Fitch Affirms ENAMI's 'A-' Foreign Currency Rating.

CHICAGO -- Fitch Ratings has affirmed the 'A-' long-term foreign currency rating of Empresa Nacional de Mineria (ENAMI). The Rating Outlook for ENAMI's foreign currency rating remains Positive. Fitch has also affirmed ENAMI's 'A+' long-term local currency rating. The Rating Outlook for ENAMI's local currency rating remains Stable. The ratings reflect the explicit and implicit support the company receives from the Chilean government.

ENAMI's 'A-' foreign currency rating applies to the company's US$220 million three-year syndicated bank loan due December 2005. The loan carries a full and unconditional guarantee from the Republic of Chile whose long-term foreign currency obligations are also rated 'A-', Outlook Positive.

The ENAMI ratings also indicate the credit quality of all debt at ENAMI, including debt that does not carry an explicit government guarantee. Fitch does not differentiate between the debt with and without the explicit government guarantee due to a letter from the government to the unsecured lenders, in which the government expresses its intent to support these loans and states that it does not consider them subordinate to the syndicated loan. Fitch believes that the Chilean government will honor this implicit commitment to ENAMI's lenders due to the negative externalities that would arise from a default by ENAMI.

ENAMI's financial leverage remains high. Since 1994, the company's total debt has grown to nearly US$500 million from about US$250 million, mainly as a result of the capital expenditures made to adhere to stricter environmental standards and the cumulative, dividend like advances on earnings made to the Chilean government of approximately US$164 million.

Current industry conditions will benefit ENAMI as treatment and refining fees (TC/RCs) have improved. Due to the high price of copper and production levels of concentrate in the market, TC/RCs are expected to increase significantly in 2005. Due primarily to higher operating income, ENAMI's ratio of total debt-to-EBITDA declined to 7.5 times (x) as of June 30, 2004, from 9.5x in 2003. Interest coverage, as measured by EBITDA/interest expense, has improved to 4.4x from less than 2.1x over the same period. ENAMI's liquidity has also improved, as the company held US$32 million in cash at June 30, 2004 compared to just US$6.6 million at year-end 2003.

In 2005, ENAMI will most likely sell its smelting and refining facilities at Ventanas to government-owned Corporacion Nacional del Cobre (Codelco), the world's largest copper producer. These asset sales should generate about US$400 million in proceeds which would be used to reduce debt and thereby substantially improve ENAMI's credit profile. The company's interests in several Chilean copper mines, such as Quebrada Blanca and Carmen de Andacollo, as well as numerous mineral prospects, could be sold and the proceeds used to reduce debt. Remaining debt would be serviced from the cash flow generated by ENAMI's Paipote smelter (with the capacity to process about 300,000 tons of concentrates per year) and the Matta ore processing plant. Support will continue for Chile's small scale mining sector as treatment and refining capacity at Ventanas will still be allotted to such miners.

ENAMI is wholly-owned by the Chilean government and provides copper smelting and refining services to small to midsized mining operations. ENAMI supports these companies by providing price-stabilization programs, loans, and technical and marketing assistance. In 2003, ENAMI sold 213,000 tons of electrolytic copper, that together with sales of copper concentrates, gold, silver, sulfuric acid and smelting and refining services, generated total revenues of US$609 million.