Fitch Upgrades ENAMI's Foreign Currency Rating to 'A'.

CHICAGO -- Fitch Ratings has upgraded the long-term foreign currency rating of Empresa Nacional de Mineria (ENAMI) to 'A' from 'A-'. Fitch has also affirmed the 'A+' senior unsecured local currency (Chilean peso) rating. The Rating Outlook is Stable.

This rating action follows this week's upgrade of the long-term foreign currency sovereign rating of Chile to 'A' from 'A-'. Fitch also affirmed the 'A+' local currency rating of the Republic of Chile. ENAMI's 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 that closed Dec. 31, 2002. The loan carries a full and unconditional guarantee from the Republic of Chile whose long-term foreign currency obligations are also rated 'A'. The ENAMI ratings also represent 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 (including non interest-bearing debt) has grown to approximately 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. 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 financial flexibility.

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 2004, ENAMI registered sales of 227,000 tons of electrolytic copper, that together with sales of gold, silver, sulfuric acid, other by-products, as well as smelting and refining services, generated total revenues of US$878 million.