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## Letter to the Shareholders 

2004 was an outstanding year for Southern Peru Cop- per Corporation (SPCC). In addition to the substantial rise in the price of metals produced by the Company, SPCC’s output and sales reached unprecedented levels. The production of copper, molybdenum, and silver in- creased 6.06%, 17.79%, and 6.0%, respectively, as compared to 2003. Company products sold (copper, molybdenum, silver) also increased 115%. 

Price hikes were outstanding during 2004 as compared to the previous year. Average price of products was: copper, $1.30 per pound, that is, 60% higher than in 2003; molybdenum, $16.21 per pound, a 300% in- crease; silver, $6.68 per ounce, as compared to $4.87 in 2003. 

With respect to 2004 production, mined copper totaled 876 million pounds in 2004. Higher copper output at SPCC resulted mainly from expanded production at the Toquepala mine and higher treated volumes after pro- cessing capacity increased at the concentration plant. The Toquepala concentration plant produced 580,111 tons of concentrate, a new production record. Further- more, Toquepala mine also produced more molybdenum: output increased from 4,153 tons to 6,004 tons. This 

growth also resulted from higher mined ore grades and recoveries in 2004. 

Greater output at Cuajone mine in 2004 also resulted from higher ore grades in 2004 and improved recovery in grinding that resulted in 752,941 tons of concentrate, also an unprecedented production level. SX/EW cop- per output decreased 12.4 million pounds due to lower grades in the pregnant leaching solutions (PLS). The smelter also attained a new record by smelting 1,213,030 tons of concentrate. 

Net income was an outstanding item in 2004: it reached $597 million, or 400% higher than in 2003. Operating cash cost per pound of copper decreased from $0.399 to $0.046 due mainly to high price of molybdenum, a by-product of copper mining. 

At present, SPCC has mining operations in Peru, Mexico and Chile, with beds to be explored that might increase the Company’s reserves and future profile. SPCC also maintained its prospecting program in all of Peru, mainly in the south, focusing in the finding of copper and gold resources. With respect to Los Chancas project, the drill- ing program was maintained during 2004 and, according 

to estimates, the pre-feasibility study will continue dur- ing 2005. 

Southern Peru launched major projects in 2004, such as the one related with the Leaching Dums Project, where conveyor belts will be replaced with haulage trucks to transport minerals at the Toquepala mine. Construction works are scheduled to conclude in June 2005. 

Also in 2004, as part of the Environmental Compliance and Management Program agreed with the government of Peru, SPCC began to upgrade the Ilo smelter. The up- graded smelter will use Australian Isasmelt technology to process 1.2 million tons of copper annually, with anodes as the final product instead of the blister bars produced at present. Sulfur capture will be of the order of 95%, well over the standards required by environmental regulations in force. The smelter upgrading is the largest environ- mental project undertaken by our Company in Peru, and once it is completed, it will mean the conclusion of SPCC’s environmental commitments in the country. 

SPCC continued its globalization efforts during 2004. The Board of Directors appointed a special committee to ana- lyze the proposal to acquire Minera Mexico, a subsidiary 

of Americas Mining Corporation (AMC), the holding of Grupo Mexico engaged in mining operations. After eight months of comprehensive work, the Special Committee of Disinterested Directors advised the Board to accept the offer. The proposal was approved by a majority of the Board and, once authorized by the relevant regulat- ing authorities, the shareholders will vote on the matter during the first quarter of 2005. 

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Southern Peru foresees the investment projects it carries out will further consolidate its position among the main producers of metals worldwide, therefore signaling a positive economic return for our shareholders, a contri- bution for the relevant countries and their communities, and a benefit for SPCC workers. 

On behalf of Southern Peru’s Board of Directors, we want to express our gratitude to the workers and employees for their effort and dedication, to our clients for their trust and loyalty, and to you, our shareholders, for your long-term support. 

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