Fitch Ratings Affirms Codelco’s L-T Foreign IDR at ‘A’; Outlook Positive

Fitch Ratings has affirmed the following ratings on Corporacion Nacional del Cobre de Chile (Codelco):

–Long-term foreign currency Issuer Default Rating (IDR) at ‘A’, Outlook Positive;

–Long-term local currency IDR at ‘A+’, Outlook Positive;

–Long-term national scale rating at ‘AAA’chl, Outlook Stable.

–Senior unsecured debt at ‘A’.

Codelco’s ratings are highly influenced by the credit profile of Chile’s sovereign foreign currency IDR of ‘A’ and local currency IDR of ‘A+’, with a Positive Rating Outlook. The ratings incorporate its state ownership, favorable government support and strategic importance to the country. Codelco’s ratings also reflect its solid financial and export-oriented operating profile, as well as its position as the world’s largest copper and molybdenum producer.

Codelco maintains the world’s largest copper reserves, and represents more than 70 years of production at current levels. The company has one of the lowest-cash costs of production in the copper industry. This position is assisted by Codelco’s significant molybdenum byproduct production, which further lowers its production cost structure. These strengths are tempered by vulnerability to fluctuations in international commodity prices, rising production costs, large capital-investment requirements, increasing debt levels and exposure to political interference.

Codelco’s financial profile is strong. Although, operational results slightly diminished, it still remains strong due to sharp rise in copper and molybdenum prices over the last three years, lower production, and higher operational costs. The company reported total debt/EBITDA of 0.4 times (x) and EBITDA/interest expense of 40.8x through September 2007. Although Codelco competes in a cyclical market where revenues and profitability can vary greatly, the company has benefited from high operational margins even during periods of low prices given its relatively low production cost compared with other market participants. Production costs have been, and will continue to increase as a result of rising energy and labor costs in Chile, which will pressure operating margins over the medium term assuming static prices.

Codelco benefits from strong liquidity, backed by a track record of accessing debt in the local and international markets and a well-diversified debt maturity profile. At 9M07, the company had US$4.3 billion of total debt compared with US$3.7 billion at 9M06, this increase was the result of a new US$400 million, seven year, senior unsecured term loan facility issued in September 2007, which partially financed Codelco’s investment program.

Codelco, Chile’s state copper company, is engaged in the mining, smelting and refining of copper, molybdenum and other sub-products. Codelco is the largest copper and molybdenum producer in the world, with approximately 1.78 million tons per year of copper and 27.2 thousand tons per year of molybdenum. The company’s diversified operations are distributed in four mining divisions (Codelco Norte, Salvador, Andina, and El Teniente) and the Ventana’s smelter and refinery division, as well as a 49% share in El Abra mine.

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