Letter from the Chairman of the Board

On behalf of the Board of Directors of the National Copper Corporation of Chile, I have the pleasant responsibility of presenting the 2010 Sustainability Report, an official document of the Corporation whose objective is to present a balanced, documented, and verifiable view of our sustainability performance between January 1st and December 31st 2010.

 

This Report is an essential corporate management document, as it complements the presentation of our business results in the Annual Financial Report while emphasizing “how” we obtained such results.

 

Modern societies don´t just accept results, good though they may be, if the means used to obtain them are not accounted for. Approval of the Corporation as a company depends more and more on its sustainability management. This approval is increasingly important to the results themselves; for example, to obtain funding, enjoy a social license to operate, or achieving project approval, and for many other reasons.

 

I would like to highlight that this is the first edition of the Codelco Sustainability Report in which the Board of Directors has participated in its elaboration, by giving final approval to its scope and contents.

 

I would also like to point out that with this report Codelco has achieved 12 years of uninterrupted editions, becoming a pioneer in Chile with regards to communicating sustainability performance since the publication of the first Environmental Report in 1999 – the first Report in Chile- as well as a pioneer in applying Global Initiative Reporting (GRI) guidelines since 2002, independent verification of its contents for nine years, and quarterly publishing of diverse environmental and safety indicators on its website since 2008.

 

Codelco’s economic, environmental and social management during 2010 presented many advances, as well as aspects which are negative or which need future improvement.

 

Among the first, it’s important to highlight that this year was one of the best in terms of company economic performance, mainly due to the surplus generated, which was 47% higher than the previous period. This signals a step forward in recovering from the global financial crisis and the increase of demand for copper products in developed and emerging countries.

 

In environmental matters, Codelco has made progress in reducing and mitigating its negative impacts, meeting emissions and waste regulations, and making efforts to use energy and water resources efficiently. This is how during this year wastewater discharges were noticeably reduced and high levels of water recirculation and efficient use of energy have been maintained.

 

However, this evaluation must also recognize negative aspects. Firstly, we must mention that in terms of safety, despite all our efforts and achievements during this period, we had to mourn the loss of seven workers, three from Codelco and four from contractor companies. This imposes a need to turn this matter around during our administration.

 

This is why, on behalf of the Board I represent, I am taking this opportunity to ratify that the health and safety of our workers is our first priority, which is why we have established stringent goals and commitments, such as notably decreasing our frequency and severity rates.

 

Even though during 2010 we reached the lowest accident frequency rate in the history of Codelco – 16.5% lower than in 2009 -, we still need to continue improving, and definitively reach our ethical commitment of eradicating fatalities from our operations and projects.

 

Of no less importance is our relationship with the communities surrounding Company operations, where, in accordance with our Corporate Policy for Sustainable Development, we have sought to generate favorable conditions that stimulate and strengthen their development, through transparent, trustworthy and respectful relations. This is why for over 10 years the Corporation has driven and supported diverse social initiatives through the Codelco Good Neighbor Program.

 

At the same time -and another positive aspect of the 2010 management- this Board is proud to present in this edition our new Codelco Value Statement, which represents all those working in the company and acts as the main guide for our management and behavior.

 

Despite not correlating strictly to the period being informed, on this occasion I must take on the incident which affected the town of La Greda on March 23rd 2011, near the industrial complex in the Valparaíso region where our Ventanas Division is located. This environmental episode, produced by a failure occurred during start-up of a smelter after a programmed maintenance, triggered the involuntary emission of sulfur dioxide (SO2), temporarily affecting the residents of the area. We restate the apologies offered previously, first of all to those affected, to the authorities and to the national community in general, and we confirm it corresponds to an isolated incident, and that all operational measures are being taken to avoid it ever being repeated.

 

Despite the above, we consider that the historic situation produced by industrial and residential coexistence in the Quintero bay, which after 50 years shows signs of accumulated multi-industrial pollution, is not acceptable today, despite compliance shown by our Ventanas Division with regulations regarding emissions since the establishment of environmental regulations in the area.

 

Regarding this, Codelco reiterates its disposition to collaborate with government authorities, to work alongside the communities, other industries and with the local authorities, so as to overcome this situation in terms of feasible mitigations and in the establishment of coexistence standards acceptable to all. From a Corporate Governance viewpoint, 2010 was a key year for the transformation brought about in the Corporation in this area, as the changes established in the New Codelco Corporate Governance Law, which were defined towards the end of 2009 through the promulgation of modifications to Law 1.350 (Codelco Law), were set in motion.

 

The importance of the Corporate Governance law is that it assimilates the functioning of this state-owned company to that of a private company, which presents a historic opportunity due to the profound changes in company management. On March 1st, a professional Board of Directors was appointed which is independent of the Government, responding instead to the State of Chile.

 

On May 11th 2010 I had the honor being appointed Chairman of this independent Board of Directors, where we are doing our best effort as a collegiate entity to make Codelco a company of excellence that benefits all Chileans, with sustainability occupying a relevant place in our business strategy.

 

Different committees have been established as a functional mode within the Board of Directors for the purpose of having a closer view of the topics which are relevant to the Corporation. These committees cover the areas of Corporate Governance and Sustainability, Auditing, Ethics and Compensations, Investment Projects and Funding, and Management. I would like to stress the role of the Governance and Sustainability Committee of this Board, which I serve and preside, and which has permanently monitored issues such as water resources, community management, mine closure, emissions, etc. This Committee’s creation and activity, whose objective, among others, is to periodically evaluate and support the Board in matters related to sustainability policies, reaffirms how important it is to Codelco to make efficient use of natural resources and to control and mitigate its potential impacts in all areas related to sustainability.

 

By way of conclusion, I would like to close this letter by making a reference to Codelco’s participation in the rescue of 33 miners trapped in the San José Mine. Codelco’s contribution was fundamental to this historic achievement by Chile.From day one of the tragedy the Government requested us to collaborate with our best effort, and with an absolute determination to rescue the trapped miners.

 

To answer this call, the Corporation put together a team of over 100 people who joined forces in different moments and tasks, demonstrating the capability and commitment of our workers. For this, Codelco assigned the most experienced professionals to this enormous challenge, who gave themselves to this task with great generosity and the highest standards. To them, we once more extend our most sincere acknowledgement.

 

This episode fills us with pride to be Chilean and gives us the confidence and inspiration to face, with the same devotion, committment and generous spirit, the challenges faced by the Corporation, for the benefit and progress of its owners, the people of Chile.