Income refers to revenues before income taxes, extraordinary items, minority interest and Law Nº 13,196, which applies a 10% tax on foreign currency returns from the sale of copper and byproducts abroad.

The US$237 million rise in income before taxes in 2003 over 2002 reflects primarily the following factors:

The higher copper price was the main positive factor affecting income before taxes. The average copper price on the London Metal Exchange reached 80.7 cents per pound in 2003, up 10.1 cents over the price the previous year. The higher price accounted for a US$342 million rise in income due to sales of our own copper. However, this higher price was down by US$61 million due to a 161,000 ton decline in sales.

Lower sales reflected the decision made by the company's Board of Directors in November 2002 to set aside 200,000 fine tons of copper from 2003 production to establish a stabilizing stock.

Among the adverse factors that had a strong impact on income were foreign exchange differences and corrections, the result of asset and liability balances in currencies other than the dollar, particularly pesos, held by the Corporation.

At the end of the 2002 fiscal year, the exchange rate stood at 718.61 pesos per dollar, which fell to 593.8 pesos per dollar by the end of December 2003. The peso revaluation required a greater exchange rate correction between the two fiscal years, negatively affecting 2003 income by US$74 million, US$107 million more than in 2002, when it had a positive effect of US$33 million. This situation occurred mainly due to obligations for severance pay for years of service that Codelco owes its workers.

Better results in related companies helped to offset the effect of foreign exchange differences.

Earnings before interest, taxes, depreciation, and amortization, EBITDA, reached US$1.296 billion in 2003, up from US$1.039 billion in 2002.

In 2003, Codelco's contribution to the national Treasury reached US$688 million, up from US$326 million the previous year, which breaks down as follows:

Average net cathode costs for divisions reached 55.9 cents per pound in 2003, similar to the 55.5 cents per pound posted in 2002.

Higher costs and special company charges led to a general rise in Codelco's costs. Of these, the most important was differences in the exchange rate, up in 2003 over 2002, which pushed costs 3.2 cents higher; higher financial expenditures, reflecting more borrowing to finance the investment plan, which contributed a 0.9 cent increase; while higher costs for retirement plans, associated with productivity increase projects, amounted to 0.5 cents. In summary, these three exceptional situations affected 2003 costs by 4.6 cents.

Molybdenum production reached 23,173 tons, up 3,272 tons, or 16%.

The ore processed by Codelco's Divisions reached 196 million dry metric tons up 192 million tons over the previous year.

The average ore grade was 0.91%, similar to 2002. For the five-year period, 1999-2003, it should be noted that the ore grade has declined 13%.

Sales of own copper reached 1,421,000 tons in 2003, 161,000 tons less than in 2002, when these reached 1,582,000 tons. Associated income reached US$2.551 billion and US$2.415 billion, respectively.

Sales of third party copper reached US$619 million during 2003, up from US$575 million in 2002.

Income from by products and other business reached US$612 million in 2003, up from US$500 million in 2002.

Molybdenum, the main by product, generated sales of US$237 million, up US$86 million from US$151 million in 2002.

Codelco's sales policy for non-refined output aims to ensure the best possible use of its facilities. The first priority is to supply smelters with concentrates and refineries with anodes, and then determine the excess available for sale.

Operations carried out do not include those of a speculative nature.

As with the copper price, operations carried out do not include those of a speculative nature.

Goods insured: all facilities used for the purposes of its main business in Chile.

Type of coverage: all risk of loss and material damage combined with interrupted activities, with an initial loss of US$500 million.

During 2003, Codelco approached the financial market on two occasions. In the first half, it obtained a syndicated credit from seven international banks worth US$300 million; during the second half, it issued US$500 million in bonds on the international market.

Bond issue
These results show investor's confidence in Codelco's management and experience.
In 2003, Codelco issued US$500 million in ten-year bonds on the international market. Demand reached over US$3.300 billion, with a 125 base point spread over US Treasury bonds, which represents the lowest spread obtained by a Latin American company in the past five years.

Syndicated loan
The loan to Codelco matures in five years, with amortization at the period's end and an annual margin of Libor plus 0.45%.

This operation reaffirmed Codelco's excellent standing in international financial markets, as it once again obtained the best conditions for a Latin American company for similar loans by amount and maturity. This way the company contributes to setting favorable credit conditions for other Chilean companies.

Aside from the quality of the participating banks, the most outstanding feature of this operation was the spread of 0.45% per annum. This reflects the risk premium that capital lenders require from the borrower. This clearly confirmed Codelco's excellent reputation in the international banking market.

Ratings
On the Chilean market, Codelco's risk rating is AAA, according to Fitch-Rate and Feller-Rate, the top rating possible for a Chilean issuer.

Codelco's international risk rating has remained at A2 (Moody's) and A- (Standard & Poor's). Codelco's rating is two levels higher than that of the Chilean Republic, according to Moody's, and the best in Latin America.

For Standard & Poor's, the risk rating is tied to analysts' evaluation of Chile's country risk. Both classifications place Codelco among the world's top rated mining firms. The main bases for this rating include its solid business position in the world copper market and its good operating performance. Codelco generates a good cash flow; it is one of the world's most efficient copper producers; and it has the largest known reserves.