The Ilo Smelter Modernization Project. The new smelter  will use an Isasmelt furnace and two rotatory furnaces  to skim matte from slag in the fusion stage, the con- verter stage will be done in four Peirce Smith converters  15 feet of diameter by 35 feet long, three of which will  be refurbished and one will be new; also, a new anode  plant, a new acid plant and a new oxygen plant will be  installed, as well as other auxiliary facilities. Processing capacity will be 1.2 million tons of concen- trated copper per year. Levels of SO$_{2}$ collection will  reach 95%, a level which exceeds the environmental  legislation in force. The final product of the new  smelter will be anodes instead of the blister currently  produced. In 2004, Fluor started developing the engineering  and procurement, and has reached 66% progress.  Purchase orders were placed for the main pieces of  equipment taking the longest time for manufacturing.  Also starting in the third quarter, Fluor will start the  Project’s construction management. Site preparation  for the new plants has already started and is 70%  complete. Demolition, reinforcement and foundation  work for the new anode plant is 35% complete. Work  at the anodes plant is expected to conclude in the third  quarter 2005.  We are exploring a porphyry copper system in the  south of Peru, which is in its evaluation stage. We have  completed a diamond drilling program of 21,792 meters  and plan to continue an additional program of 20,000  meters in order to determine the existing resource.  No drilling program was executed in the Tantahuatay  Proyect. All efforts were oriented to social issues and  During 2004, the Company completed the final phase of  Los Chancas Project diamond drilling program with a total  of 10,400 meters. Second phase of metallurgical test was  also completed during the year. Process for estimation of  probable and proved mineral reserves has begun and pre- feasibility studies will soon start. Analysis at this point in- dicate resources amounting to 200 million tons with values  of 1.0% copper, 0.07% Mo, and 0.12 Au grams per ton.  Towards the end of 2004, contractors were chosen for  the Ocean Water Intake and for Underground Services.  Construction is expected to conclude in June 2006, with  commissioning and startup commencing one month  later. The new Smelter should become operational in  November 2006 to allow us meeting our Environmental  Conformance and Management Program (PAMA) ahead  of the January 2007 deadline. EXPLORATION community environment. Resources would be 27.1 million  tons with an average of 0.89 Au grams per ton and 13.0  Ag grams per ton. A drilling program of 2,500 m. has  been planned for 2005. SPCC has a 44.245% share in the  Tantahuatay Proyect. As part of the comprehensive exploration plans within  the Peruvian territory for 2005, a program of 15,000  meters of diamond drilling will be executed in different  exploration prospects, considering porphyry copper sys- tems and epithermal gold systems. We actually have in Peru direct control of 131,831.59  hectares of mining properties. In Chile, during 2004, the Company initiated explora- tion work on the acquired mining properties executing  diamond drilling programs in two prospects located in  the III Region, which are being explored for copper-gold.  We will continue our exploration program extending our  work to the I Region.  The Company owns 35,258 hectares of mining rights  within the I and III Regions in Chile.  Southern Peru is a major economic engine in Peru’s  COMMUNITY OUTREACH southern area and is particularly involved in the sustain- able development and wellbeing of the people of Tacna  and Moquegua, where it promotes and directly conducts  social investment initiatives in the neighboring communi- ties. These initiatives take place in jointly managed efforts  with various public agencies and the people themselves.  SPCC is also deeply committed to fulfill its social responsi- bility principles. Its social responsibility philosophy directs  the Company’s community outreach to the geographical  environment in its role as facilitator of socioeconomic de- velopment. Southern Peru is a good corporate, social and  environmentally responsible neighbor, an approach that  was fulfilled in its co-participatory projects. In 2004, SPCC carried out the following main projects: • Water management. Phase V of the Chilligua Canal con- cluded in Torata Valley in Moquegua. Small irrigation in- frastructure improvements were made in four valley areas.  The Water Users Board in Torata received our logistic and  technical support. In Candarave, Tacna, we built the Mari- sol Water Divide to benefit the Cairani, Huanuara, Canda- rave and Quilahuani districts. In Higuerani we improved  the canals and installed advanced irrigation systems.  • Agriculture: In Candarave we assisted potato and garlic  seed areas, continued enhancing alfalfa fields by im- • Livestock: We continued to provide support to sheep  breeding, sustainable vicuna breeding, enhanced cat- tle livestock raising, and dairy processing. A cattle arti- ficial insemination and stabling program was launched.  In Torata, we started a veterinarian assistance plan. In  Suches Huaytire we continued improving alpaca breed- ing. In Tacalaya, Candarave, we started alpaca breed- ing and control of sarcocystosis in domestic camelids.  In Higuerani, Ilabaya, Tacna, we started a guinea pig  breeder’s pilot program. The communities engaged  in these activities are provided ongoing technical as- sistance in health and animal husbandry. Arondaya,  in Cuajone, started a program to support subsistence  animal husbandry to improve camelid, sheep and goat  farming by providing veterinarian training to young lo- cal residents. SOUTHERN PERU COPPER CORPORATION 15. State of the art GPS system  in use at drilling = U ug Fr SOUTHERN PERU COPPER CORPORATION 14. proving water use, and promoted planting of oat for  cattle feed. In Tarata, construction of a nursery is under  way to support fruit growing, and we are also providing  training for other local produce. In Locumba, Sama and  Ite valleys, works focused on irrigation infrastructure  and business management training. In Huaytire, a new  study on pasture productivity will determine the conve- nience of introducing cultivated grasses. To determine  the condition of pastures, an agristologic census evalu- ated the extension and strength of pastures.