UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      20-F


o
              
              REGISTRATION
                  STATEMENT PURSUANT TO SECTION 12(b) OR (g)OF
                  THE SECURITIES EXCHANGE ACT OF 1934ORx
              
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d)OF
                  THE SECURITIES EXCHANGE ACT OF 1934For
                  the fiscal year ended December 31, 2007OR ̈
              
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                  EXCHANGE ACT OF 1934OR ̈
              
              SHELL
                  COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
                OF
                  THE SECURITIES EXCHANGE ACT OF
                  1934


Date
      of
      event requiring this shell company report





For
      the
      transition period from         
 to





Commission
      file number 001-14370





COMPAÑÍA
      DE MINAS BUENAVENTURA S.A.A.


(Exact
      name of Registrant as specified in its charter)




BUENAVENTURA
      MINING COMPANY INC.


(Translation
      of Registrant’s name into English)




REPUBLIC
      OF PERU


(Jurisdiction
      of incorporation or organization)




CARLOS
      VILLARAN 790


SANTA
      CATALINA, LIMA 13, PERU


(Address
      of principal executive offices)




Securities
      registered or to be registered pursuant to Section 12(b) of the Act:




Title
                of each class
            
            Name
                of each exchange on which registered*Common
                shares, nominal (par) value of*
              *four
                Peruvian Nuevos Soles per share*
              
              *American
                Depositary Shares (ADSs)*
              *representing
                one Common share each*
            
            New
                York Stock Exchange Inc.٭
              Lima
                Stock Exchange
              
              New
                York Stock Exchange Inc.







٭
                Not for trading but only in connection with the registration of ADSs
                pursuant to the requirements of the Securities Exchange
                Commission







Securities
      registered or to be registered pursuant to Section 12(g) of the Act: None





Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:
      None





Indicate
      the number of outstanding shares of each of the issuer’s classes of capital or
      common stock as of the close of the period covered by the annual
      report.


Common
                  shares nominal (par) value of S/.4.00 per share
              
              
              **137,444,962**
              *****Investment
                  shares nominal (par) value of S/.4.00 per share
              
              
              **372,320**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.




Yes  ̈ No x  ****





If
      this
      report is an annual or transition report, indicate by check mark if the
      registrant is not required to file reports pursuant to Section 13 or 15(d)
      of
      the Securities Exchange Act of 1934.




Yes  ̈ No x





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.




Yes x No  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.




Large
      accelerated filer x Accelerated
      filer  ̈  Non-accelerated filer  ̈





Indicate
      by check mark which financial statement item the registrant has elected to
      follow.




Item
      17  ̈ Item
      18 x





If
      this
      is an annual report, indicate by check mark whether the registrant is a shell
      company (as defined in Rule 12b-2 of the Exchange Act).


Yes  ̈ No x










TABLE
      OF
      CONTENTS


PageINTRODUCTION
              
              1ITEM
                  1.
              Identity
                  of Directors, Senior Management and Advisers
              3ITEM
                  2.
              Offer
                  Statistics and Expected Timetable
              3ITEM
                  3.
              Key
                  Information
              3ITEM
                  4.
              Information
                  on the Company
              23ITEM
                  5.
              Operating
                  and Financial Review and Prospects
              97ITEM
                  6.
              Directors,
                  Senior Management and Employees
              141ITEM
                  7.
              Major
                  Shareholders and Related Party Transactions
              147ITEM
                  8.
              Financial
                  Information
              149ITEM
                  9.
              The
                  Offer and Listing
              152ITEM
                  10.
              Additional
                  Information
              155ITEM
                  11.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              167ITEM
                  12.
              Description
                  of Securities Other Than Equity Securities
              169PART
                  IIITEM
                  13.
              Defaults,
                  Dividend Arrearages and Delinquencies
              169ITEM
                  14.
              Material
                  Modifications to the Rights of Security Holders and Use of
                  Proceeds
              169ITEM
                  15.
              Controls
                  and Procedures
              169ITEM
                  16A.
              Audit
                  Committee Financial Expert
              171ITEM
                  16B.
              Code
                  of Ethics
              171ITEM
                  16C.
              Principal
                  Accountant Fees and Services
              171ITEM
                  16D.
              Exemptions
                  from the Listing Standards for Audit Committees
              172ITEM
                  16E.
              Purchases
                  of Equity Securities by the Issuer and Affiliated
                  Purchasers
              172PART
                  IIIITEM
                  17.
              Financial
                  Statements
              172ITEM
                  18.
              Financial
                  Statements
              172ITEM
                  19.
              Exhibits
              173










**INTRODUCTION**




Presentation
      of Financial Information




As
      used
      in this Annual Report on Form 20-F, or Annual Report, unless the context
      otherwise requires, references to “we,” “us,” “our,” “Company,” “BVN” or
“Buenaventura” mean Compañía de Minas Buenaventura S.A.A. and its consolidated
      subsidiaries. Unless otherwise specified or the context otherwise requires,
      references to “$”, “US$”, “Dollars” and “U.S. Dollars” are to United States
      Dollars, and references to “S/.”, “Nuevo Sol” or “Nuevos Soles” are to Peruvian
      Nuevos Soles, the legal currency of the Republic of Peru, or Peru.




Until
      December 31, 2005, we and our subsidiaries maintained our financial books and
      records in Nuevos Soles, the functional and reporting currency until such date.
      Effective January 1, 2006, we changed our functional and reporting currency
      from
      Nuevos Soles to U.S. Dollars. See Note 3(f) to our audited consolidated
      financial statements as of December 31, 2006 and 2007 and for the years
      ended December 31, 2005, 2006 and 2007, or the Financial Statements, for an
      explanation of the main reasons supporting this change. We present our
      consolidated financial statements in conformity with accounting principles
      generally accepted in Peru, which we refer to as Peruvian GAAP. See Note 35
      to
      the Financial Statements for a description of the significant differences
      between the accounting principles we follow under Peruvian GAAP and the
      accounting principles generally accepted in the United States of America, which
      we refer to as U.S. GAAP, and Note 36 to the Financial Statements for a
      reconciliation to U.S. GAAP of net income and shareholders’ equity for the
      periods covered. Pursuant to the rules of the United States Securities and
      Exchange Commission, or the Commission, this Annual Report includes certain
      separate financial statements and other financial information of Minera
      Yanacocha S.R.L., or Yanacocha, and Sociedad Minera Cerro Verde S.A.A., or
      Cerro
      Verde. Yanacocha and Cerro Verde maintain their financial books and records
      in
      U.S. Dollars and present their financial statements in accordance with U.S.
      GAAP
      and Peruvian GAAP, reconciled to U.S. GAAP, respectively.




We
      record
      our investments in Yanacocha and Cerro Verde in accordance with the equity
      method. Our partnership interest in Yanacocha has been calculated at 43.65
      percent for the years ended December 31, 2006 and 2007, as described in “Item 5.
      Operating and Financial Review and Prospects—The Company—General” and Note 3(e)
      to the consolidated Financial Statements. As of December 31, 2007, our equity
      interest in Cerro Verde was 18.50 **** percent.




**Exchange
      Rates**




Effective
      January 1, 2006, our functional and reporting currency changed from the Nuevo
      Sol to the Dollar. This change resulted from an evaluation of the currency
      denominations of our cash flows in recent years and, in particular, reflects
      the
      increasing significance of dividends from affiliates denominated in Dollars
      to
      our financial position, results of operation and cash flows. Profit and loss
      accounts for year ended December 31, 2005 were translated into Dollars using
      the
      average exchange rate of US$1.00 to S/.3.305.




The
      translation of amounts expressed in nominal or constant Nuevos Soles with
      purchasing power as of a specified date by the then-prevailing exchange rate
      may
      result in presentation of Dollar amounts that differ from the Dollar amounts
      that would have been obtained by translating nominal or constant Nuevos Soles
      with purchasing power as of another specified date by the prevailing exchange
      rate on that specified date. See “Item 3. Key Information—Exchange Rates” for
      information regarding the average rates of exchange between the Nuevo Sol and
      the Dollar for the periods specified therein.




1




Certain
      amounts and percentages have been rounded for presentation purposes and may
      not
      sum exactly.




**Forward-Looking
      Statements**




Certain
      statements contained in this Annual Report contain “forward-looking” information
      (as defined in the U.S. Private Securities Litigation Reform Act of 1995) that
      involve risks and uncertainties, including those concerning our and Yanacocha’s
      costs and expenses, results of exploration, the continued improving efficiency
      of operations, prevailing market prices of gold, silver and other metals mined,
      the success of joint ventures, estimates of future exploration, production,
      subsidiaries’ plans for capital expenditures, estimates of reserves and Peruvian
      political, economic and legal developments. Additional forward-looking
      statements related to Cerro Verde contained in this Annual Report include those
      concerning costs and expenses, the continued improving efficiency of operations,
      prevailing market prices of copper and molybdenum, production and Peruvian
      political, economic and legal developments. These forward-looking statements
      reflect our view with respect to our, Yanacocha’s and Cerro Verde’s future
      financial performance. Actual results could differ materially from those
      projected in the forward-looking statements as a result of a variety of factors
      discussed elsewhere in this Annual Report, including but not limited to those
      discussed under “Item 3. Key Information—Risk Factors.”




2





**PART
      I**




**ITEM
              1.**
            **Identity
                of Directors, Senior Management and
                Advisers**




Not
      applicable.




**ITEM
              2.**
            **Offer
                Statistics and Expected
                Timetable**




Not
      applicable.




**ITEM
              3.**
            **Key
                Information**




**Selected
      Financial Data**




***Selected
      Financial Information and Operating Data***




The
      following information should be read in conjunction with, and is qualified
      in
      its entirety by reference to, the Financial Statements including the Notes
      thereto appearing elsewhere in this Annual Report. The selected financial
      information as of December 31, 2006 and 2007, and for the three years ended
      December 31, 2007, is derived from the Financial Statements appearing elsewhere
      in this Annual Report. The selected financial information as of and for the
      years ended December 31, 2003 and 2004 has been derived from consolidated
      financial statements and related notes thereto which are not included in this
      Annual Report. The report of Medina, Zaldivar, Paredes & Asociados (a member
      firm of Ernst & Young International) on our 2006 and 2007 Financial
      Statements appears elsewhere in this Annual Report. **** The
      Financial Statements are prepared and presented in accordance with Peruvian
      GAAP, which differ in certain respects from U.S. GAAP. Note 35 to the Financial
      Statements provides a description of the principal differences between Peruvian
      GAAP and U.S. GAAP as such differences relate to us, and Note 36 to the
      Financial Statements provides a reconciliation to U.S. GAAP of our net income
      for the years ended 2005, 2006 and 2007, and shareholders’ equity as of December
      31, 2005, 2006 and 2007 *.* The
      operating data presented below is derived from our records and has not been
      subject to audit. The financial information and operating data presented below
      should be read in conjunction with “Item 5. Operating and Financial Review and
      Prospects—The Company,” the Financial Statements and the related notes thereto
      and other financial information included in this Annual Report.




3




As
                of and for the year ended December 31,2003(2)
            
            2004(2)
            
            2005(2)
            
            2006
            
            2007(In
                thousands of US$)(1)Income
                statement data:*Peruvian
                GAAP*Net
                sales of goods and services
            
            
            211,477
            
            
            266,405
            
            
            283,387
            
            
            548,072
            
            
            747,021Realization
                of deferred income from sale of future production
            
            
            -
            
            
            20,187
            
            
            28,064
            
            
            50,325
            
            
            5,393Royalty
                income
            
            
            33,609
            
            
            37,797
            
            
            46,094
            
            
            48,475
            
            
            34,014Total
                income
            
            
            245,086
            
            
            324,389
            
            
            357,545
            
            
            646,872
            
            
            786,428Operating
                costsCost
                of sales, without considering depreciation and amortization
            
            
            (88,186
            )
            
            (99,911
            )
            
            (103,881
            )
            
            (149,309
            )
            
            (182,007
            )Exploration
                and development in units in operation
            
            
            (24,836
            )
            
            (37,371
            )
            
            (41,166
            )
            
            (49,534
            )
            
            (51,033
            )Depreciation
                and amortization
            
            
            (18,345
            )
            
            (21,723
            )
            
            (33,640
            )
            
            (27,574
            )
            
            (36,345
            )Total
                operating costs
            
            
            (131,367
            )
            
            (159,005
            )
            
            (178,687
            )
            
            (226,417
            )
            
            (269,385
            )Gross
                income
            
            
            113,719
            
            
            165,384
            
            
            178,858
            
            
            420,455
            
            
            517,043Operating
                expensesAdministrative
            
            
            (35,684
            )
            
            (22,833
            )
            
            (34,350
            )
            
            (36,639
            )
            
            (59,205
            )Exploration
                innon-operational
                areas
            
            
            (17,042
            )
            
            (25,877
            )
            
            (27,812
            )
            
            (36,190
            )
            
            (46,407
            )Royalties
            
            
            (7,231
            )
            
            (9,254
            )
            
            (12,209
            )
            
            (24,420
            )
            
            (33,978
            )Sales
            
            
            (7,413
            )
            
            (5,231
            )
            
            (4,800
            )
            
            (5,928
            )
            
            (10,818
            )Total
                operating expenses
            
            
            (67,370
            )
            
            (63,195
            )
            
            (79,171
            )
            
            (103,177
            )
            
            (150,408
            )Operating
                income before unusual item
            
            
            46,349
            
            
            102,189
            
            
            99,687
            
            
            317,278
            
            
            366,635Net
                loss on release of fixed-price component in commercial
                contracts
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (185,922
            )Operating
                income after unusual item
            
            
            46,349
            
            
            102,189
            
            
            99,687
            
            
            317,278
            
            
            180,713Other
                income (expenses), netShare
                in affiliated companies, net
            
            
            160,356
            
            
            177,423
            
            
            263,994
            
            
            313,168
            
            
            249,555Interest
                income
            
            
            2,239
            
            
            3,558
            
            
            3,523
            
            
            7,949
            
            
            11,772Gain
                (loss) on currency exchange difference
            
            
            (136
            )
            
            (3,706
            )
            
            448
            
            
            (308
            )
            
            5,190Gain
                (loss) on change in the fair value of gold certificates
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,861
            )
            
            5,126Loss
                on change in the fair value of derivative financial
                instruments
            
            
            (192,128
            )
            
            (17,360
            )
            
            (26,588
            )
            
            (13,268
            )
            
            -Interest
                expense
            
            
            (2,498
            )
            
            (4,273
            )
            
            (4,060
            )
            
            (5,948
            )
            
            (8,614
            )Gain
                (loss) from exposure to inflation
            
            
            228
            
            
            (2,888
            )
            
            -
            
            
            -
            
            
            -Other,
                net
            
            
            (3,683
            )
            
            (4,811
            )
            
            (3,227
            )
            
            (19,502
            )
            
            (8,686
            )Total
                other income (expenses), net
            
            
            (35,622
            )
            
            147,943
            
            
            234,090
            
            
            277,230
            
            
            254,343Income
                before workers’ profit sharing, income tax and minority interest
            
            
            10,727
            
            
            250,132
            
            
            333,777
            
            
            594,508
            
            
            435,056Provision
                for workers’ profit sharing
            
            
            18,087
            
            
            (5,383
            )
            
            (2,593
            )
            
            (14,271
            )
            
            (19,931
            )Provision
                for income tax
            
            
            57,028
            
            
            (29,911
            )
            
            (22,816
            )
            
            (64,033
            )
            
            (43,975
            )Net
                income
            
            
            85,842
            
            
            214,838
            
            
            308,368
            
            
            516,204
            
            
            371,150Net
                income attributable to minority interest
            
            
            (14,675
            )
            
            (8,261
            )
            
            (19,971
            )
            
            (88,147
            )
            
            (96,389
            )Net
                income attributable to Buenaventura
            
            
            71,167
            
            
            206,577
            
            
            288,397
            
            
            428,057
            
            
            274,761Cumulative
                effect of change in accounting principles due to mine closing
            
            
            (20,792
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income
            
            
            50,375
            
            
            206,577
            
            
            288,397
            
            
            428,057
            
            
            274,761Basic
                and diluted earnings per share(3)
                (4)
            
            
            0.40
            
            
            1.62
            
            
            2.27
            
            
            3.36
            
            
            2.16Basic
                and diluted earnings per ADS(3)
            
            
            0.40
            
            
            1.62
            
            
            2.27
            
            
            3.36
            
            
            2.16Dividends
                per share
            
            
            0.36
            
            
            0.32
            
            
            0.35
            
            
            0.47
            
            
            0.55Average
                number of shares outstanding
            
            
            127,236,219
            
            
            127,236,219
            
            
            127,229,844
            
            
            127,221,164
            
            
            127,221,164




4




As
                of and for the year ended December 31,2003(2)
            
            2004(2)
            
            2005(2)
            
            2006
            
            2007(In
                thousands of US$)(1)*U.S.
                GAAP*Operating
                income (loss)
            
            
            64,731
            
            
            96,961
            
            
            97,225
            
            
            302,277
            
            
            345,618Net
                income – restated(5)
            
            
            55,473
            
            
            206,685
            
            
            288,488
            
            
            424,697
            
            
            225,458Basic
                and diluted earnings per share – restated(3)
            
            
            0.44
            
            
            1.62
            
            
            2.27
            
            
            3.34
            
            
            1.78Basic
                and diluted earnings per ADS– restated(3)(5)
            
            
            0.44
            
            
            1.62
            
            
            2.27
            
            
            3.34
            
            
            1.78Balance
                sheet data:*Peruvian
                GAAP*Total
                assets
            
            
            881,415
            
            
            973,184
            
            
            1,251,122
            
            
            1,735,771
            
            
            1,981,469Total
                debt
            
            
            40,624
            
            
            18,803
            
            
            8,517
            
            
            10,606
            
            
            84,119Shareholders’
                equity
            
            
            453,788
            
            
            587,023
            
            
            862,959
            
            
            1,300,506
            
            
            1,580,216*U.S.
                GAAP*Total
                assets – restated(5)
            
            
            880,835
            
            
            972,712
            
            
            1,250,741
            
            
            1,732,030
            
            
            1,972,207Shareholders’
                equity – restated(6)
            
            
            446,563
            
            
            574,649
            
            
            839,162
            
            
            1,205,328
            
            
            1,360,984Operating
                data (unaudited):(5)Production:Gold
                (oz.)
            
            
            319,427
            
            
            357,562
            
            
            388,042
            
            
            405,383
            
            
            403,955Silver
                (oz.)
            
            
            13,813,658
            
            
            15,095,562
            
            
            16,429,816
            
            
            22,179,552
            
            
            19,430,511Proven
                and probable reservesGold
                (oz.)
            
            
            870,345
            
            
            931,924
            
            
            1,036,543
            
            
            1,032,063
            
            
            1,315,925Silver
                (oz.)
            
            
            92,817,825
            
            
            95,862,405
            
            
            116,452,462
            
            
            117,808,602
            
            
            102,195,344







(1)
            Except
                per share, per ADS, outstanding shares and operating data.


(2)
              Until
                  December 31, 2005, our financial books and records were maintained
                  in
                  Nuevos Soles, the functional and reporting currency as of such
                  date.
                  Effective January 1, 2006, we changed the functional and reporting
                  currency from Nuevos Soles to U.S. Dollars. See Note 3(f) to the
                  Financial
                  Statements. For comparative purposes, all prior years are presented
                  assuming that U.S. Dollars were used as the reporting currency.
                  See Note
                  3(f) to the Financial Statements for a description of the translation
                  procedures.


(3)
              Income
                  per share has been calculated for each year as net income divided
                  by
                  average number of shares outstanding during the year. As of December
                  31,
                  2003 and 2004, the total number of Common Shares outstanding was
                  137,444,962, including 10,585,130 treasury shares, and the total
                  number of
                  Investment Shares Outstanding was 372,320, including 15,933****treasury
                  shares. On October 28, 2003, we approved a modification of the
                  ratio of
                  the Common Shares to ADSs from two Common Shares per ADS to one
                  Common
                  Share per ADS. The ratio change became effective on November 12,
                  2003 and
                  income per ADS in prior years has been restated to reflect this
                  modification. During 2005, we acquired 15,055 Investment Shares
                  that are
                  held as treasury shares.


(4)
            Basically
                diluted.


(5)
              Net
                  income, total assets and shareholders’ equity for the years ended December
                  31, 2003 and 2004 have been adjusted retroactively to comply with
                  APB
                  Opinion No. 18 – The Equity Method of Accounting for Investments in
                  Common Stock, due to the change in the accounting treatment of
                  Cerro
                  Verde’s investment during 2005. See Note 10(c) to the Financial
                  Statements.


(6)
            The
                amounts in this table reflect our total operating data and the total
                operating data of each of our consolidated subsidiaries for each
                year,
                2003 through 2007. As of December 31, 2007, our ownership percentages
                for the relevant companies were as follows: Condesa, 100%; Conenhua,
                100%;
                Colquijirca, 61.42%; Chaupiloma, 60.0% and Cedimin, 100%.





As
      of
      December 31, 2004, Minera Paula 49 S.A.C., which as of October 22, 2004 was
      100%
      owned by us, was merged with and into Cedimin S.A.C. and is no longer a separate
      legal entity.




5




***Yanacocha
      Selected Financial Information and Operating Data***





The
      following table presents selected financial information and operating data
      for
      Yanacocha at the dates and for each of the periods indicated. This information
      should be read in conjunction with, and is qualified in its entirety by
      reference to, Yanacocha’s audited financial statements as of December 31,
      2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007, or
      the Yanacocha Financial Statements, which Dongo-Soria Gaveglio y Asociados
      (a
      member firm of PricewaterhouseCoopers) audited. The report of Dongo-Soria
      Gaveglio y Asociados on the Yanacocha Financial Statements appears elsewhere
      in
      this Annual Report. The selected information as of and for the years ended
      December 31, 2003 and 2004 has been derived from financial statements and
      related notes thereto which are not included in this Annual Report. The
      Yanacocha Financial Statements are prepared and presented in accordance with
      U.S. GAAP, which differ in certain respects from Peruvian GAAP. The significant
      differences between U.S. GAAP and Peruvian GAAP applicable to Yanacocha have
      been quantified in determining Yanacocha’s reported Peruvian GAAP selected
      financial data. The operating data presented below, which is based on 100
      percent of Yanacocha’s production and reserves, is derived from Yanacocha’s
      records and has not been subject to audit. The financial information presented
      below should be read in conjunction with “Item 5. Operating and Financial Review
      and Prospects—Yanacocha,” the Yanacocha Financial Statements and the related
      Notes thereto and other financial information included in this Annual Report.




6


As
                    of and for the year ended December 31,2003
                
                2004
                
                2005
                
                2006
                
                2007(In
                    thousands of US$)(1)Income
                    statement data:*U.S.
                    GAAP*Revenues
                
                
                1,036,370
                
                
                1,249,882
                
                
                1,490,402
                
                
                1,543,212
                
                
                1,093,347Costs
                    and expenses:Costs
                    applicable to sales
                
                
                (377,214
                )
                
                (450,825
                )
                
                (507,806
                )
                
                (515,883
                )
                
                (557,140
                )Depreciation
                    and depletion
                
                
                (146,822
                )
                
                (179,441
                )
                
                (193,587
                )
                
                (171,730
                )
                
                (159,148
                )Exploration
                    costs
                
                
                (13,574
                )
                
                (35,236
                )
                
                (32,884
                )
                
                (32,254
                )
                
                (28,234
                )General
                    and administrative costs
                
                
                (5,126
                )
                
                (4,986
                )
                
                (5,453
                )
                
                (5,589
                )
                
                (2,928
                )Other
                    expenses
                
                
                (18,126
                )
                
                (6,135
                )
                
                6,669
                
                
                (60,790
                )
                
                (30,062
                )Total
                    operating expenses
                
                
                (560,862
                )
                
                (676,623
                )
                
                (733,061
                )
                
                (786,246
                )
                
                (777,512
                )Operating
                    income
                
                
                443,541
                
                
                573,259
                
                
                757,341
                
                
                756,966
                
                
                315,835Interest
                    expense and other
                
                
                (1,055
                )
                
                (1,392
                )
                
                3,540
                
                
                6,825
                
                
                12,698Pre-tax
                    income
                
                
                474,453
                
                
                571,867
                
                
                760,881
                
                
                763,791
                
                
                328,533Income
                    tax provision
                
                
                (121,688
                )
                
                (181,563
                )
                
                (235,407
                )
                
                (238,343
                )
                
                (107,044
                )Net
                    income before cumulative effect of change in accounting
                    principles
                
                
                352,765
                
                
                390,304
                
                
                525,474
                
                
                525,448
                
                
                221,489Cumulative
                    effect of change in accounting principle, net
                
                
                (32,353
                )
                
                -
                
                
                -
                
                
                -
                
                
                -Net
                    income and comprehensive income
                
                
                320,412
                
                
                390,304
                
                
                525,474
                
                
                525,448
                
                
                221,489*Peruvian
                    GAAP*Revenues(2)
                
                
                1,059,951
                
                
                1,266,550
                
                
                1,527,609
                
                
                1,636,009
                
                
                1,148,546Operating
                    income
                
                
                475,894
                
                
                605,019
                
                
                675,293
                
                
                886,373
                
                
                379,541Net
                    income
                
                
                313,143
                
                
                427,975
                
                
                535,476
                
                
                567,659
                
                
                244,192Balance
                    sheet data:*U.S.
                    GAAP*Total
                    assets
                
                
                1,146,041
                
                
                1,207,748
                
                
                1,549,583
                
                
                1,824,853
                
                
                1,895,884Total
                    debt
                
                
                67,356
                
                
                37,316
                
                
                3,160
                
                
                200,000
                
                
                218,111Partners’
                    equity
                
                
                700,870
                
                
                811,174
                
                
                1,156,648
                
                
                1,196,409
                
                
                1,326,325*Peruvian
                    GAAP*Total
                    assets
                
                
                974,630
                
                
                1,091,571
                
                
                1,473,255
                
                
                1,823,480
                
                
                1,925,125Total
                    debt
                
                
                65,777
                
                
                36,553
                
                
                2,850
                
                
                200,000
                
                
                218,111Partners’
                    equity
                
                
                587,228
                
                
                735,203
                
                
                1,090,679
                
                
                1,200,562
                
                
                1,353,180Operating
                    data (unaudited):Gold
                    produced (oz.)
                
                
                2,851,143
                
                
                3,017,303
                
                
                3,333,088
                
                
                2,612,199
                
                
                1,563,669Gold
                    proven and probable reserves (thousands of oz.)
                
                
                31,709
                
                
                32,257
                
                
                32,620
                
                
                29,327
                
                
                27,594







(1)
            Except
                operating data.


(2)
            Under
                U.S. GAAP, Yanacocha recognizes revenues when the price is determinable
                and upon delivery and transfer of title of gold to the customer.
                In
                addition, revenues from silver sales are credited to costs applicable
                to
                sales as a by-product credit. Under Peruvian GAAP, revenues, including
                gold and silver sales, are recognized, net of transportation and
                refining
                costs, when doré is delivered to the
                shipper.




7




***Cerro
      Verde Selected Financial Information and Operating
      Data***





The
      following table presents selected financial information and operating data
      for
      Cerro Verde at the dates and for each of the periods indicated. This information
      should be read in conjunction with, and is qualified in its entirety by
      reference to, Cerro Verde’s audited financial statements as of December 31,
      2006 and 2007 and for the years ended December 31, 2005, 2006 and 2007, or
      the Cerro Verde Financial Statements. Medina, Zaldívar, Paredes & Asociados
      (a member firm of Ernst & Young International) audited the Cerro Verde
      Financial Statements for the year ended December 31, 2007 and the report of
      Medina, Zaldívar, Paredes & Asociados on Cerro Verde’s financial statements
      appear elsewhere in this Annual Report. The selected information as of and
      for
      the years ended December 31, 2003 and 2004 has been derived from financial
      statements and related notes thereto which are not included in this Annual
      Report. The Cerro Verde Financial Statements are prepared and presented in
      accordance with Peruvian GAAP, which differs in certain respects from U.S.
      GAAP.
      Note 26 to the Cerro Verde Financial Statements provides a description of
      the principal differences between Peruvian GAAP and U.S. GAAP as such
      differences relate to Cerro Verde, and Note 27 to the Cerro Verde Financial
      Statements provides a reconciliation to U.S. GAAP of Cerro Verde’s net income
      for the years ended 2005, 2006 and 2007 and shareholders’ equity as of December
      31, 2006 and 2007. The operating data presented below, which is based on 100
      percent of Cerro Verde’s production and reserves, is derived from Cerro Verde’s
      records and has not been subject to audit. The financial information presented
      below should be read in conjunction with “Item 5. Operating and Financial Review
      and Prospects—Cerro Verde,” the Cerro Verde Financial Statements and the related
      Notes thereto and other financial information included in this Annual Report.




8


As
                    of and for the year ended December 31,2003
                
                2004
                
                2005
                
                2006
                
                2007(In
                    thousands of US$)(2)Income
                    statement data:*Peruvian
                    GAAP*Net
                    sales of goods
                
                
                156,724
                
                
                260,782
                
                
                358,928
                
                
                667,671
                
                
                1,794,559Total
                    revenues
                
                
                156,724
                
                
                260,782
                
                
                358,928
                
                
                667,671
                
                
                1,794,559Costs
                    of salesTotal
                    costs of
                    sales
                
                
                (103,962
                )
                
                (119,482
                )
                
                (133,715
                )
                
                (140,423
                )
                
                (418,108
                )Gross
                    margin
                
                
                52,762
                
                
                141,300
                
                
                225,213
                
                
                527,248
                
                
                1,376,451Operating
                    expensesSelling
                    expenses
                
                
                (601
                )
                
                (1,089
                )
                
                (1,295
                )
                
                (3,538
                )
                
                (54,405
                )Negotiated
                    payment (voluntary contribution)
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (48,674
                )Other
                    operating expenses
                
                
                -
                
                
                -
                
                
                -
                
                
                (48,100
                )
                
                (2,432
                )Total
                    operating expenses
                
                
                (601
                )
                
                (1,089
                )
                
                (1,295
                )
                
                (51,638
                )
                
                (105,511
                )Operating
                    income
                
                
                52,161
                
                
                140,211
                
                
                223,918
                
                
                475,610
                
                
                1,270,940Other
                    income (expenses), netFinancial
                    income
                
                
                142
                
                
                1,148
                
                
                7,063
                
                
                10,899
                
                
                33,168Financial
                    expense
                
                
                (2,293
                )
                
                (1,975
                )
                
                (14
                )
                
                (2,984
                )
                
                (23,346
                )Other,
                    net
                
                
                6,864
                
                
                (31
                )
                
                169
                
                
                (550
                )
                
                (426
                )Total
                    other income (expenses), net
                
                
                4,713
                
                
                (858
                )
                
                7,218
                
                
                7,365
                
                
                9,396Income
                    before workers’ profit sharing and income tax
                
                
                56,874
                
                
                139,353
                
                
                231,136
                
                
                482,975
                
                
                1,280,336Workers’
                    profit sharing
                
                
                (2,726
                )
                
                (11,502
                )
                
                (18,578
                )
                
                (42,805
                )
                
                (106,846
                )Income
                    tax
                
                
                (10,873
                )
                
                (40,188
                )
                
                22,105
                
                
                4,451
                
                
                (368,805
                )Net
                    income
                
                
                43,275
                
                
                87,663
                
                
                234,663
                
                
                444,621
                
                
                804,685Basic
                    and diluted earnings per share
                
                
                0.19
                
                
                0.386
                
                
                0.785
                
                
                1.270
                
                
                2.300Dividends
                    per share
                
                
                -
                
                
                0.066
                
                
                0.492
                
                
                -
                
                
                1.77Average
                    number of shares outstanding
                
                
                227,309,099
                
                
                227,309,099
                
                
                298,911,465
                
                
                350,056,012
                
                
                350,056,012*U.S.
                    GAAP*Operating
                    income (loss)
                
                
                53,894
                
                
                141,967
                
                
                224,715
                
                
                476,432
                
                
                1,284,612Net
                    income
                
                
                44,483
                
                
                88,794
                
                
                235,460
                
                
                445,443
                
                
                573,726Basic
                    and diluted earnings per share
                
                
                0.196
                
                
                0.391
                
                
                0.788
                
                
                1.272
                
                
                1.640Balance
                    sheet data:*Peruvian
                    GAAP*Total
                    assets
                
                
                238,947
                
                
                364,043
                
                
                908,800
                
                
                1,651,256
                
                
                1,985,810Total
                    debt
                
                
                -
                
                
                -
                
                
                1,906
                
                
                183,667
                
                
                73,764Shareholders’
                    equity
                
                
                192,948
                
                
                265,611
                
                
                816,436
                
                
                1,261,057
                
                
                1,445,742*U.S.
                    GAAP*Total
                    assets
                
                
                221,005
                
                
                347,857
                
                
                893,851
                
                
                1,637,584
                
                
                1,985,810Shareholders’
                    equity
                
                
                181,393
                
                
                255,187
                
                
                806,809
                
                
                1,252,252
                
                
                1,205,978Operating
                    data (unaudited):Production:Copper
                    (in thousands of
                    recoverable pounds)
                
                
                192,537
                
                
                195,108
                
                
                206,245
                
                
                221,726
                
                
                594,227Proven
                    and probable reservesCopper
                    (in thousands of DMT)
                
                
                657,511
                
                
                1,646,742
                
                
                1,594,184
                
                
                1,741,432
                
                
                1,765,634





9




***Exchange
      Rates***




The
      following table sets forth the high and low month-end rates and the average
      and
      end-of-period offered rates for the sale of Nuevos Soles in U.S. Dollars for
      the
      period indicated, as published by the *Superintendencia
      de Bancos y Seguros* (Superintendent of Bank and Insurance, or the SBS). The Federal Reserve Bank
      of
      New York does not report a noon buying rate for Nuevos Soles.




Exchange
      Rates


(Nuevos
      Soles per US$) (1)




Year
            
            High(2)
            
            Low(2)
            
            Average(3)
            
            Period
                end(4)2003
            
            
            3.495
            
            
            3.461
            
            
            3.478
            
            
            3.4632004
            
            
            3.499
            
            
            3.277
            
            
            3.413
            
            
            3.2772005
            
            
            3.427
            
            
            3.253
            
            
            3.303
            
            
            3.4272006
            
            
            3.355
            
            
            3.194
            
            
            3.264
            
            
            3.1942007
            
            
            3.201
            
            
            2.967
            
            
            3.123
            
            
            2.995




2007
            
            High(5)
            
            Low(5)
            
            Average(6)
            
            Period
                end(7)December
            
            
            3.000
            
            
            2.967
            
            
            2.980
            
            
            2.995




2008January
            
            
            2.983
            
            
            2.923
            
            
            2.950
            
            
            2.933February
            
            
            2.930
            
            
            2.886
            
            
            2.905
            
            
            2.886March
            
            
            2.884
            
            
            2.737
            
            
            2.810
            
            
            2.743April
            
            
            2.848
            
            
            2.692
            
            
            2.746
            
            
            2.848May
            
            
            2.867
            
            
            2.756
            
            
            2.804
            
            
            2.841June
            
            
            2.966
            
            
            2.799
            
            
            2.890
            
            
            2.965







(1)
            Expressed
                in nominal (not inflation adjusted) Nuevos Soles.


(2)
            Highest
                and lowest of the twelve month-end exchange rates for each year based
                on
                the offered rate.


(3)
            Average
                of month-end exchange rates based on the offered rate.


(4)
            End
                of period exchange rates based on the offered
                rate.


(5)
            Highest
                and lowest of the exchange notes based on the offered rate on the
                last day
                of each month.


(6)
            Average
                of the exchange rates based on the offered rate on the last date
                of each
                day in the relevant month.


(7)
            The
                exchange rate based on the offered rate on the last day of each relevant
                month.


Source:
      SBS




On July
      4, 2008, the offered rate for Dollars as published by the SBS was S/.2.889
      =
      US$1.00.




**Capitalization
      and Indebtedness**




Not
      applicable.




**Reasons
      for the Offer and Use of Proceeds**




Not
      applicable.




10





**Risk
      Factors**




***Factors
      Relating to the Company***




*Dependence
      on Mining Exploration Agreements*




An
      integral part of our operations is the participation in mining exploration
      projects with experienced mining companies. Such projects benefit us by
      providing a source of outside funds for exploration of mining rights, giving
      us
      access to the holdings of outside parties without the risks and costs of
      outright acquisition. They also enable us to expand the scope of knowledge
      and
      experience of our senior management, geologists and engineers through increased
      contact with their counterparts from other organizations. We can be highly
      dependent upon our partners, co-venturers or other shareholders in a joint
      mining exploration project carrying out their obligations under the applicable
      joint mining exploration agreement or mining operating agreement. Such partners,
      co-venturers and other shareholders in a joint mining exploration venture may
      contribute capital to cover the expenses of the joint venture project or provide
      critical technological expertise and/or management and organizational expertise.
      See “Item 4. Information on the Company—Yanacocha—Overview” for a description of
      how we and Newmont Mining Corporation, a Delaware corporation, or Newmont
      Mining, have joined together to participate in Yanacocha and how Yanacocha
      is
      dependent upon Newmont Peru Limited, Peruvian Branch, or Newmont Peru, to
      provide management and other expertise to the Yanacocha project. If, however,
      a
      partner, a co-venturer or in certain cases another shareholder does not carry
      out its obligations under the applicable joint venture agreement, joint mining
      operating agreement, by-laws or shareholders agreement, the value of our
      investment in the joint mining exploration project could be adversely affected
      and we could incur significant expense in enforcing our rights or pursuing
      remedies. There can be no assurance that our current or future partners will
      fulfill their obligations under such agreements. See “Item 4. Information on the
      Company—Yanacocha” and “Item 4. Information on the Company—The Company—Business
      Overview—Exploration.”




*Investment
      in International Operations*




Foreign
      operations are subject to certain risks inherent in conducting business abroad,
      including, among others, exposure to foreign currency fluctuations, devaluations
      or supply restrictions, exchange control regulations, government policies,
      price
      and wage controls, taxation, intervention, social instability and other
      political, economic or diplomatic developments beyond our control. There can
      be
      no assurance that our foreign exploration activities will not be adversely
      affected in the future.




*Prices
      of Gold* *,
      Silver and Copper*




Because
      our revenues are derived primarily from the sale of ore concentrates containing
      gold and silver, Yanacocha’s revenues are derived primarily from the sale of
      gold and silver and Cerro Verde’s revenues are derived primarily from copper
      sales, the prices we, Yanacocha and Cerro Verde obtain for gold, silver, copper
      and ore concentrates containing such metals, and our, Yanacocha’s and Cerro
      Verde’s earnings, are directly related to world market prices for such metals.
      Such prices have historically fluctuated widely and are affected by numerous
      factors beyond our control, including the overall demand for and worldwide
      supply of gold, silver, copper and other metals; the availability and price
      of
      competing commodities, international economic trends, currency exchange
      fluctuations, expectations of inflation, actions of commodity markets
      participants, consumption and demand patterns and political events in major
      producing countries. We have in the past engaged in hedging activities, such
      as
      forward sales and option contracts, to minimize our exposure to fluctuations
      in
      the prices of gold, silver and other metals. Due to actions taken in 2007 and
      early 2008 to release our gold hedge book from specified fixed prices, we are
      now completely unhedged as to the price at which our gold and silver will be
      sold. As a result, we are fully exposed to the effects of changes in prevailing
      market prices of gold, silver and copper. See “Risk Factors—Factors Relating to
      the Company—Hedging,” “Item 11. Quantitative and Qualitative Disclosures About
      Market Risk” and Note 30 to the Financial Statements. For information on gold
      and silver prices for each of the years in the five-year period ended December
      31, 2007, see “Item 4. Information on the Company—The Company—Business
      Overview—Sales of Metal Concentrates.” On December 31, 2007 and June 30,
      2008, the morning fixing price for gold on the London Bullion Market was
      US$836.50 **** per
      ounce
      and US$930.25 per ounce, respectively. On December 31, 2007 and June 30,
      2008, the afternoon fixing spot price of silver on the London market, or London
      Spot, was US$14.76 **** per
      ounce
      and US$17.41 **** per
      ounce, respectively. On December 31, 2007 and May 30, 2008, the London Metal
      Exchange Settlement price for copper was US$3.03 **** per
      pound
      and US$3.98 **** per
      pound, respectively.




11




The
      world
      market prices of gold, silver and copper have historically fluctuated widely
      and
      there is no assurance that the prices for these metals will continue to maintain
      their current high historical levels. We cannot predict whether metal prices
      will rise or fall in the future. A decline in the market price of one or more
      of
      these metals could adversely impact our revenues, net income and cash flows
      and
      adversely affect our ability to repay our debt and meet our other financial
      obligations.




In
      addition, sustained low gold, silver or copper prices could: reduce revenues
      further through production declines due to cessation of the mining of deposits,
      or portions of deposits, that have become uneconomic at the then-prevailing
      market price; reduce or eliminate the profit that we currently expect from
      reserves; halt or delay the development of new projects; reduce funds available
      for exploration; and reduce existing reserves by removing ores from reserves
      that can no longer be economically processed at prevailing prices. Such declines
      in price and/or reductions in operations could also cause significant volatility
      in our financial performance and adversely affect the trading prices of our
      Common Shares and ADSs.




*Impact
      of Government Regulation*




Our,
      Yanacocha’s and Cerro Verde’s activities in Peru depend on mining concessions
      for exploration, which we refer to as mining concessions, being obtained from
      the Peruvian Ministry of Energy and Mines, or MEM, in our case, and through
      the
      assignment of concessions granted to a related entity by the Peruvian
      government, in the case of Yanacocha. In addition, our and Yanacocha’s
      activities in Peru depend on provisional permits, obtained from the MEM, for
      exploration rights of the area of the claim, which we refer to as provisional
      permits, and together with mining concessions, referred to as mining rights,
      and/or processing concessions, obtained from the MEM, for treatment of mining
      ores, or processing concessions, as well as compliance by us and Yanacocha
      with
      certain agreements entered into with the Peruvian government. Under Peru’s
      current legal and regulatory regime, our mining rights have an indefinite term
      and Yanacocha’s assigned mining rights have a term of 20 years, contingent upon
      payment of the annual concession fee for each mining right, with an option
      to
      renew for an additional term of 20 years. The mining rights are maintained
      by
      meeting a minimum annual level of production or investment and by the annual
      payment of a concession fee. A fine is payable for the years in which minimum
      production or investment requirements are not met. In addition if, in any year,
      the concession fee is not paid, payment may be made the following year within
      the term provided for making such payment. Any payment made will be applied
      to
      the prior year if such prior year payment was not paid. Failure to pay such
      concession fees or fines for two consecutive years could result in the loss
      of
      one or more of the mining rights. However, mining and processing concessions
      will not lapse if the administrative authority failed to issue a resolution
      declaring the termination of the concession within the first five years
      following the date on which such payment failure occurred. Our and Yanacocha’s
      processing concessions enjoy the same duration and tenure as the mining rights,
      subject to payment of a fee based on nominal capacity for the processing plant.
      Failure to pay such processing fees or fines for two consecutive years could
      result in the loss of the processing concessions. We are, and Yanacocha has
      informed us that Yanacocha is, current in the payment of all amounts due in
      respect to its mining and processing concessions.




12




On
      June
      24, 2004, the Peruvian Congress approved Law No. 28258 – Mining Royalties
      Law. This law established a mining royalty that owners of mining concessions
      must pay to the Peruvian government for the exploitation of metallic and
      non-metallic resources. The mining royalties are calculated on a sliding scale
      with rates ranging from 1 to 3 percent over the value of mineral concentrates
      based on international market prices. As provided by Law No. 28969, effective
      since January 26, 2007, government tax agencies are responsible for the
      collection of mining royalties. See “Item 4. Information on the Company—The
      Company—Business Overview—Regulatory Framework—Mining Royalties.” We made our
      first payment of the mining royalty pursuant to Law No. 28258 in 2004. Yanacocha
      and Cerro Verde were exempt from this payment pursuant to its Mining Law
      Stabilization Agreements under the General Mining Law with the Peruvian
      government. There can be no assurance that the Peruvian government will not
      impose additional mining royalties on us, Yanacocha or Cerro Verde in the future
      or that such mining royalties will not have an adverse effect on our,
      Yanacocha’s or Cerro Verde’s results of operations or financial condition.




In
      addition, during 2006 Peruvian mining companies, represented by the Sociedad
      Nacional de Minería, Petróleo y Energía, agreed to a mining payment equivalent
      to 3.75 percent of income after taxes. The payment was negotiated with the
      Peruvian government and is intended to support government efforts to alleviate
      poverty. On December 21, 2006, the Peruvian government issued Supreme Decree
      No.
      071-2006-EM, which approved the form of agreement to be entered by mining
      companies and the Peruvian government and authorized the Minister of Economy
      and
      Finance and the Minister of Energy and Mines to sign such agreements. The form
      of agreement contains the conditions under which the negotiated payment will
      be
      paid by Peruvian mining companies. The payment amounts to 3.75 percent of
      Peruvian income after income tax, including 2.75 percent to be paid to a local
      mining fund and 1 percent to be paid to a regional mining fund. This payment
      is
      payable from 2006 through 2010, contingent on the price of gold. Payments shall
      be made on or before April 30 of each year, after the income tax sworn
      declaration is submitted to the Peruvian tax authority. Pursuant to the Supreme
      Decree 033-2007-EM, mining companies can make the payments to the local and
      regional funds after such deadline, provided the prior approval of the Ministry
      of Energy and Mines and the Ministry of Economy and Finance is obtained.
      Fulfillment of the payment obligations will be reviewed by an audit entity
      by
      performing certain agreed-upon procedures to verify the validity of the payment
      amounts recorded as such with the *Comisión
      Nacional Supervisora de Empresas y Valores* (National Supervisory Commission of Business and Securities, or CONASEV) to
      be
      agreed between the mining company, the Ministry of Energy and Mines and the
      Ministry of Economy and Finance.




In
      2007,
      Cerro Verde negotiated an agreement with the Peruvian government that allowed
      a
      credit against contributions to the local mining fund for Cerro Verde’s work in
      constructing water and sewage treatment facilities in the Arequipa region in
      2006. However, during the third-quarter of 2007, Cerro Verde’s agreement with
      the government was modified to exclude this credit. As of December 31, 2007,
      Cerro Verde’s liability associated with the local mining fund contributions
      totaled US$49 million.




*Environmental
      and other Regulatory Matters*




Our,
      Yanacocha’s and Cerro Verde’s exploration, mining and milling activities, as
      well our and Yanacocha’s smelting and refining activities, are subject to a
      number of Peruvian laws and regulations, including environmental laws and
      regulations. Additional matters subject to regulation include, but are not
      limited to, concession fees, transportation, production, water use and
      discharges, power use and generation, use and storage of explosives, surface
      rights, housing and other facilities for workers, reclamation, taxation, labor
      standards, mine safety and occupational health.




13




We
      anticipate additional laws and regulations will be enacted over time with
      respect to environmental matters. The development of more stringent
      environmental protection programs in Peru could impose constraints and
      additional costs on our, Yanacocha’s and Cerro Verde’s operations and require
      us, Yanacocha and Cerro Verde to make significant capital expenditures in the
      future. Although we believe we are substantially in compliance, and Yanacocha
      and Cerro Verde have advised us that Yanacocha and Cerro Verde are substantially
      in compliance, with all applicable environmental regulations, there can be
      no
      assurance that future legislative or regulatory developments will not have
      an
      adverse effect on our, Yanacocha’s or Cerro Verde’s business or results of
      operations. See “Item 4. Information on the Company—The Company—Regulatory
      Framework—Environmental Matters” and “—Permits” and “Item 4. Information on the
      Company—Yanacocha—Regulation, Permit and Environmental Matters.” ****




*Hedging*




Since
      2003, we have been modifying the terms of certain derivative instruments in
      order to qualify them as normal sales contracts. On January 15, 2007, we
      modified the schedule of commitments for gold with two of our clients. As a
      consequence of this modification, we transferred 208,000 and 108,000 gold ounces
      that had been committed for sale in 2007 and 2008, respectively, and committed
      them for sale in 2012 instead, without any cash disbursement. In March and
      May
      2007, we negotiated with several counterparties to eliminate the fixed or
      maximum price component on determined commitments for a total of 971,000 gold
      ounces scheduled for delivery from 2008 to 2012, which required us to make
      aggregate payments of US$315.69 million. Additionally, in January and February
      2008, we negotiated with several counterparties to eliminate the fixed or
      maximum price component on all of our outstanding gold commitments, representing
      922,000 gold ounces, which required us to make aggregate payments of US$517.15
      million. After these transactions, we will continue delivering physical gold
      as
      scheduled but will receive the prevailing market price at the time of
      delivery. **** As
      a
      result, we are fully exposed to the effects of changes in prevailing market
      prices of gold, silver and copper. See “—Factors Relating to the Company—Prices
      of Gold, Silver and Copper.” ****




At
      El
      Brocal, we implemented a base metal hedging policy for a maximum of 30% of
      El
      Brocal’s total payable metal contained per year, for up to three years. As of
      March 31, 2008 all transactions entered have been forward pricing operations
      through non-delivery (Asian) swaps. Outstanding hedging commitments for 2008
      to
      2010 amount to 10% of payable metal and are as follows: (i) 4,200 metric tons
      of
      copper at an average price of US$7,273 per metric ton, (ii) 15,900 metric tons
      of lead at an average price of US$2,797 per metric ton and (iii) 18,750 metric
      tons of zinc at an average price of US$2,757 per metric ton.




See
“Item
      11. Quantitative and Qualitative Disclosures About Market Risk” and Note 30 to
      the Financial Statements.




Yanacocha
      and Cerro Verde have not engaged in, and are currently not engaged in, gold
      or
      copper price hedging activities, such as forward sales or option contracts,
      to
      minimize its exposure to fluctuations in the price of gold or copper. No
      assurance can be given, however, that Yanacocha or Cerro Verde will not enter
      into hedging transactions in the future or that such transactions, if entered
      into, will have the desired effect.




14




*Speculative
      Nature of Precious Metals Exploration*




Precious
      metals exploration, particularly gold exploration, is highly speculative in
      nature, involves many risks and frequently is unsuccessful. There can be no
      assurance that our, Yanacocha’s or Cerro Verde’s precious metals exploration
      efforts will be successful. Once mineralization is discovered, it may take
      a
      number of years from the initial phases of drilling before production is
      possible, during which time the economic feasibility of production may change.
      Substantial expenditures are required to establish proven and probable ore
      reserves through drilling, to determine metallurgical processes to extract
      the
      metals from the ore and, in the case of new properties, to construct mining
      and
      processing facilities. As a result of these uncertainties, no assurance can
      be
      given that our or Yanacocha’s exploration programs will result in the expansion
      or replacement of current production with new proven and probable ore reserves.




Advanced
      exploration projects have no operating history upon which to base estimates
      of
      proven and probable ore reserves and estimates of future cash operating costs.
      Such estimates are, to a large extent, based upon the interpretation of geologic
      data obtained from drill holes and other sampling techniques, and feasibility
      studies which derive estimates of cash operating costs based upon anticipated
      tonnage and grades of ore to be mined and processed, the configuration of the
      ore body, expected recovery rates of the mineral from the ore, comparable
      facility and equipment operating costs, anticipated climatic conditions and
      other factors. As a result, it is possible that actual cash operating costs
      and
      economic returns based upon proven and probable ore reserves may differ
      significantly from those originally estimated. Moreover, significant decreases
      in actual over expected prices may mean reserves, once found, will be
      uneconomical to produce. It is not unusual in new mining operations to
      experience unexpected problems during the start up phase. Yanacocha and Cerro
      Verde used US$575 per ounce of gold and US$1.75 **** per
      pound
      of copper to calculate their gold and copper reserves, respectively, as of
      December 31, 2007; we use a fixed price of US$575 **** per
      ounce
      of gold and a three-year average historic price of US$10 per ounce of silver
      to
      calculate our proven and probable ore reserves.




*Increased
      Costs Could Affect Profitability*




Costs
      at
      any particular mining location frequently are subject to variation due to a
      number of factors, such as changing ore grade, changing metallurgy and revisions
      to mine plans in response to the physical shape and location of the ore body.
      In
      addition, costs are affected by the price of commodities, such as fuel,
      electricity and labor. Commodity costs are at times subject to volatile price
      movements, including increases that could make production at certain operations
      less profitable. Reported costs may be affected by changes in accounting
      standards. A material increase in costs at any significant location could have
      a
      significant effect on our profitability.




*Indebtedness*




We
      incurred significant indebtedness during 2007 and 2008 in connection with the
      unwinding of our gold hedge book. The agreements governing our indebtedness
      contain covenants that restrict our ability to:




§
            incur
                additional indebtedness;




§
            engage
                in transactions with affiliates;




§
            create
                liens on our assets;




§
            make
                certain investments;




15




§
            sell
                assets, subject to certain
                exceptions;




§
            acquire
                other companies or dissolve, liquidate or merge with or into other
                companies;




§
            enter
                into unrelated businesses;




§
            make
                guarantees;




§
            enter
                into burdensome
                agreements; and




§
            enter
                into certain hedging transactions other than in the ordinary course
                of
                business.




In
      addition, we are required to maintain certain financial ratios and operating
      metrics.




Any
      failure to comply with the restrictions under any agreement governing our other
      indebtedness may result in an event of default. Such default may allow the
      creditors to accelerate the related debt, which may trigger cross-acceleration
      or cross-default provisions in other debt agreements. Our assets and cash flow
      may not be sufficient to fully repay borrowings under our debt instruments
      that
      are accelerated upon an event of default.




If
      we are
      unable to repay, refinance or restructure our indebtedness under, or amend
      the
      covenants contained in, our loan or credit agreements at maturity or in the
      event of a default, the lenders could declare all borrowings outstanding
      (together with accrued interest and other fees) immediately due and payable
      and
      institute foreclosure proceedings against the security. Any such actions could
      force us into bankruptcy or liquidation.




*Capital
      Intensive Nature of Precious Metals Exploration*




Precious
      metals exploration requires substantial capital expenditures for the
      exploration, extraction, production and processing stages and for machinery,
      equipment and experienced personnel. There can be no assurance that we or
      Yanacocha will generate sufficient cash flow and/or that we will have access
      to
      sufficient external sources of funds in the form of outside investment or loans
      to continue exploration activities at the same or higher levels than in the
      past.




*Reserves
      Estimates*




The
      proven and probable ore reserve figures presented in this Annual Report are
      our,
      Yanacocha’s and Cerro Verde’s estimates, and there can be no assurance that the
      level of recovery of gold, silver, copper and certain other metals will be
      realized. Reserve estimates may require revision based on actual production
      experience. Market price fluctuations of gold, silver and other metals, as
      well
      as increased production costs or reduced recovery rates, may render proven
      and
      probable ore reserves containing relatively lower grades of mineralization
      uneconomic to exploit and may ultimately result in a restatement of proven
      and
      probable ore reserves. Moreover, short-term operating factors relating to the
      reserves, such as the processing of different types of ore or ore grades, could
      adversely affect our or Yanacocha’s profitability in any particular accounting
      period. See “Item 4. Information on the Company—Property, Plants and
      Equipment—Our Property—Reserves” and “Item 4. Information on the
      Company—Property, Plants and Equipment—Yanacocha’s
      Properties—Reserves.”




16




*Replacement
      of Reserves*




As
      we
      produce gold, silver, zinc and other metals, we deplete our ore reserves for
      such metals. To maintain production levels, we must replace depleted reserves
      by
      exploiting known ore bodies and locating new deposits. Success in exploration
      for gold, silver and the other metals we produce is very uncertain and there
      is
      a risk that our depletion of reserves will not be offset by new
      discoveries.




*Industry
      Risks*




The
      business of mining, smelting and refining gold, silver, copper and other metals
      is generally subject to a number of risks and hazards, including industrial
      accidents, labor disputes, unusual or unexpected geological conditions, changes
      in the regulatory environment, environmental hazards and weather and other
      natural phenomena such as earthquakes. Such occurrences could result in damage
      to, or destruction of, mining properties or production facilities, personal
      injury or death, environmental damage, delays in mining, monetary losses and
      possible legal liability. We, Yanacocha and Cerro Verde each maintain insurance
      against risks that are typical in the mining industry in Peru and in amounts
      that we and Yanacocha believe to be adequate but which may not provide adequate
      coverage in certain circumstances. Insurance against certain risks (including
      certain liabilities for environmental pollution or other hazards as a result
      of
      exploration and production) is not generally available to us or Yanacocha or
      to
      other companies within the industry.




*Increased
      Equipment Costs and Shortages; Increase Production Costs*




In
      recent
      years there has been a significant increase in mining activity worldwide in
      response to increased demand and significant increases in prices of natural
      resources. The opening of new mines and expansion of existing mines has led
      to
      increased demand for, and increased costs and shortages of, equipment, supplies
      and experienced personnel. These cost increases have significantly
      increased overall operating and capital budgets of companies like ours, and
      continuing shortages could affect the timing and feasibility of expansion
      projects.




Energy
      represents a significant portion of our production costs. Our principal energy
      sources are electricity, purchased petroleum products, natural gas and coal.
      An
      inability to procure sufficient energy at reasonable prices could adversely
      affect our profits, cash flow and growth opportunities. Our production costs
      are
      also affected by the prices of commodities we consume or use in our operations,
      such as sulfuric acid, grinding media, steel, reagents, liners, explosives
      and
      diluents. The prices of such commodities are influenced by supply and demand
      trends affecting the mining industry in general and other factors outside our
      control and such prices are at times subject to volatile movements. Increases
      in
      the cost of these commodities could make our operations less profitable, even
      in
      an environment of relatively high copper prices. Increases in the costs of
      commodities that we consume or use may also significantly affect the capital
      costs of new projects.




*Labor
      Matters*




Prior
      to
      April 30, 2007, we had not experienced any strikes during the past five
      years.  On April 30, 2007, we experienced a five-day labor stoppage at the
      Uchucchacua mine, which coincided with a strike called by the National Mining
      and Metallurgical Union.  In November 2007, unionized workers at
      Uchucchaccua engaged in a three-day strike called by the National Mining and
      Metallurgical Union. There can be no assurance that we will not experience
      strikes or other labor-related work stoppages that could have a material adverse
      effect on our operations and/or operating results in the future.




17




In
      February 2004, Yanacocha entered into its first collective bargaining agreement
      with Workers’ Union of Minera Yanacocha S.R.L., or the Union, which was created
      and registered before the Peruvian Labor Ministry on December 9, 2003. This
      collective bargaining agreement expired in February 2007. In May 2007, Yanacocha
      completed negotiations with the Union’s members and entered into a new
      collective bargaining agreement, which is applicable only to the Union’s members
      and effective from March 2007 to February 2010. Yanacocha has informed us that
      it considers its relations with its employees to be good. However, a small
      percentage of Union members engaged in a two-day strike in November 2007, called
      by the National Mining and Metallurgical Union. The strike did not have any
      material impact on Yanacocha’s operations; nevertheless there can be no
      assurance that Yanacocha will not experience other strikes or labor-related
      work
      stoppages that could have a material adverse effect on its operations or its
      operating results. See “Item 6. Directors, Senior Management and
      Employees—Employees” and “Item 4. Information on the
      Company—Yanacocha—Employees.”




On
      June
      10, 2008, the the Sindicato Unico de Trabajadores de Sociedad Minera de Cerro
      Verde S.A.A. commenced an 11-day strike at Cerro Verde. The strike, which was
      declared illegal by the Peruvian Work Ministry, ended on June 21, 2008 and
      did
      not negatively impact Cerro Verde’s operations.




*Political
      and Social Perception*




Our
      and
      Yanacocha’s exploration and production activities are potentially subject to
      political and social risks. Over the past several years, we and Yanacocha have
      been the target of local political protests, including community protests at
      our
      La Zanja project, a roadblock in protest of drilling activities at Yanacocha’s
      Cerro Quilish mine and a roadblock carried out by members of the Combayo
      community. In September 2004, due to the incidents at Cerro Quilish, Yanacocha
      suspended all drilling activities at this mine. In December 2004, Yanacocha
      removed the Cerro Quilish gold deposit from its proven and probable reserves.
      See “Item 4. Information on the Company—The Company—History and
      Development—Greenfield Exploration Projects—La Zanja” and “Item 4. Information
      on the Company—Yanacocha—Legal Proceedings.” There can be no assurance that
      these incidents will not continue, or that similar incidents will not occur,
      or
      that the continuation or intensification of community protests would not
      adversely affect our or Yanacocha’s exploration and production activities or our
      or Yanacocha’s results of operations or financial condition.




On
        June
        30, 2008, the contractor workers of our Uchucchacua mining unit commenced
        a
        7-day strike promoted by the National Federation of Mining Unions. The strike
        was declared illegal by the Peruvian Work Ministry.




*Investment
      Company Act*




We
      own a
      43.65 percent partnership interest in Yanacocha and an 18.50 percent equity
      interest in Cerro Verde. These interests may constitute “investment securities”
for purposes of the U.S. Investment Company Act of 1940, as amended, or the
      Investment Company Act.




Under
      the
      Investment Company Act, an investment company is defined in relevant part to
      include (i) any company that is or holds itself out as being engaged primarily,
      or proposes to engage primarily, in the business of investing, reinvesting
      or
      trading in securities and (ii) any company that owns or proposes to acquire
      investment securities having a value exceeding 40 percent of such company’s
      total assets (exclusive of certain items) on an unconsolidated basis. Issuers
      that are investment companies within the meaning of the Investment Company
      Act,
      and which do not qualify for an exemption from the provisions of such act,
      are
      required to register with the Commission and are subject to substantial
      regulations with respect to capital structure, operations, transactions with
      affiliates and other matters. If we were deemed to be an investment company
      and
      did not qualify for an exemption from the provisions of the Investment Company
      Act, we would be required to register with the Commission and would be subject
      to such regulations, which would be unduly burdensome and costly for us and
      possibly adversely impact us.




18




We
      received an order from the Commission on April 19, 1996 declaring us to be
      primarily engaged in a business other than that of an investment company and,
      therefore, not an investment company within the meaning of the Investment
      Company Act. We intend to conduct our operations and maintain our investments
      in
      a manner, and will take appropriate actions as necessary, to ensure we will
      not
      be deemed to be an investment company in the future. The Commission, however,
      upon its motion or upon application, may find that the circumstances that gave
      rise to the issuance of the order no longer exist, and as a result may revoke
      such order. There can be no assurance that such order will not be revoked.




***Factors
      Relating to Peru***




*Exposure
      to Peruvian Political Risk*




All
      of
      our, Yanacocha’s and Cerro Verde’s operations are conducted in Peru.
      Accordingly, our, Yanacocha’s and Cerro Verde’s business, financial condition or
      results of operations could be affected by changes in economic or other policies
      of the Peruvian government or other political, regulatory or economic
      developments in Peru.




During
      the past several decades, Peru has had a history of political instability that
      has included military coups and a succession of regimes with differing policies
      and programs. Past governments have frequently played an interventionist role
      in
      the nation’s economy and social structure. Among other things, past governments
      have imposed controls on prices, exchange rates and local and foreign investment
      as well as limitations on imports, restricted the ability of companies to
      dismiss employees, expropriated private sector assets (including mining
      companies) and prohibited the remittance of profits to foreign
      investors.




During
      the 1980s, government policies restricted our ability, among other things,
      to
      repatriate funds and import products from abroad. In addition, currency exchange
      rates were strictly controlled, and all export sales were required to be
      deposited in Peru’s Banco Central de Reserva, or Central Bank, where they were
      exchanged from U.S. Dollars to Peruvian currency at less-than-favorable rates
      of
      exchange. These policies generally affected our results of operations. Controls
      on repatriation of funds limited the ability of our shareholders to receive
      dividends outside of Peru, but did not limit the ability of our shareholders
      to
      receive distributions of earnings in Peru. See “Item 10. Additional
      Information—Exchange Controls.”




In
      July 1990, Alberto Fujimori was elected president of Peru, and his
      administration implemented a broad-based reform of Peru’s political system,
      economy and social conditions, aimed at stabilizing the economy, restructuring
      the national government by reducing bureaucracy, privatizing state-owned
      companies, promoting private investment, developing and strengthening free
      markets, institutionalizing democratic representation and enacting programs
      for
      the strengthening of basic services related to education, health, housing and
      infrastructure. However, after Fujimori’s reelection to his third five-year term
      of office on May 29, 2000, Fujimori resigned from his post amid increasing
      social pressure. The Peruvian Congress appointed Valentin Paniagua as interim
      President. New elections were subsequently held on April 8, 2001 and a run-off
      election was held on June 3, 2001, in which Alejandro Toledo was elected
      President. President Toledo’s government has largely retained the economic
      policies of the previous government, focusing on promoting private investment,
      privatizing state-owned companies in various sectors including energy, mining
      and public services.




At
      the
      elections held on April 9, 2006, no presidential candidate received the
      required 50 percent or more of the votes. As a result, a second round election
      between the top two presidential candidates, Ollanta Humala Tasso from the *Partido
      Union por el Peru* ,
      or the
      UPP, and Alan García Pérez of the *Partido
      Alianza Popular Revolucionaria* ,
      or
      APRA, was held on June 4, 2006. Alan García Pérez was elected, but he has no
      majority in Congress. The new government has continued the economic policies
      of
      its predecessor.




19




During
      1980s and early 1990s the
      Sendero Luminoso, or SL, and the Movimiento Revolucionario Tupac Amaru, or
      MRTA,
      terrorist organizations were particularly active in Peru. Although SL and MRTA
      were almost de-activated in 1992 and 1997 respectively, we cannot guarantee
      that
      acts by these or other terrorist organizations will not adversely affect our
      operations in the future.




*Risks
      of Inflation, Reduced Economic Growth and Currency Devaluation*




Over
      the
      past several decades, Peru has experienced periods of high inflation, slow
      or
      negative economic growth and substantial currency devaluation. The inflation
      rate in Peru, as measured by the *Indice
      de Precios al Consumidor* ,
      or IPC,
      and published by Instituto
      Nacional de Estadística e Informática, or  INEI,
      has
      fallen from a high of 7,649.7 percent in 1990 to 2.5 percent in 2003, 3.5
      percent in 2004, 1.5 percent in 2005, 1.1 percent in 2006 and 3.93 percent
      in
      2007. The Peruvian currency has been devalued numerous times during the last
      20
      years. The devaluation rate has decreased from a high of 4,019.3 percent in
      1990
      to revaluations of 1.5 percent in 2003 and 5.5 percent in 2004, a
      devaluation of 4.5 percent in 2005 and revaluations of 6.4 percent in 2006
      and
      7.0 percent in 2007. Our revenues and operating expenses are primarily
      denominated in U.S. Dollars. If inflation in Peru were to increase without
      a
      corresponding devaluation of the Nuevo Sol relative to the U.S. Dollar, our
      financial position and results of operations, and the market price of our Common
      Shares and American Depositary Shares, or ADSs, could be affected. Although
      the
      Peruvian government’s stabilization plan has significantly reduced inflation,
      and the Peruvian economy has experienced strong growth in recent years, there
      can be no assurance that inflation will not increase from its current level
      or
      that such growth will continue in the future at similar rates or at all.




Among
      the
      economic circumstances that could lead to a devaluation would be the decline
      of
      Peruvian foreign reserves to inadequate levels. Peru’s foreign reserves at
      December 31, 2007 were US$27.7 billion as compared to US$17.6 billion at
      December 31, 2006. Although actual foreign reserves must be maintained at
      levels that will allow the succeeding government the ability to manage the
      Peruvian economy and to assure monetary stability in the near future, there
      can
      be no assurance that Peru will be able to maintain adequate foreign reserves
      to
      meet its foreign currency denominated obligations, or that Peru will not devalue
      its currency should its foreign reserves decline. See “Item 3. Key
      Information—Selected Financial Data—Exchange Rates.”




Peru’s
      current account deficit is being funded partially by foreign direct investment.
      There can be no assurance that foreign direct investment will continue at
      current levels, particularly if adverse political or economic developments
      in
      Peru arise, a development that may also contribute to devaluation
      pressure.




*Deterioration
      in Economic and Market Conditions in Latin America and Other Emerging Market
      Countries*




The
      market for securities issued by Peruvian companies is influenced by economic
      and
      market conditions in Peru and, to varying degrees, market conditions in other
      Latin American and emerging market countries. Although economic conditions
      are
      different in each country, the reaction of investors to developments in one
      country is likely to cause the capital markets in other countries to fluctuate.
      For example, political and economic events, such as the crises in Venezuela,
      Ecuador, Bolivia, Brazil and Argentina, have influenced investors’ perceptions
      of risk with regard to Peru. The negative investor reaction to developments
      in
      our neighboring countries may adversely affect the market for securities issued
      by countries in the region, cause foreign investors to decrease the flow of
      capital into Latin America and introduce uncertainty about plans for further
      integration of regional economies. ****




20




*Exchange
      and Investment Controls*




Peruvian
      law currently imposes no restrictions on the ability of companies operating
      in
      Peru to transfer foreign currency from Peru to other countries, to convert
      Peruvian currency into foreign currency or foreign currency into Peruvian
      currency or to remit dividends abroad or on the ability of foreign investors
      to
      liquidate their investment and repatriate their capital. Prior to 1991, Peru
      had
      restrictive exchange controls and exchange rates. During the latter part of
      the
      1980s, exchange restrictions prevented payment of dividends to our shareholders
      in the United States in U.S. Dollars. Accordingly, should such or similar
      controls be instituted, dividends paid to holders of Common Shares and,
      consequently, holders of American Depositary Receipts, or ADRs, could be
      affected. There can be no assurance that the Peruvian government will continue
      to permit such transfers, remittances or conversion without restriction. See
      “Item 10. Additional Information—Exchange Controls.”




*Corporate
      Disclosure and Accounting Standards*




We
      prepare our financial statements using Peruvian GAAP, which differs in certain
      material respects from U.S. GAAP. Thus, the presentation of Peruvian financial
      statements and reported earnings may not be comparable to those companies whose
      financial statements are prepared in accordance with U.S. GAAP. See Note 35
      to
      the Financial Statements for a description of the significant differences
      between Peruvian GAAP and U.S. GAAP, as such differences relate to us, and
      Note
      36 for a reconciliation to U.S. GAAP of our net income and shareholders’ equity
      for the period included therein. In addition, as a foreign private issuer in
      the
      United States, we have less intensive reporting requirements and information
      regarding us may not be as readily disseminated into the market.




*Enforceability
      of Civil Liabilities*




We
      are
      organized under the laws of Peru. A significant majority of our directors and
      officers reside outside the United States (principally in Peru). All or a
      substantial portion of our assets or the assets of such persons are located
      outside the United States. As a result, it may not be possible for investors
      to
      effect service of process within the United States upon us or upon such persons
      or to enforce against them in federal or state courts in the United States
      judgments predicated upon the civil liability provisions of the federal
      securities laws of the United States. We have been advised by our Peruvian
      counsel, that there is uncertainty as to the enforceability, in original actions
      in Peruvian courts, of liabilities predicated solely under the United States
      federal securities laws and as to the enforceability in Peruvian courts of
      judgments of United States courts obtained in actions predicated upon the civil
      liability provisions of the United States federal securities laws.




***Factors
      Relating to the Common Shares and ADSs***




*Voting
      Rights; Effective Control by Principal Shareholders*




The
      aggregate percentage of the economic interest of our outstanding share capital
      held by Alberto Benavides de la Quintana, our Chairman and former Chief
      Executive Officer, and certain members of his immediate and extended family
      and
      their spouses, or the Benavides Family, as of April 30, 2008, was 27.01 percent.
      Because of the significant ownership interest the Benavides Family holds in
      common shares and because the Investment Shares held by others do not have
      voting rights, the Benavides Family has the power to elect a significant number
      of the outstanding directors and has a significant influence over the outcome
      of
      substantially all matters to be decided by a vote of shareholders. In addition,
      under the terms of the Amended and Restated Deposit Agreement dated May 3,
      2002,
      as further amended and restated as of November 12, 2003, among us, The Bank
      of
      New York, as depositary, or the Depositary, and the owners and beneficial owners
      of ADSs, or the Amended and Restated Deposit Agreement, relating to our ADSs,
      if
      holders of ADSs do not provide the Depositary with timely instructions for
      the
      voting of Common Shares represented by such ADRs, the Depositary will be deemed
      to be instructed to give a person designated by us, which will likely be Alberto
      Benavides de la Quintana, a discretionary proxy to vote such shares, unless
      we
      inform the Depositary that we do not wish such proxy to be given.






21




*Fewer
      and Less Well* *-Defined
      Shareholders’ Rights*




Our
      shareholders have fewer and less well-defined rights under applicable Peruvian
      law than they might have as shareholders of a corporation incorporated in a
      jurisdiction of the United States or certain other countries.




*Shares
      Eligible for Future Sale*




Sales
      of
      a substantial number of our shares by Alberto Benavides de la Quintana and
      certain other members of the Benavides Family could materially and adversely
      affect prevailing market prices for the Common Shares and ADSs. There is no
      contractual restriction on the disposition of shares of our share capital by
      our
      shareholders, including the Benavides Family. Furthermore, under the *Ley
      General de Sociedades Peruana* ,
      or
      Peruvian Companies Law, any restriction on the free sale of shares in a *sociedad
      anónima abierta* (open
      stock company) such as we are, is null and void.




*Possible
      Inability of ADS Holders to Exercise Preemptive Rights*




Holders
      of the ADSs are, under Peruvian law, entitled to exercise preemptive rights
      and
      accretion rights on the Common Shares underlying the ADSs in the event of any
      future capital increase by us unless (x) the increase is approved,
      expressly stating that the shareholders have no preemptive rights to subscribe
      and pay for the Shares to be issued in such increase, by holders of Common
      Shares, holding at least 40 percent of the Common Shares, at a properly called
      meeting with a proper quorum and (y) the increase is not designed to
      improve directly or indirectly the shareholding of any shareholder. However,
      United States holders of ADSs may not be able to exercise through the Depositary
      for the ADSs the preemptive rights and accretion rights for Common Shares
      underlying their ADSs unless a registration statement under the Securities
      Act
      of 1933, as amended, or the Securities Act, is effective with respect to such
      rights or an exemption from the registration requirement thereunder is
      available. Any such rights offering would have a dilutive effect upon
      shareholders who are unable or unwilling to exercise their rights. We intend
      to
      evaluate, at the time of any rights offering, the costs and potential
      liabilities associated with any registration statement as well as the benefits
      to it of enabling the holders of ADSs to exercise such rights and will then
      make
      a decision as to whether to file such a registration statement. Therefore,
      no
      assurance can be given that any such registration statement would be filed.
      To
      the extent that holders of ADSs are unable to exercise such rights because
      a
      registration statement has not been filed and no exemption from such
      registration statement under the Securities Act is available, the Depositary
      will, to the extent practicable, sell such holders’ preemptive rights or
      accretion rights and distribute the net proceeds thereof, if any, to the holders
      of ADSs and such holders’ equity interest in us would be diluted
      proportionately. The Depositary has discretion to make rights available to
      holders of ADSs or to dispose of such rights and to make any net proceeds
      available to such holders. If, by the terms of any rights offering or for any
      other reason, the Depositary is not able to make such rights or such net
      proceeds available to any holder of ADSs, the Depositary may allow the rights
      to
      lapse.




22




**ITEM
              4.**
            **Information
                on the Company**




**THE
      COMPANY**




**History
      and Development**




***Overview***




We
      are
      Peru’s largest publicly-traded precious metals company and are engaged in the
      exploration, mining and processing of gold, silver and, to a lesser extent,
      other metals, in Peru. We currently operate the Julcani, Recuperada, Orcopampa,
      Poracota, Uchucchacua, Antapite and Ishihuinca mines and have controlling
      interests in two other mining companies which operate the Colquijirca and
      Shila-Paula mines.  We
      also
      own an electric power transmission company and an engineering services
      consulting company and have minority interests in several other mining
      companies, including a significant ownership interest in Yanacocha, a Peruvian
      partnership that operates South America’s largest gold mine, and Cerro Verde, a
      Peruvian company that operates a copper mine located in the south of Peru.
      For
      the year ended December 31, 2007, our consolidated net sales were
      US $747
      million and our
      consolidated net income was US$275 million. The tables below summarize the
      total
      production and our equity share of production for the Julcani, Recuperada,
      Orcopampa, Poracota, Uchucchacua, Antapite and Ishihuinca, Shila-Paula, El
      Brocal, Yanacocha and Cerro Verde mines for the year ended December 31,
      2007:


**TOTAL
                    PRODUCTION**
                
                **BUENAVENTURA’S EQUITY SHARE OF PRODUCTION****UNIT**
                
                **Silver**
                  **Oz**
                
                **Gold**
                  **Oz**
                
                **Lead**
                  **DST**
                
                **Zinc**
                  **DST**
                
                **Copper**
                  **DST**
                
                **BVN**
                  **SHARE**
                  **(%)**
                
                **Silver**
                  **Oz**
                
                **Gold**
                  **Oz**
                
                **Lead**
                  **DST**
                
                **Zinc**
                  **DST**
                
                **Copper**
                  **DST**(in
                    thousands)
                
                (in
                    thousands)**Orcopampa
                    and Poracota**
                
                
                83.2
                
                
                284.6
                
                
                —
                
                
                —
                
                
                —
                
                
                **100.00**
                
                
                83.2
                
                
                284.6
                
                
                —
                
                
                —
                
                
                —**Uchucchacua**
                
                
                9,873.8
                
                
                —
                
                
                9.7
                
                
                8.7
                
                
                —
                
                
                **100.00**
                
                
                9,873.8
                
                
                —
                
                
                9.7
                
                
                8.7
                
                
                —**Julcani**
                
                
                1,483.4
                
                
                —
                
                
                1.7
                
                
                0.1
                
                
                —
                
                
                **100.00**
                
                
                1,483.4
                
                
                0.0
                
                
                1.7
                
                
                0.1
                
                
                —**Recuperada**
                
                
                696.0
                
                
                —
                
                
                2.2
                
                
                3.3
                
                
                —
                
                
                **100.00**
                
                
                696.0
                
                
                —
                
                
                2.2
                
                
                3.3
                
                
                —**Antapite**
                
                
                90.4
                
                
                72.2
                
                
                —
                
                
                —
                
                
                
                
                
                **100.00**
                
                
                90.4
                
                
                72.2
                
                
                —
                
                
                —
                
                
                —**Ishihuinca**
                
                
                —
                
                
                14.9
                
                
                —
                
                
                —
                
                
                —
                
                
                **100.00**
                
                
                —
                
                
                14.9
                
                
                —
                
                
                —
                
                
                0.2**Shila-Paula**
                
                
                104.7
                
                
                32.3
                
                
                —
                
                
                —
                
                
                —
                
                
                **100.00**
                
                
                104.7
                
                
                32.3
                
                
                —
                
                
                —
                
                
                —**EI
                    Brocal**
                
                
                7,099.1
                
                
                —
                
                
                34.9
                
                
                96.1
                
                
                1.4
                
                
                **34.29**
                
                
                2,434.3
                
                
                —
                
                
                12.0
                
                
                32.9
                
                
                0.5**Yanacocha**
                
                
                2,318.7
                
                
                1,563.7
                
                
                —
                
                
                —
                
                
                —
                
                
                **43.65**
                
                
                1,012.1
                
                
                682.5
                
                
                —
                
                
                —
                
                
                —**Cerro
                    Verde**
                
                
                1,219.0
                
                
                —
                
                
                —
                
                
                —
                
                
                297.1
                
                
                **18.50**
                
                
                225.5
                
                
                —
                
                
                —
                
                
                —
                
                
                55.0**TOTAL
                    CONTENT**
                
                
                **22,968.2**
                
                
                **1,967.6**
                
                
                **48.5**
                
                
                **108.1**
                
                
                **298.7**
                
                
                
                
                
                **16,003.3**
                
                
                **1,086.5**
                
                
                **25.6**
                
                
                **45.0**
                
                
                **55.6**




Compañía
      de Minas Buenaventura S.A.A., a *sociedad
      anónima abierta* (open
      stock company) under the laws of Peru, ** was
      originally established in 1953 as a *sociedad
      anónima* (company) under the laws of Peru, and currently operates under the laws of
      Peru.
      Our registered office is located at Carlos Villarán 790, Santa Catalina, Lima
      13, Perú, telephone no. 5-11-419-2538. Our Internet Website address is
      http://www.buenaventura.com. The information on our website is not a part of,
      and is not incorporated into, this document.




23




***History***




During
      our first 25 years, our efforts focused on the exploration of silver mines.
      During this period, we built up our principal mines in Peru, commencing with
      the
      acquisition of the Julcani mine in 1953. We commenced exploration of the
      Orcopampa mine in 1962 and operations in 1965. We began exploring the
      Uchucchacua mine site in 1960 and, after operating a pilot project in the area
      in the early 1970s with successful results, built an ore processing plant at
      the
      mine site, which began operations in 1975.




Because
      of political uncertainties in Peru in the mid-1970s, we explored mining
      possibilities in other countries in South America, including Colombia, Ecuador,
      Venezuela, Bolivia and Argentina. Exploration began on a small scale at the
      Toachi mine near Quito, Ecuador, but this project was discontinued in 1981
      due
      to border disputes between Peru and Ecuador. At that time, we also decided
      to
      discontinue our exploration outside Peru and to intensify efforts in Peru.




Following
      a sharp increase in silver prices, which peaked in 1980, we initiated a program
      to explore for gold and, to a lesser extent, other metals in Peru to reduce
      our
      dependence on silver, since we believed the high price of silver could not
      be
      sustained. Faced with declining silver prices throughout the 1980s, we expanded
      silver output to reduce cash flow while at the same time continuing our
      exploration efforts for other metals. Exploration of gold anomalies in the
      Yanacocha district began in 1983 and an expansion of the Orcopampa mine, which
      had operated since 1967 as a silver-producing mine, to enable us to explore
      newly-discovered gold veins began in 1984 and was concluded in 1999. In 2002,
      after an intense exploration program of the Orcopampa mine, gold production
      was
      commenced in the Chipmo area. New gold mining operations commenced at the
      Ishihuinca mine in the early 1980s and at the Antapite mine in 2001.




Since
      the
      late 1980s, we have continued our efforts to decrease our exposure to silver
      price fluctuations and have pursued a plan to increase overall precious metals
      production and production efficiency. We have continued to expand our mineral
      reserves through the implementation of property acquisition and intensive
      exploration programs designed to increase reserves and production of gold.
      As
      part of this strategy, we acquired an equity interest in Yanacocha and conducted
      exploration leading to the discovery of gold mineralization and subsequent
      production of gold at the Orcopampa, Shila, Ishihuinca and Antapite mines.
      These
      initiatives have transformed us from primarily a silver producer into primarily
      a gold producer, based on allocated revenue. In 2007, gold, copper, silver
      and
      other metals accounted for 44 percent, 22 percent, 13 percent and 21 percent,
      respectively, of our equity share of production value in our consolidated
      subsidiaries, Yanacocha and Cerro Verde.




On
      January 14, 1992, we, through our wholly-owned subsidiary, Compañía Minera
      Condesa S.A., or Condesa, together with Newmont Second Capital Corporation,
      or
      Newmont Second, a wholly-owned subsidiary of Newmont Mining, and Société
d’Etudes, de Recherches et d’Exploitations Miniéres, or Serem, a wholly-owned
      subsidiary of the Bureau de Recherches Geologiques et Minières, or BRGM, the
      geological and mining bureau of the French government, formed Yanacocha to
      continue exploration of the deposits at a mining site in the Cajamarca area.
      At
      that time, Yanacocha was 38 percent owned by Newmont Second, 24.7 percent owned
      by Serem, 32.3 percent owned by Condesa and 5 percent owned by The International
      Finance Corporation, or IFC, the branch of the World Bank that promotes private
      investments. As of May 31, 2008, our participation in Yanacocha is 43.65
      percent, and Newmont Second’s is 51.35 percent, with IFC continuing to own 5
      percent.




In
      October 2000, we and Newmont Mining agreed to consolidate our properties in
      Cajamarca, northern Peru, in Yanacocha. Under the consolidation plan and
      according to agreements signed in December 2000, we sold several assets to
      Yanacocha, including the Minas Conga project, the China Linda lime plant, mining
      rights, aerial land and other machinery and equipment and inventories. See
      “—Property, Plants and Equipment—Yanacocha’s Properties—Operating Properties.”
We received approximately US$9 million in connection with this sale. We
      also entered into an administration agreement with Yanacocha, setting forth
      that
      we would manage the China Linda lime plant until December 18, 2010, for a
      monthly fee of US$10,000 plus reimbursement of all incurred costs. However,
      in
      December 2001, Yanacocha terminated the agreement and we ceased to manage the
      China Linda plant. As a result of the termination, we received a payment of
      US$1,800,000 from Yanacocha.




24




On
      June
      1, 2005, Cerro Verde conducted a capital increase whereby we subscribed
      42,925,975 shares for US$154.9 million, increasing our interest in Cerro
      Verde from 9.17 percent to 18.21 percent. Freeport-McMoran Copper & Gold
      Inc. maintains a majority interest in Cerro Verde. See “—Intermediate Holding
      Companies, Subsidiaries and Equity Participations—Sociedad Minera Cerro Verde
      S.A.A.” As of March 31, 2008, Cerro Verde was 53.56 **** percent
      owned by Cyprus Climax Metals Company, a subsidiary of Freeport-McMoran Copper
      & Gold Inc., 21 **** percent
      owned by SMM Cerro Verde Netherlands B.V. and 18.50 **** percent
      owned by us.




*Redesignation
      of our Shares and ADSs; Share Split*




At
      our
      shareholder meeting held on April 30, 2002, following special meetings of our
      Series A shareholders and Series B shareholders on the same date, or the Special
      Meetings, amendments to our *estatutos* ,
      or
      By-laws, were approved pursuant to the Special Meetings to effect the
      redesignation of each outstanding Series B Share as one Series A Share
      and the immediate redesignation thereafter of each Series A Share as one
      Common Share, or the Redesignation. The Redesignation was effective May 3,
      2002.
      At that date, we had Common Shares with a nominal par value of S/.4.00 per
      share
      and Investment Shares also with a nominal par value of S/.4.00 per share. The
      Common Shares represent 100 percent of our outstanding share capital. The
      Investment Shares have no voting rights and are not, under Peruvian law and
      accounting rules, characterized as share capital.




Our
      ADSs
      have traded on the New York Stock Exchange Inc., or the New York Stock Exchange,
      since May 15, 1996. Prior to the Redesignation, each of our ADSs represented
      two
      Series B Shares. In connection with the Redesignation, we submitted a technical
      original listing application to the New York Stock Exchange dated April 25,
      2002, or the Application, for the redesignation of our ADSs representing
      non-voting Class B Shares to ADSs representing voting Common Shares and the
      reservation of additional ADSs issuable upon redesignation of Class B Shares
      as
      Class A Shares and immediate redesignation thereafter of Class A Shares as
      Common Shares. The New York Stock Exchange approved the Application prior to
      the
      date of Redesignation and on May 3, 2002, each of our ADSs represented two
      Common Shares. Since that date, we have had Common Shares with a nominal par
      value of S/.4.00 per share. On November 3, 2003, we submitted a supplemental
      listing application to the New York Stock Exchange to modify the ratio of our
      ADSs, and on November 12, 2003, our ratio of Common Shares per ADSs was modified
      from two Common Shares per ADS to one Common Share per ADS.




In
      March
      2008, our shareholders approved an increase in the nominal par value of our
      Common Shares and Investment Shares from S/.4.00 per Common Share or Investment
      Share to S/.20.00 per Common Share or Investment Share, as well as a subsequent
      two for one stock split of our Common Shares and Investment Shares. We expect
      that the stock split will be effected in July 2008, at which time holders of
      our
      Common Shares, Investment Shares and ADSs will receive one additional Common
      Share, Investment Share or ADS, as the case may be, for each Common Share,
      Investment Share or ADS, as the case may be, held by such holder.  In
      connection with the stock split, our bylaws have been amended to decrease the
      nominal par value of our Common Shares and Investment Shares from S.20.00 to
      S/.10.00 Common Share or Investment Share.




25




***Business
      Strategy***




Our
      strategy is to strengthen our position as one of Peru’s leading gold and silver
      mining companies by expanding our reserves and production. We are currently
      engaged in an active exploration and mine development program and participate
      in
      several mining exploration projects with Newmont, Minera ABX Exploraciones
      S.A.,
      or ABX, Gold Fields Peru S.A., or Gold Fields, Southern Copper Corporation,
      or
      SCC, Phelps Dodge Corporation, or Phelps Dodge, and Teck Cominco Perú S.A., or
      Teck Cominco. Further, we seek to increase the efficiency and capacity of our
      mining operations. We are aware of our social and environmental responsibilities
      and aim to excel in the prevention, mitigation and rehabilitation of
      mining-related disturbances.




*Maintaining
      an Active Exploration Program*




We
      view
      an active exploration program as our primary means to obtain new reserves.
      As of
      May 2008, we hold, either directly or in conjunction with exploration partners,
      593,269 hectares of mining rights, excluding an additional 205,615 **** hectares
      in mining properties which consolidate production units, making us a major
      holder of mining rights in Peru.




During
      2007 we spent approximately US$50.6 **** million
      on “greenfield” and “brownfield” exploration-related investments in Peru. Our
“greenfield” investments focused on the following exploration projects: El
      Faique, La Zanja, Tantahuatay, Hualgayoc, Los Pircos, El Milagro, Titiminas,
      Llillinta, Huañacancha, Breapampa, Trapiche and Argentina. In 2008, we intend to
      concentrate on the El Faique, La Zanja, Tantahuatay, Hualgayoc, El Milagro,
      Titiminas, Huañacancha, Chucapaca, Breapampa, Trapiche and Argentina **** exploration
      projects with a budget of approximately US$21.2 **** million.
      The 2007 exploration program was financed by internal funds as well as a
      US$4.3 million contribution by Newmont Peru S.R.L., SCC and Gold Fields.
      Our “brownfield” investments focused on the following exploration projects in
      2007: Soras, Pozo Rico, Mallay, Anamaray, Layo and Shila-Paula. In 2008, we
      intend to invest US$6.8 million in the Mallay, Anamaray, Soras, Layo,
      Umachulco-Manto N and Shila-Paula **** brownfield
      exploration projects.




*Participation
      in Mining Exploration Agreements*




In
      addition to managing and operating precious metals mines, we participate in
      mining exploration agreements with mining partners to reduce risks, gain
      exposure to new technologies and diversify revenues to include other metals.
      See
“—Business Overview—Exploration.” We believe that maintaining our focus on
      mining operations complements our partnership strategy because the engineering
      and geological expertise gained from such operations enhances our ability to
      participate in and contribute to those projects.




***Capital
      Expenditures***




Our
      capital expenditures in the past three years have related principally to the
      acquisition of new mining properties, construction of new facilities and renewal
      of plant and equipment. Capital expenditures relating to exploration are not
      included herein and are discussed separately in “—Business
      Overview—Exploration.” Set forth below is information concerning capital
      expenditures incurred by us in respect of each of our principal operating mines
      (not including capital expenditures for administrative purposes or other
      non-mining subsidiaries) and by category of expenditure:




26




Year
                Ended December 31,2005
            
            2006
            
            2007(in
                thousands)Julcani
            
            US$
            133
            
            US$
            802
            
            US$
            1,089Uchucchacua
            
            
            6,610
            
            
            13,560
            
            
            5,458Orcopampa(a)
            
            
            3,122
            
            
            13,649
            
            
            12,977Recuperada
            
            
            122
            
            
            939
            
            
            1,563Ishihuinca
            
            
            229
            
            
            154
            
            
            142Shila-Paula(b)
            
            
            427*
            
            
            1,385
            
            
            442Colquijirca
            
            
            3,222
            
            
            15,362
            
            
            6,346Antapite(c)
            
            
            899
            
            
            5,440
            
            
            7,527Conenhua(d)
            
            
            137
            
            
            537
            
            
            3,846Total
            
            US$
            14,904(e)
            
            US$
            51,828
            
            US$
            39,390




Year
                Ended December 31,2005
            
            2006
            
            2007(in thousands)Machinery
                and equipment
            
            US$
            1,796
            
            US$
            2,634
            
            US$
            5,768Infrastructure
            
            
            4,836
            
            
            20,998
            
            
            23,362Mining
            
            
            2,609
            
            
            5,856
            
            
            6,153Milling
            
            
            4,713
            
            
            17,594
            
            
            1,316Transportation
            
            
            200
            
            
            999
            
            
            938Communications
            
            
            136
            
            
            205
            
            
            65Environmental
            
            
            22
            
            
            20
            
            
            174Other
            
            
            532
            
            
            3,522
            
            
            1,614Total
            
            US$
            14,904
            
            US$
            51,828
            
            US$
            39,390







(a)
            For
                2007, includes US$3.2 million for the expansion of the tailing dam
                and US$1.0 million for the expansion of the
                plant.


(b)
            As
                of January 1, 2005, Paula’s operating data has been consolidated with
                Shila’s operating data.


(c)
            The
                2007 figure includes US$6.8 million for the expansion of tailing
                dam
                number 4.


(d)
            The
                2006 figure includes US$3.5 million for the construction of the
                Cajamarca Norte – Goldmill Transmission
                Line.


(e)
            Does
                not include US$23.9 million for mining
                rights.





We
      financed our capital expenditures in 2005, 2006 and 2007 with
      internally-generated funds. ****




We
      have
      budgeted approximately US$53.0 million and US$48.0 **** million
      for capital expenditures in 2008 and 2009, respectively. Exploration expenses
      in
      non-operating units are expected to be US$35.0 **** million
      and US$35.0 **** million
      in 2008 and 2009, respectively. To fund our planned capital expenditures
      program, we plan to use internally-generated funds. See “Item 5. Operating and
      Financial Review and Prospects—The Company—Liquidity and Capital Resources.”




In
      Uchucchacua, our ongoing projects include (i) the deepening of the master shaft
      in the Carmen mine from level 3,990 to level 3,930, (ii) the construction of
      ramp 626 and the deepening of the Luz Shaft in the Socorro mine to reach level
      3,920 from level 4,060 and (iii) the plant expansion from 2,500 short tons
      per
      day, or STPD, to 3,000 STPD to treat additional lead/zinc material from lower
      levels of the time. In Orcopampa, our ongoing projects include (i) the deepening
      of the Nazareno shaft from level 3,290 to level 3,170 and (ii) the construction
      of facilities to treat the old flotation tailing that will permit the recovery
      of approximately 53,000 ounces of gold in 2008 and 2009.




We
      continuously evaluate opportunities to expand our business within Peru, as
      well
      as in other countries as opportunities arise, and expect to continue to do
      so in
      the future. We may in the future decide to acquire part or all of the equity
      of,
      or undertake other transactions with, other companies involved in the same
      business as us or in related other businesses. However, there can be no
      assurance that we will decide to pursue any such new activity or
      transaction.




27




**Business
      Overview**




***Production***




We
      principally produce refined gold and different types of metal concentrates
      that
      we distribute and sell internationally, including silver-lead concentrate,
      silver-gold concentrate, zinc concentrate and lead-gold-copper concentrate.
      The
      following table sets forth the production of the Antapite, Julcani, Uchucchacua,
      Orcopampa, Poracota, Recuperada (which resumed operations in February 2006),
      Ishihuinca, Paula, Colquijirca and Shila **** mines
      by
      type of product for the last three years, calculated in each case on the basis
      of 100 percent of the applicable mine’s production.




Year
                Ended December 31,2005
            
            2006
            
            2007Gold
                (oz.)(1)
            
            
            388,042
            
            
            405,383
            
            
            403,955Silver
                (oz.)
            
            
            16,429,816
            
            
            22,179,552
            
            
            19,403,507Zinc
                (ST)(2)
            
            
            69,550
            
            
            80,686
            
            
            108,110Lead
                (ST)
            
            
            35,619
            
            
            44,436
            
            
            48,521Copper
                (ST)
            
            
            280
            
            
            141
            
            
            1,578







(1)
            Throughout
                this Annual Report, “oz” refers to troy ounces of a fineness of 999.9
                parts per 1,000, equal to 31.0134
                grams.


(2)
            Throughout
                this Annual Report, “ST” refers to short tons, each weighing 2,000*avoirdupois*pounds.




***Exploration***




We
      view
      exploration as our primary means of generating growth value for shareholders
      and
      typically maintain a portfolio of active exploration projects at various stages
      of exploration for mineral resources in Peru. We currently hold, either directly
      or in conjunction with exploration partners, 593,269 hectares of mining rights
      as part of our exploration program; this figure excludes an additional 205,615
      hectares in mining properties which are involved in consolidated production
      units. We invested approximately US$55.6 million in exploration for Mineralized
      Material not in Reserve, or NRM, during
      2007, including 47,980 **** meters
      of
      exploratory diamond drilling and 5,937 meters of exploratory underground
      workings in the El Faique, La Zanja, Tantahuatay, Hualgayoc, Los Pircos, Mallay,
      Pampa Andino, Llillinta, El Milagro, Titiminas, Huañacancha, Breapampa,
      Trapiche, Layo, Soras and Shila Paula **** projects.
      In addition, our exploration partners invested US$4.3 **** million
      in the Tantahuatay, La Zanja, Hualgayoc and Cordillera Negra
      projects. ****




In
      2008,
      we expect to invest a minimum of approximately US$53.0 **** million
      in greenfield and brownfield exploration activities. Exploration programs at
      our
      principal mines are individual and expressed as part of mine cost structure.
      Exploration expenditures in greenfield and brownfield projects include all
      of
      the costs associated with manpower and activities such as geologists,
      contractors, engineering, drilling equipment, metallurgical testing and economic
      feasibility studies. Management of the exploration division prepares programs
      and budgets for individual projects each year and we allocate, subject to board
      approval, the proper amount to finance each particular exploration activity
      considered worthwhile. In light of the nature of mining exploration and in
      order
      to maintain flexibility to take advantage of opportunities, we allocate budgeted
      amounts by property or project only in the case of high geological expectation
      as decided by management. **** We
      also
      allocate non-budgeted amounts over the course of the year to new projects based
      on our needs and our geologists’ periodic evaluations of the progress of each
      opportunity and its potential for further exploration of minerals. ****




28




An
      integral part of our exploration program is the participation in mining
      exploration agreements with affiliates of experienced mining companies,
      including Newmont Peru S.R.L., ABX, SCC and Gold Fields La Cima. The benefits
      of
      these joint exploration projects include greater investment in the exploration
      of our mining rights from the funds contributed by the partners, access to
      the
      assets of the partners without the costs and risks of outright acquisition,
      increased exposure to new exploration technologies and expansion of knowledge
      and sharing of experiences of management, geologists and engineers. In these
      mining exploration agreements, we may be the designated operator, an equity
      participant, the manager or a combination of these and other functions.




We
      do not
      generally conduct significant research and development activities other than
      investments in geological research and exploration as described herein.
      Nevertheless, we have sponsored university-based research and training of
      geological staff, with the objective of improving the appraisal of our
      properties, presently carried out at the Mineral Deposit Research Unit,
      University of British Columbia, with research on mineral zoning at Uchucchacua,
      and at the Research School of Earth Sciences, Western Australian University,
      with research on the Nazareno vein at Orcopampa, and at the Universidad
      Politécnica de Madrid, with research on regional distribution of copper deposits
      in northern Peru. In addition, we have three geologists studying to receive
      their M.Sc. degree in the Red DESIR program promoted by the Universidad
      Politecnica de Madrid in Lima, which is funded by the European Union and
      supported by the Universidad Nacional Mayor de San Marcos and the Universidad
      Nacional de Ingenieria. In 2007, we joined the Australian Mineral Research
      Association (AMIRA) as a sponsor of the P765A project called “Halos in green
      rocks and lithocaps,” which studies the transition between porphyry and
      epithermal deposits. In 2008, our field geologists will conduct similar case
      studies in the Yanacocha, Tantahuatay and Colquijirca deposits of Peru with
      the
      help of several geoscientists from Hobbart University.




The
      following table lists our current greenfield exploration projects, our effective
      participation in each project, our partners with respect to each project, the
      total hectares as of April 14, 2008, observed mineralization of each project
      and
      the total exploration expenditures (in millions of US$) during 2005, 2006 and
      2007.




29


Exploration
                Projects(1)(2)
              
              Company’s
                Effective
                Participation
              
              Principal
                Partners
              
              Property
                Hectares
              
              Observed
                Mineralization
              
              Total Exploration
                Expenditures During
                2005
              
              Total Exploration
                Expenditures During
                2006
              
              Total Exploration
                Expenditures During
                2007at April 14, 2008
              
              
              
              Total
              
              BVN’S
              
              Total
              
              BVN’S
              
              Total
              
              BVN’S(US$ in millions)
              
              (US$ in millions)
              
              (US$ in millions)Joint Venture Projects:Argentina
              
              0.00
              %
              Petra Gold
              
              30,000
              
              Gold & copper
              
              0.00
              
              0.00
              
              0.00
              
              0.00
              
              1.23
              
              1.23Breapampa
              
              0.00
              %
              Newmont
              
              90,857
              
              Gold & silver
              
              0.00
              
              0.00
              
              0.00
              
              0.00
              
              5.01
              
              5.01Hualgayoc
              
              50.00
              %
              Gold Fields
              
              11,728
              
              Silver, zinc & lead
              
              0.86
              
              0.21
              
              0.88
              
              0.17
              
              1.41
              
              0.70La
                  Zanja(3)
              
              53.06
              %
              Newmont
              
              32,070
              
              Gold & silver
              
              2.64
              
              1.40
              
              3.65
              
              1.94
              
              1.90
              
              1.01Minasnioc(4)
              
              60.00
              **%**
              ABX
              
              23,600
              
              Gold & silver
              
              0.86
              
              0.86
              
              0.43
              
              0.43
              
              0.06
              
              0.06Hueso
                  Sur(4)
              
              60.00
              **%**
              ABX
              
              11,500
              
              Gold & silver
              
              0.00
              
              0.00
              
              0.36
              
              0.36
              
              0.36
              
              0.36Puquio
              
              0.00
              **%**
              Gold Fields
              
              0
              
              Gold & silver
              
              0.70
              
              0.20
              
              0.11
              
              0.11
              
              0.00
              
              0.00Santa
                  Marina
              
              0.00
              **%**
              Rio Narcea
              
              0
              
              Gold & copper
              
              0.25
              
              0.25
              
              0.10
              
              0.10
              
              0.30
              
              0.30Aguas
                  Verdes
              
              0.00
              **%**
              Peñoles
              
              0
              
              Copper
              
              0.02
              
              0.01
              
              0.00
              
              0.00
              
              0.00
              
              0.00Tantahuatay
              
              40.00
              %
              SCC, Espro
              
              17,722
              
              Gold & copper
              
              1.55
              
              0.62
              
              3.96
              
              2.21
              
              5.99
              
              3.34Company’s
                  Projects:Altiplano
                  Peru
              
              100.00
              **%**
              None
              
              1,998
              
              Gold & silver
              
              0.19
              
              0.19
              
              0.07
              
              0.07
              
              0.08
              
              0.08Cofradia
              
              0.00
              **%**
              None
              
              0
              
              Gold & silver
              
              0.52
              
              0.52
              
              0.00
              
              0.00
              
              0.00
              
              0.00Cordillera
                  Oriental
              
              100.00
              **%**
              None
              
              9,500
              
              Gold & silver
              
              0.13
              
              0.13
              
              0.18
              
              0.18
              
              0.01
              
              0.01El
                  Faique
              
              100.00
              **%**
              None
              
              87,341
              
              Copper, zinc & gold
              
              1.62
              
              1.62
              
              0.75
              
              0.75
              
              0.75
              
              0.75El
                  Milagro
              
              100.00
              **%**
              None
              
              13,400
              
              Zinc, silver, lead
              
              0.00
              
              0.00
              
              2.06
              
              2.06
              
              6.75
              
              6.75Huancavelica
              
              100.00
              %
              None
              
              42,223
              
              Lead, silver & zinc
              
              0.56
              
              0.56
              
              0.64
              
              0.64
              
              0.11
              
              0.11Huañacancha
              
              100.00
              %
              None
              
              1,000
              
              Copper & gold
              
              0.00
              
              0.00
              
              0.00
              
              0.00
              
              0.14
              
              0.14Llillinta
              
              100.00
              %
              None
              
              4,400
              
              Gold & silver
              
              0.00
              
              0.00
              
              0.00
              
              0.00
              
              0.83
              
              0.83Los
                  Pircos(5)
              
              0.00
              **%**
              Troy
              
              36,776
              
              Gold & silver
              
              0.99
              
              0.99
              
              3.48
              
              3.48
              
              1.05
              
              1.05Pampa Andino(5)
              
              0.00
              **%**
              Troy
              
              9,000
              
              Gold & silver
              
              1.35
              
              1.35
              
              0.99
              
              0.99
              
              0.48
              
              0.48


30


Exploration
              Projects(1)(2)
            
            Company’s
              Effective
              Participation
            
            Principal
              Partners
            
            Property
              Hectares
            
            Observed
              Mineralization
            
            Total Exploration
              Expenditures During
              2005
            
            Total Exploration
              Expenditures During
              2006
            
            Total Exploration
              Expenditures During
              2007at April 14, 2008
            
            
            
            Total
            
            BVN’S
            
            Total
            
            BVN’S
            
            Total
            
            BVN’S(US$ in millions)
            
            (US$ in millions)
            
            (US$ in millions)Tinyaclla(6)
            
            0.00
            **%**
            Milpo
            
            2,576
            
            Copper, zinc, gold
            
            0.00
            
            0.00
            
            4.47
            
            4.47
            
            0.11
            
            0.11Titiminas
            
            100.00
            %
            None
            
            9,300
            
            Zinc, silver, lead
            
            0.00
            
            0.00
            
            0.00
            
            0.00
            
            0.28
            
            0.28Trapiche
            
            100.00
            **%**
            None
            
            26,712
            
            Copper & molybdenum
            
            0.91
            
            0.91
            
            1.92
            
            1.92
            
            3.00
            
            3.00Oyotun
            
            100.00
            **%**
            None
            
            7,200
            
            Zinc, copper & silver
            
            0.24
            
            0.24
            
            0.03
            
            0.03
            
            0.00
            
            0.00Arenizo
            
            0.00
            **%**
            None
            
            0
            
            Gold
            
            1.03
            
            1.03
            
            0.00
            
            0.00
            
            0.00
            
            0.00Others(7)
            
            100.00
            **%**
            None
            
            52,836
            
            Gold and polymetallic
            
            1.68
            
            1.68
            
            0.65
            
            0.65
            
            1.46
            
            1.46521,739
            
            
            
            16.10
            
            12.77
            
            24.73
            
            20.56
            
            31.31
            
            27.06







(1)
            This
                table does not include projects abandoned by us, consolidated mining
                units
                or those placed on hold prior to
                2005.


(2)
            In
                addition to these projects, we continue to conduct exploration at
                all of
                our operating mines and our subsidiaries.


(3)
            On
                December 31, 2003, Newmont Peru’s interest in the project was diluted to
                46.94 percent.


(4)
            These
                properties have been returned to
                ABX.


(5)
            In
                January 2008, these properties were transferred to Inversiones Troy
                S.A.


(6)
            In
                February 2008, this property was sold to Milpo
                Group.


(7)
            Includes
                generative exploration in new areas.




The
      following table lists our current brownfield exploration projects, our effective
      participation in each project, the total hectares as of April 14, 2008, observed
      mineralization of each project and the total exploration expenditures (in
      millions of US$) during 2005, 2006 and 2007.


Exploration
                Projects
              
              Company’s
                Effective
                Participation
              
              Principal
                Partners
              
              Property
                Hectares
              
              Observed
                Mineralization
              
              Total Exploration
                Expenditures During
                2005
              
              Total Exploration
                Expenditures During
                2006
              
              Total Exploration
                Expenditures During
                2007Brownfield Projects:
              
              at April 14, 2008
              
              
              
              Total
              
              BVN’S
              
              Total
              
              BVN’S
              
              Total
              
              BVN’S(US$ in millions)
              
              
              
              (US$ in millions)
              
              
              
              (US$ in millions)Pozo Rico
              
              100.00
              %
              None
              
              3,377
              
              Silver, lead & zinc
              
              2.48
              
              2.48
              
              2.86
              
              2.86
              
              0.89
              
              0.89
  31


Exploration
              Projects
            
            Company’s
              Effective
              Participation
            
            Principal
              Partners
            
            Property
              Hectares
            
            Observed
              Mineralization
            
            Total Exploration
              Expenditures During
              2005
            
            Total Exploration
              Expenditures During
              2006
            
            Total Exploration
              Expenditures During
              2007Brownfield Projects:
            
            at April 14, 2008
            
            
            
            Total
            
            BVN’S
            
            Total
            
            BVN’S
            
            Total
            
            BVN’S(US$ in millions)
            
            
            
            (US$ in millions)
            
            
            
            (US$ in millions)Anamaray
            
            100.00
            %
            None
            
            6,952
            
            Zinc, lead & silver
            
            0.24
            
            0.24
            
            0.34
            
            0.34
            
            0.96
            
            0.96Mallay
            
            100.00
            %
            None
            
            2,250
            
            Silver, lead & zinc
            
            0.63
            
            0.63
            
            1.92
            
            1.92
            
            4.69
            
            4.69Julcani
            
            100.00
            %
            None
            
            580
            
            Silver
            
            0.00
            
            0.00
            
            0.20
            
            0.20
            
            0.40
            
            0.40Hatun Orco
            
            100.00
            %
            None
            
            20,700
            
            Gold & silver
            
            0.08
            
            0.08
            
            2.40
            
            2.40
            
            1.27
            
            1.27Poracota(1)
            
            100.00
            %
            None
            
            6,674
            
            Gold
            
            7.70
            
            7.70
            
            7.87
            
            7.87
            
            11.60
            
            11.60Soras
            
            100.00
            %
            None
            
            22,323
            
            Gold, silver & copper
            
            0.42
            
            0.42
            
            0.77
            
            0.77
            
            0.86
            
            0.86Layo
            
            100.00
            %
            None
            
            737
            
            Gold, silver & copper
            
            2.23
            
            2.23
            
            5.17
            
            5.17
            
            1.62
            
            1.62Umachulco-Manto
                N
            
            100.00
            %
            None
            
            474
            
            Gold & silver
            
            0.00
            
            0.00
            
            0.23
            
            0.23
            
            0.34
            
            0.34Shila-Paula
            
            100.00
            %
            None
            
            41,152
            
            Gold & silver
            
            0.77
            
            0.77
            
            1.72
            
            1.72
            
            0.86
            
            0.86105,192
            
            
            
            14.55
            
            14.55
            
            23.48
            
            23.48
            
            23.49
            
            23.49




(1)
      Includes 2007 mining constructions costs.




32




The
      following is a brief summary of current greenfield and brownfield exploration
      activities conducted by us directly and through joint exploration agreements
      that are believed to represent the best prospects for the discovery of new
      reserves. There can be no assurance, however, that any of our current
      exploration projects will result in viable mineral production or that any of
      the
      mineralization identified to date will ultimately result in an increase in
      our
      ore reserves. Non-reserve mineralization has been included in our 2007 Annual
      Report from the La Zanja, Tantahuatay, Mallay, El Milagro, Breapampa and
      Trapiche exploration projects. **** Set
      forth
      below is a map of all our exploration activities in Peru as of December 31,
      2007: ****




buena


33




***Greenfield
      Exploration Projects***




*Hualgayoc.* Hualgayoc is a silver, zinc and lead exploration project, with copper
      (moly-gold) potential, owned by Consolidada de Hualgayoc S.A., or Consolidada,
      which is owned 50 percent by Compañía Minera Colquirrumi S.A., or Colquirrumi,
      and 50 percent by Goldfields La Cima S.A., a wholly-owned subsidiary of Gold
      Fields. Consisting of 11,728 hectares, the project is located in the Hualgayoc
      district, Cajamarca region, and commenced operations in March 2007 with
      exploration for copper, gold, zinc and lead ore. Since 1991, Colquirrumi stopped
      mining and mineral exploration programs. On April 20, 2004, a capital increase,
      through the creation of Series A Common Shares and Series B Common Shares,
      was
      authorized at an extraordinary shareholders meeting. The Series A Common Shares
      and Series B Common Shares receive 90 percent and 10 percent, respectively,
      of
      the profits or losses of Colquirrumi. **** On May
      28, 2004, we became the sole shareholder of the Series A Common Shares and
      hold
      a 99.99 percent interest in Colquirrumi. On February 24, 2005, we signed an
      agreement with Gold Fields to explore the Hualgayoc district, including certain
      areas within the Colquirrumi project. During 2005, Gold Fields invested US$0.65
      million to drill 2,474 meters in eight holes. Low grade copper-gold
      mineralization of porphyry style was found in the Cerro Jesús, Lola and Quijote
      areas. In 2006, Gold Fields invested US$0.71 million to drill 1,941 meters
      in
      the San José and Lola areas. In 2007, Consolidada invested US$1.4 million in
      2,754 meters of diamond drilling from underground workings to generate silver,
      lead and zinc reserves. Colquirrumi was focused on underground workings in
      the
      Cerro Jesus area, and Gold Fields was focused on superficial exploration efforts
      centered on porphyry copper-gold targets in the Cuadratura and Titán Arabe
      areas. In 2008, Consolidada plans to invest US$1.5 million in 20,000 meters
      of
      diamond drilling in the Cuadratura and Titán Arabe areas.




*Breapampa.* The
      Breapampa project is a joint venture with Newmont Peru S.R.L. and is operated
      by
      us. The Breapampa project was leased to us by Newmont Peru S.R.L. and
      encompasses 90,857 hectares located in the southern portion of Ayacucho region.
      It consists of gold and silver mineralization emplaced in epithermal high
      sulfidation breccias in tertiary volcanic rocks over the Parccaorcco hill and
      the Senccata area. During 2007 we invested US$5.01 million in this project
      to conduct a 10,268-meter diamond drilling campaign, which included
      sterilization, geomechanic and hydrogeologic drilling. We estimate NRM of
      5,128,000 metric tons with an average grade of 1.5 grams per ton of gold and
      25.6 grams per ton of silver. In 2008 we plan to invest US$2.5 million to test
      gold mineralization in other projects inside the claim boundary.




*La
      Zanja* .
      Minera
      La Zanja S.R.L., or La Zanja, controls 32,070 hectares of mineralized ground
      in
      the La Zanja project, which is located 35 kilometers north-west of Cajamarca
      city. Originally, the La Zanja project was part of the Northern Peru joint
      mining exploration project, which was 35 percent owned by us and 65 percent
      owned by Newmont Peru. We executed a carve-out agreement with Newmont Peru
      on
      August 1, 2000, providing for the eventual dilution of Newmont Peru’s interest
      in the project. The project, which is operated by us, consists of the San Pedro
      Sur and Pampa Verde superficial gold and silver oxide deposits, amenable to
      low-strip open pits and heap-leach operation. NRM is 36.5 million metric
      tons with an average grade of 0.72 grams per ton of gold. We have started to
      test for deep sulfide ore potential in other prospects within the property.
      During 2003, we acquired an additional 910 hectares of surface rights, conducted
      an airborne electromagnetic survey of 30,000 hectares, and conducted a drilling
      campaign at the Pampa Verde oxide-gold deposit, the Alcaparrosa prospect and
      the
      San Pedro Norte deposit. During 2004, we invested US$5.8 million in the La
      Zanja project to conduct metallurgical and feasibility studies, to drill 4,504
      meters at the Pampa Verde deposit, 2,933 meters at the Turmalina prospect,
      1,113
      meters at the Campana prospect, 1,194 meters at the San Pedro Sur deposit,
      458
      meters at the Pampa Verde Sur prospect and 190 meters at the Co Buitre prospect,
      and to conduct 3,268 meters of sterilization drilling in the Pampa Bramadero
      area. As of December 31, 2005, we
      owned
      a 53.06 percent interest in La Zanja and Newmont Peru’s interest was diluted to
      46.94 percent. Newmont Peru elected to maintain a 46.94 percent interest in
      La
      Zanja for 2003, 2004 and 2005. On November 16, 2004, during a protest at the
      La
      Zanja project, a warehouse was set on fire, which resulted in the loss of 25
      km
      of drill cores that were stored in the warehouse. As a result, in 2005 we
      downgraded reserves to NRM. In addition, we invested a total of
      US$2.6 million to address social issues and to conduct 18,050 meters of
      geophysical surveys and to drill 1,674 meters at the Cerro La Zanja deep sulfide
      prospect. We drill-tested a transition zone between a porphyry copper to an
      epithermal gold system. In 2005, surface rock sampling at the Turmalina prospect
      identified a new oxide-related gold occurrence with an average content of 0.42
      grams per ton of gold. In 2006, we invested US$3.6 million on a 2,942 meter
      drilling campaign at the deep copper-gold sulfide deposit at the Cerro La Zanja
      prospect, a 2,064 meter drilling campaign at the gold oxide deposit at the
      Cerro
      La Zanja prospect and a 7,679 meter drilling campaign at the superficial oxide
      gold Turmalina prospect, an extension of San Pedro Sur. We have increased the
      geological resources in oxides at the Turmalina prospect, where
      11.8 million metric tons with an average grade of 0.72 grams per ton of
      gold have been indicated by systematic diamond drilling. In 2007, we invested
      US$1.9 million to maintain the property and conduct an environmental impact
      study, or EIA ( *Estudio
      de Impacto Ambiental* ).
      In
      2008, we plan to present the EIA and obtain the necessary permits to start
      construction of the project.




34




*Los
      Pircos* .
      The Los
      Pircos project was originally a joint mining exploration project with Meridian
      Gold Company, or MDG. Consisting of 36,776 hectares, the project is located
      east
      of Chiclayo in the Western Cordillera of Cajamarca, approximately 690 kilometers
      northwest of the city of Lima. During 2003, MDG conducted 5,073 meters of
      diamond drilling of the Diana, Maribel, Juana Sofia, Milagros, Andrea and Rosa
      Victoria veins and Lucero area, and an 18.5-kilometer electromagnetic survey
      of
      the Los Pircos vein system to define vein continuity at depth. On March 25,
      2004, MDG withdrew from the project and, since that time, we have operated
      the
      project with the primary objective of exploring precious metal veins of
      epithermal character. To date, we have located, mapped and sampled five
      principal veins, which have shown strong anomalous gold and silver values.
      The
      principal vein, the Diana vein, has a 380-meter long central section with
      average widths of 2.10 meters and outcropping average grades of 8 grams per
      ton
      of gold and 300 grams per ton of silver. First pass drilling with a total 3,566
      meters in 2002 over the Diana vein system showed mineralization of 203,680
      metric tons at 18.3 grams per ton of gold and 17.4 ounces per ton of silver
      in
      veins with an average thickness of two meters. During 2004, we focused on
      renewing our surface rights permits and negotiated a three-year agreement with
      the Santa Rosa de Sexi and Corral Viejo neighborhoods, which was signed in
      April
      2005, to ensure the continuation of our exploration activities at the Diana
      and
      Maribel veins. In 2006, we drove two crosscuts into the Diana vein system at
      levels of 2,000 meters and 2,050 meters, totaling 2,450 meters of underground
      workings at a cost of US$3.5 million. We generated 211,374 metric tons of
      high-grade gold and silver NRM with an average grade of 15.7 grams per ton
      of
      gold and 319 grams per ton of silver. We did not conduct any further exploration
      efforts for the Los Pircos project in 2007. We are conducting the remediation
      of
      the site, including waste dumps and other surface and underground workings
      created during exploration, according to environmental permits granted by the
      Peruvian government. In May 2008, the property will be transferred to
      Inversiones Troy S.A., a small mining and exploration company, which was the
      high bidder for this asset.




*Hueso
      Sur Project.* The
      Hueso
      Sur project was a joint venture with ABX and is operated by us. The Hueso Sur
      project encompasses 11,500 hectares located in the Huancavelica region, adjacent
      to the Minasnioc project and 25 km east of the Antapite mine. It consists of
      epithermal high sulfidation breccias and structures in volcaniclastic rocks
      of
      the Castrovirreyna formation. During 2006, we invested US$0.36 million in
      this project to conduct a diamond drilling campaign, which returned negative
      results. We did not conduct additional exploration activities in this project
      in
      2007. We are currently in the process of returning this property to ABX.




35




*Minasnioc* .
      The
      Minasnioc project was a joint mining exploration project with ABX and Compañía
      Minera Ares S.A.C., a company owned by the Hochschild Group, or MHC. In August
      2004, ABX withdrew as operator of the Minasnioc project and since that date,
      we
      have been the operator of the project. In addition, MHC withdrew from the
      project in 2004. We currently have a 60 percent interest in the
      project. **** The
      Minasnioc project encompasses 23,600 hectares of high sulfidation epithermal
      terrain located in southern Peru, in the Huancavelica region, 310 kilometers
      southeast of Lima. The first-pass 2003 drilling campaign by ABX confirmed the
      presence of low-grade uneconomic gold mineralization hosted in volcanic rocks,
      mainly following a stratabound pattern. In the last quarter of 2004, we invested
      US$200,000 in exploration and the construction of new camp facilities. In 2005,
      we invested US$861,768 in 1,802 meters of diamond drilling and additional
      studies to confirm the presence of gold enriched veinlets. The results of the
      2005 campaign indicated poor evidence of gold mineralization at depth. In 2006,
      our exploration efforts were focused on exploring additional areas not
      previously explored in detail by ABX and to define our interest in the Minasnioc
      project. After testing the overall mineral potential of these areas with
      detailed structural mapping and selective geochemical sampling, none of the
      three target areas proved positive. Diamond drilling and trenching at the
      Minasnioc prospect demonstrated enriched surface veinlets and produced only
      narrow, poor intercepts at depth. We did not conduct additional exploration
      activities in this project in 2007 and have returned the properties to ABX.




*Puquio* .
      The
      Puquio generative project was a joint mining exploration project with Gold
      Fields that originally encompassed 0 hectares of hydrothermally altered and
      mineralized volcanic terrain in the Ayacucho region, 500 kilometers southeast
      of
      Lima. The project was operated by Gold Fields, which had a 60 percent effective
      participation. In 2003, US$0.37 million was invested to review selected
      anomalies detected by rock-geochemistry and satellite imagery. In 2004, Gold
      Fields invested US$0.43 million in the Incapacha prospect to conduct 2,500
      meters of diamond drilling, 3,000 meters of reverse circulation drilling and
      an
      electromagnetic survey, which had negative results. In addition, Gold Fields
      invested US$0.16 million to evaluate the Titanca, Tampa Tampa, Condoray and
Ñayca prospects in 2004. In 2005, we and Gold Fields invested
      US$0.69 million in 2,500 meters of a diamond drilling campaign at the Ñayca
      prospect and thereafter decided to abandon the Puquio project due to poor
      geochemical results. The joint exploration agreement was terminated in February
      2006. ****




*Tantahuatay* .
      The
      Tantahuatay project, a gold-copper project, is wholly-owned by Compañía Minera
      Coimolache S.A., or Coimolache, an entity which is 40.1 percent owned by us,
      44.2 percent owned by SCC, and 15.7 percent owned by ESPRO S.A.C., a
      Peruvian-based holding company. Since January 2003, the project has been managed
      and operated by an independent mining engineer, Ing. Amado Yataco, appointed
      by
      us. The area of the project consists of 17,722 hectares of mineralized ground.
      The Tantahuatay project is located 30 kilometers northwest of Yanacocha in
      the
      Hualgayoc district, 950 kilometers north of the city of Lima. Two of the five
      outcropping gold anomalies have NRM. Tantahuatay 2 was infill-drilled during
      2002 and Ciénaga Norte in 2006; together they host NRM of 826,000 ounces of gold
      and 7.9 million ounces of silver. The studies have been focused in the
      oxide zone only. Cyanidation column tests have been completed with encouraging
      results, which indicate rapid extractions in the order of 80 to 90 percent,
      by
      low-concentration cyanide leaching. The Tantahuatay 2 prospect is being
      evaluated for Feasibility and Environmental Impact Study during 2007.
      Infill-drilling has been completed in the Ciénaga deposit, and after the
      metallurgical studies are completed a feasibility study will be finalized to
      address viability of a 15,000-ton per day open-pit/heap leach operation. We
      are
      focusing our efforts on resolving community issues and obtaining permits to
      continue our exploration **** and **** enhance
      support of our infill drilling and feasibility studies for both oxide and
      sulfide targets. During 2005, Coimolache invested US$1.55 million in the
      Tantahuatay project. In 2006 we obtained permits for a diamond drilling campaign
      in the Ciénaga Norte area, 3 km southwest from the Tantahuatay 2 area. Beginning
      in the third quarter of 2006, we drilled 3,179 meters in 27 holes, which
      required an investment of US$2.2 million. Best hole C-57 intercepted 120
      meters with 2.06 grams per ton of gold. In 2007, Coimolache invested US$6.0
      million (of which we provided US$3.3 million) in 5,665 meters of diamond
      drilling and 1,684 meters of reverse circulation drilling for exploration,
      sterilization and engineering in Tantahuatay 2, Mirador Norte and Cienaga Norte.
      Total reserves on Tantahuatay 2 and Cienaga Norte have been calculated to be
      25
      million metric tons in oxides with an average grade of 0.81 grams per ton of
      gold and 9.66 grams per ton of silver, and an additional NRM on Mirador Norte
      in
      oxides of 10.7 million metric tons with an average grade of 0.47 grams per
      ton
      of gold. In 2008, we plan to invest a minimum of US$2.5 million in a
      10,000-meter diamond drilling program and to complete feasibility studies
      focused on obtaining environmental permits from the government for a future
      mine.




36




*El
      Faique.* The
      El
      Faique project, previously known as El Papayo, is wholly-owned and operated
      by
      us. The project encompasses 87,341 hectares and is located in the Sechura desert
      of northern Peru in the Piura region. This project includes 3,200 hectares
      sold
      to us by Cedimin on April 4, 2006. During 2005, we invested US$1.6 million
      to consolidate this project by acquiring property from third parties and by
      claiming new areas. The El Faique project consists of a deep massive sulfide
      deposit evidenced by diamond drilling 400 to 700 meters below the surface in
      the
      B5 **** gravimetric
      anomaly. This deposit contains a higher-grade mineralization of
      7.91 million tons with 2.3 percent copper and significant traces of zinc
      and gold. In 2006, we invested US$747,790 in gravimetric reinterpretation and
      hydrogeologic studies to determine ground water resources and in a community
      public relations campaign to address social and environmental issues related
      to
      the project. We obtained permits to conduct a drilling program in 2007 over
      geophysical anomaly A22, 52 km southeast of B5, which was detected after
      gravimetric reinterpretation. In 2007, we drilled 753 meters in two holes in
      the
      A22 anomaly with disappointing results. We invested US$0.8 million in 2007,
      mainly to obtain surface permits. **** In
      2008,
      we plan to invest US$0.7 million to get access to the surface above the B5,
      A7
      and A9 anomalies.




*Oyotún* .
      The
      Oyotún project is wholly-owned and was operated **** by
      us
      until 2005. Consisting of 7,200 hectares, the project is located on a
      prospective area for exploration of massive sulfide and iron oxide deposits
      in
      the coastal zone of Piura and the Lambayeque and La Libertad regions in northern
      Peru. In 2005, we invested US$236,237 in regional surveys at the Sicán prospect,
      where we conducted a drilling campaign of 270 meters. Due to the lack of
      mineralization at this prospect, we do not intend to conduct additional field
      work. Claims will elapse in 2007 after two consecutive years without payment
      of
      tenure.




*Cordillera
      Oriental* .
      The
      Cordillera Oriental project is wholly-owned and operated **** by
      us. **** Consisting
      of 9,500 hectares, the project is located on three prospective areas in the
      eastern cordillera of Central Peru in the Pasco and Junín regions. These areas
      were identified after a regional stream sediment campaign was conducted by *Instituto
      Geológico, Minero y Metalúrgico* ,
      or
      INGEMMET, in early 2004. In 2005, we invested US$121,555 in the Cordillera
      Oriental project and identified and claimed mining properties over three
      mineralized areas. In 2006, we continued field work over the claimed prospects
      to define mineralization, however our explorations indicated uneconomic
      polymetallic deposits in all three areas. No additional field work is planned
      for 2007. We are evaluating properties owned by third parties for exploration
      in
      this region and will divest our properties.




*Huancavelica.* The
      Huancavelica project is wholly-owned and operated by us. Consisting of 42,223
      hectares, the project covers several prospects of the Huancavelica region.
      We
      initiated exploration efforts in 1994 with the purpose of identifying base-metal
      skarns and/or disseminated precious metal deposits along the Cenozoic volcanic
      belt and underlying Mesozoic basement. During 2003, the Pampa Andino prospect
      was separated from the Huancavelica project. In 2004, we invested US$473,000
      to
      evaluate several prospective areas, including the Cofradía, Yuracjasa, Dorita
      Sur and Llipina prospects. At the end of 2004, the Cofradía prospect was
      separated from the Huancavelica project, and at the end of 2005 and the
      beginning of 2006, the El Milagro and Tinyaclla projects were separated from
      the
      Huancavelica project. During 2007, we discontinued the Huancavelica project
      as a
      budgeted project but evaluated several prospective areas in the region including
      Llillinta and Titiminas projects located to the north and south of El Milagro,
      respectively. In 2008, we plan to evaluate new areas such as Luishaja and
      Terciopelo to identify potentially economic polymetallic mineralization. We
      also
      plan to abandon several positions in this claim block and to consolidate the
      remainder of this project into our general exploration budget in 2008.




37




*Tinyaclla.* The
      Tinyaclla project is wholly-owned and operated by us and consists of 2,576
      hectares located northwest of Huancavelica city. We acquired the property from
      Inca Pacific S.A., or Inca Pacific, for US$3.6 million in late 2005. The
      property was previously explored intensively for skarn mineralization by Inca
      Pacific and Rio Tinto Minera Peru Limitada S.A.C., or RTZ, which conducted
      a
      6,341-meter diamond drilling campaign. We initiated exploration efforts in
      1998
      around the Rumimaqui area in the northern portion of the property to identify
      base-metal skarns. During 2006 we conducted a geophysical survey with 218 km
      of
      magnetic lines and 38 km of induced polarization electrical lines pursuant
      to
      which we conducted a 2,705-meter diamond drilling program over the Lucía and
      Talia breccia bodies. Exploration results were negative and we plan to abandon
      these reclaimed properties. We invested US$4.47 million for this project in
      2006, including the acquisition price for the property. In 2007, we completed
      remediation work according to environmental permits granted by the government.
      In February 2008, the property was sold to the Compañía
      Minera M ilpo
      S.A.A., a mid-sized Peruvian metal base producer, for US$1.8 million.




*El
      Milagro* .
      The El
      Milagro project is wholly-owned and operated **** by
      us. **** Consisting
      of 13,400 hectares located in the Ayacucho and Huancavelica regions, the project
      includes four prospective areas named El Milagro, Yuraccasa, Vizcachayoc and
      Titiminas. The project consists of polymetallic, zinc-lead and silver-rich
      breccias and replacement bodies in the Jurassic limestones of the Pucara
      formation. We have mining lease & option agreements with Complejo Minero
      Industrial S.R.L. and Sociedad Minera de Responsabilidad Limitada Tambo del
      Condor, owners of certain critical properties. In 2006 we invested
      US$2.06 million to conduct a 4,782-meter drilling campaign at the El
      Milagro area and a 1,313-meter drilling campaign at the Yuraccasa area, as
      well
      as to construct a 8.65-km road and an 8-meter bridge to reach the Yuraccasa
      area. In 2007, we invested US$6.8 million to conduct 2,253 meters of underground
      exploration workings and 1,908, 2,697 and 4,862 meters of diamond drilling
      in
      the El Milagro, Yuraccasa and Vizcachayoc areas, respectively. As a result
      of
      this work in 2007, the previously estimated NRM of 567,900 metric tons with
      an
      average grade of 7.5 percent of zinc, 130 grams per ton of silver and 2 percent
      lead was reduced to 99,254 metric tons with an average grade of 6.5 percent
      of
      zinc, 3.1 ounces per ton of silver and 2.5 percent of lead. In 2008, we plan
      to
      invest US$4.0 million in a 15,000-meter diamond drilling campaign and 2,000
      meters of underground exploration workings to prove continuity of mineralization
      at depth and increase ore reserves.




*Llillinta.* The
      Llillinta project is wholly-owned and operated by us. Consisting of 4,400
      hectares, the project is located in the Huancavelica region northeast of El
      Milagro property. It consists of gold-enriched breccia bodies along the contact
      between Jurassic limestone of the Pucara formation and tertiary subvolcanic
      intrusive rocks. During 2007, we invested US$0.8 million in the Titiccasa and
      Yaurillas areas, including 2,580 meters of diamond drilling. After disappointing
      drilling results, we do not plan to conduct further exploration efforts in
      this
      project.




*Titiminas.* The
      Titiminas project is the southern extension of El Milagro property and is
      wholly-owned and operated by us. Consisting of 9,300 hectares, the project
      is
      located in the Ayacucho region and was previously lightly exploited by illegal
      miners. The project covers several polymetallic veins, including the Juanita
      and
      Zoila veins located within the red beds of the Casapalca formation. We initiated
      first pass exploration in 2006. In 2007, we invested US$0.3 million in trenching
      and mapping with the purpose of defining vein continuity. In 2008, we plan
      to
      conduct an intense surface drilling campaign to delineate the outcropping
      Juanita ore shoot, which measures 230 meters long and 1.6 meters wide and
      contains an average of 7.6 percent zinc, 3.0 percent lead and 1.5
      ounces **** per
      ton
      of silver.




38




*Pampa
      Andino.* In May
      2005, we acquired mining rights for the Pampa Andino project for
      US$1.9 million. The Pampa Andino project consists of 9,000 consolidated
      hectares located 175 kilometers southeast of Lima, on the border between the
      Ica
      and Huancavelica regions. The Pampa Andino project is a low sulfidation
      epithermal vein system and is the outcome of a regional exploration program
      designed to focus on gold **** exploration **** in
      Huancavelica. In 2003, we invested US$0.3 million in 2,726 meters of
      diamond drilling over the Rosita and Claudia veins. In 2004, we invested
      US$1.1 million in 300 meters of diamond drilling and 1,563 meters of
      underground workings, initially identifying NRM of 15,700 metric tons at 15.0
      grams per ton of gold and 21 ounces per ton of silver at the Rosita
      vein. **** In
      2005,
      we invested US$1.3 million in 3,036 meters of diamond drilling and 1,458
      meters of underground workings at the Rosita vein. During 2006, we invested
      US$1.0 million and continued diamond drilling and extended underground
      workings by approximately 500 meters, with disappointing results. In 2007,
      we
      finished underground drilling to test continuity of Rosita vein at depth, with
      poor results. We are involved in the remediation of the site, including waste
      dumps generated during previous underground workings, in accordance with
      environmental permits given by the Peruvian government. In January 2008, the
      property was leased to Inversiones Troy S.A., a small Peruvian mining and
      exploration company, which took control of the property in March 2008.




*Huañacancha.* The
      Huañacancha project is wholly-owned and operated by us. Consisting of 1,000
      hectares in the southern portion of Huancavelica region, the Antapite 59 claim
      (located northwest of Antapite mine) was occupied by illegal local miners who
      dug several small adits over copper enriched tourmaline breccia bodies and
      over
      a skarn layer in the contact between intrusive rocks of Cretaceous Coastal
      Batholith and sediments of the Yura formation. We initiated exploration efforts
      at the end of 2007, spending US$141,635 to reorganize local miners. We plan
      to
      invest US$672,000 for exploration in 2008, including a diamond drilling campaign
      which is in progress.




*Altiplano
      Peru* .
      The
      Franja Sur project, renamed the Altiplano Peru project in 2004, is wholly-owned
      and operated by us. Consisting of 1,998 hectares, the project is located in
      the
      Apurimac, Arequipa, Cusco and Puno regions of volcanic rocks and carbonate
      terrains of south-eastern Peru. After regional reconnaissance and a selection
      of
      mineralized areas, we conducted initial mapping, sampling and drilling at
      several project sites, including the Pichacani prospect, which demonstrated
      a
      strong mercury and tellurium anomaly in a high sulfidation epithermal system.
      During 2003, we invested US$0.6 million to explore the Pichacani prospect,
      which had disappointing results. In 2004, we conducted first pass drilling
      with
      a total of 591 meters drilled in the Chilacocha epithermal prospect located
      in
      the Apurimac region, investing US$0.4 million. Due to disappointing
      results, we have decided to cease activity in the Chilacocha prospect after
      engaging in environmental remediation efforts. In 2005, we invested
      US$0.2 million in a regional exploration program on gold stream sediment
      anomalies previously detected in the Puno region in the Armapampa prospect
      with
      disappointing results. From 2006 to 2008, we continued our exploration
      activities in the periphery of the Trapiche project in the Apurimac region
      as
      well as in the Cusco and Puno regions, with a renewed effort to evaluate
      third-party properties that are structurally and geochemically
      anomalous.




*Trapiche* .
      The
      Trapiche project is wholly-owned by us and encompasses 26,712 hectares of
      porphyry and skarn style mineralization in the Apurimac region. The Apurimac
      region is part of a mineralized belt known as the Andahuaylas-Yauri batholith,
      where several copper deposits have been identified. In 2005, we conducted a
      magnetic geophysical reinterpretation, metallurgical tests and a diamond
      drilling campaign on the two main prospects, Millucucho and Cerro Trapiche.
      In
      2006, we invested US$1.9 million to conduct 4,338 meters of diamond
      drilling in both Millucucho and Cerro Trapiche porphyry to contour and expand
      previously identified disseminated copper and molybdenum mineralization. In
      2007, we invested US$3.0 million in 9,998 meters of diamond drilling and 21
      kilometers of geophysics lines on Cerro Trapiche. Based on 46 holes drilled
      with
      100 meter spacing, AMEC estimates resources of 315 million tons with an average
      grade of 0.49 percent of copper and 0.02 percent of molybdenum with a cutoff
      of
      0.20 percent of copper using the geostatistical block model method completed
      in
      December 2007. Preliminary metallurgical tests show recoveries of 91 percent
      of
      copper and 51 percent of moly by flotation methods on three composite samples
      for enriched mixed and primary ores and recovery of 72.8 percent of copper
      in
      enriched mineral over 143 days by column leaching method. We plan to invest
      US$8.0 million in 2008 to conduct an additional 36,000 meters of diamond
      drilling, metallurgical tests and an engineering/economic scoping study.




39




*Arenizo* .
      The
      Arenizo project is wholly-owned by us and encompasses 2,916 hectares of
      hydrothermally altered and mineralized volcanic terrain in the Arequipa region.
      In 2003, we invested US$60,000 in superficial exploration efforts with
      systematic trenches, which identified the Anita, María and Nelly quartz veins.
      In 2004, we invested US$1.3 million, focusing on 886.7 meters of
      underground workings and 3,544 meters of diamond drilling in these veins, which
      confirmed NRM of 7,305 metric tons at 9.54 grams per ton of gold with an average
      thickness of 1.2 meters. In 2006, we did not conduct additional exploration
      in
      Arenizo. All claims in the Arenizo project elapsed during 2007. ****




***Brownfield
      Exploration Projects***




*Uchucchacua.* The
      Uchucchacua brownfield exploration project is located in 12,579 hectares of
      our
      mining and exploration properties and was established in late 2004 and began
      operations in 2005. We have currently focused our exploration on three
      prospects, Pozo Rico, Anamaray and Mallay. The Pozo Rico prospect is a
      silver-rich breccia pipe deposit with manganese, lead and zinc skarn. Ore
      reserves as of December 31, 2006 are 342,425 dry short tons, or DST, with an
      average grade of 15.6 ounces per ton of silver, 0.46 percent lead and 0.85
      percent zinc. In 2006, we invested US$2.86 million in 2,652 meters of
      underground development workings and 4,998 meters of diamond drilling. In 2007,
      we invested US$0.89 million in additional underground development workings
      and
      diamond drilling on the Mercedes breccia pipe. In 2008, expect to begin
      production for the Pozo Rico prospect. The Anamaray-Jancapata prospect is
      another silver, lead and zinc-bearing set of breccias and veins in limestone.
      During 2006, we invested US$0.34 million in 2,073 meters of diamond
      drilling and intercepted several ore-grade structures. **** In
      2007,
      we invested US$0.96 million in underground works and diamond drilling and
      recognized NRM of 185,823 DST at 2.54 ounces per ton of silver, 5.64 percent
      lead and 8.95 percent zinc. In 2008, we expect to continue our exploration
      efforts to locate new minerals and resources. We intend to invest
      US$1.2 million in the Anamaray-Jancapata prospect. The Mallay prospect
      consists of 2,250 hectares leased for 20 years and optioned for four years.
      On
      August 8, 2007, we exercised this option and on September 20, 2007 Minera Los
      Rios S.R.L. transferred all of the mining rights for the Mallay prospect to
      us
      by public deed. We have paid US$850,000 of the US$1.25 million total transaction
      price and will pay the remaining US$400,000 in two equal parts on January 2009
      and 2010, respectively. Exploration activities during 2006 included about 36,000
      meters of geophysical surveys, 1,863 meters of diamond drilling and 1,839 meters
      of underground workings for an aggregate investment of US$1.92 million. We
      estimate NRM of 317,090 DST at an average grade of 7.6 percent zinc, 4.9 percent
      lead and 5.6 ounces per ton silver in massive sulfide and skarn deposits. In
      2007, underground exploration works were primarily focused in Manto Isguiz
      and
      Jumasha limestone. We have estimated NRM of 475,755 DST with 6.2 ounces per
      ton
      silver, 4.3 percent lead, 7.2 percent zinc and invested US$4.7 million. In
      2008
      we are planning to invest US$6.8 million to increase underground exploration
      works in Manto Isguiz, mainly in Jumasha limestone veins.




*Orcopampa.* Brownfield
      exploration at the Layo deposit was encouraging during 2005. Diamond drill
      tests
      carried out in the northern sector intercepted three mineralized structures:
      the
      first with a 0.8 meter thickness and 12.5 ounces per DST of gold, 0.7 ounces
      per
      DST of silver and traces of copper; the second with a 0.5 meter thickness with
      0.03 ounces per DST of gold, 18.3 ounces per DST of silver and 4.5 percent
      copper; and the third with a 0.8 meter thickness with 0.6 ounces per DST of
      gold, 21.7 ounces per DST of silver and 3.4 percent copper. New reserves found
      during initial workings in 2005 were 20,875 DST with 0.3 ounces per DST of
      gold,
      2.5 ounces per DST of silver and 0.3 percent copper. Metallurgical tests of
      diamond drill cores suggest that the Layo mineralization is apt for gravity
      and
      flotation treatment. Bulk samples were sent for metallurgical assaying obtaining
      concentrates with a high grade of silver, gold and copper with recoveries
      ranging between 80 percent and 90 percent. Metallurgical research will continue
      to establish optimum operational parameters for the flotation circuit at
      Orcopampa’s concentration plant which is currently available for use and rated
      to treat up to 1,200 DST per day, although the crushing and the milling
      processes require adaptation. In 2005, we invested US$2.2 million in the
      Layo prospect. During 2006 we invested an additional US$5.17 million in
      2,542 meters of underground exploration workings and 1,545 meters of diamond
      drilling. In 2007, we invested an additional US$1.6 million in underground
      exploration workings and diamond drilling in the Layo Norte prospect, but
      decided to stop exploration activities because of poor results. Our expenditures
      in 2007 included costs associated with closing the Layo Norte prospect.




40




In
      addition, during 2007 we invested US$0.34 million in surface geological
      exploration of the Manto Norte, Chipmo Sureste and Umachulco prospects. In
      2008,
      we intend to invest US$3.1 million to conduct geological mapping, geophysical
      surveys and diamond drilling in four prospects, Pariguanas, Mulañan-Calera NE,
      Chipmo Superficie and Pucay.




*Julcani–Recuperada.* In
      view
      of the encouraging results obtained at Julcani from the exploration work
      conducted on the Acchilla dome veins, we plan to explore other structures in
      the
      Condoray and Taype domes, as well as in the area between these two domes and
      Acchilla. For most of 2007, we concentrated our exploration efforts on the
      Tablapampa prospect area, drilling diamond holes and searching for
      zinc-lead-silver ore bodies in Pucará limestone, with poor results. In December
      2007, we began exploring an area between Acchilla and the old Mimosa mine,
      focusing on the Estela area. We had positive results, with indications that
      silver mineralized veins extend across Acchilla to the Mimosa mine. During
      exploration of the Estela mine area in veins related to the Magdalena and Maria
      Jesús veins, we located some vein lengths with high grade silver-gold
      mineralization. During 2007, we invested US$0.40 million on this project, and
      we
      plan to invest US$0.60 million during 2008.




Exploration
      activities in the Recuperada region focused on the Esperanza area to search
      for
      new reserves to justify resuming mining operations. As of December 31, 2005,
      we
      calculated 143,190 DST of mineralization out of reserves with 10.4 ounces per
      DST of silver, 2.8 percent lead and 5.0 percent zinc. Additionally, we estimated
      94,905 DST with 6.2 ounces per DST of silver, 6.8 percent lead and 4.9 percent
      zinc in other areas, totaling 238,095 DST with 8.7 ounces per DST silver, 4.4
      percent lead and 4.9 percent zinc. Mineralization located in areas currently
      inaccessible in the lower sections of the Teresita mine was estimated in the
      order of 605,185 DST, with 2.8 ounces per DST of silver, 5.9 percent lead and
      8.2 percent zinc. From these, 190,835 DST is proven-probable ore reserves and
      414,350 DST is NRM indicated by drill holes. In the Hallazgo area, we are
      exploring a group of veins with silver, lead and zinc mineralization. We intend
      to focus our exploration efforts in 2007 to locate new reserves. Remnants of
      old
      mine workings in the areas of Carhuancho, together with information on the
      mining activity of this particular area in colonial times, appear to make
      Recuperada’s brownfield exploration a target worth studying and exploring. **** During
      2006, we invested US$0.20 million in 523 meters of diamond drilling in the
      Hallazgo area and other exploration activities. In 2007, we invested
      US$0.19 million on underground explorations and diamond drilling but did
      not discover ore grades similar to those found on surface trenches.




*Shila-Paula.* The
      Shila-Paula brownfield exploration is focused on several areas surrounding
      actual operating units such as Ampato, Paula Brownfield, Puncuhuayco-Ticlla,
      Tocracancha and other projects. In 2005, we invested US$0.77 million to
      conduct trenching and diamond drilling in the Ampato and Tocracancha prospects.
      The Ampato prospect is located northwest of the Shila-Paula mine. The Angela
      vein in the Ampato prospect shows gold and silver values up to 130 grams per
      ton
      and 128 grams per ton respectively. In the Puncuhuayco-Ticlla prospect, the
      Teresa vein shows gold and silver values up to 18.8 grams per ton and 706 grams
      per ton, respectively, as well as base metal contents. In Paula Brownfield,
      we
      are conducting a 1,050 meter diamond drilling campaign. In Tocracancha, we
      conducted 1,607 meters of diamond drilling with poor results, and accordingly,
      this prospect was discarded because of irregular continuity of metal content
      in
      the veins. In 2006, we invested US$1.72 million in complementary surface
      workings in the Ampato prospect and diamond drilling near the Paula mine. In
      2007, we invested US$0.86 million, mainly in surface geological mapping on
      41,185 hectares of the Escribano, Tocracancha, Desamparados–Ampato, Paque,
      Llavenayoc, Sihuincha, Rio Colca, Choco and Tuyumina prospects. In 2008, we
      intend to invest US$1.2 million to complete geological survey and diamond
      drilling in previously mentioned projects and conduct underground exploration
      in
      Ampato (in other veins related to the well-known Angela vein).




41




*Poracota.* The
      Poracota mining exploration project, in which we acquired a 100 percent
      interest, is currently operated by the Orcopampa team. The Poracota project
      encompasses 6,674 hectares owned by Minas Poracota S.A. (a former subsidiary
      of
      Minera del Suroeste S.A.C.) and is located 20 kilometers west of the Orcopampa
      mine in southern Peru. On December 31, 2005, we exercised an option to purchase
      a 50 percent participation in Minas Poracota from Minera del Suroeste S.A.C.
      for
      US$4.6 million. We also invested US$0.4, US$1.0 and US$1.6 million in
      2003, 2004 and 2005, respectively, to exercise a second option to purchase
      an
      additional 25 percent interest from Teck Cominco. In October 2006, we purchased
      the remaining 25 percent interest from Teck Cominco for
      US$2.25 million. **** The
      epithermal high sulfidation system is comprised of two main areas, Huamanihuayta
      and Perseverancia. During 2003 and 2004, the drilling campaign in the
      Huamanihuayta area confirmed vertical ore shoots in two sub-horizontal
      structures, Manto Dorado and Manto Aguila, with an average thickness of 5 to
      6
      meters each. The Manto Dorado structures included NRM of 693,785 metric tons
      at
      10.6 grams per ton of gold with an average thickness of 6.0 meters and the
      Manto
      Aguila structure included NRM of 801,687 metric tons at 10.0 grams per ton
      of
      gold with an average thickness of 5.2 meters. In 2004, we invested
      US$2.45 million in 967 meters of underground workings and a 5,250-meter
      diamond drilling campaign. In addition, we invested US$2.95 million for the
      construction of a 30.5-kilometer gravel road to connect the Poracota project
      to
      the Orcopampa mine. **** In
      2005,
      we advanced our exploration efforts with 1,688 meters of underground workings
      and 6,369 meters of diamond drilling, in addition to conducting metallurgical
      tests. We are preparing scoping studies based on an updated ore reserve
      calculation. Currently, the Poracota project is centered on mine development
      at
      depth, bulk flotation tests at the Orcopampa mine and permitting to begin mine
      production. During 2007, we invested US$11.6 million to conduct underground
      exploration and geological surveys. We have estimated ore reserves of 542,806
      DST at 11.2 grams per ton of gold and mineral out of reserves of 333,104 DST
      at
      6.9 grams per ton of gold. In 2008, we expect to invest US$0.73 million solely
      on brownfield exploration, with particular focus on diamond drilling in Poracota
      Oeste (West Huamanihuayta and Perseverancia projects) in order to locate new
      ore
      reserves.




*Soras* .
      The
      Soras project is wholly-owned by us and located adjacent to the Poracota
      project. The Soras project encompasses 22,323 hectares of hydrothermally altered
      and mineralized volcanic terrain in the Arequipa region. In 2004 and 2005,
      we
      identified two main mineralized structures, the Soraya and Soraya 1 veins,
      with
      surface ore grades of up to 26 grams per ton of gold. First-pass drilling
      identified two narrow veins with grades of 16 and 36 grams per ton of gold
      with
      an average of 5.9 ounces of silver and 3.8 percent copper. In 2006, we initiated
      underground workings and additional drilling to contour mineralization and
      generate new ore reserves. The Soraya vein system has been intercepted in the
      4,720 crosscut with narrow, high grade, northeast-trending pyritic enargite
      veins. Drifting and raising along the Soraya veins will follow in 2007 to
      demonstrate continuity. Both the Soras and Poracota mining exploration projects
      have been transferred to the Orcopampa operation, which will manage future
      mine
      development and exploration.




42




*Cedimin* .
      Cedimin
      S.A.C., or Cedimin, is wholly-owned by us and controls 51,649 hectares of owned
      and leased mining concessions, including the Crucero project. As of January
      2,
      2003, Minera Shila S.A.C. merged with and into Cedimin and is no longer a
      separate legal entity. As a result of this merger, mining activities at
      Cedimin **** increased
      significantly compared to exploration activities. In addition, on October 22,
      2004, Cedimin acquired a 100 percent equity interest in Inversiones Mineras
      Aureas S.A.C., or Mineras Aureas, which had a 49 percent interest in Minera
      Paula 49 S.A.C., or Minera Paula. As a result of this acquisition, Minera Paula
      became wholly-owned by us. As of December 31, 2004, Mineras Aureas and Minera
      Paula merged with and into Cedimin and are no longer separate legal entities.
      Their exploration is managed as part of the Orcopampa brownfield activities.




*Hatun
      Orcco* .
      Prior
      to 2005, the Hatun Orcco project was wholly-owned and operated by us. Consisting
      of 20,700 hectares of mining properties, the project is located 20 kilometers
      north of the Antapite mine in the headwaters of the Ica valley. The Hatun Orcco
      project is the outcome of a regional exploration program designed to focus
      on
      gold **** exploration **** in
      Huancavelica. Epithermal veins, located in the Hatun Orcco Norte, Hatun Orcco
      Sur and Karla prospects, have sporadic high-grade gold and silver geochemical
      anomalies. During 2003, our exploration efforts included a US$1.1 million
      investment in an underground exploration program of 1,276 meters to test for
      grade continuity along the Mercedes and Capicúa veins in the Hatun Orcco Sur
      prospect. The results confirmed NRM of 16,330 metric tons at 16.9 grams per
      ton
      of gold and 6.6 ounces per ton of silver with an average width of 1.1 meters.
      In
      2004, we continued our exploration efforts, investing US$1.2 million in
      1,703 meters of tunneling and 1,710 meters of diamond drilling in the Hatun
      Orcco Sur prospect. In March 2005, we decided to lease the land and mineral
      rights of the Hatun Orcco project to Inminsur, which will operate this as a
      brownfield project going forward due to the proximity to the Antapite mine
      and
      mill area. We do not intend to continue any exploration work on this
      project.




***Competition***




We
      believe that competition in the metals market is based primarily upon cost.
      We
      compete with other mining companies and private individuals for the acquisition
      of mining concessions and leases in Peru and for the recruitment and retention
      of qualified employees.




***Sales
      of Metal Concentrates***




All
      of
      our metal production is sold to smelters, traders and banks, either in
      concentrate or metal form, such as gold-silver concentrate, silver-lead
      concentrate, zinc concentrate, lead-gold-copper concentrate and gold and silver
      bullion. Our concentrates sales are made under one to three-year,
      U.S. Dollar-denominated contracts, pursuant to which the selling price is
      based on world metal prices as follows: generally, in the case of gold and
      silver-based concentrates, the London Spot settlement prices for gold, less
      certain allowances, and the London Spot or the United States Commodities
      Exchange settlement price for silver, less certain allowances; and, in the
      case
      of base-metal concentrates, such as zinc, lead and copper, the London Metals
      Exchange settlement prices for the specific metal, less certain allowances.
      Sales prices vary according to formulas that take into account agreed
      contractual average prices for a quotational period, generally being the month
      of, the month prior to, or the month following the scheduled month of shipment
      or delivery according to the terms of the contracts.




43




The
      historical average annual prices for gold and silver per ounce and our average
      annual gold and silver prices per ounce for each of the last five years are
      set
      forth below:




Gold
            
            SilverAverage Annual
              Market Price
            
            Our Average
              Annual Price(1)
            
            Average Annual
              Market Price
            
            Our Average
              Annual Price(1)US$/oz.
                (2)
            
            US$/oz.
            
            US$/oz.(3)
            
            US$/oz.2003
            
            
            363.51
            
            
            364.88
            
            
            4.88
            
            
            4.912004
            
            
            409.21
            
            
            373.78
            
            
            6.65
            
            
            6.512005
            
            
            444.88
            
            
            359.75
            
            
            7.31
            
            
            7.382006
            
            
            604.34
            
            
            354.98
            
            
            11.57
            
            
            11.922007
            
            
            696.66
            
            
            684.59
            
            
            13.39
            
            
            13.372008
                (through June 30, 2008)
            
            
            910.44
            
            
            909.94
            
            
            17.38
            
            
            17.40







(1)
            Our
                average annual price includes only the consolidated average annual
                price
                from the Julcani, Uchucchacua, Orcopampa, Antapite, Recuperada,
                Colquijirca, Ishihuinca and Shila
                mines.


(2)
            Average
                annual gold prices are based on the London PM fix as provided by
                Metals
                Week.


(3)
            Average
                annual silver prices are based on London Spot
                prices.





Most
      of
      the sales contracts we enter into with our customers state a specific amount
      of
      metal or concentrate the customer will purchase. We have sales commitments
      from
      various parties for virtually all of our estimated 2008 production; however,
      concentrates not sold under any of our contracts may be sold on a spot sale
      basis to merchants and consumers.




*Sales
      and Markets*




The
      following table sets forth our total revenues from the sale of gold, silver,
      lead, zinc and copper in the past three fiscal years:




As of and for the year ended December 31(1)Product
            
            2005
            
            2006
            
            2007(In thousands of US$)Gold
            
            
            125,422
            
            
            147,420
            
            
            286,841Silver
            
            
            107,136
            
            
            228,987
            
            
            223,760Lead
            
            
            29,508
            
            
            48,268
            
            
            114,650Zinc
            
            
            67,677
            
            
            202,735
            
            
            242,896Copper
            
            
            527
            
            
            692
            
            
            4,431







(1)
      Does
      not include refinery charges and penalties incurred in 2007, 2006 and 2005
      of
      US$136,820, US$105,458 and US$53,372, respectively.





We
      sold
      our concentrates to 20 customers in 2007. Approximately 54 percent, 46 percent
      and 53 percent of our concentrate sales in 2005, 2006 and 2007, respectively,
      were sold outside Peru. Set forth below is a table that shows the percentage
      of
      sales of concentrate from our mines, and of sales of gold bullion that were
      sold
      to our various customers from 2005 to 2007.




44




Percentage of Concentrates and Gold Bullion Sales2005
            
            2006
            
            2007**Export
                Sales:**Hochschild
            
            
            0.50
            
            
            –
            
            
            –Johnson
                Matthey
            
            
            7.91
            
            
            1.99
            
            
            21.52Glencore
            
            
            6.55
            
            
            11.58
            
            
            4.78Trafigura
            
            
            –
            
            
            –
            
            
            3.65Marc
                Rich
            
            
            1.39
            
            
            –
            
            
            –Umicore
            
            
            1.83
            
            
            3.09
            
            
            2.84Transamine
            
            
            1.30
            
            
            2.33
            
            
            0.91J.P.
                Morgan
            
            
            7.46
            
            
            3.97
            
            
            5.12Standard
                Bank
            
            
            9.11
            
            
            –
            
            
            –Macquarie
            
            
            8.40
            
            
            4.47
            
            
            –Mitsui
            
            
            9.51
            
            
            11.38
            
            
            5.08J
                Aron
            
            
            –
            
            
            5.23
            
            
            3.41BHL
            
            
            –
            
            
            1.82
            
            
            –Dreyfus
            
            
            –
            
            
            –
            
            
            0.92Nyrstar
            
            
            –
            
            
            –
            
            
            0.64Euromin
            
            
            –
            
            
            –
            
            
            0.87Peñoles
            
            
            –
            
            
            –
            
            
            1.42Barclays
            
            
            –
            
            
            –
            
            
            1.39**Total
                Export Sales**
            
            
            53.96
            
            
            45.86
            
            
            52.55**Domestic
                Sales:**Doe
                Run
            
            
            17.82
            
            
            14.15
            
            
            13.44Cormin
            
            
            14.74
            
            
            17.13
            
            
            10.11BHL
            
            
            7.68
            
            
            14.29
            
            
            6.89Cajamarquilla
            
            
            2.60
            
            
            5.10
            
            
            4.79Procesadora
                Sudamericana
            
            
            0.83
            
            
            0.98
            
            
            1.95Ayssa
            
            
            2.37
            
            
            2.49
            
            
            9.06MK
                Metal Trading
            
            
            –
            
            
            –
            
            
            1.21**Total
                Domestic Sales**
            
            
            46.04
            
            
            54.14
            
            
            47.45**Total
                Sales**
            
            
            100
            
            
            100
            
            
            100





The
      following table sets forth the terms of our sales contracts for the delivery
      of
      silver-lead, gold-silver and zinc concentrates from 2007 to 2010:


Wet metric
              
              Delivery periodBuyer
              
              Concentrate
              
              Dated
              
              tons
              
              From
              
              ToAYS
                  S.A.
              
              Uchucchacua’s
                  Silver-Lead
              
              Jan-08
              
              42,000
              
              Jan-07
              
              Dec-09AYS
                  S.A.
              
              Recuperada’s
                  Silver-Lead
              
              Feb-08
              
              2,900
              
              Feb-08
              
              Oct-08AYS
                  S.A.
              
              Recuperada’s
                  Zinc
              
              Feb-08
              
              5,000
              
              Feb-08
              
              Dec-08AYS
                  S.A.
              
              Uchucchacua’s
                  Zinc
              
              Feb-08
              
              5,000
              
              Feb-08
              
              Dec-08BHL
                  Perú S.A.C.
              
              Uchucchacua’s
                  Zinc
              
              Oct-06
              
              39,000
              
              Nov-06
              
              Dec-07BHL
                  Perú S.A.C.
              
              Recuperada’s
                  Silver -Lead
              
              Apr-06
              
              5,700
              
              May-06
              
              Apr-07BHL
                  Perú S.A.C.
              
              Recuperada’s
                  Silver -Lead
              
              Apr-08
              
              9,600
              
              May-07
              
              Dec-09BHL
                  Perú S.A.C.
              
              Recuperada’s
                  Zinc
              
              Apr-06
              
              8,000
              
              May-06
              
              Apr-07BHL
                  Perú S.A.C.
              
              Recuperada’s
                  Zinc
              
              Oct-08
              
              11,800
              
              May-07
              
              Dec-08
 Consorcio
                  Minero S.A.
              
              Caraveli ́s
                  Copper-Gold
              
              Jan-07
              
              3,240
              
              Jan-07
              
              Dec-08Consorcio
                  Minero S.A.
              
              Uchucchacua’s
                  Silver-Lead
              
              Feb-08
              
              2,000
              
              Feb-08
              
              Dec-08Consorcio
                  Minero S.A.
              
              Uchucchacua’s
                  Zinc
              
              Jan-08
              
              15,000
              
              Jan-08
              
              Dec-08Consorcio
                  Minero S.A.
              
              Uchucchacua’s
                  Zinc
              
              Apr-08
              
              15,000
              
              Apr-08
              
              Dec-08Consorcio
                  Minero S.A.
              
              Julcani’s
                  Silver-Lead
              
              Feb-08
              
              1,495
              
              Feb-08
              
              Dec-08Doe
                  Run S.R.L.
              
              Julcani’s
                  Silver-Lead
              
              Feb-06
              
              2,400
              
              Jan-06
              
              Dec-07Doe
                  Run S.R.L.
              
              Julcani’s
                  Silver-Lead
              
              Jan-08
              
              5,000
              
              Feb-08
              
              Dec-09Doe
                  Run S.R.L.
              
              Uchucchacua’s
                  Silver-Lead
              
              Feb-06
              
              33,000
              
              Jan-06
              
              Dec-07Doe
                  Run S.R.L.
              
              Uchucchacua’s
                  Silver-Lead
              
              Jan-08
              
              36,000
              
              Jan-08
              
              Dec-09Mk
                  Metal Trading
              
              Poracota's
                  Gold-Silver
              
              Jan-08
              
              15,500
              
              Jan-08
              
              Dec-08




Note:
      The
      price of the concentrate supplied under the contract is based on specified
      market quotations minus deductions.




45




We
      also
      sell refined gold, which is derived from our operations at Orcopampa,
      Shila-Paula, Antapite and Ishihuinca and processed at a local smelter in Lima,
      to Johnson Matthey Public Limited Company, or Johnson Matthey, which further
      refines the gold. Under the terms of the Johnson Matthey sales contract, we
      supply Johnson Matthey, at our option, with gold assaying in excess of 75
      percent gold and approximately 20 percent silver, monthly from January 1, 2007
      to December 31, 2007. The price of the gold supplied under the contract is
      determined based on, for the gold content, the quotation for gold at the London
      Gold Market PM fixing in U.S. Dollars, and for the silver content, the quotation
      for silver at the London Silver Market spot fixing in U.S. Dollars, minus,
      in
      each case, certain minimum charges, as well as charges for customs clearance
      and
      treatment of the gold (which varies depending on its gold and silver content).
      The contract also provides that we may elect to have our material toll refined
      at Johnson Matthey’s Royston U.K. works and returned to our account for sale to
      third parties. Under the terms of the contract, we are responsible for
      delivering the gold to Johnson Matthey’s designated flight at the Lima airport.




On
      February 2008, BHL Peru S.A., or BHL, an international trader that had been
      our
      client for more than 10 years, entered into default due to the imbalance
      produced between BHL’s buying and selling contracts due to increases in lead and
      zinc treatment charges, and the cancellation of deliveries from their
      counterparties in China. In order to settle this difference, we had to assume
      a
      loss of US$5.4 million.




*Hedging/Normal
      Sales Contracts*




In
      October 2004, our Board of Directors issued a mandate not to enter into new
      hedging transactions. At December 31, 2005, we were engaged in gold price
      hedging activities, such as forward sales and put/call options, from derivative
      contracts executed prior to 1999. Since 2003, we have been modifying the terms
      of certain derivative instruments in order to qualify them as normal sales
      contracts. In March 2006, we closed out all our outstanding gold derivative
      contracts as of December 31, 2005 and replaced them with normal sales contracts.
      On January 15, 2007, we modified the schedule of commitments for gold with
      two
      of our clients. As a consequence of this modification, we transferred 208,000
      and 108,000 gold ounces that had been committed for sale in 2007 and 2008,
      respectively, and committed them for sale in 2012 instead, without any cash
      disbursement. In March and May 2007, we negotiated with several counterparties
      to eliminate the fixed or maximum price component on determined commitments
      for
      a total of 971,000 gold ounces scheduled for delivery from 2008 to 2012, which
      required us to make aggregate payments of US$315.69 million. Additionally,
      in
      January and February 2008, we negotiated with several counterparties to
      eliminate the fixed or maximum price component on all of our outstanding gold
      commitments, representing a total of 922,000 gold ounces, which required us
      to
      make aggregate payments of US$517.15 million. After these transactions we will
      continue delivering physical gold as scheduled but will receive the prevailing
      market price at the time. As a result, we are fully exposed to the effects
      of
      changes in prevailing market prices of gold, silver and copper. See “Item 3. Key
      Information—Risk Factors—Factors Relating to the Company—Prices of Gold, Silver
      and Copper.”




46




At
      El
      Brocal, we implemented a base metal hedging policy for a maximum of 30 percent
      of El Brocal’s total payable metal contained per year, for up to three years. As
      of March 31, 2008 all transactions entered have been forward pricing operations
      through non-delivery (Asian) swaps. Outstanding hedging commitments for 2008
      to
      2010 amount to 10 percent of payable metal and are as follows: (i) 4,200 metric
      tons of copper at an average price of US$7,273 per metric ton, (ii) 15,900
      metric tons of lead at an average price of US$2,797 per metric ton and (iii)
      18,750 metric tons of zinc at an average price of US$2,757 per metric ton.
      See
“Item 11. Quantitative and Qualitative Disclosures About Market Risk” and Note
      38 to the Financial Statements.




Yanacocha
      and Cerro Verde have not engaged in, and are currently not engaged in, gold
      and
      copper price hedging activities, such as forward sales or option contracts,
      to
      minimize their respective exposures to fluctuations in the price of gold and
      copper.




***Regulatory
      Framework***




*Mining
      and Processing Concessions*




In
      Peru,
      as in many other countries, the government retains ownership of all subsurface
      land and mineral resources. The surface land, however, is owned by the
      individual landowners. Our right to explore, extract, process and/or produce
      silver, gold and other metals is granted by the Peruvian government in the
      form
      of mining and processing concessions. The rights and obligations of holders
      of
      mining concessions, provisional permits and processing concessions are currently
      set forth in the General Mining Law (Single Unified Text, 1992, Supreme Decree
      014-92-EM), which is administered by the MEM.




Prior
      to
      1991, in order to obtain a mining concession, a prospective claimant filed
      a
      mining claim with the MEM and obtained from it a provisional permit to explore
      the area of the claim. Thereafter, the MEM would issue a technical and legal
      report on the claimed area and the mining concession would be granted. In 1991,
      however, a new system was established for granting new mining concessions,
      based
      on *Universal
      Transversal Mercator Coordinates* ,
      or UTM
      Coordinates, to map the mining concessions and provisional permits on Peru’s
      land area. Under the new system, no provisional permits are granted, and
      therefore filers of mining claims filed after 1991 must obtain a mining
      concession before they may explore the areas claimed. The application filed
      is
      known as *petitorio* .
      A
      holder of a provisional permit, granted with respect to claims over an area
      claimed before 1991 who follows proper procedures to comply with the new 1991
      system, however, is permitted to continue to explore the area claimed. Effective
      December 21, 2007, applications for mining concessions must be filed with
      INGEMMET.




47




Following
      implementation of the new system in 1991, there was a period of transition
      during which pre-1991 provisional permits and mining concessions could be
      brought into compliance with the new grid coordinate system by following certain
      specified procedures. Some conflicts developed regarding recognizing new mining
      concessions, identifying the exact location of old mining claims and placing
      old
      mining claims into the established UTM Coordinates, which slowed down the period
      of transition. To address such conflicts, the Mining Properties Mapping Law
      was
      enacted in May 1996. The Mining Properties Mapping Law established a new mapping
      system to identify the land area of mining claims and to set forth a procedure
      to resolve such conflicts and to recognize the rights held by holders of mining
      concessions and provisional permits claimed from colonial times until 1991.
      Under this law, to establish mining concessions claimed from colonial times
      to
      1991, the MEM publishes provisional UTM Coordinates with respect to such mining
      concessions in *El
      Peruano* ,
      or El
      Peruano, the official gazette of Peru, and requests that any objections to
      such
      provisional UTM Coordinates be made to the MEM within 90 days of such
      publication. A similar procedure has been established for provisional permits
      claimed from colonial times to 1991; however, an owner of such provisional
      permit must establish the area subject to such provisional permit in UTM
      Coordinates and, once such land area is established, INGEMMET publishes such
      provisional UTM Coordinates in El Peruano, requesting that any objections to
      such provisional permit be made to the INGEMMET within 120 days of such
      publication and before the granting of the mining concession. Mining concessions
      applied for after 1991 under the UTM Coordinates system have been placed into
      the new mapping system and do not have to follow the procedure described
      above.




Until
      Legislative Decree No. 1010 becomes effective, mining concessions have an
      indefinite term, subject to payment of (a) an annual concession fee of US$3
      per
      hectare claimed and (b) an annual fine if a minimum annual production of US$100
      per hectare, with respect to metallic resources, is not achieved before the
      expiration of the sixth year of tenure, counted from the year in which the
      title
      of the concession was granted, amounting to US$6 per hectare payable starting
      in
      the seventh year following the year in which the title of the concession was
      granted until the year in which such minimum annual production is achieved;
      failure to comply with the minimum annual production after the eleventh year
      following the year in which the title of the concession was granted, would
      result in a US$20 per hectare penalty starting in the twelfth year counted
      since
      the year in which the title of the concession was granted. The fine may be
      avoided, however, by demonstrating investments in the mining rights during
      the
      previous year of amounts more than ten times greater than the fine to be paid.
      In order to calculate the production of and investment in each mining right,
      the
      titleholder may create an operating unit, or *Unidad
      Económica Administrativa* ,
      provided the mining rights are all within a radius of five kilometers. If,
      in
      any year, the concession fee is not paid, payment may be made the following
      year
      within the term provided for making such payment. Any payment made will be
      applied to the prior year if such prior year was not paid. Failure to pay such
      concession fees or fines for two consecutive years could result in the loss
      of
      one or more of the mining rights. However, mining and processing concessions
      will not lapse if the administrative authority failed to issue a resolution
      declaring the termination of the concession within the first five years
      following the date on which such payment failure occurred. Processing
      concessions have an indefinite term, subject to payment of a fee based on
      nominal capacity for the processing plant. No other payments or royalties are
      required by the Peruvian government for us to maintain mining and exploration
      property rights in full force and effect. As of 2002, the annual concession
      fee
      and the annual fine will be calculated pursuant to the provisions of the General
      Mining Law and of Supreme Decree No. 010-2002-EM, effective since March 10,
      2002. Provisions related to the procedure for cancelling a mining concession
      due
      to failure to pay concession fees or fines have been amended by Supreme Decree
      No. 045-2007-EM. We paid approximately US$2.7 million, US$3.2 million and US$3.5
      million in fees for mining rights and approximately US$6,475, US$7,190 and
      US$8,550 in fees for processing concessions for the years ended
      December 31, 2005, 2006 and 2007, respectively, and are current in the
      payment of all amounts due in respect of our mining rights and processing
      concessions.




48




On
      May 9,
      2008 Legislative Decree No. 1010 was published. The Fifth Temporary and
      Supplementary Provision of said Legislative Decree provides that the Legislative
      Decree will enter into effect when its regulations are approved. The regulations
      must be approved within 45 days of May 9, 2008. From January 1 of the year
      following the date Legislative Decree No. 1010 becomes effective, mining
      concessions with respect to metallic resources will continue having an
      indefinite term, subject to payment of (a) an annual concession fee of US$3
      per
      hectare claimed and (b) an annual fine if a minimum annual production of, at
      least, the equivalent to one Tax Unit ( *Unidad
      Impositiva Tributaria* )
      per
      hectare is not achieved before the expiration of the seventh year, counted
      from
      the year in which the title of the concession was granted. The fine is the
      equivalent of 10 percent of the minimum annual production per year and hectare
      payable starting in the eighth year following the year in which the title of
      the
      concession was granted until the year in which such minimum annual production
      is
      achieved; failure to comply with the minimum annual production after the
      thirteenth year following the year in which the title of the concession was
      granted would result in MEM’s cancellation of the mining concession. Failure to
      comply with the minimum annual production during two years after such minimum
      has already been achieved would also result in the cancellation by MEM of the
      mining concession. The failure to achieve the minimum annual production will
      not
      be an event of cancellation if it is due to force majeure or acts of God duly
      demonstrated. In order to calculate the production of and investment in each
      mining right, the titleholder may create an operating unit, or *Unidad
      Económica Administrativa* ,
      provided the mining rights are all within a radius of five kilometers. If,
      in
      any year, the concession fee is not paid, payment may be made the following
      year
      within the term provided for making such payment. Any payment made will be
      applied to the prior year if the concession fee for the prior year was not
      paid.
      Failure to pay such concession fees or fines for two years, whether consecutive
      or not, could result in MEM’s cancellation of the correspondent mining rights.
      However, mining and processing concessions will not lapse if the administrative
      authority failed to issue a resolution declaring the termination of the
      concession within the first five years following the date on which such payment
      failure occurred. Processing concessions have an indefinite term, subject to
      payment of a fee based on nominal capacity for the processing plant. No other
      payments or royalties are required by the Peruvian government for us to maintain
      mining and exploration property rights in full force and effect.




As
      of May
      31, 2008, we owned and administered, directly and indirectly, through
      subsidiaries or in conjunction with joint venture partners, approximately
      950,439 hectares devoted to mineral exploration and mining operations. Mining
      rights and processing concessions are in full force and effect under applicable
      Peruvian laws. We believe that we are in compliance with all material terms
      and
      requirements applicable to the mining rights and processing concessions and
      that
      we are not subject to any condition, occurrence or event that would cause the
      revocation, cancellation, lapse, expiration or termination thereof, except
      that
      we may, from time to time, allow to lapse, revoke, cancel or terminate mining
      rights and processing concessions that are not material to the conduct of our
      business. The principal mining rights and processing concessions are (i) with
      respect to our mines, new applications ( *petitorios* )
      filed
      for mining concessions at Julcani, Uchucchacua, Orcopampa, Colquijirca,
      Ishihuinca, Antapite, Recuperada and Shila-Paula; and (ii) with respect to
      our
      current exploration projects, new applications filed for mining concessions,
      the
      provisional pre-1991 permits and the mining concessions at the Tantahuatay,
      El
      Milagro, Trapiche, Breapampa and El Faique projects. The principal processing
      concessions are the processing concessions of the concentrators at Julcani,
      Uchucchacua, Orcopampa, Colquijirca, Ishihuinca, Antapite, Recuperada and
      Shila-Paula.




Both
      mining concessions and provisional permits claimed before 1991 conferred on
      their holders the right to mine underground ore reserves, and it is often the
      case that the titleholders of these mining rights are not the owners of the
      land
      surface. Since October 1996, pursuant to Peruvian regulations, all operators
      of
      new mining areas in Peru are required to have an agreement with the owners
      of
      the land surface above the mining rights or to establish an easement upon such
      surface for mining purposes pursuant to General Mining Law, Article 7 of Law
      No.
      26505, as amended by Law No. 26570 and the regulations to such Article 7
      contained in Supreme Decree 017-96-AG, as amended by Supreme Decree No.
      015-2003-AG. We have been actively pursuing the acquisition of the land surface
      or obtaining easements relating to land positions containing prospective
      geological exploration target sites, deposits that can be exploited in the
      future or areas that would be considered for plant or facility
      sites.




49




On
      December 19, 1998, Special Law No. 27015, the Law Regulating Mining Concessions
      in Urban Areas and Urban Expansion Areas, was released. Law No. 27015 was
      amended by Law No. 27560, effective as of November 25, 2001 (Law No. 27015
      as
      amended by Law No. 27560, the Urban Mining Concessions Law). Regulations
      pursuant to the Urban Mining Concessions Law were set forth in Supreme Decree
      No. 007-99-EM published on March 22, 1999, which was abrogated and replaced
      by
      Supreme Decree No. 008-2002-EM, effective since February 22, 2002, or the
      Regulations, which in turn was amended by Supreme Decree No. 041-2007-EM,
      effective as of July 26, 2007. Under the Urban Mining Concessions Law, metallic
      or non-metallic mining concessions will be granted in areas that have been
      or
      are designated as urban areas by municipal ordinances issued by the provincial
      municipality pursuant to the procedures set forth in the Regulations for the
      Territorial Conditioning, Urban Development and Environment approved by Supreme
      Decree No. 007-85-VC, unless the grant of such title or concession is expressly
      authorized by a special law. This Supreme Decree was abrogated by Article 2
      of
      Supreme Decree No. 027-2003-Vivienda, published on October 6, 2003. Article
      1 of
      the same Supreme Decree approved the new Regulations for the Territorial
      Conditioning, Urban Development and Environment currently in
      effect.




The
      granting of titles to metallic and non-metallic mining concessions in an area
      designated as an urban expansion area by means of municipal ordinances in force
      as of the date of filing of an application for a mining concession requires
      authorization through a Ministerial Resolution of the Ministry of Energy and
      Mines. The issuance of a Ministerial Resolution requires the receipt of a
      resolution of the Council of the applicable provincial municipality, which
      will
      be issued within a period of sixty days. If the opinion is negative or if no
      opinion is issued, the application for the mining concession will be rejected.
      Any change from a metallic concession to a non-metallic concession and vice
      versa will be subject to these same requirements.




Applications
      for concessions in urban expansion areas will be presented on the basis of
      increments of 10 to 100 hectares under the UTM Coordinates system. A mining
      concession in an urban expansion area, whether metallic or non-metallic, will
      be
      granted for a term of 10 years, renewable for like terms under the procedures
      set forth above for the grant of the initial concession. In both urban areas
      or
      urban expansion areas the only legally valid easements for mining purposes
      are
      those which are entered into directly with the owner of the surface
      area.




Law
      No.
      28964, which became effective on January 25, 2007, abrogated Law No. 27474,
      the
      purpose of which was to ensure that mining, power and hydrocarbon obligations
      are audited by auditing companies duly registered with the MEM. Law No. 28964
      created the *Organismo
      Supervisor de la Inversión en Energía y Minería (OSINERGMIN)* as the
      government agency in charge of regulating and auditing the electricity,
      hydrocarbon and mining activities of companies. Law No. 28964 provides that
      overview and audit of activities related to the environment, mining safety
      and
      health regulations may be performed by companies duly certified and approved
      by
      OSINERGMIN.




*Environmental
      Matters*




On
      September 8, 1990, Peru enacted the nation’s first environmental regulation,
      codified in Legislative Decree 613. On June 2, 1992, new environmental laws,
      codified in Title 15 of the General Mining Law, relating to the mining industry
      were enacted. These laws and the related regulations significantly increased
      the
      level of environmental regulation previously in effect in Peru and established
      standards as well as guidelines with respect to discharges into bodies of water
      and the atmosphere, explorations activities and tailings management, among
      other
      requirements. As of 1998, environmental quality standards enforceable for all
      economic activities have to be in line with the provisions set forth by Supreme
      Decree No. 044-98-PCM, which was abrogated and replaced by Supreme Decree No.
      033-2007-PCM, effective as of March 6, 2007. In 2005, the General Environmental
      Law (Law No. 28611) was passed, revoking Legislative Decree 613 and
      incorporating a number of environmental management guidelines relating mainly
      to
      emissions standards. Pursuant to Law No. 28817, the National Environmental
      Authority has until July 22, 2008 to approve the environmental emission
      standards and the maximum permissible levels of emission following the procedure
      contemplated in Supreme Decree No. 033-2007-PCM.




50




Under
      the
      legal framework of Legislative Decree 613, the Peruvian government issued
      Supreme Decree No. 016-93-EM approving the Regulations of Title Fifteenth of
      the
      General Mining Law, Regulations for Environmental Protection of the Mining
      and
      Metallurgical Activities, as amended and supplemented by Supreme Decrees Nos.
      059-93-EM, 029-99-EM and 022-2002-EM, and Supreme Decree No. 046-2001-EM
      containing the Safety and Hygienic Regulations for Mining Activities, as amended
      by Supreme Decree No. 018-2003-EM and Supreme Decree No. 046-2005-EM. On April
      12, 2008 new Environmental Regulations for Mining Exploration Activities became
      effective, abrogating Supreme Decree No. 038-98-EM and Supreme Decree No.
      014-2007-EM. Holders of mining concessions, whether or not in urban areas or
      urban expansion areas, that want to develop mining exploration activities must
      comply with the provisions of such new regulations as well as those applicable
      provisions set forth in Supreme Decree No. 016-93-EM, as amended and
      supplemented by Supreme Decrees Nos. 059-93-EM, 029-99-EM and 022-2002-EM,
      as
      well as the provisions contained in the Safety and Hygienic Regulations for
      Mining Activities set forth in Supreme Decree No. 046-2001-EM published on
      July 26, 2001, as amended by Supreme Decree No. 018-2003-EM effective May
      31, 2003 and Supreme Decree No. 046-2005-EM, effective as of October 30, 2005.
      Supreme Decree No. 016-93-EM and the Safety and Hygienic Regulations for Mining
      Activities set forth in Supreme Decree No. 046-2001-EM as amended are also
      applicable to exploitation activities. Failure to comply with the provisions
      of
      the aforementioned regulations may be punished with a fine or by the temporary
      suspension of mining activities. In the event of continuing non-compliance,
      the
      mining concession may be revoked.




The
      MEM
      monitors environmental compliance and sets specific environmental standards.
      In
      particular, the MEM has established standards for emissions or discharges of
      liquid and gas effluents. The MEM also approves the environmental impact
      assessments and programs for environmental control.




The
      MEM
      has issued regulations that establish maximum permissible levels of emissions
      of
      liquid effluents approved by **** Ministerial
      Resolution No. 011/96-EM/VMM. Generally, holders of mining rights and processing
      plants that were in operation prior to May 2, 1993 have a maximum of 10 years
      to
      comply with the maximum permissible levels; in the meantime, they must prepare
      their *Programas
      de Adecuación y Manejo Ambiental* (Environmental Adaptation and Management Programs, or PAMAs) to comply with
      more
      stringent maximum permissible levels. Under Peruvian environmental regulations
      passed in 1993, a company that initiated operations prior to May 2, 1993, as
      is
      the case for us and most of our affiliated companies, was required to file
      with
      the Peruvian government an *Evaluación
      Ambiental Preliminar* (Preliminary
      Environmental Evaluation, or EVAP) for each of its mining units to disclose
      any
      pollution problems in its operations and, thereafter, to submit a follow-up
      PAMA
      aimed at implementing measures in order to solve problems identified in the
      EVAP. Companies must correct the pollution problems relating to their mining
      activities within five years, while smelters must comply within ten years.
      These
      companies must allocate no less than one percent of their annual sales to
      redress the problems identified in their EVAPs and contemplated in their PAMAs.
      Mining and processing activities that began after May 2, 1993 or had at that
      time a specific environmental program will be required to file and obtain
      approval for an Environmental Impact Study, or EIS, before being authorized
      to
      operate. Mining and plant processing activities that began after May 2, 1993
      are
      required to comply with the more stringent maximum permissible levels for liquid
      effluents from the initiation of their operations. Exploration activities,
      classified as either initial, intermediate and advanced, are also subject to
      heightened compliance requirements. Unlike initial exploration projects, which
      do not require MEM approval, intermediate exploration projects must submit
      a
      Sworn Declaration, or SD. Furthermore, advanced exploration projects are
      required to submit an Environmental Assessment, or EA, which incorporates
      technical, environmental and social matters. Commitments assumed by the mining
      company in the SDs and EAs are obligatory for such mining companies and
      enforceable by the MEM.




51




Many
      of
      our mining rights and processing plants were in operation prior to May 2, 1993,
      and we are in substantial compliance with the maximum permissible levels. EVAPs
      for Julcani, Uchucchacua, Orcopampa, Recuperada, Ishihuinca and Shila were
      all
      accepted between August and September 1995. The EISs for Huallanca and Paula
      were approved in 1998 and February 2001, respectively. Between November 2002
      and
      April 2003, the MEM approved and verified the PAMAs for all these entities,
      issuing and approving resolution for each respective mining unit.




EISs
      for
      capacity expansion at the Uchucchacua mine and the Esperanza project (near
      the
      Recuperada mine) were approved in May 2006 and September 2006,
      respectively.




The
      EAs
      for the La Zanja, Los Pircos, Tantahuatay, Samana and Pozo Rico exploration
      projects were approved in July
      2001, August 2001, December 2000, December 2001 and May 2003, respectively.
      EAs
      for Hatun Orcco, Ccarhuarazo, Salpo and Poracota were all accepted in 2003.
      The
      SDs for the Anamaray, Cofradia, Sican, Shilacocha and Trapiche projects and
      the
      EAs for the Esperanza, Hatun Orco, Layo Mallay, Minasnioc and Soras projects
      were approved in 2005. The SDs for El Milagro, Jancapata, Fortuna, Tablapampa,
      El Rifle projects and the EAs for Pampandino, Hallazgo, Angélica Rublo, El
      Milagro and Anamaray projects were approved in 2006 and early 2007.




In
      October 2001, Consorcio Energético de Huancavelica S.A., or Conenhua, completed
      the construction of two transmission lines, one between Trujillo and Cajamarca
      and the other between Cajamarca Norte and La Pajuela, and of a substation in
      Cajamarca Norte, in order to provide electricity to Yanacocha and the city
      of
      Cajamarca. The final concessions for the two transmission lines were granted
      by
      Supreme Resolution No. 165-2001-EM in October 2001.




In
      2001,
      we submitted an EIS for a transmission line from Ares to Huancarama, which
      will
      connect Orcopampa with the national electricity grid. Orcopampa was connected
      to
      the Peruvian national electricity grid on September 12, 2002 and Minera Shila
      S.A.C. was connected on April 9, 2003. On August 24, 2006, MEM approved the
      EIS
      for the Huancarama-Chipmo-Poracota transmission line and its substations. This
      connection to the national grid should result in lower energy
      costs.




Except
      as
      described above, there are no material legal or administrative proceedings
      pending against us with respect to any environmental matters.




Law
      No.
      28090, *Ley
      que Regula el Cierre de Minas* (Law
      that Regulates the Closing of Mines), was published on October 14, 2003,
      establishing the obligations and procedures that mining companies must follow
      to
      prepare, submit and execute plans for the closing of mines, or Closure Plans,
      and the granting of environmental guarantees to secure compliance with Closure
      Plans. Pursuant to Law No. 28090, as amended by Law No. 28507, published on
      May
      8, 2005 and the Mine Closure Regulations approved by Supreme Decree 033-2005-EM,
      published on August 15, 2005, as amended by Supreme Decree No. 045-2006-EM,
      we
      are required to (i) submit a Closure Plan for “New Projects” to the MEM within
      one year following approval of the EIS or PAMA, or in the case of “Existing
      Projects”, one year after August 15, 2005; (ii) submit a modification to the
      Closure Plan to the MEM within nine months after August 15, 2005; (iii) inform
      the MEM semi-annually of any progress on the conditions established in the
      Closure Plan; (iv) perform the Closure Plan consistent with the schedule
      approved by the MEM during the life of the concession; and (v) grant an
      environmental guarantee that covers the estimated amount of the Closure Plan.
      The guarantee may be in the form of cash, trusts, and any other guarantee
      contemplated in the Banking Law. Supreme Decree No. 045-2006-EM, dated August
      14, 2006, amended Articles 8 and 51 of the Mine Closure Regulations relating
      to
      companies obliged to submit a duly approved Closure Plan. Article 51 refers
      to
      the method of calculating the guarantee. On November 24, 2003, Ministerial
      Resolution No. 627-2003-MEM/DM was published to create the *Registro
      de Entidades Autorizadas a Elaborar Planes de Cierre de Mina y de Plantas de
      Beneficio* (Registry
      for Authorized Entities to Elaborate the Closing of Mines and the Beneficial
      Plants). Only the entities recorded in such registry are allowed to prepare
      the
      Closure Plan .
      The
      Mine Closure Regulations, Supreme Decree No. 033-2005-EM, deals with the effects
      on health, safety, property and the environment at the end of the productive
      life of mining-related facilities.




52




Law
      No.
      28271, *Ley
      que Regula los Pasivos Ambientales de la Actividad Minera* (Law
      that Regulates the Mining Liabilities of the Mining Activities), became
      effective on July 7, 2004 to regulate the identification of liabilities in
      mining activity and financial responsibility for remediation, in each case
      to
      mitigate any negative impact mining may have with respect to the health of
      the
      population, environment and property. Pursuant to Law No. 28271, as amended
      by
      Law No. 28526, published on May 25, 2005 and the Mining Environmental
      Liabilities Regulations approved by Supreme Decree 059-2005-EM, published on
      December 8, 2005, the technical branch of the MEM will identify environmental
      liabilities, mining companies responsible for abandoned mining facilities,
      mining works and residue deposits that may be linked to such environmental
      liabilities and holders of inactive mining concessions with mining liabilities.
      Holders of inactive mining concessions with environmental mining liabilities
      will be required to submit a Closure Plan within one year of their
      identification and notification as holders of inactive mining concessions with
      environmental mining liabilities. The Peruvian government will only assume
      the
      environmental mining liabilities of unidentified holders. In addition, holders
      will enter into environmental remediation agreements with the MEM, acting
      through the General Directorate of Mining Environmental Affairs, to perform
      any
      studies and work necessary to control and mitigate the risk and effects of
      any
      contamination, which will be financed by the *Fondo
      Nacional del Ambiente – FONAM* .
      A
      Closure Plan must be submitted one year after the approval of the EIS by the
      General Directorate of Mining Environmental Affairs.




We
      anticipate additional laws and regulations will be enacted over time with
      respect to environmental matters. The development of more stringent
      environmental protection programs in Peru could impose constraints and
      additional costs on our operations, and we would be required to make significant
      additional capital expenditures in the future. Although we believe that we
      are
      substantially in compliance with all applicable environmental regulations of
      which we are now aware, there is no assurance that future legislation or
      regulatory developments will not have an adverse effect on our business or
      results of operations.




*Permits*




We
      believe that our mines and facilities have all necessary material permits.
      All
      future exploration projects will require a variety of permits. Although we
      believe the permits for these projects can be obtained in a timely fashion,
      permitting procedures are complex, time-consuming and subject to potential
      regulatory delay. We cannot predict whether we will be able to renew our
      existing permits or whether material changes in existing permitting conditions
      will be imposed. Non-renewal of existing permits or the imposition of additional
      conditions could have a material adverse effect on our financial condition
      or
      results of operations.




53




*Insurance*




We
      maintain a comprehensive insurance program designed to address specific risks
      associated with our operations, in addition to covering the insured risks common
      to major mining companies. Our insurance program is provided through the local
      Peruvian insurance market and includes employers’ liability, comprehensive third
      party general liability, comprehensive automobile liability, all risk property
      on a replacement basis, including transit risks, business interruption insurance
      and mining equipment.




*Mining
      Royalties*




Article
      20 of Law No. 26821, *Ley
      Orgánica para el Aprovechamiento Sostenible de los Recursos
      Naturales* , ** establishes
      that private companies must pay compensation to the Peruvian government for
      the
      economic use of natural resources. Law No. 28258, published on June 24, 2004
      and
      amended by Law No. 29323, created a mining royalty ( *regalia
      minera* )
      that
      holders of mining concessions must pay on a monthly basis to the Peruvian
      government for the exploitation of metallic and non-metallic resources. The
      royalty, which is the compensation referred to in Article 20 of Law No. 26821, *Ley
      Orgánica para el Aprovechamiento Sostenible de los Recursos
      Naturales* ,
      is not
      considered a tax. However, it will be included in the scope of the Mining Law
      Stabilization Agreements and mining companies that are taxpayers and are party
      to such Stabilization Agreements will not have to pay this compensation or
      royalty during the life of their Stabilization Agreements. Although we are
      not
      party to a Stabilization Agreement, Yanacocha has entered into Mining Law
      Stabilization Agreements under the General Mining Law with the Peruvian
      government. See “Item 5. Operating and Financial Review and
      Prospects—Yanacocha—Operating Results.” Law
      No.
      28969, effective since January 26, 2007, provides that government tax agencies
      are responsible for the collection of mining royalties and establishes rules
      relating to the calculation of royalties, valuation methods and
      penalties.




The
      royalty is calculated on revenue from sales of product (based on the
      international market price) less certain refining and transportation expenses.
      The mining royalty to be paid for ore concentrates with a value (i) up to
      US$60 million per year, is 1 percent of such value, (ii) between
      US$60 million and US$120 million per year, is 2 percent of such value
      and (ii) in excess of US$120 million per year, is 3 percent of such value.
      The MEM will publish the international market price of minerals and in the
      event
      that a mineral does not have an international market price, the mining royalty
      will be 1 percent of the mining component.




*Negotiated
      Payment (voluntary contribution)*




During
      2006 Peruvian mining companies, represented by the Sociedad Nacional de Minería,
      Petróleo y Energía, agreed to a voluntary mining payment equivalent to 3.75
      percent of net income after taxes. The payment was negotiated with the Peruvian
      government and is intended to support government efforts to alleviate poverty.
      On December 21, 2006, the Peruvian government issued Supreme Decree No.
      071-2006-EM, which approved the form of agreement to be entered into by mining
      companies and the Peruvian government. The form of agreement contains the
      conditions under which the negotiated payment will be paid. The payment amounts
      to 3.75 percent of Peruvian net income after income tax, including 2.75 percent
      to be paid to a local mining fund and 1 percent to be paid to a regional mining
      fund. This payment is payable from 2006 through 2010, contingent on the price
      of
      gold. Payments shall be made on or before April 30 th of each
      year, after the income tax sworn declaration is submitted to the Peruvian tax
      authority. Pursuant to Supreme Decree 033-2007-EM, mining companies can make
      payments to the local and to the regional funds after such deadline provided
      that the prior approval of the Ministry of Energy and Mines and the Ministry
      of
      Economy and Finance is obtained. Fulfillment of the payment obligations will
      be
      controlled by an audit entity recorded as such with CONASEV to be agreed between
      the mining company, the Ministry of Energy and Mines and the Ministry of Economy
      and Finance. We and Yanacocha paid a total of US$2.6 million and US$9.7 million,
      respectively, during the year ended December 31, 2007.




54




In
      February 2007, under the framework of this agreement executed with the Peruvian
      government (D.S. No. 071-2006-EM), we formed a trust in the Banco de Credito
      del
      Peru to serve two funds: the Buenaventura Local Mining Fund and the Buenaventura
      Regional Mining Fund. Proceeds from these funds were used to provide school
      furniture, teacher training and healthcare equipment.




On
      November 8, 2007, Cerro Verde executed an agreement with the Peruvian government
      in accordance with the terms outlined above, resulting in a contribution of
      US$16.7 million and US$32.0 million for the years ended December 31, 2006 and
      2007, respectively, which was paid in the first half of 2008 and is recorded
      as
      a negotiated payment (voluntary contribution) in the Cerro Verde Financial
      Statements.




**Organizational
      Structure**




As
      of May
      31, **** 2008,
      we
      conducted our mining operations directly and through various majority-owned
      subsidiaries, controlled companies and other affiliated companies as described
      in the following organizational chart.




55


56




***Intermediate
      Holding Companies, Subsidiaries and Equity
      Participations***




*Compañía
      Minera Condesa S.A.*




Condesa,
      wholly-owned by us, is a mining and facilities holding company with direct
      and
      indirect ownership participation in two mining-related entities, Cedimin and
      Yanacocha, and in exploration projects conducted by Minas Conga and Conenhua.
      See “—Business Overview—Exploration.” As a partner in Yanacocha, Condesa shares
      responsibility for the investments made in the Yanacocha mine. In addition,
      on
      August 15, 2007, Cedimin transferred its equity interest in Chaupiloma to
      Condesa, and, as a result, Condesa now receives a portion of the royalty
      revenues paid by Yanacocha to Chaupiloma equal to such ownership interest.
      See
“—S.M.R.L. Chaupiloma Dos de Cajamarca” below. Condesa also holds a 7.68 percent
      interest in us.




*Compañía
      de Exploraciones, Desarrollo e Inversiones Mineras S.A.C.*




Cedimin,
      wholly-owned by us, is a mining and facilities holding company. At December
      31,
      2005, Cedimin held a 40 percent participation in Minas Conga and a 40 percent
      interest in S.M.R.L. Chaupiloma Dos de Cajamarca. See “—The Company—History and
      Development” and “—S.M.R.L. Chaupiloma Dos de Cajamarca” below. See “—The
      Company—History and Development” for a description of the legal proceedings in
      the Peruvian courts concerning the ownership of certain shares of Cedimin
      originally held by BRGM. on August 15, 2007, Cedimin transferred its equity
      interest in Chaupiloma to Condesa.




As
      of
      January 2, 2003, Minera Shila S.A.C. merged with and into Cedimin. **** As
      a
      result of the merger, our interest in Cedimin increased from 0.0009 percent
      before the merger to 44.83 percent after the merger, and Condesa’s interest in
      Cedimin decreased from 99.9991 percent before the merger to 55.17 percent after
      the merger. In addition, on October 22, 2004, Cedimin acquired a 100 percent
      equity interest in Inversiones Mineras Aureas S.A.C., or Mineras Aureas, which
      had a 49 percent interest in Minera Paula 49 S.A.C., or Minera Paula. As a
      result of this acquisition, Minera Paula became wholly-owned by us. As of
      December 31, 2004, Mineras Aureas and Minera Paula merged with and into Cedimin
      and are no longer separate legal entities.




*S.M.R.L.
      Chaupiloma Dos de Cajamarca*




S.M.R.L.
      Chaupiloma Dos de Cajamarca, or Chaupiloma, is a Peruvian limited liability
      company that holds all of the mining rights for the areas mined by Yanacocha
      and
      Minas Conga. Chaupiloma receives a royalty that is calculated as a percentage
      of
      the total revenues of Yanacocha. We, Condesa and Newmont Peru own a 20 percent
      interest, a 40 percent interest and a 40 percent interest, respectively, in
      Chaupiloma. We own, directly and indirectly, through our interest in Condesa,
      a
      60 percent interest in Chaupiloma. ****




*Consorcio
      Energético Huancavelica S.A.*




Conenhua
      is an electrical transmission company that provides a significant portion of
      our
      electrical needs through its transmission facilities. We own 100 percent of
      Conenhua and manage its operations. Conenhua obtained the concession for power
      transmission in the Huancavelica area in 1983, enabling us to buy energy from
      Electro Perú and to transmit electric power to our mining facilities through our
      own facilities. The provinces of Huancavelica, Angaraes, Acobamba and
      Castrovirreyna are now connected to the system. Conenhua also provides electric
      power to other mining companies in the area. In 2007, Conenhua sold
      32.9 **** million
      kilowatt hours, or kWh, in Huancavelica. Revenues generated by Conenhua benefit
      us in the form of operational costs savings at the rate of US$0.11 per kWh
      regarding thermoelectric generation costs. Conenhua has become the operator
      of
      Paragsha II-Uchucchacua, the power line which provides electricity to the
      Uchucchacua mine and two other mines and, in 2007, Conenhua provided
      153.6 million kWh to those mines. Conenhua also operates the Callalli-Ares
      power line, which in 2007 provided 57.5 **** million
      kWh to the Orcopampa, Poracota and Shila-Paula mines. In addition, Conenhua
      provides the Antapite mine (which was operated by Inminsur until 2006) with
      electricity, including electrical power service and maintenance and, in 2007,
      Conenhua provided 15.0 **** million
      kWh to this mine. In 2007, Conenhua provided 383.7 **** million
      kWh to Yanacocha, a 6.7 percent increase compared to 2006. **** Conenhua’s
      revenues in 2007 amounted to US$14.8 million.




57




In
      order
      to ensure the availability of electricity for future mining projects, Conenhua
      purchased Hidroelectrica Marañon and Empresa Generacion Huanza, each of which
      owns a hydroelectric project to be developed in the short term by Energía
      Transandina SRL, a company created to be a holding company of both projects,
      and
      created Egehuaura to develop minor hydroelectric projects.




*Buenaventura
      Ingenieros S.A.*




Buenaventura
      Ingenieros S.A., or BISA, one of our wholly-owned subsidiaries, has provided
      mining sector geological, engineering, design and construction consulting
      services for over 30 years. During this time, BISA has consulted in Peru, Chile,
      Argentina, Mexico and Ecuador on a range of projects, operations and expansions.
      In 1995, BISA created an environmental services group. In 2007, BISA inaugurated
      its Mineralogical Characterization Laboratory for the analysis of rocks and
      minerals. BISA owns a 99.95 percent interest in Contacto Corredores de Seguros
      S.A., an insurance brokerage company that provides insurance brokerage and
      related services to us and our affiliates. In 2005, 2006 and 2007, BISA
      participated in 181, 183 and 231 projects, respectively, for domestic and
      international mining industry customers in Latin America, including the
      preparation of Environmental Impact Studies and Environmental Adaptation and
      Management Programs. In 2007, BISA’s revenues amounted to US$17.9 **** million.




*Sociedad
      Minera Coshuro S.A.*




Coshuro,
      which began operations in December 1995, was created jointly by us and Newmont
      Peru to conduct gold mining exploration in the Yanacocha volcanic belt. Coshuro
      was 35 percent owned by us until December 20, 2000, on which date Newmont
      Peru transferred 10.9 percent of its interest in the Coshuro to us. On
      August 13, 2002, Sociedad Minera Coshuro S.A. authorized the separation and
      transfer to us of all of the mining concessions granted to Coshuro pursuant
      to
      the Separation Agreement dated September 25, 2000. The mining concessions were
      transferred to Minera La Zanja S.R.L., or Minera La Zanja, incorporated in
      July
      2004, in which we held a 35 percent interest. **** After
      July 2004, Minera La Zanja conducted a capital increase whereby our interest
      in
      Minera La Zanja increased to 53.06 percent. As a result, we currently hold
      a
      45.9 percent interest in Coshuro.




*Inversiones
      Colquijirca S.A. / Sociedad Minera El Brocal S.A.A.*




In
      January 1999, we purchased all of the outstanding shares ADRA International
      Holding Corp., or ADRA, for US$14.29 million, subject to contractual purchase
      price adjustment. As a result of this acquisition, we acquired ADRA’s 29.73
      percent equity interest in Inversiones Colquijirca S.A. We currently hold a
      61.42 percent equity interest in Inversiones Colquijirca S.A., including a
      direct 31.20 percent equity interest a 30.22 percent indirect equity interest
      through our wholly-owned subsidiary, ADRA. In addition, we hold a 34.29 percent
      ownership interest in Sociedad Minera El Brocal S.A.A., or El
      Brocal.




58





In
      January 2006, we entered into arbitration to resolve a dispute related to the
      purchase price adjustment for our acquisition of ADRA International Holding
      Corp. in 1999. On February 26, 2007, we received the arbitration award and
      agreed to pay an additional US$19.9 million in connection with the purchase
      price adjustment for the shares. In addition, we agreed to pay US$4 million
      to
      an investor that was not part of the arbitration award. On June 8, 2007, we
      paid
      approximately US$19.9 million of this award. The remaining balance of
      approximately US$3.9 million was paid in January 2008. See Note 11 to the
      Financial Statements.





*Ferrovías
      Central Andino S.A.*




We
      hold
      10 percent of Ferrovías Central Andino S.A., or Ferrovías, a railroad company,
      pursuant to a concession granted to a consortium of several companies in April
      2000. Among the other companies holding interests in the share capital of
      Ferrovías are Railroad Development Corporation, Cemento Andino S.A.,
      Commonwealth Development Corporation and others. Ferrovías will provide
      transportation for concentrates from El Brocal’s mining operations at a lower
      cost. ****




*Sociedad
      Minera Cerro Verde S.A.A.*




We
      hold a
      18.50 percent interest in Cerro Verde, which owns the Cerro Verde copper deposit
      located approximately 1,100 kilometers southeast of Lima. The Peruvian
      government previously owned and operated the mine. In November 1993, the
      Cerro Verde operation was privatized. Cyprus Climax Metals Company (now a
      subsidiary of Freeport-McMoran Copper & Gold Inc.) bought 91.65 percent and,
      pursuant to Peruvian privatization laws, the employees of Cerro Verde purchased
      approximately 8.35 percent of the shares of Cerro Verde. Cyprus Climax Metals
      Company paid US$33.9 million for its equity interest in Cerro Verde and
      made a US$485 million capital commitment to finance the construction of the
      facilities. In 2002, Cerro Verde obtained ISO 14001 certification.
      Freeport-McMoran Copper & Gold Inc. is currently the operator and senior
      partner of Cerro Verde. In 2007, the mine produced 203.6 million pounds of
      copper cathodes, compared to 212.7 million pounds produced in 2006. It also
      produced 390.6 million pounds of copper concentrate in 2007, compared to 8.9
      million pounds produced in 2006. Cerro Verde contains has 20,825 hectares of
      mining concessions in its mining district.




On
      June
      1, 2005, Cerro Verde completed a capital increase. As a result of the capital
      increase, SMM Cerro Verde Netherlands B.V. acquired a 21 percent equity interest
      in Cerro Verde. In addition, we increased our equity interest in Cerro Verde
      from 9.17 percent to 18.21 percent. The remaining minority shareholders own
      7.23
      percent of Cerro Verde through shares publicly traded on the Lima Stock
      Exchange. As a result of the transaction, Cerro Verde received
      US$441.7 million in cash, net of US$1.0 million in expenses, and
      Phelps Dodge’s interest in Cerro Verde was reduced to 53.56 percent from 82.48
      percent. In March 2007, Freeport-McMoran Copper & Gold Inc. acquired Phelps
      Dodge. Freeport-McMoran Copper & Gold Inc. maintains a majority interest in
      Cerro Verde. Since June 1, 2005, we have purchased additional common shares
      in
      Cerro Verde on the Lima Stock Exchange, increasing our interest to 18.50 percent
      as of March 2007. ****




In
      February 2005, the board of directors of Cerro Verde approved an approximately
      US$850 million expansion and financing of the Cerro Verde mine. On
      September 30, 2005, Cerro Verde obtained in connection with such financing,
      debt-financing facilities in an overall amount of US$450 million, including
      US$90 million through an offering of corporate bonds. The cash invested by
      us
      and Sumitomo Metal Mining Co. and Ltd. and Sumitomo Corporation in connection
      with the capital increase financed approximately US$420 million of the
      expansion for the year ended December 31, 2006.




Effective
      on January 17, 2007 Cerro Verde terminated its commitments with each lender
      under its credit facilities. Approximately US$78.8 million in corporate bonds
      remain outstanding. As of May 31, 2008, Cerro Verde had total debt outstanding
      of approximately US$78.8 million, representing no change from the amount
      reported as of December 31, 2007.




59




Presented
      in the table below is certain financial and operating data regarding Cerro
      Verde
      for the years ended December 31, 2005, 2006 and 2007:




As
                of and for the year ended December 31,2005
            
            2006
            
            2007**Income
                statement data****(1)**Total
                revenues (US$ in thousands)
            
            
            358,928
            
            
            667,671
            
            
            1,794,559Net
                income (US$ in thousands)
            
            
            234,663
            
            
            444,621
            
            
            804,685**Proven
                and Probable
                Reserves****(2)**Leachable
                ore reserves (metric tons in thousands)
            
            
            331,327
            
            
            334,296
            
            
            309,402Millable
                ore reserves (metric tons in thousands)
            
            
            1,262,857
            
            
            1,407,136
            
            
            1,456,232Average
                copper grade of leachable ore reserves (%)
            
            
            0.44
            
            
            0.46
            
            
            0.44Average
                copper grade of millable ore reserves (%)
            
            
            0.49
            
            
            0.47
            
            
            0.44**Production****(3)**Cathodes
                (in thousands of recoverable pounds)
            
            
            206,245
            
            
            212,781
            
            
            203,595Concentrates
                (in thousands of recoverable pounds)
            
            
            –
            
            
            8,945
            
            
            390,632Price
                (US$ per metric ton)
            
            
            3,684
            
            
            6,731
            
            
            7,126


____________________


(1)
            Derived
                from Cerro Verde’s financial statements filed with CONASEV. See the Cerro
                Verde Financial Statements, including the notes thereto, appearing
                elsewhere in this Annual Report.


(2)
            Reserve
                calculations are derived from the financial statements filed by Cerro
                Verde with CONASEV. See the Cerro Verde Financial Statements, including
                the notes thereto, appearing elsewhere in this Annual Report. The
                calculation or estimation of proven and probable ore reserves for
                Cerro
                Verde may differ in some respects to the calculations of proven and
                probable reserves for us and Yanacocha located elsewhere in this
                Annual
                Report. According to Cerro Verde, ore estimates for Cerro Verde are
                based
                upon engineering evaluations of assay values derived from samplings
                of
                drill holes and other openings. Cerro Verde’s ore estimates includes
                assessments or the resource, mining and metallurgy, as well as
                consideration of economic, marketing, legal, environmental, social
                and
                governmental factors, including projected long-term prices for copper
                and
                molybdenum and Cerro Verde’s estimate of future cost
                trends.


(3)
            Derived
                from Cerro Verde’s financial statements filed with CONASEV. See the Cerro
                Verde Financial Statements, including the notes thereto, appearing
                elsewhere in this Annual Report.




60




**YANACOCHA**




***Overview***




Founded
      in Peru in 1992, Yanacocha is the largest gold producer in South America.
      Yanacocha produced 1,563,669 **** ounces
      of
      gold in 2007, its fourteenth full year of operations. Yanacocha’s operations are
      located in the Andes Mountains in Northern Peru in the area of Cajamarca,
      located approximately 900 kilometers north of Lima and north of the City of
      Cajamarca at an altitude of 4,000 meters above sea level. As of December 31,
      2007, Yanacocha’s proven and probable reserves (excluding Conga’s proven and
      probable reserves) were estimated to be 15.8 **** million
      ounces of gold, representing a 9.7 **** percent
      decrease over Yanacocha’s proven and probable reserves as of December 31, 2006,
      which were estimated to be 17.5 **** million
      ounces of gold. The decrease in reserves of gold was mainly due to a mining
      depletion of 2.2 million ounces, partially offset by an increase of
      0.5 million ounces of gold reserves due to an increase in the price of gold
      and updated grade in recovery models. As of December 31, 2007, Conga’s proven
      and probable reserves were estimated to be 11.8 million ounces of gold and
      3.2 billion pounds of copper, representing no variation from estimated 2006
      gold
      and copper reserves. As of December 31, 2007, Yanacocha’s total proven and
      probable reserves (including Conga) were estimated to be 27.6 million
      ounces of gold, representing a 5.8 percent decrease over Yanacocha’s total
      proven and probable reserves as of December 31, 2006, which were estimated
      to be
      29.3 million ounces of gold. **** Yanacocha’s
      total proven and probable reserves of copper were 3.2 billion pounds as of
      December 31, 2007 and 2006.




Proven
      and probable reserves are based on extensive drilling, sampling, mine modeling
      and metallurgical testing from which economic feasibility has been determined.
      Under the Management Contract (as defined below), Newmont Mining, in conjunction
      with Yanacocha, calculates Yanacocha’s reserves by methods generally applied
      within the mining industry and in accordance with SEC Industry Guide 7. Reserves
      represent estimated quantities of proven and probable ore that, under present
      and anticipated conditions, may be economically mined and processed. Newmont
      Mining has not quoted silver reserves at Yanacocha for the last year due to
      recovery issues.




Yanacocha’s
      exploration activities encompass 294,275 hectares covered by 429 mining
      concessions.  Chaupiloma holds the mining rights with respect to these
      hectares and has assigned the mining rights related to 108,569 hectares to
      Yanacocha, which are covered by 163 mining concessions.  Chaupiloma has
      assigned these mining concessions to Yanacocha pursuant to several assignments
      of mining rights.




In
      1994,
      its first full year of production, Yanacocha produced 304,552 ounces of gold.
      Yanacocha produced 2,851,143 ounces of gold in 2003, 3,017,303 ounces in 2004,
      3,333,088 ounces in 2005, 2,612,199 ounces in 2006 and 1,563,669 ounces in
      2007.
      Yanacocha expects production to increase by approximately 12 percent from the
      2007 production level to 1,754,050 ounces in 2008, mainly as a result of the
      commencement of operation at its new gold mill facility. Yanacocha believes
      that
      it was one of the world’s lowest cost gold producers in 2007, with a cost per
      ounce of gold sold of US$356. Yanacocha’s cost per ounce of gold sold was US$201
      in 2006, US$153 in 2005, US$148 in 2004 and US$132 in 2003.




The
      decrease in gold production in 2007 as compared to 2006 was mainly attributed
      to
      lower leach tons placed, 89.7 million dry metric tons and 108.5 million dry
      metric tons for the periods ended December 31, 2007 and 2006, respectively,
      and
      a higher waste to ore ratio, 1.11 grams per ton and 0.82 grams per ton for
      the
      periods ended December 31, 2007 and 2006, respectively.




61




Yanacocha
      expects production of silver to increase by approximately 107 percent from
      the
      2007 production level to 4,802,496 ounces in 2008, mainly as a result of
      the commencement of operation at its new gold mill facility. Yanacocha reduces
      the cost of gold sold with sales of silver, which is considered a by-product.
      Silver production was 24,467 ounces in 1993, Yanacocha’s first full year of
      production, 3,035,275 ounces in 2003, 3,479,436 ounces in 2004, 4,342,292 ounces
      in 2005, 3,441,401 ounces in 2006, and 2,318,696 ounces in 2007.




The
      decrease in silver production in 2007 as compared to 2006 was mainly attributed
      to lower leach tons placed, 89.7 million dry metric tons and 108.5 million
      dry
      metric tons for the periods ended December 31, 2007 and 2006, respectively,
      and
      a higher waste to ore ratio, 1.11 grams per ton and 0.82 grams per ton for
      the
      periods ended December 31, 2007 and 2006, respectively.




Yanacocha
      is owned 51.35 percent by Newmont Mining, through its wholly-owned subsidiary
      Newmont Second, 43.65 percent by us through our wholly-owned subsidiary Condesa,
      and 5 percent by IFC. Yanacocha is managed by Newmont Peru. See “—Management of
      Yanacocha—General Manager/Management Agreement.” Since 1992, aggregate capital
      contributions of US$2.3 million have been made by Condesa, Newmont Second
      and IFC to Yanacocha. Although Yanacocha did not pay dividends during its
      development years, 1992 through 1994, cash dividends were distributed from
      1995
      to 2000. In 2001, Yanacocha paid an aggregated amount of US$10 million in
      dividends in respect of 2000 earnings and elected to reinvest US$80 million
      from 2001 profits based on a new reinvestment program for the years 2001 to
      2004. In December 2001, the MEM approved the 1998 reinvestment program
      (increased in 1999) for US$206.5 million. As a result, an additional
      US$13.5 million was capitalized. In 2002, Yanacocha paid an aggregated
      amount of US$50.7 million in dividends in respect of 2001 earnings and
      elected to reinvest US$80 million from 2002 profits. In 2003, Yanacocha
      paid an aggregated amount of US$300 million in dividends in respect of 2002
      earnings and elected to reinvest US$29.6 million from 2003 profits. In
      2004, Yanacocha paid an aggregated amount of US$280 million in dividends in
      respect of 2003 earnings and completed all investments under its reinvestment
      program from 2000-2004. See the Statements of Changes in Partners Equity in
      the
      Yanacocha Financial Statements on page F-56 and “Item 5. Operating and
      Financial Review and Prospects—Yanacocha—Operating Results.” In 2005, Yanacocha
      paid an aggregated amount of US$180 million in dividends in respect of 2004
      earnings.




Undistributed
      earnings associated with the reinvestment program, amounting to US$180 million,
      were presented as restricted earnings as of December 31, 2004, 2005 and 2006.
      On
      December 26, 2006, Yanacocha received the resolution from the MEM approving
      the
      reinvestment program for the periods 2001 to 2004. In compliance with Peruvian
      laws, Yanacocha capitalized this amount through public deed dated December
      20,
      2007 and shall not reduce its partners’ equity during the following four fiscal
      years.




On
      October 31, 1999, pursuant to a public deed, Yanacocha changed its legal
      structure from a corporation to a partnership, changing its name from “Minera
      Yanacocha S.A.” to “Minera Yanacocha S.R.L.” As a result, Yanacocha (i) cannot
      have more than 20 partners; (ii) its capital stock is represented in
      participations; (iii) is not required to maintain a legal reserve (see Note
      16
      to Yanacocha Financial Statements); and (iv) will not receive a different income
      tax treatment under Peruvian law than it did as a corporation.




***Capital
      Expenditures***




Yanacocha’s
      capital expenditures from its formation in 1992 through 2007 have related
      principally to the construction of the Carachugo, Maqui Maqui, San José, Cerro
      Yanacocha and La Quinua mining operations, the construction of the two plants
      at
      Carachugo and Yanacocha that include a leach solution processing facility and
      a
      smelter at each plant, the construction of four carbon column plants at Cerro
      Yanacocha and La Quinua, the acquisition of both new and used mining equipment,
      the construction of two dams, the construction of one agglomeration plant at
      La
      Quinua, the construction of a gold mill facility at Yanacocha and several
      expansions of the leach pads located at the Carachugo, Maqui Maqui, Cerro
      Yanacocha and La Quinua mining operations. Yanacocha’s capital expenditures from
      its formation through December 31, 2007 totaled approximately US$2,412.6
      million, including capital expenditures of US$233.0 million in 2005, US$269.4
      million in 2006 and US$278.1 million in 2007. In 2007, Yanacocha’s principal
      capital expenditures included US$138.9 million for a gold mill facility, US$28.5
      million for high altitude mining trucks, US$18.5 million and US$11.5 million
      for
      leach pad expansions of Carachugo (stages 10 and 11) and Yanacocha,
      respectively, US$7.6 million for construction of an alternate road to the coast
      of Peru, US$2.8 million for land acquisitions, US$8.7 million for the Conga
      project, US$5.2 million for waterways and irrigation channels acquired from
      the
      Quishuar and Encajón communities and US$5.5 million for project development.
      Capital expenditures in 2006 included an investment of US$157.8 million for
      mine
      and leach pad expansions of Carachugo (stage 10) and La Quinua (stage 6), US$9.3
      million for environmental site and regional water management projects, US$11.9
      million for mining equipment, US$44.8 million for the Yanacocha gold mill
      facility, US$11.1 million for the Conga project and US$32.7 million for work
      related to other ongoing expansions. Capital expenditures in 2005 included
      an
      investment of US$73 million for mine and leach pad construction, US$12 million
      for environmental site and regional water management projects,
      US$30 million for mining equipment, US$17 million for the Minas Conga
      project and US$98 million related to other ongoing expansions. See “—The
      Company—History and Development.”




62




Yanacocha
      anticipates that its capital expenditures for 2008 will be approximately
      US$255.8 million, which it plans to use primarily in the completion of the
      leach
      pad expansion at Carachugo (stage 11), La Quinua (stage 7) and Yanacocha (stage
      5B), the continuation of the site-wide management plan to control sediment
      and
      chemicals, installation of a reverse osmosis plant for excess water treatment
      at
      Pampa Larga, continuation of the Yanacocha gold mill project and the Minas
      Conga
      project, development of the Chaquicocha deposit, construction of an alternate
      road to the coast of Peru, and the acquisition of real property, heavy mining
      equipment and other miscellaneous mining equipment. The Yanacocha gold mill
      facility, or YGM, will provide an alternative process to exploit high grade
      oxide ore and sulfide ores which are not amenable to heap leaching through
      a
      grinding circuit classification, followed by pre-leach thickening, a 24-hour
      leaching process and countercurrent decantation. Since the YGM will be located
      within Yanacocha’s current operating area, it will maximize utilization of
      existing infrastructure at La Quinua. Minas Conga currently consists of two
      gold-copper porphyry deposits located northeast Yanacocha’s operating area in
      the provinces of Celendin, Cajamarca and Hualgayoc. This project, incorporated
      to reserves in 2004, reported 11.8 million ounces of gold reserves and 3.2
      billion pounds of copper reserves in 2007 and 2006.




Yanacocha
      expects that it will meet its working capital, capital expenditure and
      exploration requirements for the next several years from internally-generated
      funds, cash on hand and financing from banks and financial
      institutions. **** There
      can
      be no assurance that sufficient funding will be available to Yanacocha from
      internal or external sources to finance future working capital, capital
      expenditures and exploration and construction requirements, or that external
      funding will be available for such purposes on terms or at prices favorable
      to
      Yanacocha. A very significant decline in the price of gold would be reasonably
      likely to affect the availability of such sources of liquidity. See “Item 5.
      Operating and Financial Review and Prospects—Yanacocha—Exploration Costs;
      Capital Expenditures.” ****




***Description
      of Yanacocha’s Operations***




As
      of
      December 31, 2007, Yanacocha’s business operations consisted of five separate
      open-pit mines located at Carachugo, Maqui Maqui, San José, Cerro Yanacocha and
      La Quinua, of which only two, Cerro Yanacocha and La Quinua, are currently
      in
      operation. The Carachugo, Maqui Maqui, San José, Cerro Yanacocha and La Quinua
      mining areas began operations in August 1993, October 1994, January 1996, the
      last quarter of 1997 and October 2001, respectively. The Maqui Maqui open-pit
      mine temporarily ceased mining operations in 2000. The San José open-pit mine
      ceased operations in 2002, but temporarily reopened and closed again during
      2006. San José has increased reserves as a result of an increase in the base
      price for proven and probable reserve estimates, from US$500 in 2006 to US$575
      in 2007. The Carachugo open-pit mine has temporarily ceased mining operations,
      although one ore processing facility remains in operation.




63




Leach
      pads are located at Carachugo
      (410 million ton-capacity), Maqui Maqui (70 million ton-capacity),
      Cerro Yanacocha (470 million ton-capacity) and La Quinua (540 million
      ton-capacity). Each of these leach pads includes at least two leach solution
      storage ponds and storm water ponds located down gradient from each leach pad.
      The Cerro Yanacocha site has two additional solution ponds attached to Stages
      6
      and 7 for the segregation of solution generated from the treatment of transition
      ores. A raw water pond is used both for storm containment and to store excess
      solution during the wet season. La Quinua has an additional solution pond
      attached to Stage 4.




Yanacocha
      has three processing facilities, which are located at Pampa Larga, Yanacocha
      Norte and La Quinua. The processing facilities can be used to process
      gold-bearing solutions from any of the leach pads through a network of solution
      pumping facilities located adjacent to the solution storage ponds. The Pampa
      Larga facility includes Merrill-Crowe and carbon column gold recovery plants,
      and two four-stage water plants to allow treatment of excess process solutions
      accumulated during the rainy season. The Pampa Larga facility also includes
      the
      original gold refinery installation, which is maintained for emergency standby
      purposes only. The Yanacocha Norte facility includes Merrill-Crowe and carbon
      column gold recovery plants, three four-stage water treatment plants, and a
      reverse osmosis water plant to allow treatment of excess process solutions
      accumulated during the rainy season. This facility also contains primary
      refining and mercury retorting operations and an acid water treatment plant
      to
      allow neutralization of acid waters emanating from its mining operation and
      waste dumps prior to release into the environment. In addition, a slaking plant
      to provide lime for ensuring an alkaline pH on the pads and for water treatment
      purposes is located in close proximity to the facility. The La Quinua facility
      includes a carbon column gold recovery plant, an acid water treatment plant
      to
      allow neutralization of acid waters emanating from its mining operations and
      waste dumps prior to release into the environment, and a slaking plant to
      provide lime for ensuring an alkaline pH on the pads and for water treatment
      purposes.




Mining
      consists of a sequence of drilling, blasting, loading and hauling. Ore
      containing gold is transported from each mine to the nearest active leach pad
      while waste is taken to specially designed storage facilities. Unlike
      Yanacocha’s other mines, the ore in the La Quinua mine contains clays and fine
      grain material which can inhibit the heap leaching process if not handled
      properly. Initially, the La Quinua mine utilized an ore crushing and
      agglomeration process to improve the permeability of the ore prior to stacking
      ore on the leach pad. In May 2004, this process was replaced with a more
      inexpensive method whereby the ore is re-excavated using hydraulic shovels
      to a
      depth of four meters to improve permeability. Improved ore control to ensure
      proper blending of fine and coarse grained ore is an integral part of this
      process.




Ore
      is
      leached by introducing dilute solutions of cyanide through an irrigation system
      placed on top of the ore. This solution percolates through the ore, dissolving
      gold and silver as AuCN and AgCN complexes respectively, and results in a
“pregnant” solution which drains to solution storage ponds to be transferred to
      the nearest recovery facility. Carbon column gold recovery plants typically
      treat lower grade solutions to produce a highly upgraded metal-bearing solution
      which in turn is routed to the Merrill-Crowe plants. Solution from the carbon
      column gold recovery plants or high grade solutions from the leach pads are
      sent
      to the Merrill-Crowe plants for gold extraction by a zinc precipitation process.
      The resulting gold precipitate is distilled by retorts (700°C) to remove
      mercury, and then smelted, producing doré bars currently assaying approximately
      52 percent gold and 45 percent silver. The doré bars are transported from the
      processing plant by an outside security firm and refined outside of Peru. See
      “—Transportation and Refining.” The solution from which the gold is removed
      (barren solution) is recycled to the leach pads for further heap-leaching after
      having been reconstituted with cyanide. The leaching process is generally a
      closed system. However, during periods of high rainfall, excess water must
      be
      treated at the facilities located at Yanacocha Norte and Pampa Larga, which
      have
      been designed to meet or exceed standards for drinking water and for agriculture
      and livestock as set out by the Peruvian Ministry of Health, the U.S.
      Environmental Protection Agency, the State of Nevada Regulations and World
      Bank
      guidelines. See “—Regulation, Permit and Environmental Matters.”




64




Electric
      power for Yanacocha’s operations is currently provided by local power companies
      via two separate networks. Yanacocha also maintains diesel generation capacity
      for emergency requirements which have an aggregate power generation capacity
      of
      16 megawatts, or MW. In addition, Yanacocha has been connected to the Peruvian
      national electricity grid since the end of 1997. Yanacocha currently receives
      its supply of electric power through a 220 kilovolt, or kV, power line
      originating in Trujillo, which is owned by Buenaventura and has the capacity
      to
      provide up to 150 MW to Yanacocha (although current contracted demand is limited
      to 42 MW). In addition, a 60 kV power line routed through Cajamarca permits
      Yanacocha to receive up to 15 MW. This power line is used only in emergencies.
      See “Item 5. Operating and Financial Review and Prospects.”




Water
      for
      Yanacocha’s operations is collected from rainfall and wells. All excess water
      used by Yanacocha undergoes treatment at the treatment facilities described
      above.




Set
      forth
      below are certain unaudited operating data, for the years shown for each of
      Yanacocha’s mining operations that were then in operation:


2003
              
              2004
              
              2005
              
              2006
              
              2007Mining
                  Operations:Ore
                  mined (DST):Cerro
                  Yanacocha
              
              
              78,201,929
              
              
              73,551,712
              
              
              64,582,674
              
              
              59,944,475
              
              
              56,696,685Carachugo
              
              
              101,150
              
              
              —
              
              
              —
              
              
              950,355
              
              
              7,563,243Maqui
                  Maqui
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —La
                  Quinua
              
              
              68,555,909
              
              
              63,714,676
              
              
              80,889,028
              
              
              414,559
              
              
              35,283,067San
                  José
              
              
              —
              
              
              —
              
              
              —
              
              
              54,485,222
              
              
              —Total
                  ore mined (DST)
              
              
              146,858,989
              
              
              137,266,389
              
              
              145,471,702
              
              
              115,794,610
              
              
              99,542,995Average
                  gold grade of ore mined(oz./DST):Cerro
                  Yanacocha
              
              
              0.024
              
              
              0.022
              
              
              0.034
              
              
              0.030
              
              
              0.012Carachugo
              
              
              0.014
              
              
              —
              
              
              —
              
              
              0.039
              
              
              0.047Maqui
                  Maqui
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —San
                  José
              
              
              —
              
              
              —
              
              
              —
              
              
              0.028
              
              
              —La
                  Quinua
              
              
              0.031
              
              
              0.029
              
              
              0.023
              
              
              0.021
              
              
              0.022Total
                  average gold grade of ore Mined (oz./DST)
              
              
              0.027
              
              
              0.025
              
              
              0.028
              
              
              0.026
              
              
              0.019Gold
                  Production (oz.):Cerro
                  Yanacocha
              
              
              813,132
              
              
              740,087
              
              
              1,198,160
              
              
              1,035,794
              
              
              566,006Carachugo
              
              
              826,920
              
              
              701,491
              
              
              421,967
              
              
              308,600
              
              
              307,867Maqui
                  Maqui
              
              
              64,335
              
              
              45,612
              
              
              38,631
              
              
              21,747
              
              
              21,460San
                  José
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —La
                  Quinua
              
              
              1,146,756
              
              
              1,530,112
              
              
              1,674,329
              
              
              1,246,058
              
              
              668,336Total
                  gold (oz.)
              
              
              2,851,143
              
              
              3,017,302
              
              
              3,333,088
              
              
              2,612,199
              
              
              1,563,669




65




***Exploration***




Yanacocha’s
      exploration activities encompass 294,275 hectares covered by 429 mining
      concessions. Chaupiloma holds the mining rights with respect to these hectares
      and has assigned the mining rights related to 108,569 hectares to Yanacocha,
      which are covered by 163 mining concessions. Chaupiloma has assigned these
      mining concessions to Yanacocha pursuant to several assignments of mining
      rights.




Yanacocha
      has three processing concessions from the MEM for its processing plant: Cerro
      Yanacocha (Cerro Negro, La Quinua and Yanacocha), Yanacocha (Carachugo and
      Pampalarga) and China Linda. The processing concessions have indefinite terms,
      subject to the payment of a fee based on nominal capacity for the processing
      plant. In 2006, Yanacocha requested extensions for two of these processing
      concessions, Cerro Yanacocha and Yanacocha.




Exploration
      expenditures amounted to approximately US$32.9 million, US$32.3 million and
      US$28.2 million in 2005, 2006 and 2007, respectively. These expenditures have
      resulted in the identification of several deposits, which have been advanced
      to
      reserves, including Carachugo, Maqui Maqui, San José, Cerro Yanacocha, La Quinua
      (which includes Cerro Negro), Chaquicocha, El Tapado, El Tapado Oeste
      (Corimayo), Antonio, Quecher and Minas Conga (Perol, Chailhuagón and Amaro).
      Exploration expenditures have also been used to identify deep sulfide
      mineralization beneath the oxide deposits at El Tapado, El Tapado Oeste
      (Corimayo), Antonio, Maqui Maqui, Yanacocha and Chaquicocha. In 2008,
      exploration efforts will focus on metallurgical initial **** data **** at
      the
      Yanacocha Verde project which is the sulfide mineralized portion beneath the
      Yanacocha oxide deposit. A first pass drilling test and follow up has been
      scheduled at several target sites, namely, San Cirilo (which includes the San
      Cirilo Sur, Rosa, Chilla Negra and Rosa Sur targets), Conga (which includes
      the
      La Carpa, Napo, Yuru, Perlita, Chasu, Lindero, Atocha, Plucnijoc, Vizcacha
      and
      Gentiles SE targets) and the western and eastern portions of the Yanacocha
      District (including the Exaltado, Colorado graben, Arnacocha, Derrumbo, Antonio,
      Pamela, Karicia and Pachanes targets).




Yanacocha’s
      exploration expenditures include all of the costs associated with exploration
      activities such as drilling, geological and metallurgical testing. Yanacocha
      prepares a budget for each year and allocates an amount for exploration
      activities. In light of the nature of mining exploration and in order to
      maintain flexibility to take advantage of opportunities that may arise,
      Yanacocha does not allocate a specified budgeted amount by property or project.
      Rather, Yanacocha allocates a budgeted amount over the course of the year to
      each project based on Yanacocha’s needs and its geologists’ periodic evaluations
      of the progress of each project and its potential for mine
      construction.




Yanacocha
      intends to continue to develop the Cerro Yanacocha, La Quinua and Chaquicocha
      gold deposit projects and the Minas Conga gold-copper deposit project over
      the
      next several years, while continuing to explore the remainder of the Yanacocha
      district along with the adjacent Minas Conga and Solitario mineral holdings.
      For
      2008, Yanacocha’s estimated expenditures will be US$37.2 **** million
      for exploration, which will be expensed, and an additional US$2.8 million
      for delineation activities for ore bodies that are currently classified as
      reserves, which will be capitalized. This budgeted amount will be expended
      mainly on the Chaquicocha, Cerro Yanacocha, La Quinua, and Minas Conga deposits
      along with an extensive exploration program in Yanacocha’s
      properties.




In
      2001
      and 2002, activities resulted in the identification of a continuous, high-grade
      zone at Corimayo, which can be traced for at least 600 meters in a north-south
      direction and contains a significant volume of oxide material with grades of
      5
      to 20 grams per metric ton common through this zone. At the end of 2003,
      Corimayo, Antonio and Quecher contained 3.00 million, 0.11 million and
      0.04 million ounces of reserves, respectively. In 2004, exploration efforts
      focused on the exploration of near-surface oxide deposits at Cerro Quilish,
      including Cerro Negro, and Chaquicocha, and the expansion of the Antonio deposit
      and the Giuliana prospect, located north of the Yanacocha Norte pit. Exploration
      of gold-dominant sulfide mineralization continues beneath known oxide deposits
      at Yanacocha Sur, Chaquicocha, El Tapado, El Tapado Oeste (Corimayo), Antonio
      and Maqui Maqui. In 2004, infill drilling at Minas Conga added 8.7 million
      ounces of gold and 2.23 billion pounds of copper from the Perol and Chailhuagón
      deposits. In 2005, additional infill drilling at Chaihuagón and Perol added
      3.1 million ounces of gold and 0.99 billion pounds of copper reserves.
      Several early stage target sites were tested by drilling, including Gentiles
      at
      the Minas Conga deposit and San Cirilo at the Solitario Regional Sector. In
      2006, 400,000 ounces were added from Chaquicocha. In addition, early stage
      drilling continues at San Cirilo, Deborah corridor, Minas Conga and Yanacocha.
      In 2007, Yanacocha added 1.27 million ounces of gold to its reserves; however,
      this was offset by losses of 0.84 million ounces of gold due mainly to cost
      increases in some marginal pits. The net gain to reserves was 0.44 million
      ounces derived mainly from development work at Maqui Maqui, La Quinua and Cerro
      Yanacocha deposits. In addition, the La Carpa and Chasu targets were tested
      in
      the Conga site with encouraging results and exploration work will be continued
      in 2008. Drilling at San Cirilo and Deborah corridor was also developed as
      well
      as the evaluation of several targets within the Yanacocha district.




66




***Transportation
      and Refining***




The
      doré
bars produced by Yanacocha are transported to refineries outside of Peru and,
      accordingly, Yanacocha has entered into pre-established transportation
      contracts. Yanacocha has engaged Hermes Transportes Blindados S.A., or
      Hermes *,* to
      service its local transportation requirements. Under the terms of Yanacocha’s
      agreement with Hermes, the risk of loss with respect to the doré bars is assumed
      in its entirety by Hermes during the transportation of the doré bars from the
      mines to Jorge Chávez Airport in Lima. Thereafter, the responsibility for the
      doré bars shifts to the refiner, which has entered into a contract with an
      outside security firm to provide offshore transportation. The doré bars are
      melted, weighed and sampled in refineries abroad, which store the doré bars in
      strong-room vaults and assume responsibility there for the doré bars. Yanacocha
      pays a predetermined fee for the refining service. The final output from
      refineries, known as London Good Delivery gold and silver, is credited to
      Yanacocha’s London bullion accounts until transferred to purchasers.




***Sales
      of Gold***




Yanacocha’s
      gold sales are made through a monthly open-bidding process in which Yanacocha
      auctions its production, corresponding to the next four to five weeks. This
      bidding process is set up by Yanacocha with approximately 10 financial
      institutions and trading firms prior to each month. Yanacocha collects bids
      and
      confirms sales. The gold is typically sold on the date of departure from Jorge
      Chávez Airport in Lima. If a portion of gold remains unsold, it is sold on the
      spot market within a few days. Silver is sold on the spot market approximately
      once a month to financial institutions or trading firms. The cash from such
      sales is received into a collection account in London against orders to the
      London bullion bank for deliveries of the gold and silver to the purchasers.




Delivery
      is made once a week and payments are collected the day of confirmation. The
      payment price for the gold consists of either (i) the market price at the
      confirmation of the sale, or (ii) the average London PM Fixing price over the
      tendered period plus a small premium established pursuant to the bidding
      process. Since 1994, Yanacocha has consistently sold to five or six financial
      institutions and trading firms at each auction. Such buyers are market makers
      and active participants in precious metal markets.




67




***Employees***




As
      of
      December 31, 2007, Yanacocha had 3,014 employees. **** Compensation
      received by Yanacocha’s employees includes base salary and other non-cash
      benefits such as a health program and term life insurance. In addition, pursuant
      to the profit sharing plan mandated by Peruvian labor legislation, employees
      at
      Yanacocha are entitled to receive eight percent of the annual pre-tax profits
      of
      their employers, or the Employee Profit Sharing Amount, fifty percent of such
      profits to be distributed based on the number of days each employee worked
      during the preceding year and the remaining fifty percent of such profits to
      be
      distributed among the employees based on the aggregate annual salary of each
      employee. Effective January 1, 1997, the annual payment to each employee under
      the profit sharing plan cannot exceed 18 times such employee’s monthly salary,
      and any difference between the Employee Profit Sharing Amount and the aggregate
      amount paid to employees must be contributed by Yanacocha to the *Fondo
      Nacional de Capacitación Laboral y Promoción del Empleo* (FONDO
      EMPLEO), a public fund established to promote employment and employee training.
      Since 2005, if the amount contributed by Yanacocha exceeds 2,200 *Unidades
      Impositivas Tributarias* (Tax
      Units), the excess should be dedicated exclusively to the financing of road
      infrastructure works and managed by the regional government.




In
      1998,
      the Peruvian government issued additional regulations regarding the calculation
      of the workers’ participation, which limited to 18 monthly salaries the total
      amount to which each employee is entitled. However, there is a difference in
      the
      criteria for the calculation between the law and its regulations. Yanacocha
      followed the criteria established by the law in determining the amount to be
      paid to its employees since 1998. In December 2006, Yanacocha accrued US$14.9
      million as a liability for the possible workers’ profit participation
      contingency. In addition, Yanacocha booked and wrote off a receivable amounting
      to US$11.6 million. As of December 31, 2007, Yanacocha recorded an additional
      charge of US$2.9 million, included in “ *Other
      expenses, net* ,”
to
      cover any payment derived from the different criteria established to make these
      payments by both the law and the regulation.




Pursuant
      to the Peruvian labor laws enacted in 1991, Yanacocha deposits funds for
      severance payments in a bank account selected by each employee and for the
      benefit of such employee, in both May and November of each year.




Yanacocha’s
      employees receive the benefit of one of two types of pension arrangements.
      All
      workers can choose to enroll in the system of the *Oficina
      de Normalización Previsional* (the
      Public Pension System, or ONP), or in a privately-managed system of individual
      contribution pension funds managed by the *Administradoras
      de Fondos de Pensiones* ,
      or
      AFPs. Yanacocha is required to withhold 13 percent from the salary of each
      employee enrolled in the ONP system and pay such amount to the ONP system,
      and
      withhold between 12.37 percent and 12.96 percent from the salary of each
      employee enrolled in the AFP system and pay such amount to the respective AFP.
      Yanacocha has no liability for the performance of these pension plans.




In
      addition, Yanacocha pays approximately 9 percent of its total payroll to
      ES-SALUD (the social security agency) for general health services for all
      employees. Law No. 26790 also requires Yanacocha to provide private insurance
      representing an average payment equal to 1.48 percent of the payroll of covered
      employees for employment-related incapacity and death for blue collar employees
      and other employees exposed to mining-related hazards.




Yanacocha
      has entered into arrangements with independent contractors who are responsible
      for the security services and staffing for several operational and
      administrative areas. As of December 31, 2007, independent contractors employed
      9,152 persons who worked at Yanacocha’s operations. In 2004, Yanacocha entered
      into its first collective bargaining agreement with Workers’ Union of Minera
      Yanacocha S.R.L., or the Union, which was created on December 9, 2003. Because
      the Union’s 605 members as of December 31, 2006 represented a minority of
      Yanacocha’s employees, the collective bargaining agreement applied only to the
      Union’s members and expired on February 28, 2007. In May 2007, Yanacocha
      completed negotiations with the Union’s members and entered into a new
      collective bargaining agreement, which is applicable only to the Union’s members
      and effective from March 2007 to February 2010.




68




In
      November 2007, a small percentage of Union members engaged in a two-day strike
      notwithstanding the recent collective bargaining agreement reached between
      Yanacocha and the Union. The strike did not have any material impact on
      Yanacocha’s operations; nevertheless there can be no assurance that Yanacocha
      will not experience other strikes or labor-related work stoppages that could
      have a material adverse effect on its operations or its operating results.




Since
      commencement of operations, Yanacocha’s rate of turnover has been less than ten
      percent per year. Yanacocha has informed us that it considers its relations
      with
      its employees to be good. Yanacocha annually evaluates employee relations using
      an anonymous employee opinion survey to measure employee opinions of its
      benefits and policies. Approximately 80 percent of payroll employees participate
      in this survey each year.




***Social
      Development***




Since
      its
      formation, Yanacocha has been attentive to its relationship with the community
      in the fields of social relations and development.




During
      2006, the External Affairs Management, an internal department within Yanacocha,
      through its Community Relations and Rural Development Departments, established
      social development programs that address 122 rural communities and the city
      of
      Cajamarca. To implement these programs, Yanacocha developed active relationships
      with domestic and foreign institutions and organizations, including the Ministry
      of Health, the Ministry of Education, the Ministry of Agriculture, the Ministry
      of Foreign Trade and Tourism, Cajamarca local governments, International Finance
      Corporation, CITE Koriwasi, Cooperative Housing Foundation or CHF, Asociacion
      para el Desarrollo Rural de Cajamarca or ASPADERUC, Asociacion para el
      Desarrollo Forestal or ADEFOR, Camara Regional de Turismo or CARETUR, FONDO
      EMPLEO, Antares, Asociacion para el Desarrollo Local or ASODEL, Foncreagro,
      Cenfotur and Aprec, among others. In 2006, Yanacocha invested up to
      US$24 million in its social development programs, including the Conga
      project.




In
      2007,
      Yanacocha invested US$4.9 million in educational infrastructure at the
      Davey school and US$7.6 million for road improvements. Yanacocha also
      invested US$6.9 million in development projects for rural areas, including
      community capacity building, agriculture, health, education and other projects.
      In addition, Yanacocha invested US$5.2 million in mitigation programs in
      areas such as Tual, La Quinua, La Shacsha, La Ramada, Lagamarca and Granja
      Porcón.




Since
      1993, Yanacocha has invested nearly US$106 million in social development
      programs including education, health, social infrastructure (schools and medical
      posts), productive infrastructure projects, rural electrification, roads,
      transformation plants, business promotion programs, local tourist programs,
      livestock and agricultural assistance programs.




***Security***




Yanacocha
      has 54 security employees on its payroll. In addition, there is a contracted
      security force of over 375 persons assigned to rotating shifts. Distribution
      of
      payroll security personnel includes six persons with respect to the processing
      plant, one person with respect to its headquarters in Lima and one person with
      respect to the road to the coast. **** The
      distribution of the contracted security force is throughout the site, at access
      points, offices and residential areas in Cajamarca and at check point 0 on
      the
      road to the coast. In addition to the standing posts, there is a rapid response
      force of 18 persons per shift. No terrorist incidents have been recorded against
      Yanacocha’s personnel or property at its mining operations or at its
      headquarters in Lima.




69




***Mining
      and Processing Concessions***




Yanacocha’s
      exploration activities encompass 294,275 hectares covered by 429 mining
      concessions. Chaupiloma holds the mining rights with respect to these hectares
      and has assigned the mining rights related to 108,569 hectares to Yanacocha,
      which are covered by 163 mining concessions. Chaupiloma has assigned these
      mining concessions to Yanacocha pursuant to several assignments of mining
      rights, each with an initial term of 20 years (with the exception of one
      contract that has an initial term of 30 years) and expiring in 2012, 2014,
      2015,
      2018, 2021, 2024, 2025, 2026 and 2035, that are renewable at Yanacocha’s request
      for an additional 20-year term. Chaupiloma has not yet assigned 100 hectares
      covered by one mining concession to Yanacocha. Approximately 22 percent of
      the
      mining concessions that have been assigned by Chaupiloma to Yanacocha were
      claimed prior to 1991. Chaupiloma is owned 40 percent by Newmont Peru and 60
      percent by Minera Condesa and Cedimin.




Currently,
      17 **** of
      the
      mining concessions assigned to Yanacocha are being utilized for mining
      operations. They are Chaupiloma Uno, Chaupiloma Dos, Chaupiloma Tres, Chaupiloma
      Cuatro, Chaupiloma Cinco, Chaupiloma Seis, Chaupiloma Once, Chaupiloma Doce,
      Chaupiloma Trece, Chaupiloma Veintiuno, Chaupiloma Veintiuno A2, Chaupiloma
      Cuarentaidos, Chaupiloma Cincuentaicuatro, El Sol No. 4, La Providencia, Mirtha
      III and Claudina Ocho. ****




The
      Carachugo and San José mining facilities are located on the mining concessions
      of Chaupiloma Tres, Chaupiloma Cuatro and Chaupiloma Cinco; the Maqui Maqui
      mining facility is located on the mining concessions of Chaupiloma Seis and
      Chaupiloma Doce; the Cerro Yanacocha mining operation is located on the
      Chaupiloma Uno, Chaupiloma Dos and Chaupiloma Tres mining concessions; the
      La
      Quinua mining facility is located on the Chaupiloma Dos, Chaupiloma Once,
      Chaupiloma Veintiuno, Chaupiloma Cuarentidos, Chaupiloma Cincuenticuatro, Mirtha
      III, La Providencia, Chaupiloma Trece, Chaupiloma Veintiuno A2 and El Sol No.
      4
      mining concessions; and the Calera China Linda mining operation is located
      on
      the Claudina Ocho mining concession. Yanacocha currently conducts mining
      activities at Cerro Yanacocha, La Quinua and Calera China Linda.




Yanacocha
      pays a royalty fee to Chaupiloma of 3 percent of the net sale value of all
      ore
      extracted from these mining concessions after deducting refinery and transport
      costs for the right to mine five of the mining concessions. For 2007, Yanacocha
      paid royalties of US$34 million to Chaupiloma. The mining concession not
      yet assigned to Yanacocha will be assigned to Yanacocha by Chaupiloma on
      comparable terms.




According
      to Peruvian mining law, the assignee in an assignment of mining concessions
      assumes all the duties and rights of the holder of the concession. Management
      of
      Yanacocha believes that the mining concessions assigned to Yanacocha are in
      full
      force and effect under applicable Peruvian laws and that Yanacocha is in
      compliance with all material terms and requirements applicable to the mining
      concessions and is not experiencing any condition, occurrence or event known
      to
      it that would cause the revocation, cancellation, lapse, expiration or
      termination thereof, except that Yanacocha and Chaupiloma may, from time to
      time, remake, cancel, terminate or allow to lapse mining concessions assigned
      to
      Yanacocha that are not material to the conduct of Yanacocha’s
      business.




70




Yanacocha
      has been actively pursuing the acquisition of the land surface rights or
      obtaining easements relating to land positions containing prospective geological
      exploration target sites, deposits that can be developed in the future or areas
      that would be considered for plant or facility sites. To date, Yanacocha has
      acquired all the surface rights with respect to 13,927 hectares of the surface
      land covering its Carachugo, Chaquicocha, Maqui Maqui, Haussing, Laboratorio,
      Línea de Alta Tensión, Presas, Museo, Sorpresa Mishacocha, San José, Cerro
      Yanacocha and La Quinua (which includes the Cerro Negro deposit) mining
      operations, and a majority of the Cerro Quilish deposit and Calera China Linda.




In
      addition, as of December 31, 2007, Yanacocha had acquired 26,316 hectares,
      including 7,847 hectares of surface rights with respect to the Minas Conga
      deposit, 3,581 hectares for the San Cirilo and Las Lagunas prospects at
      Solitario, and 421 hectares for future land swaps. See “—The Company—History and
      Development.”




***PROJECT***
            
            ***Hectares
                as***
              ***of
                December 31, 2006***
            
            ***Exchanges***
            
            ***Hectares***
              ***acquired
                in***
              ***2007***
            
            ***Hectares as ofDecember
                31,***
              ***2007***Carachugo
                - San José - Chaquicocha
            
            
            3,462.35
            
            
            —
            
            
            34.65
            
            
            3,497.00Cerro
                Quilish - Cerro Negro
            
            
            2,825.88
            
            
            —
            
            
            8.22
            
            
            2,834.10Calera
                China Linda
            
            
            347.29
            
            
            —
            
            
            60.92
            
            
            408.21Haussing
            
            
            10.89
            
            
            —
            
            
            —
            
            
            10.89La
                Quinua
            
            
            2,817.58
            
            
            —
            
            
            —
            
            
            2,817.58Laboratorio
            
            
            0.10
            
            
            —
            
            
            —
            
            
            0.10Las
                Lagunas
            
            
            1,674.78
            
            
            —
            
            
            —
            
            
            1,674.78Línea
                de Alta Tensión
            
            
            0.01
            
            
            —
            
            
            —
            
            
            0.01Maqui
                Maqui
            
            
            1,957.23
            
            
            —
            
            
            —
            
            
            1,957.23Minas
                Conga
            
            
            5,053.43
            
            
            —
            
            
            2,793.98
            
            
            7,847.41Presas
            
            
            196.72
            
            
            —
            
            
            —
            
            
            196.72San
                Cirilo
            
            
            1,896.77
            
            
            —
            
            
            9.54
            
            
            1,906.31Terrenos
                para canjes
            
            
            419.50
            
            
            1.59
            
            
            —
            
            
            421.09Cerro
                Yanacocha
            
            
            2,135.31
            
            
            —
            
            
            2.85
            
            
            2,138.16Museo
            
            
            8.56
            
            
            —
            
            
            —
            
            
            8.56Sorpresa
                Mishacocha
            
            
            146.38
            
            
            —
            
            
            451.45
            
            
            597.83**TOTAL**
            
            
            **22,952.78**
            
            
            **1.59**
            
            
            **3,361.61**
            
            
            **26,315.98**





***NOTE:***
 *In
        addition to the 419.50 hectares reported as of December 31, 2006, 1.59 hectares
        have been acquired by permuting, resulting in a total of 421.09 hectares
        for
        exchange as of December 31, 2007.*





***Regulation,
      Permit and Environmental Matters***




Yanacocha
      is subject to a full range of governmental regulation and supervision generally
      applicable to companies engaged in business in Peru, including mining laws,
      labor laws, social security laws, public health, consumer protection laws,
      environmental laws, securities laws and antitrust laws. See “—The
      Company—Regulatory Framework—Mining and Processing Concessions” and “—The
      Company—Regulatory Framework—Environmental Matters” for a general description of
      Peruvian regulations of mining companies and environmental obligations. See
      “—Mining and Processing Concessions” above for a discussion of Peruvian
      regulations relating to the mining and processing concessions utilized by
      Yanacocha in its mining operations.




Yanacocha
      is required to submit certain documentation with respect to its plans and
      operations for the review and approval of various Peruvian government entities,
      including the MEM, the Ministry of Agriculture and the Ministry of Health.
      Yanacocha is required to file and obtain approval of an EIS for each of its
      mining operations before being authorized to operate such mine. EISs for the
      Carachugo, Maqui Maqui, San José, Cerro Yanacocha, La Quinua (including Cerro
      Negro) mining operations and China Linda lime plant have been approved. Pursuant
      to current Peruvian regulations, Yanacocha also submits supplemental EISs each
      time a project’s production rate or disturbed area used is expanded by more than
      50 percent. In 2006, Yanacocha filed an EIS to expand its operations at the
      Yanacocha and La Quinua areas. After an EIS is approved and construction
      activities are initiated, a governmental-accredited environmental auditing
      firm
      is required to audit the operation three times per year. Each of the Carachugo,
      Maqui Maqui, San José, Cerro Yanacocha, La Quinua (including Cerro Negro) mining
      operations and China Linda lime plant has been and continues to be audited
      as
      required with no significant pollution problems identified.




71




Yanacocha’s
      corporate policy is to operate
      in compliance with all material applicable laws and regulations and adopt and
      adhere to standards that are protective of both human health and the environment
      at the facilities it builds and operates. Additionally,
      Yanacocha has agreed to several environmental covenants in loans with the IFC
      that require Yanacocha to comply with relevant World Bank environmental
      guidelines and World Bank occupational health and safety guidelines, and such
      covenants are monitored annually by IFC. See “—Trust Certificates and IFC Loan
      Documents.” In addition, in 2005 Yanacocha became a signatory of the
      International Cyanide Code, which provides specific and strict standards on
      how
      to manage cyanide.




In
      August
      2001, the Financial Accounting Standards Board, or FASB, issued SFAS No. 143,
      “Accounting for Asset Retirement Obligations,” effective January 1, 2003, which
      established a uniform methodology for accounting for estimated reclamation
      and
      abandonment costs. Accordingly, on January 1, 2003, Yanacocha recorded the
      estimated present value of reclamation liabilities, or asset retirement
      obligation or ARO, and increased the carrying amount of the related asset to
      be
      retired in the future. **** Yanacocha
      allocates the carrying amount of the related asset to expense over the life
      of
      the related assets, adjusting for changes resulting from the passage of time
      and
      revisions to either the timing or amount of the original present value estimate.
      At January 1, 2003, Yanacocha recorded approximately US$50 million for the
      carrying amount of the related asset, net, an increase of approximately
      US$72.1 million to ARO, an increase of US$7.9 million to deferred tax
      liabilities, and an increase of US$2.3 million to deferred profit sharing
      liabilities.




Prior
      to
      the adoption of SFAS No. 143, estimated future reclamation costs were based
      principally on legal and regulatory requirements. Such costs for active mines
      were accrued and charged over the expected operating lives of the mines using
      the unit of production method based on proven and probable reserves. Future
      remediation costs for inactive mines were accrued based on management’s best
      estimate at the end of each period of the undiscounted costs expected to be
      incurred at a site. Such cost estimates included, where applicable, ongoing
      care, maintenance and monitoring costs. Changes in estimates were reflected
      in
      earnings in the period an estimate was revised.




Yanacocha
      has informed us that its management believes that its operations are conducted
      in accordance with all applicable
      laws and regulations. All
      future exploration and construction projects require or will require a variety
      of permits. Although procedures for permit applications and approvals are
      customarily faster in Peru than in the United States, permitting procedures
      are
      still complex, time-consuming and subject to potential regulatory delay.




Yanacocha
      has informed us that its management does not believe that existing permitting
      requirements or other environmental protection laws and regulations applicable
      to Yanacocha will have an adverse effect on its business, financial condition
      or
      results of operations. However, Yanacocha’s management recognizes the
      possibility that additional, more stringent environmental laws and regulations
      may be enacted in Peru, which could result in significant additional expense,
      capital expenditures, restrictions or delays associated with the construction
      and operation of Yanacocha’s properties. Neither we nor Yanacocha can predict
      whether Yanacocha will be able to renew its existing permits or whether
      significant changes in existing permit conditions will be imposed. Non-renewal
      of existing permits or the imposition of additional conditions with respect
      to
      Yanacocha could have a significant adverse effect on its financial condition
      or
      results of operations.




72




Yanacocha
      has informed us that its management believes that it is in compliance with
      all
      applicable regulations and international standards concerning safety.




***Insurance***




Yanacocha
      maintains a comprehensive insurance program designed to address the specific
      risks associated with its operations, in addition to covering the normal insured
      risks encountered by major mining companies.




Yanacocha’s
      insurance program consists of a “Primary Program” and an “Umbrella/Excess
      Program.” Coverage under the Primary Program is provided through the local
      Peruvian insurance market and includes employers’ liability, comprehensive third
      party general liability, comprehensive automobile liability, all risk property
      on a replacement basis, including transit risks, business interruption insurance
      and mining equipment. Coverage under the Umbrella/Excess Program is provided
      through Newmont Mining’s master worldwide insurance program and addresses claims
      that the Primary Program cannot, or will not, cover. During 2005 and 2004,
      Yanacocha received US$1.1 million and US$1.0 million, respectively,
      from its insurance program in connection with a mercury spill and expects to
      receive further insurance payments to cover most of the remediation expenses
      it
      incurred as a result of the accident.




***Financing
      Activities***




On
      July
      27, 2006, Yanacocha issued US$100 million in bonds in the Peruvian capital
      markets under a US$200 million bond program approved by the Peruvian
      securities regulatory authority. The bonds are held by various Peruvian
      entities, including pension funds, mutual funds, government funds and insurance
      companies. The issuance was comprised of US$42 million in floating rate
      notes bearing interest at LIBOR plus 1.4375% and US$58 million in fixed
      rate notes bearing interest at 7.0%. The bonds have a four-year grace period
      and
      amortize quarterly over six years. The bonds are unsecured and are non-recourse
      to both Newmont and us. Funds generated from the issuance will be used by
      Yanacocha primarily for capital expenditures.




On
      May
      19, 2006, Yanacocha entered into a US$100 million bank facility with a
      syndicate of Peruvian commercial banks, comprised of Banco de Crédito del Perú,
      BBVA Banco Continental and Banco Wiese Sudameris (now Scotiabank Perú).
      Quarterly repayments began in May 2007 with final maturity on May 2014.
      Borrowings under the facility bear interest at a rate of LIBOR plus 1.875%.
      The
      loan is non-recourse to both Newmont and us. During 2007, Yanacocha repaid
      the
      first three installments of the credit facility for a total amount of US$10.3
      million.




In
      September 2007, Yanacocha entered
      into a leasing contract with Banco de Crédito del Perú related to the
      acquisition of nine high altitude mining trucks, with a purchase option. The
      lease is for three years and bears an annual interest rate of
      6.10%.




In
      December 2007, Yanacocha entered
      into a leasing contract with Scotiabank related to the acquisition of one high
      altitude mining  truck,
      with a purchase option. The lease is for three years and bears an annual
      interest rate of 6.00%. The total lease agreement signed amounts to US$16.3
      million to acquire six high altitude mining trucks. As of December 31, 2007,
      as
      per the lease agreement, Yanacocha is
      committed to the bank for US$4.0 million.




73




***By-Laws
      of Yanacocha***




Yanacocha
      is governed by the Peruvian Companies Law and the *estatutos* (the
      combined articles of incorporation and by-laws) of Yanacocha, or the Yanacocha
      By-Laws.




*Control
      Over Major Corporate Events*




Pursuant
      to the Peruvian Companies Law and the Yanacocha By-Laws (including applicable
      quorum requirements), without the affirmative vote of the partners of Yanacocha
      representing at least 51 percent of the voting shares, none of the
      following may occur: (i) an increase or decrease in Yanacocha’s capital, (ii)
      the issuance of any debentures, (iii) any sale of an asset whose book value
      is
      at least 50 percent of the paid in capital relating to such asset, (iv) any
      amendment to the Yanacocha By-Laws in order to change its business form, (v)
      the
      merger, consolidation, dissolution or liquidation of Yanacocha or (vi) any
      other
      amendment of the Yanacocha By-Laws.




Pursuant
      to the Shareholders Agreement among Newmont Second, Condesa, *Compagnie
      Miniére Internationale Or S.A.* and
      IFC,
      dated as of August 16, 1993, as amended by a General Amendment Letter, dated
      August 17, 1994, any member of the Executive Committee of Yanacocha who wishes
      to propose that Yanacocha’s Executive Committee authorize Yanacocha to take a
      Significant Action (as defined below) must (i) give written notice to each
      partner of such proposal prior to consideration thereof at a meeting of the
      Executive Committee and (ii) refrain from voting to approve such Significant
      Action until (x) the Executive Committee has received the consent of 80 percent
      of the partners of Yanacocha (a partner is deemed to have consented if no
      objection is received from such partner within 30 days after being
      notified) or (y) the Executive Committee has received the consent of at least
      51
      percent of the partners of Yanacocha and 45 days have elapsed since the member
      of the Executive Committee who proposed the Significant Action has responded
      in
      writing to objections received from objecting partners. “Significant Action”
means (i) a disposal or sale of more than 20 percent by value of Yanacocha’s
      fixed assets, (ii) any planned shutdown or cessation of Yanacocha’s mining
      activities that is planned to last for more than one year, (iii) any capital
      expenditure by Yanacocha exceeding US$20 million, (iv) any disposal or sale
      by Yanacocha of the mining rights covered by certain concessions or (v) the
      approval of the construction of a project in the area owned by Yanacocha (other
      than the Carachugo mine and processing facilities).




*Preemptive
      Rights*




The
      Peruvian Companies Law and the Yanacocha By-Laws provide preemptive rights
      to
      all partners of Yanacocha. In the event of a capital increase, any partner
      has a
      preemptive right to pay its pro rata share of such increase in order to maintain
      such partner’s existing participation in Yanacocha.




In
      the
      event of a proposed transfer, exchange or sale, either voluntary or involuntary,
      of participation, collectively referred to as the Offered Participation, of
      one
      or more partners, any partner has a right to acquire the Offered Participation
      in proportion to its holdings of partners’ capital. In the event that not all of
      the partners wish to exercise this right or some indicate their decision to
      acquire a smaller share than that to which they are entitled, the other partners
      will be entitled to an increase, and consequently, the remaining participation
      will be distributed among them in proportion to such partners’ capital
      participation and within the maximum limit of the participation they have stated
      their intention to acquire. Finally, any Offered Participation remaining
      unsubscribed by the partners must first be offered to Yanacocha before they
      may
      be offered to third parties.




74




***Legal
      Proceedings***




*Choropampa.* In June
      2000, a transport contractor of Yanacocha spilled approximately 151 kilograms
      of
      elemental mercury near the town of Choropampa, Peru, which is located 53 miles
      (85 kilometers) southwest of the Yanacocha mine. Elemental mercury is not used
      in Yanacocha ’s
      operations but is a by-product of gold mining and was sold to a Lima firm for
      use in medical instruments and industrial applications. A comprehensive health
      and environmental remediation program was undertaken by Yanacocha in
      response to the incident. In August 2000, Yanacocha paid
      under protest a fine of S/.1.7 million Nuevos Soles (approximately
      US$0.5 million) to the Peruvian government. Yanacocha entered
      into settlement agreements with a number of individuals impacted by the
      incident. As compensation for the disruption and inconvenience caused, Yanacocha entered
      into agreements with and provided a variety of public works in the three
      communities impacted by this incident. Yanacocha ,
      certain
      related companies and other defendants were named in a lawsuit filed by over
      1,100 Peruvian citizens and the Provincial Municipality of Cajamarca in the
      Denver District Court of the State of Colorado. This action seeks compensatory
      damages based on claims associated with the mercury spill incident. In February
      2005, Yanacocha responded to the complaint in the Denver District Court of the State of
      Colorado. The parties in these cases have agreed to submit these matters to
      binding arbitration. In October 2007, the parties to the arbitration entered
      a
      court-approved settlement agreement, resolving most of these cases.




In
      May
      2002, over 900 Peruvian citizens filed additional lawsuits against Yanacocha
      in
      the local courts of Cajamarca, Peru, related to the Choropampa incident. Such
      lawsuits seek aggregate payments of US$229.4 million and S/.1.2 million Nuevos
      Soles. A significant number of plaintiffs in these lawsuits entered into
      settlement agreements with Yanacocha prior to filing such claims. In September
      2006, the Peruvian Supreme Court issued contradictory opinions on the validity
      of these settlement agreements. Subsequent lower court decisions have upheld
      the
      validity of these settlement agreements, discharging a number of the lawsuits.
      In 2005, Yanacocha entered into settlement agreements with approximately 350
      additional plaintiffs. Yanacocha cannot
      reasonably predict the final outcome of any of the above-described
      lawsuits.




*Conga.* Yanacocha is
      involved in a dispute with the Provincial Municipality of Celendín regarding the
      authority of that governmental body to regulate the development of the Conga
      project. In 2004, the Municipality of Celendín enacted an ordinance declaring
      the area around Conga to be a mining-free reserve and a protected nature area. Yanacocha has
      challenged this ordinance by means of two legal actions, one filed by Yanacocha
      (as the lease holder of the Conga mining concessions) and one filed by Minera
      Chaupiloma (as the titleholder of the Conga mining concessions). In August
      2007,
      a Peruvian Court of First Instance upheld Chaupiloma’s claim, stating that the
      Municipality of Celendín lacks the authority to create protected nature areas.
      The Municipality of Celendín has not appealed the ruling. Based on legal
      precedent established by Peru's Constitutional Tribunal and the foregoing
      resolution of Chaupiloma’s claim, it is reasonable to believe that Yanacocha’s
      mining rights will be upheld.




*Hacienda
      Los Negritos.* On
      October 21, 2002, Yanacocha was sued
      by Grimaldina Malpica Rojas, seeking: (i) the repossession of the “Los Negritos”
property, which is currently held and utilized by Yanacocha ,
      and
      (ii) a payment for damages of up to US$65 million. Yanacocha has
      opposed the lawsuit and all its terms, requesting that her registration of
      the
      property in the Public Registry of Cajamarca be declared void. The legal
      proceeding is currently pending resolution in Cajamarca’s Court of First
      Instance. Yanacocha believes
      that the plaintiff’s claim is without merit.




*Baños
      del Inca.* On
      September 11, 2006, the Municipality of Baños del Inca issued a declaration
      designating an area that includes the Carachugo Expansion and San José Projects
      as reserved and protected areas. Based on previous experience and actions taken
      by Peru’s Constitutional Tribunal in respect of Cerro Quilish, in which it was
      ruled that such declaration did not affect Yanacocha ’s
      mining
      rights, Yanacocha believes
      that Baños del Inca’s declaration should not impact Ya nacoc ha ’s
      legal
      rights to exploit these concessions. The legal proceeding is currently pending
      resolution in Lima’s Court of First Instance.




75




*San
      Pablo* .
      On
      February 16, 2007, the Municipality of San Pablo issued an ordinance designating
      an area that includes Las Lagunas and Pozo Seco as reserved and protected areas,
      where Yanacocha has mining rights. Based on previous experience and actions
      taken by Peru’s Constitutional Tribunal in respect of Cerro Quilish, in which it
      was ruled that such declaration did not affect Yanacocha ’s
      mining
      rights, Yanacocha believes
      that San Pablo’s declaration should not impact Yanacocha ’s
      legal
      rights to exploit these concessions. Yanacocha has
      challenged this ordinance on the grounds that, under Peruvian law, local
      governments lack authority to create such areas, denying the rights granted
      by Yanacocha ’s
      mining
      concessions. The Court in the First Instance rejected the complaint based on
      formal grounds. The resolution of the Court was appealed and such appeal is
      currently pending resolution in Lima’s Court of Second Instance.




*Other
      contingencies - Cerro Quilish* . **** Yanacocha was
      involved in a dispute with the Provincial Municipality of Cajamarca regarding
      the authority of that governmental body to regulate the development of the
      Cerro
      Quilish ore deposit. Cerro Quilish is located in the same watershed in which
      the
      City of Cajamarca is located. The Municipality enacted an ordinance declaring
      Cerro Quilish and its watershed to be a reserve and protected nature area. Yanacocha challenged this ordinance on the grounds that, under Peruvian law, local
      governments lack authority to create such areas. Peru’s Constitutional Tribunal
      heard the case in early 2003 and ruled on April 7, 2003. The ruling established
      that Yanacocha ’s
      rights
      were not impacted by the ordinance and ordered Yanacocha to complete a full
      environmental impact study prior to initiating any development at Cerro Quilish
      and adopt mitigation measures necessary to protect the quality and quantity
      of
      the water supply of the City of Cajamarca. In July 2004, Yanacocha received
      a
      drilling permit and commenced exploration activities on the Cerro Quilish
      deposit. During September 2004, individuals from the Cajamarca region conducted
      a sustained blockade of the road between the City of Cajamarca and the mine
      site
      in protest of these exploration activities. Yanacocha suspended all drilling
      activities at Cerro Quilish and the blockade was resolved. In November 2004,
      in
      recognition of local concerns, Yanacocha requested and received the revocation
      of its Cerro Quilish drilling permit. In this regard, Yanacocha continues to
      work to improve its relationship with the communities in the vicinity of
      Cajamarca.




Other
      than the legal proceedings described above, Yanacocha is involved in certain
      legal proceedings arising in the normal course of its business, none of which
      individually or in the aggregate is material to Yanacocha or its operations.
      For
      information regarding the legal proceedings relating to the ownership of
      Yanacocha’s equity, see “—The Company—History and Development.”




***Management
      of Yanacocha***




*Executive
      Committee*




Pursuant
      to the Yanacocha By-Laws, Yanacocha’s Executive Committee consists of six
      members, all of whom are appointed by the partners of Yanacocha. Richard T.
      O’Brien, President and Chief Executive Officer of Newmont Mining Corporation
      has
      been appointed Chairman of Yanacocha’s Executive Committee and Alberto Benavides
      de la Quintana, our Chairman of the Board and Chief Executive Officer, has
      been
      appointed as the Vice Chairman of Yanacocha’s Executive Committee. **** The Vice
      Chairman has the power to preside over the meetings of Yanacocha’s Executive
      Committee in the Chairman’s absence. The members of the Executive Committee are
      elected for a three-year term but may continue in their positions until the
      next
      election takes place and the newly elected members accept their positions.
      Alternate members are elected in the same manner as members and can act in
      the
      place of members with all of their authority when a member is unavailable,
      except that an alternate member may not act as either Chairman or Vice Chairman
      of Yanacocha’s Executive Committee. The Chairman has the right to cast the
      deciding vote in the event of a deadlock among Yanacocha’s Executive
      Committee.




76




*General
      Manager/Management Agreement*




The
      Yanacocha By-Laws provide that the Yanacocha Partners’ Meeting has the power to
      appoint and remove the Manager of Yanacocha; the Executive Committee has the
      power to appoint and remove other officers of Yanacocha, determine their duties
      and compensation and grant and revoke powers of attorney. Newmont Peru was
      named
      as Yanacocha’s Manager according to a publicly filed deed, and it continues to
      hold that position. Newmont Peru’s duties as Manager are defined in the
      Management Contract dated February 28, 1992, as amended, between Yanacocha
      and
      Newmont Peru. Pursuant to the Management Contract, Newmont Peru is responsible
      for managing, conducting and controlling the day-to-day operations of Yanacocha
      and keeping Yanacocha’s Executive Committee informed of all operations through
      the delivery of various written reports. The Management Contract was amended
      as
      of December 19, 2000. The amendment extends the term of the Management Contract
      for a period of 20 years starting at the date of amendment and provides that
      it
      may be extended for additional terms of 20 years upon request by Newmont Peru.
      Newmont Peru, however, may cancel the Management Contract by giving six months’
prior notice to Yanacocha. The Management Contract will be deemed terminated
      if,
      due to reasons attributable to the bad management of Yanacocha, except for
      reasons beyond its control, Newmont Peru is unable to substantially complete
      the
      agreed work programs. In exchange for its services as Manager, Newmont Peru
      receives remuneration of US$2 per ounce of gold production and its equivalent
      for copper production paid on a quarterly basis, which amount is expected to
      cover the overhead and administrative expenses for the management of the
      operations. Also, Newmont Peru may charge Yanacocha for the salaries of
      employees of Newmont Peru or its affiliates who are directly involved in the
      operation of Yanacocha. In 2007, Yanacocha accrued fees of US$3.1 million
      owed to Newmont Peru and its affiliates under the Management
      Contract.




*Control
      Over Major Corporate Events*




See
      “—By-Laws of Yanacocha” above for a description of certain provisions of
      Peruvian law and of the Yanacocha By-Laws relating to control over major
      corporate events.




*Preemptive
      Rights and Rights of First Refusal*




See
      “—By-Laws of Yanacocha” above for a description of certain provisions of
      Peruvian law and of the Yanacocha By-Laws relating to preemptive rights and
      rights of first refusal.




77





**Property,
      Plants and Equipment**




**Our
      Property**




***Introduction***




We
      operate seven mines: Julcani, Recuperada, Uchucchacua, Orcopampa, Poracota,
      Antapite and Ishihuinca. We also have controlling interests in two mining
      companies which operate the Shila-Paula and Colquijirca mines. We also own
      an
      electric power transmission company, an engineering services consulting company
      and have minority interests in several other mining companies including a
      significant ownership interest in Yanacocha and Cerro Verde. See “—The
      Company—Organizational Structure” and “—Intermediate Holding Companies,
      Subsidiaries and Equity Participations.” Set forth below is a map of our
      principal mining operations as of May 31, 2008. ****




buena




78




Effective
      March 2001, we temporarily suspended operations and decided to discontinue
      exploration efforts at the Recuperada mine and, as a result, all activity at
      the
      mine was temporarily suspended. In April 2004, we elected to resume exploration
      efforts at the Esperanza vein of the Recuperada mine due to an increase in
      the
      price of metals. In February 2006, the exploitation process in the Recuperada
      Mine resumed due to the significant increase in the price of metals and reserves
      in the Esperanza, Camucha and Teresita veins. Until March 30, 2002, we held,
      indirectly through Condesa and Cedimin, a 100 percent interest in Minera
      Huallanca. On such date, we transferred this interest to BHL-Perú S.A.C. through
      the sale of all of our shares in Minera Huallanca for US$2 million. As of
      January 2, 2003, Minera Shila S.A.C. merged with and into Cedimin. **** As
      a
      result of the merger, our interest in Cedimin increased from 0.0009 percent
      before the merger to 44.83 percent after the merger, and Condesa’s interest in
      Cedimin decreased from 99.9991 percent before the merger to 55.17 percent after
      the merger. In addition, on October 22, 2004, Cedimin acquired a 100 percent
      equity interest in Mineras Aureas, which had a 49 percent interest in Minera
      Paula. As a result of this acquisition, Minera Paula became wholly-owned by
      us.
      As of December 31, 2004, Mineras Aureas and Minera Paula merged with and into
      Cedimin and are no longer separate legal entities. On August 22, 2006, we
      purchased approximately 22 percent of the outstanding shares of Inminsur from
      minority shareholders, which resulted in our acquisition of a 100 percent
      controlling interest in Inminsur. In December 2006, Inminsur merged with and
      into us.




Our
      mining operations are located throughout Peru. Our Julcani mine is located
      in
      the province of Angaraes in the department of Huancavelica, approximately 500
      kilometers southeast of the city of Lima. Our Uchucchacua mine is located in
      the
      province of Oyón in the department of Lima, approximately 265 kilometers
      northeast of the city of Lima. Our Orcopampa and Poracota mines are located
      in
      the province of Castilla in the department of Arequipa, approximately 1,350
      kilometers southeast of the city of Lima. Our Recuperada mine is located in
      the
      province of Huancavelica, in the department of Huancavelica, approximately
      500
      kilometers southeast of the city of Lima. Our Ishihuinca mine is located in
      the
      province of Caravelí in the department of Arequipa, approximately 780 kilometers
      southeast of the city of Lima. Our Antapite mine is located in the province
      of
      Huaytara in the department of Huancavelica, approximately 434 kilometers
      southeast of the city of Lima. The Shila mine, which is operated by one of
      our
      wholly-owned subsidiaries, is located in the province of Castilla in the
      department of Arequipa, approximately 1,350 kilometers southeast of the city
      of
      Lima and 100 kilometers south of our Orcopampa mine. The Paula mine, which
      is
      operated by one of our wholly-owned subsidiaries, is located in the province
      of
      Castilla, approximately 1,400 kilometers southeast of the city of Lima and
      140
      kilometers south of the Orcopampa mine, and as of January 1, 2005, Paula’s
      operating data has been consolidated with Shila’s operating data. The
      Colquijirca mine, which is operated by one of our majority-owned subsidiaries,
      is located approximately 285 kilometers east of Lima and 10 kilometers south
      of
      the city of Cerro de Pasco. The Yanacocha mine, in which we have a 43.65 percent
      interest, is located in the province and department of Cajamarca, approximately
      900 kilometers north of Lima. **** The
      Cerro
      Verde mine, in which we have a 18.50 percent interest as of March 31, 2008,
      is
      located in the department of Arequipa. ****




***Operating
      Properties***




*Orcopampa*




The
      Orcopampa mine is wholly-owned and operated by us. We lease the rights to the
      mining concessions of Orcopampa from a group of private investors. This lease,
      which was renewed in September 2003 and expires in 2043, stipulates a payment
      from us equal to 10 percent of production value, subject to certain conditions.
      Operations started in the Orcopampa mine in 1965. In 2007, we made lease
      payments of US$12.3 million. We operated Orcopampa as a silver mine until
      the late 1990s, when we also began to mine gold-bearing veins. In December
      1996,
      Orcopampa S.A., then owner and operator of the Orcopampa mine, merged into
      us.
      As a result of the merger, Orcopampa S.A. assigned, and we assumed, the right
      to
      the mining concessions of Orcopampa. At December 31, 2007, the net total
      fixed assets of Orcopampa were approximately US$47.0 million.




79




The
      Orcopampa mine is located in the province of Castilla in the department of
      Arequipa, approximately 1,350 kilometers southeast of the city of Lima at an
      altitude of between 3,800 and 4,500 meters above sea level. Access is by a
      192-kilometer unpaved public road, which connects to the Pan American highway,
      and by airstrip.




Mining
      at
      Orcopampa is conducted underground using the mechanized cut-and-fill method.
      Ore
      is processed at a mill located at Orcopampa. Until February 2004, the mill
      had a
      rated capacity of 1,200 DST per day and utilized both bulk flotation and gravity
      concentration processes.




Until
      February 2004, flotation concentrates were exported to different smelters around
      the world, while gravity concentrates continued to be treated at Los Volcanes,
      a
      small cyanidation plant located next to the Orcopampa mill which has been in
      operation since 1989. **** Until
      the
      end of 2001, Los Volcanes produced gold/silver electrolytic precipitates which
      were smelted and refined in Lima and then sold to Johnson Matthey. During the
      second half of 2001, we installed a Merrill-Crowe circuit and a smelter which
      began operations in December of that year, allowing us to produce doré bars from
      the gold and silver precipitate produced in the cyanidation plant of Los
      Volcanes.




Positive
      results of exploration conducted in the Nazareno and Prometida veins, changes
      in
      the characteristics of the ore and results from metallurgical tests performed
      in
      2002 have suggested the replacement of the flotation process with direct
      cyanidation of the ore. In January 2003, we initiated construction of a
      cyanidation circuit which commenced operations on a continuous basis in March
      2004 and therefore eliminated the production of flotation concentrates. The
      cyanidation circuit includes a 70 foot thickener from which a gold rich solution
      is obtained and sent to the Merrill-Crowe unit for gold precipitation, six
      agitator tanks to which cyanide and activated carbon are added (Carbon in Leach
      process), and a carbon desorption circuit which includes an electrolytic cell
      for the recovery of gold and silver as precipitate. The Electrolytic and
      Merrill-Crowe precipitates are smelted into doré bars prior to
      shipment. ****




In
      June
      2006, we engaged a metallurgical consultant to evaluate the possibility of
      installing a pressure leach circuit for the pre-treatment of gold ore from
      Poracota prior to cyanidation next to the Orcopampa plant. After a careful
      evaluation and review of all of the data available, we decided to continue
      with
      the project and engaged Aker Kvaerner Metals, Inc., or Aker Kvaerner, an
      engineering firm, to perform an engineering study. In July 2007, Aker Kvaerner
      issued a preliminary report which showed that the installation of an autoclave
      was not feasible after taking into account current Poracota ore reserves and
      metal prices. As a result, the Poracota ore will continue to be treated by
      flotation.




Electric
      power is generated and supplied by a 3,900 kw hydroelectric plant and power
      line, connected to the Peruvian national electricity grid on September 12,
      2002,
      owned by us and, when water is scarce, it can be provided by a 3,976 kw diesel
      generator. Water for operations at Orcopampa is obtained from a lake and three
      rivers.




In
      2006
      we continued exploration activities in the Nazareno vein, and 43 drill holes
      explored in the western and eastern section of the vein confirm that
      economically viable mineralization extends over that area. Another 13 drill
      holes explored in the eastern part of the Prometida vein indicate good ore
      shoots in both the Prometida and Nazareno veins. In addition, the exploration
      of
      the Prometida and Nazareno veins has led to the discovery of new mineral
      reserves and, in 2005, mineral reserves increased 16.6 percent in gold content
      reaching 1,137,215 DST of mineral with a minimum grade of 0.68 ounces of gold
      per short ton and 0.27 percent ounces of silver per short ton with a
      metallic content of 773,306 ounces of gold. To facilitate ventilation and access
      to the eastern region of Prometida, where ongoing reserve measurement and
      estimation efforts are being carried out ,
      we
      finished construction of the “Mario” ramp. In addition, we have commenced
      construction of three additional ramps to facilitate access to ore reserves
      and
      resources at the 3,590 and 3,990 levels. During
      2007, we continued underground exploration works on the Nazareno, Prometida
      and
      Esperanza veins, including diamond drilling at depth principally in the Nazareno
      vein, with positive results. Ore reserves as of December 31, 2007 are 1,301,940
      DST at 0.633 ounces per ton of gold, 0.20 ounces per ton of silver and metallic
      content of 824,128 ounces of gold.




80




Set
      forth
      below are certain unaudited operating data for the periods shown for Orcopampa,
      calculated on the basis of 100 percent of the mine’s production.




Year
                Ending December 31,(1)2003
            
            2004
            
            2005
            
            2006
            
            2007Mining
                Operations:Ore
                mined
                (ST)
            
            
            393,210
            
            
            431,241
            
            
            461,091
            
            
            467,953
            
            
            478,669Average
                gold grade
                (oz./ST)
            
            
            0.504
            
            
            0.518
            
            
            0.530
            
            
            0.564
            
            
            0.581Average
                silver grade
                (oz./ST)
            
            
            0.20
            
            
            0.34
            
            
            0.30
            
            
            0.24
            
            
            0.26Average
                copper
                grade
            
            
            —
            
            
            —
            
            
            —
            
            
            —Production:Gold
                (oz.)
            
            
            180,725
            
            
            211,388
            
            
            233,182
            
            
            254,631
            
            
            267,935Silver
                (oz.)
            
            
            63,135
            
            
            97,359
            
            
            86,080
            
            
            81,005
            
            
            77,666Copper
                (ST)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Recovery
                rate (gold)
                (%)
            
            
            86.5
            
            
            93.7
            
            
            95.4
            
            
            96.0
            
            
            96.3Recovery
                rate (silver)
                (%)
            
            
            77.3
            
            
            64.9
            
            
            63.1
            
            
            64.1
            
            
            62.4


________


(1)  Incorporates
      losses for mining dilution and recovery.





The
      increase in 2003 gold production was mainly due to our exploration activities
      in
      the Nazareno vein and the exploration of the Prometida, Prosperidad and Lucy
      Piso veins. In 2004, the increase in gold production is primarily due to a
      considerable increase in the recovery of gold. The slight increase in gold
      production in 2006 compared to the previous year was due to an increase in
      total
      run of mine ore treated at the plant, a slightly higher grade of gold in the
      feed and an increase in the recovery of gold. In 2007, the increase of gold
      production was mainly due to an increase in the volume of ore treated and a
      slight increase in the average grade of gold in the ore. In addition,
      Orcopampa’s total production of gold and silver in 2007 includes 1,246 ounces of
      gold and 3,085 ounces of silver that were obtained from activated carbon columns
      installed in the barren solution stream and treatment of slag material received
      from Procesadora Sudamericana S.A., a precious metals refinery located in
      Lima.




*Poracota*




The
      Poracota mine is wholly-owned by us and currently operated by the Orcopampa
      team. The Poracota project encompasses 6,674 hectares located 20 kilometers
      west
      of the Orcopampa mine in southern Peru. As of December 31, 2007, we estimated
      ore reserves of 542,806 DST at 11.2 grams per ton of gold and mineral out of
      reserves of 333,104 DST at 6.9 grams per ton of gold. Currently, the Poracota
      project is centered on mine development at depth, bulk flotation tests at the
      Orcopampa mine and permitting to begin mine production.




81




Since
      February 2007, ore from the Poracota mine has been treated by flotation at
      the
      Orcopampa concentrator plant. The following table shows the production obtained
      through December 31, 2007:


Year
                  Ending December 31,2007Mining
                  Operations:Ore
                  mined (ST)
              
              
              61,867Average
                  gold grade (oz./ST)
              
              
              0.318Average
                  silver grade (oz./ST)
              
              
              0.11Production:Gold
                  (oz.)
              
              
              16,679Silver
                  (oz.)
              
              
              5,499Recovery
                  rate (gold) (%)
              
              
              84.8Recovery
                  rate (silver) (%)
              
              
              80.1




*Uchucchacua*




The
      Uchucchacua mine is wholly-owned and operated by us. Operations started in
      1975,
      and Uchucchacua is currently our largest producer of silver. At December 31,
      2007, total estimated reserves were 67,695,026 ounces of silver, 90,861 DST
      of
      lead and 128,948 DST of zinc. The net total fixed assets of Uchucchacua were
      approximately US$34.4 **** million.




Uchucchacua
      is located in the province of Oyón in the department of Lima, approximately 265
      kilometers northeast of the city of Lima at an altitude of between 4,000 and
      5,000 meters above sea level. Access is by an unpaved road, 145 kilometers
      in
      length, which connects to the Pan American highway.




Mining
      at
      Uchucchacua is conducted underground utilizing cut-and-fill stopping, shrinkage
      stopping, and sublevel stopping methods. Ore is processed at a mill located
      at
      Uchucchacua. The mill, which has a rated capacity of 2,500 DST per day since
      October 2006 and which had a 94.08 percent utilization rate in 2007, utilizes
      differential flotation to obtain a lead-silver concentrate and a zinc
      concentrate. ****




Electric
      power is generated by a 3,400 kw hydroelectric plant that we own and by a 3,025
      kw diesel generator. We utilize a power line connecting Uchucchacua to the
      Peruvian national electricity grid and has electrical distribution facilities
      within the Uchucchacua mine. Water for operations at Uchucchacua is obtained
      from three lakes.




In
      2001,
      we started construction to deepen the Luz shaft for the purpose of improving
      the
      extraction and transportation infrastructure of the mine. Construction continued
      in 2002 and we commenced operation of the Luz shaft in July 2003. **** During
      2003, we completed the construction of a new 1.7 kilometer drainage tunnel,
      the
      Patón tunnel, which measures 4.5 kilometers from a point close to Lake Patón up
      to the main shaft and serves to explore the veins of the Plomopampa and
      Casualidad zones. On December 6, 2003, the Patón tunnel was connected to the
      Carmen mine. In addition to facilitating drainage, the Patón tunnel also
      improves ventilation and the output of hydroelectric power, reducing electric
      energy purchased from the national grid for pumping and ventilation by 7.2
      MWH,
      electric energy generation by 1.6 MWH and decreasing the use of fuel-driven
      generator sets at peak hours. The implementation of the tunnel results in an
      annual savings of US$1 million.




82




At
      the
      end of 2003, we commenced evaluating the possibility of recovering the silver
      values still contained in the final tails produced in the concentrator plants.
      Metallurgical investigations indicated that an additional five to eight percent
      of the silver value could be recovered by a cyanide leach of a silver bearing
      pyrite concentrate previously obtained by flotation of the final tails. Further
      metallurgical evaluations performed during 2004 indicated that cyanide leaching
      is very effective when applied to a bulk zinc-silver concentrate obtained by
      flotation of the lead-silver final tails flotation circuit. After cyanidation,
      a
      zinc concentrate may still be produced from the cyanidation residue. Due
      to
      encouraging results in the last quarter of 2004, we commenced engineering
      studies and the construction of a 300 metric tons per day cyanidation circuit, which
      is
      designed to treat both pyrite and bulk zinc-silver concentrates.




The
      new
      cyanidation plant commenced operations on a trial basis in June 2006 and became
      fully operational by September 2006. From June to December 2006, the cyanidation
      plant produced 181,482 ounces of silver. Due to an increasing amount of ore
      coming from the Socorro mine, the feed to the cyanidation plant came from a
      silver bearing pyrite concentrate obtained by flotation of the final
      tails.




During
      the third quarter of 2005, samples of an oxide ore located in the upper levels
      of the mine were tested for cyanidation and indicated that the silver contained
      in this ore can be successfully leached by cyanidation. Based on these results,
      we have decided to install a crushing and grinding circuit for the comminution
      of the oxide ore and new leaching tanks and filters. The oxide
      circuit commenced operations in October 2006. Total silver production in the
      oxide circuit was 36,590 ounces for the year ended December 31, 2006. Set forth
      below are certain unaudited operating data for the periods shown for
      Uchucchacua, calculated on the basis of 100 percent of the mine’s
      production. ****




During
      2007 and after performing some improvements in the cyanidation circuit, a total
      of 914,912 ounces of silver were produced as silver bars. Out of this total,
      659,984 ounces were obtained from silver bearing pyrite concentrates and 254,928
      ounces were produced from oxide ore.




Year
                    Ending December 31,(1)2003
                
                2004
                
                2005
                
                2006
                
                2007Mining
                    Operations:Ore
                    mined
                    (ST)
                
                
                747,190
                
                
                795,036
                
                
                813,220
                
                
                810,280
                
                
                850,463Average
                    silver grade
                    (oz./ST)
                
                
                17.20
                
                
                16.79
                
                
                16.93
                
                
                16.04
                
                
                16.02Average
                    zinc grade
                    (%)
                
                
                1.40
                
                
                1.48
                
                
                1.39
                
                
                1.24
                
                
                1.90Average
                    lead grade
                    (%)
                
                
                1.09
                
                
                1.13
                
                
                1.12
                
                
                1.06
                
                
                1.31Production:Silver
                    (oz.)
                
                
                9,575,605
                
                
                9,832,393
                
                
                10,213,794
                
                
                9,692,300
                
                
                9,873,772Zinc
                    (ST)
                
                
                6,216
                
                
                7,477
                
                
                6,553
                
                
                5,225
                
                
                8,657Lead
                    (ST)
                
                
                7,218
                
                
                8,042
                
                
                8,067
                
                
                7,718
                
                
                9,708Recovery
                    rate (silver)
                    (%)
                
                
                74.4
                
                
                73.67
                
                
                74.20
                
                
                74.50
                
                
                72.50





(1)  Incorporates
      losses for mining dilution and recovery.





A
      total
      of 31,053 ST of oxide ore was also mined and treated directly in the cyanidation
      plant, together with 18,057 ST of a silver bearing pyrite concentrate that
      was
      produced and stored since 2000. The increase in silver production was mainly
      due
      to the silver bars produced at the cyanidation circuit.




*Julcani*




The
      Julcani mine is wholly-owned and operated by us. We acquired Julcani in 1953
      as
      our first operating mine. In November 1999, due to the depletion of gold and
      silver reserves, we were forced to suspend production in Julcani and carry
      out
      exploration activities only. In 2000, we started to carry out the actions
      required by the Environmental Shutdown Plan, or *Plan
      de Cierre Ambiental* ,
      and
      undertook only limited efforts primarily in the Herminia zone in 2001. As a
      result, ore mined in the Herminia zone was primarily milled to produce copper
      and lead concentrates until 2003. In 2003, we initiated an exploration program
      in the Acchilla area. In 2004, we continued the exploration and initiated
      exploitation of ore with positive results. At December 31, 2007, total estimated
      ore reserves were 201,365 DST at 21.0 ounces of silver per short ton, 1.8
      percent of lead and 0.2 percent of zinc. At December 31, 2007, the net total
      fixed assets of Julcani were approximately US$1.8 million.




83




Julcani
      is located in the province of Angaraes in the department of Huancavelica,
      approximately 500 kilometers southeast of Lima at an altitude of between 4,200
      and 5,000 meters above sea level. Access is by a 195 kilometer unpaved public
      road, which connects to a paved public road and an airstrip.




Run
      of
      mine ore is processed in a concentrator plant located 50 meters from the mine
      entrance. The ore is crushed and ground, and bulk flotation is used thereafter
      to obtain a silver-gold-lead concentrate. The plant has a rated capacity of
      350
      DST per day and had a 69.75 percent utilization rate in 2007.




Electric
      power is generated by three Conenhua hydroelectric plants. Power generation
      capacity from these plants is 800 kw (Huapa), 1,200 kw (Tucsipampa) and 760
      kw
      (Ingenio), respectively. We also rely on the Peruvian national electricity
      grid
      through Electro Perú, Peru’s national electric utility, for its remaining
      electrical power. Water for operations of Julcani is obtained from a creek,
      two
      springs and a lake.




Set
      forth
      below are certain unaudited operating data for the periods shown for Julcani,
      calculated on the basis of 100 percent of the mine’s production.




Year
                Ending December 31,(1)2003
            
            2004
            
            2005
            
            2006
            
            2007Mining
                Operations:Ore
                mined (ST)
            
            
            37,650
            
            
            58,900
            
            
            73,700
            
            
            80,450
            
            
            89,100Average
                gold grade
                (oz./ST)
            
            
            0.016
            
            
            0.002
            
            
            0.002
            
            
            0.001
            
            
            0.001Average
                silver grade
                (oz./ST)
            
            
            15.33
            
            
            18.50
            
            
            18.80
            
            
            18.80
            
            
            17.6Average
                lead
                grade
            
            
            0.83
            
            
            1.68
            
            
            2.02
            
            
            2.10
            
            
            2.11Average
                copper grade
                (%)
            
            
            0.40
            
            
            0.17
            
            
            0.13
            
            
            0.14
            
            
            0.14Production:Gold
                (oz.)
            
            
            415
            
            
            59
            
            
            40
            
            
            26.14
            
            
            26.88Silver
                (oz.)
            
            
            526,516
            
            
            1,019,743
            
            
            1,302,596
            
            
            1,417,666
            
            
            1,483,428Lead
                (ST)
            
            
            225
            
            
            854
            
            
            1,308
            
            
            1,529
            
            
            1,725Copper
                (ST)
            
            
            104
            
            
            83
            
            
            82
            
            
            100
            
            
            98Recovery
                rate (gold)
                (%)
            
            
            68.9
            
            
            50.7
            
            
            35.8
            
            
            25.2
            
            
            30.3Recovery
                rate (silver)
                (%)
            
            
            91.2
            
            
            93.7
            
            
            94.0
            
            
            93.8
            
            
            94.6


________


(1)  Incorporates
      losses for mining dilution and recovery.





The
      significant increase in silver production in 2007 was mainly due to a
      10.75  percent
      increase in run of mine ore treated in the plant.




*Recuperada*




The
      Recuperada mine is wholly-owned and operated by us. Effective March 2001, we
      temporarily suspended operations and discontinued exploration efforts at the
      Recuperada mine. In April 2004, we elected to resume exploration efforts at
      the
      Esperanza vein of the Recuperada mine due to an increase in ore reserves as
      well
      as the rising price of metals. In February 2006 we initiated mining operations.
      At December 31, 2007, the net total fixed assets of Recuperada were
      approximately US$2.5 million.




84




Recuperada
      is located in the province of Huancavelica, in the department of Huancavelica,
      approximately 540 kilometers southeast of Lima at an altitude of between 4,300
      and 4,800 meters above sea level. Access is by a 242 kilometer unpaved public
      road, which connects to the Pan American highway.




Set
      forth
      below are certain unaudited operating data for the periods shown for Recuperada,
      calculated on the basis of 100 percent of the mine’s production.




Year
                Ending December 31,2003
            
            2004
            
            2005
            
            2006
            
            2007Mining
                Operations:Ore
                mined (ST)
            
            
            -
            
            
            -
            
            
            -
            
            
            72,200
            
            
            98,970Average
                silver grade
                (oz./ST)
            
            
            -
            
            
            -
            
            
            -
            
            
            7.32
            
            
            7.45Average
                lead grade
                (%)
            
            
            -
            
            
            -
            
            
            -
            
            
            2.72
            
            
            2.38Average
                zinc grade
                (%)
            
            
            -
            
            
            -
            
            
            -
            
            
            4.75
            
            
            3.78Production:Silver
                (oz.)
            
            
            -
            
            
            -
            
            
            -
            
            
            478,129
            
            
            695,970Lead
                (ST)
            
            
            -
            
            
            -
            
            
            -
            
            
            1,781
            
            
            2,164Zinc
                (ST)
            
            
            -
            
            
            -
            
            
            -
            
            
            3,039
            
            
            3,313




The
      significant increase in the production of silver, lead and zinc was mainly
      due
      to a 37.1 percent increase in the volume of ore mined compared to
      2006.




*Colquijirca*




The
      Colquijirca mine is wholly-owned by El Brocal. El Brocal was formed in 1956
      and
      is engaged in the extraction, concentration and sale of concentrates of
      polymetallic minerals, mainly zinc, lead and silver. As of December 31, 2002,
      we
      held a 59.02 percent interest in Inversiones Colquijirca and a 32.83 percent
      interest in El Brocal’s mining properties. Other unrelated mining investors hold
      the balance of the share capital of Inversiones Colquijirca. In January 2003,
      El
      Brocal conducted a US$1 million capital increase to finance the exploration
      of the Marcapunta deposit, reduction of the arsenic content and enhancement
      of
      the gold content of the deposit’s copper resources. We participated in this
      capital share increase by exercising its and Teck Cominco’s interest in El
      Brocal, through each of their interests in Inversiones Colquijirca, to invest
      approximately S/.1,500,000. Currently, our interest in Inversiones Colquijirca
      is 61.42 percent. ****




In
      addition, as a result of the stock dividends, which in the aggregate were
      equivalent to S/.2.9 million, distributed by us in November 2002 in the
      form of El Brocal shares, Sociedad Minera El Brocal S.A.A. became a *sociedad
      anónima abierta* (open
      stock company) in 2003. Total reserves as of December 31, 2007 were 13,317,007
      DST with a silver content of 1.76 ounces per DST, 4.4 percent of zinc and 1.47
      percent of lead. At December 31, 2007, the net total fixed assets of El Brocal
      were approximately US$35.7 million. **** Total
      ore
      reserves as of December 31, 2007 were 21,622,137 DST at 1.26 ounces of silver
      per DST, 0.005 ounces of gold per DST, 2.71 percent of zinc, 0.91 percent of
      lead and 0.995 percent of copper.




The
      Colquijirca mine is located 285 kilometers east of the city of Lima and 10
      kilometers south of the city of Cerro de Pasco. El Brocal produces zinc and
      lead/silver concentrates. The Colquijirca mine consists of three important
      polymetallic deposits: the Tajo Norte deposit, which contains zinc, silver
      and
      lead ore; the Marcapunta deposit, which contains an auriferous mineralization
      in
      breccia oxides, a non-arsenic copper chalcosite mineralization, and an arsenic
      copper enargite mineralization as a continuation of the mineralized mantles
      of
      the Marcapunta Norte; and the San Gregorio deposit, which contains
      zinc.




85




Mining
      is
      conducted through the open-pit method. El Brocal’s zinc concentrate typically
      contains 50 percent zinc, while its lead concentrate typically contains 55
      percent lead. The concentrates are sold locally and also exported to Europe
      and
      Asia (primarily Korea and China) for refining. The capacity of the concentration
      has been increased to 6,600 tons per day, having processed a total of 2,125,332
      ST of ore, thereby meeting the established program. The mill had a
      92 percent utilization rate in 2007. The Colquijirca mine primarily relies
      on a power line, connected to the Peruvian national electricity grid in November
      2002, for its electrical power.




In
      2001,
      El Brocal initiated an intensive exploration program, financed by a capital
      increase in 2002 at the Marcapunta deposit, to confirm mineralization and find
      possible extensions. In 2002, exploration revealed gold-bearing arsenic copper
      resources in the Marcapunta deposit. **** El
      Brocal’s production greatly increased from 2002 to 2006 and in 2007, El Brocal
      achieved ore throughput of 2,125,332 DST, representing a unprecedented 30.3
      percent increase from 2006.




Set
      forth
      below are certain unaudited operating data for the Colquijirca mine calculated
      on the basis of 100 percent of the mine’s production.




Year
                    Ending December 31,(1)2003
                
                2004
                
                2005
                
                2006
                
                2007Mining
                    Operations:Ore
                    mined (ST)
                
                
                1,409,104
                
                
                1,492,569
                
                
                1,513,964
                
                
                1,631,668
                
                
                2,125,332Average
                    silver grade (oz./ST)
                
                
                2.93
                
                
                3.23
                
                
                4.03
                
                
                8.17
                
                
                4.82Average
                    zinc grade (%)
                
                
                5.55
                
                
                5.82
                
                
                5.95
                
                
                5.90
                
                
                6.08Average
                    lead grade (%)
                
                
                2.32
                
                
                2.89
                
                
                2.92
                
                
                3.31
                
                
                2.66Production:Silver
                    (oz.)
                
                
                2,895,735
                
                
                3,399,130
                
                
                4,394,940
                
                
                10,269,511
                
                
                7,099,093Zinc
                    (ST)
                
                
                61,733
                
                
                63,448
                
                
                62,997
                
                
                72,422
                
                
                96,067Lead
                    (ST)
                
                
                21,766
                
                
                27,069
                
                
                26,244
                
                
                33,408
                
                
                34,924Recovery
                    rate (silver) in zinc (%)
                
                
                26.67
                
                
                26.07
                
                
                24.88
                
                
                23.61
                
                
                25.92Recovery
                    rate (zinc) (%)
                
                
                78.89
                
                
                73.0
                
                
                69.9
                
                
                75.18
                
                
                76.82Recovery
                    rate (silver) in lead (%)
                
                
                43.49
                
                
                44.46
                
                
                48.0
                
                
                53.39
                
                
                43.33Recovery
                    rate (lead) (%)
                
                
                66.50
                
                
                62.82
                
                
                60.0
                
                
                61.88
                
                
                63.77





(1)  Incorporates
      losses for mining dilution and recovery.




During
      the last quarter of 2007, a total of 69,845 short tons of copper ore were
      treated at the concentrator plant with a feed grade of 0.52 ounces of silver,
      2.27 percent copper and 0.016 ounces of gold per short ton. After treatment
      of
      this ore, the plant produced 27,237 ounces of silver, 1,405 short tons of copper
      and 618.24 ounces of gold with recovery rates of 74.89 percent, 87.81 percent
      and 54.12 percent for silver, copper and gold, respectively. Treatment of the
      copper ore will continue during 2008.




86




*Ishihuinca*




In
      1985,
      we purchased 51.0 percent of Inminsur, the owner and operator of the Ishihuinca
      mine. As a result of subsequent purchases of shares of Inminsur, we currently
      own 100 percent of Inminsur. **** Inminsur
      has leased the rights to the mining concessions of Ishihuinca from a third
      party. The lease agreement, which expires in 2015, stipulates payment by
      Inminsur to the lessor of a royalty of 7 percent of the price of the
      concentrates sold. In
      2007,
      Ishihuinca paid US$0.71 million in royalties. At December 31, 2007, the net
      total fixed assets of Ishihuinca were approximately US$1.1 million.




The
      Ishihuinca mine is located in the province of Caravelí in the department of
      Arequipa, approximately 780 kilometers southeast of the city of Lima at an
      altitude of 2,200 meters above sea level. Access is by the Pan American
      highway.




Mining
      is
      conducted underground utilizing the conventional cut-and-fill stopping method.
      Ore is processed at a mill located at Ishihuinca. The mill, which has a rated
      capacity of 181 DST per day and which had a 82.6 **** percent
      utilization rate in 2007, utilizes bulk flotation and gravity concentration
      processes. **** The
      bulk
      flotation process produces a copper/gold concentrate, which is sold to a local
      mineral broker, and a gold bearing pyrite concentrate which is leached with
      cyanide in agitator tanks. The gravity concentrates, from the gravity
      concentration processes, are treated by cyanidation in vats. The dissolved
      gold
      obtained from the cyanidation of the gold bearing pyrite concentrate and gravity
      concentrate is precipitated on zinc dust (Merrill-Crowe process) and the
      resulting precipitate is refined in Lima and then sold to Johnson Matthey.
      The
      mill at the Ishihuinca mine was last modernized and expanded to operate at
      its
      current capacity in 1993.




Electric
      power is generated by three electric generators, with a capacity of 709 kw,
      804
      kw and 800 kw, respectively. Water for operations at Ishihuinca is obtained
      from
      nearby wells.




Exploration
      conducted in 2003 indicated economically viable mineralization at Ishihuinca,
      suggesting that, although ore deposits at the mine seemed depleted, it may
      still
      contain reserves that warrant aggressive exploration. In 2003, we initiated
      an
      exploration program in the Córdova area, located 2 kilometers north of our
      Ishihuinca operations with positive results. In 2004, we identified the
      Prolongación Córdova vein in the Cordova area with underground workings of 2,110
      meters and an estimated 5,765 metric tons at 14.56 grams per ton of gold with
      an
      average thickness of 0.85 meters. In 2005, we continued exploration of the
      Prolongación Córdova vein in the Cordova area with underground workings of 2,158
      meters and an estimated 20,015 metric tons at 13.49 grams per ton of gold with
      an average thickness of 0.90 meters. **** During
      2006, we continued exploration efforts in the Córdova area, primarily on the
      Prolongación Córdova vein and an estimated 16,465 metric tons at 17.60 grams per
      ton of gold. During **** 2007,
      we
      conducted 1,574 meters of diamond drilling, primarily in the Córdova area and
      other mineralized structures, with negative results. Ore reserves as of December
      31, 2007 are 29,400 metric tons at 13.14 grams per ton of gold. In 2008, we
      will
      conduct a diamond drilling plan to search for new ore reserves mainly in the
      Huiscoro and Bella Unión areas. ****




87




Set
      forth
      below are certain unaudited operating data for the periods shown for Ishihuinca,
      calculated on the basis of 100 percent of the mine’s production.


Year
                  Ending December 31,(1)2003
              
              2004
              
              2005
              
              2006
              
              2007Mining
                  Operations:Ore
                  mined (ST)
              
              
              57,463
              
              
              60,213
              
              
              65,435
              
              
              66,705
              
              
              54,740Average
                  gold grade (oz./ST)
              
              
              0.508
              
              
              0.474
              
              
              0.436
              
              
              0.377
              
              
              0.322Average
                  copper grade (%)
              
              
              0.41
              
              
              0.345
              
              
              0.40
              
              
              0.33
              
              
              0.437Production:Gold
                  (oz.)
              
              
              25,287
              
              
              24,505
              
              
              23,911
              
              
              21,020
              
              
              14,814Copper
                  (ST)
              
              
              194
              
              
              169
              
              
              198
              
              
              141
              
              
              185Zinc
                  (ST)
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Lead
                  (ST)
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Recovery
                  rate (gold)(%)
              
              
              86.62
              
              
              85.80
              
              
              83.7
              
              
              83.3
              
              
              83.97Recovery
                  rate (copper)(%)
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              76.90


________


(1) Incorporates
      losses for mining dilution and recovery.




There
      was
      a 29.2 percent decrease in the production of gold in 2007 compared to the
      previous year, mainly due to a decrease in the volume of ore mined and a lower
      gold feed grade.




*Antapite*




The
      Antapite mine is wholly-owned by us. We leased the mine until July 2015 to
      Inminsur, our wholly-owned subsidiary. At December 31, 2007, the net total
      fixed
      assets of Antapite were approximately US$22.1 million.




Antapite
      is located in the province of Huaytará, in the department of Huancavelica,
      approximately 434 kilometers southeast of the city of Lima at an altitude of
      approximately 3,400 meters above sea level. The mine is accessed primarily
      by
      the Pan American Highway and local roads. The Antapite mine consists of 20,800
      hectares and Inminsur has identified epithermal vein gold deposits containing
      an
      estimated 400,000 tons of gold ore, with average grades of 0.5 ounces per ton.
      The Zorro Rojo and Reyna veins are the main source of ore reserves and mining
      efforts are focused on these veins. Inminsur has initiated exploration of the
      Pampeñita and Antapite veins, which run parallel and close to the Zorro Rojo
      vein, and is also conducting exploration to confirm the presence of important
      drill intersections in the Reyna vein located two kilometers from the Zorro
      Rojo
      vein.




In
      2006,
      exploration efforts were centered on the Zorro Rojo and Reyna areas and
      consisted mainly of underground workings and diamond drill holes. Total
      calculated ore reserves as of December 31, 2006 were 466,135 DST with 0.343
      ounces of gold. During 2007, we conducted 13,994 meters of underground
      exploration works and 18,517 meters of diamond drill holes in Zorro Rojo, Zorro
      Rojo ́s branch, Antapite, Reyna, Reyna ́s branch, Liliana and Emperatriz. Ore
      reserves as of December 31, 2007 were 261,122 DST at 0.285 ounces per ton of
      gold and 0.47 ounces per ton of silver. In 2008, we intend to conduct an intense
      exploration works to search for new ore reserves in areas near this
      mine.




Mining
      is
      conducted underground utilizing the conventional cut-and-fill stopping method.
      Ore is processed at a cyanidation plant located at Antapite. The plant, which
      was completed in June 2001 with capacity for 272 DST per day, has increased
      its
      capacity to 496 DST per day since May 2003. **** The
      plant had a 98.32 percent utilization rate in 2007.




The
      Antapite mine obtains approximately 98.5 percent of its electric power through
      the Peruvian national electricity grid and the remaining power through
      Electrical Supplier Machine Sultzer. Water for operations at Antapite is
      obtained from an underground drainage system.




88




Set
      forth
      below are certain unaudited operating data for the periods shown for Antapite,
      calculated on the basis of 100 percent of the mine’s production.


Year
                  Ending December 31,(1)2003
              
              2004
              
              2005
              
              2006
              
              2007Mining
                  Operations:Ore
                  mined (ST)
              
              
              155,494
              
              
              179,785
              
              
              179,873
              
              
              179,820
              
              
              178,969Average
                  gold grade (oz./ST)
              
              
              0.59
              
              
              0.57
              
              
              0.60
              
              
              0.60
              
              
              0.420Average
                  silver grade (oz./ST)
              
              
              0.94
              
              
              0.74
              
              
              0.81
              
              
              0.65
              
              
              0.73Production:Gold
                  (oz.)
              
              
              84,361
              
              
              97,137
              
              
              103,931
              
              
              103,370
              
              
              72,171Silver
                  (oz.)
              
              
              91,492
              
              
              86,162
              
              
              102,222
              
              
              83,258
              
              
              90,368Recovery
                  rate (gold) (%)
              
              
              91.8
              
              
              94.4
              
              
              95.9
              
              
              96.6
              
              
              96.0Recovery
                  rate (silver) (%)
              
              
              62.5
              
              
              64.5
              
              
              70.4
              
              
              71.2
              
              
              69.2


________


(1)  Incorporates
      losses for mining dilution and recovery.





There
      was
      a 30.9 percent decrease in the production of gold in 2007 compared to the
      previous year, mainly due to a lower gold feed grade and slightly lower gold
      recovery rate.




*Shila*




Minera
      Shila S.A.C., or Minera Shila, owned 100 percent of the Shila mining operation
      and held, directly and indirectly, through Condesa, a 100 percent equity
      interest in Minera Shila. As of January 2, 2003, Minera Shila merged with and
      into Cedimin and **** is
      no
      longer a separate legal entity. Cedimin operates the Shila mine, which began
      production in 1989. As of December 31, 2004, Minera Paula merged with and into
      Cedimin, and as of January 1, 2005, the Paula mine’s operating results have been
      consolidated with the Shila mine’s operating data. At December 31, 2007, the net
      total fixed assets of the Shila and Paula mining operations were approximately
      US$4.0 million.




The
      Shila
      mine is located in the province of Castilla in the department of Arequipa,
      approximately 1,350 kilometers southeast of Lima and 25 kilometers south of
      the
      Orcopampa mining operation at an altitude of between 4,650 and 5,400 meters
      above sea level. Access is by a 250-kilometer unpaved road.




Due
      to
      the high cost of transportation and smelting of the concentrates, we installed
      a
      small cyanidation plant at the Shila mine, which entered into operation in
      August of 2001 with a net capacity of 3,200 metric tons per year.




Mining
      is
      conducted underground utilizing the conventional cut-and-fill stopping method.
      Ore is processed at a mill located at the Shila mine with a rated capacity
      of
      227 DST per day. The mill had an 83.8 percent utilization rate in 2007. The
      mill
      utilizes bulk flotation and gravity concentration processes. Gravity
      concentrates and flotation concentrates are later treated together by
      cyanidation leaching. The extracted gold and silver values are precipitated
      using the Merrill-Crowe process and the product from this circuit is sent to
      the
      smelter located next to the mill. The dore silver/gold bars are then purchased
      by Cia de Minas Buenaventura who sends the bars to a refinery in Lima. The
      refined products are later sold overseas.




Electric
      power for Shila is provided by four diesel generators, two with a capacity
      of
      650 kw, one with a capacity of 1,135 kw and one with a capacity of 1,600 kw,
      and
      a power line, connected to the Peruvian national electricity grid on April
      9,
      2003. Water for operations at Shila is obtained from runoff from a snow
      peak.




89




Set
      forth
      below are certain unaudited operating data for the periods shown for Shila,
      calculated on the basis of 100 percent of the mine’s production.


Year
                  Ending December 31,(1)2003
              
              2004
              
              2005(2)
              
              2006
              
              2007Mining
                  Operations:Ore
                  mined (ST)
              
              
              50,085
              
              
              41,151
              
              
              64,050
              
              
              67,888
              
              
              68,858Average
                  gold grade (oz./ST)
              
              
              0.38
              
              
              0.38
              
              
              0.45
              
              
              0.418
              
              
              0.491Average
                  silver grade (oz./ST)
              
              
              13.8
              
              
              17.5
              
              
              5.9
              
              
              3.0
              
              
              2.1Production:Gold
                  (oz.)
              
              
              17,772
              
              
              14,086
              
              
              26,978
              
              
              26,336
              
              
              32,261Silver
                  (oz.)
              
              
              592,261
              
              
              587,181
              
              
              330,184
              
              
              157,683
              
              
              104,711Recovery
                  rate (gold) (%)
              
              
              94.10
              
              
              90.0
              
              
              93
              
              
              92.8
              
              
              95.4Recovery
                  rate (silver) (%)
              
              
              85.70
              
              
              81.3
              
              
              83
              
              
              78.6
              
              
              72.4


________


(1)  Incorporates
      losses for mining dilution and recovery.


(2)  Data
      for
      2005 reflects the consolidation of the operating data for the Paula mine into
      Shila’s operating data.




During
      2007, there was a 22.5 percent increase in the production of gold ounces mainly
      due to an increase in the gold feed grade and, to a lesser extent, an increase
      in the recovery rate of gold. By contrast, silver production decreased by 33.6
      percent, principally due to a decrease of the silver grade in the
      feed.




*Paula*




Minera
      Paula owns 100 percent of the Paula mining operation. Prior to October 22,
      2004,
      Minera Aureas S.A. held a 49 percent interest in Minera Paula and we held
      the remaining 51 percent interest through Cedimin. On October 22, 2004, Cedimin
      acquired a 100 percent equity interest in Inversiones Mineras Aureas S.A.C.,
      or
      Mineras Aureas, and Minera Paula became wholly-owned by us. As of December
      31,
      2004, Mineras Aureas S.A.C. and Minera Paula merged with and into Cedimin and
      are no longer separate legal entities. As of January 1, 2005, Paula’s operating
      data has been consolidated with Shila’s operating data.




The
      Paula
      mine is located in the province of Castilla in the department of Arequipa,
      approximately 1,400 kilometers southeast of the city of Lima and 140 kilometers
      south of the Orcopampa mining operation, at an altitude of between 5,000 and
      5,400 meters above sea level. Access is by a 300 kilometer highway from
      Arequipa.




Mining
      is
      conducted underground utilizing the conventional fill ascending method. After
      being processed at the Shila processing plant, the concentrates are sold to
      us
      and then are treated by cyanidation and vat leaching. The resulting precipitates
      are refined in Lima and then sold to Johnson Matthey.




In
      January 2005, Paula was connected to the Peruvian national electricity grid
      and
      ceased operations at its two diesel generators, each with a 65 kw installed
      capacity. The water for operations at Paula is obtained from runoff from a
      snowpeak.




90




Set
      forth
      below are certain unaudited operating data for Paula, calculated on the basis
      of
      100 percent of the mine’s production.


Year
                  Ending December 31,(1)Mining
                  Operations:
              
              
              2003
              
              
              2004(2)Ore
                  mined (ST)
              
              
              14,880
              
              
              16,831Average
                  gold grade (oz./ST)
              
              
              0.73
              
              
              0.645Average
                  silver grade (oz./ST)
              
              
              4.83
              
              
              4.83Production:Gold
                  (oz.)
              
              
              10.867
              
              
              10,387Silver
                  (oz.)
              
              
              68,914
              
              
              73,594Recovery
                  rate (gold) (%)
              
              
              95.80
              
              
              94.80Recovery
                  rate (silver) (%)
              
              
              91.40
              
              
              89.00


________


(1) Incorporates
      losses for mining dilution and recovery.


(2) Data
      until January 1, 2005, when Paula’s operating data was consolidated with Shila’s
      operating data.




***Reserves***




We
      calculate our ore reserves by methods generally applied within the mining
      industry and in accordance with Commission Industry Guide 7. All mineral
      reserves are estimated quantities of proven and probable ore that under present
      conditions may be economically mined and processed.




The
      proven and probable ore reserve figures presented in this Annual Report are
      our
      and Yanacocha’s estimates, and no assurance can be given that the level of
      recovery of gold, silver and certain other metals will be realized. See “Item 3.
      Key Information—Risk Factors—Factors Relating to the Company—Reserves
      Estimates.”




The
      term
“proven reserves” means ore reserves for which (a) quantity is computed from
      dimensions revealed in outcrops, trenches, workings or drill holes, and grade
      and/or quality are computed from the results of detailed sampling, and (b)
      the
      sites for inspection, sampling and measurement are spaced so closely and the
      geologic character is so well defined that size, shape, depth and mineral
      content of reserves are well established. The term “probable reserves” means ore
      reserves for which quantity and grade and/or quality are computed from
      information similar to that used for proven reserves, but the sites for
      inspection, sampling and measurement are farther apart or are otherwise less
      adequately spaced. The degree of assurance, although lower than that for proven
      reserves, is high enough to assume continuity between points of
      observation.




The
      following table lists the proven and probable ore reserves at December 31,
      2007 for each mining operation in which we have at least a 50 percent interest
      as well as the average grade of such ore, calculated on the basis of 100 percent
      of each mine’s reserves and US$575 per ounce of gold and US$10 per ounce of
      silver.




91




**Proven
      and Probable Ore Reserves at December 31, 2007** (1)(2)




Julcani
            
            Uchucchacua (5)
            
            Orcopampa
            
            Recuperada
            
            Colquijirca (4)
            
            Ishihuinca
            
            Antapite (6)
            
            Shila-Paula (3)
            
            Poracota
            
            Total/AverageOre
                Reserves (ST)
            
            
            201,365
            
            
            4,636,625
            
            
            1,301,940
            
            
            299,585
            
            
            21,622,137
            
            
            32,408
            
            
            281,005
            
            
            121,761
            
            
            542,806
            
            
            29,039,632Grade:Gold
                (oz./ST)
            
            
            —
            
            
            —
            
            
            0.633
            
            
            —
            
            
            0.0048
            
            
            0.383
            
            
            0.297
            
            
            0.794
            
            
            0.359
            
            
            0.045Silver
                (oz./ST)
            
            
            21.00
            
            
            14.6
            
            
            0.20
            
            
            7.10
            
            
            1.262
            
            
            —
            
            
            0.80
            
            
            2.4
            
            
            0.16
            
            
            3.582Copper
                (%)
            
            
            0.19
            
            
            —
            
            
            —
            
            
            —
            
            
            0.995
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            0.757Zinc
                (%)
            
            
            0.20
            
            
            2.78
            
            
            —
            
            
            5.10
            
            
            2.71
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            2.566Lead
                (%)
            
            
            1.80
            
            
            1.96
            
            
            —
            
            
            4.60
            
            
            0.905
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1.068Gold
                (oz.)
            
            
            —
            
            
            —
            
            
            824,128
            
            
            —
            
            
            104,146
            
            
            12,416
            
            
            83,509
            
            
            96,678
            
            
            195,048
            
            
            1,315,925Silver
                (oz.)
            
            
            4,228,665
            
            
            67,695,026
            
            
            260,388
            
            
            2,127,054
            
            
            27,279,843
            
            
            —
            
            
            224,750
            
            
            292,226
            
            
            87,392
            
            
            102,195,344Copper
                (ST)
            
            
            383
            
            
            —
            
            
            —
            
            
            —
            
            
            215,124
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            215,507Zinc
                (ST)
            
            
            403
            
            
            128,948
            
            
            —
            
            
            15,279
            
            
            585,948
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            730,578Lead
                (ST)
            
            
            3,625
            
            
            90,861
            
            
            —
            
            
            13,781
            
            
            195,750
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            304,017


______________


(1)
            Reserves
                as stated are diluted and mineable.


(2)
            Incorporates
                losses for mining dilution and
                recovery.


(3)
            Reflects
                the consolidation as of January 1, 2005 of the operating data of
                Paula
                into Shila’s operating data.


(4)
            Ore
                reserves Zn-Pb-Ag plus Cu-Ag-Au
                (Marcapunta).


(5)
            Ore
                reserves Uchucchacua plus ore reserves Pozo
                Rico.


(6)
            Ore
                reserves Antapite plus ore reserves Jatun
                Orcco.





Eight
      underground mines and one open pit mine, Colquijirca, comprise our mining
      operations. Since establishing a significant amount of reserves in underground
      mines requires costly and extensive exploration programs, we have, in order
      to
      control costs, traditionally pursued an exploration and development program
      in
      our mines designed to establish an amount of reserves sufficient to permit
      the
      steady production of minerals over an extended period of time. The following
      table sets forth the aggregate amount of production of ore, gold and silver
      and
      the average grade of gold and silver for each of our nine mines for the ten-year
      period ended December 31, 2007, calculated in each case on the basis of 100
      percent of the relevant mine’s production.


Julcani
              
              Uchucchacua
              
              Orcopampa
              
              Recuperada
              
              Colquijirca
              
              Ishihuinca
              
              Antapite
              
              Shila-Paula(1)
              
              Poracota
              
              TotalOre
                  mined (ST)
              
              
              89,100
              
              
              850,463
              
              
              478,669
              
              
              98,970
              
              
              2,125,332
              
              
              54,740
              
              
              178,969
              
              
              68,858
              
              
              61,867
              
              
              4,006,968Gold
                  produced (oz.)
              
              
              27
              
              
              —
              
              
              267,935
              
              
              —
              
              
              —
              
              
              14,882
              
              
              72,171
              
              
              32,261
              
              
              16,679
              
              
              403,955Average
                  Gold Grade (oz./ST)
              
              
              0.001
              
              
              —
              
              
              0.581
              
              
              —
              
              
              —
              
              
              0.332
              
              
              0.420
              
              
              0.491
              
              
              0.318
              
              
              0.101Silver
                  produced (oz.)
              
              
              1,483,428
              
              
              9,873,772
              
              
              77,666
              
              
              695,970
              
              
              7,099,093
              
              
              —
              
              
              90,368
              
              
              104,711
              
              
              5,499
              
              
              19,430,507Average
                  silver Grade (oz./ST)
              
              
              17.6
              
              
              16.02
              
              
              0.26
              
              
              7.45
              
              
              4.82
              
              
              —
              
              
              0.73
              
              
              2.10
              
              
              0.11
              
              
              4.85


____________


(1)  Reflects
      the consolidation as of January 1, 2005 of the operating data of Paula into
      Shila’s operating data.




92




***Yanacocha’s
      Properties***




***Operating
      Properties***




For
      operating data (including ore mined, average gold grade of ore mined and gold
      production) for each of Yanacocha’s operating properties and a description of
      how ore is processed and the source of electricity and water for each of
      Yanacocha’s operating properties, see “—Yanacocha—Overview” and “—Description of
      Yanacocha’s Operations.”




*Carachugo*




Carachugo
      is a 90-hectare gold deposit with a leach pad that covers approximately 332
      hectares. Carachugo, Yanacocha’s first mine, commenced operations in August
      1993. Mining is conducted by the open-pit method. Carachugo has one ore
      processing facility.




*Maqui
      Maqui*




Maqui
      Maqui is a 75-hectare gold deposit with a leach pad covering 67 hectares,
      located five kilometers northeast of the Carachugo pit. Mining operations at
      Maqui Maqui began in October 1994 and used the open-pit mining method. Although
      mining operations at Maqui Maqui ceased in September 2000, gold recovery from
      the leach pad continues.




*San
      José*




San
      José
is a 100-hectare gold deposit, located 1.5 kilometers southwest of the Carachugo
      pit, that shares the leach pad located at Carachugo. Mining operations at San
      José began in January 1996 using the open-pit mining method. Mining operations
      at San José temporarily ceased during the fourth quarter of 2002 and reopened in
      2005 to complete San José East. San José West is scheduled to commence
      operations in 2010.




*Cerro
      Yanacocha*




Cerro
      Yanacocha is a 247-hectare gold deposit (ultimate pit) with a leach pad covering
      approximately 315 hectares. The Cerro Yanacocha pit is located two kilometers
      northwest of the Carachugo pit. Operations began in the fourth quarter of 1997
      using the open-pit mining method. Cerro Yanacocha includes a carbon column
      gold
      recovery plant and a Merrill-Crowe-type processing facility.




*La
      Quinua*




La
      Quinua
      is a 376-hectare gold deposit (ultimate pit) with a leach pad covering 336
      hectares. The La Quinua pit is located three kilometers southwest of the Cerro
      Yanacocha pit. Operations began in the fourth quarter of 2001 using the open-pit
      mining method. All solution processing occurs at the Cerro Yanacocha plant
      following treatment at the La Quinua leach pad and carbon column
      facility.




The
      La
      Quinua mining operation included Cerro Negro, a 15-hectare gold deposit
      (ultimate pit) which is located six kilometers southwest of the La Quinua pit.
      Cerro Negro utilized the La Quinua leach pad. Operations began in April 2004
      using the open-pit mining method and all solution processing occurred at the
      Cerro Yanacocha plant following treatment at the La Quinua leach pad and carbon
      column facility. Mining operations at Cerro Negro ceased in March
      2005.




93




*China
      Linda*




In
      October 1999, we commenced lime production at the China Linda plant, which
      is
      located 12 kilometers to the northeast of the Yanacocha installations, in
      Cajamarca. Access to the plant from Yanacocha is by a ten kilometer private,
      unpaved road. We had 100 percent ownership of China Linda until December 19,
      2000, at which date the plant became Yanacocha’s property pursuant to the
      unitization of our and Newmont Mining’s properties in Northern Peru. In January
      2002, Yanacocha took over the operation of the China Linda plant. See “Item 4.
      Information on the Company—The Company—History and Development.” Lime is used in
      the gold and silver mining process to regulate the alkalinity of the cyanide
      solutions in the leaching process and for pH control in water treatment
      applications. Currently, the plant has a production capacity of 63,000 tons
      of
      lime per year. Additionally, construction gravel is obtained as a
      sub-product.




***Reserves***




Proven
      and probable reserves are based on extensive drilling, sampling, mine modeling
      and metallurgical testing from which economic feasibility is determined. Under
      the Management Contract, Newmont Mining, in conjunction with Yanacocha,
      calculates Yanacocha’s reserves by methods generally applied within the mining
      industry and in accordance with SEC Industry Guide 7. Reserves represent
      estimated quantities of proven and probable ore that under present and
      anticipated conditions may be economically mined and processed.




The
      following table lists Yanacocha’s proven and probable reserves and the average
      grade of ore as of December 31, 2003 through December 31, 2007. The table also
      includes proven and probable reserves for the districts of Yanacocha and Conga,
      along with average grade of ore. Calculations with respect to the estimates
      of
      proven and probable reserves are based on a gold price of US$575 per ounce
      as of
      December 31, 2007, US$500 per ounce as of December 31, 2006, US$400 per ounce
      as
      of December 31, 2005, US$350 per ounce as of December 31, 2004 and US$325 per
      ounce as of December 31, 2003. Calculations with respect to Conga’s copper
      reserves were calculated at a price of US$1.75 per pound as of December 31,
      2007, US$1.00 per pound as of December 31, 2006 and 2005 and US$0.90 per pound
      as of December 31, 2004. The districts of Yanacocha’s and Conga’s proven and
      probable reserves represent the total quantity of ore to be extracted from
      the
      deposits, allowing for mining efficiencies and ore dilution. Ounces of gold
      and
      pounds of copper in the districts of Yanacocha’s and Conga’s proven and probable
      reserves are calculated prior to any losses during metallurgical
      treatment.




94




Proven
                    and Probable
                  Reserves
                    at
                  December
                    31, 2007
                
                Proven
                    and Probable
                  Reserves
                    at
                  December
                    31, 2006
                
                Proven
                    and Probable
                  Reserves
                    at
                  December
                    31, 2005Tonnage
                
                Average
                  Gold
                    Grade
                
                Ounces
                  Contained
                
                Tonnage
                
                Average
                  Gold
                    Grade
                
                Ounces
                  Contained
                
                Tonnage
                
                Average
                  Gold
                    Grade
                
                Ounces
                  Contained(thousands
                    of DST)
                
                (oz./DST)
                
                (thousands
                    of ounces)
                
                (thousands
                    of DST)
                
                (oz./DST)
                
                (thousands
                    of ounces)
                
                (thousands
                    of DST)
                
                (oz./DST)
                
                (thousands
                    of ounces)Maqui
                    Maqui
                
                
                5,930
                
                
                0.038
                
                
                225
                
                
                7,013
                
                
                0.028
                
                
                198
                
                
                7,889
                
                
                0.026
                
                
                203Quecher
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Antonio
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Cerro
                    Quilish
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Cerro
                    Negro
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Carachugo
                
                
                68,951
                
                
                0.043
                
                
                2,931
                
                
                83,091
                
                
                0.039
                
                
                3,231
                
                
                69,016
                
                
                0.040
                
                
                2,763San
                    José
                
                
                7,970
                
                
                0.021
                
                
                166
                
                
                8,225
                
                
                0.019
                
                
                160
                
                
                7,334
                
                
                0.021
                
                
                153Giuliana
                
                
                210
                
                
                0.029
                
                
                6
                
                
                1,415
                
                
                0.025
                
                
                36
                
                
                -
                
                
                -
                
                
                -Cerro
                    Yanacocha
                
                
                136,102
                
                
                0.035
                
                
                4,781
                
                
                179,872
                
                
                0.028
                
                
                5,103
                
                
                208,178
                
                
                0.033
                
                
                6,807La
                    Quinua
                
                
                73,101
                
                
                0.022
                
                
                1,609
                
                
                83,926
                
                
                0.020
                
                
                1,670
                
                
                214,643
                
                
                0.027
                
                
                5,812Tapado
                
                
                57,783
                
                
                0.041
                
                
                2,351
                
                
                66,842
                
                
                0.040
                
                
                2,661
                
                
                -
                
                
                -
                
                
                -Corimayo
                
                
                57,584
                
                
                0.043
                
                
                2,470
                
                
                57,201
                
                
                0.053
                
                
                3,019
                
                
                62,755
                
                
                0.049
                
                
                3,074In
                    process
                
                
                35,313
                
                
                0.034
                
                
                1,219
                
                
                45,524
                
                
                0.031
                
                
                1,413
                
                
                71,108
                
                
                0.028
                
                
                1,968Subtotal
                    Yanacocha/avg
                
                
                442,945
                
                
                0.036
                
                
                15,758
                
                
                533,110
                
                
                0.033
                
                
                17,491
                
                
                640,923
                
                
                0.032
                
                
                20,780Subtotal
                    Minas Conga/avg.*
                
                
                560,447
                
                
                0.021
                
                
                11,836
                
                
                560,447
                
                
                0.021
                
                
                11,836
                
                
                617,787
                
                
                0.019
                
                
                11,836Total/average
                
                
                1,003,392
                
                
                0.028
                
                
                27,594
                
                
                1,093,557
                
                
                0.027
                
                
                29,327
                
                
                1,258,710
                
                
                0.026
                
                
                32,616


Proven
                  and Probable
                Reserves
                  at
                December
                  31, 2004
              
              Proven
                  and Probable
                Reserves
                  at
                December
                  31, 2003Tonnage
              
              Average
                Gold
                  Grade
              
              Ounces
                Contained
              
              Tonnage
              
              Average
                Gold
                  Grade
              
              Ounces
                Contained(thousands
                  of DST)
              
              (oz./DST)
              
              (thousands
                  of ounces)
              
              (thousands
                  of DST)
              
              (oz./DST)
              
              (thousands
                  of ounces)Maqui
                  Maqui
              
              
              5,694
              
              
              0.025
              
              
              141
              
              
              -
              
              
              -
              
              
              -Quecher
              
              
              -
              
              
              -
              
              
              -
              
              
              1,128
              
              
              0.037
              
              
              43Antonio
              
              
              -
              
              
              -
              
              
              -
              
              
              2,186
              
              
              0.050
              
              
              109Cerro
                  Quilish
              
              
              -
              
              
              -
              
              
              -
              
              
              143,431
              
              
              0.027
              
              
              3,855Cerro
                  Negro
              
              
              253
              
              
              0.031
              
              
              8
              
              
              20,329
              
              
              0.032
              
              
              643Carachugo
              
              
              66,405
              
              
              0.042
              
              
              2,777
              
              
              63,976
              
              
              0.043
              
              
              2,762San
                  José
              
              
              10,818
              
              
              0.020
              
              
              213
              
              
              9,475
              
              
              0.021
              
              
              198Cerro
                  Yanacocha
              
              
              257,363
              
              
              0.032
              
              
              8,328
              
              
              311,979
              
              
              0.031
              
              
              9,783La
                  Quinua
              
              
              275,157
              
              
              0.027
              
              
              7,388
              
              
              372,739
              
              
              0.025
              
              
              9,395Corimayo
              
              
              58,425
              
              
              0.051
              
              
              3,006
              
              
              54,442
              
              
              0.054
              
              
              2,955In
                  process
              
              
              60,860
              
              
              0.028
              
              
              1,685
              
              
              67,363
              
              
              0.029
              
              
              1,966Subtotal
                  Yanacocha/avg
              
              
              734,974
              
              
              0.032
              
              
              23,547
              
              
              1,047,049
              
              
              0.030
              
              
              31,710Subtotal
                  Minas Conga/avg*
              
              
              371,110
              
              
              0.023
              
              
              8,711
              
              
              —
              
              
              —
              
              
              —Total/average
              
              
              1,106,084
              
              
              0.029
              
              
              32,257
              
              
              1,047,049
              
              
              0.030
              
              
              31,710


____________________


*
      Minas
      Conga’s proven and probable reserves as of December 31, 2007 include
      3.2 billion pounds of 0.261 percent grade copper.




95




As
      of
      December 31, 2007, the Yanacocha District’s proven and probable reserves
      (excluding Conga’s proven and probable reserves) were estimated to be 15.8
      million ounces of gold, a 9.7 percent decrease **** from
      the
      Yanacocha District’s proven and probable reserves as of December 31, 2006, which
      were estimated to be 17.5 million ounces of gold. The decrease **** in
      reserves of gold was mainly due to the depletion of 2.2 million ounces of
      gold due to mining and reserves revisions of 0.03 million ounces of gold
      reserves, partially offset by an increase of 0.5 million ounces of gold
      reserves due to an increase in the price of gold and updated grade in recovery
      models. ****




As
      of
      December 31, 2007, Conga’s proven and probable reserves were estimated to be
      11.8 million ounces of gold and 3.2 billion pounds of copper, representing
      no change from the 2006 gold reserves and **** 2006
      copper reserves, respectively. ****




As
      of
      December 31, 2007, Yanacocha’s total proven and probable reserves (including
      Conga) were estimated to be 27.6 **** million
      ounces of gold, representing a 5.8 **** percent
      decrease **** over
      Yanacocha’s total proven and probable reserves as of December 31, 2006, which
      were estimated to be 29.3 million ounces of gold. Yanacocha’s total proven
      and probable reserves of copper were 3.2 billion pounds as of December 31,
      2007,
      representing no change from Yanacocha’s total proven and probable reserves as of
      December 31, 2006. Newmont Mining did not quote silver reserves at Yanacocha
      for
      the year ended December 31, 2007 due to recovery issues.




Based
      on
      the current recovery rate and estimated gold production levels in 2007,
      Yanacocha’s proven and probable reserves as of December 31, 2007 will be
      depleted by 2014 unless Yanacocha continues to add to its reserves. Yanacocha’s
      management believes that its prospective land positions and mining concessions
      provide it with potential for future exploration and additions to its reserves.




96




ITEM
      5.Operating
      and Financial Review and Prospects




**THE
      COMPANY**




***Introduction***




The
      following discussion should be read in conjunction with the Financial Statements
      as of December 31, 2006 and 2007 and for the years ended December 31, 2005,
      2006
      and 2007 and the related notes thereto included elsewhere in this Annual Report.
      The Financial Statements are prepared and presented in accordance with Peruvian
      GAAP, which differ in certain respects from U.S. GAAP. Note 35 to the Financial
      Statements provides a description of the principal differences between Peruvian
      GAAP and U.S. GAAP, as such differences relate to us, and Note 36 to the
      Financial Statements provides a reconciliation to U.S. GAAP of our net income
      for the years ended December 31, 2005, 2006 and 2007 and shareholders’ equity as
      of December 31, 2005, 2006 and 2007. We present our financial statements in
      U.S.
      Dollars.




**Operating
      Results**




***General***




*Overview.* We
      were
      established in 1953 and are one of Peru’s leading producers of gold, silver and
      other metals. Our consolidated financial statements comprise all of our accounts
      and those of our subsidiaries, which include: (i) the Julcani, Uchucchacua,
      Orcopampa, Antapite and Ishihuinca mining units; (ii) the Colquijirca and
      Shila-Paula mines, which are owned through consolidated subsidiaries; (iii)
      Chaupiloma, which receives a royalty payment from Yanacocha; (iv) Condesa,
      which
      is mainly a holding company for investments in us, Yanacocha and other
      affiliated mining companies; (v) Conenhua, which is mainly engaged in the
      transmission of electric power to Yanacocha and other mining companies; (vi)
      Cerro Verde, which is an equity investee engaged in the exploitation and
      commercialization of copper; and (vii) other minor subsidiaries.




*Yanacocha.* A
      substantial part of our net income before income tax was derived from our equity
      interest in Yanacocha. We have a 43.65 percent equity participation in Yanacocha
      through Condesa. Our interest in Yanacocha’s partnership’s equity is accounted
      for under the equity method and is included under the caption “Investments in
      shares” on our consolidated balance sheets. According to International
      Accounting Standard 28, we make the appropriate adjustments to the Yanacocha
      Financial Statements prepared under Peruvian GAAP to conform to our accounting
      policies to determine our equity share in Yanacocha.




*Cerro
      Verde.* We
      hold a
      direct interest in Cerro Verde. During 2005, we acquired an additional interest
      in Cerro Verde which allows us to exercise significant influence over this
      company. See Note 10(c) to the Financial Statements. As a result, we account
      for
      our investment in Cerro Verde using the equity method. According to
      International Accounting Standard 28, we make the appropriate adjustments to
      the
      Cerro Verde financial statements prepared under Peruvian GAAP to conform to
      our
      accounting policies to determine our equity share in Cerro Verde. As of December
      31, 2007 we had an 18.50 percent equity participation in Cerro
      Verde.




*Results
      of operations.* The
      primary factors affecting our results of operations are (i) the amount of gold,
      silver, zinc and copper produced and sold by us; (ii) prevailing world market
      prices for gold, silver, zinc and copper; (iii) commercial terms with respect
      to
      the sale of ore concentrates; and (iv) our operating expenses.




97




*Gold
      and silver price hedging* .
      Our
      revenues and earnings are strongly influenced by world market prices for gold,
      silver, zinc and copper that fluctuate widely and over which we have no control.
      Depending upon the metal markets and other conditions, we may from time to
      time
      hedge our gold and silver sales in order to decrease our exposure to
      fluctuations in the prices of these metals. Between 1998 and 2004, our hedging
      strategy was focused on long-term position-taking on the price of precious
      metals. In October 2004, our Board of Directors issued a mandate not to enter
      into new hedging transactions. Due to actions taken in 2007 and early 2008
      to
      release our gold hedge book from specified fixed prices, we are now completely
      unhedged as to the price at which our gold and silver will be sold. As a result,
      we are fully exposed to the effects of changes in prevailing market prices
      of
      gold and silver.




We
      regularly examine our strategy with regard to hedging. Our Chief Executive
      Officer, Chief Financial Officer and Commercial Deputy Manager coordinate our
      day-to-day hedging activities according to a policy established with the Board
      of Directors. See “Item 11. Quantitative and Qualitative Disclosures About
      Market Risk”, “Item 3. Key Information-Risk Factors—Factors Relating to the
      Company—Prices of Gold, Silver and Copper” and “—Hedging” and Note 30 to the
      Financial Statements.




*Operating
      costs and expenses.* Operating costs and expenses consist of (i) operating costs, which are direct
      production costs, the major component of operating expenses; (ii) exploration
      and development costs in operational mining sites; (iii) depreciation and
      amortization expenses; (iv) exploration costs in non-operational mining areas;
      (v) general and administrative expenses, which principally consist of personnel
      expenses; (vi) royalties, which consist of payments to third parties and the
      Peruvian government to operate leased mining rights; and (vii) selling expenses,
      which principally consist of freight expenses.




*Reserves.* We
      utilize geological mapping, projection of ore-bearing structures, diamond
      drilling, core logging and chemical assaying, in addition to drifting along
      previously indicated mineralization, to replace and grow reserves. In addition,
      we use metallurgical test-work of core and bulk samples as a follow-up activity
      to prove the amenability of any previously indicated mineralization to certain
      methods available on site. We continuously analyze this information with respect
      to tonnage, precious-metals average grades, metallurgical recoveries and
      economic value and allocate funds preferentially to those projects that have
      the
      best potential to sustain or enhance profitable mine production in the
      near-term. Our mining operations are primarily conducted underground and consist
      of deposits that are difficult to explore and measure in advance of mining
      and
      in which the value or prospects for ore based on geologic evidence exceeds
      the
      value based on proved reserves throughout most of the life of mines supported
      by
      them, or extramensurate deposits.




In
      addition, underground mine infrastructure, such as declines, shafts and/or
      dewatering/ore haulage crosscuts, that facilitate access to ore reserves are
      constructed and categorized as mine development. We consider such underground
      mine infrastructure vital to assure sustainable mine production and reserve
      production. The design, construction and implementation of our underground
      mine
      infrastructure are presented and supervised by our Operations Manager with
      the
      Board of Directors’ approval. We capitalize mine development and mineral land
      costs incurred after we have identified proven and probable reserves. Upon
      commencement of production, we amortize these costs over the expected life
      of
      the mining area, based on proven and probable reserves and other
      factors.




We
      believe that our replacement measures have been effective to increase reserves.
      Reserves at our Orcopampa mine, our principal gold mining operation, have
      increased steadily over the past five years. Gold reserves at the Orcopampa
      and
      Poracota mines increased from 0.54 million ounces for the year ended December
      31, 2003 to 1.0 million ounces for the year ended December 31, 2007. Silver
      reserves at the Uchucchacua mine, our principal silver mining operation, have
      decreased over the past five years, from 64.6 million ounces for the year ended
      December 31, 2003 to 63.9 million ounces for the year ended December 31,
      2007.




98




Our
      other
      mining operations are smaller and have variable fluctuations in production
      and
      reserves due to complexities of the ore located in certain mining operations
      (such as the Colquijirca mine); the sale of certain mining operations (such
      as
      the Huallanca mine); closures of mining operations (such as the Shila-Paula
      and
      Recuperada mines); and the production of silver only as by-product of gold
      (such
      as the Orcopampa, Antapite and Shila-Paula mines).




*Net
      income and net distributable income.*  Under
      Peruvian law, each company is required to establish a legal reserve of at least
      20 percent of its paid-in capital on an unconsolidated basis. An annual
      contribution of at least 10 percent of net income must be made until such legal
      reserve equals 20 percent of paid-in capital. The legal reserve may offset
      losses or be capitalized. However, following any instance in which the reserve
      is used, Peruvian law calls for mandatory replenishment of the reserve.




*Royalties.* R oyalty
      expenses consist mainly of payments made by us pursuant to lease agreements
      relating to mining rights for the Orcopampa and Ishihuinca mines. Specifically,
      we pay the lessor a royalty of 10 percent of the value of the concentrates
      produced in Orcopampa mine and 7 percent of the value of the concentrates
      produced in the Ishihuinca mine.




In
      addition, on June 24, 2004, the Peruvian Congress approved Law 28258 - Mining
      Royalties Law. This law established a mining royalty that owners of mining
      concessions must pay to the Peruvian government for the exploitation of metallic
      and non-metallic resources. The mining royalties are calculated on a sliding
      scale with rates ranging from one to three percent of the value of mineral
      concentrates based on international market prices. See “Item 4. Information on
      the Company—The Company—Business Overview—Regulatory Framework—Mining
      Royalties.”




*Environmental
      protection laws and related regulations.*  Our
      business is subject to Peruvian laws and regulations relating to the exploration
      and mining of mineral properties, as well as the possible effects of such
      activities on the environment. We conduct our operations substantially in
      accordance with such laws and regulations.




According
      to environmental regulations set forth by the MEM, we submitted EVAPs for our
      operating mines in 1995. See “Item 4. Information on the Company—The
      Company—Business Overview — Regulatory
      Framework—Environmental Matters.” Based on the results of the EVAPs, PAMAs were
      prepared and submitted to the MEM in 1996 and approved by the MEM in 1997.




Pursuant
      to the environmental regulations, mines were given a five or ten-year period
      to
      comply with the agreements reflected in each PAMA. See “Item 4. Information on
      the Company—The Company—Business Overview—Regulatory Framework—Environmental
      Matters.” Upon completion of the project and agreement with regard to the
      financial investment, a final report of execution was submitted to the MEM
      and
      the MEM designated a group of independent companies, registered with the MEM,
      to
      conduct an audit of each PAMA. Thereafter, the MEM issued a resolution
      recognizing compliance with the relevant mine’s PAMA and completion of the
      adjustment process. Resolutions for each of our mines were issued between
      November 2002 and April 2003 and thereafter there have been inspection audits
      each semester. As of December 31, 2005, the activities defined in the PAMAs
      for
      the Uchucchacua, Julcani, Orcopampa, Colquijirca and Ishihuinca mining units
      had
      been completed.




99




Throughout
      this process, we have been in substantial compliance with applicable maximum
      emission levels and other legal requirements. In addition, Law No. 28090
      providing for the closing of mines was published on October 14, 2003. The
      corresponding ruling was approved on August 15, 2005. In May and August 2006,
      we
      submitted a feasibility-level Closure Plan to the MEM for our mining units
      and
      exploration projects. See “Item 4. Information on the Company — The
      Company — Business
      Overview — Regulatory
      Framework — Environmental
      Matters.” ****




On
      July
      6, 2004, the Peruvian Congress enacted Law No. 28271 - Ley que Regula los
      Pasivos Ambientales de la Actividad Minera (Law that Regulates the Environmental
      Liabilities for the Mining Activity). This law regulates identification of
      potential environmental liabilities for mining activities and the means to
      remediate the affected areas. In order to comply with Law No. 28271, we are
      performing reviews in areas currently abandoned or inactive in which we
      previously carried out exploitation activities, in order to determine which
      remediation activities, if any, are necessary. In August 2006, we conducted
      and
      delivered an environmental liabilities inventory to the MEM for liabilities
      related to our former exploration activities. Subsequently, in December 2006
      we
      presented the Environmental Liabilities Closure Plans for the MEM’s evaluation.
      See “Item 4. Information on the Company—The Company—Business Overview—Regulatory
      Framework—Environmental Matters.”




In
      2005,
      2006 and 2007, we spent approximately US$2.0 million, US$2.3 million and
      US$2.66 million, respectively, in connection with environmental protection
      measures. We estimate that capital expenditures needed to comply with
      environmental regulations will be approximately US$3.0 million in each of
      2008 and 2009. This amount will be used on items such as new equipment and
      the
      construction of new processing plants and leaching fields, as well as the
      implementation of a program to minimize the environmental impact and improve
      the
      quality of mining residues. There are currently no legal or administrative
      proceedings against us for violation of environmental protection laws or other
      environmental regulations in Peru that could have a material adverse effect
      on
      our financial position or results of operations.




*Change
      of functional and reporting currency.* Effective
      January 1, 2006, our functional and reporting currency changed from the Nuevo
      Sol to the Dollar. This change resulted from an evaluation of the currency
      denominations of our cash flows in recent years and, in particular, reflects
      the
      increasing significance to our financial position of dividends from affiliates
      denominated in Dollars to our financial position, results of operation and
      cash
      flows. Profit and loss accounts for the year ended December 31, 2005 have been
      translated into Dollars using the average exchange rate of US$1.00 to
      S/.3.305.




***Critical
      Accounting Estimates***




The
      following is a discussion of our application of critical accounting policies
      that require our management, or Management, to make assumptions about matters
      that are highly uncertain at the time the accounting estimate is made, and
      where
      different estimates that Management reasonably could have used in the current
      period, or changes in the accounting estimate that are reasonably likely to
      occur from period to period, would have a material impact on our financial
      statements. Management has identified the following accounting estimates as
      critical:




§
            Impairment
                of long-lived assets;




§
            Useful
                life of property, plant and
                equipment;




§
            Amortization
                of capitalized mining costs;




§
            Deferred
                stripping costs;




100




§
            Deferred
                income tax asset;




§
            Accrual
                for mine closing costs;




§
            Fair
                value of derivative instruments;
                and




§
            Contingencies.




We
      also
      have certain accounting policies that we consider to be important, such as
      our
      policies for investments carried at fair value, revenue recognition and
      exploration costs, that do not meet the definition of critical accounting
      estimates as they do not require Management to make estimates or judgments
      that
      are subjective or highly uncertain.




Management
      has discussed the development and selection of our critical accounting estimates
      with the Audit Committee of the Board of Directors.




*Impairment
      of long-lived assets*




We
      review
      and evaluate the impairment of our long-lived assets if an event occurs that
      indicates that the book value of such assets may not be recoverable. An
      impairment loss represents the amount by which the book value of an asset
      exceeds the higher of its net selling price or use value. The value in-use
      of an
      asset is generally calculated as the present value of estimated future cash
      flows expected to be earned from continual use of the asset and from its
      disposal at the end of its useful life. An impairment loss recognized in a
      previous year may be adjusted if there is any indication that the estimates
      used
      when the impairment loss was recognized should be adjusted to reflect a more
      favorable cash flow scenario. Future cash flow assumptions include, but are
      not
      limited to, estimates of recoverable ounces and tons of ore and metal, prices
      (which include current and historical prices, price trends and related factors),
      production levels and capital costs, all based on mine plans. Such future cash
      flow assumptions are valid when estimated but may change significantly when
      new
      information becomes available. Any difference between assumptions and actual
      market conditions could have an important effect on our financial condition
      and
      results of the operations.




In
      2007,
      Management evaluated the impairment of the long-lived assets of our mining
      units. As a result of this evaluation, no impairment loss resulted. Management
      used future cash flow estimates to evaluate the impairment of long-lived assets
      for this year. These estimates incorporate our own assumptions about the use
      of
      the assets, prices and exclude interest charges and income tax. Management
      believes such assumptions are reasonable in relation to the assumptions used
      by
      us in developing other information.




*Useful
      life of property, plant and equipment*




Depreciation
      is calculated under the straight-line method of accounting. The table set forth
      below reflects the estimated years of useful life for property, plant and
      equipment, based on current production levels and market prices:




Property,
                Plant and Equipment
            
            Estimated
                Years of Useful LifeBuildings,
                constructions and other
            
            6
                to 20Machinery
                and equipment
            
            4
                to 10





101




Certain
      of our depreciable assets, primarily buildings and constructions, have a useful
      life in excess of the current productive life of the mines because such assets
      may be transferred to another mine or converted to another use when production
      at the mine where it is currently used ceases. In addition, the expected
      productive life of the mine is normally higher than the current life derived
      from the proven and probable reserves at year-end. Rather than exploring
      long-term reserves, we focus on sustaining current reserves.




*Amortization
      of capitalized mining costs*




We
      capitalize mine infrastructure and mineral land costs incurred after Management
      has identified proven and probable reserves. Upon commencement of production,
      we
      amortize these costs over their expected lives, based on proven and probable
      reserves and other factors.




The
      process of estimating quantities of reserves is complex, requiring subjective
      decisions in the evaluation of all available geological, geophysical,
      engineering and economic data. The data for a given ore body may also change
      substantially over time as a result of numerous factors, including, but not
      limited to, additional exploration and construction activity, evolving
      production history and the continual reassessment of the viability of production
      under various economic conditions.




A
      material revision to existing reserve estimates could occur because of, among
      other things: revisions to geological data or assumptions; changes in assumed
      prices; and results of drilling and exploration activities. We make every effort
      to ensure that reported reserve estimates represent the most accurate assessment
      possible. However, because of the subjective decisions Management has to make,
      as well as variances in available data for each ore body, these estimates are
      generally uncertain.




Changes
      in reserve quantities, including changes resulting from gold, silver, zinc,
      lead
      and copper price assumptions, would cause corresponding changes in amortization
      expense in periods subsequent to the revision, and could result in impairment
      of
      the carrying amount of property, plant and equipment and capitalized mining
      costs.




We
      estimate reserves for our direct operations assuming a US$575.00 per ounce
      gold
      price, a US$10.00 **** per
      ounce
      silver price, a US$1,901.00 **** per
      metric ton zinc price and a US$1,050.00 **** per
      metric ton lead price and US$1.20 per pound copper price.




The
      mines
      where amortization charges would be most significantly affected by changes
      in
      reserve estimates are Uchucchacua, Orcopampa, Colquijirca, Poracota and
      Antapite. These mines generally have the largest amounts of property, plant
      and
      equipment subject to depreciation and the highest per ounce amortization
      charges.




*Deferred
      income tax asset*




*Effective
      Income Tax Rate – 2007*




Our
      income tax expense decreased to US$44.0 million in 2007 from
      US$64.0 million in 2006, mainly as a result of the following:




(a)
      Decreased pre-tax income from US$580.2 million in 2006 to US$415.1 million
      in
      2007, mainly
      due to the net loss as a result of the release of fixed-price components in
      commercial contracts amounting to US$185.9 million, which is presented as an
      unusual item in the statement of income .




102




(b)
      Non-taxable income. According to current tax regulations, equity participation
      in affiliates, including the receipt of dividends, is not taxable in Peru.
      In
      2007, the equity participation in affiliated companies decreased from US$313.2
      million in 2006 to US$249.6 million in 2007, which reduced our income tax
      expense by US$45.6 million in 2007. In addition, the gain on change in the
      fair
      value of gold certificates is not taxable. We incurred a loss on change in
      the
      fair value of gold certificates of US$4.9 million in 2006 compared to a gain
      of
      US$5.1 million in 2007, which increased our income tax expense by US$2.8
      million.




(c)
      Non-deductible expenses. Pursuant to current tax regulations, the loss (negative
      fair value) on derivative instruments entered into with investment banks is
      not
      deductible to the extent it is generated abroad. In 2007, there was no income
      tax effect related to losses on derivatives instruments, while in 2006 we
      obtained a loss of US$13.3 million on derivative instruments resulting in an
      income tax effect of US$3.7 million. In addition, t he
      fair
      values of normal sales contracts of US$77.4 million decreased
      our income tax expense by US$21.4 million in 2006 .




*Effective
      Income Tax Rate – 2006*




Our
      income tax expense of US$64.0 million in 2006 differed from our income tax
      expense of US$22.8 million in 2005 mainly as a result of the following:




(a)
      Increased pre-tax income from US$331.2 million in 2005 to US$580.2 million
      in
      2006.




(b)
      Non-taxable income. According to current tax regulations, equity participation
      in affiliates, including the receipt of dividends, is not taxable (permanent
      item). In 2006, we reduced our income tax expense by US$86.4 million
      compared to a US$72.9 million reduction in 2005 due to our equity
      participation.




(c)
      Non-deductible expenses. Pursuant to current tax regulations, the loss (negative
      fair value) on derivative instruments entered into with investment banks is
      not
      deductible to the extent it is generated abroad (permanent item). In 2006,
      we
      increased our income tax expense by US$3.7 million, compared to an increase
      of US$7.3 million in 2005, due to the non-deductible expense originated by
      our derivative contracts.




(d)
      Change of status of derivative contract. In March 2006, we modified the terms
      of
      our gold derivative contracts maintained as of December 31, 2005 in order to
      qualify them as normal sales contracts; according to this change, the related
      loss (negative fair value) became a temporary difference under Peruvian tax
      regulation. Due to the change from a permanent to a temporary item, we reduced
      our income tax expense by US$21.4 million 2006 compared to a
      US$14.0 million reduction in 2005.




*Accrual
      for mine closing costs*




We
      record
      a provision for mine closure when a legally enforceable obligation arises,
      which
      is independent of the full depletion of the mine reserves. Once such an
      obligation has been appropriately measured, it is recorded by creating a
      liability equal to the amount of the obligation and recording a corresponding
      increase to the carrying amount of the related long-lived asset (mine
      development cost and property, plant and equipment). Over time, the amount
      of
      the obligation changes, impacting recording and accretion expenses.
      Additionally, the capitalized cost is depreciated and/or amortized based on
      the
      useful lives of the related assets.




103




Any
      difference in the settlement of the liability will be recorded in the results
      of
      the period in which such settlement occurs. The changes in the fair value of
      an
      obligation or the useful life of the related assets that occur from the revision
      of the initial estimates should be recorded as an increase or decrease in the
      book value of the obligation and related asset.




Following
      our accounting treatment, we have recorded an accrual for mine closure costs
      of
      US$57.9 million as of December 31, 2007 in order to comply with governmental
      requirements for environmental remediation.




*Fair
      value of derivative financial instruments*




(a)  *Outstanding
      derivative contracts*




We
      recognize derivative instruments as assets or liabilities, measured at their
      fair value, in our consolidated balance sheets pursuant to IAS 39, “Financial
      Instruments — Recognition and Measurement.”




Subsidiary
      derivative contracts. During 2007, our indirect subsidiary, El Brocal, entered
      into price-hedge agreements to protect future cash flows. The key terms of
      these
      hedge agreements were negotiated to coincide with the negotiated terms of the
      commercial contracts to which they are related. The hedge of cash flows was
      assessed by El Brocal’s management as 100 percent effective, measured by using
      the dollars-offset method, which it believes best reflects the objective of
      managing price risk. In 2007, El Brocal posted a credit of US$8.0 million to
      the
“Unrealized gain on derivative financial instruments” equity account due to the
      changes in fair value. This amount, net of the deferred income tax and workers’
profit sharing amounting to US$2.8 million, is separately presented within
      equity. See Note 29 to the Financial Statements.




Our
      derivative contracts. During 2007, we held gold put option contracts, which
      grant us the right to sell 17,500 ounces of gold at an average price of US$345
      per ounce, depending on certain market conditions. These contracts were
      cancelled during April 2008 against a total payment in our favor of US$500.00.
      During 2006, we recorded a loss of US$13.3 million due to changes in the
      fair value of derivative instruments compared to a loss of US$26.6 million
      during 2005.




During
      the first quarter of 2006, our management completed modifications to the terms
      of all derivative contracts maintained as of December 31, 2005 in order to
      qualify them as normal sales contracts.




(b)  *Normal
      sale contracts*




To
      minimize future fluctuations in consolidated results of operations, during
      2003,
      2005 and 2006 we modified the terms of certain derivative contracts in order
      to
      qualify them as normal sale contracts. These contracts were replaced with a
      series of sales contracts requiring physical delivery of gold over future
      periods that do not extend beyond December 2012. Under the terms of the
      contracts, we will realize fixed or capped prices ranging up to US$451 per
      ounce
      of gold.




On
      January 15, 2007, we modified the schedule of commitments for gold with two
      of
      our clients. As a consequence of this modification, we transferred 208,000
      and
      108,000 gold ounces that had been committed for sale in 2007 and 2008,
      respectively, and committed them for sale in 2012 instead, without any cash
      disbursement. In addition, in March and May 2007, we negotiated with several
      counterparties to eliminate the fixed or maximum price component on determined
      commitments for a total of 971,000 gold ounces scheduled for delivery from
      2008
      through 2012, which required us to make aggregate payments of US$315.73 million.
      In January and February 2008, we negotiated with several counterparties to
      eliminate the fixed or maximum price component on all of our remaining gold
      commitments, representing a total of 922,000 gold ounces, which required us
      to
      make aggregate payments of US$517.14 million. After these transactions, we
      will
      continue delivering physical gold as scheduled but will receive the prevailing
      market price at the time of delivery.




104




(c)  *Embedded
      derivative due to changes of the prices in commercial
      contracts*




Substantially
      all of our concentrate sales contracts provide final copper pricing in a
      specified period (generally one to four months from the shipment date) based
      on
      quoted LME prices. We ultimately receive market prices based on prices in the
      specified future period; however, the accounting rules applied to these sales
      result in changes recorded to revenue until the specified future period. We
      record revenues and invoice customers at the time of shipment based on the
      current LME prices, which result in an embedded derivative on our provisional
      priced concentrate sales that are adjusted to fair value through earnings of
      each period until the date of final pricing. To the extent final prices are
      higher or lower than what was recorded on a provisional basis, an increase
      or
      decrease to revenues is recorded each reporting period until the date of final
      pricing. See Note 29 to the Financial Statements.




*Contingencies*




Contingent
      liabilities, when identified, are assessed as either remote, possible or
      probable. Contingent liabilities are recorded in the consolidated financial
      statements when it is probable that future events will confirm them and when
      their amount can be reasonably estimated. Contingent liabilities deemed as
      possible are only disclosed, together with a possible debit range, when
      determinable, in notes to the Financial Statements.




Contingent
      assets are not recognized in the financial statements; however, they may be
      disclosed in notes to the financial statements if it is probable that such
      contingent assets will be realized. See Note 32 to the Financial
      Statements.




**Results
      of Operations for the Twelve Months Ended December 31, 2007 and
      2006**




*Net
      sales.* Net
      sales increased **** by
      36.3
      percent, from US$548.1 million in 2006 to US$747.0 million in 2007,
      principally due to increases in the price and volume sold of gold and lead
      during 2007. The following tables reflect the average realized price and volume
      sold of gold, silver, lead and zinc during the years ended December 31, 2006
      and
      2007:




Average
                Realized Price
            
            Year
                ended December 31,2006
            
            2007
            
            VariationGold
                (US$/oz.)
            
            US$
            354.98
            
            US$
            684.59
            
            
            92.9
            %Silver
                (US$/oz.)
            
            
            11.92
            
            
            13.37
            
            
            12.2
            %Lead
                (US$/MT)
            
            
            1,319.89
            
            
            2,760.30
            
            
            109.1
            %Zinc
                (US$/MT)
            
            
            3,407.98
            
            
            3,069.26
            
            
            -9.9
            %Copper
                (US$/MT)
            
            
            7,037.74
            
            
            7,285.46
            
            
            3.5
            %




Volume
                Sold
            
            Year
                ended December 31,2006
            
            2007
            
            VariationGold
                (oz.)
            
            
            415,288
            
            
            418,999
            
            
            0.9
            %Silver
                (oz.)
            
            
            19,207,066
            
            
            16,734,876
            
            
            -12.9
            %Lead
                (MT)
            
            
            36,570
            
            
            41,535
            
            
            13.6
            %Zinc
                (MT)
            
            
            59,489
            
            
            79,139
            
            
            33.0
            %Copper
                (MT)
            
            
            98
            
            
            608
            
            
            520.4
            %




105




(a)  *Gold
      sales* .
      The
      average sales price for gold increased **** from
      US$354.98 per ounce in 2006 to US$684.59 **** per
      ounce
      in 2007. Additionally, gold sales volume increased **** from
      415,288 ounces in 2006 to 418,999 **** ounces
      in
      2007. The combined effect of these changes resulted in a US$139.4 million
      increase **** in
      income
      from sales of gold in 2007 compared to 2006. This increase was largely due
      to
      the increase in the average realized price.




(b) **  *Silver
      sales* .
      Average
      silver prices increased from US$11.92 per ounce in 2006 to US$13.37 per ounce
      in
      2007. The volume of silver sales decreased from 19,207,066 ounces in 2006 to
      16,734,876 ounces in 2007. The combined effect of these changes resulted in
      a
      US$5.2 million decrease in income from sales of silver in 2007 compared to
      2006.
      This decrease was due to decreased silver production at our Colquijirca
      mine.




(c)  *Lead
      sales* .
      Average
      lead prices increased from US$1,319.89 per metric ton in 2006 to US$2,760.30
      per
      metric ton in 2007. Additionally, the volume of lead sold increased from 36,570
      metric tons in 2006 to 41,535 metric tons in 2007. The combined effect of these
      changes resulted in a US$66.4 million increase in income from sales of lead
      in
      2007 compared to 2006. This increase was due to increased lead production at
      our
      Colquijirca mine.




(d)  *Zinc
      sales* .
      Average
      zinc prices decreased **** from
      US$3,407.98 per metric ton in 2006 to US$3,069.26 **** per
      metric ton in 2007. The volume of zinc sold increased from 59,489 metric tons
      in
      2006 to 79,139 metric tons in 2007. The combined effect of these changes
      resulted in a US$40.2 million **** increase **** in
      income
      from sales of zinc in 2007 compared to 2006. This increase **** was
      due
      to increased zinc production at our Colquijirca mine.




(e)  *Copper
      sales* .
      Average
      copper prices increased **** from
      US$7,037.74 per metric ton in 2006 to US$7,285.46 **** per
      metric ton in 2007. The volume of copper sold increased from 98 metric tons
      in
      2006 to 608 metric tons in 2007. The combined effect of these changes resulted
      in a US$3.7 million increase **** in
      income
      from sales of copper in 2007 compared to 2006. This increase **** was
      due
      to increased copper production at our Colquijirca mine.




The
      revenues from gold, silver, lead, zinc and copper mentioned above do not include
      refinery charges and penalties incurred, which amounted to US$136.8 **** million
      in 2007, compared to US$105.5 million in 2006. This increase **** was
      principally due to the higher volume of concentrates sold in 2007 compared
      to
      2006.




*Realization
      of deferred income from sale of future production* .
      To
      minimize future fluctuations in the consolidated results of operations, we
      modified the terms of certain derivative contracts in order to qualify them
      as
      normal sales contracts. During 2005 and 2006 our outstanding derivative
      contracts were replaced with a series of sales contracts that required physical
      delivery of gold over future periods that do not extend beyond 2012. Under
      the
      terms of these new contracts, our revenue will be capped at between US$332
      to
      US$451 per ounce of gold. The fair values of the replaced contracts were
      US$50.6 million and US$77.4 million in 2005 and 2006, respectively,
      and were calculated immediately prior to the execution of these contracts and
      recorded as deferred revenue in each year.




In
      2007
      we delivered 40,000 gold ounces compared to 388,000 gold ounces delivered in
      2006, as a result of agreements reached with certain of our customers to release
      the fixed price component in their commercial contracts and to modify the
      schedule of gold commitments. As a result, we recognized revenues of
      US$5.4 million in 2007 compared to US$50.3 million in 2006. See Note
      18 to the Financial Statements. On January 24 and February 6, 2008, we reached
      agreements with customers to eliminate the fixed price component in all of
      our
      remaining commercial contracts and to sell gold at market prices between 2010
      and 2012. See Note 34 to the Financial Statements.




106




*Royalty
      income.* In 2007,
      royalty income received by Chaupiloma amounted to US$34.0 million,
      representing a 29.9 percent decrease from the US$48.5 million of royalty
      income received in 2006. This decrease is attributed to decreased sales from
      Yanacocha in 2007, which resulted from a decrease in the volume of gold sold
      during 2007.




*Total
      operating costs* .
      Total
      operating costs increased **** by
      18.9
      percent, from US$226.4 million in 2006 to US$269.4 million in 2007,
      due to the following:




(a)
      Cost
      of sales, without considering depreciation and amortization increased by 21.9
      percent, from US$149.3 million in 2006 to US$182.0 million in 2007,
      mainly due to (i) an increase in reagent **** consumption
      caused by operations at our new cyanidation plant; (ii) an increase in ore
      treated, a reduction in silver grade and a lower recovery rate caused by higher
      clay and manganese from the Socorro mine and oxide ore from the Huantajalla
      mine; (iii) increased expenses for support supplies and (iv) lower silver
      production in the second quarter due to the impact of a 10-day strike in May
      2007.




(b)
      Exploration and development in units in operation increased **** by
      3.0 **** percent,
      from US$49.5 million in 2006 to US$51.0 **** million
      in 2007. These increased **** costs
      were due principally to an increase in exploration expenses due to increased
      diamond drilling.




(c)
      Depreciation and amortization costs increased **** by
      31.5 **** percent,
      from US$27.6 million in 2006 to US$36.3 **** million
      in 2007, mainly due to a US$2.5 million increase in amortization of mining
      concessions, from US$5.9 million in 2006 to US$8.4 million in 2007, principally
      as a result of the amortization of mining concessions held by our subsidiaries,
      Inminsur and Inversiones Colquijirca, and depreciation
      recorded by our subsidiary, El Brocal, relating to the capitalization of
      tailings pond No. 5 in December 2006, amounting US$1.5 million, which was fully
      depreciated in 2007, and as a result of a US$10.7 million adjustment of the
      provision for mine closing recorded in 2006, which generated a higher
      depreciation of US$1.8 million in 2007.




*Total
      operating expenses.* Operating expenses increased by 45.7 percent, from US$103.2 million in 2006
      to US$150.4 million in 2007, due to changes in the following components:




(a)
      Exploration costs in non-operational areas increased by 28.2 percent, from
      US$36.2 million in 2006 to US$46.4 million in 2007 due to higher
      expenditures in exploration areas, primarily in the El Milagro, Breapampa,
      Mallay, Marcapunta and Trapiche projects.




(b)
      Administrative expenses increased by 61.7 percent, from US$36.6 million in
      2006 to US$59.2 million in 2007, mainly due to a US$25.0 million increase
      in long-term officers’ compensation (stock appreciation rights) as a result of
      the increase in our stock price from US$28.06 as of December 31, 2006 to
      US$56.60 as of December 31, 2007.




(c)
      Royalty expenses to third parties and the Peruvian government increased by
      39.3
      percent, from US$24.4 million in 2006 to US$34.0 million in 2007. Royalties
      paid
      to third parties amounted to US$13.2 million and US$16.4 million in 2006 and
      2007, respectively. Royalties paid to the Peruvian government amounted to
      US$11.3 million and US$17.6 million in 2006 and 2007, respectively. The increase
      in royalties paid to third parties was mainly due to increased sales. The
      increase in royalties paid to the Peruvian government was mainly due to the
      increase of net income before profit sharing and income tax.




107




Peruvian
      legislation requires owners of mining concessions to pay to the Peruvian
      government for the exploitation of metallic and non-metallic resources. Mining
      royalties are calculated with rates ranging from 1 percent to 3 percent of
      the
      value of mineral concentrates or equivalent, according to the quoted market
      price published by the Ministry of Energy and Mines.




(d)
      Sales
      expenses increased by 83.1 percent, from US$5.9 million in 2006 to US$10.8
      million in 2007, due mainly to higher freight payments required to transport
      concentrates and related services, both required as a result of the increased
      volume of sales.




*Operating
      income before unusual item.* As a
      result of the foregoing, operating income before unusual item increased by
      15.6
      percent, from US$317.3 million in 2006 to US$366.6 million in 2007.




*Net
      loss on release of fixed-price component in commercial contracts.* As
      of
      December 31, 2006, we had committed to sell 1,933,000 ounces of gold at
      previously-agreed prices that ranged from US$345 to US$451 per ounce of gold
      between 2007 and 2012. In March and May 2007, we agreed with six of our
      customers to sell 971,000 ounces of gold at market prices instead of fixed
      prices. This agreement to release the fixed-price component in our commercial
      contracts required us to pay these customers US$315.7 million, which resulted
      in
      an expense of US$185.9 million in 2007 and a decrease to liabilities of US$129.8
      million at the date of the release of the fixed-price component of its
      commercial contracts.




*Share
      in affiliated companies, net.* Income
      from equity investments in affiliated companies decreased by 20.3 percent,
      from
      US$313.2 million in 2006 to US$249.6 million in 2007, principally due to the
      net
      effect of a decrease in the equity income of Yanacocha, partially offset by
      an
      increase in the equity income of Cerro Verde.




Income
      from our interest in Yanacocha decreased by 57.8 **** percent,
      from US$229.8 million in 2006 to US$97.2 **** million
      in 2007, due mainly to the net effect of a decrease in volume of gold sold,
      from
      2.6 million ounces in 2006 to 1.6 million ounces in 2007, and an increase in
      the
      cost of production per ounce of gold, from US$268.26 per ounce in 2006 to
      US$458.36 per ounce in 2007, partially offset by an increase in the realized
      price per ounce of gold sold from US$599.94 per ounce in 2006 to US$698.80
      in
      2007.




Income
      from our interest in Cerro Verde increased by 85.2 percent, from US$80.2 million
      in 2006 to US$148.5 million in 2007, mainly as a result of an increase in Cerro
      Verde’s net income, from US$445.4 million in 2006 to US$813.6 million in 2007,
      which was primarily due to increased copper production, from 221.7 million
      pounds in 2006 to 594.2 million pounds in 2007, due to an expansion of its
      mine
      in December 2006.




*Loss
      on change in the fair value of derivative financial
      instruments.* In
      accordance with IAS 39 (“Financial Instruments - Recognition and Measurement”),
      our derivative instruments have been measured at their fair value. Our silver
      derivative contracts expired in August 2006, resulting in a US$13.3 million
      loss
      during 2006. No similar loss was recorded during 2007.




*Interest
      income.* Interest
      income increased by 49.4 percent, from US$7.9 million in 2006 to US$11.8 million
      in 2007, due to a US$171.6 million increase in total time deposits (with
      original maturity greater than or equal to 90 days). We maintained US$181.9
      million in time deposits as of December 31, 2006 compared to US$353.5 million
      as
      of December 31, 2007. Additionally, we recorded a gain of US$1.2 million due
      to
      the change in the fair value of investment funds.




108




*Interest
      expense* .
      Interest expense increased by 44.8 percent, from US$5.9 million in 2006 to
      US$8.6 million in 2007, due mainly to an increase in our indebtedness from
      US$10.6 million in 2006 to US$84.1 million in 2007, including (i) a new US$75
      million bank loan obtained by us **** and
      (ii)
      a new US$9 million loan obtained by our wholly-owned subsidiary, Consorcio
      Energético de Huancavelica S.A. See Notes 15 and 24 to the Financial
      Statements.




*Gain
      (loss) on change in the fair value of gold certificates.* In May
      2006, we acquired one million participations of an Exchange Traded Fund, or
      Gold
      ETF, endorsed by the World Gold Council, equivalent to 100,000 gold ounces,
      at a
      cost of US$68.07 per unit. This Gold ETF was accounted for as a financial asset
      at fair value through profit or loss, in accordance with the intention of our
      management at the time of the acquisition. As of December 31, 2006, the fair
      value of the Gold ETF was US$63.2 million and, consequently, we recognized
      a
      loss of US$4.9 million, which was separately presented in our consolidated
      statements of income.




In
      January 2007, we made additional acquisitions equivalent to 110,000 gold ounces,
      at a cost of US$60.77 per unit. In March 2007, we sold all of our Gold ETF
      participations. On the date of sale, the fair value of our Gold ETF position
      was
      US$64.38 million and, consequently, we recognized a gain of US$5.1 million,
      which was separately presented in our consolidated statement of
      income.




*Other,
      net.* Other,
      net decreased from an expense of US$19.5 million in 2006 to an expense of US$8.7
      million in 2007, mainly due to a net effect of a decrease of the adjustment
      of
      provision for closure of mining unit and exploration projects, from US$9.4
      million in 2006 to US$3.7 million in 2007, and an increase of insurance proceeds
      received from US$0.2 million in 2006 to US$2.1 million in 2007.




*Gain
      (loss) on currency exchange difference* .
      The
      gain on currency exchange difference increased
      1,585.1 percent from a loss of US$0.3 million in 2006 to a gain of US$5.2
      million in 2007 due mainly to the revaluation of the Peruvian Nuevo Sol against
      the U.S. Dollar of 6.6 percent in 2007, compared to a revaluation of 6.9 percent
      in 2006. We held a net asset position in Nuevos Soles in 2007 and net liability
      position in Nuevos Soles in 2006.




*Provision
      for workers’ profit sharing* .
      Workers’ profit sharing expense increased by 39.2 percent from US$14.3 million
      in 2006 to US$19.9 million in 2007, due to an increase in our taxable income.
      This amount is calculated by applying a percentage to the taxable income. See
      “—Critical Accounting Estimates—Income Tax”.




*Provision
      for income tax* .
      Income
      tax expense decreased by 31.3 percent, from US$64.0 million in 2006 to US$44.0
      million in 2007. See “—Critical Accounting Estimates—Income Tax”.




*Minority
      interest* .
      Minority interest expense increased by 9.4 percent, from US$88.1 million in
      2006
      to US$96.4 million in 2007, mainly due to greater allocations of profits from
      Colquijirca S.A. and Chaupiloma .




*Net
      income.* As a
      result of the foregoing, net income decreased by 35.8 percent, from US$428.1
      million in 2006 to US$274.8 million in 2007. As a percentage of net sales,
      net
      income was 36.8 percent in 2007 as compared to 78.1 percent in
      2006.




109




**Results
      of Operations for the Twelve Months Ended December 31, 2006 and
      2005**




*Net
      sales.* Net
      sales increased by 93.4 percent, from US$283.4 million in 2005 to
      US$548.1 million in 2006, due to the following:




(a)
      An
      increase in the price and volume sold of gold, silver, lead and zinc during
      2006. The following tables reflect the average realized price and volume sold
      of
      gold, silver, lead and zinc for 2005 and 2006:




Average
                Realized Price
            
            Year
                ended December 31,2005
            
            2006
            
            VariationGold
                (US$/oz.)
            
            US$
            359.75
            
            US$
            354.98
            
            
            -1.33
            %Silver
                (US$/ oz.)
            
            
            7.38
            
            
            11.92
            
            
            61.52
            %Lead
                (US$/MT)
            
            
            973.22
            
            
            1,319.89
            
            
            35.62
            %Zinc
                (US$/MT)
            
            
            1,299.34
            
            
            3,407.98
            
            
            162.29
            %







Volume
                Sold
            
            Year
                ended December 31,2005
            
            2006
            
            VariationGold
                (oz.)
            
            
            348,634
            
            
            415,288
            
            
            19.12
            %Silver
                (oz.)
            
            
            14,517,024
            
            
            19,207,066
            
            
            32.31
            %Lead
                (MT)
            
            
            30,320
            
            
            36,570
            
            
            20.61
            %Zinc
                (MT)
            
            
            52,086
            
            
            59,489
            
            
            14.21
            %




(i)  *Gold
      sales* .
      The
      average sales prices for gold decreased from US$359.75 per ounce in 2005 to
      US$354.98 per ounce in 2006, however gold sales increased by 66,654 ounces
      compared to 2005. The combined effect of these changes resulted in higher income
      from sales, which increased by US$22.0 million in 2006 compared to 2005.
      This increase in income from sales was largely attributable to the sale of ore
      produced at our Orcopampa and Antapite mines.




(ii) **  *Silver
      sales* .
      Average
      silver prices rose from US$7.38 per ounce in 2005 to US$11.92 per ounce in
      2006.
      In addition, the volume of silver sales increased by 4,690,042 ounces compared
      to 2005. The combined effect resulted in higher revenue from sales of
      US$121.8 million over 2005 levels. This difference was attributed mainly to
      the increased silver production in the Uchucchacua and Colquijirca mines.




(iii) **  *Lead
      sales* .
      Average
      lead prices rose from US$973.2 per metric ton in 2005 to US$1,319.89 per metric
      ton in 2006. Additionally, the volume sold was 6,250 metric tons greater than
      in
      2005. The combined effect resulted in an increase of US$18.8 million in our
      2006 sales revenues, primarily due to the sales of ore produced by the
      Colquijirca mine.




(iv) **  *Zinc
      sales.* Average
      zinc prices increased from US$1,299.34 per metric ton in 2005 to US$3,407.98
      per
      metric ton in 2006. The total volume sold also increased by 7,403 metric tons
      in
      2006. The combined effect of these changes resulted in higher revenue from
      zinc
      sales, totaling US$135.1 million in 2006. This increase was mainly due to
      the increased production contributed by the Colquijirca mine.




The
      revenues from gold, silver, lead and zinc mentioned above do not include the
      refinery charges and penalties incurred, which amounted to US$105.5 million
      in 2006, compared to US$53.4 million in 2005. This increase is due to the
      increased amount of metric tons of concentrates sold in 2006 compared to
      2005.




110




*Realization
      of deferred income from sale of future production* .
      To
      minimize future fluctuations in the consolidated results of operations, we
      modified the terms of certain derivative contracts in order to qualify them
      as
      normal sales contracts. During 2005 and 2006 our outstanding derivative
      contracts were replaced with a series of sales contracts that required physical
      delivery of gold over future periods that do not extend beyond 2012. Under
      the
      terms of these new contracts, our revenue will be capped at between US$332
      to
      US$451 per ounce. The fair values of the replaced contracts were
      US$50.6 million and US$77.4 million in 2005 and 2006, respectively,
      and were calculated immediately prior to the execution of these contracts and
      recorded as deferred revenue in each year. The revenues under these contracts
      will be included as part of total revenues for each year in which delivery
      occurs until 2012.




In
      2006,
      we delivered 38,800 ounces as a part of the sales contracts mentioned above
      compared to 282,000 ounces delivered in 2005. As a result, we recognized
      revenues of US$50.3 million in 2006 compared to US$28.1 million in
      2005. See Note 18 to the Financial Statements.




*Royalty
      income.* In 2006,
      royalty income received by Chaupiloma amounted to US$48.5 million,
      representing a 5.17 percent increase over the US$46.1 million of royalty
      income in 2005. This increase is attributed to the increased sales from
      Yanacocha in 2006, which resulted from higher gold prices throughout the
      reporting period.




*Total
      operating costs* .
      Total
      operating costs increased by 26.7 percent, from US$178.7 million in 2005 to
      US$226.4 million in 2006 due to the following:




(a)
      Cost
      of sales without considering depreciation and amortization increased by 43.7
      percent, from US$103.9 million in 2005 to US$149.3 million in 2006,
      mainly due to increased work commissioned to third party contractors, increased
      supply requirements and other items for our various mining units, as a result
      of
      increased volume of ore produced during 2006.




(b)
      Exploration and development costs in units in operation increased by 20.3
      percent, from US$41.2 million in 2005 to US$49.5 million in 2006.
      These additional costs were due principally to increased exploration activity
      in
      our Orcopampa, Caravelí and Recuperada mines.




(c)
      Depreciation and amortization costs decreased by 17.3 percent, from
      US$33.6 million in 2005 to US$27.6 million in 2006, due principally to
      the net effect of an additional depreciation of US$6.5 million recorded in
      2005
      in connection with a revision of mine closure costs estimates and a US$1.1
      million increase in amortization of mining concessions, from US$4.8 million
      in
      2005 to US$5.9 million in 2007, mainly due to the increased amortization of
      Inminsur’s and Cedimin’s mining concessions.




(d)
      Royalty expenses to third parties and to the Peruvian government increased
      100
      percent, from US$12.2 million in 2005 to US$24.4 million in 2006. This increase
      was mainly due to (i) an increase in royalties related to the Sindicato Minero
      de Orcopampa S.A., from US$7.2 million in 2005 to US$12.3 million in 2006,
      as a
      result of the previously noted increase in our sales and gold production; and
      (ii) an increase in the royalties paid to the Peruvian government, from US$4.3
      million in 2005 to US$11.3 million in 2006, as a result of our increased
      sales.




*Total
      operating expenses.* Operating expenses increased by 30.3 percent, from US$79.2 million in 2005
      to US$103.2 million in 2006, due to changes in the following components:




111




(a)
      Exploration costs in non-operational mining areas increased by 30.1 percent,
      from US$27.8 million in 2005 to US$36.2 million in 2006, due to higher
      expenditures in exploration areas, primarily in the Tinyaclla, La Zanja, Los
      Pircos and Trapiche projects, as well as other projects where we are exploring
      for additional reserves of gold, silver and copper. See Note 22 to the Financial
      Statements.




(b)
      Administrative expenses increased by 6.7 percent, from US$34.3 million in
      2005 to US$36.6 million in 2006. This increase was due mainly to the
      increase in personnel expenses, from US$9.8 million in 2005 to
      US$12.0 million in 2006, and to the increase in board members’
remuneration, from US$2.2 million to US$5.9 million, both as a result
      of the revaluation of the Peruvian Nuevo Sol. These increases were partially
      offset by the decrease of long-term officers’ compensation (stock appreciation
      rights), from US$8.1 million in 2005 to US$3.6 million in 2006, as a
      result of the decrease in our stock price from US$28.30 as of December 31,
      2005
      to US$28.06 as of December 31, 2006.




(c)
      Royalty expenses to third parties and to the Peruvian government increased
      100
      percent, from US$12.2 million in 2005 to US$24.4 million in 2006. This increase
      was mainly due to (i) an increase in royalties related to the Sindicato Minero
      de Orcopampa S.A., from US$7.2 million in 2005 to US$12.3 million in 2006,
      as a
      result of the previously noted increase in our sales and gold production; and
      (ii) an increase in the royalties paid to the Peruvian government, from US$4.3
      million in 2005 to US$11.3 million in 2006, as a result of our increased
      sales.




(d)
      Sales
      expenses increased 23.5 percent from US$4.8 million in 2005 to US$5.9 million
      in
      2006, due mainly to the higher freight payments required to transport
      concentrates and related services, both required as a result of the greater
      volume of sales.




*Operating
      income.* As a
      result of the foregoing, operating income increased by 218.3 percent, from
      US$99.7 million in 2005 to US$317.3 million in 2006.




*Share
      in affiliated companies, net.* Income
      from equity investments in affiliated companies increased by 18.6 percent,
      from
      US$264.0 million in 2005 to US$313.2 million in 2006, principally due to the
      increase in the net earnings of Yanacocha and Cerro Verde.




(a)  Income
      from our interest in Yanacocha increased by 1.7 percent, from US$225.9 million
      in 2005 to US$229.8 million in 2006, due mainly to the net effect of (i) an
      increase in price per ounce realized on gold sales, from US$447.90 ounce in
      2005
      to US$599.93 per ounce in 2006, and (ii) a decrease in volume of gold sold,
      from
      3.3 million ounces in 2005 to 2.6 million ounces in 2006, offset in part by
      an
      increase in the cost of production per ounce, from US$150.0 in 2005 to US$198.0
      in 2006.




(b)  Income
      from our interest in Cerro Verde increased by 111 percent, from US$38.0 million
      in 2005 to US$80.2 million in 2006, mainly as a result of increased net income
      of this affiliate from US$223.8 million in 2005 to US$445.4 million in 2006.
      In
      addition, we acquired an additional interest of 0.29 percent in the equity
      of
      Cerro Verde during 2006.




*Loss
      on change in the fair value of derivative financial
      instruments.* According to the IAS 39 (“Financial Instruments - Recognition and Measurement”),
      our derivatives instruments have been measured at their fair value. In 2006
      we
      suffered net losses resulting from changes in the fair value of its derivative
      transactions amounting to US$13.3 million, as compared with losses of US$26.6
      million in 2005. See “—Critical Accounting Estimates” and Note 29 to the
      Financial Statements.




112




*Interest
      income.* Interest
      income increased by 125.6 percent, from US$3.5 million in 2005 to US$7.9 million
      in 2006, due to a US$2.9 million increase in income from time deposits. We
      maintained US$73.5 million in time deposits as of December 31, 2005 compared
      to
      US$181.9 million as of December 31, 2006. Additionally we recorded a gain of
      US$1.6 million due to change in the fair value of investment funds. See Note
      24
      to the Financial Statements.




*Interest
      expense* .
      Interest expense increased by 46.5 percent, from US$4.1 million in 2005 to
      US$5.9 million in 2006, due mainly to: (i) the bank loan obtained by Consorcio
      Energético de Huancavelica S.A., increasing our indebtedness to US$10 million in
      2006 compared to US$7.6 million in 2005; and (ii) an increase of US$1.2 million
      as a result of having updated the reserve for mine closure. See Note 24 to
      the
      Financial Statements.




*Loss
      on change in the fair value of gold certificates.* In May
      2006, we acquired one million participations of an Exchange Traded Fund, or
      Gold
      ETF, endorsed by the World Gold Council, equivalent to 100,000 gold ounces,
      at a
      cost of US$68.07 per unit. This Gold ETF has been accounted for as a financial
      asset at fair value through profit or loss, in accordance with the intention
      of
      our management at the time of the acquisition. As of December 31, 2006, the
      fair
      value of the Gold ETF was US$63.2 million and, consequently, we have recognized
      a loss of US$4.8 million, which is separately presented in our consolidated
      statements of income. No similar loss was recorded during 2005.




*Other,
      net.* Other,
      net increased from an expense of US$3.2 million in 2005 to an expense of US$19.5
      million in 2006, mainly due to the voluntary mining contribution agreed with
      the
      Peruvian government of US$1.8 million and the increase of adjustment of
      provision for closure of mining unit and exploration project from nil in 2005
      to
      US$9.4 million in 2006.




*Provision
      for workers’ profit sharing* .
      Workers’ profit sharing expense increased by 450.4 percent, from US$2.6 in 2005
      to US$14.3 million in 2006. This amount is calculated by applying a percentage
      to the taxable income. See “—Critical Accounting Estimates—Income Tax.”




*Provision
      for income tax* .
      Income
      tax expense increased by 180.7 percent, from US$22.8 million in 2005 to US$64.0
      million in 2006. See “—Critical Accounting Estimates—Income Tax.”




*Minority
      interest* .
      Minority interest expense increased by 341.4 percent, from US$20.0 million
      in
      2005 to US$88.1 million in 2006, mainly due to a greater allocation of profits
      from Colquijirca S.A. and Chaupiloma.




*Net
      income.* As a
      result of the foregoing, net income increased by 48.43 percent, from US$288.4
      million in 2005 to US$428.1 million in 2006. As a percentage of net sales,
      net
      income was 78.1 percent in 2006 compared to 101.8 percent in 2005.




**Liquidity
      and Capital Resources**




As
      of
      December 31, 2007, we had cash and cash equivalents of US$302.9 million,
      compared to US$176.6 million at December 31, 2006.




*Cash
      provided by operating activities for the years ended December 31, 2007 and
      2006.* Net
      cash
      and cash equivalents provided by operating activities were US$203.0 **** million
      in 2007 compared to US$358.8 million in 2006. The
      decrease in net cash flow provided by operating activities in 2007 compared
      with
      2006 was mainly attributable to: a
      payment of US$315.7 million related to the release of fixed-price components
      in
      commercial contracts during 2007; decreased of dividends received, primarily
      from Yanacocha, from US$ 209.5 million
      in 2006 to US$43.7 million in 2007; decreased collection of royalties from
      Chaupiloma, owner of the mining concessions exploited by Yanacocha, from US$48.5
      million in 2006 to US$34.0 million in 2007, due mainly to the decrease of the
      Yanacocha’s gold production; increased payments to suppliers and third parties,
      from US$160.4 million in 2006 to US$202.1 million in 2007, as a result of a
      corresponding increase in the operating activities of our mining units;
      increased income tax paid, from US$53.3 million in 2006 to US$91.4 million
      in
      2007, as a result of increased earnings by Colquijirca and Chaupiloma; increased
      payments to employees, from US$49.3 million in 2006 to US$78.9 million in 2007,
      due mainly to the workers’ profit sharing between our subsidiary, Sociedad
      Minera El Brocal S.A.A., and us and the revaluation of the Peruvian Nuevo Sol
      against the U.S. dollar; increased payments of royalties, from US$22.7 million
      in 2006 to US$33.0 million in 2007, as a result of increased royalty payments
      to
      the Peruvian government and to the third parties; and increased interest
      payments from US$2.4 million in 2006 to US$5.8 million in 2007, as a result
      of
      the bank loans obtained by Consorcio Energético de Huancavelica S.A. and us.
      These decreases were partially offset by the following: increased proceeds
      from
      sales, from US$497.9 million in 2006 to US$722.9 million in 2007; and the sale
      of our investment in Gold ETF participations for US$135.2 million in
      2007.




113




*Cash
      provided by operating activities for the years ended December 31, 2006 and
      2005.* Net
      cash
      and cash equivalents provided by operating activities were US$358.8 **** million
      in 2006 compared to US$164.2 million in 2005. The
      increase in net cash flow provided by operating activities in 2006 compared
      with
      2005 was mainly attributable to: increased
      proceeds from sales, from US$284.5 million in 2005 to US$497.9 million in 2006;
      increased dividends received, primarily from Yanacocha, from US$76 .9 million
      in 2005 to US$209.5 million in 2006; and increased collection of royalties
      from
      Chaupiloma, owner of the mining concessions exploited by Yanacocha, from US$40.1
      million in 2005 to US$55.8 million in 2006, due mainly to an increase in the
      price of gold. These increases were partially offset by the following: the acquisition
      of Gold ETF participations for an aggregate purchase price of US$68.1 million;
      increased payments to suppliers and third parties, from US$124.3 million in
      2005
      to US$160.4 million in 2006, as a result of a corresponding increase in the
      operating activities in our mining units; increased payments for exploration
      activities, from US$56.9 million in 2005 to US$72.0 million in 2006, due to
      higher expenditures in exploration areas, primarily in our Orcopampa, Caraveli
      and Recuperada mines and our Tinyaclla, La Zanja, Los Pircos and Trapiche
      projects; increased payments to employees, from US$41.6 million in 2005 to
      US$49.3 million in 2006, due mainly to the revaluation of the Peruvian Nuevo
      Sol; increased of income tax paid, from US$25.9 million in 2005 to US$53.3
      million in 2006, as a result of increased earnings by us, Colquijirca and
      Chaupiloma; and increased payments of royalties, from US$12.8 million in 2005
      to
      US$22.7 million in 2006, as a result of increased royalty payments to the
      Peruvian government.




*Cash
      used in investment activities for the Twelve Months Ended December 31, 2007
      and
      2006* .
      Net
      cash and cash equivalents used in investing activities were US$54.1 million
      in
      2007 compared to US$202.3 million in 2006. The decrease in net cash flow used
      in
      investing activities in 2007 compared with 2006 was mainly attributable to:
      decreased payments in connection with time deposits deposited at banks from
      US$62.9 million in 2006 to US$15.8 million in 2007; collection of US$55.7
      million related to the settlement of available-for-sale financial assets
      (including structured notes, fixed investment funds and variable investment
      funds), while in 2006 we had disbursements of US$40.3 million (including US$40.0
      million related to acquisitions of structured notes, US$12.0 million related
      to
      acquisitions fixed investment funds, off-set by the settlement of variable
      investment funds by US$11.3 million); decreased expenditures related to
      investments shares from US$22.8 million in 2006, mainly related to the
      acquisition of a minority interest in Inversiones Mineras del Sur S.A., to
      US$1.6 million in 2007. These decreases were partially offset by the following:
      increased expenditures on the purchase of property, plant and equipment from
      US$50.1 million in 2006 to US$61.6 million in 2007, mainly related to the
      construction of the fourth stage of the Antapite tailings deposit for US$9.2
      million, the capacity increase in the Orcopampa No. 4 tailing deposit for US$5.6
      million and the construction of a transmission line in Huacarama (Orcopampa)
      for
      US$3.9 million; and increased disbursements for development activities from
      US$24.1 million in 2006 to US$31.7 million in 2007, mainly related to increased
      exploration activities at our Orcopampa, Poracota and Uchucchacua
      mines.




114


*Cash
      used in investment activities for the Twelve Months Ended December 31, 2006
      and
      2005* .
      Net
      cash and cash equivalents used in investing activities were US$202.3 million
      in
      2006 compared to US$174.1 million in 2005 *.* The
      increase in net cash flow used in investing activities in 2005 compared with
      2006 was mainly attributable to: net payments of US$62.9 million in connection
      with time deposits deposited in banks compared to net proceeds of US$7.1 million
      related to time deposits that matured in 2005; a US$29.6 million increase in
      purchase of property, plant and equipment, from US$20.5 million in 2005 to
      US$50.1 million in 2006, mainly related to the cyanidation project and water
      treatment in Uchuchachua mining unit; disbursements of US$40.3 million related
      to the acquisitions of structured notes totaling US$40.0 million and fixed
      investment funds totaling US$12.0 million offset by the settlement of variable
      investment funds by US$11.3 million; and a US$7.3 million increase in
      development expenditures, from US$16.8 million in 2005 to US$24.1 million in
      2006, mainly related to increased exploration activities at our Orcopampa and
      Antapite mines. These increases were partially offset by a decrease of US$125.6
      million in payments related to purchases of investments in shares, from US$148.4
      million in 2005, related to acquisition of additional shares in Cerro Verde,
      to
      US$22.8 million in 2006, related to the acquisition of minority interests in
      Inminsur and Poracota. See Note 2 and Note 10 to the Financial
      Statements.




*Cash
      used in financing activities for the Twelve Months Ended December 31, 2007
      and
      2006* .
      Net
      cash and cash equivalents used in financing activities were US$22.7 million
      in
      2007 compared to US$76.8 **** million
      in 2006. The
      decrease in net cash flow used in financing activities in 2007 compared with
      2006 was mainly attributable to: US$85.0 million in long-term debt incurred
      during 2007, including a US$10.0 million bank loan obtained by Consorcio
      Energetico de Huancavelica S.A. and a US$75.0 million bank loan obtained by
      us;
      decreased bank loans from a net borrowing of US$2.3 million loan in 2006 to
      a
      net payment of US$10 million in 2007 (composed of proceeds from bank loans
      of
      US$55.2 million and payments of bank loans of US$65.2 million); increased
      payment of dividends to shareholders from US$59.8 million in 2006 to US$70.0
      million in 2007; increased payment of dividends to minority interest
      shareholders from US$19.1
      million in 2006 to US$26.2 million in 2007 .




*Cash
      used in financing activities for the Twelve Months Ended December 31, 2006
      and
      2005* .
      Net
      cash and cash equivalents used in financing activities were US$76.8 **** million
      in 2006 compared to US$65.3 million in 2005. The
      increase in net cash flow used in financing activities in 2006 compared with
      2005 was mainly attributable to: a
      US$15.5
      million increase in payments of dividends, from US$44.3 million in 2005 to
      US$59.8 million in 2006; and a US$8.4 million increase in payments of dividends
      to minority interest shareholders, from US$10.7 million in 2005 to US$19.1
      in
      2006. These increases were partially offset by a decrease of US$14.4 million
      in
      long-term debt as a result of repayments according to schedule of maturity.




115




**Long-Term
      Debt Changes in 2008**




On
      February 20, 2008, we borrowed US$450 million pursuant to a syndicated Bridge
      Loan Credit Agreement, led by Banco de Credito del Peru, in order to finance
      the
      unwinding of our gold hedge book.




On
      May
      21, 2008, in order to repay a US$450 million syndicated bridge loan, we borrowed
      US$450 million, referred to as the Syndicated Term Loan, under a new Term Loan
      Agreement, among us, as borrower, Condesa, as guarantor, Banco de Credito del
      Peru, as administrative agent and collateral agent, and the lenders party
      thereto. Borrowing under the Syndicated Term Loan will bear interest at a rate
      per annum equal to LIBOR plus 2.25%. Interest and installments of principal
      equal to 1/20 th of the
      aggregate principal amount borrowed will be payable quarterly until maturity
      in
      May 2013 (on which date all amounts outstanding shall be payable).  Obligations
      under the Syndicated Term Loan are guaranteed by Condesa, our wholly-owned
      subsidiary and secured by a pledge of our Common Shares held by Condesa.  The
      term
      loan agreement governing the Syndicated Term Loan contains certain customary
      covenants and events of default. See “Item 10. Additional Information—Material
      Contracts.”




**Exploration
      Costs; Capital Expenditures**




Total
      capital expenditures and exploration costs for 2008 and 2009 (excluding
      exploration costs at our principal mines, which are included as part of their
      cost of production) are estimated to be approximately US$106.0 million and
      US$98.0 million, respectively. These budgeted expenditures include the following
      projects: (a) in Uchucchacua, our ongoing projects include (i) the deepening
      of
      the master shaft in the Carmen mine from level 3,990 to level 3,930, (ii) the
      construction of ramp 626 and the deepening of the Luz Shaft in the Socorro
      mine
      to reach level 3,920 from level 4,060 and (iii) the plant expansion from 2,500
      STPD to 3,000 STPD to treat additional lead/zinc material from the lower levels
      of the mine; (b) in Orcopampa, our ongoing projects include (i) the deepening
      of
      the Nazareno shaft from level 3,290 to level 3,170 and (ii) the construction
      of
      the facilities to treat the old flotation tailing that will permit the recovery
      of approximately 53,000 ounces of gold in 2008 and 2009.




During
      2007 we spent approximately US$50.6 **** million
      on greenfield and brownfield exploration-related investments in Peru. Our
      greenfield investments focused on the following exploration projects: El Faique,
      La Zanja, Tantahuatay, Hualgayoc, Los Pircos, El Milagro, Titiminas, Llillinta,
      Huañacancha, Breapampa, Trapiche and Argentina. In 2008, we intend to
      concentrate on the El Faique, La Zanja, Tantahuatay, Hualgayoc, El Milagro,
      Titiminas, Huañacancha, Chucapaca, Breapampa, Trapiche and Argentina **** exploration
      projects with a budget of approximately US$21.2 **** million.
      The 2007 exploration program was financed by internal funds as well as a
      US$4.3 million contribution by Newmont Peru S.R.L., SCC and Gold Fields.
      Our brownfield investments focused on the following exploration projects in
      2007: Soras, Pozo Rico, Mallay, Anamaray, Layo and Shila-Paula. In 2008, we
      intend to invest US$6.8 million in the Mallay, Anamaray, Soras, Layo,
      Umachulco-Manto N and Shila-Paula **** brownfield
      exploration projects.




We
      undertook EVAPs filed with the Peruvian government in March 1995 to make
      capital expenditures in respect of environmental projects. In 2005, 2006 and
      2007, we incurred capital expenditures in connection with these environmental
      projects of approximately US$2.0 million, US$2.4 million, and US$2.7 million,
      respectively. We expect to incur approximately US$2.9 million in 2008 and US$3.2
      million in 2009 in capital expenditures relating to environmental projects.
      Our
      capital spending plans under the PAMAs were approved by the Peruvian government.
      The development of more stringent environmental protection programs in Peru
      could impose additional costs and other constraints on our operations. See
“Item
      4. Information on the Company—The Company—Business Overview—Regulatory
      Framework—Environmental Matters.”




116


We
      expect
      that we will meet our working capital, capital expenditure and exploration
      expense requirements for the next several years from internally generated funds,
      cash on hand and dividends received from our investments in non-consolidated
      mining operations, including Yanacocha. Additional financing, if necessary
      for
      the construction of any project, is expected to be obtained from borrowings
      under bank loans and the issuance of debt securities. There can be no assurance,
      however, that sufficient funding will be available to us from the internal
      or
      external sources to finance any future capital expenditure program, or that
      external funding will be available to us for such purpose on terms or at prices
      favorable to us. A very significant decline in the prices of gold and silver
      would be reasonably likely to affect the availability of such sources of
      liquidity. In addition, if we fund future capital expenditures from internal
      cash flow, there may be less funds available for the payment of
      dividends.




***Recent
      Accounting Pronouncements***




**U.S.
      GAAP** ****




*Business
      Combinations.* In
      December 2007, the FASB issued FASB Statement No. 141(R), “Business
      Combinations,” which amends SFAS No. 141, and provides revised guidance for
      recognizing and measuring identifiable assets and goodwill acquired ,
      liabilities assumed, and any noncontrolling interest in the acquiree. It also
      provides disclosure requirements to enable users of the financial statements
      to
      evaluate the nature and financial effects of the business combination. SFAS
      No. 141(R) is effective for our fiscal year beginning January 1, 2009
      and is to be applied prospectively. Early adoption is prohibited. We are
      currently evaluating the potential impact of adopting this statement on our
      consolidated financial position, results of operations or cash flows.




*Noncontrolling
      Interests in Consolidated Financial Statements.* In
      December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling
      Interests in Consolidated Financial Statements- an amendment of ARB No. 51” which establishes accounting and
      reporting standards pertaining to ownership interests in subsidiaries held
      by
      parties other than the parent, the amount of net income attributable to the
      parent and to the noncontrolling interest, changes in a parent’s ownership
      interest, and the valuation of any retained noncontrolling equity investment
      when a subsidiary is deconsolidated. SFAS No. 160 also establishes
      disclosure requirements that clearly identify and distinguish between the
      interests of the parent and the interests of the noncontrolling owners.
      SFAS No. 160 is effective for our fiscal year beginning
      January 1, 2009 with early adoption prohibited. We are currently evaluating
      the potential impact of adopting this statement on our consolidated financial
      position, results of operations or cash flows.




*Accounting
      for Income Tax Benefits of Dividends on Share-Based Payment Awards.* In
      June
      2007, the EITF reached consensus on Issue No. 06-11, *“Accounting
      for Income Tax Benefits of Dividends on Share-Based Payment
      Awards.”* EITF
      Issue No. 06-11 requires that the tax benefit related to dividend and
      dividend equivalents paid on equity-classified nonvested shares and nonvested
      share units, which are expected to vest, be recorded as an increase to
      additional paid-in capital. EITF Issue No. 06-11 is to be applied
      prospectively for tax benefits on dividends declared in our fiscal year
      beginning January 1, 2008. We are currently evaluating the impact that the
      adoption of this statement will have on our consolidated financial position,
      results of operations or cash flows.




*Fair
      Value Option of Financial Assets and Liabilities.* In
      February 2007, the FASB issued FASB Statement No. 159, *“The
      Fair Value Option for Financial Assets and Financial
      Liabilities”* ( *“FAS No. 159”* ).
      FAS
      No. 159 permits entities to choose to measure many financial instruments and
      certain other items at fair value, with the objective of improving financial
      reporting by mitigating volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. The provisions of FAS No. 159 are effective for our
      fiscal year beginning January 1, 2008. We are currently evaluating the
      impact, if any, of the adoption of FAS No. 159 our consolidated financial
      results.




117




In
      September 2006, the FASB issued FASB Statement No. 157, *“Fair
      Value Measurements”* ( *“FAS
      No. 157”* ).
      FAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. The provisions of FAS No. 157 are effective for our fiscal
      year beginning January 1, 2008. We are currently evaluating the impact, if
      any, of the adoption of FAS No. 159 our consolidated financial results.




*Hierarchy
      of Generally Accepted Accounting Principles.* In
      May
      2008, the FASB issued FASB Statement No. 162, “Hierarchy of Generally Accepted
      Accounting Principles.” FAS No. 162 identifies the sources of accounting
      principles and the framework for selecting the principles to be used in the
      preparation of financial statements of nongovernmental entities that are
      presented in conformity with GAAP in the United States (the GAAP
      hierarchy).




This
      Statement is effective 60 days
      following the SEC’s approval of the Public Company Accounting Oversight Board
      amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With
      Generally Accepted Accounting Principles.” The
      Company is currently evaluating the impact, if any, of the adoption of FAS
      No.
      159 the Company’s consolidated financial results.




**Peruvian
      GAAP** **




Effective
      year 2008, through Resolution No040-2008 - EE/94 enacted on March 14, 2008, the
      Peruvian Accounting Standards Board had mandated the application of IFRIC ́s
      1,2,4,5,6,7,8,9,10,11 and 12 effective for 2008 fiscal year. In addition, it
      duly approved the application of IFRS 7 “Financial instruments: disclosures”,
      IFRS 8 “Operating segments”, IAS 32 “Financial Instruments: Presentation” and
      IFRIC 13 and 14 for effective year 2009.




*IFRIC
      1, Changes in Existing Decommissioning, Restoration and Similar Liabilities.* IFRIC
      1
      contains guidance on accounting for changes in decommissioning, restoration
      and
      similar liabilities that have previously been recognised both as part of the
      cost of an item of property, plant and equipment under IAS 16 and as a provision
      (liability) under IAS 37. The interpretation addresses subsequent changes to
      the
      amount of the liability that may arise from (a) a revision in the timing or
      amount of the estimated decommissioning or restoration costs or from (b) a
      change in the current market-based discount rate.




*IFRIC
      2, Members’ Shares in Cooperative Entities and Similar Instruments.* Members'
      shares in co-operative entities have some characteristics of equity. They also
      give the holder the right to request redemption for cash, although that right
      may be subject to certain limitations. IFRIC 2 gives guidance on how those
      redemption terms should be evaluated in determining whether the shares should
      be
      classified as financial liabilities or as equity.




*IFRIC
      4, Determining whether an Arrangement contains a Lease.* The
      Interpretation specifies that an arrangement that meets the following criteria
      is, or contains, a lease that should be accounted for in accordance with IAS
      17
      Leases: (a) fulfillment of the arrangement depends upon a specific asset. The
      asset need not be explicitly identified by the contractual provisions of the
      arrangement; rather it may be implicitly specified because it is not
      economically feasible or practical for the supplier to fulfill the arrangement
      by providing use of alternative assets; and (b) the arrangement conveys a right
      to control the use of the underlying asset.




118




*IFRIC
      5, Rights to Interests arising from Decommissioning, Restoration and
      Environmental Rehabilitation Funds.* IFRIC
      5
      sets out the accounting treatment for funds set up to finance the
      decommissioning of assets.




*IFRIC
      6, Liabilities arising from Participating in a Specific Market-Waste Electrical
      and Electronic Equipment.* IFRIC
      6
      prescribes the date at which recognition of a liability is required for disposal
      of Electrical and Electronic Equipment in accordance with the EU
      Directive.




*IFRIC
      8, Scope of IFRS 2.* International
      Financial Reporting Interpretations Committee 8 Scope of IFRS 2 (“IFRIC 8”)
      clarifies that IFRS 2 will apply to any arrangement when equity instruments
      are
      granted or liabilities are incurred by an entity, when the identifiable
      consideration appears to be less than the fair value of the instruments given.




*IFRIC
      9, Reassessment of Embedded Derivatives.* International
      Financial Reporting Interpretations Committee 9 Reassessment of Embedded
      Derivatives (“IFRIC 9”) requires an entity to assess whether a contract contains
      an embedded derivative at the date an entity first becomes a party to the
      contract and prohibits reassessment unless there is a change to the contract
      that significantly modifies the cash flows.




*IFRIC
      10, Interim Financial Reporting and Impairment.* International
      Financial Reporting Interpretations Committee 10 Interim Financial Reporting
      and
      Impairment (“IFRIC 10”) addresses an inconsistency between IAS 34 Interim
      Financial Reporting and the impairment requirements relating to goodwill in
      IAS
      36 Impairment of Assets and equity instruments classified as available for
      sale
      in IAS 39.




*IFRIC
      11, IFRS 2 - Group and Treasury Share Transactions.* IFRIC
      11
      provides guidance on applying IFRS 2 in three circumstances: (a) share-based
      payment involving an entity's own equity instruments in which the entity chooses
      or is required to buy its own equity instruments (treasury shares) to settle
      the
      share-based payment obligation – is this
      an
      equity-settled or cash-settled transaction; (b) a parent grants rights to its
      equity instruments to employees of its subsidiary – how to account in the
      individual entities' financial statements; (c) a subsidiary grants rights to
      equity instruments of its parent to its employees – how to account in the
      individual entities' financial statements.




*IFRIC
      12, Service Concession Arrangements.* IFRIC
      12
      outlines an approach to account for contractual arrangements arising from
      entities providing public services. It provides that the operator should not
      account for the infrastructure as property, plant and equipment, but recognize
      a
      financial asset and/or an intangible asset.




*IFRS
      8, Operating Segments.* This
      IFRS
      replaces IAS 14 and adopts a management approach to segment reporting. The
      information reported would be that which management uses internally for
      evaluating the performance of operating segments and allocating resources to
      those segments.




We
      are
      evaluating the effects in its consolidated financial statements from the
      adoption of the new IAS, IFRS and IFRIC issued.




119




**YANACOCHA**




***Introduction***




The
      following discussion should be read in conjunction with Yanacocha’s Financial
      Statements as of December 31, 2006 and 2007 and for the years ended
      December 31, 2005, 2006 and 2007 and the related notes thereto included
      elsewhere in this Annual Report. Yanacocha’s Financial Statements are prepared
      and presented in accordance with U.S. GAAP and in U.S. Dollars.




**Operating
      Results**




***Overview***




Yanacocha,
      the largest gold producer in South America, was established in Peru in January
      1992, and commenced production activities in August 1993. Yanacocha’s operations
      are located in the Andes mountains in Northern Peru, in the area of Cajamarca
      which is located approximately 900 kilometers north of Lima and north of the
      City of Cajamarca, at an altitude of 4,000 meters above sea level. Yanacocha
      is
      51.35 percent owned by Newmont Mining, through its wholly-owned subsidiary
      Newmont Second, 43.65 percent by us through our wholly-owned subsidiary Condesa,
      and 5 percent by IFC. **** Yanacocha
      is managed by Newmont Peru S.R.L. See “Item 4. Information on the
      Company—Yanacocha—Management of Yanacocha—General Manager/Management Agreement.”
On October 31, 1999, pursuant to a public deed, Yanacocha changed its legal
      structure from a corporation to a partnership, changing its name from “Minera
      Yanacocha S.A.” to “Minera Yanacocha S.R.L.” As a result, Yanacocha (i) cannot
      have more than 20 partners; (ii) its capital stock is represented in
      participations; (iii) is not required to maintain a legal reserve (see Note
      16
      to Yanacocha’s Financial Statements); and (iv) will not receive a different
      income tax treatment under Peruvian law than it did as a
      corporation.




The
      table
      below highlights key financial and operating results:




**Summary
      of Financial and Operating Performance**




Year
                Ended December 31,2007
            
            2006
            
            2005Gold
                Sales (in thousands of US$)
            
            
            1,093,347
            
            
            1,543,212
            
            
            1,490,402Gold
                sold (oz.)
            
            
            1,564,614
            
            
            2,572,298
            
            
            3,327,515Average
                gold price received (US$/oz.)
            
            
            699
            
            
            600
            
            
            448Costs
                applicable to sales (US$/oz.)
            
            
            356
            
            
            201
            
            
            153Other
                expenses(in thousands of US$)
            
            
            30,062
            
            
            60,790
            
            
            (6,669
            )Net
                income (in thousands of US$)
            
            
            221,489
            
            
            525,448
            
            
            525,474Dividends
                Paid (in thousands of US$)
            
            
            100,000
            
            
            480,000
            
            
            180,000





*Gold
      sales.*




Gold
      sales decreased by 29 percent, or US$449.9 million, from 2006 to 2007, due
      principally to a 39 percent decrease in gold sold as a consequence of the lower
      level of gold produced, partially offset by a higher realized average price
      which increased from US$600 per ounce in 2006 to US$699 per ounce in 2007.
      Yanacocha has not engaged in gold price hedging activities, such as forward
      sales or option contracts, to minimize its exposure to fluctuations in the
      price
      of gold.




120




*Costs
      applicable to sales.*




Costs
      applicable to sales increased by 8 percent from 2006 to 2007 due primarily
      to
      higher operating costs, mainly attributed to: (i) higher diesel expense, (ii)
      higher emulsion and nitrate consumption due to higher presence of water in
      blasting areas, (iii) increased electricity used in blasting, (iv) higher labor
      expenses for salary and bonus increases and (v) increased capitalized costs
      in
      leach pad and precious metal inventories; and due to a US$12.8 million net
      realizable value adjustment recorded in June 2007; partially offset by lower
      royalties and decreased workers’ profit participation expenses as a consequence
      of lower gold sales revenues. **** Costs
      applicable to sales include: (i) operating costs, consisting primarily of direct
      production costs such as mining and treatment of the ore, which are the most
      significant components of costs applicable to sales, (ii) employee profit
      sharing of 8 percent of pre-tax profits calculated in accordance with Peruvian
      GAAP, (iii) royalties of 3 percent of the quarterly net sale value of all gold
      and silver extracted from the mining concessions payable to Chaupiloma after
      deducting refinery and transportation costs, (iv) management fees payable to
      Newmont Peru, the operator of Yanacocha, (v) selling expenses, (vi) accretion
      costs related to asset retirement obligations and (vii) other
      costs.




*Other
      expenses.*




Other
      expenses decreased by 51 percent, or US$30.7 million, from 2007 to 2006, due
      mainly to less accruals related with: (i) negotiated payment (voluntary
      contribution) of US$12.2 million, as a consequence of lower gold sales revenues,
      (ii) 1997-2005 workers’ profit participation of US$13.3 million and (iii) La
      Quinua leach pad failure repair of US$8.9 million; partially offset by US$2.0
      million recorded in 2007 related to a contractor bankruptcy.




*Income
      tax.*




Yanacocha’s
      financial and operating results were impacted by a tax expense of US$107.0
      million in 2007, as compared to US$238.3 million in 2006, which reflects its decreased
      profitability mainly due to lower gold sales revenues as a consequence of a
      decrease in gold production .




*Dividends.*




As
      of
      December 31, 2007, Yanacocha has paid cumulative dividends of US$100 **** million
      to partners and has not reserved any money related to reinvestment
      programs.




*Forward-looking
      statements.*




Certain
      key factors will affect Yanacocha’s future financial and operating results.
      These include, but are not limited to fluctuations in the price of
      gold *.*




Yanacocha
      expects 2008 gold sales to be 1.76 ** million
      ounces at costs applicable to sales per ounce of approximately
      US$362 ** per
      ounce. Sales from 2009 through 2012 are expected to average approximately 1.47
      million ounces at costs applicable to sales of approximately US$391 per ounce,
      with actual gold sales and costs being determined by, among other factors,
      further mine plan optimization efforts, the discovery and development of
      additional oxide deposits, and the development of Conga, currently scheduled
      to
      commence production in 2010 .




121




***Critical
      Accounting Policies***




Yanacocha
      has furnished us with a discussion of its critical accounting policies or
      methods used in the preparation of its financial statements. Critical accounting
      policies are defined as those that are reflective of significant judgments
      and
      uncertainties and could potentially impact results under different assumptions
      and conditions. Note 2 ** to
      Yanacocha’s Financial Statements includes a summary of the significant
      accounting policies and methods used in the preparation of Yanacocha’s Financial
      Statements. The following is a brief discussion of the identified critical
      accounting policies and the estimates and judgments made by
      Yanacocha.




*Stockpiles,
      Ore on Leach Pads and Inventories.*




As
      described below, costs that are incurred in, or benefit, the productive process
      are accumulated as stockpiles, ore on leach pads and inventories. Stockpiles,
      ore on leach pads and inventories are carried at the lower of average cost
      or
      net realizable value. Net realizable value represents the estimated future
      sales
      price of the product based on current and long-term metals prices, less the
      estimated costs to complete production and bring the product to sale.
      Write-downs of stockpiles, ore on leach pads and inventories resulting from
      net
      realizable value impairments are reported as a component of costs applicable
      to
      sales. The current portion of stockpiles, ore on leach pads and inventories
      is
      determined based on the expected amounts to be processed within the next twelve
      months. Stockpiles, ore on leach pads and inventories not expected to be
      processed within the next twelve months are classified as long-term. The major
      classifications are as follows:




*Stockpiles.*




Stockpiles
      represent ore that has been mined and is available for further processing.
      Stockpiles are measured by estimating the number of tons added and removed
      from
      the stockpile, the number of contained ounces (based on assay data) and the
      estimated metallurgical recovery rates (based on the expected processing
      method). Stockpile ore tonnages are verified by periodic surveys. Costs are
      allocated to a stockpile based on relative values of material stockpiled and
      processed using current mining costs incurred up to the point of stockpiling
      the
      ore, including applicable overhead, depreciation, depletion and amortization
      relating to mining operations, and removed at each stockpile’s average cost per
      recoverable unit.




*Ore
      on Leach Pads.*




The
      recovery of gold from certain oxide ores is achieved through heap leaching.
      Under this method, ore is placed on leach pads where it is treated with a
      chemical solution, which dissolves the gold contained in the ore. The resulting
      “pregnant” solution is further processed in a plant where the gold is recovered.
      Costs are added to ore on leach pads based on current mining costs, including
      applicable depreciation, depletion and amortization relating to mining
      operations. Costs are removed from ore on leach pads as ounces are recovered
      based on the average cost per recoverable ounce of gold on the leach
      pad.




The
      estimates of recoverable gold on the leach pads are calculated from the
      quantities of ore placed on the pads (measured tons added to the leach pads),
      the grade of ore placed on the leach pads (based on assay data) and a recovery
      percentage (based on ore type). In general, the leach pads recover approximately
      50 percent to 95 percent of the ultimate recoverable ounces in the first year
      of
      leaching, declining each year thereafter until the leaching process is
      complete.




122




Although
      the quantities of recoverable gold placed on the leach pads are reconciled
      by
      comparing the grades of ore placed on the pads to the quantities of gold
      actually recovered (metallurgical balancing), the nature of the leaching process
      inherently limits the ability to precisely monitor inventory levels. As a
      result, the metallurgical balancing process is constantly monitored and
      estimates are refined based on actual results over time. Historically,
      Yanacocha’s operating results have not been materially impacted by variations
      between the estimated and actual recoverable quantities of gold on its leach
      pads. As of December 31, 2007, the weighted-average cost per recoverable ounce
      of gold on leach pads was US$319 per ounce (unaudited). Variations between
      actual and estimated quantities resulting from changes in assumptions and
      estimates that do not result in write-downs to net realizable value are
      accounted for on a prospective basis. ****




The
      ultimate recovery of gold from a leach pad will not be known until the leaching
      process is concluded. Based on current mine plans excluding any Minas Conga
      production, Yanacocha expects to place the last ton of ore on its leach pads
      in
      2014. Including the estimated time required for residual leaching, rinsing
      and
      reclamation activities, Yanacocha expects that its leaching operations will
      terminate within approximately six years following the date that the last ton
      of
      ore is placed on the leach pad.




The
      current portion of leach pads is determined based on estimates of the quantities
      of gold at the balance sheet date that is expected to be recovered during the
      next twelve months.




*In-process
      Inventory.*




In-process
      inventories represent materials that are currently in the process of being
      converted to a saleable product. Yanacocha’s conversion process is leach
      in-circuit. In-process material is measured based on assays of the material
      fed
      into the process and the projected recoveries of the respective plants.
      In-process inventories are valued at the average cost of the material fed into
      the process attributable to the source material coming from the mines,
      stockpiles and/or leach pads plus the in-process conversion costs, including
      applicable depreciation relating to the process facilities incurred to that
      point in the process.




*Amortization
      of Property, Plant and Mine Development.*




Amortization
      charges for mine development costs are calculated using the units of production
      method and are based on Yanacocha’s current gold production as a percentage of
      total expected gold production over the life of Yanacocha’s mines. The life of
      the mines is estimated by Yanacocha’s geology department using interpretations
      of mineral reserves, as determined in accordance with the SEC’s Industry Guide
      7. The estimate of the total expected future life of Yanacocha’s mines could be
      materially different from the actual amount of gold mined in the future and
      the
      actual life of the mines due to changes in the factors used in determining
      Yanacocha’s mineral reserves, such as the gold price and operating costs. Any
      change in management’s estimate of the total expected future life of Yanacocha’s
      mines would impact the amortization charge recorded in Yanacocha’s financial
      statements.




*Asset
      Impairment.*




Yanacocha
      reviews and evaluates its long-lived assets for impairment when events or
      changes in circumstances indicate that the related carrying amounts may not
      be
      recoverable. An impairment is considered to exist if the total estimated future
      cash flows of the assets on an undiscounted basis are less than the carrying
      amount of those assets. An impairment loss is measured and recorded based on
      discounted estimated future cash flows. Future cash flows are estimated based
      on
      quantities of recoverable minerals, expected gold and other commodity prices
      (considering current and historical prices, price trends and related factors),
      production levels and operating costs of production and capital, all based
      on
      life-of-mine plans. Existing proven and probable reserves and value beyond
      proven and probable reserves, including mineralization other than proven and
      probable and other material that is not part of the measured, indicated or
      inferred resource base, are included when determining the fair value of mine
      site reporting units at acquisition and, subsequently, in determining whether
      the assets are impaired. The term “recoverable minerals” refers to the estimated
      amount of gold and other minerals that will be obtained after taking into
      account losses during ore processing and treatment. In estimating future cash
      flows, assets are grouped at the lowest levels for which there are identifiable
      cash flows that are largely independent of cash flows from other asset groups.
      Yanacocha’s estimates of future cash flows are based on numerous assumptions and
      it is possible that actual future cash flows will be significantly different
      than the estimates, as actual future quantities of recoverable minerals, gold
      and other commodity prices, production levels and operating costs of production
      and capital are each subject to significant risks and
      uncertainties.




123




*Reclamation
      and Remediation Costs (Asset Retirement Obligations).*




Reclamation
      costs are allocated to expense over the life of the related assets and are
      periodically adjusted to reflect the changes in the estimated present value
      resulting from the passage of time and revisions to the estimates of either
      the
      timing or amount of the reclamation or abandonment costs. The asset retirement
      obligation is based on when the spending for an existing environmental
      disturbance and activity to date will occur. Yanacocha reviews, on an annual
      basis, unless otherwise deemed necessary, the asset retirement obligation at
      each mine site in accordance with FAS No. 143, “Accounting for Asset Retirement
      Obligations.”




***Results
      of Operations for the Twelve Months Ended December 31, 2007 and
      2006***




*Sales*




Sales
      decreased by 29 percent from US$1,543.2 million in 2006 to US$1,093.3 million
      in
      2007, due primarily to a 39 percent decrease in gold sold, partially offset
      by a
      higher realized average price, US$699 per ounce in 2007 compared to US$600
      per
      ounce in 2006. Production by mine was as follows:




**Mine**
            
            **2007**
            
            **2006****(ounces)**
            
            **(ounces)**Yanacocha
            
            
            566,006
            
            
            1,035,794La
                Quinua
            
            
            668,336
            
            
            1,246,058Carachugo
            
            
            307,867
            
            
            308,600Maqui
                Maqui
            
            
            21,460
            
            
            21,7471,563,669
            
            
            2,612,199




The
      decrease in ounces of gold produced in 2007 as compared to 2006 was mainly
      attributed to lower leach tons placed, 89.7 million dry metric tons and 108.5
      million dry metric tons for the periods ended December 31, 2007 and 2006,
      respectively, a higher waste to ore ratio, 1.11 grams per ton and 0.82 grams
      per
      ton for the periods ended December 31, 2007 and 2006, respectively, and lower
      placed ore grade, 0.65 grams per ton and 0.88 grams per ton for the periods
      ended December 31, 2007 and 2006, respectively .




*Costs
      applicable to sales*




Costs
      applicable to sales increased by 8 percent from US$515.9 million in 2006 to
      US$557.1 million in 2007 due primarily to higher operating costs, mainly
      attributed to: (i) higher diesel expense, (ii) higher emulsion and nitrate
      consumption due to the higher presence of water in blasting areas,
      (iii) increased electricity used in blasting, (iv) higher labor expenses
      due to salary and bonus increases and (v) increased capitalized costs in leach
      pad and precious metal inventories; and due to a US$12.8 million net realizable
      value adjustment recorded in June 2007; partially offset by lower royalties
      and
      decreased workers’ profit participation expenses as a consequence of lower gold
      sales revenues. Costs applicable to sales per ounce of gold increased by 77
      percent from US$201 in 2006 to US$356 in 2007, primarily as a result of a higher
      operating cost per ounce of US$335 in 2007 as compared to US$189 in 2006, a
      higher royalty expense per ounce of US$22 in 2007 as compared to US$19 in 2006
      and a higher accretion cost per ounce of US$6 in 2007 as compared to US$3 in
      2006. These costs were partially offset by lower employee profit-sharing costs
      per ounce of US$21 in 2007 as compared to US$30 in 2006 and a higher by-product
      metal sales credit per ounce of US$22 as compared to US$16 in 2006, due to
      an
      increase in the price of silver.




124




Operating
      costs increased by 8 percent from US$485.2 million in 2006 to US$523.6 million
      in 2007. Operating costs consist primarily of drilling, blasting, loading and
      hauling costs, which increased in 2007 primarily as a result of an increase
      in
      fuel price from an average of US$2.71 per gallon in 2006 to US$2.76 per gallon
      in 2007. Additional increases in operating costs resulted from the greater
      consumption of critical items such as drills, nitrate, tires, electricity,
      cyanide and lime (from increased tonnage mined and treated), higher personnel
      costs as a result of hiring new employees (as part of the self performance
      program) and greater expenses on donations and charitable contributions as
      a
      part of the social responsibility plan.




The
      decrease in the royalty expense paid to Chaupiloma (equivalent to 3 percent
      of
      net sales) was directly related to the decrease in sales revenues. Royalty
      expense was US$34.0 million in 2007 as compared to US$48.5 million in 2006.
      Workers’ profit participation expense is calculated based on taxable net income
      and in accordance with Peruvian labor legislation. See “Item 4. Information on
      the Company—Yanacocha—Employees.” The decrease in workers’ profit participation
      expense is directly related to the decrease of taxable net income. Workers’
profit participation was US$33.6 million in 2007 and US$76.0 million in 2006.




*Depreciation,
      depletion and amortization*




Depreciation,
      depletion and amortization decreased by 7 percent from US$171.7 million in
      2006
      to US$159.1 million in 2007. This decrease was attributable principally to
      the
      fact that some of Yanacocha’s older assets (e.g., leach pads, machinery, etc.)
      were already fully depreciated. This decrease was partially offset by higher
      mine development amortization.




*Exploration
      Expenses*




Exploration
      costs decreased by 12 percent from US$32.3 million in 2006 to US$28.2 million
      in
      2007. This decrease was attributable principally to delays in perforation works
      and the Maqui Maqui drilling project caused by a lack of environmental permits
      and issues with the local community.




*Other
      expenses*




Other
      expenses decreased by 51 percent from US$60.8 million in 2006 to US$30.1 million
      in 2007, due mainly to less accruals related with: (i) negotiated payment
      (voluntary contribution) of US$12.2 million, as a consequence of lower gold
      sales revenues, (ii) 1997-2005 workers’ profit participation of US$13.3 million
      and (iii) La Quinua leach pad failure repair of US$8.9 million; partially offset
      by US$2.0 million recorded in 2007 related to a contractor bankruptcy.




125




Peruvian
      mining companies, represented by the Sociedad Nacional de Minería, Petróleo y
      Energía, agreed to a mining payment equivalent to 3.75 percent of net income
      after taxes. On December 21, 2006, the Peruvian government issued Supreme Decree
      No. 071-2006-EM, which regulates the conditions under which the negotiated
      payment will be paid by Peruvian mining companies. The payment amounts to 3.75
      percent of Peruvian net income after income tax, including 2.75 percent to
      be
      paid to a local mining fund and 1 percent to be paid to a regional mining fund.
      This payment is payable from 2006 through 2010, contingent on the price of
      gold.




Yanacocha
      will be released from paying the negotiated payment if Yanacocha has to
      undertake major obligations arising from new taxes or from the modification
      of
      existing taxes, and in particular taxes related to mining activities. Yanacocha
      also will be released if the gold price decreases below the average price for
      the prior year set by the London Bullion Market Association. The negotiated
      payment will recommence if gold prices subsequently rise above the reference
      price.




In
      1998,
      the Peruvian government issued additional regulations regarding the calculation
      of the workers participation, which limited to 18 monthly salaries the total
      amount to which each employee is entitled. However, there is a difference
      between the law and the regulations with regard to the criteria for the
      calculation. Yanacocha followed the criteria established by the law in
      determining the amount to be paid to its employees since 1998. As of December
      31, 2006, Yanacocha recorded a charge of US$14.9 million to cover any payment
      derived from the different criteria established to make these payments in
      accordance with both the law and the regulations. **** In
      August 2007, the court reached
      an arbitration decision confirming that Yanacocha had overpaid FONDOEMPLEO and the regional government .
      Although this is a final decision and cannot be appealed, it is not binding
      on
      the regional government. Yanacocha’s legal department, based on its best
      estimate, believes that it can recover a maximum of US$3.9 million of the US$5.3
      million paid in excess to FONDOEMPLEO. The amount that Yanacocha can recover
      from the regional government will depend on negotiations. In September 2007,
      Yanacocha proceeded to pay the balance of US$21.8 million (including interest)
      owed to employees, which exceeds the original amount accrued of US$6.9 million.
      The additional amount paid relates to differences in the assumptions made by
      Yanacocha and those made by the court. The net effect of US$1.6 million from
      the
      US$6.9 million and the accrual of US$5.3 million was charged under the heading,
      “ *Other
      expense net* .”




*Interest
      expense and other income*




Interest
      expense and other income increased by 86.8 percent from US$6.8 million in 2006
      to US$12.7 million in 2007. This increase was attributable principally to higher
      capitalized interest resulting from a full year of capitalized interest expense
      in 2007 as compared to a partial year in 2006.




*Income
      tax provision*




The
      increase in income tax provision was directly related to Yanacocha’s increase in
      taxable income. The net effective tax rate was 32.6 percent in 2005 compared
      to
      31.2 percent in 2006. The statutory rate for both years was a blend of 30
      percent. The factors that most significantly impacted Yanacocha’s net effective
      tax rate were related to non-deductible expenses and penalties.




T he
      uniform income tax rate in Peru was 27 percent of taxable income in 2003.
      Effective January 1, 2004, the income tax rate in Peru is 30 percent of taxable
      income (Yanacocha, as explained below, has a stabilized corporate tax rate
      of 30
      percent, excluding income from the La Quinua mine which had a tax rate of 27
      percent until December 31, 2003 and 29 percent since January 1, 2004) and for
      financial statement purposes is calculated for Yanacocha in accordance with
      U.S.
      GAAP. Pursuant to Supreme Decree No. 027-98-EF, mining companies can obtain
      a
      tax benefit in the form of an investment credit, by effectively reinvesting
      non-distributed earnings into capital expansion projects that increase
      Yanacocha’s productivity. This investment credit is based on 80 percent of
      amounts reinvested and is obtained by application to and approval by the
      MEM.




126




Yanacocha
      has entered into Mining Law Stabilization Agreements under the General Mining
      Law with the Peruvian government. A Mining Law Stabilization Agreement is a
      standardized agreement prepared by the MEM, the Ministry of Economy and Finance,
      the Central Bank and other Peruvian governmental ministries. Such agreements
      (i)
      provide stabilized corporate tax rates, (ii) grant the ability to obtain VAT
      credit, (iii) provide full access to foreign currency and guarantee treatment
      in
      all foreign exchange matters as is given to Peruvian nationals, (iv) protect
      against foreign exchange controls and (v) grant the right to freely dispose
      of and export mineral products. Yanacocha has entered into such agreements
      with
      regard to the following mines: Carachugo/San Jose, Maqui Maqui, Cerro Yanacocha
      and La Quinua. Pursuant to these agreements, the income tax rate in Peru is
      30
      percent of taxable income, excluding income from the La Quinua mine which had
      a
      tax rate of 27 percent until December 31, 2003 and 29 percent since ** January
      1, 2004.




*Net
      Income*




As
      a
      consequence of the foregoing, net income decreased by 58 percent, or
      US$304.0 **** million **,** from
      US$525.4 million in 2006 to US$221.5 million **** in
      2007.
      As a percentage of sales, net income decreased from 34 percent in 2006 to 20
      percent in 2007.




***Results
      of Operations for the Twelve Months Ended December 31, 2006 and
      2005***




*Sales*




Sales
      increased by 4 percent from US$1,490.4 million in 2005 to US$1,543.2 million
      in
      2006, due primarily to an increase in the average price per ounce of gold from
      US$448 in 2005 to US$600 in 2006, partially offset by decreased production,
      which resulted in a 23 percent decrease in the quantity of gold sold, from
      3,327,515 ounces in 2005 to 2,572,298 ounces in 2006. Production by mine was
      as
      follows:




**Mine**
            
            **2006**
            
            **2005****(ounces)**
            
            **(ounces)**Yanacocha
            
            
            1,035,794
            
            
            1,198,161La
                Quinua
            
            
            1,246,058
            
            
            1,674,329Carachugo
            
            
            308,600
            
            
            421,967Maqui
                Maqui
            
            
            21,747
            
            
            38,6312,612,199
            
            
            3,333,088





The
      decrease in ounces of gold produced in 2006 as compared to 2005 was mainly
      attributed to lower leach tons placed, 107.5 million dry metric tons and 133.0
      million dry metric tons for the periods ended December 31, 2006 and 2005,
      respectively, a higher waste to ore ratio, 0.81 grams per ton and 0.50 grams
      per
      ton for the periods ended December 31, 2006 and 2005, respectively, and lower
      placed ore grade, 0.88 grams per ton and 0.95 grams per ton for the periods
      ended December 31, 2006 and 2005, respectively.




127




*Costs
      applicable to sales*




Costs
      applicable to sales increased by 2 percent from US$507.8 million in 2005 to
      US$515.9 million in 2006, due primarily to higher operating costs mainly
      attributed to an increase in the cost of diesel, higher consumption of cyanide
      and personnel costs, as well as increased royalties and employee profit sharing
      expenses, partially offset by higher by-product credits and increased
      capitalized cost in a leach pad and precious metal inventories. Costs applicable
      to sales per ounce of gold increased 31 percent from US$152.6 in 2005 to
      US$200.6 in 2006, primarily as a result of a higher operating cost per ounce
      of
      US$189 in 2006 as compared to US$122 in 2005, a higher royalty expense per
      ounce
      of US$19 in 2006 as compared to US$14 in 2005, and higher employee profit
      sharing costs per ounce of US$30 in 2006 as compared to US$22 in 2005, partially
      offset by an increased by-product metal sales credit per ounce of US$16 as
      compared to US$10 in 2005, due to an increase in silver sold.




Operating
      costs increased from US$428.2 million in 2005 to US$485.2 million in 2006.
      Operating costs consist primarily of drilling, blasting, loading and hauling
      costs which increased in 2006 primarily as a result of an increase in fuel
      price
      from an average of US$2.57 per gallon in 2005 to US$2.71 per gallon in 2006.
      Additional increases in operating costs resulted from the greater consumption
      of
      critical items such as drills, nitrate, tires, cyanide and lime (from increase
      tonnage mined and treated), electricity, increase of personnel costs related
      to
      new employees hired (as part of the self performance program) and greater
      expenses on donations and charitable contributions as a part of the social
      responsibility plan.




The
      increase in the royalty expense paid to Chaupiloma (equivalent to 3 percent
      of
      net sales) was directly related to the increase in sales revenues. Royalty
      expense was US$45.6 million in 2005 as compared to US$48.5 million in 2006.
      Workers’ profit participation expense is calculated based on taxable net income
      and in accordance with Peruvian labor legislation. See “Item 4. Information on
      the Company—Yanacocha—Employees.” The increase in workers’ profit participation
      expense is directly related to the increase of taxable net income. Workers’
profit participation was US$68.8 million in 2005 and US$76.0 million in
      2006.




*Depreciation,
      depletion and amortization*




Depreciation,
      depletion and amortization decreased 11 percent from US$193.6 million in 2005
      to
      US$171.7 million in 2006. This decrease was attributable principally to the
      increase in the volume of inventories, which resulted in a higher amount of
      capitalized depreciation and a lower amount charged to the results of the year
      and higher depreciation expense in connection with its asset retirement cost
      as
      a result of the adoption of SFAS No. 143 from US$7.1 million in 2005 to US$11.9
      million in 2006.




*Exploration
      Expenses*




Exploration
      costs decreased US$0.6 million from US$32.9 million in 2005 to US$32.3 million
      in 2006.




*Other
      expenses*




Other
      expenses increased in 2006 to US$60.8 million, primarily due to US$21.8 million
      related to a new mining payment negotiated with the Peruvian government intended
      to support government efforts to alleviate poverty and US$14.9 million related
      to an employee profit sharing plan accrual as a result of the different criteria
      established by the applicable law and its regulations.




Peruvian
      mining companies, represented by the Sociedad Nacional de Minería, Petróleo y
      Energía, agreed to a mining payment equivalent to 3.75 percent of net income
      after taxes. On December 21, 2006, the Peruvian government issued Supreme Decree
      No. 071-2006-EM, which regulates the conditions under which the negotiated
      payment will be paid by Peruvian mining companies. The payment amounts to 3.75
      percent of Peruvian net income after income tax, including 2.75 percent to
      be
      paid to a local mining fund and 1 percent to be paid to a regional mining fund.
      This payment is payable from 2006 through 2010, contingent on the price of
      gold.




128




Yanacocha
      will be released from paying the negotiated payment if Yanacocha has to
      undertake major obligations arising from new taxes or from the modification
      of
      existing taxes, and in particular taxes related to mining activities. Yanacocha
      also will be released if the gold price decreases below the average price for
      the prior year set by the London Bullion Market Association. The negotiated
      payment will recommence if gold prices subsequently rise above the reference
      price.




In
      1998,
      the Peruvian government issued additional regulations regarding the calculation
      of the workers participation, which limited to 18 monthly salaries the total
      amount to which each employee is entitled. However, there is a difference in
      the
      criteria for the calculation between the law and its regulations. Yanacocha
      followed the criteria established by the law in determining the amount to be
      paid to its employees since 1998. As of December 31, 2006, Yanacocha recorded
      a
      charge of US$14.9 million to cover any payment derived from the different
      criteria established to make these payments by both the law and the
      regulation.




*Interest
      expense and other income*




Interest
      expense and other income increased by 93 percent to US$6.8 million in 2006
      from
      US$3.5 million in 2005. This increase was due primarily to increased interest
      income from an increase in average cash available in banks with higher interest
      rates during 2006.




*Income
      tax provision*




The
      increase in income tax provision was directly related to Yanacocha’s increase in
      taxable income. The net effective tax rate was 30.9 percent in 2005 as compared
      to 31.2 percent in 2006. The statutory rate for both years was a blend of 30
      percent. The factors that most significantly impacted Yanacocha’s net effective
      tax rate were related to non-deductible expenses and penalties.




T he
      uniform income tax rate in Peru was 27 percent of taxable income in 2003.
      Effective January 1, 2004, the income tax rate in Peru is 30 percent of taxable
      income (Yanacocha, as explained below, has a stabilized corporate tax rate
      of 30
      percent, excluding income from the La Quinua mine which had a tax rate of 27
      percent until December 31, 2003 and 29 percent since January 1, 2004) and for
      financial statement purposes is calculated for Yanacocha in accordance with
      U.S.
      GAAP. Pursuant to Supreme Decree No. 027-98-EF, mining companies can obtain
      a
      tax benefit in the form of an investment credit, by effectively reinvesting
      non-distributed earnings into capital expansion projects that increase
      Yanacocha’s productivity. This investment credit is based on 80 percent of
      amounts reinvested and is obtained by application to and approval by the
      MEM.




Yanacocha
      has entered into Mining Law Stabilization Agreements under the General Mining
      Law with the Peruvian government. A Mining Law Stabilization Agreement is a
      standardized agreement prepared by the MEM, the Ministry of Economy and Finance,
      the Central Bank and other Peruvian governmental ministries. Such agreements
      (i)
      provide stabilized corporate tax rates, (ii) grant the ability to obtain VAT
      credit, (iii) provide full access to foreign currency and guarantee treatment
      in
      all foreign exchange matters as is given to Peruvian nationals, (iv) protect
      against foreign exchange controls and (v) grant the right to freely dispose
      of and export mineral products. Yanacocha has entered into such agreements
      with
      regard to the following mines: Carachugo, San José, Maqui Maqui, Cerro Yanacocha
      and La Quinua. Pursuant to these agreements, the income tax rate in Peru is
      30
      percent of taxable income, excluding income from the La Quinua mine which had
      a
      tax rate of 27 percent until December 31, 2003 and 29 percent since ** January
      1, 2004.




129




*Net
      Income*




As
      a
      consequence of the foregoing, net income decreased by US$0.1 million from
      US$525.5 million in 2005 to US$525.4 million in 2006. As a percent of sales,
      net
      income decreased from 35 percent in 2005 to 34 percent in 2006.




**Liquidity
      and Capital Resources**




As
      of
      December 31, 2007, Yanacocha had cash and cash equivalents of
      US$288.4 **** million,
      substantially all of which were held in U.S. Dollars, as compared to US$379.9
      million as of December 31, 2006.




*Cash
      provided by operating activities*




Yanacocha’s
      operations generated a net cash flow of US$269.0 million in 2007, US$637.2
      million in 2006 and US$665.4 million in 2005. The decrease in net cash flow
      provided by operating activities in 2007 was mainly due to lower gold sales
      revenues due to a decrease in the volumes of gold sold during 2007, lower
      depletion, depreciation and amortization expenses and lower tax pre-payments.
      The decrease in net cash flow provided by operating activities in 2006 was
      primarily attributable to increased operating costs, higher levels of materials
      and supplies inventories, lower depletion, depreciation and amortization
      expenses and higher income tax pre-payments. The increase in net cash flow
      provided by operating activities in 2005 is primarily attributable to higher
      sales revenues, partially offset by increased operating costs and higher level
      of materials and supplies inventories.




*Cash
      used in investing activities*




Net
      cash
      used in investing activities was US$250.2 **** million
      in 2007, US$268.4 million in 2006 and US$223.6 million in 2005. In 2007,
      Yanacocha’s investing activities consisted primarily of US$139.3 million for the
      Yanacocha gold mill facility, US$12.4 million for the Conga project, US$26.4
      million for the purchase of high altitude mining trucks, US$7.6 million for
      the
      construction of an alternate road to the coast of Peru, US$5.2 million for
      waterways and irrigation channels acquired from the Quishuar and Encajón
      communities, US$11.5 million for the Yanacocha 5A leach pad expansion and
      US$18.6 million for the Carachugo (stages 10 and 11) leach pad expansion. **** Investing
      activities in 2006 consisted primarily of US$157.8 million for mine and leach
      pad expansions of Carachugo (stage 10) and La Quinua (stage 6), US$9.3 million
      for environmental site and regional water management projects, US$11.9 million
      for mining equipment, US$44.8 million for the Yanacocha Gold Mill Facility,
      US$11.1 million for the Conga Project and US$32.7 million for work related
      to
      other ongoing expansions. In 2005, investing activities consisted primarily
      of
      US$56.0 million for capital expenditures associated with the expansions of
      the
      La Quinua (stages 5 and 6), Cerro Yanacocha (stage 7) and Carachugo (stage
      10)
      leach pads, US$23.9 million for mine development of Chaquicocha, Cerro Yanacocha
      and La Quinua, US$30.2 million for new mine equipment and US$12.0 million for
      environmental projects. In addition, Yanacocha invested US$17.4 million in
      developing the Conga Project.




*Cash
      used in financing activities*




Net
      cash
      used in financing activities was US$110.4 million in 2007, US$284.4 million
      in
      2006 and US$216.1 million in 2005. In 2007, financing activities consisted
      principally of US$100 million of dividends distributed to partners and US$10.3
      million of debt repayments. Financing activities in 2006 consisted primarily
      of
      dividends of US$480 million distributed to partners, partially offset by
      proceeds received from debt of US$200 million. In 2005, financing activities
      consisted of the repayment of US$34.2 million of long-term debt and dividends
      of
      US$180 million distributed to partners.




130




***Exploration
      Costs; Capital Expenditures***




**Exploration**




Yanacocha’s
      basic and advanced exploration costs during the period from 1992 through 2007
      were financed with a combination of internally generated funds, advances from
      partners, loans from DEG and IFC and proceeds from Yanacocha’s Receivables
      Securitization. See Note 11 to Yanacocha’s Financial Statements. During
      2005, 2006 and 2007, Yanacocha incurred
      US$32.9 million, US$32.3 million and US$28.2 million, respectively, in
      exploration costs. During 2008,
      Yanacocha plans to spend approximately US$37.2
      million on
      exploration. These exploration costs include all of the costs associated with
      exploration activities such as drilling services (which are subcontracted),
      geologists and metallurgical testing. See “Item 4. Information on the
      Company—Yanacocha—Exploration.”




**Capital
      Expenditures**




Yanacocha’s
      capital expenditures from its formation in 1992 through 2007 were financed
      with
      a combination of internally generated funds, advances from partners, loans
      from
      DEG and IFC and proceeds from Yanacocha’s Receivables Securitization (see Note
      11 to the Yanacocha Financial Statements). Such capital expenditures have
      related principally to the construction of the Carachugo, Maqui Maqui, San
      José,
      Cerro Yanacocha and La Quinua mining operations, the construction of the two
      plants at Carachugo and Yanacocha that include a leach solution processing
      facility and a smelter at each plant, the construction of four carbon column
      plants at Cerro Yanacocha and La Quinua, the acquisition of both new and used
      mining equipment, the construction of two dams, the construction of one
      agglomeration plant at La Quinua, the construction of a gold mill facility
      at
      Yanacocha and the expansion of the leach pads located at the Carachugo, Maqui
      Maqui, Cerro Yanacocha and La Quinua mining operations. Yanacocha’s capital
      expenditures from its formation through December 31, 2007 totaled approximately US$2,412.6
      million .
      Yanacocha anticipates that its capital expenditures for 2008 will be
      approximately US$255.8
      million ,
      in
      connection with the Yanacocha gold mill facility, the Minas Conga project,
      construction of an alternate road to the coast of Peru, the construction of
      the
      La Quinua (stage 7), Carachugo (stage 11) and Yanacocha (stage 5B) leach pad
      expansions, the continuation of the site-wide management plan to control
      sediment and chemicals, construction of the reverse osmosis plant for excess
      water treatment at Pampa Larga, development of the Chaquicocha deposit and
      the
      acquisition of real property, heavy mining equipment and various other mining
      equipment.




**Research
      and Development**




Yanacocha
      is a mining exploration and production company and does not engage in research
      and development activities.




131




**CERRO
      VERDE**




***Introduction***




The
      following discussion should be read in conjunction with the Cerro Verde
      Financial Statements and the related notes thereto included elsewhere in this
      Annual Report. The Cerro Verde Financial Statements are prepared and presented
      in accordance with Peruvian GAAP.




**Operating
      Results**




***Overview***




We
      hold
      18.50 percent interest in Cerro Verde, which operates an open-pit and molybdenum
      mining complex located 20 miles southwest of Arequipa, Peru. The site is
      accessible by paved highway. The Cerro Verde mine has been in operation since
      1976. The Cerro Verde mine is a porphyry copper deposit that has leachable
      oxide
      and secondary sulfide mineralization, and millable primary sulfide
      mineralization. The predominant copper minerals are brochantite, chrysocolla,
      malachite and copper “pitch”. Chalcocite and covellite are the most important
      secondary copper sulfide minerals. Chalcopyrite and molybdenite are the dominant
      prymary sulfides.




Cerro
      Verde’s current operations consist of an open-pit copper mine and SX/EW leaching
      facilities. Leach-copper production is derived from a 39,000 metric ton-per-day
      crushed leach facility and a ROM leach system. This leaching operation has
      a
      capacity of approximately 200 million pounds of copper per year. A new 108,000
      metric ton-per-day concentrator was completed in late 2006, and processing
      of
      sulfide ore began in the fourth quarter of 2006. Annual production over the
      next
      three years is expected to range from 655 to 705 million pounds of copper per
      year, of which 127 to 131 million pounds would be our equity share of
      production, and seven to nine million pounds of molybdenum per
      year.




Cerro
      Verde has sufficient equipment to move an average of 295,000 metric tones of
      material per day using a fleet of 26 180-metric ton and 230-metric ton haul
      trucks loaded by six shovels with bucket sizes ranging in size from 21 to 46
      cubic meters. Copper cathodes and concentrate production are transported
      approximately 70 miles by truck and rail to the Pacific Port of Matarani for
      shipment to international markets.




***Critical
      Accounting Policies***




Cerro
      Verde has furnished us with a discussion of its critical accounting policies
      or
      methods used in the preparation of its financial statements. Critical accounting
      policies are defined as those that are reflective of significant judgments
      and
      uncertainties and could potentially impact results under different assumptions
      and conditions. Note 2 ** to
      the
      Cerro Verde Financial Statements includes a summary of the significant
      accounting policies and methods used in the preparation of Cerro Verde’s
      Financial Statements. The following is a brief discussion of the identified
      critical accounting policies and the estimates and judgments made by Cerro
      Verde.




**Mineral
      Reserve and depreciation, Depletion and Amortization**




Cerro
      Verde depreciates the life-of-mine mining and milling assets using the
      unit-of-production method based on the estimated recoverable proven and probable
      copper reserves. Cerro Verde has other assets that they depreciate on a
      straight-line basis over their estimated useful lives. The estimates of
      recoverable proven and probable copper reserves and the useful lives of the
      straight-line assets impact the depreciation, depletion and amortization
      expense.




132




Accounting
      for depreciation represents a critical accounting estimate because the
      determination of reserves involves uncertainties with respect to the ultimate
      geology of the reserves and the assumptions used in determining the economic
      feasibility of mining those reserves, including estimated copper prices and
      costs of conducting future mining activities. Additionally, changes in estimated
      recoverable proven and probable reserves and useful asset lives can have a
      material impact on net income. Cerro Verde performs annual assessments of the
      existing assets, including a review of asset costs and depreciable lives, in
      connection with the review of mine operating and development plans. When Cerro
      Verde determines that assigned asset lives do not reflect the expected remaining
      period of benefit, it make prospective changes to those depreciable
      lives.




There
      are
      a number of uncertainties inherent in estimating quantities of reserves,
      including many factors beyond the control of Cerro Verde’s management. Ore
      reserve estimates are based upon engineering evaluations of samplings of drill
      holes. The estimates of recoverable proven and probable reserves are prepared
      by
      the employees of Cerro Verde, and majority of these estimates are reviewed
      and
      verified by independent experts in mining, geology and reserve determination.
      At
      December 31, 2007, recoverable reserves included 14.3 billion pounds of copper.
      These estimates involve assumptions regarding future copper prices, the geology
      of Cerro Verde mine, the mining methods that Cerro Verde uses and the related
      costs it incurs to develop and mine the reserves. Changes in these assumptions
      could result in material adjustment to Cerro Verde ́s reserve estimates, which
      could result in changes to depreciation, depletion and amortization expense
      in
      future periods, with corresponding adjustments to net income.




Cerro
      Verde reviews and evaluates the long-lived assets for impairment when events
      or
      changes in economic circumstances indicate that the related carrying amount
      of
      such assets may not be recoverable. Changes to the estimates of recoverable
      proven and probable reserves could have an impact on the assessment of asset
      impairment. Revisions to the estimates of recoverable proven and probable copper
      reserves could give rise to an impairment of the assets.




**Recoverable
      Copper**




Cerro
      Verde records, as inventory, applicable costs for copper contained in mill
      and
      leach stockpiles that are expected to be processed in the future based on proven
      processing technologies. Mill and leach stockpiles are evaluated periodically
      to
      ensure that they are stated at the lower of cost or market. Accounting for
      recoverable copper from mill and leach stockpiles represents a critical
      accounting estimate because (i) it is generally impracticable to determine
      copper contained in mill and leach stockpiles by physical count, and therefore,
      requires management to employ reasonable estimation methods and (ii) recovery
      rates from leach stockpiles can vary significantly. The quantity of material
      delivered to mill and leach stockpiles is based on surveyed volumes of mined
      material and daily production records. Sampling and assaying of blast hole
      cutting determine the estimated copper grade contained in the material delivered
      to the mill and leach stockpiles.




Expected
      copper recovery rates for mill stockpiles are determined by metallurgical
      testing. The recoverable copper in mill stockpiles, once entered into the
      production process, can be extracted into copper concentrate almost
      immediately.




Processes
      and recovery rates are monitored continuously, and recovery rate estimates
      are
      adjusted periodically as additional information becomes available and as related
      technology changes.




133




**Reclamation
      and Closure Cost**




Reclamation
      is an ongoing activity that occurs throughout the life of a mine. In accordance
      with IAS 37 “Provisions, contingent liabilities and contingent assets”, Cerro
      Verde records the fair value of the estimated asset retirement obligations
      (AROs) associated with tangible long-lived assets in the period incurred. Fair
      value is measured as the present value of cash flow estimates after considering
      inflation and then applying a market risk premium. The cost estimates are
      reflected on a third-party cost basis and comply with the legal obligation
      to
      retire tangible, long-lived assets as defined by IAS 37. These cost estimates
      may differ from financial assurance cost estimates for reclamation activities
      because of a variety of factors, including obtaining updated cost estimates
      for
      reclamation activities, the timing of reclamation activities, changes in scope
      and the exclusion of certain costs not accounted for under IAS 37.




Generally,
      ARO activities are specified by regulations or in permits issued by the relevant
      governing authority, and management judgment is required to estimate the extent
      and timing of expenditures based on life-of-mine planning. Accounting for
      reclamation and closure costs represents an estimate because (i) Cerro Verde
      will not incur most of these costs for a number of years, requiring us to make
      estimates over a long period, (ii) reclamation and closure laws and regulations
      could change in the future and/or circumstances affecting the operations could
      change, either or which could result in significant changes to the current
      plans, (iii) calculating the fair value or the AROs in accordance with IAS
      37
      requires management to estimates projected cash flows, make long-term
      assumptions about inflation rates, determine the credit-risk adjusted rate
      and
      determine market risk premiums that are appropriate for the operations and
      (iv)
      given the magnitude of the estimated reclamation and closure costs, changes
      in
      any or all of these estimates could have a significant impact on net
      income.




**Environmental
      obligations**




Accounting
      for environmental obligations represents a critical accounting estimate because
      changes to environmental laws and regulations and/or circumstances affecting
      the
      operations, could result in significant changes to the estimates, which could
      have a significant impact in the net income. As management judgment and
      estimates are required to comply with applicable Peruvian GAAP guidance, on
      an
      annual basis, Cerro Verde reviews changes in facts and circumstances associated
      with the environmental obligations. Judgments and estimates are based upon
      available fact, existing technology, presently enacted law and regulations,
      remediation experience, whether or not Cerro Verde is a Potentially Responsible
      Party, or PRP, the ability of other PRPs to pay their allocated portions and
      take into consideration reasonably possible outcomes. The estimates can change
      substantially as additional information becomes available regarding the nature
      or extend of the contamination, required remediation methods and actions by
      or
      against governmental agencies or private parties.




**Deferred
      Taxes**




In
      preparing the annual financial statements, Cerro Verde estimates the actual
      amount of taxes currently payable or receivable as well as deferred tax assets
      and liabilities attributable to temporary differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax basis. Deferred income tax assets and liabilities are measured
      using enacted tax rates expected to apply to taxable income in the years in
      which these temporary differences are expected to be recovered on settled.
      The
      effect on deferred tax assets and liabilities of a change in tax rate and laws
      is recognized in income in the period in which such changes are
      enacted.




A
      valuation allowance is provided for those deferred tax assets for which it
      is
      more likely than not that the related benefits will not be realized. In
      determining the amount of the valuation allowance, Cerro Verde considers
      estimated future taxable income as well as feasible tax planning strategies
      in
      each jurisdiction. If Cerro Verde determines that it will not realize all or
      a
      portion of our deferred tax assets, it will increase its valuation allowance
      with a change to income tax expense. Conversely, if Cerro Verde determines
      that
      it will ultimately be able to realize all or a portion of the related benefits
      for which a valuation allowance has been provided, all or a portion of the
      related valuation allowance will be reduced with a credit to income tax
      expense.




134




**Results
      of Operations for the Twelve Months Ended December 31, 2007 and
      2006**




*Net
      sales.* Net
      sales increased by
      168.8
      percent, from US$667.7 million in 2006 to US$1,794.6 million in 2007,
      principally due to the increase in the volume of copper concentrate sold during
      2007, while the volume of copper cathode sold remained constant. Cerro Verde
      also sold small quantities of molybdenum during 2007. The following tables
      reflect the average realized price and volume sold of copper (both cathode
      and
      concentrate) during the years ended December 31, 2006 and 2007:


Year
                  ended December 31,2006
              
              2007
              
              VariationAverage
                  priceCopper
                  (US$/MT)
              
              US$
              6,874
              
              US$
              6,743
              
              
              1.9
              %Volume
                  soldCopper
                  (MT)
              
              
              97,127
              
              
              266,132
              
              
              174.0
              %




Average
      realized copper prices per metric ton decreased from US$6,874 in 2006 to
      US$6,743 in 2007. The volume of copper sold increased from 97,127 metric ton
      in
      2006 to 266,132 metric ton in 2007, mainly due to production at Cerro Verde’s
      new copper concentrate plant, which reached design capacity production in June
      2007. The combined effect of these changes resulted in a US$1,126.9 million
      increase in income from sales of copper in 2007 compared to 2006.




*Total
      costs of sales* .
      Total
      costs of sales increased by 197.8 percent, from US$140.4 million in 2006 to
      US$418.1 million in 2007, due to the following:




(a)
      Material and supplies consumption costs increased by 137.8 percent from US$73.2
      million in 2006 to US$174.1 million in 2007, primarily related to the increase
      in the utilization of new and more expensive materials, supplies and spare
      parts
      resulting from the operation of Cerro Verde’s new copper concentrate plant,
      which became operational in December 2006.




(b)
      Depreciation and amortization costs increased by 236.1 **** percent
      from US$26.9 million in 2006 to US$90.4 **** million
      in 2007, due principally to depreciation of US$57.0 million recorded in 2007
      related to Cerro Verde’s new copper concentrate plant.




(c)
      Energy costs increased by 190.4 percent from US$15.6 million in 2006 to US$45.3
      million in 2007, mainly due to increased consumption of electricity as a result
      of the operation of Cerro Verde’s new copper concentrate plant, which reached
      design capacity production in June 2007.




(d)
      Labor
      costs increased by 78.3 percent from US$22.6 million in 2006 to US$40.3 million
      in 2007, due mainly to the operation of Cerro Verde’s new copper concentrate
      plant. In addition, maintenance and other costs increased by 338.5 percent
      from
      US$24.7 million in 2006 to US$108.3 million in 2007, mainly due to scheduled
      and
      unscheduled maintenance performed at Cerro Verde’s new copper concentrate plant
      as a consequence of some operational issues that were resolved during
      2007.




135




*Total
      operating expenses.* Operating expenses increased by 104.5 percent from US$51.6 million in 2006
      to
      US$105.5 million in 2007, due to changes in the following components:




(a)
      Selling expenses increased by 1,454.3 percent from US$3.5 million in 2006 to
      US$54.4 million in 2007, due mainly to increased ocean freight expenses incurred
      as a consequence of the increased volume of copper concentrate sold during
      2007.




(b)
      Negotiated payment (voluntary contribution) amounted to US$48.7 million in
      2007.
      In order to support to the Peruvian government’s efforts to eradicate poverty in
      Peru and generate a favorable economic environment, on November 8, 2007 Cerro
      Verde signed an agreement with the Peruvian government to pay a negotiated
      payment (voluntary contribution) of 3.75 percent of net income, which resulted
      in a total contribution of US$48.7 million for the years 2007 and
      2006.




(c)
      Other
      operating expenses decreased by 1,904.2 percent from US$48.1 million in 2006
      to
      US$2.4 million in 2007 principally due to a contribution made to local
      communities to finance and implement the construction of a drinking water plant
      amounting to US$40.0 million and other minor contributions to Arequipa’s
      Municipalities and Regional Government amounting to US$8.1 million, recorded
      in
      2006.




*Operating
      income.* As
      a
      result of the foregoing, operating income increased **** by
      167.2
      percent, from US$475.6 million in 2006 to US$1,270.9 million in
      2007.




*Financial
      income.* Financial income increased by 204.6 percent from US$10.9 million in 2006 to
      US$33.2 million in 2007, primarily related to increased investment of excess
      cash from operations in marketable securities. As of December 31, 2007 and
      2006,
      these investments amounted to US$627.3 million and US$340.2 million,
      respectively




*Financial
      expense* .
      Financial expense increased by 676.7 percent from US$3.0 million in 2006 to
      US$23.3 million in 2007, mainly due to interest expenses and debt issuance
      costs
      related to debt issued to finance the construction of Cerro Verde’s copper
      concentrate plant, which were capitalized during the construction period. During
      2007, such expenses and costs were recognized as a financial expense.




*Workers’
      profit sharing.* Workers’
profit sharing expense increased by 149.5 percent from US$42.8 million in 2006
      to US$106.8 million in 2007. The increase in workers’ profit sharing was
      directly related to the Cerro Verde ́s increase in taxable income. Workers’
profit sharing is calculated as a percentage of the taxable income.




*Income
      tax* .
      Income
      tax expense increased by 8,095.6 percent from a benefit of US$4.5 million in
      2006 to an expense of US$368.8 million in 2007.




In
      2004,
      Cerro Verde signed an Agreement of Guarantees and Measures to Promote Investment
      with the Government of Peru, under the Peruvian General Mining Law. Upon the
      approval of the agreement, Cerro Verde is subject to the tax in force at May
      6,
      1996. Cerro Verde has tax stability for a period of fifteen years counted from
      January 1, 1999. Pursuant to Supreme Decree No. 07-94-EF, mining companies
      can
      obtain a tax benefit in the form of an investment credit, by effectively
      reinvesting non-distributed earnings into capital expansion projects that
      increase Cerro Verde productivity. This investment credit is based on 80 percent
      of amounts reinvested and is obtained by application to and approval by the
      MEM.
      Under the terms of this program, Cerro Verde invested the sum of US$334.2
      million during 2007 and US$317.1 million in 2006 corresponding to the profit
      obtained in those years, which resulted in a reduced income tax of US$100.2
      million in 2007 and US$95.1 million in 2006.




136




*Net
      income.* As a
      result of the foregoing, net income increased by 81.0 percent from US$444.6
      million in 2006 to US$804.6 million in 2007. As a percentage of net sales,
      net
      income was 44.9 percent in 2007, compared with 66.6 percent in
      2006.




**Results
      of Operations for the Twelve Months Ended December 31, 2006 and
      2005**




*Net
      sales.* Net
      sales increased by 86.0 percent, from US$358.9 million in 2005 to US$667.7
      million in 2006 due to increases in the average realize price and volume of
      copper sold during 2006. The following tables reflect the average realized
      price
      and volume sold of copper for 2005 and 2006:


Year
                    ended December 31,2006
                
                2007
                
                VariationAverage
                    priceCopper
                    (US$/MT)
                
                US$
                3,852
                
                US$
                6,874
                
                
                78.5
                %Volume
                    soldCopper
                    (MT)
                
                
                93,183
                
                
                97,127
                
                
                4.2
                %




Average
      realized copper prices per metric ton increased from US$3,852 in 2005 to
      US$6,874 in 2006; additionally the volume of copper sold increased by 3,944
      metric ton in 2006. The combined effect of these changes resulted in a US$308.8
      million increase **** in
      income
      from sales of copper in 2006 compared to 2005. This increase was the result
      of
      higher market prices reached in 2006.




*Total
      costs of sales* .
      Total
      costs of sales increased by 5.01 percent, from US$133.7 million in 2005 to
      US$140.4 million in 2006 principally due to a 33.8 percent increase in
      depreciation and amortization costs, from US$20.1 million in 2005 to US$26.9
      million in 2006, mainly as a result of additional depreciation of US$5.1 million
      recorded in 2006 in connection with the initiation of operations of Cerro
      Verde’s new copper concentrate plant in December 2006.




*Total
      operating expenses.* Operating expenses increased by 3,869.2 percent from US$1.3 million in 2005
      to
      US$51.6 million in 2006, mainly due to contributions of US$40.0 million made
      to
      local communities to finance and implement the construction of a drinking water
      plant and other minor contributions to Arequipa’s Municipalities and Regional
      Government amounting to US$8.1 million.




*Operating
      income* . ** As
      a
      result of the foregoing, operating income increased by 112.4 percent, from
      US$223.9 million in 2005 to US$475.6 million in 2006.




*Financial
      income* .
      Financial income increased by 55.71 percent from US$7.0 million in 2005 to
      US$10.9 million in 2006, primarily related to increased investment of excess
      cash from operations in marketable securities. As of December 31, 2006 and
      2005
      these investments amounted to US$340.2 million and US$247.9 million,
      respectively




*Financial
      expense* .
      Financial expense increased by 29,900.0 percent from US$0.01 million in 2005
      to
      US$3.0 million in 2006, due to the amortization of debt issuance costs during
      2006 amounting to US$2.5 million.




*Workers’
      profit sharing.* Workers’
      profit sharing expense increased by 130.1 percent, from US$18.6 million in
      2005
      to US$42.8 million in 2006. This amount is calculated by applying a percentage
      to Cerro Verde’s taxable income. The increase in workers’ profit sharing was
      directly related to the Cerro Verde’s increased taxable income. Workers’ profit
      sharing is calculated by applying a percentage to the taxable income.




137




*Income
      tax* Income
      tax expense decreased by 79.6 percent from a benefit of US$22.1 million in
      2005
      to a benefit of US$4.5 million in 2006.




Cerro
      Verde has signed an Agreement of Guarantees and Measures to Promote Investment
      with the Government of Peru, under the Peruvian General Mining Law. Upon the
      approval of the agreement, Cerro Verde is subject to the tax in force at May
      6,
      1996. Cerro Verde has tax stability for a period of fifteen years counted from
      January 1, 1999. Pursuant to Supreme Decree No. 07-94-EF, mining companies
      can
      obtain a tax benefit in the form of an investment credit, by effectively
      reinvesting non-distributed earnings into capital expansion projects that
      increase Cerro Verde productivity. This investment credit is based on 80 percent
      of amounts reinvested and is obtained by application to and approval by the
      MEM.
      Under the terms of this program, Cerro Verde invested the sum of US$317.1
      million during 2006 and US$148.0 million in 2005 corresponding to the profits
      obtained in those years, which resulted in a reduced income tax of US$95.1
      million in 2006 and US$44.3 million in 2005.




*Net
      income* As a
      result of the foregoing, net income increased by 89.4 percent from US$234.7
      million in 2005 to US$444.6 million in 2006. As a percentage of net sales,
      net
      income was 66.6 percent in 2006, compared with 65.4 percent in
      2005.




**Liquidity
      and Capital Resources**




As
      of
      December 31, 2007, Cerro Verde had cash and cash equivalents of US$630.4
      million, compared to US$354.9 million at December 31, 2006.




*Cash
      provided by operating activities for the years ended December 31, 2007 and
      2006.* Net cash
      and cash equivalents provided by operating activities were US$1,118.6 million
      in
      2007 and US$467.5 million in 2006. The
      increase in net cash flow provided by operating activities in 2007 compared
      with
      2006 was mainly attributable to the following factors: increased
      collection from customers, from US$647.8 million in 2006 to US$1,647.7 million
      in 2007;  increased
      payments to suppliers and third parties, from US$62 million in 2006 to US$374
      million in 2007; increased payments to personnel, from US$41.7 million in 2006
      to US$82.2 million in 2007; decreased payments of other expenses due to
      contributions in favor of local government, from US$8.1 million in 2006 to
      US$2.4 million in 2007; and increased payments of income tax, from
      US$65.1 **** million
      in 2006 to US$138.9 million in 2007, due to greater taxable income in 2007
      compared to 2006.




*Cash
      provided by operating activities for the years ended December 31, 2006 and
      2005.* Net
      cash
      and cash equivalents provided by operating activities were US$467.5 **** million
      in 2006 and US$107.8 million in 2005. The
      increase in net cash flow provided by operating activities in 2006 compared
      with
      2005 was mainly attributable to the following factors: increased
      collection from customers, from US$307 million in 2005 to US$647.8 million
      in
      2006; decreased payments to suppliers and third parties, from US$85 million
      in
      2005 to US$62 million in 2006; increased payments to personnel, from US$19.1
      million in 2005 to US$22.6 million in 2006; increased payments of other expenses
      due to contributions in favor of local government, from nil in 2005 to US$8.1
      million in 2006; and increased payments of income tax, from US$60.8 million
      in
      2005 to US$65.1 million in 2006 due to increased sales and income before
      taxes.




*Cash
      used in investing activities.* Net
      cash
      and cash equivalents used in investing activities were US$99.8 million in 2007,
      US$559.9 million in 2006 and US$314.3 million in 2005 *.*




138




*Cash
      used in investing activities for the years ended December 31, 2007 and
      2006* .
      Net
      cash used in investing activities decreased in 2007 compared to 2006, mainly
      due
      to a US$460.1 million decrease in purchases of property, plant and equipment,
      from US$560 million in 2006 to US$99.9 million in 2007, mainly as a result
      of
      the completion of the construction of Cerro Verde’s copper concentrate plant in
      December 2006.




*Cash
      used in investing activities for the years ended December 31, 2006 and
      2005* .
      Net
      cash used in investing activities increased in 2006 compared to 2005, mainly
      due
      to a US$245.1 million increase in purchases of property, plant and equipment,
      from US$314.9 million in 2005 to US$560.0 million in 2006, mainly related to
      the
      construction of Cerro Verde’s copper concentrate plant during 2006.




*Cash
      provided by (used in) financing activities.* Net
      cash
      and cash equivalents used by financing activities were US$743.2 million in
      2007
      and net cash and cash equivalents provided by financing activities were
      US$182 **** million
      in 2006 and US$314.6 million in 2005.




*Cash
      provided by financing activities for the years ended December 31, 2007 and
      2006* . The
      decrease in net cash flow provided by financing activities in 2007 compared
      with
      2006 was mainly attributable to a US$620.0 million increase in dividend payments
      and US$123.2 million on payments on long-term debt .
      During
      2006, Cerro Verde received proceeds from debt issuance amounting to US$182.0
      million.




*Cash
      provided by financing activities for the years ended December 31, 2006 and
      2005* . The
      decrease in net cash flow provided by financing activities in 2006 compared
      with
      2005 was mainly attributable to the
      capital contribution amounting to US$441.7 million received in 2005 and US$20.0
      million proceeds from debt issuance, partially off-set by US$147.1 million
      in
      dividend payments. During 2006, cash and cash equivalents provided by financing
      was US$182.0 million in proceeds from debt issuance.




**Trend
      Information**




**The
      Company’s Trend Information**




Other
      than as disclosed in this Annual Report, we are not aware of any trends,
      uncertainties, demands, commitments or events which are reasonably likely to
      have a material effect upon our net sales or revenues, income from continuing
      operations, profitability, liquidity or capital resources, or that would cause
      reported financial information to be not necessarily indicative of future
      operating results or financial condition.




For
      our
      exploration activities, there is no production, sales or inventory in a
      conventional sense. Our financial success is dependent upon the extent to which
      we are capable of discovering mineralization and the economic viability of
      exploration properties. The construction and operation of such properties may
      take years to complete and the resulting income, if any, cannot be determined
      with certainty. Further, the sales value of mineralization discovered by us
      is
      largely dependent upon factors beyond our control, including the market value
      at
      any given time of the metals produced.




**Yanacocha’s
      Trend Information**




Other
      than as disclosed in this Annual Report, Yanacocha has informed us that it
      is
      not aware of any trends, uncertainties, demands, commitments or events which
      are
      reasonably likely to have a material effect upon Yanacocha’s net sales or
      revenues, income from continuing operations, profitability, liquidity or capital
      resources, or that would cause reported financial information to not necessarily
      be indicative of future operating results or financial condition.




139




**Cerro
      Verde’s Trend Information**




Other
      than as disclosed in this Annual Report, Cerro Verde has informed us that it
      is
      not aware of any trends, uncertainties, demands, commitments or events which
      are
      reasonably likely to have a material effect upon Cerro Verde’s net sales or
      revenues, income from continuing operations, profitability, liquidity or capital
      resources, or that would cause reported financial information to not necessarily
      be indicative of future operating results or financial condition.




**Off-Balance
      Sheet Arrangements**




**Our
      Off-Balance Sheet Information**




There
      are
      no off-balance sheet arrangements that have or are reasonably likely to have
      a
      current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that are material to investors.




**Yanacocha’s
      Off-Balance Sheet Information**




Yanacocha
      has informed us that there are no off-balance sheet arrangements that have
      or
      are reasonably likely to have a current or future effect on Yanacocha’s
      financial condition, changes in financial condition, revenues or expenses,
      results of operations, liquidity, capital expenditures or capital resources
      that
      are material to investors.




**Cerro
      Verde’s Off-Balance Sheet Information**




Cerro
      Verde has informed us that there are no off-balance sheet arrangements that
      have
      or are reasonably likely to have a current or future effect on Cerro Verde’s
      financial condition, changes in financial condition, revenues or expenses,
      results of operations, liquidity, capital expenditures or capital resources
      that
      are material to investors.




**Tabular
      Disclosure of Contractual Obligations**




**Our
      Contractual Obligations**




The
      following table shows our contractual obligations as of December 31, 2007:




Payments
                due by Period (US$ in millions)Less than
              or equal to
            
            1-3
            
            4-5
            
            After
                5Total
            
            1 year
            
            years
            
            years
            
            yearsLong-Term
                Debt
            
            
            84,119
            
            
            20,869
            
            
            60,250
            
            
            3,000
            
            
            –Total
                Contractual Cash Obligations
            
            
            84,119
            
            
            20,869
            
            
            60,250
            
            
            3,000
            
            
            –





As
      of
      December 31, 2007, we had no other commercial commitments.




On
      May
      21, 2008, we borrowed a US$450 million Syndicated Term Loan pursuant to the
      Term
      Loan Agreement. The Term Loan Agreement provides that the Syndicated Term Loan
      will be repaid in 20 equal quarterly installments and that the final payment
      will be due in May 2013. See “Item 10. Additional Information—Material
      Contracts.”




140




**Yanacocha’s
      Contractual Obligations**




The
      following table shows Yanacocha’s contractual obligations as of December 31,
      2007:




Payments
                due by Period (US$ in millions)Less than
              or equal to
            
            1-3
            
            4-5
            
            After
                5Total
            
            year
            
            years
            
            years
            
            yearsLong-Term
                Debt
            
            
            189.6
            
            
            14.0
            
            
            65.1
            
            
            59.6
            
            
            50.9Capital
                Lease Obligations
            
            
            28.5
            
            
            8.7
            
            
            19.8
            
            
            -
            
            
            -Reclamation
                and Remediation Liability
            
            
            151.0
            
            
            4.4
            
            
            11.9
            
            
            11.4
            
            
            123.3Open
                purchase orders
            
            
            52.8
            
            
            52.8
            
            
            -
            
            
            -
            
            
            -Other
                Long-Term Obligations (*)
            
            
            30.5
            
            
            19.8
            
            
            10.7
            
            
            -
            
            
            -Total
                Contractual Cash Obligations
            
            
            452.4
            
            
            99.7
            
            
            107.5
            
            
            71.0
            
            
            174.2







(*)  Other
      long-term contracts include deferred workers compensation obligations, power
      and
      fuel supply contract commitments and fuel and inventory
      obligations.




**ITEM
              6.**
            **Directors,
                Senior Management and Employees**




**Board
      of Directors and Senior Management**




Our
      Board
      of Directors is responsible for policy decisions and our overall direction
      and
      other corporate matters in accordance with our By-laws and the Peruvian
      Companies Law. Our executive officers oversee our business and are responsible
      for the execution of the policy decisions of the Board of Directors. The Board
      of Directors, which must be comprised of seven members, is elected at the annual
      obligatory meeting of shareholders, or the Annual Obligatory Meeting for a
      three
      year term. The last election took place on March 27, 2008, and the next
      election is scheduled for March 2011. See Item 10. “Additional
      Information—Memorandum and Articles of Association.”




Our
      current directors and executive officers are as follows: ****




Name
            
            Age
            
            Position
            
            Date
                First
              Appointed
            
            Current
              Term
                EndsDirectorsAlberto
                Benavides(1)
            
            87
            
            Chairman
                of the Board
            
            1980
            
            March
                2011Norman
                Anderson
            
            77
            
            Director
            
            1994
            
            March
                2011Luis
                Coleridge
            
            71
            
            Director
            
            2000
            
            March
                2011Aubrey
                Laurence Paverd
            
            69
            
            Director
            
            2002
            
            March
                2011Felipe
                Ortiz-de-Zevallos
            
            60
            
            Director
            
            2003
            
            March
                2011Roque
                Benavides(2)
            
            53
            
            Director
            
            2004
            
            March
                2011Germán
                Suárez(3)
            
            66
            
            Director
            
            2005
            
            March
                2011




Name
            
            Age
            
            Position
            
            Date
                First
              Appointed
            
            Current
              Term
                EndsExecutive
                OfficersRoque
                Benavides(1)
            
            53
            
            President
                and Chief Executive Officer
            
            2001Carlos
                E. Gálvez
            
            55
            
            Vice
                President and Chief Financial Officer
            
            2001Raúl
                Benavides(1)
            
            52
            
            Business
                Development Vice President
            
            1997Francois
                Muths
            
            56
            
            Operations
                Vice President
            
            2007José
                Miguel Morales(1)
            
            62
            
            General
                Counsel
            
            1970César
                E. Vidal
            
            53
            
            Explorations
                Vice President
            
            1996Carlos
                Humberto Rodríguez
            
            63
            
            Comptroller
            
            1984







(1)
            Alberto
                Benavides de la Quintana is the father of Roque Benavides Ganoza
                and Raúl
                Benavides Ganoza, the father-in-law of José Miguel Morales Dasso and the
                brother of Jorge Benavides de la Quintana.


(2)
            Roque
                Benavides Ganoza replaced Jorge Benavides de la Quintana, who was
                a
                Director until July 2004


(3)
              Germán
                  Suárez replaced Carlos Plenge Washburn, who was Director until March
                  2005.





Set
      forth
      below is biographical information concerning members of our management:




*Alberto
      Benavides, Founder, Chairman and member of the Compensation Committee and
      Nominating/Corporate Governance Committee.* Mr.
      Alberto Benavides served as our Chief Executive Officer from 1953 to April
      1964,
      when he joined Cerro de Pasco Corporation as its President and CEO. In 1971
      he
      resigned from Cerro and became head of the Mining Engineering School at the
      Catholic University of Peru.  In 1976 he rejoined Buenaventura as Chairman
      of the Board and CEO until 2001, when he resigned as CEO but continued as
      Chairman of the Board, a position which he still holds.  He has been Vice
      Chairman of Yanacocha’s Executive Committee since 1992. He also has served as a
      director of numerous other mining and mining-related companies that are our
      subsidiaries. He spent a total of 17 years (1944-1952 and 1964-1971) with Cerro
      de Pasco Corporation, a Delaware corporation engaged in the mining business,
      where he was in various management and executive positions involved in the
      exploration and geology of mines in Peru. He served as President of the
      Privatization Committee for Centromín from 1992 to 1994 and as director of the *Banco
      Central de Reserva del Perú* (the
      Central Reserve Bank of Peru) from 1992 to 2000. He received a B.S. degree
      in
      Engineering from the *Universidad
      Nacional de Ingeniería* (National
      University of Engineering, or UNI) in Peru in 1941 and an M.S. in Geology from
      Harvard University in 1944 and completed the Advanced Management Program at
      the
      Harvard Business School in 1971.




*Norman
      Anderson, Director and member of the Nominating/Corporate Governance
      Committee.* Mr.
      Anderson has been a director since 1994. He is currently President of Anderson
      & Associates, a Canadian consulting firm. In 1991, he was elected Chairman
      of the Board of International Corona Corporation, a Canadian gold mining company
      that has since merged with a wholly-owned subsidiary of Homestake Company,
      a
      U.S. mining company. From 1978 to 1986, he was Chief Executive Officer and
      Chairman of the Board of Cominco. He was President and CEO of Fording Coal
      from
      1973 to 1977 and was employed from 1970 to 1973 by AMAX Inc., a company that
      has
      since merged with Cyprus Minerals Company to create Cyprus Amax, and from 1953
      to 1970 by Cominco. He is currently a Chairman of HudBay Minerals Corporation
      and is or has been a director or officer of other smaller mining companies
      and a
      consultant since leaving Cominco. Mr. Anderson graduated from the University
      of
      Manitoba with a B.S. in Geological Engineering in 1953.




*Luis
      Coleridge, Director, Financial Expert, Chairman of the Audit Committee and
      member of the Nominating/Corporate Governance Committee.* Mr . Coleridge
      was elected a Board Member on March 29, 2000. He is presently an independent
      business consultant. A retired partner of Arthur Andersen, Mr. Coleridge’s
      career as a public accountant spanned 33 years, in which he rose to the position
      of Managing Partner of Arthur Andersen’s Peruvian operations and retired in
      1997. He was also professor of accounting and auditing at the *Universidad
      Nacional Mayor de San Marcos* ,
      or
      UNMSM, and other Peruvian universities and colleges. Mr. Coleridge graduated
      from UNMSM with a B.S. degree in 1962 and completed post-graduate studies in
      Economics in 1964.




141




*Aubrey
      Laurence Paverd, Director and member of the Nominating/Corporate Governance
      Committee* .
      Dr.
      Paverd is currently a private consultant based in Melbourne, Australia. He
      has
      been a director since 2002. From 1994 to 2000, he held the position of Group
      Executive Exploration with North Ltd., a diversified mining company with gold
      and base metal mines in Australia, Europe, North and South America. His career
      with Newmont Mining Corporation spanned 21 years. He began as Chief Geologist
      of
      South Africa in 1973, rising through the positions of Chief Geologist at Tsumeb
      Corporation Ltd., Namibia, a subsidiary of Newmont, to assistant to the Vice
      President of Exploration in New York in 1979, Director of Foreign Exploration
      in
      1981 and ultimately Vice President of Exploration when he left Newmont in 1994.
      Mr. Paverd was also a lecturer in geology at Rhodes University during 1972
      and
      1973 and worked as a field and mining geologist in Australia and Zambia during
      the period from 1962 to 1969. He received B.S. (Hons) and M.S. degrees from
      Rhodes University in 1961 and 1966 respectively and a Ph.D. from the University
      of James Cook North Queensland in 1972. Mr. Paverd is currently also a director
      of Randgold Resources Ltd., a London listed West African gold mining
      company.




*Felipe
      Ortiz-de-Zevallos, Director and member of the Audit Committee, Compensation
      Committee and Nominating/Corporate Governance Committee.* Mr. Ortiz-de-Zevallos has been a director since August 2003. He was
      President of the Universidad del Pacifico de Lima from 2004 to 2006 and is
      the
      founder and chairman of the Board of Groupo APOYO since 1977.
      Mr. Ortiz-de-Zevallos received a degree in Industrial Engineering from The
      National University of Engineering in 1968, received an M.S. in Administration
      and System Analysis from the University of Rochester in 1970 and completed
      the
      Owner/President Management program at Harvard Business School in 1996. He is
      currently the Peruvian ambassador to the United States of America.




*Roque
      Benavides, Director, President and Chief Executive Officer*  *and
      member of the Nominating/Corporate Governance Committee* .
      Mr. Benavides has been a director since July 2004 and was our Chief
      Financial Officer from 1985 to February 2001, when he was appointed President
      and Chief Executive Officer. Prior to that time, he served as Assistant to
      our
      Chairman of the Board from 1980 to 1985 and as a Project Engineer from 1977
      to
      1979. Mr. Benavides also has been an alternate member of the Executive Committee
      of Yanacocha since 1992. In addition, he is an alternate board member of Cerro
      Verde and was the General Manager of Recuperada S.A., formerly one of our
      majority-owned subsidiaries that has since merged into us, from 1981 to 1996.
      He
      currently is serving as an executive officer and as a director of several of
      our
      related companies. He also has served as a director of the *Sociedad
      Nacional de Minería, Petróleo y Energía* (National Association of Minerals, Petroleum and Energy) since 1988, serving
      as
      Chairman of the Board from 1993 to 1995. Mr. Benavides served as chairman of
      the *Confederación
      Nacional de Instituciones Empresariales Privadas* (National
      Confederation of Private Companies, or CONFIEP) from 1999 to March 2001. In
      2001, Mr. Benavides was appointed Vice Chairman of the World Gold Council and
      Vice Chairman of the Silver Institute in 2007. Mr. Benavides received a B.S.
      in
      Engineering from *Pontificia
      Universidad Católica del Perú* (Pontifical Catholic University of Peru) in Lima, Peru in 1977 and an M.B.A.
      from Henley, The Management College of Brunnel University in 1980, completed
      the
      Program for Management Development at the Harvard Business School in 1985 and
      the Advanced Management Program at Templeton College of Oxford University in
      1997.




*German
      Suárez, Director and member of the Audit Committee, Compensation Committee and
      Nominating/Corporate Governance Committee* .
      Mr. Suárez has been a director since March 2005. Mr. Suárez is an
      economist who was employed by the Central Bank from 1964 to 1990. From 1979
      to
      1980, he worked at the International Monetary Fund, or IMF, representing Peru,
      and from 1981 to 1990 he was in charge of different posts at the Ministry of
      Economy and Finance. Mr. Suárez served as Chairman of *Banco
      de la Nacion* from
      1990 to 1992 and Chairman of the Central Bank of Peru from 1992 to 2001. He
      was
      a member of the board of directors at Bladex, Extebandes and Arlabank, Latin
      American Reserves Fund, La Pampilla Refinery, or Relapasa, Credicorp Ltd. and
      Banco de Credito del Peru. From 1993 to 2001, Mr. Suárez served as Governor
      of the IMF and Alternate Governor of the Inter-American Development. For the
      period from 2000 to 2001, Mr. Suárez was elected Chairman of the G-24 (IMF-World
      Bank). Mr. Suárez graduated from UNMSM with a B.S. in Economics in 1965 and
      received an M.A. in Economics from Columbia University in 1969.




142




*Carlos
      E. Gálvez, Vice President and Chief Financial Officer.* Mr.
      Gálvez was the Deputy Manager, Finance and Information Systems, from 1985 to
      February 2001, when he was appointed Vice President and Chief
      Financial ** Officer.
      Since March 2003, Mr. Gálvez has been an alternate member of Executive Committee
      of Yanacocha. He served as Deputy Manager of our Treasury from 1980 to 1985,
      and
      as Treasurer from 1978 to 1980. Mr. Gálvez has also served as director of the
      Colquirrumi and Coimolache, two of our subsidiaries, and was appointed director
      of Conenhua in 2000, director of El Brocal in 2002, director of Contacto S.A.
      in
      2005. He is an alternate member of the Executive Committee of Yanacocha in
      and
      an alternate board member of Cerro Verde. He also has served as director of
      the *Sociedad
      de Minería, Petróleo y Energía del Perú* (Mining,
      Petroleum and Energy Society of Peru) since 2000. Prior to joining us, Mr.
      Gálvez served as Managerial Adjunct for Finance and Credit from 1977 to 1978
      at *Banco
      Minero del Perú* (Mining
      Bank of Peru). He has also served as a board member of the *Comité
      de Operación Económica del Sistema Eléctrico Nacional* (Committee of Economic Operation of the National Electric System). Mr. Gálvez
      received his B.A. in Economics from the *Universidad
      Nacional Federico Villarreal* in 1976,
      his M.B.A. from the Universidad del Pacifico de Lima in 1980 and completed
      the
      Program for Management Development, in 1997, and the Advanced Management
      Program, in 2005, at The Harvard Business School.




*Raúl
      Benavides Ganoza, Business Development Vice President.* Mr
      Benavides has been our Business Development Vice President since 1992. He is
      also currently an alternate member of the Executive Committee of Yanacocha
      (1992-to date), board member of Cerro Verde and several of our related
      companies. From 1984 to 1996 he was Manager of the Orcopampa mine. Prior to
      that
      time, Mr Benavides was a Manager of Operations from 1983 to 1984 and Chief
      of
      Mining from 1980 to 1983 at Colquirrumi. Mr.
      Benavides is currently chairman of the World Gold Council and vice president
      of
      the Silver Institute.  Since
      1995, he has been a professor of mining administration at *Pontificia
      Universidad Católica del Perú* .
      Mr.
      Benavides also has served as Vice President of the *Instituto
      de Ingenieros de Minas* (Institute of Mining Engineering) since 1994 and was also the President of
      the *Instituto
      de Seguridad Minera del Perú* (Mining
      Safety Institute of Peru) from 1996 to 2000. Mr. Benavides was a member of
      the
      Consulting Board for the National Occupational Safety Association from 2003
      to
      2004. Mr. Benavides received a B.S. in Mining Engineering from the University
      of
      Missouri-Rolla in 1980, an M.S. in Mineral Engineering-Management from
      Pennsylvania State University in 1984 and completed the Advanced Management
      Program at The Harvard Business School in 2001.




*Francois
      Muths,* *Vice
      President* *of
      Operations* *.* Mr. Muths
      was appointed Vice President of Operations in February 2007. Prior to
      that time, Mr. Muths
      served as a director and general manager of Inversiones Mineras del Sur S.A.,
      our wholly-owned subsidiary from 2005 to 2006, general manager from 1985 to
      2005
      and superintendent of the Uchucchacua mine from 1981 to 1983. He received a
      B.S.
      in engineering from the National Engineering University of Peru and a M.S.
      in
      mining from the
      Colorado School of Mines .
      In
      2005, Mr. Muths completed the Program for Management Development at Harvard
      Business School.




143




*José
      Miguel Morales, General Counsel.* Mr. Morales has been our General Counsel since 1973. From 1992 to 1995,
      Mr. Morales served as an alternate member of the Executive Committee of
      Yanacocha. Mr. Morales has also served as a member of the Executive
      Committee of Yanacocha since 1995. Mr. Morales currently serves as a director
      of
      seven of our nineteen mining and mining-related subsidiaries or affiliates.
      In
      addition, he has served as a director of the *Instituto
      Nacional de Derecho de Minería y Petróleo* (National Institute of Mining and Petroleum Law), serving as its President
      from
      1989 to 1990 and as a director of the *Sociedad
      de Minería y Petróleo del Perú* (Mining
      and Petroleum Society of Peru) since 1998, serving as its vice chairman since
      2000. He has been a director of the following non-mining related companies:
      Almacenera del Perú S.A. from 1992, Inversiones Cosepa S.A. from 1979, Hotel
      Costa del Pacífico S.A. from 1994 and El Pacífico—Peruana Suiza Compañía de
      Seguros from 1979. Since 1973, he also has been a partner of Estudio Aurelio
      García Sayán—Abogados, a Lima law firm. In February 2003, Mr. Morales was
      elected president of the *Sociedad Nacional de Minería, Petróleo y Energía* (National Association of Minerals, Petroleum and Energy). On January 31, 2005,
      Mr. Morales ended his tenure as President of *Sociedad
      Nacional de Minería, Petróleo y Energía* and was
      elected on March 16, 2005 President of *Confederación
      Nacional de Instituciones Empresariales Privadas* (National
      Confederation of Private Companies, or CONFIEP) until 2007. Mr. Morales received
      his law degree from *Pontificia
      Universidad Católica del Perú* in 1968
      and completed the Sloan Program at Stanford University’s Graduate School of
      Business in 1976.




*Mario
      Santillán, Operations Vice President* (since
      1992 to February 2007). Mr. Santillán served as our Vice Manager of Operations
      from 1982 to 1992, Superintendent of our Julcani mine from 1977 to 1982,
      Superintendent of our Orcopampa mine from 1974 to 1977 and Division
      Chief/Captain of our Julcani mine from 1970 to 1974. From 1968 to 1970, he
      was
      Chief of Mining at Mina Yuritala, a Peruvian mining company. He is a member
      of
      the Colegio de Ingenieros del Perú (Engineering Association of Peru). Mr.
      Santillán received a B.S. in Mining Engineering from UNI in 1968 and also
      studied advanced courses in mining at Pontificia Universidad Católica del Perú,
      UNI, the Universidad del Pacífico (University of the Pacific) in Peru and the
      Colorado School of Mines. He retired in February 2007.




*César
      E. Vidal, Explorations Vice President.* Mr. Vidal has been our Explorations Vice President since the beginning of
      1996. Mr. Vidal also currently serves as director of El Brocal and Coimolache
      and as an alternate member of the Executive Committee of Yanacocha *.* From
      1981
      to 1987, he served as a geologist for BISA. Prior to joining us, from 1991
      to
      1995, he served as an independent economic geologist consultant to several
      mining companies, including us. From 1987 to 1991, he served as the chief
      geologist for Perubar S.A., a Peruvian zinc mining company. Mr. Vidal received
      his B.S. in Geology from UNI in 1977, a Ph.D. in Geology from the University
      of
      Liverpool in 1980 and certification as an engineering geologist in Peru from
      UNI
      in 1984. He also was a post-doctoral research fellow at the **Universität*
      Heidelberg* (the
      University of Heidelberg) from 1985 to 1986. He completed the Advanced
      Management Program at Templeton College of Oxford University in
      2005.




*Carlos
      Humberto Rodríguez, Comptroller.* Mr.
      Rodríguez has served as our Comptroller since 1984 and as Secretary of our Audit
      Committee. In February 2003, Mr. Rodríguez was elected our Compliance and Ethics
      Officer. He also served as Comptroller at Cyanamid Peruana S.A., a Peruvian
      chemical and pharmaceutical company, from 1965 to 1975, and as General
      Accountant at Petrolera Amotape S.A., a Peruvian oil company devoted to
      exploration and development of oil, from 1963 to 1964. Mr. Rodríguez
      received his B.S. in Economic and Commercial Sciences and Accounting from *Pontificia
      Universidad Católica del Perú* in 1972.
      In 1988, Mr. Rodríguez obtained a degree in Management from *Universidad
      de Piura.*




144




**Compensation**




During
      the year ended December 31, 2007, the aggregate amount of compensation that
      we paid to all directors and executive officers was approximately S/.23.1
      million, including director’s fees accrued in 2006 and paid in 2007. We do not
      disclose to our shareholders or otherwise make available public information
      as
      to the compensation of our individual directors or executive officers.




We
      have a
      long-term stock appreciation program, with a term of ten years once initiated,
      that allows certain executives to receive a cash remuneration equivalent to
      any
      excess of the market value at a future date over a stated price of a stated
      number of our ADSs. This program is in effect as long as the executives are
      employed by us at the settlement date of the program. See Note 14 to the
      Financial Statements. ****




**Board
      Practices**




***The
      Audit Committee***




The
      Audit
      Committee, composed entirely of independent directors as defined in Section
      303A.02 of the New York Stock Exchange’s Listed Company Manual, is responsible
      for assisting the Board of Directors in the appointment of independent auditors,
      upon delegation of such responsibility by the shareholders at the general
      meeting of shareholders, or General Meeting, and reviewing the scope of internal
      and external audits. The Audit Committee also reviews compliance with internal
      control systems, reviews our annual and quarterly financial statements, reviews
      financial statements before their presentation to the *Comisión
      Nacional Supervisora de Empresas y Valores* (National Supervisory Commission of Business and Securities, or CONASEV), the *Bolsa
      de Valores de Lima* (Lima
      Stock Exchange) and the Commission and maintains the integrity of the
      preparation of audits. The members of the Audit Committee are currently Messrs.
      Coleridge, Ortiz-de-Zevallos and Suárez.




***The
      Compensation Committee***




The
      Compensation Committee is responsible for evaluating executive performance
      and
      approving executive compensation, including compensation of the chief executive
      officer and any stock option compensation plans. The members of the Compensation
      Committee are currently Messrs. Benavides-de-la-Quintana, Ortiz-de-Zevallos
      and
      Suárez.




***Nominating/Corporate
      Governance Committee***




The
      Nominating/Corporate Governance Committee is responsible for preparing the
      proposals for the general meetings in respect of the composition of the Board
      of
      Directors along with the director remuneration to be approved by the
      shareholders, and monitoring issues and practices related to corporate
      governance and to propose necessary actions in respect thereof. The members
      of
      the Nominating/Corporate Governance Committee are currently Messrs. Anderson,
      Coleridge, Paverd, Ortiz-de-Zevallos, Benavides-Ganoza and Suárez.




**Employees**




At
      December 31, 2007, we and our subsidiaries had 2,476 employees, of
      which 1,926 were on our payroll.  In addition, we have entered into
      arrangements with independent contractors, which employed 4,220 persons who
      worked at our operations.  We have sought to strengthen our workforce by
      implementing a qualifications-based hiring policy and, with respect to employees
      working in the mines, reducing the average age of the workforce.  As of
      December 31, 2007, the average tenure of our permanent laborers at the Julcani,
      Uchucchacua, Orcopampa, Recuperada, Ishihuinca and Antapite mines (the only
      mines for which we have long-term historical records) was approximately 14
      years.




145




Of
      our 1,926 permanent employees, approximately 40.97 percent are members of
      nine different labor unions (including three unions and one labor union
      committee for clerical workers and five unions for permanent laborers), which
      represent all clerical workers and laborers in collective bargaining
      negotiations with us.  Recently we also received notice of the formation of
      two new unions for workers employed by independent contractors, one in
      Uchucchacua and the other at our Ishihuinca  mine.




Each
      of
      the labor unions is a company-based union with an affiliation to a national
      union.  Administrative personnel are not represented by unions.  Labor
      relations for unionized and non-unionized employees in our production
      facilities, including compensation and benefits, are governed by collective
      bargaining agreements, the terms and length of which are negotiated throughout
      the year as the various collective bargaining agreements come up for
      renewal.  These collective bargaining agreements are typically one year in
      length, and set wages for the applicable period and include increases as
      negotiated and certain other employee benefits, such as overtime, bonuses and
      family benefits.




Compensation
      received by our employees includes salary, other cash payments (such as
      overtime, vacation pay and bonuses including, but not limited to, high altitude
      and underground mining bonuses) and non-cash benefits.  Non-cash benefits
      include medical insurance, life insurance and training programs for workers
      and
      administrative staff.  For mine and processing plant workers, benefits also
      include transportation services, meals or food allowances, education for
      children of our employees and housing, hospitals and a full range of social
      services for our permanent employees and their families at townsites near our
      mines in compliance with mining regulations.  We voluntarily provide power,
      water and sewage services for the camp and houses of the workers as well as
      for
      certain towns nearby.  In addition, pursuant to a profit-sharing plan
      mandated by Peruvian labor legislation, employees of mining companies in Peru
      are entitled to receive the Employee Profit Sharing Amount equivalent to eight
      percent of the annual pre-tax profits of their employer, fifty percent of such
      profits to be distributed based on the number of days each employee worked
      during the preceding year and the remaining fifty percent of such profits to
      be
      distributed based on the aggregate annual salary of each employee. 
Effective January 1, 1997, the annual payment to each employee under the profit
      sharing plan cannot exceed 18 times such employee’s monthly salary, and any
      difference between the Employee Profit Sharing Amount and the aggregate amount
      paid to employees must be contributed by us to the ** *Fondo
      Nacional de Capacitación Laboral de Promoción del Empleo (FONDO
      EMPLEO)* ,
      a fund
      established to promote employment and employee training.




Under
      Peruvian law, we may dismiss workers for cause by following certain formal
      procedures.  We may dismiss a worker without cause, provided that we pay
      such worker a layoff indemnification in an amount equal to one and a half
      month’s salary for each full year worked plus the pro rata portion for any
      uncompleted year, not to exceed in the aggregate 12 months’ salary. 
Several decisions adopted by the Peruvian Constitutional Court, holding that
      an
      employee is entitled for reinstatement if no cause for dismissal is expressed
      by
      the employer or for failure to present evidence supporting the employer’s
      grounds, have limited our ability to dismiss a worker without cause. 
However, all employees are entitled to a severance payment upon termination
      of
      their employment, regardless of the reason for such termination, equal to
      approximately one month’s salary for each full year worked plus the pro rata
      portion for any uncompleted year.  Pursuant to the Peruvian labor laws
      enacted in 1991, we deposit funds for severance payments in a bank account
      selected by each employee and for the benefit of such employee, in both May
      and
      November of each year.




146




Our
      permanent employees receive the benefit of one of two types of pension
      arrangements.  All workers can choose to enroll in the ONP or in
      AFPs.  We are required to withhold from each of the salaries of the
      employees enrolled in the ONP system approximately 13 percent of such employee’s
      salary, and pay such amount to the ONP system and withhold from the salary
      of
      each employee enrolled in the AFP system approximately 13 percent of such
      employee’s salary, and pay such amounts to the respective AFP (exact amount
      varies from one AFP to another).  Additionally, for workers involved in
      mining and metallurgical processes, an additional 2 percent is withheld from
      their salaries, and we contribute an additional 2 percent to increase their
      pension funds.  We have no liability for the performance of these pension
      plans.  In addition, our independent contractors are responsible for
      covering severance and pension payments with respect to their
      employees. ****




In
      addition, we pay ES-SALUD nine percent of our total payroll for general health
      services for all permanent employees.  Prior to May 1997, we were required
      to pay to ES-SALUD one percent of our payroll of blue collar employees for
      employment related illness and accidents, or the Workers Compensation Fund
      Payment.  In addition, Law No. 26790 also requires us to provide private
      insurance representing an average payment equal to 1.30 percent of the payroll
      of covered employees for employment-related incapacity and death for blue collar
      employees and other employees exposed to mining-related hazards.  As of
      December 1, 2004, we are no longer required to pay a total of 2 percent of
      our
      total payroll for the Extraordinary Solidarity Tax.




Prior
      to
      April 30, 2007, we had not experienced any strikes during the past five
      years.  On April 30, 2007, we experienced a five-day labor stoppage at the
      Uchucchacua mine, which coincided with a strike called by the National Mining
      and Metallurgical Union. In November 2007, unionized workers at Uchucchaccua
      engaged in a three-day strike called by the National Mining and Metallurgical
      Union. On
      June
      30, 2008, the contractor workers of our Uchucchacua mining unit commenced a
      7-day strike promoted by the National Federation of Mining Unions. The strike
      was declared illegal by the Peruvian Work Ministry.




**Share
      Ownership**




At
      April
      30, 2008, our directors and executive officers, as a group, owned 25,588,692
      Common Shares, representing 20.17 percent of all the 126,879,832 common shares
      outstanding. Our directors and executive officers do not own any Investment
      Shares.




**ITEM
              7.**
            **Major
                Shareholders and Related Party
                Transactions**




**Major
      Shareholders**




As
      of
      April 30, 2008, we had 137,444,962 Common Shares, including 10,580,130 treasury
      shares, and 372,320 Investment Shares, including 30,988 treasury shares. The
      Common Shares are voting securities. The table below sets forth certain
      information concerning ownership of (i) the Common Shares and Investment Shares
      and (ii) the aggregate Common Shares and Investment Shares, as of April
      30, **** 2008
      with
      respect to each shareholder known to us to own more than 2.5 percent of the
      outstanding Common Shares and with respect to all directors and executive
      officers as a group.




147




Control
      of the Company*




Shareholder
              
              Number of
                Common Shares
              
              Percentage
                Beneficial
                Ownership of
                Common
                Shares(2)
              
              Number of
                Investment
                Shares
              
              Percentage
                Beneficial
                Ownership of
                Investment
                Shares
              
              Number of Common
                Shares
                and Investment Shares
              
              Percentage Beneficial
                Ownership of
                Common Shares and
                Investment SharesBlackrock
                  Investment Management (UK) Ltd.
              
              
              14,328,798
              
              
              10.43
              
              
              —
              
              
              —
              
              
              14,328,798
              
              
              10.40Benavides
                  Family(1)
              
              
              37,121,010
              
              
              27.01
              
              
              89,313
              
              
              23.99
              
              
              37,210,323
              
              
              27.00Blackrock
                  global Funds-World Gold Fund.
              
              
              6,700,000
              
              
              4.88
              
              
              —
              
              
              —
              
              
              6,700,000
              
              
              4.87Cia
                  Minera Condesa S.A.
              
              
              10,580,130
              
              
              7.70
              
              
              30,988
              
              
              8.32
              
              
              10,611,118
              
              
              7.70Blackrock
                  Global Funds-Mining Fund
              
              
              5,500,000
              
              
              4.01
              
              
              —
              
              
              —
              
              
              5,500,000
              
              
              3.99Fidelity
                  Management & Research.
              
              
              3,599,229
              
              
              2.62
              
              
              —
              
              
              —
              
              
              3,599,229
              
              
              2.62AFP,
                  Prima
              
              
              6,850,236
              
              
              4.99
              
              
              —
              
              
              —
              
              
              6,850,236
              
              
              4.97AFP,
                  Integra
              
              
              6,201,383
              
              
              4.52
              
              
              —
              
              
              —
              
              
              4,201,383
              
              
              4.50AFP
                  Horizonte.
              
              
              4,009,295
              
              
              2.92
              
              
              —
              
              
              —
              
              
              4,009,295
              
              
              2.91Directors
                  and Executive Officers as a Group
              
              
              25,588,692
              
              
              18.62
              
              
              —
              
              
              —
              
              
              25,588,692
              
              
              18.57





(1)
            Includes
                Common Shares directly or indirectly owned by Alberto Benavides de
                la
                Quintana and certain members of his immediate and extended family
                and
                their spouses.




(2)
            The
                beneficial ownership of Common Shares adds up to more than 100 percent
                due
                to participation by certain members of the Benavides Family as Directors
                and/or Executive Officers.




*
            At
                April 30, 2008.




As
      of
      April 30, 2008, we estimate that 78,700,685 ADSs are held in the United States,
      which represent approximately 57.26 percent of Common Shares outstanding. The
      number of institutional record holders of our Common Shares (or of ADSs
      representing our Common Shares) in the United States was 24 institutions at
      April 30, 2008.




**Related
      Party Transactions**




Except
      as
      otherwise disclosed herein, no director, senior officer, principal shareholder
      or any associate or affiliate thereof, had any material interest, direct or
      indirect, in any transaction since the beginning of our last financial year
      that
      has materially affected us, or in any proposed transaction that would materially
      affect us. Except as otherwise disclosed herein, we have entered into no
      transactions with parties that are not “related parties” but who would be able
      to negotiate terms not available on an arm’s-length basis. From time to time in
      the ordinary course of business, we enter into management, exploration, mine
      construction, engineering and employment contracts with joint venture companies
      in which one or more of our direct or indirect subsidiaries holds equity or
      partnership interests. ****




Chaupiloma
      is the legal owner of the mineral rights operated by Yanacocha and receives
      a 3
      percent royalty based on quarterly sales, after deducting refinery and
      transportation costs. Royalties amounted to US$46.0 million, US$48.5 million
      and
      US$34.0 million in 2005, 2006 and 2007, respectively, and are presented as
      royalty income in the consolidated statements of income.




Condesa
      received cash dividends from Yanacocha of approximately US$77.0 million,
      US$209.5 million and US$43.7 million in 2005, 2006 and 2007,
      respectively.




Cash
      dividends received from Cerro Verde amounted to approximately US$12.8 million
      in
      2005 and US$114.7 million in 2007. No cash dividends were received from Cerro
      Verde in 2006.




In
      March
      2002, Buenaventura Ingenieros S.A. signed a technical service agreement with
      Yanacocha to perform a number of specialized activities and services. Pursuant
      to the agreement, the services performed will be related to the construction
      of
      mining projects and will include completion of analysis and studies, work plan
      design, and functions related to planning, monitoring and administrating the
      infrastructure projects required by Yanacocha in its operations. This contract
      expired on December 31, 2004 and was renewed in January 2005 under the same
      terms. The revenues related to this service contract amounted to approximately
      US$4.0 million for the year ended December 31, 2007, US$5.1 million for the
      year
      ended December 31, 2006 and US$3.4 million for the year ended December 31,
      2005. ****




148




In
      November 2000, Conenhua signed an agreement with Yanacocha for the construction
      and operation of a 220 kw transmission line between Trujillo and Cajamarca,
      a 60
      kw transmission line between Cajamarca and La Pajuela, and the Cajamarca Norte
      substation; this agreement also encompassed activities necessary to enlarge
      the
      Trujillo substation. Pursuant to this contract, the construction work was
      completed in October 2001. **** Concurrently,
      we and Yanacocha signed a 10-year agreement covering electric energy
      transmission and infrastructure operation beginning in November 2001. In
      exchange for us operating and managing the transmission project, Yanacocha
      will
      pay an annual fee of US$3.7 million. The revenues for these services amounted
      to
      approximately US$4.4 million, US$3.9 million and US$3.9 million in 2007, 2006
      and 2005, respectively. ****




**Interests
      of Experts and Counsel**




Not
      applicable.




**ITEM
              8.**
            **Financial
                Information**




**Consolidated
      Financial Statements**




See
“Item
      19. Exhibits” for a list of financial statements filed under Item
      18.




**Other
      Financial Information**




*Legal
      Proceedings*




Other
      than the legal proceedings relating to Yanacocha described in “Item 4.
      Information on the Company—Yanacocha—Legal Proceedings” and as described below,
      we and Yanacocha are each parties to certain other legal proceedings arising
      in
      the normal course of business, none of which, individually or in the aggregate,
      is material.




*Dividends
      and Dividends Policy*




We
      can
      distribute three kinds of dividends: (i) cash dividends, which are paid out
      of
      our net distributable income for each year, (ii) stock dividends that are akin
      to stock splits rather than distributions of earnings, which are issued for
      the
      purpose of adjusting the book value per share of our stock, and (iii) stock
      dividends for the purpose of capitalizing profits, in each case as described
      in
      more detail below. All shares outstanding and fully paid are entitled to share
      equally in any dividend declared based on the portion of our capital represented
      by such share. Shares of capital stock, which are only partially paid
      participate in a dividend or distribution in the same proportion that such
      shares have been paid at the time of the dividend or distribution. No cash
      dividend may be declared in respect of a given year unless we have earned net
      distributable income in respect of such year. However, a company may declare
      dividends during the year. We may make interim provisional payments to
      shareholders in respect of net distributable income for the current fiscal
      year,
      which are referred to as “provisional dividends”, as explained
      below.




The
      Board
      of Directors, following the end of each fiscal year, makes a recommendation
      to
      the annual obligatory shareholders’ meeting regarding the amount and timing of
      payments, if any, to be made as dividends on our Common Shares and Investment
      Shares.




149




The
      dividend policy establishes that dividends will be not less than 20 percent
      of
      our net profits. In principle there are two kinds of dividend payments: the
      interim dividends which are approved by the Board and are generally paid during
      the fourth quarter of the year, and the final dividend payment which will be
      paid in accordance with the general shareholders’ meeting resolutions. However,
      the amount and timing of such payments is subject to the final approval at
      such
      annual obligatory shareholders’ meeting and Board meeting, as well as to the
      availability of earnings to distribute. According to the Peruvian Companies
      Law,
      there is an exception that permits holders of at least 20 percent of total
      Common Shares outstanding, require that not less than 50 percent of our
      after-tax profits during the previous year and legal reserve allocation be
      paid
      out in the form of dividends.




Available
      earnings are subject to the following priorities. First, the mandatory employee
      profit sharing of eight percent of pre-tax profits (which may differ from
      pre-tax profits determined under Peruvian GAAP due to different depreciation
      treatment and different adjustments of non-taxable income and/or non-deductible
      expenses) is paid. Next, remaining earnings are taxed at the standard corporate
      income tax rate, which is 30 percent since January 1, 2004. Not less than ten
      percent of such after-tax net profits must then be allocated to a legal reserve,
      which is not available thereafter except to cover future losses or for use
      in
      future capitalizations. Amounts reserved are nevertheless included in taxable
      income. The obligation to fund this reserve continues until the reserve
      constitutes 20 percent of the paid-in share capital. In addition, the holders
      of
      Common Shares can agree to allocate any portion of the net profits to any
      special reserve. The remainder of the net profits is available for distribution
      to shareholders. Any dividend approved by a shareholders’ meeting after December
      31, 2002 is subject to an additional withholding tax at the rate of 4.1 percent
      of the total amount of dividends distributed to the shareholders who either
      are
      (i) individuals, whether domiciled or non-domiciled in Peru, or (ii) a
      non-domiciled company or entity. Dividends paid to domiciled companies or
      entities are not subject to such withholding tax. If any tax or other
      governmental charge will become payable by Scotiabank Peru, as custodian, the
      Depositary or us with respect to any ADR or any deposited securities represented
      by the ADSs evidenced by such ADR, such tax or other governmental charge will
      be
      payable by the owner or beneficial owner of such ADR to the
      Depositary.




Dividends
      on issued and outstanding Common Shares and Investment Shares are distributed
      in
      accordance with the proportion of the total capital represented by such
      respective shares. Dividends are distributed pro rata in accordance with the
      number of Common Shares or Investment Shares. Accordingly, any dividend declared
      would be apportioned 99.73 percent to the holders of Common Shares and 0.27
      percent to the holders of Investment Shares. This proportion will not change
      in
      the future except and to the extent holders of Common Shares and Investment
      Shares exercise their preemptive rights disproportionately in any future
      issuance of Common Shares and Investment Shares, or we issue Common Shares
      without preemptive rights in accordance with Article 259 of the Peruvian
      Companies Law.




Holders
      of Common Shares and Investment Shares are not entitled to interest on dividend
      payments.




Holders
      of ADRs are entitled to receive dividends with respect to the Common Shares
      underlying the ADSs evidenced by such ADRs, subject to the terms of the related
      Amended and Restated Deposit Agreement, to the same extent as owners of Common
      Shares.




To
      the
      extent that we declare and pay dividends on the Common Shares, owners of the
      ADSs on the relevant record date are entitled to receive the dividends payable
      in respect of the Common Shares underlying the ADSs, subject to the terms of
      the
      Amended and Restated Deposit Agreement. Cash dividends are paid to the
      Depositary in Nuevos Soles and, except as otherwise described under the Amended
      and Restated Deposit Agreement, are converted by the Depositary into U.S.
      Dollars and paid to owners of ADRs net of currency conversion expenses. Under
      the Amended and Restated Deposit Agreement, the Depositary may, and will if
      we
      so request, distribute stock dividends in the form of additional ADRs evidencing
      whole ADSs resulting from a dividend or free distribution of Common Shares
      by us
      received by the Depositary. Cash dividends paid with respect to the Common
      Shares and amounts distributed with respect to ADSs are currently subject to
      Peruvian withholding income tax of 4.1 percent. See “Item 10. Additional
      Information—Taxation—Peruvian Tax Considerations.”




150




We
      issue
      stock dividends for value per share of our stock. The book value of our share
      capital is based on the nominal (par) value of each share but is adjusted to
      account for inflation; thus, in inflationary periods, our book value will
      increase while the nominal value will remain constant. In order to adjust the
      book value of each share to equal or approximate the nominal value, we
      periodically issue new shares that are distributed as stock dividends to each
      existing shareholder in proportion to such shareholder’s existing holdings,
      unless it increases the nominal value of the existing shares. These stock
      dividends (which under the Peruvian income tax law are not considered dividends)
      do not change a stockholder’s percentage of interest in us. In addition, we may
      from time to time capitalize profits and, in such case, we have to distribute
      stock dividends representing the profits capitalized.




Dividends
      not collected within ten years will be retained by us, increasing our legal
      reserve, and the right to collect such dividends will expire.




Under
      Peruvian law, each company may make formal cash distributions only out of net
      distributable income (calculated on an individual, unconsolidated basis and
      demonstrated by a balance sheet at any given time). We, however, may pay
      provisional dividends. Payment of provisional dividends will be approved on
      the
      basis of financial statements which show the existence of net distributable
      income obtained during the current fiscal year. In the event that, following
      such an interim provisional payment, we suffer a loss or if we finish the fiscal
      year with a net income that is lower than the amount of provisional dividends
      paid during such fiscal year, we could legally require all shareholders
      (including holders of ADRs) to return such payment to us with interest. However,
      it has been and continues to be our policy not to require shareholders to return
      such payment of provisional dividends, but rather to cover such contingency
      through a “dividends paid in advance” account to be offset by future net
      distributable income.




The
      following table sets forth the amounts of interim and final cash dividends
      and
      the aggregate of cash dividends paid with respect to the years 2003 to 2007.
      Prior to May 3, 2003, cash dividends with respect to were paid per Series A
      Share, Series B Share and ADS. Effective on May 3, 2002, we redesignated our
      Series B Shares and Series A Shares as Common Shares and each of our ADSs,
      which
      previously represented two Series B Shares, represented two Common Shares.
      Effective November 12, 2003, we modified the ratio of our ADSs from two Common
      Shares per ADS to one Common Share per ADS. Dividends with respect to the years
      2003 to 2007 were paid per Common Share and ADS. See “Item 4. Information
      on the Company—The Company—History and Development—History—Redesignation of Our
      Shares and ADSs”:




Year
                ended
              December
                31,
            
            Per
              Common
                Share
            
            Per
              ADSs
            
            Per
              Investment
                ShareInterim
            
            Final
            
            Total
            
            Interim
            
            Final
            
            Total
            
            Interim
            
            Final
            
            Total2003(1)
            
            
            0.5453
            
            
            —
            
            
            0.5453
            
            
            1.0906
            
            
            —
            
            
            1.0906
            
            
            0.5453
            
            
            —
            
            
            0.54532003(1)
            
            
            0.3282
            
            
            0.5536
            
            
            0.8818
            
            
            0.3282
            
            
            0.5536
            
            
            0.8818
            
            
            0.3282
            
            
            0.5536
            
            
            0.88182004(2)
            
            
            0.5312
            
            
            0.585
            
            
            1.1162
            
            
            0.5312
            
            
            0.585
            
            
            1.1162
            
            
            0.5312
            
            
            0.585
            
            
            1.11622005(3)
            
            
            0.6102
            
            
            0.7216
            
            
            1.3318
            
            
            0.6102
            
            
            0.7216
            
            
            1.3318
            
            
            0.6102
            
            
            0.7216
            
            
            1.33182006(4)
            
            
            0.25
            
            
            0.37
            
            
            0.62
            
            
            0.25
            
            
            0.37
            
            
            0.62
            
            
            0.25
            
            
            0.37
            
            
            0.622007(4)
            
            
            0.18
            
            
            0.22
            
            
            0.40
            
            
            0.18
            
            
            0.22
            
            
            0.40
            
            
            0.18
            
            
            0.22
            
            
            0.40







(1)
            Interim
                and final dividend amounts are expressed in nominal Nuevos Soles
                as of
                December 31, 2003.


(2)
            Interim
                and final dividend amounts are expressed in nominal Nuevos Soles
                as of
                December 31, 2004.






151




(3)
            Interim
                and final dividend amounts are expressed in nominal Nuevos Soles
                as of
                December 31, 2005.


(4)
            Interim
                and final dividend amounts are expressed in U.S.
                Dollars.





In
      addition to the above mentioned cash dividends, in November 2002, we distributed
      stock dividends, which in the aggregate were equivalent to S/.2.8 million,
      in
      the form of El Brocal shares. **** In
      August
      2003, we distributed an extraordinary stock dividend as of S/.0.5453 per share.




*Minority
      Shareholders*




Law
      No.
      28370, published on October 30, 2004, included in the Peruvian Companies Law
      certain provisions for the protection of the minority shareholders that were
      formerly contained in Law No. 26985. Pursuant to Article 262-A of the Peruvian
      Companies Law, we will publish within sixty days after the Annual Obligatory
      Shareholders Meeting the total number and value of any shares not claimed by
      shareholders, the name of such shareholders, the share quote in the securities
      market for such shares; the total amount of uncollected dividends; and where
      shares and dividends pending claim are available for the minority shareholders.
      The publication must be made in the official gazette “El Peruano” and on our
      website. Article 262-B describes the procedure to request share certificates
      and/or dividends. Pursuant to Article 262-C, we are required to submit to
      CONASEV the list of shareholders that have and have not picked-up their share
      certificates and/or have or have not collected their dividends within 60 days
      of
      the required publication in El Peruano. Article 262-D provides that CONASEV,
      upon the review of appropriate documentation submitted by us, will issue a
      certificate stating that we have complied with the rules for the protection
      of
      the minority shareholders. Article 262-F describes the procedure for handling
      any claim that the minority shareholders may file, such claims to be solved
      by
      CONASEV.




**Significant
      Changes**




No
      significant change in our financial affairs has occurred since the date of
      the
      annual financial statements included in this Annual Report.




**ITEM
              9.**
            **The
                Offer and Listing**




**Offer
      and Listing Details**




Not
      applicable.




**Plan
      of Distribution**




Not
      applicable.




**Trading
      Markets**




Effective
      on May 3, 2002, we redesignated our Series B Shares and Series A Shares as
      Common Shares. From such date, each of our ADSs, which previously represented
      two Series B Shares, represented two Common Shares. Effective November 12,
      2003,
      we modified the ratio of our ADSs from two Common Shares per ADS to one Common
      Share per ADS. See “Item 4. Information on the Company—The Company—History
      and Development—History—Redesignation of Our Shares and ADSs.” Accordingly,
      since May 3, 2002, the Common Shares and ADSs representing the Common Shares
      (each ADS representing two Common Shares) have been listed and traded on the
      New
      York Stock Exchange under the symbol “BVN.” In addition, the Common Shares are
      listed and traded on the Lima Stock Exchange. The Investment Shares have been
      listed and traded on the Lima Stock Exchange since 1979.




152




As
      of
      April 30, 2008, the share capital with respect to the Common Shares was
      S/.549,779,848 represented by 137,444,962 shares and the share capital with
      respect to the Investment Shares was S/.1,489,280 represented by 372,320 shares.
      The Common Shares represent 100 percent of our outstanding share capital. The
      Investment Shares have no voting rights and are not, under Peruvian law and
      accounting rules, characterized as share capital. As of April 30, 2008, there
      were 1,302 owners of record of the Common Shares and 985 owners of record of
      the
      Investment Shares.




*Historical
      Information*




The
      Series B Shares and the ADSs which represented the Series B Shares (each ADS
      represented two Series B Shares) were listed, and the ADSs were traded, on
      the
      New York Stock Exchange from May 31, 1996 until May 2, 2002, under the symbol
      “BVN.” In addition, the Series B Shares were listed and traded on the Lima Stock
      Exchange from May 15, 1996 until May 2, 2002. The ADSs which represented the
      Series B Shares were issued under the terms of a Deposit Agreement dated May
      20,
      1996, among ourselves, The Bank of New York, as depositary, and the owners
      and
      beneficial owners of ADSs. The Series A Shares were listed and traded on the
      Lima Stock Exchange since 1971.




The
      creation of the Series B Shares was authorized at an extraordinary meeting
      of
      shareholders held on March 20, 1996. At that meeting, outstanding common
      shares were renamed as Series A Shares, and a capital increase of a new class
      of
      common shares, designated Series B Shares, was approved. On May 31, 1996, the
      Series B Shares began trading on the Lima Stock Exchange and on May 15, 1996,
      the ADSs began trading on the New York Stock Exchange. On November 26, 1997,
      we
      consummated the Series A Exchange Offer, pursuant to which we exchanged
      32,472,952 Series A Shares for an equal number of Series B Shares. Immediately
      prior to the Series A Exchange Offer, there were 98,995,000 Series A Shares
      and
      19,154,617 Series B Shares. Upon consummation of the exchange, there were
      66,522,048 Series A Shares and 51,627,569 Series B Shares.




On
      December 10, 1998, we consummated an exchange offer pursuant to which we
      exchanged 18,666,198 Labor Shares (now known as Investment Shares) for
      18,666,198 Series B Shares. On December 3, 1999, we commenced an exchange offer,
      pursuant to which we offered to exchange on a one-for-one basis, all outstanding
      Series A Shares and Investment Shares for our Series B Shares, or the Redemption
      and Exchange Offer. The Redemption and Exchange Offer terminated, in accordance
      with its terms, on January 13, 2000. As a result of the Redemption and Exchange
      Offer, 23,433,294 Series A Shares and 629,147 Investment Shares were tendered
      for redemption and/or exchange and accepted by us and were exchanged for equal
      numbers of Series B Shares. At December 31, 1999 (prior to the consummation
      of
      the Redemption and Exchange Offer), the share capital with respect to the Series
      A Shares was S/.66,522,048 represented by 66,522,048 shares; the share capital
      with respect to the Series B Shares was S/.70,293,767 represented by 70,293,767
      shares; and the share capital with respect to the Investment Shares was
      S/.1,011,467 represented by 1,001,467 shares. Following the consummation of
      the
      Redemption and Exchange Offer, the share capital with respect to the Series
      A
      Shares was S/.43,088,754 represented by 43,088,754 shares; the share capital
      with respect to the Series B Shares was S/.94,356,208 represented by 94,356,208
      shares and the share capital with respect to the Investment Shares was
      S/.372,320 represented by 372,320 shares.




In
      March
      2008, our shareholders approved an increase in the nominal par value of our
      Common Shares and Investment Shares from S/.4.00 per Common Share or Investment
      Share to S/.20.00 per Common Share or Investment Share, as well as a subsequent
      two for one stock split of our Common Shares and Investment Shares. We expect
      that the stock split will be effected in July 2008, at which time holders of
      our
      Common Shares, Investment Shares and ADSs will receive one additional Common
      Share, Investment Share or ADS, as the case may be, for each Common Share,
      Investment Share or ADS, as the case may be, held by such holder.  In
      connection with the stock split, our bylaws have been amended to decrease the
      nominal par value of our Common Shares and Investment Shares from S.20.00 to
      S/.10.00 Common Share or Investment Share.




153




*Trading
      Information*




The
      table
      below sets forth the trading volume and the high and low closing prices of
      the
      Common Shares and Investment Shares in Nuevos Soles. The table also includes
      the
      trading volume and the high and low closing prices of the ADSs representing
      the
      Common Shares in U.S. Dollars for the same periods. See “Item 4.
      Information on the Company—The Company—History and
      Development—History—Redesignation of Our Shares and ADSs”:


Common Shares(1)
              
              ADSs(2)
              
              Investment Shares(1)Trading
                Volume
              
              High
              
              Low
              
              Trading
                Volume
              
              High
              
              Low
              
              Trading
                Volume
              
              High
              
              Low(in
                millions)
              
              (in nominal
                S/. per share)
              
              (in
                millions)
              
              (in US$ per
                ADS)
              
              (in
                millions)
              
              (in nominal
                S/. per share)Annual
                  highs and lows2003
              
              
              4.56
              
              
              109.50
              
              
              39.70
              
              
              66.99
              
              
              31.81
              
              
              12.00
              
              
              0.13
              
              
              56.00
              
              
              26.032004
              
              
              2.21
              
              
              105.00
              
              
              66.80
              
              
              109.38
              
              
              30.49
              
              
              18.46
              
              
              0.18
              
              
              70.20
              
              
              48.002005
              
              
              3.03
              
              
              109.00
              
              
              65.06
              
              
              106.57
              
              
              32.54
              
              
              19.93
              
              
              0.09
              
              
              80.70
              
              
              51.002006
              
              
              2.33
              
              
              106.50
              
              
              77.12
              
              
              173.71
              
              
              32.49
              
              
              22.81
              
              
              0.04
              
              
              88.00
              
              
              73.002007
              
              
              1.53
              
              
              186.00
              
              
              82.50
              
              
              137.20
              
              
              61.00
              
              
              25.39
              
              
              0.02
              
              
              126.50
              
              
              82.00Quarterly
                  highs and lows20061st
                  quarter
              
              
              0.83
              
              
              106.50
              
              
              77.12
              
              
              49.74
              
              
              31.34
              
              
              22.81
              
              
              0.02
              
              
              75.0
              
              
              73.02nd
                  quarter
              
              
              0.86
              
              
              101.40
              
              
              77.50
              
              
              57.85
              
              
              32.49
              
              
              23.30
              
              
              0.002
              
              
              78.0
              
              
              75.03rd
                  quarter
              
              
              0.37
              
              
              99.00
              
              
              83.00
              
              
              35.41
              
              
              30.93
              
              
              24.91
              
              
              0.02
              
              
              88.0
              
              
              76.04th
                  quarter
              
              
              0.27
              
              
              91.50
              
              
              78.00
              
              
              30.71
              
              
              28.68
              
              
              23.72
              
              
              0.003
              
              
              85.0
              
              
              80.020071st
                  quarter
              
              
              0.33
              
              
              96.00
              
              
              82.50
              
              
              30.68
              
              
              30.24
              
              
              25.39
              
              
              0.0086
              
              
              85.00
              
              
              82.002nd
                  quarter
              
              
              0.39
              
              
              116.90
              
              
              95.00
              
              
              29.97
              
              
              37.46
              
              
              30.38
              
              
              0.0049
              
              
              84.01
              
              
              83.003rd
                  quarter
              
              
              0.45
              
              
              154.00
              
              
              102.00
              
              
              39.48
              
              
              50.24
              
              
              33.57
              
              
              0.0101
              
              
              109.00
              
              
              99.004th
                  quarter
              
              
              0.36
              
              
              186.00
              
              
              141.76
              
              
              37.06
              
              
              61.00
              
              
              46.44
              
              
              0.0003
              
              
              126.50
              
              
              110.00Monthly
                  highs and lows2007November
              
              
              0.19
              
              
              186.00
              
              
              157.40
              
              
              14.34
              
              
              61.00
              
              
              52.39
              
              
              0.0000007
              
              
              125.00
              
              
              125.00December
              
              
              0.11
              
              
              171.00
              
              
              158.00
              
              
              10.20
              
              
              59.17
              
              
              51.00
              
              
              -
              
              
              -
              
              
              -2008January
              
              
              0.05
              
              
              202.00
              
              
              169.00
              
              
              19.18
              
              
              71.42
              
              
              55.82
              
              
              0.00056
              
              
              140.00
              
              
              130.10February
              
              
              0.06
              
              
              221.00
              
              
              184.70
              
              
              12.94
              
              
              78.50
              
              
              61.55
              
              
              0.0001
              
              
              138.00
              
              
              135.00March
              
              
              0.09
              
              
              237.50
              
              
              188.00
              
              
              20.07
              
              
              85.78
              
              
              64.08
              
              
              0.001
              
              
              155.00
              
              
              140.00April
              
              
              0.05
              
              
              201.00
              
              
              170.41
              
              
              15.05
              
              
              75.01
              
              
              61.03
              
              
              0.0002
              
              
              155.00
              
              
              150.00May
              
              
              0.03
              
              
              188.50
              
              
              170.70
              
              
              13.17
              
              
              70.70
              
              
              58.51
              
              
              0.0006
              
              
              165.00
              
              
              150.00




(1)
              Source:
                  Lima Stock Exchange


(2)
            Source:
                Bloomberg; Yahoo Finance




**Selling
      Shareholders**




Not
      applicable.




**Dilution**




Not
      applicable.




154




**ITEM
              10.**
            **Additional
                Information**




**Share
      Capital**




Not
      applicable.




**Memorandum
      and Articles of Association**




*Organization
      and Register*




We
      were
      formed on September 7, 1953 by public deed as a Peruvian *sociedad
      anónima.* However,
      in May of 1998, our By-laws were changed to conform with the new Peruvian
      Companies Law. The term of existence is indefinite and our principal place
      of
      business is Lima, Peru.




We
      are
      managed by the General Meeting, the Board of Directors and the
      management.




*Objectives
      and Purposes*




Our
      legal
      purpose is to engage in mining operations and related activities either directly
      or through majority-owned subsidiaries and controlled companies. Likewise,
      we
      may hold shares of companies performing mining operations.




*Directors*




The
      Board
      of Directors, which must be comprised of seven members, is elected at the Annual
      Obligatory Meeting. Any changes in the Board of Directors require the approval
      of the shareholders. The removal of the Board of Directors must be approved
      at a
      shareholders’ meeting, attended by holders of 75 percent of the Common Shares in
      the first summons and 70 percent of the Common Shares in the second summons,
      by
      resolution approved by, at least, two thirds of the total number of Common
      Shares outstanding. In the case of resignation of Directors, the Board of
      Directors may appoint substitute Directors who will serve until the next
      shareholders’ meeting.




Directors
      are elected as a group for a term of three years and may be reelected
      indefinitely. Pursuant to Article 29 of our By-laws, Directors are not required
      to be shareholders. The Board of Directors, in its first meeting after the
      Annual Obligatory Meeting during which elections are held, must choose from
      among its members a Chairman and a Vice Chairman. The Peruvian Companies Law
      requires that all companies ( *sociedades
      anónimas* )
      provide
      for the representation of minority shareholders on their Boards of Directors.
      To
      that effect, each of our Common Shares gives the holder the right to as many
      votes as there are directors to be elected. Each holder may pool his votes
      in
      favor of one person or distribute them among various persons. Those candidates
      for the Board who receive the most votes are elected directors.




The
      Board
      of Directors meets when called by the Chairman of the Board, who is appointed
      by
      the Board. The Board of Directors is validly convened when all Directors are
      present and unanimously agree to carry out the meeting for the purpose of
      transacting the business that has been proposed. Pursuant to article 177 of
      the
      Peruvian Companies Law, Directors may be jointly and severally liable to us,
      the
      shareholders and third parties for their actions if they act with willful
      misconduct, gross negligence or abuse their powers.




Our
      By-laws do not contain any provisions related to a director’s power to vote on
      matters in which the director is materially interested. However, Article 180
      of
      the Peruvian Companies Law requires a director with an interest that conflicts
      with an interest of ours on a specific matter to disclose such interest to
      us
      and abstain from participating in the deliberation and decision of the said
      matter. A director that contravenes such requirement is liable for the damages
      suffered by us and can be removed by the Board of Directors or a shareholders’
meeting upon the request of any shareholder or any member of the
      Board.




155




Our
      By-laws also do not contain any provisions with respect to the power of the
      Directors to vote upon matters relating to their own compensation. Nevertheless,
      Article 30 of the By-laws requires that the Board of Directors receive
      compensation of no more than 4 percent of the profits of each fiscal year after
      making deductions for workers’ profit sharing, taxes, reinvestment of profits
      for tax benefits and legal reserves. This amount will be submitted for
      ratification by the General Meeting during the annual obligatory meeting, at
      which time it approves the balance sheet, taxes, reinvestment of profits for
      tax
      benefits and legal reserves.




Our
      By-laws contain no provision relating to the directors’ power to borrow from us.
      However, Article 179 of the Peruvian Companies Law provides that directors
      of a
      company may enter into an agreement with such company only in the event that
      the
      agreement relates to operations the company performs in the regular course
      of
      business and in an arms-length transaction. Further, a company may provide
      a
      loan to a director or grant securities in his favor only in connection with
      operations that the company usually performs with third parties. Agreements,
      credits, loans or guarantees that do not meet the requirements set forth above
      require prior approval from at least two thirds of the members of the company’s
      Board of Directors. Directors are jointly liable to the company and the
      company’s creditors for contracts, credit, loans or securities executed or
      granted without complying with Article 179 of the Peruvian Companies Law.




Neither
      our By-laws nor the Peruvian Companies Law contain age limit requirements for
      the retirement or non-retirement of directors.




*Shares
      and Voting Rights*




We
      have
      two classes of shares, the Common Shares and the Investment Shares. The Common
      Shares represent 100 percent of our outstanding share capital. The Investment
      Shares have no voting rights and are not, under Peruvian law and accounting
      rules, characterized as share capital. The Common Shares and the Investment
      Shares may be either physical share certificates in registered form or
      book-entry securities in the CAVALI ICLV S.A. book-entry settlement system,
      also
      in registered form.




Holders
      of Common Shares are entitled to one vote per share, with the exception of
      the
      election of the Board of Directors, where each such holder is entitled to one
      vote per share per nominee. Each holder’s votes may be cast all for a single
      nominee or distributed among the nominees at the holder’s discretion. Holders of
      Common Shares may attend and vote at shareholder meetings either in person
      or
      through a proxy. Additionally, holders of Common Shares have the right to
      participate in the distribution of dividends and shareholder equity resulting
      from liquidation. Our By-laws do not establish a maximum time limit for the
      payment of the dividends. However, according to Article 232 of the Peruvian
      Companies Law, the right to collect past-due dividends in the case of public
      companies that are *sociedades
      anónimas abiertas* ,
      as we
      are, expires at 10 years from the date on which the payment was due in
      accordance with the dividend declaration.




Our
      share
      capital may be increased by holders of Common Shares at a shareholder meeting.
      Capital reductions may be voluntary or mandatory and must be approved by holders
      of Common Shares at a shareholder meeting. Capital reductions are mandatory
      when
      accumulated losses exceed 50 percent of capital to the extent such accumulated
      losses are not offset by accumulated earnings and capital increases within
      the
      following fiscal year. Capital increases and reductions must be communicated
      to
      CONASEV, the Lima Stock Exchange and the *Superintendencia
      Nacional de Administración Tributaria* (SUNAT)
      and published in the official gazette El Peruano and in a widely circulated
      newspaper in the city in which we are located.




156




The
      Investment Shares do not represent our stock obligations. Holders of Investment
      Shares are neither entitled to exercise voting rights nor to participate in
      shareholder meetings. However, Investment Shares confer upon the holders thereof
      the right to participate in the dividends distributed according to their nominal
      value, in the same manner as Common Shares.




*Changes
      in the Rights of Shareholders*




Our
      By-laws do not contain special provisions relating to actions necessary to
      change the rights of holders of the classes of shares. However, Article 88
      of
      the Peruvian Companies Law establishes that all shares of a same class must
      have
      the same rights and obligations, and that in the event that we decide to
      establish different rights and obligations we must create a different class
      of
      shares, which creation will be agreed upon by the General Meeting in accordance
      with the requirements for modification of the By-laws. The Common Shares are
      the
      only class of shares representing 100 percent of our share capital, and,
      therefore, each Common Share has the same rights and obligations of each other
      Common Share. These requirements are described under “—Shares and Voting Rights”
above.




The
      rights of any class of shares may not be reduced except in accordance with
      the
      Peruvian Companies Law.




*Shareholders’
      Meetings*




Pursuant
      to Peruvian law and our By-Laws, the Annual Obligatory Meeting must be held
      during the three-month period after the end of each fiscal year. Additional
      General Meetings may be held during the year. Because
      we are a *sociedad
      anónima abierta* ,
      we are
      subject to the special control of CONASEV, as provided in Article 253 of the
      Peruvian Companies Law. If
      we do
      not hold the Annual Obligatory Meeting during the three-month period after
      the
      end of each fiscal year or any other shareholder meeting required by the
      Peruvian Companies Law or our By-Laws, CONASEV will directly, or at the request
      of at least one shareholder of the Common Shares, call for such a meeting,
      which
      will take place in a reasonable period of time. Other shareholder meetings
      are
      convened by the Board of Directors when deemed convenient for us or when it
      is
      requested by the holders of at least five percent of the Common Shares. If,
      at the request of holders of five percent of the Common Shares, the shareholder
      meeting is not convened by the Board of Directors within 15 business days of
      the
      receipt of such request, CONASEV will call for such meeting. If CONASEV calls
      for a shareholders meeting, CONASEV will indicate the place, time and hour
      of
      the meeting, the agenda and the person who will preside. If it is a meeting
      other than the Annual Obligatory Meeting or a shareholder meeting required
      by
      the Peruvian Companies Law or the By-Laws, the agenda will contain those matters
      requested by the shareholders who requested the meeting. Resolución CONASEV No.
      111-2003-EF-94.10, as amended by Resolución CONASEV No. 016-2004-EF/94.10 and
      Resolución CONASEV No. 015-2005-EF/94.10, approved provisions related to the
      right of the minority shareholders to obtain information regarding a *sociedad
      anónima abierta* such
      as
      us and to request CONASEV to call a shareholders meeting if it is not called
      by
      the *sociedad
      anónima abierta* upon
      request, for which purpose Resolución CONASEV No. 007-2006-EF/94.10 shall apply.
      Notwithstanding the notice requirements as described in the preceding two
      sentences, any shareholder meeting will be deemed called and legally installed,
      provided that the shareholders representing all of the voting shares are
      present, and provided that every present shareholder, whether or not such
      shareholder has paid the full price of such shareholder’s shares, agrees to hold
      the shareholder meeting and accepts the business to be discussed therein.
      Holders of Investment Shares have no right to request the Board to convene
      shareholder meetings.




157




Since
      we
      are a *sociedad
      anónima abierta* ,
      notice
      of shareholders’ meetings must be given by publication of a notice, with the
      publication occurring at least 25 days prior to any shareholders’ meeting, in El
      Peruano and in a widely circulated newspaper in the city in which we are
      located. The notice requirement may be waived at the shareholder meeting by
      holders of 100 percent of the outstanding Common Shares. According to Article
      25
      of the By-Laws and Article 257 of the Peruvian Companies Law, shareholder
      meetings called for the purpose of considering a capital increase or decrease,
      the issuance of obligations, a change in the By-Laws, the sale in a single
      act
      of assets with an accounting value that exceeds 50 percent of our capital stock,
      a merger, division, reorganization, transformation or dissolution, are subject
      to a first, second and third quorum call, each of the second and third quorum
      to
      occur upon the failure of the preceding one. A quorum for the first call
      requires the presence of shareholders holding 50 percent of our total voting
      shares. For the second call, the presence of shareholders holding at least
      25
      percent of our total voting shares constitutes a quorum, and for the third
      call
      there is no quorum requirement. These decisions require the approval of the
      majority of the voting shares represented at the shareholder meeting. General
      Meetings convened to consider all other matters are subject to a first and
      second quorum call, the second quorum call to occur upon the failure of the
      first quorum.




In
      the
      case of shareholder meetings called for the purpose of considering the removal
      of members of the Board of Directors, at least 75 percent and 70 percent of
      the
      total number of Common Shares outstanding are required to be represented at
      the
      shareholder meeting on the first quorum call and second quorum call
      respectively. Provided such quorum is attained, the affirmative vote of no
      less
      than two thirds of the total number of Common Shares outstanding is required
      to
      effect the removal of members of the Board of Directors. The special quorum
      and
      voting requirements described above cannot be modified at a shareholder meeting
      called for the purpose of considering the removal of members of the Board of
      Directors.




Under
      our
      By-Laws, the following actions are to be taken at the annual obligatory
      shareholders’ meetings: approval of our balance sheets, profit and loss
      statements and annual reports; approval of management performance; allocation
      of
      profits; election of external auditors; election of the members of the Board
      of
      Directors; and any other matters submitted by the Board of Directors. The
      following actions are to be taken at the same annual shareholders’ meetings if
      the quorum and majority requirements are met or at any other shareholders’
meeting: any amendment of the By-Laws; any decision to increase or reduce
      capital; any decision to issue debt; initiating investigations or requesting
      auditor’s reports; liquidating, spinning-off, merging, consolidating,
      dissolving, or changing our business form or structure.




In
      accordance with Article 21 of the By-laws, only those holders of Common Shares
      whose names are inscribed in the Share Register not less than 10 days in advance
      of a meeting will be entitled to attend shareholder meetings and to exercise
      their rights.




*Limitations
      on the Rights of Nonresident or Foreign Shareholders*




There
      are
      no limitations in our By-laws or the Peruvian Companies Law on the rights of
      nonresident or foreign shareholders to own securities or exercise voting rights
      on our securities.




*Change
      in Control*




There
      are
      no provisions in our By-laws that would have the effect of delaying, deferring
      or preventing a change in control.




158




*Disclosure
      of Share Holdings*




There
      are
      no provisions in our By-laws governing the ownership threshold above which
      share
      ownership must be disclosed. However, according to Regulation No.
      009-2006-EF.94.10 of the CONASEV, which became effective on May 3, 2006, as
      amended by Regulation No. 020-2006-EF.94.10, when an individual or financial
      group acquires, in one act or various successive acts, a significant percentage
      (more than 25 percent) of the voting shares of a company, a procedure known
      as *Oferta
      Pública de Adquisición* ,
      or
      Takeover Bid, must be followed. This has the effect of alerting other
      shareholders and the market that an individual or financial group has acquired
      a significant percentage of a company’s voting shares, and gives other
      shareholders the opportunity to sell their shares at the price offered by the
      purchaser. The purchase of ADRs is exempted from the Takeover Bid unless the
      holders: (i) exercises the voting rights of the Common Shares underlying the
      ADSs evidenced by such ADRs, or (ii) requests the delivery of such underlying
      Common Shares. In addition, CONASEV and the Lima Stock Exchange must be notified
      of any transfer of more than 5 percent of our paid-in-capital.




*Changes
      in the Capital*




Our
      By-laws do not establish special conditions for increases or reductions of
      capital that are more stringent than is required by the Peruvian Companies
      Law.
      Furthermore, the Peruvian Companies Law forbids *sociedades
      anónimas abiertas* ,
      such as
      us, from including in their by-laws stipulations limiting the transfer of their
      shares or restraining their trading in other ways. We cannot recognize a
      shareholders’ agreement that contemplates limitations, restrictions or
      preferential rights on the transfer of shares, even if such agreement is
      recorded in our Share Register ( *matrícula
      de acciones* )
      or in
      CAVALI.




**Corporate
      Governance**




In
      November 2003, the Commission approved changes to the New York Stock Exchange’s
      listing standards related to the corporate governance practices of listed
      companies. Under these rules, listed foreign private issuers, like us, must
      disclose any significant ways in which their corporate governance practices
      differ from those followed by United States domestic companies under the New
      York Stock Exchange, or NYSE, listing standards.




There
      are
      significant differences in the corporate governance practices followed by us
      as
      compared to those followed by United States domestic companies under the NYSE’s
      listing standards. The NYSE listing standards provide that the board of
      directors of a United States domestic listed company must consist of a majority
      of independent directors and that certain committees must consist solely of
      independent directors. Under Peruvian corporate governance practices, a Peruvian
      company is not required to have a majority of the members of the board of
      directors be independent.




The
      listing standards for the NYSE also require that United States domestic
      companies have an audit committee, a nominating/corporate governance committee
      and a compensation committee. Each of these committees must consist solely
      of
      independent directors and must have a written charter that addresses certain
      matters specified in the listing standards. Peruvian corporate governance
      practices permit the Board of Directors of a Peruvian company to form special
      governance bodies in accordance with the needs of such company and does not
      require that these special governance bodies be composed partially or entirely
      of independent directors. We maintain three committees, which include the Audit
      Committee, the Compensation Committee and the Nominating/Corporate Governance
      Committee. Our Board of Directors has determined that our Audit Committee is
      composed entirely of independent directors, as defined in the NYSE’s Listed
      Company Manual.




159




The
      NYSE’s listing standards also require United States domestic companies to adopt
      and disclose corporate governance guidelines. In July 2002, CONASEV and a
      committee composed by regulatory agencies and associations prepared and
      published a list of suggested corporate governance guidelines called “Principles
      of Good Governance for Peruvian Companies.” These principles are disclosed on
      Conasev web page http://www.conasev.gob.pe .
      Our
      code of business conduct and ethics establishes our principles of good corporate
      governance and, as indicated in “Item 16B. Code of Ethics,” is posted on our
      website.




**Material
      Contracts**




On
      March
      16, 2005, we, along with Sumitomo Metal Mining Co., Ltd., Sumitomo Corporation,
      Summit Global Management B.V., Phelps Dodge, Cyprus Amax Minerals Company,
      Cyprus Metals Company, Cyprus Climax Metals Company and Sociedad Minera Cerro
      Verde S.A.A., entered into a participation agreement, or the Participation
      Agreement, whereby, subject to certain closing conditions, we agreed to increase
      our ownership interest in Cerro Verde up to 20.1 percent and Sumitomo Metal
      Mining Co., Ltd., Sumitomo Corporation and Summit Global Management B.V., or
      the
      Sumitomo Group, agreed to acquire an ownership interest in Cerro Verde of
      between 21.0 and 24.99 percent in connection with a US$850 million expansion
      of
      the Cerro Verde operation to mine a primary sulfide ore body. On June 1, 2005,
      Cerro Verde conducted a capital increase whereby we subscribed 42,925,975
      shares, increasing our interest in Cerro Verde from 9.17 percent to 18.21
      percent and Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation acquired
      equity positions in Cerro Verde totaling 21 percent. The remaining minority
      shareholders own 7.2 percent of Cerro Verde through shares publicly traded
      on
      the Lima Stock Exchange. As a result of the transaction, Cerro Verde received
      cash totaling US$441.8 million, net of US$1.0 million in expenses, and Phelps
      Dodge’s interest in Cerro Verde was reduced to 53.6 percent from 82.5 percent.
      Since that time, we purchased additional common shares on the Lima Stock
      Exchange, and currently own 18.5 percent of Cerro Verde as of March 31, 2008. On March
      19 , 2007 ,
      Phelps
      Dodge was acquired by Freeport-McMoRan and now
      operates under the name Freeport-McMoRan Copper & Gold Inc.




On
      September 30, 2005, Cerro Verde obtained debt financing facilities in the
      overall amount of US$450 million, subject to certain conditions for the
      expansion. The above-mentioned cash invested by the Sumitomo Group and us to
      establish or increase ownership interest in Cerro Verde is also a major source
      of funds for the expansion. Approximately US$300 million has been spent on
      the
      Cerro Verde expansion. The current copper production at Cerro Verde after
      completion of the expansion is approximately 300,000 short tons per
      year.




On
      December 30, 2005 and January 2, 2006, we acquired 50 percent and 25 percent,
      respectively, of the capital stock of Minas Poracota S.A., or Minas Poracota,
      for a purchase price of US$4.5 million. According to the shareholders agreement
      we executed with Teck Cominco, if a preliminary study to be carried out by
      us
      and Teck Cominco indicates a probability of gold production that is greater
      than
      300,000 ounces per year, Teck Cominco will have the right to increase its equity
      interest in Minas Poracota to 50 percent and operate the project. Teck Cominco
      will prepare a feasibility study with a production of 300,000 ounces of gold.
      In
      October 2006, we purchased the remaining 25 percent interest from Teck Cominco
      for US$2.25 million. See Note 2 to the Financial Statements.




On
      May
      21, 2008, we borrowed a US$450 million Syndicated Term Loan under a new Term
      Loan Agreement. Borrowing under the Syndicated Term Loan will bear interest
      at a
      rate per annum equal to LIBOR plus 2.25%. Interest and installments of principal
      equal to 1/20 th of the
      aggregate principal amount borrowed will be payable quarterly until maturity
      in
      May 2013 (on which date all amounts outstanding shall be payable). The
      Syndicated Term Loan may be prepaid at our option, subject to a prepayment
      fee
      of (i) 0.4% of the principal amount of the loan prepaid on or before May 21,
      2009, (ii) 0.3% of the principal amount of the loan prepaid on or before May
      21,
      2010 or (iii) 0.2% of the principal amount of the loan prepaid after May 21,
      2010.




160




Obligations
      under the Syndicated Term Loan are guaranteed by our wholly-owned
      subsidiary, Condesa, and secured by a pledge of 10,565,130 of our Common Shares
      held by Condesa. The pledged shares are subject to daily market value reviews
      and if the market value of the delivered securities falls below 1.25 times
      the
      outstanding principal amount of the Syndicated Term Loan, we or Condesa will
      be
      required to deliver additional pledged securities or cash collateral or prepay
      a
      portion of the loan so that the value of all collateral pledged is equal to
      1.50
      time the outstanding principal amount of the Syndicated Term Loan. In addition,
      we may request the release of a portion of the delivered securities under
      certain circumstances if the market value of collateral provided is greater
      than
      1.50 times the outstanding principal amount of the Syndicated Term
      Loan.




The
      Term
      Loan Agreement governing the Syndicated Term Loan contains certain customary
      covenants, including covenants that restrict our ability to: incur additional
      indebtedness; engage in transactions with affiliates; create liens on our
      assets; make certain investments; sell assets, subject to certain exceptions;
      acquire other companies or dissolve, liquidate or merge with or into other
      companies; enter into unrelated businesses; make guarantees; enter into
      burdensome agreements; and enter into certain hedging transactions other
      than in the ordinary course of business. In addition, we are required to meet
      certain financial tests, including a Debt Ratio (as defined in the Term Loan
      Agreement) of 3.5 to 1.0, and certain operational metrics, including obligations
      requiring us to maintain the economic value of reserves and the average service
      life of mining units at specified levels.




The
      Syndicated Term Loan is also subject to certain customary events of default,
      including defaults related to non-payment, violation of certain covenants,
      cross-defaults, insolvency, judgments, invalidity of loan documents or security
      interests, government intervention or termination of certain concession
      contracts.




**Exchange
      Controls**




Since
      August 1990, there have been no exchange controls in Peru and all foreign
      exchange transactions are based on free market exchange rates. Prior to
      August 1990, the Peruvian foreign exchange market consisted of several
      alternative exchange rates. Additionally, during the 1990s, the Peruvian
      currency has experienced a significant number of large devaluations, and Peru
      has consequently adopted, and operated under, various exchange rate control
      practices and exchange rate determination policies, ranging from strict control
      over exchange rates to market determination of rates. Current Peruvian
      regulations on foreign investment allow the foreign holders of equity shares
      of
      Peruvian companies to receive and repatriate 100 percent of the cash dividends
      distributed by such companies. Such investors are allowed to purchase foreign
      exchange at free market currency rates through any member of the Peruvian
      banking system and transfer such foreign currency outside Peru without
      restriction.




**Taxation**




The
      following summarizes the material Peruvian and United States tax consequences
      under present law of the purchase, ownership and disposition of ADSs or Common
      Shares. The discussion is not a full description of all tax considerations
      that
      may be relevant to a decision to purchase ADSs or Common Shares. In particular,
      this discussion deals only with holders that hold ADSs or Common Shares as
      capital assets and that have the U.S. Dollar as their functional currency.
      The
      summary does not address the tax treatment of certain investors that may be
      subject to special tax rules, such as banks, securities dealers, insurance
      companies, tax-exempt entities, persons that will hold ADSs or Common Shares
      as
      a position in a “straddle” or “conversion transaction” for tax purposes and
      holders of ten percent or more of our voting shares. There is no tax treaty
      currently in effect between Peru and the United States, except for a treaty
      to
      exchange tax information. The information to be exchanged is defined in such
      treaty as any data or declaration that may be relevant or essential to the
      administration and application of taxes. Accordingly, the discussions below
      of
      Peruvian and U.S. tax considerations are based on the domestic law of each
      of
      Peru and the United States which are subject to change and possibly with
      retroactive effect.




161




As
      used
      herein, “Peruvian holder” means an owner of ADSs or Common Shares that is (i) an
      individual domiciled in Peru, (ii) a business entity created under the laws
      of
      Peru, or (iii) a Peruvian branch, agency or permanent establishment of a
      non-Peruvian individual or entity. “U.S. Holder” means a beneficial owner of
      ADSs or Common Shares that is (i) a United States citizen or resident, (ii)
      a
      domestic corporation or partnership, (iii) a trust subject to the control of
      a
      U.S. fiduciary and the primary supervision of a U.S. court or (iv) estate the
      income of which is subject to United States Federal income taxation regardless
      of its source.




***Peruvian
      Tax Considerations***




*Cash
      Dividends and Other Distributions*




Cash
      dividends paid with respect to the Common Shares and amounts distributed with
      respect to ADSs are currently subject to Peruvian withholding income tax, at
      a
      rate of 4.1 percent of the dividend paid, when the dividend is paid to
      shareholders that are: (i) individuals, whether domiciled or non-domiciled
      in
      Peru or (ii) non-domiciled companies or entities. Distributions of additional
      Common Shares representing profits, distribution of shares which are not
      distribution of earnings or profits, as well as distribution of preemptive
      rights with respect to Common Shares that are made as part of a pro rata
      distribution to all shareholders generally will not be subject to Peruvian
      income or withholding taxes.




*Capital
      Gains*




Pursuant
      to Article 19, paragraph l, item 1, of the Peruvian Income Tax Law, as amended
      by Legislative Decree 945 effective since January 1, 2004, and by Legislative
      Decree 970 effective since January 1, 2007, capital gains
      resulting from the sale or other disposition of ADSs or Common Shares are
      exempted from Peruvian income tax if (i) in the case of individuals, the
      transaction is effected on or before December 31, 2008; and (ii) in the case
      of
      shareholders other than individuals, the transaction is effected on a Peruvian
      stock exchange (floor session) on or before December 31, 2008. **** Legislative
      Decree 945 also amended Article 2 of the Peruvian Income Tax Law to define:
      (i)
      capital gains as any revenue coming from the sale of capital assets; and (ii)
      capital assets as those assets whose purpose is not to be traded in the regular
      course of business of the owner of the assets. This definition of capital gains
      could imply that the gains effected from the sale or disposition of Common
      Shares on the Peruvian stock exchange (floor session) are not exempted from
      Peruvian income tax if such Common Shares are deemed not to be capital assets
      as
      defined in Article 2 of the Preuvian Income Tax Law. However, Article 2 of
      the
      Peruvian Income Tax Law also provides that the sale of shares and similar
      securities is an operation which produces capital gains. Therefore, capital
      gains resulting from the sale or other disposition of ADSs or Common Shares
      are
      exempted from Peruvian income tax if the seller is an individual and the
      transaction is effected on or before December 31, 2008 or, if the seller is
      not
      an individual, the transaction is effected on a Peruvian stock exchange (floor
      session) on or before December 31, 2008. There is
      no assurance that this exemption will be extended beyond December 31, 2008.




162




An
      entity
      organized in Peru will be subject to Peruvian tax on capital gains from any
      sale
      on or before December 31, 2008 not effected on a Peruvian stock
      exchange .
      In
      addition, if Common Shares sold or disposed of on a Peruvian stock exchange
      are
      deemed not to be capital assets, they will not produce capital gains **** for
      purposes of enjoying the exemption described above .
      The
      amount of any taxable capital gain will be the excess of the sale price of
      the
      Common Shares over the price of Common Shares when acquired by the
      holder.




With
      respect to any sale on or before December 31, 2008, an individual holder will
      be
      taxed on capital gains from the sale or other disposition of Common Shares
      only
      if (a) such individual (i) in the case of an individual domiciled in
      Peru, “customarily transacts in shares or other securities” or (ii) in the
      case of an individual not domiciled in Peru, “customarily transacts in shares
      issued by Peruvian companies” and (b) the sale of such shares is not
      effected on a Peruvian stock exchange ,
      unless
      the first paragraph of Article 2 of the Peruvian Income Tax Law, as amended
      by
      Legislative Decree 945, is interpreted to deem that Common Shares are not
      capital assets and therefore they do not produce capital gains for purposes
      of
      enjoying the exemption described above. For this
      purpose, an individual “customarily transacts in shares or other securities” if
      such person makes at least ten purchases and at least ten sales of shares or
      other securities during the taxable year, and an individual “customarily
      transacts in shares issued by Peruvian companies” if such person makes at least
      ten purchases and at least ten sales of shares issued by Peruvian companies
      during the taxable year. The amount of any taxable gain will be the excess
      of
      the sale price of the Common Shares over the price of Common Shares when
      acquired by the holder.




*Sales
      effected after December 31, 2008*




Legislative
      Decree 972, published on March 10, 2007 and effective since January 1, 2009,
      amended the Peruvian Income Tax Law. According to the amendments, capital gains
      resulting from the sale or other disposition of ADSs or Common Shares effective
      after December 31, 2008 shall be subject to Peruvian income tax, either if
      the
      transferor is an individual or a legal entity, domiciled or not domiciled in
      Peru, if the sale is effected on a Peruvian stock exchange or not, or if the
      sale is effected in Peru or outside Peru. Article 2 of the Peruvian Income
      Tax
      Law, as amended by Legislative Decree 945 defines: (i) capital gains as any
      revenue coming from the sale of capital assets; and (ii) capital assets as
      those
      assets whose purpose is not to be traded in the regular course of business
      of
      the owner of the assets. Article 2 of the Peruvian Income Tax Law also provides
      that the sale of shares and similar securities is an operation which produces
      capital gains.




An
      entity
      domiciled in Peru will be subject to Peruvian tax on capital gains from any
      sale, whether effected on a Peruvian stock exchange or not, at the regular
      30
      percent corporate income tax rate. The amount of any capital gain will be the
      excess of the sale price of the Common Shares over the price of Common Shares
      when acquired by the holder.




An
      entity
      not domiciled in Peru will be subject to Peruvian tax on capital gains from
      any
      sale either effected on a Peruvian stock exchange or not, at a reduced 5 percent
      income tax rate, if the sale is effected in Peru. When the sale is effected
      outside Peru, the regular 30 percent income tax rate is applicable on capital
      gain. The amount of any capital gain will be the excess of the sale price of
      the
      Common Shares over the price of Common Shares when acquired by the
      holder.




An
      individual holder will be subject to 30 percent income tax rate on capital
      gains
      from the sale or other disposition of Common Shares after December 31, 2008,
      if
      such individual (i) in the case of an individual domiciled in Peru,
“customarily transacts in shares or other securities” or (ii) in the case
      of an individual not domiciled in Peru, “customarily transacts in shares issued
      by Peruvian companies.” For this purpose, an individual “customarily transacts
      in shares or other securities” if such person makes at least ten purchases and
      at least ten sales of shares or other securities during the taxable year, and
      an
      individual “customarily transacts in shares issued by Peruvian companies” if
      such person makes at least ten purchases and at least ten sales of shares issued
      by Peruvian companies during the taxable year. The amount of any capital gain
      will be the excess of the sale price of the Common Shares over the price of
      Common Shares when acquired by the holder.




163




If
      the
      individual holder is domiciled in Peru, any capital gain resulting from the
      first ten sales of shares or other securities issued by Peruvian companies
      effected during the taxable year, shall be subject to the reduced effective
      5
      percent income tax rate (6.25 percent nominal income tax rate on the net capital
      gain, that is 80 percent of the gross capital gain) and any taxable capital
      gain
      resulting from the eleventh sale and from further sales during the taxable
      year,
      shall be subject to the corporate 30 percent income tax rate, being meaningless
      if the sale is effected in Peru or outside Peru.




If
      the
      individual holder is not domiciled in Peru, any capital gain resulting from
      the
      first ten sales of shares or other securities issued by Peruvian companies
      effected during the taxable year, shall be subject to the reduced effective
      5
      percent income tax rate if the sale is effected in Peru. Any capital gain
      resulting from the first ten sales of shares issued by Peruvian company during
      the taxable year if effected outside Peru and any capital gain resulting from
      the eleventh sale and from further sales during the taxable year, either
      effected in Peru or outside Peru, shall be subject to the corporate 30 percent
      income tax rate.




The
      acquisition price is required to calculate the capital gain resulting from
      the
      sale or other disposition of ADSs or Common Shares registered in the Public
      Registry of the Stock Market and traded on a Peruvian stock exchange. For shares
      acquired on or before January 1, 2009, the acquisition price shall be
      established by the Reference Table based on the Peruvian stock exchange prices
      that will be published by the Ministry of Economy and Finance.




If
      the
      transferor is an individual either domiciled in Peru or domiciled outside Peru
      or if the transferor is a legal entity not domiciled in Peru, the applicable
      income tax on capital gains resulting from the sale or other disposition of
      ADSs
      or Common Shares, shall be withheld by the purchaser from the purchase price
      and
      paid directly to the Tax Authority. It is expected that new provisions will
      be
      enacted to ensure the tax withholding responsibility when the transaction is
      effective on a Peruvian stock exchange. However there is no assurance that
      the
      expected new provisions will not affect the sale or other disposition of ADSs
      or
      Common Shares ** traded
      on
      the ** Peruvian
      stock exchange. If the transferor is a legal entity domiciled in Peru there
      is
      no withholding tax responsibility.




*Other
      Considerations*




No
      Peruvian estate or gift taxes are imposed on the gratuitous transfer of ADSs
      or
      Common Shares. No stamp, transfer or similar tax applies to any transfer of
      Common Shares, except for commissions payable by seller and buyer to the Lima
      Stock Exchange (0.15 percent of value sold), fees payable to CONASEV (0.05
      percent of value sold), brokers’ fees (about 0.05 percent to 1 percent of value
      sold) and added taxes (at the rate of 19 percent) on commissions and fees.
      Any
      investor who sells its Common Shares on the Lima Stock Exchange will incur
      these
      fees and taxes upon purchase and sale of the Common Shares.




***United
      States Federal Income Tax Considerations***




Assuming
      the obligations contemplated by the Amended and Restated Deposit Agreement
      are
      being performed in accordance with its terms, holders of ADSs (or ADRs
      evidencing ADSs) generally will be treated for United States federal income
      tax
      purposes as the owners of the Common Shares represented by those ADSs.




164




*Cash
      Dividends and Other Distributions*




Cash
      dividends paid with respect to Common Shares or Common Shares represented by
      ADSs generally are includible in the gross income of a U.S. Holder as ordinary
      income. Dividends generally are treated as foreign source income. Dividends
      paid
      to a U.S. Holder that is a corporation are not eligible for the dividends
      received deduction available to corporations. Under current law, a maximum
      15
      percent U.S. tax rate is imposed on the dividend income of an individual U.S.
      holder with respect to dividends paid by a domestic corporation or “qualified
      foreign corporation” if certain holding period requirements are met. A qualified
      foreign corporation generally includes a foreign corporation if (i) its shares
      are readily tradable on an established securities market in the U.S. or (ii)
      it
      is eligible for benefits under a comprehensive U.S. income tax treaty. Clause
      (i) will apply with respect to ADSs if such ADSs are readily tradable on an
      established securities market in the U.S. The ADSs are traded on the New York
      Stock Exchange. As a result, we believe that we should be treated as a qualified
      foreign corporation and, therefore, dividends paid to an individual U.S. holder
      with respect to ADSs for which the minimum holding period requirement is met
      should be taxed at a maximum rate of 15 percent. The maximum 15 percent tax
      rate
      is effective with respect to dividends included in income during the period
      beginning on or after January 1, 2003, and ending December 31, 2010. Dividends
      paid in Nuevos Soles are includible in a United States dollar amount based
      on
      the exchange rate in effect on the date of receipt (which, in the case of ADSs,
      will be the date of receipt by the Depositary) whether or not the payment is
      converted into U.S. Dollars at that time. Any gain or loss recognized upon
      a
      subsequent sale or conversion of the Nuevos Soles for a different amount of
      U.S.
      Dollars will be United States source ordinary income or loss. Distributions
      to
      U.S. Holders of additional Common Shares or preemptive rights with respect
      to
      Common Shares that are made as part of a pro rata distribution to all of our
      shareholders generally will not be subject to United States federal income
      tax
      but in other circumstances may constitute a taxable dividend.




A
      U.S.
      Holder will be entitled to a foreign tax credit for Peruvian taxes imposed
      by
      withholding or otherwise, subject to generally applicable limitations and
      restrictions. In the case of U.S. individuals for whom the reduced rate of
      tax
      on dividends applies, such limitations and restrictions will appropriately
      take
      into account the rate differential under rules similar to section 904(b)(2)(B)
      of the Internal Revenue Code. The rules governing foreign tax credits are
      complex and U.S. Holders should consult their tax advisors regarding their
      application to the particular circumstances of such holder.




A
      non-U.S. Holder generally is not subject to United States Federal income or
      withholding tax on dividends paid with respect to Common Shares or Common Shares
      represented by ADSs, unless such income is effectively connected with the
      conduct by the non-U.S. Holder of a trade or business within the United States.




*Capital
      Gains*




U.S.
      Holders will recognize capital gain or loss on the sale or other disposition
      of
      ADSs or Common Shares (or preemptive rights with respect to such shares) held
      by
      the U.S. Holder or by the Depositary. U.S. Holders will not recognize gain
      or
      loss on deposits or withdrawals of Common Shares in exchange for ADSs or on
      the
      exercise of preemptive rights. Any gain recognized by a U.S. Holder generally
      will be treated as United States source income. Consequently, in the case of
      a
      disposition of Common Shares or ADSs in a transaction subject to Peruvian tax,
      the U.S. Holder may not be able to claim the foreign tax credit for any Peruvian
      tax imposed on the gain unless it has sufficient foreign source income from
      other sources against which it can apply the credit. Generally, gain or loss
      will be a long-term capital gain or loss if the U.S. Holder’s holding period for
      such Common Shares or ADSs exceeds one year. Long-term capital gain for an
      individual U.S. Holder is generally subject to a reduced rate of tax. With
      respect to sales occurring on or after May 6, 2003, but before January 1, 2011,
      the long-term capital gain tax rate for an individual U.S. Holder is 15 percent.
      For sales occurring before May 6, 2003, or after December 31, 2010, under
      current law the long-term capital gain rate for an individual U.S. Holder is
      20
      percent.




165




A
      non-U.S. Holder of ADSs or Common Shares will not be subject to United States
      income or withholding tax on gain from the sale or other disposition of ADSs
      or
      Common Shares unless (i) such gain is effectively connected with the conduct
      of
      a trade or business within the United States or (ii) the non-U.S. Holder is
      an
      individual who is present in the United States for at least 183 days during
      the
      taxable year of the disposition and certain other conditions are met.




*Passive
      Foreign Investment Company*




We
      believe that we are not and will not become a passive foreign investment company
      for United States Federal income tax purposes. A foreign corporation is a
      passive foreign investment company, or PFIC, in any taxable year in which,
      after
      taking into account the income and assets of certain subsidiaries pursuant
      to
      the applicable look-through rules, either (i) at least 75 percent of its gross
      income is passive income or (ii) at least 50 percent of the average value of
      its
      assets is attributable to assets that produce passive income or are held for
      the
      production of passive income.




If
      we
      were a PFIC in any year during which a U.S. Holder owned ADSs or Common Shares,
      we would not be treated as a “qualified foreign corporation” for purposes of
      qualifying dividends paid to a U.S. Holder for the preferential 15 percent
      maximum U.S. tax rate noted above and the U.S. Holder would be subject to
      additional taxes on any excess distributions received from us and any gain
      realized from the sale or other disposition of ADSs or Common Shares (regardless
      of whether we continued to be a PFIC). A U.S. Holder has an excess distribution
      to the extent that distributions on ADSs or Common Shares during a taxable
      year
      exceed 125 percent of the average amount received during the three preceding
      taxable years (or, if shorter, the U.S. Holder’s holding period for the ADSs or
      Common Shares). To compute the tax on an excess distribution or any gain, (i)
      the excess distribution or the gain is allocated ratably over the U.S. Holder’s
      holding period for the ADSs or Common Shares, (ii) the amount allocated to
      the
      current taxable year is taxed as ordinary income and (iii) the amount allocated
      to other taxable years is taxed at the highest applicable marginal rate in
      effect for each year and an interest charge is imposed to recover the deemed
      benefit from the deferred payment of the tax attributable to each year.




If
      we
      were a PFIC, U.S. holders of interests in a holder of ADSs or Common Shares
      may
      be treated as indirect holders of their proportionate share of the ADSs or
      Common Shares and may be taxed on their proportionate share of any excess
      distribution or gain attributable to the ADSs or Common Shares. An indirect
      holder also must treat an appropriate portion of its gain on the sale or
      disposition of its interest in the actual holder as gain on the sale of the
      ADSs
      or Common Shares.




*Information
      Reporting and Backup Withholding*




Dividends
      in respect of the ADSs or Common Shares and the proceeds from the sale,
      exchange, or redemption of the ADSs or Common Shares may be reported to the
      United States Internal Revenue Service and a backup withholding tax may apply
      to
      such amounts unless the holder (i) is a domestic corporation (which may be
      required to establish its exemption by carrying its status on U.S. Internal
      Revenue Service Form W-9), (ii) in the case of a U.S. Holder other than a
      corporation, provides an accurate taxpayer identification number in the manner
      required by applicable law, (iii) in the case of a non-U.S. Holder, provides
      a
      properly executed U.S. Internal Revenue Service Form W-8BEN; or other successor
      Form, or (iv) otherwise establishes a basis for exemption. The amount of any
      backup withholding from a payment to a U.S. Holder generally will be allowed
      as
      a credit against the U.S. Holder’s United States Federal income tax liability.




166




**Dividends
      and Paying Agents**




Not
      applicable.




**Statement
      by Experts**




Not
      applicable.




**Documents
      on Display**




We
      are
      subject to the informational requirements of the United States Securities
      Exchange Act of 1934, as amended. In accordance with these requirements, we
      file
      annual reports and other information to the Commission. These materials,
      including this Annual Report on Form 20-F and the exhibits hereto, may be
      inspected and copied at the Commission’s Public Reference Room at 450 Fifth
      Street, N.W., Washington, D.C. 20549 and at the Commission’s regional offices at
      500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 233 Broadway,
      New York, New York 10279-0001. Copies of the materials may be obtained from
      the
      Public Reference Room of the Commission at 100 F Street, N.E., Washington,
      D.C.
      20549 at prescribed rates. The public may obtain information on the operation
      of
      the Commission’s Public Reference Room by calling the Commission in the United
      States at 1-800-SEC-0330. The Commission also maintains a web site at http://www.sec.gov that
      contains reports, proxy statements and other information regarding registrants
      that file electronically with the Commission. Form 20-F reports and some of
      the
      other information submitted by us to the Commission may be accessed through
      this
      web site.




**Subsidiary
      Information**




Not
      applicable.




**ITEM
              11.**
            **Quantitative
                and Qualitative Disclosures About Market
                Risk**




The
      following discussion contains forward looking statements that are subject to
      risks and uncertainties, many of which are out of our control. Our primary
      market risks are related to fluctuations in the prices of gold, silver, zinc
      and
      lead. To a lesser extent, we are subject to market risk related to fluctuations
      in US$/Nuevo Sol exchange rates and to market risk related to interest rate
      fluctuation on our cash balances.




**Commodity
      Contracts**




*Gold,
      silver, lead and copper hedging and sensitivity to market
      price*




Our
      revenues and expenses are to a great extent influenced by world market prices
      for gold, copper, silver, zinc and lead that fluctuate widely and over which
      we
      have no control. Until 1998, we pursued a limited economic hedging and options
      strategy, locking in metals prices on a medium-term basis when we considered
      market prices attractive. However, in 1998 we adopted a new hedging strategy,
      in
      order to focus on long-term position-taking on the price of precious
      metals.




Yanacocha
      and Cerro Verde have informed us that they have generally not engaged in, and
      are currently not engaged in, gold or copper price hedging activities, such
      as
      forward sales or option contracts, to minimize its exposure to fluctuations
      in
      the price of gold.




167




In
      October 2004 our Board of Directors issued a mandate not to enter into new
      hedging transactions. To avoid future fluctuations in the consolidated results
      of operations, since 2003, we have been modifying the terms of certain gold
      derivative instruments in order to qualify them as normal sales contracts.
      In
      March 2006, we closed out all of our outstanding gold derivative contracts
      that
      were maintained as of December 31, 2005 and replaced them with sales contracts
      that require physical delivery of gold (normal sales) at fixed or maximum
      prices. On January 15, 2007, we modified the schedule of commitments of gold
      with two of our clients. As a consequence of this modification, we transferred
      208,000 and 108,000 gold ounces that had been committed for 2007 and 2008,
      respectively, and committed them for sale in 2012 instead, without any cash
      disbursement. In March and May 2007, we negotiated with several counterparties
      to eliminate the fixed or maximum price component on determined commitments
      for
      a total of 971,000 gold ounces scheduled for delivery from 2008 to 2012, which
      required us to make aggregate payments of US$315.69 million. Additionally,
      from
      January to February 2008, we negotiated with several counterparties to eliminate
      the fixed or maximum price component on all of our outstanding gold commitments,
      representing a total of 922,000 gold ounces, which required us to make aggregate
      payments of US$517.15 million. After these transactions we will continue
      delivering physical gold as scheduled but will receive the prevailing market
      price at the time. As a result, we are fully exposed to the effects of changes
      in prevailing market prices of gold, silver and copper. See “Item 3. Key
      Information—Risk Factors—Factors Relating to the Company—Prices of Gold, Silver
      and Copper.”




As
      of May
      31, 2008, we had no fixed price commitments for the sale of our metals. In
      2005 and 2006, we delivered 282,000 and 388,000 ounces of gold at an average
      price of US$341.58 and US$338.94, respectively, as part of the sales contracts
      mentioned above. See further discussion in Note 29 to our Financial Statements.
      As of May 31, 2008, we had no silver derivative contracts in place. As of May
      31, 2008, we had no gold convertible put option contracts.




At
      El
      Brocal, we implemented a base metal hedging policy for a maximum of 30 percent
      of El Brocal’s total payable metal contained per year, for up to three years. As
      of March 31, 2008 all transactions entered have been forward pricing operations
      through non-delivery (Asian) swaps. Outstanding hedging commitments for 2008
      to
      2010 amount to 10 percent of payable metal and are as follows: (i) 4,200 metric
      tons of copper at an average price of US$7,273 per metric ton, (ii) 15,900
      metric tons of lead at an average price of US$2,797 per metric ton and (iii)
      18,750 metric tons of zinc at an average price of US$2,757 per metric
      ton.




*Normal
      Sales*




We
      had no
      normal sales contracts with fixed or capped prices outstanding at May 31, 2008.




We
      regularly examine our strategy with regard to hedging. Our Chief Executive
      Officer, Chief Financial Officer and Treasurer coordinate our day-to-day
      economic hedging activities.




*Foreign
      currency risk*




We
      buy
      and sell our products and obtain capital facilities and investment in U.S.
      Dollars. The assets and liabilities in different currencies from the U.S. dollar
      (Nuevos Soles) are not significant. We estimate that the future exchange rate
      fluctuations of Peruvian currency versus the U.S. dollar will not significantly
      affect the results of our future operations.




168




*Interest
      Rate Sensitivity*




We
      reduce
      our exposure to the risks due to variations in interest rates by engaging in
      financial obligations and capital leasing with fixed interest rates. See Note
      30
      to the Financial Statements. Consequently, we do not use derivative instruments
      to manage this risk and we do not expect to incur significant losses based
      on
      interest risks.




**ITEM
              12.**
            **Description
                of Securities Other Than Equity
                Securities**




Not
      applicable.




**PART
      II**




**ITEM
              13.**
            **Defaults,
                Dividend Arrearages and
                Delinquencies**




Not
      applicable.




**ITEM
              14.**
            **Material
                Modifications to the Rights of Security Holders and Use of
                Proceeds**




Not
      applicable.




**ITEM
              15.**
            **Controls
                and Procedures**




*Evaluation
      of disclosure controls and procedures* .




As
      of
      December 31, 2007, we carried out an evaluation under the supervision and with
      the participation of our management, including our Chief Executive Officer
      and
      Chief Financial Officer, of the effectiveness of the design and operation of
      our
      disclosure controls and procedures. There are inherent limitations to the
      effectiveness of any system of disclosure controls and procedures, including
      the
      possibility of human error and the circumvention or overriding of the controls
      and procedures. Accordingly, even effective disclosure controls and procedures
      can only provide reasonable assurance of achieving their control objectives.
      Based upon and as of the date of our evaluation, our Chief Executive Officer
      and
      Chief Financial Officer concluded that the disclosure controls and procedures
      are effective to provide reasonable assurance that information required to
      be
      disclosed in the reports we file and submit under the United States Securities
      Exchange Act of 1934, as amended, is recorded, processed, summarized and
      reported as and when required.




*Management’s
      Annual Report on Internal Control over Financial Reporting*




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is a
      process designed to provide reasonable assurance regarding the reliability
      of
      financial reporting and the preparation of financial statements for external
      reporting purposes in accordance with generally accepted accounting principles.
      Because of its inherent limitations, internal control over financial reporting
      may not prevent or detect misstatements. Our management has assessed the
      effectiveness of our internal control over financial reporting as of
      December 31, 2007. In making its assessment, management has utilized the
      criteria set forth by the Committee of Sponsoring Organizations (COSO) of the
      Treadway Commission in *Internal
      Control—Integrated Framework.* **** ** Our
      management concluded that based on its assessment, our internal control over
      financial reporting was effective as of December 31, 2007.




169




*Attestation
      Report of the Independent Registered Public Accounting Firm*





To
      the
      Board of Directors and Shareholders of **Compañía
      de Minas Buenaventura S.A.A.**





We
      have
      audited Compañía de Minas Buenaventura S.A.A.’s internal control over financial
      reporting as of December 31, 2007, based on based on criteria established in
      Internal Control - Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (the COSO criteria). Compañía de Minas
      Buenaventura S.A.A.’s management is responsible for maintaining effective
      internal control over financial reporting, and for its assessment of the
      effectiveness of internal control over financial reporting included in the
      accompanying Management’s report. Our responsibility is to express an opinion on
      the company’s internal control over financial reporting based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, assessing the risk that a material weakness exists, testing
      and evaluating the design and operating effectiveness of internal control based
      on the assessed risk, and performing such other procedures as we considered
      necessary in the circumstances. We believe that our audit provides a reasonable
      basis for our opinion.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





In
      our
      opinion, Compañía de Minas Buenaventura S.A.A. and subsidiaries maintained, in
      all material respects, effective internal control over financial reporting
      as of
      December 31, 2007, based on the COSO criteria.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of Compañía de
      Minas Buenaventura S.A.A. and subsidiaries as of December 31, 2007 and 2006,
      and
      the related consolidated statements of income, shareholders’ equity, and cash
      flows for each of the three years in the period ended December 31, 2007 of
      Compañía de Minas Buenaventura S.A.A. and subsidiaries and our report dated July
      11, 2008, expressed an unqualified opinion thereon.


/S/
                  MEDINA, ZALDIVAR, PAREDES & ASOCIADOSCountersigned
                  by:
  170
  /S/
                  VICTOR BURGAVíctor
                  BurgaC.P.C.
                  Register No.14859Lima,
                  PeruJuly
                  1, 2008




*Changes
      in internal controls* .




There
      has
      been no change in our internal control over financial reporting during 2007
      that
      has materially affected, or is reasonably likely to materially affect, our
      internal control over financial reporting.




**ITEM
              16A.**
            **Audit
                Committee Financial Expert**




The
      Board
      of Directors has determined that Mr. Luis Coleridge Alcántara is the Audit
      Committee financial expert as defined in Item 16A of Form 20-F. The Board of
      Directors has also determined that Mr. Coleridge and each of the other members
      of the Audit Committee are “independent directors” as defined in Section 303A.02
      of the NYSE’s Listed Company Manual.




**ITEM
              16B.**
            **Code
                of Ethics**




We
      have
      adopted a written code of business conduct and ethics that applies to our
      principal executive officer, principal financial officer, principal accounting
      officer and controller, or persons performing similar functions, as well as
      all
      other employees. Our code of business conduct and ethics is posted on, and
      within five days following the date of any amendment or waiver we intend to
      disclose any amendments to or waivers from our code of business conduct and
      ethics on, our website which is located at http:// www.buenaventura.com .
      The
      information on our website is not a part of, nor incorporated into, this
      document.




**ITEM
              16C.**
            **Principal
                Accountant Fees and
                Services**




Medina,
      Zaldivar, Paredes & Asociados, a member firm of Ernst & Young
      International, has served as our independent public accountant for each of
      the
      fiscal years in the two-year period ended December 31, 2006 and 2007, for
      which audited financial statements appear in this annual report on Form 20-F.
      The auditor is elected annually at the General Meeting. The Audit Committee
      proposed at the General Meeting that Medina, Zaldivar, Paredes & Asociados
      be elected as the independent auditor for 2007.




The
      following table presents the aggregate fees for professional services and other
      services rendered by Medina, Zaldivar, Paredes & Asociados for 2006 and
      2007.




Year ended December 31,2006
            
            2007Audit
                Fees
            
            US$
            490,646
            
            US$
            580,759Audit-Related
                Fees
            
            
            —
            
            
            —Tax
                Fees
            
            US$
            160,500
            
            US$
            131,092Total
            
            US$
            651,146
            
            US$
            711,851




171




*Audit
      Fees* .
      Audit
      fees in the above table are the aggregate fees billed by Medina, Zaldivar,
      Paredes & Asociados in connection with the audit of our annual financial
      statements, the review of our quarterly financial statements and statutory
      and
      regulatory audits. In addition, the amounts in the above table includes fees
      that were incurred in connection with the audit of internal control over
      financial reporting in 2006 and 2007.




*Tax
      Fees* .
      Tax
      fees in the above table are fees billed by Medina, Zaldivar, Paredes &
Asociados in connection with review of income tax filings, transfer pricing
      studies and tax consultations. ****




*Audit
      Committee Pre-approval Policies and Procedures*




Our
      Audit
      Committee is responsible for the oversight of the independent auditor. The
      Audit
      Committee has adopted a policy regarding pre-approval of audit services provided
      by our independent auditors, or the Policy. In accordance with the Policy,
      the
      Audit Committee must pre-approve the provision of services by our independent
      auditor for all audit and non-audit services prior to commencement of the
      specified service. The requests for pre-approval are submitted to the Audit
      Committee by the Chief Financial Officer and following approval by audit
      committee members and engagement letter is executed. The Audit Committee
      approved all audit, tax and audit-related fees in 2007.




**ITEM
              16D.**
            **Exemptions
                from the Listing Standards for Audit
                Committees**




Not
                applicable.




**ITEM
              16E.**
            **Purchases
                of Equity Securities by the Issuer and Affiliated
                Purchasers**




For
      the
      year ended December 31, 2007, neither we nor any person acting on our behalf
      made any purchase of our common shares.




**PART
      III**




**ITEM
              17.**
            **Financial
                Statements**




Not
                applicable.




**ITEM
              18.**
            **Financial
                Statements**




Please
                refer to Item 19.




172




**ITEM19.**
            **Exhibits**


Page(a)
                    Index to Financial Statements and SchedulesCOMPAÑIA
                    DE MINAS BUENAVENTURA S.A.A. AND SUBSIDIARIESReport
                    of Independent Registered Public Accounting Firm
                F-2Consolidated
                    financial statementsConsolidated
                    balance sheets as of December 31, 2006 and 2007
                F-4Consolidated
                    statements of income for the years ended December 31, 2005, 2006
                    and
                    2007
                F-6Consolidated
                    statements of changes in shareholders’ equity for the years ended December
                    31, 2005, 2006 and 2007
                F-7Consolidated
                    statements of cash flows for the years ended December 31, 2005,
                    2006 and
                    2007
                F-10Notes
                    to the consolidated financial statements
                F-12MINERA
                    YANACOCHA S.R.L.Report
                    of Independent Registered Public Accounting Firm
                F-53Financial
                    statementsStatements
                    of income for the years ended December 31, 2005, 2006 and
                    2007
                F-54Balance
                    sheets as of December 31, 2006 and 2007
                F-55Statements
                    of cash flows for the years ended December 31, 2005, 2006 and
                    2007
                F-56Statements
                    of changes in Partners’ Equity for the years ended December 31, 2005, 2006
                    and 2007
                F-57Notes
                    to the financial statements
                F-58SOCIEDAD
                    MINERA CERRO VERDE S.A.A.Reports
                    of the Independent Registered Public Accounting Firm
                F-78Financial
                    statementsBalance
                    sheets as of December 31, 2006 and 2007
                F-80Statements
                    of income for the years ended December 31, 2005, 2006 and 2007
                F-81Statements
                    of changes in Partners’ Equity for the years ended December 31, 2005, 2006
                    and 2007
                F-82Statements
                    of cash flows for the years ended December 31, 2005, 2006 and
                    2007
                F-83Notes
                    to the financial statements
                F-85
  (b)
                    Index to Exhibits1.1
                By-Laws
                    (Estatutos) of Compañía de Minas Buenaventura S.A.A., as amended April 30,
                    2002 (incorporated by reference from Compañía de Minas Buenaventura S.A.A.
                    Annual Report on Form 20-F for the year ended December 31, 2002,
                    filed on
                    June 25, 2003).1.2
                By-Laws
                    (Estatutos) of Minera Yanacocha S. R. L., as amended October
                    18, 1999
                    (incorporated by reference from Compañía de Minas Buenaventura S.A.A.
                    Annual Report on Form 20-F for the year ended December 31, 2002,
                    filed on
                    June 25, 2003).4.1
                Participation
                    Agreement among Sumitomo Metal Mining Co., Ltd., Sumitomo Corporation,
                    Summit Global Management B.V., Compañía de Minas Buenaventura S.A.A.,
                    Phelps Dodge Corporation, Cyprus Amax Minerals Company, Cyprus
                    Metals
                    Company, Cyprus Climax Metals Company and Sociedad Minera Cerro
                    Verde
                    S.A.A. dated March 16, 2005 (incorporated by reference from
                    Compañia
                    de Minas Buenaventura S.A.A. Annual Report on Form 20-F for the
                    year ended
                    December 31, 2004, filed on May 27, 2005).
  173
  4.2
                Shareholders
                    Agreement among SMM Cerro Verde Netherlands B.V., Sumitomo Metal
                    Mining
                    Co., Ltd., Sumitomo Corporation, Summit Global Management B.V.,
                    Compañía
                    de Minas Buenaventura S.A.A., Cyprus Climax Metals Company, Phelps
                    Dodge
                    Corporation and Sociedad Minera Cerno Verde S.A.A. dated June 1, 2005
                    (incorporated by reference from Compañia
                    de Minas Buenaventura S.A.A. Annual Report on Form 20-F for the
                    year ended
                    December 31, 2005, filed on June 6, 2006).4.3
                Term
                    Loan Agreement, dated as of May 21, 2008, among Compañía
                    de Minas Buenaventura S.A.A., as borrower, Compañía
                    de Minera Condesa S.A., as guarantor, Banco de Credito del Peru,
                    as
                    administrative agent, Banco de Credito del Peru, as collateral
                    agent, and
                    each lender party thereto.†4.4
                Pledge
                    Agreement, dated as of May 21, 2008, between Compañía
                    de Minera Condesa S.A., as pledgor, and Banco de Credito del
                    Peru, as
                    collateral agent.†11
                Code
                    of Conduct and Ethics (incorporated by reference from Compañía de Minas
                    Buenaventura S.A.A. Annual Report on Form 20-F for the year ended
                    December
                    31, 2002, filed on June 25, 2003).12.1
                Certification
                    of Chief Executive Officer of Compañía de Minas Buenaventura S.A.A.
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                    †12.2
                Certification
                    of Chief Financial Officer of Compañía de Minas Buenaventura S.A.A.
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                    †13.1
                Certification
                    of Chief Executive Officer of Compañía de Minas Buenaventura S.A.A.
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                    †13.2
                Certification
                    of Chief Financial Officer of Compañía de Minas Buenaventura S.A.A.
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                    †


†
Filed
      herewith.




174




SIGNATURE




The
      registrant hereby certifies that it meets all of the requirements for filing
      on
      Form 20-F and that it has duly caused and authorized the undersigned to
      sign this annual report on its behalf.


COMPAÑÍA
                DE MINAS BUENAVENTURA S.A.A.By:
            /S/
              CARLOS E.
              GÁLVEZ PINILLOSDated:
                July 15, 2008
            Carlos
                E. Gálvez Pinillos
              Chief
                Financial Officer












Index
      to
      the Financial Statements




Page**Compañía
                de Minas Buenaventura S.A.A. and subsidiaries**Report
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                financial statementsConsolidated
                Balance Sheets as of December 31, 2006 and 2007
            F-4Consolidated
                Statements of Income for the years ended December 31, 2005, 2006
                and
                2007
            F-6Consolidated
                Statements of Changes in Shareholders’ Equity for the years ended December
                31, 2005, 2006 and 2007
            F-7Consolidated
                Statements of Cash Flows for the years ended December 31, 2005, 2006
                and
                2007
            F-10Notes
                to the Consolidated Financial Statements
            F-12**Minera
                Yanacocha S.R.L.**Report
                of Independent Registered Public Accounting Firm
            F-53Financial
                statementsStatements
                of Income for the years ended December 31, 2005, 2006 and
                2007
            F-54Balance
                Sheets as of December 31, 2006 and 2007
            F-55Statements
                of Cash Flows for the years ended December 31, 2005, 2006 and
                2007
            F-56Statements
                of Changes in Partners’ Equity for the years ended December 31, 2005, 2006
                and 2007
            F-57Notes
                to the Financial Statements
            F-58**Sociedad
                Minera Cerro Verde S.A.A**Reports
                of Independent Registered Public Accounting Firm
            F-78Financial
                statementsBalance
                sheets as of December 31, 2006 and 2007
            F-80Statements
                of income for the years ended December 31, 2005, 2006 and 2007
            F-81Statements
                of changes in Partners’ Equity for the years ended December 31, 2005, 2006
                and 2007
            F-82Statements
                of cash flows for the years ended December 31, 2005, 2006 and 2007
            F-83Notes
                to the financial statements
            F-85




F-1




***ERNST
&
                YOUNG***
            Medina, Zaldivar, Paredes& Asociados Sociedad Civil




Report
      of
      Independent Registered Public Accounting Firm




To
      the
      Shareholders of **Compañía
      de Minas Buenaventura S.A.A.**


We
      have
      audited the accompanying consolidated balance sheets of Compañía de Minas
      Buenaventura S.A.A. (a Peruvian company) and subsidiaries (together, the
      "Company") as of December 31, 2007 and 2006, and the related consolidated
      statements of income, shareholders’ equity and cash flows for each of the three
      years in the period ended December 31, 2007. These consolidated financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits. We did not audit the financial statements as of December 31, 2007
      and 2006 of Minera Yanacocha S.R.L (an affiliate in which the Company has a
      43.65% interest through one of its subsidiary) and the financial statements
      as
      of December 31, 2006 of Sociedad Minera Cerro Verde S.A.A. (an affiliate in
      which the Company has an 18.50% interest). In the consolidated financial
      statements of the Company, the investment and share in the net income of Minera
      Yanacocha S.R.L. amounts to US$577.5 million as of December 31, 2007 (US$522.6
      million as of December 31, 2006) and US$98.3 million for the year ended December
      31, 2007 (US$232.4 million for the year ended December 31, 2006 and US$228.2
      million for the year ended December 31, 2005). The investment in Sociedad Minera
      Cerro Verde S.A.A. amounts to US$231.6 million as of December 31, 2006 and
      share
      in the net income amounts to US$82.3 million for the year ended December 31,
      2006 and US$38 million for the year ended December 31, 2005. Those statements
      were audited by other auditors whose reports were furnished to us and our
      opinion, insofar as it relates to the amounts included for Minera Yanacocha
      S.R.L. and Sociedad Minera Cerro Verde S.A.A. is based solely on the reports
      of
      the other auditors





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free from material misstatement. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements. An audit also includes assessing the
      accounting principles used and significant estimates made by management, as
      well
      as evaluating the overall financial statement presentation. We believe that
      our
      audits and the reports of the other auditors provide a reasonable basis for
      our
      opinion.





In
      our
      opinion, based on our audits and the reports of the other auditors, the
      consolidated financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of **Compañía
      de Minas Buenaventura S.A.A. and subsidiaries** as
      of
      December 31, 2007 and 2006, and the consolidated results of their operations
      and
      their cash flows for each of the three years in the period ended December 31,
      2007, in conformity with Peru generally accepted accounting principles, which
      differ in certain respects from U.S. generally accepted accounting principles
      (see notes 35 and 36 to the consolidated financial statements).




F-2




(continued)




We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), **Compañía
      de Minas Buenaventura S.A.A.**  ́s **** internal
      control over financial reporting as of December 31, 2007, based on criteria
      established in Internal Control - Integrated Framework issued by the Committee
      of Sponsoring Organizations of the Treadway Commission and our report dated
      July
      1, 2008 expressed an unqualified opinion thereon.





Countersigned
      by:





/S/
                MEDINA, ZALDIVAR, PAREDES & ASOCIADOSCountersigned
                by:


/S/
                VICTOR BURGA


Victor
        Burga


C.P.C
      Register No. 14859





Lima,
      Peru,


July
      11,
      2008




F-3


**Compañía
      de Minas Buenaventura S.A.A. and Subsidiaries**




Consolidated
      Balance Sheet


As
      of
      December 31, 2007 and 2006





**Note**
            
            **2007**
            
            **2006****US$(000)**
            
            **US$(000)****Assets****Current
                assets**Cash
                and cash equivalents
            
            
            5
            
            
            381,612
            
            
            239,533Financial
                assets at fair value through profit or loss (Gold Certificates)
            
            
            6
            
            
            -
            
            
            63,210Available-for-sale
                financial assets
            
            
            7
            
            
            -
            
            
            56,549Current
                portion of derivative financial instruments
            
            
            29
            
            
            2,929
            
            
            -Trade
                accounts receivable
            
            
            8
            
            
            107,540
            
            
            77,422Other
                accounts receivable, net
            
            
            
            
            
            7,760
            
            
            4,481Accounts
                receivable from affiliates
            
            
            33
            
            
            14,420
            
            
            11,714Inventory,
                net
            
            
            9
            
            
            35,149
            
            
            30,621Current
                portion of prepaid taxes and expenses
            
            
            
            
            
            16,032
            
            
            7,961**Total
                current assets**
            
            
            
            
            
            565,442
            
            
            491,491Other
                long-term accounts receivable
            
            
            
            
            
            1,451
            
            
            1,524Prepaid
                taxes and expenses
            
            
            
            
            
            5,338
            
            
            10,501Derivative
                financial instruments
            
            
            29
            
            
            5,035
            
            
            -Investment
                in shares
            
            
            10
            
            
            932,420
            
            
            839,129Mining
                concessions and property, plant and equipment, net
            
            
            11
            
            
            244,992
            
            
            215,643Development
                costs, net
            
            
            12
            
            
            84,187
            
            
            64,776Deferred
                income tax and workers ́ profit sharing asset, net
            
            
            26
            
            
            141,118
            
            
            111,447Other
                assets
            
            
            
            
            
            1,486
            
            
            1,260**Total
                assets**
            
            
            
            
            
            1,981,469
            
            
            1,735,771





F-4


**Compañía
      de Minas Buenaventura S.A.A. and Subsidiaries (continued)**


Consolidated
      Balance Sheet


As
      of
      December 31, 2007 and 2006





**Note**
            
            **2007**
            
            **2006****US$(000)**
            
            **US$(000)****Liabilities
                and shareholders’ equity****Current
                liabilities**Bank
                loans
            
            
            
            
            
            -
            
            
            10,000Trade
                accounts payable
            
            
            13
            
            
            24,662
            
            
            28,539Income
                tax payable
            
            
            
            
            
            15,349
            
            
            34,485Other
                current liabilities
            
            
            14
            
            
            96,823
            
            
            59,779Derivative
                financial instruments liabilities
            
            
            29
            
            
            5,984
            
            
            -Current
                portion of long-term debt
            
            
            15
            
            
            20,869
            
            
            491Deferred
                income from sale of future production
            
            
            18
            
            
            -
            
            
            43,032**Total
                current liabilities**
            
            
            
            
            
            163,687
            
            
            176,326Other
                long-term liabilities
            
            
            14
            
            
            72,308
            
            
            64,651Long-term
                debt
            
            
            15
            
            
            63,250
            
            
            115Deferred
                income from sale of future production
            
            
            18
            
            
            102,008
            
            
            194,173**Total
                liabilities**
            
            
            
            
            
            401,253
            
            
            435,265**Shareholders’
                equity, net**
            
            
            16Capital
                stock, net of treasury shares for US$14,474,000 in 2007 and
                2006
            
            
            
            
            
            173,930
            
            
            173,930Investment
                shares, net of treasury shares for US$37,000 in 2007 and
                2006
            
            
            
            
            
            473
            
            
            473Additional
                paid-in capital
            
            
            
            
            
            177,713
            
            
            177,713Legal
                reserve
            
            
            
            
            
            37,679
            
            
            37,679Other
                reserves
            
            
            
            
            
            269
            
            
            269Retained
                earnings
            
            
            
            
            
            1,056,937
            
            
            852,148Cumulative
                translation loss
            
            
            
            
            
            (34,075
            )
            
            (34,075
            )Unrealized
                gain on valuation of derivative financial instruments, net
            
            
            
            
            
            1,518
            
            
            -Cumulative
                unrealized gain on investments held at fair value
            
            
            
            
            
            158
            
            
            9321,414,602
            
            
            1,209,069Minority
                interest
            
            
            
            
            
            165,614
            
            
            91,437**Total
                shareholders’ equity, net**
            
            
            
            
            
            1,580,216
            
            
            1,300,506**Total
                liabilities and shareholders’ equity, net**
            
            
            
            
            
            1,981,469
            
            
            1,735,771





F-5


**Compañía
      de Minas Buenaventura S.A.A. and Subsidiaries**


Consolidated
      Statement of Income


For
      the
      years ended December 31, 2007, 2006 and 2005


**Note**
              
              **2007**
              
              **2006**
              
              **2005**US$(000)
              
              US$(000)
              
              US$(000)**Operating
                  income**Net
                  sales
              
              
              18
              
              
              747,021
              
              
              548,072
              
              
              283,387Realization
                  of deferred income from sale of future production
              
              
              18
              
              
              5,393
              
              
              50,325
              
              
              28,064Royalty
                  income
              
              
              33
              
              
              34,014
              
              
              48,475
              
              
              46,094**Total
                  income**
              
              
              
              
              
              786,428
              
              
              646,872
              
              
              357,545**Operating
                  costs**Cost
                  of sales, without considering depreciation and amortization
              
              
              19
              
              
              182,007
              
              
              149,309
              
              
              103,881Exploration
                  and development in units in operation
              
              
              20
              
              
              51,033
              
              
              49,534
              
              
              41,166Depreciation
                  and amortization
              
              
              
              
              
              36,345
              
              
              27,574
              
              
              33,640**Total
                  operating costs**
              
              
              
              
              
              269,385
              
              
              226,417
              
              
              178,687**Gross
                  income**
              
              
              
              
              
              517,043
              
              
              420,455
              
              
              178,858**Operating
                  expenses**Administrative
              
              
              21
              
              
              59,205
              
              
              36,639
              
              
              34,350Exploration
                  in non-operating areas
              
              
              22
              
              
              46,407
              
              
              36,190
              
              
              27,812Royalties
              
              
              23
              
              
              33,978
              
              
              24,420
              
              
              12,209Sales
              
              
              
              
              
              10,818
              
              
              5,928
              
              
              4,800**Total
                  operating expenses**
              
              
              
              
              
              150,408
              
              
              103,177
              
              
              79,171**Operating
                  income before unusual item**
              
              
              
              
              
              366,635
              
              
              317,278
              
              
              99,687Net
                  loss on release of fixed-price component in commercial contracts
              
              
              18
              
              
              (185,922
              )
              
              -
              
              
              -**Operating
                  income after unusual item**
              
              
              
              
              
              180,713
              
              
              317,278
              
              
              99,687**Other
                  income (expenses), net**Share
                  in affiliated companies, net
              
              
              10(b)
              
              
              249,555
              
              
              313,168
              
              
              263,994Interest
                  income
              
              
              24
              
              
              11,772
              
              
              7,949
              
              
              3,523Gain
                  (loss) on currency exchange difference
              
              
              
              
              
              5,190
              
              
              (308
              )
              
              448Gain
                  (loss) on change in the fair value of gold certificates
              
              
              6
              
              
              5,126
              
              
              (4,861
              )
              
              -Loss
                  on change in the fair value of derivative financial instruments
              
              
              29
              
              
              -
              
              
              (13,268
              )
              
              (26,588
              )Interest
                  expense
              
              
              24
              
              
              (8,614
              )
              
              (5,948
              )
              
              (4,060
              )Other,
                  net
              
              
              25
              
              
              (8,686
              )
              
              (19,502
              )
              
              (3,227
              )**Total
                  other income, net**
              
              
              
              
              
              254,343
              
              
              277,230
              
              
              234,090**Income
                  before workers ́ profit sharing, income tax and minority interest**
              
              
              
              
              
              435,056
              
              
              594,508
              
              
              333,777Provision
                  for workers ́ profit sharing
              
              
              26
              
              
              (19,931
              )
              
              (14,271
              )
              
              (2,593
              )Provision
                  for income tax
              
              
              26
              
              
              (43,975
              )
              
              (64,033
              )
              
              (22,816
              )371,150
              
              
              516,204
              
              
              308,368Net
                  income attributable to minority interest
              
              
              
              
              
              (96,389
              )
              
              (88,147
              )
              
              (19,971
              )**Net
                  income attributable to Buenaventura**
              
              
              
              
              
              274,761
              
              
              428,057
              
              
              288,397**Net
                  earnings per basic and diluted share, stated in U.S.
                  dollars**
              
              
              27
              
              
              2.16
              
              
              3.36
              
              
              2.27




The
      accompanying notes are an integral part of this consolidated statement.




F-6


**Compañía
      de Minas Buenaventura S.A.A. and Subsidiaries**


Consolidated
      Statement of Changes in Shareholders’ Equity


For
      the
      years ended December 31, 2007, 2006 and 2005


**Capital
                        stock, net of treasury shares****Number
                        of shares outstanding**
                    
                    **Common
                        shares**
                    
                    **I****nvestment****shares**
                    
                    **Additional
                        paid-in capital**
                    
                    **Legal
                        reserve**
                    
                    **Other
                        reserves**
                    
                    **Accumulated
                        earnings**
                    
                    **Cumulative
                        translation loss**
                    
                    **Unrealized
                        gain (loss) on valuation of derivative financial instruments,
                        net**
                    
                    **Cumulative
                        unrealized gain on investments held at fair value**
                    
                    **Total**
                    
                    **Minority
                        Interest**
                    
                    **Total
                        Equity**US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)**Balance
                        as of January 1, 2005**
                    
                    
                    126,879,832
                    
                    
                    173,930
                    
                    
                    491
                    
                    
                    177,983
                    
                    
                    37,679
                    
                    
                    269
                    
                    
                    239,391
                    
                    
                    (54,403
                    )
                    
                    (303
                    )
                    
                    84
                    
                    
                    575,121
                    
                    
                    11,902
                    
                    
                    587,023Dividends
                        declared and paid, note 16(e)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (44,304
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (44,304
                    )
                    
                    (10,737
                    )
                    
                    (55,041
                    )Unrealized
                        loss on investments in shares held at fair value
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (14
                    )
                    
                    (14
                    )
                    
                    -
                    
                    
                    (14
                    )Realization
                        of deferred income from sale of future production of a subsidiary
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    303
                    
                    
                    -
                    
                    
                    303
                    
                    
                    462
                    
                    
                    765Capitalization
                        of debts to minority shareholder of Minasnioc
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    748
                    
                    
                    748Acquisition
                        of investment shares by subsidiary
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (18
                    )
                    
                    (270
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (288
                    )
                    
                    -
                    
                    
                    (288
                    )Gain
                        for translation of investment in Minera Yanacocha S.R.L.
                        held through
                        Compañía Minera Condesa S.A., and in Sociedad Minera Cerro Verde
                        S.A.A.
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    30,849
                    
                    
                    -
                    
                    
                    -
                    
                    
                    30,849
                    
                    
                    -
                    
                    
                    30,849Loss
                        for translation to U.S. dollars, note 3(f)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (10,521
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    (10,521
                    )
                    
                    (765
                    )
                    
                    (11,286
                    )Other
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,835
                    
                    
                    1,835Net
                        income
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    288,397
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    288,397
                    
                    
                    19,971
                    
                    
                    308,368


The
      attached notes are integral part of this statement consolidated.




F-7


Consolidated
        Statement of Changes in Shareholders’ Equity (continued)


**Capital
                        stock, net of treasury shares****Number
                        of shares outstanding**
                    
                    **Common
                        shares**
                    
                    **I****nvestment****shares**
                    
                    **Additional
                        paid-in capital**
                    
                    **Legal
                        reserve**
                    
                    **Other
                        reserves**
                    
                    **Accumulated
                        earnings**
                    
                    **Cumulative
                        translation loss**
                    
                    **Unrealized
                        gain (loss) on valuation of derivative financial instruments,
                        net**
                    
                    **Cumulative
                        unrealized gain on investments held at fair value**
                    
                    **Total**
                    
                    **Minority
                        Interest**
                    
                    **Total
                        Equity**US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)
                    
                    US$(000)**Balance
                        as of December 31, 2005**
                    
                    
                    126,879,832
                    
                    
                    173,930
                    
                    
                    473
                    
                    
                    177,713
                    
                    
                    37,679
                    
                    
                    269
                    
                    
                    483,484
                    
                    
                    (34,075
                    )
                    
                    -
                    
                    
                    70
                    
                    
                    839,543
                    
                    
                    23,416
                    
                    
                    862,959Dividends
                        declared and paid, note 16(e)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (59,767
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (59,767
                    )
                    
                    (19,111
                    )
                    
                    (78,878
                    )Capitalization
                        of debt to minority shareholder of Minera La Zanja S.R.L.
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    6,213
                    
                    
                    6,213Acquisition
                        of minority interest in Inversiones Mineras del Sur S.A.
                        and Minas
                        Poracota S.A., note 2
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (7,240
                    )
                    
                    (7,240
                    )Unrealized
                        gain on available-for-sale financial assets
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    834
                    
                    
                    834
                    
                    
                    -
                    
                    
                    834Unrealized
                        gain on investment shares held at fair value
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    28
                    
                    
                    28
                    
                    
                    -
                    
                    
                    28Other
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    374
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    374
                    
                    
                    12
                    
                    
                    386Net
                        income
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    428,057
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    428,057
                    
                    
                    88,147
                    
                    
                    516,204**Balance
                        as of December 31, 2006**
                    
                    
                    126,879,832
                    
                    
                    173,930
                    
                    
                    473
                    
                    
                    177,713
                    
                    
                    37,679
                    
                    
                    269
                    
                    
                    852,148
                    
                    
                    (34,075
                    )
                    
                    -
                    
                    
                    932
                    
                    
                    1,209,069
                    
                    
                    91,437
                    
                    
                    1,300,506Dividends
                        declared and paid, note 16(e)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (69,972
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (69,972
                    )
                    
                    (26,199
                    )
                    
                    (96,171
                    )Unrealized
                        gain on available-for-sale financial assets
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    798
                    
                    
                    798
                    
                    
                    -
                    
                    
                    798Realization
                        of accumulated gain on financial instruments available for
                        sale
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (1,633
                    )
                    
                    (1,633
                    )
                    
                    -
                    
                    
                    (1,633
                    )
 The
                accompanying notes are an integral part of this consolidated
                statement.
  F-8
  Consolidated
                Statement of Changes in Shareholders’ Equity (continued)
 **Capital
                          stock, net of treasury shares****Number
                          of shares outstanding**
                      
                      **Common
                          shares**
                      
                      **I****nvestment****shares**
                      
                      **Additional
                          paid-in capital**
                      
                      **Legal
                          reserve**
                      
                      **Other
                          reserves**
                      
                      **Accumulated
                          earnings**
                      
                      **Cumulative
                          translation loss**
                      
                      **Unrealized
                          gain (loss) on valuation of derivative financial instruments,
                          net**
                      
                      **Cumulative
                          unrealized gain on investments held at fair value**
                      
                      **Total**
                      
                      **Minority
                          Interest**
                      
                      **Total
                          Equity**US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)
                      
                      US$(000)Unrealized
                          gain on derivative financial instruments held by El Brocal,
                          note 29
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1,518
                      
                      
                      -
                      
                      
                      1,518
                      
                      
                      3,611
                      
                      
                      5,129Unrealized
                          gain on investment shares held at fair value
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      61
                      
                      
                      61
                      
                      
                      -
                      
                      
                      61Capitalization
                          of debt to minority shareholder of Minasnioc
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      140
                      
                      
                      140Other
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      236
                      
                      
                      236Net
                          income
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      274,761
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      274,761
                      
                      
                      96,389
                      
                      
                      371,150**Balance
                          as of December 31, 2007**
                      
                      
                      126,879,832
                      
                      
                      173,930
                      
                      
                      473
                      
                      
                      177,713
                      
                      
                      37,679
                      
                      
                      269
                      
                      
                      1,056,937
                      
                      
                      (34,075
                      )
                      
                      1,518
                      
                      
                      158
                      
                      
                      1,414,602
                      
                      
                      165,614
                      
                      
                      1,580,216
 The
          accompanying notes are an integral part of this consolidated statement.
  F-9




**Compañía
      de Minas Buenaventura S.A.A. and Subsidiaries**


Consolidated
      Statements of Cash Flows


For
      the
      years ended December 31, 2007, 2006 and 2005





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Operating
                activities**Proceeds
                from sales
            
            
            722,887
            
            
            497,875
            
            
            284,451Dividends
                received
            
            
            159,037
            
            
            209,520
            
            
            89,748Settlement
                of gold certificates
            
            
            135,189
            
            
            -
            
            
            -Royalties
                received
            
            
            30,713
            
            
            55,821
            
            
            40,101Value
                Added Tax recovered
            
            
            13,235
            
            
            16,322
            
            
            9,936Interest
                received
            
            
            10,841
            
            
            7,496
            
            
            3,227Release
                of fixed-price component in commercial contract
            
            
            (315,726
            )
            
            -
            
            
            -Payments
                to suppliers and third parties
            
            
            (202,161
            )
            
            (160,365
            )
            
            (124,295
            )Income
                tax paid
            
            
            (91,353
            )
            
            (53,296
            )
            
            (25,908
            )Payments
                to employees
            
            
            (78,852
            )
            
            (49,316
            )
            
            (41,601
            )Payments
                for exploration activities
            
            
            (75,084
            )
            
            (71,982
            )
            
            (56,938
            )Acquisition
                of gold certificates
            
            
            (66,853
            )
            
            (68,071
            )
            
            -Payments
                of royalties
            
            
            (33,033
            )
            
            (22,742
            )
            
            (12,817
            )Payments
                of interest
            
            
            (5,841
            )
            
            (2,413
            )
            
            (1,754
            )**Net
                cash and cash equivalents provided by operating****activities**
            
            
            202,999
            
            
            358,849
            
            
            164,150**Investment
                activities**Settlement
                (acquisition) of available-for-sale financial assets
            
            
            55,715
            
            
            (40,292
            )
            
            11,329Proceeds
                from sale of plant and equipment
            
            
            916
            
            
            32
            
            
            193Payments
                for derivative financial instruments settled, net
            
            
            -
            
            
            (2,050
            )
            
            (7,041
            )Additions
                to plant and equipment
            
            
            (61,649
            )
            
            (50,127
            )
            
            (20,476
            )Disbursements
                for development activities
            
            
            (31,681
            )
            
            (24,112
            )
            
            (16,784
            )Decrease
                (increase) in time deposits
            
            
            (15,815
            )
            
            (62,933
            )
            
            7,069Purchase
                of investment shares
            
            
            (1,563
            )
            
            (22,829
            )
            
            (148,401
            )**Net
                cash and cash equivalents used in investment activities**
            
            
            (54,077
            )
            
            (202,311
            )
            
            (174,111
            )**Financing
                activities**Proceeds
                from long-term debt
            
            
            85,000
            
            
            -
            
            
            580Payments
                of long-term debt
            
            
            (1,487
            )
            
            (266
            )
            
            (14,678
            )Proceeds
                from bank loans
            
            
            55,237
            
            
            2,355
            
            
            3,812Payments
                of bank loans
            
            
            (65,237
            )
            
            -
            
            
            -Dividends
                paid
            
            
            (69,972
            )
            
            (59,767
            )
            
            (44,304
            )Dividends
                paid to minority shareholders
            
            
            (26,199
            )
            
            (19,111
            )
            
            (10,737
            )**Net
                cash and cash equivalents used in financing activities**
            
            
            (22,658
            )
            
            (76,789
            )
            
            (65,327
            )Increase
                (decrease) in cash and cash equivalents for the year, net
            
            
            126,264
            
            
            79,749
            
            
            (75,288
            )Cash
                and cash equivalents at beginning of year
            
            
            176,600
            
            
            96,851
            
            
            172,139**Cash
                and cash equivalents at end of year, note 5**
            
            
            302,864
            
            
            176,600
            
            
            96,851




F-10


Consolidated
      Statements of Cash Flows (continued)





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Reconciliation
                of net income to cash and cash equivalents provided by operating
                activities**Net
                income
            
            
            274,761
            
            
            428,057
            
            
            288,397**Add
                (less)**Minority
                interest
            
            
            96,389
            
            
            88,147
            
            
            19,971Depreciation
                and amortization
            
            
            38,550
            
            
            28,113
            
            
            34,300Long-term
                officers ́ compensation
            
            
            28,666
            
            
            3,634
            
            
            8,134Amortization
                of development costs
            
            
            13,205
            
            
            11,270
            
            
            10,315Fair
                value of embedded derivatives
            
            
            5,984
            
            
            -
            
            
            -Provision
                for closure of mining units
            
            
            3,682
            
            
            9,357
            
            
            -Accretion
                expense of the provision for closure of mining units
            
            
            2,456
            
            
            3,535
            
            
            2,306Net
                cost of plant and equipment retired
            
            
            923
            
            
            998
            
            
            1,049Loss
                on change in the fair value of derivative financial instruments
            
            
            -
            
            
            13,268
            
            
            26,588Loss
                on change in the fair value of gold certificates
            
            
            -
            
            
            4,861
            
            
            -Income
                from release of fixed-price component in commercial contracts
            
            
            (129,804
            )
            
            -
            
            
            -Share
                in affiliated companies, net of dividends received in cash
            
            
            (90,518
            )
            
            (103,648
            )
            
            (174,246
            )Deferred
                income tax and workers ́ profit sharing benefit
            
            
            (32,506
            )
            
            (21,651
            )
            
            (12,960
            )Realization
                of deferred income from sale of future production
            
            
            (5,393
            )
            
            (50,325
            )
            
            (28,064
            )Loss
                (gain) on currency exchange difference
            
            
            (5,190
            )
            
            308
            
            
            (448
            )Provision
                (reversal) for slow moving and obsolescence supplies
            
            
            (1,820
            )
            
            (1,507
            )
            
            2,839Other
            
            
            1,988
            
            
            32
            
            
            (619
            )**Net
                changes in operating assets and liabilities
                accounts**Decrease
                (increase) in operating assets -Financial
                assets at fair value through profit or loss (Gold Certificates)
            
            
            63,210
            
            
            (68,071
            )
            
            -Trade
                accounts receivable
            
            
            (30,118
            )
            
            (50,197
            )
            
            1,064Other
                accounts receivable
            
            
            (3,206
            )
            
            1,033
            
            
            (2,178
            )Accounts
                receivable from affiliates
            
            
            (3,301
            )
            
            7,545
            
            
            (5,829
            )Inventory
            
            
            (4,528
            )
            
            348
            
            
            (8,637
            )Prepaid
                taxes and expenses
            
            
            9,736
            
            
            (2,251
            )
            
            (317
            )Increase
                (decrease) in operating liabilities -Trade
                accounts payable
            
            
            (3,877
            )
            
            13,066
            
            
            (2,361
            )Income
                tax payable
            
            
            (31,780
            )
            
            23,614
            
            
            3,543Other
                liabilities
            
            
            5,490
            
            
            19,313
            
            
            1,303**Net
                cash and cash equivalents provided by operating****activities**
            
            
            202,999
            
            
            358,849
            
            
            164,150**Transactions
                that did not affect cash flows:**Transfer
                of derivative financial instruments to deferred income from sale
                of future
                production
            
            
            -
            
            
            77,425
            
            
            50,553Increase
                in the book value of long-term assets
            
            
            935
            
            
            19,022
            
            
            8,151


The
      accompanying notes are an integral part of this consolidated statement.




F-11





**Compañía
      de Minas Buenaventura S.A.A. and Subsidiaries**


Notes
      to
      the Consolidated Financial Statements


As
      of
      December 31, 2007, 2006 and 2005





**1.** **Identification
      and Business Activity**





Compañía
      de Minas Buenaventura S.A.A. (hereafter “Buenaventura”) is a publicly traded
      corporation incorporated in 1953. It is engaged in the exploration (individually
      and in association with third parties), extraction, concentration and
      commercialization of polymetallic ores. Buenaventura’s legal domicile is at
      Avenida Carlos Villaran 790, Santa Catalina, Lima, Peru.





Buenaventura
      directly operates six mining units located in Peru: Uchucchacua, Orcopampa,
      Julcani, Recuperada, Antapite and Ishihuinca (the latter two as a result of
      the
      merger with Inversiones Mineras del Sur S.A. on December 31, 2006), see note
      2.
      In addition, the Company has a controlling interest in Sociedad Minera El Brocal
      S.A.A., which operates the Colquijirca mining unit, and in Compañía de
      Exploraciones, Desarrollo e Inversiones Mineras S.A.C., which operates the
      Shila
      and Paula mining units. Also, the Company holds interests in a number of other
      mining companies; the most important of which are Minera Yanacocha S.R.L.
      (hereinafter "Yanacocha") and Sociedad Minera Cerro Verde S.A.A. (hereinafter
      "Cerro Verde"). The Company also owns an electric power distribution company
      and
      a mining engineering services company.





The
      consolidated financial statements for the 2007 year have been approved by
      Management and will be presented for the approval of the Board of Directors
      and
      the Shareholders within the terms established by law. In Management ́s opinion,
      the accompanying consolidated financial statements will be approved without
      any
      change in the Board of Directors and Shareholders’ Meetings to be held in the
      first quarter of 2008. The consolidated financial statements as of December
      31,
      2006 were approved by the Shareholders’ Meeting held on March 28, 2007.


The
      consolidated financial statements include the financial statements of the
      following subsidiaries:





**Ownership
                Percentage as of****December
                31, 2007**
            
            **December
                31, 2006****Direct**
            
            **Indirect**
            
            **Direct**
            
            **Indirect**%
            
            %
            
            %
            
            %**Mining
                concessions held, exploration and exploitation of
                minerals**Compañía
                de Exploraciones, Desarrollo e Inversiones Mineras S.A.C. -
                CEDIMIN
            
            
            44.83
            
            
            55.17
            
            
            44.83
            
            
            55.17Compañía
                Minera Condesa S.A.
            
            
            99.99
            
            
            -
            
            
            99.99
            
            
            -Compañía
                Minera Colquirrumi S.A.
            
            
            90.00
            
            
            -
            
            
            90.00
            
            
            -Inversiones
                Colquijirca S.A.
            
            
            61.42
            
            
            -
            
            
            61.42
            
            
            -Minas
                Conga S.R.L.
            
            
            -
            
            
            60.00
            
            
            -
            
            
            60.00S.M.R.L.
                Chaupiloma Dos de Cajamarca
            
            
            20.00
            
            
            40.00
            
            
            20.00
            
            
            40.00Minera
                La Zanja S.R.L.
            
            
            53.06
            
            
            -
            
            
            53.06
            
            
            -Minera
                Minasnioc S.A.C.
            
            
            60.00
            
            
            -
            
            
            60.00
            
            
            -**Electric
                power activity**Consorcio
                Energético de Huancavelica S.A.
            
            
            99.99
            
            
            0.01
            
            
            99.99
            
            
            0.01**Services
                rendered**Buenaventura
                Ingenieros S.A.
            
            
            100.00
            
            
            -
            
            
            100.00
            
            
            -Contacto
                Corredores de Seguros S.A.
            
            
            -
            
            
            99.99
            
            
            -
            
            
            99.99





**2.** **Acquisition
      of minority interest and merger of subsidiaries**





*Inversiones
      Mineras del Sur S.A. -*


On
      August
      21, 2006, Inversiones Mineras del Sur S.A. (INMINSUR) acquired 21.96% of its
      common shares through payment of US$17,300,000. The difference between the
      amount paid and the book value of the additional interest acquired was
      US$11,662,000, which was recognized as a mining concession within the *Property,
      Plant and equipment* caption,
      see note 11. As a result of this operation, Buenaventura obtained control of
      100% of INMINSUR’s common voting shares.




F-12





The
      shareholders’ meeting dated November 2, 2006 approved the merger of the Company
      with its subsidiary Inversiones Mineras del Sur S.A. The latter was dissolved
      without being liquidated. The effective date of the merger was December 31,
      2006.





*Minas
      Poracota S.A. -*


On
      November 10, 2006, Buenaventura acquired a 25 percent interest in Minas Poracota
      S.A. (hereinafter Poracota) from Teck Cominco for US$2,250,000. As a result,
      Buenaventura became the holder of 100 percent of Poracota’s shares.
      Subsequently, the Buenaventura shareholders’ meeting dated December 4, 2006
      approved the merger with Poracota. The effective date of the merger was January
      2, 2007.





As
      of the
      date of the merger, Poracota was in the construction and mine development stage;
      as a result, all of its disbursements were capitalized as development costs.





These
      acquisitions resulted in a reduction of US$7,240,000 in the minority interests
      shown in the consolidated statement of shareholders’ equity.





**3.** **Significant
      accounting principles and practices**





In
      the
      preparation and presentation of the consolidated financial statements,
      Management has followed International Financial Reporting Standards (IFRS)
      effective in Peru as of December 31, 2007, 2006 and 2005, which differ in
      certain respects from accounting principles generally accepted in the United
      States of America (“U.S. GAAP”). A description of these differences and their
      effects on net income and shareholders’ equity is set forth in Notes 35 and 36.
      The consolidated financial statements derive from the statutory consolidated
      financial statement presentation and include certain additional disclosures
      in
      order to conform more closely to the form and content of financial statements
      required by the Securities and Exchange Commission of the United States of
      America (the “SEC”).





The
      principal accounting principles and practices used in accounting for the
      transactions and in preparing the consolidated financial statements
      are:




(a)
            Basis
                of presentation -


The
      financial statements have been prepared in accordance with generally accepted
      accounting principles in Peru, which comprises International Financial Reporting
      Standards (IFRS) duly approved by the Peruvian Accounting Standards Board
      (Consejo Normativo de Contabilidad). The IFRS incorporate the International
      Accounting Standards (IAS) and the respective pronouncements issued by the
      Standards Interpretations Committees (SIC and IFRIC). To the date of the
      consolidated financial statements, the Peruvian Accounting Standards Board
      has
      mandated the application of IASs 1 to 41, IFRSs 1 to 6 and SICs 1 to 33.





The
      accompanying consolidated financial statements are presented in U.S. dollars,
      see (f).





(b)
            Use
                of estimates and assumptions -


The
      preparation of financial statements requires Management to make certain
      estimates and assumptions. These estimates and assumptions affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the consolidated financial statements, as well as
      the
      reported amounts of revenues and expenses for the years ended December 31,
      2007,
      2006 and 2005. Actual results could differ from those estimates.





(c)
            Principles
                of consolidation -


The
      consolidated financial statements include the accounts of Buenaventura and
      the
      accounts of those subsidiaries in which possess more than 50 percent equity
      participation and/or exercises control. All significant inter-company balances
      and transactions have been eliminated. The minority interest is presented
      separately in the consolidated balance sheets and in the consolidated statements
      of income.





See
      companies included in the consolidated financial statements in Note 1.





(d)
            Business
                combinations -


Business
      combinations are accounted for using the purchase accounting method. This
      involves recognizing identifiable assets and liabilities of the acquired
      business at fair value. The excess of the cost of the business combination
      over
      the Company’s interest in the fair value of the acquiree’s identifiable assets
      and liabilities is recorded as Mining Rights within the Property, Plant and
      Equipment caption, and is amortized using the units-of-production method based
      on the proven and probable reserves.




F-13





(e)
            Investments
                in associates -


Investments
      in entities in which the Company’s ownership is greater than 20 percent or
      exercise significant influence are accounted for by the equity method. Under
      this method, the investment in the associate is carried in the consolidated
      balance sheet at cost plus cost acquisition changes in the Company’s share of
      net assets of the associate. The amount paid in excess of the fair value of
      the
      share of net assets of the associate is included in the carrying amount of
      the
      investment and is amortized using the units-of-production method based on proven
      and probable reserves. The functional and reporting currency of the affiliates
      Yanacocha and Cerro Verde is the U.S. dollar. Until December 31, 2005, the
      translation of the financial statements of Yanacocha and Cerro Verde resulted
      in
      exchange differences arising from translating (a) income and expense items
      at
      the exchange rates prevailing on the individual transaction dates, (b) assets
      and liabilities at the closing exchange rate, and (c) equity accounts at the
      historical exchange rates. The net exchange difference is classified in equity
      until further disposal of the net investment. The statement of income reflects
      the share of the results of operations of the associate. Profits and losses
      resulting from transactions between the Company and the associate are eliminated
      to the extent of the interest in the associate.





The
      reporting dates of the associates and the Company are identical and the
      associates ́ accounting policies are consistent to those used by the Company for
      like transactions and events in similar circumstances.





After
      the
      application of the equity method, the Company determines whether it is necessary
      to recognize an additional impairment loss of the Company’s investment in
      associates. The Company determines at each balance sheet date whether there
      is
      any objective evidence that the investment in associate is impaired. If this
      is
      the case, the Company calculates the amount of impairment as being the
      difference between the fair value of the associate and the acquisition cost
      and
      recognizes the amount in the consolidated statement of income.





(f)
            Foreign
                currency translation -





*Change
      of functional and financial reporting currency*


Effective
      January 1, 2006, the Company’s functional and financial reporting currency is
      the US dollar (the Nuevo Sol until December 31, 2005). In recent years, Company
      Management observed the evolution of the currency in which its income is
      generated and its payments are made, and noted certain conditions that made
      it
      necessary to change its functional currency from Nuevos Soles to U.S. dollars.
      The main indicators that Management took into account to conclude about the
      change in functional currency were as follows: (i) the growing significance
      of
      the dividends received in U.S. dollars from affiliates in the financial
      position, of operations and cash flows of the Company; (ii) the gradual increase
      in costs denominated in U.S. dollars; (iii) the Company’s decision to pay
      dividends in U.S. dollars and (iv) the continuous cash increase in U.S. dollars
      with respect to the Company’s cash balance.




The
      change of the functional and reporting currency has been made prospectively
      effective January 1, 2006. To give effect to this change, the Company has done
      the following:





-
            The
                assets and liabilities in Nuevos Soles as of December 31, 2005 have
                been
                translated into U.S. dollars using the exchange rates for buying
                and
                selling one U.S. dollar, respectively, published by the Superintendencia
                de Banca, Seguros y AFP as of such date (S/3.429 for buying and S/3.431
                for selling). Equity accounts have been translated using the exchange
                rate
                for selling of S/3.431.





-
            Profit
                and loss accounts for years 2005 and 2004 have been translated into
                U.S.
                dollars using the average exchange rates of such years (S/3.305 for
                2005
                and S/3.410 for 2006).





-
            The
                Company has recognized in the equity a translation effect as a result
                of
                the conversion of the initial balances of the consolidated balance
                sheet
                and the consolidated statements of income of US$1,261,000 in 2004
                and
                US$10,521,000 in 2005.





The
      Company will continue using its financial statements in Nuevos Soles for tax
      purposes.





*Transactions
      and balances*


Transactions
      in foreign currency (any currency different to the functional currency) are
      initially recorded at the functional currency rate ruling at the date of the
      transaction. Monetary assets and liabilities denominated in foreign currencies
      are retranslated at the functional currency rate of exchange ruling at the
      consolidated balance sheet date. Non-monetary items that are measured in terms
      of historical cost in a foreign currency are translated using the exchange
      rates
      as of the dates of the initial transactions. Exchange differences resulting
      from
      the settlement of the transactions in foreign currencies and from the
      translation of the monetary assets and liabilities at the exchange rates at
      year-end, are recognized in the consolidated statement of income.




F-14




(g)
            Cash
                and cash equivalents -


Cash
      and
      cash equivalents include all cash on hand and deposited in banks. For the
      consolidated statements of cash flows, cash balances and cash equivalent
      includes cash on hand, time deposits and highly liquid investments with original
      maturities of three months or less.





(h)
            Investments
                and other financial instruments -


Investments and other financial assets -


Financial
      assets within the scope of IAS 39 are classified as either financial assets
      at
      fair value through profit and loss, loans and receivables, and available for
      sale financial assets, as appropriate. When financial assets are recognized
      initially, they are measured at fair value. The Company determines the
      classification of its financial assets after initial recognition and, where
      allowed and appropriate, re-evaluates this designation at each financial year
      end.





*Financial
      assets at fair value through profit or loss*


Financial
      assets at fair value through profit or loss includes financial assets held
      for
      trading and financial assets designated upon initial recognition as at fair
      value through profit or loss. Derivatives are also classified as held for
      trading unless they are designated as effective hedging instruments. Assets
      within this category are classified as current assets if they are held for
      trading or it is expected to realize them within the next twelve months counted
      as from the balance sheet date. Gain or losses on investments held for trading
      are recognized in profit and loss. The Company has classified gold certificates
      in this category, which remained in effect as of December 31, 2006.





*Loans
      and receivables*


Loans
      and
      receivables are non-derivative financial assets with fixed or determinable
      payments that are not quoted in an active market. After initial measurement
      loans and receivables are subsequently carried at amortized cost using the
      effective interest method less any allowance for impairment. Gains and losses
      are recognized in the consolidated statement of income when the loans and
      receivables are derecognized or impaired.





In
      relation to trade receivables, a provision for impairment is made when there
      is
      objective evidence that the Company will not be able to collect all of the
      amounts due under the original terms of the invoice. The carrying amount of
      the
      receivable is reduced through use of an allowance account. The amount of the
      loss shall be recognized in the consolidated statement of income. Impaired
      receivables are derecognized when they are assessed as
      uncollectible.





If
      in a
      subsequent period, the amount of the impairment loss decreases, the previously
      recognized impairment loss is reversed through profit or loss.





*Available-for-sale financial investments*


Available-for-sale
      financial assets are those non-derivative financial assets that are designated
      as available-for-sale or are not classified in any of the other categories.
      After initial measurement, available for sale financial assets are measured
      at
      fair value with unrealized gains or losses being recognized directly in equity.
      When the investment is disposed of, the cumulative gain or loss previously
      recorded in equity is recognized in the consolidated statement of income. The
      Company has classified its mixed variable-income investment funds, fixed-income
      mutual funds and structured notes as available-for-sale financial instruments,
      which remained in effect as of December 31, 2006.





(i)
            Inventories
                -


Inventories
      are stated at the lower of average cost or net realizable value. Net realizable
      value is defined as the estimated sales price obtainable in the ordinary course
      of business, less estimated costs of completion and the estimated costs
      necessary to make the sale. Cost is determined using the average
      method.





The
      accrual for obsolescence is based on an item-by-item analysis completed by
      the
      Company’s management and related amounts are charged to expense in the period in
      which the obsolescence is deemed to have occurred.




(j)
            Property,
                plant and equipment -


Property,
      plant and equipment are stated at cost, net of accumulated depreciation and
      accumulated impairment in value. Such cost includes the cost of replacing part
      of the plant and equipment when that cost is incurred, if the recognition
      criteria are met. In addition, when each major inspection is performed, its
      cost
      is recognized in the carrying amount of the asset as a replacement if the
      recognition criteria are satisfied. Other repair and maintenance costs are
      recognized as expenses as incurred.




F-15





Depreciation
      is calculated under the straight-line method of accounting considering the
      lower
      of estimated useful lives of the asset or estimated reserves of the mining
      unit.
      The useful lives are the following:





**Years**Buildings,
                construction and other
            Between
                6 and 20Machinery
                and equipment
            Between
                5 and 10Transportation
                units
            5Furniture
                and fixtures
            Between
                8 and 10Computer
                equipment
            4





An
      item
      of property, plant and equipment is derecognized upon disposal or when no future
      economic benefits are expected from its use or disposal. Any gain or loss
      arising from the derecognition **** of **** the
      asset
      (calculated as the difference between the proceeds from the sale and the book
      value of the asset) is included in the consolidated statement of income in
      the
      year the asset is derecognized.





The
      asset’s useful lives and methods of depreciation are reviewed, and adjusted if
      appropriate, at each financial year end.





(k)
            Mining
                concessions -


The
      mining concessions balance corresponds to the amounts paid in excess of fair
      value of net assets acquired in the purchase of subsidiaries. The mining
      concessions are shown as a part of the property, plant and equipment caption
      and
      represent the ownership of the mining sites which contains the mineral reserves
      acquired. The mining concessions are amortized using the units-of-production
      method, based on the proven and probable reserves.





(l)
            Exploration
                and mine development costs -


Exploration
      costs are charged to expense as incurred. When it is determined that a mineral
      property can be economically developed, meaning when the existence of proved
      and
      probable reserves is determined, the costs incurred to develop this property,
      the costs incurred to develop it, including the costs to further delineate
      the
      ore body and remove overburden to initially expose the ore body, are
      capitalized. In addition, expenditures that increase significantly the economic
      reserves in the mining units under exploitation are capitalized. Mine
      development costs are amortized using the units-of-production method, based
      on
      proven and probable reserves.





On-going
      development expenditures to maintain production are charged to operations as
      incurred.




(m)
            Determination
                of mineral reserves and resources -


The
      Company computes its reserves using methods generally applied by the mining
      industry in accordance with international guidelines. All reserves computed,
      which are audited by an independent third party, represent the estimated amounts
      of proved and probable ore that can be processed economically under the present
      conditions.





The
      process for estimating the amount of reserves is complex and requires making
      subjective decisions at the time of assessing all the geologic, geophysical,
      engineering and economic data that is available. Revisions could be made of
      the
      current estimates of ore reserves due to, among other factors: revisions of
      the
      geologic data or assumptions; changes in estimated prices; and the results
      of
      exploration activities.





Changes
      in the amount of ore reserves could mainly affect the depreciation of fixed
      assets directly related to the mining activity and the period for amortization
      of development costs.





(n)
            Impairment
                of non-financial assets -


The
      Company assesses at each reporting date whether there is an indication that
      an
      asset may be impaired. If any such indication exists, the Company makes an
      estimate of the asset’s recoverable amount. An asset’s recoverable amount is the
      higher of an asset’s fair value less costs to sell and its value in use and is
      determined for an individual asset, unless the asset does not generate cash
      inflows that are largely independent of those from other assets or groups of
      assets. Where the carrying amount of an asset exceeds its recoverable amount,
      the asset is considered impaired and is written down to its recoverable amount.
      In assessing value in use, the estimated future cash flows are discounted to
      their present value using a discount rate that reflects current market
      assessments of the time value of money and the risks specific to the
      asset.





Impairment losses are recognized in the statement of income in those expense
      categories consistent with the function of the impaired asset.




F-16





A
      previously recognized impairment loss is reversed only if there has been a
      change in the estimates used to determine the asset’s recoverable amount since
      the last impairment loss was recognized. The increased amount cannot exceed
      the
      carrying amount that would have been determined, net of depreciation, had no
      impairment loss been recognized for the asset in prior years. Such reversal
      is
      recognized in the consolidated statement of income.





(o)
            Borrowings
                -


All
      loans
      and borrowings are initially recognized at the fair value of the cash received
      less directly attributable transaction costs. After initial recognition,
      interest bearing loans and borrowings are subsequently measured at amortized
      cost using the effective interest method.





(p)
            Share-based
                payments -


Senior
      executives of the Company are granted share appreciation rights, which can
      only
      be settled in cash (cash-settled transactions). For cash-settled transactions,
      the liability is measured at each reporting date until settlement.





On
      January 1, 2006, the Company adopted IFRS 2 “Share-Based Payments”. According to
      this standard, the cost of cash-settled transactions is measured initially
      at
      fair value at the grant date using a binomial model (see more details in Note
      14). This fair value is expensed over the period until vesting with recognition
      of a corresponding liability. The liability is re-measured at each balance
      sheet
      date up to and including the settlement date with changes in fair value
      recognized in profit and loss.


Until
      December 31, 2005, the cost and liability were recorded at the intrinsic value
      of the obligation; the adoption of IFRS 2 had no significant effect in the
      prior
      year consolidated financial statements.





(q)
            Provisions
                -


*General*


Provisions
      are recognized when the Company has a present obligation (legal or constructive)
      as a result of a past event, it is probable that an outflow of resources
      embodying economic benefits will be required to settle the obligation and a
      reliable estimate can be made of the amount of the obligation. The expense
      relating to any provision is presented in the consolidated statement of income.
      Provisions are discounted using a current rate that reflects, where appropriate,
      the risks specific to the liability. When discounting is used, the increase
      in
      the provision due to the passage of time is recognized as a financial
      expense.





*Provision
      for closure of mining units*


The
      Company records a provision for mine closure when a legally enforceable
      obligation arises, independently of the full depletion of the reserves. Once
      such obligation has been appropriately measured, it is recorded by creating
      a
      liability equal to the amount of the obligation and recording a corresponding
      increase to the carrying amount of the related long-lived assets (mine
      development costs and property, plant and equipment). As time passes, the amount
      of the obligation changes, recording an accretion expense; additionally, the
      capitalized cost is depreciated and/or amortized based on the useful lives
      of
      the related asset. Any difference in the settlement of the liability will be
      recorded in the results of the period in which such settlement occurs. The
      changes in estimates of future cost of the obligation or useful life of the
      related assets that occur from the revision of the initial estimates should
      be
      recorded as an increase or decrease in the book value of the obligation and
      the
      related asset.





(r)
            Contingencies
                -


Loss
      contingencies are recorded in the financial statements when it is probable
      their
      occurrence and they can be reasonably estimated. In other case, they are only
      disclosed in notes to the consolidated financial statements.





Contingent
      assets are not recognized in the consolidated financial statements; however,
      they are disclosed in notes to the consolidated financial statements if it
      is
      probable that such contingent assets will be realized.





(s)
            Treasury
                shares -


The
      Company, through a subsidiary, has treasury shares (common and investment
      shares). The nominal values of these shares are presented net of the capital
      stock and investment shares amounts.





The
      effect of the dividends income arising from the treasury shares held by the
      subsidiary are eliminated in the consolidated financial statements.





(t)
            Revenue
                recognition -


Revenue
      is recognized to the extent that it is probable that the economic benefits
      will
      flow to the Company and the revenue can be reliably measured. Revenue is
      measured at the fair value of the consideration received, excluding discounts
      and other sales taxes or duty. The following specific recognition criteria
      must
      also be met before revenue is recognized:




F-17





*Sales
      of concentrates and ounces of gold*


Revenues
      from sales of concentrates and ounces of gold are recognized when the
      significant risks and rewards of ownership are transferred to the buyer, which
      takes place at the time the goods are delivered.





As
      far as
      the measurement of revenues from the sale of concentrate, the Company assigns
      a
      provisional value to these sales, since they are subject to a final price
      adjustment at the end of a contractually-set period, which normally ranges
      between 30 and 180 days after delivery of the concentrate to the customer.
      Exposure to changes in metals price generates an embedded derivative that must
      be separated from the commercial contract. At the close of each period, the
      sale
      price used initially is adjusted in accordance with the future price for the
      quotation period stipulated in the contract. Any gain or losses arising from
      changes in the fair value on these embedded derivatives during the year are
      taken directly to profit or loss. Adjustment of the provisional sale value
      is
      posted as an increase or decrease in net sales.





*Interest
      received*


Revenues
      are recognized as interest accrues.





*Commercial
      sales contracts*


Gain
      and
      losses on derivative contracts qualifying as normal sales are initially deferred
      in the consolidated balance sheets and then recognized as income in the years
      in
      which the Company makes a physical delivery of the committed ounces of gold
      and
      tons of mineral see Note 18.





(u)
            Borrowing
                cost -


Borrowing
      costs that
      are
      directly attributable to the acquisition, construction or production of a
      qualifying asset are capitalizeduntil
      assets are ready for their intended use.





(v)
            Income
                tax and workers ́ profit sharing -


*Current
      portion of income tax and workers ́ profit sharing*


Income
      tax and workers’ profit sharing for the current period are measured at the
      amount expected to be paid to the taxation authorities and workers,
      respectively. The rates and laws used to compute the amount are those that
      are
      enacted by the consolidated balance sheet date.





*Deferred
      portion of income tax and workers ́ profit sharing*


Deferred
      income tax and workers’ profit sharing are provided using the liability method
      on temporary differences at the consolidated balance sheet date between the
      tax
      bases of assets and liabilities and their carrying amounts for financial
      reporting purposes.





Deferred
      income tax and workers’ profit sharing liabilities are recognized for all
      taxable temporary differences, except for taxable temporary differences
      associated with investments in subsidiaries and associates where the timing
      of
      the reversal of the temporary differences can be controlled and it is probable
      that the temporary differences will not reverse in the foreseeable
      future.





Deferred
      income tax and workers’ profit sharing liabilities are recognized for all
      deductible temporary differences and tax loss carry-forwards, to the extent
      that
      is probable that taxable profit will be available against which the deductible
      temporary differences and unused tax losses can be utilized. The carrying amount
      of the deferred income tax and workers’ profit sharing assets is reviewed at
      each consolidated balance sheet date and reduced to the extent that it is no
      longer probable that sufficient taxable profit will be available to allow all
      or
      part of the deferred asset to be utilized. Unrecognized deferred assets are
      reassessed at each consolidated balance sheet date and are recognized to the
      extent that it has become probable that future taxable profit will allow the
      deferred asset to be recovered.





Deferred
      income tax assets and deferred income tax liabilities are offset, if a legally
      enforceable right exists to set off current tax assets against current income
      tax liabilities and the deferred income taxes relate to the same taxable entity
      and the same taxation authority.





(w)
            Derivative
                financial instruments -


*Derivatives
      not designated as hedging instrument*


Derivative
      contracts are recognized as assets and liabilities at fair value in the
      consolidated balance sheet. Changes in the fair value of derivative contracts
      not qualifying as hedging instruments are recorded in the caption “Loss from
      Change in the Fair Value of Derivative Instruments” in the consolidated
      statements of income.




F-18


*Derivatives designated as hedge*


Derivative
      contracts that are designated to hedge future cash flows are posted as assets
      or
      liabilities in the consolidated balance sheet and presented at their fair value.
      To the extent that these hedges are used to offset future flows from sale of
      the
      related production, the changes in fair value are debited or credited to a
      shareholders’ equity account. This fair value is transferred to the year’s
      results in the period in which the sale of the corresponding production took
      place, affecting the *Net
      Sales* account.





(x)
            Basic
                and diluted earnings per share -


Basic
      and
      diluted earnings per share have been calculated based on the weighted average
      number of common and investment shares outstanding at the date of the
      consolidated balance sheets; treasury shares have been excluded from the
      calculation.




(y)
            Segments
                -


A
      business segment is a group of assets and operations engaged in providing
      products or services that are subject to risks and returns that are different
      from those of other business segments. A geographical segment is engaged in
      providing products or services within a particular economic environment that
      are
      subject to risks and return that are different from those of segments operating
      in other economic environments.





(z)
            Comparative
                consolidated financial statements -


No
      material reclassifications have been made to the balances as of December 31,
      2006 or 2005 for the purpose of making them comparable to those for the year
      2007.





(aa)
            New
                accounting pronouncements -


Effective
      year 2008, through Resolution No040-2008 - EE/94 enacted on March 14, 2008, the
      Peruvian Accounting Standards Board had mandated the application of IFRIC ́s
      1,2,4,5,6,7,8,9,10,11 and 12 effective for 2008 fiscal year. In addition, it
      duly approved the application of IFRS 7 “Financial instruments: disclosures”,
      IFRS 8 “Operating segments”, IAS 32 “Financial Instruments: Presentation” and
      IFRIC 13 and 14 for effective year 2009.





**IFRIC
      1, Changes in Existing Decommissioning, Restoration and Similar
      Liabilities**


IFRIC
      1
      contains guidance on accounting for changes in decommissioning, restoration
      and
      similar liabilities that have previously been recognised both as part of the
      cost of an item of property, plant and equipment under IAS 16 and as a provision
      (liability) under IAS 37. The interpretation addresses subsequent changes to
      the
      amount of the liability that may arise from (a) a revision in the timing or
      amount of the estimated decommissioning or restoration costs or from (b) a
      change in the current market-based discount rate.





**IFRIC
      2, Members’ Shares in Cooperative Entities and Similar
      Instruments**


Members'
      shares in co-operative entities have some characteristics of equity. They also
      give the holder the right to request redemption for cash, although that right
      may be subject to certain limitations. IFRIC 2 gives guidance on how those
      redemption terms should be evaluated in determining whether the shares should
      be
      classified as financial liabilities or as equity.





**IFRIC
      4, Determining whether an Arrangement contains a Lease**


The
      Interpretation specifies that an arrangement that meets the following criteria
      is, or contains, a lease that should be accounted for in accordance with IAS
      17
      Leases: (a) fulfillment of the arrangement depends upon a specific asset. The
      asset need not be explicitly identified by the contractual provisions of the
      arrangement; rather it may be implicitly specified because it is not
      economically feasible or practical for the supplier to fulfill the arrangement
      by providing use of alternative assets; and (b) the arrangement conveys a right
      to control the use of the underlying asset.





**IFRIC
      5, Rights to Interests arising from Decommissioning, Restoration and
      Environmental Rehabilitation Funds**


IFRIC
      5
      sets out the accounting treatment for funds set up to finance the
      decommissioning of assets.





**IFRIC
      6, Liabilities arising from Participating in a Specific Market-Waste Electrical
      and Electronic Equipment**


IFRIC
      6
      prescribes the date at which recognition of a liability is required for disposal
      of Electrical and Electronic Equipment in accordance with the EU
      Directive.




F-19





**IFRIC
      8, Scope of IFRS 2**


International
      Financial Reporting Interpretations Committee 8 Scope of IFRS 2 (“IFRIC 8”)
      clarifies that IFRS 2 will apply to any arrangement when equity instruments
      are
      granted or liabilities are incurred by an entity, when the identifiable
      consideration appears to be less than the fair value of the instruments given.





**IFRIC
      9, Reassessment of Embedded Derivatives**


International
      Financial Reporting Interpretations Committee 9 Reassessment of Embedded
      Derivatives (“IFRIC 9”) requires an entity to assess whether a contract contains
      an embedded derivative at the date an entity first becomes a party to the
      contract and prohibits reassessment unless there is a change to the contract
      that significantly modifies the cash flows.





**IFRIC
      10, Interim Financial Reporting and Impairment**


International
      Financial Reporting Interpretations Committee 10 Interim Financial Reporting
      and
      Impairment (“IFRIC 10”) addresses an inconsistency between IAS 34 Interim
      Financial Reporting and the impairment requirements relating to goodwill in
      IAS
      36 Impairment of Assets and equity instruments classified as available for
      sale
      in IAS 39.





**IFRIC
      11, IFRS 2 - Group and Treasury Share Transactions**


IFRIC
      11
      provides guidance on applying IFRS 2 in three circumstances: (a) share-based
      payment involving an entity's own equity instruments in which the entity chooses
      or is required to buy its own equity instruments (treasury shares) to settle
      the
      share-based payment obligation – is this an equity-settled or cash-settled
      transaction; (b) a parent grants rights to its equity instruments to employees
      of its subsidiary – how to account in the individual entities' financial
      statements; (c) a subsidiary grants rights to equity instruments of its parent
      to its employees – how to account in the individual entities' financial
      statements.





**IFRIC
      12, Service Concession Arrangements**


IFRIC
      12
      outlines an approach to account for contractual arrangements arising from
      entities providing public services. It provides that the operator should not
      account for the infrastructure as property, plant and equipment, but recognize
      a
      financial asset and/or an intangible asset.





**IFRS
      8, Operating Segments**


This
      IFRS
      replaces IAS 14 and adopts a management approach to segment reporting. The
      information reported would be that which management uses internally for
      evaluating the performance of operating segments and allocating resources to
      those segments.





The
      Company is evaluating the effects in its consolidated financial statements
      from
      the adoption of the new IAS, IFRS and IFRIC issued.





**4.** **Transactions
      in Nuevos Soles**





Transactions
      in Nuevos Soles take place at the exchange rates published by the Peruvian
      Banking and Insurance Superintendency (SBS). As of December 31, 2007, the
      exchange rates for Nuevos Soles were US$0.3339 for purchase and US$0.3337 for
      sale (US$0.3131 for purchase and US$0.3128 for sale as of December 31, 2006)
      and
      have been applied by the Company to asset and liability accounts, respectively.





As
      of
      December 31, 2007, the subsidiary El Brocal had time deposits and an income
      tax
      liability of S/254,500,000 and S/85,660,000, respectively. There are no
      additional significant assets and liabilities denominated in Nuevos Soles as
      of
      December 31, 2007 and 2006.





**5.** **Cash
      and cash equivalents**





(a)
            The
                table below presents the components of this caption:





**2007**
            
            **2006**US$(000)
            
            US$(000)Cash
            
            
            460
            
            
            349Bank
                accounts
            
            
            27,700
            
            
            32,237Time
                deposits (b)
            
            
            274,704
            
            
            118,949Liquidity
                fund (c)
            
            
            -
            
            
            25,065Cash
                balances included in the consolidated statement of cash
                flows
            
            
            302,864
            
            
            176,600Time
                deposits with original maturity greater than 90 days (d)
            
            
            78,748
            
            
            62,933381,612
            
            
            239,533




F-20








(b)
            As
                of December 31, 2007, this corresponds mainly to time deposits denominated
                in U.S. dollars, which accrued interest at annual rates varying between
                4.57% and 5.61%, with original maturities of between 2 and 90 days.
                As of
                December 31, 2006, this corresponded to time deposits denominated
                in U.S.
                dollars, which accrued interest at annual rates varying between 5.05%
                and
                5.26%, with original maturities of between 30 and 90 days.





(c)
            During
                the first half of 2007, Buenaventura used the time deposits and the
                liquidity fund held as of December 31, 2006 to partially fund
                disbursements related to the release of the fixed-price component
                in
                commercial contracts, see note 18.





(d)
            As
                of December 31, 2007, this corresponds mainly to time deposits constituted
                by the subsidiarySociedad
                Minera El BrocalS.A.A., in Nuevos Soles and U.S. dollars, which accrues interest
                at annual
                rates varying between 5.00% and 5.55%, with original maturities of
                between
                91 and 271 days.





**6.**
            **Financial
                assets at fair value through profit or loss (Gold
                Certificates)**





In
      May
      2006, Buenaventura acquired one million shares in an Exchange Traded Fund ("Gold
      ETF") supported by the World Gold Council, equivalent to 100,000 ounces of
      gold,
      at a unit cost of US$68.07. The gold certificates were posted at fair value
      as a
      financial investment with changes reflected in results, in accordance with
      Management’s intention at the time of acquisition. As of December 31, 2006, the
      fair value of these gold certificates amounted to US$63,210,000.





In
      January 2007, Buenaventura made additional gold certificate purchases (1.1
      million shares) in the amount of US$66,853,000, equivalent to 110,000 ounces
      of
      gold, at an average unit cost of US$60.77.





In
      March
      2007, with the objective of financing the disbursements related to release
      of
      the fixed-price component in commercial contracts, see note 18, Buenaventura
      liquidated all of its gold certificates as of December 31, 2006, as well as
      those acquired in January 2007, for the total amount of US$135,189,000. The
      resulting gain due to changes in the fair value of these gold certificates
      amounted to US$5,126,000 in 2007 (a loss of US$4,861,000 in 2006) and is shown
      separately in the consolidated statement of income.





**7.**
            **Available-for-sale
                financial assets**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**US$(000)
            
            US$(000)Structured
                notes
            
            
            -
            
            
            40,154Fixed-income
                mutual funds
            
            
            -
            
            
            12,325Mixed
                variable-income investment funds
            
            
            -
            
            
            4,070-
            
            
            56,549





In
      September 2006, Buenaventura invested its excess cash in the following financial
      instruments: (i) structured notes issued by Deutsche Bank for US$40,000,000;
      and
      (ii) fixed-income mutual funds issued by Franklin Global Templeton Bond and
      Morgan Stanley U.S. Bond for US$12,000,000. It also held mixed variable-income
      investment funds administered by Compass Group.





In
      May
      and June of 2007, Buenaventura liquidated all of these financial instruments
      at
      a fair value of US$56,889,000, in order to fund the disbursements related to
      release of the fixed-price component in commercial contracts, see note 18.




F-21


**8.**
            **Trade
                accounts receivable**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**US$(000)
            
            US$(000)Johnson
                Matthey Limited
            
            
            22,522
            
            
            -Trafigura
                A.G.
            
            
            19,505
            
            
            -Consorcio
                Minero S.A. – CORMIN
            
            
            16,825
            
            
            24,872AYS
                S.A.
            
            
            16,558
            
            
            2,601Doe
                Run Peru S.R.L.
            
            
            11,324
            
            
            9,290BHL
                Peru S.A.C.
            
            
            5,224
            
            
            11,557Votarantim
                Metais Cajamarquilla S.A.
            
            
            5,189
            
            
            3,725Glencore
                International A.G.
            
            
            1,752
            
            
            22,957MK
                Metal Trading Peru S.A.C.
            
            
            1,554
            
            
            -Sudamericana
                Trading S.R.L.
            
            
            2,565
            
            
            -Other
            
            
            4,522
            
            
            2,420107,540
            
            
            77,422





The
      accounts receivable are denominated in United States dollars, have current
      maturities and do not accrue interest. No specific guarantees have been granted
      for these obligations.





In
      Management ́s opinion, it is not necessary to record a provision for doubtful
      accounts.





**9.**
            **Inventory,
                net**





(a)
            The
                table below presents the components of this caption:





**2007**
            
            **2006**US$(000)
            
            US$(000)Spare
                parts and supplies
            
            
            16,909
            
            
            17,261Products
                in process
            
            
            12,333
            
            
            10,286Finished
                goods
            
            
            7,875
            
            
            6,86237,117
            
            
            34,409Provision
                for impairment of value of spare parts andsupplies(b)
            
            
            (1,968
            )
            
            (3,788
            )35,149
            
            
            30,621





(b)
            The
                provision for impairment of value of spare parts andsupplieshad
                the following movement during the years 2007, 2006 and 2005:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Opening
                balance**
            
            
            3,788
            
            
            5,295
            
            
            2,771Provision
                for the period
            
            
            15
            
            
            138
            
            
            2,971Reversal
                of provision****
            
            
            (1,049
            )
            
            (1,389
            )
            
            -Reversal
                of provision due to sale of spare parts and supplies
            
            
            (786
            )
            
            (30
            )
            
            -Write-offs
            
            
            -
            
            
            -
            
            
            (315
            )Loss
                on translation to U.S. dollars
            
            
            -
            
            
            (226
            )
            
            (132
            )**Closing
                balance**
            
            
            1,968
            
            
            3,788
            
            
            5,295





In
      the
      opinion of Company Management, the provision for impairment of value of spare
      parts and supplies adequately covers this risk as of the date of the
      consolidated balance sheet.




F-22


**10.**
            **Investments
                in shares**





(a)
            The
                table below presents the components of this
                caption:





**Share in shareholders’ equity**
            
            **Amount****2007**
            
            **2006**
            
            **2007**
            
            **2006**%
            
            %
            
            US$(000)
            
            US$(000)**Investments
                held under the equity method**Minera
                Yanacocha S.R.L. (c)Equity
                share
            
            
            43.65
            
            
            43.65
            
            
            577,537
            
            
            522,568Payment
                in excess of the share in fair value of assets and liabilities, net
            
            
            
            
            
            
            
            
            19,599
            
            
            20,710597,136
            
            
            543,278Sociedad
                Minera Cerro Verde S.A.A. (c)Equity
                share
            
            
            18.50
            
            
            18.50
            
            
            267,448
            
            
            231,641Payment
                in excess of the share in fair value of assets and liabilities, net
            
            
            
            
            
            
            
            
            57,960
            
            
            59,928325,408
            
            
            291,569**Investments
                held at fair value**Other
            
            
            
            
            
            
            
            
            9,876
            
            
            4,282932,420
            
            
            839,129





(b)
            The
                table below presents the net share in affiliated companies:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Minera
                Yanacocha S.R.L.
            
            
            97,216
            
            
            229,787
            
            
            225,858Sociedad
                Minera Cerro Verde S.A.A.
            
            
            148,533
            
            
            80,171
            
            
            37,993Other
            
            
            3,806
            
            
            3,210
            
            
            143249,555
            
            
            313,168
            
            
            263,994





(c)
            The
                investments held in Yanacocha (a gold mine located in Cajamarca,
                Peru) and
                Cerro Verde (a copper mine located in Arequipa, Peru) represent the
                Company’s most significant investments. The share in their results has
                been significant in relation to the Company’s net earnings in 2007, 2006
                and 2005.





The
      table
      below presents the movement in the investments in Yanacocha and Cerro Verde:





**Yanacocha**
            
            **Cerro Verde****2007**
            
            **2006**
            
            **2007**
            
            **2006**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Opening
                balance**
            
            
            522,568
            
            
            499,686
            
            
            231,641
            
            
            147,683Share
                in affiliated companies****
            
            
            98,327
            
            
            232,402
            
            
            150,501
            
            
            82,300Payments
                for acquisition of additional shares
            
            
            -
            
            
            -
            
            
            -
            
            
            1,658Dividends
                received
            
            
            (43,650
            )
            
            (209,520
            )
            
            (114,694
            )
            
            -Other
            
            
            292
            
            
            **-**
            
            
            -
            
            
            **-****Ending
                balance**
            
            
            577,537
            
            
            522,568
            
            
            267,448
            
            
            231,641




F-23


The
      table
      below presents the movement in the payments in excess of the share in the fair
      value of assets and liabilities acquired from Yanacocha and Cerro Verde:





**Yanacocha**
            
            **Cerro
                Verde****2007**
            
            **2006**
            
            **2007**
            
            **2006**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Opening
                balance**
            
            
            20,710
            
            
            23,325
            
            
            59,928
            
            
            60,735Amount
                paid in excess of the fair value of assets and liabilities
            
            
            -
            
            
            -
            
            
            -
            
            
            1,322Amortization
                of excess amount paid
            
            
            (1,111
            )
            
            (2,615
            )
            
            (1,968
            )
            
            (2,129
            )**Ending
                balance**
            
            
            19,599
            
            
            20,710
            
            
            57,960
            
            
            59,928




*Acquisition
      of additional interest in Cerro Verde -*


In
      2005
      Buenaventura increased its interest from 9.17 percent to 18.214 percent. As
      of
      December 31, 2006 and 2007, the Company had an 18.5 percent interest in Cerro
      Verde. These increases have enabled Buenaventura to exercise significant
      influence, which is demonstrated mostly by its participation in the Board of
      Directors and policy-setting processes, which include the decisions on dividends
      as well as its position as Cerro Verde ́s guarantor in the loan agreement that
      the latter had with foreign banks to fund its copper sulfide project.
      Consequently, Buenaventura has decided to use the equity method to account
      for
      its investment in Cerro Verde.





*Reinvestment
      programs -*


Mining
      companies can obtain a tax benefit (Reinvestment Credit) by applying retained
      earnings to investment programs oriented towards attaining increased production
      levels (Reinvestment Programs). Reinvestment credits are obtained by means
      of an
      application approved by the Ministry of Energy and Mines, which must guarantee
      80 percent of the amount reinvested.





Yanacocha
      restricted its earnings by US$189.6 million in accordance with its reinvestment
      program for the 2002-2004 period. Also, according to current tax regulations,
      Yanacocha capitalized (transferred from restricted earnings to partners’
contributions ) this amount in 2007, which cannot be reduced in the four years
      following capitalization.





In
      addition, Cerro Verde restricted its earnings for US$800 million in accordance
      with its reinvestment program for the 2004-2007 period. According to current
      tax
      regulations, Cerro Verde will capitalize this amount in 2008, which cannot
      be
      reduced in the four years following capitalization.





*Summary
      of financial information based on the financial statements of Yanacocha and
      Cerro Verde -*


The
      table
      below presents the principal amounts in the financial statements of Yanacocha
      and Cerro Verde, adjusted to conform to Buenaventura’s accounting practices:





**Yanacocha**
            
            **Cerro
                Verde****2007**
            
            **2006**
            
            **2005**
            
            **2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Balance
                Sheet**Total
                assets
            
            
            1,895,884
            
            
            1,825,457
            
            
            1,539,074
            
            
            2,010,776
            
            
            1,637,584
            
            
            893,851Total
                liabilities
            
            
            569,559
            
            
            629,049
            
            
            388,464
            
            
            565,034
            
            
            385,405
            
            
            87,042Shareholders’
                equity
            
            
            1,326,325
            
            
            1,196,408
            
            
            1,150,610
            
            
            1,445,742
            
            
            1,252,179
            
            
            806,809**Results**Total
                income
            
            
            1,093,347
            
            
            1,560,899
            
            
            1,490,402
            
            
            1,794,559
            
            
            667,671
            
            
            358,928Operating
                income
            
            
            315,835
            
            
            763,790
            
            
            760,881
            
            
            1,270,514
            
            
            524,875
            
            
            207,054Net
                income
            
            
            229,915
            
            
            531,485
            
            
            519,436
            
            
            813,554
            
            
            445,370
            
            
            223,803




F-24


**11.**
            **Mining
                concessions and property, plant and equipment, net**





The
      table
      below presents the movement in cost and accumulated depreciation during year
      2007:




**Opening**
              **balance**
            
            **Additions**
            
            **Retirements**
            
            **Sales**
            
            **Transfers**
            
            **Closing**
              **balance**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Cost**Land
            
            
            2,366
            
            
            77
            
            
            -
            
            
            -
            
            
            58
            
            
            2,501Mining
                land
            
            
            7,327
            
            
            -
            
            
            (54
            )
            
            -
            
            
            (58
            )
            
            7,215Mining
                concessions
            
            
            83,021
            
            
            23,906
            
            
            -
            
            
            -
            
            
            -
            
            
            106,927Buildings,
                construction and other
            
            
            131,746
            
            
            107
            
            
            (91
            )
            
            -
            
            
            14,477
            
            
            146,239Machinery
                and equipment
            
            
            176,639
            
            
            10,992
            
            
            (662
            )
            
            (1,064
            )
            
            225
            
            
            186,130Transportation
                units
            
            
            7,534
            
            
            1,046
            
            
            (52
            )
            
            (450
            )
            
            (361
            )
            
            7,717Furniture
                and mixtures
            
            
            4,427
            
            
            3,519
            
            
            (135
            )
            
            -
            
            
            4,782
            
            
            12,593Works
                in progress
            
            
            27,521
            
            
            25,985
            
            
            (229
            )
            
            -
            
            
            (19,123
            )
            
            34,154Mine
                closure costs
            
            
            25,147
            
            
            -
            
            
            (251
            )
            
            -
            
            
            -
            
            
            24,896465,728
            
            
            65,632
            
            
            (1,474
            )
            
            (1,514
            )
            
            -
            
            
            528,372**Accumulated
                depreciation and amortization**Mining
                land
            
            
            4,340
            
            
            670
            
            
            -
            
            
            -
            
            
            (59
            )
            
            4,951Mining
                concessions
            
            
            33,222
            
            
            8,400
            
            
            -
            
            
            -
            
            
            -
            
            
            41,622Buildings,
                construction and other
            
            
            72,278
            
            
            10,153
            
            
            (60
            )
            
            -
            
            
            -
            
            
            82,371Machinery
                and equipment
            
            
            122,535
            
            
            13,034
            
            
            (596
            )
            
            (685
            )
            
            59
            
            
            134,347Transportation
                units
            
            
            4,350
            
            
            693
            
            
            (49
            )
            
            -
            
            
            -
            
            
            4,994Furniture
                and mixtures
            
            
            2,000
            
            
            369
            
            
            (4
            )
            
            (420
            )
            
            -
            
            
            1,945Mine
                closure costs
            
            
            11,360
            
            
            2,041
            
            
            (251
            )
            
            -
            
            
            -
            
            
            13,150250,085
            
            
            35,360
            
            
            (960
            )
            
            (1,105
            )
            
            -
            
            
            283,380**Net
                cost**
            
            
            215,643
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            244,992





*Mining
      concessions -*


The
      table
      below presents the movement of the cost and accumulated amortization of the
      mining concessions by mining units:





**Balance as ofJanuary 1,****2007**
            
            **Additions**
            
            **Balance as of****December 31,****2007**US$(000)
            
            US$(000)
            
            US$(000)**Cost**Compañía
                de Exploraciones, Desarrollo e Inversiones Mineras S.A.C.-
                CEDIMIN
            
            
            51,138
            
            
            -
            
            
            51,138Inversiones
                Colquijirca S.A.
            
            
            12,380
            
            
            23,906
            
            
            36,286Minas
                Poracota S.A.
            
            
            2,864
            
            
            -
            
            
            2,864Sociedad
                Minera El Brocal S.A.A.
            
            
            3,405
            
            
            -
            
            
            3,405Minera
                Paula 49 S.A.C.
            
            
            1,572
            
            
            -
            
            
            1,572Inversiones
                Mineras del Sur S.A., note 2
            
            
            11,662
            
            
            -
            
            
            11,66283,021
            
            
            23,906
            
            
            106,927**Accumulated
                amortization**Compañía
                de Exploraciones, Desarrollo e Inversiones Mineras S.A.C. –
                CEDIMIN
            
            
            22,558
            
            
            3,609
            
            
            26,167Inversiones
                Colquijirca S.A.
            
            
            8,039
            
            
            2,767
            
            
            10,806Minas
                Poracota S.A.
            
            
            -
            
            
            125
            
            
            125Sociedad
                Minera El Brocal S.A.A.
            
            
            1,218
            
            
            332
            
            
            1,550Minera
                Paula 49 S.A.C.
            
            
            1,018
            
            
            111
            
            
            1,129Inversiones
                Mineras del Sur S.A.
            
            
            389
            
            
            1,456
            
            
            1,84533,222
            
            
            8,400
            
            
            41,622




F-25


*Additional
      payment for acquisition of shares in Inversiones Colquijirca S.A. -*


In
      January 2006, Buenaventura entered an arbitration process with the companies
      Fort Vermillion Finance S.A. and Grisha Management Inc. (hereinafter the
“Sellers") in the Lima Chamber of Commerce’s National and International
      Arbitration and Reconciliation Center, for the purpose of adjusting the balance
      of the price for the 1999 purchase of ADRA International Holding Corp. (ADRA),
      the company owning the shares in Inversiones Colquijirca S.A.. Buenaventura
      claimed that the date for exercising the option to adjust the balance of the
      price expired on February 24 2004; however the Sellers contended that the term
      was indefinite.





On
      February 26, 2007, an arbitration award was issued to resolve this controversy;
      as a consequence, on June 8, 2007 Buenaventura paid the Sellers US$19,923,000
      for the adjustment of the price of the shares. It further agreed to pay
      US$3,983,000 to one investor that did not participate in the above-mentioned
      arbitration procedure. In January 2008, Buenaventura paid the amount agreed,
      for
      which there are no additional claims on the part of the Sellers that
      participated in the arbitration process in the Lima Chamber of Commerce. The
      total amount paid of US$23,906,000 has been posted as an addition to the mining
      concessions and property, plant and equipment caption in the consolidated
      balance sheet.





*Works
      in progress -*


During
      the year 2007, Buenaventura had works in progress mostly related to the
      construction of the fourth stage of the Antapite tailings deposit for
      US$9,206,000, the capacity increase in the of the Orcopampa No. 4 tailings
      deposit for US$5,619,000, and the construction of a transmission line in
      Huacarama (in Orcopampa) for US$3,930,000.





**12.**
            **Mine
                development costs, net**





The
      table
      below presents the movement in the cost and accumulated amortization by mining
      units:





**Balance as ofJanuary 1,****2007**
            
            **Additions**
            
            **Balance as of****December 31,****2007**US$(000)
            
            US$(000)
            
            US$(000)**Cost**Orcopampa
            
            
            37,886
            
            
            11,708
            
            
            49,594Uchucchacua
            
            
            31,463
            
            
            4,187
            
            
            35,650Poracota
            
            
            12,289
            
            
            11,713
            
            
            24,002Antapite
            
            
            18,698
            
            
            219
            
            
            18,917Recuperada
            
            
            235
            
            
            2,707
            
            
            2,942Ishihuinca
            
            
            1,010
            
            
            17
            
            
            1,027Julcani
            
            
            188
            
            
            615
            
            
            803Shila
                and Paula
            
            
            815
            
            
            -
            
            
            815La
                Llave
            
            
            -
            
            
            515
            
            
            515Mine
                closure costs
            
            
            11,906
            
            
            935
            
            
            12,841114,490
            
            
            32,616
            
            
            147,106**Accumulated
                amortization**Orcopampa
            
            
            12,416
            
            
            4,132
            
            
            16,548Uchucchacua
            
            
            18,689
            
            
            3,513
            
            
            22,202Poracota
            
            
            -
            
            
            1,049
            
            
            1,049Antapite
            
            
            12,063
            
            
            2,998
            
            
            15,061Recuperada
            
            
            -
            
            
            318
            
            
            318Ishihuinca
            
            
            941
            
            
            53
            
            
            994Shila
                and Paula
            
            
            -
            
            
            204
            
            
            204Mine
                closure costs
            
            
            5,605
            
            
            938
            
            
            6,54349,714
            
            
            13,205
            
            
            62,919**Net
                cost**
            
            
            64,776
            
            
            
            
            
            84,187





**13.**
            **Trade
                accounts payable**





Trade
      accounts payable arise mainly from the acquisition of material, supplies and
      spare parts. These obligations are mostly denominated in U.S. dollars, have
      current maturities and do not accrue interest. No specific guarantees have
      been
      granted for these obligations.




F-26


**14.**
            **Other
                liabilities**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**US$(000)
            
            US$(000)Provision
                for closure of mining units and exploration projects
            
            
            57,889
            
            
            54,287Stock
                appreciation rights
            
            
            37,803
            
            
            14,214Remuneration
                and similar benefits payable
            
            
            16,841
            
            
            8,001Workers ́
                profit sharing payable
            
            
            13,863
            
            
            18,701Taxes
                payable
            
            
            7,142
            
            
            7,692Provision
                for environmental liabilities
            
            
            6,448
            
            
            6,764Royalties
                payable to the Peruvian State
            
            
            4,079
            
            
            2,434Provision
                payable to investor, note 11
            
            
            3,983
            
            
            -Provision
                for labor contingencies
            
            
            3,708
            
            
            2,933Accounts
                payable to partner
            
            
            2,982
            
            
            2,609Negotiated
                payment (voluntary mining contribution)
            
            
            2,601
            
            
            1,786Royalties
                payable to third parties
            
            
            1,609
            
            
            1,197Dividends
                payable
            
            
            972
            
            
            664Other
                liabilities
            
            
            9,211
            
            
            3,148169,131
            
            
            124,430**Long-term
                portion**Provision
                for closure of mining units and exploration projects
            
            
            (45,094
            )
            
            (46,143
            )Stock
                appreciation rights
            
            
            (22,229
            )
            
            (9,135
            )Accounts
                payable to partner
            
            
            (2,982
            )
            
            (2,609
            )Provision
                for environmental liabilities
            
            
            (1,503
            )
            
            (6,764
            )Notes
                payable
            
            
            (500
            )
            
            -(72,308
            )
            
            (64,651
            )**Current
                portion**
            
            
            96,823
            
            
            59,779





*Provision
      for closure*  *of
      mining units and exploration projects*


The
      table
      below presents the movement of the provision for closure of mining units and
      exploration projects:





US$(000)**Balance
                as of January 1, 2006**
            
            
            26,922Disbursements
            
            
            (4,549
            )Additions
                and changes in estimates
            
            
            28,379Accretion
                expense
            
            
            3,535**Balance
                as of December 31, 2006**
            
            
            54,287Disbursements
            
            
            (3,471
            )Additions
            
            
            4,617Accretion
                expense
            
            
            2,456**Balance
                as of December 31, 2007**
            
            
            57,889





The
      estimates of the costs for closure of mining units are based on studies prepared
      by independent advisers that meet the environmental regulations in effect.
      The
      provision for closure of mining units corresponds mostly to activities that
      must
      be carried out for restoring the mining units and areas affected by the
      Company’s operating activities. The principal works to be performed correspond
      to earthworks, revegetation efforts and disassembly of the plants.




F-27


In
      accordance with the environmental protection laws in effect for the year 2006,
      the Company reassessed its environmental obligations, with an increased
      liability of US$28,379,000 for all its mining units.





As
      of
      December 31, 2007, the future value of the provision for closure of mining
      units
      and exploration projects was US$86,248,000, was discounted using the rate of
      8%,
      which is the credit-adjusted risk-free rate, resulting in an updated liability
      of US$57,889,000. The Company believes that this liability is sufficient to
      comply with the prevailing environmental protection legislation approved by
      the
      Ministry of Energy and Mines.





The
      table
      below presents the non-current portion of the provision for closure of mining
      units and exploration projects for coming years:





**Year ended December 31,****US$(000)**2009
            
            
            9,6672010
            
            
            7,0102011
            
            
            4,2772012
            
            
            4,0142013
            
            
            4,371Thereafter
            
            
            15,75545,094





*Stock
      Appreciation Rights*


Senior
      executives of the Company are granted share appreciation rights, which can
      only
      be settled in cash, if the executive is working for the Company at each
      program’s settlement date. These programs are mainly structured in a ten-year
      term, allocated in several programs with progressive maturities. The average
      price of the granted programs is assigned based on the last quarter market
      quotation of the shares before the grant date and the settlement is determined
      based on the variation of the market prices at the maturity date as compared
      to
      the price at the date of the grant.





The
      table
      below presents the principal assumptions used by the Company to estimate the
      fair value as of December 31, 2007 and 2006:





**2007**
            
            **2006**Method
                used
            
            
            Turnbull & Wakeman
            
            
            Black-Scholes-MertonHistorical
                volatility
            
            
            47.90%
            
            
            48.50%Risk-free
                interest rate
            
            
            3.25%
            
            
            4.63%
                - 4.90%Dividend
                yield
            
            
            1.44%
            
            
            1.49%Period
                covered by the program
            
            
            8
                years
            
            
            5.6
                yearsMarket
                value of the shares at closing
            
            
            US$54.65
            
            
            US$26.52





The
      table
      below presents the movement of the shares subject to the compensation program
      for the years 2007 and 2006:





**Number of shares****2007**
            
            **2006****Opening
                balance**
            
            
            2,230,000
            
            
            2,364,600Granted
                during the year
            
            
            400,000
            
            
            400,000Settled
                during the year
            
            
            (371,400
            )
            
            (383,400
            )Expired
                during the year
            
            
            -
            
            
            (151,200
            )**Closing
                balance**
            
            
            2,258,600
            
            
            2,230,000




The
      expiries of shares per year are as follows: 398,800 in 2008; 364,600 in 2009;
      289,950 in 2010; 276,850 in 2011; 296,400 in 2012; and 632,000 thereafter.





The
      average price for the programs granted during the year 2007 was US$26.52 per
      share (US$28.38 per share during the year 2006).




F-28


The
      table
      below presents the movement of the *stock
      appreciation rights* for
      the
      years 2007 and 2006:





**2007**
            
            **2006**US$(000)
            
            US$(000)**Opening
                balance**
            
            
            14,214
            
            
            17,291Provisions
                for the year
            
            
            28,666
            
            
            4,519Payments
                made during the year
            
            
            (5,077
            )
            
            (7,306
            )Programs
                expired during the year
            
            
            -
            
            
            (885
            )Gain
                on translation to U.S. dollars
            
            
            -
            
            
            59537,803
            
            
            14,214**Less
                - non-current portion**
            
            
            (22,229
            )
            
            (9,135
            )**Current
                portion**
            
            
            15,574
            
            
            5,079





**15.**
            **Long-term
                debt**





(a)
            The
                table below presents the detail of long-term debt as of December
                31, 2007
                and 2006, for which no specific guarantees have been granted:





**Guarantee**
            
            **Annual interest**
              **rate `**
            
            **Maturities**
            
            **2007**
            
            **2006**US$(000)
            
            US$(000)**Compañía
                de Minas Buenaventura S.A.A.**Banco
                de Crédito del Peru (b)
            
            None
            
            Three-month
                LIBOR plus 0.85%
            
            Quarterly
                maturities from September 2009 to June 2010
            
            75,000
            
            -**Consorcio
                Energético de Huancavelica S.A.**BBVA
                Banco Continental
            
            Buenaventura
                guarantee
            
            Three-month
                LIBOR plus 1.25%
            
            Quarterly
                maturities from September 2007 to June 2012
            
            9,000
            
            -**Sociedad
                Minera El Brocal S.A.A.**Banco
                de Crédito del Peru
            
            Goods
                leased
            
            5.34%
            
            June
                2008
            
            119
            
            60684,119
            
            606**Non-current
                portion**
            
            
            
            
            
            
            
            (63,250)
            
            (115)**Current
                portion**
            
            
            
            
            
            
            
            20,869
            
            491





(b)
            This
                loan requires that Buenaventura maintain a debt ratio no greater
                than 3.5
                in its consolidated financial statements throughout the term of the
                loan.
                As of December 31, 2007, Buenaventura has met this condition.




F-29


(c)
            The
                table below presents the maturity of the non-current portion of long-term
                debt for coming years:





**2007**US$(000)**Year**2009
            
            
            39,5002010
            
            
            20,7502011
            
            
            2,0002012
            
            
            1,00063,250





**16.**
            **Shareholders’
                Equity**





(a)
            Capital
                stock -


Common
      shares with voting rights represent 100 percent of the Company’s issued capital.
      The table below presents the components of the capital stock as of December
      31,
      2007 and 2006:





**Number**
              **of**
              **shares**
            
            **Nominal**
              **value**
            
            **Result from**
              **exposure to**
              **inflation**
            
            **Capital**
              **stock**
            
            **Capital**
              **Stock**S/(000)
            
            S/(000)
            
            S/(000)
            
            US$(000)Common
                shares
            
            
            137,444,962
            
            
            549,780
            
            
            96,598
            
            
            646,378
            
            
            188,393Treasury
                shares
            
            
            (10,565,130
            )
            
            (42,261
            )
            
            (7,362
            )
            
            (49,623
            )
            
            (14,463
            )126,879,832
            
            
            507,519
            
            
            89,236
            
            
            596,755
            
            
            173,930




The
      market value of common shares amounted to US$56.52 as of December 31, 2007
      (US$27.55 as of December 31, 2006) and had a trading turnover of 84 percent
      (79
      percent as of December 31, 2006).





(b)
            Investment
                shares -


Investment
      shares do not have voting rights or participate in shareholders’ meetings but do
      participate in the distribution of dividends. The table below presents the
      components of investment shares as of December 31, 2007 and 2006:





**Number**
              **of**
              **shares**
            
            **Nominal**
              **value**
            
            **Result from**
              **exposure to**
              **inflation**
            
            **Investment**
              **shares**
            
            **Investment**
              **shares**S/(000)
            
            S/(000)
            
            S/(000)
            
            US$(000)Investment
                shares
            
            
            372,320
            
            
            1,489
            
            
            260
            
            
            1,749
            
            
            510Treasury
                investment shares
            
            
            (30,988
            )
            
            (124
            )
            
            (3
            )
            
            (127
            )
            
            (37
            )341,332
            
            
            1,365
            
            
            257
            
            
            1,622
            
            
            473





The
      market value of investment shares amounted to US$41.81 as of December 31, 2007
      (US$26.33 as of December 31, 2006), and had a trading turnover of 21 percent
      (32
      percent as of December 31, 2006).





(c)
            Additional
                paid-in capital -


Buenaventura’s
      additional paid-in capital as of December 31, 2007 includes the following:





-
            The
                premium obtained on the issuance of Series B common shares for
                US$159,381,000;





-
            Proceeds
                from the sale of ADR ́s for US$8,827,000 in previous years; and,





-
            The
                difference between the constant par value of treasury (common and
                investment) shares held through the Condesa subsidiary and the related
                inflation-adjusted cost of US$9,505,000.




F-30


(d)
            Legal
                reserve -


The
      Peruvian Corporations Law ( *Ley
      General de Sociedades)* requires
      that a minimum of ten percent of the distributable earnings for each period,
      after deducting the income tax, be transferred to a legal reserve until the
      latter is equal to 20 percent of the capital stock. This legal reserve can
      be
      used to offset losses or may be capitalized, with the obligation in both cases
      of replenishing it.





(e)
            Dividends
                declared and paid -


The
      table
      below presents the dividends declared and paid in 2007, 2006 and 2005:





**Meeting**
            
            **Date**
            
            **Dividends**
              **declared**
            
            **Dividend**
              **per share**US$(000)
            
            US$(000)**2007
                Dividends**Mandatory
                Annual Shareholders’ Meeting
            
            
            March
                28
            
            
            50,992,000
            
            
            0.37Board
                of Directors’ Meeting
            
            
            October
                26
            
            
            24,806,000
            
            
            0.18Less
                –dividends granted to Condesa
            
            
            
            
            
            (5,826,000
            )69,972,000**2006
                Dividends**Mandatory
                Annual Shareholders’ Meeting
            
            
            March
                30
            
            
            30,320,000
            
            
            0.22Board
                of Directors’ Meeting
            
            
            October
                30
            
            
            34,454,000
            
            
            0.25Less
                –dividends granted to Condesa
            
            
            
            
            
            (5,007,000
            )59,767,000**2005
                Dividends**Mandatory
                Annual Shareholders’ Meeting
            
            
            March
                31
            
            
            23,498,000
            
            
            0.17Board
                of Directors’ Meeting
            
            
            October
                26
            
            
            24,511,000
            
            
            0.18Less
                –dividends granted to Condesa
            
            
            
            
            
            (3,705,000
            )44,304,000





**17.**
            **Tax
                Situation**





(a)
            The
                Company and its subsidiaries are subject to the Peruvian tax system.
                As of
                December 31, 2007, the income tax rate was 30 percent on taxable
                income.





Legal
      entities and individuals not domiciled in Peru are subject to an additional
      tax
      of 4.1 percent on the dividends received.





(b)
            During
                the four years following the year of filing tax returns the tax
                authorities have the power to review and, as applicable, correct
                the
                income tax computed by the Company. The Income Tax and Value Added
                Tax
                (IGV) returns for the following years are open to review by tax
                authorities:





**Entity**
            
            **Years
                open to review by tax**
              **authorities**Compañía
                de Minas Buenaventura S.A.A.
            
            2006
                and 2007Buenaventura
                Ingenieros S.A.
            
            2003,
                2004, 2005, 2006 and 2007Compañía
                de Exploraciones, Desarrollo e InversionesMineras
                S.A.C. – CEDIMIN
            
            2003,2004,
                2005, 2006 and 2007Compañía
                Minera Condesa S.A.
            
            2004,
                2005, 2006 and 2007Compañía
                Minera Colquirrumi S.A.
            
            2003,
                2004, 2005, 2006 and 2007Consorcio
                Energético de Huancavelica S.A.
            
            2003,
                2004, 2005, 2006 and 2007Contacto
                Corredores de Seguros S.A.
            
            2003,
                2004, 2005, 2006 and 2007Inversiones
                Colquijirca S.A.
            
            2003,
                2004, 2005, 2006 and 2007Sociedad
                Minera El Brocal S.A.A.
            
            2004,
                2005, 2006 and 2007Minas
                Conga S.R.L.
            
            2003,
                2004, 2005, 2006 and 2007S.M.R.L.
                Chaupiloma Dos de Cajamarca
            
            2003,
                2004, 2006 and 2007Minera
                La Zanja S.R.L.
            
            2004,
                2005, 2006 and 2007Minera
                Minasnioc S.A.C.
            
            2004,
                2005, 2006 and 2007




F-31





Due
      to
      the possible interpretations that the tax authorities might give to legislation
      in effect, it is not possible to determine whether or not any tax audits that
      are perform would result in increased liabilities for the Company, for which
      reason any tax or surcharge that could arise from possible tax audits would
      be
      applied to the income of the period in which it is determined. However, in
      Management's opinion, any possible additional payment of taxes would not have
      a
      material effect on the consolidated financial statements as of December 31,
      2007
      and 2006.





*Buenaventura
      -*


Buenaventura’s
      Income Tax Returns for the 2000 and 2003 periods have been audited by the Tax
      Administration. As a result of the aforesaid, the Tax Administration has issued
      assessments denying recognition of Buenaventura’s tax-loss carryforwards
      declared as of December 31, 2000 and 2003 amounting to S/177,822,000
      (US$51,828,000) and S/49,652,000 (US$14,472,000), respectively. The principal
      objection is against having considered certain non-taxable income (dividends
      and
      income originating from application of the equity accounting method) as taxable
      income for the purpose of determining tax-loss carryforwards. In Management's
      opinion, this interpretation has no legal basis, for which reason Buenaventura
      would obtain a favorable result in the tax claim procedure initiated against
      the
      above-mentioned assessments.





During
      the year 2007, Buenaventura’s Income Tax Returns for the 2004 and 2005 periods
      were audited by the Tax Administration. As consequence of the aforementioned,
      the Tax Administration issued assessments denying recognition of deductions
      of
      S/92,274,000 (US$31,450,000) for 2004 and S/119,785,000 (US$40,827,000) for
      2005. The principal objection was against the recognition the deferred income
      from the sale of future production as taxable income when Buenaventura delivered
      the ounces of gold committed. In the opinion of Buenaventura’s Management, this
      interpretation has no legal basis, for which reason Buenaventura would obtain
      a
      favorable result in the tax claim procedure initiated against the
      above-mentioned assessments.





*Cedimin
      -*


Cedimin’s
      Income Tax Return for the 2002 period has been audited by the Tax
      Administration. As a result, the Tax Administration has issued assessments
      modifying the tax-loss carryforward declared by Cedimin. The principal objection
      is against having considered Cedimin’s loss of S/27,129,000 (US$7,907,000) on
      the sale of Minera Huallanca S.A.C. and Minera Yanaquihua S.A shares as
      non-deductible. In the opinion of Cedimin’s Management, this interpretation has
      no legal basis, for which reason Cedimin would obtain a favorable result in
      the
      tax claim procedure initiated against the above-indicated assessment.





*Condesa
      -*


Condesa’s
      Income Tax Returns for the 2000, 2001 and 2003 periods have been audited by
      the
      Tax Administration. As a result, the Tax Administration has issued assessments
      reducing the tax-loss carryforwards from previous years declared by Condesa
      in
      these periods by S/1,359,000 (US$396,000), S/15,594,000 (US$4,545,000) and
      S/13,892,000 (US$4,049,000) respectively. In addition, with respect to the
      2001
      Income Tax Return, the Tax Administration has determined a tax omission of
      S/1,153,000 (US$$336,000) and a fine of S/573,000 (US$167,000), mainly as
      consequence of reducing the tax loss originating from 2000. For these periods,
      the principal objection is against having considered non-taxable income
      (dividends) as taxable for purposes of determining the tax-loss carryforward.
      In
      the opinion of Condesa’s Management, this interpretation has no legal basis, for
      which reason Condesa would obtain a favorable result in the tax claim procedure
      initiated against the above-mentioned assessments.





*Sociedad
      Minera El Brocal S.A.A. -*


In
      2006,
      the Tax Administration audited Sociedad Minera El Brocal S.A.A. (El Brocal)’s
      Income Tax Return for the 2003 period), determining an increase of S/2,292,000
      (US$668,000) in net income for the period, claiming the omission of sales due
      to
      the allegedly improper deduction of freight and insurance on mineral exports,
      which in turn implied a reduction in the tax-loss carryforward for the same
      amount. The Tax Administration has issued an assessment alleging these concepts,
      which has not been accepted by El Brocal, for which reason the latter has filed
      a tax claim against this assessment. In the opinion of El Brocal’s Management,
      this interpretation has no legal basis, for which reason El Brocal would obtain
      a favorable result in the tax claim procedure initiated against the
      above-mentioned assessments.





(c)
            As
                of December 31, 2007 the tax-loss carryforward determined by Buenaventura
                amounts to approximately S/489,254,000, arising mainly from the release
                of
                fixed prices in its commercial sales contracts.****This
                loss can be used to offset net income obtained in subsequent periods.
                As
                allowed by the Income Tax Law, Buenaventura has chosen a system for
                offsetting this loss with an annual cap equivalent to 50 percent
                of net
                future taxable income, until exhausting this amount. The amount of
                the
                tax-loss carryforward is subject to the results of the audits mentioned
                in
                the previous paragraph (b).





Buenaventura
      has decided to recognize a deferred income tax asset insofar as there it is
      more
      likely than not that the tax-loss carryforward can be used to offset future
      net
      income.




F-32


**18.**
            **Net
                sales and sales commitments**





The
      Company’s revenues are mostly from sales of gold
      and precious
      metals  in
      the
      form of concentrates, including silver -lead,
      silver-gold, zinc and lead-gold-copper concentrates and ounces of gold. The
      table below presents the net sales to customers by geographic region and product
      type:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Net
                sales by geographic region**Peru
            
            
            346,704
            
            
            294,375
            
            
            121,210Europe
            
            
            97,960
            
            
            86,919
            
            
            66,145America
            
            
            219,220
            
            
            70,196
            
            
            48,415Asia
            
            
            66,540
            
            
            57,497
            
            
            13,406Oceania
            
            
            279
            
            
            23,459
            
            
            23,591730,703
            
            
            532,446
            
            
            272,767**Services
                rendered**Peru
            
            
            16,318
            
            
            15,626
            
            
            10,620747,021
            
            
            548,072
            
            
            283,387**Net
                sales by product**Gold
            
            
            270,016
            
            
            125,838
            
            
            107,396Silver
            
            
            14,471
            
            
            5,157
            
            
            2,325Concentrates:Gold
            
            
            13,745
            
            
            4,552
            
            
            5,414Silver
            
            
            114,445
            
            
            186,819
            
            
            81,578Zinc
            
            
            174,980
            
            
            169,215
            
            
            52,676Copper
            
            
            3,339
            
            
            577
            
            
            410Lead
            
            
            139,707
            
            
            40,288
            
            
            22,968446,216
            
            
            401,451
            
            
            163,046**Services
                rendered**
            
            
            16,318
            
            
            15,626
            
            
            10,620747,021
            
            
            548,072
            
            
            283,387





*Fixed
      price sales contracts -*


The
      table
      below presents the movement in deferred income from sales of future production
      for the years 2007 and 2006:





**2007**
            
            **2006****Ounces**
              **committed at**
              **fixed price**
            
            **Deferred income**
              **from sale of**
              **future**
              **production**
            
            **Ounces**
              **committed at**
              **fixed price**
            
            **Deferred income**
              **from sale of**
              **future**
              **production**US$(000)
            
            
            
            US$(000)**Opening
                balance**
            
            
            1,933,000
            
            
            237,205
            
            
            1,981,000
            
            
            210,105Agreement
                to release the fixed- price component in commercial contracts (a)
            
            
            (971,000
            )
            
            (129,804
            )
            
            -
            
            
            -Transfer
                of derivative financial instruments liability to deferred income
                from sale
                of future production
            
            
            -
            
            
            -
            
            
            340,000
            
            
            77,425Realization
                of deferred income from sale of future production
            
            
            (40,000
            )
            
            (5,393
            )
            
            (388,000
            )
            
            (50,325
            )**Ending
                balance (b)**
            
            
            922,000
            
            
            102,008
            
            
            1,933,000
            
            
            237,205Less
                - non-current portion
            
            
            (922,000
            )
            
            (102,008
            )
            
            (1,565,000
            )
            
            (194,173
            )Current
                portion
            
            
            -
            
            
            -
            
            
            368,000
            
            
            43,032




F-33


(a)
            As
                of December 31, 2006, Buenaventura had committed to sell 1,933,000
                ounces
                of gold at previously-agreed prices that ranged from US$345 to US$451
                per
                ounce of gold during the 2007-2012 period. In March and May of 2007,
                Buenaventura agreed with six of its customers to sell 971,000 ounces
                of
                gold at market prices instead of selling them at fixed prices. This
                agreement to release the fixed- price component in commercial contracts
                resulted in Buenaventura paying these customers US$315,726,000, with
                a
                charge to results for the period and reversing the provision of
                US$129,804,000 for deferred income from sale of future production
                held to
                these dates, with a credit to income of the period. The net effect,
                amounting to US$185,922,000, is presented in the consolidated statement
                of
                income.





(b)
            As
                of December 31, 2007, the Company had commitments to sell 922,000
                ounces
                of gold at previously-agreed prices that ranged from US$345 to US$451
                per
                ounce of gold in periods from March 2010 to December 2012. The fair
                value
                of these contracts amounted to a loss position of US$452,700,000
                as of
                December 31, 2007.





In
      2008,
      as part of its business strategy, Buenaventura agreed with its customers to
      sell
      the ounces committed at market prices, see note 34.





*Embedded
      derivative -*


The
      Company’s sales based on a provisional sales price contain an embedded
      derivative which is required to be bifurcated from the host contract. The host
      contract is the sale of the metals contained in the concentrates at the current
      spot LME price. The Company applies the normal purchase and sale exception
      allowed by SFAS 133 to the host contract in its concentrate sales agreements
      because the sales always result in physical delivery. The embedded derivative,
      which does not qualify for hedge accounting, is marked-to-market through
      earnings each period. At December 31, 2007, the Company had consolidated
      embedded derivatives based on forward prices for the expected settlement dates.
      Final prices on these sales will be established over the next several months
      pursuant to terms of sales contracts. The impact of fluctuations in the forward
      prices used for these derivatives through the settlement date is reflected
      as
      derivative gains and losses in revenues.


Concentrate
      sales include adjustments to the provisional sale value resulting from changes
      in the fair value of the embedded derivative. These adjustments resulted in
      reducing sales by US$5,984,000 and US$2,260,000 in 2007 and 2006; respectively
      and increasing sales by US$6,475,000 in the year 2005. See note 29.





*Concentration
      of sales -*


In
      2007,
      the three most important customers represented 22%, 14% and 10% of total sales
      (13%, 14% and 17% of total sales in 2006). As of December 31, 2007, 47% of
      the
      accounts receivable are related to these customers (49% as of December 31,
      2006). Some have sales contracts that guarantee supplying them the production
      from the Company’s mines at prices that are based on market quotations and/ or
      previously-agreed prices. The production from the Company’s mining units is
      currently committed under sales contracts, which expire on different dates,
      none
      beyond December 30, 2012.








**19.**
            **Costs
                of Sales, without Considering Depreciation and Amortization**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Contractors
            
            
            63,909
            
            
            51,988
            
            
            41,703Supplies
            
            
            42,244
            
            
            37,486
            
            
            26,756Utilities
                and other
            
            
            39,101
            
            
            34,419
            
            
            9,780Personnel
                expense
            
            
            36,738
            
            
            25,278
            
            
            22,803Provision
                for impairment of inventory
            
            
            15
            
            
            138
            
            
            2,839182,007
            
            
            149,309
            
            
            103,881




F-34


**20.**
            **Exploration
                and development in operating units**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Exploration
                expenses**Orcopampa
            
            
            9,047
            
            
            10,853
            
            
            7,957Uchucchacua
            
            
            8,913
            
            
            11,847
            
            
            10,528Antapite
            
            
            6,017
            
            
            3,275
            
            
            5,660Shila
            
            
            4,780
            
            
            4,908
            
            
            3,806Poracota
            
            
            3,217
            
            
            -
            
            
            -Recuperada
            
            
            2,756
            
            
            1,396
            
            
            -Julcani
            
            
            2,370
            
            
            1,881
            
            
            1,425Ishihuinca
            
            
            1,607
            
            
            4,104
            
            
            1,47538,707
            
            
            38,264
            
            
            30,851**Amortization
                of development costs**
            
            
            12,326
            
            
            11,270
            
            
            10,31551,033
            
            
            49,534
            
            
            41,166





**21.**
            **General
                and administrative expenses**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Stock
                appreciation rights, note 14
            
            
            28,666
            
            
            3,634
            
            
            8,134Personnel
                expense
            
            
            12,820
            
            
            12,010
            
            
            9,794Sundry
                expenses
            
            
            6,619
            
            
            6,201
            
            
            5,453Professional
                fees
            
            
            6,512
            
            
            6,102
            
            
            6,349Board
                of Directors’ fees
            
            
            2,072
            
            
            5,940
            
            
            2,241Insurance
            
            
            769
            
            
            794
            
            
            596Maintenance
            
            
            589
            
            
            585
            
            
            673Rent
            
            
            464
            
            
            481
            
            
            373Supplies
            
            
            433
            
            
            631
            
            
            466Amortization
                of other assets
            
            
            261
            
            
            261
            
            
            27159,205
            
            
            36,639
            
            
            34,350





**22.**
            **Exploration
                in non-operating areas**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Outside
                of mining units**El
                Milagro Project
            
            
            6,804
            
            
            1,946
            
            
            -Mallay
                Project
            
            
            4,279
            
            
            1,802
            
            
            533Breapampa
                Project
            
            
            4,256
            
            
            -
            
            
            -Trapiche
                Project
            
            
            3,009
            
            
            2,820
            
            
            852Sausa
                Layo-Norte Project
            
            
            1,733
            
            
            3,386
            
            
            1,644La
                Zanja Project
            
            
            1,583
            
            
            4,449
            
            
            3,286Hatun
                Orco Project
            
            
            1,272
            
            
            2,546
            
            
            1,167Los
                Pircos-Cirato Project
            
            
            1,049
            
            
            3,442
            
            
            962Argentina
                Project
            
            
            942
            
            
            167
            
            
            207




F-35




**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Soras
                Poracota Project
            
            
            852
            
            
            771
            
            
            211Consolidado
                de Hualguayoc Project
            
            
            838
            
            
            -
            
            
            -Llillinta
                Project
            
            
            827
            
            
            -
            
            
            -Anamaray
                Project
            
            
            799
            
            
            324
            
            
            247El
                Faique Project
            
            
            748
            
            
            721
            
            
            1,623Pampa
                Andino Project
            
            
            481
            
            
            933
            
            
            1,525San
                Francisco Project (Argentina)
            
            
            369
            
            
            -
            
            
            -Hueso
                Sur Project
            
            
            360
            
            
            346
            
            
            -Tinyaclla
                Project
            
            
            107
            
            
            4,450
            
            
            -Other
            
            
            2,733
            
            
            442
            
            
            10,30133,041
            
            
            28,545
            
            
            22,558**In
                mining units**Marcapunta
            
            
            9,881
            
            
            6,002
            
            
            3,367Recuperada
            
            
            -
            
            
            268
            
            
            1,887Other
            
            
            3,485
            
            
            1,375
            
            
            -46,407
            
            
            36,190
            
            
            27,812





**23.**
            **Royalties**




The
      table
      below presents the components of this caption:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Peruvian
                State
            
            
            17,601
            
            
            11,260
            
            
            4,299Sindicato
                Minero de Orcopampa S.A.
            
            
            15,670
            
            
            12,332
            
            
            7,241Minera
                El Futuro de Ica S.R.L.
            
            
            707
            
            
            828
            
            
            66933,978
            
            
            24,420
            
            
            12,209





**24.**
            **Interest
                income and expense**




The
      table
      below presents the components of this caption:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Interest
                income**Interest
                on deposits
            
            
            9,120
            
            
            5,534
            
            
            2,584Interest
                on loans
            
            
            1,491
            
            
            818
            
            
            939Income
                from liquidation of investment funds
            
            
            1,161
            
            
            1,597
            
            
            -11,772
            
            
            7,949
            
            
            3,523**Interest
                expense**Loan
                interest
            
            
            4,493
            
            
            1,167
            
            
            854Accretion
                expense, note 14
            
            
            2,456
            
            
            3,535
            
            
            2,306Other
            
            
            1,665
            
            
            1,246
            
            
            9008,614
            
            
            5,948
            
            
            4,060




F-36


**25.**
            **Other,
                net**





The
      table
      below presents the components of this caption:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Other
                income**Reversal
                of the provision for impairment of inventory
            
            
            2,413
            
            
            1,645
            
            
            -Insurance
                proceeds
            
            
            2,072
            
            
            186
            
            
            279Net
                gain on sale of property, plant and equipment
            
            
            237
            
            
            24
            
            
            3514,722
            
            
            1,855
            
            
            630**Other
                expenses**Adjustment
                of provision for closure of mining units and exploration projects
            
            
            3,682
            
            
            9,357
            
            
            -Accident
                in Colquijirca mining unit
            
            
            2,696
            
            
            -
            
            
            703Negotiated
                payment (voluntary mining contribution)
            
            
            2,637
            
            
            1,783
            
            
            -Net
                loss on sale of obsolete supplies
            
            
            1,203
            
            
            3,173
            
            
            -Provision
                for labor contingencies
            
            
            549
            
            
            1,319
            
            
            485Depreciation
            
            
            -
            
            
            211
            
            
            217Other
            
            
            2,641
            
            
            5,514
            
            
            2,45213,408
            
            
            21,357
            
            
            3,857**Other,
                net**
            
            
            (8,686
            )
            
            (19,502
            )
            
            (3,227
            )




**26.**
            **Income
                tax and workers ́ profit sharing**





(a)
            The
                Company and its subsidiaries recognize the effects of timing differences
                between the accounting basis and the tax basis. The table below presents
                the components of this caption, according to the items that give
                rise to
                them:





**Credit (debit) to the consolidated**
              **statement of income****As of**
              **January 1,**
              **2007**
            
            **Income**
              **tax**
            
            **Workers ́ profit**
              **sharing**
            
            **As of**
              **December 31,**
              **2007**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Deferred
                asset**Tax
                - loss carryforward
            
            
            -
            
            
            45,056
            
            
            13,060
            
            
            58,116Deferred
                income from sale of future production
            
            
            81,342
            
            
            (37,330
            )
            
            (10,820
            )
            
            33,192Stock
                appreciation rights provision
            
            
            3,686
            
            
            7,576
            
            
            2,196
            
            
            13,458Provision
                for closure of mining units
            
            
            10,094
            
            
            2,326
            
            
            674
            
            
            13,094Loss
                on translation into U.S. dollars
            
            
            3,955
            
            
            3,852
            
            
            1,116
            
            
            8,923Difference
                in depreciation and amortization rates
            
            
            5,993
            
            
            1,664
            
            
            482
            
            
            8,139Embedded
                derivative from sale of concentrates
            
            
            -
            
            
            1,653
            
            
            478
            
            
            2,131Other
            
            
            10,282
            
            
            536
            
            
            157
            
            
            10,975115,352
            
            
            25,333
            
            
            7,343
            
            
            148,028Less
                – Allowance for deferred asset recoverability
            
            
            (3,905
            )
            
            (132
            )
            
            (38
            )
            
            (4,075
            )**Deferred
                asset**
            
            
            111,447
            
            
            25,201
            
            
            7,305
            
            
            143,953




F-37




**Credit (debit) to the consolidated**
              **statement of changes in Shareholders’Equity****As of**
              **January 1,**
              **2007**
            
            **Income**
              **tax**
            
            **Workers ́ profit**
              **sharing**
            
            **As of**
              **December 31,**
              **2007**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Less
                deferred liability affecting retained earnings**Derivative
                financial instruments
            
            
            -
            
            
            (2,198
            )
            
            (637
            )
            
            (2,835
            )**Deferred
                asset, net**
            
            
            111,447
            
            
            
            
            
            
            
            
            141,118





Buenaventura
      has not recognized deferred income tax and workers ́ profit sharing liabilities
      in relation to the excess of the accounting basis over the tax basis of
      investments in shares due to the following:





-
            In
                the case of the Cerro Verde affiliate, Buenaventura has not recognized
                a
                deferred income tax and workers ́ profit sharing liability for
                US$50,302,000 given that Buenaventura Management has the intention
                and
                capacity to hold this investment until its copper reserves are depleted;
                in this sense, Management believes that the timing differences will
                be
                reversed by means of dividends to be received in the future that
                are not
                subject to the income tax paid by the Company.





-
            In
                the case of the Yanacocha affiliate, Buenaventura has not recognized
                a
                deferred income tax and workers ́ profit sharing liability for
                US$150,713,000, given that Buenaventura Management has the intention
                and
                capacity to hold this investment until its gold and silver reserves
                are
                depleted; in this sense it is believed that the timing differences
                will be
                reversed by means of dividends to be received in the future that
                are not
                subject to the income tax paid by the Company.





(b)
            The
                table below presents the current and deferred portions of the provisions
                for income tax and workers ́ profit sharing shown in the consolidated
                statement of income for the years 2007, 2006 and 2005:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Income
                tax expense (income)****Current**Inversiones
                Colquijirca S.A.
            
            
            54,350
            
            
            48,752
            
            
            8,504Compañía
                de Minas Buenaventura S.A.A.
            
            
            -
            
            
            15,375
            
            
            5,980S.M.R.L.
                Chaupiloma Dos de Cajamarca
            
            
            9,860
            
            
            14,096
            
            
            13,607Compañía
                de Exploraciones, Desarrollo eInversiones Mineras S.A.C - Cedimin
                S.A.C.
            
            
            2,508
            
            
            1,288
            
            
            650Consorcio
                Energético de Huancavelica S.A.
            
            
            933
            
            
            726
            
            
            380Inversiones
                Mineras del Sur S.A. (ii)
            
            
            -
            
            
            -
            
            
            3,579Other
            
            
            1,525
            
            
            582
            
            
            16369,176
            
            
            80,819
            
            
            32,863**Deferred**Compañía
                de Minas Buenaventura S.A.A.
            
            
            (21,409
            )
            
            (13,904
            )
            
            (8,536
            )Inversiones
                Colquijirca S.A.
            
            
            (3,230
            )
            
            (2,800
            )
            
            (363
            )Inversiones
                Mineras del Sur S.A. (ii)
            
            
            -
            
            
            -
            
            
            (973
            )Other
            
            
            (562
            )
            
            (82
            )
            
            (175
            )(25,201
            )
            
            (16,786
            )
            
            (10,047
            )**Total**
            
            
            43,975
            
            
            64,033
            
            
            22,816




F-38





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Workers ́
                profit sharing expense (income) (i)****Current**Inversiones
                Colquijirca S.A.
            
            
            15,753
            
            
            14,130
            
            
            2,465Compañía
                de Minas Buenaventura S.A.A.Current
                - legal
            
            
            -
            
            
            4,444
            
            
            1,733Current
                - without effect of unusual item
            
            
            10,322
            
            
            -
            
            
            -Compañía
                de Exploraciones, Desarrollo eInversiones
                Mineras S.A.C – Cedimin S.A.C.
            
            
            727
            
            
            374
            
            
            168Consorcio
                Energético de Huancavelica S.A.
            
            
            164
            
            
            127
            
            
            67Inversiones
                Mineras del Sur S.A. (ii)
            
            
            -
            
            
            -
            
            
            1,038Other
            
            
            270
            
            
            61
            
            
            3527,236
            
            
            19,136
            
            
            5,506**Deferred**Compañía
                de Minas Buenaventura S.A.A.
            
            
            (6,204
            )
            
            (4,030
            )
            
            (2,474
            )Inversiones
                Colquijirca S.A.
            
            
            (936
            )
            
            (811
            )
            
            (105
            )Inversiones
                Mineras del Sur S.A. (ii)
            
            
            -
            
            
            -
            
            
            (283
            )Other
            
            
            (165
            )
            
            (24
            )
            
            (51
            )(7,305
            )
            
            (4,865
            )
            
            (2,913
            )**Total**
            
            
            19,931
            
            
            14,271
            
            
            2,593





(i)
            According
                to Peruvian law, mining companies with more than 20 employees must
                have an
                workers ́ profit sharing plan equivalent to 8 percent of annual taxable
                income. As of December 31, 2007, 2006 and 2005, S.M.R.L. Chaupiloma
                Dos de
                Cajamarca, Contacto Corredores de Seguros S.A. and Compañía Minera Condesa
                S.A. had less than 20 employees.





(ii)
            The
                current and deferred portions of the Inversiones Mineras del Sur
                S.A.
                provisions for income tax and workers ́ profit sharing for 2006 are shown
                as part of Compañía de Minas Buenaventura S.A.A., as a result of the
                merger explained in note 2.





(c)
            During
                the years 2007, 2006 and 2005, the provisions posted for workers ́ profit
                sharing and income tax in the Statement of Income were determined
                as
                follows:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Income
                before workers ́ profit sharing and income tax**
            
            
            435,056
            
            
            594,508
            
            
            333,777Combined
                legal rate
            
            
            35.60
            %
            
            35.60
            %
            
            35.60
            %**Workers ́
                profit sharing and income tax expense according to combined legal
                rate**
            
            
            154,880
            
            
            211,645
            
            
            118,825**Permanent
                differences:**Effect
                of share in affiliated companies
            
            
            (88,842
            )
            
            (111,488
            )
            
            (93,982
            )Gain
                (loss) on change in the fair value of gold certificates
            
            
            (1,825
            )
            
            1,731
            
            
            -Effect
                of the fair value of derivative contracts that were changed to commercial
                contracts
            
            
            -
            
            
            (27,563
            )
            
            (18,585
            )Effect
                of the fair value of derivative financial instruments
            
            
            -
            
            
            4,723
            
            
            9,465Other
                permanent items
            
            
            (307
            )
            
            (744
            )
            
            9,686(90,974
            )
            
            (133,341
            )
            
            (93,416
            )**Total**
            
            
            63,906
            
            
            78,304
            
            
            25,409




F-39


**27.**
            **Basic
                and diluted earnings per share**





The
      table
      below presents the computation of basic and diluted earnings per share for
      the
      years 2007, 2006 and 2005:





**2007**
            
            **2006**
            
            **2005**Net
                income (numerator) – US$
            
            
            274,761,000
            
            
            428,057,000
            
            
            288,397,000Shares
                (denominator)
            
            
            127,221,164
            
            
            127,221,164
            
            
            127,229,844Basic
                and diluted earnings per share– US$
            
            
            2.16
            
            
            3.36
            
            
            2.27





The
      number of shares used as the denominator for computing the basic and diluted
      earnings per share for the years ended December 31, 2007, 2006 and 2005 was
      determined as follows:





**2007**
            
            **2006**
            
            **2005**Common
                shares
            
            
            137,444,962
            
            
            137,444,962
            
            
            137,444,962Investment
                shares
            
            
            372,320
            
            
            372,320
            
            
            372,320137,817,282
            
            
            137,817,282
            
            
            137,817,282Less
                - Treasury shares
            
            
            (10,596,118
            )
            
            (10,596,118
            )
            
            (10,596,118
            )127,221,164
            
            
            127,221,164
            
            
            127,221,164Weighted
                average number of shares outstanding
            
            
            127,221,164
            
            
            127,221,164
            
            
            127,229,844





**28.**
            **Disclosure
                of information on segments**





International
      Accounting Standard (IAS) 14 requires that corporations present financial
      information by line of business and by geographic area. Corporations should
      take
      into account their organizational structure and internal reporting system to
      identify reportable segments. A business segment is a component of a corporation
      that provides a single product or service or a group of related products and
      services and that is subject to risks and returns that are different from those
      of other business segments. A geographic segment is a component of a corporation
      that provides products and services within a particular economic ambit and
      that
      is subject to risks and returns that are different from those of components
      operating in other economic ambits.





The
      Company’s most important line of business is mining, which activities are
      carried out through eight companies. Management believes that these companies
      can be combined in a single segment (mining) due to the fact that they show
      similar financial performance and characteristics as far as the nature of its
      products, the nature of the production process, the class of customers and
      the
      legal framework. The electricity, mining consultancy and insurance segments
      are
      not relevant for purposes of assessing the course of the business; thus
      Management believes that the Company’s only reportable segment is mining.





The
      Company’s  geographic
      segments have been determined based on the location of its assets: Peru. Sales
      to customers abroad are disclosed in geographic segments based on the geographic
      location of its customers.





**29.**
            **Derivative
                Financial Instruments**





*Derivative
      contracts -*


In
      March
      2006, Buenaventura completed the conversion of the gold derivative contracts
      that it held as of December 31, 2005 to normal sales contracts (for 340,000
      ounces of gold). The losses resulting from these contracts, during the time
      that
      they were in effect, were US$13,268,000 in 2006 and US$26,588,000 in 2005.





As
      of
      December 31, 2007, Buenaventura held put option contracts (gold convertible
      put
      option contracts), which grant it the right to sell 172,500 ounces of gold
      at an
      average price of US $345 per ounce, depending on certain market conditions.
      These contracts have different expiries through July 2011; their fair value
      was
      less than US$1,000 as of December 31, 2007.




F-40


During
      the year 2007, El Brocal entered into price-hedge contracts to cover the future
      flows from its sales. The critical terms of these hedge operations have been
      negotiated with brokers so that they coincide with the negotiated terms of
      the
      commercial contracts to which they are related. The hedge of cash flows from
      sales to be made in the coming years has been assessed by El Brocal Management
      as being 100% effective. The effectiveness of hedge operations has been measured
      by means of the dollar-offset method since El Brocal management believes that
      it
      is the method that best reflects the objective of managing risk in relation
      to
      hedge. In 2007, El Brocal posted a credit of US$7,964,000 to the “Unrealized
      gain on derivative financial instruments” equity account due to the changes in
      fair value occurring this year. This amount, net of the deferred income tax
      and
      workers ́ profit sharing amounting to US$2,835,000, is presented separately in
      the *Unrealized
      loss on derivative financial instruments* equity
      account.





In
      2007,
      El Brocal recognized losses of US $454,000 in relation to hedge transactions
      settled in this period. These amounts are included in the *Net
      sales* caption
      of the consolidated statement of income.





The
      table
      below presents the hedge instruments held by the El Brocal subsidiary as of
      December 31, 2007:





**Metal**
            
            **Broker**
            
            **Amount**
            
            **Fixed**
              **Price**
            
            **Period**
            
            **Fair**
              **value**US$(000)
            
            
            
            US$(000)Zinc
            
            Sempra Metals Limited
            
            6,000 MT
            
            3,050
            
            July 2008 - June 2009
            
            4,049Zinc
            
            Standard Bank
            
            1,500 MT
            
            2,960
            
            July 2009 - December 2009
            
            896Zinc
            
            Standard Bank
            
            1,500 MT
            
            2,845
            
            January 2010 - June 2010
            
            733Lead
            
            BNP Paribas
            
            3,000 MT
            
            2,835
            
            January 2008 - December 2008
            
            912Lead
            
            Sempra Metals Limited
            
            2,100 MT
            
            2,710
            
            January 2009 - June 2009
            
            563Lead
            
            Sempra Metals Limited
            
            1,800 MT
            
            2,595
            
            July 2009 - December 2009
            
            384Lead
            
            Sempra Metals Limited
            
            2,100 MT
            
            2,525
            
            January 2010 - June 2010
            
            4277,964Non-current portion
            
            
            
            
            
            
            
            
            
            (5,035
            )Current
                portion
            
            
            
            
            
            
            
            
            
            2,929





*Embedded
      derivative due to changes of the prices in commercial contracts -*


The
      Company’s concentrate sales contain embedded derivatives that must be separated
      from the commercial contracts for accounting purposes, for which they are
      recognized as assets and liabilities at fair value in the balance sheet, see
      note 3(t).





As
      of
      December 31, 2007, the provisional settlements (in metric tons of silver, zinc,
      lead and copper) held by El Brocal and their periods for final liquidation
      are
      as follows:





**Quotations****Metal**
            
            **Amount**
            
            **Expiry
                2008**
            
            **Provisional**
            
            **Future**
            
            **Fair**
              **value**US$
            
            US$
            
            US$(000)Zinc
            
            85,784
                MT
            
            January
                - April
            
            Between
                2,241 and 3,830
            
            Between
                2,353 and 2,975
            
            (6,655
            )Lead
            
            35,030
                MT
            
            January
                - April
            
            Between
                1,915 and 3,729
            
            Between
                2,549 and 3,720
            
            959Copper
            
            2,586
                MT
            
            January
                - May
            
            Between
                6,715 and 8,008
            
            Between
                6,588 and 6,685
            
            (64
            )(5,760
            )Embedded
                derivative held by Buenaventura
            
            (224
            )Embedded
                derivative held as of December 31, 2007
            
            (5,984
            )





The
      fair
      value of this e mbedded **** derivative
      is a loss of US$5,984,000 and is shown in the *Sales* caption
      of the consolidated statement of income.





**30.**
            **Financial
                risk management**




The
      Company’s activities expose it to a variety of financial risks: market risks
      (including interest-rate risk, currency risk and the risk of changes in the
      prices of minerals), credit risk and liquidity risk. The Company’s
      risk-management program seeks to reduce the potential adverse effects on its
      financial performance.




F-41


Company
      Management controls and monitors the currency, interest-rate, credit and
      liquidity risks following policies approved by the Board of Directors. The
      most
      important aspects for Management of these risks are:





(a)
            Currency
                risk -


The
      Company purchases and sells its products and obtains financing for working
      capital and investments in U.S. dollars. The El Brocal subsidiary holds assets
      and liabilities denominated in Nuevos Soles; nevertheless Management believes
      that future fluctuations in the exchange rate for Peruvian currency against
      the
      US dollar will not significantly affect the results of the Company’s future
      operations and is currently not hedging such risk.





(b)
            Interest-rate
                risk -


The
      Company’s exposure to this risk arises from changes in the interest rates in its
      financial instruments and liabilities. The Company holds financial instruments,
      mostly time deposits, subject to a fixed interest rate, and financial
      liabilities at a floating interest rate. Nevertheless, the Company does not
      expect to incur material losses due to interest-rate risk because its time
      deposits have short-term maturities and are followed-up by the
      Management.





(c)
            Price
                risk -


As
      of
      December 31, 2007, the Company is exposed to risk in the change of prices on
      the
      minerals markets. For thus, the Company had partially committed its future
      production at fixed prices in various maturity dates but do not extend beyond
      December 31, 2012. Due to the current minerals quotation, the Company agreed
      with those customers with which it had commercial contracts at previously-agreed
      prices to sell the ounces of gold at market prices during the 2010 - 2012
      period, See note 34(a).


Management
      assesses the advisability of periodically executing or renegotiating fixed-price
      contracts.





(d)
            Credit
                risk -


The
      Company conducts commercial operations only with a portfolio of local and
      international customers of renowned credit and solvency. The Company’s policy is
      that all customers that wish to do business using credit are subject to
      credit-verification procedures. The Company’s greatest credit-risk exposure is
      the book value of its trade accounts receivable.





With
      respect to the credit risk arising from the Company’s other financial
      instruments (mainly the balances deposited in banks) the Company’s credit-risk
      exposure due to non-fulfillment by a counterpart would at most be the book
      value
      of those financial instruments.





(e)
            Liquidity
                risk -


The
      Company has sufficient funds to meet the commitments it has assumed; thus it
      believes that it has little liquidity risk.





**31.**
            **Fair
                value of financial instruments**





The
      information on the fair value of financial instruments, is presented below:





-
            Current
                assets and liabilities approximate their fair value due to the short-term
                maturities of these financial instruments.





-
            The
                fair value of long-term debt approximates its book value because
                it has
                recently been obtained.





-
            The
                fair value of the income deferred from sale of future production
                is a loss
                of US$452,700,000 as of December 31, 2007 (US$585,662,000 as of December
                31, 2006).





**32.**
            **Commitments
                and contingencies**





(a)
            Environmental
                -


The
      Company’s exploration and exploitation activities are subject to environmental
      protection standards, in compliance with which the Company has filed preliminary
      environment assessments and Environmental Adjustment and Management Programs
      (PAMA) for its mining units. The Ministry of Energy and Mines has approved
      the
      PAMA presented by the Company for its Uchucchacua, Julcani, Orcopampa and
      Huachocolpa mining units. As of December 31, 2006, the PAMA for the Uchucchacua,
      Julcani and Orcopampa mining units had been completed.




F-42


Law
      28090
      was promulgated on October 14, 2003 to rule the obligations and procedures
      that
      must be met by the holders of mining activities for the preparation, filing
      and
      implementation of Mine Closure Plans, as well as the establishment of the
      corresponding environmental guarantees to secure fulfillment of the investments
      that this includes, subject to the principles of protection, preservation and
      recovery of the environment. On August 15, 2005 the Law’s regulations were
      approved. According to their first transitory disposition, closure plans
      approved prior to enactment of the regulations must be adjusted to the new
      provisions within a term no greater than nine months starting from their
      publication. During the year 2006, in compliance with this Law, the Company
      completed the Mine Closure Plan assessments for its mining units. To the date
      of
      this report, these Mine Closure Plans are pending approval by the Ministry
      of
      Energy and Mines.





In
      2007
      the Company made disbursements of US$3,471,000 (US$3,130,000 and US$4,549,000
      during the years 2005 and 2006, respectively, related to activities included
      in
      the mine closure budgets. As of December 31, 2007, the Company has recognized
      liabilities amounting to US$57,889,000 (US$54,287,000 as of December 31, 2006)
      related to its obligations for the future closure of mining units, see note
      14.





On
      July
      2, 2004 the Congress of the Republic passed Law No. 28271 "Law to Regulates
      the
      Environmental Liabilities of Mining Activities". This Law has the objectives
      of
      ruling the identification of mining activity’s environmental liabilities and
      financing the remediation of the affected areas. According to this law,
      environmental liabilities refer to the impact caused to the environment by
      abandoned or inactive mining operations. On December 7, 2005, the corresponding
      regulations were approved, and mining companies were given one year to estimate
      the amount of their environmental liabilities and to file a mine closure plan.
      According to these regulations, the Ministry of Energy and Mines had to prepare
      a preliminary inventory of environmental liabilities, identifying one
      responsible party for each remediation area. This inventory was published by
      means of Ministerial Resolution No.290-2006 issued June 15, 2006 and the holders
      of the mining concessions were given sixty days to identify new liabilities
      and
      to make the corresponding objections.





The
      Company reconciled the areas identified by the Ministry of Energy and Mines
      to
      those identified in its own records and proceeded to estimate its liabilities,
      posting an operating expense of US$6,764,000 (US$4,980,000 related to the Santa
      Barbara unit and US$1,784,000 related to the Buenaventura operating units)
      as of
      December 31, 2006. The mine closure plans were prepared by an independent third
      party authorized by the Ministry of Energy and Mines. The Company expects to
      settle these liabilities over the next three years.





The
      Company believes that the liabilities posted are sufficient to comply with
      the
      environmental regulations in effect in Peru.





(b)
            Leased
                concessions -


*Sindicato
      Minero Orcopampa S.A.*


The
      Company pays 10% on the valued production of mineral obtained from the
      concessions leased by Sindicato Minero Orcopampa S.A. This concession is in
      force until the year 2043.





*Minera
      El Futuro de Ica S.R.L.:*


INMINSUR
      entered into a contract with Minera El Futuro de Ica S.R.L. to operate
      leased  mining
      concessions in the department of Arequipa. The contractual terms establish
      that
      the lease is subject to payment of a royalty equivalent to seven percent of
      the
      monthly sales value of concentrates. As part of the merger explained in note
      2,
      Buenaventura has assumed this contract, which will be in force until the year
      2015.





The
      total
      expense for mining royalties, amounting to US$16,377,000 in 2007 (US$13,160,000
      and US$7,910,000 in 2006 and 2005, respectively), is shown as an operating
      expense in the consolidated statement of income, see note 23.





(c)
            Legal
                and tax procedures -





**Buenaventura’s
      legal procedures**


Buenaventura
      is a party in legal procedures that have arisen in the normal course of its
      activities; nevertheless, in the opinion of Buenaventura’s Management, none of
      these procedures, in particular or as a whole, could result in material
      contingencies.





**Yanacocha’s
      judicial procedures -**


*Mercury
      spill in Choropampa*


In
      June
      2000 a Yanacocha contractor spilled approximately 11 liters of mercury near
      Choropampa, located 85 kilometers from Yanacocha. In August 2000, under protest
      Yanacocha paid the Peruvian Government (Ministry of Energy and Mines) a fine
      amounting to S/1,740,000 (approximately US$0.5 million). Yanacocha has made
      out-of-court settlements with the people affected by the incident for the
      purpose of carrying out a series of public works as compensation for the
      disadvantages and interruptions caused by the incident. Yanacocha, related
      companies and the others accused were sued by more than 1,100 Peruvian citizens
      and the Provincial Municipality of Cajamarca in the Denver District Federal
      Court in Colorado. This law suit seeks compensation for damages related to
      the
      incident. In February 2005, Yanacocha filed its answer with the Denver District
      Federal Court. The parties involved in this case agreed to submit the case
      to
      arbitration. In October 2007, the parties to the arbitration entered a
      court-approved settlement agreement, resolving most of these cases.




F-43


In
      May
      2002, additional judicial procedures related to the Choropampa incident were
      filed in two local courts in the city of Cajamarca, Peru, by more than 900
      Peruvian citizens. These suits seek the payment of US$229,400,000 and
      S/1,245,000 (equivalent to US$354,000). As of December 31, 2006, Yanacocha
      had
      reached settlements with approximately 40% of the plaintiffs for amounts
      considerably lower that those initially demanded in their complaints, thereby
      significantly reducing the contingency that these cases created.





In
      addition, more than half of the remaining plaintiffs in these cases had made
      out-of-court settlements with Yanacocha before filing their suits. Yanacocha
      has
      made motions to dismiss based on these previous settlements and has obtained
      favorable rulings from the Civil Part of the Cajamarca Superior Court. The
      plaintiffs have appealed many of these decisions before the Supreme Court,
      where
      they are currently pending.





As
      of
      December 31, 2007, Yanacocha had disbursed approximately US$37.1 million applied
      to public works, personal remediation efforts, compensation and to communities,
      as well as to fines, legal and notary fees and other related costs and expenses,
      which have been partially offset by approximately US$14.3 million in insurance
      proceeds. Yanacocha cannot predict the amount of additional expenses related
      to
      these claims.





*Conga
      -*


Yanacocha
      is involved in a dispute with the Provincial Municipality of Celendín with
      respect to the authority of that government to rule development of the Minas
      Conga ore deposit. In 2004, the Municipality of Celendín promulgated a decree
      declaring Minas Conga and its river basin a natural reserve and protected area.
      As in the case of Cerro Quilish (see the following paragraphs), Yanacocha has
      protested this decree arguing that, under Peruvian law, local governments lack
      the authority to create such areas, denying the rights granted by Yanacocha’s
      mining concessions. Based on the precedents established by the Constitutional
      Court, Yanacocha believes that a similar result will occur to protect its
      rights. In August 2007, a Peruvian Court of First Instance upheld Chaupiloma’s
      claim, stating that the Municipality of Celendín lacks the authority to create
      protected nature areas. The Municipality of Celendín has not appealed the
      ruling. Based on legal precedent established by Peru's Constitutional Tribunal
      and the foregoing resolution of Chaupiloma claim, it is reasonable to believe
      that Yanacocha’s mining rights will be upheld.





*Hacienda
      Los*  *Negritos
      -*


On
      October 21, 2002, Yanacocha was sued by Grimaldina Malpica Rojas, who was
      seeking: (i) to repossess the Los Negritos property, which is currently retained
      and occupied by Yanacocha, and (ii) payment for damages and injury amounting
      to
      US$65 million.





Yanacocha
      has opposed the complaint and all of its demands, requesting that the registry
      entry filed by the plaintiff in the Cajamarca public records registry be
      declared invalid. The law suit is currently pending resolution in the Cajamarca
      Trial Court. Yanacocha considers the plaintiff’s claim as baseless.





*Baños
      del Inca -*


On
      September 11, 2006, the Baños del Inca Municipality issued a declaration
      designating the area that includes the Carachugo and San José expansion projects
      as reserved and protected areas. Based on previous experience and the actions
      taken by the Constitutional Court (Peruvian Court of last resort in
      constitutional matters) with respect to the Cerro Quilish case, in which it
      was
      decided that such a declaration would not affect Yanacocha’s mining rights, the
      latter considers that the Baños del Inca declaration should not have any impact
      on Yanacocha’s legal rights to operate these concessions. The judicial procedure
      is currently pending resolution in the Lima Trial Court.





*San
      Pablo -*


On
      February 16, 2007 the Municipality of San Pablo promulgated a decree declaring
      Las Lagunas and Pozo Seco as a natural reserve and protected area. Based on
      the
      precedents established and the actions taken by the Constitutional Court with
      respect to the Cerro Quilish case, Yanacocha has opposed this decree arguing
      that, under Peruvian law, local governments lack the authority to create such
      areas, denying the rights granted by Yanacocha’s mining concessions. The trial
      court rejected the claim based on formal land. The court’s resolution has been
      appealed and is pending resolution in the Lima Appellate Court.




F-44


*Tax*  *procedures
      -*


As
      of
      December 31, 2007, the Tax Authority had audited the tax returns from the period
      2003 forward. As a result of these audits, the Tax Authority issued certain
      assessments, with which Yanacocha and its legal advisers do not agree. For
      2004
      and 2006, Yanacocha has paid US$11,500,000 and US$7,600,000, respectively,
      with
      the objective of preventing the accrual of interest and fines generated on
      the
      assessments proposed, which are of a timing nature. It should be mentioned
      that
      the assessments relate to the timing of certain deductible expenses. Yanacocha
      has posted a provision for financial purposes for an amount that represents
      Management’s best estimate of the income tax expense resulting from these tax
      audits. In the opinion of Yanacocha’s Management, resolution of the income tax
      controversy will not have a material effect on the financial statements or
      on
      Yanacocha’s liquidity.





*Other
      contingencies - Cerro Quilish*


Yanacocha
      has a dispute with the Provincial Municipality of Cajamarca with respect to
      that
      government body’s authority to rule the development of the Cerro Quilish gold
      deposit. Cerro Quilish is located on the same slope as the city of Cajamarca.
      The Municipality has promulgated a decree that declares Cerro Quilish and its
      slope as a protected area and natural reserve. Yanacocha has opposed this decree
      arguing that, under Peruvian law, local governments do not have the authority
      to
      create such areas. The Peruvian Constitutional Court heard the case in early
      2003, and on April 7, 2003 decided that Yanacocha had the right to explore
      this
      area in accordance with its mining concessions. The Court demanded that
      Yanacocha complete an environmental impact assessment conducted by independent
      certified organizations or entities before initiating any work in Cerro Quilish,
      and that it adopt the mitigation measures necessary to protect the quality
      and
      amount of water supplied to the City of Cajamarca. In July 2004, Yanacocha
      received a drilling permit and began its exploration activities in the Cerro
      Quilish deposit. In September 2004, city of Cajamarca residents blocked the
      highway between the city of Cajamarca and the mine to protest against these
      exploration activities. Yanacocha suspended all drilling activities in Cerro
      Quilish and the blockade ended. In November 2004, as an acknowledgement of
      community concerns, Yanacocha asked for and received a revocation of its
      drilling permit for Cerro Quilish. In this regard, Yanacocha continues to work
      to improve its relationship with the communities in the vicinity of Cajamarca.





(d)
            Guarantees
                granted -


On
      September 30, 2005, Cerro Verde signed several contracts with various export
      credit agencies and commercial banks in relation to a US$450-million financing
      for expansion of its operations. The financing received required establishing
      mortgages and liens on Cerro Verde’s assets, and also that Phelps Dodge,
      Sumitomo and Buenaventura comply with maintaining a minimum equity, which in
      the
      case of Buenaventura amounted to US$600 million. A company that fails to meet
      this condition would have to grant a letter of guarantee in favor of the
      representative of the banks that participated in the financing. Furthermore,
      the
      shares that Buenaventura held in Cerro Verde were pledged in favor of these
      banks.





In
      September 2007, Cerro Verde repaid the loan to the financial entities, and
      on
      October 25, 2007 the mortgages and liens were lifted.





**33.**
            **Transactions
                with affiliates**





The
      Company has carried out the following transactions with affiliates in the years
      2007, 2006 and 2005:





**S.M.R.L.
      Chaupiloma Dos de Cajamarca (“Chaupiloma”)**


This
      is
      the owner of the mining claims operated by Yanacocha, in consideration for
      which
      it receives royalties of three percent of the sales made by Yanacocha. In 2007,
      these royalties amounted to US$34,014,000 (US$48,475,000 and US$46,094,000
      in
      2006 and 2005, respectively) and is presented in the “Royalty income” caption in
      the consolidated statement of income.





**Compañía
      Minera Condesa S.A. (“Condesa ") -**


In
      2007,
      Yanacocha granted approximately US$43,650,000 (US$209,520,000 and US$76,955,000
      in 2006 and 2005, respectively) in cash dividends to Condesa.





**Sociedad
      Minera Cerro Verde S.A.A. ("Cerro Verde") -**


In
      2007,
      Buenaventura received the amount of US$114,694,000 (US$12,793,000 in the year
      2005) in cash dividends from Cerro Verde.





**Buenaventura
      Ingenieros S.A. ("Bisa") -**


Bisa
      renders engineering services to Yanacocha. The income related to these services
      amounted to approximately US$4,002,284 in 2007 (US$5,163,100 in 2006 and
      US$3,434,450 in the year 2005). These amounts are presented in the “Net sales”
caption of the consolidated statement of income.




F-45


**Consorcio
      Energético de Huancavelica S.A. ("Conenhua") -**


In
      November 2001, Conenhua entered into a contract with Yanacocha to provide
      electrical energy transmission and services for a term of ten years, for which
      an annual compensation of US$3.7 million was set. The income related to this
      service during the year 2007 amounted to approximately US$4,407,000
      (US$3,873,000 and US$3,877,000 in 2006 and 2005, respectively) and is presented
      in the “Net sales” caption of the consolidated statement of income.





As
      a
      result of the transactions indicated above and other minor ones, the Company
      has
      the following accounts receivable from affiliates:





**2007**
            
            **2006**US$(000)
            
            US$(000)Minera
                Yanacocha S.R.L.
            
            
            14,307
            
            
            11,329Other
            
            
            113
            
            
            38514,420
            
            
            11,714





**34.**
            **Subsequent
                Event**





(a)
            On
                January 24, and February 6 2008, Buenaventura agreed with those customers
                with which it had commercial contracts at previously-agreed prices
                to sell
                the ounces of gold at market prices during the 2010 - 2012 period.
                As a
                result of these agreements, Buenaventura has been freed from the
                obligation to sell 922,000 ounces of gold at agreed prices which
                will now
                be sold at the market price in effect on the date of each physical
                delivery. Buenaventura agreed to pay approximately US$517,025,000
                for
                these settlements. Buenaventura has made disbursements with a charge
                to
                results for the period and reversing the provision of US$102,008,000
                for
                deferred income from sale of future production held to these dates,
                with a
                credit to income of the period. The net loss of US$415,017,000 was
                recorded in the 2008 consolidated statement of
                income.





(b)
            The
                Mandatory annual Shareholders’ Meeting held March 27, 2008, agreed to
                increase the nominal value of the common and investment shares from
                S/4.00
                to S/20.00 each. For this, the Meeting approved the capitalization
                of
                retained earnings for the amount of S/2,108,219,000 (US$626,421,000)
                increasing the capital stock account and investment shares by
                US$576,610,000 and US$1,546,000,
                respectively.




In
        this meeting, the shareholders approved a subsequent two for one stock split.
        The Company expects that the stock split will be effected in July 2008, at which time holders of Common Shares,
        Investment Shares and ADSs will receive one additional Common Share, Investment
        Share or ADS, as the case may be, for each Common Share, Investment Share
        or ADS, as the case may be, held by such holder.  In connection with the
        stock split, bylaws have been amended to decrease the nominal par value of
        Common Shares and Investment Shares from S.20.00 to S/.10.00.




(c)
            On
                February 20, 2008, Buenaventura signed a Syndicate Bridge Loan Agreement
                for the amount of US$450 million with a syndicate of banks led by
                Banco de
                Credito del Peru (the agent bank). On May 21, 2008, in order to repay
                a
                US$450 million bridge loan that was used to finance the unwinding
                of
                Company’s gold hedge book in February 2008, Buenaventura borrowed US$450
                million, referred to as the Syndicated Term Loan, under a new Term
                Loan
                Agreement. Borrowing under the Syndicated Term Loan will bear interest
                at
                a rate per annum equal to LIBOR plus 2.25%, payable quarterly until
                maturity in May 2013. Obligations under the Syndicated Term Loan
                are
                guaranteed by Compañía
                Minera Condesa, S.A., Company’s wholly owned subsidiary. The term loan
                agreement governing the Syndicated Term Loan contains certain customary
                covenants and events of default.





**35.**
            **Summary
                of significant differences between accounting principles followed
                by the
                Company and U.S. generally accepted accounting principles**





**Differences
      in preparation**





The
      Company's consolidated financial statements have been prepared in accordance
      with Peruvian GAAP which differs in certain respects from U.S. GAAP. The effects
      of these differences are reflected in Note 36 and are principally related to
      the
      items discussed in the following paragraphs:





***Shares
      in Yanacocha and Cerro Verde***


Peruvian
      GAAP – In the consolidated financial statements, Yanacocha and Cerro Verde are
      accounted for by the equity method. The consolidated results and shareholders’
equity include the participation in Yanacocha and Cerro Verde which are obtained
      from their financial statements prepared following Peruvian GAAP, modified
      to
      recognize the current accounting policies of Buenaventura.





U.S.
      GAAP
– The consolidated results and shareholders’ equity under U.S. GAAP include the
      shares in Yanacocha and Cerro Verde obtained from those entities financial
      statements prepared in accordance with U.S. GAAP.




F-46


***Deferred
      Income Tax***


Peruvian
      GAAP – Under paragraph 70 of IAS 1, Presentation of Financial Statements,
      deferred tax assets and liabilities are always classified as non-current assets
      or liabilities.





U.S.GAAP
      – Deferred income tax liabilities and assets shall be classified as current or
      non-current based on the classification of the related asset or liability for
      financial reporting purposes.





Under
      Peruvian GAAP, specifically paragraph 41 of IAS 12 – Income Taxes, the Company
      must consider the effect on the deferred income tax and workers’ profit sharing
      generated by maintaining book basis in U.S. dollars and a tax basis in Nuevos
      Soles (for tax purposes, the functional currency is Nuevos Soles). US GAAP,
      FAS
      109 - Accounting for Income Taxes, prohibits the recognition of a deferred
      tax
      liability or asset for differences related to non-monetary assets and
      liabilities that, under FASB 52 “Foreign Currency Translation”, are remeasured
      from the local currency into the functional currency using historical exchange
      rates and that result from changes in exchange rates. Therefore, the deferred
      income tax recorded under Peruvian GAAP has been included as a reconciliation
      item, see note 36.





***Workers'
      profit sharing***


Peruvian
      GAAP – Workers' profit sharing expense (income) is separately presented in the
      consolidated statements of income in a similar way as income tax expense
      (income). Also, deferred workers' profit sharing asset (liability) is separately
      presented in the consolidated balance sheets in a similar way as deferred income
      tax assets (liabilities).





U.S.
      GAAP
– The practice is to recognize the workers' profit sharing expense (income) as
      part of operating expense (income). Also, deferred workers' profit sharing
      assets (liabilities) shall be classified as current or non-current based on
      the
      classification of the related assets or liability for financial reporting
      purposes.





See
      also
      discussion on recognition of deferred tax liability or asset arising from
      remeasurement from the local currency into the functional currency in the
      section Deferred Income Tax above.





***Guarantees***


Peruvian
      GAAP – Under Peruvian GAAP, when an enterprise issues a guarantee, this
      commitment has to be disclosed in the notes to financial statements. A liability
      related to the guarantee will be recognized when it is probable that resources
      of the Company will be required to settle the obligation and it can be
      reasonably estimated.





U.S.
      GAAP
– Under U.S. GAAP, FIN 45 - Guarantor's Accounting and Disclosure Requirements
      for Guarantees, requires that upon issuance of certain guarantees, a guarantor
      must recognize a liability for the fair value of an obligation assumed under
      the
      guarantee.





As
      a
      guarantor, Buenaventura was involved in financial guarantees related to Cerro
      Verde debt-financing facility, see note 33(d) to the consolidated financial
      statements. As of December 31, 2006 and 2005, under U.S. GAAP, such guarantees
      should be accounted for at fair value, which was deemed
      insignificant.


In
      September 2007, Cerro Verde repaid the loan to the financial entities, and
      on
      October 25, 2007 the mortgages and liens were lifted. For this reason, there
      is
      no US GAAP difference in connection with this guarantee.





***Equity
      accounts translation***


Peruvian
      GAAP – Under Peruvian GAAP, based on IAS 21 - The Effects of Changes in Foreign
      Exchange Rates, when there
      is
      a change in an entity’s functional currency,the
      entity shall apply the translation procedures applicable to the new functional
      currency prospectively from the date of the changeusing
      the
      exchange rate at the date of the change. The resulting translated amounts for
      non-monetary items are treated as their historicalcost.
      Therefore, for Peruvian GAAP purposes, the Company has translated equity
      accounts into U.S. dollars using the exchange rate as of December 31,
      2005.





U.S.
      GAAP
– Under U.S. GAAP, based on FAS 52 - Foreign Currency Translation, equity
      accounts should be translated into U.S. dollars using historical exchange rates.
      If the Company had applied historical exchange rates to translate its equity
      accounts, the detail of equity accounts as of December 31, 2007 and 2006, would
      have been the following:


F-47




**2007**
            
            **2006****U.S. GAAP**
            
            **Peruvian GAAP**
            
            **U.S. GAAP**
            
            **Peruvian GAAP**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)Capital
                stock, net of treasury shares for US$14,474,000 in 2007 and
                2006
            
            
            134,645
            
            
            173,930
            
            
            134,645
            
            
            173,930Investment
                shares, net of treasury shares for US$37,000 in 2007 and
                2006
            
            
            357
            
            
            473
            
            
            357
            
            
            473Additional
                capital
            
            
            176,633
            
            
            177,713
            
            
            176,633
            
            
            177,713Legal
                reserve and other reserves
            
            
            37,313
            
            
            37,948
            
            
            37,313
            
            
            37,948Retained
                earnings
            
            
            1,029,687
            
            
            1,056,937
            
            
            874,775
            
            
            852,148Cumulative
                translation loss
            
            
            (19,323
            )
            
            (34,075
            )
            
            (19,323
            )
            
            (34,075
            )Unrealized
                gain on valuation of derivative financial instruments, net
            
            
            1,518
            
            
            1,518
            
            
            -
            
            
            -Cumulative
                unrealized gain on investments in shares carried at fair
                value
            
            
            154
            
            
            158
            
            
            928
            
            
            932**Total
                shareholders ́ equity, net (not including minority interest under Peruvian
                GAAP)**
            
            
            1,360,984
            
            
            1,414,602
            
            
            1,205,328
            
            
            1,209,069





***Acquisition
      of minority interests***


Peruvian
      GAAP – In November 30, 2006, Buenaventura acquired a minority interest in its
      subsidiary INMINSUR. IFRS 3, Business Combinations, states that the acquisition
      of a minority interest is not a business combination; therefore, Buenaventura
      has recorded the difference between the cost of acquisition and the book value
      of the minority interest acquired as Mining Rights (the “Parent entity extension
      method”). This is an acceptable method of accounting for acquisition of minority
      interests.





US
      GAAP –
Under SFAS No. 141, Business Combinations, the acquisition of some or all of
      the
      non-controlling interests in a subsidiary is not a business combination.
      However, paragraph 14 of this Statement specifies that such acquisition -
      whether acquired by the parent, the subsidiary itself, or another affiliate
      -
      shall be accounted for using the purchase method. Any difference between the
      cost of acquisition and the fair value of the minority interest acquired is
      recorded as Mining Right. The difference between the book value and the fair
      value of the net assets acquired in INMINSUR is immaterial and is not presented
      as a reconciliation item between Peruvian GAAP and US GAAP.





**Differences
      in presentation**


***Presentation
      of minority interests***


Under
      Peruvian GAAP, based on IAS 1 - Presentation of Financial Statements, minority
      interests should be presented within equity, but separate from the parent
      shareholders' equity.





Under
      U.S. GAAP, minority interests shall be presented outside equity, between
      liabilities and equity. Consequently, minority interest has been included as
      a
      reconciliation item, see note 36.





***Presentation
      of royalties and unusual item related to net loss on release of fixed-price
      component in commercial contracts***





Peruvian
      GAAP – Royalties granted to the Peruvian State and third parties amounting to
      US$33,978,000, US$24,420,000 and US$12,209,000 in 2007, 2006 and 2005,
      respectively, as well as the unusual item related to net loss on release of
      fixed-price component in commercial contracts amounting to US$185,922,000 in
      2007, are presented as part of operating expenses.





US
      GAAP –
The royalties above mentioned must be presented as part of operating costs,
      affecting the gross margin. The presentation of the loss on the derivative
      contracts as unusual item is not permitted.





**36.**
            **Reconciliation
                between net income and shareholders' equity determined under Peruvian
                GAAP
                and U.S. GAAP**





Until
      December 31, 2005, the Company had designated Peruvian Nuevos Soles as its
      functional and reporting currency. Effective January 1, 2006, the functional
      and
      reporting currency of the Company is U.S. dollar for Peruvian GAAP and U.S.
      GAAP
      purposes. The methodology of translation from Nuevos Soles into U.S. dollars
      and
      the reasons supporting this change are described in note 3(f) of the
      consolidated financial statements.




F-48


The
      following is a summary of the adjustments to net income for the years ended
      December 31, 2007, 2006 and 2005 and to shareholders' equity as of December
      31,
      2007 and 2006 that would be required if U.S. GAAP had been applied instead
      of
      Peruvian GAAP in the consolidated financial statements:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Net
                Income**
            
            
            274,761
            
            
            428,057
            
            
            288,397**Items
                increasing (decreasing) reported net income**Deferred
                Income tax and workers ́ profit sharing arising from having a functional
                currency different from the currency used for tax purposes
            
            
            (4,968
            )
            
            (3,381
            )
            
            -Share
              in investment in affiliate
            
            
            (44,356
            )
            
            -
            
            
            -Other
            
            
            32
            
            
            32
            
            
            142Deferred
                Income tax and workers’ profit sharing assets, net
            
            
            (11
            )
            
            (11
            )
            
            (51
            )**Net
                adjustments**
            
            
            (49,303
            )
            
            3,360
            
            
            91**Net
                income under U.S. GAAP**
            
            
            225,458
            
            
            424,697
            
            
            288,488**Other
                comprehensive income (loss)**Investments
                in shares held at fair value
            
            
            61
            
            
            28
            
            
            (14
            )Financial
                Investments maintained at fair value
            
            
            798
            
            
            834
            
            
            -Realization
                of accumulated gain on financial instruments
                available-for-sale
            
            
            (1,633
            )
            
            -
            
            
            -Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            19,896Gain
                (loss) on translation to U.S. dollar
            
            
            -
            
            
            -
            
            
            432Unrealized
                gain on derivate financial instruments held by subsidiary
            
            
            1,518
            
            
            -
            
            
            303Other
            
            
            -
            
            
            374
            
            
            -**Total
                comprehensive income under U.S. GAAP**
            
            
            226,202
            
            
            425,933
            
            
            309,105





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Accumulated
                other comprehensive income (loss) under U.S. GAAP**Investments
                in shares maintained at fair value
            
            
            158
            
            
            98
            
            
            70Financial
                Investments maintained at fair value
            
            
            -
            
            
            834
            
            
            -Cumulative
                translation loss
            
            
            (34,075
            )
            
            (34,075
            )
            
            (34,075
            )Unrealized
                gain on derivate financial instruments held by subsidiary
            
            
            1,518
            
            
            -
            
            
            -Other
            
            
            643
            
            
            643
            
            
            269**Total
                accumulated other comprehensive loss under U.S.
                GAAP**
            
            
            (31,756
            )
            
            (32,500
            )
            
            (33,736
            )**Basic
                and diluted income per share under U.S. GAAP**
            
            
            1.78
            
            
            3.34
            
            
            2.27








**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Shareholders ́
                equity according to the financial statements under Peruvian
                GAAP**
            
            
            1,580,216
            
            
            1,300,506
            
            
            862,959Minority
                interest presented within equity under Peruvian GAAP
            
            
            (165,614
            )
            
            (91,437
            )
            
            (23,416
            )Share
              in investment in affiliate
            
            
            (44,356
            )
            
            -
            
            
            -Deferred
                income tax and worker's profit sharing arising from having a functional
                currency different from the currency used for tax purposes
            
            
            (8,923
            )
            
            (3,381
            )
            
            -Other
            
            
            (527
            )
            
            (559
            )
            
            (591
            )Deferred
                income tax and workers' profit sharing assets, net
            
            
            188
            
            
            199
            
            
            210**Shareholders ́
                equity according to the financial statements under U.S.
                GAAP**
            
            
            1,360,984
            
            
            1,205,328
            
            
            839,162




F-49


The
      following is a roll forward of the components of shareholders' equity under
      U.S.
      GAAP:





US$(000)**Shareholders ́
                equity under U.S. GAAP at January 1, 2005**
            
            
            574,649Net
                Income in accordance with U.S. GAAP
            
            
            288,488Declared
                and paid dividends
            
            
            (44,304
            )Fair
                value of derivative instruments classified as hedging instruments
                held by
                El Brocal
            
            
            303Investments
                shares acquired by Subsidiary
            
            
            (288
            )Cumulative
                translation adjustment
            
            
            19,896Gain
                on translation to U.S. dollar
            
            
            432Investments
                in shares held at fair value
            
            
            (14
            )**Shareholders ́
                equity under U.S. GAAP at December 31, 2005**
            
            
            839,162Net
                Income in accordance with U.S. GAAP
            
            
            424,697Declared
                and paid dividends
            
            
            (59,767
            )Other
            
            
            374Financial
                Investments held at fair value
            
            
            834Investments
                in shares held at fair value
            
            
            28**Shareholder's
                equity under U.S. GAAP at December 31, 2006**
            
            
            1,205,328Net
                Income in accordance with U.S. GAAP
            
            
            225,458Declared
                and paid dividends
            
            
            (69,972
            )Financial
                Investments held at fair value
            
            
            (835
            )Investments
                in shares held at fair value
            
            
            61Unrealized
                gain on derivate financial instruments held by subsidiary
            
            
            1,518Other
            
            
            (574
            )**Shareholder's
                equity under U.S. GAAP at December 31, 2007**
            
            
            1,360,984





***FASB
      Interpretation N° 48, “Accounting for Uncertainty in Income Taxes” (FIN 48)***


On
      January 1, 2007 the Company adopted FASB Interpretation N° 48, “Accounting for
      Uncertainty in Income Taxes” (FIN 48) an interpretation of FASB Statement N°
109, “Accounting for Income Taxes”. FIN 48 clarifies the accounting and
      reporting for uncertainties in the application of the income tax laws to the
      Company’s operation. The interpretation prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. FIN 48 also
      provides guidance on derecognition, classification, interest and penalties,
      accounting in interim periods, disclosure and transition. The adoption of FIN
      48
      had no impact on the Company’s financial statements.





**37.**
            **Recently
                Issued Accounting Pronouncements and
                Developments**





***Business
      Combinations***


In
      December 2007, the FASB issued FASB Statement No. 141(R), *“Business
      Combinations,”* which
      amends SFAS No. 141, and provides revised guidance for recognizing and
      measuring identifiable assets and goodwill acquired, liabilities assumed, and
      any noncontrolling interest in the acquiree. It also provides disclosure
      requirements to enable users of the financial statements to evaluate the nature
      and financial effects of the business combination. SFAS No. 141(R) is
      effective for the Company’s fiscal year beginning January 1, 2009 and is to
      be applied prospectively. Early adoption is prohibited. The Company is currently
      evaluating the potential impact of adopting this statement on the Company’s
      consolidated financial position, results of operations or cash flows.




F-50


***Noncontrolling
      Interests in Consolidated Financial Statements***


In
      December 2007, the FASB issued FASB Statement No. 160, *“Noncontrolling
      Interests in Consolidated* Financial *Statements- an amendment of ARB No. 51”* which
      establishes accounting and reporting standards pertaining to ownership interests
      in subsidiaries held by parties other than the parent, the amount of net income
      attributable to the parent and to the noncontrolling interest, changes in a
      parent’s ownership interest, and the valuation of any retained noncontrolling
      equity investment when a subsidiary is deconsolidated. SFAS No. 160
      also establishes disclosure requirements that clearly identify and distinguish
      between the interests of the parent and the interests of the noncontrolling
      owners. SFAS No. 160 is effective for the Company’s fiscal year
      beginning January 1, 2009 with early adoption prohibited. The Company is
      currently evaluating the potential impact of adopting this statement on the
      Company’s consolidated financial position, results of operations or cash flows.





***Accounting
      for Income Tax Benefits of Dividends on Share-Based Payment Awards***


In
      June
      2007, the EITF reached consensus on Issue No. 06-11, *“Accounting
      for Income Tax Benefits of Dividends on Share-Based Payment
      Awards.”* EITF
      Issue No. 06-11 requires that the tax benefit related to dividend and
      dividend equivalents paid on equity-classifed nonvested shares and nonvested
      share units, which are expected to vest, be recorded as an increase to
      additional paid-in capital. EITF Issue No. 06-11 is to be applied
      prospectively for tax benefits on dividends declared in the Company’s fiscal
      year beginning January 1, 2008. The Company is currently evaluating the
      impact that the adoption of this statement will have on the Company’s
      consolidated financial position, results of operations or cash flows.





***Fair
      Value Option of Financial Assets and Liabilities***


In
      February 2007, the FASB issued FASB Statement No. 159, *“The
      Fair Value Option for Financial Assets and Financial
      Liabilities”* ( *“FAS
      No. 159”* ).
      FAS
      No. 159 permits entities to choose to measure many financial instruments and
      certain other items at fair value, with the objective of improving financial
      reporting by mitigating volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. The provisions of FAS No. 159 are effective for the
      Company’s fiscal year beginning January 1, 2008. The Company is currently
      evaluating the impact, if any, of the adoption of FAS No. 159 the Company’s
      consolidated financial results.





In
      September 2006, the FASB issued FASB Statement No. 157, *“Fair
      Value Measurements”* ( *“FAS
      No. 157”* ).
      FAS
      No 157 defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles, and expands disclosures about
      fair
      value measurements. The provisions of FAS No 157 are effective for the
      Company’s fiscal year beginning January 1, 2008. The Company is currently
      evaluating the impact, if any, of the adoption of FAS No. 159 the Company’s
      consolidated financial results.





***Hierarchy
      of Generally Accepted Accounting Principles***


In
      May
      2008, the FASB issued FASB Statement No. 162, “Hierarchy of Generally Accepted
      Accounting Principles”. FAS 162 identifies the sources of accounting principles
      and the framework for selecting the principles to be used in the preparation
      of
      financial statements of nongovernmental entities that are presented in
      conformity with generally accepted accounting principles (GAAP) in the United
      States (the GAAP hierarchy).


This
      Statement is effective 60 days following the SEC’s approval of the Public
      Company Accounting Oversight Board amendments to AU Section 411, The Meaning
      of
      Present Fairly in Conformity With Generally Accepted Accounting Principles.
      The
      Company is currently evaluating the impact, if any, of the adoption of FAS
      No. 159 the Company’s consolidated financial results.




F-51




**MINERA
      YANACOCHA S.R.L.**


FINANCIAL
      STATEMENTS


DECEMBER 31,
      2007 AND 2006




CONTENTS
            
            PageReport
                of Independent Registered Public Accounting Firm
            
            F-53Statements
                of income for each of the three years ended December 31,
                2007
            
            F-54Balance
                sheets as of December 31, 2007 and 2006
            
            F-55Statements
                of cash flows for each of the three years ended December 31,
                2007
            
            F-56Statements
                of changes in partners’ equity for each of the three years ended December
                31, 2007
            
            F-57Notes
                to the financial statements
            
            F-58




F-52




***PricewaterhouseCoopers***
            Dongo-Soria
                Gaveglio y AsociadosSociedad
                CivilFirma
                Miembro de PricewaterhouseCoopers





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




February
      28, 2008




To
      the
      Partners and the Executive Committee of




**Minera
      Yanacocha S.R.L.**




In
      our
      opinion, the accompanying balance sheets and the related statements of income,
      changes in partners’ equity and cash flows, present fairly, in all material
      respects, the financial position of **Minera
      Yanacocha S.R.L.** at
      December 31, 2007 and 2006, and the results of its operations and its cash
      flows
      for each of the three years in the period ended December 31, 2007 in conformity
      with accounting principles generally accepted in the United States of America.
      These financial statements are the responsibility of the Company’s management.
      Our responsibility is to express an opinion on these financial statements based
      on our audits. We conducted our audits of these financial statements in
      accordance with the standards of the Public Company Accounting Oversight Board
      (United States). Those standards require that we plan and perform the audit
      to
      obtain reasonable assurance about whether the financial statements are free
      of
      material misstatement. An audit of financial statements includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, and evaluating the overall financial statement presentation.
      We believe that our audits provide a reasonable basis for our
      opinion.




/S/ DONGO-SORIA
      GAVEGLIO Y ASOCIADOS




Countersigned
      by




/S/
      FERNANDO GAVEGLIO




Fernando
      Gaveglio




Peruvian
      Public Accountant




Registration
      No.19847




F-53




**STATEMENTS
      OF INCOME**





**Years Ended December 31,****2007**
            
            **2006**
            
            **2005****(dollars in thousands)**Revenues
            
            $
            1,093,347
            
            $
            1,543,212
            
            $
            1,490,402Costs
                and expensesCosts
                applicable to sales (exclusive of depreciation, depletion and amortization
                shown separately below)
            
            
            557,140
            
            
            515,883
            
            
            507,806Depreciation,
                depletion and amortization
            
            
            159,148
            
            
            171,730
            
            
            193,587Exploration
                and advanced projects
            
            
            28,234
            
            
            32,254
            
            
            32,884Other
                expense, net (Note 3)
            
            
            32,990
            
            
            66,379
            
            
            (1,216
            )777,512
            
            
            786,246
            
            
            733,061Other
                income (expense), netOther
                income (Note 4)
            
            
            15,877
            
            
            19,202
            
            
            4,774Interest
                expense, net of capitalized interest of US$11,696, US$4,146 and US$1,390,
                respectively
            
            
            (3,179
            )
            
            (12,377
            )
            
            (1,234
            )12,698
            
            
            6,825
            
            
            3,540Income
                before income taxes
            
            
            328,533
            
            
            763,791
            
            
            760,881Income
                tax expense (Note 5)
            
            
            (107,044
            )
            
            (238,343
            )
            
            (235,407
            )Net
                income
            
            $
            221,489
            
            $
            525,448
            
            $
            525,474





The
      accompanying notes are an integral part of these financial
      statements.




F-54




**BALANCE
      SHEETS**





**At December 31,****2007**
            
            **2006****(dollars in thousands)****ASSETS**Cash
                and cash equivalents
            
            $
            288,376
            
            $
            379,923Accounts
                receivable (Note 6)
            
            
            57,506
            
            
            29,501Due
                from related parties (Note 12)
            
            
            152
            
            
            121Inventories
                (Note 7)
            
            
            85,523
            
            
            85,018Stockpiles
                and ore on leach pads (Note 8)
            
            
            86,624
            
            
            82,196Deferred
                income tax assets (Note 5)
            
            
            8,746
            
            
            8,141Other
                current assets (Note 9)
            
            
            14,385
            
            
            13,182Current
                assets
            
            
            541,312
            
            
            598,082Property,
                plant and mine development, net (Note 10)
            
            
            1,182,774
            
            
            1,045,357Long-term
                stockpiles and ore on leach pads (Note 8)
            
            
            165,701
            
            
            175,317Other
                long-term assets
            
            
            6,097
            
            
            6,097Total
                assets
            
            $
            1,895,884
            
            $
            1,824,853**LIABILITIES**Current
                portion of long-term debt (Note 11)
            
            $
            22,724
            
            $
            10,345Accounts
                payable
            
            
            35,234
            
            
            32,415Due
                to related parties (Note 12)
            
            
            15,827
            
            
            13,191Workers’
                participation (Note 13)
            
            
            24,530
            
            
            53,228Income
                taxes payable
            
            
            4,777
            
            
            24,107Other
                current liabilities (Note 14)
            
            
            65,626
            
            
            92,731Current
                liabilities
            
            
            168,718
            
            
            226,017Long-term
                debt (Note 11)
            
            
            195,387
            
            
            189,655Reclamation
                and remediation liabilities (Note 15)
            
            
            146,367
            
            
            136,108Deferred
                workers’ participation (Note 13)
            
            
            9,355
            
            
            11,416Deferred
                income tax liabilities (Note 5)
            
            
            44,728
            
            
            51,235Other
                long-term liabilities
            
            
            5,004
            
            
            14,013Total
                liabilities
            
            
            569,559
            
            
            628,444Commitments
                and contingencies (Note 19)**PARTNERS’
                EQUITY**Partners’
                contributions
            
            
            398,216
            
            
            208,616Additional
                contributions
            
            
            226
            
            
            226Restricted
                earnings
            
            
            -
            
            
            189,600Retained
                earnings
            
            
            927,883
            
            
            797,967Total
                partners’ equity (Note 16)
            
            
            1,326,325
            
            
            1,196,409Total
                liabilities and partners’ equity
            
            $
            1,895,884
            
            $
            1,824,853





The
      accompanying notes are an integral part of these financial
      statements.




F-55




**STATEMENTS
      OF CASH FLOWS**





**Years Ended December 31,****2007**
            
            **2006**
            
            **2005****(dollars in thousands)**Operating
                activities:Net
                income
            
            $
            221,489
            
            $
            525,448
            
            $
            525,474Adjustments
                to reconcile net income to net cash provided from operating
                activitiesDepreciation,
                depletion and amortization
            
            
            159,148
            
            
            171,730
            
            
            193,587Deferred
                income taxes
            
            
            (6,173
            )
            
            (15,263
            )
            
            (9,053
            )Deferred
                workers’ participation
            
            
            (2,061
            )
            
            (4,944
            )
            
            (3,886
            )Accretion
                of reclamation obligations
            
            
            9,685
            
            
            7,918
            
            
            7,059Other
                operating adjustments
            
            
            15,510
            
            
            3,310
            
            
            (12,381
            )(Increase)
                in operating assets:Inventories,
                stockpiles and ore on leach pads
            
            
            (23,139
            )
            
            (73,261
            )
            
            (45,398
            )Other
                assets
            
            
            (25,499
            )
            
            (1,445
            )
            
            (8,079
            )(Decrease)
                increase in operating liabilities:Accounts
                payable and other accrued liabilities
            
            
            (72,271
            )
            
            31,821
            
            
            24,803Reclamation
                liabilities
            
            
            (7,701
            )
            
            (8,133
            )
            
            (6,721
            )Net
                cash provided from operations
            
            
            268,988
            
            
            637,181
            
            
            665,405Investing
                activities:Additions
                to property, plant and mine development
            
            
            (252,725
            )
            
            (269,293
            )
            
            (225,846
            )Proceeds
                from sale of assets
            
            
            2,556
            
            
            935
            
            
            2,289Net
                cash used in investing activities
            
            
            (250,169
            )
            
            (268,358
            )
            
            (223,557
            )Financing
                activities:Proceeds
                from debt, net
            
            
            -
            
            
            198,785
            
            
            -Repayments
                of debt
            
            
            (10,345
            )
            
            (3,160
            )
            
            (34,157
            )Distributions
                to partners
            
            
            (100,000
            )
            
            (480,000
            )
            
            (180,000
            )Change
                in restricted cash
            
            
            (21
            )
            
            (36
            )
            
            (1,978
            )Net
                cash used in financing activities
            
            
            (110,366
            )
            
            (284,411
            )
            
            (216,135
            )Net
                change in cash and cash equivalents
            
            
            (91,547
            )
            
            84,412
            
            
            225,713Cash
                and cash equivalents at beginning of the year
            
            
            379,923
            
            
            295,511
            
            
            69,798Cash
                and cash equivalents at end of the year
            
            $
            288,376
            
            $
            379,923
            
            $
            295,511





See
      Note
      17 for supplemental cash flow information.





The
      accompanying notes are an integral part of these financial
      statements.




F-56




**STATEMENTS
      OF CHANGES IN PARTNERS’ EQUITY**





**Partners’**
              **contributions**
            
            **Additional**
              **contributions**
            
            **Restricted**
              **earnings**
            
            **Retained**
              **earnings**
            
            **Total partners’**
              **equity****(dollars in thousands)**Balance
                at January 1, 2005
            
            $
            208,616
            
            $
            226
            
            $
            189,600
            
            $
            412,732
            
            $
            811,174Distributions
                of profits to the partners
            
            
            -
            
            
            -
            
            
            -
            
            
            (180,000
            )
            
            (180,000
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            525,474
            
            
            525,474Balance
                at December 31, 2005
            
            $
            208,616
            
            $
            226
            
            $
            189,600
            
            $
            758,206
            
            $
            1,156,648Cumulative
                effect of adjustment referred to stripping costs (Note 2)
            
            
            -
            
            
            -
            
            
            -
            
            
            (5,687
            )
            
            (5,687
            )Distributions
                of profits to the partners
            
            
            -
            
            
            -
            
            
            -
            
            
            (480,000
            )
            
            (480,000
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            525,448
            
            
            525,448Balance
                at December 31, 2006
            
            $
            208,616
            
            $
            226
            
            $
            189,600
            
            $
            797,967
            
            $
            1,196,409Cumulative
                effect of adoption of FIN 48 (Note 2)
            
            
            -
            
            
            -
            
            
            -
            
            
            8,427
            
            
            8,427Capitalization
                of restricted earnings (Note 5)
            
            
            189,600
            
            
            -
            
            
            (189,600
            )
            
            -
            
            
            -Distributions
                of profits to the partners
            
            
            -
            
            
            -
            
            
            -
            
            
            (100,000
            )
            
            (100,000
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            221,489
            
            
            221,489Balance
                at December 31, 2007
            
            $
            398,216
            
            $
            226
            
            $
            -
            
            $
            927,883
            
            $
            1,326,325




F-57




**1.**  **BUSINESS
      ACTIVITIES**





Minera
      Yanacocha S.R.L. (the “Company”), formerly Minera Yanacocha S.A., was
      incorporated in Peru on January 14, 1992 and commenced operations in 1993.
      The
      Company is engaged in the production of and exploration for gold under the
      mining concessions it owns or that are owned by S.M.R.L. Chaupiloma Dos de
      Cajamarca (“Chaupiloma”).





The
      Company is owned 51.35% by Newmont Second Capital Corporation, a 100% indirectly
      owned subsidiary of Newmont Mining Corporation (“Newmont”), 43.65% owned by
      Compañía Minera Condesa S.A., which is 100% owned by Compañía de Minas
      Buenaventura S.A.A. (“Buenaventura”) and 5% owned by the International Finance
      Corporation.





The
      majority partners of the Company (or their affiliates) also own the majority
      interest in Chaupiloma. In accordance with a mining lease, amended effective
      January 1, 1994, the Company pays Chaupiloma a 3% royalty based on quarterly
      production sold at current market prices, after deducting refinery and
      transportation costs. The royalty agreement expires in 2012, but can be extended
      at the Company’s option.





Located
      in the Cajamarca province of Peru, the Company’s operation consists of three
      active open pit mines: Cerro Yanacocha, La Quinua and Chaquicocha. In addition,
      reclamation and/or backfilling actitivites in the mining areas of Carachugo,
      San
      José and Maqui Maqui are currently underway. Gold-bearing ores are transported
      to one of four leach pads for gold recovery using conventional heap-leaching
      cyanidation, followed by Merrill-Crowe zinc precipitation and smelting where
      a
      final doré product is poured. The doré is then shipped offsite for refining and
      is sold in worldwide gold markets.





The
      Conga
      project consists of two gold-copper porphyry deposits located northeast of
      the
      Yanacocha operating area in the provinces of Celendin, Cajamarca and Hualgayoc.
      The Conga project has proven and probable reserves of 11.8 million (unaudited)
      ounces of gold and 3.2 billion (unaudited) pounds of copper at December 31,
      2007
      and December 31, 2006.





Total
      proven and probable reserves contained in the three active open pits and the
      Conga project are approximately 27.6 million (unaudited) and 29.3 million
      (unaudited) ounces of gold at December 31, 2007 and 2006, respectively and
      3.2
      billion (unaudited) pounds of copper at December 31, 2007 and 2006.





During
      2007, 2006 and 2005, the Company sold 1.56 million, 2.57 million and 3.33
      million ounces of gold, respectively.





Gold
      mining requires the use of specialized facilities and technology. The Company
      relies heavily on such facilities and technology to maintain production levels.
      Also, the cash flow and profitability of the Company’s operations are
      significantly affected by the market price of gold. Gold prices can fluctuate
      widely and are affected by numerous factors beyond the Company’s
      control.




F-58




**2.**  **SIGNIFICANT
      ACCOUNTING POLICIES**





**Use
      of Estimates**





The
      Company’s financial statements have been prepared in accordance with accounting
      principles generally accepted in the United States of America. The preparation
      of the Company’s financial statements requires the Company to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      the
      related disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. The more significant areas requiring the use of management
      estimates and assumptions relate to mineral reserves that are the basis for
      future cash flow estimates utilized in impairment calculations and
      units-of-production depreciation, depletion and amortization calculations;
      environmental, reclamation and closure obligations; estimates of recoverable
      gold and other minerals in stockpile and leach pad inventories; write-downs
      of
      inventory to net realizable value; employee benefit liabilities; valuation
      allowances for deferred tax assets; workers’ participation; and reserves for
      contingencies and litigation. The Company bases its estimates on the Company’s
      historical experience and on various other assumptions that are believed to
      be
      reasonable under the circumstances. Accordingly, actual results may differ
      significantly from these estimates under different assumptions or
      conditions.





**Currency**





The
      financial statements are stated in U.S. dollars, the Company’s functional
      currency, as most of its transactions are traded, collected and paid in such
      currency. All amounts are rounded to the nearest thousand ($000) unless
      otherwise stated. Transactions in other currencies are recorded in U.S. dollars
      based on exchange rates prevailing at the time of such transactions. Monetary
      assets and liabilities denominated in other currencies are translated into
      the
      U.S. dollar at exchange rates prevailing at the balance sheet dates, and any
      resulting gains or losses are reflected in current earnings.





**Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents consist of all cash balances and deposits in banks with an
      original maturity of three months or less. Because of the short maturity of
      these balances, the carrying amounts approximate their fair value.





**Stockpiles,
      Ore on Leach Pads and Inventories**





As
      described below, costs that are incurred in or benefit the productive process
      are accumulated as stockpiles, ore on leach pads and inventories. Stockpiles,
      ore on leach pads and inventories are carried at the lower of average cost
      or
      net realizable value. Net realizable value represents the estimated future
      sales
      price of the product based on current and long-term metals prices, less the
      estimated costs to complete production and bring the product to sale.
      Write-downs of stockpiles, ore on leach pads and inventories resulting from
      net
      realizable value impairments are reported as a component of *Costs
      applicable to sales* .
      The
      current portion of stockpiles, ore on leach pads and inventories is determined
      based on the expected amounts to be processed within the next twelve months.
      Stockpiles, ore on leach pads and inventories not expected to be processed
      within the next twelve months are classified as long-term. The major
      classifications are as follows:




F-59




***Stockpiles***





Stockpiles
      represent ore that has been mined and is available for further processing.
      Stockpiles are measured by estimating the number of tons added and removed
      from
      the stockpile, the number of contained ounces (based on assay data) and the
      estimated metallurgical recovery rates (based on the expected processing
      method). Stockpile ore tonnages are verified by periodic surveys. Costs are
      allocated to a stockpile based on relative values of material stockpiled and
      processed using current mining costs incurred up to the point of stockpiling
      the
      ore, including applicable overhead, depreciation, depletion and amortization
      relating to mining operations, and removed at each stockpile’s average cost per
      recoverable unit.





***Ore
      on Leach Pads***





The
      recovery of gold from certain gold oxide ores is achieved through heap leaching.
      Under this method, ore is placed on leach pads where it is treated with a
      chemical solution, which dissolves the gold contained in the ore. The resulting
      “pregnant” solution is further processed in a plant where the gold is recovered.
      Costs are added to ore on leach pads based on current mining costs, including
      applicable depreciation, depletion and amortization relating to mining
      operations. Costs are removed from ore on leach pads as ounces are recovered
      based on the average cost per recoverable ounce of gold on the leach pad.





The
      estimates of recoverable gold on the leach pads are calculated from the
      quantities of ore placed on the pads (measured tons added to the leach pads),
      the grade of ore placed on the leach pads (based on assay data) and a recovery
      percentage (based on ore type). In general, the leach pads recover approximately
      50% to 95% of the ultimate recoverable ounces in the first year of leaching,
      declining each year thereafter until the leaching process is
      complete.





Although
      the quantities of recoverable gold placed on the leach pads are reconciled
      by
      comparing the grades of ore placed on the pads to the quantities of gold
      actually recovered (metallurgical balancing), the nature of the leaching process
      inherently limits the ability to precisely monitor inventory levels. As a
      result, the metallurgical balancing process is constantly monitored and
      estimates are refined based on actual results over time. Historically, the
      Company’s operating results have not been materially impacted by variations
      between the estimated and actual recoverable quantities of gold on its leach
      pads. Variations between actual and estimated quantities resulting from changes
      in assumptions and estimates that do not result in write-downs to net realizable
      value are accounted for on a prospective basis.





***In-process
      Inventory***





In-process
      inventories represent materials that are currently in the process of being
      converted to a saleable product. The Company’s conversion process is leach
      in-circuit. In-process material is measured based on assays of the material
      fed
      into the process and the projected recoveries of the respective plants.
      In-process inventories are valued at the average cost of the material fed into
      the process attributable to the source material coming from the mines,
      stockpiles and/or leach pads plus the in-process conversion costs, including
      applicable depreciation relating to the process facilities incurred to that
      point in the process.




F-60




***Precious
      Metals Inventory***





Precious
      metals inventories include gold doré and/or gold bullion. Precious metals that
      result from the Company’s mining and processing activities are valued at the
      average cost of the respective in-process inventory incurred prior to the
      refining process, plus applicable refining costs.




***Materials
      and Supplies***





Materials
      and supplies are valued at the lower of average cost or net realizable value.
      Cost includes applicable taxes and freight.





**Property,
      Plant and Mine Development**





***Facilities
      and Equipment***





Expenditures
      for new facilities or equipment and expenditures that extend the useful lives
      of
      existing facilities or equipment are capitalized and recorded at cost. The
      facilities and equipment are depreciated using the straight-line method at
      rates
      sufficient to depreciate such costs over the estimated productive lives, which
      do not exceed the related estimated mine lives, of such facilities based on
      proven and probable reserves.





***Mine
      Development***





Mine
      development costs include engineering and metallurgical studies, drilling and
      other related costs to delineate an ore body, the removal of overburden to
      initially expose an ore body at open pit surface mines and the building of
      access ways, shafts, lateral access, drifts, ramps and other infrastructure
      at
      underground mines. Costs incurred before mineralization is classified as proven
      and probable reserves are expensed and classified as *Exploration*  *and*  *Advanced
      projects* expense.
      Capitalization of mine development project costs, that meet the definition
      of an
      asset, begins once mineralization is classified as proven and probable reserves.





Drilling
      and related costs are capitalized for an ore body where proven and probable
      reserves exist and the activities are directed at obtaining additional
      information on the ore body or converting non-reserve mineralization to proven
      and probable reserves and the benefit is expected to be realized over a period
      beyond one year. All other drilling and related costs are expensed as incurred.
      Drilling costs incurred during the production phase for operational ore control
      are allocated to inventory costs and then included as a component of *Costs
      applicable to sales* .





The
      cost
      of removing overburden and waste materials to access the ore body at an open
      pit
      mine prior to the production phase are referred to as “pre-stripping costs.”
Pre-stripping costs are capitalized during the development of an open pit mine.
      Where multiple open pits exist at a mining complex utilizing common processing
      facilities, pre-stripping costs are capitalized at each pit. The removal and
      production of de minimis saleable materials may occur during development and
      are
      recorded as *Other
      income* ,
      net of
      incremental mining and processing costs.





The
      production phase of an open pit mine commences when saleable minerals, beyond
      a
      de minimis amount, are produced. Stripping costs incurred during the production
      phase of a mine are variable production costs that are included as a component
      of inventory to be recognized in *Costs
      applicable to sales* in the
      same period as the revenue from the sale of inventory.




F-61




The
      Company’s definition of a mine and the mine’s production phase may differ from
      that of other companies in the mining industry resulting in incomparable
      allocations of stripping costs to deferred mine development and production
      costs. Other mining companies may expense pre-stripping costs associated with
      subsequent pits within a mining complex.




Mine
      development costs are amortized using the units-of production (“UOP”) method
      based on estimated recoverable ounces or pounds in proven and probable reserves.
      To the extent that these costs benefit an entire ore body, they are amortized
      over the estimated life of the ore body. Costs incurred to access specific
      ore
      blocks or areas that only provide benefit over the life of that area are
      amortized over the estimated life of that specific ore block or
      area.




Interest
      cost allocable to the cost of developing mining properties and to constructing
      new facilities is capitalized until assets are ready for their intended
      use.




***Mineral
      Interests***




Mineral
      interests are recorded at fair value at the time of acquisition, in *Property,
      plant and mine development, net* ,
      and
      represent mineral use rights regardless of whether the Company owns the related
      surface rights (“mining concessions”). The Company’s mineral interests represent
      mineral use rights related to production, development or exploration stage
      properties, and the value of such mineral interests is primarily driven by
      the
      nature and amount of mineralized content believed to be contained in such
      properties. Development stage mineral interests represent interests in
      properties under development that contain proven and probable reserves.
      Exploration stage mineral interests represent interests in properties that
      are
      believed to potentially contain mineralized material consisting of (i) other
      mineralized material such as inferred material within pits; measured, indicated
      and inferred material with insufficient drill spacing to qualify as proven
      and
      probable reserves; and inferred material in close proximity to proven and
      probable reserves; (ii) around-mine exploration potential such as inferred
      material not immediately adjacent to existing reserves and mineralization but
      located within the immediate mine infrastructure; (iii) other mine-related
      exploration potential that is not part of measured, indicated or inferred
      material and is comprised mainly of material outside of the immediate mine
      area;
      or (iv) greenfields exploration potential that is not associated with any other
      production, development or exploration stage property, as described above;
      or
      (v) any acquired right to explore or extract a potential mineral deposit. The
      Company’s mining concessions are enforceable regardless of whether proven and
      probable reserves have been established. In addition, these mining concessions
      provide for both the right to explore and exploit. However, the Company must
      first obtain the respective exploration and exploitation permits, which are
      generally granted in due course. The Company may retain mining concessions
      indefinitely by paying annual fees and, during exploitation, complying with
      production obligations or paying assessed fines. Mining concessions are freely
      assignable or transferable.




**Asset
      Impairment**




The
      Company reviews and evaluates its long-lived assets for impairment when events
      or changes in circumstances indicate that the related carrying amounts may
      not
      be recoverable. An impairment is considered to exist if the total of the assets
      estimated future cash flows on an undiscounted basis are less than the carrying
      amount of the assets. An impairment loss is measured and recorded based on
      discounted estimated future cash flows. Future cash flows are estimated based
      on
      quantities of recoverable minerals, expected gold and other commodity prices
      (considering current and historical prices, price trends and related factors),
      production levels and operating costs of production and capital, all based
      on
      life-of-mine plans. Existing proven and probable reserves and value beyond
      proven and probable reserves, including mineralization other than proven and
      probable and other material that is not part of the measured, indicated or
      inferred resource base, are included when determining the fair value of mine
      site reporting units at acquisition and, subsequently, in determining whether
      the assets are impaired. The term “recoverable minerals” refers to the estimated
      amount of gold and other minerals that will be obtained after taking into
      account losses during ore processing and treatment. In estimating future cash
      flows, assets are grouped at the lowest levels for which there are identifiable
      cash flows that are largely independent of cash flows from other asset groups.
      The Company’s estimates of future cash flows are based on numerous assumptions
      and it is possible that actual future cash flows will be significantly different
      than the estimates, as actual future quantities of recoverable minerals,
      gold  and
      other
      commodity prices, production levels and operating costs of production and
      capital are each subject to significant risks and uncertainties.




F-62




**Revenue
      Recognition**





Revenue
      is recognized, net of treatment and refining charges, from a sale when the price
      is determinable, the product has been delivered, the title has been transferred
      to the customer and collection of the sales price is reasonably assured.
      Revenues from silver sales are credited to C *osts
      applicable to sales* as a
      by-product credit.





**Reclamation
      and Remediation Costs (Asset Retirement Obligations)**





Reclamation
      costs are allocated to expense over the life of the related assets and are
      periodically adjusted to reflect changes in the estimated present value
      resulting from the passage of time and revisions to the estimates of either
      the
      timing or amount of the reclamation or abandonment costs. The asset retirement
      obligation is based on when the spending for an existing environmental
      disturbance and activity to date will occur. The Company reviews, on an annual
      basis, unless otherwise deemed necessary, the asset retirement obligation at
      each mine site in accordance with FAS No. 143, “Accounting for Asset Retirement
      Obligations.”





**Income
      Tax and Profit Sharing**





The
      Company accounts for income tax and legally required profit sharing using the
      liability method, recognizing certain temporary differences between the
      financial reporting basis of the Company’s liabilities and assets and the
      related income tax basis for such liabilities and assets. This method generates
      a net deferred income tax liability and profit sharing liability or net deferred
      income tax asset and profit sharing asset for the Company, as measured by the
      statutory tax and profit sharing rates in effect as enacted. The Company derives
      its deferred income tax charge or benefit and profit sharing charge or benefit
      by recording the change in the net deferred income tax liability and profit
      sharing liability or net deferred income tax asset and profit sharing asset
      balance for the year, based on Peruvian income tax and profit sharing
      rates.





The
      Company’s deferred income tax assets include certain future tax benefits. The
      Company records a valuation allowance against any portion of those deferred
      income tax assets when it believes, based on the weight of available evidence,
      it is more likely than not that some portion or all of the deferred income
      tax
      asset will not be realized.





As
      of
      January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes,” (“FIN 48”), an interpretation of FASB Statement
      No. 109, “Accounting for Income Taxes”, guidance to record these liabilities
      (refer to Note 5 for additional information). The cumulative effects of applying
      this interpretation have been recorded as an increase in retained earnings
      of
      $8,427, an increase in net deferred tax assets of $1,847, an increase of $939
      in
      deferred income tax expense, and a decrease of $5,641 in the net liability
      for
      unrecognized income tax benefits. The Company adjusts these reserves in light
      of
      changing facts and circumstances; however, due to the complexity of some of
      these uncertainties, the ultimate resolution may result in a payment that is
      materially different from the Company’s current estimate of the tax liabilities.
      If the Company’s estimate of tax liabilities proves to be less than the ultimate
      assessment, an additional charge to expense would result. If payment of these
      amounts ultimately proves to be less than the recorded amounts, the reversal
      of
      the liabilities would result in tax benefits being recognized in the period
      when
      the Company determines the liabilities are no longer necessary. The Company
      recognizes interest and penalties, if any, related to unrecognized tax benefits
      in income tax expense.





**Stripping
      Costs**





Stripping
      costs incurred during the production phase of a mine are variable production
      costs that are included as a component of inventory to be recognized in *Costs
      applicable to sales* in the
      same period as the revenue from the sale of inventory. Capitalization of
      post-production stripping costs is appropriate only to the extent product
      inventory exists at the end of a reporting period.





On
      January 1, 2006 the Company adopted Emerging Issues Task Force Issue
      No. 04-06 (“EITF 04-06”), “Accounting for Stripping Costs Incurred during
      Production in the Mining Industry.” The guidance required application through
      recognition of a cumulative effect adjustment to opening retained earnings
      in
      the period of adoption, with no charge to current earnings for prior periods.
      The cumulative effect adjustment reduced opening retained earnings by $5.7
      million, reduced property, plant and mine development, net by $11.3 million,
      increased ore on leach pads by $1.3 million, and decreased deferred income
      tax
      liabilities by $3.3 million and workers’ participation liabilities by $1.0
      million. Adoption of EITF 04-06 had no impact on the Company’s cash position or
      net cash from operations.




F-63




**Reclassifications**





Certain
      amounts in prior years have been reclassified to conform to the 2007
      presentation. The significant items includes proceeds from sale of assets that
      were reclassified from the operating to the investing activities section in
      the
      Cash flow statement as well as reclassifying prepaid assets previously recorded
      as Accounts receivable to Other current assets in the Balance Sheet.
      Additionally, the Company reclassified the World Gold Council dues from General
      and administrative to *Other
      Expense, net* .
      These
      changes were reflected in the Statements of Cash Flow, Balance Sheet and
      Statements of Income for all periods presented.





**Recently
      Issued Accounting Pronouncements**





***Fair
      Value Accounting***





In
      February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities” (“FAS No. 159”). FAS
      No 159 permits entities to choose to measure many financial instruments and
      certain other items at fair value, with the objective of improving financial
      reporting by mitigating volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. The provisions of FAS No 159 are effective for the
      Company’s year ending December 31, 2008. The Company is currently evaluating the
      impact that the adoption of this statement will have on the Company’s financial
      position, results of operations, cash flow and disclosures.





In
      September 2006, the FASB issued FASB Statement No. 157, “Fair Value
      Measurements” (“FAS No. 157”). FAS No. 157 defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosures about fair value measurements.
      The provisions of FAS No. 157 are effective for the Company’s fiscal year
      ending December 31, 2008. The Company is currently evaluating the impact that
      the adoption of this statement will have on the Company’s financial position,
      results of operations cash flow and disclosures.





**3.**  **OTHER
      EXPENSE, NET**





**Years Ended December 31,****2007**
            
            **2006**
            
            **2005**Negotiated
                payment
            
            $
            9,683
            
            $
            21,839
            
            $
            -Mercury
                spill (Note 19)
            
            
            8,615
            
            
            5,110
            
            
            -World
                Gold Council dues
            
            
            2,928
            
            
            5,589
            
            
            5,453Contractor
                bankruptcy
            
            
            1,956
            
            
            -
            
            
            -Reclamation
                and remediation
            
            
            1,916
            
            
            1,741
            
            
            (10,766
            )Workers’
                participation reserve (Note 13)
            
            
            1,615
            
            
            14,900
            
            
            -Write-down
                of long-lived assets
            
            
            1,269
            
            
            1,514
            
            
            -La
                Quinua leach pad repair
            
            
            1,000
            
            
            9,911
            
            
            -Tax
                contingencies
            
            
            -
            
            
            2,536
            
            
            -Other
            
            
            4,008
            
            
            3,239
            
            
            4,097$
            32,990
            
            $
            66,379
            
            $
            (1,216
            )




**Negotiated
      payment**





Mining
      companies represented by the Sociedad Nacional de Minería, Petróleo y Energía
      (SNMPE) agreed to a mining payment equivalent to 3.75% of net income after
      taxes. The funds will be managed by a trust fund or association designated
      by
      the Company. The trust fund or association can be established by the Company.
      The mining companies are contributing these funds to participate in the
      government efforts to eradicate poverty in Peru in the current favorable
      economic environment.




F-64




The
      Peruvian Government issued on December 21, 2006 a law (Supreme Decree
      N°071-2006-EM) that regulates the conditions in which the negotiated payment
      will be paid by Peruvian mining companies. The payment amounts to 3.75% of
      Peruvian net income after income tax (2.75% to be paid to a Local Mining Fund
      and 1% to be paid to a Regional Mining Fund), and is payable for 2006 and the
      following four years depending on the price of gold.





The
      Company will be released from paying the negotiated payment if the Company
      has
      to undertake major obligations arising from new taxes or from the modification
      of those existing and specifically imposed taxes related to mining activities;
      or if the gold price decreases below the average price for the 15 years prior
      to
      2005 (equivalent to $537 per ounce), according to the London Bullion Market
      Association (LBMA). The negotiated payment will recommence if prices
      subsequently rise above the reference price.





**4.**  **OTHER
      INCOME, NET**





**Years
                Ended December 31,****2007**
            
            **2006**
            
            **2005**Interest
                income
            
            $
            14,054
            
            $
            16,127
            
            $
            4,472(Loss)
                gain on sale of assets
            
            
            (184
            )
            
            237
            
            
            46Foreign
                currency exchange gain (loss)
            
            
            807
            
            
            206
            
            
            (159
            )Other
            
            
            1,200
            
            
            2,632
            
            
            415$
            15,877
            
            $
            19,202
            
            $
            4,774





**5.**  **INCOME
      TAXES**





**Tax
      Stabilization Agreements**





The
      Company has entered into the following tax stability agreements, each with
      a
      term of 15 years:





**Date of the**
            
            **Tax regimes****Mine**
            
            **Effective**
            
            **tax agreement**
            
            **in force**Carachugo/San José
            
            January 1, 1995
            
            May 19, 1994
            
            October 29, 1999Maqui
                Maqui
            
            January
                1, 1997
            
            September
                12, 1994
            
            May
                6, 1994Cerro
                Yanacocha
            
            January
                1, 2000
            
            September
                16, 1998
            
            May
                22, 1997La
                Quinua
            
            January
                1, 2004
            
            August
                25, 2003
            
            August
                25, 2003





These
      agreements guarantee the Company’s use of the tax regimes shown in the table
      above and permit maintenance of its accounting records in U.S.
      dollars.





The
      Company has determined the taxable income according to its understanding, and
      that of its legal advisors, of the applicable tax legislation. This legislation
      requires adding to and deducting from accounting income as determined in the
      financial statements, those items that the referred legislation recognizes
      as
      taxable and non-taxable, respectively.





For
      the
      years ended December 31, 2007, 2006 and 2005 the income tax rate was 30% except
      for the La Quinua mine for which a 29% income tax rate applied.





**Reinvestment
      of Earnings**





Pursuant
      to Supreme Decree No027-98-EF, mining companies can obtain a tax benefit by
      effectively reinvesting non-distributed earnings into capital expansion projects
      that increase the Company’s productivity (“Reinvestment Program”). The tax
      benefit is based on 80% of the earnings effectively obtained and up to the
      maximum amount of the Reinvestment Program approved by the Ministry of Energy
      and Mines (“MEM”), amount that must be presented as restricted earnings.




F-65




On
      March
      4, 2003, the Company received a resolution from the MEM dated February 28,
      2003,
      in which it approved the reinvestment program for the years from 2002 to 2004
      for an amount of $189,600.





The
      Company received a subsequent resolution from the MEM dated June 27, 2003,
      with
      the following rulings: a) amended the years to be included in the reinvestment
      program (from 2001 to 2004) and b) confirmed that the investment that would
      be
      part of the program to be executed between 2002 and 2004 amounts to
      $189,600.





In
      2004,
      the Company transferred from retained earnings to restricted earnings $189,600
      according with the above reinvestment program in prior years.





On
      December 26, 2006, the Company received the resolution from the MEM approving
      the reinvestment program for the periods 2001 to 2004. In compliance with
      article 8 of Supreme Decree N°027-98-EF, the Company capitalized this amount
      through public deed dated December 20, 2007 and shall not declare dividends
      from
      Partners’ contributions during the following four fiscal years.





**Peruvian
      Income Tax and Workers’ Participation**





The
      current income tax and workers’ participation expense (Note 13) was determined
      as follows:





**Years
                Ended December 31,****2007**
            
            **2006**
            
            **2005**Income
                before workers’ participation and income tax in accordance with Peruvian
                GAAP
            
            $
            393,224
            
            $
            893,027
            
            $
            852,316Plus:Reclamation
                liability
            
            
            22,558
            
            
            19,823
            
            
            3,374Non-deductible
                expenses
            
            
            32,483
            
            
            43,993
            
            
            19,885Income
                tax recorded as other expenses
            
            
            1,360
            
            
            21,354
            
            
            14,983Provision
                for obsolescence of inventories
            
            
            2,777
            
            
            1,148
            
            
            352Other
            
            
            8,048
            
            
            1,615
            
            
            3,86267,226
            
            
            87,933
            
            
            42,456Less:Depreciation
                of mine development and mineral interests
            
            
            (9,593
            )
            
            (30,980
            )
            
            (19,487
            )Depreciation
                straight line
            
            
            -
            
            
            -
            
            
            (7,778
            )Reclamation
                (environmental) expense
            
            
            (7,701
            )
            
            (8,133
            )
            
            (6,721
            )Capitalized
                interests
            
            
            (11,696
            )
            
            (4,146
            )
            
            (1,390
            )Accrual
                contingencies and commitments year 2006
            
            
            (9,161
            )
            
            12,572
            
            
            -Other
            
            
            (2,643
            )
            
            -
            
            
            -(40,794
            )
            
            (30,687
            )
            
            (35,376
            )Base
                to calculate the workers’ profit sharing
            
            
            419,656
            
            
            950,273
            
            
            859,396Workers’
                participation (8%)
            
            
            (33,572
            )
            
            (76,022
            )
            
            (68,752
            )Taxable
                income
            
            $
            386,084
            
            $
            874,251
            
            $
            790,644Income
                tax (30%)
            
            $
            115,825
            
            $
            262,275
            
            $
            237,193Credit
                for charitable donations
            
            
            (1,406
            )
            
            (1,553
            )
            
            (1,767
            )Adjustment
                due to the income tax rate applicable to La Quinua
            
            
            (1,202
            )
            
            (4,240
            )
            
            (3,931
            )Current
                income tax
            
            $
            113,217
            
            $
            256,482
            
            $
            231,495




F-66




**Income
      tax – Reconciliation from Peru Tax Return to U.S. GAAP and Tax Balance
      Sheets**





The
      Company’s income tax provision consisted of the following:





**Years Ended December 31,****2007**
            
            **2006**
            
            **2005**Current
                Peru tax return
            
            $
            113,217
            
            $
            256,482
            
            $
            231,495Income
                tax prior years adjustments
            
            
            -
            
            
            (2,876
            )
            
            12,965Current
                U.S. GAAP
            
            
            113,217
            
            
            253,606
            
            
            244,460Deferred
            
            
            (6,173
            )
            
            (15,263
            )
            
            (9,053
            )Income
                tax expense
            
            $
            107,044
            
            $
            238,343
            
            $
            235,407





Income
      tax expense differs from the amount computed by applying the statutory Peruvian
      corporate income tax rate of 30% to pre-tax income as a result of the
      following:





**Years Ended December 31,****2007**
            
            **2006**
            
            **2005**Income
                before tax provision
            
            $
            328,533
            
            $
            763,791
            
            $
            760,881Peruvian
                statutory rate
            
            
            30
            %
            
            30
            %
            
            30
            %Income
                tax at statutory rate
            
            
            98,560
            
            
            229,137
            
            
            228,264Income
                tax recognized through refilling of tax returns
            
            
            -
            
            
            -
            
            
            5,255Difference
                due to the income tax rate of La Quinua
            
            
            (1,202
            )
            
            (4,240
            )
            
            (3,931
            )Income
                tax from tax disputes
            
            
            -
            
            
            230
            
            
            894Negotiated
                payment
            
            
            2,905
            
            
            6,551
            
            
            -Donations
            
            
            5,295
            
            
            3,728
            
            
            3,311Other
                (non-deductible expense and tax credits)
            
            
            1,486
            
            
            2,937
            
            
            1,614Total
                income tax expense
            
            $
            107,044
            
            $
            238,343
            
            $
            235,407





Components
      of deferred income tax liabilities and assets were as follows:





**At December 31,****2007**
            
            **2006****Deferred
                tax assets:**Reclamation
                and remediation costs
            
            $
            34,138
            
            $
            32,515Accounts
                receivable
            
            
            11,795
            
            
            10,099Accounts
                payable and accrued expenses
            
            
            10,550
            
            
            6,246Deferred
                workers’ participation
            
            
            2,806
            
            
            3,425Other
            
            
            -
            
            
            13959,289
            
            
            52,424**Deferred
                tax liabilities:**Property,
                plant and mine development costs
            
            
            (77,463
            )
            
            (86,623
            )Inventories
            
            
            (9,929
            )
            
            (11,736
            )Accrued
                liabilities
            
            
            (2,870
            )
            
            3,503Debt
                issuance costs
            
            
            (336
            )
            
            (384
            )Other
            
            
            (2,825
            )
            
            (278
            )(93,423
            )
            
            (95,518
            )**Net
                deferred tax liability**
            
            $
            (34,134
            )
            $
            (43,094
            )Current
                deferred tax asset
            
            $
            8,746
            
            $
            8,141Non-current
                deferred tax assets
            
            
            1,848
            
            
            -Less:Non-current
                deferred tax liabilities
            
            
            (44,728
            )
            
            (51,235
            )**Net
                deferred tax (liability)**
            
            $
            (34,134
            )
            $
            (43,094
            )




F-67




The
      Company adopted the provisions of FASB Interpretation No. 48, “Accounting
      for Uncertainty in Income Taxes,” (“FIN48”) an interpretation of FASB Statement
      No. 109, “Accounting for Income Taxes” on January 1, 2007. FIN 48 clarifies
      the accounting and reporting for uncertainties in the application of the income
      tax laws to the Company’s operations. The interpretation prescribes a
      comprehensive model for the financial statement recognition, measurement,
      presentation and disclosure of uncertain tax positions taken or expected to
      be
      taken in income tax returns. The cumulative effects of applying this
      interpretation have been recorded as an increase in retained earnings of $8,427,
      an increase in net deferred tax assets of $1,847, an increase of $939 in
      deferred income tax expense, and a decrease of $5,641 in the net liability
      for
      unrecognized income tax benefits. The Company is no longer subject to
      examinations by taxing authorities for years through 2003.





During
      the year 2007, the Company had no reconciling items between the beginning and
      ending balance of total amount of gross unrecognized tax benefits; therefore,
      as
      of December 31, 2007, the balance amounts to $1,847.





The
      above
      amount of unrecognized tax benefits, if recognized, would have no impact on
      the
      Company’s effective income tax rate.





The
      Company’s continuing practice is to recognize interest and/or penalties related
      to unrecognized tax benefits as part of its income tax expense. The Company
      had
      $0.2 million accrued for interest at January 1, 2007. Through December 31,
      2007,
      the Company accrued an additional $1.7 million of interest and penalties,
      bringing the Company’s total accrued interest and penalties as of December 31,
      2007 to $1.9 million.





In
      addition, as is customary, the tax returns of the Company are subject to review
      by the various Peruvian taxing authorities. At present, the income tax
      authorities have reviewed the Company’s tax filings up to year 2003. In
      connection with this review, the tax authorities have identified certain
      adjustments with which the Company and its advisors do not agree. In the third
      quarter of 2006 and the fourth quarter of 2004, payments of $7.6 million and
      $11.5 million, respectively, were made to the tax authorities principally to
      avoid the accruing of interest and penalties on the proposed adjustments that
      are related to the timing of the deductions. The Company has accrued a liability
      for financial reporting purposes in an amount that represents the Company’s best
      judgment concerning the amount that is required to be included in its income
      tax
      expense as a result of the current tax review. In the opinion of management,
      the
      resolution of the income tax controversy will not have a material impact on
      the
      financial condition or liquidity of the Company.





**6.**  **ACCOUNTS
      RECEIVABLE**





**At December 31,****2007**
            
            **2006**Value
                added tax credit
            
            $
            53,048
            
            $
            25,923Employee
                receivables
            
            
            237
            
            
            502Other
            
            
            4,221
            
            
            3,076$
            57,506
            
            $
            29,501





**7.**  **INVENTORIES**





**At
                December 31,****2007**
            
            **2006**In-process
            
            $
            17,592
            
            $
            12,258Precious
                metals
            
            
            16,170
            
            
            15,651Materials
                and supplies
            
            
            51,761
            
            
            57,109$
            85,523
            
            $
            85,018




F-68




**8.**  **STOCKPILES
      AND ORE ON LEACH PADS**





**At December 31,****2007**
            
            **2006**Current:Stockpiles
            
            $
            7,902
            
            $
            5,097Ore
                on leach pads
            
            
            78,722
            
            
            77,099$
            86,624
            
            $
            82,196Long-term:Ore
                on leach pads
            
            $
            165,701
            
            $
            175,317





**9.**  **OTHER
      CURRENT ASSETS**





**At December 31,****2007**
            
            **2006**Income
                tax credit
            
            $
            3,298
            
            $
            -Claims
                for tax refunds
            
            
            2,821
            
            
            2,821Restricted
                cash
            
            
            2,036
            
            
            2,014Prepayments
                to supplies and contractors
            
            
            245
            
            
            2,001Prepaid
                expenses and other
            
            
            5,985
            
            
            6,346$
            14,385
            
            $
            13,182





**10.**  **PROPERTY,
      PLANT AND MINE DEVELOPMENT**





**At December 31, 2007**
            
            **At December 31, 2006****Cost**
            
            **Accumulated**
              **Depreciation**
              **Depletion and**
              **Amortization**
            
            **Net Book**
              **Value**
            
            **Cost**
            
            **Accumulated**
              **Depreciation**
              **Depletion and**
              **Amortization**
            
            **Net Book**
              **Value**Land
            
            
            30,121
            
            
            -
            
            
            30,121
            
            
            27,358
            
            
            -
            
            
            27,358Buildings
                and equipment
            
            
            1,705,196
            
            
            (1,097,628
            )
            
            607,568
            
            
            1,513,164
            
            
            (986,335
            )
            
            526,829Mine
                development
            
            
            352,798
            
            
            (137,413
            )
            
            215,385
            
            
            324,912
            
            
            (120,144
            )
            
            204,768Mineral
                interests
            
            
            45,680
            
            
            (5,917
            )
            
            39,763
            
            
            45,680
            
            
            (4,894
            )
            
            40,786Asset
                retirement cost
            
            
            121,680
            
            
            (73,830
            )
            
            47,850
            
            
            115,447
            
            
            (60,957
            )
            
            54,490Construction-in-progress
            
            
            242,087
            
            
            -
            
            
            242,087
            
            
            191,126
            
            
            -
            
            
            191,1262,497,562
            
            
            (1,314,788
            )
            
            1,182,774
            
            
            2,217,687
            
            
            (1,172,330
            )
            
            1,045,357Leased
                assets included above in property, plant and mine
                development
            
            
            33,128
            
            
            (5,385
            )
            
            27,743
            
            
            4,672
            
            
            (4,672
            )
            
            -





Additions
      to construction-in-progress in 2007 correspond mainly to the Yanacocha Gold
      Mill
      Project, which will treat approximately 5 million tones per year of high grade
      oxide and transitional ores. This project will enhance recovery of gold from
      the
      higher grade oxide ores, increase recovery of silver, and allow the treatment
      of
      transition ores that are not amenable to heap leaching. The construction was
      initiated in September 2006 and is 97% completed as of December 31, 2007. It
      is
      expected the Gold Mill will start-up in March 2008 and commercial production
      will be reached in the second quarter of 2008.





In
      2007,
      the Company recorded $138.9 million related to the Gold Mill as
      construction-in-progress ($44.5 million recorded in 2006).




F-69




Additions
      to leased assets in 2007 correspond to the acquisition of ten haul trucks for
      $28,456 (Note 11).





**Estimated Useful Lives of**
            
            **Years**Buildings
                and equipment
            
            Buildings
            
            12
                to 25Leach
                pads
            
            5Equipment
            
            7
                to 10.5All
                remaining assets
            
            5Mine
                development
            
            UOP
                based on ounces mined
            
            8
                to 21Mineral
                interests
            
            UOP
                for producing property
            
            12Asset
                retirement cost
            
            Related
                asset
            
            5
                to 15Leased
                assets included above in property, plant and mine
                development
            
            
            
            5





**At December 31, 2007**
            
            **At December 31, 2006****Gross**
              **Carrying**
              **Value**
            
            **Accumulated**
              **Amortization**
            
            **Net**
              **Book**
              **Value**
            
            **Gross**
              **Carrying**
              **Value**
            
            **Accumulated**
              **Amortization**
            
            **Net**
              **Book**
              **Value**Mineral
                interests:Production
                stage
            
            $
            8,551
            
            $
            (5,558
            )
            $
            2,993
            
            $
            8,551
            
            $
            (4,535
            )
            $
            4,016Development
                stage
            
            
            20,298
            
            
            (174
            )
            
            20,124
            
            
            20,298
            
            
            (174
            )
            
            20,124Exploration
                stage
            
            
            16,831
            
            
            (185
            )
            
            16,646
            
            
            16,831
            
            
            (185
            )
            
            16,646Total
            
            $
            45,680
            
            $
            (5,917
            )
            $
            39,763
            
            $
            45,680
            
            $
            (4,894
            )
            $
            40,786





**11.**  **DEBT**





**At December 31,****2007**
            
            **2006**Credit
                facility
            
            $
            89,655
            
            $
            100,000Bonds:Floating
                rate
            
            
            42,000
            
            
            42,000Fixed
                rate
            
            
            58,000
            
            
            58,000Truck
                leases
            
            
            28,456
            
            
            -218,111
            
            
            200,000Less
                current portion
            
            
            (22,724
            )
            
            (10,345
            )$
            195,387
            
            $
            189,655





During
      2007, the Company repaid the first three installments of the credit facility
      for
      a total amount of $10,345.





Scheduled
      minimum debt repayments are $22,724 in 2008, $23,267 in 2009, $31,844 in 2010,
      $29,793 in 2011, $29,793 in 2012, and $80,690 thereafter.





**Credit
      Facility**





During
      2006, the Company entered into an uncollateralized $100,000 bank financing
      with
      a syndicate of Peruvian commercial banks. Quarterly repayments of $3,448 started
      in May 2007 with final maturity May 2014. Borrowings under the facility bear
      interest at a rate of LIBOR plus 1.875%.





**Bonds**





During
      2006, the Company issued $100,000 of bonds into the Peruvian capital markets
      under a $200,000 bond program. The issuance is comprised of $42,000 of floating
      interest rate bonds bearing interest at a rate of LIBOR plus 1.4375% and $58,000
      of fixed rate bonds bearing an annual interest of 7.0%. Quarterly repayments
      of
      $4,000 will begin in July 2010 for six years. The bonds are uncollateralized.




F-70




**Leasing**





***Banco
      de Crédito del Perú***





In
      September 2007, the Company entered into a leasing contract with Banco de
      Crédito del Perú related to the acquisition of nine haul trucks, with a purchase
      option. The lease period is three years bearing annual interest at a rate of
      6.10%.





***Scotiabank***





In
      December 2007, the Company entered into a leasing contract with Scotiabank
      related to the acquisition of one haul truck, with a purchase option. The lease
      period is three years bearing annual interest at a rate of 6.00%. The total
      lease agreement signed amounts to $16,332 to acquire six haul trucks. As of
      December 31, 2007, as per the lease agreement, the Company is committed to
      the
      bank for $3,957.





**Compliance
      with Covenants**





The
      financing agreements oblige the Company to comply with certain financial
      covenants including debt coverage ratios. In addition, there are covenants
      addressing the extent to which, the Company can incur additional indebtedness
      and distributions of earnings to the partners. As of December 31, 2007 the
      Company was in compliance with these covenants.





**12.**  **DUE
      TO/FROM RELATED PARTIES**





The
      Company has the following receivables and liabilities to related
      parties:


**At December 31,****2007**
              
              **2006****Due
                  from related parties:**Empresa
                  Minera Inti Raymi S.A.
              
              $
              140
              
              $
              7Newmont
                  Peru S.R.L.
              
              
              12
              
              
              114$
              152
              
              $
              121





**At December 31,****2007**
            
            **2006****Due
                to related parties:**S.M.R.L.
                Chaupiloma Dos de Cajamarca
            
            $
            11,687
            
            $
            8,802Newmont
                Peru S.R.L.
            
            
            2,437
            
            
            2,285Newmont
                USA
            
            
            683
            
            
            914Newmont
                Technologies Limited
            
            
            386
            
            
            228Consorcio
                Energético Huancavelica S.A.
            
            
            323
            
            
            323Buenaventura
                Ingenieros S.A.
            
            
            292
            
            
            593Newmont
                SF Chile
            
            
            19
            
            
            14Newmont
                Mining Corporation of Canada Limited
            
            
            -
            
            
            32$
            15,827
            
            $
            13,191





Management,
      exploration, mine development, engineering and employment services are provided
      pursuant to contracts with affiliates. The corresponding charges totaled $46.5
      million, $40.0 million and $45.7 million in 2007, 2006 and 2005,
      respectively.





As
      described in Note 1, the Company pays Chaupiloma a 3% royalty based on quarterly
      production sold at current market prices, after deducting refinery and
      transportation costs. Royalty expense totaled $34.0 million, $48.5 million
      and
      $45.6 million in 2007, 2006 and 2005, respectively and is included in *Costs
      applicable to sales* .




F-71




**13.**  **WORKERS’
      PARTICIPATION**





In
      accordance with Peruvian legislation, the Company maintains an employee profit
      sharing plan equal to 8% of annual taxable income. Distributions to employees
      under the plan are based 50% on the number of days that each employee worked
      during the preceding year and 50% on proportionate annual salary
      levels.





In
      2007,
      2006 and 2005, the current expense portion of workers’ profit sharing amounted
      to $33.6 million, $76.0 million and $68.8 million, respectively, which was
      included in *Costs
      applicable to sales* .





Peruvian
      law limits payments of annual profit sharing per employee to eighteen months
      salary but continues to base total profit sharing on 8% of taxable income,
      notwithstanding the per employee limitation. Supreme Decree N°009-98-TR,
      published on August 6, 1998, provides that the excess of total profit sharing
      for the year over aggregate profit sharing payable to all employees be paid
      to
      the Fondo Nacional de Capacitación Laboral y de Promoción del Empleo -
      FONDOEMPLEO. Law 28464 published in January 2005, which modified art.3 of Law
      Decree 892, provides that the excess of total profit sharing for the year over
      aggregate profit sharing payable to all employees be applied to training of
      employees and construction of public facilities. Supreme Decree N° 002-2005-TR,
      published in May 6, 2005, establishes a limit of 2,200 UIT (inflation
      measurement unit, equivalent to $2.6 million as of December 31, 2007) in the
      contributions to FONDOEMPLEO indicating that the difference goes to the Regional
      Government.





In
      1998,
      the Peruvian Government issued additional regulations regarding the calculation
      of the workers participation, which limited to 18 monthly salaries the total
      amount each employee is entitled to. However, there is a difference between
      the
      Law and its regulations. The law establishes that the 18 months limit should
      be
      based upon 18 times the remuneration earned by the employee in December of
      the
      respective year. However the regulation established an average approach for
      the
      calculation, by means of which, the total of the compensation earned by the
      employee during the year divided by the number of months worked provides the
      monthly salary cap on which the limit of 18 salaries is then calculated
      (including any bonus paid).





The
      Company followed the criteria established by the Law in determining the amount
      to be paid to its employees since 1998. As of December 31, 2006, the Company
      recorded a charge of $14.9 million, included in *Other
      expense, net* ,
      to
      cover any payment derived from the different criteria established to make these
      payments by both the law and the regulation.





In
      August
      2007, the Court enacted an arbitration decision confirming that the Company
      had
      paid in excess to FONDOEMPLEO and the Regional Government. This decision is
      considered the last instance and it cannot be appealed, however it is not
      binding to the Regional Government. In this regard, the Company’s legal
      department, based on its best estimated believes that the highest amount to
      be
      recovered from FONDOEMPLEO is only $3.9 million of the $5.3 million paid in
      excess to FONDOEMPLEO, the balance was written off.. The amount to be recovered
      from the Regional Government will depend on negotiations.





In
      September 2007, the Company proceeded to pay the balance owed to the employees
      of $21.8 million (including interest), which exceeds the original amount accrued
      of $6.9 million. The additional amount paid relates to changes in the
      assumptions considered by the Company against the assumptions ruled by the
      Court. The net effect of $1.6 from the $6.9 million and the accrual of $5.3
      million was charged to *Other
      expense net* .





In
      2007,
      the company has a liability to the Regional Government of $7,987. In 2006,
      the
      Company made payments to FONDOEMPLEO and Regional Government of $2.3 million
      and
      $17.5 million, respectively, and in 2005 made
      payments of $2.2 million and $12.8 million, respectively.




F-72




**14.**  **OTHER
      CURRENT LIABILITIES**





**At December 31,****2007**
            
            **2006**Operating
                costs
            
            $
            20,752
            
            $
            34,224Capital
                projects
            
            
            18,045
            
            
            21,265Negotiated
                payment (Note 3)
            
            
            9,683
            
            
            21,839Payroll
                and other benefits
            
            
            6,159
            
            
            4,773Reclamation
                and remediation (Note 15)
            
            
            4,599
            
            
            4,724Interest
                payable
            
            
            2,081
            
            
            2,101Taxes
                other than income tax
            
            
            2,097
            
            
            1,917Withholding
                income tax
            
            
            2,210
            
            
            1,888$
            65,626
            
            $
            92,731





**Operating
      costs**





As
      of
      December 31, 2007, operating cost accruals include mainly the following: (i)
      $6.6 million related to contractors working on operating activities, (ii) $1.6
      million for electricity services, (ii) $1.5 million of maintenance costs for
      mine equipment, (iii) $1.0 million for World Gold Council dues, (iv) $0.9
      million for outsourced personnel, (v) $0.9 million for food services, and (vi)
      $0.7 million for insurance.





In
      2006,
      operating costs accruals refers mainly to the following: (i) the estimated
      cost
      for the repair of La Quinua leach pad of $9.9 million, (ii) construction of
      the
      Otuzco-Combayo road of $1.2 million as part of the agreement signed with the
      community, (iii) indemnity to the communities involved in the damage by fire
      treatment water pipes occurred in the canals of Encajon, Collotan, and Ouishar
      of $4.0 million, and (iv) $9.5 million related to contractors working on
      operating activities.





**15.**  **RECLAMATION
      AND REMEDIATION (ASSET RETIREMENT OBLIGATIONS)**





The
      Company’s mining and exploration activities are subject to various laws and
      regulations governing the protection of the environment. These laws and
      regulations are continually changing and are generally becoming more
      restrictive. The Company conducts its operations so as to protect the public
      health and environment and believes its operations are in compliance with all
      applicable laws and regulations in all material respects. The Company has made,
      and expects to make in the future, expenditures to comply with such laws and
      regulations, but cannot predict the amount of such future expenditures.
      Estimated future reclamation costs are based principally on legal and regulatory
      requirements.





The
      liability corresponds primarily to activities to be performed in the reclamation
      and remediation of mining activities once the gold extraction process has been
      finished. Theses activities include reclamation of the mine sites, operating
      water treatment plants, re-vegetation and earth works.





The
      following is a reconciliation of the total liability for reclamation and
      remediation:





Balance
                December 31, 2005
            
            $
            118,565Additions,
                change in estimates and other, net
            
            
            22,482Liabilities
                settled
            
            
            (8,133
            )Accretion
                expense
            
            
            7,918Balance
                December 31, 2006
            
            
            140,832Additions,
                change in estimates and other, net
            
            
            8,150Liabilities
                settled
            
            
            (7,701
            )Accretion
                expense
            
            
            9,685Balance
                December 31, 2007
            
            $
            150,966





The
      current portion of *Reclamation
      and remediation liabilities* of $4.6
      million and $4.7 million at December 31, 2007 and 2006, respectively, are
      included in *Other
      current liabilities* .




F-73




Increases
      in the asset retirement obligation in 2007 relate primarily to the expanded
      mining operations and new facilities at Yanacocha (in 2006 corresponds primarily
      to Yanacocha and La Quinua), and the related projected remediation and
      reclamation costs for this expansion.





**16.**  **PARTNERS’
      EQUITY**





**Partners’
      Contributions**





Partners’
      contributions represent 1,278,451,304 common partnership interests with a par
      value of one Peruvian Nuevo sol each, fully subscribed and paid. Such
      partnership interest includes 720,407,310 that are owned by foreign
      investors.





Under
      current Peruvian regulations, there is no restriction on remittance of dividends
      or repatriation of foreign investment, except as discussed in sections below.





The
      legal
      structure of the Company is that of a Limited Liability Partnership. The main
      characteristics of such structure are: (i) the number of partners cannot exceed
      20, (ii) the capital is represented by partnership interests, and (iii) there
      is
      no obligation to create a legal reserve.





**Restricted
      Earnings**





As
      explained in Note 5, the Company, capitalized $189,600 as decided on the
      Partners’ meeting carried out on December 10, 2007.





As
      a
      result, Partners’ contributions increased from $208,616 to $398,216 as of
      December 31, 2007.





**Retained
      Earnings**





Effective
      January 1, 2003, distribution of earnings for partners other than legal entities
      domiciled in Peru is subject to a withholding tax of 4.1%.





**17.**  **SUPPLEMENTAL
      CASH FLOW INFORMATION**





Net
      cash
      provided from operations included the following cash payments:





**Years Ended December 31,****2007**
            
            **2006**
            
            **2005**Income
                taxes paid
            
            $
            139,213
            
            $
            277,993
            
            $
            234,667Interest
                paid net of capitalized interest
            
            $
            3,042
            
            $
            9,873
            
            $
            891





**Noncash
      Investing Activities and Financing Activities**





In
      2007,
      the Company entered into mining equipment leases that resulted in non-cash
      increases to *Property,
      plant and mine development, net* and *Long-term
      debt* of
      $28,456.




F-74




**18.**  **MAJOR
      CUSTOMERS AND EXPORT SALES**





The
      Company is not economically dependent on a limited number of customers for
      the
      sale of its product because gold can be sold through various commodity market
      traders worldwide. In 2007, sales to one customer accounted for $0.7 billion
      which represents 63% of total annual sales. In 2006, sales to one customer
      accounted for $1.29 billion which represented 81% of total annual sales. In
      2005, sales to one customer accounted for $1.47 billion which represented 99%
      of
      total annual sales. All gold sales were made outside of Peru.





**19.**  **COMMITMENTS
      AND CONTINGENCIES**





**Tax
      contingencies**





Tax
      contingencies are provided for under FIN 48 (see Notes 2 and 5).





**Peruvian
      Mining Royalty**





During
      the second quarter of 2004, the government of Peru enacted legislation to
      establish a sliding scale mining royalty of up to 3% based on the volume of
      mine
      production. The royalty is calculated on revenue from sales of product less
      certain refining and transportation expenses. While the Peruvian royalty became
      effective during the second quarter of 2004, it does not apply to those projects
      that had stabilization agreements prior to the adoption of the royalty law.
      The
      Company’s current production is derived from projects that were stabilized prior
      to the enactment of the royalty legislation. Future production from
      non-stabilized projects could be burdened by this royalty.





**Reinvestment
      program**





As
      of
      June 30, 2004, the Company completed all of its investments under the
      Reinvestment Program from 2001 to 2004. As of December 31, 2006, after
      completing the MEM’s audit the Company received their resolution of approval.
      The amount of $189,600 that had been booked as restricted earnings was
      capitalized in December 2007, as stated by law. The Company shall not declare
      dividends from Partners’ contributions within the following four fiscal
      years.





**Unitization
      of Properties**





In
      December 2000, as a result of the unitization plan carried out by partners,
      the
      Company signed several asset transfer and mining lease agreements with related
      entities. The main conditions are:





·
            The
                Company must pay to Chaupiloma, S.M. Coshuro R.L. and Buenaventura,
                3% of
                the quarterly net sales proceeds of mineral extracted from the transferred
                and leased concessions. These properties are currently under exploration,
                except for a lime concession.





·
            The
                Company must pay to Los Tapados S.A. 3% on quarterly net sales proceeds
                of
                mineral extracted from the transferred and leased concessions of
                Los
                Tapados S.A. The transferred and leased concessions of Los Tapados
                S.A.
                are also subject to a previously existing royalty on the minerals.
                The
                properties are currently not being exploited by the Company.




F-75




**Legal
      Proceedings**





(a)  **Choropampa
      (mercury spill)**





In
      June
      2000, a transport contractor of the Company spilled approximately 151 kilograms
      of elemental mercury near the town of Choropampa, Peru, which is located 53
      miles (85 kilometers) southwest of the mine. Elemental mercury is not used
      in
      the Company’s operations but is a by-product of gold mining and was sold to a
      Lima firm for use in medical instruments and industrial applications. A
      comprehensive health and environmental remediation program was undertaken by
      the
      Company in response to the incident. In August 2000, the Company under protest
      paid a fine of S/.1,740,000 Peruvian Nuevos Soles (approximately $500) to the
      Peruvian Government. The Company entered into settlement agreements with a
      number of individuals impacted by the incident. As compensation for the
      disruption and inconvenience caused by the incident the Company entered into
      agreements with and provided a variety of public works in three communities
      impacted by this incident. The Company, related companies and other defendants
      were named in a lawsuit by over 1,100 Peruvian citizens and the Provincial
      Municipality of Cajamarca in the Denver District Court of the State of Colorado.
      This action seeks compensatory damages based on claims associated with the
      mercury spill incident. In February 2005, the Company responded to the complaint
      in the Denver District Court of the State of Colorado. The parties in these
      cases have agreed to submit these matters to binding arbitration. In October
      2007, the parties to the arbitration entered a court-approved settlement
      agreement, resolving most of these cases.





Additional
      lawsuits related to the Choropampa incident were filed against the Company
      in
      the local courts of Cajamarca in Peru, in May 2002 by over 900 Peruvian
      citizens. Such lawsuits seek the payment of $229.4 million, and S/.1,245,000
      Peruvian Nuevos Soles. A significant number of plaintiffs in these lawsuits
      entered into settlement agreements with Yanacocha prior to filing such claims.
      In September 2006, the Peruvian Supreme Court issued contradictory opinions
      on
      the validity of these settlement agreements. Subsequent lower court decisions
      have upheld the validity of these settlement agreements, discharging a number
      of
      the lawsuits. In 2005, Yanacocha entered into settlement agreements with
      approximately 350 additional plaintiffs. The Company cannot reasonably predict
      the final outcome of any of the above-described lawsuits.





Conga





The
      Company is involved in a dispute with the Provincial Municipality of Celendin
      regarding the authority of that governmental body to regulate the development
      of
      the Conga project. In 2004, the Municipality of Celendin enacted an ordinance
      declaring the area around Conga to be a mining-free reserve and naturally
      protected area. The Company has challenged this ordinance by means of two legal
      actions, one filed by the Company (as the lease holder of the Conga mining
      concessions) and one filed by Minera Chaupiloma (as the titleholder of the
      Conga
      mining concessions). In August 2007, a Peruvian Court of first instance upheld
      Chaupiloma’s claim, stating that the Municipality of Celendin lacks the
      authority to create natural protected areas. The Municipality of Celendin has
      not appealed the ruling. Based on legal precedent established by Peru's
      Constitutional Tribunal and the foregoing resolution of the Chaupiloma claim,
      it
      is reasonable to believe that Yanacocha’s mining rights will be
      upheld.





Hacienda
      Los Negritos





On
      October 21, 2002, the Company was sued by Grimaldina Malpica Rojas, seeking:
      (i)
      the repossession of the “Los Negritos” property, which is currently held and
      utilized by the Company, and (ii) a payment for damages of up to $65
      million.





The
      Company has opposed the lawsuit and all its terms, requesting that her
      registration of the property in the Public Registry of Cajamarca be declared
      void. The legal proceeding is currently pending resolution in Cajamarca’s court
      of first instance. The Company believes that the plaintiff’s claim is without
      merit.





Baños
      del Inca





On
      September 11, 2006 the Municipality of Baños del Inca issued a declaration
      designating an area that includes the Carachugo Expansion and San Jose Projects
      as reserved and protected areas. Based on previous experience and actions taken
      by the Constitutional Tribunal (Peru Court of Last instance for Constitutional
      issues) in respect of Cerro Quilish in which it was ruled that such declaration
      did not affect the Company’s mining rights, the Company believes that Baños del
      Inca’s declaration, should not impact the Company’s legal rights to exploit
      these concessions. The legal proceeding is currently pending resolution in
      Lima’s Court of First Instance.




F-76




San
      Pablo





On
      February 16, 2007 the Municipality of San Pablo issued an ordinance designating
      an area that includes Las Lagunas and Pozo Seco as reserved and protected areas,
      where the company has mining rights. Based on previous experience and actions
      taken by the Constitutional Tribunal in respect of Cerro Quilish in which it
      was
      ruled that such declaration did not affect the Company’s mining rights, the
      Company believes that San Pablo’s declaration, should not impact the Company’s
      legal rights to exploit these concessions. The Company has challenged this
      ordinance on the grounds that, under Peruvian law, local governments lack the
      authority to create such areas, denying the rights granted by the Company’s
      mining concessions. The Court in the first instance rejected the complaint
      based
      on formal grounds. The resolution of the Court was appealed and such appeal
      is
      currently pending resolution in Lima’s Court of Second Instance.





**Other
      contingencies - Cerro Quilish**





The
      Company was involved in a dispute with the Provincial Municipality of Cajamarca
      regarding the authority of that governmental body to regulate the development
      of
      the Cerro Quilish ore deposit. Cerro Quilish is located in the same watershed
      in
      which the City of Cajamarca is located. The Municipality enacted an ordinance
      declaring Cerro Quilish and its watershed to be a reserve and naturally
      protected area. The Company challenged this ordinance on the grounds that,
      under
      Peruvian law, local governments lack authority to create such areas. The
      Peruvian Constitutional Tribunal heard the case in early 2003 and ruled on
      April
      7, 2003. The ruling established that the Company’s rights were not impacted by
      the ordinance; that the Company would complete a full environmental impact
      study
      prior to initiating any development at Cerro Quilish; and, adopt mitigation
      measures necessary to protect the quality and quantity of the water supply
      of
      the City of Cajamarca. In July 2004, the Company received a drilling permit
      and
      commenced exploration activities on the Cerro Quilish deposit. During September
      2004, individuals from the Cajamarca region conducted a sustained blockade
      of
      the road between the City of Cajamarca and the mine site, in protest of these
      exploration activities. The Company suspended all drilling activities at Cerro
      Quilish and the blockade was resolved. In November 2004, in recognition of
      the
      communities’ concerns, the Company requested and received the revocation of its
      Cerro Quilish drilling permit. In this regard, the Company continues to work
      to
      improve its relationship with the communities in the vicinity of
      Cajamarca.




F-77




***ERNST
                & YOUNG***
            Medina,
                Zaldivar, Paredes & AsociadosSociedad
                Civil





Report
      of
      Independent Registered Public Accounting Firm




To
      the
      Shareholders of **Sociedad
      Minera Cerro Verde S.A.A.**





We
      have
      audited the accompanying balance sheets of **Sociedad
      Minera Cerro Verde S.A.A.** (a
      Peruvian company, subsidiary of Freeport McMoRan Copper and Gold Inc.), as
      of
      December 31, 2007, and the related statements of income, shareholders’ equity
      and cash flows for the year ended December 31, 2007. The financial statements
      of **Sociedad
      Minera Cerro Verde S.A.A.** for the
      years ended December 31, 2006 and 2005 were audited by other independent
      auditors whose report dated February 9, 2007 expressed an unqualified opinion
      on
      such financial statements.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of **Sociedad
      Minera Cerro Verde S.A.A.** as of
      December 31, 2007 and the results of its operations and its cash flows for
      the
      year then ended, in conformity with generally accepted accounting principles
      in
      Peru, which differ in certain respects from U.S. generally accepted accounting
      principles (see notes 26 and 27 to the financial statements).





Lima,
      Peru,


July
      11,
      2008





Countersigned
      by:




/S/
                MEDINA, ZALDIVAR, PAREDES & ASOCIADOSCountersigned
                by: /S/
                  VICTOR BURGA


Victor
      Burga


C.P.C.
      Register No.14859




F-78


***PRICEWATERHOUSECOOPERS***
              Dongo-Soria
                  Gaveglio y AsociadosSociedad
                  CivilFirma
                  Miembro de PricewaterhouseCoopers
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 February
        9, 2007
 
 To
        the
        Shareholders of
 
 **Sociedad
        Minera Cerro Verde S.A.A.**
 
 In
        our
        opinion, the accompanying balance sheet and the related income statements,
        statements of changes in shareholders' equity and cash flows statements,
        present
        fairly, in all material respects, the financial position of **Sociedad
        Minera Cerro Verde S.A.A.** **** at
        December 31, 2006, and the results of its operations and its cash flows for
        each
        of the two years in the period ended December 31, 2006 in conformity with
        accounting principles generally accepted in Peru. These financial statements
        are
        the responsibility of the Company’s management. Our responsibility is to express
        an opinion on these financial statements based on our audits. We conducted
        our
        audits of these financial statements in accordance with the standards of
        the
        Public Company Accounting Oversight Board (United States). Those standards
        require that we plan and perform the audit to obtain reasonable assurance
        about
        whether the financial statements are free of material misstatement. An audit
        of
        financial statements includes examining, on a test basis, evidence supporting
        the amounts and disclosures in the financial statements, assessing the
        accounting principles used and significant estimates made by management,
        and
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 Accounting
        principles generally accepted in Peru vary in certain significant respects
        from
        accounting principles generally accepted in the United States of America.
        The
        application of the latter would have affected the determination of net income
        and of cash flows from operating activities for the two years in the period
        ended December 31, 2006 and the determination of shareholders’ equity and
        financial position at December 31, 2006 to the extent summarized in Note
        27 to
        the financial statements.
 
 
 /S/ DONGO-SORIA
        GAVEGLIO Y ASOCIADOS
  Countersigned
        by
 
 /S/
        LUIS
        W. MONTERO
  Luis
        W.
        Montero
  Peruvian
        Public Accountant
  Registration
        No.17729


F-79




**Sociedad
      Minera Cerro Verde S.A.A.**


**Balance
      Sheets**


As
      of
      December 31, 2007 and 2006




**Note**
            
            **2007**
            
            **2006**US$(000)
            
            US$(000)**Assets****Current
                Assets**Cash
                and cash equivalents
            
            
            
            
            
            630,360
            
            
            354,862Trade
                accounts receivable from third parties
            
            
            
            
            
            36,344
            
            
            -Trade
                accounts receivable from affiliates
            
            
            5
            
            
            160,559
            
            
            50,103Value
                added tax credit
            
            
            
            
            
            5,855
            
            
            38,786Other
                trade accounts receivable
            
            
            
            
            
            1,000
            
            
            1,865Inventories,
                net
            
            
            6
            
            
            93,735
            
            
            77,012Prepaid
                expenses
            
            
            
            
            
            3,038
            
            
            4,329**Total
                current assets**
            
            
            
            
            
            930,891
            
            
            526,957Long
                term inventories
            
            
            6
            
            
            40,187
            
            
            20,114Deferred
                income tax
            
            
            11(a)
            
            
            -
            
            
            99,015Property,
                plant and equipment, net
            
            
            7
            
            
            1,014,732
            
            
            991,498Mine
                development costs, net
            
            
            
            
            
            -
            
            
            13,672**Total
                assets**
            
            
            
            
            
            1,985,810
            
            
            1,651,256**Liabilities
                and shareholders’ equity, net****Current
                liabilities**Trade
                accounts payable
            
            
            8
            
            
            50,394
            
            
            44,430Trade
                accounts payable to affiliates
            
            
            20(d)
            
            
            8,092
            
            
            739Income
                tax payable
            
            
            
            
            
            138,006
            
            
            8,381Workers’
                profit sharing payable
            
            
            
            
            
            99,649
            
            
            39,492Other
                accounts payable
            
            
            9
            
            
            98,529
            
            
            45,748Current
                portion of financial obligations
            
            
            10
            
            
            11,250
            
            
            25,250**Total
                current liabilities**
            
            
            
            
            
            405,920
            
            
            164,040Long-term
                financial obligations
            
            
            10
            
            
            62,514
            
            
            158,417Provision
                for remediation and mine closure
            
            
            19(a)
            
            
            15,634
            
            
            14,918Deferred
                income tax and workers’ profit sharing, net
            
            
            11(a)
            
            
            55,697
            
            
            52,277Deferred
                income
            
            
            
            
            
            303
            
            
            547**Total
                liabilities**
            
            
            
            
            
            540,068
            
            
            390,199**Shareholders’
                equity, net**
            
            
            12Capital
                stock
            
            
            
            
            
            189,030
            
            
            189,030Additional
                paid-in capital
            
            
            
            
            
            375,660
            
            
            375,660Legal
                reserve
            
            
            
            
            
            37,845
            
            
            37,845Restricted
                earnings
            
            
            
            
            
            800,030
            
            
            469,979Retained
                earnings
            
            
            
            
            
            43,177
            
            
            188,543**Total
                shareholders’ equity, net**
            
            
            
            
            
            1,445,742
            
            
            1,261,057**Total
                liabilities and shareholders’ equity, net**
            
            
            
            
            
            1,985,810
            
            
            1,651,256





The
      accompanying notes are an integral part of these financial
      statements.




F-80




**Sociedad
      Minera Cerro Verde S.A.A.**


Statements
      of Income


For
      the
      years ended December 31, 2007, 2006 and 2005





**Note**
            
            **2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Net
                sales
            
            
            14
            
            
            1,794,559
            
            
            667,671
            
            
            358,928Cost
                of sales
            
            
            15
            
            
            (418,108
            )
            
            (140,423
            )
            
            (133,715
            )**Gross
                revenue**
            
            
            
            
            
            1,376,451
            
            
            527,248
            
            
            225,213**Operating
                Expenses**Selling
                expenses
            
            
            16
            
            
            (54,405
            )
            
            (3,538
            )
            
            (1,295
            )Voluntary
                contribution
            
            
            19(b)
            
            
            (48,674
            )
            
            -
            
            
            -Other
                operating expenses
            
            
            17
            
            
            (2,432
            )
            
            (48,100
            )
            
            -**Operating
                income**
            
            
            
            
            
            1,270,940
            
            
            475,610
            
            
            223,918**Other
                (expenses) income:**Financial
                expenses
            
            
            18
            
            
            (23,346
            )
            
            (2,984
            )
            
            (14
            )Financial
                income
            
            
            18
            
            
            33,168
            
            
            10,899
            
            
            7,063Other,
                net
            
            
            
            
            
            (426
            )
            
            (550
            )
            
            169**Profit
                before workers’ profit sharing and income tax**
            
            
            
            
            
            1,280,336
            
            
            482,975
            
            
            231,136**Workers’
                profit sharing**Current
            
            
            13(b)
            
            
            (105,851
            )
            
            (41,825
            )
            
            (19,139
            )Deferred
            
            
            11(a)
            
            
            (995
            )
            
            (980
            )
            
            561**Income
                tax**Current
            
            
            13(b)
            
            
            (267,138
            )
            
            (49,381
            )
            
            (21,632
            )Deferred
            
            
            11(a)
            
            
            (101,667
            )
            
            53,832
            
            
            43,737**Net
                Income**
            
            
            
            
            
            804,685
            
            
            444,621
            
            
            234,663**Basic
                and diluted earnings per share (stated in U.S
                dollars)**
            
            
            21
            
            
            2.30
            
            
            1.27
            
            
            0.79**Weighted
                average number of share outstanding**
            
            
            21
            
            
            350,056,012
            
            
            350,056,012
            
            
            298,911,465





The
      accompanying notes are an integral part of these financial
      statements.




F-81




**Sociedad
      Minera Cerro Verde S.A.A.**


Statements
      of Changes in Shareholders’ Equity


For
      the
      years ended December 31, 2007, 2006 and 2005




**Capital**
              **stock**
            
            **Additional**
              **paid-in**
              **capital**
            
            **Legal**
              **Reserve**
            
            **Restricted**
              **Earnings**
            
            **Retained**
              **Earnings**
            
            **Total**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Balances
                at January 1, 2005**
            
            
            122,747
            
            
            194
            
            
            9,056
            
            
            -
            
            
            155,200
            
            
            287,197Dividend
                distributions, note 12 (f)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (147,173
            )
            
            (147,173
            )Contributions
                of shareholders, note 12(a)
            
            
            66,283
            
            
            375,466
            
            
            -
            
            
            -
            
            
            -
            
            
            441,749Transfer
                to the legal reserve
            
            
            -
            
            
            -
            
            
            8,766
            
            
            -
            
            
            (8,766
            )
            
            -Transfer
                to restricted earnings, note 12(d)
            
            
            -
            
            
            -
            
            
            -
            
            
            152,911
            
            
            (152,911
            )
            
            -Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            234,663
            
            
            234,663**Balances
                at December 31, 2005**
            
            
            189,030
            
            
            375,660
            
            
            17,822
            
            
            152,911
            
            
            81,013
            
            
            816,436Transfer
                to the legal reserve
            
            
            -
            
            
            -
            
            
            20,023
            
            
            -
            
            
            (20,023
            )
            
            -Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            444,621
            
            
            444,621Transfer
                to restricted earnings, note 12(d)
            
            
            -
            
            
            -
            
            
            -
            
            
            317,068
            
            
            (317,068
            )
            
            -**Balances
                at December 31, 2006**
            
            
            189,030
            
            
            375,660
            
            
            37,845
            
            
            469,979
            
            
            188,543
            
            
            1,261,057Transfer
                to restricted earnings, note 12(d)
            
            
            -
            
            
            -
            
            
            -
            
            
            330,051
            
            
            (330,051
            )
            
            -Dividend
                distributions, note 12(f)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (620,000
            )
            
            (620,000
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            804,685
            
            
            804,685**Balances
                at December 31, 2007**
            
            
            189,030
            
            
            375,660
            
            
            37,845
            
            
            800,030
            
            
            43,177
            
            
            1,445,742





The
      accompanying notes are an integral part of these financial
      statements.




F-82




**Sociedad
      Minera Cerro Verde S.A.A.**


Statements
      of Cash Flows


For
      the
      years ended December 31, 2007, 2006 and 2005




**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Operating
                activities**Net
                income
            
            
            804,685
            
            
            444,621
            
            
            234,663**Adjustments
                to net income that do not affect net cash flow from operating
                activities:**Depreciation
            
            
            76,696
            
            
            25,627
            
            
            18,896Provision
                for obsolescence of materials and supplies
            
            
            197
            
            
            277
            
            
            492Amortization
                of deferred income
            
            
            (244
            )
            
            (242
            )
            
            (243
            )Amortization
                of debt issuance costs
            
            
            12,038
            
            
            2,819
            
            
            -Gain
                on sale of machinery and equipment
            
            
            (69
            )
            
            (72
            )
            
            (47
            )Amortization
                of mine development costs
            
            
            13,672
            
            
            1,277
            
            
            1,237Accretion
                expense due to mine closure accrual
            
            
            703
            
            
            447
            
            
            442Deferred
                income tax and workers’ profit sharing
            
            
            102,435
            
            
            (52,852
            )
            
            (44,298
            )Amortization
                of other assets
            
            
            -
            
            
            -
            
            
            137**Net
                changes in assets and liabilities accounts:**Decrease
                (increase) in operating assets:Trade
                accounts receivable from third parties
            
            
            (36,344
            )
            
            99
            
            
            76Trade
                accounts receivable from affiliates
            
            
            (110,456
            )
            
            (19,959
            )
            
            (21,200
            )Value
                added tax credit
            
            
            32,931
            
            
            (10,643
            )
            
            (27,712
            )Other
                accounts receivable
            
            
            865
            
            
            1,369
            
            
            (3,004
            )Inventories
            
            
            (36,993
            )
            
            (29,500
            )
            
            (3,076
            )Prepaid
                expenses
            
            
            1,291
            
            
            (9,924
            )
            
            (13,211
            )Increase
                (decrease) in operating liabilities:Trade
                accounts payable
            
            
            5,964
            
            
            29,442
            
            
            1,423Trade
                accounts payable to affiliates
            
            
            7,353
            
            
            (467
            )
            
            400Income
                tax payable
            
            
            129,625
            
            
            8,069
            
            
            (29,816
            )Workers’
                profit sharing payable
            
            
            60,157
            
            
            21,483
            
            
            9,783Other
                accounts payable
            
            
            52,781
            
            
            43,239
            
            
            1,002Debt
                issuance costs
            
            
            1,309
            
            
            (3,058
            )
            
            (18,094
            )**Net
                cash and cash equivalents provided by operating
                activities**
            
            
            1,118,596
            
            
            467,534
            
            
            107,850




F-83




Statements
      of Cash Flows (continued)





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Investing
                activities**Purchase
                of property, plant and equipment
            
            
            (99,961
            )
            
            (560,095
            )
            
            (314,974
            )Proceeds
                from sales of plant and equipment
            
            
            113
            
            
            148
            
            
            651**Net
                cash and cash equivalents used in investing
                activities**
            
            
            (99,848
            )
            
            (559,947
            )
            
            (314,323
            )**Financing
                activities**Capital
                contribution
            
            
            -
            
            
            -
            
            
            441,749Proceeds
                from financial obligations
            
            
            -
            
            
            182,000
            
            
            20,000Payments
                of financial obligations
            
            
            (123,250
            )
            
            -
            
            
            -Payment
                of dividends
            
            
            (620,000
            )
            
            -
            
            
            (147,173
            )**Net
                cash and cash equivalents provided by (used in) financing
                activities**
            
            
            (743,250
            )
            
            182,000
            
            
            314,576Net
                increase in cash and cash equivalents during the year
            
            
            275,498
            
            
            89,587
            
            
            108,103Cash
                and cash equivalents at beginning of year
            
            
            354,862
            
            
            265,275
            
            
            157,172**Cash****and cash equivalents****at year-end**
            
            
            630,360
            
            
            354,862
            
            
            265,275**Additional
                information:**See
                additional information in Note 22.





The
      accompanying notes are an integral part of these financial
      statements.




F-84




**Sociedad
      Minera Cerro Verde S.A.A.**


Notes
      to
      the Financial Statements


As
      of
      December 31, 2007, 2006 and 2005





**1.**
            **Identification
                and business activity**





(a)
            Identification
                -





Sociedad
      Minera Cerro Verde S.A.A. (hereinafter the Company) was incorporated in Peru
      on
      August 20, 1993 as a result of the privatization process carried out by the
      Peruvian state in that year. The Company has listed its shares on the Lima
      Stock
      Exchange since November 14, 2000.





On
      March
      19, 2007, Freeport-McMoRan Copper and Gold Inc. (“Freeport”) completed the
      acquisition process of Phelps Dodge Corporation (“Phelps Dodge”). Phelps Dodge,
      through its subsidiary Cyprus Climax Metals Company, owns 53.56% of the voting
      shares of the Company. Additionally, SMM Cerro Verde Netherlands B.V. (a
      subsidiary of Sumitomo Metal Mining Company), Compañía de Minas Buenaventura
      S.A.A. and the minority stakeholders own 21%, 18.50% and 6.94% of the voting
      shares of the Company, respectively.





The
      Company’s legal address is Asiento Minero Cerro Verde S/N Uchumayo –
Arequipa. The ore deposits are located southwest of the city of
      Arequipa.





(b)
            Business
                activity –





The
      Company’s activities are regulated by the Peruvian General Mining Law and
      comprise the extraction, production and sale of copper cathodes and
      concentrates.





(c)
            Approval
                of financial statements -





Financial
      statements as of December 31, 2007 and 2006 were approved at the General
      Shareholders Meeting held on March 28, 2008 and March 26, 2007,
      respectively.





**2.**
            **Significant
                accounting principles and
                policies**





In
      the
      preparation and presentation of the financial statements, Management has
      followed International Financial Reporting Standards (IFRS) effective in Peru
      as
      of December 31, 2007, 2006 and 2005, which differ in certain respects from
      accounting principles generally accepted in the United States of America (“U.S.
      GAAP”). A description of these differences and their effects on net income and
      shareholders’ equity is set forth in Notes 26 and 27. The financial statements
      derive from the statutory financial statement presentation and include certain
      additional disclosures in order to conform more closely to the form and content
      of financial statements required by the Securities and Exchange Commission
      of
      the United States of America (the “SEC”).





The
      principal accounting principles and practices used in accounting for the
      transactions and in preparing the consolidated financial statements
      are:





(a)
            Basis
                of presentation -





The
      financial statements of the Company have been prepared in accordance with
      accounting principles generally accepted in Peru, which comprise the
      International Financial Reporting Standards ( ̈IFRS ̈), made official through
      resolutions issued by the Peruvian Accounting Standards Board. IFRS include
      the
      International Financial Reporting Standards, the International Accounting
      Standards (IAS) and the pronouncements of the Interpretations Committees (SIC
      and IFRIC). At the date of the financial statements, the Peruvian Accounting
      Standards Board has made official the application of IAS 1 to 41, IFRS 1 to
      6
      and SIC pronouncements 1 to 33.





The
      financial statements are presented in US dollars, which is the Company’s
      functional and presentation currency, see (c).





(b)
            Use
                of estimates and assumptions –





The
      preparation of financial statements in conformity with generally accepted
      accounting principles in Peru requires Management to make estimates and
      assumptions in order to determine the amounts of the assets and liabilities,
      the
      disclosure of contingent assets and liabilities and the amounts of revenues
      and
      expenses to be reported for the years ended December 31, 2007 and
      2006.




F-85




The
      most
      significant estimates considered in the preparation of the accompanying
      financial statements are the copper cathode and concentrate provisional sales
      prices which are initially recorded according to the terms of sales contracts,
      the expected copper recovery rates used to estimate copper contained in the
      in-process inventories, the provision for obsolescence of materials and
      supplies, the useful life and the recoverable amount of property, plant and
      equipment, the determination of ore reserves, and the provision for mine closure
      costs. Any difference between the estimated and actual amounts is recorded
      in
      the year of occurrence.





(c)
            Foreign
                currency translation -





*Functional
      and presentation currency –*





Financial
      statements are presented in US dollars, which is the Company’s functional and
      presentation currency.





*Transactions
      and balances in foreign currency –*





Transactions
      that are not originated in the functional currency are considered foreign
      currency transactions. Initially, transactions in foreign currency are recorded
      at the exchange rate in effect on the transaction dates. Later, at each balance
      sheet date: (a) monetary assets and liabilities denominated in foreign
      currencies are translated using the exchange rate on that date, and (b)
      non-monetary items denominated in foreign currencies, that are measured in
      terms
      of historical cost are translated using the exchange rates in effect on the
      dates of the initial transactions.





Exchange
      differences resulting from the settlement of monetary items or from the
      translation of monetary items at exchange rates different from those originally
      used are recognized as gains and losses of the current period.





(d)
            Financial
                assets -





The
      Company classifies its financial assets in the following categories: at fair
      value through profit or loss, loans and receivables, held-to-maturity financial
      assets and available-for-sale. Management determines the classification of
      its
      financial assets at initial recognition and re-evaluates this classification
      at
      every balance sheet date.





*Financial
      assets at fair value through profit or loss –*





This
      category has two sub-categories: held-for-trading financial assets and those
      designated at fair value through profit or loss at the time of acquisition.
      A
      financial asset is classified in this category if acquired principally for
      the
      purpose of its sale in the short term or if so designated by management. Assets
      in this category are classified as current assets if they are either held for
      trading or are expected to be traded within 12 months of the balance sheet
      date.
      The Company has classified within this category its marketable securities as
      of
      December 31, 2007 and 2006.





*Loans
      and receivables –*





Loans
      and
      receivables are non-derivative financial assets with fixed or determinable
      payments that are not quoted in an active market. After initial measurement,
      loans and receivables are subsequently carried at amortized cost using the
      effective interest method less any allowance for impairment.





If
      there
      is objective evidence that an impairment loss on assets has been incurred (such
      as the probability of insolvency or significant financial difficulties of the
      debtor), the amount of the loss is measured as the difference between the
      asset’s carrying amount and the present value of estimated future cash flow
      discounted at the financial asset’s original effective interest rate or interest
      rate applicable to a similar transaction. The carrying amount of the receivable
      is reduced through use of an allowance account. The amount of the loss is
      recognized in the statements of income. Impaired receivables are expensed when
      they are assessed as uncollectible.





If,
      in a
      subsequent period, the amount of the impairment loss decreases, the previously
      recognized impairment loss is reversed through profit or loss.




F-86




*Held-to-maturity
      investments –*





Held-to-maturity
      investments are non-derivative financial assets with fixed or determinable
      payments and fixed maturities that the Company’s management has the positive
      intention and ability to hold to maturity. The Company does not maintain any
      financial assets in this category as of December 31, 2007 and 2006.





*Available-for-sale
      financial assets –*





Available-for-sale
      financial assets are those non-derivative financial assets that are designated
      as available-for-sale or are not classified in any of the other categories.
      After initial measurement, available-for-sale financial assets are measured
      at
      fair value with unrealized gains or losses being recognized directly in equity.
      When the investment is disposed of, the cumulative gain or loss previously
      recorded in equity is recognized in the statements of income. The Company did
      not maintain any financial assets in this category as of December 31, 2007,
      2006
      and 2005.





(e)
            Cash
                and cash equivalents -





Cash
      and
      cash equivalents comprise cash at banks and on hand. For the purpose of the
      statements of cash flows, cash and cash equivalents also include short term
      deposits with an original maturity of three months or less.





(f)
            Inventories
                -





Inventories
      are stated at the lower of cost or the net realizable value. Cost of finished
      products and work in progress is determined by using the first-in, first-out
      (FIFO) method. Cost of materials and supplies is determined by using the
      weighted average method and the cost of in-transit inventories is determined
      under the specific identification method. Net realizable value is the estimated
      selling price in the normal course of business, less estimated cost of
      production to complete the process and variable selling expenses.





The
      accrual for materials and supplies obsolescence is based on an item-by-item
      analysis completed by the Company’s management, and the related amount is
      charged to expense in the period in which the obsolescence is deemed to have
      occurred.





(g)
            Property,
                plant and equipment -





Property,
      plant and equipment are stated at cost, net of accumulated depreciation and
      accumulated impairment losses. The cost comprises its purchase price, any costs
      directly attributable to bringing the asset to the location and condition
      necessary for it to be capable of operating in the manner intended by
      management, and the initial estimation of the costs of dismantling and removing
      the item and restoring the site on which it is located.





Subsequent
      costs are included in the asset’s carrying amount or recognized as a separate
      asset, as appropriate, only when it is probable that future economic benefits
      associated with the item will flow to the Company and the cost of the item
      can
      be measured reliably. Repair and maintenance costs are charged to the cost
      of
      production during the period in which they are incurred.





Land
      is
      not depreciated. Depreciation on items of property, plant and equipment directly
      related to the useful life of the mine is calculated by using the
      units-of-production method, based on the proven and probable reserves. Other
      assets are depreciated by using the straight-line method based on the following
      estimated useful lives:








**Years**Buildings
                and other constructions
            
            Between 12 and 30Machinery
                and equipment
            
            Between
                5 and 10Transportation
                units
            
            3Furniture
                and fixtures
            
            7Other
                equipment
            
            Between
                3 and 12




The
      assets’ useful lives and depreciation methods are reviewed at year-end, to
      ensure that they are consistent with the economic benefit of the property,
      plant
      and equipment items.





An
      item
      of property, plant and equipment is disposed of when no future economic benefits
      are expected from its later use. Any gain or loss arising on disposal of **** the
      asset
      is included in current profit or loss statement.




F-87




(h)
            Impairment
                of non-financial assets -





The
      Company assesses at each reporting date whether there is an indication that
      an
      asset may be impaired. If any such indication exists, the Company makes an
      estimate of the asset’s recoverable amount. An asset’s recoverable amount is the
      higher of an asset’s fair value less costs to sell and its value in use and is
      determined for an individual asset, unless the asset does not generate cash
      inflows that are largely independent of those from other assets or groups of
      assets. When the carrying amount of an asset exceeds its recoverable amount,
      the
      asset is considered impaired and is written down to its recoverable amount.
      In
      assessing value in use, the estimated future cash flows are discounted to their
      present value using a discount rate that reflects current market assessments
      of
      the time value of money and the risks specific to the asset.





A
      previously recognized impairment loss is reversed only if there has been a
      change in the estimates used to determine the asset’s recoverable amount since
      the last impairment loss was recognized. The revised valuation cannot exceed
      the
      carrying amount that would have been determined, net of depreciation, had no
      impairment loss been recognized for the asset in prior years. Such reversal
      is
      recognized in the statements of income.





The
      Company considers that machinery & equipment are the main assets subject to
      impairment testing.





(i)
            Borrowings
                -





All
      loans
      and borrowings are initially recognized at the fair value of the cash received
      less directly attributable transaction costs. After initial recognition,
      interest bearing loans and borrowings are subsequently measured at amortized
      cost using the effective interest method.





(j)
            Provisions
                -





*General
      -*





A
      provision is recognized only when the Company has a present obligation (legal
      or
      constructive) as a result of a past event, it is probable that resources of
      the
      Company will be required to settle the obligation, and the related amount can
      be
      fairly estimated. The expense relating to any provision is presented in the
      statements of income. Provisions are discounted using a current rate that
      reflects, where appropriate, the risks specific to the liability. When
      discounting is used, the increase in the provision due to the passage of time
      is
      recognized as a financial expense.





*Mine
      closure costs -*





The
      Company records a provision for mine closure when a legally enforceable
      obligation arises, independently of the full depletion of the reserves. The
      Company estimates the present value of its future obligations for remediation
      and mine closure (asset retirement obligation or “ARO”) and increases the
      carrying amount of the related asset (asset retirement cost or “ARC”) to be
      retired in the future, which is included in the property, plant and equipment
      account in the balance sheet. Subsequently, ARC is attributed to income during
      the useful life of the related assets. Any difference in the settlement of
      the
      liability will be recorded in the results of the period in which such settlement
      occurs. The changes in the fair value of the obligation or useful life of the
      related assets that occur from the revision of the initial estimates are
      recorded as an increase or decrease in the book value of the obligation and
      the
      related asset.





(k)
            Contingencies
                -





Contingent
      liabilities are recorded in the financial statements when occurrence is probable
      and they can be reasonably estimated. In other cases, they are only disclosed
      in
      notes to the financial statements.





Contingent
      assets are not recognized in the financial statements; however, they are
      disclosed in notes to the financial statements if it is probable that such
      contingent assets will be realized.





(l)
            Revenue
                recognition -





Revenue
      comprises the fair value of the sale of goods, net of the related value added
      tax.





The
      Company recognizes revenues when the amount can be reliably measured, it is
      probable that future economic benefits will flow to the Company and specific
      criteria have been met for each of the Company’s activities as described below.
      The amount of revenue is not considered reliably measurable until all
      contingencies relating to the sale have been resolved.




F-88




*Sales
      of copper cathodes and copper concentrate*  *-*


Local
      sales of copper cathodes are recognized when the Company has delivered the
      goods
      to the shipping company designated by the client. Foreign sales of copper
      cathodes and concentrates are recognized when the products are delivered to
      the
      shipping port.





Regarding
      revenue measurement, copper sales are recorded based on a provisional sales
      price in accordance with the terms specified in the relevant sales contracts.
      Sales based on a provisional sales price contain an embedded derivative which
      is
      required to be bifurcated from the host contract. The embedded derivative does
      not qualify for hedge accounting. Therefore, the embedded derivative on these
      provisional sales is adjusted to the fair value through the income statement
      in
      the net sales caption. At period end, the provisional sales are adjusted based
      on an estimated price for the quotation period agreed in the contract. The
      provisional sales adjustment is recorded as an increase or decrease of the
      net
      sales.





*Interest
      income*  *-*





Interest
      income is recognized as interest accrues using the effective interest rate.





(m)
            Income
                tax and workers’ profit sharing -





*Current
      income tax and workers’ profit sharing -*





Income
      tax and workers’ profit sharing for the current period are measured at the
      amounts expected to be paid to the tax authorities and workers, respectively.
      The Company calculates the income tax expense and liability, as explained in
      note 13. The current workers' profit sharing expense and liability is computed
      using a rate of 8 percent over the taxable income.





*Deferred
      income tax and workers’ profit sharing -*





Deferred
      income tax and workers’ profit sharing are recorded using the liability method
      on temporary differences at the balance sheet date between the tax bases of
      assets and liabilities and their carrying amounts for financial reporting
      purposes.





Deferred
      income tax and workers’ profit sharing liabilities are recognized for all
      taxable temporary differences. Deferred income tax and workers’ profit sharing
      assets are recognized for all deductible temporary differences and tax loss
      carry-forwards, to the extent that is probable that taxable profit will be
      available against which the deductible temporary differences and unused tax
      losses can be utilized. The carrying amount of the deferred income tax and
      workers’ profit sharing assets is reviewed at each balance sheet date and
      reduced to the extent that it is no longer probable that sufficient taxable
      profit will be available to allow all or part of the deferred asset to be
      utilized. Unrecognized deferred assets are reassessed at each balance sheet
      date.





(n)
            Tax
                credits for reinvestment programs -




The
      tax
      benefit from the reinvestment programs, note 13(c), is recognized in the year
      in
      which investments related to the reinvestment programs are made. Any temporary
      difference between the tax benefit applied in the year and the income tax
      payable is considered as a deferred income tax.





(o)
            Borrowing
                costs -




Borrowing
      costs incurred for the construction of any qualifying assets are capitalized
      during the period of time that is required to complete and prepare the asset
      for
      its intended use. Other borrowing costs are recorded as expense when
      incurred.





(p)
            Basic
                and diluted earnings per share -





Basic
      and
      diluted earnings per share are calculated by dividing basic earnings per share
      by the weighted average common shares outstanding during the period, excluding
      treasury shares. The shares issued as a result of capitalization of profits
      are
      adjusted retrospectively. As of December 31, 2007, 2006 and 2005, the Company
      did not maintain financial instruments with diluting effects; as a result,
      the basic
      and diluted earnings per share are the same for 2007, 2006 and 2005.




F-89




(q)
            Comparative
                financial statements -





In
      order
      to improve the presentation of the statements of income, the Company has
      reclassified US$48,100,000, principally related to contributions to the Regional
      Government and Municipalities of Arequipa previously included in the “Others,
      net” caption, to the “Other operating expenses” caption. This reclassification
      has not modified the net income of 2006. The detail of the caption is show
      in
      Note 17(a).





(r)
            New
                accounting pronouncements -





Effective
      year 2008, through Resolution No040-2008 - EE/94 enacted on March 14, 2008, the
      Peruvian Accounting Standards Board had mandated the application of IFRIC ́s
      1,2,4,5,6,7,8,9,10,11 and 12 effective for 2008 fiscal year. In addition, it
      duly approved the application of IFRS 7 “Financial instruments: disclosures”,
      IFRS 8 “Operating segments”, IAS 32 “Financial Instruments: Presentation” and
      IFRIC 13 and 14 for effective year 2009.





**IFRIC
      1, Changes in Existing Decommissioning, Restoration and Similar
      Liabilities**





IFRIC
      1
      contains guidance on accounting for changes in decommissioning, restoration
      and
      similar liabilities that have previously been recognized both as part of the
      cost of an item of property, plant and equipment under IAS 16 and as a provision
      (liability) under IAS 37. The interpretation addresses subsequent changes to
      the
      amount of the liability that may arise from (a) a revision in the timing or
      amount of the estimated decommissioning or restoration costs or from (b) a
      change in the current market-based discount rate





**IFRIC
      2, Members’ Shares in Cooperative Entities and Similar
      Instruments**





Members'
      shares in co-operative entities have some characteristics of equity. They also
      give the holder the right to request redemption for cash, although that right
      may be subject to certain limitations. IFRIC 2 gives guidance on how those
      redemption terms should be evaluated in determining whether the shares should
      be
      classified as financial liabilities or as equity.





**IFRIC
      4, Determining whether an Arrangement contains a Lease**





The
      Interpretation specifies that an arrangement that meets the following criteria
      is, or contains, a lease that should be accounted for in accordance with IAS
      17
      Leases: (a) fulfillment of the arrangement depends upon a specific asset. The
      asset need not be explicitly identified by the contractual provisions of the
      arrangement; rather it may be implicitly specified because it is not
      economically feasible or practical for the supplier to fulfill the arrangement
      by providing use of alternative assets; and (b) the arrangement conveys a right
      to control the use of the underlying asset.





**IFRIC
      5, Rights to Interests arising from Decommissioning, Restoration and
      Environmental Rehabilitation Funds**





IFRIC
      5
      sets out the accounting treatment for funds set up to finance the
      decommissioning of assets.





**IFRIC
      6, Liabilities arising from Participating in a Specific Market-Waste Electrical
      and Electronic Equipment**





IFRIC
      6
      prescribes the date at which recognition of a liability is required for disposal
      of Electrical and Electronic Equipment in accordance with the EU
      Directive.





**IFRIC
      8, Scope of IFRS 2**





International
      Financial Reporting Interpretations Committee 8 Scope of IFRS 2 (“IFRIC 8”)
      clarifies that IFRS 2 will apply to any arrangement when equity instruments
      are
      granted or liabilities are incurred by an entity, when the identifiable
      consideration appears to be less than the fair value of the instruments given.





**IFRIC
      9, Reassessment of Embedded Derivatives**





International
      Financial Reporting Interpretations Committee 9 Reassessment of Embedded
      Derivatives (“IFRIC 9”) requires an entity to assess whether a contract contains
      an embedded derivative at the date an entity first becomes a party to the
      contract and prohibits reassessment unless there is a change to the contract
      that significantly modifies the cash flows.




F-90




**IFRIC
      10, Interim Financial Reporting and Impairment**





International
      Financial Reporting Interpretations Committee 10 Interim Financial Reporting
      and
      Impairment (“IFRIC 10”) addresses an inconsistency between IAS 34 Interim
      Financial Reporting and the impairment requirements relating to goodwill in
      IAS
      36 Impairment of Assets and equity instruments classified as available for
      sale
      in IAS 39.





**IFRIC
      11, IFRS 2 - Group and Treasury Share Transactions**





IFRIC
      11
      provides guidance on applying IFRS 2 in three circumstances: (a) share-based
      payment involving an entity's own equity instruments in which the entity chooses
      or is required to buy its own equity instruments (treasury shares) to settle
      the
      share-based payment obligation – is this an equity-settled or cash-settled
      transaction; (b) a parent grants rights to its equity instruments to employees
      of its subsidiary – how to account in the individual entities' financial
      statements; (c) a subsidiary grants rights to equity instruments of its parent
      to its employees – how to account in the individual entities' financial
      statements.





**IFRIC
      12, Service Concession Arrangements**





IFRIC
      12
      outlines an approach to account for contractual arrangements arising from
      entities providing public services. It provides that the operator should not
      account for the infrastructure as property, plant and equipment, but recognize
      a
      financial asset and/or an intangible asset.





**IFRS
      8, Operating Segments**





This
      IFRS
      replaces IAS 14 and adopts a management approach to segment reporting. The
      information reported would be that which management uses internally for
      evaluating the performance of operating segments and allocating resources to
      those segments.





The
      Company is evaluating the effects in its financial statements from the adoption
      of the new IAS, IFRS and IFRIC issued.





**3.**
            **Foreign
                currency transactions**





Translations
      to foreign currency (Nuevos Soles) are completed using exchange rates published
      by the Superintendencia de Banca y Seguros y AFP. As of December 31, 2007,
      the
      exchange rates published by this Institution were S/2.995 for buying and S/2.997
      for selling U.S. dollars (S/3.194 for buying and S/3.197 for selling as of
      December 31, 2006) and have been applied to the respective assets and
      liabilities accounts.





As
      of
      December 31, 2007 the Company does not maintain significant assets or
      liabilities denominated in Nuevos soles.





**4.**
            **Cash
                and cash equivalents**




(a)
            The
                cash and cash equivalents are made up as
                follows:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$Cash
                and banks
            
            
            3,013
            
            
            14,692
            
            
            17,354Cash
                equivalents
            
            
            627,347
            
            
            340,170
            
            
            247,921630,360
            
            
            354,862
            
            
            265,275




(b)
            As
                of December 31, 2007 and 2006 this caption comprises a portfolio
                of
                investments in foreign securities which yield variable returns, and
                are
                classified as highly liquid current assets since management plans
                to use
                them for its short-term cash needs. The carrying amount of these
                investments corresponds to their fair value at the date of the financial
                statements. Changes in the fair value of these investments are recognized
                as financial income in the statements of income, see note
                18.




F-91




**5.**
            **Accounts
                receivable from****affiliate**





(a)
            This
                item is made up as follows:





**2007**
            
            **2006**US$(000)
            
            US$(000)Phelps
                Dodge Corporation (b)
            
            
            80,831
            
            
            37,019Sumitomo
                Metal Mining Company, Ltd. (c)
            
            
            72,662
            
            
            13,083Climax
                Molybdenum Marketing Corporation (d)
            
            
            7,066
            
            
            -Minera
                Phelps Dodge del Peru S.A.C
            
            
            -
            
            
            1160,559
            
            
            50,103





Trade
      accounts receivable are denominated in U.S. dollars, have current maturity,
      do
      not bear interest and have no specific guarantees.





(b)
            On
                January 1, 2007, the Company signed an agreement with Phelps Dodge
                Corporation by means of which it commits to sell a minimum of 68,875
                MT of
                copper cathodes per year, at a monthly negotiated price based on
                the
                London Metal Exchange quotation and under a delivery type known as
                FAS
                ( ̈free along side ship ̈) in the Matarani Port, Arequipa, Peru. In 2007,
                the Company sold copper cathodes to Phelps Dodge Corporation amounting
                to
                US$536,816,000 (US$249,523,000 from August to December of 2006 to
                Phelps
                Dodge Corporation and US$281,151,000 to Phelps Dodge Sales Company,
                an
                affiliate with whom the Company had a sales agreement until July
                31, 2006
                and US$287,699,000 in 2005 to Phelps Dodge Sales Company). This contract
                is valid for one year, and is renewable until one of the parties
                expresses
                its desire to terminate it.





On
      October 15, 2006, the Company signed an agreement with Phelps Dodge Corporation
      by means of which it commits to sell 20% of its annual copper concentrate
      production. This contract is valid for one year, and is renewable until one
      of
      the parties expresses its desire to terminate it. In 2007, copper concentrate
      sales to Phelps Dodge Corporation amounted to US$324,714,000.





(c)
            On
                June 1, 2005, the Company signed an agreement with Sumitomo Metal
                Mining
                Company Ltd., by mean of which it commits to sell 50% of its annual
                copper
                concentrate production, until December 31, 2016. As of December 31,
                2007,
                the sales to Sumitomo Metal Mining Company Ltd. amounted to US$600,673,000
                (US$13,083,000 in 2006).





(d)
            On
                October 1, 2006, the Company signed an agreement with Climax Molybdenum
                Corporation by means of which it commits to sell 100% of its annual
                molybdenum concentrate, at a price based on the Metal Week Dealer
                Oxide
                (MLUDO) and under a delivery type known as CIF (cost, insurance and
                freight). This contract is valid for one year, and is renewable until
                one
                of the parties expresses its desire to terminate it. In 2007 the
                sales to
                Climax Molybdenum Corporation amounted to
                US$22,142,000.





(e)
            In
                2007, the Company sold copper concentrate to its affiliate, Compañía
                Contractual Minera Candelaria, for US$53,390,000. As of December
                31, 2007
                and 2006, the Company did not maintain trade accounts receivable
                with this
                affiliate.




F-92




**6.**
            **Inventories,
                net**





(a)
            This
                item is made up as follows:





**2007**
            
            **2006**US$(000)
            
            US$(000)Copper
                cathodes
            
            
            1,846
            
            
            6,948Copper
                concentrate
            
            
            12,428
            
            
            3,187Molybdenum
                concentrate
            
            
            76
            
            
            -Inventory
                in process
            
            
            64,587
            
            
            62,503Materials
                and supplies
            
            
            47,672
            
            
            24,426Inventories
                in transit
            
            
            9,653
            
            
            2,205136,262
            
            
            99,269Provision
                for obsolescence of materials and supplies (c)
            
            
            (2,340
            )
            
            (2,143
            )133,922
            
            
            97,126Long-term
                inventory in process (d)
            
            
            (40,187
            )
            
            (20,114
            )93,735
            
            
            77,012





(b)
            Until
                September 2007, the Company provided Citibank with a floating mining
                pledge of up to US$202,000,000 on the ore extracted, copper cathodes
                and
                copper concentrates from certain of the Company’s mining concessions, to
                secure the financing for the Primary Sulfide Plant. These loans were
                pre-paid in September 2007 and, consequently, the pledges have been
                lifted. Currently, the Company is engaged in releasing the pledge
                in the
                Public Registries.





(c)
            In
                Management’s opinion, the provision for obsolescence of materials and
                supplies is sufficient to cover the risks of obsolescence as of the
                date
                of financial statements.





(d)
            This
                item corresponds principally to low grade sulfide material mined
                placed in
                the stockpiles and ready to be processed in the concentrator.
                Additionally, it includes the copper pounds contained in leach pads,
                for
                which recovery is achieved through its exposure to acidic solutions
                and
                subsequent transfer to the electrowinning plant to produce copper
                cathodes. The expected recovery of copper pounds contained in leach
                stockpiles is estimated based upon metallurgical assays performed
                on the
                material.




F-93




**7.**
            **Property,
                plant and equipment, net**





(a)
            The
                changes in cost and accumulated depreciation accounts are shown
                below:





**Beginning**
              **balance**
            
            **Additions**
            
            **Adjustments**
            
            **Transfers**
            
            **Ending**
              **balance**US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)
            
            US$(000)**Cost**Land
            
            
            1,465
            
            
            -
            
            
            -
            
            
            -
            
            
            1,465Buildings
                and other constructions
            
            
            50,364
            
            
            -
            
            
            -
            
            
            27,131
            
            
            77,495Machinery
                and equipment
            
            
            307,594
            
            
            -
            
            
            (122
            )
            
            843,640
            
            
            1,151,112Transportation
                units
            
            
            6,580
            
            
            -
            
            
            (21
            )
            
            7
            
            
            6,566Furniture
                and fixtures
            
            
            389
            
            
            -
            
            
            -
            
            
            303
            
            
            692Other
                equipment
            
            
            6,158
            
            
            -
            
            
            (115
            )
            
            1,100
            
            
            7,143Work
                in progress and transit units
            
            
            816,123
            
            
            99,961
            
            
            -
            
            
            (872,181
            )
            
            43,903Mine
                closure costs
            
            
            12,455
            
            
            13
            
            
            -
            
            
            -
            
            
            12,4681,201,128
            
            
            99,974
            
            
            (258
            )
            
            -
            
            
            1,300,844**Accumulated
                depreciation**Buildings
                and other constructions
            
            
            14,459
            
            
            2,770
            
            
            -
            
            
            -
            
            
            17,229Machinery
                and equipment
            
            
            184,892
            
            
            71,718
            
            
            (106
            )
            
            -
            
            
            256,504Transportation
                units
            
            
            4,738
            
            
            800
            
            
            (21
            )
            
            -
            
            
            5,517Furniture
                and fixtures
            
            
            186
            
            
            57
            
            
            -
            
            
            -
            
            
            243Other
                equipment
            
            
            4,063
            
            
            980
            
            
            (87
            )
            
            -
            
            
            4,956Mine
                closure costs
            
            
            1,292
            
            
            371
            
            
            -
            
            
            -
            
            
            1,663209,630
            
            
            76,696
            
            
            (214
            )
            
            -
            
            
            286,112**Net
                cost**
            
            
            991,498
            
            
            
            
            
            
            
            
            
            
            
            1,014,732




(b)
            Fully
                depreciated assets as of December 31, 2007 and 2006 amount to
                US$39,140,000 and US$35,976,000 respectively. Currently, these assets
                are
                being used by the Company and comprise mainly machinery and
                equipment.





(c)
            As
                of December 31, 2006 work in progress is mainly comprised of the
                investment in the Primary Sulfides expansion. This investment includes
                US$8,472,000 of capitalized
                interest.





(d)
            As
                of December 31, 2007, the Company has released the first and preferred
                mining mortgage on certain mining concessions for up to US$202,000,000
                and
                the pledge on machinery and equipment for up to US$105,000,000, which
                guaranteed loans obtained from financial institutions for the construction
                of the concentrator. The registration of the pledges is currently
                being
                released in the Public Registries. See note
                10(a).





(e)
            As
                of December 31, 2007, work in progress and transit units mainly correspond
                to the purchase of an electric shovel and to the expansion of the
                draining
                and filtering system.





As
      of
      December 31, 2006, work in progress was mainly comprised of the investment
      made
      in the Primary Sulfide expansion. It comprised the construction of a
      concentrator plant that allowed the Company to increase its annual copper
      production from 90,000 to 270,000 MT. The new plant reached its intended
      capacity in June 2007.





**8.**
            **Trade
                accounts payable**




Trade
      accounts payable are mainly originated by the acquisition of materials, supplies
      and spare parts. These obligations are mainly denominated in U.S. dollars,
      have
      current maturities and do not accrue interest. No guarantees have been granted.




F-94




**9.**
            **Other
                accounts payable**





(a)
            This
                item is made up of the following:





**2007**
            
            **2006**US$(000)
            
            US$(000)Voluntary
                contribution, note 19(b)
            
            
            48,674
            
            
            -Water
                plant (b)
            
            
            40,000
            
            
            40,000Other
                accounts payable
            
            
            9,855
            
            
            5,74898,529
            
            
            45,748





(b)
            On
                August 2, 2006 the Company and the Committee for the Defense of the
                Interest of Arequipa (hereinafter, the Committee) signed an agreement
                by
                means of which the Company agreed to finance and implement all the
                technical documentation required for the construction of a drinking
                water
                plant in Alto Cayma and a waste water treatment plant. The agreement
                establishes that the costs to be incurred in the construction of
                the
                drinking water treatment plant will be assumed by the Company and
                those of
                the waste water treatment plant by the municipalities of the province
                of
                Arequipa, and if any difference arises between the costs required
                by both
                plants a compensation will be applied in order to result that 50%
                of the
                total cost of both plants will be assumed by each party. As of December
                31, 2007, preparation of the technical budget for the construction
                is in
                progress. Management has estimated that the cost to be assumed in
                the
                construction of the plants amounts to US$40,000,000, an amount that
                has
                been recognized through a charge to “Other operating expenses” in the
                statements of income, see note 17.





**10.**
            **Financial
                obligations**





(a)
            This
                item is made up of the following:





**Interest rate**
            
            **Maturity**
            
            **2007**
            
            **2006**US$(000)
            
            US$(000)**Master
                Participation Agreement (MPA) (c)**Japan
                Bank for International Cooperation - Trench A
            
            
            Libor + 0.875%
            
            
            Until September 2014
            
            
            -
            
            
            53,900Japan
                Bank for International Cooperation - Trench B
            
            
            Libor
                + 1.35%
            
            
            Until
                September 2014
            
            
            -
            
            
            23,100KfW
            
            
            Libor
                + 0.35%
            
            
            Until
                September 2014
            
            
            -
            
            
            7,000Calyon
                New York Branch
            
            
            Libor + range (1)
            
            
            Until
                September 2014
            
            
            -
            
            
            7,000Mizuho
                Corporate Bank Ltd.
            
            
            Libor
                + range (1)
            
            
            Until
                September 2014
            
            
            -
            
            
            7,000The
                Royal Bank of Scotland
            
            
            Libor
                + range (1)
            
            
            Until
                September 2014
            
            
            -
            
            
            7,000Bank
                of Nova Scotia
            
            
            Libor
                + range (1)
            
            
            Until
                September 2014
            
            
            -
            
            
            7,000-
            
            
            112,000**Corporate
                bonds (d)**
            
            
            Libor
                + 1.6%
            
            
            Until
                September 2014
            
            
            78,750
            
            
            90,00078,750
            
            
            202,000Less –
                Current portion
            
            
            
            
            
            
            
            
            (11,250
            )
            
            (25,250
            )67,500
            
            
            176,750Debt
                issuance costs
            
            
            
            
            
            
            
            
            (4,986
            )
            
            (18,333
            )**Non-current
                portion**
            
            
            
            
            
            
            
            
            62,514
            
            
            158,417





(1)
            Range
                between 1.2% and 2.2% per year.




F-95




(b)
            The
                payment schedule of these debts is as
                follows:





**Year**US$(000)2008
            
            
            11,2502009
            
            
            11,2502010
            
            
            11,2502011
            
            
            11,2502012
            
            
            11,2502013
            
            
            11,2502014
            
            
            11,25078,750




**Year**US$(000)2008
            
            
            11,2502009
            
            
            11,2502010
            
            
            11,2502011
            
            
            11,2502012
            
            
            11,2502013
            
            
            11,2502014
            
            
            11,25078,750




(c)
            Master
                Participation Agreement (MPA) -




On
      September 20, 2007, Management of the Company pre-paid the remaining balance
      of
      the loans obtained for the Primary Sulfide expansion from the following
      financial entities: Japan Bank for International Cooperation, Sumitomo Mitsui
      Banking Corporation, KfW, Caylon New York Branch, The Royal Bank of Scotland,
      Bank of Nova Scotia and Mizuho Corporate Bank Ltd. (hereinafter called the
      “senior lenders”).





As
      of
      December 31, 2007, the mortgage and pledges established to guarantee the loan
      have been lifted and are presently in process of registration in the Public
      Registers.





(c)
            Corporate
                bonds –





The
      General shareholders’ meeting held on September 28, 2005 approved the First
      Program of Corporate Bonds to finance the investments in the Primary Sulfide
      expansion for a maximum amount of US$250,000,000 or its equivalent in other
      currencies.





By
      means
      of Resolution No. 040-2006-EF/94.11 dated April 17, 2006, the CONASEV (Peruvian
      securities regulator) approved the filing of the first program bonds called
      “Primer Programa de Bonos Corporativos de Sociedad Minera Cerro Verde S.A.A”
(“First Program of Corporate Bonds of Sociedad Minera Cerro Verde S.A.A.), for
      a
      maximum amount of US$ 250,000,000, as well as the related prospectus. This
      resolution also approved the registration of the securities of the first issue
      for US$90,000,000, as well as the related Supplementary Prospectus. On April
      26,
      2006, the offer of corporate bonds was placed for US$90,000,000 at an interest
      rate of LIBOR plus 1.6%. These bonds will be paid from March 2007 to September
      2014.




F-96




**11.**
            **Deferred
                income tax and profit sharing**





(a)
            The
                company recognizes the effect of temporary differences between the
                tax
                bases of assets and liabilities and their carrying amounts for financial
                reporting purposes. The composition of this item is made up as
                follows:





**Opening**
              **balance**
            
            **Debit (credit) to**
              **the Statement of**
              **income**
            
            **Ending**
              **balance**US$(000)
            
            US$(000)
            
            US$(000)**Deferred
                income tax asset**Income
                tax credit due to reinvestment benefit, note 13(c)
            
            
            99,015
            
            
            99,015
            
            
            -**Deferred
                Income tax and workers’ profit sharing liability,
                net****Deductible
                temporary differences**Price
                adjustment of cathodes and concentrates
            
            
            2,215
            
            
            15,382
            
            
            17,597Difference
                in valuation method of inventories
            
            
            -
            
            
            3,614
            
            
            3,614Provision
                for remediation and mine closure
            
            
            1,880
            
            
            250
            
            
            2,130Deferred
                stripping costs
            
            
            -
            
            
            1,203
            
            
            1,203Other
                provisions
            
            
            949
            
            
            (527
            )
            
            4225,044
            
            
            19,922
            
            
            24,966**Taxable
                temporary differences**Difference
                in depreciation method
            
            
            45,444
            
            
            35,219
            
            
            80,663Assets
                for remediation and mine closure
            
            
            543
            
            
            (543
            )
            
            -Difference
                in valuation method of inventories
            
            
            7,784
            
            
            (7,784
            )
            
            -Deferred
                stripping costs
            
            
            3,550
            
            
            (3,550
            )
            
            -57,321
            
            
            23,342
            
            
            80,663**Deferred
                liabilities, net**
            
            
            52,277
            
            
            3,420
            
            
            55,697**Total
                debit to the statements of income**
            
            
            
            
            
            102,435





(b)
            The
                reconciliation of the legal combined rate with the effective rate
                of
                income tax for the years 2007, 2006 and 2005 is shown
                below:





**2007**
            
            **2006**
            
            **2005**US$
            
            US$
            
            US$**Income
                before workers’ profit sharing and Income tax**
            
            
            1,280,336
            
            
            482,975
            
            
            231,136Income
                tax rate
            
            
            30
            %
            
            30
            %
            
            30
            %Expected
                income tax expense
            
            
            384,101
            
            
            144,893
            
            
            69,341Not-deductible
                expenses
            
            
            16,138
            
            
            15,627
            
            
            640Reinvestment
                of earnings, note 13(c)
            
            
            (100,246
            )
            
            (95,120
            )
            
            (44,398
            )Tax
                benefit (expense) recognized for executed investment of the reinvestment
                program
            
            
            99,015
            
            
            (57,214
            )
            
            (41,801
            )Workers’
                profit sharing
            
            
            (32,019
            )
            
            (12,842
            )
            
            (5,787
            )Others
            
            
            1,816
            
            
            205
            
            
            (100
            )Current
                and deferred income tax expense (benefit)
            
            
            368,805
            
            
            (4,451
            )
            
            (22,105
            )




F-97




**12.**
            **Shareholders’
                equity, net**





(a)
            Capital
                stock –





As
      of
      December 31, 2007 and 2006 the authorized, subscribed and paid-up capital in
      accordance with the Company’s by-laws and its related modifications was
      350,056,012 common shares. According to the shareholders agreement of July
      11,
      2003, the nominal value of the shares was denominated in US dollars and amounts
      to US$0.54 each.





As
      of
      December 31, 2007 the quoted price of these shares is US$26.60 per share in
      active trading on the Lima Stock Exchange.





The
      General Shareholders ́ Meeting held on April 18, 2005 approved the issuance of
      122,746,913 common shares with a par value of US$0.54 per share. The shares
      were
      subsequently issued at US$3.6074 per share, resulting in US$441,749,000 in
      equity financing proceeds. Out of this total, US$66,283,000 was recognized
      as
      share capital and US$375,466,000 as additional paid-in capital.




As
      of
      December 31, 2007 the Company’s capital stock structure is as
      follows:





**Percentage of individual interest in capital**
            
            **Number of**
              **shareholders**
            
            **Total percentage**
              **interest**Up
                to 1.00
            
            
            4,945
            
            
            6.94From
                1.01 to 20.00
            
            
            1
            
            
            18.50From
                20.01 to 30.00
            
            
            1
            
            
            21.00From
                30.01 to 60.00
            
            
            1
            
            
            53.564,948
            
            
            100.00




(b)
            Additional
                paid-in capital -




As
      of
      December 31, 2007 and 2006 this account comprises the difference between the
      conversion of the par value equity shares into U.S. dollars, as well as the
      issue premium resulting from the capital increase on April 18,
      2005.





(c)
            Legal
                reserve -




In
      accordance with the Peruvian Companies Act, this reserve is created through
      the
      transfer of 10% of the earnings for the year up to a maximum of 20% of the
      paid-in capital. The legal reserve must be used to compensate for losses in
      the
      absence of non-distributed earnings or non-restricted reserves, and transfers
      made to compensate for losses must be replaced with future earnings. This
      reserve may also be used to increase capital stock but the balance must be
      restored from future earnings.





(d)
            Restricted
                earnings -




Pursuant
      to Supreme Decree N°07-94-EM, mining companies may obtain a tax benefit by
      effectively reinvesting non-distributed earnings into capital expansion projects
      that increase productivity, see Note 13(c). According to such Supreme Decree,
      the restricted earnings of the Company have to be transferred to a restricted
      earnings equity account in 2008 once the investment has been approved by the
      Ministry of Energy and Mines.





As
      of
      December 31, 2007 this balance includes a cumulative amount of approximately
      US$800 million. It is possible that the tax rules stabilized by the Company
      regulating the distribution of the restricted earnings may be subject to
      interpretations for which the effect on the financial statements is unclear.
      Any
      amount associated with this matter will be recorded during the period in which
      is incurred.





(e)
            Retained
                earnings -




In
      accordance with the mining stability agreement entered into with the Peruvian
      Government, note 13(a), the Company is authorized to distribute, without any
      restrictions, all capital invested and dividends. In addition, dividends and
      any
      other form of capital distribution are tax exempt.





Dividends
      on behalf of shareholders, other than domiciled legal entities, are subject
      to a
      4.1% income tax which is withheld and paid by the Company.




F-98




(f)
            Dividend
                Distribution -




The
      General Shareholders meeting held on November 27, 2007 approved the payment
      of
      dividends of US$620,000,000 (US$1.77 per share), an amount that initially comes
      from the retained earnings as of December 2006, and then from the retained
      earnings as of September 30, 2007. This dividend was provisional, and has been
      made under the regulations stated by article 230° of Peruvian Business
      Corporations Law, and was paid on December 20, 2007.





As
      part
      of the agreements reached for the capital increase described in (a), dated
      April
      18, 2005 the General Shareholder’s Meeting approved the distribution of a
      special dividend of US$147,173,000 (US$0.49 per share).





**13.**
            **Tax
                situation**





(a)
            On
                February 13, 1998, the Company signed an Agreement of Guarantees
                and
                Measures to Promote Investments with the Government of Peru, under
                the
                Peruvian General Mining Law. Upon approval of the agreement, the
                Company
                is subject to the tax regulations in force at May 6, 1996. In addition,
                the Company has tax stability for a period of fifteen years counted
                from
                January 1, 1999.





(b)
            The
                income tax rate applicable to the Company is 30%. In addition, the
                Company
                is subject to a minimum income tax equivalent to 2% of total assets,
                net
                of accumulated depreciation and amortization. The tax charged against
                earnings is the higher of the income tax under the tax stability
                agreements and the minimum income tax. In years 2007 and 2006, income
                tax
                was calculated under the general tax rules using the 30%
                rate.





The
      income tax calculations for 2007, 2006 and 2005 are as follow:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Profit
                before workers’ profit sharing and income tax**
            
            
            1,280,336
            
            
            482,975
            
            
            231,136Plus:Depreciation
                at an annual rate
            
            
            -
            
            
            -
            
            
            5,742Donations
            
            
            51,106
            
            
            50,004
            
            
            320Adjustment
                of prices of copper cathodes and concentrate
            
            
            49,428
            
            
            3,761
            
            
            -Adjustment
                of inventory in process and finished goods
            
            
            37,203
            
            
            4,118
            
            
            2,065Amortization
                of others assets
            
            
            14,426
            
            
            934
            
            
            970Not
                deductible expenses
            
            
            3,590
            
            
            10,083
            
            
            939155,753
            
            
            68,900
            
            
            10,036Less:Depreciation
                at an annual rate of 20%
            
            
            (109,671
            )
            
            (15,328
            )
            
            -Other
                deductions
            
            
            (4,727
            )
            
            (13,735
            )
            
            (1,931
            )(114,398
            )
            
            (29,063
            )
            
            (1,931
            )Sub-total
            
            
            1,321,691
            
            
            522,812
            
            
            239,241Workers’
                profit sharing (8%)
            
            
            (105,735
            )
            
            (41,825
            )
            
            (19,139
            )1,215,956
            
            
            480,987
            
            
            220,102Reinvestment
                earnings ( c)
            
            
            (334,154
            )
            
            (317,068
            )
            
            (147,993
            )Taxable
                income
            
            
            881,802
            
            
            163,919
            
            
            72,109Income
                tax (30%)
            
            
            264,541
            
            
            49,176
            
            
            21,632Prior
                years income taxes
            
            
            2,597
            
            
            205
            
            
            -**Total
                charged to results**
            
            
            267,138
            
            
            49,381
            
            
            21,632





During
      year 2007, the Company made income tax pre-payments of approximately
      US$137,171,000 (US$32,735,000 in 2006).





(c)
            Pursuant
                to Supreme Decree No.07-94-EM, the Company can obtain a tax benefit
                by
                effectively reinvesting non-distributed earnings into capital expansion
                projects that increase the Company’s productivity. The Reinvestment
                Program must be reviewed and approved by the Ministry of Energy and
                Mines.




F-99




On
      September 3 and October 25, 2004 the Company submitted for approval by the
      Ministry of Energy and Mines (MEM) a Reinvestment Program in the amount of
      approximately US$800 million related to the construction of a sulfide processing
      facility to be executed in the period between October 2004 and February 2007,
      see note 7(e). On December 9, 2004 through the Ministerial Resolution
      No.510-2004-MEM/DM, the MEM approved the Company’s Reinvestment Program
      application.





Under
      the
      terms of this Program, the Company invested approximately US$800 million
      corresponding to the profits obtained in years 2005-2007, which resulted in
      a
      reduced income tax of approximately US$240 million in those years. As stated
      in
      note 2(n), there were no unused benefits associated with this tax benefit as
      of
      December 31, 2007 (US$99 million as of December 31, 2006).


Upon
        approval of the executed reinvestment program by the Peruvian Government,
        the
        $800 million pool of untaxed earnings must be capitalized. This capitalization
        is accomplished by issuing additional Cerro Verde stock to existing shareholders
        and reclassifying the $800 million pool of untaxed earnings into share capital.
        Once the capitalization occurs, the reinvested share capital cannot be
        repatriated for a minimum of four years, after which time the reinvested
        share
        capital will be available for distribution.


(d)
            Peruvian
                Tax Authorities have the right to examine, and, if necessary, amend
                the
                income tax as determined by the Company during the last four years,
                calculated from the year following that in which the tax returns
                are
                filed. The income tax filings for the years 2002 through 2007 are
                open to
                examination by the tax authorities. For value added tax the period
                open
                for examination is from December 2003 to December 2007. Tax authorities
                began the examination of income taxes and value added tax for the
                year
                2003 in 2004 and both examinations were concluded in 2007. The examination
                of 2002 began in 2007.





Due
      to
      the various possible interpretations of current legislation, it is not possible
      to determine whether or not future reviews will result in tax liabilities for
      the Company. In the event that additional taxes are payable, including interest
      and surcharges, as a result of the Tax Authority reviews, they will be charged
      to expense in the period assessed and paid. However, in Management’s and legal
      advisors’ opinion, any additional tax assessment would not be significant to the
      financial statements as of December 31, 2007 and 2006.





**14.**
            **Net
                sales**





(a)
            This
                item is made up of the following:




**2007**
            
            **2006**
            
            **2005**Pounds(000)
            
            US$(000)
            
            Pounds(000)
            
            US$(000)
            
            Pounds(000)
            
            US$(000)Copper concentrate
            
            
            376,541
            
            
            1,085,735
            
            
            5,184
            
            
            13,083
            
            
            
            
            
            -Cathodes
            
            
            209,299
            
            
            686,282
            
            
            208,810
            
            
            654,193
            
            
            205,434
            
            
            358,928Others
            
            
            -
            
            
            22,542
            
            
            -
            
            
            395
            
            
            
            
            
            -1,794,559
            
            
            
            
            
            667,671
            
            
            
            
            
            358,928





Sales
      include provisional adjustments made to original invoicing which represent
      the
      changes in the fair value of the embedded derivative amounting to US$49,851,000,
      US$3,761,000 and US$2,462,000 as of December 31, 2007, 2006 and 2005,
      respectively.





(b)
            The
                following table shows net sales by geographic
                region:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Asia
            
            
            1,071,478
            
            
            13,083
            
            
            -North
                America
            
            
            559,095
            
            
            530,673
            
            
            287,699Peru
            
            
            149,819
            
            
            123,915
            
            
            71,229Others
            
            
            14,167
            
            
            -1,794,559
            
            
            667,671
            
            
            358,928




F-100




**15.**
            **Cost
                of sales**





This
      item
      is made up of the following:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Opening
                balance of finished goods
            
            
            10,135
            
            
            3,314
            
            
            2,401**Add**Materials
                and supplies
            
            
            174,090
            
            
            73,197
            
            
            66,018Depreciation
                and amortization
            
            
            90,368
            
            
            26,904
            
            
            20,133Energy
            
            
            45,269
            
            
            15,610
            
            
            12,393Labor
            
            
            40,297
            
            
            22,608
            
            
            19,156Other
                costs
            
            
            74,383
            
            
            23,054
            
            
            18,590**Less**Variation
                of inventories in process
            
            
            (2,084
            )
            
            (14,129
            )
            
            (1,662
            )Ending
                balance of finished goods
            
            
            (14,350
            )
            
            (10,135
            )
            
            (3,314
            )418,108
            
            
            140,423
            
            
            133,715





**16.**
            **Selling
                Expenses**





This
      item
      is made up of the following:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Freight
            
            
            45,070
            
            
            1,909
            
            
            -Uploading/
                handling
            
            
            5,670
            
            
            288
            
            
            -Commissions
                and other sale expenses
            
            
            3,057
            
            
            724
            
            
            708Cathode’s
                freight
            
            
            608
            
            
            617
            
            
            58754,405
            
            
            3,538
            
            
            1,295





**17.**
            **Other
                operating expenses**





(a)
            This
                item is made up of the following:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)Water
                treatment plants, note 9 (b)
            
            
            2,432
            
            
            40,000
            
            
            -Contribution
                to Arequipa’s Municipalities (b)
            
            
            -
            
            
            4,800
            
            
            -Contribution
                to the Regional Government of Arequipa (c)
            
            
            -
            
            
            3,300
            
            
            -2,432
            
            
            48,100
            
            
            -




(b)
            Contribution
                to Arequipa’s to Municipalities -





As
      part
      of negotiations carried out in August 2006 between the Company and the Committee
      for the Defense of the Interest of Arequipa, the Company committed to make
      a
      contribution to the Arequipa municipalities to cover part of its investment
      budget for the periods between June and December 2006 and between January and
      May 2007.





(c)
            San
                Jose de Uzuña Contribution -





On
      February 8, 2006, the Company signed an agreement with the Regional Government
      of Arequipa to finance the construction of an earthen dam between the Yanaorco
      and Paltaorco mountains in Polobaya, Arequipa (called San Jose de Uzuña) for
      S/10,700,000 (equivalent to US$3,300,000). In 2006 the Company has satisfied
      the
      total amount committed in the agreement.




F-101






**18.**
            **Financial
                income and expense**





This
      item
      is made up of the following:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Financial
                expenses**Amortization
                of debt issuance costs
            
            
            (12,038
            )
            
            (2,819
            )
            
            -Interest
                on corporate bonds
            
            
            (5,840
            )
            
            (4,301
            )
            
            -Interest
                on bank loans
            
            
            (5,242
            )
            
            (4,184
            )
            
            (380
            )Other
                financial expenses
            
            
            (226
            )
            
            (152
            )
            
            (14
            )Capitalized
                borrowing costs
            
            
            -
            
            
            8,472
            
            
            380(23,346
            )
            
            (2,984
            )
            
            (14
            )**Financial
                income**Gain
                on fair value of cash equivalents
            
            
            33,003
            
            
            10,608
            
            
            6,919Other
                financial income
            
            
            165
            
            
            291
            
            
            14433,168
            
            
            10,899
            
            
            7,063





**19.**
            **Commitments
                and contingencies**





(a)
            Environmental
                matters -




The
      Company’s mining and exploration activities are subject to environmental
      protection standards. In order to comply with these standards, the Company
      has
      obtained the approval for the Environment Adequacy Program (“PAMA”) and of the
      Environmental Impact Studies (EIA), required for the operation of Cerro Verde’s
      production unit.





On
      October 14, 2003 law N°28090 was enacted, which regulates the commitments and
      procedures that entities involved in mining activities must follow in order
      to
      prepare, file and implement a mine site closing plan, as well as the respective
      environmental guarantees that assure compliance with the plan in accordance
      with
      protection, conservation and restoration of the environment. On August 15,
      2005
      the regulations regarding this law were approved.





During
      year 2006, in compliance with the mentioned law, the Company completed the
      closing plans for its mine site. Up to the date of this report, the mine site
      closing plans are pending of approval by the Ministry of Energy and
      Mines.





The
      estimate of remediation and mine closing costs is based on studies prepared
      by
      independent consultants, who comply with the current environmental regulations.
      This provision corresponds mainly to the activities to be performed in order
      to
      restore the areas affected by mining activities. The principal tasks to be
      performed include ground removal, reforesting labor and dismantling of plant
      and
      equipment.





The
      table
      below presents the movement of the provision for closure of mining units and
      exploration projects:





US$(000)**Balance
                as of January 1, 2006**
            
            
            4,730Additions
                and changes in estimates
            
            
            9,741Accretion
                expense
            
            
            447**Balance
                as of December 31, 2006**
            
            
            14,918Accretion
                expense
            
            
            716**Balance
                as of December 31, 2007**
            
            
            15,634




F-102




(b)
            Negotiated
                payment (voluntary contribution) of 3.75% on profits
                -




In
      2006
      Peruvian mining companies, represented by the National Society of Mining, Oil
      and Energy (SNMPE), started a negotiation process with the Peruvian Government
      to define the terms and conditions for a voluntary contribution of 3.75% of
      net
      income, which would be deducted, when applicable by the payment of mining
      royalties. The objective of the mining companies is to contribute to the
      Peruvian Government’s efforts in eradicating poverty in Peru and generate a
      favorable economic environment.





On
      December 21, 2006 the Peruvian Government released Supreme Decree 071-2006-EM
      regulating the terms and conditions under which the voluntary contribution
      would
      be paid by mining companies in Peru. Under this regulation, the Peruvian
      government established the requirements for the agreements that would be
      negotiated individually by the mining companies. This regulation establishes
      that the contribution:





i)
            Will
                be equivalent to 3.75% of net
                income,





ii)
            Will
                be paid for 2006 and the four subsequent years, dependant on the
                level of
                international metal prices, and





iii)
            Will
                not be tax deductible.





The
      rate
      of the voluntary contribution is broken down as follows:





-
            2.75%
                for the Local Mining Fund


-
            1.00%
                for the Regional Mining Fund





On
      November 8, 2007 the Company signed an agreement with the Peruvian Government
      according to the terms listed above. The agreement recorded in 2007, resulted
      in
      a contribution of US$16,673,000 and US$32,001,000 for the periods 2006 and
      2007
      respectively, which is shown as a voluntary contribution on the statements
      of
      income.





(c)
            Construction
                of Bamputañe Dam -





On
      December 29, 2004, the Company signed an electric power supply agreement with
      Empresa de Generación Eléctrica de Arequipa S.A. (EGASA) for its mining
      operations. Under this agreement, EGASA agreed to supply electric power at
      a
      fixed commodity price for the period January 1, 2007 through December 31, 2015
      and the Company agreed to build the Bamputañe dam which will be located in the
      district of Santa Lucía, province of Lampa, department of Puno, Peru. The
      technical filings of this project are in process. As of December 31, 2007,
      the
      selection of the project supervisor is pending to be executed by EGASA.
      Additionally, certain governmental approvals remain to be obtained for the
      Company to be allowed to begin construction of the dam.





**20.**
            **Transactions
                with affiliates**





(a)
            Nature
                of relationship




-
            Shareholders –
                See note 1 to the financial
                statements


-
            Management –
                Minera Phelps Dodge del Perú S.A.C.: subsidiary of Phelps Dodge Perú Inc.





(b)
            During
                the years 2007 and 2006, the Company has carried out the following
                transactions with its affiliates:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Revenues
                / (expenses)**Copper
                cathode sales, note 5
            
            
            536,816
            
            
            530,674
            
            
            287,699Copper
                concentrate sales, note 5
            
            
            978,776
            
            
            13,083
            
            
            -Management
                services (c)
            
            
            17,075
            
            
            6,217
            
            
            6,217Management
                of the primary sulfide project (c)
            
            
            -
            
            
            3,409
            
            
            444





(c)
            On
                June 1, 2005, the Company and Minera Phelps Dodge del Perú S.A.C. signed
                an agreement whereby Minera Phelps Dodge del Perú S.A.C. was appointed as
                the general manager of the Company. For the services rendered under
                this
                agreement, the Company would pay an annual fee of US$5,500,000 during
                the
                development stage of the Primary Sulfide Expansion and US$17,075,000
                beginning when the expansion is
                operational.




F-103




(d)
            As
                a result of these transactions, the Company has accounts receivable
                as
                described in Note 5 and has the following liabilities as of December
                31,
                2007 and 2006:





**2007**
            
            **2006**US$(000)
            
            US$(000)**Accounts
                payable**Minera
                Phelps Dodge del Peru S.A.C.
            
            
            6,513
            
            
            328Phelps
                Dodge Sales Company (PDSC)
            
            
            1,455
            
            
            101Sociedad
                Contractual Minera El Abra
            
            
            45
            
            
            -Phelps
                Dodge Mining Services, Inc.
            
            
            40
            
            
            273Phelps
                Dodge Corporation
            
            
            39
            
            
            378,092
            
            
            739




**21.**
            **Earnings
                per share**





Basic
      and
      diluted earnings per common share have been determined as follows:





**2007**
            
            **2006**
            
            **2005**Profit
                for the year
            
            US$
            804,685,000
            
            US$
            444,621,000
            
            US$
            234,663,000Weighted
                average number of share outstanding
            
            
            350,056,012
            
            
            350,056,012
            
            
            298,911,465Basic
                and diluted earnings per share
            
            US$
            2.30
            
            US$
            1.27
            
            US$
            0.79




Basic
      and
      diluted earnings per share are calculated by dividing earnings by the
      weighted-average number of outstanding shares as of the date of the financial
      statements.





**22.**
            **Additional
                information regarding cash
                flows**





(a)
            During
                the year 2007, 2006 and 2005 the income tax payments amounted to
                US$138,900,000, US$32,735,000 and US$60,210,000,
                respectively.





(b)
            During
                the year 2007, the payments of financial expenses and collections
                of
                financial income amounted to US$23,346,000 and US$2,984,000, respectively
                (US$33,168,000 and US$10,899,000 in 2006 and US$139,000 and US$7,063,000
                in 2005, respectively).




**23.**
            **Financial
                risk management**





The
      Company’s activities are exposed to different financial risks: market risk
      (including interest rate risk, foreign currency risk and the risk arising from
      changes in market prices of minerals), credit risk and liquidity risk. The
      Company’s financial risk management program focuses on mitigating potential
      adverse effects on its financial performance.





The
      Company’s Management knows the conditions prevailing in the market and based on
      its knowledge and experience, manages the risks related to foreign currency,
      interest rate, credit and liquidity. The most important aspects for the
      management of these risks are summarized below:





(a)
            Liquidity
                risk -





Liquidity
      risk arises from situations in which cash might not be available to pay
      obligations at maturity date and at a reasonable cost. The company maintains
      adequate liquidity by properly managing the maturities of assets and liabilities
      to satisfy unexpected liquidity requirements.




F-104




(b)
            Currency
                risk -





The
      Company buys, sells its products, and obtains working capital facilities and
      makes investments denominated in U.S. dollars. The assets and liabilities
      maintained in currencies different from the U.S. dollar (Nuevos Soles) are
      not
      significant. Management estimates that the future exchange rate fluctuations
      of
      Peruvian currency versus the U.S dollar will not significantly affect the
      results of the Company’s future operations.





(c)
            Credit
                risk -





The
      Company’s exposure to credit risk arises from counterparty’s incapacity to fully
      pay committed amounts at maturity. The financial assets of the Company that
      are
      exposed to potential credit risk mainly are comprised of balances deposited
      in
      banks, marketable securities and trade accounts receivable. The balances of
      these items held as of December 31, 2007 and 2006 represent the maximum exposure
      to credit risk.





(d)
            Interest
                rate risk -





The
      Company’s exposure to this risk arises from the changes in interest rates for
      its financial assets and liabilities. The Company manages financial liabilities
      with floating interest rates; the risk resulting of this position is then offset
      by the effect of the marketable securities held at a variable rate.
      Consequently, the Company does not expect to incur significant losses from
      interest risk.





(e)
            Price
                risk -





The
      Company is exposed to the risk of changes in the market prices of minerals.
      The
      Company has decided to accept the risk of changes in the market prices of
      minerals, and has not hedged its exposure to price fluctuation.





**24.**
            **Fair
                value of financial
                instruments**





The
      information concerning the fair value of the financial instruments, including
      derivatives, is presented below.





-
            Current
                assets and liabilities approximate their fair value due to the short-term
                maturities of these financial instruments





-
            Given
                that the interest rates of the long-term financial obligations are
                similar
                to the current market rates for this type of instrument, the fair
                value of
                these financial instruments is not significantly different from their
                book
                value.





**25.**
            **Mineral
                reserves (unaudited)**





As
      of
      December 31, 2007 and 2006, the Company’s proven mineral reserves
      are:





**MT
                (000)**
            
            **Grade****2007**
            
            **2006**
            
            **2007**
            
            **2006**Mineral
                for leaching
            
            
            309,402
            
            
            334,296
            
            
            0.44
            
            
            0.46Mineral
                for milling
            
            
            1,456,232
            
            
            1,407,136
            
            
            0.44
            
            
            0.47





Production
      in thousands of pounds was as follows:





**2007**
            
            **2006**Cathodes
            
            
            203,595
            
            
            212,781Concentrate
            
            
            390,632
            
            
            8,945





Average
      London Metals Exchange price per metric ton:





**2007**
            
            **2006**Copper
            
            
            7,126
            
            
            6,731




F-105




**26.**
            **Summary
                of significant differences between accounting principles followed
                by the
                Company and U.S. generally accepted accounting principles**





The
      Company's financial statements have been prepared in accordance with Peruvian
      GAAP which differs in certain respects from U.S. GAAP. The effects of these
      differences are reflected in Note 27 and are principally related to the items
      discussed in the following paragraphs:





(a)
            Accounting
                differences -




***Income
      tax***


Peruvian
      GAAP – Under IAS 1, Presentation of Financial Statements, deferred tax
      assets and liabilities are always classified as non-current assets or
      liabilities.


Under
        local GAAP, current and deferred tax assets and liabilities are measured
        at the
        tax rate applicable to undistributed profits and thus the income tax
        consequences of dividends are recognised when a liability to pay the dividend
        is
        recognised.
  U.S.GAAP –
        The Company measures current and deferred tax assets and liabilities at the
        applicable tax rate. With respect to the income tax consequences of basis
        differences of undistributed earnings, the Company recognises deferred tax
        liabilities at the applicable tax rate based on its tax planning strategies.
        Due
        to the change in controlling shareholder in 2007, the Company re-assessed
        certain of its tax planning strategies and, as a result, the Company recorded
        deferred income tax liabilities related to certain undistributed
        earnings.


Effective
      January 1, 2007, the Company adopted FIN 48, Accounting for Uncertainty in
      Income Taxes an Interpretation of FASB Statement No. 109,
      “Accounting for Income Taxes.” FIN 48 clarifies the accounting and reporting for
      uncertainties in the application of the income tax laws to the Company’s
      operation. The interpretation prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. The adoption of FIN 48 did not
      have
      a significant impact on the Company’s financial statements.





***Workers'
      profit sharing***


Peruvian
      GAAP - Workers' profit sharing expense (income) is separately presented in
      the
      statements of income in a similar way as income tax expense (income). Also,
      deferred workers' profit sharing asset (liability) is separately presented
      in
      the balance sheets in a similar way as deferred income tax assets
      (liabilities).





U.S.
      GAAP
      - The practice is to recognize the workers' profit sharing expense (income)
      as
      part of operating cost and the excess over 18 salaries related to profit sharing
      is recognized as part of current income tax. Also, deferred workers' profit
      sharing assets (liabilities) shall be classified as current or non-current
      based
      on the classification of the related asset or liability for financial reporting
      purposes.




*Mine
      development cost*


Peruvian
      GAAP - Stripping costs incurred in mine preparation through December 31, 1999
      are included as mine development cost in the balance sheet and are amortized
      based on the mineral extracted until 2006. The balance of these deferred costs
      was written off in 2007. Stripping costs incurred in the operation phase as
      from
      2000 are charged to the cost of production.




U.S.
      GAAP
      - Stripping costs incurred in the operation phase are charged to the cost of
      production as incurred.




(b)
            Differences
                in presentation




**Presentation
      of voluntary contributions**




Peruvian
      GAAP - Voluntary contribution amounting to US$48,674,000 is presented as part
      of
      operating expenses.




U.S.
      GAAP
      - Voluntary contribution amounting to US$48,674,000 must be presented as part
      of
      cost of sales in the income statement.




**Presentation
      of debt issuance costs**




Peruvian
      GAAP - Debt issuance costs amounting to US$18,333,000 as of December 31, 2006
      are shown net from related debt.




U.S.
      GAAP
      - Debt issuance costs amounting to US$18,333,000 as of December 31, 2006 are
      shown as part of the current assets.




F-106




**27.**
            **Reconciliation
                between net income and shareholders' equity determined under Peruvian
                GAAP
                and U.S. GAAP**





The
      following is a summary of the adjustments to net income for the years ended
      December 31, 2007, 2006 and 2005 and to shareholders' equity as of December
      31,
      2007 and 2006 that would be required if U.S. GAAP had been applied instead
      of
      Peruvian GAAP in the consolidated financial statements:





**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Net
                income under Peruvian GAAP**
            
            
            804,685
            
            
            444,621
            
            
            234,663**Items
                increasing (decreasing) reported net income**Deferred
              income tax
            
            
            239,764
            
            
            -
            
            
            -Amortization
                of mine development cost
            
            
            13,672
            
            
            1,277
            
            
            1,237Deferred
                income tax and workers ́ profit sharing
            
            
            (4,867
            )
            
            (455
            )
            
            (440
            )**Net
                adjustments**
            
            
            (230,959
            )
            
            822
            
            
            797**Net
                income under U.S. GAAP**
            
            
            573,726
            
            
            445,443
            
            
            235,460**Basic
                and diluted income per share under U.S. GAAP**
            
            
            1.64
            
            
            1.27
            
            
            0.79








**2007**
            
            **2006**
            
            **2005**US$(000)
            
            US$(000)
            
            US$(000)**Shareholders ́
                equity according to the financial statements under Peruvian
                GAAP**
            
            
            1,445,742
            
            
            1,261,057
            
            
            816,436Deferred
              income tax
            
            
            (239,764
            )
            
            -
            
            
            -Amortization
                of mine development cost
            
            
            -
            
            
            (13,672
            )
            
            (14,949
            )Deferred
                income tax and workers ́ profit sharing
            
            
            -
            
            
            4,867
            
            
            5,322**Shareholders ́
                equity according to the financial statements under U.S.
                GAAP**
            
            
            1,205,978
            
            
            1,252,252
            
            
            806,809





The
      following is a roll forward of the components of shareholders' equity under
      U.S.
      GAAP:





US$(000)**Shareholders ́
                equity under U.S. GAAP at January 1, 2005**
            
            
            276,773Paid
                dividends
            
            
            (147,173
            )Capital
                contributions
            
            
            441,749Net
                income in accordance with U.S. GAAP
            
            
            235,460**Shareholders ́
                equity under U.S. GAAP at December 31, 2005**
            
            
            806,809Net
                income in accordance with U.S. GAAP
            
            
            445,443**Shareholders’
                equity under U.S. GAAP at December 31, 2006**
            
            
            1,252,252Paid
                dividends
            
            
            (620,000
            )Net
                income in accordance with U.S. GAAP
            
            
            573,726**Shareholders'
                equity under U.S. GAAP at December 31, 2007**
            
            
            1,205,978




F-107




**28.**
            **Recently
                Issued Accounting Pronouncements**





***Business
      Combinations -***


In
      December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      141 (revised 2007), “Business Combinations” (SFAS No. 141R) which amends SFAS
      No. 141, and provides revised guidance for recognizing and measuring
      identifiable assets and goodwill acquired, liabilities assumed, and any no
      controlling interest in the acquire. It also provides disclosure requirements
      to
      enable users of the financial statements to evaluate the nature and financial
      effects of the business combination. SFAS No. 141R is effective for business
      combinations for which the acquisition date is January 1, 2009 or later and
      is
      to be applied prospectively. Early adoption is prohibited.





***Noncontrolling
      Interests in Consolidated Financial Statements -***


In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of ARB No. 51” (SFAS No. 160) -
      which establishes accounting and reporting standards pertaining to ownership
      interests in subsidiaries held by parties other than the parent, the amount
      of
      net income attributable to the parent and to the no controlling interest,
      changes in a parent’s ownership interest, and the valuation of any retained no
      controlling equity investment when a subsidiary is deconsolidated. SFAS No.
      160
      also establishes disclosure requirements that clearly identify and distinguish
      between the interests of the parent and the interests of the no controlling
      owners. SFAS No. 160 is effective for the Company’s fiscal year beginning
      January 1, 2009 with early adoption prohibited. This statement is required
      to be
      adopted prospectively, except for the following provisions, which are expected
      to be applied retrospectively: (i) the reclassification of noncontrolling
      interests to equity in the consolidated balance sheets and (ii) the adjustment
      to consolidated net income to include net income attributable to both the
      controlling and noncontrolling interests.





***Fair
      Value Option of Financial Assets and Liabilities***


In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115” (SFAS No. 159). SFAS No. 159 permits entities to choose to
      measure many financial instruments and certain other items at fair value, with
      the objective of improving financial reporting by mitigating volatility in
      reported earnings caused by measuring related assets and liabilities differently
      without having to apply complex hedge accounting provisions. The provisions
      of
      SFAS No. 159 are effective for the Company’s fiscal year beginning January 1,
      2008. We do not believe the adoption of SFAS No. 159 will have a material impact
      on our financial reporting and disclosures.





In
      September 2006, the FASB issued FASB Statement No. 157, “Fair Value
      Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a
      framework for measuring fair value in generally accepted accounting principles,
      and expands disclosures about fair value measurements. The provisions of SFAS
      No. 157 are effective for the Company’s fiscal year beginning January 1, 2008.
      The Company is currently evaluating the impact, if any, of the adoption of
      SFAS
      No. 157 on the Company’s consolidated financial results.





***Hierarchy
      of Generally Accepted Accounting Principles***


In
      May
      2008, the FASB issued SFAS No. 162, “Hierarchy of Generally Accepted Accounting
      Principles” (SFAS No. 162). SFAS No. 162 identifies the sources of
      accounting principles and the framework for selecting the principles to be
      used
      in the preparation of financial statements of nongovernmental entities that
      are
      presented in conformity with generally accepted accounting principles (GAAP)
      in
      the United States (the GAAP hierarchy). SFAS No. 162 is effective
      60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board amendments to AU Section 411, The Meaning of Present Fairly
      in Conformity With Generally Accepted Accounting Principles. The Company is
      currently evaluating the impact, if any, of the adoption of SFAS No. 162
      the Company’s consolidated financial results.




F-108




**Exhibit
      Index**




**Exhibit No.**
            
            **Document Description**1.1
            
            By-Laws
                (Estatutos) of Compañía de Minas Buenaventura S.A.A., as amended April 30,
                2002 (incorporated by reference from Compañía de Minas Buenaventura S.A.A.
                Annual Report on Form 20-F for the year ended December 31, 2002,
                filed on
                June 25, 2003).1.2
            
            By-Laws
                (Estatutos) of Minera Yanacocha S. R. L., as amended October 18,
                1999
                (incorporated by reference from Compañía de Minas Buenaventura S.A.A.
                Annual Report on Form 20-F for the year ended December 31, 2002,
                filed on
                June 25, 2003).4.1
            
            Participation
                Agreement among Sumitomo Metal Mining Co., Ltd., Sumitomo Corporation,
                Summit Global Management B.V., Compañía de Minas Buenaventura S.A.A.,
                Phelps Dodge Corporation, Cyprus Amax Minerals Company, Cyprus Metals
                Company, Cyprus Climax Metals Company and Sociedad Minera Cerro Verde
                S.A.A. dated March 16, 2005 (incorporated by reference from Compañia de
                Minas Buenaventura S.A.A. Annual Report on Form 20-F for the year
                ended
                December 31, 2004, filed on May 27, 2005).4.2
            
            Shareholders
                Agreement among SMM Cerro Verde Netherlands B.V., Sumitomo Metal
                Mining
                Co., Ltd., Sumitomo Corporation, Summit Global Management B.V., Compañía
                de Minas Buenaventura S.A.A., Cyprus Climax Metals Company, Phelps
                Dodge
                Corporation and Sociedad Minera Cerno Verde S.A.A. dated June 1, 2005
                (incorporated by reference from Compañia de Minas Buenaventura S.A.A.
                Annual Report on Form 20-F for the year ended December 31, 2005,
                filed on June 6, 2006).4.3
            
            Term
                Loan Agreement, dated as of May 21, 2008, among Compañía de Minas
                Buenaventura S.A.A., as borrower, Compañía de Minera Condesa S.A., as
                guarantor, Banco de Credito del Peru, as administrative agent, Banco
                de
                Credito del Peru, as collateral agent, and each lender party
                thereto.†4.4
            
            Pledge
                Agreement, dated as of May 21, 2008, between Compañía de Minera Condesa
                S.A., as pledgor, and Banco de Credito del Peru, as collateral
                agent.†11
            
            Code
                of Conduct and Ethics (incorporated by reference from Compañía de Minas
                Buenaventura S.A.A. Annual Report on Form 20-F for the year ended
                December
                31, 2002, filed on June 25, 2003).12.1
            
            Certification
                of Chief Executive Officer of Compañía de Minas Buenaventura S.A.A.
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                †12.2
            
            Certification
                of Chief Financial Officer of Compañía de Minas Buenaventura S.A.A.
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
                †13.1
            
            Certification
                of Chief Executive Officer of Compañía de Minas Buenaventura S.A.A.
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                †13.2
            
            Certification
                of Chief Financial Officer of Compañía de Minas Buenaventura S.A.A.
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
                †





†
Filed
      herewith.




175