Document:

FORM OF FIXED RATE SENIOR NOTE

REGISTERED                                               REGISTERED
No. FXR                                                  U.S. $
                                                         CUSIP:

     Unless this certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.

<PAGE>

                                MORGAN STANLEY
                  SENIOR GLOBAL MEDIUM-TERM NOTES, SERIES F
                                 (Fixed Rate)

                        STOCK PARTICIPATION ACCRETING
               REDEMPTION QUARTERLY-PAY SECURITIES(SM) ("SPARQS")

                        8% SPARQS(R) DUE APRIL 15, 2006
                           MANDATORILY EXCHANGEABLE
                        FOR SHARES OF COMMON STOCK OF
                          VALERO ENERGY CORPORATION

--------------------------------------------------------------------------------
ORIGINAL ISSUE DATE: INITIAL REDEMPTION  INTEREST RATE:     MATURITY DATE: See
                       DATE: See                  per         "Maturity Date"
                       "Morgan Stanley     annum              below.
                       Call Right"         (equivalent to
                       below.              $  per annum
                                           per SPARQS)
--------------------------------------------------------------------------------
INTEREST ACCRUAL     INITIAL REDEMPTION  INTEREST PAYMENT   OPTIONAL REPAYMENT
  DATE:                PERCENTAGE: See     DATE(S): See       DATE(S):  N/A
                       "Morgan Stanley     "Interest
                       Call Right" and     Payment Dates"
                       "Call Price"        below.
                       below.
--------------------------------------------------------------------------------
SPECIFIED CURRENCY:  ANNUAL REDEMPTION   INTEREST PAYMENT   APPLICABILITY OF
  U.S. dollars         PERCENTAGE          PERIOD:            MODIFIED
                       REDUCTION: N/A      Quarterly          PAYMENT UPON
                                                              ACCELERATION OR
                                                              REDEMPTION: See
                                                              "Alternate
                                                              Exchange
                                                              Calculation in
                                                              Case of an Event
                                                              of Default"
                                                              below.
--------------------------------------------------------------------------------
IF SPECIFIED         REDEMPTION NOTICE   APPLICABILITY OF   If yes, state
  CURRENCY OTHER       PERIOD: At least    ANNUAL INTEREST    Issue Price: N/A
  THAN U.S.            10 days but no      PAYMENTS: N/A
  DOLLARS, OPTION      more than 30
  TO ELECT PAYMENT     days.  See
  IN U.S. DOLLARS:     "Morgan Stanley
  N/A                  Call Right" and
                       "Morgan Stanley
                       Notice Date"
                       below.
--------------------------------------------------------------------------------
EXCHANGE RATE        TAX REDEMPTION AND  PRICE APPLICABLE   ORIGINAL YIELD TO
  AGENT: N/A           PAYMENT OF          UPON OPTIONAL      MATURITY: N/A
                       ADDITIONAL          REPAYMENT: N/A
                       AMOUNTS: N/A
--------------------------------------------------------------------------------
OTHER PROVISIONS:    IF YES, STATE
  See below.           INITIAL OFFERING
                       DATE: N/A
--------------------------------------------------------------------------------

Issue Price.....................  $           per  each  $           principal
                                  amount of this SPARQS

Maturity Date...................  April 15, 2006, subject to acceleration as
                                  described below in "Price Event Acceleration"
                                  and "Alternate

                                      A-2

<PAGE>

                                  Exchange Calculation in Case of an Event of
                                  Default" and subject to extension if the Final
                                  Call Notice Date is postponed in accordance
                                  with the following paragraph.

                                  If the Final Call Notice Date is postponed
                                  because it is not a Trading Day or due to a
                                  Market Disruption Event or otherwise and the
                                  Issuer exercises the Morgan Stanley Call
                                  Right, the Maturity Date shall be postponed so
                                  that the Maturity Date will be the tenth
                                  calendar day following the Final Call Notice
                                  Date. See "Final Call Notice Date" below.

                                  In the event that the Final Call Notice Date
                                  is postponed because it is not a Trading Day
                                  or due to a Market Disruption Event or
                                  otherwise, the Issuer shall give notice of
                                  such postponement as promptly as possible, and
                                  in no case later than two Business Days
                                  following the scheduled Final Call Notice
                                  Date, (i) to the holder of this SPARQS by
                                  mailing notice of such postponement by first
                                  class mail, postage prepaid, to the holder's
                                  last address as it shall appear upon the
                                  registry books, (ii) to the Trustee by
                                  telephone or facsimile confirmed by mailing
                                  such notice to the Trustee by first class
                                  mail, postage prepaid, at its New York office
                                  and (iii) to The Depository Trust Company (the
                                  "Depositary") by telephone or facsimile
                                  confirmed by mailing such notice to the
                                  Depositary by first class mail, postage
                                  prepaid. Any notice that is mailed in the
                                  manner herein provided shall be conclusively
                                  presumed to have been duly given, whether or
                                  not the holder of this SPARQS receives the
                                  notice. Notice of the date to which the
                                  Maturity Date has been rescheduled as a result
                                  of postponement of the Final Call Notice Date,
                                  if applicable, shall be included in the
                                  Issuer's notice of exercise of the Morgan
                                  Stanley Call Right.

Interest Payment Dates..........  July 15, 2005, October 15, 2005, January 15,
                                  2006 and the Maturity Date.

                                  If the scheduled Maturity Date is postponed
                                  due to a Market Disruption Event or otherwise,
                                  the Issuer shall pay interest on the Maturity
                                  Date as postponed rather than on April 15,
                                  2006, but no interest will accrue on this
                                  SPARQS or on such payment during the period
                                  from or after the scheduled Maturity Date.

                                      A-3
<PAGE>

Record Date.....................  Notwithstanding the definition of "Record
                                  Date" on page 23 hereof, the Record Date for
                                  each Interest Payment Date, including the
                                  Interest Payment Date scheduled to occur on
                                  the Maturity Date, shall be the date 5
                                  calendar days prior to such scheduled Interest
                                  Payment Date, whether or not that date is a
                                  Business Day; provided, however, that in the
                                  event that the Issuer exercises the Morgan
                                  Stanley Call Right, no Interest Payment Date
                                  shall occur after the Morgan Stanley Notice
                                  Date, except for any Interest Payment Date for
                                  which the Morgan Stanley Notice Date falls on
                                  or after the "ex-interest" date for the
                                  related interest payment, in which case the
                                  related interest payment shall be made on such
                                  Interest Payment Date; and provided, further,
                                  that accrued but unpaid interest payable on
                                  the Call Date, if any, shall be payable to the
                                  person to whom the Call Price is payable. The
                                  "ex-interest" date for any interest payment is
                                  the date on which purchase transactions in the
                                  SPARQS no longer carry the right to receive
                                  such interest payment.

                                  In the event that the Issuer exercises the
                                  Morgan Stanley Call Right and the Morgan
                                  Stanley Notice Date falls before the
                                  "ex-interest" date for an interest payment, so
                                  that as a result a scheduled Interest Payment
                                  Date will not occur, the Issuer shall cause
                                  the Calculation Agent to give notice to the
                                  Trustee and to the Depositary, in each case in
                                  the manner and at the time described in the
                                  second and third paragraphs under "Morgan
                                  Stanley Call Right" below, that no Interest
                                  Payment Date will occur after such Morgan
                                  Stanley Notice Date.

Denominations...................  $    and integral multiples thereof

Morgan Stanley Call Right.......  On any scheduled Trading Day on or after
                                  September  , 2005 or on the Maturity Date
                                  (including the Maturity Date as it may be
                                  extended and regardless of whether the
                                  Maturity Date is a Trading Day), the Issuer
                                  may call the SPARQS, in whole but not in part,
                                  for mandatory exchange for the Call Price paid
                                  in cash (together with accrued but unpaid
                                  interest) on the Call Date.

                                  On the Morgan Stanley Notice Date, the Issuer
                                  shall give notice of the Issuer's exercise of
                                  the Morgan Stanley Call Right (i) to the
                                  holder of this SPARQS by

                                      A-4
<PAGE>

                                  mailing notice of such exercise, specifying
                                  the Call Date on which the Issuer shall effect
                                  such exchange, by first class mail, postage
                                  prepaid, to the holder's last address as it
                                  shall appear upon the registry books, (ii) to
                                  the Trustee by telephone or facsimile
                                  confirmed by mailing such notice to the
                                  Trustee by first class mail, postage prepaid,
                                  at its New York office and (iii) to the
                                  Depositary in accordance with the applicable
                                  procedures set forth in the Blanket Letter of
                                  Representations prepared by the Issuer. Any
                                  notice which is mailed in the manner herein
                                  provided shall be conclusively presumed to
                                  have been duly given, whether or not the
                                  holder of this SPARQS receives the notice.
                                  Failure to give notice by mail or any defect
                                  in the notice to the holder of any SPARQS
                                  shall not affect the validity of the
                                  proceedings for the exercise of the Morgan
                                  Stanley Call Right with respect to any other
                                  SPARQS.

                                  The notice of the Issuer's exercise of the
                                  Morgan Stanley Call Right shall specify (i)
                                  the Call Date, (ii) the Call Price payable per
                                  SPARQS, (iii) the amount of accrued but unpaid
                                  interest payable per SPARQS on the Call Date,
                                  (iv) whether any subsequently scheduled
                                  Interest Payment Date shall no longer be an
                                  Interest Payment Date as a result of the
                                  exercise of the Morgan Stanley Call Right, (v)
                                  the place or places of payment of such Call
                                  Price, (vi) that such delivery will be made
                                  upon presentation and surrender of this
                                  SPARQS, (vii) that such exchange is pursuant
                                  to the Morgan Stanley Call Right and (viii) if
                                  applicable, the date to which the Maturity
                                  Date has been extended due to a Market
                                  Disruption Event as described under "Maturity
                                  Date" above.

                                  The notice of the Issuer's exercise of the
                                  Morgan Stanley Call Right shall be given by
                                  the Issuer or, at the Issuer's request, by the
                                  Trustee in the name and at the expense of the
                                  Issuer.

                                  If this SPARQS is so called for mandatory
                                  exchange by the Issuer, then the cash Call
                                  Price and any accrued but unpaid interest on
                                  this SPARQS to be delivered to the holder of
                                  this SPARQS shall be delivered on the Call
                                  Date fixed by the Issuer and set forth in its
                                  notice of its exercise of the Morgan Stanley
                                  Call Right, upon

                                      A-5
<PAGE>

                                  delivery of this SPARQS to the Trustee. The
                                  Issuer shall, or shall cause the Calculation
                                  Agent to, deliver such cash to the Trustee for
                                  delivery to the holder of this SPARQS.

                                  If this SPARQS is not surrendered for exchange
                                  on the Call Date, it shall be deemed to be no
                                  longer Outstanding under, and as defined in,
                                  the Senior Indenture after the Call Date,
                                  except with respect to the holder's right to
                                  receive cash due in connection with the Morgan
                                  Stanley Call Right.

Morgan Stanley Notice Date......  The scheduled Trading Day on which the Issuer
                                  issues its notice of mandatory exchange, which
                                  must be at least 10 but not more than 30 days
                                  prior to the Call Date.

Final Call Notice Date..........  April 5, 2006; provided that if April 5, 2006
                                  is not a Trading Day or if a Market Disruption
                                  Event occurs on such day, the Final Call
                                  Notice Date will be the immediately succeeding
                                  Trading Day on which no Market Disruption
                                  Event occurs.

Call Date.......................  The day specified in the Issuer's notice of
                                  mandatory exchange, on which the Issuer shall
                                  deliver cash to the holder of this SPARQS, for
                                  mandatory exchange, which day may be any
                                  scheduled Trading Day on or after September ,
                                  2005 or the Maturity Date (including the
                                  Maturity Date as it may be extended and
                                  regardless of whether the Maturity Date is a
                                  scheduled Trading Day). See "Maturity Date"
                                  above.

Call Price......................  The Call Price with respect to any Call Date
                                  is an amount of cash per each $ principal
                                  amount of this SPARQS, as calculated by the
                                  Calculation Agent, such that the sum of the
                                  present values of all cash flows on each $
                                  principal amount of this SPARQS to and
                                  including the Call Date (i.e., the Call Price
                                  and all of the interest payments, including
                                  accrued and unpaid interest payable on the
                                  Call Date), discounted to the Original Issue
                                  Date from the applicable payment date at the
                                  Yield to Call rate of % per annum computed on
                                  the basis of a 360-day year of twelve 30-day
                                  months, equals the Issue Price, as determined
                                  by the Calculation Agent.

                                      A-6
<PAGE>

Exchange at Maturity............  At maturity, subject to a prior call of this
                                  SPARQS for cash in an amount equal to the Call
                                  Price by the Issuer as described under "Morgan
                                  Stanley Call Right" above or any acceleration
                                  of the SPARQS, upon delivery of this SPARQS to
                                  the Trustee, each $ principal amount of this
                                  SPARQS shall be applied by the Issuer as
                                  payment for a number of shares of the common
                                  stock of Valero Energy Corporation. ("Valero
                                  Stock") at the Exchange Ratio, and the Issuer
                                  shall deliver with respect to each $ principal
                                  amount of this SPARQS an amount of Valero
                                  Stock equal to the Exchange Ratio.

                                  The amount of Valero Stock to be delivered at
                                  maturity shall be subject to any applicable
                                  adjustments (i) to the Exchange Ratio
                                  (including, as applicable, any New Stock
                                  Exchange Ratio or any Basket Stock Exchange
                                  Ratio, each as defined in paragraph 5 under
                                  "Antidilution Adjustments" below) and (ii) in
                                  the Exchange Property, as defined in paragraph
                                  5 under "Antidilution Adjustments" below, to
                                  be delivered instead of, or in addition to,
                                  such Valero Stock as a result of any corporate
                                  event described under "Antidilution
                                  Adjustments" below, in each case, required to
                                  be made through the close of business on the
                                  third Trading Day prior to maturity.

                                  The Issuer shall, or shall cause the
                                  Calculation Agent to, provide written notice
                                  to the Trustee at its New York Office and to
                                  the Depositary, on which notice the Trustee
                                  and Depositary may conclusively rely, on or
                                  prior to 10:30 a.m. on the Trading Day
                                  immediately prior to maturity of this SPARQS
                                  (but if such Trading Day is not a Business
                                  Day, prior to the close of business on the
                                  Business Day preceding the maturity of this
                                  SPARQS), of the amount of Valero Stock (or the
                                  amount of Exchange Property) or cash to be
                                  delivered with respect to each $    principal
                                  amount of this SPARQS and of the amount of any
                                  cash to be paid in lieu of any fractional
                                  share of Valero Stock (or of any other
                                  securities included in Exchange Property, if
                                  applicable); provided that if the maturity
                                  date of this SPARQS is accelerated (x) because
                                  of a Price Event Acceleration (as described
                                  under "Price Event Acceleration" below) or (y)
                                  because of an Event of Default Acceleration
                                  (as defined under "Alternate

                                      A-7
<PAGE>

                                  Exchange Calculation in Case of an Event of
                                  Default" below), the Issuer shall give notice
                                  of such acceleration as promptly as possible,
                                  and in no case later than (A) in the case of
                                  an Event of Default Acceleration, two Trading
                                  Days following such deemed maturity date or
                                  (B) in the case of a Price Event Acceleration,
                                  10:30 a.m. on the Trading Day immediately
                                  prior to the date of acceleration (as defined
                                  under "Price Event Acceleration" below), (i)
                                  to the holder of this SPARQS by mailing notice
                                  of such acceleration by first class mail,
                                  postage prepaid, to the holder's last address
                                  as it shall appear upon the registry books,
                                  (ii) to the Trustee by telephone or facsimile
                                  confirmed by mailing such notice to the
                                  Trustee by first class mail, postage prepaid,
                                  at its New York office and (iii) to the
                                  Depositary by telephone or facsimile confirmed
                                  by mailing such notice to the Depositary by
                                  first class mail, postage prepaid. Any notice
                                  that is mailed in the manner herein provided
                                  shall be conclusively presumed to have been
                                  duly given, whether or not the holder of this
                                  SPARQS receives the notice. If the maturity of
                                  this SPARQS is accelerated, no interest on the
                                  amounts payable with respect to this SPARQS
                                  shall accrue for the period from and after
                                  such accelerated maturity date; provided that
                                  the Issuer has deposited with the Trustee the
                                  Valero Stock, the Exchange Property or any
                                  cash due with respect to such acceleration by
                                  such accelerated maturity date.

                                  The Issuer shall, or shall cause the
                                  Calculation Agent to, deliver any such shares
                                  of Valero Stock (or any Exchange Property) and
                                  cash in respect of interest and any fractional
                                  share of Valero Stock (or any Exchange
                                  Property) and cash otherwise due upon any
                                  acceleration described above to the Trustee
                                  for delivery to the holder of this Note.
                                  References to payment "per SPARQS" refer to
                                  each $       principal amount of this SPARQS.

                                  If this SPARQS is not surrendered for exchange
                                  at maturity, it shall be deemed to be no
                                  longer Outstanding under, and as defined in,
                                  the Senior Indenture, except with respect to
                                  the holder's right to receive the Valero Stock
                                  (and, if applicable, any Exchange Property)
                                  and any cash in respect of interest and any
                                  fractional share of Valero Stock (or any

                                      A-8
<PAGE>

                                  Exchange Property) and any other cash due at
                                  maturity as described in the preceding
                                  paragraph under this heading.

Price Event Acceleration........  If on any two consecutive Trading Days during
                                  the period prior to and ending on the third
                                  Business Day immediately preceding the
                                  Maturity Date, the product of the Closing
                                  Price per share of Valero Stock and the
                                  Exchange Ratio is less than $2.00, the
                                  Maturity Date of this SPARQS shall be deemed
                                  to be accelerated to the third Business Day
                                  immediately following such second Trading Day
                                  (the "date of acceleration"). Upon such
                                  acceleration, the holder of each $ principal
                                  amount of this SPARQS shall receive per SPARQS
                                  on the date of acceleration:

                                     (i) a number of shares of Valero Stock at
                                     the then current Exchange Ratio;

                                     (ii) accrued but unpaid interest on each $
                                     principal amount of this SPARQS to but
                                     excluding the date of acceleration; and

                                     (iii) an amount of cash as determined by
                                     the Calculation Agent equal to the sum of
                                     the present values of the remaining
                                     scheduled payments of interest on each $
                                     principal amount of this SPARQS (excluding
                                     the amounts included in clause (ii) above)
                                     discounted to the date of acceleration. The
                                     present value of each remaining scheduled
                                     payment will be based on the comparable
                                     yield that the Issuer would pay on a
                                     non-interest bearing, senior unsecured debt
                                     obligation of the Issuer having a maturity
                                     equal to the term of each such remaining
                                     scheduled payment, as determined by the
                                     Calculation Agent.

No Fractional Shares............  Upon delivery of this SPARQS to the Trustee at
                                  maturity, the Issuer shall deliver the
                                  aggregate number of shares of Valero Stock due
                                  with respect to this SPARQS, as described
                                  above, but the Issuer shall pay cash in lieu
                                  of delivering any fractional share of Valero
                                  Stock in an amount equal to the corresponding
                                  fractional Closing Price of such fraction of a
                                  share of Valero Stock as determined by the
                                  Calculation Agent as of the second scheduled
                                  Trading Day prior to maturity of this SPARQS.

                                      A-9
<PAGE>

Exchange Ratio..................  1.0, subject to adjustment for corporate
                                  events relating to Valero Energy Corporation.
                                  ("Valero") described under "Antidilution
                                  Adjustments" below.

Closing Price...................  The Closing Price for one share of Valero
                                  Stock (or one unit of any other security for
                                  which a Closing Price must be determined) on
                                  any Trading Day (as defined below) means:

                                     o  if Valero Stock (or any such other
                                        security) is listed or admitted to
                                        trading on a national securities
                                        exchange, the last reported sale price,
                                        regular way, of the principal trading
                                        session on such day on the principal
                                        United States securities exchange
                                        registered under the Securities Exchange
                                        Act of 1934, as amended (the "Exchange
                                        Act"), on which Valero Stock (or any
                                        such other security) is listed or
                                        admitted to trading,

                                     o  if Valero Stock (or any such other
                                        security) is a security of the Nasdaq
                                        National Market (and provided that the
                                        Nasdaq National Market is not then a
                                        national securities exchange), the
                                        Nasdaq official closing price published
                                        by The Nasdaq Stock Market, Inc. on such
                                        day, or

                                     o  if Valero Stock (or any such other
                                        security) is neither listed or admitted
                                        to trading on any national securities
                                        exchange nor a security of the Nasdaq
                                        National Market but is included in the
                                        OTC Bulletin Board Service (the "OTC
                                        Bulletin Board") operated by the
                                        National Association of Securities
                                        Dealers, Inc. (the "NASD"), the last
                                        reported sale price of the principal
                                        trading session on the OTC Bulletin
                                        Board on such day.

                                  If Valero Stock (or any such other security)
                                  is listed or admitted to trading on any
                                  national securities exchange or is a security
                                  of the Nasdaq National Market but the last
                                  reported sale price or Nasdaq official closing
                                  price, as applicable, is not available
                                  pursuant to the preceding sentence, then the
                                  Closing Price for one share of Valero Stock
                                  (or one unit of any such other security) on
                                  any Trading Day will mean the last reported
                                  sale price of the principal trading session on
                                  the over-the-counter market as reported on the
                                  Nasdaq National Market or the OTC Bulletin
                                  Board on such day. If,

                                      A-10
<PAGE>

                                  because of a Market Disruption Event (as
                                  defined below) or otherwise, the last reported
                                  sale price or Nasdaq official closing price,
                                  as applicable, for Valero Stock (or any such
                                  other security) is not available pursuant to
                                  either of the two preceding sentences, then
                                  the Closing Price for any Trading Day will be
                                  the mean, as determined by the Calculation
                                  Agent, of the bid prices for Valero Stock (or
                                  any such other security) obtained from as many
                                  recognized dealers in such security, but not
                                  exceeding three, as will make such bid prices
                                  available to the Calculation Agent. Bids of MS
                                  & Co. or any of its affiliates may be included
                                  in the calculation of such mean, but only to
                                  the extent that any such bid is the highest of
                                  the bids obtained. The term "security of the
                                  Nasdaq National Market" will include a
                                  security included in any successor to such
                                  system, and the term OTC Bulletin Board
                                  Service will include any successor service
                                  thereto.

Trading Day.....................  A day, as determined by the Calculation Agent,
                                  on which trading is generally conducted on the
                                  New York Stock Exchange, Inc. ("NYSE"), the
                                  American Stock Exchange LLC, the Nasdaq
                                  National Market, the Chicago Mercantile
                                  Exchange and the Chicago Board of Options
                                  Exchange and in the over-the-counter market
                                  for equity securities in the United States.

Calculation Agent...............  MS & Co. and its successors.

                                  All calculations with respect to the Exchange
                                  Ratio and Call Price for the SPARQS shall be
                                  made by the Calculation Agent and shall be
                                  rounded to the nearest one hundred-thousandth,
                                  with five one-millionths rounded upward (e.g.,
                                  .876545 would be rounded to .87655); all
                                  dollar amounts related to the Call Price
                                  resulting from such calculations shall be
                                  rounded to the nearest ten-thousandth, with
                                  five one hundred-thousandths rounded upward
                                  (e.g., .76545 would be rounded to .7655); and
                                  all dollar amounts paid with respect to the
                                  Call Price on the aggregate number of SPARQS
                                  shall be rounded to the nearest cent, with
                                  one-half cent rounded upward.

                                  All determinations made by the Calculation
                                  Agent shall be at the sole discretion of the
                                  Calculation Agent and shall, in the absence of
                                  manifest error, be

                                      A-11
<PAGE>

                                  conclusive for all purposes and binding on the
                                  holder of this SPARQS, the Trustee and the
                                  Issuer.

Antidilution Adjustments........  The  Exchange  Ratio  shall be  adjusted  as
                                  follows:

                                  1. If Valero Stock is subject to a stock split
                                  or reverse stock split, then once such split
                                  has become effective, the Exchange Ratio shall
                                  be adjusted to equal the product of the prior
                                  Exchange Ratio and the number of shares issued
                                  in such stock split or reverse stock split
                                  with respect to one share of Valero Stock.

                                  2. If Valero Stock is subject (i) to a stock
                                  dividend (issuance of additional shares of
                                  Valero Stock) that is given ratably to all
                                  holders of shares of Valero Stock or (ii) to a
                                  distribution of Valero Stock as a result of
                                  the triggering of any provision of the
                                  corporate charter of Valero, then once the
                                  dividend has become effective and Valero Stock
                                  is trading ex-dividend, the Exchange Ratio
                                  shall be adjusted so that the new Exchange
                                  Ratio shall equal the prior Exchange Ratio
                                  plus the product of (i) the number of shares
                                  issued with respect to one share of Valero
                                  Stock and (ii) the prior Exchange Ratio.

                                  3. If Valero issues rights or warrants to all
                                  holders of Valero Stock to subscribe for or
                                  purchase Valero Stock at an exercise price per
                                  share less than the Closing Price of Valero
                                  Stock on both (i) the date the exercise price
                                  of such rights or warrants is determined and
                                  (ii) the expiration date of such rights or
                                  warrants, and if the expiration date of such
                                  rights or warrants precedes the maturity of
                                  this SPARQS, then the Exchange Ratio shall be
                                  adjusted to equal the product of the prior
                                  Exchange Ratio and a fraction, the numerator
                                  of which shall be the number of shares of
                                  Valero Stock outstanding immediately prior to
                                  the issuance of such rights or warrants plus
                                  the number of additional shares of Valero
                                  Stock offered for subscription or purchase
                                  pursuant to such rights or warrants and the
                                  denominator of which shall be the number of
                                  shares of Valero Stock outstanding immediately
                                  prior to the issuance of such rights or
                                  warrants plus the number of additional shares
                                  of Valero Stock which the aggregate offering
                                  price of the total number of shares of Valero
                                  Stock so offered for subscription or purchase
                                  pursuant to such rights or warrants would
                                  purchase at the

                                      A-12
<PAGE>

                                  Closing Price on the expiration date of such
                                  rights or warrants, which shall be determined
                                  by multiplying such total number of shares
                                  offered by the exercise price of such rights
                                  or warrants and dividing the product so
                                  obtained by such Closing Price.

                                  4. There shall be no adjustments to the
                                  Exchange Ratio to reflect cash dividends or
                                  other distributions paid with respect to
                                  Valero Stock other than distributions
                                  described in paragraph 2, paragraph 3 and
                                  clauses (i), (iv) and (v) of the first
                                  sentence of paragraph 5 and Extraordinary
                                  Dividends. "Extraordinary Dividend" means each
                                  of (a) the full amount per share of Valero
                                  Stock of any cash dividend or special dividend
                                  or distribution that is identified by Valero
                                  as an extraordinary or special dividend or
                                  distribution, (b) the excess of any cash
                                  dividend or other cash distribution (that is
                                  not otherwise identified by Valero as an
                                  extraordinary or special dividend or
                                  distribution) distributed per share of Valero
                                  Stock over the immediately preceding cash
                                  dividend or other cash distribution, if any,
                                  per share of Valero Stock that did not include
                                  an Extraordinary Dividend (as adjusted for any
                                  subsequent corporate event requiring an
                                  adjustment hereunder, such as a stock split or
                                  reverse stock split) if such excess portion of
                                  the dividend or distribution is more than 5%
                                  of the Closing Price of Valero Stock on the
                                  Trading Day preceding the "ex-dividend date"
                                  (that is, the day on and after which
                                  transactions in Valero Stock on an organized
                                  securities exchange or trading system no
                                  longer carry the right to receive that cash
                                  dividend or other cash distribution) for the
                                  payment of such cash dividend or other cash
                                  distribution (such Closing Price, the "Base
                                  Closing Price") and (c) the full cash value of
                                  any non-cash dividend or distribution per
                                  share of Valero Stock (excluding Marketable
                                  Securities, as defined in paragraph 5 below).
                                  Subject to the following sentence, if any cash
                                  dividend or distribution of such other
                                  property with respect to Valero Stock includes
                                  an Extraordinary Dividend, the Exchange Ratio
                                  with respect to Valero Stock shall be adjusted
                                  on the ex-dividend date so that the new
                                  Exchange Ratio shall equal the product of (i)
                                  the prior Exchange Ratio and (ii) a fraction,
                                  the numerator of which is the Base Closing
                                  Price, and the denominator of which is the

                                      A-13
<PAGE>

                                  amount by which the Base Closing Price exceeds
                                  the Extraordinary Dividend. If any
                                  Extraordinary Dividend is at least 35% of the
                                  Base Closing Price, then, instead of adjusting
                                  the Exchange Ratio, the amount payable upon
                                  exchange at maturity shall be determined as
                                  described in paragraph 5 below, and the
                                  Extraordinary Dividend shall be allocated to
                                  Reference Basket Stocks in accordance with the
                                  procedures for a Reference Basket Event as
                                  described in clause (c)(ii) of paragraph 5
                                  below. The value of the non-cash component of
                                  an Extraordinary Dividend shall be determined
                                  on the ex-dividend date for such distribution
                                  by the Calculation Agent, whose determination
                                  shall be conclusive in the absence of manifest
                                  error. A distribution on Valero Stock
                                  described in clause (i), (iv) or (v) of the
                                  first sentence of paragraph 5 below shall
                                  cause an adjustment to the Exchange Ratio
                                  pursuant only to clause (i), (iv) or (v) of
                                  the first sentence of paragraph 5, as
                                  applicable.

                                  5. Any of the following shall constitute a
                                  Reorganization Event: (i) Valero Stock is
                                  reclassified or changed, including, without
                                  limitation, as a result of the issuance of any
                                  tracking stock by Valero, (ii) Valero has been
                                  subject to any merger, combination or
                                  consolidation and is not the surviving entity,
                                  (iii) Valero completes a statutory exchange of
                                  securities with another corporation (other
                                  than pursuant to clause (ii) above), (iv)
                                  Valero is liquidated, (v) Valero issues to all
                                  of its shareholders equity securities of an
                                  issuer other than Valero (other than in a
                                  transaction described in clause (ii), (iii) or
                                  (iv) above) (a "spinoff stock") or (vi) Valero
                                  Stock is the subject of a tender or exchange
                                  offer or going private transaction on all of
                                  the outstanding shares. If any Reorganization
                                  Event occurs, in each case as a result of
                                  which the holders of Valero Stock receive any
                                  equity security listed on a national
                                  securities exchange or traded on The Nasdaq
                                  National Market (a "Marketable Security"),
                                  other securities or other property, assets or
                                  cash (collectively "Exchange Property"), the
                                  amount payable upon exchange at maturity with
                                  respect to each $ principal amount of this
                                  SPARQS following the effective date for such
                                  Reorganization Event (or, if applicable, in
                                  the case of spinoff stock, the ex-dividend
                                  date for the

                                      A-14
<PAGE>

                                  distribution of such spinoff stock) shall be
                                  determined in accordance with the following:

                                     (a) if Valero Stock continues to be
                                     outstanding, Valero Stock (if applicable,
                                     as reclassified upon the issuance of any
                                     tracking stock) at the Exchange Ratio in
                                     effect on the third Trading Day prior to
                                     the scheduled Maturity Date (taking into
                                     account any adjustments for any
                                     distributions described under clause (c)(i)
                                     below); and

                                     (b) for each Marketable Security received
                                     in such Reorganization Event (each a "New
                                     Stock"), including the issuance of any
                                     tracking stock or spinoff stock or the
                                     receipt of any stock received in exchange
                                     for Valero Stock, the number of shares of
                                     the New Stock received with respect to one
                                     share of Valero Stock multiplied by the
                                     Exchange Ratio for Valero Stock on the
                                     Trading Day immediately prior to the
                                     effective date of the Reorganization Event
                                     (the "New Stock Exchange Ratio"), as
                                     adjusted to the third Trading Day prior to
                                     the scheduled Maturity Date (taking into
                                     account any adjustments for distributions
                                     described under clause (c)(i) below); and

                                     (c) for any cash and any other property or
                                     securities other than Marketable Securities
                                     received in such Reorganization Event (the
                                     "Non-Stock Exchange Property"),

                                        (i) if the combined value of the amount
                                        of Non-Stock Exchange Property received
                                        per share of Valero Stock, as determined
                                        by the Calculation Agent in its sole
                                        discretion on the effective date of such
                                        Reorganization Event (the "Non-Stock
                                        Exchange Property Value"), by holders of
                                        Valero Stock is less than 25% of the
                                        Closing Price of Valero Stock on the
                                        Trading Day immediately prior to the
                                        effective date of such Reorganization
                                        Event, a number of shares of Valero
                                        Stock, if applicable, and of any New
                                        Stock received in connection with such
                                        Reorganization Event, if applicable, in
                                        proportion to the relative Closing
                                        Prices of Valero Stock and any such New
                                        Stock, and with an aggregate value equal
                                        to the Non-Stock

                                      A-15
<PAGE>

                                        Exchange Property Value multiplied by
                                        the Exchange Ratio in effect for Valero
                                        Stock on the Trading Day immediately
                                        prior to the effective date of such
                                        Reorganization Event, based on such
                                        Closing Prices, in each case as
                                        determined by the Calculation Agent in
                                        its sole discretion on the effective
                                        date of such Reorganization Event; and
                                        the number of such shares of Valero
                                        Stock or any New Stock determined in
                                        accordance with this clause (c)(i) shall
                                        be added at the time of such adjustment
                                        to the Exchange Ratio in subparagraph
                                        (a) above and/or the New Stock Exchange
                                        Ratio in subparagraph (b) above, as
                                        applicable, or

                                        (ii) if the Non-Stock Exchange Property
                                        Value is equal to or exceeds 25% of the
                                        Closing Price of Valero Stock on the
                                        Trading Day immediately prior to the
                                        effective date relating to such
                                        Reorganization Event or, if Valero Stock
                                        is surrendered exclusively for Non-Stock
                                        Exchange Property (in each case, a
                                        "Reference Basket Event"), an initially
                                        equal-dollar weighted basket of three
                                        Reference Basket Stocks (as defined
                                        below) with an aggregate value on the
                                        effective date of such Reorganization
                                        Event equal to the Non-Stock Exchange
                                        Property Value multiplied by the
                                        Exchange Ratio in effect for Valero
                                        Stock on the Trading Day immediately
                                        prior to the effective date of such
                                        Reorganization Event. The "Reference
                                        Basket Stocks" shall be the three stocks
                                        with the largest market capitalization
                                        among the stocks that then comprise the
                                        S&P 500 Index (or, if publication of
                                        such index is discontinued, any
                                        successor or substitute index selected
                                        by the Calculation Agent in its sole
                                        discretion) with the same primary
                                        Standard Industrial Classification Code
                                        ("SIC Code") as Valero; provided,
                                        however, that a Reference Basket Stock
                                        shall not include any stock that is
                                        subject to a trading restriction under
                                        the trading restriction policies of
                                        Morgan Stanley or any of its affiliates
                                        that would materially limit the ability
                                        of Morgan Stanley or any of its
                                        affiliates to hedge the SPARQS

                                      A-16
<PAGE>

                                        with respect to such stock (a "Hedging
                                        Restriction"); provided further that if
                                        three Reference Basket Stocks cannot be
                                        identified from the S&P 500 Index by
                                        primary SIC Code for which a Hedging
                                        Restriction does not exist, the
                                        remaining Reference Basket Stock(s)
                                        shall be selected by the Calculation
                                        Agent from the largest market
                                        capitalization stock(s) within the same
                                        Division and Major Group classification
                                        (as defined by the Office of Management
                                        and Budget) as the primary SIC Code for
                                        Valero. Each Reference Basket Stock
                                        shall be assigned a Basket Stock
                                        Exchange Ratio equal to the number of
                                        shares of such Reference Basket Stock
                                        with a Closing Price on the effective
                                        date of such Reorganization Event equal
                                        to the product of (a) the Non-Stock
                                        Exchange Property Value, (b) the
                                        Exchange Ratio in effect for Valero
                                        Stock on the Trading Day immediately
                                        prior to the effective date of such
                                        Reorganization Event and (c) 0.3333333.

                                  Following the allocation of any Extraordinary
                                  Dividend to Reference Basket Stocks pursuant
                                  to paragraph 4 above or any Reorganization
                                  Event described in this paragraph 5, the
                                  amount payable upon exchange at maturity with
                                  respect to each $ principal amount of this
                                  SPARQS shall be the sum of:

                                     (x)  if applicable, Valero Stock at the
                                          Exchange Ratio then in effect; and

                                     (y)  if applicable, for each New Stock,
                                          such New Stock at the New Stock
                                          Exchange Ratio then in effect for
                                          such New Stock; and

                                     (z)  if applicable, for each Reference
                                          Basket Stock, such Reference Basket
                                          Stock at the Basket Stock Exchange
                                          Ratio then in effect for such
                                          Reference Basket Stock.

                                  In each case, the applicable Exchange Ratio
                                  (including for this purpose, any New Stock
                                  Exchange Ratio or Basket Stock Exchange Ratio)
                                  shall be determined by the Calculation Agent
                                  on the third Trading Day prior to the
                                  scheduled Maturity Date.

                                      A-17
<PAGE>

                                  For purposes of paragraph 5 above, in the case
                                  of a consummated tender or exchange offer or
                                  going-private transaction involving Exchange
                                  Property of a particular type, Exchange
                                  Property shall be deemed to include the amount
                                  of cash or other property paid by the offeror
                                  in the tender or exchange offer with respect
                                  to such Exchange Property (in an amount
                                  determined on the basis of the rate of
                                  exchange in such tender or exchange offer or
                                  going-private transaction). In the event of a
                                  tender or exchange offer or a going-private
                                  transaction with respect to Exchange Property
                                  in which an offeree may elect to receive cash
                                  or other property, Exchange Property shall be
                                  deemed to include the kind and amount of cash
                                  and other property received by offerees who
                                  elect to receive cash.

                                  Following the occurrence of any Reorganization
                                  Event referred to in paragraphs 4 or 5 above,
                                  (i) references to "Valero Stock" under "No
                                  Fractional Shares," "Closing Price" and
                                  "Market Disruption Event" shall be deemed to
                                  also refer to any New Stock or Reference
                                  Basket Stock, and (ii) all other references in
                                  this SPARQS to "Valero Stock" shall be deemed
                                  to refer to the Exchange Property into which
                                  this SPARQS is thereafter exchangeable and
                                  references to a "share" or "shares" of Valero
                                  Stock shall be deemed to refer to the
                                  applicable unit or units of such Exchange
                                  Property, including any New Stock or Reference
                                  Basket Stock, unless the context otherwise
                                  requires. The New Stock Exchange Ratio(s) or
                                  Basket Stock Exchange Ratios resulting from
                                  any Reorganization Event described in
                                  paragraph 5 above or similar adjustment under
                                  paragraph 4 above shall be subject to the
                                  adjustments set forth in paragraphs 1 through
                                  5 hereof.

                                  If a Reference Basket Event occurs, the Issuer
                                  shall, or shall cause the Calculation Agent
                                  to, provide written notice to the Trustee at
                                  its New York office, on which notice the
                                  Trustee may conclusively rely, and to DTC of
                                  the occurrence of such Reference Basket Event
                                  and of the three Reference Basket Stocks
                                  selected as promptly as possible and in no
                                  event later than five Business Days after the
                                  date of the Reference Basket Event.

                                      A-18
<PAGE>

                                  No adjustment to any Exchange Ratio (including
                                  for this purpose, any New Stock Exchange Ratio
                                  or Basket Stock Exchange Ratio) shall be
                                  required unless such adjustment would require
                                  a change of at least 0.1% in the Exchange
                                  Ratio then in effect. The Exchange Ratio
                                  resulting from any of the adjustments
                                  specified above will be rounded to the nearest
                                  one hundred-thousandth, with five
                                  one-millionths rounded upward. Adjustments to
                                  the Exchange Ratios will be made up to the
                                  close of business on the third Trading Day
                                  prior to the Scheduled Maturity Date.

                                  No adjustments to the Exchange Ratio or method
                                  of calculating the Exchange Ratio shall be
                                  made other than those specified above.

                                  The Calculation Agent shall be solely
                                  responsible for the determination and
                                  calculation of any adjustments to the Exchange
                                  Ratio, any New Stock Exchange Ratio or Basket
                                  Stock Exchange Ratio or method of calculating
                                  the Exchange Property Value and of any related
                                  determinations and calculations with respect
                                  to any distributions of stock, other
                                  securities or other property or assets
                                  (including cash) in connection with any
                                  corporate event described in paragraphs 1
                                  through 5 above, and its determinations and
                                  calculations with respect thereto shall be
                                  conclusive in the absence of manifest error.

                                  The Calculation Agent shall provide
                                  information as to any adjustments to the
                                  Exchange Ratio, or to the method of
                                  calculating the amount payable upon exchange
                                  at maturity of the SPARQS made pursuant to
                                  paragraph 5 above, upon written request by the
                                  holder of this SPARQS.

Market Disruption Event.........  Market Disruption Event means, with respect
                                  to Valero Stock:

                                     (i) a suspension, absence or material
                                     limitation of trading of Valero Stock on
                                     the primary market for Valero Stock for
                                     more than two hours of trading or during
                                     the one-half hour period preceding the
                                     close of the principal trading session in
                                     such market; or a breakdown or failure in
                                     the price and trade reporting systems of
                                     the primary market for Valero Stock as a
                                     result of which the reported trading

                                      A-19
<PAGE>

                                     prices for Valero Stock during the last
                                     one-half hour preceding the close of the
                                     principal trading session in such market
                                     are materially inaccurate; or the
                                     suspension, absence or material limitation
                                     of trading on the primary market for
                                     trading in options contracts related to
                                     Valero Stock, if available, during the
                                     one-half hour period preceding the close of
                                     the principal trading session in the
                                     applicable market, in each case as
                                     determined by the Calculation Agent in its
                                     sole discretion; and

                                     (ii) a determination by the Calculation
                                     Agent in its sole discretion that any event
                                     described in clause (i) above materially
                                     interfered with the ability of the Issuer
                                     or any of its affiliates to unwind or
                                     adjust all or a material portion of the
                                     hedge with respect to the SPARQS due April
                                     15, 2006, Mandatorily Exchangeable for
                                     Shares of Common Stock of Valero Energy
                                     Corporation.

                                  For purposes of determining whether a Market
                                  Disruption Event has occurred: (1) a
                                  limitation on the hours or number of days of
                                  trading shall not constitute a Market
                                  Disruption Event if it results from an
                                  announced change in the regular business hours
                                  of the relevant exchange, (2) a decision to
                                  permanently discontinue trading in the
                                  relevant options contract shall not constitute
                                  a Market Disruption Event, (3) limitations
                                  pursuant to NYSE Rule 80A (or any applicable
                                  rule or regulation enacted or promulgated by
                                  the NYSE, any other self-regulatory
                                  organization or the Securities and Exchange
                                  Commission of scope similar to NYSE Rule 80A
                                  as determined by the Calculation Agent) on
                                  trading during significant market fluctuations
                                  shall constitute a suspension, absence or
                                  material limitation of trading, (4) a
                                  suspension of trading in options contracts on
                                  Valero Stock by the primary securities market
                                  trading in such options, if available, by
                                  reason of (x) a price change exceeding limits
                                  set by such securities exchange or market, (y)
                                  an imbalance of orders relating to such
                                  contracts or (z) a disparity in bid and ask
                                  quotes relating to such contracts shall
                                  constitute a suspension, absence or material
                                  limitation of trading in options contracts
                                  related to Valero Stock and (5) a suspension,

                                      A-20
<PAGE>

                                  absence or material limitation of trading on
                                  the primary securities market on which options
                                  contracts related to Valero Stock are traded
                                  shall not include any time when such
                                  securities market is itself closed for trading
                                  under ordinary circumstances.

Alternate Exchange
 Calculation in Case
 of an Event of Default........   In case an event of default with respect to
                                  the SPARQS shall have occurred and be
                                  continuing, the amount declared due and
                                  payable per each $         principal amount
                                  of this SPARQS upon any acceleration of this
                                  SPARQS (an "Event of Default Acceleration")
                                  shall be determined by the Calculation Agent
                                  and shall be an amount in cash equal to the
                                  lesser of (i) the product of (x) the Closing
                                  Price of Valero Stock (and/or the value of any
                                  Exchange Property) as of the date of such
                                  acceleration and (y) the then current Exchange
                                  Ratio and (ii) the Call Price calculated as
                                  though the date of acceleration were the Call
                                  Date (but in no event less than the Call Price
                                  for the first Call Date), in each case plus
                                  accrued but unpaid interest to but excluding
                                  the date of acceleration; provided that if the
                                  Issuer has called the SPARQS in accordance
                                  with the Morgan Stanley Call Right, the amount
                                  declared due and payable upon any such
                                  acceleration shall be an amount in cash for
                                  each $ principal amount of this SPARQS equal
                                  to the Call Price for the Call Date specified
                                  in the Issuer's notice of mandatory exchange,
                                  plus accrued but unpaid interest to but
                                  excluding the date of acceleration.

Treatment of SPARQS for
 United States Federal
 Income Tax Purposes............  The Issuer, by its sale of this SPARQS, and
                                  the holder of this SPARQS (and any successor
                                  holder of, or holder of a beneficial interest
                                  in, this SPARQS), by its respective purchase
                                  hereof, agree (in the absence of an
                                  administrative determination or judicial
                                  ruling to the contrary) to characterize each
                                  $        principal amount of this SPARQS for
                                  all tax purposes as an investment unit
                                  consisting of (A) a terminable contract (the
                                  "Terminable Forward Contract") that (i)
                                  requires the holder of this SPARQS (subject to
                                  the Morgan Stanley Call Right) to purchase,
                                  and the Issuer to sell, for an amount equal to
                                  $       (the "Forward Price"), Valero Stock at
                                  maturity and (ii) allows the Issuer, upon

                                      A-21
<PAGE>

                                  exercise of the Morgan Stanley Call Right, to
                                  terminate the Terminable Forward Contract by
                                  returning to such holder the Deposit (as
                                  defined below) and paying to such holder an
                                  amount of cash equal to the difference between
                                  the Deposit and the Call Price and (B) a
                                  deposit with the Issuer of a fixed amount of
                                  cash, equal to the Issue Price per each $
                                  principal amount of this SPARQS, to secure the
                                  holder's obligation to purchase Valero Stock
                                  pursuant to the Terminable Forward Contract
                                  (the "Deposit"), which Deposit bears a
                                  quarterly compounded yield of    % per annum.

                                      A-22
<PAGE>

     Morgan Stanley, a Delaware corporation (together with its successors and
assigns, the "Issuer"), for value received, hereby promises to pay to CEDE &
CO., or registered assignees, the amount of Valero Stock (or other Exchange
Property), as determined in accordance with the provisions set forth under
"Exchange at Maturity" above, due with respect to the principal sum of
U.S. $      (UNITED STATES DOLLARS                       ) on the Maturity Date
specified above (except to the extent redeemed or repaid prior to maturity) and
to pay interest thereon at the Interest Rate per annum specified above, from and
including the Interest Accrual Date specified above until the principal hereof
is paid or duly made available for payment weekly, monthly, quarterly,
semiannually or annually in arrears as specified above as the Interest Payment
Period on each Interest Payment Date (as specified above), commencing on the
Interest Payment Date next succeeding the Interest Accrual Date specified above,
and at maturity (or on any redemption or repayment date); provided, however,
that if the Interest Accrual Date occurs between a Record Date, as defined
below, and the next succeeding Interest Payment Date, interest payments will
commence on the second Interest Payment Date succeeding the Interest Accrual
Date to the registered holder of this Note on the Record Date with respect to
such second Interest Payment Date; and provided, further, that if this Note is
subject to "Annual Interest Payments," interest payments shall be made annually
in arrears and the term "Interest Payment Date" shall be deemed to mean the
first day of March in each year.

     Interest on this Note will accrue from and including the most recent date
to which interest has been paid or duly provided for, or, if no interest has
been paid or duly provided for, from and including the Interest Accrual Date,
until but excluding the date the principal hereof has been paid or duly made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
described herein, be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on the date 15
calendar days prior to such Interest Payment Date (whether or not a Business Day
(as defined below)) (each such date, a "Record Date"); provided, however, that
interest payable at maturity (or any redemption or repayment date) will be
payable to the person to whom the principal hereof shall be payable. As used
herein, "Business Day" means any day, other than a Saturday or Sunday, (a) that
is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close (x) in The City of New York
or (y) if this Note is denominated in a Specified Currency other than U.S.
dollars, euro or Australian dollars, in the principal financial center of the
country of the Specified Currency, or (z) if this Note is denominated in
Australian dollars, in Sydney and (b) if this Note is denominated in euro, that
is also a day on which the Trans-European Automated Real-time Gross Settlement
Express Transfer System ("TARGET") is operating (a "TARGET Settlement Day").

     Payment of the principal of this Note, any premium and the interest due at
maturity (or any redemption or repayment date), unless this Note is denominated
in a Specified Currency other than U.S. dollars and is to be paid in whole or in
part in such Specified Currency, will be made in immediately available funds
upon surrender of this Note at the office or agency of the Paying Agent, as
defined on the reverse hereof, maintained for that purpose in the Borough of
Manhattan, The City of New York, or at such other paying agency as the Issuer
may determine, in U.S. dollars. U.S. dollar payments of interest, other than
interest due at maturity or on any date of redemption or repayment, will be made
by U.S. dollar check mailed to the address of the

                                      A-23
<PAGE>

person entitled thereto as such address shall appear in the Note register. A
holder of U.S. $10,000,000 (or the equivalent in a Specified Currency) or more
in aggregate principal amount of Notes having the same Interest Payment Date,
the interest on which is payable in U.S. dollars, shall be entitled to receive
payments of interest, other than interest due at maturity or on any date of
redemption or repayment, by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received by the Paying Agent in
writing not less than 15 calendar days prior to the applicable Interest Payment
Date.

     If this Note is denominated in a Specified Currency other than U.S.
dollars, and the holder does not elect (in whole or in part) to receive payment
in U.S. dollars pursuant to the next succeeding paragraph, payments of interest,
principal or any premium with regard to this Note will be made by wire transfer
of immediately available funds to an account maintained by the holder hereof
with a bank located outside the United States if appropriate wire transfer
instructions have been received by the Paying Agent in writing, with respect to
payments of interest, on or prior to the fifth Business Day after the applicable
Record Date and, with respect to payments of principal or any premium, at least
ten Business Days prior to the Maturity Date or any redemption or repayment
date, as the case may be; provided that, if payment of interest, principal or
any premium with regard to this Note is payable in euro, the account must be a
euro account in a country for which the euro is the lawful currency, provided,
further, that if such wire transfer instructions are not received, such payments
will be made by check payable in such Specified Currency mailed to the address
of the person entitled thereto as such address shall appear in the Note
register; and provided, further, that payment of the principal of this Note, any
premium and the interest due at maturity (or on any redemption or repayment
date) will be made upon surrender of this Note at the office or agency referred
to in the preceding paragraph.

     If so indicated on the face hereof, the holder of this Note, if denominated
in a Specified Currency other than U.S. dollars, may elect to receive all or a
portion of payments on this Note in U.S. dollars by transmitting a written
request to the Paying Agent, on or prior to the fifth Business Day after such
Record Date or at least ten Business Days prior to the Maturity Date or any
redemption or repayment date, as the case may be. Such election shall remain in
effect unless such request is revoked by written notice to the Paying Agent as
to all or a portion of payments on this Note at least five Business Days prior
to such Record Date, for payments of interest, or at least ten calendar days
prior to the Maturity Date or any redemption or repayment date, for payments of
principal, as the case may be.

     If the holder elects to receive all or a portion of payments of principal
of, premium, if any, and interest on this Note, if denominated in a Specified
Currency other than U.S. dollars, in U.S. dollars, the Exchange Rate Agent (as
defined on the reverse hereof) will convert such payments into U.S. dollars. In
the event of such an election, payment in respect of this Note will be based
upon the exchange rate as determined by the Exchange Rate Agent based on the
highest bid quotation in The City of New York received by such Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent unless such Exchange Rate
Agent is an affiliate of the Issuer) for the purchase by the quoting dealer of
the Specified Currency for U.S. dollars for settlement on such payment date in
the amount of the Specified Currency payable in the absence of such an election
to such holder

                                      A-24
<PAGE>

and at which the applicable dealer commits to execute a contract. If such bid
quotations are not available, such payment will be made in the Specified
Currency. All currency exchange costs will be borne by the holder of this Note
by deductions from such payments.

     Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.

     Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Senior Indenture, as defined on the
reverse hereof, or be valid or obligatory for any purpose.

                                      A-25
<PAGE>

      IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.

DATED:                               MORGAN STANLEY

                                     By:
                                         --------------------------------------
                                          Name:
                                          Title:

TRUSTEE'S CERTIFICATE OF
   AUTHENTICATION

This is one of the Notes referred
   to in the within-mentioned
   Senior Indenture.

JPMORGAN CHASE BANK, N.A.,
   as Trustee

By:
   ------------------------------
     Authorized Officer

                                      A-26
<PAGE>

                             REVERSE OF SECURITY

      This  Note  is  one  of  a  duly  authorized   issue  of  Senior  Global
Medium-Term Notes,  Series F, having maturities more than nine months from the
date of issue (the  "Notes") of the  Issuer.  The Notes are  issuable  under a
Senior  Indenture,  dated as of  November  1,  2004,  between  the  Issuer and
JPMorgan Chase Bank, N.A.  (formerly known as JPMorgan Chase Bank), as Trustee
(the  "Trustee,"  which term includes any  successor  trustee under the Senior
Indenture) (as may be amended or  supplemented  from time to time, the "Senior
Indenture"),  to  which  Senior  Indenture  and  all  indentures  supplemental
thereto  reference  is hereby made for a statement of the  respective  rights,
limitations of rights,  duties and  immunities of the Issuer,  the Trustee and
holders of the Notes and the terms  upon  which the Notes are,  and are to be,
authenticated  and  delivered.  The Issuer has appointed  JPMorgan Chase Bank,
N.A.  at its  corporate  trust  office  in The City of New York as the  paying
agent (the "Paying  Agent,"  which term  includes any  additional or successor
Paying Agent  appointed  by the Issuer)  with respect to the Notes.  The terms
of  individual  Notes may vary with respect to interest  rates,  interest rate
formulas,  issue dates,  maturity dates, or otherwise,  all as provided in the
Senior Indenture.  To the extent not inconsistent  herewith,  the terms of the
Senior Indenture are hereby incorporated by reference herein.

      Unless  otherwise  indicated on the face  hereof,  this Note will not be
subject to any sinking fund and, unless otherwise  provided on the face hereof
in accordance  with the provisions of the following two  paragraphs,  will not
be  redeemable  or subject to  repayment  at the option of the holder prior to
maturity.

     If so indicated on the face hereof, this Note may be redeemed in whole or
in part at the option of the Issuer on or after the Initial Redemption Date
specified on the face hereof on the terms set forth on the face hereof, together
with interest accrued and unpaid hereon to the date of redemption. If this Note
is subject to "Annual Redemption Percentage Reduction," the Initial Redemption
Percentage indicated on the face hereof will be reduced on each anniversary of
the Initial Redemption Date by the Annual Redemption Percentage Reduction
specified on the face hereof until the redemption price of this Note is 100% of
the principal amount hereof, together with interest accrued and unpaid hereon to
the date of redemption. Notice of redemption shall be mailed to the registered
holders of the Notes designated for redemption at their addresses as the same
shall appear on the Note register not less than 30 nor more than 60 calendar
days prior to the date fixed for redemption or within the Redemption Notice
Period specified on the face hereof, subject to all the conditions and
provisions of the Senior Indenture. In the event of redemption of this Note in
part only, a new Note or Notes for the amount of the unredeemed portion hereof
shall be issued in the name of the holder hereof upon the cancellation hereof.

     If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 or, if this Note is denominated in a Specified Currency other than U.S.
dollars, in increments of 1,000 units of such Specified Currency (provided that
any remaining principal amount hereof shall not be less than the minimum
authorized denomination hereof) at the option of the holder hereof at a price
equal to 100% of the principal amount to be repaid, together with interest
accrued and unpaid hereon to the date of repayment, provided that

                                      A-27
<PAGE>

if this Note is issued with original issue discount, this Note will be repayable
on the applicable Optional Repayment Date or Dates at the price(s) specified on
the face hereof. For this Note to be repaid at the option of the holder hereof,
the Paying Agent must receive at its corporate trust office in the Borough of
Manhattan, The City of New York, at least 15 but not more than 30 calendar days
prior to the date of repayment, (i) this Note with the form entitled "Option to
Elect Repayment" below duly completed or (ii) a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or a trust
company in the United States setting forth the name of the holder of this Note,
the principal amount hereof, the certificate number of this Note or a
description of this Note's tenor and terms, the principal amount hereof to be
repaid, a statement that the option to elect repayment is being exercised
thereby and a guarantee that this Note, together with the form entitled "Option
to Elect Repayment" duly completed, will be received by the Paying Agent not
later than the fifth Business Day after the date of such telegram, telex,
facsimile transmission or letter; provided, that such telegram, telex, facsimile
transmission or letter shall only be effective if this Note and form duly
completed are received by the Paying Agent by such fifth Business Day. Exercise
of such repayment option by the holder hereof shall be irrevocable. In the event
of repayment of this Note in part only, a new Note or Notes for the amount of
the unpaid portion hereof shall be issued in the name of the holder hereof upon
the cancellation hereof.

     Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or any earlier
redemption or repayment date), as the case may be. Unless otherwise provided on
the face hereof, interest payments for this Note will be computed and paid on
the basis of a 360-day year of twelve 30-day months.

     In the case where the Interest Payment Date or the Maturity Date (or any
redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest on such
payment shall accrue for the period from and after the Interest Payment Date or
the Maturity Date (or any redemption or repayment date) to such next succeeding
Business Day.

     This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured and
unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.

     This Note, and any Note or Notes issued upon transfer or exchange hereof,
is issuable only in fully registered form, without coupons, and, if denominated
in U.S. dollars, unless otherwise stated above, is issuable only in
denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess
thereof. If this Note is denominated in a Specified Currency other than U.S.
dollars, then, unless a higher minimum denomination is required by applicable
law, it is issuable only in denominations of the equivalent of U.S. $1,000
(rounded to an integral multiple of 1,000 units of such Specified Currency), or
any amount in excess thereof which is an integral multiple of 1,000 units of
such Specified Currency, as determined by reference to the noon dollar buying
rate in The City of New York for cable transfers of such Specified Currency

                                      A-28
<PAGE>

published by the Federal Reserve Bank of New York (the "Market Exchange Rate")
on the Business Day immediately preceding the date of issuance.

     The Trustee has been appointed registrar for the Notes, and the Trustee
will maintain at its office in The City of New York a register for the
registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Trustee by surrendering this Note for cancellation,
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon the
Trustee shall issue in the name of the transferee or transferees, in exchange
herefor, a new Note or Notes having identical terms and provisions and having a
like aggregate principal amount in authorized denominations, subject to the
terms and conditions set forth herein; provided, however, that the Trustee will
not be required (i) to register the transfer of or exchange any Note that has
been called for redemption in whole or in part, except the unredeemed portion of
Notes being redeemed in part, (ii) to register the transfer of or exchange any
Note if the holder thereof has exercised his right, if any, to require the
Issuer to repurchase such Note in whole or in part, except the portion of such
Note not required to be repurchased, or (iii) to register the transfer of or
exchange Notes to the extent and during the period so provided in the Senior
Indenture with respect to the redemption of Notes. Notes are exchangeable at
said office for other Notes of other authorized denominations of equal aggregate
principal amount having identical terms and provisions. All such exchanges and
transfers of Notes will be free of charge, but the Issuer may require payment of
a sum sufficient to cover any tax or other governmental charge in connection
therewith. All Notes surrendered for exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Issuer and the Trustee and
executed by the registered holder in person or by the holder's attorney duly
authorized in writing. The date of registration of any Note delivered upon any
exchange or transfer of Notes shall be such that no gain or loss of interest
results from such exchange or transfer.

     In case this Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and this Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, the Issuer in its discretion may execute a new Note of
like tenor in exchange for this Note, but, if this Note is destroyed, lost or
stolen, only upon receipt of evidence satisfactory to the Trustee and the Issuer
that this Note was destroyed or lost or stolen and, if required, upon receipt
also of indemnity satisfactory to each of them. All expenses and reasonable
charges associated with procuring such indemnity and with the preparation,
authentication and delivery of a new Note shall be borne by the owner of the
Note mutilated, defaced, destroyed, lost or stolen.

     The Senior Indenture provides that (a) if an Event of Default (as defined
in the Senior Indenture) due to the default in payment of principal of, premium,
if any, or interest on, any series of debt securities issued under the Senior
Indenture, including the series of Senior Medium-Term Notes of which this Note
forms a part, or due to the default in the performance or breach of any other
covenant or warranty of the Issuer applicable to the debt securities of such
series but not applicable to all outstanding debt securities issued under the
Senior Indenture shall have occurred and be continuing, either the Trustee or
the holders of not less than 25% in

                                      A-29
<PAGE>

aggregate principal amount of the outstanding debt securities of each affected
series, voting as one class, by notice in writing to the Issuer and to the
Trustee, if given by the securityholders, may then declare the principal of all
debt securities of all such series and interest accrued thereon to be due and
payable immediately and (b) if an Event of Default due to a default in the
performance of any other of the covenants or agreements in the Senior Indenture
applicable to all outstanding debt securities issued thereunder, including this
Note, or due to certain events of bankruptcy, insolvency or reorganization of
the Issuer, shall have occurred and be continuing, either the Trustee or the
holders of not less than 25% in aggregate principal amount of all outstanding
debt securities issued under the Senior Indenture, voting as one class, by
notice in writing to the Issuer and to the Trustee, if given by the
securityholders, may declare the principal of all such debt securities and
interest accrued thereon to be due and payable immediately, but upon certain
conditions such declarations may be annulled and past defaults may be waived
(except a continuing default in payment of principal or premium, if any, or
interest on such debt securities) by the holders of a majority in aggregate
principal amount of the debt securities of all affected series then outstanding.

     If the face hereof indicates that this Note is subject to "Modified Payment
upon Acceleration or Redemption," then (i) if the principal hereof is declared
to be due and payable as described in the preceding paragraph, the amount of
principal due and payable with respect to this Note shall be limited to the
aggregate principal amount hereof multiplied by the sum of the Issue Price
specified on the face hereof (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the Interest
Accrual Date to the date of declaration, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration), (ii) for the
purpose of any vote of securityholders taken pursuant to the Senior Indenture
prior to the acceleration of payment of this Note, the principal amount hereof
shall equal the amount that would be due and payable hereon, calculated as set
forth in clause (i) above, if this Note were declared to be due and payable on
the date of any such vote and (iii) for the purpose of any vote of
securityholders taken pursuant to the Senior Indenture following the
acceleration of payment of this Note, the principal amount hereof shall equal
the amount of principal due and payable with respect to this Note, calculated as
set forth in clause (i) above.

     If the face hereof indicates that this Note is subject to "Tax Redemption
and Payment of Additional Amounts," this Note may be redeemed, as a whole, at
the option of the Issuer at any time prior to maturity, upon the giving of a
notice of redemption as described below, at a redemption price equal to 100% of
the principal amount hereof, together with accrued interest to the date fixed
for redemption (except that if this Note is subject to "Modified Payment upon
Acceleration or Redemption," such redemption price would be limited to the
aggregate principal amount hereof multiplied by the sum of the Issue Price
specified on the face hereof (expressed as a percentage of the aggregate
principal amount) plus the original issue discount amortized from the Interest
Accrual Date to the date of redemption, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of redemption) (the "Amortized
Amount")), if the Issuer determines that, as a result of any change in or
amendment to the laws, or any regulations or rulings promulgated thereunder, of
the United States or of any political subdivision or taxing authority thereof or
therein affecting taxation, or any change in official position regarding the
application or

                                      A-30
<PAGE>

interpretation of such laws, regulations or rulings, which change or amendment
becomes effective on or after the Initial Offering Date hereof, the Issuer has
or will become obligated to pay Additional Amounts, as defined below, with
respect to this Note as described below. Prior to the giving of any notice of
redemption pursuant to this paragraph, the Issuer shall deliver to the Trustee
(i) a certificate stating that the Issuer is entitled to effect such redemption
and setting forth a statement of facts showing that the conditions precedent to
the right of the Issuer to so redeem have occurred, and (ii) an opinion of
independent legal counsel satisfactory to the Trustee to such effect based on
such statement of facts; provided that no such notice of redemption shall be
given earlier than 60 calendar days prior to the earliest date on which the
Issuer would be obligated to pay such Additional Amounts if a payment in respect
of this Note were then due.

     Notice of redemption will be given not less than 30 nor more than 60
calendar days prior to the date fixed for redemption or within the Redemption
Notice Period specified on the face hereof, which date and the applicable
redemption price will be specified in the notice.

     If the face hereof indicates that this Note is subject to "Tax Redemption
and Payment of Additional Amounts," the Issuer will, subject to certain
exceptions and limitations set forth below, pay such additional amounts (the
"Additional Amounts") to the holder of this Note who is a United States Alien as
may be necessary in order that every net payment of the principal of and
interest on this Note and any other amounts payable on this Note, after
withholding or deduction for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of such payment by
the United States, or any political subdivision or taxing authority thereof or
therein, will not be less than the amount provided for in this Note to be then
due and payable. The Issuer will not, however, make any payment of Additional
Amounts to any such holder who is a United States Alien for or on account of:

          (a) any present or future tax, assessment or other governmental charge
     that would not have been so imposed but for (i) the existence of any
     present or former connection between such holder, or between a fiduciary,
     settlor, beneficiary, member or shareholder of such holder, if such holder
     is an estate, a trust, a partnership or a corporation for United States
     federal income tax purposes, and the United States, including, without
     limitation, such holder, or such fiduciary, settlor, beneficiary, member or
     shareholder, being or having been a citizen or resident thereof or being or
     having been engaged in a trade or business or present therein or having, or
     having had, a permanent establishment therein or (ii) the presentation by
     or on behalf of the holder of this Note for payment on a date more than 15
     calendar days after the date on which such payment became due and payable
     or the date on which payment thereof is duly provided for, whichever occurs
     later;

          (b) any estate, inheritance, gift, sales, transfer, excise or personal
     property tax or any similar tax, assessment or governmental charge;

          (c) any tax, assessment or other governmental charge imposed by reason
     of such holder's past or present status as a personal holding company or
     foreign personal holding company or controlled foreign corporation or
     passive foreign investment company with respect to the United States or as
     a corporation which accumulates earnings to avoid United States federal
     income tax or as a private foundation or other tax-exempt organization or a

                                      A-31
<PAGE>

     bank receiving interest under Section 881(c)(3)(A) of the Internal Revenue
     Code of 1986, as amended;

          (d) any tax, assessment or other governmental charge that is payable
     otherwise than by withholding or deduction from payments on or in respect
     of this Note;

          (e) any tax, assessment or other governmental charge required to be
     withheld by any Paying Agent from any payment of principal of, or interest
     on, this Note, if such payment can be made without such withholding by any
     other Paying Agent in a city in Western Europe;

          (f) any tax, assessment or other governmental charge that would not
     have been imposed but for the failure to comply with certification,
     information or other reporting requirements concerning the nationality,
     residence or identity of the holder or beneficial owner of this Note, if
     such compliance is required by statute or by regulation of the United
     States or of any political subdivision or taxing authority thereof or
     therein as a precondition to relief or exemption from such tax, assessment
     or other governmental charge;

          (g) any tax, assessment or other governmental charge imposed by reason
     of such holder's past or present status as the actual or constructive owner
     of 10% or more of the total combined voting power of all classes of stock
     entitled to vote of the Issuer or as a direct or indirect subsidiary of the
     Issuer; or

          (h) any combination of items (a), (b), (c), (d), (e), (f) or (g).

In addition, the Issuer shall not be required to make any payment of Additional
Amounts (i) to any such holder where such withholding or deduction is imposed on
a payment to an individual and is required to be made pursuant to any law
implementing or complying with, or introduced in order to conform to, any
European Union Directive on the taxation of savings; or (ii) by or on behalf of
a holder who would have been able to avoid such withholding or deduction by
presenting this Note or the relevant coupon to another Paying Agent in a member
state of the European Union. Nor shall the Issuer pay Additional Amounts with
respect to any payment on this Note to a United States Alien who is a fiduciary
or partnership or other than the sole beneficial owner of such payment to the
extent such payment would be required by the laws of the United States (or any
political subdivision thereof) to be included in the income, for tax purposes,
of a beneficiary or settlor with respect to such fiduciary or a member of such
partnership or a beneficial owner who would not have been entitled to the
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the holder of this Note.

     The Senior Indenture permits the Issuer and the Trustee, with the consent
of the holders of not less than a majority in aggregate principal amount of the
debt securities of all series issued under the Senior Indenture then outstanding
and affected (voting as one class), to execute supplemental indentures adding
any provisions to or changing in any manner the rights of the holders of each
series so affected; provided that the Issuer and the Trustee may not, without
the consent of the holder of each outstanding debt security affected thereby,
(a) extend the final maturity of any such debt security, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption thereof, or change the
currency of payment thereof, or modify or amend the provisions for

                                      A-32
<PAGE>

conversion of any currency into any other currency, or modify or amend the
provisions for conversion or exchange of the debt security for securities of the
Issuer or other entities or for other property or the cash value of the property
(other than as provided in the antidilution provisions or other similar
adjustment provisions of the debt securities or otherwise in accordance with the
terms thereof), or impair or affect the rights of any holder to institute suit
for the payment thereof or (b) reduce the aforesaid percentage in principal
amount of debt securities the consent of the holders of which is required for
any such supplemental indenture.

     Except as set forth below, if the principal of, premium, if any, or
interest on this Note is payable in a Specified Currency other than U.S. dollars
and such Specified Currency is not available to the Issuer for making payments
hereon due to the imposition of exchange controls or other circumstances beyond
the control of the Issuer or is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions within the international banking community, then the Issuer will be
entitled to satisfy its obligations to the holder of this Note by making such
payments in U.S. dollars on the basis of the Market Exchange Rate on the date of
such payment or, if the Market Exchange Rate is not available on such date, as
of the most recent practicable date; provided, however, that if the euro has
been substituted for such Specified Currency, the Issuer may at its option (or
shall, if so required by applicable law) without the consent of the holder of
this Note effect the payment of principal of, premium, if any, or interest on
any Note denominated in such Specified Currency in euro in lieu of such
Specified Currency in conformity with legally applicable measures taken pursuant
to, or by virtue of, the Treaty establishing the European Community, as amended.
Any payment made under such circumstances in U.S. dollars or euro where the
required payment is in an unavailable Specified Currency will not constitute an
Event of Default. If such Market Exchange Rate is not then available to the
Issuer or is not published for a particular Specified Currency, the Market
Exchange Rate will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 a.m., New York City
time, on the second Business Day preceding the date of such payment from three
recognized foreign exchange dealers (the "Exchange Dealers") for the purchase by
the quoting Exchange Dealer of the Specified Currency for U.S. dollars for
settlement on the payment date, in the aggregate amount of the Specified
Currency payable to those holders or beneficial owners of Notes and at which the
applicable Exchange Dealer commits to execute a contract. One of the Exchange
Dealers providing quotations may be the Exchange Rate Agent unless the Exchange
Rate Agent is an affiliate of the Issuer. If those bid quotations are not
available, the Exchange Rate Agent shall determine the market exchange rate at
its sole discretion.

     The "Exchange Rate Agent" shall be Morgan Stanley & Co. Incorporated,
unless otherwise indicated on the face hereof.

     All determinations referred to above made by, or on behalf of, the Issuer
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on holders of Notes and coupons.

     So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in

                                      A-33
<PAGE>

said Borough of Manhattan for the registration, transfer and exchange as
aforesaid of the Notes. The Issuer may designate other agencies for the payment
of said principal, premium and interest at such place or places (subject to
applicable laws and regulations) as the Issuer may decide. So long as there
shall be such an agency, the Issuer shall keep the Trustee advised of the names
and locations of such agencies, if any are so designated. If any European Union
Directive on the taxation of savings comes into force, the Issuer will, to the
extent possible as a matter of law, maintain a Paying Agent in a member state of
the European Union that will not be obligated to withhold or deduct tax pursuant
to any such Directive or any law implementing or complying with, or introduced
in order to conform to, such Directive.

     With respect to moneys paid by the Issuer and held by the Trustee or any
Paying Agent for payment of the principal of or interest or premium, if any, on
any Notes that remain unclaimed at the end of two years after such principal,
interest or premium shall have become due and payable (whether at maturity or
upon call for redemption or otherwise), (i) the Trustee or such Paying Agent
shall notify the holders of such Notes that such moneys shall be repaid to the
Issuer and any person claiming such moneys shall thereafter look only to the
Issuer for payment thereof and (ii) such moneys shall be so repaid to the
Issuer. Upon such repayment all liability of the Trustee or such Paying Agent
with respect to such moneys shall thereupon cease, without, however, limiting in
any way any obligation that the Issuer may have to pay the principal of or
interest or premium, if any, on this Note as the same shall become due.

     No provision of this Note or of the Senior Indenture shall alter or impair
the obligation of the Issuer, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note at the time, place, and
rate, and in the coin or currency, herein prescribed unless otherwise agreed
between the Issuer and the registered holder of this Note.

     Prior to due presentment of this Note for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.

     No recourse shall be had for the payment of the principal of, premium, if
any, or the interest on this Note, for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Senior Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.

     This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.

     As used herein, the term "United States Alien" means any person who is, for
United States federal income tax purposes, (i) a nonresident alien individual,
(ii) a foreign corporation, (iii) a nonresident alien fiduciary of a foreign
estate or trust or (iv) a foreign partnership one or

                                      A-34
<PAGE>

more of the members of which is, for United States federal income tax purposes,
a nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.

     All terms used in this Note which are defined in the Senior Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Senior Indenture.

                                      A-35
<PAGE>

                                ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

       TEN COM   -  as tenants in common
       TEN ENT   -  as tenants by the entireties
       JT TEN    -  as joint tenants with right of survivorship and
                    not as tenants in common

      UNIF GIFT MIN ACT -                       Custodian
                           ---------------------         ------------------
                                   (Minor)                     (Cust)

      Under Uniform Gifts to Minors Act
                                       --------------------------
                                               (State)

      Additional abbreviations may also be used though not in the above list.

                                   ----------

                                      A-36
<PAGE>

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

---------------------------------------
[PLEASE INSERT SOCIAL SECURITY OR OTHER
 IDENTIFYING NUMBER OF ASSIGNEE]

------------------------------------------------------------------------------

------------------------------------------------------------------------------

------------------------------------------------------------------------------
    [PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.

Dated:
      ---------------------

NOTICE:   The signature to this assignment must correspond with the name as
          written upon the face of the within Note in every particular without
          alteration or enlargement or any change whatsoever.

                                      A-37
<PAGE>

                          OPTION TO ELECT REPAYMENT

     The undersigned hereby irrevocably requests and instructs the Issuer to
repay the within Note (or portion thereof specified below) pursuant to its terms
at a price equal to the principal amount thereof, together with interest to the
Optional Repayment Date, to the undersigned at

------------------------------------------------------------------------------

------------------------------------------------------------------------------

------------------------------------------------------------------------------
         (Please print or typewrite name and address of the undersigned)

     If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
                    ; and specify the  denomination  or  denominations  (which
shall not be less than the minimum authorized denomination) of the Notes to be
issued to the holder for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note shall be issued for the portion
not being repaid):                 .

Dated:
      --------------------------------    --------------------------------------
                                          NOTICE:  The signature on this Option
                                          to Elect Repayment must correspond
                                          with the name as written upon the face
                                          of the within instrument in every
                                          particular without alteration or
                                          enlargement.

                                      A-38<PAGE>
                                                                    Exhibit 10.1

================================================================================

                             PARTICIPATION AGREEMENT

                                      among

                         SUMITOMO METAL MINING CO., LTD.
                            (a Japanese corporation),

                              SUMITOMO CORPORATION
                            (a Japanese corporation),

                          SUMMIT GLOBAL MANAGEMENT B.V.
                             (a Dutch corporation),

                      COMPANIA DE MINAS BUENAVENTURA S.A.A.
                     (a Peruvian sociedad anonima abierta),

                            PHELPS DODGE CORPORATION
                            (a New York corporation),

                          CYPRUS AMAX MINERALS COMPANY
                            (a Delaware corporation),

                              CYPRUS METALS COMPANY
                            (a Delaware corporation),

                          CYPRUS CLIMAX METALS COMPANY
                            (a Delaware corporation),

                                       and

                       SOCIEDAD MINERA CERRO VERDE S.A.A.
                      (a Peruvian sociedad anonima abierta)

                           Dated as of March 16, 2005

================================================================================

<PAGE>

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>   <C>                                                                          <C>
1.    Definitions...............................................................     3
2.    General Capital Increase and Special Dividend.............................    10
      2.1.     Authorization of General Capital Increase and Special Dividend...    10
      2.2.     Conduct of General Capital Increase..............................    13
      2.3.     Initial Sale and Purchase of Preemptive Rights; First Round......    13
      2.4.     Second Round.....................................................    15
      2.5.     Reallocation of Capital Increase Shares..........................    15
      2.6.     Final Allocation.................................................    17
3.    Actions at the First and Final Closings...................................    17
      3.1.     Actions at the First Closing.....................................    17
      3.2.     Actions at or Prior to the Final Closing.........................    18
4.    Cost......................................................................    19
      4.1.     Expenses Incurred in Connection with the Preparation of the
                  Transaction Documents.........................................    19
5.    Representations...........................................................    19
      5.1.     Representations Regarding Cerro Verde............................    19
      5.2.     Representations Regarding PDC....................................    24
      5.3.     Representations Regarding the PD Participant.....................    25
      5.4.     Representations Regarding SC and SMM.............................    27
      5.5.     Representations Regarding SGM and the Sumitomo Participant.......    28
      5.6.     Representations Regarding BVN....................................    30
6.    Covenants.................................................................    31
      6.1.     No Sale of Interest in the Participants..........................    31
      6.2.     Permitted Encumbrances...........................................    31
      6.3.     Beneficial Ownership of PDC Common Stock.........................    32
      6.4.     Covenants Regarding the Sumitomo Participant.....................    32
      6.5.     Actions to Cause Closing, etc....................................    32
      6.6.     Transfers of Interests...........................................    32
      6.7.     Competition; Business Opportunities..............................    33
      6.8.     Conduct of Business until Final Closing..........................    33
      6.9.     Opinions of Counsel..............................................    33
</TABLE>

                                       i

<PAGE>

                                Table of Contents
                                   (continued)

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>   <C>                                                                          <C>
7.    Conditions to Closing.....................................................    34
      7.1.     Conditions to Obligations of SMM, SC, SGM and the Sumitomo
                  Participant...................................................    34
      7.2.     Conditions to Obligations of Cerro Verde, the PD Participant
                  Parents and the PD Participant................................    35
      7.3.     Consequences of Failure to Satisfy Conditions to Closing.........    36
8.    Termination...............................................................    36
      8.1.     Event of Termination.............................................    36
      8.2.     Effect of Termination............................................    37
      8.3.     Indemnification..................................................    37
      8.4.     Indemnification Procedures.......................................    38
9.    Use of Information........................................................    40
      9.1.     Confidentiality..................................................    40
      9.2.     Conflict of Interest.............................................    41
10.   Miscellaneous.............................................................    41
      10.1.    Notices..........................................................    41
      10.2.    Entire Agreement.................................................    43
      10.3.    Waiver, etc......................................................    43
      10.4.    Severability.....................................................    44
      10.5.    Governing Law....................................................    44
      10.6.    Arbitration......................................................    44
      10.7.    Binding Effect...................................................    45
      10.8.    Headings.........................................................    45
      10.9.    Counterparts.....................................................    45
      10.10.   Assignability....................................................    45
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                    <C>
                                  Exhibit List

Exhibit 1              Dividend Distribution Policy
Exhibit 2              New Cerro Verde Estatutos (Spanish and English)
Exhibit 3              Form of Shareholders Agreement

                                  Schedule List

Schedule A             Mining Concessions
Schedule 5.1(c)(ii)    Compliance with Other Instruments and Laws
Schedule 5.1(c)(iii)   Government Authorizations, Permits and Licenses
Schedule 5.1(d)        Environmental Matters
Schedule 5.1(e)        Taxes
Schedule 5.1(f)        Labor Matters
Schedule 5.1(g)(ii)    Legal Proceedings; Competing Claims
Schedule 5.1(i)        Financial Statements
Schedule 5.1(l)        Absence of Changes and Events
Schedule 5.1(m)        Title to Assets, Mining and Beneficiation Concessions and
                       Other Rights
Schedule 5.1(n)        Related Party Transactions and Commitments
</TABLE>

                                      iii

<PAGE>

     PARTICIPATION AGREEMENT, dated as of March 16, 2005, among SUMITOMO METAL
MINING CO., LTD., a Japanese corporation ("SMM"), SUMITOMO CORPORATION, a
Japanese corporation ("SC"), SUMMIT GLOBAL MANAGEMENT B.V., a Dutch corporation
("SGM"), COMPANIA DE MINAS BUENAVENTURA S.A.A., a Peruvian sociedad anonima
abierta ("BVN"), PHELPS DODGE CORPORATION, a New York corporation ("PDC"),
CYPRUS AMAX MINERALS COMPANY, a Delaware corporation ("CAMC"), CYPRUS METALS
COMPANY, a Delaware corporation ("CMC"), CYPRUS CLIMAX METALS COMPANY, a
Delaware corporation ("CCMC" or the "PD Participant") and SOCIEDAD MINERA CERRO
VERDE S.A.A., a Peruvian sociedad anonima abierta ("Cerro Verde").

                                   WITNESSETH:

     WHEREAS, Cerro Verde currently has 227,309,099 shares of common voting
stock, par value U.S.$0.5409 per share ("Common Stock"), outstanding (the
"Current Outstanding Shares");

     WHEREAS, the board of directors of Cerro Verde (the "Board") has approved
the development of a primary sulfide ore body beneath the oxide ore body located
within the mining concessions owned by Cerro Verde identified in Schedule A
hereto, which shall be processed into copper concentrate as a final product at
new facilities that are to be developed generally as described in the Cerro
Verde Primary Sulfide Feasibility Study, dated May 2004, prepared by Fluor
Canada Ltd., as modified by the Project Update, dated September 2004 (the
"Feasibility Study"), with such changes to such facilities as the Board
determines, in its good faith reasonable judgment, to be necessary or advisable
and which do not substantially alter the basic nature and scope of such
facilities (the "Sulfide Project");

     WHEREAS, in connection with obtaining the financing necessary to implement
the Sulfide Project, Cerro Verde is contemplating (i) an equity financing in the
form of a general capital increase (the "General Capital Increase") involving
the issuance of 122,746,913 additional shares of Common Stock (the "Capital
Increase Shares") at the Per Share Price (as defined below) to be consummated
after the closing conditions set forth in section 7.1 of this Agreement, as such
conditions may have been modified or waived by the Sumitomo Participant (the
"Capital Increase Closing Conditions"), have been satisfied or waived; and (ii)
debt financings to finance the development and completion of the Sulfide Project
and to provide an appropriate amount of working capital for the operation of the
Sulfide Project;

     WHEREAS, in connection with the General Capital Increase, each Holder of
Record on the date set by the shareholders of Cerro Verde at the Shareholders
Meeting

<PAGE>

(as defined below) will receive preemptive rights ("Preemptive Rights") to
subscribe for up to a number of Capital Increase Shares equal to such
shareholder's Respective Share (as defined below) multiplied by the aggregate
number of Capital Increase Shares;

     WHEREAS, BVN owns 20,833,367 Current Outstanding Shares, which represent
approximately 9.2% of the Current Outstanding Shares (the "Current BVN Shares"),
and believes it is in the best interests of Cerro Verde to develop the Sulfide
Project and to engage Minera Phelps Dodge del Peru S.A.C., a Peruvian sociedad
anonima cerrada and indirect subsidiary of PDC ("MPDP"), to assist such
development and serve as the Operator on terms and conditions to be set forth in
an operator's agreement that shall be in form and substance reasonably
satisfactory to Cerro Verde, MPDP, SMM, SC and BVN (the "Operator's Agreement");

     WHEREAS, BVN and the other parties hereto wish for BVN to increase its
equity investment in Cerro Verde to up to 20.1% of the Common Stock by
participating in the General Capital Increase on the terms and conditions
contemplated herein;

     WHEREAS, SC owns 100% of the outstanding shares of capital stock of SGM,
and as of the First Closing Date, SMM will own 80% of the outstanding capital
stock of the Sumitomo Participant, SGM will own 20% of the outstanding capital
stock of the Sumitomo Participant and the Sumitomo Parties wish to make an
investment in Cerro Verde with the understanding that MPDP, an indirect
subsidiary of PDC, will serve as Operator on the terms and conditions set forth
in the Operator's Agreement;

     WHEREAS, the parties hereto wish for the Sumitomo Participant to make an
equity investment of up to 24.99% of the Common Stock by participating in the
General Capital Increase on the terms and conditions contemplated herein;

     WHEREAS, SMM and Cerro Verde wish to arrange a ten-year concentrate sales
agreement, which shall be in form and substance reasonably satisfactory to Cerro
Verde and SMM, under which SMM would agree to purchase each year up to 50% of
all copper concentrates produced by the Sulfide Project, including copper
concentrates produced by third parties under any toll agreements providing for
the treatment of ore mined by Cerro Verde (the "SMM Concentrate Agreement");

     WHEREAS, PDC owns 100% of the outstanding shares of capital stock of CAMC;
CAMC owns 100% of the outstanding shares of capital stock of CMC, CMC owns 100%
of the outstanding shares of capital stock of the PD Participant; and the PD
Participant owns 187,500,306 Current Outstanding Shares, which represent
approximately 82.5% of the Current Outstanding Shares;

     WHEREAS, subject to the consummation of the General Capital Increase on the
Final Closing Date (as defined below), Cerro Verde intends to pay the Special
Dividend

                                       2

<PAGE>

(as defined below) on such date to the Holders of Record of Current Outstanding
Shares; and

     NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth, the parties hereto agree as follows:

     1. Definitions.

     AAA: the meaning given in section 10.6(b) of this Agreement.

     Affiliate: with respect to a particular Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.

     Agreement: this Participation Agreement, as amended, modified or
supplemented from time to time.

     Board: the meaning given in the second recital of this Agreement.

     Business Day: any day other than a Saturday, Sunday, national holiday in
the United States, the Netherlands or the Republic of Peru or day on which
either state or national banking institutions in the State of Arizona or the
State of New York or banking institutions in the Netherlands or the Republic of
Peru are not open for the conduct of normal banking business.

     BVL: Bolsa de Valores de Lima.

     BVN: Compania De Minas Buenaventura S.A.A., a Peruvian sociedad anonima
abierta.

     BVN First Round Rights: the meaning given in section 2.3(c)(i) of this
Agreement.

     BVN Shares: the Capital Increase Shares that BVN has agreed to acquire on
the Final Closing Date pursuant to this Agreement.

     BVN Shortfall: the meaning given in section 2.5(a)(i) of this Agreement.

     Call Exercise Notices: the meaning given in section 2.5(b)(ii) of this
Agreement.

     CAMC: Cyprus Amax Minerals Company, a Delaware corporation.

     Capital Increase Closing Conditions: the meaning given in the third recital
of this Agreement.

     Capital Increase Shares: the meaning given in the third recital of this
Agreement.

                                       3

<PAGE>

     CAVALI: Caja de Valores y Liquidaciones de Lima ICLV S.A.

     CCMC: Cyprus Climax Metals Company, a Delaware corporation.

     Cerro Verde: Sociedad Minera Cerro Verde S.A.A., a Peruvian sociedad
anonima abierta.

     Claimant: the meaning given in section 10.6(b) of this Agreement.

     Closing Conditions: the meaning given in section 7.1 of this Agreement.

     CMC: Cyprus Metals Company, a Delaware corporation.

     Committed Capital Increase Shares: with respect to any Person, Capital
Increase Shares that such Person has committed to purchase by validly exercising
a Preemptive Right in the General Capital Increase.

     Common Stock: the meaning given in the first recital of this Agreement.

     CONASEV: Comision Nacional Supervisora de Empresas y Valores.

     Confidential Information: the meaning given in section 9.1 of this
Agreement.

     Current BVN Shares: the meaning given in the fifth recital of this
Agreement.

     Current Outstanding Shares: the meaning given in the first recital of this
Agreement.

     Damages: the meaning given in section 8.3(a).

     Defendant: the meaning given in section 10.6(b) of this Agreement.

     Direct Claim Notice: the meaning given in section 8.4(b) of this Agreement.

     El Peruano: the Peruvian official gazette published daily by Editora Peru,
a private company fully owned and controlled by the Peruvian government.

     Excess Sumitomo Participant Shares: the meaning given in section 2.5(a)(ii)
of this Agreement.

     Feasibility Study: the meaning given in the second recital of this
Agreement.

     Final Allocation: the meaning given in section 2.6 of this Agreement.

     Final Closing: the meaning given in section 3.2 of this Agreement.

                                       4

<PAGE>

     Final Closing Date: the meaning given in section 3.2 of this Agreement.

     Financial Statements: the meaning given in section 5.1(i) of this
Agreement.

     First Closing: the meaning given in section 3.1 of this Agreement.

     First Closing Date: the meaning given in section 3.1 of this Agreement.

     First Round: the meaning given in section 2.3(a) of this Agreement.

     First Round Trading Period: the meaning given in section 2.3(a) of this
Agreement.

     Full Completion: final completion of the Sulfide Project as set forth in
the Project Debt Agreements.

     Fully Diluted Respective Share: with respect to any holder of Common Stock
or Preemptive Rights, the percentage interest of such holder in the aggregate
number of shares of Common Stock that will be outstanding immediately after the
Final Closing.

     General Capital Increase: the meaning given in the third recital of this
Agreement.

     Holder of Record: a Participant or Person registered with CAVALI as an
owner of Current Outstanding Shares on any Record Date.

     Indemnitee: the meaning given in section 8.4 of this Agreement.

     Indemnitor: the meaning given in section 8.4 of this Agreement.

     Liability Threshold Amount: the meaning given in section 8.3(a) of this
Agreement.

     Material Adverse Effect: any change or effect that is materially adverse to
(a) the financial condition, properties, assets, business or results of
operations of Cerro Verde taken as a whole or (b) the ability of Cerro Verde to
achieve Full Completion of the Sulfide Project; provided, that any adverse
change in or effect resulting from (i) regulatory, economic or political
conditions (including acts of war, declared or undeclared, armed hostilities and
terrorism) in Peru having general application and effect on the mining industry
or generally in Peru, (ii) Peruvian or international financial or securities
markets or prevailing interest rates, (iii) international market prices of
copper generally, or (iv) the announcement of this Agreement or any Other
Transaction Document or the consummation of the transactions contemplated in the
Transaction Documents or in the Project Debt Agreements, shall not constitute a
Material Adverse Effect.

                                       5

<PAGE>

     MPDP: Minera Phelps Dodge del Peru S.A.C., a Peruvian sociedad anonima
cerrada.

     New Cerro Verde Estatutos: the meaning given in section 2.1(c)(v) of this
Agreement.

     Operator: Minera Phelps Dodge del Peru S.A.C., Peruvian sociedad anonima
cerrada and an indirect wholly-owned subsidiary of PDC, which shall act as
operator pursuant to the Operator's Agreement, or any entity which shall replace
such corporation as operator pursuant to the terms thereof.

     Operator's Agreement: the meaning given in the fifth recital of this
Agreement.

     Other Transaction Documents: the Shareholders Agreement, the SMM
Concentrate Agreement and the Operator's Agreement.

     Participants: the PD Participant, the Sumitomo Participant, BVN and any
Person which becomes a party to the Shareholders Agreement and a participant in
accordance with the provisions of sections 9 or 10 of the Shareholders
Agreement.

     PDC: Phelps Dodge Corporation, a New York corporation.

     PD Closing Conditions: the meaning given in section 2.1(c)(vii)(E)

     PD Participant: Cyprus Climax Metals Company, a Delaware corporation.

     PD Participant Parents: PDC, CAMC and CMC.

     PD Participant Shortfall: the meaning given in section 2.5(a)(iv) of this
Agreement.

     PD Reallocation Call Options: the meaning given in section 2.5(b)(ii) of
this Agreement.

     PD Reallocation Shares: the meaning given in section 2.5(b)(i) of this
Agreement.

     Person: any individual, corporation, partnership, association, public body,
governmental authority or other entity.

     Per Share Price: U.S.$3.6074 per share of Common Stock.

     Peruvian GAAP: accounting principles generally accepted in the Republic of
Peru.

                                       6

<PAGE>

     Preemptive Right: the meaning given in the fourth recital of this
Agreement.

     Preemptive Right Certificate: the meaning given in the fourth recital of
this Agreement.

     Project Debt Agreements: the definitive agreements providing for
indebtedness for money borrowed or incurred by Cerro Verde to finance the
development and completion of the Sulfide Project and to provide an appropriate
amount of working capital for the operation of the Sulfide Project.

     Qualified Directors: the meaning given in the New Cerro Verde Estatutos.

     Record Date: a date set by Cerro Verde's shareholders at a shareholders
meeting or, upon appropriate delegation of authority, by Cerro Verde's Board of
Directors, in accordance with applicable Peruvian law, to determine which
shareholders will be entitled to the benefit of a specified corporate action.

     Respective Share: with respect to any holder of Common Stock, the
percentage interest of such holder of Common Stock in the aggregate number of
Current Outstanding Shares.

     SC: Sumitomo Corporation, a Japanese corporation.

     Second Round Distribution: the meaning given in section 2.4(a) of this
Agreement.

     Second Round: the meaning given in section 2.4(a) of this Agreement.

     Second Round Preemptive Rights: the meaning given in section 2.4(a) of this
Agreement.

     SGM: Summit Global Management B.V., a Dutch corporation.

     Shareholders Agreement: a shareholders agreement substantially in the form
of Exhibit 3.

     Shareholders Meeting: the meaning given in section 2.1(a) of this
Agreement.

     Six Month LIBOR Rate: the rate per annum equal to (i) the rate per annum
(rounded upward to the nearest whole multiple of 1/32 of 1% per annum) appearing
on Moneyline Telerate Markets Page 3750 (or any successor page) as the London
interbank offered rate for deposits in U.S. dollars at approximately 11:00 A.M.
(London time) on June 28, 2005 for a six-month term, minus (ii) 50 basis points.

     SMM: Sumitomo Metal Mining Co., Ltd., a Japanese corporation.

                                       7

<PAGE>

     SMM Concentrate Agreement: the meaning given in the ninth recital of this
Agreement.

     Special Board Meeting: the meaning given in section 2.1(a) of this
Agreement.

     Special Dividend: an amount, which shall be determined by the Board prior
to the Final Closing Date and, subject to the consummation of the General
Capital Increase on the Final Closing Date, paid on the Final Closing Date to
Holders of Record of Current Outstanding Shares, equal to the sum of (a)
U.S.$45.0 million plus (b) an amount equal to the product of (i) the total
number of pounds of copper cathode produced by Cerro Verde between April 30,
2004 and the Final Closing Date, and (ii) the difference between the average
copper cathode price per pound between April 30, 2004 and the Final Closing Date
and U.S.$0.90 per pound; provided, that in any case, the Special Dividend shall
be reduced by an amount that the Board in its discretion may deem to be required
to ensure that on the Final Closing Date the sum of (x) Cerro Verde's net
working capital, plus (y) costs incurred in connection with the Sulfide Project
that should be classified under generally accepted accounting principles in the
United States as construction in progress, shall be no less than U.S.$40.0
million and in no event shall the aggregate amount of the Special Dividend
exceed the amount of distributable earnings approved by the shareholders of
Cerro Verde in accordance with applicable law.

     Stability Agreement: the meaning given in section 5.1(o) of this Agreement.

     Subsidiary: with respect to any Person (the "Parent"), any other Person
(other than a natural person), whether incorporated or unincorporated, of which
at least a majority of the securities or ownership interests having by their
terms ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions is directly or indirectly owned or
controlled by the Parent or by one or more of its respective Subsidiaries.

     Sulfide Project: the meaning given in the second recital of this Agreement.

     Sumitomo First Round Rights: the meaning given in section 2.3(c)(i) of this
Agreement.

     Sumitomo Participant: SMM Cerro Verde Netherlands B.V., a Dutch
corporation.

     Sumitomo Participant Parents: SGM, SMM and SC.

     Sumitomo Participant Shortfall: the meaning given in section 2.5(a)(iii) of
this Agreement.

     Sumitomo Parties: the meaning given in section 6.9(b) of this Agreement.

                                       8

<PAGE>

     Sumitomo Shares: the Capital Increase Shares that the Sumitomo Participant
has agreed to acquire on the Final Closing Date pursuant to this Agreement.

     Taxes: the meaning given in section 2.1(c)(vii)(E) of this Agreement.

     Third Party Claim Notice: the meaning given in section 8.4(a) of this
Agreement.

     Transaction Documents: This Agreement, the Shareholders Agreement, the SMM
Concentrate Agreement and the Operator's Agreement.

     Unsubscribed Shares: the meaning given in section 2.1(c)(vii)(A) of this
Agreement.

     2. General Capital Increase and Special Dividend.

     2.1. Authorization of General Capital Increase and Special Dividend.

     (a) Promptly, and in any event within two Business Days of the date hereof,
Cerro Verde shall call a special Board meeting (the "Special Board Meeting") to
authorize, and recommend that the shareholders of Cerro Verde approve, the
General Capital Increase and the Special Dividend at the annual or an
extraordinary meeting of shareholders (the "Shareholders Meeting").

     (b) The agenda for the Special Board Meeting shall include all items
necessary or advisable to authorize the General Capital Increase and the Special
Dividend, including without limitation:

          (i) the approval of Cerro Verde financial statements that demonstrate
the existence of an amount of distributable earnings (as defined under Peruvian
law) at least equal to the amount of the then-anticipated Special Dividend and
the approval of a resolution of the Board recommending such financial statements
for approval at the Shareholders Meeting;

          (ii) the approval of a resolution of the Board recommending approval
at the Shareholders Meeting of (x) the General Capital Increase, and (y) the
Special Dividend, including approving plans of distribution and all other terms
and conditions required by Peruvian law;

          (iii) the calling of the Shareholders Meeting; and

          (iv) the authorization of the Managers and other officers of Cerro
Verde to take all other action required by law, or otherwise advisable, with
respect to the Special Dividend, the General Capital Increase and any other
actions contemplated by this section 2.1, including without limitation, making
all notices and disclosure to CONASEV and BVL necessary to effect the General
Capital Increase (including the

                                       9

<PAGE>

distribution of the Preemptive Rights pursuant to section 2.3(a)) and the
Special Dividend.

     (c) Promptly after, and in any event within two Business Days of, the
authorization of the General Capital Increase and the Special Dividend at the
Special Board Meeting, Cerro Verde shall take all action necessary to call the
Shareholders Meeting for the purpose of:

          (i) approving the financial statements recommended by the Board
pursuant to section 2.1(b)(i);

          (ii) affirming the dividend distribution policy approved by the
shareholders on December 12, 2003, a copy of which is attached as Exhibit 1;

          (iii) approving the terms of the General Capital Increase, including
the determination of the Record Date, the procedures for the issuance of
Preemptive Rights and all other terms and conditions required by Peruvian law;

          (iv) approving the Special Dividend, including approving plans of
distribution and all other terms and conditions required by Peruvian law;

          (v) adopting, subject to the consummation of the General Capital
Increase on the Final Closing Date and determination by the Board of the capital
share amounts in Article 6 and the definition of "Closing Date" in Article 1
pursuant to the delegation of authority set forth in (vii)(D) below, the Spanish
version of the amended and restated estatutos substantially in the form of
Exhibit 2 hereto (the "New Cerro Verde Estatutos") in accordance with applicable
Peruvian law;

          (vi) approving the Operator's Agreement; and

          (vii) delegating to the Board the authority to:

               (A)  sell and/or place, in its discretion, any unsubscribed
                    Capital Increase Shares remaining after the conclusion of
                    the Second Round ("Unsubscribed Shares") to any third party,
                    including without limitation, any purchaser of Capital
                    Increase Shares or any holder of Preemptive Rights in
                    accordance with section 2.6 of this Agreement;

               (B)  determine the terms, conditions and procedures for the sale
                    and/or placement of such Unsubscribed Shares in accordance
                    with section 2.6 of this Agreement;

               (C)  determine the procedures for the payment for the Committed
                    Capital Increase Shares and Unsubscribed

                                       10

<PAGE>

                    Shares, including the date of such payment and the issuance
                    of provisional share certificates regarding such Shares;

               (D)  with respect to the New Cerro Verde Estatutos, (i) determine
                    the information necessary to finalize the capital share
                    amounts in Article 6 and the definition of "Closing Date" in
                    Article 1, and (ii) declare the New Cerro Verde Estatutos
                    valid and in full force and effect upon consummation of the
                    General Capital Increase on the Final Closing Date;

               (E)  if, (i) the Sumitomo Participant delivers written notice to
                    the Board on the Final Closing Date in its good faith and
                    reasonable judgment stating that the Capital Increase
                    Closing Conditions have not been satisfied or waived as of
                    such date, (ii) the Board determines on or prior to the
                    Final Closing Date that the conditions set forth in section
                    7.2 hereof (the "PD Closing Conditions") have not been
                    satisfied or waived as of such date, or (iii) unless
                    otherwise agreed by the Sumitomo Participant, the Final
                    Closing shall not have occurred by September 30, 2005,
                    cancel the Special Dividend and the General Capital Increase
                    and cause Cerro Verde to return promptly to each applicable
                    subscriber or purchaser (x) the aggregate Per Share Price in
                    United States dollars, or any other amount of consideration,
                    paid by such subscriber or purchaser to Cerro Verde in
                    connection with the exercise of Preemptive Rights regarding
                    the Capital Increase Shares or the purchase of Unsubscribed
                    Shares, plus (y) interest, calculated at a rate per annum
                    equal to the Six Month LIBOR Rate, on such aggregate Per
                    Share Price for the period commencing on June 30, 2005 and
                    ending on the day before such aggregate Per Share Price is
                    returned; provided that with respect to subscribers and
                    purchasers who otherwise would have acquired a Fully Diluted
                    Respective Share that exceeds five percent, such return
                    shall be made in immediately available funds by wire
                    transfer to an account designated by each applicable
                    subscriber or purchaser, in each case without deduction for
                    any present or future taxes, tax withholding, levies,
                    imposts, duties or similar charges imposed by the Republic
                    of Peru or any local taxing authority therein (collectively,
                    "Taxes"); and

                                       11

<PAGE>

               (F)  determine the amount of the Special Dividend; provided that
                    if (x) the amount of the distributable earnings reflected in
                    the financial statements approved by the Special Board
                    Meeting pursuant to section 2.1(b)(i) and by the
                    Shareholders Meeting pursuant to section 2.1(c)(i) is less
                    than the amount of the Special Dividend; and (y) financial
                    statements of Cerro Verde for periods after the periods
                    covered by the previously approved financial statements (the
                    "Subsequent Financial Statements") reflect additional
                    distributable earnings, the Board shall (1) recommend that
                    the shareholders approve all Subsequent Financial Statements
                    that reflect such additional distributable earnings and (2)
                    call an extraordinary meeting of the shareholders, to be
                    held prior to the Final Closing Date, to approve such
                    Subsequent Financial Statements.

     (d) At the Shareholders Meeting, each of the PD Participant and BVN shall
vote its Current Outstanding Shares in favor of all resolutions necessary to
approve the General Capital Increase, the Special Dividend and all other matters
described in section 2.1(c) above.

     2.2. Conduct of General Capital Increase.

     (a) Promptly upon approval of the General Capital Increase and the Special
Dividend at the Shareholders Meeting, Cerro Verde will prepare and file with
CONASEV and the BVL all disclosure required by Peruvian law regarding the terms
and conditions of the General Capital Increase and the Special Dividend.
Immediately thereafter, Cerro Verde will begin the distribution of the
Preemptive Rights pursuant to section 2.3(a).

     (b) Cerro Verde shall conduct the General Capital Increase in accordance
with all applicable Peruvian laws and regulations, including without limitation
the rules of CONASEV and BVL.

     2.3. Initial Sale and Purchase of Preemptive Rights; First Round.

     (a) After filing the disclosure contemplated by section 2.2(a), Cerro Verde
will commence the General Capital Increase by issuing to each of its Holders of
Record Preemptive Rights in book entry form representing the right to purchase
up to a number of Capital Increase Shares equal to such stockholder's Respective
Share multiplied by the aggregate number of Capital Increase Shares. Such
Preemptive Rights shall be tradable for a period of 15 Business Days from, and
exercisable for a period of 17 Business Days from, but excluding the date of
issuance (such 15 Business Day Period being the "First Round Trading Period" and
such 17 Business Day period being the "First Round").

                                       12

<PAGE>

     (b) Upon commencement of the General Capital Increase, Cerro Verde shall
issue Preemptive Rights regarding 101,250,165 Capital Increase Shares to the PD
Participant and Preemptive Rights regarding 11,250,018 Capital Increase Shares
to BVN, and Preemptive Rights regarding, in the aggregate, 10,246,730 Capital
Increase Shares to all other Holders of Record.

     (c)  (i) Promptly after receipt of the Preemptive Rights contemplated in
section 2.3(b), and at any date and time selected by the PD Participant prior to
the end of the First Round Trading Period, the PD Participant shall
simultaneously (1) assign and transfer directly to the Sumitomo Participant
through a stock broker selected by the PD Participant, which is currently
expected to be Credibolsa Sociedad Agente de Bolsa S.A., and the Sumitomo
Participant shall acquire from the PD Participant directly through such stock
broker, 73,511,763 Preemptive Rights (the "Sumitomo First Round Rights") and (2)
assign and transfer directly to BVN through a stock broker selected by the PD
Participant, which is currently expected to be Credibolsa Sociedad Agente de
Bolsa S.A., and BVN shall acquire from the PD Participant directly through such
stock broker, 27,738,402 Preemptive Rights (such Preemptive Rights, together
with Preemptive Rights regarding the 11,250,018 Capital Increase Shares BVN
receives directly from Cerro Verde pursuant to the transaction contemplated in
section 2.3(b), the "BVN First Round Rights").

          (ii) The PD Participant shall be solely responsible for paying any
taxes, broker fees or commissions incurred in connection with the assignments
and transfers referred to in clause (i) above.

     (d) Immediately prior to the end of the First Round, BVN shall exercise the
BVN First Round Rights and, if the Closing Conditions have been satisfied or
waived by the Sumitomo Participant, the Sumitomo Participant shall exercise the
Sumitomo First Round Rights, in accordance with the terms of the Preemptive
Rights, pursuant to which the Sumitomo Participant and BVN each shall pay to
Cerro Verde the Per Share Price for each Committed Capital Increase Share
issuable upon exercise of the Sumitomo First Round Rights and the BVN First
Round Rights, respectively, in immediately available funds by wire transfer to
an account designated by Cerro Verde.

     (e) Except as contemplated in this section 2.3, (i) neither the PD
Participant nor the Sumitomo Participant shall, directly or indirectly, sell,
transfer, assign, acquire or exercise any Current Outstanding Shares or
Preemptive Rights during the First Round; and (ii) BVN shall not, directly or
indirectly, sell, transfer, assign or acquire any Current Outstanding Shares, or
acquire or exercise Preemptive Rights to the extent that it would result in it
acquiring, or having the opportunity to acquire through the exercise of
Preemptive Rights, a Fully Diluted Respective Share of greater than 20.1%,
during the First Round.

                                       13

<PAGE>

     2.4. Second Round.

     (a) After the conclusion of the First Round, Cerro Verde shall, in
accordance with applicable Peruvian law, recognize preemptive rights to
subscribe for a pro-rata portion of the Capital Increase Shares that were not
subscribed for during the First Round (the "Second Round Preemptive Rights") and
distribute such Second Round Preemptive Rights to each Person that exercised
Preemptive Rights during the First Round on a pro-rata basis determined in
accordance with Peruvian law. Such Second Round Preemptive Rights shall be
tradable for a period of three calendar days from, and exercisable for a period
of four calendar days from, but excluding the date of issuance (such four
calendar day period being the "Second Round").

     (b) Second Round Preemptive Rights may be exercised on or prior to the end
of the Second Round in accordance with the terms of the Second Round Preemptive
Rights. Without limiting the generality of the foregoing, holders of Second
Round Preemptive Rights shall pay to Cerro Verde the Per Share Price for each
Committed Capital Increase Share issuable upon exercise of their respective
Second Round Preemptive Rights in immediately available funds by wire transfer
to an account designated by Cerro Verde.

     (c) Neither the PD Participant nor the Sumitomo Participant shall, directly
or indirectly, sell, transfer, assign, acquire or exercise any Current
Outstanding Shares or Preemptive Rights during the Second Round. BVN shall not,
directly or indirectly, sell, transfer, assign or acquire any Current
Outstanding Shares, or acquire or exercise Preemptive Rights to the extent that
it would result in it acquiring, or having the opportunity to acquire through
the exercise of Preemptive Rights, a Fully Diluted Respective Share of greater
than 20.1%, during the Second Round.

     2.5. Reallocation of Capital Increase Shares.

     (a) Promptly after the conclusion of each of the Second Round and, with
respect to clauses (ii) and (iv) below, the Final Allocation, Cerro Verde shall
determine whether, based upon the actual exercise of Preemptive Rights in the
General Capital Increase and assuming that all Committed Capital Increase Shares
will be fully paid on the Final Closing Date:

          (i) BVN would have a Fully Diluted Respective Share of less than 20.1%
(the number of Capital Increase Shares accounting for such shortfall are
referred to as the "BVN Shortfall");

          (ii) the Sumitomo Participant would have a Fully Diluted Respective
Share that exceeds 24.99% (the number of Capital Increase Shares accounting for
such excess are referred to as the "Excess Sumitomo Participant Shares");

                                       14

<PAGE>

          (iii) the Sumitomo Participant would have a Fully Diluted Respective
Share of less than 24.99% (the number of Capital Increase Shares accounting for
such shortfall are referred to as the "Sumitomo Participant Shortfall"); and

          (iv) the PD Participant would have a Fully Diluted Respective Share of
less than 53.56% (a "PD Participant Shortfall").

     (b)  (i) If Cerro Verde determines pursuant to section 2.5(a) that a PD
Participant Shortfall exists, it shall immediately notify BVN, the PD
Participant and the Sumitomo Participant of such determination and the number of
Committed Capital Increase Shares BVN and the Sumitomo Participant shall be
required to sell to the PD Participant to cure such Shortfall (the "PD
Reallocation Shares"); provided, that the PD Participant shall be solely
responsible for paying any taxes, broker fees or commissions incurred in
connection with such sale.

          (ii) Each of BVN and the Sumitomo Participant hereby grant to the PD
Participant an option to purchase such PD Reallocation Shares, if any, on the
Final Closing Date at a price per share equal to the Per Share Price (the "PD
Reallocation Call Options"). The PD Reallocation Call Options shall be
registered in the Cerro Verde share registry. Upon receipt of the notice
contemplated in section 2.5(b)(i), the PD Participant may exercise each PD
Reallocation Call Option by delivering written requests (the "Call Exercise
Notices") to BVN and the Sumitomo Participant exercising the PD Reallocation
Call Options.

          (iii) On the Final Closing Date, immediately after the consummation of
the Final Closing and receipt of a Call Exercise Notice, BVN and the Sumitomo
Participant shall sell to the PD Participant, at the Per Share Price and in the
manner specified in the Call Exercise Notice, the applicable number of PD
Reallocation Shares set forth in the applicable Call Exercise Notice. If the PD
Participant would have a Fully Diluted Respective Share of less than 50%, BVN,
the Sumitomo Participant and the PD Participant will cooperate and use their
best efforts to obtain an express exemption from CONASEV from the obligation to
complete such sale through a public tender offer procedure (Oferta Publica de
Adquisicion - OPA). Should CONASEV require the PD Participant to acquire such PD
Reallocation Shares through such public tender offer procedure, BVN and the
Sumitomo Participant agree to (i) participate in such public tender offer
launched by the PD Participant; (ii) tender the applicable, and not more than
the applicable, number of PD Reallocation Shares set forth in the applicable
Call Exercise Notice; and (iii) refrain from tendering any other shares in
addition to the number of PD Reallocation Shares set forth in the applicable
Call Exercise Notice.

          (iv) the PD Participant shall indemnify and hold harmless each of the
Sumitomo Participant and BVN, from and against any tax incurred or paid by the
Sumitomo Participant or BVN, as the case may be, in connection with the sale of
the PD Reallocation Shares.

                                       15

<PAGE>

     (c) If, after consummation of the transaction contemplated in section
2.5(b) above, the Sumitomo Participant would continue to hold any Excess
Sumitomo Participant Shares, or if Cerro Verde determines pursuant to section
2.5(a) that the Sumitomo Participant would hold Excess Sumitomo Participant
Shares immediately after the consummation of the Final Closing, the Sumitomo
Participant shall sell on the BVL such Excess Sumitomo Participant Shares on the
Final Closing Date immediately after the consummation of the Final Closing.

     (d) BVN, the PD Participant, and the Sumitomo Participant shall cooperate
in all respects with the transactions described in this section 2.5. Each party
hereto shall execute and deliver such certificates and other documents as may be
reasonably requested by the other parties in order to consummate or implement
the transactions contemplated in this section 2.5.

     2.6. Final Allocation. If, after the conclusion of the Second Round, Cerro
Verde determines (i) pursuant to section 2.5(a) that there would be a BVN
Shortfall and/or a Sumitomo Participant Shortfall and (ii) that there are
Unsubscribed Shares, upon the approval of the Board, Cerro Verde shall, to the
extent available and on terms and conditions determined by the Board take the
following action on the Final Closing Date:

     (a) offer to BVN at the Per Share Price, a number of Unsubscribed Shares
such that, if BVN purchased such Unsubscribed Shares, BVN would have a Fully
Diluted Respective Share of not greater than 20.1%;

     (b) if BVN fails to purchase 100% of such Unsubscribed Shares after the
offer contemplated in section 2.6(a), offer to the Sumitomo Participant at the
Per Share Price, and the Sumitomo Participant shall, if the Closing Conditions
have been satisfied or waived by the Sumitomo Participant, purchase a number of
Unsubscribed Shares such that, if the Sumitomo Participant purchased such
Unsubscribed Shares, the Sumitomo Participant would have a Fully Diluted
Respective Share of not greater than 24.99%; and

     (c) if any Unsubscribed Shares remain unsold after the transactions
contemplated in sections 2.6(a) and (b) above, offer to the PD Participant at
the Per Share Price such remaining Unsubscribed Shares (the actions in clauses
(a), (b) and (c) are the "Final Allocation").

If any Unsubscribed Shares remain outstanding after the Final Allocation, Cerro
Verde may in its discretion, offer to one or more third parties, any remaining
Unsubscribed Shares on terms and conditions determined by the Board.

     3.   Actions at the First and Final Closings.

     3.1. Actions at the First Closing. The following transactions shall take
place at the offices of Rodrigo, Elias & Medrano, Av. San Felipe 758, Lima, Peru
on the date (the

                                       16

<PAGE>

"First Closing Date") that the Sumitomo Participant exercises the Sumitomo First
Round Rights (the "First Closing"):

     (a) The Sumitomo Participant shall pay to Cerro Verde, in immediately
available funds by wire transfer, the Per Share Price with respect to the
Sumitomo First Round Rights, as required by the terms of the Preemptive Right
Certificates; and

     (b) BVN shall pay to Cerro Verde, in immediately available funds by wire
transfer, the Per Share Price with respect to the BVN First Round Rights, as
required by the terms of the Preemptive Right Certificates.

     3.2. Actions at or Prior to the Final Closing. On the date determined by
the Board acting pursuant to the delegation of authority contemplated in section
2.1(c)(vii) or, in the absence of such delegation, the shareholders of Cerro
Verde in accordance with applicable Peruvian law (the "Final Closing Date"), (i)
the Sumitomo Participant shall (x) determine in its good faith and reasonable
judgment whether the Capital Increase Closing Conditions have been satisfied or
waived and (y) evidence such determination by delivering a written notice to the
Board as of such date and (ii) the Board shall determine on or prior to the
Final Closing Date whether the PD Closing Conditions have been satisfied or
waived as of such date. If (A) the Sumitomo Participant determines in its good
faith and reasonable judgment that the Capital Increase Closing Conditions have
been satisfied or waived as of such date and (B) the Board determines that the
PD Closing Conditions have been satisfied or waived as of such date, the General
Capital Increase shall be consummated and the following transactions shall take
place at the offices of Rodrigo, Elias & Medrano, Av. San Felipe 758, Lima, Peru
(the "Final Closing"):

     (a) the Board, acting by unanimous written consent or at a duly convened
special meeting, shall (i) declare the exact number of Capital Increase Shares
to be issued in the General Capital Increase; (ii) authorize the issuance of
provisional stock certificates for Capital Increase Shares that have been
properly subscribed for in accordance with the terms of the Preemptive Rights;
(iii) authorize the payment of the Special Dividend (iv) finalize the New Cerro
Verde Estatutos, including the capital share amounts in Article 6 and the
definition of "Closing Date" in Article 1 on the Final Closing Date; and (v)
declare the New Cerro Verde Estatutos, as so finalized, valid and in full force
and effect;

     (b) The Sumitomo Participant shall pay to Cerro Verde the balance of the
aggregate purchase price due, if any, of the applicable number of Committed
Capital Increase Shares subscribed for by the Sumitomo Participant in the First
Round; and Cerro Verde shall issue to the Sumitomo Participant provisional stock
certificates for the applicable number of Committed Capital Increase Shares
properly subscribed for by the Sumitomo Participant in accordance with the terms
of the Preemptive Rights and the procedures applicable to all participants in
the General Capital Increase determined by

                                       17

<PAGE>

the Board acting pursuant to the delegation of authority contemplated in section
2.1(c)(vii) (or in the absence of such delegation, the shareholders of Cerro
Verde in accordance with applicable Peruvian law);

     (c) BVN shall pay to Cerro Verde the balance of the aggregate purchase
price due, if any, of the applicable number of Committed Capital Increase Shares
subscribed for by BVN in the First Round and the Second Round, and Cerro Verde
shall issue to BVN provisional stock certificates for the applicable number of
Committed Capital Increase Shares properly subscribed for by BVN in accordance
with the terms of the Preemptive Rights and the procedures applicable to all
participants in the General Capital Increase determined by the Board acting
pursuant to the delegation of authority contemplated in section 2.1(c)(vi) (or
in the absence of such delegation, the shareholders of Cerro Verde in accordance
with applicable Peruvian law);

     (d) In addition, after consummation of the transactions contemplated in
clauses (a)-(c) above, if applicable, the parties shall consummate the
transactions contemplated in section 2.5 and section 2.6.

     4.   Cost.

     4.1. Expenses Incurred in Connection with the Preparation of the
Transaction Documents. Each party hereto shall assume and bear all expenses,
costs and fees incurred or assumed by such party or any of its Affiliates in the
preparation and execution of the Transaction Documents, whether or not the
transactions contemplated hereby or thereby are consummated.

     5.   Representations.

     5.1. Representations Regarding Cerro Verde. Cerro Verde, the PD Participant
and the PD Participant Parents hereby represent and warrant to each of BVN, SMM,
SC, SGM and the Sumitomo Participant as follows:

     (a) Organization, Authority, Binding Effect. Cerro Verde is a sociedad
anonima abierta duly incorporated, validly existing and in good standing under
the laws of the Republic of Peru. Cerro Verde has the corporate power and
authority to enter into and perform this Agreement and each of the Other
Transaction Documents and to carry out the transactions contemplated hereby and
thereby; the execution and delivery of this Agreement and each of the Other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been or will have been duly authorized by all necessary
corporate action on the part of Cerro Verde; this Agreement has been, and on the
Final Closing Date each of the Other Transaction Documents will have been, duly
executed and delivered by a duly authorized officer of Cerro Verde; and this
Agreement constitutes, and on the Final Closing Date each of the Other
Transaction Documents will constitute, the valid, legal and binding obligation
of Cerro Verde, in each

                                       18

<PAGE>

case enforceable in accordance with their respective terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights and remedies of
creditors or parties to executory contracts generally and by equitable
principles of general applicability.

     (b) Capitalization. (i) At the date hereof, the authorized, issued and
outstanding capital stock of Cerro Verde consists solely of 227,309,099 duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock.
Immediately prior to the consummation of the transactions contemplated by
section 2, the PD Participant will have the legal right and authority to
transfer its preemptive rights to the Sumitomo Participant and BVN as
contemplated by this Agreement. Upon (x) compliance by the Sumitomo Participant
with all of its obligations under this Agreement and Peruvian law regarding the
General Capital Increase, (y) consummation of the General Capital Increase and
the delivery of the Sumitomo Shares to the Sumitomo Participant and (z) receipt
by Cerro Verde of payment therefor, good and valid title to the Sumitomo Shares,
free and clear of any and all liens, claims, restrictions, encumbrances,
security interests or options (other than any created by the Sumitomo
Participant or contemplated by the Shareholders Agreement) shall pass to the
Sumitomo Participant. Upon (x) compliance by BVN with all of its obligations
under this Agreement and Peruvian law regarding the General Capital Increase,
(y) consummation of the General Capital Increase and the delivery of the BVN
Shares to BVN and (z) receipt by Cerro Verde of payment therefor, good and valid
title to the BVN Shares, free and clear of any and all liens, claims,
restrictions, encumbrances, security interests or options (other than any
created by BVN) or contemplated by the Shareholders Agreement shall pass to BVN.

          (ii) As of the Final Closing Date, (A) the authorized capital stock of
Cerro Verde will be 350,056,012 shares of Common Stock and the issued and
outstanding capital stock of Cerro Verde will not exceed 350,056,012 duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
(B) except as contemplated by Peruvian law, the Shareholders Agreement or the
Project Debt Agreements, there will not be any shares of capital stock or other
securities of Cerro Verde subject to any outstanding subscriptions, options,
warrants, calls, rights, convertible securities or other agreements or other
instruments outstanding or in effect giving any Person the right to acquire from
Cerro Verde any shares of capital stock or other securities of Cerro Verde and
(C) Cerro Verde will not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the shareholders of
Cerro Verde on any matter.

     (c) Compliance with Other Instruments and Laws.

          (i) Neither the execution and delivery of this Agreement, or any of
the Other Transaction Documents nor the consummation of the transactions
contemplated hereby or thereby will result in any violation of or be in conflict
with, constitute a default

                                       19

<PAGE>

under, or result in the creation of any lien, charge or encumbrance upon any
property of Cerro Verde pursuant to any provision of the organizational
documents of Cerro Verde, or any agreement (other than a Project Debt
Agreement), instrument, judgment, decree, order, law or regulation applicable to
Cerro Verde or any of its properties, except where such violation, conflict,
default or lien, charge or encumbrance, in any case or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect or materially
impair the consummation of the transactions contemplated by the Transaction
Documents.

          (ii) As of the date hereof, except as disclosed in Schedule
5.1(c)(ii), Cerro Verde is, and has been since March 16, 2003, in material
compliance with all such provisions, agreements, instruments, judgments,
decrees, orders, laws or regulations applicable to Cerro Verde or any of its
properties, except to the extent that such lack of compliance, in any case or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect or materially impair the consummation of the transactions contemplated by
the Transaction Documents.

          (iii) Except as disclosed in Schedule 5.1(c)(iii) or as would not, in
any case or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, (i) Cerro Verde has obtained, and is, and has been since March
16, 2003, in compliance with all of the terms and requirements of, each
governmental authorization, permit and license material to the conduct or
operation of Cerro Verde's business in the manner in which it is presently
conducted, ownership or use of any of its assets (including its mining and
beneficiation concessions) or necessary to achieve Full Completion of the
Sulfide Project and (ii) all such authorizations, permits and licenses are in
full force and effect.

     (d) Environmental Matters. Except as disclosed in Schedule 5.1(d) or as
would not, in any case or in the aggregate, reasonably be expected to result in
a Material Adverse Effect, Cerro Verde is, and has been March 16, 2003, in
material compliance with all applicable laws and regulations relating to the
protection of the environment and hazardous or toxic substances.

     (e) Taxes. Except as disclosed in Schedule 5.1(e) or as reflected or
reserved against in the Financial Statements, Cerro Verde has filed or caused to
be filed all tax returns required to be filed by it, and has paid all taxes
shown to be due and payable on such returns, or on any assessments made against
it or any of its properties by written notice, and all other taxes, assessments,
fees, liabilities or other charges imposed on it or on its properties by
applicable laws or regulations, except where such failure to file or pay, in any
case or in the aggregate, would not reasonably be expected to result in a
Material Adverse Effect.

     (f) Labor Matters. Except as disclosed in Schedule 5.1(f), Cerro Verde (i)
is, and has been since March 16, 2003, in material compliance with all
applicable laws and

                                       20

<PAGE>

regulations relating to labor, industrial relations and the employment of its
employees, except for any failure to comply that would not, in any case or in
the aggregate, reasonably be expected to result in a Material Adverse Effect and
(ii) has no knowledge of any pending or existing labor dispute that would
reasonably be expected to result in a Material Adverse Effect.

     (g) Legal Proceedings.

          (i) There is no action, suit, proceeding or investigation, at law or
in equity, or before any governmental authority or other Person, pending or, to
the best knowledge of the PD Participant, the PD Participant Parents and Cerro
Verde, threatened, against Cerro Verde or its assets that (x) questions the
validity of any of the Transaction Documents or any action taken or to be taken
pursuant hereto or thereto, or (y) in any case or in the aggregate would
reasonably be expected to result in a Material Adverse Effect.

          (ii) Except as set forth on Schedule 5.1(g)(ii), (x) as of December
31, 2004 and the Final Closing Date, there were no actions, suits, proceedings
or investigations, at law or in equity, or before any governmental authority or
other Person, pending or, to the best knowledge of the PD Participant, the PD
Participant Parents and Cerro Verde, overtly threatened, in which Cerro Verde's
claim to its mining concessions is or would be challenged, (y) as of December
31, 2004 and the Final Closing Date, there were no actions, suits or
proceedings, at law or in equity, initiated by Cerro Verde relating to its
mining concessions, and (z) as of December 31, 2004 and the Final Closing Date,
to the best knowledge of the PD Participant, the PD Participant Parents and
Cerro Verde, there were no competing, existing claims to such mining concessions
reported in El Peruano within the twelve month period immediately preceding the
date of this Agreement or registered in the Book of Mining Rights of the Public
Records Office, except in each case for any such actions, suits, proceedings,
investigations or competing existing claims, that, in any case or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect.

     (h) Consents, etc. Except in connection with the General Capital Increase
and the Special Dividend, neither the execution or delivery by Cerro Verde of
this Agreement or any of the Other Transaction Documents nor the consummation by
Cerro Verde of the transactions provided for hereby or thereby is subject to any
requirement that Cerro Verde obtain any consent, approval or authorization of,
or make any declaration or filing with, any governmental authority or third
party which, in any case or in the aggregate, if not obtained or made, would
reasonably be expected to result in a Material Adverse Effect, render such
execution, delivery or consummation illegal, or materially impair the
consummation of such transactions.

     (i) Financial Statements. Attached as Schedule 5.1(i) to this Agreement are
the audited financial statements for the twelve months ended December 31, 2003
and

                                       21

<PAGE>

2004 of Cerro Verde (the "Financial Statements"). The Financial Statements
fairly present in all material respects, the financial condition of Cerro Verde
and the results of operations and changes in financial position as of that date
and for the twelve-month periods ended December 31, 2003 and 2004 and have been
prepared according to Peruvian GAAP, consistently applied throughout the periods
reported on therein. There are no material off-balance sheet transactions,
arrangements, obligations or relationships attributable to Cerro Verde's
business or to which Cerro Verde is a party that would reasonably be expected to
result in a Material Adverse Effect.

     (j) No Broker. No broker, finder, agent or other intermediary has been
engaged by Cerro Verde in connection with the negotiation of any of the
Transaction Documents or the consummation of the transactions contemplated by
sections 2 and 3 hereof.

     (k) Absence of Undisclosed Liabilities. Cerro Verde has not incurred any
liabilities or obligations that would be required to be reflected or reserved
against in a balance sheet prepared in accordance with Peruvian GAAP in a manner
consistent with the Financial Statements except for (i) liabilities or
obligations reflected or reserved against in the Financial Statements or (ii)
liabilities, including liabilities incurred in the ordinary course of business
since December 31, 2004, that in any case or in the aggregate would not
reasonably be expected to result in a Material Adverse Effect.

     (l) Absence of Certain Changes and Events. Except as set forth in Schedule
5.1(l) or as contemplated by this Agreement, the Feasibility Study or the
Project Debt Agreements, since December 31, 2004, (x) Cerro Verde has conducted
its business in the ordinary course and has not suffered any Material Adverse
Effect, and (y) to the best knowledge of the PD Participant, the PD Participant
Parents and Cerro Verde, no event or condition is threatened that, individually
or in the aggregate, has had or would reasonably be expected to have, a Material
Adverse Effect.

     (m) Title to Assets, Mining and Beneficiation Concessions and Other Rights.
Except as set forth in Schedule 5.1(m) or the Feasibility Study or as would not,
in any case or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, Cerro Verde has full and sufficient rights to use the tangible
personal property, mining and beneficiation concessions, water rights and
surface lands necessary for the operation of the business of Cerro Verde as
currently conducted and, with respect to the Sulfide Project, as anticipated by
the Feasibility Study to be conducted. Except as would not, in any case or in
the aggregate, reasonably be expected to result in a Material Adverse Effect, or
as disclosed in the Feasibility Study, any real property owned by Cerro Verde is
currently served by all easements, rights of way and utilities services that are
necessary for the operation of the business of the Cerro Verde as currently
conducted thereon and with respect to the Sulfide Project, anticipated to be
conducted by the Feasibility Study.

                                       22

<PAGE>

     (n) Related Party Transactions and Commitments. Schedule 5.1(n) sets forth
a true, complete and correct list as of December 31, 2004 of all related party
transactions, contracts and commitments between Cerro Verde and its Affiliates
involving continuing liabilities and obligations in excess of U.S.$50,000 per
year, including an indication of which transactions, contracts and commitments
will continue following the Final Closing.

     5.2. Representations Regarding PDC. PDC hereby represents and warrants to
each of BVN, SMM, SC, SGM and the Sumitomo Participant as follows:

     (a) Organization, Authority, Binding Effect. PDC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. PDC has the corporate power and authority to enter into and perform
this Agreement and the Shareholders Agreement and to carry out the transactions
contemplated hereby and thereby; prior to the First Closing Date, upon
ratification by the PDC Board of Directors of the authorization of this
Agreement and the Shareholders Agreement by the Executive Committee of the PDC
Board of Directors, the execution and delivery of this Agreement and the
Shareholders Agreement and the consummation of the transactions contemplated
hereby and thereby shall have been duly authorized by all necessary corporate
action on the part of PDC; this Agreement has been, and on the Final Closing
Date the Shareholders Agreement will have been, duly executed and delivered by a
duly authorized officer of PDC; and this Agreement constitutes, and on the Final
Closing Date the Shareholders Agreement will constitute, the valid, legal and
binding obligation of PDC, in each case enforceable in accordance with their
respective terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors or parties to executory contracts generally
and by equitable principles of general applicability.

     (b) Compliance with Other Instruments and Laws. Neither the execution and
delivery by PDC of this Agreement or the Shareholders Agreement nor the
consummation of the transactions contemplated hereby or thereby will result in
any violation of or be in conflict with, constitute a default under, or result
in the creation of any lien, charge or encumbrance upon any property of PDC
pursuant to any provision of the PDC Certificate of Incorporation or By-Laws, or
any agreement (other than a Project Debt Agreement), instrument, judgment,
decree, order, law or regulation applicable to PDC or any of its properties,
except where such violation, conflict, default or lien, charge or encumbrance,
in any case or in the aggregate, would not reasonably be expected to result in a
Material Adverse Effect or materially impair the consummation of the
transactions contemplated by this Agreement or the Shareholders Agreement.

     (c) Legal Proceedings. There is no action, suit, proceeding or
investigation, at law or in equity, or before any governmental authority or
other Person, pending or, to the best knowledge of PDC, threatened, against PDC
or its assets that questions the validity of this Agreement or the Shareholders
Agreement, or any action taken or to be taken

                                       23

<PAGE>

pursuant hereto or that otherwise would reasonably be expected to result in a
material adverse effect on the ability of PDC to perform its obligations under
this Agreement or the Shareholders Agreement.

     (d) Consents, etc. Except in connection with the General Capital Increase
or the Special Dividend, neither the execution or delivery by PDC of this
Agreement or the Shareholders Agreement nor the consummation by PDC of the
transactions provided for hereby or thereby is subject to any requirement that
PDC obtain any consent, approval or authorization of, or make any declaration or
filing with, any governmental authority or third party which, in any case or in
the aggregate, if not obtained or made, would reasonably be expected to result
in a Material Adverse Effect, render such execution, delivery or consummation
illegal, or materially impair the consummation of such transactions.

     (e) Ownership of the PD Participant and Cerro Verde. At the date of this
Agreement, (i) PDC is the record and beneficial owner of all of the outstanding
shares of capital stock of CAMC, (ii) CAMC is the record and beneficial owner of
all of the outstanding shares of capital stock of CMC (iii) CMC is the record
and beneficial owner of all of the outstanding shares of capital stock of the PD
Participant, (iv) the PD Participant is the record and beneficial owner of
approximately 82.5% of the Current Outstanding Shares and (v) except as
contemplated in the Transaction Documents, there are not outstanding any
subscriptions, options, warrants, conversion rights or other agreements or
commitments of any kind directly or indirectly obligating Cerro Verde to issue
or sell any shares of Common Stock or any securities convertible into or
exchangeable for any such shares.

     (f) No Broker. Other than Apoyo Consultoria S.A.C., whose fees will be paid
by PDC, no broker, finder, agent or other intermediary has been engaged by PDC
in connection with the negotiation of this Agreement or the consummation of the
transactions contemplated by sections 2 and 3 hereof.

     5.3. Representations Regarding the PD Participant. The PD Participant
Parents and the PD Participant each hereby represents and warrants to each of
BVN, SMM, SC, SGM and the Sumitomo Participant as follows:

     (a) Organization, Authority, Binding Effect. The PD Participant is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of Delaware. The PD Participant has the corporate power and
authority to enter into and perform this Agreement and the Shareholders
Agreement and to carry out the transactions contemplated hereby and thereby; the
execution and delivery of this Agreement and the Shareholders Agreement and the
consummation of the transactions contemplated hereby and thereby have been or
will have been duly authorized by all necessary corporate action on the part of
the PD Participant; this Agreement has been, and on the Final Closing Date the
Shareholders Agreement will have been, duly executed

                                       24

<PAGE>

and delivered by a duly authorized officer of the PD Participant; this Agreement
constitutes, and on the Final Closing Date, the Shareholders Agreement will
constitute, the valid, legal and binding obligation of the PD Participant, in
each case enforceable in accordance with their respective terms, except that
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights and remedies of
creditors or parties to executory contracts generally and by equitable
principles of general applicability.

     (b) Compliance with Other Instruments and Laws. Neither the execution or
delivery by the PD Participant of this Agreement or the Shareholders Agreement
nor the consummation of the transactions contemplated hereby or thereby will
result in any violation of or be in conflict with, constitute a default under,
or result in the creation of any lien, charge or encumbrance, upon any property
of the PD Participant pursuant to, any provision of the Certificate of
Incorporation or By-Laws of the PD Participant, or any agreement (other than a
Project Debt Agreement), instrument, judgment, decree, order, law or regulation
applicable to the PD Participant or any of its properties, except where such
violation, conflict, default or lien, charge or encumbrance, in any case or the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect or materially impair the consummation of the transactions contemplated by
this Agreement or the Shareholders Agreement.

     (c) Legal Proceedings. There is no action, suit, proceeding or
investigation, at law or in equity, or before any governmental authority or
other Person, pending or, to the best knowledge of the PD Participant,
threatened, against the PD Participant or its assets that questions the validity
of this Agreement or the Shareholders Agreement or any action taken or to be
taken pursuant hereto or thereto or that otherwise would reasonably be expected
to result in a material adverse effect on the ability of the PD Participant to
perform its obligations under this Agreement or the Shareholders Agreement.

     (d) Consents, etc. Except in connection with the General Capital Increase
or the Special Dividend, neither the execution or delivery by the PD Participant
of this Agreement or the Shareholders Agreement nor the consummation by the PD
Participant of the transactions provided for hereby or thereby is subject to any
requirement that the PD Participant obtain any consent, approval or
authorization of, or make any declaration or filing with, any governmental
authority or third party which, in any case or in the aggregate, if not obtained
or made, would reasonably be expected to result in a Material Adverse Effect,
render such execution, delivery or consummation illegal, or materially impair
the consummation of such transactions.

     (e) No Broker. Other than Credibolsa Sociedad Agente de Bolsa S.A. whose
fees will be paid by the PD Participant, no broker, finder, agent or other
intermediary has been engaged by the PD Participant in connection with the
negotiation of this Agreement or the Shareholders Agreement or the consummation
of the transactions contemplated by sections 2 or 3 hereof.

                                       25

<PAGE>

     5.4. Representations Regarding SC and SMM. SC and SMM each hereby
represents and warrants to each of BVN, PDC, CAMC, CMC, the PD Participant and
Cerro Verde as follows:

     (a) Organization, Authority, Binding Effect. SC and SMM each is a
corporation duly incorporated, validly existing and in good standing under the
laws of Japan. SC and SMM each has the corporate power and authority to enter
into and perform this Agreement, the Shareholders Agreement and, in the case of
SMM, the SMM Concentrate Agreement and to carry out the transactions
contemplated hereby; the execution and delivery of this Agreement, the
Shareholders Agreement and, in the case of SMM, the SMM Concentrate Agreement
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of SC and
SMM, as applicable; this Agreement has been, and on the Final Closing Date the
Shareholders Agreement and the SMM Concentrate Agreement will have been, duly
executed and delivered by duly authorized officers of each of SC and SMM; and
this Agreement constitutes, and on the Final Closing Date the Shareholders
Agreement and the SMM Concentrate Agreement will constitute, the valid, legal
and binding obligation of SC and SMM, respectively, in each case enforceable in
accordance with their respective terms, except that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the rights and remedies of creditors or parties to
executory contracts generally and by equitable principles of general
applicability.

     (b) Compliance with Other Instruments and Laws. Neither the execution and
delivery by SC or SMM of this Agreement, the Shareholders Agreement or, in the
case of SMM, the SMM Concentrate Agreement, nor the consummation of the
transactions contemplated hereby or thereby will result in any violation of or
be in conflict with, constitute a default under, or result in the creation of
any lien, charge or encumbrance upon any property of either SC or SMM pursuant
to any provision of their respective organizational documents, or any agreement
(other than a Project Debt Agreement), instrument, judgment, decree, order, law
or regulation applicable to SC or SMM or any of their respective properties,
except where such violation, conflict, default or lien, charge or encumbrance,
in any case or in the aggregate, would not reasonably be expected to result in a
Material Adverse Effect or materially impair the consummation of the
transactions contemplated by this Agreement, the Shareholders Agreement or the
SMM Concentrate Agreement.

     (c) Legal Proceedings. There is no action, suit, proceeding or
investigation, at law or in equity, or before any governmental authority or
other Person, pending or, to the best knowledge of SC and SMM, threatened,
against SC or SMM or any of their respective assets that questions the validity
of this Agreement, the Shareholders Agreement or the SMM Concentrate Agreement
or any action taken or to be taken pursuant hereto or thereto or that otherwise
would reasonably be expected to result in a

                                       26

<PAGE>

material adverse effect on the ability of SC or SMM to perform their obligations
under this Agreement, the Shareholders Agreement or the SMM Concentrate
Agreement.

     (d) Consents, etc. Neither the execution or delivery by SC or SMM of this
Agreement, the Shareholders Agreement or, in the case of SMM, the SMM
Concentrate Agreement, nor the consummation by SC or SMM of the transactions
provided for hereby or thereby is subject to any requirement that SC or SMM
obtain any consent, approval or authorization of, or make any declaration or
filing with, any governmental authority or third party which, in any case or in
the aggregate, if not obtained or made, would reasonably be expected to result
in a Material Adverse Effect, render such execution, delivery or consummation
illegal, or materially impair the consummation of such transactions.

     (e) Ownership of SGM and the Sumitomo Participant. SC is the record and
beneficial owner of all of the outstanding shares of capital stock of SGM. As of
the First Closing Date, SGM will be the record and beneficial owner of 20% of
the outstanding shares of capital stock of the Sumitomo Participant and SMM will
be the record and beneficial owner of 80% of the outstanding shares of capital
stock of the Sumitomo Participant. There are not outstanding any subscriptions,
options, warrants, conversion rights or other agreements or commitments of any
kind directly or indirectly obligating SGM or the Sumitomo Participant to issue
or sell any shares of their respective capital stock or any securities
convertible into or exchangeable for any such shares.

     (f) No Broker. No broker, finder, agent or other intermediary has been
engaged by SC or SMM in connection with the negotiation of this Agreement or the
other agreements contemplated hereby or the consummation of the transactions
contemplated by sections 2 and 3 hereof.

     5.5. Representations Regarding SGM and the Sumitomo Participant. Each of
the Sumitomo Participant Parents hereby represents and warrants to each of BVN,
PDC, CAMC, CMC, the PD Participant and Cerro Verde as follows:

     (a) Organization, Authority, Binding Effect. SGM and the Sumitomo
Participant each is a corporation duly incorporated, validly existing and in
good standing under the laws of the Netherlands. SGM and the Sumitomo
Participant each has the corporate power and authority to enter into and perform
this Agreement and the Shareholders Agreement, and to carry out the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Shareholders Agreement, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of SGM and the Sumitomo Participant; this Agreement
has been, and on the Final Closing Date the Shareholders Agreement will have
been, duly executed and delivered by duly authorized officers of each of SGM and
the Sumitomo Participant, as applicable; and this Agreement constitutes, and on
the Final Closing Date the Shareholders Agreement will constitute,

                                       27

<PAGE>

the valid, legal and binding obligation of SGM and the Sumitomo Participant,
respectively, in each case enforceable in accordance with their respective
terms, except that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights and
remedies of creditors or parties to executory contracts generally and by
equitable principles of general applicability.

     (b) Compliance with Other Instruments and Laws. Neither the execution and
delivery by SGM or the Sumitomo Participant of this Agreement or the
Shareholders Agreement nor the consummation of the transactions contemplated
hereby or thereby will result in any violation of or be in conflict with,
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any property of SGM or the Sumitomo Participant pursuant to,
any provision of their respective organizational documents, or any agreement
(other than a Project Debt Agreement), instrument, judgment, decree, order, law
or regulation applicable to SGM or the Sumitomo Participant or any of their
respective properties, except where such violation, conflict, default or lien,
charge or encumbrance, in any case or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect or materially impair the
consummation of the transactions contemplated by this Agreement or the
Shareholders Agreement.

     (c) Legal Proceedings. There is no action, suit, proceeding or
investigation, at law or in equity, or before any governmental authority or
other Person, pending or, to the best knowledge of SGM and the Sumitomo
Participant, threatened, against SGM or the Sumitomo Participant or any of their
respective assets that questions the validity of this Agreement or the
Shareholders Agreement, or any action taken or to be taken pursuant hereto or
thereto or that otherwise would reasonably be expected to result in a material
adverse effect on the ability of SGM or the Sumitomo Participant to perform
their obligations under this Agreement or the Shareholders Agreement.

     (d) Consents, etc. Neither the execution or delivery by SGM or the Sumitomo
Participant of this Agreement or the Shareholders Agreement nor the consummation
by SGM or the Sumitomo Participant of the transactions provided for hereby or
thereby is subject to any requirement that SGM or the Sumitomo Participant
obtain any consent, approval or authorization of, or make any declaration or
filing with, any governmental authority or third party which, in any case or in
the aggregate, if not obtained or made, would reasonably be expected to result
in a Material Adverse Effect, render such execution, delivery or consummation
illegal, or materially impair the consummation of such transactions.

     (e) Ownership of the Sumitomo Participant. As of the First Closing Date,
SGM and SMM will be the record and beneficial owners of all of the outstanding
shares of capital stock of the Sumitomo Participant. As of the First Closing
Date, there will not be outstanding any subscriptions, options, warrants,
conversion rights or other agreements or commitments of any kind directly or
indirectly obligating the Sumitomo

                                       28

<PAGE>

Participant to issue or sell any shares of the Sumitomo Participant's capital
stock or any securities convertible into or exchangeable for any such shares.

     (f) No Broker. No broker, finder, agent or other intermediary has been
engaged by SGM or the Sumitomo Participant in connection with the negotiation of
this Agreement or the Shareholders Agreement or the consummation of the
transactions contemplated by sections 2 or 3 hereof.

     5.6. Representations Regarding BVN. BVN hereby represents and warrants to
each of PDC, CAMC, CMC, the PD Participant, the Sumitomo Participant, each of
the Sumitomo Participant Parents and Cerro Verde as follows:

     (a) Organization, Authority, Binding Effect. BVN is a sociedad anonima
abierta duly formed, validly existing and in good standing under the laws of the
Republic of Peru. BVN has the corporate power and authority to enter into and
perform this Agreement and the Shareholders Agreement and to carry out the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Shareholders Agreement, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of BVN; this Agreement has been, and on
the Final Closing Date the Shareholders Agreement will have been, duly executed
and delivered by duly authorized officers of BVN; and this Agreement
constitutes, and on the Final Closing Date the Shareholders Agreement will
constitute, the valid, legal and binding obligation of BVN, in each case
enforceable in accordance with their respective terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights and remedies of
creditors or parties to executory contracts generally and by equitable
principles of general applicability.

     (b) Compliance with Other Instruments and Laws. Neither the execution and
delivery by BVN of this Agreement or the Shareholders Agreement nor the
consummation of the transactions contemplated hereby or thereby will result in
any violation of or be in conflict with, constitute a default under, or result
in the creation of any lien, charge or encumbrance upon any property of BVN
pursuant to, any provision of its organizational documents, or any agreement
(other than a Project Debt Agreement), instrument, judgment, decree, order, law
or regulation applicable to BVN or any of its properties, except where such
violation, conflict, default or lien, charge or encumbrance, in any case or in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect or materially impair the consummation of the transactions contemplated by
this Agreement or the Shareholders Agreement.

     (c) Legal Proceedings. There is no action, suit, proceeding or
investigation, at law or in equity, or before any governmental authority or
other Person, pending or, to the best knowledge of BVN, threatened, against BVN
or any of its assets that questions the validity of this Agreement or the
Shareholders Agreement, or any action taken or to be

                                       29

<PAGE>

taken pursuant hereto or thereto or that otherwise would reasonably be expected
to result in a material adverse effect on the ability of BVN to perform its
obligations under this Agreement or the Shareholders Agreement.

     (d) Consents, etc. Except in connection with the General Capital Increase,
neither the execution or delivery by BVN of this Agreement or the Shareholders
Agreement nor the consummation by BVN of the transactions provided for hereby or
thereby is subject to any requirement that BVN obtain any consent, approval or
authorization of, or make any declaration or filing with, any governmental
authority or third party which, in any case or in the aggregate, if not obtained
or made, would reasonably be expected to result in a Material Adverse Effect,
render such execution, delivery or consummation illegal, or materially impair
the consummation of such transactions.

     (e) No Broker. No broker, finder, agent or other intermediary has been
engaged by BVN in connection with the negotiation of this Agreement or the
Shareholders Agreement or the consummation of the transactions contemplated by
sections 2 and 3 hereof.

     6.   Covenants.

     6.1. No Sale of Interest in the Participants. As of the First Closing Date
and at all times thereafter, PDC shall own directly or indirectly 100% of each
class of the outstanding capital stock of the PD Participant. As of the First
Closing Date and at all times thereafter, SMM and SC shall own directly or
indirectly 100% of each class of the outstanding capital stock of the Sumitomo
Participant and SC shall own directly or indirectly 100% of each class of each
class of the outstanding capital stock of SGM.

     6.2. Permitted Encumbrances. Neither PDC, SMM, SC nor SGM, as the case may
be, may grant or permit to exist any lien, charge or encumbrance on, or other
security interest in, the stock of the PD Participant, the Sumitomo Participant
or BVN, except to the extent required by any Project Debt Agreements.

                                       30

<PAGE>

     6.3. Beneficial Ownership of PDC Common Stock. From the date hereof until
the expiration of an eighteen-month period following the date when BVN, SMM,
SGM, SC or PDC shall have ceased to hold any direct or indirect ownership
interest in Cerro Verde, without the prior written consent of the Board of
Directors of PDC, BVN, SMM, SGM and SC shall not, and shall not permit any
Affiliate to, acquire beneficial ownership (as defined as of the date hereof in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of any common
shares of PDC, if, after any such acquisition, BVN, SMM and SC and any of its
Affiliate would hold or control, in the aggregate, beneficial ownership of more
than two percent of the common shares of PDC then outstanding.

     6.4. Covenants Regarding the Sumitomo Participant.

     (a) SMM, SC and SGM shall cause the Sumitomo Participant to be formed prior
to the First Closing Date and, until such time as the Sumitomo Participant has
been formed and has joined as a party to this Agreement in the manner
contemplated in section 6.5(b), SMM shall have all the rights, obligations and
interests of the Sumitomo Participant set forth herein as if it were the
Sumitomo Participant.

     (b) Each of the parties hereto (i) hereby consents to the Sumitomo
Participant joining as a party to this Agreement as soon as it has been formed;
provided that the Sumitomo Participant shall agree in a writing reasonably
satisfactory to Cerro Verde to be bound by the terms and conditions hereof and
(ii) shall execute and deliver such certificates, opinions and other documents
as may be reasonably requested by Cerro Verde in order to effect the admission
of the Sumitomo Participant as a party hereto.

     6.5. Actions to Cause Closing, etc.

     (a) Actions to Cause Closing. Subject to the terms and conditions provided
herein, each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all action necessary or proper and advisable to cause (i) the
satisfaction of all the conditions to closing set forth in section 7 hereof; and
(ii) the Final Closing to occur on or before September 30, 2005.

     (b) Confidentiality. The parties hereto shall adhere to the undertakings
set forth in section 12 of the Shareholders Agreement, mutatis mutandis.

     6.6. Transfers of Interests. Prior to the Final Closing, other than as set
forth in section 2 or 3, the PD Participant Parents, the Sumitomo Participant
Parents, the Sumitomo Participant, the PD Participant, BVN and Cerro Verde shall
not engage in any transaction: (i) involving the issuance, sale, purchase,
transfer or other disposition of Current Outstanding Shares or Preemptive
Rights; or (ii) that could result in either (a) the PD Participant ceasing to
hold at least a 53.56% direct or indirect equity interest in Cerro Verde, or (b)
any person other than the Sumitomo Participant or BVN or their respective
Affiliates acquiring a direct or indirect equity interest in Cerro Verde greater
than 16.0%.

                                       31

<PAGE>

Other than with respect to the transactions contemplated by this Agreement,
prior to the Final Closing, the PD Participant, the Sumitomo Participant and BVN
shall notify the other parties hereto in writing of any issuance, sale,
purchase, transfer or other disposition of shares of Current Outstanding Shares.
Prior to the Final Closing upon acquiring any equity interest in the Sumitomo
Participant, neither SGM nor SMM shall sell or otherwise transfer any direct or
indirect equity interest in the Sumitomo Participant.

     6.7. Competition; Business Opportunities. Subject to section 9 below,
nothing in this Agreement shall prevent any party hereto or any Affiliate of any
such party, at any time and without notice to or agreement by any other such
party, from entering into or continuing any business, whether or not competitive
with Cerro Verde, or acquiring or exploiting mining rights, whether or not in
the vicinity of any property owned by Cerro Verde and no party hereto shall have
any obligation to offer business or other opportunities to Cerro Verde or to any
other party hereto.

     6.8. Conduct of Business until Final Closing. From the date hereof until
the Final Closing Date, except to the extent otherwise contemplated by this
Agreement, the Feasibility Study or the Project Debt Agreements, Cerro Verde
shall, and PDC and the PD Participant shall cause Cerro Verde to, conduct its
business in all material respects in the ordinary course of business, and use
its commercially reasonable efforts to preserve intact Cerro Verde's assets,
mining and beneficiation concessions and water rights, business and
relationships with its management, employees, suppliers, customers, creditors,
agents and other Persons with whom it has a business relationship.

     6.9. Opinions of Counsel.

     (a) Cerro Verde shall cause (i) Estudio Rodrigo, Elias & Medrano, Peruvian
counsel for Cerro Verde, (ii) Ms. Julia Torreblanca, Legal and Environmental
Affairs Manager of Cerro Verde, (iii) Mr. J. Dale Brunk, Vice President and
Assistant General Counsel of PDC, and (iv) Debevoise & Plimpton LLP, special New
York counsel for Cerro Verde, to deliver written opinions dated as of the First
Closing Date and Final Closing Date to SC, SMM and the Sumitomo Participant in
form and substance reasonably satisfactory to SC, SMM and the Sumitomo
Participant.

     (b) SC, SMM, SGM and the Sumitomo Participant (the "Sumitomo Parties")
shall cause (i) Estudio Grau, Peruvian counsel for the Sumitomo Parties, (ii)
Sullivan & Cromwell LLP, special New York counsel for the Sumitomo Parties, and
(iii) Dutch counsel for the Sumitomo Parties, to deliver written opinions dated
as of the First Closing Date and Final Closing Date to the PD Participant
Parents, the PD Participant and Cerro Verde in form and substance reasonably
satisfactory to the PD Participant Parents, the PD Participant and Cerro Verde.

                                       32

<PAGE>

     7.   Conditions to Closing

     7.1. Conditions to Obligations of SMM, SC, SGM and the Sumitomo
Participant. The obligation of the Sumitomo Participant to exercise the Sumitomo
First Round Rights and pay to Cerro Verde the aggregate Per Share Price with
respect thereto pursuant to section 3.1(b) on the First Closing Date and the
obligations of each of the Sumitomo Participant, SMM, SC and SGM to take the
actions required to be taken by each of such parties at the Final Closing is
subject to the satisfaction, at or prior to the First Closing Date and Final
Closing Date, as applicable, of each of the following conditions (the "Closing
Conditions"), any of which may be waived in whole or in part by SMM, SC, SGM and
the Sumitomo Participant, as applicable:

     (a) Representations and Warranties. Each of the representations and
warranties of Cerro Verde, the PD Participant Parents and the PD Participant set
forth in this Agreement shall be true and correct in all material respects as of
the date of this Agreement and as of the First Closing Date and the Final
Closing Date, with the same effect as though such representations and warranties
had been made on and as of the First Closing Date and the Final Closing Date,
except that such representations and warranties that are made as of a specific
date need only be true as of such date.

     (b) Covenants. All of the covenants, agreements, undertakings and
obligations that Cerro Verde, the PD Participant Parents and the PD Participant
are required to perform or to comply with pursuant to this Agreement at or prior
to the First Closing or Final Closing, as applicable, shall have been duly
performed and complied with in all material respects; for the avoidance of
doubt, the failure to deliver any of the opinions as described in section 6.9,
shall constitute failure to have complied with such covenants in all material
respects.

     (c) Certificates. Each of Cerro Verde, the PD Participant Parents and the
PD Participant shall have delivered to SC, SMM, and the Sumitomo Participant a
certificate dated as of the First Closing Date and the Final Closing Date that
(i) the conditions referred to in sections 7.1(a), 7.1(b), 7.1(d) and, in the
case of the Final Closing, 7.1(f) have been satisfied, (ii) the changes set
forth in section 7.1(e) have not occurred, (iii) the actions contemplated in
section 7.1(g) have occurred and (iv) the Board of Directors of PDC and Cerro
Verde have approved the Sulfide Project, and that such approvals, including any
resolutions, are in full force and effect on the date thereof, and have not been
amended, modified, rescinded or revoked.

     (d) No Judgment, Decree, Order, Action or Proceeding. No judgment, decree,
order, action or proceeding shall be in effect, pending or threatened by any
governmental body or agency that (i) involves a challenge to or seeks to
prohibit, delay or restrict the consummation of any of the transactions
contemplated by the Transaction Documents, including the General Capital
Increase and the Sulfide Project or (ii) questions the

                                       33

<PAGE>

validity or legality of any of the transactions contemplated by the Transaction
Documents, including the General Capital Increase and the Sulfide Project.

     (e) No Material Adverse Effect. There shall not have occurred any Material
Adverse Effect.

     (f) Minimum Net Working Capital. The Board shall have determined that the
sum of (i) net working capital of Cerro Verde plus (y) costs incurred in
connection with the Sulfide Project that should be classified under generally
accepted accounting principles in the United States as construction in progress,
in each case as of the Final Closing Date, shall be no less than U.S.$40.0
million after giving effect to the Special Dividend contemplated by this
Agreement.

     (g) Election of Directors. The PD Participant shall have taken all
necessary action prior to the Final Closing Date to call an extraordinary
shareholders meeting, to be held promptly after the registration with CAVALI of
BVN's and the Sumitomo Participant's ownership of Capital Increase Shares, to
elect new directors and alternate directors of Cerro Verde.

     (h) Transaction Documents. On or prior to the Final Closing Date, (i) Cerro
Verde, the PD Participant, PDC and BVN, shall have executed and delivered the
Shareholders Agreement; (ii) Cerro Verde and MPDP shall have executed and
delivered the Operator's Agreement; and (iii) Cerro Verde shall have executed
and delivered the SMM Concentrate Agreement.

     7.2. Conditions to Obligations of Cerro Verde, the PD Participant Parents
and the PD Participant. The obligations of Cerro Verde, the PD Participant
Parents and the PD Participant to take the actions required to be taken by each
of such parties at the First Closing and Final Closing is subject to the
satisfaction, at or prior to the First Closing Date and the Final Closing Date,
as applicable, of each of the following conditions (any of which may be waived
in whole or in part by Cerro Verde, PDC, the PD Participant Parents and the PD
Participant, as applicable):

     (a) Representations and Warranties. Each of the representations and
warranties of BVN, SMM, SC, SGM and the Sumitomo Participant set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the First Closing Date and the Final Closing Date, with
the same effect as though such representations and warranties had been made on
and as of the First Closing Date and the Final Closing Date, except that such
representations and warranties that are made as of a specific date need only be
true as of such date.

     (b) Covenants. All of the covenants, agreements, undertakings and
obligations that BVN, SMM, SC, SGM and the Sumitomo Participant are required to
perform or to comply with pursuant to this Agreement at or prior to the First
Closing or

                                       34

<PAGE>

Final Closing, as applicable, shall have been duly performed and complied with
in all material respects.

     (c) Officer's Certificate. Each of BVN, SMM, SC, SGM and the Sumitomo
Participant shall have delivered to Cerro Verde, PDC and the PD Participant a
certificate, dated as of the First Closing Date and the Final Closing Date and
signed by senior executive officers of BVN, SMM, SC, SGM and the Sumitomo
Participant representing that the conditions referred to in sections 7.2(a) and
7.2(b) have been satisfied.

     (d) Transaction Documents. On the Final Closing Date, (i) BVN, the Sumitomo
Participant, SMM, SC and SGM shall have executed and delivered the Shareholders
Agreement; and (ii) SMM shall have executed and delivered the SMM Concentrate
Agreement.

     7.3. Consequences of Failure to Satisfy Conditions to Closing. If (i) the
Sumitomo Participant delivers written notice to the Board on the Final Closing
Date in its good faith and reasonable judgment stating that the Capital Increase
Closing Conditions have not been satisfied or waived as of such date, (ii) the
Board determines on or prior to the Final Closing Date that the PD Closing
Conditions have not been satisfied or waived as of such date, or (iii) unless
otherwise agreed by the Sumitomo Participant, the Final Closing shall not have
occurred by September 30, 2005, the Board shall cause Cerro Verde to and Cerro
Verde shall:

     (a) cancel the General Capital Increase and the Special Dividend; and

     (b) return promptly to each applicable subscriber or purchaser (x) the
aggregate Per Share Price in United States dollars or any other amount of
consideration paid by such subscriber or purchaser to Cerro Verde in connection
with the exercise of Preemptive Rights regarding the Capital Increase Shares or
the purchase of Unsubscribed Shares, plus (y) interest, calculated at a rate per
annum equal to the Six Month LIBOR Rate, on such aggregate Per Share Price for
the period commencing on June 30, 2005 and ending on the day before such
aggregate Per Share Price is returned; provided that with respect to subscribers
and purchasers of a Fully Diluted Respective share that exceeds five percent,
such return shall be made in immediately available funds by wire transfer to an
account designated by each applicable subscriber or purchaser, in each case
without deduction for Taxes.

     8.   Termination.

     8.1. Event of Termination. Each of the parties hereto shares the mutual
objective of causing the Final Closing to occur as soon as possible and shall
use all reasonable efforts to cause the Final Closing to occur by June 30, 2005,
provided that if the Final Closing shall not have been consummated on or before
September 30, 2005 or

                                       35

<PAGE>

such other date as the parties may mutually agree, any party hereto may
thereafter terminate this Agreement effective upon written notice to each other
party hereto.

     8.2. Effect of Termination.

     (a) The representations and warranties made by Cerro Verde, the PD
Participant and the PD Participant Parents in section 5.1 and section 5.2(e),
including as set forth in any certificate delivered pursuant to this Agreement,
shall survive the Closing until the date Full Completion (as defined in the
Project Debt Agreements) of the Sulfide Project has occurred.

     (b) No claim for indemnification, reimbursement or any other remedy
pursuant to section 8.3 hereof may be brought with respect to breaches of
representations or warranties contained herein after the expiration date set
forth in section 8.2(a); provided, that if, prior to such date and in compliance
with section 8.4, a party entitled to indemnification hereunder shall have
notified an indemnifying party in writing of a claim for indemnification under
this section 8 (whether or not formal legal action shall have been commenced
based upon such claim), such claim shall continue to be subject to
indemnification in accordance with this section 8 notwithstanding such
expiration date.

     8.3. Indemnification.

     (a) The PD Participant and the PD Participant Parents agree, jointly and
severally, to indemnify, defend and hold harmless SMM, SC and the Sumitomo
Participant, from, against and in respect of any damage, loss, liability, claim
or expense, including reasonable attorneys' fees incurred as a result thereof
(collectively, "Damages"), whether or not involving a third party claim,
arising, directly or indirectly, out of or in connection with, or resulting from
the inaccuracy or breach of any representation or warranty made by it in section
5.1 or 5.2(e), including as set forth in any certificate delivered pursuant to
this Agreement. In no event shall the PD Participant or the PD Participant
Parents have any liability under this section 8.3 (x) in an aggregate amount
that exceeds 50% of the net proceeds received by Cerro Verde from the Sumitomo
Participant or any of its Affiliates pursuant to or as contemplated by this
Agreement or the exercise of Preemptive Rights, (y) for any other matter under
this Agreement or the transactions contemplated by this Agreement and (z) unless
and until the aggregate amount of Damages shall exceed U.S.$5,000,000 (the
"Liability Threshold Amount"). If the Liability Threshold Amount is exceeded,
the Liability Threshold Amount shall be recoverable in addition to any Damages
in excess thereof. The Liability Threshold Amount shall be U.S.$0 in lieu of
U.S.$5,000,000 in any case in which the Damages are finally determined to have
arisen solely from the Indemnitor's willful misconduct, fraud or intentional
breach of this Agreement.

                                       36

<PAGE>

     (b) The right of SC, SMM and the Sumitomo Participant to indemnification
under this section 8.3 shall be limited as follows:

          (i) The amount of any Damages incurred by an Indemnitee shall be
reduced by the net amount of the tax benefits realized by any Indemnitee or its
respective Subsidiaries or Affiliates by reason of such Damages, provided that
if such tax benefits are realized by Cerro Verde the amount of any Damages shall
be reduced by such Indemnitee's Respective Share of the net amount of such
benefits; and

          (ii) The amount of any Damages incurred by an Indemnitee shall be
reduced by the net amount any Indemnitee, or its respective Subsidiaries or
Affiliates, or, in the event that such Damages arise from losses suffered
directly or indirectly by Cerro Verde, such Indemnitee's Respective Share of the
net amount that Cerro Verde, recovers (after deducting all reasonable attorneys'
fees, out-of-pocket expenses and other costs of recovery) from any insurer or
other party liable for such Damages, and the Indemnitees and Cerro Verde shall
use commercially reasonable efforts to effect any such recovery.

     8.4. Indemnification Procedures. A party entitled to indemnification
hereunder shall herein be referred to as an "Indemnitee." A party obligated to
indemnify an Indemnitee hereunder shall herein be referred to as an
"Indemnitor."

     (a) If an Indemnitee receives notice of any claim or the commencement of
any action by any third party that such Indemnitee reasonably believes may give
rise to a claim for indemnification from an Indemnitor hereunder, and such
Indemnitee intends to seek indemnification from such Indemnitor with respect
thereto under this section 8.3, such Indemnitee shall, promptly provide written
notice (the "Third Party Claim Notice") thereof to such Indemnitor; provided,
however, that any failure to provide such Third Party Claim Notice shall not
release the Indemnitor from its obligations under section 8.3 except to the
extent that such failure results in actual prejudice to the Indemnitor. Each
Third Party Claim Notice shall (i) specify in reasonable detail the basis on
which indemnification is being asserted, (ii) provide a reasonable estimate of
the amount of the Damages asserted therein to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim or demand),
(iii) specify the provision or provisions of this Agreement under which such
Damages are asserted and (iv) include copies of all notices and documents
(including court papers) served on or received by the Indemnitee from such third
party. Upon receipt of a Third Party Claim Notice, the Indemnitor shall have 45
calendar days to notify the Indemnitee whether or not it desires to participate
in such claim or action or to assume the defense thereof. All costs and expenses
incurred by the Indemnitor in participating in such claim or action or defending
such claim or action shall be borne by the Indemnitor. The Indemnitor shall not
settle, compromise or offer to settle or compromise any such claim or action on
a basis which would result in the imposition of a consent order, injunction,
decree or other non-monetary relief on an Indemnitee without the written consent
of such Indemnitee, which consent shall not be unreasonably withheld or delayed.
After notice to the Indemnitee of

                                       37

<PAGE>

the Indemnitor's election to assume the defense of such claim or action, the
Indemnitor shall not be liable to the Indemnitee under section 8.3 for any legal
or other expenses subsequently incurred by the Indemnitee in connection with the
defense thereof, provided that the Indemnitee shall have the right to employ
separate or additional counsel to represent it so long as the fees and expenses
of such separate or additional counsel shall be paid by the Indemnitee. If the
Indemnitor does not elect to assume the defense of such claim or action within
45 calendar days of the Indemnitee's delivery of the Third Party Claim Notice,
the Indemnitee shall be entitled to assume the defense thereof. Unless it has
been conclusively determined through a final, non-appealable judicial
determination (or settlement tantamount thereto) that the Indemnitor is not
liable to the Indemnitee under this section 8.4, the Indemnitee shall act
reasonably and in accordance with its good faith business judgment with respect
thereto, and shall not settle, compromise, or offer to settle or compromise any
claim or action on a basis which would result in the imposition of a consent
order, injunction, decree or other non-monetary relief affecting any Indemnitor
without the consent of the Indemnitor, which consent shall not be unreasonably
withheld or delayed. The parties hereto agree to render to each other such
assistance as may reasonably be requested in order to insure the proper and
adequate defense of any such claim or action, including making employees
available on a mutually convenient basis to provide additional information and
explanation of any relevant materials or to testify at any proceedings relating
to such claim or action.

     (b) Within 15 Business Days after an Indemnitee suffers any Damages not
involving a third party claim or action that such Indemnitee reasonably believes
may give rise to a claim for indemnification from an Indemnitor hereunder, and
such Indemnitee intends to seek indemnification from such Indemnitor with
respect thereto under section 8.3, such Indemnitee shall deliver a written
notice of such claim, which notice shall contain the information described in
the second sentence of section 8.4(a) (a "Direct Claim Notice") to such
Indemnitor; provided, however, that any failure to provide such Direct Claim
Notice shall not release the Indemnitor from its obligations under section 8.3
except to the extent that such failure results in actual prejudice to the
Indemnitor. If the Indemnitor does not notify the Indemnitee within 45 calendar
days following its receipt of such Direct Claim Notice that the Indemnitor
disputes its liability to the Indemnitee under sections 8.3 and 8.4, such claim
specified by the Indemnitee in such notice shall be conclusively deemed a
liability of the Indemnitor under section 8.3 and subject to the limitations
therein, the Indemnitor shall pay the amount of such claim to the Indemnitee
promptly after demand therefor, or in the case of any notice in which the amount
of the claim (or any portion thereof) is estimated, on such later date when the
amount of such claim (or such portion thereof) is finally determined. If the
Indemnitor has timely disputed its liability with respect to such claim as
provided above, the Indemnitor and the Indemnitee shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by arbitration in accordance with
section 10.6 of this Agreement.

                                       38

<PAGE>

     9.   Use of Information.

     9.1. Confidentiality. Each of the parties hereto shall hold all information
concerning Cerro Verde and all information concerning any other party hereto not
otherwise available to the public through no act or omission of such other party
(collectively, "Confidential Information") in strict confidence and shall not
disclose such information without the prior written consent of each party hereto
to anyone other than directors, officers, employees, accountants, consultants
and representatives of such party and its Affiliates, provided that any such
third party shall first execute a confidentiality agreement with each party
hereto containing provisions substantially equivalent to this section 9 or such
party shall, and shall cause each of its Affiliates to, use best efforts to
ensure that any such third party holds such information in strict confidence as
contemplated by this section 9. Each party hereto shall, and shall cause each of
its Affiliates to, use best efforts to ensure that other third parties will not
gain access to any Confidential Information through any act or omission on its
part. Notwithstanding the foregoing, (i) in connection with compliance with law,
the conduct of the business or operations of Cerro Verde, the possible sale of
an equity interest in Cerro Verde to a third party, or the possible sale or
treatment of concentrates to or by a third party, the PD Participant Parents,
the PD Participant and Cerro Verde and their respective Affiliates may disclose
Confidential Information not involving information about BVN, SMM, SC, SGM and
the Sumitomo Participant without notice to any of the other parties hereto, (ii)
SMM, SC, SGM and the Sumitomo Participant and their respective Affiliates may
disclose Confidential Information not involving information about PDC or Cerro
Verde to any Japanese corporation engaged in copper concentrate smelting that
expresses an interest in the purchase or treatment of Cerro Verde concentrates,
provided that prior to making any such disclosure pursuant to this clause (ii)
such party shall give written notice (identifying the third party being provided
the Confidential Information and describing the general nature of such
disclosure) to and secure the written consent of PDC and (iii) any party hereto
or any Affiliate thereof may disclose Confidential Information to any
governmental agency or the export-import bank or developmental authority of the
home country of the ultimate parent of such party if it believes in good faith
that such disclosure is required by applicable law, by governmental policy in
such home country or by policy of such export-import bank or developmental
authority, provided, that prior to making any such disclosure pursuant to this
clause (iii) such party shall, unless prohibited by such governmental agency,
give written notice (identifying such agency and describing the general nature
of such disclosure) to, and consult with, each other party hereto. All
obligations under this section 9 shall terminate at the Final Closing upon the
execution of the Shareholders Agreement (but shall remain in full force and
effect in the event this Agreement terminates pursuant to section 8).

     9.2. Conflict of Interest. Each of the parties hereto agrees that
Confidential Information concerning Cerro Verde should not be disclosed to any
such party or their Affiliates where because of a potential conflict of interest
between such party (or

                                       39

<PAGE>

Affiliates) and Cerro Verde, such disclosure could reasonably be expected to
result in an adverse effect, directly or indirectly, on Cerro Verde.
Accordingly, each party hereto may decline, in its sole discretion, to provide
such Confidential Information to any party where it has a good faith belief that
disclosure may involve such a potential conflict of interest.

     10.  Miscellaneous.

     10.1. Notices. Any notice, advice, election, request, order, demand or
other direction required or permitted to be given under this Agreement shall be
in writing and in the English language, and (unless some other mode of giving
the same is specified or accepted in writing by the recipient) shall be
effective (a) when personally delivered during normal business hours to the
addressee at the address designated for such delivery, (b) on the date of
receipt specified in any return receipt if it shall have been deposited in the
mails, certified or registered with return receipt requested and postage thereon
fully prepaid, or sent by prepaid overnight courier, in each case addressed to
such address or (c) on the day it shall have been given by facsimile
transmission (with written confirmation of receipt) to such address, whichever
of the foregoing shall first occur. Until otherwise specified by notice, the
addresses for any such notice, advice, election, request, order, demand or other
direction shall be:

     if to SMM, to it at:

     Sumitomo Metal Mining Co., Ltd.
     11-3, 5-Chome, Shimbashi
     Minato-ku, Tokyo 105
     Japan
     Attention: General Manager, Mineral Resources Division
     Telecopier (Fax): (81)-3-3436-7997

     if to SC, to it at:

     Sumitomo Corporation
     1-8-11, Harumi
     Chuo-ku, Tokyo 104-8610
     Japan
     Attention: General Manager, Nonferrous Metals and Raw Materials Department
     Telecopier (Fax): (81)-3-5166-6423

                                       40

<PAGE>

     if to SGM, to it at:

     c/o Sumitomo Corporation
     1-8-11, Harumi
     Chuo-ku, Tokyo 104-8610
     Japan
     Attention: General Manager, Nonferrous Metals and Raw Materials Department
     Telecopier (Fax): (81)-3-5166-6423

     if to the Sumitomo Participant, to it at:

     SMM Cerro Verde Netherlands B.V.
     c/o Sumitomo Metal Mining Co., Ltd.
     11-3, 5-Chome Shimbashi,
     Minato-ku, Tokyo 105
     Japan
     Attention: General Manager, Mineral Resources Division
     Telecopier (Fax): (81)-3-3436-7997

     if to BVN, to it at:

     Cia. De Minas Buenaventura S.A.A.
     Carlos Villaron 790
     Urb. Santa Catalina
     Lima 13, Peru
     Attention: President
     Telecopier (Fax): (51)-1-471-7349

     if to PDC, to it at:

     Phelps Dodge Corporation
     One N. Central Avenue
     Phoenix, Arizona 85004
     Attention: General Counsel
     Telephone: (602) 366-8100
     Telecopier (Fax): (602) 366-7321

     if to CAMC, to it at:

     One N. Central Avenue
     Phoenix, Arizona 85004
     Attention: General Counsel
     Telecopier (Fax): (602) 366-7321

                                       41

<PAGE>

     if to CMC, to it at:

     One N. Central Avenue
     Phoenix, Arizona 85004
     Attention: General Counsel
     Telecopier (Fax): (602) 366-7321

     if to the PD Participant, to it at:

     One N. Central Avenue
     Phoenix, Arizona 85004
     Attention: General Counsel
     Telecopier (Fax): (602) 366-7321

     if to Cerro Verde, to it at:

     Av. Alfonso Ugarte #304
     Cercado, Arequipa, Peru
     Attention: General Manager
     Telecopier (Fax): 054-28-33-76

     10.2. Entire Agreement. This Agreement and the exhibits hereto constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior oral and written discussions, representations and
understandings.

     10.3. Waiver, etc.

     (a) No party hereto shall be bound by any modification or amendment of this
Agreement or waiver of any provision hereof unless such modification, amendment
or waiver is set forth in a written instrument signed by each of the parties
hereto. Except as otherwise provided in this Agreement, failure on the part of
any party hereto to exercise any right hereunder or to insist upon strict
compliance by any other party hereto with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such right, term, covenant or
condition. No provision of this Agreement shall be construed to be a waiver by
any of the parties hereto of any rights or remedies such party may have against
any other party for failure to comply with the provisions of this Agreement and,
except as provided in section 10.6 or otherwise provided in this Agreement, no
remedy or right herein conferred is intended to be exclusive of any other remedy
or right, but every such remedy or right shall be cumulative and shall be in
addition to every other remedy or right herein conferred or now or hereafter
existing at law or in equity.

     (b) THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO
RECOVER PUNITIVE, EXEMPLARY, LOST PROFITS, CONSEQUENTIAL OR SIMILAR DAMAGES IN
ANY ARBITRATION, LAWSUIT,

                                       42

<PAGE>

LITIGATION OR PROCEEDING ARISING OUT OF OR RESULTING FROM ANY CONTROVERSY OR
CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

     10.4. Severability. If any provision of this Agreement or the application
of any provision hereof to any party hereto or set of circumstances is held
invalid, the remainder of this Agreement and the application of such provision
to any other party or set of circumstances shall not be affected unless the
provisions held invalid shall substantially impair the benefits of the remaining
portions of this Agreement.

     10.5. Governing Law. This Agreement and (unless otherwise expressly
provided) all amendments and supplements to, and all consents and waivers
pursuant to, this Agreement shall in all respects be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
giving effect to the conflict of laws rules thereof to the extent they are not
mandatorily applicable by statute and would require or permit the application of
the laws of another jurisdiction.

     10.6. Arbitration.

     (a) Any dispute, controversy or claim arising out of or relating to this
Agreement or the subject matter of this Agreement, or the breach, termination,
or invalidity hereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules in effect on the date of this Agreement. The
arbitration shall be the sole and exclusive forum for resolution of the dispute,
controversy or claim and the award shall be final and binding to the extent
permitted by law. Judgment thereon may be entered by any court having
jurisdiction.

     (b) There shall be three arbitrators, each of whom shall be disinterested
in the dispute, controversy or claim and shall have no connection with any party
to this Agreement. The party to this Agreement initiating arbitration
("Claimant") and the party to this Agreement named as defendant ("Defendant")
shall each name an arbitrator, as provided in Article 7 of the UNCITRAL
Arbitration Rules specified above. In the event that more than two parties to
this Agreement are involved in the arbitration, the parties to this Agreement
shall compose themselves into two sides for purposes of arbitration, and the
Claimant and Defendant holding, directly or through its Affiliates, the largest
Respective Share shall each nominate an arbitrator for all Claimants or
Defendants, as the case may be. The two arbitrators so chosen shall select a
third arbitrator. If the parties are unable to comprise themselves into two
sides, as described above, then the American Arbitration Association ("AAA")
shall appoint all three arbitrators.

     (c) Should the services of an appointment or administering authority be
necessary, the appointment or administering authority shall be the AAA. If any
party or side to this Agreement entitled to name an arbitrator should abstain
from doing so, the AAA shall appoint such arbitrator. No party to this Agreement
shall require the AAA to

                                       43

<PAGE>

(but the AAA may) designate as arbitrator a person of a nationality other than
the nationalities of the parties to this Agreement involved in the arbitration.

     (d) The place of arbitration shall be New York, New York. The arbitration
shall be conducted in the English language and any foreign language documents
presented at such arbitration shall be accompanied by an English translation
thereof. The arbitrators shall apply the laws of the State of New York.

     (e) The parties to this Agreement consent that the United States District
Courts for the Southern District of New York and for the District of Arizona
shall each have non-exclusive jurisdiction with respect to all aspects of the
enforcement of the arbitration provisions of this Agreement.

     10.7. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and permitted
assigns hereunder.

     10.8. Headings. The section headings contained in this Agreement are for
convenience only and are not a part of this Agreement.

     10.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original;
such counterparts together shall constitute but one Agreement.

     10.10. Assignability. Except as contemplated by section 6.6, neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by any party hereto.

                [End of Text; Signature Pages Follow on Page S-1]

                                       44

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

                                        SUMITOMO METAL MINING
                                        CO., LTD.

                                        By: /s/ Ichiro Abe
                                            ------------------------------------
                                            Name: Ichiro Abe
                                            Title: Executive Officer,
                                                   General Manager of Mineral
                                                   Resources Division

                                        SUMITOMO CORPORATION

                                        By: /s/ Mitsuhiko Yamada
                                            ------------------------------------
                                            Name: Mitsuhiko Yamada
                                            Title: Corporate Officer,
                                                   General Manager,
                                                   Mineral Resources Division

                                        SUMMIT GLOBAL MANAGEMENT B.V.

                                        By: /s/ Takeshi Okubo
                                            ------------------------------------
                                            Name: Takeshi Okubo
                                            Title: Managing Director

                                      S-1

<PAGE>

                                        PHELPS DODGE CORPORATION

                                        By: /s/ Kalidas V. Madhavpeddi
                                            ------------------------------------
                                            Name: Kalidas V. Madhavpeddi
                                            Title: Senior Vice President

                                        CYPRUS AMAX MINERALS COMPANY

                                        By: /s/ Kalidas V. Madhavpeddi
                                            ------------------------------------
                                            Name: Kalidas V. Madhavpeddi
                                            Title: Senior Vice President

                                        CYPRUS METALS COMPANY

                                        By: /s/ Timothy R. Snider
                                            ------------------------------------
                                            Name: Timothy R. Snider
                                            Title: President

                                        CYPRUS CLIMAX METALS COMPANY

                                        By: /s/ Timothy R. Snider
                                            ------------------------------------
                                            Name: Timothy R. Snider
                                            Title: President

                                        SOCIEDAD MINERA CERRO VERDE S.A.A.

                                        By: /s/ Jeff Monteith
                                            ------------------------------------
                                            Name: Jeff Monteith
                                            Title: Controller

                                      S-2

<PAGE>

                                        COMPANIA DE MINAS BUENAVENTURA S.A.A.

                                        By: /s/ Roque Benavides
                                            ------------------------------------
                                            Name: Roque Benavides
                                            Title: President and CEO

                                      S-3
<PAGE>
                                    EXHIBITS

<PAGE>
                                                                       Exhibit 1

                       SOCIEDAD MINERA CERRO VERDE S.A.A.

                             POLITICA DE DIVIDENDOS

Los accionistas de Sociedad Minera Cerro Verde S.A.A. (Cerro Verde, o la
Compania) aprobaron la politica de dividendos que apunta a utilizar las
utilidades de la Compania para permitir el crecimiento continuo de Cerro Verde y
el servicio de todas sus obligaciones, incluyendo sus obligaciones financieras,
antes de proceder a la distribucion de dividendos. Consistente con esta
politica, y despues de haber asignado estas utilidades para el cumplimiento de
esta obligaciones y financiar sus oportunidades de crecimiento, el Directorio de
Cerro Verde revisara periodicamente la proyeccion de los flujos de caja con la
administracion de la Compania y, si es apropiado, podra proponer a la Junta de
accionistas un pago de dividendos por un monto determinado.

Asimismo, el Directorio queda facultado para que, respetando los parametros
establecidos en esta politica, pueda distribuir dividendos a cuenta y determinar
la oportunidad de su pago, cumpliendo ademas con las normas legales y
estatutarias aplicables.

Esta politica podra ser modificada por la Junta de Accionistas con una
anticipacion no menor a 30 dias habiles a su aplicacion.
<PAGE>
SMCV-AL-1587-2003

Arequipa, December 12, 2003

Messrs.
CONASEV
Pasaje Acuna No. 106, Cercado
Lima.-

RE. RELEVANT EVENT

This is to inform you on the following Relevant Event:

The Board of Directors of Sociedad Minera Cerro Verde S.A.A. notifies to its
shareholders that in the General Shareholders' Meeting held today at 11:00 am.
at Salon Inca I and II of the Swissotel, it was approved the dividend policy of
Sociedad Minera Cerro Verde S.A.A., the same which: "Aims at using the Company's
profits to allow the continuous growth of Cerro Verde and compliance with all
its obligations, including its financial obligations, before a distribution of
dividends takes place. According to this policy, and after applying these
profits for the fulfillment of said obligations and financing its growth
opportunities, the Board of Directors of Cerro Verde will periodically review
the cashflow projection with the Company's Management and, if appropriate, it
could propose to the Shareholders' Meeting a payment of dividends in a
determined amount.

Likewise, the Board of Directors is empowered, respecting the parameters
established under this policy, to distribute anticipated dividends and to
determine the opportunity of their payment, complying besides with the legal and
statutory regulations applicable.

This policy could be amended by the Shareholders' Meeting with an anticipation
of not less than 30 working days before its application.

Also, we inform you on the designation of Mr. Harry M. Conger as new Headline
Director starting from January 1st, 2004, replacing Mr. Gary Allan Loving who
submitted his resignation to the position of Director that he held up to this
date.

Sincerely,

----------------------------------------
Rohn M. Householder
Representative before the Stock Exchange
Sociedad Minera Cerro Verde S.A.A.
<PAGE>
                                                                       Exhibit 2

                          ESTATUTO SOCIAL MODIFICADO DE
                       SOCIEDAD MINERA CERRO VERDE S.A.A.

                                    TITULO I
                                  DEFINICIONES

ARTICULO 1(0).- Para los efectos del presente Estatuto, los siguientes terminos
tendran el significado que se detalla a continuacion:

     -    ACCION O ACCIONES: son las acciones comunes, nominativas y con derecho
          a voto, representativas del capital social de la Sociedad.

     -    SOCIEDAD, EMPRESA O COMPANIA: Sociedad Minera Cerro Verde S.A.A.

     -    GASTOS DE CAPITAL: cualquier gasto o compromiso que seria capitalizado
          o cuyo desembolso seria diferido de acuerdo a los principios de
          contabilidad sobre base de devengados generalmente aceptados en el
          Peru.

     -    FECHA DE CIERRE: ___ de _________ de 2005.

     -    VALORES MOBILIARIOS DE CAPITAL: comprende a las Acciones, asi como
          opciones u otros valores mobiliarios o derechos que confieran a su
          titular la posibilidad de adquirir Acciones o cualquier otro valor
          mobiliario, instrumento o derecho (de deuda o de cualquier otro tipo)
          que sea convertible en Acciones.

     -    ESCALONADO: significa, al ser aplicado a cualquier suma representada
          en Dolares de los Estados Unidos de America aludida en el presente
          Estatuto, que dicha suma sera aumentada (o reducida), al primer dia de
          enero del ano 2007 y al primer dia de cada tercer ano que transcurra
          en adelante, en un porcentaje equivalente a la variacion porcentual
          que exista entre el indice final de Precios de Productores para
          mercancias (Producer Price Index for commodities, publicado por la
          Agencia de Estadisticas Laborales del Departamento de Trabajo de los
          Estados Unidos de America en la pagina web
          HTTP://DATA/BLS.GOV/CGI-BIN/SRGATE) (Codigo de Base de Datos: 8200,
          Serie ID: WPU00000000) correspondiente al mes de julio del ano
          calendario inmediatamente anterior al referido primer dia de enero, y
          el mismo indice correspondiente al mes de julio de 2004, el mismo que
          asciende a 147.4 En caso la mencionada Agencia deje de publicar dicho
          indice o cambie sustancialmente la base de calculo respecto de aquella
          utilizada a la Fecha de Cierre, el Directorio, en virtud de un acuerdo
          tomado por la mayoria, incluyendo a todos los Directores Calificados,
          debera designar otro indice que a su juicio se aproxime mas al Indice
          de Precios de Productores para mercancias existente a la Fecha de
          Cierre. En caso el Directorio no llegue a adoptar una decision valida
          al respecto, la designacion del indice sustituto sera efectuada por un
          tercero independiente que el Directorio elegira para tales efectos.

     -    ESTUDIO DE FACTIBILIDAD: alude al estudio de factibilidad del proyecto
          de sulfuros de la Sociedad, preparado en Mayo de 2004 por la empresa
          Fluor Canada Ltd., y a las modificaciones introducidas al mismo
          mediante el reporte de actualizacion de Septiembre de 2004.

<PAGE>

     -    FUERZA MAYOR: cualquier causa o condicion fuera del control de la
          parte afectada en tal situacion, incluyendo, sin caracter limitativo,
          cualquier acto de Dios, toda averia o destruccion de la planta o
          equipos, escasez o incapacidad de asegurar la provision de
          combustible, energia, agua, materiales o mano de obra, escasez o
          incapacidad de asegurar la provision de transporte, retrasos en el
          transporte, huelgas, cierres patronales, u otro tipo de disputas
          laborales, protestas publicas o disturbios civiles, guerras,
          inundaciones, terremotos, actos gubernamentales o regulatorios,
          bloqueos, motines, accidentes, rayos, incendios, explosiones,
          epidemias, restricciones por cuarentenas, o cualquier otra causa (sean
          del tipo descrito en este parrafo o distintas).

     -    VALOR DE MERCADO: significa, al ser aplicado a cualquier activo de la
          empresa, el valor justo de mercado que sea determinado por el voto
          mayoritario del Directorio, incluyendo el voto favorable de todos los
          Directores Calificados, o en caso no se apruebe tal determinacion, el
          valor determinado por un tercero que sea designado para tales efectos
          por el Directorio.

     -    MINAS: las minas de la Sociedad existentes a la Fecha de Cierre y
          ubicadas dentro de la zona comprendida en las concesiones mineras que
          la Sociedad mantenga a la Fecha de Cierre.

     -    PARTICIPANTES: cada una de las partes que suscribieron el Convenio de
          Accionistas.

     -    PROYECTO: cualquier programa de capital o proyecto iniciado despues de
          la Fecha de Cierre, relacionados con la exploracion o explotacion de
          cualquier concesion minera u otros derechos mineros o de exploracion
          de la Sociedad, o cualesquiera otros derechos o deberes relacionados
          sobre el particular que la Sociedad adquiera o asuma desde la Fecha de
          Cierre.

     -    CAPACIDAD DEL PROYECTO: significara el agregado de: (i) La actual
          capacidad de la planta concentradora de la Sociedad para procesar
          material con contenido de cobre, molibdeno, plata y oro que haya sido
          obtenido en el desarrollo de las operaciones de la Sociedad, (ii) la
          actual capacidad de las instalaciones de precipitacion de la Sociedad
          para procesar soluciones generadas en el desarrollo de las operaciones
          de la Sociedad, (iii) la actual capacidad de la o las plantas
          electroliticas de extraccion de solventes de la Sociedad para procesar
          soluciones generadas por la Sociedad al desarrollar sus operaciones, y
          (iv) la capacidad actual de cualquier otra instalacion que desde este
          momento en adelante sea operada por la Sociedad para procesar
          materiales que contengan minerales que sean obtenidos como resultado
          del desarrollo de sus operaciones; en cada caso y de manera
          substancialmente continua asumiendo los ceses de operaciones
          ordinarios debidos a la programacion de mantenimiento de rutina de las
          instalaciones y la ausencia de cualquier circunstancia incontrolable.

     -    DEUDA DEL PROYECTO: significa todo endeudamiento en el que incurra la
          Sociedad, incluyendo sin caracter restrictivo a la Deuda Senior y la
          Deuda Subordinada, destinado a financiar el desarrollo y concrecion de
          cualquier Proyecto y proveer un monto apropiado de capital de trabajo
          para la operacion de dichos proyectos.

     -    PRESTAMISTAS SENIOR DE PROYECTOS: Cualquier prestamista constituido
          como parte de los acuerdos de financiamiento para el desarrollo,
          concrecion y operacion de cualquier Proyecto que gocen de un orden de
          prelacion favorable respecto de la Deuda Subordinada para el repago de
          los creditos que ostentan y para el caso de liquidacion de la
          Sociedad.

<PAGE>

     -    CONVENIO DE ACCIONISTAS: El Convenio de Accionistas suscrito en la
          Fecha de Cierre entre SMM Cerro Verde Netherlands B.V., Sumitomo Metal
          Mining Co. Ltd.,Sumitomo Corporation, Summit Global Management B.V.,
          Cyprus Climax Metals Company, Phelps Dodge Corpoartion, Compania de
          Minas Buena Ventura S.A.A. y la Empresa, segun sea modificado o
          complementado en el tiempo.

     -    CONTRATO DE OPERACIONES: esta referido al Contrato de Operaciones
          suscrito en la Fecha de Cierre entre la Sociedad y Minera Phelps Dodge
          del Peru S.A.C., asi como a cualquiera de las modificaciones que se le
          puedan introducir en el futuro o a cualquier substitucion que opere de
          conformidad con sus propios terminos.

     -    PRODUCTOS: cualquier concentrado de cobre, precipitados de cobre,
          catodos de cobre electroliticos, molibdeno y cualquier otro producto
          mineral susceptible de ser comercializado, incluyendo oro y plata, que
          sean producidos por la Sociedad (incluso en el Proyecto de Sulfuros) y
          cualquier otro producto de cobre y otros producidos por terceros para
          la Sociedad bajo cualquier tipo de contrato de servicio (maquila) que
          regulen el tratamiento de la produccion derivada de las Minas o de
          cualquier Proyecto.

     -    DEUDA SUBORDINADA: esta referida al endeudamiento de la Sociedad que
          mantiene un orden de prelacion, al momento de liquidacion de la
          Sociedad, menor que cualquier financiamiento otorgado por una persona
          no afiliada a la Sociedad para el desarrollo, concrecion y operacion
          de cualquier Proyecto (Deuda Senior) y que se encuentra ademas
          subordinada y tiene un orden de prelacion inferior para su repago
          respecto de la indicada Deuda Senior, a satisfaccion de los titulares
          de dicha Deuda Senior.

     -    PROYECTO DE SULFUROS: Proyecto destinado a desarrollar un yacimiento
          de sulfuros primarios que se encuentra debajo del yacimiento de oxidos
          ubicado en la zona comprendida por las concesiones mineras de
          titularidad de la Sociedad a la Fecha de Cierre, que debera ser
          procesado para convertirse en concentrados de cobre como producto
          final en nuevas instalaciones que seran desarrolladas de acuerdo a la
          descripcion general contenida en el Estudio de Factibilidad,
          considerando los cambios a las mismas que el Directorio determine,
          segun criterio basado en la razon y la buena fe, sean necesarios o
          recomendables y que no afecten de manera sustancial la naturaleza
          basica y alcance de dichas instalaciones.

     -    GARANTIA DE CONCRECION DEL PROYECTO DE SULFUROS: Significa cualquier
          acuerdo de concrecion u otras obligaciones asumidas a favor de los
          Prestamistas Senior de Proyectos que sean requeridas de acuerdo a los
          Acuerdos de Deudas Senior para el Proyecto de Sulfuros.

     -    ACUERDOS DE DEUDA PARA EL PROYECTO DE SULFUROS: Significa los acuerdos
          definitivos que regulen el financiamiento obtenido de la Deuda Senior
          del Proyecto de Sulfuros

                                    TITULO II
                   DENOMINACION, OBJETO, DURACION Y DOMICILIO

ARTICULO 2(o).- La denominacion de la sociedad es "Sociedad Minera Cerro Verde
S.A.A.".

<PAGE>
ARTICULO 3(o).- La Sociedad tiene por objeto desarrollar todo tipo de
actividades mineras sin excepcion alguna, incluyendo, sin que esta enumeracion
sea taxativa sino meramente enunciativa, la de explorar y explotar derechos
mineros, beneficiar, fundir y refinar minerales y metales.

La Sociedad podra, asimismo, intervenir en todos los actos y celebrar todos los
contratos que las leyes permitan y que conduzcan a la realizacion de sus fines o
que de algun modo sirvan para la mejor realizacion de los mismos o que convengan
a los intereses sociales.

ARTICULO 4(o).- El domicilio de la Sociedad es la ciudad de Lima. Sin embargo,
se podran establecer sucursales, agencias u oficinas en cualquier lugar de la
Republica o del extranjero por acuerdo de Directorio.

ARTICULO 5(o).- El termino de la Sociedad es indeterminado e inicio sus
actividades el 1 de junio de 1993.

                                   TITULO III
                          DEL CAPITAL SOCIAL Y ACCIONES

ARTICULO 6(o).- El capital de la Sociedad es de US$189'030,246.48 (.Ciento
ochenta y nueve millones, treinta mil, doscientos cuarenta y seis y 48/100
Dolares de los Estados Unidos de Norte America) representado por 350'056,012
(trescientos cincuenta millones, cincuenta y seis mil y doce) acciones de un
valor nominal de US$ 0.54 Cincuenta y cuatro centavos de un Dolar de los Estados
Unidos de America) cada una, integramente suscritas y pagadas, gozando todas de
iguales derechos y prerrogativas.

ARTICULO 7(o).- La accion confiere a su titular legitimo, la calidad de socio y
le atribuye cuando menos los derechos siguientes:

     a)   Participar en el reparto de utilidades y en el del patrimonio neto
          resultante de la liquidacion.

     b)   Intervenir y votar en las juntas generales de accionistas.

     c)   Fiscalizar, en la forma establecida por la ley y el Estatuto, la
          gestion de los negocios sociales.

     d)   Salvo las excepciones previstas en la ley y el articulo 53 del
          Estatuto, a ser preferido para la suscripcion de acciones en caso de
          aumento del capital social y en los demas casos de colocacion de
          acciones.

     e)   Ser preferido, con las excepciones y en la forma prevista en la ley,
          para la suscripcion de obligaciones u otros titulos convertibles o con
          derecho a ser convertidos en acciones.

     f)   Separarse de la Sociedad en los casos previstos por la ley o el
          Estatuto.

ARTICULO 8(o).- Las acciones seran nominativas y son indivisibles.

La Sociedad considerara propietario de la accion a quien aparezca como tal en la
Matricula de Acciones.

<PAGE>

Cuando se litigue la propiedad de las acciones se admitira el ejercicio de los
derechos de accionista por quien aparezca registrado en la Sociedad como
propietario de las acciones, salvo mandato judicial en contrario.

Todas las acciones pertenecientes a un accionista deben ser representadas por
una sola persona, salvo que se trate de acciones que pertenezcan individualmente
a diversas personas pero aparezcan registradas en la sociedad a nombre de un
custodio o depositario, en cuyo caso cada propietario podra representar sus
acciones.

Si se hubiese otorgado prenda o usufructo sobre las acciones y como consecuencia
de ello se hubiere cedido el derecho de voto sobre parte de ellas, tales
acciones podran ser representadas por quien corresponda de acuerdo al titulo
constitutivo de la prenda o usufructo, siempre que dicho titulo este registrado
en la Matricula de Acciones.

Lo mismo resultara de aplicacion en los casos en que por mandato judicial el
derecho de voto respecto de parte de las acciones de un accionista sea ejercido
por persona distinta.

ARTICULO 9(o).- Cada accion da derecho a un voto en la Junta General de
Accionistas, salvo cuando se trate de la eleccion del Directorio, en cuyo caso
se aplicaran las disposiciones del articulo 37 de este Estatuto.

ARTICULO 10(o).- Las acciones podran estar representadas por certificados, por
anotaciones en cuenta o por cualquier otra forma que permita la ley.

En caso que las acciones esten representadas por certificados, en estos se
expresara la denominacion de la Sociedad, su domicilio, duracion, la fecha de la
escritura de constitucion y el Notario correspondiente, los datos relativos a su
inscripcion en el Registro, el monto del capital y el valor nominal de cada
accion, las acciones que represente el certificado, la clase a que pertenece y
los derechos y obligaciones inherentes a la accion, la cantidad desembolsada o
la indicacion de estar completamente pagada, los gravamenes o cargas que se
puedan haber establecido sobre la accion, asi como la fecha de su emision y
numero de certificado.

Los titulos de las acciones seran firmados por un Director y el Gerente o por
dos Directores.

ARTICULO 11(o).- La Sociedad abrira y mantendra una Matricula de Acciones, en la
que se anotara la creacion, emision y cancelacion de acciones, sea que esten
representadas por certificados provisionales o definitivos, las sucesivas
transferencias y la constitucion de derechos y gravamenes sobre las mismas, los
canjes y desdoblamiento de acciones y los convenios entre accionistas o de
accionistas con terceros que versen sobre las acciones o que tengan por objeto
el ejercicio de los derechos inherentes a ellas con las limitaciones
establecidas en la ley, y demas anotaciones que corresponden de acuerdo a este
Estatuto o la ley.

La Matricula de Acciones se llevara en un libro especialmente abierto a dicho
efecto o en hojas sueltas, debidamente legalizados, o mediante anotaciones en
cuenta o en cualquier otra forma que permita la ley.

Salvo por el caso de las anotaciones en cuenta, los asientos de la Matricula de
Acciones seran firmados por dos Directores o por un Director y el Gerente.

ARTICULO 12(o).- Las transferencias de acciones, la constitucion de derechos y
gravamenes sobre las mismas, los canjes y desdoblamientos, y los convenios entre
accionistas o de accionistas con

<PAGE>

terceros que versen sobre las acciones o que tengan por objeto el ejercicio de
los derechos inherentes a ellas con las limitaciones establecidas en la ley,
deben comunicarse a la Sociedad para su anotacion en la Matricula de Acciones.

ARTICULO 13(o).- Cuando las acciones esten representadas por certificados, su
transmision se podra acreditar con la entrega a la Sociedad del certificado
endosado a nombre del adquirente o por cualquier otro medio escrito. La Sociedad
solo aceptara el endoso efectuado por quien aparezca en su Matricula como
propietario de la accion o por su representante.

ARTICULO 14(o).- La adquisicion de una o mas acciones implica por parte del
accionista la aceptacion del contrato social y del Estatuto de la Sociedad, asi
como de las resoluciones de las Juntas de Accionistas y el Directorio tomadas de
acuerdo con las leyes y este Estatuto.

Los accionistas son responsables unicamente hasta el limite del valor nominal de
sus acciones.

ARTICULO 15(o).- Las acciones son indivisibles. Los copropietarios de acciones
deben designar a una sola persona para el ejercicio de los derechos de socio,
mediante carta con firma legalizada notarialmente suscrita por copropietarios
que representen mas del 50% de los derechos y acciones en copropiedad.

Los copropietarios responden solidariamente frente a la Sociedad de cuantas
obligaciones deriven de la calidad de accionistas.

ARTICULO 16(o).- En caso de deterioro, destruccion, extravio o sustraccion de
uno o mas certificados de acciones, se podra emitir otros nuevos, debiendo el
accionista satisfacer previamente todas las formalidades legales que sobre el
particular se hallen vigentes en el momento de tal ocurrencia y siendo por su
cuenta los gastos.

                                    TITULO IV
                           DEL REGIMEN DE LA SOCIEDAD

                                   CAPITULO I
                             DISPOSICIONES GENERALES

ARTICULO 17(o).- El regimen de gobierno de la Sociedad esta encomendado a la
Junta General de Accionistas, al Directorio y a la Gerencia, todos los cuales
ejerceran sus funciones de conformidad con este Estatuto.

Tanto la Junta General de Accionistas como el Directorio podran reunirse fuera
del domicilio social.

                                   CAPITULO II
                       DE LA JUNTA GENERAL DE ACCIONISTAS

ARTICULO 18(o).- La Junta General de Accionistas es el organo supremo de la
Sociedad. Los accionistas reunidos segun las prescripciones de este Capitulo
constituyen la Junta General. Todos

<PAGE>

los socios, inclusive los disidentes y los que no hayan participado en la
reunion, quedan sometidos a los acuerdos legitimamente adoptados por la Junta
General.

ARTICULO 19(o).- La Junta solo puede tratar los asuntos contemplados en la
convocatoria, salvo en el caso previsto por el articulo 22 del Estatuto y en
aquellos casos que sean permitidos por la ley.

ARTICULO 20(o).- La Junta General se reunira obligatoriamente dentro de los tres
meses siguientes a la terminacion del ejercicio economico anual.

Adicionalmente, el Directorio puede convocar a la Junta General de Accionistas
en caso se requiera resolver sobre asuntos que son competencia de la misma,
tales como aquellos a los que se hace referencia en las clausulas (a) a la (e)
del articulo 41 del presente Estatuto; cuando lo estime conveniente a los
intereses sociales; o, cuando lo solicite notarialmente uno o mas accionistas
que representen cuando menos el cinco por ciento del capital social suscrito con
derecho a voto, expresando en la solicitud los asuntos a tratarse. En este
ultimo caso, la Junta debera ser obligatoriamente convocada dentro de los quince
(15) dias siguientes a la solicitud.

Cuando dicha solicitud fuese denegada o transcurriese el plazo indicado
precedentemente sin efectuarse la convocatoria, la misma sera efectuada por la
Comision Nacional Supervisora de Empresas y Valores.

ARTICULO 21(o).- La Junta General debe ser convocada por el Directorio mediante
aviso publicado en el Diario Oficial El Peruano y en uno de los diarios de mayor
circulacion de Lima, que contenga la indicacion del dia, hora y lugar de la
reunion y las materias a tratar.

El aviso debe publicarse con anticipacion no menor de veinticinco (25) dias a
las Juntas Generales de la Sociedad. Podra hacerse constar en el aviso la fecha
en la que se reunira la Junta en segunda y tercera convocatoria, si no se
obtuviese el quorum en las correspondientes citaciones. En este caso, entre una
y otra convocatoria no debe mediar menos de tres (3) ni mas de diez (10) dias.

Sin embargo, si no se hubiera publicado en un solo aviso dos o mas
convocatorias, la Junta General en segunda convocatoria debe celebrarse dentro
de los treinta (30) dias de la primera y la tercera convocatoria dentro de igual
plazo de la segunda.

ARTICULO 22(o).- No obstante lo dispuesto en los articulos anteriores, la Junta
se entendera convocada y quedara validamente constituida siempre que esten
presentes accionistas que representen la totalidad de las acciones suscritas con
derecho a voto y los asistentes acepten por unanimidad la celebracion de la
Junta y los asuntos que en ella se trataran.

ARTICULO 23(o).- A la Junta Obligatoria Anual le compete:

a)   Aprobar o desaprobar la gestion social y los resultados economicos del
     ejercicio anterior;

b)   Disponer la aplicacion de las utilidades que hubiesen;

c)   Elegir regularmente a los miembros del Directorio en la forma prevista en
     este Estatuto y fijar su remuneracion, asi como elegir a quienes actuaran
     como Presidente y Vicepresidente del Directorio;

d)   Designar auditores externos anualmente; y,

<PAGE>

e)   Tratar los demas asuntos de competencia de la Junta General de Accionistas
     y sobre cualquier otro consignado en la convocatoria.

ARTICULO 24(o).- Corresponde, asimismo, a la Junta General de Accionistas:

a)   Remover a los miembros del Directorio y elegir a sus reemplazantes, cuando
     sea el caso;

b)   Modificar el Estatuto;

c)   Aumentar o reducir el capital;

d)   Emitir obligaciones;

e)   Disponer investigaciones y auditorias especiales;

f)   Acordar la enajenacion, en un solo acto, de activos cuyo valor contable
     exceda el 50% del capital de la Sociedad.

g)   Acordar la transformacion, fusion, escision, reorganizacion, disolucion y
     liquidacion de la Sociedad.

h)   Resolver en los demas casos en los que la ley o el Estatuto dispongan su
     intervencion y en cualquier otro asunto que requiera el interes social,
     inclusive respecto de aquellos asuntos sobre los que puede resolver el
     Directorio, salvo cuando se trate de atribuciones que corresponden
     unicamente al Directorio por mandato legal o del presente Estatuto.

ARTICULO 25(o).- Tienen derecho a asistir a la Junta General los titulares de
acciones inscritas en la Matricula de Acciones hasta los diez dias anteriores al
de la realizacion de la Junta, o sus representantes.

ARTICULO 26(o).- Los accionistas que tengan derecho a concurrir a la Junta
General pueden hacerse representar por otra persona. La representacion debe
conferirse por escrito y con caracter especial para cada Junta, salvo tratandose
de poderes otorgados por escritura publica, debiendo registrarse los poderes con
una anticipacion no menor de 24 horas a la hora fijada para la celebracion de la
Junta.

ARTICULO 27(o).- El quorum se computa y establece al inicio de la Junta.
Comprobado el quorum el presidente la declara instalada.

En las Juntas Generales convocadas para tratar asuntos que, conforme a Ley o al
Estatuto, requieren concurrencias distintas, cuando un accionista asi lo senale
expresamente y deje constancia al momento de formularse la lista de asistentes,
sus acciones no seran computadas para establecer el quorum requerido.

Las acciones de los accionistas que ingresan a la Junta despues de instalada, no
se computan para establecer el quorum pero respecto de ellas se puede ejercer el
derecho de voto.

ARTICULO 28(o).- Excepto cuando se trate de los temas que se mencionan en el
articulo siguiente y aquellos en que la ley o el Estatuto requieran quorums
diferentes, para la celebracion de la Junta General de Accionistas en primera
convocatoria se requiere la concurrencia de accionistas que

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representen no menos de la mitad de las acciones suscritas con derecho a voto.
En segunda y tercera convocatoria bastara la concurrencia de cualquier numero de
acciones.

Los acuerdos se adoptan por mayoria absoluta de las acciones suscritas con
derecho a voto concurrentes.

ARTICULO 29(o).- Cuando se trate del aumento o reduccion de capital, la
modificacion del Estatuto, la emision de obligaciones, la enajenacion, en un
solo acto, de activos cuyo valor contable exceda del 50% del capital de la
Sociedad, transformacion, fusion, escision, reorganizacion, disolucion y
liquidacion de la Sociedad, se requiere en primera convocatoria la concurrencia
del 50% de las acciones suscritas con derecho a voto. En segunda convocatoria
bastara la concurrencia de al menos el 25% de las acciones suscritas con derecho
a voto, y en caso tampoco se logre dicho quorum, la junta general se realizara
en tercera convocatoria bastando la concurrencia de cualquier numero de acciones
suscritas con derecho a voto.

En los casos senalados en el parrafo anterior los acuerdos deberan ser adoptados
por la mayoria absoluta de las acciones suscritas con derecho a voto
representadas en la Junta.

Sin embargo, cuando los acuerdos relacionados con los asuntos mencionados en el
primer parrafo del presente articulo deban adoptarse en cumplimiento de un
mandato legal, no se requerira de los quorums y mayoria antes indicados.

ARTICULO 30(o).- Segun lo contemplado en el articulo 133 de la Ley General de
Sociedades, el derecho de voto no puede ser ejercido por el accionista en los
casos en que tuviera por cuenta propia o de terceros, interes en conflicto con
el de la Sociedad. Los Directores, Gerentes y Mandatarios de la Sociedad no
pueden votar como accionistas cuando se trate de senalar su responsabilidad en
cualquier asunto.

Sin embargo, las acciones respecto de las cuales no se puede ejercitar el
derecho de voto, son computables para formar el quorum de la Junta pero no se
computaran para establecer la mayoria en las votaciones.

ARTICULO 31(o).- La Junta General de Accionistas sera presidida por el
Presidente del Directorio o, en su ausencia, por el Vicepresidente del
Directorio. En ausencia de ambos, la Junta sera presidida por el Director
alterno al Presidente del Directorio y en ausencia de este ultimo, por el
Director alterno al Vicepresidente del Directorio. De estar ausentes los arriba
indicados Directores titulares y alternos, la Junta sera presidida por quien
esta designe.

Actuara como Secretario el Gerente General de la Sociedad y, en su ausencia, la
persona que la Junta General designe. Asimismo, actuara coma Secretario quien la
Junta designe en el caso que al Gerente le corresponda presidir la Junta.

ARTICULO 32(o).- Las sesiones de Junta General y los acuerdos adoptados en
ellas, podran constar en un Libro de Actas legalizado conforme a ley o
alternativamente llevarse en hojas sueltas utilizando escritura mecanica y
siguiendo los procedimientos establecidos por las normas vigentes.

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En cada acta se hara constar el dia, lugar y hora en que se realizo la Junta; la
indicacion de si se celebra en primera, segunda o tercera convocatoria; el
nombre de las personas que actuaron como Presidente y como Secretario; la forma
y resultado de las votaciones; los acuerdos adoptados y la lista de los
concurrentes con sus domicilios, el numero y clase de acciones con las que
concurren y la especificacion de si concurren por su propio derecho o en
representacion de algun accionista, y en su caso los comprobantes de haberse
efectuado las publicaciones conforme a ley y a este Estatuto, con indicacion de
las de las fechas y los periodicos en que se publicaran los avisos de
convocatoria.

La redaccion y aprobacion del acta podra efectuarse en la misma Junta o despues
de su celebracion. Cuando el acta sea aprobada en la misma Junta se debe dejar
expresa constancia de ello, y cuando menos debera ser firmada por el Presidente,
el Secretario y tres accionistas designados al afecto.

Cuando el acta no se aprobase en la misma Junta, esta designara especialmente a
no menos de tres accionistas para que, conjuntamente con el Presidente y el
Secretario, la revisen, aprueben y suscriban, dentro de los diez (10) dias
siguientes a la fecha de realizacion de la Junta. El acta debera ser puesta a
disposicion de los accionistas concurrentes o sus representantes quienes podran
dejar constancia de sus observaciones o desacuerdos mediante carta notarial.

Cuando por cualquier circunstancia no pudiese asentarse el acta de una Junta en
el libro respectivo, se extendera en documento especial, el que se transcribira
al libro en su oportunidad.

Tratandose del caso previsto en el articulo 22(o) de este Estatuto, es
obligatoria la suscripcion del acta por todos los accionistas, salvo que hayan
firmado la lista de asistentes y en ella estuviesen consignados el numero de
acciones de los que son titulares y los diversos asuntos materia de la
convocatoria. En este supuesto bastara que el acta sea firmada por el
Presidente, el Secretario y un accionista designado al efecto. La lista de
asistentes se considerara parte integrante e inseparable del acta.

Las actas tienen fuerza legal desde su aprobacion.

ARTICULO 33(o).- La Sociedad debe proporcionar la informacion que le soliciten,
fuera de Junta, accionistas que representen no menos del cinco por ciento del
capital pagado, siempre que no se trate de hechos reservados o de asuntos cuya
divulgacion pueda ocasionar dano a la Sociedad.

Corresponde a la Comision Nacional Supervisora de Empresas y Valores resolver
sobre el caracter de reservado o confidencial de la informacion en caso de
discrepancia.

                                  CAPITULO III
                                 DEL DIRECTORIO

ARTICULO 34(o).- El Directorio se compondra de un minimo de cinco (5) y un
maximo de nueve (9) miembros. La Junta determinara, antes de cada nueva eleccion
del Directorio, el numero de miembros que conformara el nuevo Directorio,
aplicando al efecto las siguientes reglas:

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(a)  El Directorio estara compuesto por cinco (5) miembros, a menos que resulte
     de aplicacion alguno de los supuestos contemplados en los literales
     siguientes del presente articulo;

(b)  El Directorio estara compuesto por siete (7) miembros en caso que cualquier
     accionista que cuente, al final del dia correspondiente a la Fecha de
     Cierre, con un numero de acciones de la Sociedad que representen por lo
     menos el 16.67% del capital social, vea posteriormente reducida su
     participacion por debajo de 16.67%, pero se mantenga por encima de 12.51%
     del capital social.

(c)  El Directorio estara compuesto por nueve (9) miembros en caso que cualquier
     accionista que cuente, al final del dia correspondiente a la Fecha de
     Cierre, con un numero de acciones de la Sociedad que representen por lo
     menos el 16.67% del capital social, vea posteriormente reducida su
     participacion por debajo del 12.51%, pero se mantenga por encima de 10.01%
     del capital social.

El Directorio debera convocar a Junta General de Accionistas tan pronto como
tenga conocimiento de algun accionista que, al final del dia correspondiente a
la Fecha de Cierre, haya contado con una participacion accionaria representativa
de por lo menos el 16.67% del capital social, y viera reducida su participacion
accionaria por debajo de los parametros establecidos en los literales (b) y (c)
del presente articulo, de modo que la Junta pueda ajustar el numero de miembros
que compondra el Directorio y elegir a los nuevos integrantes.

Podran elegirse dos Directores alternos por cada Director titular de conformidad
con los procedimientos establecidos en el articulo 37(o) del presente Estatuto.
Los Directores Alternos, que seran identificados como Primer Alterno y Segundo
Alterno, desempenaran sus funciones en caso de ausencia o impedimento del
Director titular, bastando la sola presencia en la reunion de Directorio de
cualquiera de los Directores Alternos para que se presuma de pleno derecho tal
ausencia o impedimento. El Primer Alterno tendra prelacion sobre el Segundo
Alterno para reemplazar al Director titular en caso de ausencia o impedimento.

En el caso de preverse la ausencia o impedimento tanto del Director titular como
de los Directores alternos, cualquiera de ellos podra hacerse representar por un
tercero mediante simple carta poder dirigida al Directorio. En el supuesto que
tanto el Director titular como los Directores alternos se encontraran ausentes o
impedidos y mas de uno dirigiera cartas al Directorio para hacerse representar,
se tomara como valida en primer lugar la suscrita por el Director titular.
Asimismo, la carta dirigida por el Primer Alterno prevalecera sobre la carta
enviada por el Segundo Alterno.

ARTICULO 35(o).- Los Directores seran elegidos por el termino de 3 anos, pero
continuaran en sus cargos aunque hubiese concluido su periodo mientras no se
produzca nueva eleccion y los elegidos acepten el cargo.

ARTICULO 36(o).- Los Directores podran ser removidos en cualquier momento por la
Junta General de Accionistas.

El cargo de Director vaca por muerte, renuncia, impedimento permanente,
remocion, o cualquier otro impedimento legal, en cuyo caso la posicion vacante
sera ocupada por el Director alterno correspondiente; si es que el Director
alterno que ha asumido la posicion vacante de alguno de los Directores de la
Sociedad vaca tambien en el cargo debido a cualquiera de las causales enumeradas

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precedentemente, o si es que no se hubiera elegido Director alterno alguno,
correspondera al resto de miembros del Directorio llenar dicha vacante mediante
acuerdo adoptado por la mayoria absoluta de los Directores concurrentes,
incluyendo el voto favorable de todos los Directores Calificados.

La persona o personas que se elijan ejerceran sus funciones hasta completarse el
periodo para el que fue elegida la persona o personas que reemplazan.

ARTICULO 37(o).- El Directorio debe constituirse con representacion de la
minoria o ser elegido por unanimidad.

Cuando el Directorio se constituya con representacion de la minoria, cada accion
dara derecho a tantos votos como Directores deban elegirse, y cada votante podra
acumular su voto a favor de una sola persona o distribuirlos entre varias. Seran
proclamados Directores quienes obtengan el mayor numero de votos siguiendo el
orden de estos.

Cualquier accionista que proponga un candidato a Director podra tambien proponer
dos candidatos a Directores Alternos con relacion al Director titular propuesto.
El voto a favor del Director titular implicara tambien un voto a favor de los
Directores Alternos correspondientes, si los hubiese.

Si dos o mas personas obtienen igual numero de votos y no pueden todos formar
parte del Directorio por no permitirlo el numero de Directores fijado en el
Estatuto, se decidira por sorteo cual o cuales de ellos deban ser los
Directores.

Los miembros del Directorio que resulten elegidos seran separados en dos grupos.
Aquellos Directores elegidos con menos del 16% del total de votos posibles de
ser emitidos en la Junta General de Accionistas en la que se hubiere realizado
la eleccion correspondiente, perteneceran al grupo de los denominados
"Directores Regulares". Por otro lado, aquellos Directores elegidos con por lo
menos 16% del total de votos posibles de ser emitidos en la Junta General de
Accionistas en la que se hubiere realizado la eleccion correspondiente,
perteneceran al grupo de los denominados "Directores Calificados". Para efectos
del presente Estatuto, tanto los Directores Regulares como los Directores
Calificados tendran las mismas atribuciones y deberes, con excepcion de lo
previsto en lo articulos 40(o) y 41(o) del presente Estatuto.

ARTICULO 38(o).- Las reuniones del Directorio seran presididas por el Presidente
del Directorio y, en su ausencia, por el Vicepresidente, en ausencia del
Vicepresidente por el Director alterno del Presidente y en ausencia de este
ultimo por el Director alterno del Vicepresidente del Directorio. En caso de
ausencia de todos los anteriores o si no se hubiesen elegido Directores
alternos, presidira quien el Directorio designe.

Actuara como Secretario el Gerente o quien el Directorio designe.

ARTICULO 39(o).- El cargo de Director es remunerado. La remuneracion del
Directorio sera fijada por la Junta General de Accionistas.

ARTICULO 40(o).- El Directorio se reunira cada vez que lo convoque el Presidente
o quien haga sus veces, o cuando lo solicite cualquiera de sus miembros o el
Gerente. El Presidente (o a quien corresponda convocar a sesion de Directorio)
consultara con los Directores respecto al lugar, fecha

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y hora para cada sesion, las que podran ser llevadas a cabo en el Peru o en el
extranjero. La convocatoria se hara con diez (10) dias de anticipacion por
esquela con cargo de recepcion. Si el Presidente no efectua la convocatoria
dentro de los diez (10) dias siguientes o en la oportunidad prevista en la
solicitud, la convocatoria podra ser hecha por cualquiera de los Directores. En
el supuesto de que algun Director comunique al Presidente (o a quien corresponda
convocar a sesion de Directorio), con por lo menos tres dias de anticipacion a
la fecha prevista para la realizacion de una sesion, su imposibilidad de
concurrir a la sesion a la fecha prevista en la convocatoria, el Presidente (o
quien corresponda convocar a sesion de Directorio) pospondra dicha sesion, por
una sola vez, por un periodo de por lo menos tres (3) dias, a efectos de
permitir la participacion de dicho Director.

No obstante lo dispuesto en el parrafo anterior, el Directorio se entendera
constituido siempre que esten presentes la totalidad de los Directores y estos
acepten por unanimidad la celebracion de la sesion y los asuntos que en ella se
pretende tratar.

Asimismo, (i) el Directorio podra llevar a cabo sesiones no presenciales
utilizando medios escritos, electronicos o de otra naturaleza que permitan la
comunicacion y garanticen la autenticidad del acuerdo. Cualquier Director puede
oponerse a que se utilice este procedimiento y exigir la realizacion de una
sesion presencial; y (ii) en sesiones no presenciales el Directorio podra tomar
cualquier decision o aprobar cualquier resolucion en virtud de un acuerdo
unanime que conste por escrito, tal como es permitido por el articulo 169(o) de
la Ley General de Sociedades Ley N(o) 26887.

Cualquier Director puede someter a la consideracion del Directorio los asuntos
que crea de interes para la Sociedad.

ARTICULO 41(o).- El quorum del Directorio es la mitad mas uno de sus miembros.
Si el numero de Directores es impar, el quorum es el numero entero inmediato
superior al de la mitad de aquel. Cada Director tiene derecho a un voto.

Los acuerdos deben adoptarse por mayoria absoluta de votos de los Directores
concurrentes, y en caso de empate, decidira quien actue como Presidente. No
obstante, (i) los actos descritos a continuacion en los literales (a) al (l)
requeriran, ademas, el voto favorable de cada uno de los Directores que
conformen el grupo de Directores Calificados, y (ii) los actos descritos desde
el literal (a) hasta el (e) requeriran, ademas, ser sometidos a la aprobacion de
la Junta General de Accionistas cuando asi lo exija la ley:

(a)  Cualquier modificacion significativa de los Estatutos (con excepcion de
     aquellas modificaciones que resulten necesarias a efectos de realizar la
     emision de Valores Mobiliarios de Capital que requerira ser aprobado tan
     solo por mayoria ordinaria de acuerdo a lo previsto en literal (d) a ser
     desarrollado a continuacion.)

(b)  Cualquier fusion, consolidacion o reorganizacion, asi como cualquier
     disolucion y liquidacion de la Sociedad, o el sometimiento de la Sociedad a
     procedimientos de insolvencia;

(c)  La transformacion de la Sociedad;

(d)  Cualquier emision de Valores Mobiliarios de Capital, excepto por aquella
     emision realizada en atencion a lo establecido en la seccion 10(o) del
     Convenio de Accionistas, siempre que inmediatamente despues de la misma
     (tras haber dado efecto a cualquier conversion o derecho de ejercicio): (i)
     el accionista con participacion mayoritaria en el capital social de la
     Sociedad a

<PAGE>

     la Fecha de Cierre mantenga, directa o indirectamente, una participacion
     accionaria de por lo menos el 50% del Capital Social y (ii) ninguna
     persona, excepto aquellas que eran Participantes de la Sociedad antes de la
     referida emision, ostente una participacion de 24.99% o mas del Capital
     Social;

(e)  Cualquier recomendacion para que la Junta General de Accionistas apruebe
     modificaciones a la politica de distribucion de dividendos, salvo que se
     trate de aquellas modificaciones destinadas a facilitar el financiamiento
     de Gastos de Capital autorizados por el Directorio de conformidad con el
     literal (j) siguiente;

(f)  Cualquier modificacion sustancial al Contrato de Operaciones, que no se
     trate de aquellas exigidas por los Prestamistas Senior de Proyectos;

(g)  Cualquier venta o arrendamiento (como arrendador) o acto de disposicion de
     la Sociedad (x) realizado en virtud de una sola operacion o una serie de
     operaciones correlacionadas de activos (que no califiquen como Productos)
     que tengan en dicho momento un valor de mercado Escalonado que exceda los
     US$ 20'000,000 (y) de propiedad de la Sociedad que contenga reservas de
     cobre, clasificados de tal manera en los libros y registro de la misma, o
     cualquier otro mineral considerado por el Directorio como comercialmente
     viable, (z) de concesiones mineras, concesiones de beneficio, servidumbres
     o derechos de riego necesarios para operar el Proyecto de Sulfuros;

(h)  Constitucion por parte de la Sociedad de hipotecas, prendas, carga o
     cualquier otro gravamen sobre cualquiera de sus propiedades, con excepcion
     de (w) aquellas relacionada con la Deuda del Proyecto o al refinanciamiento
     de la misma, (x) cualquier hipoteca legal garantizando operaciones de
     endeudamiento por un valor Escalonado menor a US$ 10'000,000, (y) cualquier
     carga o gravamen no consensual que haya sido constituida como resultado del
     manejo ordinario de la empresa y que no garantice el repago de dinero
     recibido en prestamo, ni que perjudique significativamente el uso de la
     propiedad afectada, o (z) aquellas relacionadas con el financiamiento de
     Gastos de Capital autorizados por el Directorio de conformidad con el
     literal (j) siguiente;

(i)  Cualquier acuerdo u operacion (o serie de acuerdos u operaciones
     correlacionados) entre la Sociedad y el accionista con participacion
     mayoritaria en el capital social de la Sociedad a la Fecha de Cierre o
     alguna de sus empresas afiliadas (que no se trate de aquellos acuerdos u
     operaciones contempladas en el Convenio de Accionistas incluyendo las
     operaciones previstas en las secciones 7.3 u 11.3 de dicho Convenio)
     involucrando activos que cuenten con un valor de mercado en dicho momento
     de mas de US$ 3'000,000 Escalonados o que involucren pagos de rentas
     anuales, o cualquier pago o garantia por parte de la Sociedad, en un monto
     que en cualquiera de los casos anteriores tambien exceda US$ 3'000,000
     Escalonados;

(j)  Cualquier Gasto de Capital o Gastos de Capital (o cualquier arrendamiento o
     serie de arrendamientos en calidad de arrendatario) realizados por la
     Sociedad respecto del mismo programa de capital o Proyecto, excediendo el
     valor de (o que involucre activos que excedan del valor de) US$ 40'000,000
     Escalonados, pero excluyendo cualquier Gasto de Capital o Gastos de Capital
     (o arrendamiento o serie de arrendamientos) que a criterio del Directorio
     sea necesario o apropiado para (x) poder desarrollar o implementar algun
     proyecto de conformidad con algun estudio de factibilidad final de
     bancabilidad, de existir el mismo, que comprenda aquellos cambios que el
     Directorio pudiera haber identificado como necesarios o deseables de
     acuerdo a un criterio razonable y de buena fe, y que no afectan
     sustancialmente la naturaleza basica o alcances del Proyecto, (y) mantener
     o expandir la capacidad del Proyecto o expandir

<PAGE>

     las instalaciones de cualquier Mina o Proyecto, o (z) poder cumplir con la
     legislacion aplicable; y,

(k)  La suspension de la operacion o implementacion del Proyecto de Sulfuro
     durante 180 dias continuos o mas, sin que exista una propuesta razonable de
     reasumir dicho Proyecto (siempre que no se trate de un evento de Fuerza
     Mayor).

(l)  Cualquier modificacion a los Acuerdos de Deuda Senior para el Proyecto de
     Sulfuros con la finalidad de aumentar el monto del principal adeudado,
     diferir el pago del monto del principal o de los intereses relacionados con
     la Deuda Senior para el Proyecto de Sulfuros, incrementar las tasa de
     interes relacionada con dicho endeudamiento o incrementar los compromiso
     asumidos en tales acuerdos, siempre que las Garantias de Concrecion de la
     Empresa no hayan sido levantadas.

ARTICULO 42(o).- Los acuerdos que adopte el Directorio se haran constar en actas
extendidas en un libro especial legalizado conforme a ley o en hojas sueltas de
acuerdo con lo previsto en el articulo 32. Cuando por cualquier circunstancia no
pudiese asentarse el acta de una sesion en el libro u hoja suelta respectiva, se
extendera en documento especial, el que se transcribira en su oportunidad.

Las actas seran firmadas por quienes actuaron como Presidente y Secretario o por
quienes fueran expresamente designados para tal efecto. Sin embargo, el
Directorio podra acordar en la sesion que la suscriban personas distintas del
Presidente y del Secretario, todos los Directores o ciertos miembros del
Directorio en adicion al Presidente y al Secretario. En cualquier caso el acta
sera firmada por aquellos Directores que hayan manifestado en la sesion su deseo
de hacerlo, dentro de los 10 dias utiles siguientes a la fecha de la sesion o
del acuerdo segun corresponda.

Las actas deben expresar, si hubiera habido sesion: la fecha, hora y lugar de la
celebracion y el nombre de los concurrentes; de no haber habido sesion: la forma
y circunstancia en que se adoptaron los acuerdos; y, en todo caso, los asuntos
tratados, las resoluciones adoptadas y el numero de votos emitidos, asi como las
constancias que quieran dejar los directores.

ARTICULO 43(o).- El Directorio tiene todas las facultades de representacion
legal y gestion necesarias para la administracion de la Sociedad dentro de su
objeto, con la sola excepcion de los asuntos que la ley o este Estatuto
atribuyan a la Junta General.

Por lo tanto, y sin que esta enumeracion ser restrictiva sino meramente
enunciativa, el Directorio tiene las siguientes facultades:

a)   Convocar a la Junta General de Accionistas.

b)   Reglamentar su propio funcionamiento y elegir a su Presidente y
     Vicepresidente cuando la Junta no los hubiere elegido.

c)   Presentar anualmente a los accionistas la memoria y los estados
     financieros, recomendando la aplicacion que debe darse a las utilidades, si
     las hubiere.

d)   Aceptar la dimision de sus miembros y proveer las vacantes en los casos
     previstos por la ley y el Estatuto.

e)   Nombrar y destituir a los Gerentes y si lo considera conveniente o
     necesario a los demas funcionarios de la Sociedad, determinando sus
     obligaciones y remuneraciones y otorgando y

<PAGE>

     revocando los poderes con las atribuciones que juzgue conveniente. El
     Directorio podra asimismo nombrar a los representantes, asesores, agentes,
     comisionados y banqueros de que haya de servirse la Sociedad.

f)   Otorgar los poderes que juzgue convenientes.

g)   Decidir la iniciacion, continuacion, abandono o transaccion de procesos
     judiciales o procedimientos administrativos.

h)   Celebrar todo tipo de contratos y compromisos de toda naturaleza, celebrar
     transacciones, tratar toda clase de negocios, someter disputas a arbitraje
     y sin que la siguiente enumeracion sea taxativa sino meramente enunciativa,
     gravar y enajenar los bienes muebles e inmuebles de la Sociedad, incluyendo
     derechos mineros, comprar y dar o tomar en comodato, arrendar o
     subarrendar, como arrendador, subarrendador, arrendatario o
     subarrendatario, toda clase de bienes muebles e inmuebles; dar y tomar en
     cesion derechos mineros, celebrar contratos de opcion, otorgar y revocar
     fianzas; y, en general, realizar cuanto estime conveniente o necesario para
     el cumplimiento del objeto social.

i)   Abrir y cerrar cuentas de todo tipo en instituciones bancarias y
     financieras; depositar y retirar dinero de las cuentas de la Sociedad;
     abrir y cerrar cartas de credito, con o sin garantia; acordar sobregiros y
     adelantos en cuenta corriente; contratar prestamos; acordar y verificar
     todo tipo de operaciones de credito, celebrar contratos de credito
     documentario; solicitar fianzas; ordenar abonos, cargos y transferencias;
     contratar cajas de seguridad, operarlas y cancelarlas; y, en general,
     efectuar toda clase de operaciones bancarias y financieras.

j)   Girar, endosar y protestar cheques; girar, aceptar, endosar, avalar,
     prorrogar, descontar y protestar letras de cambio, vales y pagares; endosar
     conocimientos de embarque; obtener, recibir y endosar warrants y
     certificados de deposito; y, en general, efectuar toda clase de operaciones
     con titulos valores.

k)   Aprobar las operaciones de arrendamiento financiero que celebre la Sociedad
     en cumplimiento de su objeto social.

l)   Dirigir en general las operaciones y los asuntos financieros de la Sociedad
     de conformidad con el Estatuto y los acuerdos de las Juntas Generales asi
     como vigilar la marcha de la Sociedad y dictar los reglamentos internos que
     conceptue necesarios.

m)   Desarrollar cualquier otra atribucion que se derive expresa o tacitamente
     del presente Estatuto.

La delegacion permanente de alguna o algunas facultades del Directorio y la
designacion de los Directores que hayan de ejercer tal delegacion requerira para
su validez del voto favorable de las dos terceras partes de los miembros del
Directorio de su inscripcion en el Registro.

No podra ser objeto de delegacion, la rendicion de cuentas y la presentacion de
balance a la Junta General ni las facultades que esta le conceda al Directorio,
salvo que ello fuese expresamente autorizado.

ARTICULO 44(o).- No pueden ser Directores:

a)   Los que tengan pleito pendiente con la Sociedad en calidad de demandantes o
     esten sujetos a accion social de responsabilidad;

b)   Los que manejan intereses que se hallen en oposicion a los de la Sociedad,
     o practiquen actos perjudiciales a ella;

<PAGE>

c)   Los incapaces o quebrados;

d)   Los Funcionarios o Servidores Publicos, que presten servicios en entidades
     publicas cuyas funciones estuvieran directamente vinculadas al sector
     economico en el que la Sociedad desarrolla su actividad empresarial, salvo
     que representen la participacion del Estado en dichas sociedades; y,

e)   Los demas que senale la ley.

La calificacion de estas causales corresponde al Directorio que, salvo que se
produzca la renuncia, los sometera a consideracion de la Junta General de
Accionistas, resultando de aplicacion lo dispuesto en el articulo 36, en
tanto la Junta no designe a la persona que reemplazara al director removido de
su cargo.

                                   CAPITULO IV
                                 DE LA GERENCIA

ARTICULO 45(o).- La Sociedad tendra uno o mas Gerentes que seran nombrados por
el Directorio. El Gerente puede ser persona natural o juridica, en este ultimo
caso la persona juridica debera nombrar a una persona natural para que la
represente al efecto.

El cargo de Gerente es compatible con el de Presidente del Directorio y con el
de Director.

En caso de designarse mas de un Gerente se designara a un Gerente General, en
quien recaeran todas las atribuciones y funciones previstas en este Estatuto
para el Gerente. Si no se efectuara expresamente tal designacion se considerara
Gerente General al designado en primer lugar.

Son aplicables a los gerentes las disposiciones del articulo 44  del
Estatuto.

ARTICULO 46(o).- El Gerente es el ejecutor de las resoluciones del Directorio y
la Junta General de Accionistas y esta investido en consecuencia de la
representacion judicial y administrativa de la Sociedad. Sin perjuicio de los
poderes que en cada caso otorgue el Directorio o la Junta General de Accionistas
en favor del Gerente, este mismo tendra las atribuciones que por ley le
corresponden.

ARTICULO 47(o).- En caso de ausencia o impedimento de un Gerente, el Directorio
designara otra persona para reemplazarlo hasta que se reincorpore a sus
funciones.

                                    TITULO V
                ESTADOS FINANCIEROS Y DISTRIBUCION DE UTILIDADES

ARTICULO 48(o).- El Directorio, conforme a lo dispuesto por la ley, debe
formular la memoria, los estados financieros y la propuesta de distribucion de
utilidades en caso de haberlas.

ARTICULO 49(o).- Los estados financieros se formularan de acuerdo con lo
previsto en la Ley General de Sociedades y en las demas disposiciones legales
aplicables.

<PAGE>

El Directorio pondra a disposicion de los accionistas en el domicilio social, a
partir del dia siguiente a la publicacion de la convocatoria a la Junta General
de Accionistas, los documentos indicados en el articulo anterior.

La Sociedad debera tener auditoria anual a cargo de auditores externos que se
encuentren habiles e inscritos en el Registro Unico de Sociedades de Auditoria.

ARTICULO 50(o).- Solo podran declararse dividendos en razon de utilidades
realmente obtenidas o de reservas en efectivo de libre disposicion, siempre que
el patrimonio neto no sea inferior al capital pagado. Es valida la distribucion
de dividendos a cuenta.

ARTICULO 51(o).- La distribucion de utilidades se efectuara en la forma y
oportunidad que determine la Junta General sujetandose a lo dispuesto en la ley.

                                    TITULO VI
                   DE LA MODIFICACION DEL ESTATUTO, AUMENTO Y
                              REDUCCION DEL CAPITAL

ARTICULO 52(o).- Para cualquier modificacion del Estatuto se requiere:

a)   Expresar en la convocatoria de la Junta General con toda claridad los
     asuntos que hayan de ser objeto de la reunion; y,

b)   Que el acuerdo sea adoptado por la Junta de conformidad con el articulo 29
     del Estatuto.

c)   Que se de cumplimiento a las disposiciones de la Seccion Quinta y Titulo II
     de la Seccion Setima del Libre Segundo de la Ley General de Sociedades.

ARTICULO 53(o).- En los casos de aumento de capital por nuevos aportes los
accionistas tienen el derecho preferencial para suscribir las acciones que se
creen a prorrata de su participacion accionaria. No pueden ejercer este derecho
los accionistas que se encuentren en mora en el pago de los dividendos pasivos,
y sus acciones no se computaran para establecer la prorrata de participacion en
el derecho de preferencia.

No existe el derecho de suscripcion preferente en los casos expresamente
contemplados en la Ley, o de cumplirse los requisitos previstos en el articulo
259 de la Ley General de Sociedades.

El derecho de suscripcion preferente se incorpora en un titulo denominado
Certificado de Suscripcion Preferente o mediante anotacion en cuenta, ambos
libremente transferibles, total o parcialmente.

ARTICULO 54(o).- Cualquier modificacion del Estatuto que importe nuevas
obligaciones de caracter economico para los accionistas, no rige para quienes no
prestaron su aprobacion en la Junta General o que lo hagan posteriormente de
manera dubitable.

<PAGE>

                                   TITULO VII
                         DE LA DISOLUCION Y LIQUIDACION

ARTICULO 55(o).- La Sociedad procedera a su disolucion y liquidacion en los
casos previstos por la ley y cuando lo resuelva la Junta General de Accionistas
convocada con este objeto.

ARTICULO 56(o).- La Sociedad disuelta conservara su personalidad juridica
mientras se realiza la liquidacion y hasta que se inscriba la extincion en el
Registro.

Al producirse la disolucion, la Junta General nombrara a los liquidadores.

                                   TITULO VIII
                             DISPOSICIONES GENERALES

ARTICULO 57(o).- La representacion de la Sociedad en las Juntas Generales de
Accionistas y/o asambleas de socios de las empresas en las que participe, la
tendran el Presidente del Directorio, en su ausencia el Vicepresidente o sus
respectivos alternos, si hubiesen sido elegidos.

En ausencia de ellos representara a la Sociedad el Director mas antiguo que no
tenga la calidad de Presidente o Vicepresidente, el Gerente General o quien la
Junta General de Accionistas o el Directorio designe. Es prueba suficiente de
las ausencias a que se refiere este articulo el que la persona designada para
reemplazar al ausente actue en su lugar.

ARTICULO 58(o).- La Sociedad indemnizara con el monto maximo y en la forma
permitida por la ley los danos que sufra cualquier persona como consecuencia de
acciones o procedimientos, sean estos penales, civiles, administrativos o de
cualquier otra naturaleza, y asumira los gastos de defensa y de cualquier otra
naturaleza relacionados con ellos o la amenaza de los mismos, cuando tales
acciones o procedimientos se originen en el hecho que dicha persona o su
causante sea o haya sido, a partir del 18 de marzo de 1994, Director o
funcionario de la Sociedad o haya sido Director o funcionario de otra compania a
solicitud de la Sociedad.

ARTICULO 59(o).- En todo lo no previsto por este Estatuto, la Sociedad se regira
por las disposiciones de la Ley General de Sociedades No 26887, sus ampliatorias
y modificatoria.
<PAGE>
                              AMENDED AND RESTATED
                              CORPORATE BY-LAWS OF
                       SOCIEDAD MINERA CERRO VERDE S.A.A.

                                     TITLE I
                                   DEFINITIONS

ARTICLE 1 Capitalized terms used in these by-laws shall have the following
meanings:

"Shares" means the shares of common voting stock of the Company.

"Company" or "Corporation" means Sociedad Minera Cerro Verde S.A.A.

"Capital Expenditures" means any expenditure or commitment which would be
capitalized or the expense of which would be deferred in accordance with accrual
basis accounting principles generally accepted in Peru.

"Closing Date" means [________________], 2005.

"Equity Securities" means Shares or warrants, options or other rights to acquire
Shares or any other securities (debt or otherwise) convertible into or
exercisable for Shares.

"Escalated" means, as applied to any dollar amount specified or provided herein,
such amount as increased (or decreased) as of the first day of January, 2007 and
the first day of each third calendar year thereafter by a percentage equal to
the percentage change in the final Producer Price Index for commodities (Base
date code: 8200, Series ID: WPU00000000)(as published by the Bureau of Labor
Statistics of the United States Department of Labor on
http://data/bls.gov/cgi-bin/srgate) for the month of July in the calendar year
immediately prior to such first day of January, from such final Index as so
published for July, 2004 (which is 147.4). If such Bureau shall cease to publish
such Index or shall substantially change the basis on which the same is
calculated from that used on the Closing Date, the Board, by a majority vote,
including all Qualified Directors, shall designate such other index as shall in
its judgment appear most closely to approximate the Producer Price Index for
commodities as constituted on the Closing Date. Failing such vote, such other
index shall be designated by an independent third party selected by the Board.

"Feasibility Study" means the Cerro Verde Primary Sulfide Feasibility Study,
dated May 2004, prepared by Fluor Canada Ltd., as modified by the Project
Update, dated September 2004.

"Force Majeure" means any cause or condition beyond the control of the party
affected thereby including without limitation any act of God, breakdown or
destruction of plant or equipment, shortage of or inability to secure fuel,
power, water, materials or labor, inability to secure or shortage of
transportation, delay in transportation, strike, lockout or other labor dispute,
public protest, civil unrest, war, flood, earthquake, government act or
regulation, blockade, riot, accident, lightning, fire, explosion, epidemic,
quarantine restriction or any other cause (whether of the kind specified herein
or otherwise).

"Market Value" means, as applied to any asset of the Company, the fair market
value thereof as determined by a majority vote of the Board, including the
affirmative vote of all Qualified Directors, or, failing such vote, by an
independent third party selected by the Board.

<PAGE>

"Mines" means the mines of the Company existing on the Closing Date and located
within the mining concessions owned by the Company on the Closing Date.

"Operator's Agreement" the Operator's Agreement between the Company and Minera
Phelps Dodge del Peru S.A.C., dated as of the Closing Date, as amended from time
to time, or any substitution therefor pursuant to the terms thereof.

"Participant" means each party to the Shareholders Agreement.

"Product" any copper concentrates, copper precipitates or electrowon copper
cathode, molybdenum and any other marketable mineral products including gold and
silver, produced by the Company (including at the Sulfide Project) and any
copper or other products produced for the Company by others under any toll
agreements providing for the treatment of production from the Mines or any
Project.

"Project" means any capital program or project commenced after the Closing Date
relating to the exploration or exploitation of any of the mining concessions and
other mining and exploration rights of the Company and any other rights and
liabilities thereafter acquired or assumed by the Company relating thereto.

"Project Capacity" means the aggregate of (i) the actual capability of the
Company's concentrator to process copper, molybdenum, silver and gold bearing
material generated in Company operations, (ii) the actual capability of the
Company's precipitation facilities to process solutions generated in Company
operations, (iii) the actual capacity of any Company solvent extraction
electrowinning plant(s) to process solutions generated in Company operations,
and (iv) the actual capability of any other facility hereafter operated by the
Company to process mineral bearing material generated in Company operations; in
each case on a substantially continuous basis assuming shutdowns for normal
scheduled maintenance and the absence of any uncontrollable circumstance.

"Project Debt" means all indebtedness, including but not limited to Senior Debt
and Subordinated Debt, for money borrowed or incurred by the Company to finance
the development and completion of any Project and to provide an appropriate
amount of working capital for the operation of such Project.

"Senior Project Lenders" means the lenders which become parties to the
agreements regarding the financing for the development, completion and operation
of any Project that ranks in respect of payment and upon liquidation senior to
the Subordinated Debt.

"Shareholders Agreement" the shareholders agreement, dated as of the Closing
Date, among SMM Cerro Verde Netherlands B.V., Sumitomo Metal Mining Co., Ltd.,
Sumitomo Corporation, Summit Global Management B.V., Cyprus Climax Metals
Company, Phelps Dodge Corporation, Compania De Minas Buenaventura S.A.A. and the
Company, as amended, modified or supplemented from time to time.

"Subordinated Debt" means indebtedness of the Company that ranks upon
liquidation junior to any financing to be provided by the any person who is not
an affiliate of the Company for the development, completion and operation of any
Project (the "Senior Debt") and ranks in respect of payment junior and is
subordinated to the Senior Debt in a manner satisfactory to the holders of the
Senior Debt.

"Sulfide Project" means the Project to develop a primary sulfide ore body
beneath the oxide ore body located within the mining concessions owned by the
Company on the Closing Date, which

                                       2

<PAGE>

shall be processed into copper concentrate as a final product at new facilities
that are to be developed generally as described in the Feasibility Study, with
such changes to such facilities as the Board determines, in its good faith
reasonable judgment, to be necessary or advisable and which do not substantially
alter the basic nature and scope of such facilities.

"Sulfide Project Completion Guarantee" means any completion agreement with or
other undertakings to the Senior Project lenders required pursuant to the
Sulfide Project Senior Debt Agreements.

"Sulfide Project Debt Agreements" means the definitive agreements providing for
the financing of the Sulfide Project Senior Debt.

                                    TITLE II
                   NAME, CORPORATE PURPOSE, TERM AND DOMICILE

ARTICLE 2.- The Company's name is "Sociedad Minera Cerro Verde S.A.A.".

ARTICLE 3.- The purpose of the Company is to engage in all kinds of mining
activities without reservation or limitation of any kind including, but not
restricted to, that of exploring and exploiting mining claims, smelting, casting
and refining minerals and metals.

The Company may also intervene in all kind of acts and enter into all sorts of
contracts permitted by law which assist the pursuance of its goals or which
otherwise are aimed at improving them or are convenient to the Company's
interests.

ARTICLE 4.- The Company's domicile is the city of Lima. However, it may
establish branches, agencies or offices at any location within the country or
abroad as per Board resolution.

ARTICLE 5.- The corporate term is indefinite. The Company began its activities
on June 1, 1993.

                                    TITLE III
                            CAPITAL STOCK AND SHARES

ARTICLE 6.- The Company's capital stock is U.S.$189,030,246.48 (one hundred
eighty-nine million, thirty thousand, two hundred forty-six U.S. dollars and
forty-eight U.S. cents) represented by 350,056,012 (three hundred and fifty
million, fifty-six thousand, twelve) shares with a nominal value of US$0.54
(fifty-four U.S. cents) each, fully subscribed and paid in, all of which have
the same rights and prerogatives.

ARTICLE 7. One share entitles its legitimate holder to be a shareholder and to
exercise the following rights:

     a)   To participate in any distribution of dividends and the net equity on
          winding up.

     b)   Intervene and vote at any General Shareholders' Meetings.

     c)   Supervise, in the manner established by law and the by-laws, the
          Company's business management.

                                       3

<PAGE>

     d)   To be preferred, with the exceptions envisaged by law and article 53
          of the by-laws, for the subscription of shares in the event of a
          capital increase and in any other placing of shares.

     e)   To be preferred, with the exceptions and in the manner envisaged by
          law, for the subscription of convertible bonds or any other
          convertible securities, which may be converted into shares.

     f)   Exercise appraisal rights to have the Company buying back shares in
          those cases envisaged by the law or the by-laws.

ARTICLE 8.- The shares will be nominative(1) and are indivisible.

The Company will consider as holder of the share whoever appears as such in the
Share Registry Book.

In the event that the ownership of any shares is in dispute, whoever appears
recorded in the Company as the owner of the shares will be acknowledged as the
one able to exercise a shareholder's rights, except in the case of a court order
to the contrary.

All of the shares belonging to a shareholder shall be represented by one sole
person, except for shares that belong individually to several persons but are
registered in the Company under the name of one custodian or depositary, in
which case each owner may represent his shares.

If any pledge or right to use and enjoy has been granted over the shares and, as
a result thereof, the right to vote has been assigned over part of them, such
shares may be represented in accordance with the pledge or usufruct contract,
provided that such agreement has been recorded in the Share Registry Book.

The same will apply in the event that a court order mandates that the voting
rights attributable to part of the shareholding stake of a shareholder are to be
exercised by a person different from such shareholder.

ARTICLE 9- Each share entitles its holder to one vote at the General
Shareholders' Meetings, except when dealing with the election of the Board, in
which case the provisions of Article 37 of the by-laws will apply.

ARTICLE 10- The shares may be represented by certificates, book entries or any
other manner permitted by law.

In case the shares are represented by certificates, the latter will bear the
Company's name, its domicile, duration, date of the deed of incorporation and
the corresponding Notary Public, any data related to their registration in the
Registry, the capital stock amount and the nominal value of each share, the
shares represented by the certificate, the class to which it belongs and the
rights and obligations inherent to the share, the amount disbursed or an
indication that it has been fully paid in, any charges or encumbrances that have
been established over the shares as well as the date of its issuance and the
certificate's number.

----------
(1)  Translation Note: The word nominative under Peruvian law is intended to
     mean that shares must always express the name of its holder, regardless of
     whether they are represented by certificates or in book entry form. Bearer
     Shares are not permitted by Peruvian law.

                                       4

<PAGE>

The share certificates will be signed by one Director and the General Manager or
by two Directors.

ARTICLE 11.- The Company will open and maintain a Share Registry Book in which
it will set down the creation, issuance and cancellation of shares, whether they
are represented by provisional or definitive certificates, successive transfers
and the establishment of rights and encumbrances over them, exchanges and splits
of shares and agreements between shareholders or between shareholders and any
third parties regarding the shares or the exercise of the rights inherent
therein with the limitations imposed by law, as well as any other corresponding
entries in accordance with these by-laws or the law.

The Share Registry Book shall be kept in a book especially opened for that
purpose or in loose sheets, duly legalized or by means of book entries or any
other manner permitted by law.

Except in the case of book entries, the entries in the Share Registry Book will
be signed by two Directors or by one Director and the General Manager.

ARTICLE 12.- Share transfers, the establishment of rights and encumbrances over
them, any exchanges and divisions and whatever agreements which are entered into
between the shareholders themselves or between the shareholders and any third
parties regarding the shares or the exercise of the rights inherent to them with
the restraints imposed by law, shall be notified to the Company for their
registration in the Share Registry Book.

ARTICLE 13.- Whenever the shares are represented by certificates, their transfer
may be evidenced by delivering to the Company the certificate endorsed in favor
of the acquirer or by any other written means. The Company will only accept an
endorsement made by whoever appears in its Share Registry Book as the holder of
the share or by his representative.

ARTICLE 14.- The acquisition of one or more shares implies that the shareholder
accepts the articles of incorporation and the Company's by-laws as well as any
resolutions adopted by the Shareholders' Meetings and the Board of Directors,
taken in accordance with the law and these By-laws.

The shareholders shall only be liable up to the nominal value of their shares.

ARTICLE 15.- The shares are indivisible. Any co-owners of shares shall appoint
one sole person to exercise their shareholders rights by means of a letter with
legalized signatures of co-owners representing more than 50% of the rights and
shares in co-ownership.

The co-owners shall be jointly and severally liable before the Company for any
obligation in connection with their capacity as shareholders.

ARTICLE 16.- In the event of deterioration, destruction, loss or robbery of one
or more share certificates, new ones may be issued once the shareholder complies
with all legal formalities that, regarding this matter, are in force the moment
such a case occurs and all costs related thereto shall be assumed by the
shareholder.

                                       5

<PAGE>

                                    TITLE IV
                              CORPORATE GOVERNANCE

                                    CHAPTER I
                               GENERAL PROVISIONS

ARTICLE 17.- The governance of the Company is entrusted to the General
Shareholders' Meeting, the Board of Directors and the Management, all of whom
shall perform their duties in accordance with these By-laws.

Both the General Shareholders' Meeting and the Board of Directors may meet off
the premises of the corporate domicile.

                                   CHAPTER II
                          GENERAL SHAREHOLDERS' MEETING

ARTICLE 18.- The General Shareholders' Meeting is the Company's supreme body.
The shareholders gathering in accordance with this chapter constitute the
General Shareholders' Meeting. All the shareholders, even dissidents and those
who did not take part in the meeting, are subject to the resolutions
legitimately adopted by the General Shareholders' Meeting.

ARTICLE 19.- The Shareholders' Meeting may only deal with those matters
envisaged in the summons, except in the case envisaged in article 22 of the
by-laws and in those cases that are permitted by law.

ARTICLE 20.- The General Shareholders' Meeting is obliged to meet within three
months after the fiscal year has ended.

In addition, the Board of Directors may summon a General Shareholders' Meeting
in the event that it needs to resolve matters of its competence, such as those
referred to in clauses (a) through (e) of Article 41 below, when deemed
necessary in the Company's interests or whenever requested to do so through a
Notary Public by one or more shareholders who represent at least five percent of
the Company's subscribed capital stock with right to vote, expressing in the
request the matters to be dealt with. In this last case, the General
Shareholders' Meeting shall be summoned by the Board of Directors within fifteen
(15) days following the request.(2)

If such requests were to be denied or the aforementioned deadline had elapsed
and no summons had been made, it shall be summoned by the National Supervisory
Commission for Companies and Securities.

ARTICLE 21.- The General Shareholders' Meeting must be summoned by the Board of
Directors by means of a notice published in the Official Gazette "El Peruano"
and in one of the daily newspapers of major circulation in Lima and it must
contain an indication of the day, time and place where the meeting will be held
and the issues it will deal with.

----------
(2)  Translation Note: The use of the word "summon" in the Peruvian legal
     context of this phrase means that the Board must call the General
     Shareholders Meeting within 15 days after the request was made, by
     following the procedure stated in Article 20 (i.e. publishing a notice in a
     newspaper, etc). It should not be understood to require that the General
     Shareholders Meeting be held within the 15-day period as such reading would
     be against Article 20.

                                       6

<PAGE>

The notice shall be published at least twenty five (25) days prior to General
Shareholders' Meeting. The date on which the Shareholders will meet in second
and third summons, should there be no quorum during the corresponding summons,
may also be published in the notification. In this case, no less than three (3)
days and no more than ten (10) days shall fall between one and the other summon.

However, if two or more summonses were not published in the same notice, the
General Shareholders' Meeting, in second summon, shall be held within thirty
(30) days following the first summon and the third summon within the same period
from the second one.

ARTICLE 22.- Notwithstanding what is set forth in the above mentioned articles,
the General Shareholders' Meeting will be deemed as duly summoned and validly
established when the shareholders representing all of the shares subscribed with
right to vote are in attendance and that the attendees unanimously agree to hold
the Meeting and deal with all of the issues on the agenda.

ARTICLE 23.- The object of the Annual General Shareholders Meeting is to:

     a)   Approve or disapprove the performance of the management as well as the
          financial statements for the previous fiscal year;

     b)   Decide how to apply any profits obtained, if any;

     c)   Regularly appoint the members of the Board of Directors in the manner
          provided in these by-laws and establish their remunerations, as well
          as appointing who will act as President and Vice-President of the
          Board of Directors;

     d)   Annually appoint external auditors, and

     e)   Deal with any other matters of competence of the General Shareholders'
          Meeting and any other issue included in the summoning notice.

ARTICLE 24.- The General Shareholders' Meeting is also entitled to :

     a)   Remove the members of the Board of Directors and appoint their
          replacements, as the case may be;

     b)   Amend the by-laws;

     c)   Increase or decrease capital stock;

     d)   Issue bonds;

     e)   Order special investigations and audits;

     f)   Transfer in a single transaction any assets whose total book value
          exceed 50% of the Company's capital stock;

     g)   Agree any transformation, merger, spin-off, reorganization,
          dissolution and winding up of the Company;

     h)   Resolve in any other cases in which the law or the by-laws order its
          intervention and any other matter of corporate interest, even
          regarding those matters over which the

                                       7

<PAGE>

          Board of Directors can decide, except when dealing with attributions
          that correspond only to the Board as mandated by the law or these
          by-laws.

ARTICLE 25- The holders of shares registered in the Share Registry Book at least
ten days prior to the Meeting, or their representatives, have the right to
attend the General Shareholders' Meetings.

ARTICLE 26.- The shareholders with right to attend the General Shareholders'
Meeting may be represented by some other person. This representation shall be
granted in writing and separately for each Meeting, except for powers of
attorney granted by public deed and, in any case, the powers of attorney shall
be registered no later than 24 hours prior to the time established for the
Meeting to be held.

ARTICLE 27.- The quorum will be calculated and established at the beginning of
the Meeting. Once it has been verified, the President will declare the Meeting
validly installed.

In those General Shareholders Meeting which are summoned to deal with matters
that, whether by law or this bylaws, require different quorums for the valid
adoption of resolutions in such regard, any shareholder may expressly request
that her shares shall not be taken into account to calculate a particular quorum
required by law, provided such a request is expressly made at the beginning of
the meeting.(3)

The shareholders whose shares join the Meeting after it has been declared
validly installed will not be included for establishing the quorum but they will
be permitted to exercise their right to vote.

ARTICLE 28.- Except when dealing with issues that are mentioned in the following
article and those in which the law or the by-laws require different quorums, for
holding the General Shareholders' Meeting in the first summons, shareholders
representing no less than half of the shares subscribed with right to vote will
be required to attend, and at second and third summonses shareholders
representing any number of shares will be sufficient to constitute a quorum.

The resolutions are adopted by absolute majority of subscribed shares with right
to vote in attendance.

ARTICLE 29.- When dealing with a capital stock increase or reduction, an
amendment of the by-laws, any bond issue, any transfer in a single transaction
of any assets whose book value exceeds 50% of the Company's capital stock,
transformation, merger, spin off, reorganization, dissolution and winding up of
the Company, 50% of the subscribed shares with right to vote are required in the
first summons. In the second summons it will suffice that at least 25% of the
subscribed shares with right to vote attend and if a quorum is still not
reached, the General Shareholders Meeting will be held in a third summon and in
which any number of subscribed shares with right to vote shall suffice.

----------
(3)  Translation Note: This is a provision which is expressly mandated by law.
     It is intended to provide shareholders with a mechanism whereby they may
     elect to have their shares counted as present for the adoption of
     resolutions dealing with certain matters and, conversely, considered as
     absent when determining the quorum for the valid discussion and adoption of
     resolution dealing with other matters. The rationale of this rule is found
     in the fact that there are certain matters which require a "qualified
     quorum" (as set forth in Article 28) for its valid adoption (i.e. mergers)
     and others which require just a "simple quorum" (as set forth in Article
     29) (i.e. dividend distributions).

                                       8

<PAGE>

In the cases mentioned in the preceding paragraph, the resolutions shall be
adopted by an absolute majority of the subscribed shares with right to vote
represented at the General Shareholders Meeting.

However, when the resolutions related to the issues mentioned in the first
paragraph of this article are to be adopted in compliance with a legal mandate,
the quorums and majority previously mentioned will not be required.

ARTICLE 30.- As contemplated in article 133 of the General Companies Law No
26887, the right to vote cannot be exercised by a shareholder if he has an
interest, whether in his own right or when acting on behalf of a third party,
that conflicts with those of the Company. Company Directors, Managers and
Proxies may not vote as shareholders when dealing with matters that refer to
their liability in any issue.

Nevertheless, shares regarding which there is no right to vote will be counted
when it comes to forming the quorum for the Meeting but they will not count when
establishing majorities of votes.

ARTICLE 31.- The General Shareholders' Meeting will be chaired by the President
of the Board or, in his absence, by the Vice-President of the Board. In the
absence of them both, the Meeting will be chaired by the Director who deputizes
for the President of the Board and, in his absence, by whichever Director
deputizes for the Vice-President. If all of the above regular and deputy
Directors are absent, the Meeting will be chaired by whoever it appoints for
this purpose.

The Company's General Manager shall act as Secretary and, in his absence,
whoever the General Shareholders Meeting appoints. Furthermore, in the event
that the General Manager chairs the Meeting, the Secretary will be whoever is
appointed as such by the Shareholders Meeting.

ARTICLE 32.- The sessions of General Shareholders' Meetings and the resolutions
adopted therein, will be recorded in the Book of Minutes legalized in accordance
with the Law or, otherwise, they will be typed in loose sheets and following the
procedures established by the regulations in force.

Each of the minutes will keep a record of the day, place and time when the
Meeting was held, an indication of whether it was held in first, second or third
summons, the names of the persons who acted as President and Secretary, the
manner and results of voting, the resolutions adopted and the list of attendees
with their domiciles, the number and series of shares with which they attended
and a specification of whether they attended on their own right or on behalf of
some other shareholder and, as the case may be, evidence that all publications
have been made in accordance with the law and these by-laws with an indication
of the newspapers and on which dates the notices of the summons have been
published.

The minutes may be prepared and approved at the Meeting or after it has been
held. When the minutes are approved during the Meeting, a record thereof must be
left and they must be signed at least by the President, the Secretary and three
shareholders appointed for that purpose.

When the minutes are not approved during the Meeting, the Shareholders will
specially appoint at least three shareholders so that, acting together with the
President and the Secretary, they can be reviewed, approved and signed within
ten (10) days after the Meeting has been held. The minutes shall be available to
the shareholders in attendance or their representatives who may record any
observations or disagreements by means of a Notary Public's letter.

                                       9

<PAGE>

When, for any reason, the minutes of any Meeting cannot be registered in the
corresponding book, a special document will be drawn up and will be opportunely
transcribed into the book. In the case envisaged in article 22 of these by-laws,
it will be obligatory for all of the shareholders to sign the minutes, unless
they had signed the list of attendees and in that list the number of shares that
they hold and the different issues to be dealt with on the agenda had been
recorded. In this event, it will suffice that the minutes be signed by the
President, the Secretary and one shareholder appointed for that purpose. The
list of attendees will be considered integral part of the minutes and
inseparable from them.

The minutes become legal the moment they are approved.

ARTICLE 33.- The Company must provide information requested, outside meetings,
by shareholders who represent at least five percent of the paid in capital
stock, provided that they are not confidential matters or issues whose
disclosure might harm the Company.

The National Supervisory Commission of Companies and Securities is to decide
whether the information is of a reserved or confidential nature in the event of
any discrepancy.

                                   CHAPTER III
                              CONCERNING THE BOARD

ARTICLE 34.- The Board shall consist of a minimum of five (5) and a maximum of
nine (9) members. The Shareholders Meeting shall determine, prior to any new
Board election, the number of members who will be part of the Board, by applying
the following rules:

(a)  The Board shall be comprised of five (5) members unless otherwise required
     by the provisions contained herein;

(b)  The Board shall be comprised of seven (7) members if any of the
     shareholders holding at least 16.67% of the Company's share capital
     immediately after the close of business on the Closing Date holds less than
     16.67% but at least 12.51% of the Company's share capital; and

(c)  The Board shall be comprised of nine (9) members if any of the shareholders
     holding at least 16.67% of the Company's share capital immediately after
     the close of business on the Closing Date holds less than 12.51% but at
     least 10.01% of the Company's share capital.

The Board shall immediately summon a General Shareholders Meeting after taking
notice of a reduction in the participation of any of the shareholders holding at
least 16.67% of the Company share capital immediately after the close of
business on the Closing Date below the percentage thresholds referred to in (b)
and (c) above, so that the Shareholders Meeting can proceed to adjust the new
Board size and elect new Board members.

Two deputy Directors may be elected for each Director in accordance with the
procedures set forth in Article 37 below. The deputy Directors, which shall be
identified as First Deputy and Second Deputy, will act in the event of any
impediment or absence of the Director, and the presence at a Board meeting of
any of the deputy Directors will suffice to fully and legally prove such absence
or impediment. Should both deputy Directors intend to act in the event of any
impediment or absence of the Director, the First Deputy shall prevail over the
Second Deputy.

                                       10

<PAGE>

Should it be foreseen that both the Director and both deputy Directors will be
absent or prevented from attending any Board meeting, such directorship may be
represented by a third party by means of a simple letter addressed to the Board.
Should both the Director and both deputy Directors be absent or prevented from
attending, and the Director and the deputy Directors sent letters to the Board
in order to be represented, the letter signed by the Director shall be deemed as
valid and prevailing. Also, the letter signed by the First Deputy shall prevail
over the letter signed by the Second Deputy.

ARTICLE 35.- The Directors will be elected for a term of 3 years, but they shall
remain in office even though their term has expired until new elections are held
and the ones chosen accept their appointments.

ARTICLE 36.- Any Director may be removed at any time by the General
Shareholders' Meeting.

In the event that a Director's seat is vacated as a result of death,
resignation, permanent impossibility of attending Board meetings, removal or any
other legal impediment, the vacancy left by a Director will be filled by the
deputy Director; if the deputy Director who assumed the seat vacated by the full
Director vacates such seat due to any of the causes referred to above or if no
deputy Directors had been elected, the other members of the Board will fill the
vacancy by an absolute majority of votes of the Directors in attendance
including the affirmative vote of all Qualified Directors.

The person or persons elected shall perform their duties until the period for
which the person or persons they are replacing has ended.

ARTICLE 37.- The Board must be established with representation of the minority
or be unanimously elected.

When the Board is established in representation of the minority, each share will
entitle the holder to as many votes as Directors are to be elected and each
voter may accumulate his votes in favor of one sole person or distribute them
among several. Those who obtain the most votes will be proclaimed Directors.

Any shareholder nominating one director candidate may also nominate two deputy
director candidates corresponding to such director candidate. A vote for a
director candidate shall also constitute a vote for the corresponding deputy
director candidates, if any.

If two or more persons obtain the same number of votes and they cannot join the
Board because of the total number of Directors established in the by-laws, lots
will be drawn to decide which ones will become Directors.

The elected Board members shall be separated in two different groups. Those
Board members who have been elected by a vote of less than 16% of the votes
entitled to be cast at the General Shareholders Meeting at which they were duly
elected shall belong to the group of "Regular Directors". Conversely, those
Board members who have been elected by a vote of at least 16% of the votes
entitled to be cast at the General Shareholders Meeting at which they were duly
elected shall belong to the group of "Qualified Directors." For purposes of
these bylaws, Regular and Qualified Directors shall have the same rights and
duties except as otherwise set forth in Articles 40 and 41 of these by-laws.

ARTICLE 38.- Meetings of the Board will be chaired by the President of the Board
and, in his absence, by the Vice-President and in the absence of the
Vice-President, by the President's

                                       11

<PAGE>

deputy Director and in the latter's absence by the Vice-President's deputy
Director. In the event that of all of them are absent or if deputy directors had
not been elected, whoever the Board decides will chair the meeting.

The General Manager or whoever the Board appoints will act as Secretary.

ARTICLE 39.- The position of Director is remunerated and the Board's
remunerations will be established by the General Shareholders' Meeting.

ARTICLE 40.- The Board shall meet every time it is summoned by the President or
whoever acts as such or when any of its members or the General Manager requires
the President or the acting President to do so. The President (or such other
person summoning any Meeting) shall consult the Directors in selecting the
place, date, and time of such Meetings, which may be held inside or outside of
Peru. The summons will be made at least ten (10) days before the Meeting by
notice whose receipt is to be acknowledged. If the President does not make the
summons within ten (10) days following the request or in the time envisaged
therein, the summons may be made by any of the Directors. In the event that, at
least three (3) days prior to a Board meeting, a Director notifies the President
(or such other person summoning the Meeting), that he or she will be unable to
attend the meeting at the time indicated in such notice, the President (or such
other person summoning the Meeting) shall postpone such meeting once for a
period of at least three (3) days, as may be necessary to allow such Director to
participate.

Notwithstanding the preceding paragraph, the Board will be deemed properly
convened if all of the Directors are present and they unanimously agree to hold
the meeting and the matters that are to be dealt in it.

Furthermore, (i) the Board may hold virtual meetings using written, electronic
or any other media that enable communication and guarantee the authenticity of
resolutions, although any Director may oppose to use this procedure and request
that the meeting be held in person; and (ii) the Board may adopt any decision
and pass any resolution by unanimous written consent, as permitted by article
169 of the General Companies Law No 26887.

Any Director may subject to the consideration of the Board whatever matters
which are of interest to the Company.

ARTICLE 41.- The quorum for the Board is half plus one of its members. If the
number of Directors is odd, the quorum will be the next immediate whole number
over its half. Each Director is entitled to one vote.

All resolutions must be adopted by an absolute majority of votes of the
Directors in attendance and, in the event of a draw, the President will cast the
deciding vote. However, (i) the actions described below in paragraphs (a)
through (l) shall also require the affirmative vote of each Qualified Director
and (ii) the actions described below in paragraphs (a) through (e) shall also be
submitted to a shareholders' vote if required by law:

(a)  any material amendment to the by-laws of the Company (other than any
     amendment necessary to effect an issuance of Equity Securities that
     requires only a majority vote pursuant to paragraph (d) below);

(b)  any merger, consolidation or amalgamation of the Company with or into any
     other entity, or any liquidation or dissolution of the Company or
     initiation of bankruptcy proceedings by the Company;

                                       12

<PAGE>

(c)  any change in the legal form of the Company;

(d)  any issuance of Equity Securities, except for any such issuances
     consummated in accordance with section 10 of the Shareholders Agreement if
     immediately after such issuance in accordance with section 10 of the
     Shareholders Agreement (after giving full effect to any conversion or
     exercise rights) (i) the shareholder holding the majority of the capital
     stock of the Company as of the Closing Date continues to hold, directly or
     indirectly, a Respective Share of at least 50% and (ii) no Person except
     those who were Participants prior to such issuance holds, directly or
     indirectly a Respective Share of 24.99% or more;

(e)  any recommendation that the shareholders approve a change in the policy
     adopted by the shareholders on dividends and distributions (other than any
     change adopted to facilitate the financing of Capital Expenditures
     authorized by the Board pursuant to paragraph (j) below);

(f)  any material amendment of the Operator's Agreement, other than amendments
     required by the Senior Project Lenders;

(g)  any sale, lease (as lessor) or other disposition by the Company, (x) in a
     single transaction or series of related transactions, of any assets (other
     than Products) having a Market Value at such time in excess of $20 million
     Escalated, (y) of Company property which contains ore reserves, as
     classified in the books and records of the Company, or which contains other
     mineral bearing material believed by the Board to be commercially viable or
     (z) any mining concessions, beneficiation concessions, easements or water
     rights necessary to operate the Sulfide Project;

(h)  the creation by the Company of any mortgage, lien, pledge, charge or other
     encumbrance on, security interest in, or production payment burdening, any
     Company property other than (w) in connection with Project Debt or any
     refinancing thereof, (x) any purchase money mortgage securing indebtedness
     of less than $10 million Escalated, (y) any non-consensual lien, charge
     or encumbrance, created in the ordinary course of business, which
     does not secure indebtedness for borrowed money and will not materially
     impair the use of such property or (z) in connection with - the
     financing of Capital Expenditures authorized by the Board in accordance
     with paragraph (j) below;

(i)  any agreement or transaction (or series of related agreements or
     transactions) between the Company and the shareholder holding the majority
     of the capital stock of the Company as of the Closing Date or any Affiliate
     of the shareholder holding the majority of the capital stock of the Company
     as of the Closing Date (other than any agreement or transaction
     contemplated by the Shareholders Agreement including those provided for in
     sections 7.3 or 11.3 of the Shareholders Agreement) involving assets having
     a Market Value at such time, involving annual rental payments or involving
     the payment or guaranty by the Company of an amount, in any such case in
     excess of $3 million Escalated;

                                       13

<PAGE>

(j)  any Capital Expenditure or series of Capital Expenditures (or any lease or
     series of related leases, as lessee) by the Company relating to the same
     capital program or Project, exceeding (or of assets having a Market Value
     in excess of) $40 million Escalated, but excluding any such Capital
     Expenditure (or lease) or series of related Capital Expenditures (or
     leases) which in the judgment of the Board is necessary or appropriate in
     order (x) to develop or implement any Project generally in accordance
     with any final bankable feasibility study, if any, with such changes as the
     Board determines in its good faith reasonable judgment to be necessary or
     desirable and which do not substantially alter the basic nature and scope
     of such Project, (y) to maintain or increase the Project Capacity or
     expand the facilities of any Mine or Project, or (z) to comply with
     applicable law;

(k)  the decision to cease operation or construction of the Sulfide Project for
     180 continuous days or more with no reasonable prospect of resumption
     (other than as a result of Force Majeure); and

(l)  so long as the Sulfide Project Completion Guarantees have not terminated,
     any amendment to the Sulfide Project Senior Debt Agreements to increase the
     principal amount due thereunder, to defer the payment of principal or
     interest on the Sulfide Project Senior Debt, to increase the interest rate
     applicable thereto or to increase the commitments thereunder.

ARTICLE 42.- The resolutions adopted by the Board shall be recorded in the
minutes drawn up in a special book legalized in accordance with the law or on
loose sheets in accordance with what is set forth in article 32. When for any
circumstance, the minutes cannot be set down in the book or in the corresponding
loose sheets, a special document will be drafted and they will be opportunely
transcribed.

The minutes will be signed by whoever acted as President and Secretary or by
whoever was expressly appointed for that purpose. However, the Board may agree
during the meeting that it will be signed by other persons than the President
and the Secretary, all of the Directors or certain members of the Board in
addition to the President and the Secretary. In any event, the minutes will be
signed by those Directors who have shown their willingness at the meeting to do
so within 10 business days following the meeting or the resolution, as may
correspond.

The minutes shall indicate, if a meeting has been held: the date, time and place
of the meeting and the names of those attending. If no meeting has been held:
the manner and circumstances in which the resolutions were adopted and, in any
event, the matters dealt with, the resolutions adopted and the number of votes
as well as whatever other circumstances the Directors wish to record.

ARTICLE 43.- The Board has all the powers of legal representation and management
necessary for the administration of the Company within its corporate purpose,
with the sole exception of matters that the law or these by-laws attribute to
the General Shareholders' Meeting.

Therefore, and although this list is not by any means restricted thereto but
merely referential, the Board may take the following actions:

     a)   Summon a General Shareholders' Meeting.

     b)   Regulate its own functions and elect its President and Vice-President
          if the Shareholders have not already done so.

                                       14

<PAGE>

     c)   Annually submit to the shareholders, the annual report and the
          financial statements, recommending how the profits, if any, should be
          allocated.

     d)   Accept the resignation of its members and provide vacancies in the
          cases provided for by law or these by-laws.

     e)   Appoint and remove Managers and, if it deems it convenient or
          appropriate, any other officers of the Company, determining their
          obligations and remunerations and granting and revoking their powers
          of attorney with whatever attributions it deems appropriate. The Board
          may also appoint representatives, consultants, agents, commissioners
          and bankers to work for the Company.

     f)   Grant the powers of attorney it may deem convenient.

     g)   Decide the initiation, continuation, abandonment or transaction of
          judicial and/or administrative proceedings.

     h)   Enter into all kinds of contracts and commitments of any nature, enter
          into transactions, deal with all sorts of businesses, submit disputes
          to arbitration and, although this list is not restrictive but merely
          referential, encumber and pledge the Company's movable property and
          real estate, including any mining rights, purchase and give or take in
          commodatum, lease or sub-lease, as lessor, sub-lessor, lessee or
          sub-lessee, all kinds of movable property and real estate; give and
          take in assignment mining rights, enter into option contracts, grant
          and revoke guarantees and, generally speaking, do whatever is needed
          or deemed appropriate for complying with the Company's purpose.

     i)   Open and close accounts of any type in banking and financial
          institutions; deposit and withdraw money from the Company's accounts;
          open and close letters of credit with or without guarantee, agree to
          overdrafts and upfront credits in commercial account; take out loans;
          agree and verify all kinds of credit operations, enter into
          documentary credit contracts; request guarantees; order credits,
          debits and transfers, hire safe deposit boxes, operate them and cancel
          them and, in general, perform all kinds of banking and financial
          operations.

     j)   Draw, endorse and protest checks; draw, accept, endorse, be surety,
          renew, discount and protest bills of exchange, bankers' drafts and
          promissory notes; endorse bills of lading; obtain, receive and endorse
          warrants and certificates of deposit and, in general, perform all
          kinds of operations regarding securities.

     k)   Approve any leasing operations that the Company may enter into in
          connection to its corporate purpose.

     l)   In general, manage the Company's operations and financial matters in
          accordance with the by-laws and the resolutions adopted by the General
          Shareholders' Meetings as well as supervising how the Company evolves
          and issuing any internal regulations it may deem necessary.

     m)   Perform any other attributions that are expressly or tacitly derived
          from the by-laws.

                                       15

<PAGE>

Any permanent delegation of one or more of the powers of the Board and the
appointment of the Directors who have to exercise such delegation will require,
for its validity, two thirds of the votes of the members of the Board in favor
of its registration at the Registry.

Rendering accounts and presenting the balance sheets at the Annual General
Shareholders' Meeting may not be delegated nor the powers that the latter grants
to the Board, unless expressly authorized.

ARTICLE 44.- The following persons may not become Directors :

     a)   Anybody who has a lawsuit pending against the Company whilst acting as
          plaintiff or who is subject to any corporate liability action.

     b)   Anybody handling interests that are opposed to those of the Company or
          who undertake harmful acts against it.

     c)   Unfit or bankrupt individuals.

     d)   Public Officers or Servants who are rendering services at public
          entities whose duties are directly linked to the economic sector in
          which the Company performs its business, unless they represent the
          State's participation in such companies, and

     e)   Any other mentioned by the law.

The Board shall decide on these causes and, unless a resignation occurs, it will
submit them to the consideration of General Shareholders' Meeting applying what
is set forth in article 36 until the Meeting appoints the person who will
replace the Director removed from his position.

                                   CHAPTER IV
                                   MANAGEMENT

ARTICLE 45.- The Company shall have one or more Managers who will be appointed
by the Board. The Manager may be an individual or a legal entity and in the
latter case, it shall appoint an individual to represent it for this purpose.

The Manager may also serve as President of the Board and/or as a Director.

In case more than one Manager is appointed, a General Manager will be appointed,
who will have all the powers and attributions provided to the Manager in the
by-laws. If that appointment is not expressly made, the sole or first Manager
appointed will be considered the General Manager.

The provisions of article 44 of the by-laws are applicable to Managers.

ARTICLE 46.- The General Manager is the executor of all of the Board and General
Shareholders Meeting's resolutions and he therefore holds the Company's judicial
and administrative representation. The General Manager shall also have such
other the powers granted by law and those that in each case are granted by the
Board and/or the General Shareholders Meeting.

ARTICLE 47.- In the event of the General Manager's absence or impediment, the
Board will appoint another person to replace him until such time as the former
returns,

                                       16

<PAGE>

                                     TITLE V
                FINANCIAL STATEMENTS AND DISTRIBUTION OF PROFITS.

ARTICLE 48.- The Board, in accordance with what is set forth by law, must
prepare the annual report, the financial statements and a proposal of how the
profits, if any, are to be allocated.

ARTICLE 49.- The financial statements will be prepared in accordance with the
General Companies Law and in any other legal provisions applicable.

The Board shall procure that the documents mentioned in the previous article are
available to the shareholders at the Company's corporate domicile, as from the
day following the publication of the summons to the General Shareholders'
Meeting.

The Company shall conduct an annual audit by external auditors who are enabled
and registered in the Sole Registry of Company Auditors.

ARTICLE 50.- Dividends may only be declared as a result of profits that are
actually obtained or from reserves in cash that are freely disposable, provided
that the Company's net equity is not less than its paid in capital stock.
Interim dividends may also be paid.

ARTICLE 51.- Profits will be allocated in the manner and when determined by the
General Shareholders' Meeting, always in accordance with the law.

                                    TITLE VI
       AMENDMENTS TO THE BY-LAWS AND CAPITAL STOCK INCREASES AND DECREASES

ARTICLE 52.- The following is required for any amendment of the by-laws :

     a)   Clearly express in any summons to the General Shareholders' Meeting
          the issues that are to be discussed at such Meeting;

     b)   That a resolution be adopted by the General Shareholders Meeting in
          accordance with article 29 of the by-laws;

     c)   That the provisions of Section Five and Title II of Section Seven of
          Book Two of the General Companies Law be complied with.

ARTICLE 53.- In cases involving capital stock increases as a result of any new
contributions, the shareholders are preferentially entitled to subscribe the
shares that are created pro rata to each one's shareholding interest in the
Company. Shareholders who fall into arrears in the payment of any unpaid par
value may not exercise this right and their shares will not be counted when it
comes to establishing their pro rata of participation in the preemptive right.

Preemptive rights do not exist in the cases expressly envisaged in the Law or if
the requirements provided in article 259 of the General Companies Law are
complied with.

The preemptive right is incorporated into a title called a Certificate of
Preferential Subscription or by means of book entries, both of which are freely
transferable either wholly or partially.

                                       17

<PAGE>

ARTICLE 54.- Any amendment to the by-laws that implies new obligations of a
financial nature for the shareholders does not apply to those who did not
approve them at the General Shareholders' Meeting or who did so thereafter in a
dubious manner.

                                    TITLE VII
                           DISSOLUTION AND WINDING UP

ARTICLE 55.- The Company will proceed to its dissolution and winding up in those
cases provided by law and when is decided by the General Shareholders' Meeting
summoned for such effect.

ARTICLE 56.- The Company, once it has been dissolved, will keep its legal
personality whilst it is being wound up and until its extinction has been
recorded in the Registry.

Once dissolution occurs, the General Shareholders' Meeting will appoint the
Receivers.

                                   TITLE VIII
                               GENERAL PROVISIONS

ARTICLE 57.- The Company will be represented at General Shareholders' Meetings
and/or any assemblies of shareholders of the companies in which it participates,
by the President of the Board or, in his absence, by the Vice-President or their
respective deputies, if any had been elected.

In the absence of any of them, the Company will be represented by the oldest
sitting Director who is neither the President or the Vice-President, the General
Manager or whoever the General Shareholders' Meeting or the Board appoints. To
prove any absences such as the ones referred to in this article, it will suffice
that the person appointed as a replacement to the one absent acts in his place.

ARTICLE 58.- The Company will indemnify, with the maximum amount and in the
manner permitted by law, any damage caused to anybody as a result of any
criminal, civil, administrative actions or proceedings or those of any other
nature and it will assume any defense expenses and those of any other nature
related thereto or any threat thereof, when such action or proceedings have
their origin in the fact that such a person or his principal is or has been
since March 18, 1994, a Director or an official of the Company or has been a
Director or an official of another company at the Company's behest.

ARTICLE 59.- For anything not provided for in these by-laws, the Company will be
governed by the provisions of the General Companies Law No 26887 and any
amendments thereto and extensions thereof.

                                       18
<PAGE>
                                                                       Exhibit 3

================================================================================

                             SHAREHOLDERS AGREEMENT

                                      among

                        SMM CERRO VERDE NETHERLANDS B.V.
                              (a Dutch corporation)

                         SUMITOMO METAL MINING CO., LTD.
                            (a Japanese corporation)

                              SUMITOMO CORPORATION
                            (a Japanese corporation)

                          SUMMIT GLOBAL MANAGEMENT B.V.
                              (a Dutch corporation)

                      COMPANIA DE MINAS BUENAVENTURA S.A.A.
                      (a Peruvian sociedad anonima abierta)

                          CYPRUS CLIMAX METALS COMPANY
                            (a Delaware corporation)

                            PHELPS DODGE CORPORATION
                            (a New York corporation)

                                       and

                       SOCIEDAD MINERA CERRO VERDE S.A.A.
                      (a Peruvian sociedad anonima abierta)

                        Dated as of _______________, 2005

================================================================================

<PAGE>

                                Table of Contents

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>   <C>                                                                   <C>
1.    Definitions........................................................     1

2.    Board of Directors.................................................     6

      2.1     Management Duties..........................................     6
      2.2     Members....................................................     7

3.    Waiver of Distribution Rights......................................     8

4.    Programs and Budgets...............................................     8

5.    Accounting.........................................................     8

      5.1     Books and Records..........................................     8
      5.2     Unaudited Financial Statements.............................     9
      5.3     Audit......................................................     9
      5.4     Fiscal Year................................................     9

6.    Operation of the Mines and any Project.............................     9

      6.1     Operation..................................................     9
      6.2     Secondment of Sumitomo Participant Personnel...............     9
      6.3     No Concentrate Leaching Facility...........................    10

7.    Concentrate Purchase by the Sumitomo Participant and
         the PD Participant..............................................    10

      7.1     Sumitomo Participant's Right to Purchase Pro Rata Share....    10
      7.2     Consideration of Additional Concentrate or other Product
                 Sales to the Sumitomo Participant.......................    11
      7.3     Consideration of Sales to the PD Participant...............    11

8.    Operating Levels...................................................    12

9.    Transfers of Interests; Rights of First Refusal....................    12

      9.1     General Prohibition........................................    12
      9.2     Permitted Encumbrances.....................................    12
      9.3     Sales by Minority Participants.............................    13
      9.4     Sales by the PD Participant................................    14
      9.5     Compliance with Peruvian Tender Offer Rules................    16
      9.6     Separate Sales of Subordinated Debt by the
                 PD Participant..........................................    17
      9.7     Substitution of Participant................................    17
      9.8     Transfer Restriction Extension.............................    17
      9.9     Company Disclaimer of Transfer Restrictions................    18
</TABLE>

                                       i

<PAGE>

                             Table of Contents
                                (continued)

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>   <C>                                                                   <C>
10.   Issuances of Equity Securities and/or Subordinated Debt............    18

      10.1    Issuance of Equity Securities and/or Subordinated Debt
                 for Project Completion..................................    18
      10.2    Additional Issuance of Equity Securities and/or
                 Subordinated Debt.......................................    19

11.   Competition; Business Opportunities; Standstill; Transactions
         with Affiliates and Other Arrangements..........................    20

      11.1    Competition; Business Opportunities........................    20
      11.2    Standstill.................................................    20
      11.3    Transactions with Affiliates...............................    21
      11.4    Use of Proceeds............................................    21
      11.5    Status Reports.............................................    21
      11.6    Approval of Minutes........................................    21
      11.7    Virtual Meetings...........................................    21
      11.8    Estatutos..................................................    21
      11.9    Sulfide Project............................................    22
      11.10   Registration of this Agreement.............................    22
      11.11   Support of Senior Project Debt.............................    22
      11.12   Covenants of PDC, SMM, SC and SGM..........................    22

12.   Confidentiality; Conflicts of Interest.............................    23

13.   Miscellaneous......................................................    24

      13.1    Implied Covenants..........................................    24
      13.2    Notices....................................................    24
      13.3    Entire Agreement...........................................    27
      13.4    Amendments, Waivers, etc...................................    27
      13.5    No Other Arrangements or Agreements........................    27
      13.6    Severability...............................................    27
      13.7    Governing Law..............................................    27
      13.8    Arbitration................................................    28
      13.9    Binding Effect.............................................    29
      13.10   Headings...................................................    29
      13.11   Counterparts...............................................    29
      13.12   Supermajority Voting.......................................    29
      13.13   Conflicts with Estatutos or Peruvian Law...................    29
</TABLE>

                                       ii

<PAGE>

          SHAREHOLDERS AGREEMENT, dated as of ____, 2005, among SMM CERRO VERDE
NETHERLANDS B.V., a Dutch corporation (the "Sumitomo Participant"), SUMITOMO
METAL MINING CO., LTD., a Japanese corporation ("SMM"), SUMITOMO CORPORATION, a
Japanese corporation ("SC"), SUMMIT GLOBAL MANAGEMENT B.V., a Dutch corporation
("SGM"), CYPRUS CLIMAX METALS COMPANY, a Delaware corporation (the "PD
Participant"), PHELPS DODGE CORPORATION, a New York corporation ("PDC"),
COMPANIA DE MINAS BUENAVENTURA S.A.A., a Peruvian sociedad anonima abierta
("BVN"), and SOCIEDAD MINERA CERRO VERDE S.A.A., a Peruvian sociedad anonima
abierta (the "Company"). Undefined capitalized terms shall have the meanings set
forth in the Participation Agreement defined below.

                                   WITNESSETH:

          WHEREAS, the Sumitomo Participant, the PD Participant and BVN,
together with certain other entities, are parties to a Participation Agreement,
dated as of March 16, 2005 (the "Participation Agreement"), providing for the
Sumitomo Participant and BVN to acquire Capital Increase Shares by participating
in the General Capital Increase;

          WHEREAS, the Participation Agreement contemplates that the execution
and delivery of this Agreement will occur on the Closing Date of the General
Capital Increase; and

          WHEREAS, the parties hereto wish to provide for certain matters
relating to the governance and ownership of shares of the Company;

          NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein set forth, the parties hereto agree as follows:

1. Definitions. The following capitalized terms shall have the following
meanings:

          AAA: the meaning given in section 13.8(c).

          Acceptance Notice: the meaning given in section 10.2.

          Additional Participant: any Person which becomes a party to this
Agreement and a Participant in accordance with the provisions of section 9 or
section 10.

          Adjusted Respective Share: for any Participant, the percentage
interest of such Participant in the total number of shares of Common Stock held
by the Participants from time to time.

          Affiliate: with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.

<PAGE>

          Agreement: this Shareholders Agreement, as amended, modified or
supplemented from time to time.

          Board: the board of directors of the Company.

          Business Day: any day other than (i) a Saturday, Sunday, national
holiday in the United States, the Netherlands or the Republic of Peru; (ii) a
day on which state or national banking institutions in the State of Arizona or
the State of New York or banking institutions in the Netherlands or the Republic
of Peru are not open for the conduct of normal banking business; or (iii) a day
on which the BVL is not open for the conduct of business.

          BVL: Bolsa de Valores de Lima.

          BVN: the meaning given in the first paragraph of this Agreement.

          Capital Expenditure: any expenditure or commitment which would be
capitalized or the expense of which would be deferred in accordance with accrual
basis accounting principles generally accepted in Peru.

          CAVALI: Caja de Valores y Liquidaciones de Lima ICLV S.A.

          Claimant: the meaning given in section 13.8(b).

          Common Stock: common voting stock, par value U.S.$0.5409 per share, of
the Company.

          Company: the meaning given in the first paragraph of this Agreement.

          Completion Funding Notice: the meaning given in section 10.1.

          Confidential Information: the meaning given in section 12(a).

          Defendant: the meaning given in section 13.8(b).

          Delivery and Processing Expenses: any cost or expense, determined on
an accrual basis in accordance with accounting principles generally accepted in
Peru, related to the transportation, handling, insurance or processing of
Products by the Company after such Products have been loaded on board ship at
the port of embarkation from Peru or, if delivery is within Peru, after the
purchaser of such Products has assumed the risk of loss.

          Electing Participants: the meaning given in section 10.2.

                                       2

<PAGE>

          Equity Securities: Shares or warrants, options or other rights to
acquire Shares or any other securities (debt or otherwise) convertible into or
exercisable for Shares.

          Feasibility Study: the Cerro Verde Primary Sulfide Feasibility Study,
dated May 2004, prepared by Fluor Canada, Ltd., as modified by the Project
Update, dated September 2004.

          General Capital Increase: the meaning given in the fourth recital of
the Participation Agreement.

          Issuance Notice: the meaning given in section 10.2.

          Mines: the mines existing as of the date hereof and located within the
mining concessions owned by the Company identified in Exhibit 11 to the
Participation Agreement.

          Offer Consideration Period: the meaning given in section 9.3(a).

          Offering Participant: the meaning given in section 9.3(a).

          Operating Expense: any operating cost or expense determined on an
accrual basis in accordance with accounting principles generally accepted in
Peru other than any depreciation, depletion, amortization or other charge with
respect to costs or expenses capitalized or deferred in accordance with such
accounting principles and other than any cost or expense related to the
transportation, handling, insurance or processing of Products after such
Products have been loaded on board ship at the port of embarkation from Peru or,
if delivery is within Peru, after the purchaser of such Products has assumed the
risk of loss.

          Operator: Minera Phelps Dodge del Peru S.A.C., a Peruvian sociedad
anonima cerrada and an indirect wholly-owned subsidiary of PDC, which shall act
as operator pursuant to the Operator's Agreement, or any entity which shall
replace such corporation as operator.

          Operator's Agreement: the Operator's Agreement between the Company and
Minera Phelps Dodge del Peru S.A.C., dated the date hereof, as amended from time
to time, or any substitution therefor pursuant to the terms thereof.

          Participant Nominees: the meaning given in section 11.6.

          Participants: the PD Participant, the Sumitomo Participant, BVN and
any Additional Participant.

          Participation Agreement: the meaning given in the first recital.

                                       3

<PAGE>

          PDC: Phelps Dodge Corporation, a New York corporation.

          PD Mining: Phelps Dodge Mining Company, a division of PDC.

          PD Participant: the meaning given in the first paragraph of this
Agreement.

          Person: any individual, corporation, partnership, association, public
body, governmental authority or other entity.

          Post-Tender Maximum Purchase Amount: the meaning given in section
9.5(a)(iv).

          Preemptive Right Offering Participant: the meaning given in section
9.3(b).

          Preemptive Rights: the meaning given in section 9.3(a).

          Products: any copper concentrates, copper precipitates or electrowon
copper cathode, molybdenum and any other marketable mineral products including
gold and silver, produced by the Company (including at the Sulfide Project) and
any copper or other products produced for the Company by others under any toll
agreements providing for the treatment of production from the Mines or any
Project.

          Project: any project commenced after the date hereof relating to the
exploration or exploitation of any of the mining concessions and other mining
and exploration rights of the Company (including without limitation, the Sulfide
Project) and any other rights or liabilities thereafter acquired or assumed by
the Company relating thereto.

          Project Capacity: the aggregate of (i) the actual capability of the
Company's concentrator to process copper, molybdenum, silver and gold bearing
material generated in Company operations, (ii) the actual capability of the
Company's precipitation facilities to process solutions generated in Company
operations, (iii) the actual capacity of any Company solvent extraction
electrowinning plant(s) to process solutions generated in Company operations,
and (iv) the actual capability of any other facility hereafter operated by the
Company to process mineral bearing material generated in Company operations; in
each case on a substantially continuous basis assuming shutdowns for normal
scheduled maintenance and the absence of any uncontrollable circumstance.

          Project Debt: all indebtedness, including but not limited to Senior
Project Debt and Subordinated Debt, for money borrowed or incurred by the
Company to finance

                                       4

<PAGE>

the development and completion of any Project and to provide an appropriate
amount of working capital for the operation of such Project.

          Project Debt Agreements: the definitive agreements providing for the
Project Debt.

          Purchaser: the meaning given in section 10.1.

          Purchasing Participant: the meaning given in section 9.5.

          PWC: PricewaterhouseCoopers.

          Respective Share: for any Participant, the percentage interest of such
Participant in the total number of shares of Common Stock outstanding from time
to time.

          Sale Acceptance Notice: the meaning given in section 9.3(a).

          SC: Sumitomo Corporation, a Japanese corporation.

          Senior Project Debt: financing for the development, completion and
operation of any Project that ranks in respect of payment and upon liquidation
senior to the Subordinated Debt.

          Senior Project Debt Agreements: the definitive agreements providing
for the Senior Project Debt.

          Senior Project Lenders: the lenders which become parties to the Senior
Project Debt Agreements.

          SGM: Summit Global Management B.V., a Dutch corporation.

          Shares: shares of capital stock in the Company.

          SMM: Sumitomo Metal Mining Co., Ltd., a Japanese corporation.

          SMM Concentrate Agreement: the concentrate sales agreement between the
Company and SMM dated the date hereof.

          Sponsor Finance Company: any wholly-owned, directly or indirectly,
subsidiary of PDC, BVN or the Sumitomo Participant Parents which holds notes
evidencing Subordinated Debt.

                                       5

<PAGE>

          Stability Agreement: the Agreement for Investment Promotion Measures
and Guarantees, dated February 13, 1998, between the Company and the Government
of Peru acting through the Central Reserve Bank of Peru.

          Subject Offering Participant: the meaning given in section 9.5(iii).

          Subject Securities: the meaning given in section 9.5(i).

          Subordinated Debt: indebtedness of the Company (including but not
limited to indebtedness owing to Sponsor Finance Companies, the Participants or
their respective Affiliates) that ranks upon liquidation junior to the Senior
Project Debt and ranks in respect of payment junior and is subordinated to the
Senior Project Debt in a manner satisfactory to the holders of the Senior
Project Debt.

          Sulfide Project: the project to develop a primary sulfide ore body
beneath the oxide ore body located within the mining concessions owned by Cerro
Verde identified in Exhibit 11 to the Participation Agreement, which shall be
processed into copper concentrate as a final product at new facilities that are
to be developed generally as described in the Feasibility Study, with such
changes to such facilities as the Board determines, in its good faith reasonable
judgment, to be necessary or advisable and which do not substantially alter the
basic nature and scope of such facilities.

          Sulfide Project Senior Debt Agreements: the meaning given in section
11.11.

          Sumitomo Participant: the meaning given in the first paragraph of this
Agreement.

          Sumitomo Participant Parents: SCHN, SMM and SC.

          Tender Offer: the meaning given in section 9.5.

          Ultimate Parent: the meaning given in section 9.2.

2. Board of Directors.

          2.1 Management Duties. Except for such matters as shall be reserved
for shareholders of the Company by Peruvian law, the business of the Company
shall be managed under the direction of the Board. In this connection, without
limiting the generality of the foregoing, the Board shall (i) control and
supervise the Operator and the activities of the employees, independent
contractors and agents of the Operator used in connection with the Mines and any
Project, (ii) consider and approve any toll agreements under which the Company
would produce products for others, (iii) consider and approve

                                       6

<PAGE>

the annual programs and budgets of the Company and any intermediate or long-term
plans of the Company, and amendments thereto, (iv) recommend the financial
statements of the Company to be approved by the shareholders of the Company at
the annual meeting of shareholders, (v) recommend the independent auditors for
the Company, who shall be selected by the shareholders of the Company at the
annual meeting of shareholders, and (vi) authorize such actions as it may deem
necessary or appropriate in connection with, and discuss other matters of
importance relating to, the Company.

          2.2 Members. At any time that the shareholders of the Company are
permitted by Peruvian law to nominate individuals for election as members of the
Board, the PD Participant shall nominate three director candidates and two
deputy director candidates for each such director candidate, the Sumitomo
Participant shall nominate one director candidate and two deputy director
candidates for such director candidate, and BVN shall nominate one director
candidate and two deputy director candidates for such director candidate;
provided that in the event that the Sumitomo Participant or BVN owns a
Respective Share of less than 16.67% and more than 12.51% and the size of the
Board is expanded to seven members as contemplated by Article 34 of the
estatutos of the Company or otherwise, the PD Participant shall nominate up to
five director candidates and two deputy director candidates for each such
director candidate, the Sumitomo Participant shall nominate one director
candidate and two deputy director candidates for such director candidate and BVN
shall nominate one director candidate and two deputy director candidates for
such director candidate; provided further, that in the event that the Sumitomo
Participant or BVN owns a Respective Share of less than 12.51% and more than
10.01% and the size of the Board is expanded to nine members as contemplated by
Article 34 of the estatutos of the Company or otherwise, the PD Participant
shall nominate up to seven director candidates and two deputy director
candidates for each such director candidate, the Sumitomo Participant shall
nominate one director candidate and two deputy director candidates for such
director candidate and BVN shall nominate one director candidate and two deputy
director candidates for such director candidate; provided further, that if the
Board is expanded to nine members as contemplated by Article 34 of the estatutos
of the Company or otherwise, whichever of the Sumitomo Participant and BVN owns
a larger Representative Share may, if the PD Participant agrees that it owns a
sufficient number of shares to cause the election of two directors, nominate up
to two director candidates and two deputy director candidates for each such
director candidate. At each election, each of the PD Participant, the Sumitomo
Participant and BVN shall cast all of its votes for its respective nominees to
the Board. The parties hereto acknowledge and agree that a purpose of this
section 2.2 is to enable each of the Sumitomo Participant and BVN to elect at
least one member of the Board as long as it holds a Respective Share of at least
10.01%.

                                       7

<PAGE>

3. Waiver of Distribution Rights.

          Each of the PD Participant, BVN and the Sumitomo Participant hereby
waives its rights under Article 231 of the Peruvian Corporate Law (Law. No.
26887).

4. Programs and Budgets.

          Not later than March 31 of each year, the Board shall meet to consider
and approve, with or without modification, a program and budget for the Company
for the current year and any intermediate or long-term plans for periods in
excess of one year. The program and budget and any such intermediate or
long-term plans shall be furnished with the agenda for the meeting at which they
are to be considered. The annual program and budget shall include, on a
quarterly basis:

          (i) specified operating levels and itemized estimates of Products to
     be produced;

          (ii) an itemized budget specifying, separately, estimated revenues,
     Operating Expenses, Delivery and Processing Expenses and Capital
     Expenditures of the Company;

          (iii) the details of any development or capital programs; and

          (iv) such other matters as may be determined from time to time by the
     Board.

The members of the Board shall be furnished with a monthly breakdown of the
foregoing matters for the remainder of the then current year on or prior to
March 1 of each year. Any program and budget approved by the Board or monthly
breakdown thereof may be revised, supplemented or amended from time to time by
the Board. Any proposed revision, supplement or amendment shall be furnished
with the agenda for the meeting at which it is to be considered.

5. Accounting.

          5.1 Books and Records. The Company shall keep or cause to be kept
books and records, in each case in accordance with accounting practices
generally accepted in Peru, so as accurately to record all receipts of funds
from or for the account of the Company and disbursements thereof and all
Operating Expenses, Delivery and Processing Expenses and Capital Expenditures
incurred by the Company. All books and records maintained pursuant to this
section shall be open to the inspection and examination of, or made available
to, the directors, officers, accountants, consultants or representatives of any
Participant at the locations where such books, records and

                                       8

<PAGE>

information are kept in the ordinary course of business at such reasonable times
as may be specified in reasonable prior written notice to the Company.

          5.2 Unaudited Financial Statements. The unaudited annual financial
statements shall be prepared and delivered to the Board on or before February 15
of each year. The unaudited quarterly financial statements shall be prepared and
delivered to the Board within 45 days of the end of each fiscal quarter.

          5.3 Audit. The annual financial statements of the Company shall be
examined and certified by the firm of PWC or such other accounting firm of
international standing selected from time to time by the shareholders of the
Company at the annual meeting of shareholders. The audited financial statements
shall be prepared and delivered to the Board within sixty (60) days of the end
of the fiscal year of the Company. The Board shall recommend that the
shareholders of the Company approve, at least annually, audited financial
statements of the Company, showing, separately, revenues, Operating Expenses,
Delivery and Processing Expenses and Capital Expenditures.

          5.4 Fiscal Year. The fiscal year of the Company shall be the calendar
year.

6. Operation of the Mines and any Project.

          6.1 Operation. Minera Phelps Dodge del Peru S.A.C., an indirect
subsidiary of PDC, shall act as Operator of the Mines and any Project pursuant
to the Operator's Agreement. Pursuant to such Agreement, the Operator shall use
all reasonable efforts to furnish to the Company such supervisory and technical
personnel as are contemplated by the plans adopted from time to time by the
Board. Substantially all of the personnel involved in the operation of the Mines
and any Project, including without limitation, the exploration, mining, milling,
leaching, crushing, grinding, transportation, accounting and administrative
activities of the Company, shall be employed directly by the Company, but shall
be subject to the direction of the Operator. Except as set forth in section 6.2,
neither the Operator nor the Company shall be obligated to employ any
representative of the Sumitomo Participant or BVN. Representatives of the
Sumitomo Participant, BVN, and their respective Affiliates, however, shall have
the right at any time, at their own expense and risk and upon reasonable advance
written notice to the Operator, to observe the Sulfide Project's construction,
development and operation and the Company's other operations and to inspect the
Company's premises, books and records during usual business hours.

          6.2 Secondment of Sumitomo Participant Personnel. The PD Participant
shall cause either the Company or the Operator to, and either the Company or the
Operator shall, employ, at all times and for reasonable compensation, two
individuals designated by the Sumitomo Participant and approved by the Operator,
which approval

                                       9

<PAGE>

shall not be unreasonably withheld. While so employed, such individuals shall be
subject to the supervision of the Operator.

          6.3 No Concentrate Leaching Facility.

          (a) Cerro Verde shall not construct, own or operate a copper
concentrate leaching facility or similar facility designed to produce copper
from copper concentrate.

          (b) Notwithstanding the foregoing, PDC or any of its Affiliates (other
than Cerro Verde) may construct, own or operate copper concentrate leaching
facilities and, subject to section 11.3 of this Agreement and Articles 41(i) and
41(g) of the estatutos of the Company, Cerro Verde may enter into agreements or
other arrangements of any type with PDC or any of its Affiliates regarding any
such facilities; provided that Cerro Verde shall give prior written notice to
the Sumitomo Participant of any sale, lease (as lessor) or other disposition by
Cerro Verde of any mining concessions, beneficiation concessions, easements or
water rights in connection with such copper concentrate leaching facility.

7. Concentrate Purchase by the Sumitomo Participant and the PD Participant.

          7.1 Sumitomo Participant's Right to Purchase Pro Rata Share. Cerro
Verde acknowledges that, subject to the terms and conditions of the SMM
Concentrate Agreement, it has agreed to sell to SMM and any Affiliate designated
by it, and SMM has agreed to purchase from Cerro Verde, 50% of the copper
concentrates produced by Cerro Verde for a term of ten years; provided that if
the Sumitomo Participant fails to provide funding for any new Project involving
production of copper concentrates or any expansion of Project Capacity at the
Sulfide Project as contemplated in any Completion Funding Notice or Issuance
Notice, such production amount for purposes of this calculation shall exclude
increases in production resulting from such new Project or expansion of Project
Capacity. After the termination of the SMM Concentrate Sales Agreement, the
Sumitomo Participant (and any Affiliate it designates which is acceptable to the
Company, including SMM, which the Company hereby agrees is an acceptable
designated Affiliate) shall purchase from the Company, each year an amount of
the Company's concentrate equal to: (a) the estimated total production for such
year for (i) the Sulfide Project and (ii) so long as the Sumitomo Participant
has provided its share of funding for any Project involving production of copper
concentrates or any expansion of Project Capacity at the Sulfide Project as
contemplated in the applicable Completion Funding Notice or Issuance Notice, any
such new Project or expansion of the Project Capacity at the Sulfide Project, in
each case as reflected in the Company's internal budgets and plans multiplied by
(b) the Sumitomo Participant's Respective Share at the date on which the
contract for such sale and purchase is entered into. The contracts for

                                       10

<PAGE>

such transactions shall be in the form then being used by the Company for
international concentrate sale arrangements of similar duration. The term of
each such contract shall be designated by the Company but shall be at least one
year and not more than ten years. Such contracts shall contain arms'-length
market provisions calculated so as reasonably to reflect the then current market
for the sale of copper concentrate having similar characteristics in comparable
international transactions under agreements of similar duration, and to
facilitate the assignment of such contracts to lenders to the Company. If by the
expiration date of any such contract, the Company and the Sumitomo Participant
shall not have reached agreement on the terms and provisions of a successor
contract, then the issues in dispute shall be submitted by the parties to
arbitration pursuant to section 13.8 of this Agreement. Pending the issuance of
the arbitrators' decision, the parties shall continue to sell and purchase
concentrate on the same basis as provided for in the expired contract. Upon
issuance of the arbitrators' decision, such decision shall be given effect
retroactively to the expiration date of such contract. Notwithstanding the
foregoing, in the event that following the termination of the SMM Concentrate
Sales Agreement the Sumitomo Participant or any Affiliate participates as a
purchaser in concentrate sale arrangements tied to import credit financing being
provided to the Company, the amount of Company concentrate which the Company
shall be required to sell and the Sumitomo Participant shall be required to
purchase pursuant to this section 7.1 shall be reduced by the aggregate amount
of concentrate covered by such concentrate sale arrangement (including the
portion being purchased by parties other than the Sumitomo Participant or its
Affiliate).

          7.2 Consideration of Additional Concentrate or other Product Sales to
the Sumitomo Participant. In the event that the Sumitomo Participant wishes to
purchase on an arm's-length market basis more concentrate than it is entitled to
purchase under section 7.1. above or any other Product, the Company will
consider in good faith any offers from the Sumitomo Participant to purchase such
additional concentrate or other Product. In connection with its consideration of
any such offers to purchase additional concentrate or other Product, the Company
intends to deal with the Sumitomo Participant on a basis consistent with that on
which the Company deals with other prospective third-party purchasers.

          7.3 Consideration of Sales to the PD Participant. In the event that
the PD Participant (or any Affiliate it designates which is acceptable to the
Company) wishes to purchase on an arm's-length market basis Company Product, the
Company will consider in good faith any offers from the PD Participant (or such
Affiliate) to purchase such Product. In connection with its consideration of any
such offers to purchase Product, the Company intends to deal with the PD
Participant on a basis consistent with that on which the Company deals with
other prospective third party purchasers. If the Company elects to sell such
Product to the PD Participant (or such Affiliate), the contracts for such
transactions shall be in the form then being used by the Company for
international sale arrangements of similar duration, provided that contracts for
the sale of

                                       11

<PAGE>

such Product for delivery to the United States shall, if applicable, include
price provisions that are based upon COMEX or LME quotations and account for any
excess expense or savings, as the case may be, arising from the difference in
charges for shipment of such Product to U.S. Gulf Coast ports and charges for
shipping such Product to Japanese main ports by in effect fully passing along
such excess expense or savings, as the case may be, to the purchaser. The term
of each such contract shall be designated by the Company but shall be at least
one year and not more than ten years. Such contracts shall contain arm's length
market provisions (including, if applicable, price provisions that are based
upon COMEX or LME quotations and account for relative freight charges for sales
to the United States) calculated so as reasonably to reflect the then current
market for the sale of such Product having similar characteristics in comparable
international transactions under agreements of similar duration, and, if
applicable, to facilitate the assignment of such contracts to lenders to the
Company. The terms and conditions of such contracts shall be no more favorable,
nor any less favorable, than the terms and conditions of the Company's sale
contract with SMM or the Sumitomo Participant, if any, then in effect for such
Product except that, if applicable, the PD Participant's or its designated
Affiliate's contract shall provide for price provisions that are based upon
COMEX or LME quotations and account for relative freight charges for sales to
the United States.

8. Operating Levels. Operating levels shall be determined by the Board. The
Board shall have the right, for any cause or reason, (a) to reduce or increase
the level of any Company operation or to shut down any such operation
altogether, or (b) to start up any such operation that may be shut down.

9. Transfers of Interests; Rights of First Refusal.

          9.1 General Prohibition. Except as permitted by or provided for in
this Agreement, as required pursuant to the Project Debt Agreements or in a
transaction involving only one or more of its Affiliates, no Participant shall
sell, assign, convey or otherwise dispose of, or directly or indirectly
mortgage, pledge or otherwise create or suffer to exist a lien, charge or other
encumbrance or security interest in any of its Equity Securities or Subordinated
Debt that it or any Affiliate (including any Sponsor Finance Company) holds.
Each Participant shall cause any of its Affiliates (including any Sponsor
Finance Company) that holds any Subordinated Debt not to sell, assign, convey or
otherwise dispose of, or directly or indirectly mortgage, pledge or otherwise
create or suffer to exist a lien, charge or other encumbrance or security
interest in any Subordinated Debt except as permitted by or provided for in this
Agreement or as required pursuant to the Project Debt Agreements. Any sale,
assignment, conveyance or other disposition, mortgage, lien, charge,
encumbrance, or security interest permitted by or provided for in this Agreement
shall be made in accordance with applicable law and with any applicable
provisions of the Project Debt Agreements.

          9.2 Permitted Encumbrances. Each Participant that is ultimately
controlled by another Person (such person being the "Ultimate Parent") may grant
or

                                       12

<PAGE>

permit to exist any mortgage, lien, pledge, charge or encumbrance on, or other
security interest in any of its Equity Securities or Subordinated Debt that it
or any Affiliate (including any Sponsor Finance Company) holds, but only to
secure any obligation so long as the performance of each such obligation has
been and continues to be irrevocably guaranteed to the obligee by the Ultimate
Parent of such Participant (for the avoidance of doubt, as of the date hereof,
only the PD Participant and the Sumitomo Participant have an Ultimate Parent,
PDC in the case of the PD Participant, SC and SMM in the case of the Sumitomo
Participant).

          9.3 Sales by Minority Participants. (a) Joint Sales of Equity
Securities and Subordinated Debt. Should any Participant (other than the PD
Participant) wish to sell any of its Equity Securities (other than preemptive
rights or certificates representing preemptive rights issued by the Company in
connection with a general capital increase under Article 53 of the estatutos of
the Company or otherwise ("Preemptive Rights")), Subordinated Debt that it or
any Affiliate (including any Sponsor Finance Company) holds and its
corresponding rights under this Agreement (the "Offering Participant") it must
first obtain a bona fide offer for all such Equity Securities, Subordinated Debt
and rights and give to each of the other Participants written notice identifying
the offeree and describing the price and each of the terms and conditions of
such bona fide offer and offering to sell all such Equity Securities,
Subordinated Debt and rights to all such Participants at the same price and on
the same terms and conditions. If none of the Participants accepts such offer in
writing within 45 days of such notice (such 45-day period, the "Offer
Consideration Period"), then the Offering Participant shall be free to sell all
such Equity Securities, Subordinated Debt and rights to such offeree at such
price and on such terms at any time within six months of the last day of the
Offer Consideration Period. If one Participant accepts such offer in writing
(such acceptance, a "Sale Acceptance Notice"), within the Offer Consideration
Period, then such Participant and the Offering Participant shall consummate such
transaction, subject to section 9.5, as promptly as is reasonably practicable
but in any event not more than six months after the date of such acceptance. If
more than one Participant submits a Sale Acceptance Notice within the Offer
Consideration Period, then each such accepting Participant shall purchase,
subject to section 9.5, a pro rata portion of such Equity Securities,
Subordinated Debt and rights determined in proportion to their Adjusted
Respective Shares. No such Sale Acceptance Notice shall be effective unless it
applies to all such Equity Securities, Subordinated Debt and rights offered by
the Offering Participant.

          (b) Should any Participant (other than the PD Participant) wish to
sell any Preemptive Rights (a "Preemptive Right Offering Participant") to be
granted pursuant to a general capital increase of the Company, it must first
obtain a bona fide offer for all such Preemptive Rights and give to each of the
other Participants written notice identifying the offeree and describing the
price and each of the terms and conditions of such bona fide offer at least ten
days prior to the termination of the first round of subscription required under
Peruvian law, and offering to sell all such

                                       13

<PAGE>

Preemptive Rights to all such Participants at the same price and on the same
terms and conditions.

          (i) If none of the Participants submits a Sale Acceptance Notice
     within seven days of the notice identifying the offeree, then the
     Preemptive Right Offering Participant shall be free to sell such Preemptive
     Rights to such offeree at such price and on such terms prior to the
     termination of the first round of subscription required under Peruvian law.

          (ii) If one of the Participants submits a Sale Acceptance Notice
     within seven days of the notice identifying the offeree, then such
     Participant and the Preemptive Right Offering Participant shall consummate
     such transaction, subject to section 9.5, as promptly as is reasonably
     practicable prior to the termination of the first round of subscription
     required under Peruvian law. If more than one Participant submits a Sale
     Acceptance Notice within such seven-day period, then each of such accepting
     Participants shall, subject to section 9.5, so purchase a pro rata portion
     of such Preemptive Rights determined in proportion to their Adjusted
     Respective Shares prior to the termination of the first round of
     subscription required under Peruvian law.

          (iii) No acceptance of an offer in clause (i) or (ii) above shall be
     effective unless it applies to all such Preemptive Rights offered by the
     Preemptive Right Offering Participant.

          (iv) In the event that the duration of the first round of subscription
     required under Peruvian law changes subsequent to the date hereof, the
     Participants shall adjust the advance notice and acceptance requirements
     set forth in this section 9.3(b) in a manner that reflects and is
     consistent with such changes and achieves substantially similar economic
     results as the terms set forth herein on the date hereof.

          (c) Separate Sales of Equity Securities and Subordinated Debt. Any
Participant (other than the PD Participant) may sell its Equity Securities or
Subordinated Debt separately and to different offerees, provided that (i) such
sale complies with the requirements of section 9.3(a) and, if applicable, 9.5
hereof, and (ii) with respect to any separate sale of Subordinated Debt, such
sale is discussed in good faith with the other Participants prior to such sale.

          9.4 Sales by the PD Participant. (a) Should the PD Participant wish to
sell any of its Equity Securities (other than Preemptive Rights), Subordinated
Debt that it or any Affiliate (including any Sponsor Finance Company) holds and
its corresponding rights under this Agreement, it must first obtain a bona fide
offer for all such Equity Securities, Subordinated Debt and rights and give to
each of the other Participants written notice identifying the offeree and
describing the price and each of the terms and

                                       14

<PAGE>

conditions of such bona fide offer and offering to sell all such Equity
Securities, Subordinated Debt and rights to all such Participants at the same
price and on the same terms and conditions. If none of the Participants submits
a Sale Acceptance Notice during the Offer Consideration Period, then the PD
Participant shall be free to sell all such Equity Securities, Subordinated Debt
and rights to such offeree at such price and on such terms at any time within
six months of the last day of such Offer Consideration Period. If one
Participant accepts such offer in writing within 45 days of such notice, then
such Participant and the PD Participant shall consummate such transaction,
subject to section 9.5, as promptly as is reasonably practicable but in any
event not more than six months after the date of such acceptance. If more than
one Participant accepts such offer in writing within such Offer Consideration
Period, then each such accepting Participant shall purchase, subject to section
9.5, a pro rata portion of such Equity Securities, Subordinated Debt and rights
determined in proportion to their Adjusted Respective Shares. No such acceptance
shall be effective unless it applies to all such Equity Securities, Subordinated
Debt and rights offered by the PD Participant.

          (b) Should the PD Participant wish to sell any Preemptive Rights to be
granted pursuant to a general capital increase of the Company, it must first
obtain a bona fide offer for all such Preemptive Rights and give to each of the
other Participants written notice identifying the offeree and describing the
price and each of the terms and conditions of such bona fide offer at least ten
days prior to the termination of the first round of subscription required under
Peruvian law, and offering to sell all such Preemptive Rights to all such
Participants at the same price and on the same terms and conditions.

          (i) If none of the Participants submits a Sale Acceptance Notice
     within seven days of the notice identifying the offeree, then the
     Preemptive Right Offering Participant shall be free to sell such Preemptive
     Rights to such offeree at such price and on such terms prior to the
     termination of the first round of subscription required under Peruvian law.

          (ii) If one of the Participants submits a Sale Acceptance Notice
     within seven days of the notice identifying the offeree, then such
     Participant and the Preemptive Right Offering Participant shall consummate
     such transaction, subject to section 9.5, as promptly as is reasonably
     practicable prior to the termination of the first round of subscription
     required under Peruvian law. If more than one Participant submits a Sale
     Acceptance Notice within such seven-day period, then each of such accepting
     Participants shall, subject to section 9.5, so purchase a pro rata portion
     of such Preemptive Rights determined in proportion to their Adjusted
     Respective Shares prior to the termination of the first round of
     subscription required under Peruvian law.

                                       15

<PAGE>

          (iii) No acceptance of an offer in clause (i) or (ii) above shall be
     effective unless it applies to all such Preemptive Rights offered by the
     Preemptive Right Offering Participant.

          (iv) In the event that the duration of the first round of subscription
     required under Peruvian law changes subsequent to the date hereof, the
     Participants shall adjust the advance notice and acceptance requirements
     set forth in this section 9.4(b) in a manner that reflects and is
     consistent with such changes and achieves substantially similar economic
     results as the terms set forth herein on the date hereof.

          9.5 Compliance with Peruvian Tender Offer Rules. To the extent that a
purchase by a Participant which has delivered a Sale Acceptance Notice in
accordance with section 9.3 or 9.4 (a "Purchasing Participant") of Equity
Securities or Preemptive Rights would result in such Purchasing Participant
being required, under applicable Peruvian law or regulations, to make any such
purchase pursuant to a public tender offer or similar process ("Tender Offer"),
then:

          (i) the purchases of such Equity Securities or Preemptive Rights, as
the case may be, the purchase of which would be subject to the Tender Offer
requirement (the "Subject Securities") shall be made in accordance with this
section 9.5 in lieu of section 9.3 or 9.4, as the case may be;

          (ii) the Purchasing Participant shall implement and launch a Tender
Offer for a number of Equity Securities or Preemptive Rights, as the case may
be, equal to the number of the Subject Securities or such higher number as may
be required under applicable Peruvian law or regulations, at a price, and on the
terms and conditions, not less favorable to holders as those that would apply to
the Subject Securities if they were being purchased under section 9.3 or 9.4;

          (iii) the Offering Participant or Preemptive Right Offering
Participant, as the case may be (the "Subject Offering Participant"), shall
tender in the Tender Offer the Subject Securities;

          (iv) to the extent permitted under Peruvian law, the Subject Offering
Participant shall reimburse the Purchasing Participant to the extent that the
Purchasing Participant purchases Subject Securities in the Tender Offer at a
price that is greater than the price that would apply to the Subject Securities
if they were being purchased under section 9.3 or 9.4;

          (v) to the extent that the Purchasing Participant purchases in the
Tender Offer less than 100% of the Subject Securities from the Subject Offering
Participant, the Purchasing Participant shall, from time to time, as promptly as
possible, and to the extent permitted, under applicable Peruvian law and
regulations, purchase Subject Securities

                                       16

<PAGE>

from the Subject Offering Participant, at a price, and on the terms and
conditions, that would apply to the Subject Securities if they were being
purchased under section 9.3 or 9.4, until such time as such Purchasing
Participant shall have purchased 100% of the Subject Securities; and

          (vi) no Participant other than the Subject Offering Participant shall
tender any Equity Securities or Preemptive Rights in the Tender Offer;

          9.6 Separate Sales of Subordinated Debt by the PD Participant. The PD
Participant may sell its Equity Securities or Subordinated Debt separately and
to different offerees, provided that (i) such sale complies with the
requirements of section 9.4 and, if applicable, section 9.5 hereof, and (ii)
with respect to any separate sale of Subordinated Debt, such sale is discussed
in good faith with BVN and the Sumitomo Participant prior to such sale.

          9.7 Substitution of Participant. No transfer of Equity Securities and
the corresponding rights under this Agreement pursuant to section 9.3, 9.4, 9.5,
or 9.6 shall be effective until (a) (i) the transferee has delivered to the
Company and all Participants a written instrument reasonably satisfactory to
counsel for the Company whereby it assumes all liabilities and obligations of
the transferor as a Participant hereunder theretofore and thereafter incurred
pursuant to this Agreement attributable to the Equity Securities, Subordinated
Debt and the corresponding rights under this Agreement transferred to it, and
(ii) the Ultimate Parent of the transferee has entered into a principals
agreement with the ultimate parents of the other Participants substantially in
the form of sections 6.1, 6.2 and 6.3 of the Participation Agreement, together
in each case with such evidence and counsel opinions as counsel for such other
Participants may reasonably request, confirming the due authorization, execution
and enforceability of such instruments; and (b) the transferee has received all
consents of third Persons necessary for compliance with the terms of this
Agreement. Upon such transfer becoming effective, the transferee shall become a
Participant and a party to this Agreement, the Respective Share of the
transferor shall be reduced accordingly, and the transferor shall be relieved of
future (but not any then existing) liabilities and obligations as a Participant
hereunder attributable to the Respective Share of the transferee. A purchaser
that acquires only Subordinated Debt pursuant to section 9.3, 9.4, 9.5 or 9.6
shall not become a Participant but shall execute and deliver an agreement to all
Participants reasonably satisfactory to counsel for such Participants whereby
such purchaser agrees that subsequent sales, if any, of Subordinated Debt held
by such purchaser shall be made in compliance with the limitations provided in
this Agreement.

          9.8 Transfer Restriction Extension. Each of the PD Participant, the
Sumitomo Participant and BVN shall take all necessary action to maintain the
validity and effectiveness of the transfer restrictions in sections 9.1 through
9.7 for the maximum period permitted by Peruvian law, including without
limitation, executing any agreements necessary to extend the terms of sections
9.1 through 9.7 hereof.

                                       17

<PAGE>

          9.9 Company Disclaimer of Transfer Restrictions. The Company is not
bound by, and expressly disclaims any responsibility for enforcing, the transfer
restrictions of sections 9.1 through 9.8. Notwithstanding the foregoing, each of
BVN, the PD Participant and the Sumitomo Participant hereby authorizes the
Company to register this Agreement and any Senior Project Debt Agreement that
contains a transfer restriction with CAVALI or the settlement and clearance
house where the Common Stock is registered.

10. Issuances of Equity Securities and/or Subordinated Debt.

          10.1 Issuance of Equity Securities and/or Subordinated Debt for
Project Completion. In the event the Board shall unanimously determine (and with
respect to the issuance of Equity Securities, the holder or holders of a
majority of the outstanding capital stock of the Company shall approve) (a) that
the Company should issue Equity Securities and/or Subordinated Debt to finance
the development, implementation or completion of a Project or (b) that
additional Equity Securities and/or Subordinated Debt must be issued by the
Company in order to permit the Company to draw down the full amount of debt
available under the Senior Project Debt Agreements, the Board shall fix (and if
required by Peruvian law, the holder or holders of a majority of the outstanding
capital stock of the Company shall approve) the subscription price and other
terms of such Equity Securities and/or, in the case of Subordinated Debt, the
principal amount, interest and other terms and cause the Company to give each
Participant notice of the Company's intention to issue such Equity Securities
and/or Subordinated Debt to each Participant in an amount in proportion to its
Respective Share and of the anticipated material terms thereof (such notice, the
"Completion Funding Notice") at least 20 days prior to the issuance of such
Equity Securities and/or Subordinated Debt. The terms and purchase price of the
securities offered to one Participant shall be comparable to those offered to
the other Participants (after taking into account the Participants' different
Respective Shares). Each Participant shall have the obligation pursuant to the
terms of the Completion Funding Notice (i) to purchase such portion of such
Equity Securities as may be necessary for such Participant to maintain its
Respective Share (after giving full effect to the issuance of such Equity
Securities and to any conversion or exercise right provided by such Equity
Securities or any other Equity Securities previously issued) and (ii) to
purchase a percentage of such Subordinated Debt equal to such Participant's
Respective Share.

          If any Participant shall fail to purchase, or shall purchase less than
its Respective Share of such Equity Securities described above and/or
Subordinated Debt, the Company may (but shall not be required to) sell the
Equity Securities and/or Subordinated Debt that such Participant would have been
entitled to purchase to any third Person or Persons (including without
limitation any other Participant) selected by the Board (a "Purchaser") in
accordance with Peruvian law, at a closing to be held within six months of the
Completion Funding Notice at such time and place as the Board may

                                       18

<PAGE>

determine, on terms not materially more favorable to the Purchaser than those
set forth in the Completion Funding Notice. At such closing, the Company shall
also sell to each Participant, and each Participant shall purchase, the Equity
Securities and/or Subordinated Debt specified in such Participant's Acceptance
Notice. At such closing, (a) each Purchaser of Equity Securities from the
Company, together with the Company and all the Participants, shall execute and
deliver an amendment to this Agreement whereby the Purchaser shall become a
party to this Agreement entitled to all of the rights and subject to all of the
obligations of a Participant hereunder, (b) to the extent required under
Peruvian law, each Purchaser of Equity Securities, together with the requisite
number of Participants as provided in the Company estatutos shall execute and
deliver an amendment to such estatutos to reflect the new capital structure of
the Company and (c) upon the consummation of such closing with respect to Equity
Securities, the Respective Share and Adjusted Respective Share of each of the
Participants shall be adjusted accordingly.

          10.2 Additional Issuance of Equity Securities and/or Subordinated
Debt. In the event a majority, but not 100%, of the Board shall determine (and
with respect to the issuance of Equity Securities the holder or holders of a
majority of the outstanding capital stock of the Company shall approve) that the
Company should issue Equity Securities and/or Subordinated Debt, the Board shall
fix (and if required by Peruvian law the holder or holders of a majority of the
outstanding capital stock of the Company shall approve) the subscription price
and other terms of such Equity Securities and/or, in the case of Subordinated
Debt, principal amount, interest and other terms and cause the Company to give
each Participant notice of its intention to issue such Equity Securities and/or
Subordinated Debt to each Participant in an amount in proportion to its
Respective Share and of the anticipated material terms thereof (the "Issuance
Notice"). The terms and purchase price of the securities offered to one
Participant shall be comparable to those offered to the other Participants
(after taking into account the Participants' different Respective Shares). Each
Participant shall have the right (but not the obligation) to purchase up to such
portion (or any lesser amount) of (i) such Equity Securities as may be necessary
for such Participant to maintain its Respective Share (after giving full effect
to the issuance of such Equity Securities and to any conversion or exercise
right provided by such Equity Securities or any other Equity Securities
previously issued) and/or (ii) such Subordinated Debt which expressed as a
percentage of all Subordinated Debt being offered, is equal to such
Participant's Respective Share. In order to exercise such right, a Participant
must give notice (the "Acceptance Notice") to the Company within 20 days of the
Issuance Notice specifying the portion of such Equity Securities and/or
Subordinated Debt it wishes to purchase (all such Participants giving such
notice being referred to as "Electing Participants"). All such Acceptance
Notices shall be irrevocable and binding on the Electing Participant for six
months from the date of the Issuance Notice. If any Participant shall fail to
give an Acceptance Notice within such twenty-day period, shall give an
Acceptance Notice within such period but elect to purchase less than all of the
Equity Securities and/or Subordinated Debt to which it is entitled, or shall
fail to

                                       19

<PAGE>

purchase the Equity Securities and/or Subordinated Debt specified in the
Acceptance Notice on a timely basis, the Company may, to the extent permitted
under Peruvian law, (but shall not be required to) sell the Equity Securities
and/or Subordinated Debt that such Participant would have been entitled to
purchase to any Purchaser or Purchasers, at a closing to be held within six
months of the Issuance Notice at such time and place as the Board may determine,
on terms not materially more favorable to the Purchaser or Purchasers than those
set forth in the Issuance Notice. At such closing, the Company shall also sell
to each Electing Participant, and each Electing Participant shall purchase, the
Equity Securities and/or Subordinated Debt specified in such Electing
Participant's Acceptance Notice. At such closing, (a) each Purchaser of Equity
Securities from the Company, together with the Company and all the Participants,
shall execute and deliver an amendment to this Agreement whereby the Purchaser
shall become a party to this Agreement entitled to all of the rights and subject
to all of the obligations of a Participant hereunder, (b) to the extent required
under Peruvian law, each Purchaser of Equity Securities, together with the
requisite number of Participants as provided in the Company estatutos, shall
execute and deliver an amendment to such estatutos to reflect the new capital
structure of the Company and (c) upon the consummation of such closing with
respect to Equity Securities, the Respective Share and Adjusted Respective Share
of each of the Participants shall be adjusted accordingly.

11. Competition; Business Opportunities; Standstill; Transactions with
Affiliates and Other Arrangements.

          11.1 Competition; Business Opportunities. Subject to section 12,
nothing in this Agreement shall prevent any Affiliate of any Participant, at any
time and without notice to or agreement by any Participant, from entering into
or continuing any business, whether or not competitive with the Company, or
acquiring or exploiting any mining rights, whether or not in the vicinity of any
property owned by the Company, and none of the Affiliates of any Participants
shall have any obligation to offer business or other opportunities to the
Company or any other Participant.

          11.2 Standstill. Except as contemplated in this Agreement, no
Participant (other than the PD Participant) or any Affiliate of any Participant
(other than the PD Participant), will (or will assist or encourage others to),
directly or indirectly, acquire or agree, offer, seek or propose to acquire,
ownership (including, without limitation, beneficial ownership as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of any voting
stock of the Company, or any subsidiary or division thereof or successor to the
Company, or any rights or options to acquire such ownership from a third party
or otherwise, such that after such acquisition, (i) the Sumitomo Participant and
its Affiliates would beneficially own a Respective Share in excess of 24.99% of
the then outstanding voting stock of the Company, or (ii) BVN and its Affiliates
would beneficially own in excess of 20.1% of the then outstanding voting stock
of the Company.

                                       20

<PAGE>

          11.3 Transactions with Affiliates. All transactions between any
Participant or any of its Affiliates and the Company shall be on commercially
reasonable terms that are at least as favorable to the Company as those which
might be obtained in an arm's-length transaction with a Person that is not a
shareholder or a Participant.

          11.4 Use of Proceeds. Unless the Board unanimously determines
otherwise, the PD Participant shall cause the Company to, and the Company shall,
use the proceeds from the General Capital Increase paid by the Sumitomo
Participant solely for financing the design, engineering, development,
permitting, procurement, construction, pre-stripping, test production,
commissioning and other works, services, start-up costs and working capital in
connection with the Sulfide Project.

          11.5 Status Reports. Prior to final completion of the Sulfide Project
as set forth in the Project Debt Agreements, the Company and the PD Participant
shall provide the Sumitomo Participant and BVN with copies of any periodic
status reports provided to the Senior Lenders regarding the development of the
Sulfide Project pursuant to the terms of the Project Debt Agreements at the time
such reports are provided to the Senior Lenders and, subject to section 12
hereof, such other information as the Sumitomo Participant and BVN may
reasonably request.

          11.6 Approval of Minutes. The Participants shall take all actions
necessary to ensure that Participants holding a Respective Share greater than
10.00% shall each nominate one representative (together, the "Participant
Nominees") to approve and sign the minutes of any General Shareholders Meeting
in accordance with Article 32 of the estatutos of the Company. At each General
Shareholders Meeting, each Participant shall cast its votes in favor of the
Participant Nominees.

          11.7 Virtual Meetings. The Participants shall take all action
necessary to cause their nominees to the Board to not oppose the use of virtual
meetings as contemplated in Article 40 of the estatutos of the Company.

          11.8 Estatutos. Unless approved by the Board in accordance with the
procedures set forth in Article 41 of the estatutos of the Company, the
Participants shall not vote or take any action to (i) amend or modify Article
34, 37 or 41 of the estatutos of the Company (or the defined terms used
therein); (ii) approve any action which has not been approved pursuant to a vote
under Article 41(a) through (e) of the estatutos of the Company; or (iii)
pursuant to Article 36 of the estatutos of the Company, remove a director or
deputy director elected pursuant to section 2.2 of this Agreement. The parties
hereto acknowledge and agree that money damages will be the sole remedy for any
breach of this section 11.8 and that the Company and any Participant shall not
have the right to specific performance and/or injunctive relief to enforce the
provisions of this section 11.8.

                                       21

<PAGE>

          11.9 Sulfide Project. The PD Participant shall cause the Company to,
and the Company shall, use all reasonable efforts to develop the Sulfide Project
generally as described in the Feasibility Study, with such changes as the Board
determines, in its good faith reasonable judgment, to be necessary or advisable
and which do not substantially alter the basic nature and scope of such
facilities.

          11.10 Registration of this Agreement. The Company shall cause this
Agreement to be registered in its Share Registration Book (Libro de Matricula de
Acciones) immediately after execution hereof.

          11.11 Support of Senior Project Debt. It is an important objective of
all of the parties hereto that the Company enter into Senior Project Debt
Agreements regarding the financing of the Sulfide Project (the "Sulfide Project
Senior Debt Agreements"), and the parties hereto agree to work diligently to
cause the Company to use all reasonable efforts to enter into the Sulfide
Project Senior Debt Agreements. PDC will enter into, and will cause the PD
Participant to enter into, at or prior to the initial closing under the Sulfide
Project Senior Debt Agreements, any completion agreement with or other
undertakings to the Senior Project Lenders required pursuant to the Sulfide
Project Senior Debt Agreements. SMM, SC, and SGM each will enter into, and each
will cause the Sumitomo Participant to enter into, at or prior to the initial
closing under the Sulfide Project Senior Debt Agreements, any completion
agreement with or other undertakings to the Senior Project Lenders; provided
that any such completion agreement (i) will terminate upon termination of the
completion agreement or other undertakings provided by PDC and the PD
Participant to the Senior Project Lenders pursuant to the Sulfide Project Senior
Debt Agreements, and (ii) will not include any restrictive financial covenants
with respect to SMM, SC, SGM or the Sumitomo Participant. BVN will enter into,
at or prior to the initial closing under the Sulfide Project Senior Debt
Agreements, any completion agreement with or other undertaking to the Senior
Project Lenders required pursuant to the Sulfide Project Senior Debt Agreements.
Each party's obligations pursuant to any such completion agreement or other
undertakings shall be several and in proportion to such party's Adjusted
Respective Share.

          11.12 Covenants of PDC, SMM, SC and SGM. (a) PDC shall cause (i) the
PD Participant to duly and punctually perform all its obligations under this
Agreement and the estatutos of the Company and (ii) the Operator to duly and
punctually perform all its obligations under the Operator's Agreement.

          (b) SMM, SC and SGM shall cause the Sumitomo Participant to duly and
punctually perform its obligations under this Agreement and the estatutos of the
Company.

                                       22

<PAGE>

12. Confidentiality; Conflicts of Interest.

          (a) Each Participant shall hold all information concerning the Company
and the operations of any other Participant not otherwise generally available to
the public through no act or omission of such Participant ("Confidential
Information") in strict confidence and shall not use or disclose such
information without the prior written consent of each Participant affected to
anyone other than directors, officers, employees, accountants, consultants and
representatives of such Participant and its Affiliates, provided that any such
third party shall first execute a confidentiality agreement with each
Participant containing provisions substantially equivalent to this section 12 or
such Participant shall, and shall cause each of its Affiliates to, use best
efforts to ensure that any such third party holds such information in strict
confidence as contemplated by this section 12. Each Participant shall, and shall
cause each of its Affiliates to, use best efforts to ensure that other third
parties will not gain access to any Confidential Information through any act or
omission on its part. Notwithstanding the foregoing, (i) in connection with the
conduct of the business or operations of the Company, the development or
financing of the Sulfide Project or the possible sale of newly issued shares of
capital stock of the Company, PDC, the Company and their respective Affiliates
may disclose Confidential Information not involving information about any
Participant (other than an Affiliate of PDC) without notice to the Participants,
(ii) BVN, SMM, SC, the Sumitomo Participant and their respective Affiliates may
disclose Confidential Information not involving information about PDC, or the PD
Participant or BVN to any Japanese corporation engaged in copper concentrate
smelting that expresses an interest in the purchase or treatment of Company
concentrates, provided that prior to making any such disclosure pursuant to this
clause (ii) such party shall give written notice (identifying the third party
being provided the Confidential Information and describing the general nature of
such disclosure) to and secure the written consent of the PD Participant, (iii)
any Participant may disclose Confidential Information to a prospective purchaser
of any of its Shares and its corresponding rights under this Agreement, provided
such purchaser first executes a confidentiality agreement in form and substance
reasonably satisfactory to each other Participant, and (iv) any Participant or
any Affiliate thereof may disclose Confidential Information to any governmental
agency or the export-import bank or development authority of the home country of
the ultimate parent of such Participant if it believes in good faith that such
disclosure is required by applicable law, by governmental policy in such home
country or by policy of such export-import bank or development authority,
provided that prior to making any such disclosure pursuant to this clause (iv)
such Participant shall, unless prohibited by such governmental agency, give
written notice (identifying such agency and describing the general nature of
such disclosure) to, and consult with, each other Participant.

          (b) Each of the parties hereto agrees that Confidential Information
concerning the Company, the Mines or a Project should not be disclosed to any
such party or their Affiliates where because of a potential conflict of interest
between such

                                       23

<PAGE>

party (or Affiliates) and the Company, the Mines or a Project, such disclosure
could reasonably be expected to affect detrimentally, directly or indirectly,
the Company, the Mines or a Project. Accordingly, each party hereto may decline,
in its sole discretion, to provide such Confidential Information to any party
where it has a good faith belief that disclosure may involve such a potential
conflict of interest.

13. Miscellaneous.

          13.1 Implied Covenants. There are no implied covenants in this
Agreement other than those of good faith and fair dealing.

          13.2 Notices. Any notice, advice, election, request, order, demand or
other direction required or permitted to be given under this Agreement shall be
in writing and in the English language, and (unless some other mode of giving
the same is specified or accepted in writing by the recipient) shall be
effective (a) when personally delivered during normal business hours to the
addressee at the address designated for such delivery, (b) on the date of
receipt specified in any return receipt if it shall have been deposited in the
mails, certified or registered with return receipt requested and postage thereon
fully prepaid, addressed to such address or (c) on the day it shall have been
given by facsimile transmission (with written confirmation of receipt) to such
address, whichever of the foregoing shall first occur. Until otherwise specified
by notice, the addresses for any such notice, advice, election, request, order,
demand or other direction shall be:

          if to the Sumitomo Participant, to it at:

          SMM Cerro Verde Netherlands B.V.
          c/o Sumitomo Metal Mining Co., Ltd.
          11-3, 5-Chome, Shimbashi
          Minato-ku, Tokyo 105
          Japan
          Attention: General Manager, Mineral
          Resources Division
          Telecopier: (81)-3-3436-7997

          with a copy to:

          Sumitomo Metal Mining America Inc.
          Corresponsalia En Chile
          Roger de Flor 2950, Piso 5
          Las Condes, Santiago, Chile
          Attention: General Manager
          Telecopier: (56)-2-362-9289

                                       24

<PAGE>

          Sumitomo Corporation Del Peru S.A.
          Jr. San Martin No. 864 Ofi. 701
          Miraflores, Lima, Peru
          Attention: President
          Telecopier: (51)-1-447-0506

          if to SMM, to it at:

          Sumitomo Metal Mining Co., Ltd.
          11-3, 5-Chome, Shimbashi
          Minato-ku, Tokyo 105
          Japan
          Attention: General Manager, Mineral
          Resources Division
          Telecopier (Fax): (81)-3-3436-7997

          if to SC, to it at:

          Sumitomo Corporation
          1-8-11, Harumi
          Chuo-ku, Tokyo 104-8610
          Japan
          Attention: General Manager, Nonferrous Metals
          and Raw Materials Department
          Telecopier (Fax): (81)-3-5166-6423

          if to SGM, to it at:

          c/o Sumitomo Corporation
          1-8-11, Harumi
          Chuo-ku, Tokyo 104-8610
          Japan
          Attention: General Manager, Nonferrous Metals
          and Raw Materials Department
          Telecopier (Fax): (81)-3-5166-6423

          if to the PD Participant, to it at:

          Cyprus Climax Metals Company
          c/o Phelps Dodge Mining Company
          One N. Central Avenue
          Phoenix, Arizona  85004
          Attention: President
          Telephone: (602) 366-8100
          Telecopier: (602) 366-7383

                                       25

<PAGE>

          with a copy to:

          Phelps Dodge Corporation
          One N. Central Avenue
          Phoenix, Arizona  85004
          Attention: General Counsel
          Telephone: (602) 366-8100
          Telecopier: (602) 366-7383

          if to BVN, to it at:

          Cia. De Minas Buenaventura S.A.A.
          Carlos Villaran 790
          Urb, Santa Catalina, Lima 13, Peru
          Attention: President
          Telecopier: (51)-1-471-7349

          if to PDC, to it at:

          Phelps Dodge Corporation
          One N. Central Avenue
          Phoenix, Arizona 85004
          Attention: General Counsel
          Telephone: (602) 366-8100
          Telecopier: (602) 366-7383

          if to the Company, to it at:

          Sociedad Minera Cerro Verde S.A.A.
          Av. Alfonso Ugarte #304
          Cercado, Arequipa, Peru
          Attention: General Manager
          Telecopier (Fax): 054-28-33-76

          if to the Operator, to it at:

          Minera Phelps Dodge del Peru S.A.C.
          Av. Camino Real 348
          Torre El Pilar, Piso 14
          San Isidro, Lima
          Attention: General Manager
          Telecopier (Fax): (51)-1-422-2787

                                       26

<PAGE>

Whenever pursuant to any provision of this Agreement notice, advice, election,
request, order, demand or other direction is to be given to any Participant, or
the Board, a copy thereof shall also be given to each Participant and the
Operator.

          13.3 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior oral and written discussions and understandings.

          13.4 Amendments, Waivers, etc. This Agreement may not be amended or
modified except by a written instrument signed by all of the parties hereto. No
party hereto shall be bound by any waiver of any provision hereof unless such
waiver is set forth in a written instrument signed by each of the parties
hereto. Except as otherwise provided in this Agreement, failure on the part of
any party hereto to exercise any right hereunder or to insist upon strict
compliance by any other party hereto with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such right, term, covenant or
condition. No provision of this Agreement shall be construed to be a waiver by
any of the parties hereto of any rights or remedies such party may have against
any other party for failure to comply with the provisions of this Agreement and,
except as provided in section 13.8 or otherwise provided in this Agreement, no
remedy or right herein conferred is intended to be exclusive of any other remedy
or right, but every such remedy or right shall be cumulative and shall be in
addition to every other remedy or right herein conferred or now or hereafter
existing at law or in equity.

          13.5 No Other Arrangements or Agreements. Each Participant hereby
represents and warrants to the Company and to each other Participant that,
except for this Agreement and the Participation Agreement, it has not entered
into or agreed to be bound by any other arrangements or agreements of any kind
with any other party with respect to Equity Securities, including, but not
limited to, arrangements or agreements with respect to the acquisition or
disposition of Equity Securities or any interest therein or the voting of shares
of Common Stock (whether or not such agreements and arrangements are with the
Company or any of its subsidiaries, or other Participants) and each Participant
agrees that, except as expressly permitted under this Agreement, it will not
enter into any such other arrangements or agreements with respect to the voting
of shares of Common Stock (whether or not such agreements and arrangements are
with the Company or any of its subsidiaries, or other Participants).

          13.6 Severability. If any provision of this Agreement or the
application of any provision hereof to any party hereto or set of circumstances
is held invalid, the remainder of this Agreement and the application of such
provision to any other party or set of circumstances shall not be affected
unless the provisions held invalid shall substantially impair the benefits of
the remaining portions of this Agreement.

          13.7 Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York, without
giving

                                       27

<PAGE>

effect to the conflict of laws rules thereof to the extent they are not
mandatorily applicable by statute and would require or permit the application of
the laws of another jurisdiction.

          13.8 Arbitration. (a) Any dispute, controversy or claim arising out of
or relating to this Agreement or the subject matter of this Agreement, or the
breach, termination, or invalidity hereof, shall be settled by arbitration in
accordance with the UNCITRAL Arbitration Rules in effect on the date such
dispute, controversy, claim, breach, termination or invalidity arises. The
arbitration shall be the sole and exclusive forum for resolution of the dispute,
controversy or claim and the award shall be final and binding to the extent
permitted by law. Judgment thereon may be entered by any court having
jurisdiction.

          (b) There shall be three arbitrators, each of whom shall be
disinterested in the dispute, controversy or claim and shall have no connection
with any party to this Agreement or any of their Affiliates. The party to this
Agreement initiating arbitration ("Claimant") and the party to this Agreement
named as defendant ("Defendant") shall each name an arbitrator, as provided in
Article 7 of the UNCITRAL Arbitration Rules specified above. In the event that
more than two parties to this Agreement are involved in the arbitration, the
parties to this Agreement shall compose themselves into two sides for purposes
of arbitration, and the Claimant and Defendant holding, directly or through its
Affiliates, the largest Respective Share shall each nominate an arbitrator for
all Claimants or Defendants, as the case may be. The two arbitrators so chosen
shall select a third arbitrator.

          (c) Should the services of an appointment or administering authority
be necessary, the appointment or administering authority shall be the American
Arbitration Association ("AAA"). If any party to this Agreement entitled to name
an arbitrator should abstain from doing so, the AAA shall appoint such
arbitrator, unless the abstaining party is one of two or more Claimants or
Defendants, in which case the Claimant or Defendant, as the case may be,
holding, directly or through its Affiliates, the next largest Respective Share
shall nominate the arbitrator. No party to this Agreement shall require the AAA
to (but the AAA may) designate as arbitrator a person of a nationality other
than the nationalities of the parties to this Agreement involved in the
arbitration.

          (d) In the event that more than two parties to this Agreement are
involved in the arbitration and such parties are unable to compose themselves
into two sides, at the request of any such party the administering authority
shall make any arrangements (including without limitation, determining the
composition of two sides for the purposes of arbitration or designating the
members of the arbitral tribunal) necessary to effect the resolution of the
dispute by a means fair to each of the disputing parties to this Agreement, and
the administering authority's decision as to such arrangements shall be final
and binding.

                                       28

<PAGE>

          (e) The place of arbitration shall be New York, New York. The
arbitration shall be conducted in the English language and any foreign language
documents presented at such arbitration shall be accompanied by an English
translation thereof. The arbitrators shall apply the law of the State of New
York.

          (f) The parties to this Agreement consent that the United States
District Courts for the Southern District of New York and the District of
Arizona shall have jurisdiction with respect to all aspects of the enforcement
of the arbitration provisions of this Agreement.

          13.9 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors and
permitted assigns hereunder; provided however, that the Company is not bound by,
and expressly disclaims any responsibility for enforcing, the provisions in
section 9 or section 11.8.

          13.10 Headings. The section headings contained in this Agreement are
for convenience only and are not a part of this Agreement.

          13.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original;
such counterparts together shall constitute but one Agreement.

          13.12 Supermajority Voting. Each party to this Agreement acknowledges
that Article 41 of the estatutos of the Company adopted as of the date hereof
provides for supermajority voting with respect to certain matters identified
therein. In addition, each party to this Agreement agrees that it shall cause
the Company and each member of the Board that it nominates to comply with, and
to take all such actions necessary or advisable to ensure the continued
enforceability of Article 41 of the estatutos of the Company adopted as of the
date hereof.

          13.13 Conflicts with Estatutos or Peruvian Law. In the event of any
conflict between the meaning or interpretation of any term of this Agreement and
any term of the estatutos of the Company or Peruvian Company Law, any such
conflicting meaning or interpretation of, the terms of this Agreement shall not
be binding on the Company.

                      [End of Text; Signature Pages Follow]

                                       29

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

                                        SMM CERRO VERDE NETHERLANDS B.V.

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                        SUMITOMO METAL MINING CO., LTD.

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                        SUMITOMO CORPORATION

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                        SUMMIT GLOBAL MANAGEMENT B.V.

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                      S-1

<PAGE>

                                        CYPRUS CLIMAX METALS COMPANY

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                        PHELPS DODGE CORPORATION

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                        SOCIEDAD MINERA CERRO VERDE S.A.A.

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                      S-2

<PAGE>

                                        COMPANIA DE MINAS BUENAVENTURA S.A.A.

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                      S-3
<PAGE>
                                    SCHEDULES

                                     to the

                             PARTICIPATION AGREEMENT

                                      among

                        SUMITOMO METAL MINING CO., LTD.,

                              SUMITOMO CORPORATION

                          SUMMIT GLOBAL MANAGEMENT B.V.

                        SMM CERRO VERDE NETHERLANDS B.V.

                      COMPANIA 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 as of March 16, 2005

<PAGE>

                                      INDEX

<TABLE>
<S>                    <C>
Schedule A             Mining Concessions
Schedule 5.1(c)(ii)    Compliance with Other Instruments and Laws
Schedule 5.1(c)(iii)   Government Authorizations, Permits and Licenses
Schedule 5.1(d)        Environmental Matters
Schedule 5.1(e)        Taxes
Schedule 5.1(f)        Labor Matters
Schedule 5.1(g)(ii)    Legal Proceedings; Competing Claims
Schedule 5.1(i)        Financial Statements
Schedule 5.1(l)        Absence of Changes and Events
Schedule 5.1(m)        Title to Assets, Mining and Beneficiation Concessions and
                       Other Rights
Schedule 5.1(n)        Related Party Transactions and Commitments
</TABLE>

                                       2

<PAGE>

                                  INTRODUCTION

     These schedules (the "Schedules") are being furnished by Phelps Dodge
Corporation, a New York corporation ("PDC"), Cyprus Amax Minerals Company, a
Delaware corporation ("CAMC"), Cyprus Metals Company, a Delaware corporation
("CMC"), Cyprus Climax Metals Company, a Delaware corporation (the "PD
Participant" and together with PDC, CAMC, and CMC, the "PD Parties") and
Sociedad Minera Cerro Verde S.A.A., a sociedad anonima abierta organized under
the laws of the Republic of Peru ("Cerro Verde"), in connection with the
execution and delivery of the Participation Agreement (the "Agreement"), dated
as of March 16, 2005, among Sumitomo Metal Mining Co., Ltd., a Japanese
corporation ("SMM"), Sumitomo Corporation, a Japanese corporation ("SC"), Summit
Global Management B.V., a Dutch corporation ("SGN"), Compania de Minas
Buenaventura S.A.A., a Peruvian sociedad anonima abierta ("BVN"), the PD Parties
and Cerro Verde. Unless the context otherwise requires, capitalized terms used
in these Schedules without definition are defined in the Agreement.

     The Schedules are qualified in their entirety by reference to specific
provisions of the Agreement, and are not intended to, and do not, constitute any
representation or warranty of the Company or the PD Parties, except as and to
the extent expressly set forth in the Agreement.

     The fact that any item of information is contained herein shall not be
construed as an admission of liability under law, or to mean that such
information is required by the Agreement to be disclosed herein, or to mean that
such information is material. Such information shall not be used as a basis for
interpreting the term "material", "materially", "materiality" or "Material
Adverse Effect", or any similar qualification in the Agreement. Matters
reflected in these Schedules are not necessarily limited to matters required by
the Agreement to be reflected herein. Such additional matters are set forth for
informational purposes and do not necessarily include other matters of a similar
nature.

     The section headings, subheadings, schedule descriptions and
cross-references in these Schedules are for convenience of reference only and
shall not be deemed to alter or affect the express description of these
Schedules as set forth in the Agreement.

     These Schedules, and the information contained herein, are in all events
subject to the terms of Sections 9.1 and 9.2 of the Agreement.

                                       3

<PAGE>

                                   SCHEDULE A

                               MINING CONCESSIONS

1.

<TABLE>
<CAPTION>
ITEM       CONCESSION        APPLICATION DATE   APPROVAL DATE
----   -------------------   ----------------   -------------
<S>    <C>                   <C>                <C>
  1      CERROVERDE 1,2,3                         16-Dec-91
  2    PLANTA DE BENEFICIO                        20-Dec-91
  3       TAMBOQUEMADO1           8-Oct-93        31-Mar-98
  4         TIABAYA-04           20-Apr-94        21-Nov-95
  5         TIABAYA-05           20-Apr-94        24-Nov-95
  6         TIABAYA-06           20-Apr-94        30-May-95
  7         TIABAYA-10           20-Apr-94        23-Oct-95
  8         TIABAYA-12           20-Apr-94        31-Aug-95
  9         TIABAYA-14           20-Apr-94        30-Nov-94
 10         TIABAYA-16           20-Apr-94        30-Nov-94
 11         TIABAYA-21           20-Apr-94        23-Nov-94
 12         TIABAYA-22           20-Apr-94        30-Nov-94
 13         TIABAYA-23           20-Apr-94        30-Nov-94
 14         TIABAYA-24           20-Apr-94        29-Nov-94
 15         TIABAYA-25           18-Apr-95        17-Jul-95
 16         TIABAYA-26           18-Apr-95        18-Jul-95
 17         TIABAYA-27           18-Apr-95        29-Sep-95
 18         TIABAYA-28           18-Apr-95        18-Jul-95
 19         TIABAYA-29           18-Apr-95        30-Jun-95
 20         TIABAYA-30           18-Apr-95        18-Jul-95
 21         TIABAYA-31           18-Apr-95        18-Jul-95
 22         TIABAYA-32           18-Apr-95        17-Jul-95
 23         TIABAYA-33           24-Apr-95        17-Jul-95
 24         TIABAYA-34            2-May-95        30-Nov-95
 25         TIABAYA-37           28-Mar-95        28-Feb-97
 26         TIABAYA-47           21-Jul-97        25-Mar-97
 27         TIABAYA-48           28-Feb-95        28-Feb-97
 28         TIABAYA-52           31-Jul-96        30-Apr-98
 29         TIABAYA-53           14-Aug-96        30-Jan-98
 30         TIABAYA-54           21-Aug-96        29-Aug-97
 31         TIABAYA-67           22-Oct-99         5-Apr-00
 32         TIABAYA-87            2-May-01        16-Aug-01
 33         TIABAYA-91            3-Mar-03        27-Aug-03
 34         TIABAYA-92            3-Mar-03         9-Oct-03
 35         TIABAYA-93            3-Mar-03        25-Aug-03
 36         TIABAYA-95            1-Jun-04        24-Aug-04
 37         CHRISTMAS 1          12-Dec-03         4-Aug-04
</TABLE>

                                       4

<PAGE>

2.   See Schedule 5.1(m) ("Title to Assets, Mining and Beneficiation Concessions
     and Other Rights").

                                       5

<PAGE>

                               SCHEDULE 5.1(C)(II)

                   COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS

1.   Pursuant to a letter dated February 17, 2005, SUNAT informed Cerro Verde
     that, if it were subject to the new mining royalty tax, the deadline for
     the payment of such tax was February 28, 2005.

2.   SUNAT has posted royalty tax payment information to Cerro Verde's taxpayer
     account, which is accessible to Cerro Verde through a portal on SUNAT's
     website (www.sunat.gob.pe).

3.   See Schedules 5.1(d) ("Environmental Matters"); 5.1(e) ("Taxes"); 5.1(f)
     ("Labor Matters"); and 5.1(g)(ii) ("Legal Proceedings; Competing Claims").

                                       6

<PAGE>

                              SCHEDULE 5.1(C)(III)

                 GOVERNMENT AUTHORIZATIONS, PERMITS AND LICENSES

1.   Operating Permit for the Sulfide Project from the Ministry of Energy and
     Mines. The Ministry of Energy and Mines will only issue this permit after
     it completes its inspection of the Sulfide Project after construction has
     been completed.

2.   Approval of modifications to the Mining Operation Certificate issued by the
     General Mining Director of the Ministry of Energy and Mines to authorize
     increased use of explosives by Cerro Verde in connection with the operation
     of the Sulfide Project.

3.   Approval by the General Management of Control of Security Services, Arms
     Control, Munitions and Civil Use of Explosives of the Interior Ministry
     (DICSCAMEC) for the increased use of explosives in connection with the
     operation of the Sulfide Project.

4.   Approval by DICSCAMEC of the use of explosives in connection with the
     construction of the Sulfide Project.

5.   Approval of the Closure Plan for the Mines and the Sulfide Project by the
     Ministry of Energy and Mines. Current legislation requires that Cerro Verde
     submit a plan regarding the Sulfide Project for approval by September 26,
     2005. However, the Ministry of Energy and Mines has not yet promulgated
     regulations regarding such Closure Plans and consequently such deadline may
     be extended.

6.   License from the Ministry of Transportation and Communications for Cerro
     Verde's use of radio frequencies in connection with the Sulfide Project.

7.   Approval of the Agriculture Department and Regional Direction of
     Agriculture in Arequipa for Cerro Verde's plan to expand the capacity of
     its water supply infrastructure in connection with the Sulfide Project. A
     construction permit from the municipality of Uchumayo may also be required.

8.   Water Use License from the Technical Administration of the River Chili
     District granting Cerro Verde additional water rights necessary for the
     Sulfide Project.(1)

----------
(1)  Supreme Decree N(o) 003-2004-AG dated January 28, 2004, signed by the
     Agriculture Ministry, has granted Cerro Verde such water rights. Once the
     construction of the Pillones Project is completed, Cerro Verde will
     commence an administrative procedure to obtain this license from the
     Technical Administration of the River Chili District.

                                       7

<PAGE>

9.   Permit from the Regional Health Direction of the Health Ministry in
     Arequipa for the operation of a new first aid center for the Sulfide
     Project.

10.  Approval by the General Direction of Environmental Energetic Affairs under
     the Ministry of Energy and Mines of the Environmental Impact Study for the
     construction of a 220- kv transmission line.

11.  Approval by the Ministry of Energy and Mines for the construction of a 220-
     kv transmission line.

12.  Approval of the Environmental Impact Study for the expansion of the
     Matarani Port.

13.  Approval of an amendment to the Environmental Impact Study for the Sulfide
     Project, which was approved by the Mining Environmental Direction of the
     Ministry of Energy and Mines, regarding the transport of concentrates by
     train to the Matarani port. In the event that additional modifications to
     the Sulfide Project as contemplated in the Feasibility Study are made,
     approval of additional modifications to the Environmental Impact Study may
     be required.

14.  Permit by the District Municipality of Yarabamba granting Cerro Verde the
     right to extract materials to produce concrete and other construction
     materials in connection with the construction of the Sulfide Project.

15.  Approval by the Hydrocarbons General Management of the Ministry of Mines
     and OSINERG for the modification of Cerro Verde's liquid fuel usage permit
     to allow Cerro Verde to use liquid fuels for the operation of the Sulfide
     Project.

16.  Licenses from the General Direction of Environmental Health under Ministry
     of Health (DIGESA) regarding the waste water quality standards set forth in
     Executive Order N 17552 and corresponding administrative regulations.(2)

----------
(2)  These licenses will only be required if Cerro Verde loses the appeal
     described in Schedule 5.1(d) ("Environmental Matters").

                                       8

<PAGE>

                                 SCHEDULE 5.1(D)

                              ENVIRONMENTAL MATTERS

1.   On December 17, 2004, Cerro Verde received a notice from the Health General
     Direction (DIGESA) demanding that Cerro Verde modify its waste water
     treatment system to comply with the water quality standards set forth in
     Executive Order N 17552 and corresponding administrative regulations. On
     January 10, 2005, Cerro Verde appealed this notice on the grounds that
     Executive Order No. 17552 establishes water quality standards for
     agricultural uses of waste water (i.e., water use for animal consumption
     and for vegetables for human consumption), and waste water at Cerro Verde
     is not used for such purposes. Cerro Verde reuses its waste water for
     industrial processing, which is separately regulated by the Ministry of
     Energy and Mines.(3)

----------
(3)  Cerro Verde currently estimates that the cost of constructing water
     treatment facilities to comply with the notice would be approximately
     U.S.$50,000, and that the operating costs of such facilities would be
     approximately U.S.$10,000 per year.

                                       9

<PAGE>

                                 SCHEDULE 5.1(E)

                                      TAXES

1.   When the Tax Stability Agreement was signed in February 1998, the
     prevailing tax regime required Cerro Verde to pay a contribution to the
     National Habitation Fund (FONAVI) equal to 9% of employee wages. In
     December 1999, the FONAVI tax was replaced by an Extraordinary Solidarity
     Tax (EIS), which Cerro Verde paid. With the abolishment of the EIS on
     December 1, 2004, Cerro Verde's obligation to pay the FONAVI tax was
     reinstated. However, from December 1, 2004, Cerro Verde inadvertently made
     payments at the rates established by the EIS. Cerro Verde estimates that
     the tax liability for this inadvertent underpayment of the FONAVI from
     December 2004 through February 2005 is approximately U.S.$213,000,
     including penalties and interest.

2.   On October 27, 2004, the Tax Administration assessed a fine of S/1,920
     (approx. U.S.$581) against Cerro Verde for late submission of a customs
     form, the Exclusive Information Declaration (DUIM). Cerro Verde has
     appealed this assessment.

3.   From March 2000 to approximately March 2004, the Company inadvertently paid
     a 9% customs duty rather than the 15% duty that was in force when the
     Stability Agreement was signed. This error was discovered during an
     internal review. The total amount of the underpayment was approximately
     U.S.$3.5 million and the total amount of the penalties and interest paid to
     SUNAT in 2004 was approximately U.S.$2.5 million.

4.   See Schedule 5.1(c)(ii) ("Compliance with Other Instruments and Laws").

                                       10

<PAGE>

                                 SCHEDULE 5.1(F)

                                  LABOR MATTERS

1.   BONY MANUEL ALVAREZ GRANDA. On April 13, 2004, Mr. Bony Manuel Alvarez
     Granda, a Cerro Verde worker, was dismissed for intoxication during working
     hours. As required under Peruvian labor law, Cerro Verde deposited into a
     designated bank account approximately U.S.$2,955, representing the amount
     of social benefits to which Cerro Verde believes Mr. Granda was entitled
     upon dismissal, and presented proof of such deposit to Arequipa's Second
     Court. Mr. Granda has requested the receipt of this social benefit amount.
     However, because he had also filed the two cases described below regarding
     his dismissal, the court has not granted him the social benefits claimed,
     pending the outcome of these two cases. On June 23, 2004, Mr. Granda filed
     a lawsuit against Cerro Verde in Arequipa's Third Court, claiming that
     Cerro Verde miscalculated the severance payment, unpaid wages and
     corresponding social benefits to which he was entitled by approximately
     U.S.$36,994. A hearing was initially scheduled for January 25, 2005 but was
     suspended for want of a necessary third party. In addition, on May 13,
     2004, Mr. Granda filed in Arequipa's Sixth Court a constitutional claim
     seeking reinstatement. The Sixth Court dismissed this case on the grounds
     that a plaintiff may not file simultaneous claims in labor court and civil
     court. He appealed the decision with the Third Civil Appellate Court on
     October 1, 2004, and the appellate court upheld the trial court's decision
     on February 22, 2005. It is Cerro Verde's understanding that Mr. Granda has
     appealed the appellate decision before the Constitutional Court, but Cerro
     Verde has not received formal notice of such an appeal.

2.   FLORENCIO COLMENARES POZO. On December 17, 2003, Mr. Florencio Colmenares
     Pozo was dismissed for stealing copper product. As required under Peruvian
     labor law, Cerro Verde deposited into a designated bank account
     approximately U.S.$615, representing the amount of social benefits to which
     Cerro Verde believes Mr. Pozo was entitled upon dismissal, and presented
     proof of such deposit to Arequipa's Fourth Court. Mr. Pozo requested the
     receipt of this social benefit amount. However, because Mr. Pozo also filed
     the following case regarding his dismissal, the court has not yet granted
     him the social benefit claimed, pending the outcome of the other case. On
     March 26, 2004, Mr. Pozo filed a lawsuit against Cerro Verde in Arequipa's
     Fourth Court for unpaid wages and corresponding social benefits totaling
     approximately U.S.$17,878. The court hearing was initially scheduled for
     February 22, 2005 but was postponed because Mr. Pozo failed to appear.

                                       11

<PAGE>

3.   PEDRO LEON FUENTES SALAS. On May 14, 2004, Mr. Pedro Leon Fuentes Salas was
     dismissed for making false statements to claim certain welfare benefits to
     which he was not otherwise entitled. As required under Peruvian labor law,
     Cerro Verde deposited into a designated bank account approximately
     U.S.$2,302, representing the amount of social benefits to which Cerro Verde
     believes Mr. Salas was entitled upon dismissal, and presented proof of such
     deposit to Arequipa's Second Court. Mr. Salas has requested the receipt of
     this social benefit amount. However, because Mr. Salas had also filed the
     following case regarding his dismissal, the court has not yet granted him
     the social benefit claimed, pending the outcome of this other case. On
     October 4, 2004, Mr. Salas filed a constitutional claim against Cerro Verde
     in Arequipa's Sixth Civil Court, seeking reinstatement. The court dismissed
     this case on the grounds that the plaintiff cannot file simultaneous claims
     in labour court and civil court. Mr. Salas appealed the decision with the
     Third Civil Appellate Court on January 11, 2005. So far, no date has been
     scheduled by the court for the hearing.

4.   MIGUEL ANGEL CHAVEZ ALVAREZ. On May 31, 2004, Mr. Miguel Angel Chavez
     Alvarez was dismissed for making false statements to claim certain welfare
     benefits to which he was not otherwise entitled. As required under Peruvian
     labor law, Cerro Verde deposited into a designated bank account
     approximately U.S.$1,218, representing the amount of social benefits to
     which Cerro Verde believes Mr. Alvarez was entitled upon dismissal, and
     presented proof of such deposit to Arequipa's Third Court. Mr. Alvarez has
     requested for the receipt of the social benefit, and the court granted his
     request as of September 21, 2004.

5.   VICTOR ZAPANA FLORES. On October 6, 2004, Mr. Victor Zapana Flores was
     dismissed for being intoxicated while working. As required under Peruvian
     labor law, Cerro Verde deposited into a designated bank account
     approximately U.S.$678, representing the amount of social benefits to which
     Cerro Verde believes Mr. Flores was entitled upon dismissal, and presented
     proof of such deposit to Arequipa's Fourth Labor Court. Mr. Flores has
     requested the receipt of the social benefit, and the court granted Mr.
     Flores's request as of November 8, 2004.

6.   ROLANDO RIVERA. Cerro Verde recently learned through an internal review of
     its records that it inadvertently failed to pay to Rolando Rivera, an
     employee expected to retire by the end of March 2005, a salary increase
     required pursuant to the Private Pension Fund (AFP). The salary increase,
     interest and other expenses attributable to this claim total approximately
     U.S.$33,700. Cerro Verde intends to pay Mr. Rivera this amount by the end
     of March 2005, upon his retirement and execution of a release agreement
     with Cerro Verde.

                                       12

<PAGE>

7.   Law No 27942 and related administrative regulations, approved by Supreme
     Decree No 010-2003-MIMDES, required employers to implement procedures to
     protect employees from sexual harassment by March 2004. Cerro Verde did not
     timely implement the procedures required under these regulations. Cerro
     Verde intends to implement such procedures in March 2005.

                                       13

<PAGE>

                               SCHEDULE 5.1(G)(II)

                       LEGAL PROCEEDINGS; COMPETING CLAIMS

1.   JUAN NAVARRO MENDOZA (387-04 AND 383-04) AND OTHERS. On December 3, 2003,
     Juan Navarro Mendoza and a group of approximately 20 farmers submitted an
     application with the Special Land Titulation Project (PETT) to purchase
     approximately 105,000 hectares of land located in the Tiabaya 67 mining
     concession. Under Peruvian law, PETT is authorized to sell available land,
     provided that such sale will not interfere with any third party's right.
     Cerro Verde was granted title to the Tiabaya 67 mining concession in 2000
     and this mining concession is recorded with INACC. PETT is currently
     reviewing the farmers' application. Cerro Verde has challenged this
     application and has submitted to PETT documentation to establish its prior
     claim to this land. Cerro Verde has also initiated a criminal trespass
     claim to require that the farmers vacate the property.

2.   MINERA PENOLES. In the fall of 2004, Minera Penoles published a request for
     mining concessions Yarabamba 2 and Yarabamba 3, which partially overlapped
     with Cerro Verde's mining concessions for Cerro Verde 1,2,3 (99.90
     hectares) and Tiabaya 87 (4.30 hectares). On October 22, 2004, Cerro Verde
     purchased at auction the small portion of the claim for Yarabamba 3 that,
     while surrounded by the Cerro Verde 1,2,3 claim, was on land not covered by
     Cerro Verde 1,2,3.

     INACC resolutions regarding Minera Penoles' claims for Yarabamba 3 (issued
     on December 3, 2004) and Yarabamba 2 (issued on December 15, 2004)
     recognized Cerro Verde's prior right of the Cerro Verde 1,2,3 and Tiabaya
     87 concessions, and Cerro Verde's right to the portion of Yarabamba 3
     purchased at auction.

3.   ASOCIACION CASA - TALLER VIRGEN DE LA CANDELARIA. On March 23, 1988, the
     Regional Direction of Energy in Arequipa granted Cerro Verde a right of use
     over 151 hectares of land located in Congata, Uchumayo called "Franja de
     Conducciones." In accordance with its right of use, Cerro Verde has a water
     pipeline and electricity and phone cables running through this area. In
     2004, the Asociacion Casa - Taller Virgen de la Candelaria, composed of
     inhabitants of the Pueblo Joven El Nazareno, began preparing land in Franja
     de Conducciones for housing development. Cerro Verde instituted a criminal
     trespass claim against the Association and after several meetings between
     Cerro Verde and representatives of the Association, the Association has
     ceased construction preparations in the area. The area has been declared
     unfit for human habitation by the local Civil Defense agency in Arequipa.

                                       14

<PAGE>

4.   NESTOR CARI. Mr. Nestor Cari is a former worker of a Cerro Verde
     contractor. Mr. Cari has sued Cerro Verde and Ruben Miranda, a Cerro Verde
     employee, for damages in connection with the loss of Mr. Cari's leg below
     the knee in a workplace accident on April 19, 2003. In January, 2005, Mr.
     Cari was awarded approximately U.S.$6,100 in damages. Both Mr. Miranda and
     Cerro Verde have appealed the ruling because the original judgment did not
     consider a contributory negligence claim.

5.   SOCIAL SECURITY (ESSALUD AND ONP). In 1996, ESSALUD conducted an inspection
     of Cerro Verde's compliance with health and pension plan regulations. In
     connection with that review, ESSALUD found that Cerro Verde had incorrectly
     calculated health and pension plan benefits from 1993 to 1995 and held
     Cerro Verde liable for over approximately U.S.$150,000 with respect to
     health benefits and approximately U.S.$55,708.86 in connection with pension
     plan benefits. Cerro Verde appealed both calculations. The health plan
     claims were resolved in the Company's favor in January 2005. Cerro Verde's
     appeal regarding the pension benefit calculation before the National
     Pension Organization has been transferred to the Tax Tribunal and has been
     pending before the Tax Tribunal for over two years.

6.   MINISTRY OF ENERGY AND MINES. On September 5, 2003, the Ministry of Energy
     and Mines fined Cerro Verde approximately U.S.$19,018.40 (Decision No
     198-2003MEM/DGM) due to the discovery in a 2003 Security and Health
     Inspection of two broken locks on fuse boxes in a truck maintenance shop
     and the driving of a Cerro Verde contractor without a Cerro Verde driving
     permit. Cerro Verde appealed this fine and the Decision was declared
     invalid by the Mining Council on June 16, 2004. Nevertheless, on September
     23, 2004, Cerro Verde received a report from an auditing company hired by
     Ministry of Energy and Mines attempting to collect for this claim. Cerro
     Verde appealed this action on September 29, 2004.

7.   MUNICIPALIDAD DE UCHUMAYO. On December 2004, the municipality of Uchumayo
     assessed a tax charge of approximately U.S.$39,569.16 and a fine of
     approximately U.S.$7,959.04 against Cerro Verde for real property taxes in
     2000, 2001, 2002, 2003 and 2004. On December 14, 2004, Cerro Verde appealed
     both the real property tax and the fine before the Tax Tribunal because the
     property tax was improperly assessed against property. In 2002, Cerro
     Verde's appeal of a similar claim for property taxes in 1998 was resolved
     in Cerro Verde's favor by the Municipality of Arequipa, that according to
     the laws at that time was entitled to resolve the issue as the appellate
     institution.

8.   See Schedule 5.1(m) ("Title to Assets, Mining and Beneficiation Concessions
     and Other Rights").

                                       15

<PAGE>

                                 SCHEDULE 5.1(I)

                              FINANCIAL STATEMENTS

                                   [Attached]

                                       16

<PAGE>

SOCIEDAD MINERA CERRO VERDE S.A.A.

ESTADOS FINANCIEROS
31 DE DICIEMBRE DEL 2004 Y 31 DE DICIEMBRE DEL 2003

<PAGE>

SOCIEDAD MINERA CERRO VERDE S.A.A.

ESTADOS FINANCIEROS
31 DE DICIEMBRE DEL 2004 Y 31 DE DICIEMBRE DEL 2003

CONTENIDO

Dictamen de los auditores independientes

Balance general

Estado de ganancias y perdidas

Estado de cambios en el patrimonio neto

Estado de flujos de efectivo

Notas a los estados financieros

S/. = Nuevo sol
US$ = Dolar estadounidense

<PAGE>

(PRICEWATERHOUSECOOPERS LOGO)                              (80 anos en el Peru)

                                        DONGO-SORIA GAVEGLIO Y ASOCIADOS
                                        SOCIEDAD CIVIL
                                        FIRMA MIEMBRO DE PRICEWATERHOUSECOOPERS
                                        Av. Canaval y Moreyra 380
                                        Lima 27, Peru
                                        Apartado 1434-2869
                                        Telfs.:(51 1)211-6500 411-5800
                                        Fax :(51 1)442-6522 211-6565

DICTAMEN DE LOS AUDITORES INDEPENDIENTES

2 de febrero del 2005

A los senores Accionistas
SOCIEDAD MINERA CERRO VERDE S.A.A.

Hemos auditado los balances generales adjuntos de SOCIEDAD MINERA CERRO VERDE
S.A.A. al 31 de diciembre del 2004 y al 31 de diciembre del 2003 y los
correspondientes estados de ganancias y perdidas, de cambios en el patrimonio
neto y de flujos de efectivo por los anos terminados en esas fechas, expresados
en dolares estadounidenses. La preparacion de dichos estados financieros es
responsabilidad de la Gerencia de la Compania. Nuestra responsabilidad consiste
en emitir una opinion sobre estos estados financieros basada en las auditorias
que efectuamos.

Nuestras auditorias fueron efectuadas de acuerdo con normas de auditoria
generalmente aceptadas en el Peru. Tales normas requieren que planifiquemos y
realicemos nuestro trabajo con la finalidad de obtener una seguridad razonable
de que los estados financieros no contienen errores importantes. Una auditoria
comprende el examen, basado en comprobaciones selectivas, de las evidencias que
respaldan los importes y las divulgaciones expuestas en los estados financieros.
Una auditoria tambien comprende la evaluacion de los principios de contabilidad
aplicados y de las estimaciones significativas efectuadas por la Gerencia de la
Compania, asi como una evaluacion de la presentacion general de los estados
financieros. Consideramos que las auditorias efectuadas constituyen una base
razonable para fundamentar nuestra opinion.

En nuestra opinion, los estados financieros antes indicados presentan
razonablemente, en todos sus aspectos significativos, la situacion financiera de
SOCIEDAD MINERA CERRO VERDE S.A.A. al 31 de diciembre del 2004 y al 31 de
diciembre del 2003, los resultados de sus operaciones y sus flujos de efectivo
por los anos terminados en esas fechas, de acuerdo con principios de
contabilidad generalmente aceptados en el Peru.

(DONGO-SORIA GAVEGLIO Y ASOCIADOS)

Refrendado por

/s/ Luis W. Montero                  (socio)
-------------------------------------
Luis W. Montero
Contador Publico Colegiado
Matricula No. 17729

                                        Inscrita en la Partida N. 11028527
                                        Registro de Personas juridicas de Lima
                                        Capital pagado S/. 1,035,000.00

<PAGE>

SOCIEDAD MINERA CERRO VERDE S.A.A.

BALANCE GENERAL (NOTAS 1 Y, 2)

ACTIVO

<TABLE>
<CAPTION>
                                                 AL 31 DE DICIEMBRE DEL
                                                 ----------------------
                                                      2004      2003
                                                    -------   -------
                                                     US$000    US$000
<S>                                              <C>          <C>
ACTIVO CORRIENTE
Caja y bancos                                         8,628    28,670
                                                    -------   -------
Inversiones disponibles para la venta (Nota 3)      148,544        --
                                                    -------   -------
Cuentas por cobrar comerciales:
Empresas afiliadas (Nota 4)                           8,848    10,546
Terceros                                                175       131
                                                    -------   -------
                                                      9,023    10,677
Credito fiscal por recuperar                            431       278
Diversas                                                326       378
                                                    -------   -------
                                                      9,780    11,333
                                                    -------   -------
Existencias (Nota 5)                                 25,344    21,642
                                                    -------   -------
Gastos pagados por anticipado                           100       259
                                                    -------   -------
Total del activo corriente                          192,396    61,904

EXISTENCIAS (NOTA 5)                                  3,570     3,175

INMUEBLES, MAQUINARIA Y
EQUIPO, NETO (NOTA 6)                               149,805   153,943

GASTOS DE DESARROLLO
DE MINA (NOTA 7)                                     16,186    17,942

OTROS ACTIVOS                                         2,086     1,983
                                                    -------   -------
                                                    364,043   238,947
                                                    =======   =======
</TABLE>

PASIVO Y PATRIMONIO NETO

<TABLE>
<CAPTION>
                                              AL 31 DE DICIEMBRE DEL
                                              ----------------------
                                                   2004      2003
                                                 -------   -------
                                                  US$000    US$000
<S>                                           <C>          <C>
PASIVO CORRIENTE
Cuentas por pagar comerciales                     13,565     6,402
Empresas afiliadas (Nota 4)                          806       357
Tributos por pagar                                30,128         7
Remuneraciones y beneficios
   sociales por pagar                              8,226     1,270
Cuentas por pagar diversas                         1,514       547
                                                 -------   -------
Total del pasivo corriente                        54,239     8,583
                                                 -------   -------
OTROS PASIVOS A LARGO PLAZO

Provision para remediacion y cierre de mina        4,681     4,014
Impuesto a la renta y participacion de los
   trabajadores diferidos (Nota 8)                38,480    32,127
                                                 -------   -------
                                                  43,161    36,141
                                                 -------   -------

INGRESOS DIFERIDOS                                 1,032     1,275
                                                 -------   -------
PATRIMONIO NETO (NOTA 10)
Capital social                                   122,747   122,747
Capital adicional                                    194       194
Reserva legal                                      9,056     4,728
Resultados acumulados                            133,614    65,279
                                                 -------   -------
                                                 265,611   192,948
                                                 -------   -------
SITUACION TRIBUTARIA (NOTA 11)

                                                 -------   -------
                                                 364,043   238,947
                                                 =======   =======
</TABLE>

Las notas que se acompanan forman parte de los estados financieros.

<PAGE>

SOCIEDAD MINERA CERRO VERDE S.A.A.

ESTADO DE GANANCIAS Y PERDIDAS (NOTAS 1 Y 2)

<TABLE>
<CAPTION>
                                                            POR EL ANO TERMINADO
                                                           EL 31 DE DICIEMBRE DEL
                                                         -------------------------
                                                             2004          2003
                                                         -----------   -----------
                                                            US$000        US$000
<S>                                                      <C>           <C>
Ventas netas                                                 260,782       156,724
Costo de ventas (Nota 12)                                   (119,482)     (103,962)
                                                         -----------   -----------
Utilidad bruta                                               141,300        52,762
                                                         -----------   -----------
Gastos de ventas                                              (1,089)         (601)
                                                         -----------   -----------
Utilidad de operacion                                        140,211        52,161
                                                         -----------   -----------
Otros (gastos) ingresos:
Gastos financieros, neto (Nota 13)                              (827)       (2,151)
Gastos de exploracion                                             --           (75)
Varios, neto                                                     (31)        6,939
                                                         -----------   -----------
                                                                (858)        4,713
                                                         -----------   -----------
Utilidad antes de participacion de los trabajadores e
   impuesto a la renta                                       139,353        56,874
Participacion de los trabajadores:
- Corriente (Nota 9)                                         (10,075)           --
- Diferido (Nota 8)                                           (1,427)       (2,726)
Impuesto a la renta:
- Corriente (Nota 11-b)                                      (35,262)       (1,795)
- Diferido (Nota 8)                                           (4,926)       (9,078)
                                                         -----------   -----------
Utilidad neta del ano                                         87,663        43,275
                                                         ===========   ===========

Utilidad por accion (Nota 14)                            US$   0.386   US$   0.190
                                                         ===========   ===========
</TABLE>

Las notas que se acompanan forman parte de los estados financieros.

<PAGE>

SOCIEDAD MINERA CERRO VERDE S.A.A.

ESTADO DE CAMBIOS EN EL PATRIMONIO NETO (NOTA 10)
POR LOS ANOS TERMINADOS EL 31 DE DICIEMBRE DEL 2004
Y EL 31 DE DICIEMBRE DEL 2003

<TABLE>
<CAPTION>
                                           CAPITAL    CAPITAL    RESERVA   RESULTADOS
                                            SOCIAL   ADICIONAL    LEGAL    ACUMULADOS    TOTAL
                                           -------   ---------   -------   ----------   -------
                                            US$000     US$000     US$000     US$000      US$000
<S>                                        <C>       <C>         <C>       <C>          <C>
Saldos al 1 de enero del 2003              122,941       --        3,213     22,839     148,993
Transferencia al capital adicional            (194)     194           --         --          --
Transferencia a la reserva legal                --       --        1,515     (1,515)         --
Ajuste por remediacion y cierre de mina         --       --           --         92          92
Cancelacion del contrato de cobertura
  de intereses, neto de su efecto
  tributario                                    --       --                     588         588
Utilidad neta del ano                           --       --           --     43,275      43,275
                                           -------      ---        -----    -------     -------
Saldos al 31 de diciembre del 2003         122,747      194        4,728     65,279     192,948
Transferencia a la reserva legal                --       --        4,328     (4,328)         --
Distribucion de dividendos                      --       --           --    (15,000)    (15,000)
Utilidad neta del ano                           --       --           --     87,663      87,663
                                           -------      ---        -----    -------     -------
Saldos al 31 de diciembre del 2004         122,747      194        9,056    133,614     265,611
                                           =======      ===        =====    =======     =======
</TABLE>

Las notas que se acompanan forman parte de los estados financieros.

<PAGE>

SOCIEDAD MINERA CERRO VERDE S.A.A.

ESTADO DE FLUJOS DE EFECTIVO (NOTAS 2 Y 16)

<TABLE>
<CAPTION>
                                                       POR EL ANO TERMINADO
                                                      EL 31 DE DICIEMBRE DEL
                                                      ----------------------
                                                          2004      2003
                                                        -------   -------
                                                         US$000    US$000
<S>                                                   <C>         <C>
FLUJOS DE EFECTIVO DE LAS ACTIVIDADES DE OPERACION
Utilidad neta del ano                                    87,663    43,275
Ajustes al resultado neto que no afectan los
flujos de efectivo de las actividades de operacion:
Depreciacion                                             20,824    18,503
Amortizacion de gastos de desarrollo de mina              1,756     1,733
Provision para remediacion y cierre de mina                 379       501
Amortizacion de otros activos                               185        --
Ajuste por remediacion y cierre de mina                      --     1,983
Impuesto a la renta y participation de los
   trabajadores diferidos                                 6,353    11,804
Aumento (disminucion) en el flujo de operaciones
   por variaciones netas en activos y pasivos:
Cuentas por cobrar comerciales                            1,654    (2,864)
Otras cuentas por cobrar                                   (101)      830
Existencias                                              (4,097)  (10,017)
Gastos pagados por anticipado y otros activos               159    (1,141)
Cuentas por pagar comerciales                             7,163     1,316
Tributos por pagar                                       30,121        (7)
Remuneraciones y beneficios sociales                      6,956       236
Cuentas por pagar diversas                                1,416      (536)
Ingresos diferidos                                         (243)     (243)
                                                        -------   -------
Efectivo neto provisto por las actividades
   de operacion                                         160,188    65,373
                                                        -------   -------

FLUJOS DE EFECTIVO DE LAS ACTIVIDADES DE INVERSION
Inversiones en obras en curso                           (16,772)   (5,146)
Ingresos por venta de maquinaria y equipo
   y/o ajustes                                               86        --
                                                        -------   -------
Efectivo neto aplicado a las actividades
   de inversion                                         (16,686)   (5,146)
                                                        -------   -------

FLUJOS DE EFECTIVO DE LAS ACTIVIDADES
   DE FINANCIAMIENTO
Prestamos bancarios, neto                                    --   (33,000)
Pago de dividendos                                      (15,000)       --
                                                        -------   -------
Efectivo neto aplicado a las actividades
   de financiamiento                                    (15,000)  (33,000)
                                                        -------   -------
Aumento neto del efectivo y equivalente de efectivo     128,502    27,227
Saldo del efectivo y equivalente de efectivo
   al inicio del ano                                     28,670     1,443
                                                        -------   -------
Saldo del efectivo y equivalente de efectivo
   al final del ano                                     157,172    28,670
                                                        =======   =======
</TABLE>

Las notas que se acompanan forman parte de los estados financieros.

<PAGE>

SOCIEDAD MINERA CERRO VERDE S.A.A.

NOTAS A LOS ESTADOS FINANCIEROS
31 DE DICIEMBRE DEL 2004 Y 31 DE DICIEMBRE DEL 2003

1    ACTIVIDAD ECONOMICA

     SOCIEDAD MINERA CERRO VERDE S.A.A. (en adelante la Compania), subsidiaria
     de Cyprus Climax Metals Co. (Cyprus) propietaria del 82.48% de las acciones
     representativas de su capital social, se constituyo en el Peru el 20 de
     agosto de 1993 como resultado de la division de Empresa Minera del Peru
     (Minero Peru) encontrandose sus actividades reguladas por la Ley General de
     Mineria. Su domicilio legal es Av. Alfonso Ugarte No.304 - Arequipa. Su
     actividad principal es la extraccion, produccion y comercializacion de
     cobre en sus yacimientos ubicados al suroeste de la ciudad de Arequipa. La
     Compania cotiza sus acciones en la Bolsa de Valores de Lima.

     El personal empleado por la Compania para desarrollar sus actividades al 31
     de diciembre del 2004 ascendio a 665 funcionarios y empleados (603 al 31 de
     diciembre del 2003).

     Los estados financieros al 31 de diciembre del 2004 seran presentados a
     consideracion de la Junta General de Accionistas en los plazos establecidos
     por ley. En opinion de la Gerencia y el Directorio de la Compania, estos
     estados financieros seran aprobados sin modificaciones. Los estados
     fmancieros al 31 de diciembre del 2003 fueron aprobados por la Junta
     General de Accionistas del 14 de abril del 2004.

     PLANTA DE SULFUROS

     El 27 de setiembre del 2004, a traves de la Resolucion Directoral
     438-2004-MEM/AAM emitida por el Ministerio de Energia y Minas, se aprobo el
     Estudio de Impacto Ambiental del Proyecto Sulfuros Primarios. El 6 de
     octubre del 2004 el Directorio de Phelps Dodge Corporation, principal
     accionista de Cyprus, aprobo la construccion de la Planta de Sulfuros
     Primarios. El 28 de octubre del 2004 la Compania recibio la notificacion
     del Ministerio de Energia aprobando el proyecto.

     La inversion en este proyecto se estima en US$850 millones y sera
     financiado con recursos propios y con financiamiento de terceros. Se estima
     que la construccion de la Planta se llevara a cabo en dos anos, y se espera
     alcanzar los maximos niveles de produccion en el primer semestre del 2007.
     La produccion de cobre fino en promedio alcanza 90,000 TM al ano, y se
     estima que la inversion en este proyecto incrementara la produccion a
     260,000 TM por ano.

     Al 31 de diciembre del 2004, la Compania ha suscrito compromisos con
     proveedores de equipos y de servicios por un monto de aproximadamente US$40
     millones.

<PAGE>

Pagina 2

2    PRINCIPIOS Y PRACTICAS CONTABLES

     Los estados financieros se preparan de acuerdo con las disposiciones
     legales sobre la materia y los principios de contabilidad generalmente
     aceptados en el Peru. Los principios de contabilidad comprenden
     sustancialmente a las Normas Internacionales de Informacion Financiera
     (NIIF) las que incorporan a las Normas Internacionales de Contabilidad
     (NIC) oficializadas a traves de resoluciones emitidas por el Consejo
     Normativo de Contabilidad. A la fecha de los estados financieros, el
     Consejo Normativo de Contabilidad ha oficializado la aplicacion de las NIC
     de la 1 a la 41 y los pronunciamientos del 1 al 33 del Comite de
     Interpretaciones (SIC).

     Los principios y practicas contables mas importantes que han sido aplicados
     en el registro de las operaciones y la preparacion de los estados
     financieros son los siguientes:

     a) Preparacion de estados financieros -

     De acuerdo con lo permitido por el Articulo 87 del Codigo Tributario los
     registros contables de la Compania son mantenidos en dolares
     estadounidenses, que corresponde a su moneda de medicion, dado que la
     mayoria de sus transacciones son pactadas, cobradas y pagadas en esa
     moneda. Las transacciones efectuadas en nuevos soles son expresadas al tipo
     de cambio vigente de la fecha en que se realizan.

     b) Uso de estimaciones contables -

     El proceso de preparacion de los estados financieros requiere que la
     Gerencia de la Compania lleve a cabo estimaciones y supuestos para la
     determinacion de los saldos de los activos y pasivos, el monto de las
     contingencias y el reconocimiento de los ingresos y gastos. En el caso que
     estas estimaciones y supuestos variaran como resultado de cambios en las
     premisas en las que se sustentaron, los correspondientes saldos de los
     estados financieros se corrigen en la fecha en la que el cambio en las
     estimaciones y supuestos se produce. Las principales estimaciones
     relacionadas con los estados financieros se refieren a la depreciacion de
     los bienes del activo fijo, la amortizacion de los gastos de desarrollo de
     mina, provisiones para obsolescencia de materiales y suministros, para
     remediacion y cierre de mina y el impuesto a la renta y la participation de
     los trabajadores (corrientes y diferidos).

     c) Instrumentos financieros -

     Los instrumentos financieros corresponden a los contratos que dan lugar,
     simultaneamente, a un activo financiero en una empresa y a un pasivo
     financiero o a un instrumento de capital en otra empresa. En el caso de la
     Compania, los instrumentos financieros corresponden a los depositos en
     entidades financieras, inversiones, cuentas por cobrar, cuentas por pagar,
     y hasta el 2003, a instrumentos derivados que corresponden a contratos de
     cobertura de tasas de interes.

     Las inversiones que se mantendran por un periodo de tiempo indefinido, que
     pueden ser vendidas por necesidades de liquidez o cambios en las tasas de
     interes, se clasifican como disponibles para la venta; estas inversiones se
     muestran como activos no corrientes a menos que la Gerencia tenga

<PAGE>

Pagina 3

     intencion expresa de mantener la inversion por menos de 12 meses contados
     desde la fecha del balance general o a menos que sea necesario venderlas
     para aumentar el capital operativo de la Compania, en cuyo caso se
     mostraran como activos corrientes. La Gerencia determina la clasificacion
     de sus inversiones en la fecha de su compra y evalua tal clasificacion
     periodicamente.

     Las compras y ventas de inversiones se reconocen en la fecha de la
     negociacion, que corresponde a la fecha en la que la Compania se compromete
     a comprar o vender el activo. El costo de adquisicion incluye los costos
     inherentes de la transaccion. Las inversiones disponibles para la venta son
     subsecuentemente registradas a su valor razonable. Las ganancias y perdidas
     realizadas y no realizadas que surgen de cambios en el valor razonable de
     inversiones disponibles para la venta se incluyen en los resultados del
     periodo en el que se originan.

     El valor razonable es el monto por el que un activo puede ser intercambiado
     entre un comprador y un vendedor debidamente informados, o puede ser
     cancelada una obligacion, entre un deudor y un acreedor con suficiente
     informacion, bajo los terminos de una transaccion de libre competencia. En
     este sentido, en opinion de la Gerencia, los valores en libros de los
     instrumentos financieros al 31 de diciembre del 2004 y al 31 de diciembre
     del 2003 no difieren significativamente de sus valores razonables. Las
     politicas contables sobre el reconocimiento y valuacion de estas partidas
     se revelan en las respectivas politicas contables descritas en esta Nota.

     d) Cuentas por cobrar comerciales -

     Los saldos de las cuentas por cobrar comerciales se registran a su valor
     nominal, neto del estimado de cuentas incobrables determinado sobre la base
     de la revision periodica de los saldos pendientes de cobro que considera,
     entre otros factores, la antiguedad de los saldos por cobrar y la
     viabilidad de su cobranza. Las cuentas incobrables se castigan cuando se
     identifican como tales.

     e) Existencias -

     Las existencias se valorizan al costo de produccion o adquisicion o a su
     valor neto de realizacion, el que resulte menor. La valuacion de las
     existencias se determina a traves de los metodos de ultimas entradas -
     primeras salidas (productos terminados y en proceso) y promedio (materiales
     y suministros). El costo de extraccion de mineral que incluye materiales,
     mano de obra, otros costos directos y gastos generales de produccion y
     excluye los gastos de financiamiento, es asignado a los productos
     terminados (catodos de cobre) y a los productos en proceso.

     El valor neto de realizacion de las existencias es el precio de venta
     estimado en el curso normal de las operaciones del negocio, menos los
     costos necesarios para terminar su produccion y los gastos de ventas. El
     costo de las existencias por recibir ha sido determinado segun el metodo de
     identificacion especifica.

<PAGE>

Pagina 4

     f) Inmuebles, maquinaria y equipo -

     Los inmuebles, maquinaria y equipo se registran al costo, excepto por los
     activos adquiridos por Cyprus que se registran a su valor de transferencia
     menos una provision registrada para reducir su valor en libros a su valor
     recuperable estimado.

     Los gastos de mantenimiento y reparacion son cargados al costo de
     produccion cuando se incurren y las renovaciones y mejoras se capitalizan.
     Cuando el valor en libros es mayor que su valor recuperable estimado es
     inmediatamente reducido a su valor recuperable. El costo y la depreciacion
     acumulada de los activos vendidos o retirados se eliminan de sus
     respectivas cuentas y la utilidad o perdida relacionados con activos
     permanentes se afecta al saldo de la depreciacion acumulada y los
     relacionados con activos moviles se afecta a resultados.

     La depreciacion de los inmuebles, maquinaria y equipo se calcula por el
     metodo de unidades producidas en funcion de la vida util de la mina en el
     caso de los activos permanentes y por el metodo de linea recta en el caso
     de los activos moviles. Las tasas anuales de depreciacion utilizadas para
     los activos moviles fluctuan entre 5% y 33%.

     g) Gastos de desarrollo de mina -

     Los gastos de desarrollo de los asientos mineros que, de acuerdo con
     estimaciones de la Gerencia, se estima beneficiaran la produccion en el
     futuro se capitalizan. Los gastos de exploracion de proyectos cuyos
     resultados en el futuro son inciertos se cargan a los resultados cuando se
     incurren. Los costos de desbroce incurridos hasta el 31 de diciembre de
     1999 en la preparacion de la mina se muestran en el rubro gastos de
     preparacion de mina del balance general y se amortizan en funcion del
     mineral extraido. Los costos de desbroce incurridos a partir del ano 2000
     se cargan al costo de produccion.

     h) Deterioro de activos -

     En el caso de ocurrencia de eventos o cambios economicos que indiquen que
     el valor en libros de los activos de vida util prolongada se ha
     deteriorado, la Compania estima su valor recuperable y si es necesario
     reconoce una perdida por deterioro con cargo a los resultados del
     ejercicio. Esta perdida es el monto en el que el valor en libros del activo
     es reducido a su valor recuperable. El valor recuperable de los activos
     corresponde al mayor valor entre el monto neto que se obtendria de su venta
     y su valor en uso. El valor de venta neto corresponde al monto que se
     obtendria de la venta del activo en una transaccion cerrada entre partes no
     relacionadas, el precio de referencia en un mercado activo o el de
     transacciones similares recientes. El valor en uso corresponde al valor
     presente de los flujos futuros estimados que se obtendrian del uso continuo
     del activo y de su disposicion final al termino de su vida util.

     Los supuestos en que se basan los estimados de flujos futuros estan sujetos
     a riesgos e incertidumbres. Cualquier diferencia entre los supuestos y las
     condiciones de mercado y/o el

<PAGE>

Pagina 5

     desempeno de la Compania podrian tener un efecto importante en la situacion
     financiera y los resultados de sus operaciones.

     i) Impuesto a la renta -

     El impuesto a la corriente se registra de acuerdo con la legislacion
     vigente (Nota 11).

     El impuesto a la renta diferido se registra por el metodo del pasivo
     reconociendo el efecto de las diferencias temporales que surgen entre la
     base tributaria de los activos y pasivos y su saldo en los estados
     financieros, aplicando la legislacion y la tasa de impuesto promulgadas o
     sustancialmente promulgadas. Las principales diferencias temporales se
     resumen en la Nota 8.

     Impuestos diferidos activos solo se reconocen en la medida que sea probable
     que se dispondra de utilidades gravables futuras contra las que se pueda
     utilizar estos beneficios tributarios.

     j) Provisiones -

     Las provisiones se reconocen cuando la Compania tiene una obligacion
     presente legal o asumida como resultado de hechos pasados, es probable que
     se requiera de la aplicacion de recursos para cancelar la obligacion y es
     posible estimar su monto confiablemente.

     La Compania estima el valor presente de su obligacion futura por
     remediacion y cierre de mina (pasivo por remediacion o "PPR"), e incrementa
     el valor en libros del activo (activo por remediacion o "APR") a retirarse
     en el futuro, el mismo que se muestra en el rubro Otros activos en el
     balance general. Posteriormente, el APR se atribuye a los resultados en el
     plazo de vida util de los activos que le dieron origen y es ajustado para
     reflejar los cambios que pudieran resultar por el paso del tiempo y de
     revisiones de, ya sea, la fecha de ocurrencia o el monto del valor presente
     originalmente estimados.

     k) Creditos tributarios por programas de reinversion -

     El beneficio tributario por programas de reinversion (Nota 11-c) se
     reconoce en el ejercicio en el que se restringen las utilidades, como una
     reduccion del impuesto a la renta a pagar.

     1) Reconocimiento de ingresos por venta -

     Los ingresos por venta de mineral se reconocen en el momento de entrega del
     mineral al transportista designado por el cliente, momento en el que se
     transfieren al cliente los riesgos y beneficios inherentes a la propiedad
     del mineral.

<PAGE>

Pagina 6

     m) Contingencias -

     Los pasivos contingentes no se reconocen en los estados financieros y se
     exponen en notas a los estados financieros a menos que su ocurrencia sea
     remota. Los activos contingentes no se reconocen en los estados financieros
     y se revelan solo si es probable su realizacion.

     n) Efectivo y equivalentes de efectivo -

     Para propositos del estado de flujos de efectivo, el efectivo y
     equivalentes de efectivo comprenden el efectivo disponible, depositos a la
     vista en bancos y otras inversiones altamente liquidas de corto plazo.

     o) Nuevos pronunciamientos contables -

     A la fecha el Comite de Normas Internacionales de Contabilidad (IASB por
     sus siglas en ingles) ha completado el proceso de revision de las Normas
     Internacionales de Contabilidad, proceso que se conoce como el "Proyecto de
     Mejora" y ha emitido nuevas normas contables. Todas las revisiones de las
     NIC existentes y las nuevas NIIF emitidas (seis) tienen vigencia a nivel
     internacional a partir del 1 de enero de 2005; con excepcion de la NIIF 6
     cuya vigencia es a partir del 1 de enero del 2006. A la fecha estas normas
     no han sido aprobadas en el Peru por el Consejo Normativo de Contabilidad.
     La Gerencia esta evaluando el impacto que significara la adopcion de las
     NIC revisadas y las nuevas NIIF emitidas en los estados financieros de la
     Compania.

     Como parte del proyecto de mejora de las NIC llevado a cabo, quince NIC
     fueron revisadas con el objetivo de reducir o eliminar procedimientos
     alternativos, redundancias y conflictos entre las normas, para tratar con
     ciertos aspectos de convergencia, sustancialmente con las normas
     norteamericanas, e introducir otras mejoras.

     Las NIC modificadas por el proyecto se detallan a continuacion:

     -    NIC 1 (revisada en el 2003) afecta la presentacion del interes
          minoritario y otras revelaciones.

     -    NIC 2 (revisada en el 2003) elimina el metodo de valuacion de ultimas
          entradas - primeras salidas.

     -    NIC 8, 10, 16, 17, 21, 24, 27, 28, 31, 32, 33, y 40 (revisadas en el
          2003) y la NIC 39 (revisada en el 2004) no contienen cambios
          importantes.

     En adicion como parte de la revision de las normas relativas a
     combinaciones de negocios, que resulto en la emision del NIIF 3, las NIC 36
     y 38 tambien fueron revisadas.

<PAGE>

Pagina 7

     Las NIIF emitidas se detallan a continuacion:

     NIIF 2 - Pagos en Base a Acciones: NIIF 3 - Combinacion de Negocios; NIIF 4
     - Contratos de Seguro; NIIF 5 - Activos no Corrientes Mantenidos para la
     Venta y Operaciones Discontinuas y la NIIF 6 - Exploracion y Evaluacion de
     Recursos Minerales

3    INVERSIONES DISPONIBLES PARA LA VENTA

     Al 31 de diciembre del 2004 este rubro comprende inversiones en Bonos del
     Tesoro Norteamericano que devengan un interes anual a una tasa variable.
     Estas inversiones se mantendran por tiempo indefinido y pueden ser vendidas
     cuando lo requiera la Compania. Estas inversiones se clasifican como
     activos corrientes dado que la Gerencia estima venderlas para aumentar el
     capital operativo de la Compania. El valor en libros de estas inversiones
     corresponde a su valor razonable a la fecha de los estados financieros.
     Estos bonos han devengado intereses por US$591,000 que se incluyen en la
     cuenta de gastos financieros, neto en el estado de ganancias y perdidas.

4    EMPRESAS AFILIADAS

     El movimiento de las cuentas por cobrar y por pagar con empresas afiliadas
     por el ano 2004 es el siguiente:

<TABLE>
<CAPTION>
                                          SALDO                               SALDO
                                         INICIAL   ADICIONES   DEDUCCIONES    FINAL
                                         -------   ---------   -----------   ------
                                          US$000     US$000       US$000     US$000
<S>                                      <C>       <C>         <C>           <C>
Por cobrar -
   Phelps Dodge Sales Company (PDSC)      10,546     161,383    (163,081)     8,848
                                          ======     =======    ========      =====
Por pagar -
Phelps Dodge Corporation                     306       3,796      (3,333)       769
Phelps Dodge Sales Company                    34         137        (138)        33
Sociedad Minera El Abra S.A.                  --          16         (12)         4
Compania Contractual Minera Candelaria        17          --         (17)        --
Phelps Dodge Mining Services                  --         626        (626)        --
                                          ------     -------    --------      -----
                                             357       4,575      (4,126)       806
                                          ======     =======    ========      =====
</TABLE>

     Las cuentas por cobrar estan referidas a ventas de catodos de cobre. Estos
     saldos son considerados de vencimiento corriente, no devengan intereses y
     no tienen garantias especificas.

     En el ano 2004, la Compania vendio catodos de cobre a PDSC por
     aproximadamente US$161,383,000 (US$115,347,000 en el 2003) y le pago
     comisiones por US$137,000 (US$158,000 en el 2003).

     Las cuentas por pagar se originan por operaciones relacionadas
     principalmente con la prestacion de servicios y reembolsos de gastos. Estos
     saldos son de vencimiento corriente, no devengan intereses y no tienen
     garantias especificas.
<PAGE>

Pagina 8

5    EXISTENCIAS

     Al 31 de diciembre este rubro comprende:

<TABLE>
<CAPTION>
                                      2004     2003
                                     ------   ------
                                     US$000   US$000
<S>                                  <C>      <C>
Catodos de cobre                      2,401    3,076
Producto en proceso                  13,621    9,428
Materiales y suministros             13,712   15,802
Existencias por recibir                 554      664
                                     ------   ------
                                     30,288   28,970
Provision por obsolescencia de
   materiales y suministros          (1,374)  (4.153)
                                     ------   ------
                                     28,914   24,817
Productos en proceso a largo plazo   (3,570)  (3,175)
                                     ------   ------
                                     25,344   21,642
                                     ======   ======
</TABLE>

     De acuerdo con estimaciones efectuadas por la Gerencia, el monto de la
     provision para obsolescencia de materiales y suministros es suficiente
     sobre la base de la relacion entre su consumo futuro proyectado en el
     proceso productivo y su rotacion.

6    INMUEBLES, MAQUINARIA Y EQUIPO

     El movimiento de la cuenta inrnuebles, maquinaria y equipo y el de su
     correspondiente depreciacion acumulada, por el ano terminado el 31 de
     diciembre del 2004, es el siguiente:

<TABLE>
<CAPTION>
                                              ADICIONES
                                              AL COSTO/     DEDUC-
                                    SALDO    APLICADAS A   CIONES Y   TRANSFE-    SALDO
                                   INICIAL   RESULTADOS     AJUSTES    RENCIAS    FINAL
                                   -------   -----------   --------   --------   -------
                                    US$000      US$000      US$000     US$000     US$000
<S>                                <C>       <C>           <C>        <C>        <C>
Costo -
Terrenos                             1,475          --        (51)         --      1,424
Edificios y otras construcciones    37,408          --       (121)        377     37,664
Maquinaria y equipo                275,000          --        (26)      4,914    279,888
Unidades de transporte               4,244          --        (18)        321      4,547
Muebles y enseres                      196          --         --          --        196
Equipos diversos                     4,030          --       (100)        477      4,407
Obras en curso                       2,526      16,772         --      (6,089)    13,209
Provision por comparacion
con el valor de mercado            (23,851)         --         49          --    (23,802
                                   -------      ------       ----      ------    -------
Van:                               301,028          --         --          --    317,533
                                   =======      ======       ====      ======    =======
</TABLE>

<PAGE>

Pagina 9

<TABLE>
<CAPTION>
                                              ADICIONES
                                              Al COSTO/     DEDUC-
                                    SALDO    APLICADAS A   CIONES Y   TRANSFE-    SALDO
                                   INICIAL    RESULTADOS    AJUSTES    RENCIAS    FINAL
                                   -------   -----------   --------   --------   -------
                                    US$000      US$000      US$000     US$000     US$000
<S>                                <C>       <C>           <C>        <C>        <C>
Vienen:                            301,028          --         --        --      317,533
                                   -------      ======        ===       ===      -------
Depreciacion acumulada -
Edificios y otras construcciones    10,212       1,741        (56)       --       11,897
Maquinaria y equipo                129,894      18,440        (32)       --      148,302
Unidades de transporte               3,551         286        (18)       --        3,819
Muebles y enseres                      105          19         --        --          124
Equipos diversos                     3,323         338        (75)       --        3,586
                                   -------      ------       ----       ---      -------
                                   147,085      20,824       (181)       --      167,728
                                   =======      ======       ====       ===      =======
Costo neto                         153,943                                       149,805
                                   =======                                       =======
</TABLE>

7    GASTOS DE DESARROLLO DE MINA

     El movimiento de la cuenta gastos de desarrollo de mina y el de su
     correspondiente amortizacion acumulada, por el ano terminado el 31 de
     diciembre del 2004, es el siguiente:

<TABLE>
<CAPTION>
                                           ADICIONES
                                           AL COSTO/
                                 SALDO    APLICADAS A    SALDO
                                INICIAL    RESULTADOS    FINAL
                                ------    -----------   ------
                                 US$000      US$000     US$000
<S>                              <C>      <C>           <C>
Costo -
Gastos de desarrollo             11,982         --      11,982
Gastos de preparacion de mina    14,158         --      14,158
                                 ------      -----      ------
                                 26,140         --      26,140
                                 ------      =====      ------
Amortizacion acumulada -
Gastos de desarrollo y
Gastos de preparacion de mina     8,198      1,756       9,954
                                 ------      -----      ------
Costo neto                       17,942      1,756      16,186
                                 ======      =====      ======
</TABLE>

     Los gastos de desarrollo corresponden a los costos incurridos en la
     confirmacion de las reservas minables en los tajos Santa Rosa y Cerro
     Verde. Los gastos de preparacion de mina se refieren a los costos de
     desbroce incurridos hasta el 31 de diciembre de 1999 en la preparacion del
     tajo Cerro Verde para continuar su explotacion determinado en funcion de
     las reservas estimadas de mineral.

<PAGE>

Pagina 10

     La amortizacion de estos gastos se calcula por el metodo de unidades
     producidas.

8    IMPUESTO A LA RENTA Y PARTICIPACION DE LOS TRABAJADORES DIFERIDO

     a)   Al 31 de diciembre el impuesto a la renta y la participacion de los
          trabajadores diferido resulta de las siguientes partidas temporales:

<TABLE>
<CAPTION>
                                                           2004      2003
                                                         -------   -------
                                                          US$000    US$000
<S>                                                      <C>       <C>
Deudor:
Provision para obsolescencia de existencias               (1,374)   (4,153)
Diferencia en metodo de valorizacion de existencias       (9,907)  (14,825)
Provision para cierre de mina                             (4,681)   (4,014)
Provision por contratos de cobertura de intereses             --      (913)
                                                         -------   -------
                                                         (15,962)  (23,905)
                                                         -------   -------
Acreedor:
Diferencia en metodo de depreciacion                     110,116    98,898
Gastos de desbroce diferidos                              11,852    13,269
Gastos de desarrollo de mina                               2,086     1,983
                                                         -------   -------
                                                         124,054   114,150
                                                         -------   -------
                                                         108,092    90,245
                                                         =======   =======

Tasa de la participacion de los trabajadores (8%) y
   del impuesto a la renta (30%)                            35.6%     35.6%
                                                         =======   =======

Total del impuesto diferido acreedor al final del ano     38,480    32,127
Total del impuesto diferido acreedor al inicio del ano   (32,127)  (19,998)
                                                         -------   -------
Efecto total del ano                                      (6,353)  (12,129)
Efecto en el patrimonio                                       --       325
                                                         -------   -------
Cargo a resultados del ano                                (6,353)  (11,804)
                                                         =======   =======
</TABLE>

     b)   El impuesto a la renta y participacion de los trabajadores diferidos
          se discrimina en:

<TABLE>
<CAPTION>
                                     2004     2003
                                    ------   ------
                                    US$000   US$000
<S>                                 <C>      <C>
Participacion de los trabajadores    8,647    7,220
Impuesto a la renta                 29,833   24,907
                                    ------   ------
                                    38,480   32,127
                                    ======   ======
</TABLE>

<PAGE>

Pagina 11

9    PARTICIPACION DE LOS TRABAJADORES

     De acuerdo con la legislacion vigente, la participacion de los trabajadores
     en las utilidades de la Compania es el 8% de la renta anual antes de
     impuestos. Esta participacion es considerada como gasto deducible de la
     Compania para la determinacion del impuesto a la renta.

10   PATRIMONIO NETO

     a) Capital -

     Al 31 de diciembre del 2004 y 2003 el capital autorizado, suscrito y pagado
     de acuerdo con los estatutos de la Compania y sus modificaciones esta
     representado por 227,309,099 acciones comunes. Segun el acuerdo de
     accionistas del 11 de julio del 2003 se acordo denominar el valor nominal
     de las acciones en dolares estadounidenses en US$0.54 por accion. La
     cotizacion bursatil de estas acciones al 31 de diciembre del 2004 fue de
     US$3.96 por accion y su frecuencia de negociacion de 100%.

     Al 31 de diciembre del 2004, la estructura societaria del capital de la
     Compania es la siguiente:

<TABLE>
<CAPTION>
                                              PORCENTAJE
PORCENTAJE DE PARTICIPACION    NUMERO DE       TOTAL DE
   INDIVIDUAL DEL CAPITAL     ACCIONISTAS   PARTICIPACION
---------------------------   -----------   -------------
<S>                           <C>           <C>
Hasta 1.00                        943             8.35
De 1.01 al 10.00                    1             9.17
De 80.01 a 90.00                    1            82.48
                                  ---           ------
                                  945           100.00
                                  ===           ======
</TABLE>

     b) Capital adicional -

     Al 31 de diciembre del 2004 y 2003 esta cuenta comprende el diferencial
     resultante por la conversion del valor nominal de las acciones
     representativas del capital social a dolares estadounidenses.

     c) Reserva legal -

     De acuerdo con la Ley General de Sociedades, la reserva legal se constituye
     con la transferencia del 10% de la utilidad neta anual hasta alcanzar un
     monto equivalente al 20% del capital pagado. En ausencia de utilidades no
     distribuidas o de reservas de libre disposicion, la reserva legal debera
     ser aplicada a la compensacion de perdidas, debiendo ser repuesta con las
     utilidades de ejercicios posteriores. Esta reserva puede ser capitalizada
     siendo igualmente obligatoria su reposicion.

<PAGE>

Pagina 12

     d) Resultados acumulados -

     En virtud de los contratos de estabilidad tributaria suscritos con el
     Estado Peruano (Nota 11-a), la Compania esta autorizada a transferir al
     exterior, en divisas libremente convertibles, el integro de sus capitales y
     dividendos registrados en el organismo nacional competente. Asimismo, los
     dividendos y cualquier otra forma de distribucion de utilidades no
     constituyen renta gravable para efectos del impuesto a la renta.

     Al 31 de diciembre del 2004 esta cuenta incluye US$4.9 millones que seran
     transferidos en el 2005 a una cuenta especial en el patrimonio neto
     denominada utilidades restringidas. Este monto corresponde a la inversion
     sobre la que se calculo el credito contra el impuesto a la renta del ano
     2004 en aplicacion del Programa de Reinversion por el periodo de octubre
     del 2004 a febrero del 2007 (Nota 11-c).

     En adicion, esta cuenta incluye US$8.8 millones correspondiente a la
     utilidad del ano 2004 que sera transferido a la reserva legal en el 2005.

11   SITUACION TRIBUTARIA

     a)   El 16 de marzo de 1994 la Compania suscribio un contrato de garantias
          y medidas de promocion a la inversion, mediante el cual se otorga
          ciertas garantias a la Compania entre las que se encuentra la
          estabilidad en el regimen tributario vigente en la fecha de aprobacion
          del plan de inversion de la Compania. El 4 de noviembre de 1994 la
          Compania cumplio con las condiciones de dicho contrato y recibio la
          aprobacion del Gobierno en diciembre de 1994.

          En adicion, el 13 de febrero de 1998 la Compania suscribio un contrato
          con las mismas caracteristicas del anterior con relacion a una
          inversion de US$224,980,000, recibiendo la aprobacion del Gobierno en
          noviembre de 1998. De acuerdo con los terminos del contrato, el plazo
          de duracion de la estabilidad del regimen tributario se extiende por
          un periodo de 15 anos contados a partir del 1 de enero de 1999.

     b)   La Gerencia considera que ha determinado la materia imponible bajo el
          regimen general del impuesto a la renta de acuerdo con la legislacion
          tributaria vigente en la fecha del contrato antes mencionado, la que
          exige agregar y deducir al resultado antes de impuestos y
          participaciones, las partidas que la referida legislacion reconoce
          como gravables y no gravables, respectivamente.

          Al 31 de diciembre del 2004 y 2003 la tasa del impuesto a la renta es
          de 30%. En adicion al regimen general, la empresa esta sujeta al
          impuesto minimo a la renta equivalente al 2% del total de sus activos
          netos de depreciaciones y amortizaciones. El impuesto cargado a
          resultados del ano 2003 corresponde al mayor entre el impuesto a la
          renta del regimen general y el impuesto minimo a la renta. En el ano
          2003 el impuesto a la renta corresponde al regimen del impuesto
          minimo.

<PAGE>

Pagina 13

          Al 31 de diciembre del 2004 la materia imponible ha sido determinada
          como sigue:

<TABLE>
<CAPTION>
                                                           US$000
                                                           -------
<S>                                                        <C>
Utilidad antes de participaciones e impuesto a la renta    139,353
                                                           -------
Mas:
Amortizacion de otros activos                                1,417
Provision para cierre de mina                                  379
Gastos no deducibles                                         5,987
Otras adiciones                                                185
                                                           -------
                                                             7,968
                                                           -------
Menos:
Depreciacion a la tasa del 20%                             (11,203)
Ajuste de inventarios en proceso y productos terminados     (5,230)
Provision para desvalorizacion de existencias               (2,779)
Otras deducciones                                           (2,172)
                                                           -------
                                                           (21,384)
                                                           -------
Sub-total                                                  125,937
Participacion de los trabajadores                          (10,074)
                                                           -------
                                                           115,863
Reinversion de utilidades (Nota 10-d)                       (4,917)
                                                           -------
                                                           110,946
                                                           -------
Impuesto a la renta                                         33,283
Impuesto de anos anteriores y otros ajustes                  1,979
                                                           -------
Total acreditado en resultados                              35,262
                                                           =======
</TABLE>

          Al 31 de diciembre del 2004 el impuesto a la renta sobre la utilidad
          antes de impuestos difiere del monto teorico que hubiera resultado de
          aplicar la tasa del impuesto a los ingresos de la Compania, como
          sigue:

<TABLE>
<CAPTION>
                                                            US$000
                                                           -------
<S>                                                        <C>
Utilidad antes de impuestos                                139,353
                                                           -------
Impuesto calculado aplicando la tasa de 30%                 41,806
Gastos no deducibles                                         1,796
Gastos deducibles                                             (332)
Reinversion de utilidades                                   (1,475)
Participacion de los trabajadores                           (3,586)
                                                           -------
Impuesto a la renta del ano (corriente y diferido)          38,209
                                                           =======
</TABLE>

<PAGE>

Pagina 14

          Al 31 de diciembre del 2003 no se ha efectuado esta conciliacion
          debido a que en dicho ano el impuesto minimo resulto mayor que el
          impuesto a la renta del regimen general.

     c)   De acuerdo con el Decreto Supremo N 07-94-EF, la Compania puede
          obtener un beneficio tributario (credito por reinversion) aplicando
          las utilidades no distribuidas a programas de inversion orientados a
          lograr un incremento de los niveles de produccion (Programa de
          Reinversion). Los creditos por reinversion equivalen al 80% del monto
          invertido y son obtenidos mediante solicitud y aprobados por el
          Ministerio de Energia y Minas.

          Con fechas 3 de setiembre y 25 octubre del 2004 la Compania remitio
          para la aprobacion del Ministerio de Energia y Minas el Programa de
          Reinversion por el periodo de octubre del 2004 a febrero del 2007 por
          US$800,030,000 relacionado con las obras e infraestructura para la
          construccion de una planta concentradora para procesar adicionalmente
          108,000 TM/dia de mineral de sulfuros primarios para producir
          concentrado de cobre, lo que se incrementara la capacidad de 39,000
          TM/dia a 147,000 TM/dia de mineral de cobre.

          El 9 diciembre del 2004, a traves de la Resolucion Ministerial No.
          510-2004-MEM/DM, el Ministerio de Energia y Minas aprobo el Programa
          de Reinversion solicitado por la Compania con cargo a utilidades no
          distribuidas por el periodo antes indicado.

          En aplicacion de este programa, durante el ano 2004 la Compania
          reconocio un beneficio de US$4.9 millones correspondientes a las
          utilidades de dicho ano con cargo a la materia imponible que genero un
          menor impuesto de US$1.5 millones.

     d)   La Administracion Tributaria tiene la facultad de revisar y, de ser el
          caso, corregir el impuesto a la renta determinado por la Compania en
          los cuatro ultimos anos, contados a partir de la presentacion de la
          declaracion jurada del impuesto correspondiente (anos abiertos a
          fiscalizacion).

          En el caso del impuesto a la renta, los anos 1999 al 2003 inclusive,
          estan sujetos a fiscalizacion. En el caso del Impuesto General a las
          Ventas el periodo sujeto a fiscalizacion corresponde al comprendido
          entre diciembre de 1999 y diciembre del 2003. Debido a que pueden
          producirse diferencias en la interpretacion por parte de la
          Administracion Tributaria sobre las normas aplicables a la Compania,
          no es posible anticipar a la fecha si se produciran pasivos
          tributarios adicionales como resultado de eventuales revisiones.
          Cualquier impuesto adicional, moras, recargos e intereses, si se
          produjeran, seran reconocidos en los resultados del ano en el que la
          diferencia de criterios con la Administracion Tributaria se resuelva.
          La Gerencia y sus asesores legales estiman que no surgiran pasivos de
          importancia como resultado de estas posibles revisiones.

<PAGE>

Pagina 15

12   COSTO DE VENTAS

     El costo de ventas por los anos terminados el 31 de diciembre comprende:

<TABLE>
<CAPTION>
                                               2004      2003
                                             -------   -------
                                              US$000    US$000
<S>                                          <C>       <C>
Inventario inicial de productos terminados     3,076     2,372
Consumo de materias primas e insumos          46,684    39,101
Mano de obra directa                          14,979    13,362
Depreciacion y amortizacion                   22,765    20,396
Otros costos                                  38,572    31,807
Variacion de productos en proceso             (4,193)       --
Inventario final de productos terminados      (2,401)   (3,076)
                                             -------   -------
                                             119,482   103,962
                                             =======   =======
</TABLE>

13   GASTOS FINANCIEROS, NETO

     Los gastos financieros, neto por los anos terminados el 31 de diciembre
     comprenden:

<TABLE>
<CAPTION>
                                              2004     2003
                                             ------   ------
                                             US$000   US$000
<S>                                          <C>      <C>
Intereses por prestamos bancarios                --     (942)
Intereses por contratos de cobertura de
tasas de interes                                 --     (845)
Intereses por depositos bancarios             1,148      142
Otros gastos financieros                     (1,975)    (506)
                                             ------   ------
                                               (827)  (2,151)
                                             ======   ======
</TABLE>

14   UTILIDAD POR ACCION

     La utilidad por accion basica por cada accion comun ha sido determinada de
     la siguiente manera:

<TABLE>
<CAPTION>
                                                  2004             2003
                                             --------------   --------------
<S>                                          <C>              <C>
Utilidad atribuible                          US$ 87,663,000   US$ 43,275,000
                                             ==============   ==============
Promedio ponderado de acciones en
   circulacion                                  227,309,099      227,309,099
                                             ==============   ==============

Utilidad basica por accion                   US$      0.386   US$      0.190
                                             ==============   ==============
</TABLE>

     La utilidad basica por accion es calculada dividiendo la utilidad neta
     entre el promedio ponderado de las acciones comunes en circulacion a la
     fecha de los estados financieros.

<PAGE>

Pagina 16

15   ADMINISTRACION DE RIESGOS FINANCIEROS

     Factores de riesgo financiero

     Las actividades de la Compania la exponen a ciertos riesgos financieros,
     que incluyen los efectos de las variaciones en los precios de mercado de
     los minerales, variaciones en los tipos de cambio y en las tasas de
     interes. Al 31 de diciembre del 2004 la Compania no mantiene este tipo de
     contratos de cobertura a estos riesgos. Por otro lado, como parte de Phelps
     Dodge Mining Company, ciertos riesgos financieros como variacion de precios
     y riesgo de cambio son cubiertos a nivel del grupo tomado en su conjunto.

     i) Riesgo de tipo de cambio

     La Compania opera principalmente en dolares estadounidenses y registra sus
     operaciones en dicha moneda. Sus ventas, compras y gastos operativos son
     sustancialmente efectuados en dicha moneda, reduciendo asi el riesgo de
     verse afectada por las variaciones en los tipos de cambio en relacion con
     el nuevo sol peruano.

     ii) Concentracion de ventas y riesgo crediticio

     La Compania realiza ventas a una afiliada del exterior y companias locales
     no relacionadas. Las ventas por concentracion geografica son las
     siguientes:

<TABLE>
<CAPTION>
                   2004      2003
                 -------   -------
                  US$000    US$000
<S>              <C>       <C>
Norteamerica     161,383   115,347
Ventas locales    99,399    41,377
                 -------   -------
                 260,782   156,724
                 =======   =======
</TABLE>

     La Compania ha establecido politicas para asegurar que la venta de bienes y
     servicios se efectuan a clientes con adecuada historia de credito,

     iii) Riesgo de liquidez

     La administracion prudente del riesgo de liquidez implica mantener
     suficiente efectivo y equivalentes de efectivo, la disponibilidad de
     financiamiento a traves de una adecuada cantidad de fuentes de credito
     comprometidas y la capacidad de cerrar posiciones en el mercado.

16   INFORMACION SOBRE FLUJOS DE EFECTIVO

     El estado de flujos de efectivo proporciona informacion sobre los cambios
     en el efectivo. Los flujos de efectivo de las actividades de operacion
     incluyen pagos/cobros de intereses y pago del impuesto a la renta como
     sigue:

<PAGE>

Pagina 17

<TABLE>
<CAPTION>
                              2004     2003
                             ------   ------
                             US$000   US$000
<S>                          <C>      <C>
Intereses pagados             1,975    1,833
Intereses recibidos           1,148      142
Impuesto a la renta           3,278    1,393
</TABLE>

17   RESERVAS DE MINERAL (NO AUDITADO)

     Al 31 de diciembre, las reservas probadas de mineral de la Compania,
     medidas en miles de toneladas metricas secas son:

<TABLE>
<CAPTION>
                                                      LEYES
                                                   -----------
MINERAL                         2004       2003    2004   2003
-------                      ---------   -------   ----   ----
<S>                          <C>         <C>       <C>    <C>
Minerales para lixiviacion     351,214   236,552   0.45   0.54
Minerales para molienda      1,295,528   420,959   0.49   0.61
</TABLE>

     Asimismo, la produccion en toneladas metricas netas ha sido la siguiente:

<TABLE>
<CAPTION>
PRODUCCION    2004     2003
----------   ------   ------
<S>          <C>      <C>
Catodos      88,502   87,336
</TABLE>

     Precio promedio por tonelada metrica seca:

<TABLE>
<CAPTION>
             2004    2003
             -----   -----
              US$     US$
<S>          <C>     <C>
Catodos      2,868   1,807
</TABLE>
<PAGE>

                                 SCHEDULE 5.1(L)

                          ABSENCE OF CHANGES AND EVENTS

1.   See Schedules 5.1(c)(ii) ("Compliance with Other Instruments and Laws");
     and 5.1(e) ("Taxes").

                                       17

<PAGE>

                                 SCHEDULE 5.1(M)

     TITLE TO ASSETS, MINING AND BENEFICIATION CONCESSIONS AND OTHER RIGHTS

1.   The following concessions are held by Minera Phelps Dodge del Peru S.A.C.
     and have been leased to Cerro Verde pursuant to an oral agreement.
     Procedures have been implemented to transfer the concessions listed in
     items 1, 2 and 4 below to Cerro Verde.

<TABLE>
<CAPTION>
ITEM   CONCESSION   APPLICATION DATE   APPROVAL DATE
----   ----------   ----------------   -------------
<S>    <C>          <C>                <C>
  1    TIABAYA-90       19-Jun-02        18-Nov-02
  2    TIABAYA-94       24-Jul-03        10-Dec-03
  3    TIABAYA-96        1-Jun-04         2-Mar-05
  4    CHRISTMAS         3-Mar-03        25-Jul-03
</TABLE>

2.   See Schedules 5.1(g)(ii) ("Legal Proceedings; Competing Claims"); and
     5.1(c)(iii) ("Government Authorization, Permits and Licenses").

                                       18

<PAGE>

                                 SCHEDULE 5.1(N)

                   RELATED PARTY TRANSACTIONS AND COMMITMENTS

1.   Supply Agreement by and between Phelps Dodge Sales Company and Cerro Verde
     effective as of January 1, 2005.

2.   Technical Services Agreement between Phelps Dodge Mining Services, Inc. and
     Cerro Verde effective as of January 2, 2001.

3.   Amendment No. 1 to Technical Services Agreement between Phelps Dodge Mining
     Services, Inc. and Cerro Verde effective as of January 2, 2004.

4.   Technical Services Agreement between Cerro Verde and Cyprus Climax Metals
     Company effective as of January 1, 1998.(4)

     Each of the above agreements will continue following the Final Closing.

----------
(4)  Cerro Verde pays approximately U.S.$1.285M under this agreement, with PD
     receiving $900,000 after the application of Peruvian withholding taxes.

                                       19

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