SU

ST

AIN

AB

ILIT

Y R

EP

OR

TV

isio

n an

d S

trat

egy

C

ompa

ny P

rofi

le

Gov

erna

nce

Str

uct

ure

and

Man

agem

ent

Syst

ems

Glo

bal P

olic

ies

and

Mem

bers

hips

S

ocia

l Dim

ensi

on o

f Min

era

Esco

ndid

a: G

ener

atio

n an

dD

istr

ibu

tion

of o

ur

Add

ed V

alu

e

Rel

atio

ns w

ith

the

Empl

oyee

s

Envi

ronm

enta

l Rel

atio

nsR

elat

ions

wit

h th

e C

omm

uni

ty

MINERA ESCONDIDA | 2004 SUSTAINABILITY REPORT

Minera Escondida2004 Sustainability Report

Texts: Minera EscondidaDesign: Pozo Marcic Ensamble

© Minera Escondida LimitadaAll Rights Reserved.

Printed in Chile.

Minera Escondida SantiagoAvenida Américo Vespucio Sur 100Piso 9, Las Condes (Clasificador 11, Correo 10) Santiago, Chile Telephone (56-2) 330 5000Fax (56-2) 207 6520 / 207 6509

Minera Escondida AntofagastaAvenida de la Minería 501(Casilla 690) Antofagasta, ChileTelephone (56-55) 247 935Fax (56-55) 247 545

Mine LocationAtacama Desert, Northern Chile, approximately 170 km. SouthEast of Antofagasta.

Latitude: 24° 15’ 30’’ southLongitude: 69° 4’ 15’’ westElevation: 3.050 above sea level.

MINERA ESCONDIDA | 2004 SUSTAINABILITY REPORT

Vision and StrategyCharter of Principles and Values, Letter from the President.

Company ProfileScope and Profile of the 2004 Report, Profile of the Organization, Our Operations, Changes in the Operation.

Governance Structure and Management SystemsOwners Council (Board of Directors), Executive Committee (ExCo), Management Committee of Minera Escondida, EWRM (Enterprise Wide Risk Management), Business Conduct, HSEC Management Systems, HSEC Policy, HSEC Standards, Management System Procedures (SIGMEL), Our HSEC policy, The 15 HSEC Standards.

Dialogue with our StakeholdersMinera Escondida Stakeholders, Relations with our Stakeholders, Example of Involvement, Contractor Development, Indirect Impacts of Minera Escondida.

Global Policies and MembershipsPrecautionary Approach, Voluntary Principles and Commitments, Memberships, Recognitions.

Social Dimension of Minera Escondida: Generation and Distribution of our Added ValueComplementary Information, Added Value Generated, Distribution of Added Value.

5

9

13

19

23

27

57

69

41 Relations with the EmployeesWorkforce, Compensation and Benefits, Other Benefits, Relations between the Company and the Employees, Health and Safety, Training and Education, Industrial and Mining Training Center (CEIM), Diversity, Opportunity and Non-Discrimination, Human Rights: Strategy and Management, Child labor, Work Conditions.

Relation with the EnvironmentEnvironmental Policies, Management systems, Environmental Investments, Materials, Energy, Water, Biodiversity, Atmospheric Emissions, Solid Residues, Liquid Residues, Products and Services, Transportation, Closure Plan.

Relations with the CommunityIncidents with the Community, Volunteer Work by the Employees of Minera Escondida, Small Mining, Conflicts about Soil and Involuntary Reallocations, Corruption, Political Contributions, Product Responsibility: Client Health and Safety.

Compliance with Reference StandardsGlobal Reporting Initiative (GRI), International Council for Mining and Metals (ICMM), Global Compact, Glossary, Initials.

75

4

5

Vision and Strategy

Our Company vision, mission, and fundamental values are declared in a Charter of Principles and Values, which fosters a culture of operational excellence and favorable work environment for the accomplishment of our business objectives and the benefit of all our stakeholders. This document was adopted by Minera Escondida from the BHP Billiton Charter in year 2002

The Charter, in conjunction with the HSEC (Health, Safety, Environment, and Community) policy, approved in September 2001, constitute the fundamental pillars of our Integrated Management System (SIGMEL). This policy expresses the Company’s commitment to Sustainable Development, through the continuous improvement of our performance, the efficient use of natural resources and the care and respect for life, the environment and the communities we are a part of.

1,13,7

GC 9

*

**

* Global Reporting Initiative (GRI) Indicator ** Global Compact Indicator

6

We value:

– HEALTH, SAFET Y, ENVIRONMENT

AND THE COMMUNIT Y:

We declare our overriding commitment to the Health and Safety of those who work in Escondida and undertake full responsibility for the Environment and Sustainable Development.

– INTEGRIT Y:

We must do what we promise to do. Our conduct reflects ethics, honesty, justice, transparency, and the application of the highest standards in business behavior.

– HIGH PERFORMANCE:

We are exited and satisfied when we apply our greatest capabilities to obtain superior business results.

– WIN-WIN REL ATIONSHIPS:

Relations are long lasting, gratifying and more profitable, when value is created for all parties involved.

– COURAGE TO LEAD CHANGE:

We accept the responsibility to inspire and positively lead change in the face of adversity and new challenges.

– RE SPECT FOR EACH OTHER:

We support diversity in our work force and we promote open communications, disposition to share, trust, teamwork and commitment.

We are successful when:

Our shareholders obtain superior return on their investment.

Our clients and suppliers benefit from our business relations.

We are Escondida, a leading company in the copper industry, located in Chile.

Our intent is:

To be the leading copper mining company in the world, by creating value and sustainability through superior industry performance in safety, production and unit costs.

Our purpose is to create for our shareholders, communities, clients, and employees through the production of low cost and high quality copper concentrate and cathodes.

Our growth and progress requires that we:Gain the trust of our employees, clients, suppliers, communities and shareholders by being straightforward in our communications and consistent in the fulfillment of our commitments

Maintain our efforts to become a consolidated high performance organization, in which each person accepts his/her responsibility and is rewarded by his/her results and achievements.

CHARTER OF PRINCIPLES AND VALUES

The communities in which we operate value our citizenship

Every employee starts each day with a sense of purpose and ends each day with a sense of accomplishment.

7

We present our first Sustainability Report with the purpose of offering a balanced and reasonable summary of the economic, social, and environmental performance of our operations during the year 2004. On the other hand, we seek to show our contribution to society, by means of the calculation of the added value generated by Minera Escondida and its distribution among our key Stakeholders.

As a company that has adopted the principles and practices of corporate social responsibility, and is concerned about the community, employees, shareholders, suppliers, regulators, environment and clients, we subscribed to the ten principles of Global Compact and reaffirm our commitment to them.In the preparation of our Sustainability Report, we have followed the general guidelines of the “Global Reporting Initiative - GRI”, which proposes economic, environmental and social indicators. We also include the specific indicators contained in the Mining and Metals Supplement developed by GRI and ICMM (International Council for Mining and Metals), published in February 2005.

By reporting our performance in sustainable development matters, we comply with our commitment to make public our results related to our HSEC policy. In the framework of this policy we have developed the concept of “Zero Harm” which means we promote among all our collaborators including our contractor companies, a culture of care for life, the environment, and the communities that surround us.

However, we must recognize with grief that that we did not achieve our objective of operating without fatalities. In June 2004 we were impacted by the death of two contractor employees. This fact makes our efforts to manage all risks, within the framework of the HSEC policy, even more critical.

We are convinced that the adequate management of Health, Safety, Environment and Community issues effectively contributes to reduce the risks in these areas. Thus, during 2004 we advanced successfully in our Supplier Development Plan, in which 52 companies attained recommendation certificates to be accredited under the ISO 14001; OSHAS 18001 and/ or ISO 9001/2000 system. This constitutes an additional element for the

competitiveness of our collaborator companies, beyond the boundaries of Escondida, thereby contributing to the promotion and consolidation of the Mining Cluster in the Segunda Región in Chile.

On the other hand, we have set the goal of being the best corporate partner of Chile, which will result in being recognized as the leading company in Corporate Social Responsibility practices. During the past year, we have commenced to reinforce the social responsibility concepts in our company, by involving our direct collaborators and contractors in community support activities under common standards.

Through the Fundación Minera Escondida we invest in the generation of capabilities and competencies in those sectors of the community that have the greatest needs, with the purpose of promoting self-sufficiency.We acknowledge that this report is a step in the continuous improvement journey of our Social Responsibility management practices; therefore we invite you to send us your comments and suggestions to improve our performance.

Letter from the President

BERT NACKEN

PRESIDENT

1,2

8

9

Company Profile

ABOUT THIS REPORT

This is the first sustainability report issued by Minera Escondida Limitada and covers the period between January 1 and December 31, 2004.

This report includes all the facilities operated by Minera Escondida: Escondida and Escondida Norte pits, the Los Colorados and Laguna Seca concentrator plants, the Oxide Plant, Coloso Port, Well Fields (Punta Negra and Monturaqui) and the Antofagasta and Santiago offices. It also, includes the Fundación Minera Escondida as an integral part of the company. Clarification comments for cases where the indicator has been calculated for a particular operation or area have been included.

We have applied the Global Reporting Initiative (GRI) guidelines and the first pilot edition of the International Council for Mining and Metallurgy (ICMM) Supplement dated February 2005.

The economic figures presented follow the accounting principles generally accepted in Chile, issued by the College of Accountants of Chile and the standards set by the Chilean Stock and Insurance Superintendence.

Escondida operates under the safety and environmental standards established in the Chilean laws and regulations and in accordance with the Health, Safety, Environment and Community (HSEC) policies and procedures and the standards of the owner companies. Our environmental management system is based upon the ISO 14001 standard, and currently all our facilities operate under this international standard.

All the information included in this report is documented and validated by the corresponding areas. In the specific case of HSEC, the data are validated by internal and external verification included in our management system.

In this first year of publication of our Sustainability Report, we have not considered carrying out an independent external review process; nonetheless

the document was prepared considering the auditing principles proposed by Global Reporting Initiative.

With the purpose of facilitating the understanding of specific concepts used in the report, we have included a Glossary at the end of the document.

For more information, questions and suggestions about this Sustainability Report do not hesitate to contact:

Besie HarveySenior Consultant, Corporate Affairs e-mail: besie.v.harvey@bhpbilliton.comMinera Escondida LimitadaAmérico Vespucio Sur # 100, Piso 9Santiago – Chile

Additionally, attached to this document, you will find a feedback form you may use to provide us your opinion in reference to our 2004 Sustainability Report and contribute to our improvement process.

This report has been published and disseminated through our Internet web site (www.escondida.cl) and printed copies may be requested in our offices. Minera Escondida and Fundación Minera Escondida also publish their yearly financial reports, which are also available to the public.

2,11

2,13

2,17

2,18

2,20

2,21

2,10

2,22

10

Other sites of interest:

– BHP Billiton www.bhpbilliton.com– Río Tinto www.riotinto.com– Fundación Minera Escondida www.fme.cl– Iniciativa Global de Reportes Global Reporting Initiative (GRI) www.globalreporting.org– Pacto Global de Naciones Unidas UN Global Compact www.unglobalcompact.org– Consejo Mundial de Negocios para el Desarrollo Sustentable World Business Council for Sustainable Development (WBCSD) www.wbcsd.ch– Consejo Internacional de Minería y Metales International Council on Mining and Metals (ICMM) www.icmm.com

PROFILE OF THE ORGANIZATION

Minera Escondida Limitada (hereafter also called Minera Escondida, Escondida, the Company), Tax Registration Number 79.587.210-8, is a limited partnership company, registered at the Registrar of Lands, Mines and Industrial Property of Santiago in 1985 and is subject to the inspection of the Stock and Security Superintendence and the Stockholders Registrar Number is 682. Minera Escondida’s legal address is in the City of Santiago, Avenida Américo Vespucio Sur 100, Piso 10, Las Condes.

The owners of Minera Escondida are:

– BHP Escondida Inc., branch of the Australian company BHP Billiton with an ownership participation of 57.5%.

– Río Tinto Escondida Limited, branch of the British company Rio Tinto, with 30%.

– JECO Corporation, a conglomerate of Japanese companies, with 10%.

– International Finance Corporation, member of the World Bank Group, with 2,5%

Escondida is the largest privately owned copper mine in the world; accounting for 8.8 percent of the world’s mine production in the year 2004. Construction of the mine facilities and installations was initiated in August 1988, the first tonne of ore was processed in November 1990, and the first ship carrying Escondida copper concentrate was dispatched in December 1990 from the port of Coloso.

OUR OPERATIONS

We are located in the North of Chile, in the Atacama Desert, 170 kilometers southeast of the city of Antofagasta, and at 3.050 meters above sea level. We treat Sulphide ore, using a conventional milling and mineral flotation process to obtain copper concentrate. Oxide ores are processed in a leaching; solvent extraction and electro winning circuit, to obtain high-grade copper cathodes. All the ore is extracted from an open pit mine, which moves approximately 1 million tons of material per day.

2,12,52,6

2,22,3

The final product of the Sulphide circuit is a concentrate that contains an average 35% of copper and small amounts of gold and silver that are recovered later during the smelting process.

The oxide ore is treated by heap leaching with sulfuric acid solution, followed by solvent extraction and electro-winning (SX-EW), to produce thin copper plates (cathodes) with an approximate weight of 70 kilograms and 99.999% of copper. Minera Escondida cathodes obtained London Metals Exchange (LME) certification, under the brand name ESOX.

The following graph shows our historical production per calendar year and the successive capacity expansions

Our products are marketed through BHP Billiton Marketing A.G. (BMAG), a sales agency created by BHP Billiton. BMAG operates a worldwide network of companies and offices dedicated to develop and maintain relationships with current and potential customers, solve their concerns and requirements, and overall management of the company’s sales.

11

3,18

CHANGES IN THE OPERATION

During the calendar year 2004, we initiated the development of the Escondida Norte Project with an investment of US$ 400 million. The objective is to exploit the satellite ore deposit, located five kilometers from the main open pit. The removal of over burden and the preparation of the mine operation started early in 2004.

We expect that ore feed from Escondida Norte to the concentrator plants will begin during the last quarter of calendar year 2005.

On the other hand, the development of the sulfide leach project was approved in April 2004, with an investment of US$ 868 million, and cathode production scheduled to commence by midyear 2006.

0

Tonn

es

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

Coloso CathodeStartup

Productioncurtlaiment due

to low Cooper pricePhase II Phase III

Phase IV

OxidePlant

Coloso CathodeShutdown

91 92 93 94 95 96 97 98 99 00 01 02 03 04

Copper Contained in Concentrate and Cathodes

Total Production

12

Mining operation:This operation consists of drilling and blasting; loading and hauling; ore crushing and waste rock disposal. In total an average of one million tons of material are moved per day, with a 4:1 waste to ore ratio. The average ore grade during calendar year 2004 was 1.51% Copper.

Sulphide ore treatment:Two concentrator plants treat sulphide ore; los colorados plant began operations in 1990, and its treatment capacity has been expanded from the original 35.000 Tpd (tons per day) to the current 120.000 Tpd of ore the second concentrator plant, Laguna Seca, started operations during the second half of year 2003, with a treatment capacity of 110.000 Tpd. The copper concentrate produced by both plants, is transported as slurry through a pipeline to the facilities in Puerto Coloso, located 15 kilometers south of Antofagasta. In Coloso, the slurry is filtered, to obtain a concentrate with 9% moisture, which is shipped directly to the different customers around the world.

Oxide ore treatment:The oxide ore, which is extracted from the same pit, is sent to the oxide plant, where the first steps are secondary and tertiary crushing, later it is agglomerated with sulfuric acid and deposited in leach pads. The leach pads are then sprinkled with an acid solution, which dissolves the copper and is recovered at the foot of the pad, and then it is delivered to the solvent extraction plant and later to the electro-winning tankhouse where cathodes with 99.999% Copper are obtained. The copper cathodes are classified and sent by train to Antofagasta to be shipped to the different customers.

Other facilitiesOther than the production and industrial maintenance facilities, the following support installations exist on site:

– The Punta Negra and Monturaqui Well fields from which water is extracted and transported to the production facilities.

– Housing and catering installations for both Escondida and contractor employees.

– Storage warehouses for supplies and replacement parts required for operations and maintenance activities.

– Administration offices and medical services.

MINERA E SCONDIDA OPERATIONS

A corporate office building located in the city of Antofagasta accommodates support areas such as human resources, finance, supply, information systems and corporate affairs. In Santiago, minera escondida occupies part of the BHP Billiton office building, where the base metals executive team, shared business services, marketing and other support areas operate.

PACIFIC OCEAN ATACAMA DESERT ANDES MOUNTAINS

WELL FIELDS

WELL FIELDS

CATHODE SHIPMENT

CONCENTRATE SHIPMENT

ORE EXTRACTIONOXIDE PLANT

CONCENTRATOR PLANTSCAMPS

SECURITY LANDFILL

13

Governance Structure and Management Systems

OWNERS COUNCIL (BOARD OF DIRECTORS)

As a limited partnership company, we are not legally required to publish our financial statements. Nonetheless, after our 1999 sale of bonds in the local market, we are governed by the regulatory scheme for business corporations, and are under the obligation to inform our financial statements to the Chilean Superintendence of Stocks and Securities.

The Owners Council is composed of seven members that represent each of the companies that own Minera Escondida. Three Owners Council members are appointed by BHP Billiton (including the Chairman), two represent Rio Tinto; the other two members represent JECO and the IFC respectively. The background and names of the current Owners Council is detailed in the Annual Financial Report 2004.

The council receives our monthly performance reports and formal quarterly meetings are held either face to face or by Videoconference.

The Owners Council does not have independent members; each of the owner companies appoints its representatives. The members of the committee do not participate in the operational management of the company, are designated by their respective organizations and do not receive any compensation from Minera Escondida Limitada.

Furthermore, each owner may designate one or more alternate members to act in replacement of any regular member designated by these same partners. Only one member designated by each partner has the right to vote. The right to vote of each member of the Owners Committee is equivalent to the social rights of the respective partner represented by this member in the Owners Council.

Other than the Owners Council, a Technical Committee and a Finance and Tax Committee operate in a similar manner. The abovementioned committees have an advisory role, without power of resolution. Each time it is necessary to make a decision related to matters analyzed in one of the advisory committees, it is submitted to the Owners Council for approval.

The Management Agreement between the four owners stipulates that the management and operation of Minera Escondida is delegated to BHP Billiton. This company executes this mandate through its Base Metals Division whose main offices are located in Santiago, Chile.

EXECUTIVE COMMITTEE (EXCO)

The Base Metals division of BHP Billiton is managed by an Executive Committee, which is presided by its President and CEO. The Vice-presidents of Finance, Human Resources, Business Development, and Operations, and the President of Minera Escondida are members of the ExCo. The ExCo is the managing entity of all the BHP Billiton Base Metals operations in the world.

In its operating capacity the ExCo decides the requirements for specific capabilities to lead Escondida’s strategies and operations. BHP Billiton has its own requirements to designate the adequate persons for the corresponding positions.

3,1

3,8

3,2

3,3

14

15

3,5

MANAGEMENT COMMITTEE OF MINERA ESCONDIDA

On the other hand, an Executive Committee composed by the President and his team of vice-presidents, plus the manager Health and Safety conduct the operations of Minera Escondida. This Committee sets strategic objectives and production goals, and makes decisions in matters related to Health, Safety, Environment and Community.

In terms of managing our operations, Escondida is organized into six Vice-presidencies and the Health and Safety Manager, all reporting to the President, and each one of them responsible for the various processes and operations.

The executive levels of the company receive a variable compensation, which depends on the achievement of annual goals. An important component of this bonus depends on the achievement of the goals related to our HSEC policy.

2,4

bert nacken President

hans sandoval Manager, Health and Safety

patricio barrosVice President MiningMine Operations and Maintenance, Crushing and Conveying.

marcelo villoutaVice President ProcessingConcentrator Plants Operations, Oxide Plant Operations, Processing Maintenance, Metallurgical Technical Services.

pedro damjanic Vice President Operational ServicesEngineering and Construction, Services to Processing, Services to Site Facilities.

jorge muñozVice President Human ResourcesHuman Resources, Industrial Relations, Administration and Services to Personnel, Compensations and Benefits.

alfredo atuchaVice President FinanceSupply, Information Services, Planning and Performance, Financial Services and Business Risk, Treasury, Taxes.

mauro valdésVice President Corporate and External Affairs Corporate Affairs, Environmental Affairs, Legal Affairs, Minera Escondida Foundation, Industrial and Mining Training Center (Minera Escondida Educational Foundation)

3,4

EWRM (ENTERPRISE WIDE RISK MANAGEMENT)

In Minera Escondida we apply a common business risk management tool developed by BHP Billiton, called EWRM (Enterprise Wide Risk Management) for all its divisions. The EWRM allows identifying the risks that may affect our business plan and determine the specific action plans to control, mitigate or eliminate the risks.

The risks are identified in workshops in each area, later they are evaluated, prioritized and entered into a common database for the whole of BHP Billiton (CURA System). Furthermore, through the system, it is possible to prepare risk reports, which emphasize among other matters, the impacts, the area responsible for managing the problem and the different controls that are in place.

BUSINESS CONDUCT

In matters of compliance with ethical norms, we follow the BHP Billiton standards and control systems contained in the Guide to Business Conduct. All employees must comply with the principles and standards of the Guide, and those who breach these policies may be subjected to disciplinary actions including dismissal.

The BHP Billiton Global Ethics Panel is responsible for the modifications and follows up on the implementation of this code in the different divisions. It also has the objective to promote and support high standards of ethical conduct, which are consistent with the BHP Billiton Charter.

Representatives of BHP Billiton divisions and corporate functional areas plus two persons unrelated to BHP Billiton compose this Committee. The Chairman of the Committee is designated by its members and ratified by the Chief Executive Officer, and rotates every two years.

3,7

3,6

16

HSEC MANAGEMENT SYSTEMS

Minera Escondida has adopted the global social performance and environmental policies of BHP Billiton, which are permanently publicized within and outside of the company

Hierarchy of Minera Escondida’s Policies and GuidelinesThe fundamental pillars that currently guide the Integrated Management System of Minera Escondida (SIGMEL) are: the Charter and the HSEC Policy with its 15 standards. Furthermore, a business conduct guide provides guidelines related to the expected ethical conduct of our employees. The content of these guidelines is available in our web page (www.escondida.cl).

HSEC POLICY

The Health, Safety, Environment and Community policy, declares our commitment to working in a responsible manner to achieve Sustainable Development in these areas. To put the HSEC policy in practice, each Vice-presidency has an HSEC Committee, composed by the Vice-president and his direct reports (area managers), who have the responsibility of taking the necessary steps to implement the HSEC standards according to the guidelines of the Executive Committee. At the same time each manager leads an Area HSEC Committee composed by his direct reports (Superintendents).

All our business risks, including those related with HSEC are identified and managed using the EWRM. In each operating area, workshops are developed where the risks are identified, evaluated, prioritized and registered in software, which is common for the whole organization. Action plans to mitigate or control the prioritized risks are then put in place.

HSEC STANDARDS

Fifteen standards deriving from the HSEC Policy, establish a framework and structured criteria to manage the relevant issues regarding Health, Safety, Environment and Community.

MANAGEMENT SYSTEM PROCEDURES (SIGMEL)

Our integrated management system (SIGMEL) was designed taking into account the best management practices for Health, Safety, Environment and Community Relations available in the market, adapted to our needs and reality. We comply with the declarations of our Charter, the HSEC policy and its standards with established procedures, in such a way as to achieve our objective to operate under a “Zero Harm” culture.

The SIGMEL system applies to all our operational and service facilities as well as to all our contractors that operate in Escondida premises.

A worldwide help line is available for all BHP Billiton employees, to help them solve the practical problems they may face when making decisions or taking actions, which could be inconsistent with the Charter, Policy, HSEC Standards and the Business Conduct Guide.

CHARTER

HSEC POLICY

HSEC MANAGEMENT STANDARDS

MANAGEMENT SYSTEM PROCEDURES (SIGMEL)

17

Working responsibly at Minera Escondida: our Health, Safety, Environment and Community Relations Policy.

In Minera Escondida we are committed to sustainable development. Safety, health, environment and community responsibilities are integral to the way we do business.

We commit to the continuous improvement of our management systems, to the efficient use of natural resources and aspire to live a culture of Zero Harm, of respect and care for life, the environment, and the communities in which we operate.

Wherever we operate, we will: Develop, implement and maintain management systems for safety, health, environment and community, that are consistent with internationally recognized standards and enable us to:

– Identify, assess and manage risks to employees, contractors, the environment and communities;– Strive to achieve leading industry practice in these matters;– Meet and where appropriate, exceed applicable legal requirements;– Set and achieve target that include reducing and preventing contamination;– Develop our people and provide resources to meet our targets;– Support the fundamental human rights of employees, contractors and the communities in which we operate;– Respect the traditional rights of indigenous peoples;– Care for the environment and value cultural heritage;– Advise on the responsible use of our products.

Seek opportunities to share our success by:

– Working with communities to contribute to social infrastructure needs through the development and use of appropriate skills and technologies;– Developing partnerships that focus on creating sustainable value for everyone.

Communicate with, and engage employees, contractors, business partners, suppliers, customers, visitors and communities to:

– Build relationships based on honesty, openness, mutual trust and involvement;– Share responsibility for meeting the requirements of this policy.

OUR HSEC POLICY

We will review regularly and report publicly our progress and ensure this policy remains relevant to the needs of our stakeholders. We will be successful when we achieve our targets toward our goal of Zero Harm and are valued by the communities in which we work.

18

THE 15 HSEC STANDARDS

Standard 1: Leadership and responsibility in making decisionsEscondida directors, managers, employees and contractors understand their accountabilities and demonstrate leadership and commitment to HSEC.

Standard 2: Legal requirements and control of documentsRelevant legal, regulatory and other HSEC requirements are identified, accessible, understood and complied with and an effective HSEC document control system is in place.

Standard 3: Risk management and changesHSEC hazards are identified and associated risks assessed, classified, documented and managed. New or proposed changes to processes, products or services are assessed for potential HSEC risks and managed to ensure HSEC performance is maintained at an acceptable level.

Standard 4: Planning and goalsHSEC is an integral part of business planning with goals and targets established to drive continuous improvement in performance.

Standard 5: Conscience, competence and behaviorEmployees, contractors and visitors are aware of relevant HSEC hazards, risks and controls, are competent to conduct their activities and behave in a responsible manner.

Standard 6: Health and hygieneEmployees and contractors are assessed for their fitness for work and protected from health hazards associated with their work.

Standard 7: Communication, consulting and participationEffective communication and consultation is maintained with stakeholders associated with Escondida’s activities, and they are encouraged to participate in and commit to HSEC performance improvement initiatives

Standard 8: Business Behavior, human rights and indigenous affairs.Activities and operations are conducted in an ethical manner that supports fundamental human rights, respects the traditional rights of indigenous peoples and values their cultural heritage.

Standard 9: Design, construction and implementationManagement of HSEC risk is an integral part of all projects through design, approval, procurement, construction and commissioning.

Standard 10: Operations and maintenanceAll plant and equipment is operated, maintained, inspected and tested using systems and procedures that manage HSEC risks..

Standard 11: Suppliers, contractors and partnersThe contracting of services, the purchase, hire or lease of equipment and materials, and activities with partners, are carried out so as to minimize any adverse HSEC consequences and, where possible, to enhance community development opportunities.

Standard 12: Product stewardshipThe responsible production, transport, storage, use, recycling and disposal of Escondida products and by-products is promoted to minimize their life cycle HSEC impacts.

Standard 13: Report and investigation of incidentsIncidents are reported, investigated and analyzed. Corrective and preventive actions are taken and lessons shared.

Standard 14: Crisis and emergency managementProcedures and resources are in place to effectively respond to crisis and emergency situations.

Standard 15: Monitoring, auditing and reviewingHSEC performance and systems are monitored, audited and reviewed to identify trends, measure progress, assess compliance and drive continuous improvement.

19

Dialogue with our Stakeholders

In Minera Escondida as in BHP Billiton we declare our commitment to transparency and openness with our Stakeholders using consulting and participation processes. Communications and concrete actions with the different Stakeholders are executed by the Vice-presidency for Corporate and External Affairs and the Fundación Minera Escondida.

The Vice-presidency for Corporate and External Affairs concentrates its activities on aspects related mainly to the quality of life in the community, and by developing initiatives in the fields of art, culture, education and community development.

Fundación Minera Escondida is an autonomous non-profit institution created in 1996, its mission is to generate long-term human and social capabilities, to constitute a legacy that transcends our mining activities and contribute to social development.

In the year 2001 we developed a first systematic effort to identify our stakeholders. This task was developed with the support of BHP Billiton and methodological guidelines prepared by the HSEC Corporate team.

MINERA ESCONDIDA STAKEHOLDERS

The communities directly related to our operations are the following:

- The city of Antofagasta- The Coloso area- The Atacamanian town of Peine

The stakeholders in the II Region and the Metropolitan Region that constitute a priority in our activities are:

- Employees- Suppliers- Contractors- National/ Regional/ Community Authorities.- NGO’s- Universities- Press- Industrial Organizations, Chambers of Commerce- Opinion Leaders in general

RELATIONS WITH OUR STAKEHOLDERS

In the field of community relations, specifically with those that are directly related to our operations, we carry out annual opinion polls with the support of external consultants, to understand what are the community’s concerns, opinions and perceptions regarding the company:

– A poll by Globescan was conducted in May 2004, to measure the perception of the community regarding Escondida. This poll was carried out using face-to-face interviews with more than 300 persons living in the areas of San Pedro de Atacama, Mejillones, Peine, Coloso and Antofagasta.– In December 2003 we commissioned a poll to evaluate the perception by the inhabitants of Antofagasta in relation to our social, economic and environmental performance. In the survey that included a comparative analysis with other large companies of the II Región, Escondida was mentioned spontaneously by 49.5% of the people interviewed, as the most important company in the Region. Specifically we are regarded as “the company that most contributes to the development of the region”, and are distinguished for our “support to community development projects” and our contribution to the “improvement of the quality of life”.

2,93,9

3,103,11

20

– In September 2004, Fundación Minera Escondida commissioned Adimark with an opinion poll on the perception of Corporate Foundations. The results showed that Fundación Escondida is in the first place for spontaneous recollection with 27.9%. In year 2002 this perception was 22% and positioned us in second place.

We can highlight the following actions in relation to our stakeholders: – We maintain direct and regular contact with the Minera Escondida Workers Union, through the Industrial Relations Manager. – In order to obtain permanent feedback from our contractors we have a group of HSEC experts, whose main responsibility is to monitor and audit our contractor companies in terms of their performance in HSEC matters. We also hold monthly meetings with our contractor company managers, in which we share information on HSEC issues. Finally, we have implemented an Internet site, in which our contractors have access to specific information on HSEC and can inquire on other matters of their interest.– Furthermore, in Minera Escondida we are committed to periodically and appropriately inform all our stakeholders on subjects relevant to the company as well as to the interested parties. To achieve this we use a variety of methods such as newsletters, mailings, presentations to the community, and distribution of the Annual Report. Additionally, we actively participate in local and national initiatives that help us obtain direct feedback from our different stakeholders.

3,12

CONTRACTOR DEVELOPMENT

The contractors that work in our industrial sites must apply the Escondida HSEC policy in the same way our direct employees do. To achieve this objective, we implemented a specific work program that includes training activities for the contractors that work on site. Among the training provided to the contractors we can highlight the following: – Mandatory workshop, “The Road to Zero Harm”, – Area-specific risks,– Fire fighting,– First aid,– Training on the Escondida Integrated Management System (SIGMEL),– Preventive safety observations.

Qualification System for Supplier Companies (SICEP)In alliance with the Industrial Association of Antofagasta (AIA) and other mining companies, we developed a supplier registration system denominated SICEP for its initials in Spanish. This tool, managed by the AIA, allows us to maintain an updated database of the compliance of certain economic, environmental and social parameters. The SICEP verifies the information on general and specific environmental and social matters provided by the 133 suppliers that are currently registered in the system.

Supplier Development Plan (PDP) Certain service suppliers operate regularly in our worksites. Given the risk level that is inherent to our operations and the search of full compliance with our vision of being a ”Zero Harm” operation, it became necessary for these suppliers to adopt our HSEC management (PDP HSEC) and (PDP Quality) quality systems. With this objective, we commenced a program with these companies aimed at developing the necessary competencies that will enable them to obtain the OHSAS 18001, ISO 14001 and ISO 9001 certifications, year 2000 version. The implementation of the first stage of this program ended successfully in November 2004, with 36 companies receiving their OHSAS 18001, ISO 14001 recommendation certificates, which will allow

them to receive the corresponding accreditation certificates. At the same time 16 companies participated in the PDP Quality System and complied with the requirements to obtain their ISO 9001:2000 quality certifications.

INDIRECT IMPACTS OF MINERA ESCONDIDA

At the social and economic level the indirect impacts generated by our activities are very significant. Escondida represents more than one third of the Gross Domestic Product of Chile’s Segunda Región, evidencing the importance of the company in the development of this part of the country. In the distributed added value section, we describe some of the main impacts of our operation in the region and the country.

3,16

3,17

21

During, the early design stage of the Escondida facilities, it was determined that the most appropriate location for the concentrate shipment port was the Caleta Coloso cove, located south of the City of Antofagasta.

Historically, Caleta Coloso was an important port from which a significant portion of the nitrate produced in the area was shipped to markets around the world, until it was closed and abandoned in 1930. Some old structures still remain as proof of the great industrial activity in the area.

Given its geographical characteristics the area allows the safe mooring of small vessels. Taking advantage of the ruins of the nitrate port facilities, a group of artisan fishermen settled in the area and built their homes and small buildings to sell their products, including some prepared foods for on-site consumption.

Before initiating the construction of the filter plant and port facilities, it was necessary to develop a cooperative relationship with the inhabitants of the bay, given that the design of the access road considered an important earth movement operation which required the relocation of the buildings existing on the site (homes and sea food sale).

The agreed solution benefited the fishermen as well as Minera Escondida and generated a relationship based on trust and cooperation that still prevails. This good neighbor relationship has evolved from a relation of dependence into a relation of joint cooperation based upon the analysis of needs and concrete work plans in projects that contribute to improve the well being and the quality of life of the inhabitants of Caleta Coloso. Under this framework, different work areas have been identified (productive development, training, urban improvement, health, environment, safety and education) and concrete actions in collaboration with the community have been developed.

MM 7

San Pedro de Coloso

CASE STUDY

*

* International Council for Mining and Metals (ICMM)

22

23

Global Policies and Memberships

PRECAUTIONARY APPROACH

Article 15 of the 1992 Rio Principles on the precautionary approach on Environment and Development, also known as the “precautionary principle” can be translated as the obligation to suspend or cancel activities that pose a threat of serious or irreversible damage to the environment, even when insufficient scientific proof exists to link these activities to the deterioration of the environment.

Our vision of the precautionary principle is directly related to our risk management strategy using the Enterprise Wide Risk Management (EWRM) system mentioned previously. For example, for environmental risks, the severity level is determined, and based upon this analysis; we identify the necessary actions to manage them.

Furthermore, we can mention that our risk analysis system complies with every analysis required by Chilean law. In Minera Escondida our projects are submitted to the environmental impact evaluation system, in all those cases where the law requires doing so. We also do this in those cases in which the law does not expressly require to do so (Voluntary submittal). We comply strictly with legal environmental norms applying to our projects and we apply corporate standards if these are more demanding than the legal standards. Finally, Escondida participates in the generation processes for new legal norms and requirements, allowing us to express our opinions and work proactively, should these norms be applied to our operations.

3,13GC 7

3,14

VOLUNTARY PRINCIPLES AND COMMITMENTS

In Minera Escondida we have made voluntary commitments with different organizations and principles:

We adhere to the United Nations Global Compact (April 9, 2003). This international agreement is promoted by the United Nations Program for Development and is oriented at the entrepreneurial commitment for the promotion and defense of human and labor rights and of the environment,

We belong to the Chilean Chapter of the World Business Council for Sustainable Development (August 17, 2004). Escondida became part of this group created in the framework of the V Congress of Corporate Social Responsibility, which was organized by the NGO Acción RSE. This group belongs to an international coalition integrated by 170 companies from over 35 countries united by their commitment to economic growth, environmental balance and social progress.

We signed the Agreement for Clean Production (November 2000), proposed by the Mining Council and the Chilean Government with the purpose of promoting improvement of productivity and competitiveness, as well as contamination prevention practices and clean production.

We signed an agreement promoted by the Industrial Association of Antofagasta, with the purpose of setting uniform requirements for safety and accident prevention practices in the different worksites of the major mining companies of the region. This agreement was signed within the framework of Exponor 2003 (November 2003).

24

MEMBERSHIPS

Mining CouncilWe are active members of the Chilean Mining Council A.G., since its foundation in 1998. This association assembles all large Chilean copper, gold and silver producers, both public and private, with national or foreign capital. Several Mining Council member companies are ranked as the most important and efficient mining companies in the world.

National Society for Mining (SONAMI)We are members of this industrial federation, created in 1883, that congregates small, medium and large mining companies.

Industrial Association of Antofagasta (AIA)This association was created in the year 1944, with the purpose of working for the industrial development of the Segunda Región. Throughout the years and with the expansion of mining activities in the region of Antofagasta, the AIA has established a leadership in the promotion of productive development, training, and the development of small and medium sized companies. The AIA was also an active promoter of the mining Cluster of the II Región. Minera Escondida is a member of the Board of Directors of this Association.

Corporation for Productive Development (CDP)Created in 1992, the main objective of the corporation is to “Contribute to the sustainable productive development of the Segunda Región”. The Regional Government, local universities and the most important companies operating in the II Región related to the mining industry, transportation and services are members of this corporation. The corporation contributes in the design of policies and strategic definitions of the regional development plans, by integrating and channeling the efforts and actors of the public, private and academic fields. Minera Escondida is a member of the Board of Directors and has active participation in the development programs that this entity has carried out as an Operator for CORFO. The supplier development programs can be mentioned as a highlight in this corporation’s activity.

Executive Committee of the Mining ClusterThe Mining Cluster, that groups public and private entities, is a core component of the Development Strategy of the II Región. Among the Cluster’s main work areas, we can point out the strengthening of the entrepreneurial base of medium and small local companies, investment attraction, strengthening industrial parks, investigation and development work and publishing related documents. Minera Escondida is a member of the Advisory Council and of the Executive and Technical Committees.

Additionally, we work actively with institutions and organizations of the Segunda Región, such as: organizations linked to social issues, universities and corporations such as Pro-Antofagasta, among many others.

Other Institutions in which we Participate at a National Level:– Chilean - American Chamber of Commerce (AMCHAM) – Australia – Chile Chamber of Commerce – Chilean - British Chamber of Commerce – National Oceanographic Committee (CONA) – Chilean Society for Ocean Sciences – RAMSAR Agreement, High Andes Wetlands Chapter– Acción RSE (Corporate Social Responsibility)– Christian Institute for Rational Management (Icare)– Institute of Engineers, Chile– Centre for Public Studies

Other Institutions in which we Participate at the International Level:– International Copper Association, Ltd. (ICA) ProCobre

SO 4

RECOGNITIONS

During 2004, we received public recognition in different areas, some of which are:

Recognition of our “Programa Mujer” in which eleven women were hired and trained as mine equipment operators. The Minister of the National Service for Women, Mrs. Cecilia Pérez, and the Governor of the Region of Antofagasta, Jorge Molina, attended a ceremony at the mine site and publicly acknowledged Escondida.

The National Service for Training and Employment (SENCE) recognized us as the private company that provided most training to its employees during year 2003 in the Segunda Región. In this manner, our corporate policy for the development of our personnel was publicly recognized.

The National Mining Society (Sonami), distinguished us with the San Lorenzo Prize, in the category Large Companies, for the use of state of the art technologies, commitment to the environment, the community, safety and the development of the Segunda Región.

We were distinguished by the magazine “América Economía” in their selection of the 500 greatest companies in Latin America.

The Cultural Heritage Corporation of Chile awarded us the Heritage Prize that distinguishes corporate responsibility and significant support to educational, cultural and social initiatives applying specialized management and excellence.

PriceWaterhouse & Coopers and the Diario Financiero ranked Escondida number six among the “Most Admired Companies in Chile”.

Our Annual Financial Report received a special recognition to the Best Corporate Financial Report in the IX Competition of Corporate Reports organized by Revista Gestión and Price Waterhouse & Coopers.

3,15

25

26

27

2003

USD$ %

2004

USD$ %

SALES 1,594,855,000 100.0% 3,149,821,000 100.0%

NATIONAL COSTS 346,642,922 438,683,953

INTERNATIONAL COSTS 38,515,880 48,742,661

COST OF TANGIBLE

GOODS AND SERVICE

385,158,802 24.1% 487,426,614 15.5%

ADDED VALUE

GENERATED

1,209,696,198 75.9% 2,662,394,386 84.5%

EMPLOYEES 106,681,925 8.8% 146,430,872 5.5%

CONTRACTORS 130,900,000 10.9% 164,400,000 6.2%

STATE 110,634,727 9.1% 462,945,909 17.4%

OWNERS 0 0.0% 346,501,740 13.0%

COMMUNITY AND

ENVIRONMENT

11 ,780,256 1.0% 12,544,248 0.5%

REINVESTMENT 774,753,000 64.0% 1,463,948,000 55.0%

FINANCIERS 74,946,290 6.2% 65,623,617 2.5%

DISTRIBUTED

ADDED VALUE

1,209,696,198 100.0% 2,662,394,386 100.0%

1. Based on the presentation principles developed in the book:

“Social Report: a fourth basic financial state, for the social

dimension of a company”, by Luis Perera Aldama, edited by

PricewaterhouseCoopers, Chile October 2003..

In presenting this information we intend to demonstrate our contribution to the generation of added value to the Chilean economy, and the way in which we have distributed this value among our stakeholder groups. This information can be correlated with the financial statements of December 31, 2004 and 2003, and shows the social dimension of our company’s economic contribution.

In this context, the sustainability information pertaining to a social report allows us to appreciate it as an integral part of the company’s reality and is intimately related to value aspects. This section does not only show shareholder profitability, but also the benefits the company generates for society as a whole (employees, state, financiers, and reinvestment in the company to ensure a sustainable continuity of our operation).

Social Dimension of Minera Escondida: Generation and Distribution of our Added Value 1

MM 2

28

The following graphs show the value generated by the company and distributed among our main stakeholders in years 2003 and 2004:

COMPLEMENTARY INFORMATION

Value Managed by the Company and Transferred to the StateEscondida has not only transferred value to the State by paying the taxes generated by our direct economic activity, but we have also acted as a tax-withholding agent.

The following table shows the total amount of funds that the company in fact transferred to the state for all concepts in years 2003 and 2004.

Technical Notes– Costs included in this section refer exclusively to the costs for tangible goods and services incorporated to our production. – The remuneration and tax components have been re-classified into the Employee and State lines in the distributed value added demonstration.– The separation into national and international costs only shows whether purchases were made locally or abroad through imports procedures. The primary source of certain goods appearing as national may be foreign.– In the demonstration, Shareholders only shows the dividends actually collected during 2004, and correspond to profits generated that same year, net of tax burdens applied to the Shareholders, that are included and added to the State line.– The Reinvestment line includes depreciation for the period as well as the profits generated in 2004 and not distributed during that same year, although these profits could be distributed as dividends in future periods.

2003

US$('000)

2004

US$('000)

NET DIRECT TAXES PAID 92.100 324.651

INDIRECT TAXES PAID (40.728) 240.645

VALUE TRANSFERRED TO THE STATE 51.372 565.296

Distributed Value - 2003

Employees

8.8%

Contractors10.9%

State

9.1%

Community

1.0%Reinvestment

64.0%

Financers6.2%

Shareholders 0.0%

Distributed Value - 2004

Financiers2.5%

Employees

5.5% Contractors6.2%

State

17.4%

Shareholders

13.0%

Reinvestment55.0%

Community

0.5%

29

2,82,9

EC 1

YEAR INCOME IN

MILLION US$

TONS OF FINE

COPPER SOLD

AVERAGE PRICE OF

COPPER (¢/LB)

2001 959 786.751 71 ,566

2002 933 741.289 70,647

2003 1.595 970.098 80,734

2004 3.150 1.145.913 130,106

EC 2

ADDED VALUE GENERATED

IncomeIn terms of social and economic impact, in 2004, Escondida produced 8.8% of the world mine copper production and 22% of Chile’s fine copper production.

During this last period, our production was 1,195,158 metric tons of fine copper, of which 1,043,041 tons corresponded to fine copper contained in concentrate and 152,117 tons corresponded to high-grade copper cathodes.

This result was 20.2% higher than the 994,719 tons of fine copper produced in 2003.

Additionally, gold contained in our concentrate was 217,483 ounces in year 2004 and 184,330 ounces in year 2003.

It is important to highlight that between April and December 2004 we maintained an average total mine material movement of 1,100,000 tons per day (tpd), with a record one-day production of 1,261,710 tonnes. Likewise, ore feed to crushers averaged 228,000 tons per day (tpd).

Our sales income during 2004 totaled US$3,150 million, figure that almost doubled the income of the previous year:

The low income registered in 2002 was caused by the strong decrease in the copper price, which forced our management to make the decision of reducing our production level in what we called the Apollo Plan.

In 2004, the cash copper price in the London Metals Exchange averaged US¢130.1 per pound (¢/lb), the highest price since 1995. Compared to the average price for the last five years (75.3 ¢/lb) this excellent situation reflects the strong growth in demand, in moments when the offer was depressed.

In summary, our income has evolved due to the joint effect of a production increase and the price variation, while our customer base remained relatively stable in terms of geographical destinations and the composition of individual clients

Concentrate – Units SoldConcentrate sales for the period amounted to 984,348 tons of contained fine copper, which added to the tons of cathode sold, totalized 1,145,913 tonnes.

In terms of the destination of the concentrate sold, the largest customers were Japan with 31.7%, (our main concentrate buyer since 2001), and Chile with 16.4 %, while the rest of the sales were distributed between China, South Korea, India, Spain and Germany, among others.

Concentrate Sales by Destination - 2004

Japan31.7%

Chile16.4%Other

15.4%

China11.7%

South Korea8.4%

India7.8%

Spain5.6%

Germany3.0%

30

EC 2

Cathodes - Sales in UnitsApproximately 70% of our cathode production is marketed through annual contracts with copper wire producers, and the balance is sold in the spot market. Our main individual cathode customers in year 2004 were France and Taiwan.

Annual cathodes sales were in excess of 187,000 tons and were distributed according to the detail shown in the following graph:

The following comparative graph shows that cathode sales in the year 2004 were exported to more countries. It is also possible to observe that sales in Chile were duplicated.

As we can appreciate in the graph below, the variation compared to year 2003 shows a lesser participation in the local market, while Japan remains as our main concentrate customer. Sales to Spain and India reflect the opening of new markets.

It is important to point out that in some cases our customers recover the gold and silver contained in the concentrate during their smelting processes. Escondida receives credits for the gold and silver recovered by our customers, amounts that are deducted from the treatment and refining charge we pay.

Concentrate Sales per Year

0%

5%

10%

15%

20%

25%

30%

35%

South Kore

aJa

panChile

Germany

China

Traders

Other

SpainIn

dia

20042003

Cathode Sales by Destination - 2004

France11%

Taiwan9%

South Korea9%

Brasil9%

Chile8%Germany

8%

Switzrland8%

Traders14%

Other24%

Cathode Sales per Year

20042003

0%

5%

10%

15%

20%

25%

30%

Korea S

outh

Germany

France

Taiw

anJa

panBra

silIta

lyChile

Traders

Other

Switzerla

nd

31

32

EC 3

CostsOur direct costs for tangible goods and services were US$487.42 million for the year, of which the costs of energy and replacement parts equaled 25% and 20% correspondently.

The following table shows our cost distribution for years 1998 to 2004, and the percentage of each cost item for the year 2004:

In the following table we show other operational costs that added to the figures in the previous table, result in the total direct operational costs.

COST ITEMS

(MILLION US$)

1998 1999 2000 2001 2002 2003 2004 %

ENERGY 63.7 80.9 81.8 88.6 89.9 109.8 121 .9 25%

REPLACEMENT PARTS 45.6 47.7 49.1 50.1 67.1 76.7 98.3 20%

FUEL AND LUBRICANTS 19.7 18.9 28.1 27.6 26.3 32.3 45.4 9%

GRINDING BALLS 21.5 24.0 22.0 19.4 20.3 32.1 41 .0 8%

REAGENTS 8.5 25.4 20.9 23.7 21 .2 27.1 35.2 7%

EXPLOSIVES 16.1 14.9 16.4 19.4 20.4 21.6 29.5 6%

CONSULTANTS 16.4 11 .8 14.9 13.0 5.5 8.0 10.0 2%

OTHER ITEMS 93.0 98.7 94.7 91.5 93.9 77. 6 106.1 22%

COSTS OF TANGIBLE GOODS AND SERVICES 284.5 322.3 327.9 333.3 344.6 385.2 487.4 100%

CONCILIATION WITH THE ANNUAL FINANCIAL REPORT

(MILLIONS OF US $)

2003 2004 %

COSTS OF TANGIBLE GOODS AND SERVICES 385.2 487.4 60%

LABOR 100.8 140.6 17%

CONTRACTORS 130.9 164.4 20%

ADJUSTMENT FOR OTHER ITEMS USED 5.8 5.9 1%

STATE (WITHOUT INCOME TAXES) 7.2 7.9 1%

COMMUNITY 11 .8 12.5 2%

OTHER ADJUSTMENTS 3.2 (3.9) 0%

TOTAL DIRECT OPERATION COSTS 644.9 814.8 100%

33

EC 11

MM 1

PurchasesTotal purchases during the year 2004, are concentrated in Chilean suppliers, as can be seen in the following table.

We maintain business relations with a total of 3,543 suppliers, of which 2,506 are national suppliers.

The following table shows the Distribution of National Purchases, by Region during the year 2004.

NUMBER OF

SUPPLIERS

% US$ ( ‘000) %

AVERAGE ANNUAL

PURCHASES PER SUPPLIER

US$ ( ‘000)

TOTAL NATIONAL 2,506 71% 392,697 81.3% 156.7

TOTAL FOREIGN 1,037 29% 90,429 18.7% 87.2

TOTAL SUPPLIERS 3,543 100% 483,127 100% 136.3

REGION NUMBER

OF SUPPLIERS

% US$ MILLION %

AVERAGE AMOUNT

PURCHASED PER SUPPLIER

US$ MILLION

I 42 1.68% 5.60 1 .42% 0.133

I I 984 39.27% 229.80 58.52% 0.233

II I 13 0.52% 15.34 4.00% 1 .179

IV 30 1.20% 1.12 0.29% 0.037

V 50 2.00% 0.59 0.15% 0.011

VI 10 0.40% 0.29 0.07% 0.029

VII 4 0.16% 0.23 0.06% 0.057

VII I 34 1 .36% 1.94 0.50% 0.057

IX 10 0.40% 0.16 0.04% 0.016

X 4 0.16% 0.11 0.03% 0.028

METROPOLITAN 1,325 52.87% 137.51 35.02% 0.103

COUNTRY TOTAL 2,506 100.00% 392.69 100.00% 0.157

34

EC 5

EC 8EC 9

EC 4

Our supplier selection process uses the SICEP (Qualification System for Supplier Companies), managed by the Association of Industrialists of Antofagasta, of which we are founding members. The system evaluates aspects concerning juridical, financial, commercial, human resources, methods & processes, and actions related to the environment, and risk prevention. In this manner, the degree of reliability of the suppliers of goods and services is defined. Those qualified with an “A” are the trust worthiest, while those qualified with an “E” are the least recommended. Currently we have 133 suppliers registered in the SICEP.

Our purchasing policy determines we operate only with suppliers classified as A, B or C.

Our policy also establishes that the payment for good or services rendered must take place within 30 days after receiving the full invoicing documents.

The average term for paying suppliers during 2004 was 13.2 days as compared to 14 days in 2003.

DISTRIBUTION OF ADDED VALUE

EmployeesOn December 31, 2004, our manpower was 2,854 direct employees, including expatriates, permanent and fixed-term workers, per job contracts, and apprentices.

During the year 2004 total remuneration expense was US$ 146.4 million.

The above figures include among others, compensations for: salaries, various bonuses, gratifications, incentives for project completion, reimbursements for medical services, school expense reimbursements, training, sports activities and employee travel.

Our salary policy values the performance of each one of our employees and stimulates performance improvement through a variable portion of their salary. On average, an employee of Minera Escondida can duplicate his/her base salary with the bonuses and the variable portions of his/her income.

The main services provided by third parties include explosives production, loading and blasting; food services; camp maintenance; personnel transportation; materials transportation; information technology including computer lease and maintenance; rental and operation of auxiliary equipments; security services.

StateDuring 2004 the company accrued US$ 365 million in direct taxes. This amount is broken down in the table below. The main contribution was the payment of income taxes.

Also included as tax contributions for the year, were the taxes paid on the Distribution of Dividends and paid out on behalf of the owners for advanced payments on account of earnings generated during the year 2004.

2003 2004

NUMBER OF DIRECT EMPLOYEES 2,539 2,854

TOTAL COSTS FOR EMPLOYEES (US$ MILLION) 106.68 146.43

ContractorsDuring the year 2004 we paid our contractors for services rendered the total sum of US$ 164.41 million. During, 2004 2,345 contractor employees worked on a full-time equivalent (FTE) basis.

2003 2004

TOTAL NUMBER OF EMPLOYEES WORKING

FOR PERMANENT OPERATIONAL

CONTRACTORS (FTE)

2,257 2,345

TOTAL COST (US$ MILLION) 130,900 164,410

DIRECT TAXES 2003

US$ MILLION

2004

US$ MILLION

INCOME TAX 103.404 357.270

REAL ESTATE CONTRIBUTIONS 0.619 0.659

MINING LICENSES 1 .973 1 .936

COMMERCIAL LICENSES 0.397 0.425

IMPORT DUTIES 1.855 2.961

TAXES FOR REJECTED EXPENSES 0.200 -

4% ADDITIONAL TAXES

ON BANK CREDIT

2.186 1.963

TOTAL 110.634 365.214

TAXES ON ADVANCE

DISTRIBUTION OF DIVIDENDS

0 97.731

TOTAL 110.634 462.945

35

Although the above table shows the accrued taxes, during the calendar year 2004, we actually paid the State of Chile the amount of US$ 617 million, including US$ 303.4 million for additional tax on dividends.

Since the startup of our operations in 1990, until December 31, 2004, we have paid the State of Chile, a total amount of US$ 2,404.5 million dollars for income taxes and additional taxes on dividends.

The following table shows the percentage of Deferred Taxes in relation to Income Taxes for the period 2001 - 2004:

As far as the income tax is concerned, 34% of the amount accrued for the year, based on accounting practices, has been paid in advance by the application of taxation norms.

In accordance to current Chilean regulations, the payment of custom taxes for the importation of machinery and equipment can be deferred for a period up to 7 years. Deferred customs duties for the year ending December 31, 2004 and 2003, amount to US$ 27.52 million and US$ 40.79 million respectively, and all are related to importations made before December 2002.

Due to the nature of our operations and the main destinations of our production, every month a Fiscal Credit (F.C.) is generated in the form the Value Added Tax (VAT). Current regulations allow the deduction of the tax paid on fuel, from the payable Value Added Tax.

Since, 2001, the evolution of the percentage of deferred income taxes versus the total amount of income taxes paid, has decreased until the current 0% in year 2004.

CONCEPT 2001

US$ MILLION

2002

US$ MILLION

2003

US$ MILLION

2004

US$ MILLION

DEFERRED TAXES

FOR THE YEAR (IDE) 37.196 16.926 8.172 (0.920)

INCOME TAX DUE 49.151 30.026 103.404 357.270

MONTHLY TAX

PROVISION

PAYMENT (PPM)

42.282 18.773 29.284 119.851

%IDE 76% 56% 8% 0%

%PPM 86% 63% 28% 34%

PAYABLE VAT

US$ MILLION

SPECIAL TAX

ON OIL

US$ MILLION

DEBIT VAT

US$ MILLION

VAT F.C.

TO BE

RECOVERED

US$ MILLION

MONTHLY AVERAGE

IN US$ 2004 16.667 0.799 10.922 6.545

YEARLY TOTAL

US$ MILLION 200.012 9.598 131.068 78.542

36

In relation to taxes actually paid during the year 2003 and 2004, the increase was 253%, as detailed in the following table:

On the other hand, we have retained taxes (withholding taxes) on behalf of the State in the following amounts:

EC 9

OwnersMinera Escondida is a partnership with limited responsibility and our capital is expressed in terms of percentage of the ownership.

On December 31, 2004, the owner’s equity was distributed according to the detail shown in the section referring to the Profile of the Company.

Dividends paid to the owners during the year 2004, were US$1,190 million, of which US$745.767 correspond to earnings generated on previous years and US$ 444.233 million to those effectively generated in year 2004.

Dividends actually paid to the owners during the last four years, are shown below:

The following table shows the dividends paid for earnings generated during year 2004, to which a 35% tax rate is applied and the first category tax is deducted.

The policy on dividend payment agreed upon by the Owners Council consists in distributing earnings conditioned to the compliance of the financial safeguards established in credit contracts and investment plans. The distribution is carried out in proportion to each Owner’s share.

DIRECT TAXES PAID 2003

US$ MILLION

2004

US$ MILLION

1ST CATEGORY TAX 55.7 197.0

MONTHLY TAX PROVISION PAYMENT 29.3 119.9

TAXES ON REJECTED EXPENSES 0.2 0

4% ADDITIONAL TAX

ON BANK CREDITS

2.2 2.0

COMMERCIAL LICENSES 0.4 0.4

MINING LICENSES

(EXPLORATION AND EXPLOITATION)

1 .6 1 .8

REAL ESTATE TAXES 0.6 0.6

PAID CUSTOMS DUTIES 1.8 2.9

CONCESSIONS: MARITIME,

RADIO-FREQUENCY, ETC.

0.1 0.1

OTHER TAXES

NOT INCLUDED ABOVE

0.2 0

TOTAL 92.1 324.7

INDIRECT TAXES PAID 2003

US$ MILLION

2004

US$ MILLION

WITHHOLDING TAX

FOR TECHNICAL CONSULTANTS

2.403 4.003

TAX ON DISTRIBUTION OF DIVIDENDS 30.291 303.464

WORKERS INCOME TAX 9.873 11 .528

2ND. CATEGORY WITHHOLDING TAX 199 191

VALUE ADDED TAX TO BE RECOVERED

(FISCAL CREDIT)

-83.496 -78.542

TOTAL -40.728 240.645

In relation to subsidies received, we apply the general tributary regulations for mining companies. We have not received subsidies for other concepts and we do not apply the accelerated depreciation method to our assets.

2001 2002 2003 2004

DIVIDENDS PAID

(US$ MILLION)

280.786 85.487 300.216 1 ,190.000

VARIATION TO THE

PREVIOUS YEAR

- -70% 251% 296%

2003

US$ M I LLION

2004

US$ M I LLION

G ROSS PROVIS IONAL DIVI DE N D - 444.233

TA X E S - (97.731)

37

Community and EnvironmentOur contributions to the community are delivered mainly through the Vice-presidency for Corporate and External Affairs and the Fundación Minera Escondida (see the Section referring to Relations with the Community). Other concepts registered under Community are Environmental expenses and the mine closure provision.

EC 10EN 35

The Mine Closure provision reflects the annual charge provided by Minera Escondida (US$ 60.6 million as of December 31, 2004) to meet obligations established in the mine closure policy issued by BHP Billiton and other legal obligations related to the environment.

Reinvestment in the CompanyReinvestment in the company shows the value generated by the company, and is destined to continue our operations. It is composed of the items that provide for the recovery and maintenance of our production capacities, our capital, or social value.

EC 7

Added Value BalanceThe following table shows the evolution of the added value that remains in the company, added to the increase in permanent assets financed by third parties, compared to the paid up capital.

On December 31, 2004 the company held as accumulated earnings and fixed assets financed by third parties, 27.4 times the original amount of capital contributed.

* Paid Capital equivalent to US$ 102.224 million

The added value balance has been defined as: – The increase in fixed assets each year in the portion that exceeds financing with own funds generated during the same year (net profits plus depreciation for the year), plus– The added value generated that remains in the company, represented by the profits accumulated at the end of each year including the capitalized profits.

CONCEPT 2003

US$ MILLION

2004

US$ MILLION

COMMUNITY 5.036 7.117

ENVIRONMENT 2.535 2.925

MINE CLOSURE PROVISION 4.209 2.502

TOTAL 11.780 12.544

2003

US$ MILLION

2004

US$ MILLION

DEPRECIATION OF FIXED ASSETS 215.080 182.203

EARNINGS DURING FISCAL YEAR 529.053 1,725.978

SUBTOTAL 744.133 1 ,908.181

MINUS PROVISIONAL DIVIDENDS 0 444.233

TOTAL REINVESTMENT 744.133 1,463.948

2001

US$ MILLION

2002

US$ MILLION

2003

US$ MILLION

2004

US$ MILLION

FIXED ASSETS

FINANCED BY THIRD

PARTIES

1,1 1 1 .634 1 ,175.062 1 ,075.985 1 ,075.985

ADDED VALUE

REMAINING IN

THE COMPANY

933.390 961.534 1 ,190.371 1 ,726.245

ADDED VALUE

BALANCE

2,045.024 2,136.596 2,266.356 2,802.230

TIMES (SURPLUS

VALUE ADDED /

PAID CAPITAL *)

20.01 20.90 22.17 27.41

38

Financial Institutions We have outstanding obligations with local and foreign financial institutions. During the fiscal year 2004, 11% of resources financed by third parties came from Chilean banks and 89% came from foreign sources.

The following table shows the composition of Short-Term and Long-Term obligations:

EC 6

2003 2004

The short-term obligations during the fiscal year 2004 correspond to debts with local banks (Banco Santander Banco de Chile y Banco Bilbao Vizcaya Argentaria).

On the other hand, long-term loan obligations were totally contracted with foreign banks: The Bank of Tokyo-Mitsubishi Ltd., Kreditanstalt für Wiederaufbau, Japan Bank for International Cooperation and BNP Paribas. The solid financial position of the company, made it possible to gain access to the international banking market, during the fiscal year 2004, and allowed us to reschedule the different contracts on credits granted in previous years.

These figures include our obligations with the public, derived from the bonds issued in November 1999, for a total amount of US$ 200 million.

The current obligations due to the above are detailed in the following table:

The value generated and allocated to company financing during 2003 and 2004, is shown below:

Financial expenses incurred showed a significant reduction compared to the previous financial year; these resulted from various activities carried out by the treasurer. Today, our liability structure is well below other companies of the mining industry in terms and interest rates. While financial expenses were reduced by 9% compared with the previous year, financial income was doubled.

Other than the abovementioned financial expenses, during 2004 we paid capitalized interests for 3.4 million dollars. (During year 2003, no expenditures were made under this heading).

For cash reserves kept as temporary investments, we attained an average profitability during 2004, of 1.53% on investments in US dollars and 1.86% for investments Chilean pesos.

US$ MILLION % US$ MILLION %

TOTAL SHORT-TERM

OBLIGATIONS 67.023 5% 267.879 23%

TOTAL LONG-TERM

OBLIGATIONS 1 ,195.804 95% 896.272 77%

TOTAL OBLIGATIONS 1,262.827 100% 1,164.151 100%

2003

US$ MILLION

2004

US$ MILLION

SHORT-TERM PORTION 41.473 41.105

LONG-TERM PORTION 120.0 80.0

TOTAL 161.473 121.105

2003

US$ MILLION

2004

US$ MILLION

FINANCIAL EXPENSES 76.680 69.459

FINANCIAL INCOME 1 .734 3.835

TOTAL FINANCING 74.946 65.624

39

The following table shows the coefficient between the balance of equivalent cash assets and the total amount of current assets. This percentage shows the speed by which current assets can be converted into available assets.

The monthly level of cash resource generation was 6% of our sales during 2004. Our generation of cash resources was substantially higher than in 2003, net flow originating from operational activities equaled US$2,170.7 million in 2004 against US$ 809.1 million in 2003. The main factor that affected the evolution of cash, other than higher operational results, was the behaviour of our working capital (where the sales debt increased considerably due to the increase in total sales), capital investments reached US$ 380.7 million, debt payments and net amortizations were US$ 225 million, and finally the distribution of dividends, which added up to US$1,190.1 million.

2000

US$ M I LLION

2001

US$ M I LLION

2002

US$ M I LLION

2003

US$ M I LLION

2004

US$ M I LLION

EQU IVALE NT C A SH A SS ETS 93.399 118.064 39.773 104.347 255.592

TOTAL CU RR E NT A SS ETS 381.179 391.708 302.666 549.243 939.036

PE RCE NTAG E 25% 30% 13% 19% 27%

40

41

Relations with the Employees

In this section, we detail our commitment to our employees in matters of safety and occupational health, professional development, and our respect to each of them and the diversity of our workforce.

WORKFORCE

In December 2004, Minera Escondida had 2,854 direct employees including those with indefinite, per job, fixed term and apprenticeship contracts plus 2,345 contractor employees (Full Time Equivalent) working in Escondida premises. This number does not include contractors working in the major expansion projects. Overall, our combined direct and contractor manpower increased as our operations have been expanded.

LA 2

The increase of our manpower, both direct and contractors, during the 2002-2003 period was caused mainly by the development of new projects, such as the start up of the Laguna Seca concentration plant (Phase IV). Additionally, in the year 2004, we commenced the development of the Escondida Norte open pit and initiated the sulfide leach project for, which we hired 252 employees under indefinite contracts.

93 94 95 96 97 98 99 00 01 02 03 040

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Tonn

es o

f Cu

Escondida Direct Manpower and Fine CopperProduction in Concentrate and Cathodes

Tonnes of fine Cu produced

Direct manpower as of December each year with indefinite contracts

0

500

1,000

1,500

2,000

2,500

3,000

Empl

oyee

s

42

LA 1MM 1

In Minera Escondida, we are strongly committed to the region in which we conduct our business. By the end of the year 2004, 73% of all our employees lived in the Segunda Región (Antofagasta).

The distribution and functional structure of our own employees has remained practically constant in the last years, as can be seen in the following graph:

II-Antofagasta

73%

III-Copiapó

8%

Place of Residence of Our Employees

RM-Santiago 2%

2%V-Valparaíso

Other 1%

I-Iquique 5%

IV-La Serena 9%

Additionally, by the end of 2004, our direct workforce included eleven expatriates. The following graph shows the evolution of the number of expatiate personnel working in our operations. It should be noted that all the expatriate personnel that has left our operations, has been replaced by Chilean professionals.

Several indicators demonstrate the stability of our workforce. The average length of service of our employees was 7.7 years, by the end of 2004; this can be attributed to a sharp increase in the overall number of employees between the years 1997 and 1998, due to the start-up of Phase III expansion. The rate of turnover calculated on the basis of permanent contracts was 1.52% in 2004, compared to 1.50 % in 2003.

LA 1

Years

Average Length of Service by Type of Employee - December 2004

0

2

4

6

8

10

Tech./Admin. ProfessionalOperatorExecutive

Distribution by Employee Type

0%

20%

40%

60%

80%

Tech./ Admin.Executive ProfessionalOperator

200420032002

Expatriate Professionals in Escondida

Nº

of e

xpat

riat

e em

ploy

ees

27

2001

18

2002

11

2004

14

20030

5

10

15

25

25

30

43

In Minera Escondida, we have a Human Resources Intranet page where our employees can access all kinds of information and services that might be of interest to them.

The contents of this website can be classified into two types of information. The first is general information, for example the company’s complete organizational chart which is updated every day, names of the employees that celebrate their birthday each day, news about Human Resources with issues of interest to our employees, and related sites.

The second is reference material for our employees; for example the publication of Human Resource procedures, the Benefits Handbook, practical guides on procedures to obtain benefits, the Business Conduct Guide, the Collective Labor Agreement, Monthly Training Programs, Competence Development Programs, among others.The web page also offers certain services to our employees that allow them to satisfy their information requirements; such as a section called “Human Resources Self-Service” where it is possible for workers to obtain their salary slip, personal promotion reports, training and vacations, in addition to their attendance reports and other personal data.

Other services offered are the option of making on-line change of address and bank accounting information, to consult about their employees benefits and about the processing stage and/or apply for the reimbursements of dental care expenses.

Finally our Performance Evaluation System is accessible through this page; therefore, employees are able to review - at their discretion - the achievement of their agreed goals for the year.

One of the advantages of making these services available through the Intranet is that employees have access to permanent attention, that is to say, the service is at their disposal 24-hours a day throughout the year. Every worker has access to the webpage, either from their own computer or through multimedia terminals located in the Antofagasta office and at the minesite.

Consultation System for Employees

CASE STUDY

44

The rate of absenteeism in 2004 was 3.06%. This indicator is calculated as the hours of absenteeism divided by the total number of contracted hours, where:

LA 7

LA 12

COMPENSATION AND BENEFITS

In Minera Escondida, we wish to retain our good employees, because this gives us a comparative advantage. Our company facilitates this stability through an attractive compensation policy, by means of which we favor indefinite contracts, proof of which is the fact that at the end of 2004, 98% of our employees had this type of contract.

Our salary policy rewards good performance by means of a variable salary component. We have also developed for our employees and their families, an additional benefit policy on the basic salary.

HOURS OF ABSENTEEISM HOURS THAT ARE NOT WORKED DUE TO ILLNESS,

ACCIDENTS OR PERMISSIONS

CONTRACTED HOURS MAN HOURS THAT AN EMPLOYEE HAS TO WORK,

DEPENDING OF THEIR SHIFT ROSTER:

5X2 ANTOFAGASTA: 8.75 HOURS/DAY

5X2 SANTIAGO: 8 HOURS/DAY

4X4 OPERATIONS: 12 HOURS/DAY

BENEFITS

SPECIAL WORK CONDITIONS SOCIAL BENEFITS

BONUS FOR ON-THE-FIELD MEALS

ALLOWANCE FOR WORKING ON HOLIDAYS

SPECIALIZATION ALLOWANCE

BONUS FOR ATTENDANCE TO TECHNICAL SCHOOL

LENGTH OF SERVICE BONUS

TRAINING BONUS

REPLACEMENT BONUS

VACATION BONUS

COMPLEMENTARY ALLOWANCE FOR MEDICAL LEAVE

ALLOCATION FOR PARTICIPATION IN EMERGENCY BRIGADES

ZONE ALLOCATION (OPERATORS)

MINE SITE ALLOCATION (TECHNICAL & PROFESSIONALS)

SHIFT CHANGE BONUS

HOUSING PLAN

LIFE INSURANCE

HEALTH INSURANCE (REIMBURSEMENT OF MEDICAL EXPENSES)

REIMBURSEMENT OF DENTAL CARE EXPENSES

REIMBURSEMENT OF EDUCATION EXPENSES FOR CHILDREN

MARRIAGE BONUS

CHILD BIRTH BONUS

FUNERAL ASSISTANCE BONUS

PENSION PLAN CONTRIBUTION FOR LENGTH OF SERVICE & RETIREMENT

ADDITIONAL CONTRIBUTION TO PENSION PLAN FOR HEAVY WORK

ADDITIONAL CONTRIBUTION TO HEALTH PLAN COVERAGE

VOLUNTARY BONUS

EDUCATION SCHOLARSHIP FOR THE WORKER

45

During the year 2004, our total payroll was US$ 146 million. These expenses included base salaries, benefits and variable remunerations. The table below shows the breakdown of these expenses:

EC 5

Base48%

Variable28%

Benefits24%

Distribution of the Total Payroll

Other BenefitsIn 1990, along with the start-up of our operations, we designed and implemented a Housing Plan, through which our employees can purchase their house with the company providing 25% of the cost of the house, with a guaranteed minimum amount of UF 500 and a maximum of UF 1100 per employee. The workers pay only simple interests over the amount of the company loan, with an annual rate of 3%. The capital debt is condoned after seven years of continuous work in Escondida. To the end of December, 1,573 workers have had access to this benefit with a total investment of US$ 20,730,524 since the beginning of this program.

Every operator assigned to work at the minesite or Coloso receives a Zone Allocation equivalent to 35% and 30% of their base salary correspondingly. The professional and administrative staffs receive a Minesite Allocation Bonus equivalent to 5% of their base salary. Likewise, all the operators that live in the Segunda Región receive a Housing Bonus that varies depending on the worker’s marital status.

GC 3

LA 3

LA 4HR 5

RELATIONS BETWEEN THE COMPANY AND THE EMPLOYEES

In Minera Escondida, we maintain permanent relations with our employees and the organizations that represent them, in order to receive the maximum feedback from them. Our labor relations strategy is based on “ensuring we have competent union leaders that participate actively in labor issues and take responsibility for the business results; with which we will establish formal relationship channels”.

Labor UnionsOnly one union exists in the company and is called the “Sindicato Número 1 de Trabajadores de Minera Escondida Ltda.”. Union membership is voluntary and its leaders maintain permanent communication with company representatives. A manager in charge of Industrial Relations dedicates most of his time to work with the union and to analyze the requirements and concerns submitted by its leaders.

The Escondida workers union was created on December 19, 1993, with the participation of 15% of our operators and administrative employees, and has grown to 65% of the total workforce by December 2004.

The negotiation carried out between the union and management in 2003 concluded with the following: salary increases; formalization of the existing benefits in the contract; and a change in the formula used to calculate Production Bonus. The current collective contract signed in August 2003 will expire on August 1, 2006.

Additional to current legal requirements, we have implemented a Bonus for Years of Service that will improve the pension our workers receive when they retire. This bonus consists of the following: as of the fifth year of work in Escondida under permanent contract and up to the fifteenth year, an additional monthly deposit is made in each worker’s individual capitalization account at their Pension Fund Administrator (AFP in Chile). This bonus is equal to 5% of the base salary plus the corresponding zone & housing allocation in the first year, and is increased by 1% for each year of service there on.

We have also implemented a pension fund contribution that is related to the length of service of each employee. Within the first 10 days of the month after the worker completes 11, 12, 13, 14 and 15 years of uninterrupted service in the company, the equivalent to one monthly salary is deposited directly in his/her individual capitalization account at their Pension Fund Administrator (AFP).

46

LA 6

LA 5

Joint CommitteesWe have Joint Committees responsible for monitoring occupational health, hygiene and safety conditions. One of the committees is located in the mine and the other is located in the port of Coloso, allowing them greater management independence. The Joint Committee cover all company areas, given that they are formed by the 6 members required by law, plus 6 alternate members and 1 representative for each area that does not have an elected member in the committee.

We also have a Health & Quality of Life Committee that analyzes our employees’ health conditions, identifies needs and designs policies and programs aimed at the improvement of the quality of life. The members of this committee are the Chief of Occupational Health & Hygiene, one representative of the legal team, two members of the industrial relations team, a medical consultant, a representative of the Safety & Health provider on site (Mutual de Seguridad), a member of the Mine Joint Committee, the human resources manager and a representative of the Union.

HEALTH AND SAFETY

In Minera Escondida, we have an integrated policy for Health, Safety; Environment and Community Relations (HSEC Policy), as was detailed in previous sections.

Accident RegistryIn Escondida we have designed and implemented a centralized computer information system that allows us to record incidents and accidents. In terms of accident classification, their registration, reporting and subsequent handling of injuries we comply with Chilean Law 16,744 that addresses work-related accidents and professional illnesses. We also follow the guidelines and requirements established by the Mine Safety Regulations, which are managed by the National Geology and Mining Service (Sernageomin - Servicio Nacional de Geología y Minas).

Additionally, BHP Billiton conducts periodical audits of the entire system, thereby increasing the reliability of our own accident registration and notification system.

Safety ProgramsIn our journey towards a Zero Harm culture, and as part of the overall compliance with our HSEC policy in terms of Safety in the workplace, we have implemented a series of programs to encourage behaviors in our workers (both direct and contractors) that are permanently focused on their own safety as well as the safety of the people they work with. Some of such programs are:

– Take 5: consists of a series of steps that a person must follow before starting a task, in order to ensure that all the potential risks associated to it have been evaluated. If one of the steps results in a response that is different from the expected one, the person must take certain actions before continuing with the task at hand.– Five S: the main objective of this tool is to have clean and organized work places thus contributing to avoid accidents and losses due to housekeeping issues. We have trained our direct and contractor workforce both in formal workshops and field applications.– Fatal Risk Control Protocols: based on an analysis of the fatal accidents that occurred in its operations in a 10-year period, BHP Billiton identified a series of operational risks that have the potential of resulting in fatalities. The Fatal Risk Control Protocols that were published by BHP Billiton on April 2003 establish objectives, application and requirements necessary to manage these risks. In Escondida we have implemented the protocols that are applicable to our operations, including the contractor companies that have personnel working in our premises.– Preventive Observations: each person that holds a leadership position in our company is required to conduct preventive safety observations in the field. Each observation must be followed by a face to face conversation with the people involved in an action or situation that may pose a risk and immediate corrective actions are agreed. During the year, our professionals registered more than 30 thousand preventive observations with their corresponding actions.– Zero Harm Workshop: a two-day session that must be attended by our entire workforce, including contractor personnel that work in our facilities. The workshop content includes our HSEC systems and procedures, our organization, and applicable legislation. An important part of the workshop is a section on safety awareness to encourage people to naturally adopt a positive and proactive behavior when facing a situation that involves some type of risk. The workshop was designed by Escondida professionals with the assistance of the Mutual de Seguridad, institution that is also responsible for delivering the workshop. This workshop is mandatory for any person who has to work on site, and is valid for a 4-year period.

47

Occupational HealthIn matters of occupational health, in Minera Escondida we have facilities and procedures in place to prevent diseases and respond to possible injuries caused by accidents. At the mine we have a fully-equipped clinic that provides 24-hour medical health services and is supported by ambulances and rescue vehicles.

One of the most important efforts in the area of occupational health is the SIMEL (Integrated Health System). This program consists in a complete series of medical tests applied to 100% of our workers every 2 years. The tests are designed to detect any possible harm caused by agents present in our activity as well as common diseases. The program has allowed the detection of some cases of cardiac disorders, diabetes and minor hearing loss. Although these are not the direct result of work activities, we are committed to counseling the affected persons. Although the program is applied every other year, when a case is detected, we increase the frequency of the tests and allow the person to control its evolution. It is important to point out that in cases when a disease has been detected through the application of the program, we support our employees in the search of treatment & recovery alternatives.

The detection of HIV is not included in the SIMEL or in our pre-occupational tests. In the eventual situation of detecting a person with HIV, the case would be handled by the Health & Quality of Life Committee the same as any other person suffering a chronic disease.

Relation to alcohol & drugs, an important problem in the area of Antofagasta, we have prepared a specific plan that will allow us to detect consumption and to implement monitoring measures to help the persons thus affected to combat a possible dependence.

MM 13

LA 8

48

The idea of designing a preventive policy in matters of alcohol & drug consumption emerged in the year 2003. We consider our activities on this subject to be important, given the abusive consumption of alcohol, drugs and medicines without medical prescription constitute a nationwide problem that affects society as a whole and the workplace in particular. Many aspects related to safety and productivity, as well as health and quality of life have an impact on workers and their families.

Considering the above, we decided to set up a team to prepare Alcohol & Drug Policy Guidelines aimed at preventing the abuse of these substances, motivating self-control and educating people on the risks to health, work and the community. The team that included members from different areas, including the union and joint committees, worked close to a year with the support of a psychiatrist and the National Council for Narcotics Control of (CONACE).

The team delivered a document called “Preventive Guidelines for Alcohol & Drugs and the Promotion of a Healthy Life Style” that is consistent with our HSEC policy and was approved by the steering committee before the end of year 2004.

We are proud to have raised awareness about this problem and its open and honest discussion, since the process of preparing these policy guidelines was an inspiring experience for our company. Our next goal is to generate awareness among our employees, communicate the guidelines and commence their implementation.

Alcohol and Drug Directive

CASE STUDY

49

Accident RatesIn terms of safety, our overall rates have improved. However, we regret the occurrence of a fatal accident during the year 2004. Two contractor workers suffered decompression while taking samples from the ocean bottom at a depth of 67 meters, in the area close to the submarine outfall at Coloso.

We acknowledged our commitment and have taken the necessary actions to avoid the occurrence of such events in the future. It is our firm conviction that we will achieve our objective of zero fatal accidents, including our direct and contractor workforce.

The two main indicators we use to measure our accident rate and to manage safety issues are the Frequency Rate and the Severity Rate. The severity rate measures the days lost as the consequence of accidents and the Frequency Rate measures the number of lost time accidents, both calculated per million man-hours worked.

The graph below shows a downward trend in the Frequency Rate (also known as Lost Time Injury Frequency Rate) in the period 2001 to 2004. The programs we have implemented and the consolidation of our systems have resulted in the important reduction observed during this last year.

LA 7

2001 2002 2003 2004

3.0

4.55.0

3.1

4.13.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

3.4

1.4

2.42.0

Mel

ContractorsCombined

Lost Time Injury Frequency Rate

Although the frequency rate shows an important decrease, indicating that the number of accidents that resulted in injuries is substantially lower, the Severity Rate shows an increasing trend, mainly due to accidents that caused a higher number of lost days due to the severity of the injuries sustained.

MM 12

It is important to point out, that the combined frequency rate is used in the calculation of the variable portion of the compensation of the executive levels.

0

20

40

60

80

100

2002 2003 2004

Severity Rate

48.0

93.588.6

54.1

45.3 41.0

62.166.4

49.2

82.1

94.989.6

Mel

ContractorsCombined

2001

Emergency SituationsAs part of our policies we have implemented procedures to anticipate emergency situations and we have created specialized brigades qualified to act if a serious incident occurs in our operations. Also, at the corporative level we have a crisis and emergency management system, which includes aspects related to possible emergencies in the community.

Considering our production sites are located far from populated places, the potential emergencies that may have an impact on the community are restricted to Coloso, where specific action plans have been developed to manage emergencies, which include our neighbor fishermen community.

50

LA 9

In terms of coverage, defined as the percentage of the total number of workers that attended to at least one training activity, this index has remained at 60% of our workforce with indefinite contracts.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

3.87

4.775.12

5.40

2001 2002 2003 2004

Evolution of the Training Index

N° OF EMPLOYEES ATTENDING TO

AT LEAST ONE TRAINING ACTIVITY

DURING THE YEAR

COVERAGE

2003 1.475 59,4%

2004 1.689 60,1%

In the year 2004, training was mainly concentrated in competency development programs for electric and mechanical maintenance workers and instrumentation and plant operators. The competency development programs represented approximately 40% of the total training hours, and the technical specialization courses represented around 30%. The rest of the activities correspond to HSEC, leadership, languages, and computer training. INDUSTRIAL AND MINING TRAINING CENTER (CEIM)

In 1996 we created the Escondida Technical School, after we detected a gap between the actual competencies our people had and those required to achieve excellence in our operations. The main focus was to train our maintenance workers, by offering them certified qualification as Heavy Equipment Mechanics, Concentrator Plant Mechanics, Electricians and Instrumentation specialists. At the early stages of the CEIM, Escondida workers were the only recipients of the training provided by the center.

In 1999, we gave an important step by transitioning from the Escondida Technical School to the current Industrial and Mining Training Center (CEIM) that belongs to the Fundación Educacional Escondida, a private non profit corporation, whose institutional purpose is the formation and development of specific labor competencies for the mining industry.

The certification of the programs provided by the CEIM is granted by the British Columbia Institute of Technology in Vancouver, Canada.

Today, following a defined strategy determined by the Escondida Educational Foundation, we have extended the services provided by CEIM to the industrial community of the region and the country.

During the year, the British Columbia Institute of Technology performed an audit to the Quality Assurance Process of the CEIM Programs. As a result of this audit the CEIM maintains its condition as a BCIT associated institution in terms of management, implementation and joint certification of the Labor Competency Development Programs endorsed by the International Credential CEIM-BCIT.

TRAINING AND EDUCATION

Training is a priority in Minera Escondida, since it will allow us to develop our capacities to a maximum, as expressed in our charter. We expect our workers to have the necessary competencies to execute their work appropriately; consequently our investment in training programs is significant.

The trend in our training investment is increasing. In the year 2004, we invested approximately 4% more in training per person than year 2003, reaching an average of 1,912 US$ per employee.

During calendar year 2004, we carried out more than 305,000 man hours in training, which are equivalent to 14 work days per person during the year: Compared to the previous year, this represents a 21% increase.

We use an index based upon the percentage in training man-hours, compared to the total number of man-hours contracted to measure our training levels. The table below shows the increase of this index in the past four years.

51

MAIN GUIDELINES OF OUR TRAINING POLICY

Requirement DetectionAny training activity must respond to a clearly identified need and should have a positive impact on our business. The requirement may correspond to a gap between a person’s competency and the competences required for the position; a problem in the operation that can be solved or diminished as the result of training activities; or a gap in a Key Performance Indicator.

Competency Development ProgramsWe offer our workers intensive long-term programs (generally 4 years) that ensure our maintenance personnel and operators have the competencies required for the job. Passing these programs is considered along with other factors, in their performance evaluation and promotions. Several of these programs offer an internationally valid certificate.

Training BonusWe compensate the portion of their rest periods our employees dedicate to training activities defined as mandatory by the company.

Study ReimbursementsWith the previous approval of line management, we reimburse part of the cost into which our employees incur to continue university or college studies. The approval of the program depends on the relevancy of the studies in relation to the job the employee carries out, or the eventual development of a carrier in the organization.

52

In the year 2004, we implemented a long term program aimed at the development of competencies among the workers at Laguna Seca concentrator plant that commenced operations in year 2003. Here we identified the opportunity to reinforce a group of approximately 60 workers providing them with high level occupational training, based on a structure that privileges practical aspects.

In fact, this training plan called Expert High Performance Operator (Experto Operador de Alto Rendimiento - EOAR) is recognized as our response to the need of modernizing and reforming our training system at Laguna Seca. The main objectives of the program are:

– A more competitive workforce,– Flexible manpower in terms of skills,– Transition from a training system based on available supply, to a system that reflects the needs of the concentrator plant and our response to them (demand).

To achieve these objectives, we designed an integrated long term training process that intends to cover, on the one hand, the needs for technical training of the operators, and on the other hand continuity to ensure

the achievement of our organizational objectives. In this process, we defined 7 dimensions that include technical aspects as well as personal development and organizational growth. After building a baseline, we determined 5 levels of progress for each of the dimensions. This process started at the end of the year 2004, so we expect to present a first progress report in our next report.

This example emphasizes our determination to manage learning, as a key factor to maintain our competitive advantage. Furthermore, by aligning our training activities to actual requirements of the operation and the company, we will increase the value of our human capital.

Training Plan in Laguna Seca

CASE STUDY

53

DIVERSITY, OPPORTUNITY AND NON-DISCRIMINATION

Our Business Conduct Guide establishes that: “the work positions in BHP Billiton must be offered and maintained based upon merit” and that “all employees and applicants to a position in the company must be treated and evaluated solely based on their ability, suitability and capacity and appropriateness in relation to such position.”

Each of our employees may consult with his superior or the human resources team to present a situation in which he/she feels that equality of opportunities was not respected by reasons of gender, nationality, race or other reasons. The Business Conduct Guide provides the procedures to submit concerns within the company. At the BHP Billiton level, a dedicated team has been established to resolve this type of employee concerns through a phone number to call from Chile.

In terms of gender distribution, by the end of 2004, on average, women represented 4.2% of our total direct employees. This percentage is 0.9% at the operator level and 25% among technical and administrative personnel. The woman holding the highest position in Minera Escondida is in the fourth level of responsibility in the organization (president, vice-president, manager and superintendent).

During the year 2004, we implemented the “Women Program” (“Programa Mujer”) aimed at the integration of women as heavy equipment operators. This program consisted in training and later hiring 11 women to become a part of our permanent workforce in Escondida Norte.

This group of women works as heavy mining equipment operators and had a successful integration to the existing work teams. We are proud of having each one of them in our organization.

HUMAN RIGHTS: STRATEGY AND MANAGEMENT

In Minera Escondida we have subscribed the United Nations Global Pact (Global Compact) whose first principle commits the endorsing companies to support and honor human rights.

Our Guide to Business Conduct establishes that the company is committed to support the fundamental rights of our employees, contractors and communities in which we operate. Additionally in Standard number 8 of our HSEC policy, we have established the obligation to create awareness among our employees and contractors in matters of human rights.

To measure the risk of the company in matters of human rights during the year 2003 we use an evaluation tool designed by BHP Billiton (Human Rights Assessment Toolkit). The result of this work showed that our company has low exposure to risks related to human rights.

The verification of the commitment to the principles of human rights protection by our contractors is carried out through the Qualification System for Companies Providing Goods and Services (SICEP). SICEP takes into consideration the level of knowledge, and communication of the social responsibility concept, and the universal declaration of human rights.

CHILD LABOR

As a principle clearly established in our business conduct guide we reject child labor. Our labor relations strategy highlights that compliance of the legislation is a critical success factor. Chile signed Agreement 138 of the International Labor Organization (ILO) in 1999 that forbids the employment of minors younger than 15 years old.

Due to the special characteristics of the mining industry, we have committed to go beyond this requirement without endangering our commitment with the development of young people. For this reason the youngest worker employed during 2004 was a 19 year old apprentice.

LA 11GC 6

GC 1GC 2

HR 1

LA 10HR 4

GC 1GC 6

HR 2HR 3

HR 4

Average Age of Permanent Direct Workforce

0

10

20

30

50

40 37.5

Tech./ Admin.

41.3

Professional

39.3

Operator

46.9

Executive

HR 6GC 5

54

WORK CONDITIONS

Since the beginning of our operations, we implemented a 45 work-hour week. Operators at the minesite and Coloso have a 4 day on by 4 day off roster, with 12 hour shifts, which adds up to an average 42 work-hour week. The staff employees that work at the minesite have a 4 by 3 roster, with 12-hour shifts. Therefore, it was not necessary to change our operational scheme, to comply with the new Chilean law, in force since January, 2005, which placed a limit of 45 work-hours per week.

The Chilean law has defined a series of tasks that are classified as “heavy work”, and requires the companies to identify both the tasks that fall under this category as well as the people that perform them. According to this law, any worker that performs tasks categorized as heavy work must receive an additional deposit in their pension plan account, with the company having to put up an amount equal to the one deducted from the worker’s pay.

As of December 2004, 73% of our workforce was categorized as developing heavy work and received the benefit of the additional deposit in their pension plan fund. It must be pointed out that since the inception of this law; we have fulfilled all the requirements established therein.

In 1933 Chile signed the International Labor Organization Agreement that prohibits forced labor, therefore, this practice is not registered in our country. In Minera Escondida we adhere to the principles of this agreement.

HR 7

GC 4

55

Considering the remote location of the Escondida ore body, the feasibility studies carried out during the 80’s, an original work scheme was designed, that consisted of a roster system in which 4 days of work on site are followed by 4 days off; in the case of the operators and 4 days work by 3 days off for the technical and administrative staff. In order to provide our workers a good quality of life while on site, we designed and implemented a full transportation service, housing, catering, recreation and medical attention in modern installations.

Each worker assigned to work at the minesite, has a permanent room with private bath. Meals are provided in installations managed by a contractor with international reputation. During their 4 days of work, the workers have full access to all the recreational facilities that include, a gymnasium equipped with modern exercise machines, a heated swimming pool, a multiple service court, sauna rooms, library, computer rooms with access to Internet, TV and game rooms (pool). Additionally in an initiative developed by a group of workers, we implemented a Universal Chapel, where religious services and celebrations are organized by the workers.

In terms of meals, the workers have access to a low-calorie diet, both in their field lunch bags and the dining room. We are aware of the severe work conditions in a

Quality of life at the Minesite

CASE STUDY

mining operation, located in geographical altitude and desert climate like ours. With this in mind, we have put special effort into looking after for the health and safety of our workers. Some of the concrete actions in this aspect are:

– Sealed and acclimatized cabins in all our field equipment (trucks, shovels, auxiliary equipment)– Special clothes for cold climate– Mass vaccination against the flu at the beginning of winter– Heating systems in all those places where it is feasible to install (offices, warehouses, maintenance workshops)– Mandatory use of personal protective equipment in all the operational areas that require their use (safety shoes, hard hats, glasses, gloves, ear protection, respirators in areas exposed to acid mist or dust, special clothes for areas exposed to chemicals). The use of safety shoes and hard hats is mandatory in all areas of Coloso and the minesite.

56

57

Relation with the Environment

ENVIRONMENTAL POLICIES

In this section we will describe the responsible use of natural resources in our operations and the practical application of the HSEC policy referred to before. It is important to point out that since May 2003; all our operations are certified under the ISO 14001 Standard.

MANAGEMENT SYSTEMS

In Minera Escondida we have developed, implemented, certified and maintained an Environmental Management System (EMS), in accordance with the International Standard ISO 14001, which is based upon a continuous improvement concept. The objective of the EMS is to identify the environmental risks of our operation (water extraction, water management, management of hazardous substances, waste management, energy consumption, among various other aspects) and manage their control through action plans. In 1999 we commenced the implementation and certification of the Environmental Management System in the different business units and since May 2003, all operational areas are certified by the British Company ERMCVS.Additionally we have encouraged our contractor companies to obtain this certification, as described previously.

ENVIRONMENTAL INVESTMENT

In Minera Escondida we actively invest in environmental and safety matters. Other than the operational expenses in environment, our investments in fixed assets related to environment were US$ 5.9 Million during the year 2004 compared to US$5.2 million in year 2003.

3,20

EN 35

58

EN 2GC 8

MATERIALS

As part of a BHP Billiton worldwide policy, in the year 2002 we commenced reporting the use of the most important raw materials for each operation. In compliance with this policy we show our most important materials used during 2004.

EN 1GC 7

We can point out that a part of the grinding balls we use in our operation are produced from recycled material. During the year 15,280 tons of the total amounts purchased (22%) was produced from scrap, of which 6,550 tons (43%) were manufactured from scrap generated directly by Escondida.

Likewise, approximately 20% (526 thousand liters) of the total petroleum used to prepare explosives (ANFO and Heavy ANFO) are residual oil removed from our mining equipment during normal preventive maintenance activities.

ENERGY

Electric PowerOur greatest energy consumption corresponds to electric power, which is purchased from Norgener and GasAtacama. During the year 2004 we consumed a total of 8,989,672 Giga joules (Gjoules) of electricity. Our power consumption was higher during 2004 due exclusively to the increased movement as a result of the startup of pre-mine operations in Escondida Norte.

EN 3GC 8

EN 4GC 8

It is important to point out that in Escondida we do not produce our own electric power. Only in case of black-outs our back up generators start operating.

In terms of the distribution of power consumption in our operational areas, the concentrator plants of Laguna Seca and Los Colorados are the highest consumers of electric power.

Electric Power Consumption by Area

Laguna Seca34%

Services1%

Oxide Plant17%

Mine8%

Los Colorados40%

Our electric power suppliers are Gas Atacama (46%) and Norgener (54%). The graph below shows the average distribution of power purchased by Minera Escondida during the year 2004 according to the fuel used for its generation, where it can be observed that the greatest amount was generated using gas (76%). It is important to note that during the year 2004, supply of natural gas from Argentina was curtailed, and the generators had to substitute gas with other fuels like coal. As a result of this, in June 2004 37% of the total power production was generated with coal.

RAW MATERIALS UNITS 2004

SULPHURIC ACID TONS 287,569

DIESEL KILOLITRES 120,853

LIME TONS 112,980

EXPLOSIVES ( INCLUDING ESCONDIDA NORTE) METRIC TONS 75,947

GRINDING BALLS TONS 69,827

SODIUM HYDROSULPHIDE (NASH) TONS 4,777

COLLECTORS TONS 2,844

EXTRACTION SOLVENTS TONS 1,667

FLOCCULATES TONS 924

POWER CONSUMPTION 2003 2004

ELECTRICITY (GJOULES) 8,490,607 8,989,672

59

EN 17GC 9

Energy Efficiency PolicyDuring the year 2003, we developed and commenced the implementation of an Energy Efficiency policy. In March 2004 we started the “Operation Energy” with a complete program to raise awareness among our employees and their families. During the second half of the year, improvements in were implemented in the operational areas, allowing us to reduce overall power consumption. Even though we were able to reduce our power consumption during the second part of the year, we expect to show efficiency indicators in the future along with the results of the application of our plans and programs.

Other Energy ConsumptionsOther direct consumptions of energy correspond to the fuel used by our mobile equipment, of which the major portion is the diesel used by our high tonnage mining trucks. Total diesel consumption for the year 2004 was 4,664,926 Gjoules, which is equal to 134.8 million liters. 90% of this figure corresponds to our high tonnage mining trucks. The 16% increase in our consumption compared to the previous year is explained by the start-up of the pre-stripping of waste material at Escondida Norte.

Power Distribution According to Fuel Used in its Generation

NaturalGas76%

Other(Hydraulic, Diesel)

1%

Coal23%

EN 3GC 8

* Does not include fuel consumption by our contractors on site.

In addition to the diesel indicated above, light vehicles operating at the minesite (pick-up trucks, vans and other vehicles) used by Escondida personnel, registered a total consumption of 160 thousand liters of gasoline during the year.

We must point out that the reported figures account for our direct consumption and do not include third party services such as personnel and material transportation and the consumption of contractors operating on site.

POWER CONSUMPTION 2003 2004 VARIATION

DISTILLED DIESEL (GJOULES) 3,932,471* 4,664,926* 16%

60

MINERA ESCONDIDA – ENERGY EFFICIENCY POLICY

– Involve employees, suppliers and contractors in the improvement of the efficient use of energy in their own installations, promoting creativity and technological innovation.– Implement management systems to identify, evaluate, inspect and control the efficient utilization of energy, and train our employees responsible for them.– Develop systems and procedures to guarantee the highest level of reliability of our electrical system, through the generation of technical/ commercial alliances with our suppliers.– Communicate openly with our workers in topics related to energy efficiency and contribute to the development of policies, legislation and regulations that promote the efficient use of energy.– Promote the reduction of Green House Gas emission associated to our purchased power.

In Minera Escondida we are committed to the efficient use of energy; to achieving high standards in our processes and consequently obtain high energy yield; to motivating our organization towards continuous improvement by promoting innovation and creativity through reliability, costs and quality in an environment of sustainable development and progressive reduction of greenhouse gas emissions.

Consistent with these principles, wherever we operate we will:

– Develop, promote and maintain management principles aligned with our HSEC policy and five- year plans. – Pursue continuous improvement in our energy efficiency, considering operational expectations, management practices, and scientific & technological knowledge.– Comply and whenever pertinent exceed all laws, norms and regulations applicable to the use and transformation of energy in our installations.

We will monitor compliance of this policy, which will contribute to transform us into a high performance organization, demonstrating our commitment and responsibility towards the community and the environment.

61

EN 5GC 8

EN 20

WATER

In Escondida we obtain water for our operations from two ground water sources. During the year 2004, a total of 64,394 mega-liters of water were extracted from these sources.

The first of our water sources corresponds to a well field located in the Salar de Punta Negra salt flats, 35 km to the south east of the mining facilities, from where we extract an average 250 L/s. This wellfield is located in the vicinity of lagoon systems that are nesting and feeding areas for Andean flamingo colonies.

Our second source of water is located in Monturaqui, 90 km east of our facilities, from where we extract 1,400 L/s of water. This wellfield commenced operation in 1999.

Given the limited availability of water in the area where our operations are located, it is very important for us to recycle this valuable resource, therefore we have implemented systems that allow us to recover and re-use process water. During the year 2004, we recycled 22,979 mega liters of water, figure that is equal to 35.6% of our fresh consumption.

EN 22

As the following graph shows, the main water use in our operations, with a consumption equivalent of 91% of the total, occurs in the treatment of sulfide ores to obtain copper concentrate.

Water Consumption Distribution

Oxide OreProcessing

6%Dust Supression

and Other3%

Sulphide Ore Processing91%

BIODIVERSITY

In Escondida we occupy 9,550 hectares in our operations, of which 55 hectares can be classified as rich in biodiversity, although they are not included in the National System of Protected Wildlife Areas of the Chilean State (Sistema Nacional de Áreas Silvestres Protegidas del Estado de Chile - SNASPE).

Even though we do not perform ore extraction operations in these areas, indirect impacts may exist due to our presence. These potential impacts are in Punta Negra salt flats and could be caused by the existence of the well field used for the extraction of ground water.

On the other hand, in Coloso, where our filter plant and port facilities are located, potential impacts could originate from the discharge of treated process water into the ocean through a 1.3 kilometers submarine pipeline with a discharge point at a depth of 60 meters. After 14 years of continuous operation and monitoring we can declare that the information we have collected and reported to the authority, shows concrete evidence that the operation of the plant has not caused an impact. (See Case Study).

EN 6GC 8

EN 23EN 25

EN 7GC 8

SUMMARY 2003 2004

CONSUMPTION (MEGA LITERS) 51 ,924 64,394

RECYCLING (MEGA LITERS) 20,758 22,979

62

Given that we are aware of the sensitivity of these areas, in Escondida we developed environmental surveillance programs to monitor these effects, from the beginning of our activities. These programs go beyond a preventive environmental management, (see Case Studies) and their results are a contribution to scientific knowledge and have provided a set of tools for the preservation of the flora and fauna of the Segunda Región.

ATMOSPHERIC EMISSIONS

Given we do not operate a smelter; our atmospheric emissions are mainly limited to greenhouse gases. These are mainly the product of electric power generation (indirect energy) and the consumption of the diesel fuel used in operations (direct energy).

EN 8GC 8

EN 9GC 8

EN 10GC 8

* Emissions by contractors working at our sites are not included.

In all operative areas we have installed temporary storage areas for industrial and hazardous waste (yards or warehouses with the corresponding sanitary permits). Non hazardous domestic and industrial wastes are deposited in the waste rock dumps and covered. Hazardous waste is disposed in containers in a safety landfill located close to the mine installations. The safe landfill that has an impermeable layer and is covered by the corresponding sanitary permit is constantly monitored to detect leakage. Ni leakage has been detected since the landfill was put into service.

Sales yards have been implemented both at the minesite and Coloso, where any materials that have potential value for third parties are placed, to be sold or disposed of. Any disposal of waste generated by our operation and disposed outside of our premises, has a sanitary authorization.

In Escondida we recycle and reuse any waste with economic value or environmental potential. During the year 2004, 2,994,000 liters of used oil were recycled, of which 78% were recycled by a third party as fuel for a cement kiln and the remaining 22% were used on site in the preparation of explosives. Additionally 7,283 tons of scrap iron were used to manufacture grinding balls, most of which were returned to our concentrator plants.

In terms of recycling of our final product, copper is 100% reusable. Nevertheless, we do not have specific information about the use and recycling of the copper we produce.

EN 15GC 8

MM 3

None of our production processes use materials that exhaust the ozone layer. Emissions from air conditioners in offices or in trucks are not registered because they have a minor effect.

In Minera Escondida we are concerned about dust emissions into the atmosphere, since they may have an impact on the people that work in our installations. Under a requirement established by the regional environmental authority, we perform a daily monitoring procedure for respirable particulate material in our camp facilities. Additionally we have developed models and monitoring systems to determine the sources of these emissions and the relative importance of each source on the total amount of emissions in our operational areas and finally to determine measures for dust control.

SOLID WASTE

We implemented a management system, in which waste is classified into three types (domestic, industrial and hazardous). For each type of waste we have defined management strategies and specific reduction goals.

EN 11GC 8

SOLID INDUSTRIAL WASTE (IN M3)

2003 2004

GREENHOUSE GAS EMISSION

RESULTING FROM THE GENERATION

OF ELECTRIC POWER 1,180,478* 1,237,443*

EQUIVALENT

CO2 TONS

GREENHOUSE GAS EMISSION RESULTING

FROM THE USE OF DIESEL FUEL 274,050* 325,095*

EQUIVALENT

CO2 TONS

DOMESTIC

(M3)

INDUSTRIAL

(M3)

HAZARDOUS

(M3)

TOTAL

(M3)

2002 9,138 18,890 1,728 29,757

2003 13,267 32,195 1,936 47,398

2004 17,096 39,621 2,027 58,743

63

The potential environmental impacts on the marine habitat, associated to our activities in Coloso, are related to the alteration of the quality of water in the discharge area of our industrial effluent (diffuser) and the alteration of the sub-tidal sediments in the Caleta Coloso area and the inter-tidal sediments in the Playa Amarilla beach.

For over 14 years we monitored the potential impacts on the aquatic biota. Specifically we have a permanent oceanographic monitoring system in place, to measure metal levels in ocean water, in organisms and both in the sub-tidal and inter-tidal. Additionally we develop monitoring campaigns for the sub-tidal and inter-tidal aquatic communities and soft-bottom communities as well. We have also tracked the delivery of products from small scale fishermen in Caleta Coloso.

Of special scientific interest is a specific study on the marine species P. praeputialis (Piure). This marine species only exists in the Bay of Antofagasta, and genetic studies have established the existence of a similar species along 2 kilometers of the Australian coast. Our monitoring activities have enabled us to determine an increase of the marine species that inhabit the protected area of Coloso compared to the coastal line of Antofagasta.

As a result of the above mentioned studies, we have published in several scientific journals. If you wish more information about these publications, you may request it from our e-mail contact: besie.v.harvey@bhpbilliton.com

Monitoring Marine Species at Coloso

EN 27

CASE STUDY

64

Environmental Surveillance in the Punta Negra Salt Flat

The potential environmental impacts on the high Andean habitat associated to our activities in the well field area located in the Punta Negra salt flat are related to the extraction of ground water and the potential reduction or exhaustion of the natural recharge into Punta Negra. These potential impacts have indirect consequences on the biota of the salt flat and neighboring areas (vegetation and fauna).

From the beginning of our operations, we developed environmental surveillance programs to monitor these effects. Our monitoring programs include: quality and quantity of water extracted from the well field; measurement of static and dynamic levels in all production and observation wells; surface water level in the hydric systems of the Punta Negra salt flat; vegetation and fauna; and chemical analysis in lagoon sediments.

We have identified a decrease in the natural recharge of water into the Punta Negra salt flats; in response to which we developed a series of evaluations and hydro-geological models in the area that will enable us to implement corrective actions.

We have also developed impact mitigation projects; among which we can mention Artificial Feeding and Incubation of Flamingos; Artificial Recharge of the Lagoon Systems in the Punta Negra Salt Flat; Behavior of the Local Fox (Zorro Culpeo) Population.

EN 25

CASE STUDY

64

65

LIQUID RESIDUES

During the year 2004 in Coloso 684,700,000 liters of treated industrial water were discharged into the ocean, through a 1,320 meter long submarine pipeline, whose outfall lies at a depth of 60 meters. This industrial effluent is permanently monitored in accordance with criteria established by the Maritime Authority and we have not detected notorious or deleterious effects in the water column nor in the flora and fauna communities that inhabit the surrounding area.

We sell part of the treated water that results from the concentrate filtration process (approximately 21%) to third parties for industrial purposes and a minor part is used to irrigate green areas in Coloso. The weak nitric acid solution used to wash the ceramic plates in the Outokumpu filters cannot be discharged into the ocean, therefore it is sent, along with treated sewerage water, to the Cerro Jaron tailings dam, located 17 kilometers east of Coloso.

The Sulphide Leach plant, scheduled to commence operations in year 2006, includes the construction of an ocean water desalting plant in Coloso. The desalinated water obtained from this process, along with the treated industrial water currently discharged into the ocean, will be sent to the minesite. This way, we anticipate that from the moment the Sulphide Leach plant starts operating; discharge of treated water into the ocean will be limited to exceptional events.

We registered six environmental incidents during the year 2004 that resulted in spillage of hazardous substances onto the soil. Three of these incidents were related to spillage of lubrication oil, in approximate volumes of 700, 150 and 400 liters correspondingly. The other incidents were: a spillage of approximately 150 liters of coolants, another of 3,600 liters of sodium hydrosulfide and one of 300 liters of copper concentrate slurry. All these incidents were contained within the protective area designed for this purpose; therefore no associated impacts occurred. Any minor spill is immediately recovered by the users and deposited in high density plastic drums located in the different operational areas. During the year 2004, 67 cubic meters of material resulting from minor spills were deposited into the secure landfill, with an approximate content of 13.4 cubic meters of hydrocarbons.

It is important to point out that we have never received fines due to noncompliance of environmental regulations, and that our policy, beyond our legal obligation, is to communicate any relevant incident to the corresponding authority, in a timely and open manner.

EN 12GC 8

EN 32

EN 16GC 8

EN 13GC 8

PRODUCTS

As we mentioned at the beginning of this document, our products are copper concentrate, obtained from the treatment of sulphide ore, and copper cathodes from the processing of oxide ore. We extract both types of ore from the same pit, to later be processed in conventional flotation process in the case of sulphide ore and acid leaching followed by solvent extraction and electro-winning for oxide ore.

In the year 2001 we developed a life cycle study for fine copper and copper concentrate. The results of this study showed that our main environmental impacts are due to ore mining and processing. We used this study as the basis to focus our activities in the past few years to mitigate the impacts of our operations on the environment.

In general terms, the life cycle study concluded, that ore extraction is the main environmental impact on natural resources. Additionally the consumption of water and fossil fuels both direct and indirect due use of electric power, are the major environmental aspects resulting from our mining activities and the concentration and refining processes. Fuels are the main factor in the emission of CO2 and SO2 in both processing linesIn the case of copper concentrate, the production of steel balls and the generation of electric power are an important environmental load on the life cycle. On the other hand, sulfuric acid and the generation of electric power are the main contributors to the environmental load in the copper cathode product system.

Finally, the study recommended that the actions to reduce water consumption and increase energy efficiency, in both product systems, be considered as a priority in our continuous improvement activities. In this manner, since the report was issued, we have developed and implemented a series of studies and projects aimed at improving our performance in both these aspects.

MM 5

EN 14GC 8

66

SERVICES

Transportation Our operation considers the transportation of copper concentrate slurry from the mine site to our filtration facilities in Coloso using two 165 km pipelines with a diameter of 6 and 9 inches. In this way we have avoided the movement of a large number of trucks between the mine and Coloso. On the other hand, sulfuric acid and copper cathodes are transported by railroad between Antofagasta and the minesite. These two transportation systems have avoided the use of great quantities of fossil fuels and the emission of greenhouse gases.

CLOSURE PLAN

We are aware, that in spite of the positive impacts of our presence in the Antofagasta Region and in Chile, eventually our operations will cease. For this reason we have developed successive closure plans. Since a closure plan is a dynamic process, it must be updated as the mine develops. Our first closure plan was prepared in 1997, and we have already made three modifications and additional studies.

In general terms, we estimate that our operations will continue for another 40 years. For this purpose, to the end of December 2004, we have made provisions for an amount of US$ 60.6 million. Our current estimate for the cost of the final closure is US$ 173 million.

MM 10

EN 34

67

68

69

Relations with the Community

Our commitment with the community goes beyond our responsibility as employers in Antofagasta and in Chile. We are aware of the impact that our decisions and our performance can have on the community of which we are part.

As we pointed out before, we have two formal channels of relations with the community: Fundación Minera Escondida and the Vice-presidency for Corporate and External Affairs.

The employees of the Foundation and the Vice-presidency of Corporate Affairs dedicate a significant part of their time to actions, programs and dialogue with the community, the State and the media.

In Minera Escondida, we developed an extensive community relations program that responds to the values and principles that support the way we manage our business. The guidelines for this program are included in the 15 Standards defined in our HSEC Policy. Standard Nr. 7 for Communication, Consultation and Participation refers explicitly to the requirements we must fulfill in this area, for example: “having systems in place to identify and work with our stakeholders and develop strategies to manage their concerns and expectations”.

In Antofagasta, we focus our efforts in the development of programs aimed at improving the quality of life in the city. Among our programs that are highly valued by the community, we may point out the Children’s Painting Competition “Mamita yo te pinto a mi pinta” –(Mommy I Paint you My Way) directed to children in grade school levels and the Minera Escondida Literary Competition– for high school students, which in year 2004, were in versions XIV y XII respectively. Both initiatives are sponsored by the Regional Ministerial Secretary for Education and are fully organized and paid by the company.

In order to measure our performance, we monitor the implementation of our community relations program and measure its effects. For example at the corporate level, we do post-implementation evaluations on many of the initiatives and projects we support, especially the Research and Development projects that we carry out with different universities. In this area it is important to point out the R&D Agreement with the Universities of Antofagasta and Católica del Norte, which provided funding for a variety of projects during the last 10 years.

In Santiago, we support different projects aimed at providing massive access to artistic and cultural events of excellence, especially in areas with limited financial resources. One example is our nine-year alliance with the Theater Festival “Teatro a Mil” that has presented internationally renowned shows to massive audiences and with presentations in different areas in Santiago.

The contest “Santiago en Cien Palabras” (Santiago in 100 Words) that we organize jointly with the Santiago Metro and Plagio magazine, has increased the number of participants from 3,000 in year 2002 to 23,000 this past year. Both initiatives contribute to the creation of new audiences and generates an opportunity of participation to a large sector of the population in Santiago.

SO 1

70

FUNDACIÓN MINERA ESCONDIDA

Fundación Escondida was created by Minera Escondida in 1996 with the purpose of investing in the development of human and social capabilities, as an expression of the company’s commitment to social responsibility. They should constitute a valuable legacy and contribute effectively to social development at a local and national level beyond our mining activity (extract from the: Charter of Fundación Escondida). Based on the charter, in Fundación Minera Escondida we developed a strategic plan for social investment focused on the following five areas: Education, Health, Social Development, Indigenous Development and Youth. Each of these areas has clear objectives with annual goals and performance indicators for each project which allow us to measure the satisfaction of the participating community.

We achieve our goals by working hand in hand with the community both in financial and economic terms, to generate a change from an initial social situation to an improved social situation. From an economic perspective our policy for the development of projects, requires that the counterparts (the beneficiaries) contribute with at least 25% of the funds necessary to implement the project. During the year 2004, 158 projects were initiated, of which, 120 were completed during the year and 38 were in process as of December 31.

During the year 2004 a total of US $ 471,834 were budgeted and used to purchase fixed assets for the community in the areas of Education, Indigenous Development and Health, an is equal to 22% of the social investment resources executed by the foundation.

The performance indicators for the foundation are published in its annual report (see web site: www.fme.cl).

EC 10MM 1

Along the years, the number of such groups increased and began to work in a more organized manner, establishing objectives for the extent and involvement of their contribution to the community. The volunteer work in which our workers are engaged is highly heterogeneous in character, but are mainly focused on marginal sectors and groups at social risk.

We are very proud of the charitable work carried out by our employees. Financial support to these groups is not provided directly, but they may submit their projects and participate to obtain financial support from the Fundación Minera Escondida that has destined a certain amount for the projects presented by our direct and contractor employees.

We recently conducted a survey to determine the number of workers that participate in these activities as the result of which we identified 34 projects and organized groups of workers doing charitable work. Of this total, 32 are groups formed by workers in the different areas of the company and two projects are company-wide initiatives. Overall, these organized groups gather more than 1,500 persons.

A notable initiative is the Community Service Group formed by the Minera Escondida Ladies that was formed in1990 and is currently formed by 42 wives of company employees and contractors. This group carries out systematic assistance work helping various institutions whose main beneficiaries are women, children and elderly groups in social risk. One of the projects developed by this group is a “Scholarship Program” that was commenced in the year 2000. This project granted 11 scholarships to high school, technical and university students during this past year. The ladies work is self financed by different fund raising activities they organize during the year.

MM 7

INCIDENTS WITH THE COMMUNITY

In 2004 no incidents with the community were registered.

However, we must mention that late in the year 2004, incidents that indirectly affected the operation of our filter plant and port occurred in the fishermen village of Caleta Coloso, located in the vicinity of our facilities.

The incidents were originated in the construction of a sewer system and a waste water treatment plant for the community of Caleta Coloso, with government funds. The sewerage treatment plant commenced operations at the beginning of the year, but due to flow and maintenance problems it stopped operations by mid-year. At the end of November, the saturation of the plant and the sewer system caused a sanitary crisis and the Health Service ordered the temporary closure of all the restaurants and cookeries located in the area. In response to this decision, the owners of the restaurants, with the support of some members of the community carried out a public manifestation, obstructed the road and prevented movement of vehicles to and from our facilities during several hours.

Since the occurrence of this incident until the date this report was issued, we have contributed with the clean-up of the treatment plant each time it has been requested. On the other hand our Corporative Affairs team is involved in the search of a permanent solution, working with regional and municipal authorities and with the Coloso fishermen village.

VOLUNTARY WORK BY THE EMPLOYEES

OF MINERA ESCONDIDA

Historically our External Affairs team has received requests from our employees to carry out volunteer work with the community. In Minera Escondida, we recognize voluntary work as the community work carried out by our workers in their free time.

71

CASE STUDY

This project, developed in year 2002 consisted of the construction of a new building to replace the old Escuela F-89 grade school; today re-named Escuela Fundación Minera Escondida. The old 971 m2 building was in very poor conditions, and the teachers, students and all the community around the school were exposed to accidents. Additionally the capacity was limited to only 320 students.

During eight years the school community that was recognized for its academic performance had struggled to obtain the necessary resources to make this investment, but for various reasons the resources had not been granted.

In its search for concrete ways to develop human and social capabilities Fundación Minera Escondida, mapped the condition of the local education system and detected an important shortfall in school infrastructure. Based upon this diagnosis and after extensive meetings with representatives of the community and the school, the Board approved the investment of approximately two million US dollars to finance 100% of the construction and equipment of a 4,406 m2 building of for a new school with a maximum capacity of 640 students.

EC 12 Since the beginning of the 2003 school year, teachers and students of the Escuela Fundación Minera Escondida have enjoyed their new installations, with adequate rooms, complete facilities, excellent furnishings and equipment.

However, the contribution and commitment of the Foundation went beyond the delivery of the infrastructure, it is involved in the school’s educational project, implementing educational experiences, and delivering technical and technological resources to further improve the school’s academic performance.With these concrete actions, the work of the Fundación Minera Escondida demonstrates an effective expression of Social Responsibility, totally in line with the principles of the HSEC policy, applied by its founders Minera Escondida Limitada.

Fundación Minera Escondida School

72

EC 12 This Project was developed with the foundation contributing 75% of its cost, and the remainder 25% was financed by the Municipal Corporation of Social Development of Antofagasta

The corporation committed itself to deliver US $ 41,263to the Fundación Minera Escondida to finance the project that had a total cost of US $ 177,790. Specifically the project consisted of the full remodeling of 5 rooms located in different primary health attention clinics in Antofagasta. Four of these rooms were equipped as dental clinics and 1 as Primary Attention for Dental Emergencies (SAPUDENT). The project included 8 dentist chairs, 2 amalgamation units, 8 dental compressors and 16 dentist stools.

With the implementation of these dental clinics and the SAPUDENT, in December 2004, the total dental care projects developed by Fundación Minera Escondida in the country, add up to18, six of which are located in Antofagasta.

Dental Clinics for Primary Attention in Antofagasta

The facilities implemented by the Fundación Minera Escondida, in alliance with the local municipality, provided 56% of the primary dental attention demanded by the population benefited by the public system.

CASE STUDY

73

MM 8

HR 12MM 11

MM 9

SO 2GC 10

SO 3SO 5

PR 1PR 2

SMALL SCALE MINING

In the geographical area where our installations are located, there were no artisan mining activities at the time we initiated our operations and there are none today. Nevertheless, in other places within the Region of Antofagasta, these small scale operations do exist.

In this respect we can point out, our support to Baquedano Project, that belongs to the Antofagasta Mining Association and consists of the construction and operation of a copper ore treatment plant with an initial investment of US$ 1.6 million. Considering the high impact that this project will have on the small and medium size mining activity in the Region of Antofagasta, we transferred 338 tons of equipment and materials to the project. LAND AND INVOLUNTARY RELOCATION CONFLICTS

Standard No. 8 of our HSEC policy declares our respect for the rights of the indigenous communities, their traditions, culture and values which may be affected by our operations.

Since the creation of our company, we never have had conflicts with the indigenous people, the State or any other party. However, we recognize that our operations are located in a region where indigenous communities exist, as is the case with the Atacamanian People. This is the reason to relate with them through the Fundación Minera Escondida, that has an office in the town of San Pedro de Atacama.

Historically we had only one event with the resettlement of the fishermen of Caleta Coloso described in the case study on page 21.

CORRUPTION

In the Guide to Business Conduct we define behavior guidelines for issues related to economic incentives, facilitation payments, conflicts of interests, external activities, among others.

Each new worker receives a copy of the Business Conduct when they sign their work contract with Escondida.

In the operational scale, we have defined a set of cardinal rules that provide guidelines to increase clarity, confidence, consistency and responsibility for the decision making process in terms of safety and risk prevention. This set of rules constitutes a basic and minimum imperative of labor behavior.

POLITICAL CONTRIBUTIONS

In Minera Escondida, we do not participate or contribute to political activities of any kind. We apply the principles of our Guide to Business Conduct, which sets an impartial position in relation to political parties. Therefore, we do not contribute with funds or goods to any political party or candidate to public office. Through our Guide to Business Conduct we commit to maintain honest relations with the governments and their agencies, officers and personnel.

In terms of respect to the rules free trade, we respond to the HSEC standards and to our Guide to Business Conduct, which declares that any conduct infringing laws in matters of free trade is absolutely prohibited. We also give our employees the possibility to consult with a legal adviser belonging to the company in case of doubt on the scope and the requirements of the laws of free competition applicable in Chile.

PRODUCT RESPONSIBILITY:

CLIENT HEALTH AND SAFETY

Considering that copper is a commodity, we do not follow-up on the effects of our own product on health and safety. Nevertheless, as members of the International Copper Association, - ICA, we participate in programs that monitor and measure the impact of copper, in its different applications, on human health and the environment.

For each country to which we export our products we have a Material Safety Data Sheet (MSDS) available for the clients who request it.

74

The day care center “Sirenita”, is an educational institution located in a section of Antofagasta called Los Pinares. They recently were able to make one of their greatest challenges come true: repair their installations to avoid robberies and reduce the risk of accidents to more than 60 children in pre-school age that they care for. The work carried out by the workers to improve safety and comfort of the premises, included repairing fences, installing protections and painting the facilities. These actions were actively supported by the children’s mothers who worked mainly in construction and conservation of the playground.

This challenge became a reality due to the solidarity work of the employees of Ames Chile Industrial, a contractor company that participated in the second social responsibility awardable funds organized by Fundación Minera Escondida.

On the other hand, as part of the Project “Rescue Vehicle for the 3rd Firemen Company of Antofagasta” partially financed by the foundation’s awardable funds, the firemen and Ames Chile Industrial have joined efforts to translate their social responsibility into concrete actions, and provided training on risk prevention in the home environment to the children and parents, with emphasis on “Zero Harm”.

Community Work in the “Sirenita” Kindergarten and the Third Firemen Company

Volunteers from the 3rd Firemen Company focused their training on fire prevention and self care in the homes of the children that attend the Sirenita Kindergarten.

With this work and training activities carried out in the “Sirenita” Kindergarten, that takes care of more than 60 children from underprivileged homes, the employees of Ames Chile Industrial and the Third Firemen Company comply with one of the great challenges outlined the foundation in its awardable funds program: to strengthen involvement and face to face contact between Escondida workers, our contractor companies and non profit organizations, to carry out community work in areas under social risk in Antofagasta.

CASE STUDY

75

Compliance with Reference Standards

77

Vision y Strategy

1,1 – Vision and Strategy of the Organization with respect to its contribution to sustainable development. p 51,2 – Declaration of the executive President describing the main elements of the Sustainability Report. p 7

Profile

2,1 – Name of the informing organization. p 10

2,2 – Main Products and Services. p 10

2,3 – Operational structure of the organization. p 10

2,4 – Description of the main departments, branch offices and joint ventures. p 15

2,5 – Countries in which the organization operates. p 10

2,6 – Nature of the Property; legal form. p 10

2,7 – Nature of the markets served. p 29

2,8 – Size of the informing organization. p 29

2,9 – List of interested parties and attributes. p 19, 29

2,10 – Contact person for matters related to the Report. p 92,11 – Period covered by the Report. p 92,12 – Date of the previous Report. N/A This is the first

Sustainability Report (SR)2,13 – Coverage of the Report and specific limitations of its scope. p 7

2,14 – Significant Changes since the last Report. N/A This is the first SR2,15 – Basis for the elaboration of Reports with joint venture companies. N/A Does not have joint ventures2,16 – Description of the nature and effect of any reformulation of information presented in previous reports. N/A This is the first SR2,17 – Decision not to apply the GRI principles or protocols. p 72,18 – Criteria and definitions used in accounting. p 72,19 – Significant changes in the calculation methods compared to previous years. N/A This is the first SR

2,20 – Policies and internal practices to enhance and provide assurance about the accuracy, completeness, and reliability that can be placed on the sustainability report. p 9

2,21 – Policy and current practice with regard to providing independent assurance for the full report. p 92,22 – Means by which report users can obtain additional information and reports about economic, environmental,

and social aspects of the organization’s activities, including facility-specific information (if available.p 9

Government Structure and Managing Systems

3,1 – Governance structure of the organization, including major committees under the board of directors that are responsible for setting strategy and for oversight of the organization.

p 13

3,2 – Percentage of the board of directors that are independent, non-executive directors. p 13

3,3 – Process for determining the expertise board members need to guide the strategic direction of the organization, including issues related to environmental and social risks and opportunities.

p 13

3,4 – Board-level processes for overseeing the organization’s identification and management of economic, environmental, and social risks and opportunities.

p 15

3,5 – Linkage between executive compensation and achievement of the organization’s financial and non-financial goals (e.g., environmental performance, labor practices).

p 15

CODE

GRI

MATTER / INDICATOR SHOWN PAGE

Global Reporting Initiative (GRI) Index

78

3,6 – Organizational structure and key individuals responsible for oversight, implementation, and audit of economic, environmental, social, and related policies.

p 15

3,7 – Mission and values statements, internally developed codes of conduct or principles, and polices relevant to economic, environmental, and social performance and the status of implementation.

pp 5, 15

3,8 – Mechanisms for shareholders to provide recommendations or direction to the board of directors. p 13

3,9 – Identification and selection of main stakeholders. p 19

3,10 – Approaches to stakeholder consultation reported in terms of frequency of consultations by type and by stakeholder group. p 19

3,11 – Type of information generated by stakeholder consultations. p 19

3,12 – Use of information resulting from stakeholder engagements. p 20

3,13 – Explanation of whether and how the precautionary approach or principle is addressed by the organization. p 23

3,14 – Externally developed, voluntary economic, environmental, and social charters, sets of principles, or other initiatives to which the organization subscribes or which it endorses.

p 23

3,15 – Principal memberships in industry and business associations, and/or national/international advocacy organizations. p 24

3,16 – Policies and/or systems for managing upstream and downstream impacts. p 20

3,17 – Reporting organization’s approach to managing indirect economic, environmental, and social impacts resulting from its activities. p 20

3,18 – Major decisions during the reporting period regarding the location of, or changes in, operations. p 11

3,19 – Programs and procedures pertaining to economic, environmental, and social performance. Throughout the report3,20 – Status of certification pertaining to economic, environmental, and social management systems. p 57

Economic Performance Indicators

EC 1 – Net sales. p 29

EC 2 – Geographical breakdown of markets. pp 29, 30

EC 3 – Cost of all goods, materials and services purchased. p 32

EC 4 – Percentage of contracts paid in accordance with agreed terms excluding agreed penalty arrangements. p 34

EC 5 – Total payroll and benefits (including wages, pension, other benefits, and redundancy payments) broken down by country or region. pp 34, 45

EC 6 – Distributions to providers of capital broken down by interest on debt and borrowings, and dividends on all classes of shares, with any arrears of preferred dividends to be disclosed.

p 38

EC 7 – Increase/decrease in retained earnings at end of period. p 37

EC 8 – Total sum of taxes of all types paid broken down by country. p 34

EC 9 – Subsidies received broken down by country or region. pp 34, 36

EC 10 – Donations to community, civil society, and other groups broken down in terms of cash and in-kind donations per type of group. pp 37, 70

EC 11 – Supplier breakdown by organization and country. p 33

EC 12 – Total spent on non-core business infrastructure development. pp 71, 72

Indicators of Environmental Performance

EN 1 – Total materials use, other than water by type. p 58

EN 2 – Percentage of materials used that are wastes (processed or unprocessed) from sources. p 58

EN 3 – Direct energy use segmented by primary source. pp 58, 59

EN 4 – Indirect energy use. p 58

EN 5 – Total water use. p 61

EN 6 – Location and size of land owned, leased, or managed in biodiversity-rich habitats. p 61

Global Reporting Initiative (GRI) Index (continuation)

CODE

GRI

MATTER / INDICATOR SHOWN PAGE

79

EN 7 – Description of the major impacts on biodiversity associated with activities and/or products and services in terrestrial, freshwater, and marine environments.

p 61

EN 8 – Greenhouse gas emissions. p 62

EN 9 – Use and emissions of ozone-depleting substances. p 62

EN 10 – NOX SO

X and other significant air emissions by type p 62

EN 11 – Total amount of waste by type and destination p 62

EN 12 – Significant discharges to water by type. p 65

EN 13 – Significant spills of chemicals, oils and fuels in terms of total number and total volume. p 65

EN 14 – Significant environmental impacts of principal products and services. p 65

EN 15 – Percentage of weight of the products sold that is reclaimable at the end of the products’ useful life and percentage that is actually reclaimed.

p 62

EN 16 – Incidents of and fines for non-compliance with all applicable international declarations/conventions/treaties, and national, sub-national, regional, and local regulations associated with environmental issues.

p 65

EN 17 – Additional indicator: Initiatives to use renewable energy sources and to increase energy efficiency. p 59

EN 20 – Additional indicator: Water sources and related ecosystems/habitats significantly affected by use of water. p 61

EN 22 – Additional indicator: Total recycling and reuse of water. p 61

EN 23 – Additional indicator: Total amount of land owned, leased, or managed for production activities or extractive use. p 61

EN 25 – Additional indicator: Impacts of activities and operations on protected and sensitive areas. pp 61, 64

EN 27 – Additional Indicator: Objectives, programs and targets for protecting and restoring ecosystems and species in degraded areas. p 63

EN 32 – Additional Indicator: Water sources and related ecosystems / habitats significantly affected by discharges of water and runoff. p 65

EN 34 – Additional Indicator: Significant environmental impacts of transportation used for logistical purposes. p 66

EN 35 – Additional Indicator: Total environmental expenditures by type. pp 37, 57

Social Performance Indicators

LA 1 – Breakdown of workforce, where possible, by region/country, status (employee/non-employee), employment type (full time/part time), and by employment contract (indefinite or permanent/fixed term or temporary). Also identify workforce retained in conjunction with other employers (temporary agency workers or workers in co-employment relationships), segmented by region/country.

p 42

LA 2 – Net employment creation and average turnover segmented by region/country. p 41

LA 3 – Percentage of employees represented by independent trade union organizations or other bona fide employee representatives broken down geographically OR percentage of employees covered by collective bargaining agreements broken down by region/country.

p 45

LA 4 – Policy and procedures involving information, consultation, and negotiation with employees over changes in the reporting organization’s operations (e.g., restructuring).

p 45

LA 5 – Practices in recording and notification of occupational accidents and diseases, and how they relate to the ILO Code of Practice on Recording and Notification of Occupational Accidents and Diseases.

p 46

LA 6 – Description of formal joint health and safety committees comprising management and worker representatives and proportion of workforce covered by any such committees.

p 46

LA 7 – Standard injury, lost day, and absentee rates and number of work-related fatalities (including subcontracted workers). pp 44, 49

LA 8 – Description of policies and programs (for the workplace and beyond) on HIV/ AIDS. p 47

LA 9 – Average of training hours per year per employee by category of employee. p 50

LA 10 – Description of equal opportunity policies or programs, as well as monitoring systems to ensure compliance and results of monitoring. p 53

LA 11 – Composition of senior management and corporate governance bodies (including the board of directors), including female/male ratio and other indicators of diversity as culturally appropriate.

p 53

Global Reporting Initiative (GRI) Index (continuation)

CODE

GRI

MATTER / INDICATOR SHOWN PAGE

80

LA 12 – Additional Indicator: Employee benefits beyond those legally mandated. p 44

HR 1 – Description of policies, guidelines, corporate structure, and procedures to deal with all aspects of human rights relevant to operations, including monitoring mechanisms and results.

p 53

HR 2 – Evidence of consideration of human rights impacts as part of investment and procurement decisions, including selection of suppliers/contractors.

p 53

HR 3 – Description of policies and procedures to evaluate and address human rights performance within the supply chain and contractors, including monitoring systems and results of monitoring.

p 53

HR 4 – Description of global policy and procedures/programs preventing all forms of discrimination in operations, including monitoring systems and results of monitoring.

p 53

HR 5 – Description of freedom of association policy and extent to which this policy is universally applied independent of local laws, as well as description of procedures/programs to address this issue.

p 45

HR 6 – Description of policy excluding child labor as defined by the ILO Convention 138 and extent to which this policy is visibly stated and applied, as well as description of procedures/programs to address this issue, including monitoring systems and results of monitoring.

p 53

HR 7 – Description of policy to prevent forced and compulsory labor and extent to which this policy is visibly stated and applied as well as description of procedures/programs to address this issue, including monitoring systems and results of monitoring.

p 54

HR 12 – Additional: Description of policies, guidelines, and procedures to address the needs of indigenous people. p 73

SO 1 – Description of policies to manage impacts on communities in areas affected by activities, as well as description of procedures /programs to address this issue, including monitoring systems and results of monitoring.

p 69

SO 2 – Description of the policy, procedures/management systems, and compliance mechanisms for organizations and employees addressing bribery and corruption.

p 73

SO 3 – Description of policy, procedures/management systems, and compliance mechanisms for managing political lobbying and contributions.

p 73

SO 4 – Additional indicator: Awards received relevant to social, ethical and environmental matters performance. p 24

SO 5 – Additional indicator: Amount of money paid to political parties and institutions whose prime function is to fund political parties or their candidates.

p 73

PR 1 – Description of policy for preserving customer health and safety during use of products and services, and extent to which this policy is visibly stated and applied, as well as description of procedures/programs to address this issue, including monitoring system and results of monitoring.

p 73

PR 2 – Description of policy, procedures/management systems and compliance mechanisms related to product information and labeling. p 73

PR 3 – Description of policy, procedures/management systems and compliance mechanisms for consumer privacy. N/A Due to the characteristics of our products

Global Reporting Initiative (GRI) Index (continuation)

CODE

GRI

MATTER / INDICATOR SHOWN PAGE

81

International Council for Mining and Metals (ICMM) Index

CODE

ICMM

MINING – MATERIAL INDICATOR / INDICATOR TO REVELE PAGE

MM 1 – Percentage of goods, materials and services purchased locally, nationally or internationally. p 33

– Percentage of work force from local communities . p 42

– Investment in public infrastructure and its maintenance. p 70

MM 2 – Value added disaggregated to country level. p 27

MM 3 – The number/percentage of sites identified as requiring biodiversity management plans, and the number/percentage of sites with plans in place. Also include criteria for deciding that a biodiversity management plan is required and the key components of a plan.

p 62

MM 4 – Percentage of products derived from secondary materials. N/AMM 5 – Describe policies for assessing the eco-efficiency and sustainability of products. p 65

MM 6 – Describe the management of overburden, rock, tailings, and sludges/residues, including the assessment of risks, structural stability of storage facilities, metal leaching potential and hazardous properties.

Information not available

MM 7 – Describe significant incidents affecting communities during the reporting period, and grievance mechanisms used to resolve the incidents and their outcomes. pp 21, 70

MM 8 – Describe programs in which the reporting organization has been involved that addressed artisan and small-scale mining (ASM) within company areas of operation.

p 73

MM 9 – Identify sites where resettlements took place and the number of households resettled in each. – Include practices regarding resettlement and compensation, and the degree of alignment with the World Bank Operational Directive on Involuntary Resettlement.

p 73

MM 10 – Number or percentage of operations with closure plans, covering social – including labor transition –, environmental and economic aspects. Describe company policy, stakeholder engagement processes, frequency of plan review, and amount and type of financial provisions for closure.

p 66

MM 11 – Describe process for identifying local communities’ land and customary rights, including those of indigenous peoples, and grievance mechanisms used to resolve any disputes.

p 73

MM 12 – Describe approach to identifying, preparing for, and responding to emergency situations affecting employees, communities, or the environment. Include a description of the nature of existing skills, teams who respond to emergency situations, training, drills, review processes and community involvement.

p 49

MM 13 – Number of new cases of occupational disease by type. Describe programs to prevent occupational disease. p 47

82

Global Compact Index

PRINCIPLES OF THE GLOBAL COMPACT GRI INDICATOR PAGE

Human Rights

GC 1 – The companies support and respect the protection of international human rights. HR 1 p 53

HR 2 p 53

HR 3 p 53

HR 4 p 53

GC 2 – Assurance that the companies are not accomplices of the abuse of human rights. HR 2 p 53

Employees

GC 3 – The companies defend the liberty of association and the effective recognition of the right to collective bargaining. HR 5 p 45

LA 3 p 45

LA 4 p 45

GC 4 – Elimination of all forms of forced and obligatory labor. HR 7 p 54

GC 5 – Effective abolition of child labor. HR 6 p 53

GC 6 – Elimination of discrimination regarding employment and occupation. HR 4 p 53

LA 10 p 53

LA 11 p 53

Environment

CG 7 – That the companies support a precaution focus in front of the environmental challenges. 3, 13 p 23

EN 1 p 58

GC 8 – To undertake initiatives to promote a greater environmental responsibility. EN 2 p 58

EN 3 pp 58, 59

EN 4 p 58

EN 5 p 61

EN 6 p 61

EN 7 p 61

EN 8 p 62

EN 9 p 62

EN 10 p 62

EN 11 p 62

EN 12 p 65

EN 13 p 65

EN 14 p 65

EN 15 p 62

EN 16 p 65

GC 9 – Promote development and diffusion of technologies that respect the environment. 1,1 p 5EN 17 p 59

Anti-corruption GC 10 – The companies must avoid corruption and any type of extortion. SO 2 p 73

83

84

Glossary

BHP BillitonIncludes BHP Billiton Limitada and BHP PLc and its branch companies.

BiodiversityVariability of living organisms which form a part of all terrestrial and aquatic eco-systems. Includes the diversity of plants and animals

CharterSet of defined values and applicable to every employee of Minera Escondida

Zero HarmOur objective expressed in our HSEC policy, is that our operations do not cause harm to persons or the environment

Analysis/Evaluation of Product LifeExhaustive analysis of the complete life cycle of a product, process, system or function.

Sustainable DevelopmentIn sustainable development one commonly defines it as the development which responds to present day necessities without endangering the capacity of future generations of covering their own necessities.

EWRMEnterprise-Wide Risk Management - structured and consistent focus that aligns strategies, processes, persons, technology and knowledge with the purpose of evaluating and manage the uncertainties which the company must face to create value for its shareholders.

Greenhouse GasesGas emissions to the atmosphere that may contribute to global heating of the planet.

Global Reporting Initiative (GRI)A framework for the preparation of reports on the economic, environmental, and social performance of informing organizations.

Business Conduct GuideGuide that provides our employees and contractors with the guidelines and recommendations of conducting business and interacting with the government, communities and shareholders of the company.

HSEC Management StandardsA group of 15 management standards, mandatory for all BHP Billiton sites and operations, and are the basis for the development and application of the HSEC management systems at all levels of the company.

Phase IVConsisted in the construction of the Laguna Seca concentrator plant, the tailings management system, and the expansion of the Coloso filter plant.

HSEC PolicyCore declaration of the company referring to the applicable principles in matters of health, safety, environment and community: the policy is implemented through managing standards and the HSEC protocols.

Human Rights Assessment Toolkit A package of tools designed by BHP Billiton applied in its operations. It allows and facilitates the evaluation of risks related to human rights and the identification of the areas in which relief measures are required

Indigenous peopleNatives of a particular region or country.

Training IndexA rate that represents training hours compared to total hours worked

Severity RateDays lost x 1.000.000/ Total hours worked

Frequency RateNumber of accidents with loss of time x 1.000.000/ Total hours worked

Absenteeism RateHours of Absenteeism/ Work Hours Agreed. Absenteeism does not include vacations, strikes and activities with the labor union.

ISO 14001International Standard for the management of the environment. Its main function is to help the organization to minimize the impacts on the environment caused by its activities and to improve their environmental performance.

MMSDGlobal study of present day mining industry and its potential contributions toward a sustainable development.

MSDSMaterial Safety Data Sheet it is prepared for every product and identifies those aspects associated with its use as far as health, safety and environment are concerned.

RiskExposure to uncertain consequences – risk has two dimensions, the probability that an event may occur and the consequences of this occurrence.

StakeholdersOrganizations or persons that are impacted in a positive or negative manner by our operations, that have an interest in what we are doing, and those who have some degree of influence on what we do

Protocol on Greenhouse GasMeasurement protocol developed jointly with the World Institute of Resources and the World Entrepreneurial Council for Sustainable Development.

HIV/ AIDSAIDS is a disease caused by the human immunodeficiency virus (HIV), which destroys the white cells of the body, causing diseases and ultimately death.

85

Initials

AIAAsociación de Industriales de Antofagasta Industrial Association of Antofagasta

AFPAdministradora de Fondos de PensiónPension Fund Administrator

AMCHAMAmerican Chamber of Commerce

CDPCorporación de Desarrollo ProductivoProductive Development Corporation

CODEFFComité Nacional Pro Defensa de la Flora y FaunaNacional Committee for the Defence of Flora and Fauna

CONAComité Oceanográfico Nacional National Oceanografic Committee

CONAFCorporación Nacional ForestalNacional Forestry Corporation

CORFOCorporación de Fomento FabrilCorporation for the Promotion of the Industry

EWRMEnterprise-Wide Risk Management

E xCoExecutive Committee of BHP Billiton Base Metals

FMEFundación Minera Escondida

GRIGlobal Reporting Initiative

HSECHealth, Safety, Environment & Community

IC AInternational Copper Association

ICMMInternational Council on Mining & Metals

R&DResearch & Development

IFCInternacional Finance Corporation

MELMinera Escondida Limitada

MMSDMining, Metals and Sustainable Development

MSDSMaterial Safety Data Sheet

US$ MTHOUSA N DS OF US DOLL ARS

N/ANot Applicable

NGONon Government Organization

UNUnited Nations

PDPProyecto de Desarrollo de ProveedoresSupplier Development Project

SAGServicio Agrícola y GanaderoAgriculture and Livestock Service

SBSShared Business Services

SICEPSistema de Calificación de Proveedores de bienes y servicios Supplier Qualification System

SIMELSistema Integrado de Salud Minera Escondida LimitadaMinera Escondida Integrated Health System

SIGMELSistema Integrado de Gestión Minera Escondida LimitadaMinera Escondida Integrated Management System

SINGSistema Interconectado del Norte GrandeInterconnected Power Grid in Northern Chile

SONAMISociedad Nacional de Minería Nacional Mining Society

SERNAGEOMINServicio Nacional de Geología y MineríaNacional Service for Geology and Mining

VPVice Presidency

WBC SDWorld Business Council for Sustainable Development

WRIWorld Resources Institute

86