(a) The provision for social commitments is associated with repaving Alata-Congata Road (US$6.1 million as of December 31, 2022 and US$6.3 million as of December 31, 2021) and an irrigation project in La Joya (US$4.3 million as of December 30, 2022 and 2021).

(b) The provision for legal contingencies is associated with OSINERGMIN (Organismo Supervisor de la Inversión en Energía y Minería) and SUNAFIL (Superintendencia Nacional de Fiscalización Laboral) fines, which have been appealed by the Company.

(c) The Company’s mineral exploitation activities are subject to environmental protection standards. In order to comply with these standards, the Company has obtained the approval for the Environment Adequacy Program (PAMA) and for the Environmental Impact Studies (EIA), required for the operation of Cerro Verde’s production unit.

On October 14, 2003, Law 28090 was enacted, which regulates the commitments and procedures that entities involved in mining activities must follow in order to prepare, file and implement a mine site closure plan, as well as the respective environmental guarantees that assure compliance with the plan in accordance with protection, conservation and restoration of the environment. On August 15, 2005, the regulations regarding this law were approved.

During 2006, in compliance with the mentioned law, the Company completed the closure plans for its mine site and presented it to the Ministry of Energy and Mines.

The closure plans for its mine site were approved by Resolution No 302-2009 MEM-AAM and its modifications were approved by Resolution No 207-2012 MEM-AAM, Resolution No 186-2014 MEM-DGAAM and its last modification, Resolution No 032-2018 MEM-DGAAM. As of December 31, 2022, pursuant to legal requirements, the Company has issued a letter of credit to the Ministry of Energy and Mines totaling US$86.5 million to secure mine closure plans.

The estimate of remediation and mine closure costs is based on studies prepared by independent consultants and based on current environmental regulations. This provision corresponds mainly to the activities to be performed in order to restore the areas affected by mining activities. The main tasks to be performed include ground removal, soil recovery, and dismantling of plant and equipment.

Under the closure regulations, the Company must submit a closure plan that includes the reclamation methods, closure cost estimates, methods of control and verification, closure and post-closure plans, and financial assurance. In compliance with the requirement for five-year updates, the Company submited the last updated closure plan and cost estimate to the Ministry of Energy and Mines in February 2023.

The table below presents the changes in the provision for remediation and mine closure:


	2022	2021
	US$(000)	US$(000)

Beginning balance	222,910	237,543
Accretion expense	4,566	3,715
Changes in estimates (see Note 7)	(17,812)	(18,271)
Progressive mine closure payments in hydrometallurgy process	—	(87)
Exchange rate effect	(4)	10
Final balance	209,660	222,910

As of December 31, 2022, the Company’s provision for remediation and mine closure was US$209.7 million (reflecting the future value of the provision for remediation and mine closure of US$477.6 million, discounted using an annual risk-free rate of 4.06%). As of December 31, 2021, the Company’s provision for remediation and mine closure was US$222.9 million (reflecting the future value of the provision for remediation and mine closure of US$374.3 million, discounted using an annual risk-free rate of 1.93%). The Company considers this liability sufficient to meet the current environmental protection laws approved by the Ministry of Energy and Mines.

As of December 31, 2022 changes in estimate (decrease of US$17.8 million) primarily related to changes in the discount rate, partially offset by higher future nominal flows coupled with change in the escalation rate. As of December 31, 2021, changes in estimates (decrease of US$18.3 million) primarily relate to changes in the discount rate.

(d)

As of December 31, 2022, represents interest and penalties related to income tax for the years 2018 and 2021 and related taxes. As of December 31, 2021, represents interest and penalties related to income tax for the years 2017 and 2018 and related taxes. All amounts were determined in accordance with the IFRIC 23, “Uncertainty over Income Tax Treatments.”