Principles and Actions:Copper in Chile, Codelco

&Sustainable Development

Isabel MarshallVice President for Quality,

Marketing and Sustainability

Codelco

April - 2004April - 2004

•• Concepts on SustainableConcepts on Sustainable

Development (SD) & MiningDevelopment (SD) & Mining

•• The Business CaseThe Business Case

•• Chile: Mining and SD PerformanceChile: Mining and SD Performance

•• Codelco: Beyond StatementsCodelco: Beyond Statements

Introduction

Sustainable Development

* The Bruntland Definition from the 1992 Rio Summit

““development that meets the needs ofthe present without compromising the

ability of future generations to meettheir own needs”*

–– Integrates social, economic and Integrates social, economic and

environmental goalsenvironmental goals

–– Supports development to meet the needs of the Supports development to meet the needs of the

presentpresent

–– Current generation must not compromise the Current generation must not compromise the

ability of future generations to meet their ownability of future generations to meet their own

needsneeds

• Some believe that minerals and metals are part of the problem, notthe solution: environmental & social impacts, with little or nileconomic benefits

• Mining would be un-sustainable per se, since the resource is notrenewable

• In the case of mineral resources, however,

– new geological discoveries continue to add to world mineralreserves;

– moreover, many mineral commodities, especially metallic mineralproducts, can be recovered after use and recycled

• It is essential that depleting mineral assets be used to generate newwealth which, in the form of useful lasting capital, can benefitpresent and future generations

Sustainable Development &Mining

Mining’s role

• Creation of new wealth

– Jobs, taxes and economic growth– Foundation for eliminating poverty– Enhanced standard of living

• Providing mineral-based products to meet society’sbasic material and energy needs and demands

– Building blocks of economic growth– Metallurgical and technological advances have provided

advances to civilization

Mining’s Role

• Mitigation of mining’s impact on the environment

– Modern mines are designed and built for closure– Mineral products are compatible with environmental

protection– Recyclable mineral products

• Efficient use of resources – energy, water, land andminerals

– Technological improvements promote resourceconservation and efficiency, and extend mine life

Copper & SD

• Copper is a creator of new wealth: the case of Chile

• Copper provides mineral-based products to meet society’s needsand demands

• Copper production is compatible is with environmental andhealth protection

• A recyclable mineral product: high rate of recycling: >50% indeveloped countries

• Copper allows an efficient use of energy

• Copper is an essential nutrient: required by humans and allliving species

• WHO: higher risk for human health from deficit than fromexcess of copper

•• Concepts on SD & MiningConcepts on SD & Mining

•• The Business CaseThe Business Case

•• Chile: Mining and SD PerformanceChile: Mining and SD Performance

•• Codelco: Beyond StatementsCodelco: Beyond Statements

Industry Is Changing

• Historically, companies were expected to meet their

responsibilities to their employees, their shareholders,

and the regulatory authorities

• Today increasingly it’s in a company’s financial interest

to strive for good environmental, economic, and social

performance

• SD: a good business? From cost reduction to a value

maximization approach

The Business Case for SD (I)

• Access to markets and consumers:

– Markets that are increasingly demanding

– SD based regulations that limit market access

– The possibility of differentiating our products: CertificationSystems (ISO 14,001; OHSAS 18,001; SD ISO?)

• Access to financial and natural resources

• Project feasibility, access to business & NPV

• Savings & recycling of resources (energy, water) andwastes

The Business Case for SD (II)

• Financial risk

• Investor preferences and requirements

• Integral control of quality and production cycle fromexploration to customer satisfaction

• Quality & satisfaction of labor force

• Security, risk control, occupational health: lower healthcosts

• Technological innovation, environment & productionefficiency

• Lower closure costs

•• Concepts on SD & MiningConcepts on SD & Mining

•• The Business CaseThe Business Case

•• Chile: Mining and SD PerformanceChile: Mining and SD Performance

•• Codelco: Beyond StatementsCodelco: Beyond Statements

Chilean Mining& Environment

• The Chilean mining industry has been the leader in theenvironmental performance

• Large scale mining has decisively cooperated in thedevelopment of our environmental regulations

• Large mining companies have their own environmentalstandards, often more demanding than the Chilean regulations

• Environmental policies, programs and practices are integratedas an essential management element

• The mining industry has lead the implementation ofenvironmental management systems during the 90s

– Environmental Impact Assessment System (EIAS)

– Pollution abatement plans in copper smelters

– Voluntary commitments to international standards (ISO 9,001

and 14,001)

– Mine closure plans

– Framework Agreement for Clean Production (Chilean Mining

Council with government authorities)

– Voluntary company initiatives

– Environmental Reports

SD & Chilean Mining Sector

Investment submitted toEIAS by sector (to 2002)

639

711

204

345

558

8,676

2,850

4,232

7,934

6,221

2,976

4,086

US$17,403

0 2.000 4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000 20.000

Environmental cleaning

Fishing and see food

Others

MINING

Textile facilities

Building

Port infrastructure

Hydraulic infrastructure

Transport infrastructure

Forest

Equipment

Energy

Farming and livestock

Million US$

Total: US$56,840

Reduction of SO2 emissionsfrom Chilean copper smelters

• SO2 emissions were reduced 64% according to plans, despite the fact that smelter production increasedslightly in this period.

• Arsenic emissions were reduced from about 4,600 tons in 1998 to 2,064 tons in 2001.

Copper smelter production

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1993 1994 1995 1996 1997 1998 1999 2000 2001 20020

500

1000

1500

2000

2500

3000

3500

4000

4500

SO2 emission Sulfuric acidproduction

Thousands metric tonsSulfuric

acidSO2 emission

&Copper smelter

production

• People who work in large - scale mining are a keyfactor in the development and success of thecompanies:

– The mining industry offers top quality jobs, salaries and fair

compensations

– The highest unionization rate in the country

– High levels of training and technical abilities

SD & Chilean the Mining Sector

UnionizationPercentage

0

10

20

30

40

50

60

70

80

Mining CouncilCompanies

National AveragePe

rcen

tage

(%)

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

Mining CouncilCompanies

National Average

Inco

me

(US$

)

Annual Average Income

Average Years of Studies

0

2

4

6

8

10

12

14

Mining CouncilCompanies

National Average

Yea

rs

0

100

200

300

400

500

600

700

Mining CouncilCompanies

National Average

(US$

)

Investment in Training

• Communities, economy & society

– Chile, where mining is a crucial sector of the economy, is now

among the group of ‘high human development’ countries (UNDP).

– Chile has a state owned and managed copper stabilization fund,

into which it saves part of state-copper revenues during high

price cycles, and spends out of it during depressive cycles.

– The mining boom explains 10% of the overall per capita GDP

increase of Chile during the 1990s, and salaries in mining double

the national average (CIPMA 2002).

SD & Chilean the Mining Sector

Poverty & Education

National Average

Local Average

Primary Education 2000%

Yea

rs

Poverty percentage over population, I,II,II y IV regions

•• Concepts on SD & MiningConcepts on SD & Mining

•• The Business CaseThe Business Case

•• Chile: Mining and SD PerformanceChile: Mining and SD Performance

•• Codelco: Beyond StatementsCodelco: Beyond Statements

Introduction

“ This Corporation has embraced the principles ofsustainable development and views them as anessential part of its business project. Proof of this isthe approval during this year of the corporate policyon sustainable development, which contains thevision and commitment of Codelco with specificeconomic, social and environmental goals”

Juan Villarzú, President & CEO

Codelco’s Environment & Community Report

2003

Codelco’s Strategy

Return onAssets

HumanDevelopment

SustainableDevelopment

ValueCreation

Activities/ years 1994 1995 1996 1997 1998 1999 2000 1994-2000

Smelter Decontamination Plans

39.8 70.8 52.5

85.6 71.0 46.9 366.8

Tailings managment

12.7 25.1 49.5 68.4 93.1 44.4 11.1 304.3

Other Projects

26.5 14.7 12.5 16.3 11.6 12.7 6.8 100.9

Total (US$ Millions)

39.1 79.6 132.8 136.5 190.3 129.1 65.5 773.0

Environmental Investment (Millions of US$)

Figures for 1994-2003 are expressed in 2003 currency value

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total

45 80 59 97 81 51 47 165 33 658

14 28 56 77 105 50 12 1 12 4 359

30 17 14 19 13 14 8 3 12 3 133

44 90 150 155 215 145 71 51 189 40 1150

SO2 Emissions and Reduction Plansfor Codelco’s Smelters

0

20

40

60

80

10019

83

1986

1989

1992

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Year

Energy consumption

RT

3250

3300

3350

3400

3450

3500

3550

3600

3650

MWh/Ton cobre fino

1995 1996 1997 1998 1999 2000

año

MWh/MFT

Year

3250

3300

3350

3400

3450

3500

3550

3600

3650

MWh/Ton cobre fino

1995 1996 1997 1998 1999 2000

año

MWh

/Mft

Year

RT

Water discharges(1995-2006)

0%

20%

40%

60%

80%

100%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Years

% M

anag

emen

t Eff

icie

ncy

National water discharge standards issued

Corporate Guidelines

Compliance withregulations

Optimization

Water resources guidelines

LocalMgmt.

DivisionalIntegratedMgmt.

CorporateIntegrated Mgmt.

High level performance

Solid Wastes(1995-2006)

0%

20%

40%

60%

80%

100%19

95

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007 Years

% %

Man

agem

ent E

ffic

ien

cy Corporate Guidelinesfor Solid Wastes

Divisional guidelinesFor Solid Wastes

Solid Waste Management Centers

Minimization plans

Site recoveries (start-up)

Management Plans for Solid Wastes

LocalMgmt.

DivisionalIntegratedMgmt.

CorporateIntegrated Mgmt.

High level performance

CodelcoSD Policy

Codelco SD Policy

•• Corporate SD Policy approved by the Executive CommitteeCorporate SD Policy approved by the Executive Committeein mid 2003:in mid 2003:

– It highlights the relevance of the dialogue with the internal andexternal stakeholders

– It states and formalizes the corporate commitment on valuesand ethical business aspects, such as the respect and protectionof fundamental human rights and the dignity of all individuals.

– The policy provides a broad conceptual framework, givingstrategic orientation and reinforcing a number of specificexisting policies, guidelines and standards related tosustainability

• Ethical and responsible practices of business; humanrights and dignity of the workers of its operations

– A framework of existing policies, guidelines, norms &

controls mechanisms

– Joint work & agreement of management & workers´unions:

an ongoing initiative since 2000. Joint development of a vision,

mission, values, management style & strategic priorities

– Values: dignity, mutual respect, participation, responsibility,

trust, ethical behaviour, transparency, honesty, fairness, social

responsibility, solidarity, loyalty, integrity, commitment

Principles & Actions

• Criteria of sustainable development in the decisions ofthe company & systems of management, of environment,safety, occupational health & community relations

– Performance Agreements (Balanced Scorecards): SD variables since1993, linked to incentives

– Policy (2001) on Environment, Security & Occupational Health

– ISO 14,001 Certification (2003) - the whole Corporation is certified

– Decision (2003) to certify under OHSAS 18,001 by 2005

– Integral management of quality, environment, security, occupationalhealth & community relationships (ISO criteria)

– Voluntary Environmental Agreements (regional working committeesin our operations with local governmental authorities )

Principles & Actions

• Conditions for the development of the neighboringcommunities

– Perception study

– Sustainable Codelco Index/operations’ performanceagreements

– Pro-regional Corporations (all Divisions)

– Good Neighbor programs

• To communicate, to inform and to report opportunely andtransparently on its performance

– Membership and participation in WBCSD and GRI

– Since 1999: Annual Environmental Report (using GRI), with

goal of external auditing in 2005

Principles & Actions

• To stimulate environmentally responsible production anduse of products during their whole life cycle & to contributewith scientific information that can help develop sound andappropriate regulations with respect to copper

– On-going study: Life Cycle Inventory and Evaluation ofCodelco’s Commercial Products

– The environmental program of ICA/IMOA

– Active participation in national & international regulatorydiscussions, directly and with government authorities and othercompanies

• To promote this Policy between all those are related to thecompany’s operations

– Codelco’s internal and external communication strategy

– Environment & Community reports

Principles & Actions