Buenaventura.com.pe

FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of May 2006 BUENAVENTURA MINING COMPANY INC. (Translation of Registrant's Name into English) CARLOS VILLARAN 790 SANTA CATALINA, LIMA 13, PERU (Address of Principal Executive Offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F X Form 40-F ___ Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ___No X If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-________________. This report consists of consolidated Financial Statements issued as of December 31, 2003, 2004 and 2005, together with the Report of Independent Auditors Compania de Minas Buenaventura S.A.A. and subsidiaries Consolidated Financial Statements as of December 31, 2003, 2004 and 2005, together with the Report of Independent Auditors Content Report of Independent Auditors Consolidated Financial Statements Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements To the Shareholders of Compania de Minas Buenaventura S.A.A. 1. We have audited the accompanying consolidated balance sheets of Compania de Minas Buenaventura S.A.A. (a Peruvian company) and subsidiaries (together, the Company) as of December 31, 2004 and 2005, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 2003, 2004 and 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit either the financial statements of Minera Yanacocha S.R.L. (an equity accounted affiliated entity in which the Company has an 43.65 percent interest) nor the financial statements of Sociedad Minera Cerro Verde S.A. A. (an equity accounted affiliated entity in which the Company has an 18.299 percent interest) as of December 31, 2004 and 2005 and for the years ended December 31, 2003, 2004 and 2005. Those statements have been audited by others auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Minera Yanacocha S.R.L. and Sociedad Minera Cerro Verde S.A.A., is based solely on the reports of the others auditors. In the consolidated financial statements of the Company, as derived from the financial statements of Minera Yanacocha S.R.L., the Company's investment and share in the net income in this entity amount to approximately S/1,152.2 million and S/1,714.4 million as of December 31, 2004 and 2005, and S/515.7 million, S/583.3 million and S/752.9 million for the years ended December 31, 2003, 2004 and 2005, respectively. Likewise, the Company's investment and share in the net income in Sociedad Minera Cerro Verde S.A.A., obtained from the corresponding financial statements, amount to approximately S/491.9 million as of December 31, 2005 and S/125.6 million for the year ended December 31, 2005, respectively. 2. We conducted our audits in accordance with auditing standards generally accepted in Peru. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the independent auditors of Minera Yanacocha S.R.L. and Sociedad Minera Cerro Verde S.A.A provide a reasonable basis for our opinion. 3. In our opinion, based on our audits and the report of the auditors of Minera Yanacocha S.R.L. and Sociedad Minera Cerro Verde S.A.A., the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Compania de Minas Buenaventura S.A.A. and subsidiaries as of December 31, 2004 and 2005, and the consolidated results of their operations and their cash flows for the years ended December 31, 2003, 2004 and 2005, in conformity with accounting principles generally accepted in Peru. 4. Effective January 1, 2003, the Company adopted the IAS 39, Financial Instruments - Recognition and Measurement, and together with its affiliate Minera Yanacocha S.R.L., modified its accounting policy to record its long-lived assets retirement obligations. Likewise, effective January 1, 2005, with the purpose of adopting international industry practices, the Company modified its accounting principle for recording mining stripping costs. See note 3. Countersigned by: ____________________ Victor Burga C.P.C. Register No.14859 Lima, Peru February 17, 2006 Compania de Minas Buenaventura S.A.A. and subsidiaries Consolidated Balance Sheets As of December 31, 2004 and 2005 Note 2004 2005 2005 S/(000) S/(000) US$(000) (Note 4) Assets Current assets Cash and cash equivalents 6 614,862 332,102 96,795 Investment funds 7 86,971 52,884 15,414 Trade accounts receivable 8 97,061 93,354 27,209 Other accounts receivable, net 9 12,248 19,089 5,563 Accounts receivable from affiliates 37(b) 46,078 66,038 19,247 Inventories, net 10 69,353 94,377 27,507 Current portion of prepaid tax and expenses 11 40,471 43,182 12,586 _________ _________ _________ Total current assets 967,044 701,026 204,321 Long - term other accounts receivable 9 4,574 5,044 1,470 Prepaid tax and expenses 11 14,059 12,405 3,616 Investment in shares 12 1,531,347 2,502,267 729,311 Property, plant and equipment, net 13 603,559 583,281 170,003 Development costs, net 14 143,258 163,924 47,778 Deferred stripping costs 3(b) 56,056 - - Goodwill, net 6,199 5,303 1,546 Deferred income tax and workers' profit 31(b) 245,299 308,091 89,796 sharing asset, net _________ _________ _________ Total assets 3,571,395 4,281,341 1,247,841 _________ _________ _________ Note 2004 2005 2005 S/(000) S/(000) US$(000) (Note 4) Liabilities and shareholders' equity, net Current liabilities Bank loans 15 13,150 26,229 7,645 Trade accounts payable 16 61,188 53,089 15,473 Other current liabilities 17 133,261 204,597 59,633 Derivative instruments 34(a) 70,927 59,138 17,236 Current portion of long-term debt 18 36,332 1,631 475 Deferred income from sale of future 34(b) 74,937 107,079 31,209 production _________ _________ _________ Total current liabilities 389,795 451,763 131,671 Other long-term liabilities 17 83,465 96,852 28,229 Derivative instruments 34(a) 267,852 168,017 48,970 Long-term debt 18 15,031 1,367 398 Deferred income from sale of future 34(b) 568,772 613,791 178,896 production _________ _________ _________ Total liabilities 1,324,915 1,331,790 388,164 _________ _________ _________ Minority interest 19 66,347 80,247 23,389 _________ _________ _________ Shareholders' equity, net Capital stock, net of treasury shares of 20 596,755 596,755 173,930 S/49,659,000 in 2004 and 2005 Investment shares, net of treasury shares of 1,683 1,622 473 S/66,000 in 2004 and S/127,000 in 2005 Additional capital 610,659 609,734 177,713 Legal reserve 129,276 129,276 37,679 Other reserves 923 923 269 Retained earnings 734,059 1,598,716 465,962 Cumulative translation loss (148,513) (67,962) (19,808) Cumulative unrealized gain on investments in 256,331 240 70 shares carried at fair value, note 12(a) Cumulative unrealized loss on derivative (1,040) - - instruments _________ _________ _________ Total shareholders' equity, net 2,180,133 2,869,304 836,288 _________ _________ _________ Total liabilities and shareholders' equity, 3,571,395 4,281,341 1,247,841 net _________ _________ _________ Compania de Minas Buenaventura S.A.A. and subsidiaries Consolidated Statements of Income For the years ended December 31, 2003, 2004 and 2005 Note 2003 2004 2005 2005 S/(000) S/(000) S/(000) US$(000) (Note 4) Operating revenues Net sales 22 735,306 908,441 936,595 272,980 Realized income from 34(b) - 68,837 92,753 27,034 sale of future production Royalties income 37(a) 116,857 128,889 152,342 44,402 _________ _________ _________ _________ Total revenues 852,163 1,106,167 1,181,690 344,416 _________ _________ _________ _________ Costs of operations Operating costs 23 306,624 340,697 343,327 100,066 Exploration and 24 86,354 127,435 136,053 39,654 development costs in operational mining sites Depreciation and 13(c) 63,786 74,077 111,177 32,404 amortization _________ _________ _________ _________ Total costs of 456,764 542,209 590,557 172,124 operations _________ _________ _________ _________ Gross margin 395,399 563,958 591,133 172,292 _________ _________ _________ _________ Operating expenses Exploration costs in 25 59,255 88,241 91,919 26,792 non-operational mining sites General and 26 123,161 76,866 112,630 32,827 administrative Royalties 27 25,142 31,557 40,350 11,760 Selling 28 25,776 17,839 15,864 4,624 Amortization of 910 994 896 261 goodwill _________ _________ _________ _________ Total operating 234,244 215,497 261,659 76,264 expenses _________ _________ _________ _________ Operating income 161,155 348,461 329,474 96,028 _________ _________ _________ _________ Other income (expenses), net Share in affiliated 12(b) 557,558 575,858 870,748 253,788 companies, net Loss from change in the 34(a) (668,030) (58,774) (87,872) (25,611) fair value of derivative instruments Interest income 29 7,785 12,132 11,646 3,394 Gain (loss) from 2(a) 793 (9,847) - - exposure to inflation Exchange difference (472) (12,636) 1,483 432 gain (loss) Interest expense 29 (8,687) (7,515) (5,797) (1,689) Other, net 30 (12,804) (13,505) (18,305) (5,334) _________ _________ _________ _________ Total other income (123,857) 485,713 771,903 224,980 (expenses), net _________ _________ _________ _________ Income before workers' 37,298 834,174 1,101,377 321,008 profit sharing, income tax, minority interest and cumulative effects of changes in accounting principles Workers' profit sharing 31(a) 62,887 (18,356) (8,569) (2,498) Income tax 31(a) 198,286 (101,997) (75,406) (21,978) _________ _________ _________ _________ Income before minority 298,471 713,821 1,017,402 296,532 interest and cumulative effects of changes in accounting principles Minority interest 19 (51,023) (28,171) (66,003) (19,237) _________ _________ _________ _________ Income before 247,448 685,650 951,399 277,295 cumulative effects of changes in accounting principles Cumulative effect of 3(a) (72,295) - - - change in accounting principle due to mine closing Cumulative effect of 3(b) - - (10,416) (3,036) change in accounting principle due to stripping costs _________ _________ _________ _________ Net income 175,153 685,650 940,983 274,259 _________ _________ _________ _________ Basic and diluted 32 1.95 5.39 7.48 2.18 earnings per share, before cumulative effects of changes in accounting principles, stated in Peruvian Nuevos Soles and U.S. dollars Cumulative effect of (0.57) - - - change in accounting principle due to mine closing Cumulative effect of - - (0.08) (0.02) change in accounting principle due to stripping costs _________ _________ _________ _________ Basic and diluted 32 1.38 5.39 7.40 2.16 earnings per share, stated in Peruvian Nuevos Soles and U.S. dollars _________ _________ _________ _________ Weighted average number 127,236,219 127,236,219 127,229,844 127,229,844 of shares outstanding _________ _________ _________ _________ Compania de Minas Buenaventura S.A.A. and subsidiaries Consolidated Statements of Changes in Shareholders' Equity For the years ended December 31, 2003, 2004 and 2005 Number Common Investment Additional Legal Other Retained Cumulative Cumulative Cumulative Total shares shares capital earnings unrealized unrealized S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) Balance as 126,879,832 596,755 1,683 610,659 81,537 - 683,769 7,369 - - 1,981,772 Loss in the - - - - - - (5,957) - - - (5,957) Declared and - - - - - - (159,164) - - - (159,164) Shares - - - - - - - - 209,130 - 209,130 Loss in the - - - - - - (458,189) - - - (458,189) Gain in the - - - - - - - - - 1,742 1,742 Loss from - - - - - - - - - (8,085) (8,085) Transfer to - - - - 17,749 - (17,749) - - - - Cumulative - - - - - - - (36,764) - - (36,764) Net income - - - - - - 175,153 - - - 175,153 __________ _________ _________ _________ _________ _________ __________ __________ __________ __________ __________ Balance as 126,879,832 596,755 1,683 610,659 99,286 - 217,863 (29,395) 209,130 (6,343) 1,699,638 Declared and - - - - - - (139,464) - - - (139,464) Investments - - - - - - - - 47,201 - 47,201 Transfer to - - - - 29,990 - (29,990) - - - - Cumulative - - - - - - - (119,118) - - (119,118) Net income - - - - - - 685,650 - - - 685,650 __________ _________ _________ _________ _________ _________ __________ __________ __________ __________ __________ Balance as 126,879,832 596,755 1,683 610,659 129,276 923 734,059 (148,513) 256,331 (1,040) 2,180,133 Effect of - - - - - - 75,680 (10,348) (256,043) - (190,711) Declared and - - - - - - (152,006) - - - (152,006) Investment - - (61) (925) - - - - - - (986) Cumulative - - - - - - - 90,899 - - 90,899 Net income - - - - - - 940,983 - - - 940,983 __________ _________ _________ _________ _________ _________ __________ __________ __________ __________ __________ Balance as 126,879,832 596,755 1,622 609,734 129,276 923 1,598,716 (67,962) 240 - 2,869,304 _________ ________ ________ _________ ________ ________ _________ _________ _________ _________ _________ Compania de Minas Buenaventura S.A.A. and subsidiaries Consolidated Statements of Cash Flows For the years ended December 31, 2003, 2004, and 2005 2003 2004 2005 2005 S/(000) S/(000) S/(000) US$(000) (Note 4) Operating activities Collection from customers 733,646 885,646 940,302 274,061 Collection of dividends 482,025 419,782 307,926 89,748 Collection of royalties 112,354 120,136 131,816 38,419 Collection of interest 8,827 11,909 10,627 3,097 Payments to suppliers and third parties (313,826) (355,188) (365,353) (106,485) Payments of exploration expenditures (128,684) (172,215) (181,921) (53,023) Payments to employees (101,629) (119,594) (147,048) (42,859) Payments of income tax (38,509) (44,478) (84,750) (24,701) Payments of royalties (25,976) (27,248) (42,803) (12,475) Payments of interest (8,686) (5,170) (5,797) (1,690) ________ ________ ________ ________ Net cash provided by operating activities 719,542 713,580 562,999 164,092 ________ ________ ________ ________ Investing activities Payments by purchase of investments in (4,663) (8,084) (509,163) (148,401) shares Purchase of property, plant and equipment (67,814) (96,507) (70,253) (20,476) Development expenditures (38,504) (38,611) (57,586) (16,783) Payments from derivative instruments (20,812) (73,403) (24,157) (7,041) settled, net Proceeds from sale of plant and equipment 2,464 1,595 663 193 Decrease (increase) on time deposits - (24,255) 24,255 7,069 Decrease (increase) of investment fund (53,068) (34,735) 38,869 11,329 Proceeds from sale of shares 3,059 330 - - ________ ________ ________ ________ Net cash used in investing activities (179,338) (273,670) (597,372) (174,110) ________ ________ ________ ________ Financing activities Payments of dividends (159,164) (139,464) (152,006) (44,304) Payments of long-term debt (22,213) (76,705) (50,354) (14,675) Payments of dividends for minority interest (33,283) (33,521) (36,840) (10,737) shareholders Proceeds from long-term debt - 12,147 1,989 580 Increase (decrease) of bank loans, net (22,921) (10,311) 13,079 3,811 ________ ________ ________ ________ Net cash used in financing activities (237,581) (247,854) (224,132) (65,325) ________ ________ ________ ________ Net increase (decrease) in cash and cash 302,623 192,056 (258,505) (75,343) equivalents during the year Cash and cash equivalents at beginning of 95,928 398,551 590,607 172,138 year ________ ________ ________ ________ Cash and cash equivalents at year-end, note 398,551 590,607 332,102 96,795 6 ________ ________ ________ ________ 2003 2004 2005 2005 S/(000) S/(000) S/(000) US$(000) (Note 4) Reconciliation of net income to net cash provided by operating activities Net income 175,153 685,650 940,983 274,259 Add (deduct) Depreciation and amortization 66,908 75,481 112,465 32,779 Loss from change in the fair value of 668,030 21,937 87,872 25,611 derivative instruments Minority interest 51,023 28,171 66,003 19,237 Amortization of development costs 16,445 33,265 34,090 9,936 Officers' compensation 49,594 2,135 26,883 7,835 Cumulative effect of accounting change 72,295 - 10,416 3,036 Asset impairment loss and write-off 12,433 2,889 9,382 2,735 Accretion expense 4,724 7,056 7,621 2,221 Net cost of retired plant and equipment 6,490 754 3,598 1,049 Amortization of goodwill 910 994 896 261 Loss (gain) on sale of plant and equipment (2,133) (157) 137 40 Allowance for doubtful accounts 5,952 1,146 76 22 Exchange difference loss (gain) 472 12,636 (1,483) (432) Gain from change in the fair value of (1,813) (5,022) (2,503) (730) investment fund Provisions for deferred income tax and (301,980) 37,840 (42,836) (12,485) workers' profit sharing Income from sale of future production - (68,837) (92,753) (27,034) Share in affiliated companies, net of (75,533) (160,947) (562,822) (164,040) dividends Loss (gain) from exposure to inflation (793) 9,847 - - Gain on sale of shares (267) (51) - - Net changes in assets and liabilities accounts Decrease (increase) of operating assets - Trade and other accounts receivable (16,019) (22,259) (23,665) (6,897) Inventories 558 5,097 (29,278) (8,533) Prepaid taxes and expenses (6,432) (48,952) (97,515) (28,422) Deferred stripping costs (14,329) - - - Increase (decrease) of operating liabilities - Trade accounts payable and other current 7,854 94,907 115,432 33,644 liabilities ________ ________ ________ ________ Net cash provided by operating activities 719,542 713,580 562,999 164,092 _______ _______ _______ _______ Transactions that did affect cash flows: Transfer from derivative instruments to deferred income from sale 709,963 - 172,540 50,289 of future production Increase of the book value of long-term assets 8,658 24,842 27,967 8,226 Compania de Minas Buenaventura S.A.A. and subsidiaries Notes to the Consolidated Financial Statements As of December 31, 2003, 2004 and 2005 1.Business activity Compania de Minas Buenaventura S.A.A. (hereafter "Buenaventura") is a public company incorporated in 1953. It is engaged in the exploration (individually and in association with third parties), extraction, concentration and commercialization of polymetallic ores. Buenaventura operates two mining units in Peru (Uchucchacua and Orcopampa) and has a controlling interest in three Peruvian mining companies that own the Colquijirca, Antapite, Ishihuinca, Shila and Paula mines. In addition, the Company holds direct and indirect interests in a number of other mining companies; the most important of such interests is in Minera Yanacocha S.R.L. (hereafter "Yanacocha") and Sociedad Minera Cerro Verde S.A.A. (hereafter, "Cerro Verde"), see note 12. Buenaventura also owns an electric power distribution company and a mining engineering services consulting company. In 1999 and 2001, Buenaventura decided to suspend exploitation activities in the Julcani and Recuperada mines, respectively, and only continue to carry out exploration activities. Mineral found in Julcani during exploration activities is treated and sold. Due to the increase in the market quotations of metals, Buenaventura's management has decided to reinitiate its exploration activities in Recuperada during the first quarter of 2006. As of December 31, 2004 and 2005, the number of employees at Buenaventura and its subsidiaries (together "the Company"), is as follows: 2004 2005 Officers 78 87 Employees 868 974 Workers 1,038 1,066 _________ _________ 1,984 2,127 _________ _________ Buenaventura's legal address is Carlos Villaran Avenue 790, Santa Catalina, Lima, Peru. The 2005 consolidated financial statements have been approved by Management and will be presented for the approval of the Directors and Shareholders at the times established by Law. In Management's opinion, the accompanying consolidated financial statements will be approved without modifications in the Board of Directors' and Shareholders' meetings to be held during the first quarter of 2006. Consolidated financial statements as of December 31, 2004 were approved in the Shareholders' meeting held on March 31, 2005. The consolidated financial statements include the financial statements of the following subsidiaries: Ownership percentages as of December 31, ________________________________________________ ______________________ _________________ Subsidiaries Direct Indirect Direct Indirect Business Buenaventura 100.00 - 100.00 - Provides advisory Compania de 44.83 55.17 44.83 55.17 Holds investments Compania 99.99 - 99.99 - Holds investments Consorcio 99.99 0.01 99.99 0.01 Transmission of Minas Conga - 60.00 - 60.00 Owner of mining S.M.R.L. 20.00 40.00 20.00 40.00 Owner of the (i)Effective December 30, 2005 and January 2, 2006, Buenaventura acquired 50% and 25% of the capital stock of Minas Poracota S.A. (Poracota), respectively, in exchange for a payment of US$4,501,000. According to the Shareholders' agreement signed with Teck Cominco Peru S.A. (hereafter "Teck Cominco"), if a preliminary study to be prepared by Teck Cominco and Buenaventura, indicates that there is a probability of obtaining a production greater than 300,000 ounces of gold per year, Teck Cominco will have the right to recover its position as the owner of the 50% of the capital stock of Poracota and to be the operator of the project. To this effect, Teck Cominco will prepare a feasibility study with a production of 300,000 ounces of gold, assuming the cost of this study. If the project were a smaller one, Buenaventura can opt for buying the remaining 25% of the capital stock of Poracota for US$2,250,000. 2.Significant accounting principles and practices The consolidated financial statements are prepared based on Accounting Principles Generally Accepted in Peru. Accounting Principles substantially comprise International Financial Reporting Standards (IFRS), which include International Accounting Standards (IAS) duly approved by the Peruvian Accounting Standards Board. To the date of the consolidated financial statements, this Board has approved the use of IAS 1 to 41, and the Interpretations 1 to 33. The main accounting principles and practices used in accounting for the transactions and in preparing the consolidated financial statements are: (a)Presentation Basis - The accompanying consolidated financial statements have been prepared from the accounting records of the company, which are stated in nominal monetary terms of the date of the transactions. Until December 31, 2004, these consolidated financial statements were maintained in nominal Peruvian currency and adjusted to reflect changes In the National Wholesale Price Level Index (IPM), according to the methodology approved by the Peruvian Accounting Standards Board. This methodology required the adjustment of the non-monetary items in the consolidated financial statements considering their origin date and applying the corresponding Wholesale Price Indexes. Monetary items and foreign currency-denominated items were not restated because they are stated in currency of acquisition power at the consolidated balance sheet dates. Effective year 2005, through Resolution No.031-2004-EF/93.01 enacted on May 18, 2004, the Peruvian Accounting Standards Board suspended the restatement of the financial statements to recognize the inflation effect. The restated balances as of December 31, 2004 have been considered as initial balances as of January 1, 2005. This accounting treatment has been also adopted by tax authorities for calculating the income tax for the year 2005. Therefore, the Company has not recognized a result from exposure to inflation in the income of 2005, while in 2003 and 2004, a gain of S/793,000 and a loss of S/9,847,000, respectively, were recorded. (b)Use of estimates and assumptions - The preparation of financial statements in conformity with generally accepted accounting principles in Peru requires Management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses for the years ended December 31, 2003, 2004 and 2005. Actual results could differ from those estimates. The most significant estimates in the accompanying consolidated financial statements are the obsolescence supplies reserves, the useful lives and impairment of long-term assets, the determination of mineral reserves, the recoverability of deferred income tax and workers' profit sharing, the accrual for mine closing costs and the fair value of derivates instruments. (c)Principles of consolidation - The consolidated financial statements include the accounts of Buenaventura and the accounts of those subsidiaries in which possess more than 50 percent equity participation and/or exercises control. All significant inter-company balances and transactions have been eliminated. The minority interest is presented separately in the consolidated balance sheets and in the consolidated statements of income. See companies included in the consolidated financial statements in Note 1. (d)Cash and cash equivalents - Cash and cash equivalents include all cash on hand and deposited in banks. For preparing the consolidated statements of cash flows, cash a balances and cash equivalent includes cash on hand, time deposits and highly liquid investments with original maturities of three months or less. (e)Inventories - Inventories are stated at the lower of average cost or net realizable value. Net realizable value is defined as the estimated sales price obtainable in the ordinary course of business, less estimated costs of completion and estimated selling and distribution expenses. Cost is determined using the average method. The accrual for obsolescence is based on an item-by-item analysis completed by the Company's management and related amounts are charged to expense in the period in which the obsolescence is deemed to have occurred. (f)Investments in shares - Until December 31, 2002, investments in which the Company's interest is lower than 20 percent or not exercise significant influence were stated at cost, less any permanent value impairment. Effective January 1, 2003, the Company has adopted IAS 39, Financial Instruments - Recognition and Measurement. Under the requirements of this standard, such investments must be recorded at fair value and changes in such value must be separately presented in the consolidated statements of changes in shareholders' equity. The Company has recorded a charge to retained earnings by S/5,957,000, corresponding to the initial adoption of this standard. The corresponding dividends are credited to income when declared. Investments in entities in which the Company's ownership is greater than 20 percent but less than 50 percent or exercise significant influence are accounted for by the equity method, recognizing the Company's proportionate share in the results of the affiliates in the consolidated statements of income. The measurement and reporting currency of affiliates is the Peruvian Nuevo Sol, with the exception of Yanacocha and Cerro Verde whose measurement and reporting currency is the U.S. dollar. The translation of the financial statements of Yanacocha and Cerro Verde results in exchange differences arising from translating (a) income and expense items at the exchange rates prevailing on the individual transaction dates, (b) assets and liabilities at the closing exchange rate, and (c) equity accounts at the historical exchange rates. The net exchange difference is classified in equity until further disposal of the net investment. The purchase method is used to record business acquisitions. Under this method, the assets and liabilities of acquired businesses are recorded at fair value and any difference between the amount paid and the fair value of assets and liabilities acquired is recorded as a mining concession in the caption "property, plant and equipment" (when the difference corresponds to mineral reserves) or goodwill. For companies in which the Company's ownership is between 20 and 50 percent, any amount paid in excess of book value of the shares is reported in the Investment caption. The Company presents in this caption amounts paid over the book value of Yanacocha and Cerro Verde shares, and amortizes this amount using the units-of-production method, see Note 12. (g)Property, plant and equipment - Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment loss. Maintenance and minor repairs are charged to expense as incurred. Expenditures that result in future economic benefits, beyond those originally contemplated in standards of performance for the existing assets, are capitalized. Depreciation is calculated under the straight-line method of accounting considering the lower of estimated useful lives of the asset or estimated reserves of the mining unit. The useful lives are the following: Years Buildings, constructions and other 10 and 20 Machinery and equipment 5 and10 Transportation units 5 Furniture and fixtures 8 and 10 Computer equipment 4 The useful life assigned and the depreciation method chosen by the Company are reviewed periodically to ensure that the method and the depreciation period are consistent with the economic benefit and life expectations for use of property, plant and equipment items. (h)Exploration and mine development costs - Exploration costs are charged to expense as incurred. When it is determined that a mineral property can be economically developed, the costs incurred to develop it, including the costs to further delineate the ore body and remove overburden to initially expose the ore body, are capitalized. In addition, expenditures that increase significantly the economic reserves in the mining units under exploitation are capitalized. Mine development costs are amortized using the units-of-production method, based on proven and probable reserves. On-going development expenditures to maintain production are charged to operations as incurred. (i)Mining concessions - The mining concessions balance corresponds to the amounts paid in excess of fair value of net assets acquired in the purchase of Compania de Exploraciones, Desarrollo e Inversiones Mineras S.A.C. - CEDIMIN (Cedimin), Inversiones Colquijirca S.A. (Colquijirca), Sociedad Minera El Brocal S.A.A. (El Brocal), Minera Paula 49 S.A.C. (Paula) and Minas Poracota S.A.( Poracota). The mining concessions are shown as a part of the property, plant and equipment caption and represent the ownership of the mining sites which contains the mineral reserves acquired. The mining concessions are amortized using the units-of-production method, based on the proved and probable reserves. Annually, the Company reviews the carrying amounts of mining concessions and assesses whether any potential impairment issues exist respective to recoverability. If it is evident that the mining concessions are impaired, the Company provides for the impairment loss in the consolidated statements of income. (j)Impairment of assets - The Company reviews for and evaluates the potential impact of impairment on its assets when events or changes in circumstance occur that indicate the book value may not be recoverable. An impairment loss is recognized for the amount by which the book value of an asset exceeds the higher of its net selling price or value in use. The value in use of an asset is generally calculated as the present value of the estimated future cash flows expected to be earned from continual use of the asset and from its disposal at the end of its useful life. An impairment loss recognized in a previous year is reversed if events or changes occur that indicate the estimates used when the impairment loss was recognized should be adjusted to reflect a more favorable cash flow scenario. The future cash flow assumptions used include, among other items, estimates of recoverable ounces and metric tones, estimates of realizable prices and costs, and estimates of production quantities. Assumptions in which estimated future cash flows are based are subject to risk and uncertainty. Differences between assumptions and market conditions and/or the Company's development profile could have a material effect on the financial situation and results of operations of the Company. (k)Accruals - An accrual is recognized only when the Company has a present obligation (legal or implicit) as a result of a past event, it is probable that resources of the Company will be required to settle the obligation, and the related amount can be reasonably estimated. Accruals are revised periodically and are adjusted to reflect the best available information at the date of the consolidated balance sheets. (l)Accrual for mine closing costs - See note 3(a) for further information about the accounting change. (m)Deferred stripping costs - See note 3(b) for further information about the accounting change. (n)Recognition of revenues, costs and expenses - Sales of concentrates are recorded at the time of shipment in the case of export sales or, when the concentrates physically pass to the customer's warehouse for domestic sales. Sales are recorded at estimated value according to preliminary billings. The sales amount is then adjusted in the period in which final billings are released. When it is evident that the quotations to be used in the final billings are lower than those used in preliminary billings, the excess is reversed in the period in which final prices are known. Sales of ounces of gold are recorded at the time of the delivery and passage of the title rights of such ounces to the client. Costs and expenses are recorded on an accrual basis. (o)Foreign currency transactions - Transactions occurring in a foreign currency are recorded in local Peruvian currency by applying to the foreign currency amount the exchange rate at the transaction date. Exchange gains and losses resulting from differences between the closing exchange rate and the exchange rate used to initially record transactions, are recognized in the consolidated statements of income in the period in which they arise. (p)Income tax and workers' profit sharing - The current income tax and workers' profit sharing balances are calculated and recorded pursuant to current legal regulations effective in Peru. Following the balance sheet liability method, the Company recognizes the effect of temporary differences between book and tax basis of assets and liabilities to the extent that such differences result in a deferred tax liability. If a deferred asset arises, it is not recognized unless it is more likely than not that it will be recoverable. (q)Contingencies - Loss contingencies are recorded in the financial statements when it is probable their occurrence and they can be fairly determined. In other case, they are only disclosed in notes to the financial statements. Contingent assets are not recognized in the financial statements; however, they are disclosed in notes to the financial statements if it is probable that such contingent assets will be realized. (r)Derivative instruments - Until December 31, 2002, the Company used to disclose in notes to the consolidated financial statements the fair value of the derivative instruments. Effective January 1, 2003, IAS 39, Financial Instruments - Recognition and Measurement, is in force. Following the description of the changes resulting from the adoption of this standard: -The fair value of derivative contracts qualifying as cash flow hedges are reflected as assets or liabilities in the consolidated balance sheets. To the extent these hedges are effective in offsetting forecasted cash flows from the sale of production, changes in fair value are deferred in an equity account. Amounts deferred in such account are reclassified to Sales when the underlying production is sold. The effect of the initial adoption of this standard by the subsidiary El Brocal resulted in a credit to the equity account "unrealized loss on derivative instruments" of S/1,742,000. -The fair value of derivative contracts not qualifying as cash flow hedges are reflected as assets or liabilities in the consolidated balance sheets. Changes in fair values are recorded in the caption "gain (loss) from Change in the Fair Value of Derivative Instruments" in the consolidated statements of income. The effect of the initial adoption of this standard resulted in a charge to retained earnings of 2003 by S/458,189,000. -Gain and losses on derivative contracts qualifying as normal sales are initially deferred in the consolidated balance sheets and then recognized in income in the years in which the Company makes a physical delivery of the committed ounces of gold and tones of minerals, see note 34(b). (s)Treasury shares - The Company has common and investment shares under treasury. The nominal values of these shares are presented net of the capital stock and investment shares amounts. The effect of the dividends income arising from the treasury shares held by a subsidiary are eliminated in the consolidated financial statements. (t)Basic and diluted earnings per share - Basic and diluted earnings per share have been calculated based on the weighted average number of common and investment shares outstanding at the date of the consolidated balance sheets; treasury shares have been excluded from the calculation. (u)Comparative financial statements - For improving the presentation of Consolidated Financial Statements, the company has made some reclassifications for the years 2003 and 2004. -The amortization of goodwill of S/910,000 in 2003 and S/994,000 in 2004, which used to be presented as other income (expenses) net, is currently presented as operating expense. -The realized deferred income from sale of future production of S/68,837,000 in 2004, which used to be presented as other income (expenses), is currently presented as an operating revenue. -The mining concessions of S/151,345,000 have been reclassified from the mining concessions and goodwill caption to the property, plant and equipment caption of the consolidated balance sheet as of December 31, 2004. -The amortization of mining concessions of S/14,668,000 in 2003 and S/14,604,000 in 2004, have been reclassified from the amortization of mining concessions and goodwill caption to the depreciation and amortization caption of the consolidated statements of income. (v)New accounting pronouncements - Through Resolutions N' 034-2005-EF/93.01 and N' 036-2005-EF/93.01 dated March 2, 2005 and December 15, 2005, respectively, the Peruvian Accounting Standards Board (CNC in Spanish), approved the International Accounting Standards (IAS) revised and the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Committee. These standards are in force in Peru effective January 1, 2006. Through Resolution N' 038-2005-EF/93.01 of February 3, 2006, CNC approved to suspend until December 31, 2006, the mandatory application of the IAS 21 "Effect of the Variations in the Exchange Rates of Foreign Currencies" (revised in 2003), related to the identification and use of a functional currency. As well, CNC resolved to maintain the equity method in the preparation of the individual financial statements. The Company is evaluating the effects in its consolidated financial statements from the adoption of the revised IAS and the new IFRS issued. 3.Change in an accounting principle (a)Effective January 1, 2003, the Company and its affiliated Yanacocha made an accounting change related to the provision for mine closure. Following, we describe the accounting changes, and the cumulative effect as of January 1, 2003: (i)Until December 31, 2002, the Company used to record the obligation for mine closure when the related amount could be fairly estimated, which normally occurred at end of the life mine. Effective January 1, 2003, the Company records such liability when a legally enforceable obligation arises for mine closing, independently of the full depletion of the reserves. Once such obligation has been appropriately measured, it is recorded by creating a liability equal to the amount of the obligation and recording a corresponding increase to the carrying amount of the related long-lived assets (development costs and property, plant and equipment). As time passes, the amount of the obligation changes, recording an accretion expense; additionally, the capitalized cost is depreciated and/or amortized based on the useful lives of the related asset. Any difference in the settlement of the liability will be recorded in the results of the period in which such settlement occurs. The changes in the fair value of the obligation or useful life of the related assets that occur from the revision of the initial estimates should be recorded as an increase or decrease in the book value of the obligation and the related long-lived asset. The cumulative effect of this change in accounting principle, net of the workers' profit sharing, income tax and minority interest, was a loss of S/20,711,000; this amount is presented in the caption "cumulative effect of change accounting principle due to mine closing" in the consolidated statements of income. * Until December 31, 2002, the affiliated Yanacocha used to accrue the mine closing costs and charge to income over the expected operating lives of the mines using the unit-of-production method. Effective January 1, 2003, Yanacocha records such obligation using an accounting treatment similar to the one used by Buenaventura and its subsidiaries. The cumulative effect of the change in the accounting principle was a loss of S/51,584,000, which is presented as "cumulative effect of change in accounting principle due to mine closing costs" in the consolidated statements of income. (b)Until December 31, 2004, with the intent to reasonably match revenues and current production costs, El Brocal was deferring certain costs incurred in the expansion of the Tajo Norte mining site. These costs are commonly referred as "deferred stripping costs" and are incurred in mining activities that are associated with the removal of waste rock to access the ore body. Costs related to additional quantities of waste that must be moved to obtain 1 MT of mineral were deferred when the actual waste material extracted was higher than the estimate; likewise, these costs were amortized when actual waste mineral extraction was lower than the estimate. Effective January 1, 2005, El Brocal considers the deferred stripping costs incurred during the production stage as variable production costs that should be included in the cost of the inventories produced. This accounting change allows El Brocal to adopt international industry practices. The cumulative effect of this accounting change, net of workers' profit sharing, income tax and minority interest, was a loss of S/10,416,000, which is separately presented in the caption "Cumulative effect of change in accounting principle due to stripping costs" in the consolidated statements of income. This accounting change had no effect in the consolidated financial statements of 2004 due to the fact that the stripping costs incurred in such period were treated as in the current period. In 2003, this change would have represented in the consolidated statements of income an increase in the operating costs from S/456,764,000 to S/471,093,000 and a decrease in the net income from S/175,153,000 to S/172,490,000. In addition, the basic and diluted earnings per share would have decreased from S/1.38 per share to S/1.36 per share. 4.Convenience Translation of Peruvian Nuevos Soles amounts into U.S. dollar amounts The consolidated financial statements are stated in Peruvian Nuevos Soles. U.S. dollar amounts are included solely for the convenience of the reader, and were obtained by dividing Peruvian Nuevos Soles amounts by the exchange rate for selling U.S. dollars at December 31, 2005 (S/3.431 to US$1), as published by the Superintendencia de Banca y Seguros (Superintendent of Bank and Insurance, or "SBS"). The convenience translation should not be construed as a representation that the Peruvian Nuevos Soles amounts have been, could have been or could be converted into U.S. dollars at the foregoing or any other rate of exchange. 5.Foreign currency transactions Translations to foreign currency are completed using exchange rates published by the Superintendencia de Banca y Seguros y AFP. As of December 31, 2005, the exchange rates published by this Institution were S/3.429 for buying and S/3.431 for selling (S/3.280 for buying and S/3.283 for selling as of December 31, 2004) and have been applied for the assets and liabilities accounts. As of December 31, 2004 and 2005, the Company had the following assets and liabilities denominated in foreign currency: 2004 2005 _______________________ _______________________ __ __ Equivalent to Equivalent to US$(000) S/(000) US$(000) S/(000) Assets Cash and 161,786 530,658 88,611 303,847 cash equivalents Investment 26,515 86,969 15,423 52,885 funds Trade and 30,699 100,693 17,038 58,424 other accounts receivable (including current portion) Account 13,935 45,708 19,202 65,844 receivable from affiliates _________ _________ _________ _________ 232,935 764,028 140,274 481,000 _________ _________ _________ _________ Liabilities Bank loans 3,900 12,804 7,500 25,733 Trade 12,703 41,704 8,328 28,573 accounts payable Derivative 103,192 338,779 66,206 227,155 instruments Other current liabilities -Accrual for 20,567 67,521 26,922 92,371 mine closing costs -Stock 14,330 47,047 17,291 59,324 appreciation rights -Others 5,516 18,109 6,911 23,712 Long-term 15,645 51,363 874 2,998 debt (including current portion) _________ _________ _________ _________ 175,853 577,327 134,032 459,866 _________ _________ _________ _________ Net asset 57,082 186,701 6,242 21,134 position _________ _________ _________ _________ 6.Cash and cash equivalents (a)This item is made up as follows: 2004 2005 S/(000) S/(000) Cash 2,893 1,080 Demand deposits accounts 108,102 79,049 Time deposits (b) 479,612 251,973 _________ _________ Cash balances included in the consolidated statements of cash flow 590,607 332,102 Time deposits with an original maturity of more than 90 days 24,255 - _________ _________ 614,862 332,102 _________ _________ (b)As of December 31, 2005, it corresponds principally to time deposits for US$71,851,000, with annual interest rates ranging from 4.030 % to 5.425%, and maturities from 30 to 90 days (time deposits for US$146,000,000 with annual interest rates ranging from 1.96% to 2.67% as of December 31, 2004). 7.Investment funds (a)This item is made up as follows: 2004 2005 S/(000) S/(000) Variable Investment fund 52,155 52,884 Investment fund in process of liquidation (b) 34,816 - _________ _________ 86,971 52,884 _________ _________ As of December 31, 2004 and 2005, this caption includes variable investment funds under the administration of Compass Group S.A., which are carried at fair value. (b)As of December 31, 2004, the Company settled this fund. The cash was available for the Company on January 18, 2005. 8.Trade accounts receivable This item is made up as follows: 2004 2005 S/(000) S/(000) Doe Run Peru S.R.L. 13,092 33,196 Consorcio Minero S.A. 17,411 23,416 BHL Peru S.A.C. 18,209 17,711 Refineria de Cajamarquilla S.A. 2,479 7,438 AyS S.A. 8,479 4,195 Mitsui & Co. Precious Metals 16,334 - Johnson Matthey 16,292 - Others 4,765 7,398 _________ _________ 97,061 93,354 _________ _________ Trade accounts receivable are denominated in U.S. dollars, have current maturity, earn no interest and do not have specific guarantees. In Management's opinion, the allowance for doubtful accounts is sufficient to cover bad debt risks at the date of the consolidated balance sheets. 9.Other accounts receivable, net (a)This item is made up as follows: 2004 2005 S/(000) S/(000) Value added tax receivable, note 21(d) - 8,310 Doubtful account from sale of shares 4,942 4,942 Claims to tax authorities (b) 4,048 4,048 Advances to suppliers and third parties 3,305 3,159 Loans to employees 1,896 2,543 Interest receivable 1,769 265 Other accounts receivable 7,345 7,315 _________ _________ 23,305 30,582 Allowance for doubtful accounts (c) (6,483) (6,449) _________ _________ 16,822 24,133 Non - current portion (4,574) (5,044) _________ _________ Current portion 12,248 19,089 _________ _________ (b)It corresponds to income tax payments of 2001, made in excess to Tax Administration. The Company is asking for a refund of these payments. In Management's and its legal advisors' opinion, this amount will be recovered once the claim process is over. * Movement of the allowance for doubtful accounts is shown bellow: 2003 2004 2005 S/(000) S/(000) S/(000) Beginning balance 11,066 14,375 6,483 Accrual for the year, note 26 5,952 1,146 76 Result from the exposure to inflation 298 (672) - Write-off (2,941) (8,366) (110) _________ _________ _________ Ending balance 14,375 6,483 6,449 _________ _________ _________ In Management's opinion, the allowance for doubtful accounts is sufficient to cover bad debt risk at the date of the consolidated balance sheets. 10.Inventories, net (a)This item is made up as follows: 2004 2005 S/(000) S/(000) Spare parts and supplies 54,311 55,852 Products in process 17,574 24,624 Finished products 6,975 32,067 _________ _________ 78,860 112,543 Slow moving and obsolescence supplies reserves (b) (9,507) (18,166) _________ _________ 69,353 94,377 _________ _________ The Company expects to use its supplies inventory in the normal course of operations. An immaterial amount related to supplies with slow turnover is classified as a current asset within this caption. (b)The reserve for supplies had the following movements during 2003, 2004 and 2005: 2003 2004 2005 S/(000) S/(000) S/(000) Beginning balance 6,285 6,618 9,507 Accrual for the year, note 23 624 2,889 9,382 Write-off (291) - (723) ________ ________ ________ Ending balance 6,618 9,507 18,166 ________ ________ ________ In Management's opinion, the reserve above created is sufficient to cover the risks of slow moving and obsolete supplies at the date of the consolidated balance sheets. 11.Prepaid taxes and expenses (a)This item is made up as follows: 2004 2005 S/(000) S/(000) Value added tax credit 21,772 24,464 Additional income tax prepayment (b) 11,451 11,451 Deferred costs 1,218 4,680 Pre-paid insurance 2,812 4,473 Tax on net assets - 2,708 Income tax credit 14,497 2,322 Other 2,780 5,489 _________ _________ 54,530 55,587 Less - Current portion (40,471) (43,182) _________ _________ Non - current portion (c) 14,059 12,405 _________ _________ (b)On November 13, 2004, the Peruvian Constitutional Court enacted a sentence by means of which the Additional Income Tax Advance was considered unconstitutional; consequently, this advance is no longer in force effective such date. Buenaventura has applied for its devolution in accordance with the regulations of the Peruvian Tax Code. In management's opinion, this excess payment with be recovered in the short-term. (c)As of December 31, 2004 and 2005, it mainly includes the value added tax originated by the exploration activities of Minera La Zanja S.R.L. In Management's opinion, this credit will be offset with the future value added tax liability to be generated when the exploitation activities begin. 12.Investments in shares (a)This item is made up as follows: Equity ownership Amount ________________ ___________________ ____ _ 2004 2005 2004 2005 % % S/(000) S/(000) Equity method investments (c) Minera Yanacocha S.R.L. (d) 43.65 43.65 Equity share (e) 1,152,188 1,714,424 Mining concession, net (f) 103,866 94,245 ________ ________ 1,256,054 1,808,669 ________ ________ Sociedad Minera Cerro Verde S.A.A. Equity share (k) - 18.299 - 491,933 Mining concession, net (l) - 197,754 ________ ________ - 689,687 ________ ________ Investment carried at fair value Sociedad Minera Cerro Verde S.A.A. (i) 9.17 - 270,600 - Ferrovias Central Andino S.A. 10.00 10.00 2,207 2,207 Others 925 1,531 ________ ________ 273,732 3,738 ________ ________ Others 1,561 173 ________ ________ 1,531,347 2,502,267 ________ ________ (b)The detail of share in affiliated companies is: 2003 2004 2005 S/(000) S/(000) S/(000) Minera Yanacocha S.R.L. 558,103 575,188 744,710 Sociedad Minera Cerro Verde S.A.A. - - 125,567 Others (545) 670 471 _________ _________ _________ 557,558 575,858 870,748 _________ _________ _________ (c)The amount of equity participation in affiliates has been determined from audited financial statements of each affiliate as of December 31, 2004 and 2005. Minera Yanacocha S.R.L. (d)Economic activity - Yanacocha represents the most significant investment of Buenaventura. Yanacocha is engaged in the exploration for and exploitation of gold in the open pit mines of Carachugo, San Jose, Maqui Maqui, Cerro Yanacocha and La Quinua; all mines are located in the department of Cajamarca, Peru. Chaupiloma is the legal owner of the mineral rights on the mining concessions exploited by Yanacocha. (e)Investment in Yanacocha - The movement of the equity investment in Yanacocha is as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Yanacocha's equity at beginning of year 2,554,932 2,547,851 2,662,511 Participation percentage 43.65% 43.65% 43.65% _________ _________ _________ Company's participation in Yanacocha's 1,115,228 1,112,137 1,162,186 equity at beginning of year Elimination of intercompany gains (*) (12,130) (11,092) (9,998) _________ _________ _________ Balance of investment at beginning 1,103,098 1,101,045 1,152,188 of year Participation in Yanacocha's income 567,282 583,268 752,908 Participation in the cumulative effect of (51,584) - - change in accounting principle Dividends received, note 37(a) (482,025) (414,911) (264,034) Realization of intercompany gains (*) 1,038 1,904 1,423 Cumulative translation gain (loss) (36,764) (119,118) 71,939 _________ _________ _________ Balance at year-end 1,101,045 1,152,188 1,714,424 _________ _________ _________ (*)The elimination of related inter-company gains corresponds to profits generated in past years, and is presented net of the investment in Yanacocha for reporting purposes. The Company increases the investment and recognizes a gain in the share in affiliated companies as Yanacocha depreciates and amortizes the acquired assets. The net increase in the participation in Yanacocha's net income during 2005 compared to 2004 is mainly due to increased sales of Yanacocha (price and volume), offset by a slight increase in the cash cost per ounce of gold sold. In addition, this participation is reduced as a consequence of the exchange rate used to convert into Nuevos Soles the participation in Yanacocha's results, reported in U.S. Dollars (the exchange rates used for that translation were S/3.302 and S/3.407 per US$1 for as of December 31, 2004 and 2005, respectively). The information related to Yanacocha's result is shown below: Year Sales Average Quantity of Cash cost quotation ounces sold per ounce sold US$(000) US$ (In millions) US$ 2003 1,036,370 363 2.86 129 2004 1,249,882 411 3.04 147 2005 1,490,402 448 3.33 151 (f)Mining concession - The movement of the amount paid over fair value of assets and liabilities of Yanacocha's shares at its acquisition time, is as follows: 2004 2005 S/(000) S/(000) Balance at beginning of year 113,850 103,866 Amortization (9,984) (9,621) _________ _________ Balance at year end 103,866 94,245 _________ _________ (g)Summary of financial information based on the Yanacocha's financial statements - Presented below is certain summary financial information extracted from the Yanacocha's financial statements and adjusted to conform to accounting practices and principles of the Company: Summary of Yanacocha's balance sheets data as of December 31, 2004 and 2005 (includes 100 percent of Yanacocha's operations): 2004 2005 S/(000) S/(000) Total assets 3,961,413 5,277,485 Total liabilities 1,298,902 1,332,043 Shareholders' equity 2,662,511 3,945,442 Summary data from the Yanacocha statements of income for the years ended December 31, 2003, 2004 and 2005 (includes 100 percent of Yanacocha's operations): 2003 2004 2005 S/(000) S/(000) S/(000) Total revenues 3,818,072 4,279,074 4,949,129 Operating income 1,751,810 1,957,834 2,526,633 Income before cumulative effect of change in accounting principle 1,299,615 1,336,238 1,724,874 Cumulative effect of change in accounting principle (118,176) - - Net income 1,181,439 1,336,238 1,724,874 (h)Legal processes of Yanacocha Mercury spill in Choropampa - In June 2000, a Yanacocha's contractor spilled approximately 11 liters of mercury nearby Choropampa, located at 84.8 kilometers from Yanacocha. As a result of the accident, 1,000 Peruvian citizens and the Municipality of Cajamarca sue Yanacocha and other persons involved at the District Court of the state of Colorado, United States of America (hereinafter "the Court"). The plaintiffs demand compensations by the damages originated by this spill. In February 2005, Yanacocha responded to this demand. Likewise, approximately 900 Peruvian citizens sued Yanacocha and others evolved at the presence Cajamarca's judicial authorities. Those demands claim a financial compensation of US$229,420,000 and S/1,245,000. As of December 31, 2005, Yanacocha has reached agreements with approximately 40% of the sewers for lower amounts from the initially demanded, reducing significantly the contingencies originated by this legal process. Additionally, more than half of the remaining plaintiffs that still maintain legal processes had reached compensations agreements with Yanacocha, before the demands begin. Yanacocha applied to the Civil Court from the Cajamarca Superior Court the end of this process due to its previews agreements, having obtained favorable sentences .The sewers have appealed those sentences before the Peru's Supreme Court, where they remain pending. Up to this date, Yanacocha considers that it is not possible to predict the final outcome of these demands; however, any effect related to them will not be significant for that financial statements. Tax processes - Tax authorities have reviewed the income tax and value added tax returns for years 1998 to 2001. As a result of these reviews, Yanacocha was notified with tax assessments of US$35.0 million, from which Yanacocha recorded an accrual of US$17.5 million in 2004. With the purpose of eliminating some of these contingencies, Yanacocha filed for the "Sistema Especial de Actualizacion y Pago de Deudas Tributarias - SEAP" which allows the payment of incorrectly declared taxes, eliminating fines and accrued interest at preferential rates, resulting in a payment of US$ 11.5 million. In the opinion of Yanacocha's Management and its legal advisors, the accrual recorded is enough to cover the tax contingency. Sociedad Minera Cerro Verde S.A.A. (i)Economic activity - Cerro Verde is engaged in the extraction, production and commercialization of copper in its mining concessions located in the department of Arequipa, Peru. Currently, Cerro Verde is carrying out the construction of the primary sulfide plant. The investment in this project is estimated in US$850 million and will allow its copper production increase from 90,000 MT to 300,000 MT. (j)Acquisition of additional share - The Shareholders's meeting of Cerro Verde held on April 18, 2005 agreed to increase the capital stock by US$440 millions with the purpose of financing the construction of the primary sulfide plant, which total investment is estimated at US$850 million. This capital increase permitted Buenaventura to raise its share in Cerro Verde from 9.17% to 18.214%, by a payment of US$154.8 million. Subsequently, through of additional acquisitions of Cerro Verde's shares, Buenaventura has increased its total share to 18.299%. The share increase in Cerro Verde allows Buenaventura to exercise significant influence (faculty to participate in the decisions related to financial and operational policies), which is evidenced by its representation in the Board of Directors; the participation in policy-making processes, including participation in decisions about dividends; participation as guarantor of Cerro Verde in the loan agreements entered by this entity with several foreign banks in connection with the financing of the construction of the primary sulfide plant; and unrestrictive access to the interim and annual financial information. As a consequence, Buenaventura has decided to account for its investment in Cerro Verde using the equity method, since this investment no longer meets the criteria to be recorded at its fair value. Following, we describe the main accounting effects: -The fair value of the investment in Cerro Verde as of January 1, 2005 of S/256,043,000 was reversed with a charge to the account "Cumulative gain on investments at fair value" and a credit to the captions of investment by S/250,087,000 and retained earnings by S/5,956,000. -The prior years effects, resulting from the application of the equity method since the date of the initial acquisition occurred in 1996, are S/69,724,000. This amount is recorded by a charge to the investment caption and by a credit to the retained earnings caption of 2005. For the years 2003 and 2004, the change would have represented an increase in the share in affiliated companies in the consolidated statements of income from S/557,558,000 and S/575,858,000 to S/571,734,000 and S/603,453,000, respectively, and an increase in the net income from S/175,153,000 and S/685,650,000 to S/189,329,000 and S/713,245,000, respectively. In addition, the basic and diluted earnings per share would have increased from S/1.38 and S/5.39 to S/1.49 and S/5.61, respectively. -Buenaventura has recognized an amount of S/197,754,000, as a result of comparing the acquisition cost with the share in the fair values of the assets and liabilities of Cerro Verde. This amount is included in the investment caption and amortized based on the proven and probable reserves of Cerro Verde (k)Investment in Cerro Verde - The movement of the equity investment in Cerro Verde during 2005 is as follows: S/(000) Cerro Verde's equity at beginning of year 871,204 Participation percentage 9.17% __________ Balance of investment at beginning of year 79,889 Acquisition of additional share 509,163 Amount paid over fair value of assets and liabilities (197,754) Participation in Cerro Verde's income 125,567 Dividends received (43,892) Cumulative translation gain 18,960 __________ Balance at year - end 491,933 __________ (l)Mining concession - The movement of this amount is as follows: 2005 S/(000) Balance at beginning of year - Amount paid over fair value of assets and liabilities 197,754 __________ Balance at year end 197,754 __________ (m)Summary of financial information based on the Cerro Verde's financial statements - Presented below is certain summary of financial information extracted from the Cerro Verde's financial statements and adjusted to conform to accounting practices and principles of the Company: Summary of Cerro Verde's balance sheets data as of December 31, 2005 (includes 100 percent of Cerro Verde's operations): S/(000) Total assets 2,911,715 Total liabilities 223,412 Shareholders' equity 2,688,303 Summary data from the Cerro Verde statement of income for the year ended December 31, 2005 (includes 100 percent of Cerro Verde's operations). S/(000) Total revenues 1,183,027 Operating income 682,450 Net income 737,655 (n)Dividends received- Cash dividends paid by Cerro Verde amounted to S/4,871,000 and S/43,892,000, during 2004 and 2005, respectively. (o)Guarantees granted - On September 30, 2005, Cerro Verde signed some agreements with several export credit agencies and commercial banks in connection with the financing of US$450 million for the expansion of its operations. The financing requires the granting of mortgages and pledges over the Cerro Verde's assets, and that Phelps Dodge, Sumitomo and Buenaventura comply with maintaining a minimum shareholders' equity (US$600 million for Buenaventura). The company that does not comply with this requirements must grant a stand-by letter for the representative of the banks that participate in the financing. Additionally, shares in Cerro Verde owned by Buenaventura are pledged in favor of such banks. 13.Property, plant and equipment, net (a)The 2005 movement with the cost and accumulated depreciation accounts is show below: Beginning Additions Retirements Sales Transfers Ending Balance Balance S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) Cost Land 6,909 79 - - 749 7,737 Mining lands 23,463 1,675 - - - 25,138 Mining 228,874 14,897 - - - 243,771 concessions (d) Building, 395,914 121 (9,749) - 48,203 434,489 constructions and other Machinery and 585,109 34,663 (79,725) (4,631) 7,118 542,534 equipment Transportation 29,773 263 (9,091) (993) 1,534 21,486 units Furniture and 16,950 22 (5,088) - 2,617 14,501 mixtures Work in 56,094 18,533 - - (60,221) 14,406 progress Mine closure 17,642 27,967 - - - 45,609 costs, notes 3 and 17(c) _________ _________ _________ _________ _________ _________ 1,360,728 98,220 (103,653) (5,624) - 1,349,671 _________ _________ _________ _________ _________ _________ Accumulated depreciation and amortization Mining lands 10,821 2,112 - - - 12,933 Mining 77,529 16,330 - - - 93,859 concessions (d) Building, 207,509 23,848 (8,616) - - 222,741 constructions and other Machinery and 421,019 41,131 (78,460) (4,629) - 379,061 equipment Transportation 20,962 1,646 (8,037) (858) - 13,713 units Furniture and 10,002 894 (4,942) - - 5,954 mixtures Mine closure 9,327 28,802 - - - 38,129 costs, note 3 _________ _________ _________ _________ _________ _________ 757,169 114,763 (100,055) (5,487) - 766,390 _________ _________ _________ _________ _________ _________ Net cost 603,559 583,281 _________ _________ (b)Fully depreciated assets as of December 31, 2004 and 2005 amount to S/405,937,000 and S/360,187,000, respectively. Currently, these assets are being used by the Company. (c)The distribution of annual depreciation and amortization was as follow: 2003 2004 2005 S/(000) S/(000) S/(000) Inventories 817 44 2,298 Operating costs 63,786 74,077 111,177 Exploration cost in non-operative mining areas 479 - 571 Others 2,643 1,404 717 _________ _________ _________ 67,725 75,525 114,763 _________ _________ _________ (d)The 2005 movement of cost and accumulated amortization of mining concessions are shown below: Balance as of January 1, Additions Balance as of December 31, 2005 2005 S/(000) S/(000) S/(000) Cost Compania de Exploraciones, 175,456 - 175,456 Desarrollo e Inversiones Mineras S.A.C.- CEDIMIN Inversiones Colquijirca S.A. 42,476 - 42,476 Minas Poracota S.A. - 8,763 8,763 Sociedad Minera El Brocal S.A.A. 5,549 6,134 11,683 Minera Paula 49 S.A.C. 5,393 - 5,393 _________ _________ _________ 228,874 14,897 243,771 _________ _________ _________ Accumulated amortization Compania de Exploraciones, 54,117 10,897 65,014 Desarrollo e Inversiones Mineras S.A.C. - CEDIMIN Inversiones Colquijirca S.A. 21,364 2,967 24,331 Sociedad Minera El Brocal S.A.A. 2,048 493 2,541 Minera Paula 49 S.A.C. - 1,973 1,973 _________ _________ _________ 77,529 16,330 93,859 _________ _________ _________ Cost net 151,345 149,912 _________ _________ 14.Development costs, net (a)Movement of the cost and accumulated amortization as follow: Balance as of January Additions Balance as of December 31, 2005 1, 2005 S/(000) S/(000) S/(000) Cost Uchucchacua 94,821 2,667 97,488 Orcopampa 60,681 38,940 99,621 Antapite 60,280 1,910 62,190 Ishihuinca 16,624 751 17,375 Poracota - 12,263 12,263 Veta Nazareno - 1,055 1,055 Mine closing costs, 21,938 - 21,938 note 3 _________ _________ _________ 254,344 57,586 311,930 ________ ________ ________ Accumulated amortization Uchucchacua 45,694 8,741 54,435 Orcopampa 18,558 13,056 31,614 Antapite 17,498 12,656 30,154 Ishihuinca 15,469 900 16,369 Mine closing costs, 13,867 1,567 15,434 note 3 ________ ________ ________ 111,086 36,920 148,006 ________ ________ ________ Net cost 143,258 163,924 ________ ________ (b)The annual amortization was distributed as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Exploration and development costs in 16,445 31,120 34,090 operational mining sites, note 24 Exploration cost in-non operational mining areas - 2,145 - Inventories 238 63 2,830 _________ _________ _________ 16,683 33,328 36,920 _________ _________ _________ 15.Bank loans Bank loans, mainly contracted in U.S. dollars consist of: 2004 2005 S/(000) S/(000) Inversiones Mineras del Sur S.A. Banco de Credito del Peru 9,521 3,431 Banco Wiese Sudameris - 22,302 Sociedad Minera El Brocal S.A.A. Banco Interamericano de Finanzas - BIF 3,283 - Other subsidiaries 346 496 _________ _________ 13,150 26,229 _________ _________ As of December 31, 2004 and 2005, this caption is mainly conformed by pre and post-export loans obtained from various domestic banks. The weighted average annual interest rates on bank loans were 3.12 percent and 4.85 percent at December 31, 2004 and 2005, respectively. 16.Trade accounts payable Trade accounts payable are mainly originated by the acquisition of materials, supplies and spare parts. These obligations are stated in local and foreign currency, have current maturities and do not accrue interest. No guarantees have been granted. 17.Other liabilities (a)This item is made up as follow: 2004 2005 S/(000) S/(000) Accrual for mine closing costs (c) 67,521 92,371 Stock appreciation rights (b) 47,047 59,324 Income tax payable 25,143 37,299 Other taxes payable 20,072 20,538 Accounts payable to a joint venture partner 9,435 18,218 Remuneration and similar benefits payable 7,202 17,100 Workers' profit sharing payable 11,738 14,657 Derivative instruments payable - 8,100 Accrual for labor contingencies 3,140 4,744 Royalties payable to the Peruvian Government 6,639 3,825 Royalties payable to third parties, note 36(b) 2,513 2,874 Dividends payable 1,467 2,274 Other liabilities, each individually less than S/1,500,000 14,809 20,125 _________ _________ 216,726 301,449 _________ _________ Long - term portion Accrual for mine closing costs (39,881) (44,377) Stock appreciation rights (32,444) (34,257) Accounts payable to a joint venture partner (9,435) (18,218) Others (1,705) - _________ _________ (83,465) (96,852) _________ _________ Current portion 133,261 204,597 _________ _________ (b)Stock Appreciation Rights - The Company has a program under which certain executives earn a cash bonus equal to that executive's allotted number of shares multiplied by the difference between the market value at a future date of the Company's shares and the base price on the executive's share. This program remains in effect as long as the executive works for the Company at each program's settlement date. The measurement is made at the end of each reporting period based on the current market price of the shares. Compensation expense is recognized ratably over the vesting period established in each program. The number of shares units which will be granted to executives subject to the stock appreciation rights bonus in future years, are as follows: Years Number of shares 2006 383,400 2007 400,200 2008 396,800 2009 343,500 2010 282,700 Thereafter 558,000 _________ 2,364,600 _________ In 2005, the Company recorded an expense amounting to S/26,883,000 in connection with this program (S/49,594,000 and S/2,135,000 in 2003 and 2004, respectively), which is recorded in the "general and administrative" caption in the consolidated statements of income. (c)Accrual for mine closing costs - Movements within the accrual for mine closing costs follow: S/(000) Balance as of January 1, 2004 51,202 Disbursements (5,691) Additions and changes in estimates 21,019 Accretion expense, note 30 7,056 Gain from exposure to inflation (6,065) _________ Balance as of December 31, 2004 67,521 Disbursements (10,738) Additions and changes in estimates, note 13 27,967 Accretion expense, note 30 7,621 _________ Balance as of December 31, 2005 92,371 _________ The increase in the accrual of 2005 is explained mainly by the new estimation of the closing costs for the Colquirrumi mining unit, which has not being operating for more than 15 years. The accrual for mine closing costs is based on studies completed by independent parties, in accordance with current environmental protection regulations, see note 36(a). The accrual for mine closing costs corresponds mainly to activities that have to be completed for the restoration of the mining units and affected areas as a consequence of the exploitation activities. The main works that have to be completed are the land movements, reforestation labor and remove of the mining plants. 18.Long-term debt (a)Long-term debt, denominated in U.S. dollars, was as follows: Guarantee Annual Final maturity 2004 2005 interest rate S/(000) S/(000) Sociedad Minera El Brocal S.A.A. Banco de Leased 5.34% June 2008 - 1,181 Credito del property Peru (capital lease) Banco de Leased 6.36% June 2007 - 808 Credito del property Peru (capital lease) Banco de Leased 5.00% June 2007 1,044 676 Credito del property Peru (capital lease) BBVA Banco Pledge over Three month November 2009 12,147 - Continental machinery and Libor plus (Pre-paid in equipment for 2.35% December 2005) US$1,000,000; and cash flow from collection of a client Banco de Pledge over Three month September 2006 10,532 - Credito del machinery and Libor plus (Pre-paid in Peru equipment for 3.75% December US$5,822,000; 2005) and cash flow from collections of two clients Inversiones Mineras del Sur S.A. Banco de Guaranteed by 4.50% September 2005 22,981 - Credito del Buenaventura Peru Consorcio Energetico de Huancavelica S.A. BBVA Banco Guaranteed by Three month April 2005 4,323 - Continental Buenaventura Libor plus 1.2% (3.76% as of December 31, 2004) Others 336 333 ________ ________ 51,363 2,998 Current (36,332) (1,631) portion ________ ________ Long-term 15,031 1,367 portion ________ ________ (b)The long-term debt maturity schedule as of December 31, 2005 is as follows: Year ended December 31, Amount S/(000) 2007 1,084 2008 283 _________ 1,367 _________ (c)The weighted average annual interest rates of the long - term debt were 4.92 percent and 5.56 percent during 2004 and 2005, respectively. 19.Minority interest The 2004 and 2005 movement of minority interest is as follows: 2004 2005 S/(000) S/(000) Beginning balance 48,428 66,347 Minority share in the results 28,171 66,003 Contributions from minority shareholders - 2,566 Cumulative unrealized loss on derivative instruments 13,778 1,193 Cumulative effect at change in accounting principle in El Brocal (stripping - (25,684) costs) Dividends paid to minority shareholders of S.M.R.L Chaupiloma Dos de Cajamarca (33,521) (36,840) Reduction of capital stock 3,877 - Others 5,614 6,662 _________ _________ Ending balance 66,347 80,247 _________ _________ 20.Shareholders' equity (a)Capital stock - The Company has common shares entitled to exercise voting rights that represent the 100 percent of its outstanding share capital. As explained in note 2(s), the nominal value restated by inflation of the treasury shares is presented net from the capital stock. The detail of the capital stock as of December 31, 2005 is as follows: Number Nominal Result from exposure to inflation Capital value stock of shares S/(000) S/(000) S/(000) Common shares 137,444,962 549,780 96,634 646,414 Treasury shares (10,565,130) (42,261) (7,398) (49,659) ___________ ________ _________ _______ 126,879,832 507,519 89,236 596,755 ___________ ________ _________ _______ As a result of the restatement of the 2004 financial statements for inflation at December 31, 2004, the Company is permitted to issue additional common shares for a total value of S/96,634,000. The capital stock structure as of December 31, 2004 and 2005 is shown below: Percentage Number of shares Whole participation ____________________ _________________ _____ ________ 2004 2005 2004 2005 Less than 0.20% 1,581 1,395 8.63 9.67 From 0.20% to 1.00% 20 19 12.68 10.66 From 1.01% to 5.00% 21 23 42.27 46.25 From 5.01% to 10.00% 3 3 22.40 19.40 From 10.01% to 100.00% 1 1 14.02 14.02 The market value of the common shares is S/97.10, equivalent to US$28.30 as of December 31, 2005 (S/75.18, equivalent to US$22.90 as of December 31, 2004), and presents a negotiation rate of 100 percent. (b)Investment shares - The investment shares are not entitled to exercise voting rights and do not represent the Company's stock obligation. However, investment shares confer upon the holders thereof the right to participate in the dividends distributed. As explained in note 2(s), the nominal value restated by inflation of the investment shares held in treasury is presented net from the investment shares. The detail of the investment shares as of December 31, 2005 follows: Number of Nominal value Result from Investment shares exposure to shares inflation S/(000) S/(000) S/(000) Investment shares 372,320 1,489 260 1,749 Investment shares (30,988) (124) (3) (127) held in treasury __________ _________ _________ _________ 341,332 1,365 257 1,622 __________ _________ _________ _________ As a result of the restatement of the 2004 financial statements for inflation at December 31, 2004, the Company is permitted to issue additional shares for a total value of S/260,000. (c)Additional capital - The additional capital of the Company includes the following as of December 31, 2005: -The premium received on the issuance of Series B common shares for S/546,835,000. -The income from the sale of ADR for S/30,286,000, and -The difference between constant nominal values of treasury shares (common and investment), held by the subsidiary Condesa, and the cost of such shares for S/32,613,000. (d)Legal reserve - According to the Ley General de Sociedades (General Corporations Law), a minimum of 10 percent of distributable income in each year, after deducting income tax, shall be transferred to a legal reserve, until such reserve is equal to 20 percent of capital stock. This legal reserve may be used to offset losses or may be capitalized; however, if used to offset losses or if capitalized, the reserve must be replenished with future profits. (e)Treasury shares maintained by subsidiary - As explained in note 2(s), the values of treasury shares are presented net of the capital stock and investment shares, and increasing the additional capital account. (f)Declared and paid dividends - The information about declared and paid dividends in the years 2003, 2004 y 2005 is as follows: Meeting/Board Date Declared Dividends dividends per share S/ S/ Dividends 2003 Mandatory annual shareholders' meeting March 31 44,198,000 0.32 Board of Directors July 31 80,280,000 0.58 Board of Directors October 28 47,771,000 0.35 __________ 172,249,000 Less - Dividends paid to Condesa (13,085,000) __________ 159,164,000 _________ Dividends 2004 Mandatory annual shareholders' meeting March 26 77,823,000 0.56 Board of Directors October 28 73,208,000 0.53 __________ 151,031,000 Less - Dividends paid to Condesa (11,567,000) __________ 139,464,000 _________ Dividends 2005 Mandatory annual shareholders' meeting March 31 80,623,000 0.58 Board of Directors October 26 84,096,000 0.61 __________ 164,719,000 Less - Dividends paid to Condesa (12,713,000) __________ 152,006,000 _________ (g)Cumulative translation gain (loss) - This amount corresponds to the exchange differences that arise as a result of applying the methodology described in Note 2(f) when translating the financial statements of Yanacocha and Cerro Verde from U.S. dollars to Peruvian Nuevos Soles. These exchange differences will be presented in equity until the related investment is disposed of. 21.Taxation (a)Buenaventura and their subsidiaries are subject to Peruvian tax law. As of December 31, 2005, the statutory income tax rate in Peru is 30 percent. Non - domiciled companies in Peru and individuals must pay an additional tax of 4.1 percent over received dividends. (b)The tax authorities are legally entitled to review and, if necessary, adjust the income tax calculated by the Company during the four years subsequent to the year of the related tax return filing. The income tax and value added tax returns of the following years are pending review by the tax authorities: Entity Years open to review by tax authorities Buenaventura 2001, 2002, 2003, 2004 and 2005 Buenaventura Ingenieros S.A. 2001, 2002, 2003, 2004 and 2005 Compania de Exploraciones, Desarrollo e Inversiones 2001, 2003, 2004 and 2005 Mineras S.A.C. - CEDIMIN Compania Minera Condesa S.A. 2002, 2003, 2004 y and 2005 Compania Minera Colquirrumi S.A. 2001, 2002, 2003, 2004 and 2005 Consorcio Energetico de Huancavelica S.A. 2001, 2002, 2003, 2004 and 2005 Contacto Corredores de Seguros S.A. 2001, 2002, 2003, 2004 and 2005 Sociedad Minera El Brocal S.A.A. 2001, 2002, 2003, 2004 and 2005 Inversiones Mineras del Sur S.A. 2002, 2003, 2004 and 2005 Minas Conga S.R.L. 2001, 2002, 2003, 2004 and 2005 S.M.R.L. Chaupiloma Dos de Cajamarca 2002, 2003, 2004 and 2005 Minera La Zanja S.R.L. 2004 and 2005 Minas Poracota S.A. 2005 Minera Minasnioc S.A.C. 2004 and 2005 The income tax of Buenaventura for 2000 was reviewed by the Tax Administration. As a consequence, Buenaventura received an assessment that reduced the tax loss carryforward in S/114,001,000. The main issue is that the Company considered certain revenues (dividends and equity participation) as taxable for determining the tax loss carryforward. In opinion of the Company's legal advisors, the assessment does not have solid grounds. It is expected that the Company obtains a favorable opinion in the administrative process initiated against the assessment. The 2002 income tax of Cedimin was reviewed by the Tax Administration. As a consequence, Cedimin received an assessment that modified the tax loss carryforward. The main issue is that Cedimin considered the loss from the sale of its shares in Minera Huallanca S.A.C. and Minera Yanaquihua S.A by S/27,129,000 as deductible. In opinion of Cedimin's legal advisors, such assessment has no solid grounds and therefore, it is expected that Cedimin obtains a favorable opinion in the administrative process initiated against the assessment. Additionally, the 2000 and 2001 income tax of Condesa was reviewed by the Tax Administration. As a consequence, the Company received tax assessments that reduced the tax loss carrryforward by S/1,360,000 in 2000 and by S/16,987,000 in 2001. In both periods, the main issue was that Condesa considered certain revenues - dividends and equity participation - as taxable for determining the tax loss carryforward. In opinion of Condesa's legal advisors, such assessment has no solid grounds and therefore, it is expected that Condesa obtains a favorable opinion in the administrative process initiated against the assessment. Due to various possible interpretations of current legislation, it is not possible to determine whether or not future reviews will result in tax liabilities for the Company. In the event that additional taxes payable, interest and surcharges result from tax authority reviews, they will be charged to expense in the period assessed and paid. However, in Management's and legal advisory opinion, any additional tax assessment would not be significant to the consolidated financial statements as of December 31, 2004 and 2005. (c)With the purpose of determining the income tax and the value added tax, the transfer prices among related parties and for transactions with companies domiciled in countries considered tax havens, prices should be supported by documentation containing information about the valuation methods applied and criteria used in its determination. Based on an analysis of the Company's operations, Management and its legal advisors do not believe that the new regulations will result in significant contingencies for the Company as of December 31, 2004 and 2005. (d)The Company has the benefit to recover the value added tax of the sales export. Therefore, the tax paid in the acquisitions can be applied to the tax from its sales or other tax obligations, or request a refund. During the year 2005, Buenaventura has asked for the refund of the valued added tax for S/39,570,000. On December 31, 2005, the amount pending at refund from the tax authority of S/8,310,000 is included in the caption "other accounts receivable". 22.Net sales by geographic region sales agreements The Company's revenues primarily result from the sale of precious metal concentrates, including silver-lead, silver-gold, zinc and lead-gold-copper concentrates and ounces of gold. The following table shows net sales by geographic region: 2003 2004 2005 S/(000) S/(000) S/(000) Peru 383,180 437,411 435,701 Europe 289,597 424,614 218,053 North America 28,793 50,736 160,011 Asia 26,065 15,838 44,307 Oceania 2,266 - 77,969 South America - - 554 _________ _________ _________ 729,901 928,599 936,595 Income (expense) from hedging transactions 5,405 (20,158) - of subsidiary _________ _________ _________ 735,306 908,441 936,595 _________ _________ _________ In 2005, the Company's three largest customers accounted for 18%, 17% and 13%, respectively, of total sales (20%, 16% and 13% of total sales in 2004). As of December 31, 2005, 61% of the trade accounts receivable is related to these customers (48% as of December 31, 2003). Some of these customers have sale contracts with the Company that guarantee them the production output from specified Company mines at prices based on market quotations or previously agreed. Currently, the production of the mining units of the Company is subject to such sale agreements; these agreements have various maturity dates but do not extend beyond December 31, 2012. 23.Operating costs This item is made up as follow: 2003 2004 2005 S/(000) S/(000) S/(000) Contractors 115,313 122,803 137,828 Supplies 74,359 84,327 88,427 Personnel expenses 67,134 82,893 75,363 Others 49,194 47,785 32,327 Slow moving and obsolescence supplies reserve, note 10(b) 624 2,889 9,382 _________ _________ _________ 306,624 340,697 343,327 _________ _________ _________ 24.Exploration and development cost in operational mining sites This item is made up as follow: 2003 2004 2005 S/(000) S/(000) S/(000) Exploration expenses Uchucchacua 22,926 38,111 34,797 Orcopampa 21,883 22,628 26,299 Antapite 12,967 13,817 18,707 Shila 5,034 4,708 12,580 Ishihuinca 4,129 6,843 4,872 Julcani 1,627 4,191 4,708 Paula 1,301 3,446 - Others 42 2,571 - _________ _________ _________ 69,909 96,315 101,963 Amortization of development costs, note 14(b) 16,445 31,120 34,090 _________ _________ _________ 86,354 127,435 136,053 _________ _________ _________ 25.Exploration costs in non-operational mining sites This item is made up as follows: 2003 2004 2005 S/(000) S/(000) S/(000) In areas external to the mining sites Mining concessions agreements 45,797 81,812 85,680 _________ _________ _________ In mining sites Huachocolpa 1,948 4,507 6,239 Julcani 4,295 - - Paula 2,876 - - _________ _________ _________ 9,119 4,507 6,239 _________ _________ _________ Studies and project expenses 4,339 1,922 - _________ _________ _________ 59,255 88,241 91,919 _________ _________ _________ 26.General and administrative expenses This item is made up as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Personnel expenses 29,493 31,802 32,369 Officers' compensation, note 17(b) 49,594 2,135 26,883 Professional fees 16,673 18,569 20,984 Board members' remuneration 3,859 4,655 7,407 Insurance 1,730 2,164 1,970 Supplies 943 1,649 1,540 Maintenance 750 668 2,224 Rentals 989 890 1,227 Accrual for doubtful receivable, note 7(c) 5,952 1,146 76 Other expenses 13,178 13,188 17,950 _________ _________ _________ 123,161 76,866 112,630 _________ _________ _________ 27.Royalties This item is made up as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Royalties to third parties, note 36(b) 25,142 24,918 26,143 Royalties to the Peruvian Government - 6,639 14,207 _________ _________ _________ 25,142 31,557 40,350 _________ _________ _________ 28.Selling expenses This item is made up as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Freight 18,425 12,913 11,900 Sundry services 6,231 3,412 2,117 Others 1,120 1,514 1,847 _________ _________ _________ 25,776 17,839 15,864 _________ _________ _________ 29.Interests income and expense This item is made up as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Interest income Interest on deposits 5,639 5,726 8,539 Change in the fair value of investment fund 1,813 5,022 2,503 Interest on loans 333 1,384 604 _________ _________ _________ 7,785 12,132 11,646 _________ _________ _________ Interest expense Interests on loans (7,361) (4,609) (2,824) Others (1,326) (2,906) (2,973) _________ _________ _________ (8,687) (7,515) (5,797) _________ _________ _________ 30.Other, net This item is made up as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Other revenues Gain on sale of property, plant and equipment 1,175 259 1,160 Revenue from insurance - 273 922 Dividends received from Cerro Verde - 4,871 - Gain from sale of supplies 2,871 - - Others 2,989 287 5,025 _________ _________ _________ 7,035 5,690 7,107 _________ _________ _________ Other expenses Accretion expense, notes 3 and 17 (c) 4,724 7,056 7,621 Additional taxes 1,246 2,232 6,990 Social disbursements 1,313 925 2,883 Damages in Colquijirca mining unit - - 2,325 Depreciation, note 13 (c) 2,643 1,404 717 Labor contingencies - 3,443 1,604 Administrative penalties 1,657 817 730 Employee termination bonuses 1,046 - - Accrual for impairment loss on investments 874 - - Others 6,336 3,318 2,542 _________ _________ _________ 19,839 19,195 25,412 _________ _________ _________ Net (12,804) (13,505) (18,305) _________ _________ _________ 31.Income tax and workers' profit sharing (a)As explained in note 2(p), Buenaventura and their subsidiaries recognize temporary differences between tax and book basis of assets and liabilities through the recording of deferred tax assets and liabilities. The income tax and workers' profit sharing asset is composed of the following: Credit (debit) to the consolidated statements of income _________________________ ______ Balance as of Income tax Workers' Charge to Balance January 1st, profit shareholders' as of 2005 sharing equity for December change in 31, 2005 accounting principle (note 3) S/(000) S/(000) S/(000) S/(000) S/(000) Deferred asset Deferred 217,578 22,021 6,383 - 245,982 income from sale of future production Accrual for 17,669 4,186 1,214 - 23,069 mining closing Officers' 11,922 678 196 - 12,796 compensation Slow moving 3,091 4,612 1,337 - 9,040 and obsolescence supplies reserves Exploration 11,512 (2,729) (791) - 7,992 expenses Impairment of 5,840 (302) (88) - 5,450 property, plant and equipment Tax loss 3,967 - - - 3,967 carryforward Unrealized 4,159 (393) (114) - 3,652 gain with affiliates Royalties 1,946 (776) (225) - 945 payable to the Peruvian government Allowance for 1,786 286 83 - 2,155 doubtful accounts receivable Accrual for 2,087 561 163 - 2,811 labor contingencies Others 3,542 3,461 1,006 - 8,009 _________ _________ _________ _________ _________ 285,099 31,605 9,164 - 325,868 Less - (12,739) (914) (266) - (13,919) Allowance for deferred asset _________ _________ _________ _________ _________ Deferred 272,360 30,691 8,898 - 311,949 asset ________ ________ _________ ________ ________ Deferred liability Deferred (19,956) - - 19,956 - stripping costs Other (7,105) 2,517 730 - (3,858) _________ _________ _________ _________ _________ Deferred (27,061) 2,517 730 19,956 (3,858) liability _________ _________ _________ _________ _________ Deferred 245,299 33,208 9,628 19,956 308,091 asset, net ________ ________ _________ ________ ________ The Company has not recorded a deferred income tax and workers' profit sharing liability originated by the excess of the book basis over the tax basis of the investments in shares due to the following: * In the case of the affiliate Cerro Verde under any circumstance - dividend distribution or sale of the investment - the reversal of the basis difference will not be taxable. Cerro Verde S.A. is a company that quotes its shares in the Lima Stock Exchange and, in accordance with the Peruvian tax regulations, any gain or losses arising from the disposition of these shares are not taxable. On the other hand dividends distributions are income tax exempt. * In the case of the affiliate Yanacocha, Buenaventura's management has the intention and ability of maintaining the investment until the date of the depletion of its gold and silver reserves; in this sense, it considers that the temporary difference will be reverted through future dividends, which are not taxable. On the other hand, Buenaventura's management has the ability of reversing the temporary difference, by other form different than dividends distributions, without any tax effects. (b)The current and deferred portions of the income tax and workers' sharing expense (benefit) amounts for the years 2003, 2004 and 2005 included in the consolidated statements of income are made up as follows: 2003 2004 2005 S/(000) S/(000) S/(000) Expense (benefit) for income tax Current S.M.R.L. Chaupiloma Dos de Cajamarca 30,683 37,509 44,970 Inversiones Mineras del Sur S.A. 6,543 12,642 11,828 Buenaventura - 10,345 19,765 Inversiones Colquijirca S.A. - 8,368 28,107 Consorcio Energetico de Huancavelica S.A. - 2,126 1,257 Compania de Exploraciones, Desarrollo e Inversiones Mineras - 1,051 2,147 S.A.C. - CEDIMIN Others 1,283 620 540 _________ _________ _________ 38,509 72,661 108,614 _________ _________ _________ Deferred Buenaventura (228,834) 21,582 (28,212) Inversiones Colquijirca S.A. (4,916) 7,370 (1,199) Inversiones Mineras del Sur S.A. (2,798) - (3,216) Others (247) 384 (581) _________ _________ _________ (236,795) 29,336 (33,208) _________ _________ _________ Total (198,286) 101,997 75,406 _________ _________ _________ Expense (benefit) for workers' profit sharing (i) Current Inversiones Colquijirca S.A. - 2,426 8,147 Buenaventura - 2,998 5,729 Inversiones Mineras del Sur S.A. 2,111 3,664 3,431 Consorcio Energetico de Huancavelica S.A. - 373 220 Compania de Exploraciones, Desarrollo e Inversiones Mineras - 305 622 S.A.C. - CEDIMIN Others 187 86 48 _________ _________ _________ 2,298 9,852 18,197 _________ _________ _________ Deferred Buenaventura (62,896) 6,256 (8,178) Inversiones Colquijirca S.A. (1,425) 2,136 (348) Inversiones Mineras del Sur S.A. (811) 112 (934) Others (53) - (168) _________ _________ _________ (65,185) 8,504 (9,628) _________ _________ _________ Total (62,887) 18,356 8,569 _________ _________ _________ (i)In accordance with Peruvian legislation, mining companies that have more 20 employees should accrue an amount equal to 8 percent of annual taxable income to be distributed under an employee profit-sharing plan. As of December 31, 2002, 2003 and 2004, S.M.R.L. Chaupiloma Dos de Cajamarca Contacto Corredores de Seguros S.A. and Compania Minera Condesa S.A. have less than 20 employees. (c)During 2003, 2004 and 2005 the provision for tax and workers' profit sharing recorded in the consolidated income statement is as follow: 2003 2004 2005 S/(000) S/(000) S/(000) Income before income tax and workers' profit sharing 37,298 834,174 1,101,377 Legal combined rate 32.84% 35.60% 35.60% _________ __________ _________ Expected income tax and workers' profit sharing 12,249 296,966 392,090 according to the legal combined rate Permanent differences Share in affiliated companies (i) (183,102) (205,005) (309,986) Effect of fair value of derivative instruments (ii) 73,085 20,923 31,282 Effect of fair value of derivative contracts turned (94,794) - (61,424) into normal sale contracts (iii) Gain in exchange difference at derivative instruments - - 1,886 Change in valuation allowance (53,944) - 1,180 Gain in normal sale contracts due to market price - - 3,765 difference Non-deductible exploration expenses - 3,430 2,219 Amortization of goodwill - 1,620 2,259 Effect of change in tax rate (21,978) - - Other permanent items 7,311 2,419 20,704 _________ __________ _________ (273,422) (176,613) (308,115) _________ __________ _________ Total (261,173) 120,353 83,975 _________ __________ _________ (i)According to current Peruvian tax regulations, the equity participation in affiliates, including dividends received, are not taxable. (ii)According to current Peruvian tax regulations, the loss on derivative instruments is not deductible to the extent it is generated abroad. (iii)Effective January 1, 2003, the Company adopted IAS 39, recording the initial effect of the fair value of all derivative contracts in the equity account: retained earnings (loss). In December 2003 and May 2005, the Company modified certain conditions of its derivative contracts to qualify them as sales contracts; pursuant to this revision, the related loss (negative fair value) became a temporary difference under current Peruvian tax regulations. The income tax effect has been recorded in each year because the change of status of a permanent, to a temporary item occurred in December 2003 and May 2005. (iv)Effective April 1, 2004, the statutory income tax rate in Peru is 30 percent. Until December 31, 2003, the income tax rate was 27 percent. In both periods the workers' profit sharing rate was 8 percent. 32.Basic and diluted earning per share The computation of the Basic and diluted earning per share for the year ended December 31, 2003, 2004 and 2005 is presented below: For the year ended December 31, 2003 For the year ended December 31, 2004 For the year ended December 31, 2005 ________________________________________________ ________________________________________________ ________________________________________________ Net income Shares Earnings Net income Shares Earnings Net income Shares Earnings (numerator) (denominator) per share (numerator) (denominator) per share (numerator) (denominator) per share Basic and 247,448,000 127,236,219 1.95 685,650,000 127,236,219 5.39 951,399,000 127,229,844 7.48 Cumulative (72,295,000) 127,236,219 (0.57) - - - - - - Cumulative - - - - - - (10,416,000) 127,229,844 (0.08) __________ __________ __________ _________ __________ __________ Basic and 175,153,000 127,236,219 1.38 685,650,000 127,236,219 5.39 940,983,000 127,229,844 7.40 __________ __________ __________ _________ __________ __________

Source: http://www.buenaventura.com.pe/doc/sec_filings/FS4Q05.pdf