GONZÁLEZ JOSÉ I. DE LOS HEROS Germán Larrea Mota-Velasco Emilio Carrillo Gamboa Jaime Fernando Collazo González Xavier García de Quevedo Topete Oscar González Rocha Harold Handelsman Genaro Larrea Mota-Velasco Armando Ortega G. Luis Miguel Palomino Bonilla Gilberto Perezalonso Cifuentes Juan Rebolledo Gout Carlos Ruiz Sacristán Vice-President, Finance and Chief Financial Officer MARIO VINAGERAS Vice-President, Commercial REMIGIO MARTÍNEZ Vice-President, Exploration VIDAL MUHECH Vice-President, Projects ARMANDO ORTEGA AUDIT COMMITTEE Vice-President, Legal, General Counsel and Secretary Emilio Carrillo Gamboa, Presidente del Comité 56. Luis Miguel Palomino Bonilla, and Gilberto Perezalonso Cifuentes JOSÉ N. CHIRINOS FANO Treasurer and Assistant Comptroller EXECUTIVE OFFICERS ADMINISTRATION OF THE BRANCH Commercial Director LUIS E. ECHEVARRIA Legal Manager (a.i. Legal Director) ALBERTO J. GILES Human Resources Director MANUEL A. PLENGE Logistics Director ELSIARIO ANTÚNEZ DE MAYOLO Director of Cuajone Operations EZIO BUSELLI Director of Environmental Services EDGARD CORRALES Exploration Director GERMÁN LARREA MOTA-VELASCO OSCAR GONZÁLEZ ROCHA FERNANDO MEJÍA Chairman of the Board President and Chief Executive Officer Director of Toquepala Operations OSCAR GONZÁLEZ ROCHA JOSÉ N. CHIRINOS WILLIAM E. TORRES President and Chief Executive Officer Director of Comptroller, Finance and Administration Director of Ilo Operations N O I T A R O P R O C R E P P O C U R E P N R E H T U O S 

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