In Our 10Th Anniversary Year, We Take Stock of a Decade Of

117318.175P.M5.PASMINCO 18/9/98 10:41 AM Page 1

Pasminco Limited Pasminco Annual Report 1998

PASMINCO LIMITED ACN 004 368 674 Registered Office Level 15 380 St Kilda Road Melbourne 3004 Australia Telephone 61 3 9288 0333 Facsimile 61 3 9288 0406 Email [email protected] Website: www.pasminco.com.au The Company’s Share Register (Above) Exploration was maintained at a is maintained by Corporate high level on the Benagerie Ridge in South Registery Services Pty Ltd. Australia. In this aerial photo, the Portia Shareholders’ enquiries about exploration camp can be seen in the Annual Report 1998 their shareholdings should be background. addressed to: (Above Right) By end June 1998, more than 1300 people were employed on Pasminco Corporate Registery Century Project and the mine prestrip In our 10th anniversary Services Pty Ltd operation was well advanced. Collins Wales House Level 12, 565 Bourke Street (Front Cover Left) Scott Lehman, Precious Melbourne, 3000, Australia Metals Superintendent, at the Port Pirie GPO Box 2975EE smelter. Melbourne, 3001, Australia (Front Cover Right) EZDA-branded zinc is year, we take stock Tel: 61 3 9611 5711 loaded onto one of the three dedicated Fax: 61 3 9611 5710 vessels which now operate between the Australian smelters and the four major ports of Pasminco’s Asian markets. of a decade of progress, a year of major development and a future full of opportunity. 117318.175P.M5.PASMINCO 18/9/98 10:41 AM Page 2

Pasminco Lead Sales by End Use 1997/8 Pasminco Zinc Sales by End Use 1997/8

Battery 71% (96/7:75%) Galvanising 59% (96/7:56%)

Chemicals 11% (96/7:10%) Diecasting 24% (96/7:20%)

Battery Can Lead Sheet Alloy 5% (96/7:7%) 5% (96/7:5%) Brass and Bronze Solder 2% (96/7:2%) 2% (96/7:3%)

Alloy Castings 1% (96/7:2%) Zinc Oxide 2% (96/7:4%)

Other 10% (96/7:7%) Other 8% (96/7:10%) In a tough year, we made great progress

Casting Operator During the year, Pasminco Darren Gillies straps successfully launched new lead in modernising EZDA diecasting alloy products, “VRLA Refined Lead” as it comes off a casting and “MF Refined Lead”, which / AC TOD PTY LTD machine at the Hobart significantly enhance the smelter. Forklift driver performance of valve-regulated

PRINTING Peter Jarvis can be seen and maintenance-free lead-acid existing assets and in the background. batteries, by both enhancing beneficial Bismuth levels and also guaranteeing manufacturers that chemical elements deleterious to building our new successful battery performance are at optimum low levels. This innovation, the result Annual General Meeting of more than five years of 11.30am Wednesday, 28 October 1998 research, represents a / EASTERN STUDIOS GRAPHICS PTY LTD / / EASTERN STUDIOS GRAPHICS PTY LTD significant technological Century. ANZ Pavillion Victorian Arts Centre St Kilda Road, Melbourne. FILM advance on previous lead A notice of meeting and a proxy form specifications for this growing are included with this Annual Report. high-tech battery sector For further information on investor services supplying the automotive and please refer to page 71. telecommunications industries.

/ ROB CRACKNELL PHOTOGRAPHY Pasminco is a founding member of the International Zinc Association (IZA), established in 1990 to promote the benefits PHOTOGRAPHY of Zinc. / ROBINSON TOWNS PTY LTD / / ROBINSON TOWNS PTY LTD DESIGN Pas A/R Final Text 18/9/98 8:12 AM Page 1

10 Years p.10 Pasminco’s Vision To be the Best from Mine to Market through Performance, Quality and Respect. Chairman & MD p.2 Financial Highlights 1998 1997 % Variance Gross sales revenue $1,370.1m $1,352.8m 1.3% Cost of sales (including exploration & research) $1,152.5m $1,104.2m 4.4% Depreciation $131.7m $121.5m 8.4% Operating profit after tax & before abnormals $39.6m $70.0m (43.4)% Operating profit after tax & after abnormals $63.3m $64.7m (2.2)% Projects p.12 Earnings per share -before abnormals 3.9c 8.8c (55.7)% -after abnormals 6.2c 8.1c (23.5)% Dividend per share 4.0c 4.0c 0.0% Return on shareholders’ equity 4.3% 8.3% (48.2)% Paid up capital as at 30 June $1,124.6m $795.1m 41.4% Shareholders’ equity $1,490.7m $778.5m 91.5% Economic entity (Group) net debt $166.5m $239.1m (30.4)% Capital expenditure $445.3m $196.5m 126.6% People p.16 Total assets $2,411.4m $1,569.3m 53.7% Profit After Tax Contents and after Abnormal and Extraordinary Items 1 Financial Highlights $m 2 Chairman & MD Letter 70 4 Operations at a Glance 60 6 Financial & Market Summary 64.7 63.3 10 10 Years of Progress 12 Development Projects 1998 50 16 People 18 Safety 40

20 Environment 40.8 23 Exploration 30 Financial Summary p.6 24 Technology 25 Mining 20 27 Australian Smelting 28 European Smelting 10

30 Management Team 12.2 31 Board 0

32 Ore Reserves ) 34 Production 5 Year Summary (10) 14.4 14.4 ( 36 Performance 10 Year Summary 38 Glossary (20) 39 Directors’ Report, 199 456 78 Markets p.8 Financial Statements, Key Financial Dates & Shareholder Information

Operations p.23 Pas A/R Final Text 18/9/98 8:13 AM Page 2

1997/8 was a difficult but constructive year. Profit after tax and abnormals of $63.3 million was marginally below the previous year’s $64.7 million; however this result was assisted significantly by an abnormal gain of $23.7 million. At $39.6 million, profit after tax and before abnormals reflected lower production volumes and higher costs during the second half, as we implemented a comprehensive program to improve the competitiveness of existing operations. The economic downturn in a number of Asian economies continues to create uncertainty in product and equity markets in our region and wider afield. With production facilities in Australia and Europe, and customers in some 45 countries, Pasminco performed well in 1997/8 in terms of aggregate sales compared with the previous year. Perceptions about future demand, however, depressed world prices for our products despite the fact that global zinc and lead demand continue to exceed supply.

Chairman Mark Rayner (left) Amid the year’s volatile economic conditions, our and Managing Director and break-even zinc price increased to US$998/tonne Chief Executive David Stewart looking over plans at from US$934/tonne. the construction site for Century’s concentrator Our top priority and expectation for the current facility. year is to reduce this key measure by lifting production and revenue and driving down costs. The development projects outlined in this report will assist these objectives. Pas A/R Final Text 18/9/98 8:14 AM Page 3

3 Profit After Tax Return on Shareholders' Equity Break-Even Zinc Price % US$/t 9 8.3 1,300 8.3

1,200 6 5.4

1,100 4.3 3 Index Pasminco SharSharee Price Other Metals Points 1,003 1,003 1.6 998 1,000 998 3.0 1,500 942 942 934 934 2.5 1,250 0 900 2.0 1,000 900 900 1.5 750 ) ) 2.0 800 (3) ( 1.0 500 199 45 678 199 45 678 JUL 97AUG 97 SEP 97 OCT 97 NOV 97 DEC 97 JAN 98 FEB 98 MAR98 APR98 MAY 98 JUN 98

The completion of the Century acquisition in September 1997 opened major opportunities for the company.With a world-class cost structure, Century will reduce our dependence on existing mines and give us more flexibility in their operations and has the potential to contribute significantly to shareholder value.Your Board welcomes the support given by shareholders and banks to the Century fund-raising program. The project is ahead of schedule and under budget. Your Board is confident of the strong underlying value of Pasminco’s business and its future potential. In the climate of uncertainty created by the Asian downturn, we are disappointed that current share prices do not appear to recognise fully the underlying value of many resources companies, including our own. As an integrated, focused zinc and lead producer and supplier, we will continue to seek opportunities to add to our asset base through exploration, acquisition and internal growth. Our objective is to ensure that all assets in the portfolio are among the world’s most competitive. The outlook is for improved production performance and lower costs. Global supply-demand remains in deficit, and with London Metal Exchange inventories falling, metal prices are considered to have potential for improvement. In conclusion, we extend our thanks to all Pasminco’s employees. Ours is a tough, performance-oriented business and we wish to acknowledge the significant contribution of our people who thrive in this environment.

Mark R Rayner David M Stewart Chairman Managing Director and Chief Executive Pas A/R Final Text 18/9/98 8:15 AM Page 4

In 1997 Pasminco embarked on an exciting growth phase with the acquisition of two undeveloped world-class zinc deposits, Century and Dugald River. Budel Headquartered in Melbourne, Pasminco has production facilities in Australia and the Netherlands and marketing offices in Australia, the Netherlands, the UK, Hong Operations at a Glance Kong and China. Following commissioning of the Century mine in late 1999, Pasminco will become the world’s largest zinc producer and the third largest silver producer.

Exploration Mining Pasminco Exploration is coordinated by the Group office in Melbourne, in Pasminco Mining has three major underground zinc-lead-silver mining conjunction with our operations in the Netherlands. Major bases are operations in Australia: Broken Hill, Elura and Rosebery. It also operates an located at Broken Hill and Cobar in Australia and at Karachi in Pakistan. open-cut mine, Potosi, at Broken Hill. Project generation is a global effort with particular emphasis on Australia, Asia and South America.

Financials 1998 $m 1997 $m Financials 1998 $m 1997 $m

Expenditure - expensed EBIT ✚ 15.1 25.7 (Exploration group only) ▲ 16.8 18.1 Gross sales revenue ≈ 377.4 365.3 Expenditure - expensed ◗ (Mine sites only) 5.1 5.4 Cost of sales 300.7 280.0 Total expenditure - expensed ▲ 21.9 23.5 Depreciation & amortisation 61.6 59.6 Expenditure - capitalised 5.9 8.7 Capital expenditure 71.9 68.9 Total assets 512.4 495.9

Production

Tonnes (Contained Metal) Zinc 312,358 319,798 Lead 164,425 185,959 Silver (kg) 165,462 202,105 Gold (kg) 530 625 Total ore Treated 4,387,000 4,395,088

▲ includes research and development Sales expenditure and depreciation of $0.7m (1996/7-$0.8m) ✚ includes unrealised profit on consolidation from Tonnes (Contained Metal) intra-group sales 1997/8-nil, 1996/7-$6.8m ≈ includes sales to Group smelters of $258.6m in Zinc ❍ 291,187 324,205 1997/8 and $226.4m in 1996/7 ❍ ◗ includes exploration and research and development Lead 168,341 177,925 ❍ includes sales to Group smelters Silver (kg) ❍ 180,730 192,104 ▼ includes research and development ❍ ● includes purchased zinc Gold (kg) 499 566 ◆ includes sales from Cockle Creek to Port Pirie ‡ includes 50% ARA production Pas A/R Final Text 18/9/98 8:16 AM Page 5

PrProductionoduction Sales PrProductionoduction Sales PrProductionoduction Sales PrProductionoduction Sales

350,000 250,000 600,000 400,000 87 23 324,205 324,205 1,1 535,000 535,000 529,000 529,000 305,990 291,187 29 290,1 290,123 9,944 518,000 518,000

7 350,000 2 279,944 494,700 300,000 494,700 203,162 203,162

188,386 500,000 200,000 439,300 439,300 319,798 00 177,925 181,572 1

305,083 300,000 524,400 312,358 519,000 300,466 267,000 168,341 168,341

250,000 536,000 262,300 259, 259,100 293,275

196,376 400,000 238,400

202,320 250,000 224,700 445,400 150,000 185,434 185,959

200,000 419,600 272,600 268,000 164,425

300,000 200,000 250,400 244,500

150,000 224,100 100,000 150,000 200,000 100,000 100,000 50,000 100,000 50,000 50,000

0 0 0 0 199 45 678 199 45 678 199 45 678 199 45 678

Australian Smelting European Smelting Pasminco operates and markets the output from three primary and two Pasminco Budel Zink operates and markets the output from the electrolytic secondary smelters in Australia: the Cockle Creek ISF zinc and lead zinc smelter in the Netherlands. smelter, the Hobart electrolytic zinc smelter, the Port Pirie lead and zinc smelter and ARA lead recycling plants in Sydney and Melbourne. ARA is a 50-50 joint venture with Simsmetal. Sales and marketing offices are located in Melbourne, Hong Kong and Guangzhou.

Financials 1998 $m 1997 $m Financials 1998 $m 1997 $m

EBIT 78.7 74.5 EBIT 77.3 42.9 Gross sales revenue 868.8 907.7 Gross sales revenue 382.6 306.2 Cost of sales ▼ 732.8 784.3 Cost of sales ▼ 295.0 252.5 Depreciation & amortisation 57.3 48.9 Depreciation & amortisation 10.3 10.8 Capital expenditure 65.1 102.6 Capital expenditure 23.4 14.6 Total assets 788.4 680.6 Total assets 198.7 182.9

Production Production

Tonnes (Metal) Tonnes (Metal) Zinc 303,576 319,747 Zinc 215,385 204,626 Refined lead and alloys 185,061 201,755 Lead bullion 25,149 28,795 Secondary lead 13,889 13,971 Silver (kg) 112,030 231,756

Sales Sales

Tonnes (Metal) Tonnes (Metal) Zinc ● 300,245 324,220 Zinc 217,792 211,832 Refined lead and alloys 187,887 194,991 Lead bullion ◆ 22,304 30,034 Secondary lead 14,497 13,379 Silver (kg) 104,700 251,540 Pas A/R Final Text 18/9/98 8:16 AM Page 6

6 External Factors

11998998 11997997 Change Fav/ (Unfav)

Zinc Prices* (US$/t) 111192 9 2 11124124 68

Lead Prices* Financial & Market Summary (US$/t) 562 724 (116262)

A$/US$ ▲ (cents) 70.070.0 76.8 6.8

A$/Nlg ▲ (cents) 138.0138.0 1140.340.3 (2.03) Realised * LME Price ▲ Realised exchange rate

■ Pasminco recorded a profit after tax and abnormals of $63.3 million for 1997/8, a decrease of $1.4 million from the previous year. ■ The result was assisted by an abnormal gain of $23.7 million relating to a reduction of the environmental provision at Budel Zink. ■ Results were favourably influenced by a higher zinc price and weaker Australian dollar, offset by a lower lead price. ■ Operating performance was below potential, with lower production volumes, higher costs and lower metal premiums in Asia impacting unfavourably on the result. ■ The Group maintained a conservative balance sheet, given the uncertainties surrounding commodity prices and exchange rates.

External Factors 1998 Progress Against Objectives At US$1,192, the average realised zinc price in 1997/8 increased 6% compared with US$1,124 in 1996/7. The realised lead price was Objective: Sustain profitability at all points significantly lower in 1997/8, averaging US$562 compared with US$724 in the metal cycle in 1996/7. Progress: Construction of the Century mine is on time and on budget to improve Pasminco’s break-even zinc price The average realised AUD/USD exchange rate for 1997/8 including the (see page 12). New business systems will lead to improved impact of the Group’s natural revenue hedge was 70.0 cents compared productivity, make the most of combined purchasing power and with 76.8 cents in 1996/7. The natural revenue hedge allows the Group improve decision tools (see page 14). The Port Pirie upgrade will to match movements in its US dollar debt against future revenue. increase production and reduce operating costs per tonne (see page 13). The Dutch guilder was marginally stronger in 1997/8, with the Australian dollar/Dutch guilder exchange rate averaging 138 cents compared with Operating Performance the previous year’s 140.3 cents. As approximately 15% of the Group’s The Group undertook a number of major capital improvement programs cost base is in Dutch guilders, a stronger guilder has an unfavourable during the year. These included the refinery replacement and impact on the Group’s results. modernisation at Port Pirie, commissioning of the co-treatment process at The higher zinc price and weaker Australian dollar contributed $26 million Hobart and Port Pirie and the four-week campaign maintenance shutdown and $68 million respectively to earnings. The lower lead price and stronger at Cockle Creek. Each of these impacted production and costs during the Dutch guilder reduced earnings by $40 million and $2 million respectively. course of the year. Budel’s production performance improved. Mine production for the year was affected by lower ore grades at Broken Hill, a ground fall at Rosebery in January 1998 which restricted production until June, and the availability of only a single production stope at Elura for most of the year. Lower production volumes and higher costs in 1997/8 reduced earnings by $44 million and $32 million respectively. Lower metal premiums reduced earnings by $16 million in 1997/8. Reflecting operating performance during the year and the impact of the lower lead price, the Group’s break-even zinc price increased from US$934/tonne in 1996/7 to US$998/tonne in 1997/8. Excluding the impact of abnormal items in each of the two years, the break-even zinc price rose from US$919/tonne in 1996/7 to US$1,061/tonne in 1997/8. Return on shareholders equity was 4.3% after inclusion of new equity raised for the Century project. Pas A/R Final Text 18/9/98 8:17 AM Page 7

40 9 1,400 240 8.8 1,370.1 8.1 1,200 1,352.8 219.9 1,318.2 30 1,224.1 180 1,193.7 26.9 26.9

1,000 188.7 6 23.5 23.5 169.2 800 20 6.9

120 139.0 16.9 1

4.3 600

3 400 60 10 0.0 10.0 1 200 9.4 9.4 43.3

0 0.6 0 0 0 ABCD 199 456 78 199 456 78 199 456 78

A. Impact of US$25/t change in zinc price *Cash flow from operating activities plus B. Impact of US$25/t change in lead price movement in operating working capital C. Impact of A$:US$ 1 cent change D. Impact of A$:Nlg 1 cent change

Cash Flow The Group generated cash from operations of $220 million in 1997/8. From this, capital expenditure of $445 million was funded. Major projects included the Port Pirie refinery replacement ($16 million), Budel’s conversion to Century concentrates ($15 million), and installation of the Pasminco Business Systems ($28 million). Capitalised mine development expenditure was $35 million. Capital expenditure on the Century project was $255 million. A dividend of 4 cents per share, franked to 96%, was paid in November 1997, the dividend payment totalling $32 million. Financing costs in 1997/8 were $14 million, $4 million lower than in 1996/7 due to lower average net debt levels during the year. Although no tax was paid in Australia during the year because of the Group’s carried forward tax losses, the Group’s effective tax rate was 38%, 5% above the previous year’s rate. The higher tax rate was due to the reduction in eligible development, and research and development, Malcolm Wilson allowances. (left) Finance In November 1997, the Group completed an equity raising for the Century Manager, Century project totalling $669 million, net of expenses. The equity was raised and Steve Pearce, through a 10% book-build placement to institutions of 79.5 million shares Group Treasurer, at $2.30 per share, immediately after the completion of the Century worked with acquisition on 24 September 1997. The placement, which raised $183 Pasminco’s banks million, was followed by a 2 for 7 rights issue to shareholders at $2.00 per on the debt share, which raised $500 million. Acquisition costs of $345 million (including component Dugald River) were funded from the raising, and for the short term the balance of the funding for of new equity was used to retire existing debt facilities. A review of progress Century and the Currency Options on the Century project is contained on page 12. ancillary projects. A currency option program was recommenced in 1997/8 to protect the Group’s US dollar revenue stream against adverse movements in the Financing Activities AUD/USD dollar exchange rate. When the exchange weakened The major financing activity during 1997/8 was the finalisation of a significantly in the latter part of 1997, and in periods of weakness since US$600 million facility to fund development of the Century project. Other then, call options were purchased and put options were sold financing activities were undertaken in relation to funding of ancillary simultaneously. This is referred to as a collar option strategy. As at 30 June projects associated with Century. 1998, collar options to the value of US$940 million were in place over the The credit watch negative announced by ratings agency Standard and period January 1999 to December 2001. The average strike price of the Poors after the Century acquisition in January 1997 was removed in cap is US67 cents and the average strike price of the floor is US59 cents. January 1998. Pasminco maintains its BBB credit rating. The effect of this strategy is to protect US$940 million of revenue against During the year maturing bilateral debt facilities to the value of US$50 a rise in the AUD/USD exchange rate above US67 cents while forgoing million and A$120 million were renegotiated. the benefit of a fall in the exchange rate below US59 cents. It should be As at 30 June 1998, the Group had committed facilities of A$1,590 million noted that for the six month period to 31 December 1998 the Group is fully of which A$1,366 million was undrawn. Net debt at 30 June 1998 was exposed to the prevailing AUD/USD dollar exchange rate. A$167 million. The Group maintained a conservative balance sheet with a Full details of this position are contained in Note 22 to the accounts on page 59. net debt to debt plus equity ratio of 10%. Although debt will rise in the coming year as funding commitments for Century build up, the Group’s balance sheet and gearing ratio do not preclude it undertaking other development projects or acquisitions. Pas A/R Final Text 18/9/98 8:17 AM Page 8

8 Pasminco Zinc Sales by Region 1997/8 Pasminco Lead Sales by Region 1997/8 Pasminco Concentrates Sales 1997/8

EuropeEurope 35% (96/7:33%) North Asia 34% (96/7:37%) Hobart 36% (96/7:32%)

North Asia 22% (96/7:21%) SE Asia 22% (96/7:24%) ExternalExternal 29% (96/7:37%)

Australasia Australasia 19% (96/7:17%) 21% (96/7:23%)

SE Asia 14% (96/7:16%) WWestest Asia 15% (96/7:10%) PPortort PiriePirie 28% (96/7:26%)

WestWest Asia 7% (96/7:7%) Africa 7% (96/7:5%)

Other 3% (96/7:6%) Other 1% (96/7:1%) Cockle CrCreekeek 7% (96/7:5%)

Zinc Metal Market 1998 Progress Against Objectives Zinc prices showed great volatility during 1997, despite the steady reduction in London Metals Exchange (LME) stocks. Objective:Be the supplier of choice by The LME cash price for zinc ranged from a high of US$1,725 per tonne meeting or exceeding customer expectations in September 1997 to a low of US$988 per tonne in late June 1998. Progress:Pasminco’s new distribution Pasminco’s average realised base LME zinc price for the year was system will significantly improve the US$1,192, up 6% from the previous year’s US$1,124. company’s competitiveness in the critical Despite the zinc market being slightly in surplus at the beginning of the first Asian market by providing a faster, more half, zinc reached its highest cash price for many years (US$1,725) in flexible service. See page 15. September 1997 before tumbling to an average of US$1,060 for the second half. With the strengthening zinc price and record Chinese exports during the first half, LME stocks rose from 424,000 tonnes to peak at 495,000 tonnes. Once the zinc price collapsed, stocks decreased steadily from December 1997. On the back of strong European demand and slower Chinese exports, the average draw-down at the end of the period was more than 1,000 tonnes per day. At year end, LME stocks totalled 367,000 tonnes, an overall decrease for the year of 57,000 tonnes or 13%. Year-end LME zinc stocks are estimated to represent 6.6 weeks of consumption when combined with approximate consumer and producer stocks.

The zinc demand/supply equation is expected to be generally balanced during 1998/9. No new supply capacity will become available while much lower metal exports are expected from the People’s Republic of China. Continuing strength in European and North American consumption will be offset by slower Asian demand. Lead Metal Market Average London Metal Exchange (LME) stocks of lead for 1997/8 remained at the previous year’s level of 112,000 tonnes. At year end, LME lead stocks combined with approximate consumer and Regional impacts on Pasminco metal sales producer stocks are estimated to represent just above four weeks’ Pasminco exports to more than 45 countries around the world. Core markets consumption. are in Europe and the Asia Pacific Rim. Despite historically low stocks, Pasminco’s average realised LME base In the European zinc metal market, demand and premiums strengthened lead price for the year was US$562, down 22% from the previous year’s steadily throughout 1997/8. Increasing demand from the general and US$724. continuous galvanising sectors was the key driver. Western world lead production grew by almost 4% in 1997/8, but is In Pasminco’s core Asian markets, the economic slowdown saw a decrease expected to reduce gradually to around 1% during the next few years. in demand for all commodities in the main affected countries (Indonesia, Primary lead production accounted for most of the growth in 1997/8, Malaysia, South Korea and Thailand). For Pasminco, decreased demand in due to rising concentrate supplies and some smelter capacity upgrades these markets was largely offset by the strong demand in North Asian countries and de-bottlenecking. Growth in secondary lead production especially such as Taiwan and Hong Kong/China, West Asian countries such as in Europe and North America was restricted by the tight supply of scrap. Bangladesh and India, and South Africa. Western world lead consumption is forecast to grow at 1.4% (70,000 Having the advantage of operations in both the southern and northern tonnes) p.a. over the next five years, with the Americas showing the hemispheres, Pasminco can adjust its sales effort to maximise returns. During strongest growth rates. Estimates of Asian demand growth during the the report period, the mix of European and Asian sales was fine-tuned; but the next 12 months range from 1.4% to negative 3%. company continued to ship zinc metal from Europe into Asia throughout the year. The Asian downturn had the greatest impact on Pasminco markets catering to domestic demand in the weakened economies, such as general galvanising in the case of zinc and domestic battery supply in the case of lead. In contrast, export-oriented areas such as diecasting in some cases actually increased consumption of Pasminco zinc. In aggregate, Pasminco retained most of its share of the zinc and lead metal import market in the Asian region. Pas A/R Final Text 18/9/98 8:17 AM Page 9

Despite historically low stocks, Pasminco’s average realised Zinc prices showed great volatility during 1997, despite the LME base lead price for the year was US$562, down 22% from steady reduction in London Metal Exchange (LME) stocks. the previous year’s US$724.

US$ LME Price LME Stocks US $ LME Price LME Stocks US$ US$

1,400,000 2,000 400,000 11,000,000

1,050,000 1,500 300,000 750

700,000 1,000 200,000 500

350,000 500 100,000 250

0 0 0 0 JUL 93 JUL 94 JUL 95 JUL 96 JUL 97 JUN98 JUL 93 JUL 94 JUL 95 JUL 96 JUL 97 JUN98

Pasminco Zinc Premiums Pasminco Lead Premiums US$/t US$/t

150 150

100 100

50 50

0 0 JUL 93 JUL 94 JUL 95 JUL 96 JUL 97 JUN 98 JUL 93 JUL 94 JUL 95 JUL 96 JUL 97 JUN 98

Concentrates Markets Concentrate treatment charges moved in favour of smelters during the report period, particularly in the case of lead concentrate. Approximately 61% of Pasminco’s zinc concentrate sales in 1997/8 were to the Group’s own smelters, up from 52% in the previous year. Export sales were reduced in line with lower production from Pasminco mines and increased demand from Cockle Creek after the closure of the Woodlawn mine. Most zinc concentrate export sales continued to be directed to Japan and Korea, where demand remained strong. The percentage of internal lead concentrate sales increased slightly to 93% in 1997/8, compared with 89% in the previous year. To optimise feed mix, Pasminco purchased some zinc and lead concentrates from other Australian and overseas mines. The largest suppliers to Pasminco’s Australian smelters were the Hellyer mine in Tasmania, the Woodlawn mine in New South Wales (prior to its closure in March 1998) and the McArthur River European Smelting’s mine in the Northern Territory. Shipments of lead concentrate from the new commercial division, Cannington mine in Queensland to the Port Pirie smelter commenced in which has been built January 1998 and will increase in future years. up progressively When Century begins production late in calendar 1999, Pasminco’s Budel since Pasminco’s and Hobart smelters will be given priority in initial zinc concentrate deliveries. 100% ownership As Century’s production will increase rapidly beyond these smelters’ of Budel, was again requirements, significant external sales will follow. Strong demand is strengthened and emerging for Century concentrates and negotiations to secure long-term is now fully staffed contracts have reached an advanced stage. with experienced The zinc concentrate market is expected to trend toward surplus in the next people. Here, two few years but anticipated mine closures, new smelter start-ups and marketing employees, incremental capacity increases during the early part of the next decade are Sander de Leeuw likely to reverse this situation. The lead concentrate market is likely to remain (left) and in surplus for some time. Maarten de Leeuw, are pictured in the zinc storage area. Pas A/R Final Text 18/9/98 8:19 AM Page 10

10 Years of Progress Pasminco was formed from assets of varying quality and cultures. In the past 10 years, we have reshaped and developed the business into one of the world’s leading resource companies. With the Century acquisition, we can now go forward with a cohesive base for future growth as the world’s leading zinc supplier.

1988/9 Pasminco is formed through the merger, effective from July 1988, of the zinc-lead-silver mining, smelting and international marketing activities of CRA Limited and North Broken Hill Peko Limited. A public share issue raises $203 million, with subsequent listing on the Australian Stock Exchange in March 1989. Ownership is CRA 40%, North 40%, other 20%. Mr Donald S Carruthers is Founding Chairman and Mr Peter C Barnett is Founding MD&CEO. $217 million is spent on modernisation programs.

1989/90 The Pasminco 1990/1 Pasminco records 1991/2 The effluent 1992/3 Mr Mark R Rayner Exploration Unit and a loss as world economic treatment plant at Hobart becomes Chairman. CRA Limited Pasminco Research Centre are growth slows down and metal (pictured) is commissioned. and North Broken Hill Peko formed. Major modernisation prices fall sharply. Operations Pasminco participates in new Limited reduce their shareholdings and environmental programs at Elura are scaled down. community health programs from approximately 40% each to continue at Broken Hill, Following a benchmarking at Broken Hill and Port Pirie around 31% and 20% respectively. Hobart and Port Pirie, study, programs are introduced to address elevated blood Pasminco’s Vision & Values are including construction of to improve key operating lead levels. adopted.The northern operations a surface decline (pictured) factors at all sites.The Mining, at Broken Hill are closed. Pasminco at Broken Hill which enables Metals and Corporate offices commits to cease ocean disposal of direct vehicular access from are consolidated at one jarosite at Hobart; investigations the surface to underground location in Melbourne. continue into finding permanent workings. Pasminco begins earning long-term solutions to jarosite 40% of CRA’s Dugald River disposal at both Hobart and Budel. (pictured) deposit in The new gas purification plant is NW Queensland. commissioned at Hobart and 36 houses adjacent to the Cockle Creek smelter are purchased to develop an environmental buffer zone.

1,500 1,409 1,293 1,225 1,174 1,123 942 1,000

500

0 1989 1990 1991 1992 1993 1994 Pas A/R Final Text 18/9/98 8:20 AM Page 11

1995/6 Pasminco adopts 1996/7 In January 1997, the break-even zinc price as Pasminco announces the a key performance indicator acquisition of the Century in its goal of being profitable and Dugald River deposits at all points of the metal price from CRA for $345 million, cycle. In August 1995, CRA subject to the necessary disposes of its remaining Queensland Government 10% shareholding in Pasminco. approvals being issued. Following delays to the Century In May 1997, the Gulf project (as it commences the Communities Agreement “right to negotiate” process is signed, clearing the way under the Native Title Act), for these approvals. Dutch Budel seeks an extension to authorities extend Budel’s its jarosite licence from the jarosite licence to end June Dutch authorities. Capital works 2000. Pasminco signs commence at the Hobart a Greenhouse Cooperative (pictured) and Port Pirie Agreement with the smelters for the co-treatment Australian Government. project. Sixty per cent of The Port Pirie refinery employees take up options replacement and modernisation when the Pasminco Limited commences. Pasminco’s sites Employee Option Plan is adopt new names to reflect introduced in November 1995. Group identity.

1993/4 Pasminco’s UK-based 1994/5 Pasminco returns to operations (Avonmouth, Bloxwich) profitability and resumes dividend are sold to MIM Limited for $111 payments. Shell’s 50% interest in million. In May, 38.9% of Pasminco’s the joint venture zinc smelter at stock is placed with institutional Budel (pictured) is acquired for investors, reducing CRA’s holding Nlg 14 million (A$10 million) to 10% and removing North from giving Pasminco 100% ownership, the register.In November, and the supply of low-iron zinc $88 million is raised through concentrates from CRA’s planned the placement of 10% of Pasminco’s Century mine in NW Queensland equity with institutional investors. is negotiated. Pasminco’s first In December 1993, agreement exploration project offshore from is reached with Dutch authorities Australia is initiated when for Budel to cease production of agreement is reached with the 1997/8 In September 1997, Pasminco jarosite from mid-1998. In February Pakistan Mineral Development completes the Century acquisition. Funding 1994, the Australian Government Corporation and Balochistan is raised through US$600 million of debt facility, issues the final permit for Hobart’s Development Authority whereby a $183 million global placement to institutions, ocean disposal of jarosite until Pasminco may earn a 75% interest and a $490 million rights issue.The co-treatment end 1997 to enable the co-treatment in the Duddar zinc deposit and process to eliminate jarosite production is process to be implemented. surrounding exploration areas commissioned at the Hobart and Port Pirie Pasminco begins implementing its by completing a feasibility study smelters. Pasminco sells its railway business in Lead Strategy, focusing on employee on the project.The fertiliser plant Tasmania. Port Pirie’s expanded silver refinery exposure and emission control. at Hobart is sold. Mr Peter Barnett began operating. retires on 30 June 1995 and is succeeded by Mr David M Stewart. 998 1,003 942 934 900

1994 1995 1996 1997 1998 Pas A/R Final Text 18/9/98 8:20 AM Page 12

Development Projects 1998 Last year, we continued a vigorous and extensive development program to realise the potential of our people, markets and resources.

Century construction begins View of the Century project development The Century project is ahead of time and under budget to begin production in the final quarter area, showing the steel framework for of 1999 and build up quickly thereafter to full production. the concentrate processing facility in By end August 1998, major contracts had been let, the mine engineering design was 60% the distance at centre. The warehouse complete, and the administration centre, workshop facilities and new accommodation village is just right of the centre and at left were completed and operational. are the mine workshop, temporary Work is now well advanced on the mine prestrip and the construction of the concentrator power station and fuel storage. processing facility, pipeline, port and new air strip. More than 1300 people are employed on the project and Century’s core operations team is in place. The project engineer and manager is Century Minenco Bechtel Joint Venture. A seven-year contract for the mining operation, including the prestrip, has been signed with a joint venture of Roche Bros and Eltin Pty Ltd and power will be supplied under contract by CS Energy’s Mica Creek power station at Mt Isa. More than $600 million in value of goods and services has been provided from Australian sources. Gulf Communities Agreement Century’s partnership agreement with the local Gulf communities and the Queensland Government is based on several key themes: ■ Indigenous employment: At 30 June 1998, 65 local people (31% women) were employed on the Century project. A centralised recruitment process is used whereby all new job descriptions are ■ Cultural and environmental protection: Comprehensive procedures checked against a database of local people seeking work. Training are in place to ensure identification and management of sites programs are being conducted on site, with funding coming from of cultural significance. The Century Environment Committee, Pasminco and government agencies. consisting of local indigenous community members and Century ■ Business development: Century has established a trust fund and will representatives, overviews the project’s performance. contribute $1.0 million p.a. to provide financial assistance for local ■ Pastoral properties: Discussions have commenced with local businesses. The trustees are elected by the communities. Century is indigenous groups to develop a business planning approach to the five also helping to establish local businesses and has employed an pastoral properties that Century will transfer over time to local indigenous business adviser to identify and assist in further opportunities. Aboriginal groups. Pas A/R Final Text 18/9/98 8:21 AM Page 13

Waanyi Elders and students from Doomadgee School Indigenous Education Unit perform the Dance of the Brolga during the visit to Century of Pasminco Directors and Executives, May 1998.

Encouraging Groupwide cross-cultural Port Pirie transformation on track awareness and diversity Port Pirie’s replacement and modernisation is on track to increase lead While Century faces the most immediate challenges production refining by 15% and more than double silver production by end in working effectively with indigenous employees calendar 1998. and communities, Pasminco recognises the need to In late May 1998, the expanded silver refinery began operating and by end develop awareness and capability across the entire June a significant part of the major engineering work for the modernised and company and to work with indigenous people at the upgraded lead operation was completed. The old continuous lead refinery local project and community level. ceased operation in mid-June, with the changeover to the new batch In September 1997, a Group Manager Indigenous refining technology being phased in from June to October 1998. Affairs was appointed. A three-year plan for The upgrade will indigenous affairs focuses on implementing ■ increase lead production to systems which can be transferred to growth 250,000 tonnes p.a. initiatives anywhere in the world. Culturally sensitive ■ increase silver production from exploration procedures with objectives for 220 to 450 tonnes p.a. employment, business development and ■ reduce the plant’s operating community relations are being prepared. costs per tonne In addition to Century’s extensive program, other ■ enable Australian value-adding site-level initiatives are being piloted. For example, of lead bullion previously the Hobart smelter is working with the regional office refined offshore of the Aboriginal and Torres Strait Islander ■ allow more flexibility Commission (ATSIC) to increase indigenous in feedstock requirements employment, building on relationships developed ■ improve occupational health through activities in conserving Aboriginal middens and safety and environmental on the site. performance. A Groupwide cross-cultural awareness program is now under way, with initial emphasis on those dealing directly with indigenous communities but ultimately extending to “It’s been worth it,” says Scott Pasminco as a whole. Lehman, Precious Metals Superintendent, of the newly expanded silver operation. “We had some difficulties producing, constructing and demolishing all at the same time and place, but we’re seeing the benefits now. The new equipment is easy to operate, we’re lifting output and it’s a much nicer, cleaner place to work.” Pas A/R Final Text 18/9/98 8:21 AM Page 14

Development Projects continued

Co-treatment ends jarosite production at Hobart After a five-year, $12 million research and development program, followed by capital investment of approximately $85 million, in 1997/8 Pasminco commissioned the co-treatment program at the Hobart and Port Pirie smelters. Port Pirie upgraded At Hobart, a partial changeover commenced in May 1997, with complete its sinter plant conversion occurring after August. Circuit changes are still being fine- to improve processing tuned and a program is in place to accelerate the plant along the learning of parageothite curve of the new process. Port Pirie also experienced some production disruption due to the product. Tony Wise, changeover. An innovative engineering solution involving the upgrade of Sinter Plant Develop- the sinter plant was completed in the third quarter of 1997/8. By year-end, lead ment Metallurgist, production had improved and all paragoethite product was being processed. adjusts equipment (See also page 22 of Environment.) as part of the New business systems will improve efficiency commissioning In a project called Pasminco Business Systems (PBS), the company is process. moving to an integrated business system utilising SAP software and encompassing sales and marketing, asset management, maintenance, finance, purchasing and human resources processes across the Group. Benefits will accrue through increased utilisation of plant and equipment, leveraging of combined purchasing power and improved decision-making tools. PBS will also largely mitigate the risks associated with the Year 2000 problem for Pasminco’s commercial systems. The PBS “roll-out” process commenced shortly before 30 June 1998 and will be completed at all sites by the third quarter of calendar 1999. Representatives from all sites have helped develop the system and comprehensive training and change management programs are in place to support people throughout implementation (see page 17).

Port Pirie is one of the first sites to introduce Pasminco’s new business systems. In preparation for “go-live” in September 1998, a team drawn from maintenance people across the plant cleansed and converted data for the new SAP platform. They are (from left) Dean Butler, Brian Broadfoot, Richard Mallaby, Darby Munro, Malcolm Davis, Steve Rohrsheim, Brian Demarco, Geoff Taylor and John Quin. Pas A/R Final Text 18/9/98 8:21 AM Page 15

Value Added 1997/8 1996/7 Gross sales made by Group to external customers 1,370.1 1,352.8 Reinvested in the business 40% Less goods & services bought in from outside the Group 870.3 935.0 Value added by Group companies 499.8 417.8 Salaries and wages Distribution to employees 44% Salaries & wages to employees 222.0 220.6 Interests to Reinvested in the business 197.4 127.6 lenders of funds 3% Interest to lenders of funds 13.5 17.1 Dividends to shareholders 31.8 23.8 Dividends provided Taxes and other Taxes and other government charges 35.1 28.7 for shareholders 6% government charges 7% Total 499.8 417.8

Addressing Y2K issues An initial risk and inventory audit of Pasminco’s exposure to the Year 2000 1998 Progress Against Objectives (Y2K) problem, conducted in mid 1997, identified the need to focus on risk mitigation in two areas, commercial systems and technical systems. Objective: Ensure quality is built into As the implementation of PBS is addressing the former, the Year 2000 all our processes, systems and practices project management structure is focusing on technical systems risk Progress: All sites should be accredited mitigation as well as coordinating Pasminco’s overall Year 2000 compliance to the ISO14001 environmental standard effort. The compliance definition is set down in the Pasminco Year 2000 by June 2001. Organisational Compliance Standard, which exceeds the British Standards Institution’s Year 2000 compliance rules as described in DISC PD2000-1. Each Pasminco site has established a Year 2000 team, responsible for identifying and mitigating Year 2000 risks at site. This includes investigating the compliance status of critical vendors (such as electricity, transport and concentrate suppliers) and establishing appropriate contingency plans. Project progress is reported to the Board as a standing agenda item. To obtain an independent view of its Year 2000 compliance plan, costing and processes, Pasminco has also established an audit schedule with its internal auditor. As at June 1998, the estimated cost for Pasminco’s Year 2000 project is $7 million. Innovative distribution system set to deliver competitive edge in Asia Near year-end, Pasminco launched an innovative distribution system for its finished metal into Asia which will significantly improve the company’s competitiveness in the critical Asian market by providing a faster, more flexible service. The result of a complete overhaul of distribution processes, the arrangements maximise synergies across the Group and establish a totally Pasminco zinc is unloaded at Port Kelang, new distribution logistics operation in Asia. which is the distribution point Three dedicated vessels, capable of both break-bulk and container for Malaysia and trans-shipment to loading, now operate between the Australian smelters and the four major West Asia in Pasminco’s improved Asian ports of Pasminco’s Asian markets (Hong Kong, Kaohsiung, Port Kelang distribution system. and Jakarta). Distribution centres at the destination ports have been The warehouse facility can be seen established to fast-track order fulfilment and give customers the choice of in the background. door-to-door or ex-warehouse delivery. In the wake of Asia’s economic turbulence, the improved system provides customers with welcome flexibility in inventory and credit management. The service also gives a major boost to the regional ports of Port Pirie and Newcastle, with an additional 24 vessels calling annually.

1998 Progress Against Objectives

Objective: Deliver supplier relationships for mutual benefit Progress: Century’s partnership approach with contractors is benefiting the project budget and schedule (see page 17). Pasminco’s new Asian distribution strategy is based on alliances with three suppliers responsible respectively for metal handling and distribution within Australia, shipping between Australia and Asia, and warehousing and delivery to customers in Asia. Pas A/R Final Text 18/9/98 8:22 AM Page 16

People After 10 years of change, Pasminco is a leaner, more focused and integrated organisation. We recognise the value of developing our people and engaging them in the development and living out of a shared vision and values.

The majority of local people who complete Century’s employment skills preparation program find full-time jobs on the project. From left: Gavin Wilson, Lance Rapson and facilitator Debbie Hanna attend the program.

Developing frontline leaders The site leadership program commenced in 1997. Its aim is to help 1998 Progress Against Objectives frontline supervisors enhance their skills and abilities within the organisation. It seeks to develop supervisors so that they can better Objective: Develop high-performance support their teams within the business. leadership and employee capability Each participant focuses on a job-relevant project throughout the program, Progress: The new and highly ensuring the practical application of the knowledge gained. The program successful site leadership and systems emphasises skills and methodology in performance management, training programs are facilitated by in keeping with the importance Pasminco places on this task. specially trained employee volunteers. Facilitated by eight specially trained frontline employees from across the company, the program has been very well received and supported by site management. Improving organisational climate Since 1996, Pasminco has conducted six-monthly employee surveys to identify the factors affecting work climate. In 1997/8, focus group discussions were introduced at sites to obtain more detailed feedback about the drivers of perceptions and the changes needed to achieve improvement. Development through inter-site transfers and promotions 1998 Progress Against Objectives An interesting aspect of Pasminco’s approach to employee development is illustrated in the increasing number of inter-site transfers, secondments Objective:Ensure an understanding and and promotions. These internal moves benefit the company as well as the commitment to Pasminco’s Vision & Values individuals concerned, by helping to integrate the business and Progress:The Vision & Values program transferring both skills and best practice. was extended to the Budel smelter and Century Project. Employee participation in Pasminco’s 1997/8 share option scheme was Employee Numbers 1998 1997 1996 1995 1994 77%, up from 56% the previous year. More Mining* 1242 1214 1339 1320 1295 than 80% of employees now hold options. Metals 1814 1835 1926 1989 2078 Europe 579 575 592 596 18 Exploration/ Group Office/GTS 184 173 180 166 161 Total 3819 3797 4037 4071 3552 *includes 51 for Century Pas A/R Final Text 18/9/98 8:23 AM Page 17

About a third of Pasminco Exploration increased Laboratory Industrial Century’s employees expenditure on the Broken Hill Chemist Ian Brogan from local communities Block from $3.3 million in 1996/7 prepares samples in the are female. to $4.8 million in 1997/8. Senior analytical laboratory at Century trainees Geologist Tim Green and Cockle Creek, which tests Edwina O’Keefe (left) Geophysicist Noelene Dorn process control samples, and Melanie Brandon of the Broken Hill Exploration product quality and air with Phil Rolfe. team compare a geology map and water samples of the Broken Hill Block Map as part of the site’s with an aeromagnetic image quality and environmental to identify potential anomalies. management systems.

A teamwork approach to Century’s development In keeping with evolving industry practice over the past decade, Century is outsourcing many activities. Direct employment will focus on those ‘core’ activities which only Century itself can perform or which can provide a competitive edge by being developed in-house. Pasminco, Century Minenco Bechtel Joint Venture (CMBJV) and major contractors currently employ over 1,300 people on the mine site, pipeline and port construction areas. Project construction is taking place across the Gulf region from the Century mine site to Karumba while design and project management offices are located in Brisbane and Melbourne. To deliver the project on time and budget, Century is pursuing a partnership approach between owners, project management and contractors emphasising team-building and commitment. Teamwork 1998 Progress Against Objectives development programs will ensure all teams work together effectively. Objective: Achieve and maintain trust Local employment is a primary objective of the Gulf Communities through fair, honest and consistent Agreement which forms the basis of Century’s partnership with local behaviour communities. Opportunities are maximised through the use of a Century Progress: Employee focus groups recruitment database. Each contractor is required to develop a local have helped to clarify issues and ensure employment management plan. All project employees undertake a cross- that suggestions raised in the Vision & cultural awareness program and the business ensures that senior Values program and climate surveys are managers keep up to date on the progress of both the Agreement and followed up. other related regional issues. Century has initiated a four-week employment skills preparation program for local people who may have limited work experience. The program has been successful, with the majority finding full-time employment. Additional Involving people in new business systems support through mentoring programs also helps trainees deal with the Preparing people for change is critical to introducing new business difficulties of separation from family and social networks. New traineeship systems successfully (see Pasminco Business Systems on page 14). programs include the areas of mining, engineering production, hospitality, Extensive review, consultation, communication and training are under way pastoral management and clerical/administration. so that the company’s employees are ready for the changeover. Building relationships within the Gulf region is fundamental to the success Around 100 frontline employees will be trained as facilitators and virtually of the project. Links have been established with local government, everyone in the company, including senior managers, will receive training. community groups and educational institutions who have all made strong A comprehensive on-line ‘Help’ facility has been developed in-house to contributions to the development and implementation of the training ensure a smooth transition to the new systems. programs. Pas A/R Final Text 18/9/98 8:23 AM Page 18

18 Serious Injury and Lost Time Frequency Rate 1997/8

140 180 27 1 127

18 18 160 1 1 118 118 1 164

120 1 1 111 08 1 108 153 05 1 105 140 100 90 90 120 77 77 Safety 80 100

The Pasminco Safety Policy was 80 60 reviewed and enhanced, with the 80 60 objective of achieving zero incidents 40

becoming a fundamental principle. 40 49 3 3 3 3 20 3 3 2 0 1 1 1 1 13 13 13 13 1 1 13 13 1 12 1 10 20 0 0 1 10 1 9 9 9 1 1 1 0 0 0 0 0 JUN95 JUN96 JUN97 JUN98

µ µ Pasminco Safety System > = 40 g/dL* > = 50 g/dL* Pasminco’s safety standards were expanded during the year. 1Q 96/97 2Q 96/97 3Q 96/97 4Q 96/97 5Q 97/98 6Q 97/98 7Q 97/98 8Q 97/98 A mandatory procedure was introduced for investigating potentially fatal 12 Month Moving Average - SI FR accidents. Someone independent of the operation is now involved 12 Month Moving Average - LTIFR in such investigations. The Pasminco Safety Policy was reviewed and enhanced, with the objective of achieving zero incidents becoming a fundamental principle. A timetable of annual audits (by both internal and external parties) of sites’ safety and health management systems was agreed, and all operations were audited during the year. The focus of measurement to monitor safety performance was broadened from the traditional emphasis on lost time injuries to encompass any injuries that result in medical treatment or selected/restricted duties, whether or not there is lost time (a measure called “serious injuries”). There were 615 serious injuries in 1997/8, of which 95 resulted in lost time. This compares with 835 serious injuries and 80 lost time injuries in 1996/7. The Serious Injury Frequency Rate (SIFR, the number of serious injuries per million hours worked) showed steady improvement during the report period, falling from 118 to 77. The Lost Time Injury Frequency Rate (LTIFR) decreased from 13 to 10 during the same period.

Employee blood lead levels Safety Indicators 1997/8* Worksafe Australia’s national standard for the control of inorganic lead at Mining work sets a blood lead level of 50 µg/dL. In 1996, Pasminco established the goal, in advance of this Worksafe standard, to have no employees with SI SIFR LTI LTIFR blood lead levels greater than or equal to 40 µg/dL. Broken Hill 192(204) 139(140) 36(29) 26(20) Although the target deadline of end calendar 1997 for realising this goal Elura 51(29) 76(48) 10(8) 15(13) was not achieved, the number of employees with blood lead levels greater Rosebery 72(153) 87(216) 21(15) 25(21) than or equal to 40 µg/dL continued to decline during the report period, EBR 29(17) 161(81) 1(1) 6(5) falling from 80 at end June 1997 to 49 at end June 1998. Century 6 6 2 6.5 Following a progress review, the goal level has been reduced further. The Total Mining 25(403) 88(136) 70(53) 18(18) focus is now on having no employees with blood lead levels greater than or equal to 35 µg/dL by end June 2002, which is well in advance of the Australian Smelting Worksafe standard of 50 µg/dL. SI SIFR LTI LTIFR Safety awards ARA 28(24) 236(162) 6(6) 50(40) Teams representing Pasminco’s three major sites in New South Wales Cockle Creek 81(67) 81(74) 11(14) 11(15) achieved outstanding results in the NSW Minerals Council’s fifth annual Hobart 123(246) 88(193) 4(17) 3(13) First Aid and Rescue Competition held at Broken Hill on 8 November Port Pirie 208(228) 98(155) 16(22) 7(15) 1997. The Broken Hill team took out the Champion Team Cup along with Total each of the six individual first aid awards. Cockle Creek’s team was runner- Australian Smelting 440(565) 95(149) 37(59) 8(15) up for the Cup while Elura won the Underground Mines Rescue Event. Presented with the NSW Mining Industry’s Silver Award, Elura was also European Smelting recognised by the NSW Minerals Council and Department of Mineral SI SIFR LTI LTIFR Resources for management’s and employees’ efforts in improving Budel 21(33) 21(20) 1(1) 1(1) occupational health and safety systems and performance. Group (includes GTS, Exploration and Group Office) SI SIFR LTI LTIFR 817(1,002) 77(118) 110(113) 10(13)

*Note: Figures in brackets for 1996/7. Pas A/R Final Text 18/9/98 8:24 AM Page 19

Broken Hill launched In April 1998, Pasminco brought together several major health and senior management with safety, health, safety initiatives, including environment, human resources and public sponsoring employees affairs practitioners to discuss the next to participate in a Quit step forward in developing a culture Smoking program and have dedicated to safety and environment their blood analysed for improvement. Called CleanSafe ’98, multiple health issues as well the conference was addressed by guest as lead levels. (Photo courtesy speakers from academia, government, of Gavin Schmidt, business and interest groups. Barrier Daily Truth)

During the year, 1998 Progress Against Objectives Port Pirie involved all employees in an Objective: Ensure a safe integrated safety and healthy workplace training program Progress: Pasminco’s revised which was developed safety and health policy established the after an extensive longer-term goal of achieving an needs analysis. Here, employees gain incident-free organisation. Performance practical experience continued to improve. in the different methods of fire fighting. Pas A/R Final Text 18/9/98 8:25 AM Page 20

Environment 1998 Progress Against Objectives Groupwide objectives to deliver the intent of the environment policy Objective: Minimise our impact on the environment were established, with sites now Progress:All sites have quantified objectives setting targets for each objective. to deliver the intent of Pasminco’s Environmental Policy. The Hobart smelter stopped producing jarosite and the Budel plant is set to follow suit when Century concentrates come on stream.

The focus of Broken Hill’s site environmental program is on circuit water management and rehabilitation for suppression of dust and erosion. At a decommissioned tailings dam on site, Environmental Scientist Greg Scanlan tends to a newly revegetated area adjacent to the dam. The recently completed “rock armouring” of the dam’s external face to control dust and erosion can be seen in the background.

Environmental Management Systems The Pasminco Environmental Policy was revised to include the requirements of ISO14001 in keeping with the company’s accreditation goal. The baseline audit of sites’ compliance with ISO14001 requirements was completed. All sites should be accredited to the ISO14001standard by June 2001. Groupwide objectives to deliver the intent of the environment policy were established, with sites now setting targets for each objective. Site Environmental Action Plans The Executive Safety Health and Environment Committee Mining (ESHE) reviewed the progress of the sites’ CO2 Emissions Breakdown 1997/8 environmental action plans. The review found that 44% of the more serious issues Electricity 86% identified by the external audits of 1996 have been resolved to date. The next round of external audits will commence in late 1999. Australian Minerals Industry Code for Environmental Management In August 1997, Pasminco signed the Australian Minerals Industry Code for Environmental Management, becoming one of 40 signatory companies operating in Australia and overseas. Petroleum Products 11% Publicly Available Report In line with the Minerals Industry Code, Pasminco will produce a publicly available environmental report. Publication is planned for August 1999 following consultation with shareholders, employees and Reagents 3% communities near Pasminco operations about the scope of the report. Pas A/R Final Text 18/9/98 8:26 AM Page 21

21 Lead in Air at Cockle Creek Site Boundary Lead in Air (µg/m3) Pasminco and NHMRC Goal (1.5µg/m3) 5

0 JAN92 JAN93 JAN94 JAN95 JAN96 JAN97 JAN98 1998 Progress Against Objectives Lead in Air at Port Pirie Site Boundary Lead in Air (µg/m3) Pasminco and NHMRC Goal (1.5µg/m3) Objective: Build community confidence 4 in our operations Progress: Established operations extended 3 their community consultation, sponsorship 2 and outreach activities, while Century consolidated and built upon its extensive 1 community networks. 0 JAN92 JAN93 JAN94 JAN95 JAN96 JAN97 JAN98

Les Barnett, General Manager, planting the 115,000th tree in Port Pirie’s revegetation project. Standing (from left) are Allan Barnett, and John Caputo of the Environment & Plant Services Department and Kerry Backstrom of Zinc Production.

Compliance Australian Smelting CO2 Emissions Breakdown 1997/8 Sites are required to report to the ESHE any significant environmental incidents and compliance breaches along with plans Coke and Coal 54% to avoid recurrences. A ranking system is used to ensure effective prioritisation in resource allocation. The main environmental issues for 1997/8 were non-compliance Electricity 32% with the conditions of consent for ambient sulphur dioxide at Cockle Creek, some exceedence of the limits in the water permit at Budel Zink and of the statutory limit for lead in air at the boundary of the ARA Melbourne plant. Projects are currently in progress to resolve these issues in the short term. Natural Gas 8%

Reagents 4%

Petroleum Products 2% Pas A/R Final Text 18/9/98 8:26 AM Page 22

22 Environment - Continued

Dr Peter Eaglen Alan Byers, Information from site energy calibrates an automatic Superintendent monitoring equipment is used to creek level monitor which Logistics, in front develop greenhouse gas reduction measures water depth as of the new wharf strategies. Electrical Project part of ongoing water storage shed at Hobart, Engineer John Martin (on left) is monitoring studies of all part of the co-treatment Greenhouse Coordinator for Broken significant creeks on the project which enabled Hill, seen here discussing data with Century lease. the end of jarosite Maintenance Coordinator Electrical production and Steve Corradini and Graduate disposal. Electrical Engineer Mark Nash.

Century’s Environmental Program Given the region’s scarcity of water and extreme weather conditions, Century puts a high priority on effective water management. Water for the operations will be drawn from a local, unutilised underground aquifer. Pumping of the aquifer commenced in 1995. Since this time, groundwater levels in the region have been monitored by 60 boreholes to confirm that the drawdown will not impact on vegetation, waterways and the Lawn Hill National Park. A priority is protecting the nearby Lawn Hill National Park both aesthetically and environmentally. Comprehensive environmental monitoring programs are in place to ensure that any impacts can be identified and managed. The Century Environment Committee, consisting of local indigenous communities’ representatives, is working with the company to develop and monitor environment management programs. Century will make monitoring data available and provide assistance to the committee to obtain independent advice on matters of concern. Greenhouse Challenge In May 1997, Pasminco joined the Australian Government’s Greenhouse Challenge and committed to a 3% reduction in Co-treatment greenhouse gas emission rates by the year 2000. On budget and two months ahead of the 31 December 1997 The Executive Safety Health and Environment committee deadline agreed with the Australian and Tasmanian (ESHE) oversees and monitors the agreement’s implementation Governments, Hobart ended the production and ocean through a coordinating team and regularly reports greenhouse disposal of jarosite. An intermediary product called paragoethite emissions and key performance indicators to Government. is now produced in place of jarosite and shipped to Port Pirie to Progress to date includes the development of a Pasminco undergo additional treatment and further metal recovery. Greenhouse Gas Reduction and Energy Efficiency Standard, the The co-treatment initiative is a ‘world first’ which establishes trial of a project audit procedure, the formation of operating site new environmental standards in waste stream management for energy committees and the commencement of awareness the zinc and lead industries. programs. Several capital projects which will reduce (See also page 14.) greenhouse gas emissions have also been initiated, along with a more detailed study of process energy balances. Pas A/R Final Text 18/9/98 8:27 AM Page 23 Review

16 15.6 14.5

12 11.6 10.8

8 7.7

0 Exploration 199 45 678 Exploration* Expenditure 1997/8 of *other than at operating mines

Mt Isa Block $2.5m

Broken Hill Block $4.8m Peru $0.6m Operations Cobar $1.7m

Pakistan $4.9m India $0.9m Tasmania $0.8m Other $0.6m

■ Pasminco maintained its vigorous international exploration effort. Expenditure for the year, other than at the operating mines, was $16.8 million. ■ A further $5.1 million was spent on exploration at the operating mines. ■ Total drill meterage decreased throughout the Exploration group to 74,389 metres, compared with 87,298 metres in 1996/7.

Geologist Omar Faiyaz Khan logs chips from an air core drill rig at the Lorenzo prospect, Benagerie Ridge. Pas A/R Final Text 18/9/98 8:27 AM Page 24

24 Review of Operations - Continued

Exploration Projects Activity focused on fewer areas compared with last year, with all Anna Quillinan, a chemical engineer who advanced exploration carried out in the districts around Pasminco joined Pasminco in the 1998 graduate mines and zinc deposits in NW Queensland, Cobar, Broken Hill, intake, is working on a project aimed at Tasmania and Pakistan. improving Hobart’s cell room performance. Project generation continued in India, where applications were made for Here she is testing reagent levels in the licences over some interesting mineralised belts, and in Peru, where electrowinning cells, as part of a study projects, mostly at an advanced stage of exploration, are being sought to determine optimum additive levels for and assessed. All international projects are coordinated by our European current efficiently as well as environmental office. performance.

Results Exploration was maintained at a high level on the Benagerie Ridge, where drilling has identified exciting gold and copper-gold mineralisation at five prospects: Shylock, South Nerissa, Lorenzo, Jessica, North Portia and Portia. Highlights of the results received from reconnaissance air core drilling include: Drill hole BEN 617- 14m @ 3.2g/t Au from 74-88m (Shylock prospect) Drill hole BEN 677- 23m @ 79.3g/t Au from 90-113m (Shylock prospect) Drill hole BEN 657- 13m @ 0.9g/t Au from 50-63m (South Nerrissa prospect) Drill hole BEN 862- 18m @ 3.7g/t Au from 110-128m (Lorenzo prospect) Drill hole BEN 737 - 2m @ 5.1%Cu, 470g/t Ag from 110-112 (Jessica prospect) At the North Portia prospect, shallow copper-gold intersections reported last year were followed up with diamond drilling to test below the oxidised zone. The best results from the program included: Drill hole BEN 592- 76m @ 1.2g/t Au and 1.1%Cu from 297-373m Drill hole BEN 596- 72m @ 0.6g/t Au and 0.7%Cu from 246-318m

At the Portia prospect, work Deep drilling established continued to assess the additional potential at depth with Technology economic potential of oxidised hole D102 intersecting 60.3m ■ In pursuit of its objective “To give gold mineralisation. Further @ 11.7% zinc and 3.2% lead Pasminco the competitive edge in process drilling is necessary to upgrade from a depth of 1328.9 to technology”, Group Technical Support this mineralisation to resource 1,389.2 metres. Dispite these category leading to a feasibility encouraging results, the size of (GTS), has become an increasingly valued study. Overall, these results the deposit does not allow resource for technical input at all Pasminco provide strong encouragement Pasminco to meet its investment operations. for the presence on the criteria. Unfortunately, first-pass ■ Benagerie Ridge of a significant exploration in the wider region The major challenge for 1997/8 has been to gold or copper-gold deposit. did not locate any significant support the commissioning and fine-tuning Exploration in the area will additional resources and of the co-treatment process at Hobart continue at a high level. consequently a purchaser is now Further drilling in Balochistan, being sought for Pasminco’s and Port Pirie. Pakistan, increased the rights to 75% of the project. Highlights for the year in GTS’s main areas include: company’s level of confidence During the year, Pasminco Refining/Casting/Products in the Duddar zinc resource purchased the Mt Roseby ■ supported the rebuilding of Cockle Creek’s furnace during the and located a deep new zone. project which includes areas campaign shutdown A resource estimate based on surrounding the Dugald River ■ helped develop Pasminco’s casting strategy these results (compiled by Steve Deposit lease in NW ■ developed an on-line Pasminco refractories and wear Sullivan, Resource Geologist, Queensland. materials database Maptek Pty Ltd) shows the The area is prospective for ■ developed and tested a method to produce quenched bullion deposit to contain an indicated extensions of the Dugald deposit at Cockle Creek resource of 6.8 million tonnes at along strike, as well as copper - a grade of 12.6% zinc and 3.0% gold mineralisation Process Control lead and an inferred resource of ■ provided technical support and direction for process control system 6.4 million tonnes at a grade of development at all smelters 6.4% zinc and 3.7% lead, both ■ initiated a process control workshop for managers from all smelters using a 7% zinc and lead cut-off. Pas A/R Final Text 18/9/98 8:27 AM Page 25

25 Roast/Leach/Purification/Electrolysis Mining EBIT ■ established a best practice network $m

group across all smelters 30 Includes ■ contributed to improving process unrealisedunrealised profitprofit on stability at Hobart and Port Pirie, consolidated

particularly in paragoethite production fromfrom intra-grintra-groupoup 25.7 sales 1998-$nil,1998-$nil, 23.5 at Hobart 1997-$6.8m1997-$6.8m ■ constructed a pilot concentrate roaster 15 19.3

to monitor Century zinc concentrate 15.1 quality and performance for Budel Sintering/Blast Furnaces/Slag Fuming ■ supported the commissioning of 0 paragoethite treatment at Port Pirie Mineral Processing ■ supported concentrate quality improvement at all mining sites (15) ■ conducted metallurgical testwork

of Dugald River ore ) ■ supported Century’s concentrate 27.5 ( production preparation (30) Pasminco Information Service Mining 199 45 678 ■ established on-line library access Technological Development ■ Safety performance improved, with the SIFR reducing to 88 compared GTS researchers produced over 50 with 136 in 1996/7, while the LTIFR was steady at 18. The number of kilograms of high grade zinc metal from Elura waste material through a new leaching employees with lead in blood greater than or equal to 40 µg/dL and electrowinning process. Construction decreased from 4 to 1. of a one-tonne-a-day plant is now ■ proposed with the ultimate aim of Earnings before interest and tax of $15.1 million were impacted by increasing Elura’s zinc recovery by 15%. lower production and the cost of mine development at Elura and Challenges for 1998/9 Rosebery. ■ supporting the commissioning ■ of the Century mine and the Budel At 854,800 tonnes, total concentrate production was disappointing smelter’s change-over to Century due to lower overall throughput and low grades, particularly in the concentrates second half. All sites returned to design production rates by year end. ■ development of the Dugald River deposit process flowsheet ■ To maximise returns over Broken Hill’s remaining operating years, a Life ■ Y2K testing for process control of Mine Optimisation Study has been instigated. Rosebery has initiated equipment ■ supporting the commissioning of the a major operational performance review and Elura is now benefiting Port Pirie refinery replacement from 5.3 kilometres of development to access additional ore sources. ■ input to Hobart process stability study

The Potosi open pit at Broken Hill produced 188,228 tonnes of ore in 1997/8. Pas A/R Final Text 18/9/98 8:28 AM Page 26

26 Review of Operations - Continued extensive underground diamond drilling program currently under Broken Hill way to test the Elura ore bodies Broken Hill achieved good at depth and upgrade production during the first half the resource to measured status. of 1997/8. However, stope New fine grinding equipment failures in the lead lode areas installed on the lead flotation of the mine adversely impacted circuit was commissioned in both volume and grade during May 1998. When the circuit is the second half. Total contained optimised, grade and recovery metal production of 295,692 will improve, providing a more tonnes was down 9.4% marketable product. on the previous year despite During the next few years, a record high throughput of it is planned to install a pebble 2,715,402 tonnes. crusher to increase the grinding Site blood lead levels decreased rate, which combined with to an average of 10.33 µg/dL additional flotation capacity (down from 10.92 µg/dL in will enable throughput to be 1996/7). There are no increased to 1.5 million tonnes employees with lead in blood p.a. Depending upon the results content greater than or equal of the upgraded exploration to 40 µg/dL (down from program, further expansion In April 1998, Pasminco officially handed back one the previous year). to 2.4 million tonnes p.a. to Tasmania 139 hectares of land from its Following more than two years will be investigated. Rosebery mining lease containing the historic of negotiation, a new enterprise Rosebery 10,500-year-old Huon Pine on Mt Read. Thought agreement moved the A ground failure at Rosebery to be one of the world’s oldest living organisms, underground mining workforce in the second half restricted the tree is now within a nature reserve to extended shifts. access to high-grade areas administered by the State’s Parks and Wildlife for four months. department. Pictured at the handover ceremony Elura are (from left) Rosebery General Manager Most of Elura’s production At 649,657 tonnes, total ore milled for the year was 1.4% David Rose, Pasminco Managing Director and was sourced from the previously Chief Executive David Stewart, The Hon Tony unmined northern ore body above last year’s 640,593 tonnes. Contained zinc of Rundle MHA, Premier of Tasmania, and during 1997/8, as ground The Hon John Beswick MHA, Minister for Mines. problems associated with the 56,134 tonnes was 1.7% lower subsidence in 1996 interrupted than last year’s 57,089 tonnes production from the main ore due to lower zinc ore grade. body. Following accelerated Contained lead of 12,243 tonnes Chief surveyor Gary Watts establishes development by a mining was also marginally lower than laser control for the development work contractor, Elura returned in the previous year at Rosebery which put production back to its design rate of 1.2 million (12,608 tonnes). on track after a ground fall. tonnes p.a. by the end of the A review of the site’s safety report period, with grades and production performance was equal to or slightly better than initiated, focusing on systems in the past. and processes. Two key capital In total, 1,021,965 tonnes were projects to improve safety milled for the year, compared and operational performance with 1,044,253 tonnes for the (Northern Upcast and new previous year. At 53,365 tonnes, underground primary crusher) contained zinc was 15% lower commenced during the year, than last year’s 62,498 tonnes. with completion due in 1998/9. Contained lead was also down, Other programs have been at 37,587 tonnes compared introduced to improve recoveries with 43,166 tonnes in the and concentrate quality. previous year. With 21,800 metres drilled In September 1997, a trial mass during the year, Rosebery’s deep blast of 5/9 crown pillar and exploration program continued associated blocks demonstrated to identify new resources. As the that the mine can produce mine deepens, grades have ore efficiently from the areas tended to improve. Looking adjacent to the subsidence ahead, therefore, there is an zone. Future mass blasts in the opportunity to offset the more main ore body are planned. difficult ground conditions with The main decline was extended higher grades. to 90 metres below 8 level. As well as restoring access to Operator Jeff Crase the main ore body, the decline greasing the Tamrock has established sites for an CHA 1100 blasthole drill rig at Potosi. Pas A/R Final Text 18/9/98 8:28 AM Page 27

Australian Smelting

■ On an aggregate basis, Australian Smelting’s safety performance improved markedly, with the SIFR declining to 95 from the previous year’s 149, and the LTIFR declining from 15 to 8. The number of employees with lead in blood greater than or equal to 40 µg/dL decreased from 77 to 48. ■ Earnings before interest and tax of $78.7 million were up slightly on the previous year’s $74.5 million. ■ At 533,600 tonnes, total zinc, lead and copper metal production was down 6% compared with the previous year due to disruptions associated with the commissioning of co-treatment, the Port Pirie refinery upgrade and the campaign shutdown at Cockle Creek. ■ Zinc production improved in the final quarter.

Cockle Creek completed successful trials for tuyere injection of pump sump dross with hand-over in late July 1998. Graduate recruits Paul Trotta (front) and Peter Frost assisted with the project. Pas A/R Final Text 18/9/98 8:28 AM Page 28

28 Review of Operations - Continued Hobart achieved a major Australian Refined Alloys (ARA) environmental milestone when ARA achieved steady and full it ceased the ocean disposal production, a better safety result Cockle Creek of jarosite residue on 25 October and a significant improvement in Zinc production for the year was 1997. The first stage of the employee blood lead levels during 71,291 tonnes, compared with rehabilitation of the old jarosite the year. 79,393 tonnes in 1996/7. stockpile site was recognised with Metal production was 27,777 Lead bullion production was a State Environmental Excellence tonnes, compared with last year’s 25,149 tonnes, compared with the Award to the principal contractor for 27,941 tonnes. previous year’s 28,795 tonnes. the earth-moving industry. Other The loss of a separate lead Two major factors contributed environmental improvements include byproduct market resulted in fewer to the lower production. After the construction of a second recycled batteries (down 14%), but the planned campaign shutdown contaminated water pond, further the conversion of this material to in August 1998, the blast furnace demolition of disused buildings and lead metal, thereby expanding experienced weir block failures the introduction of an environmental smelting capacity and restoring the during start-up. awareness program for employees. battery treatment rate, is being The sinter plant also experienced There was one major environmental studied. mechanical failures following incident during the year, a All employees were below the modifications to achieve new significant release of sulphur benchmark 40 µg/dL lead blood emission conditions effective from trioxide in July 1997, which led to level from February 1998. January 1998. an action program of remedial The expansion of the product Although the goal conversion rate maintenance, improved process range to include refined lead is being achieved and emissions control and enhanced operating proved valuable in a changing have been reduced by 40%, procedures for the site’s acid market but incurred some cost modifications to the sinter plant fell facilities. and servicing pressures. short of delivering the required SO 2 During 1998/9, the construction of levels in the community. An internal Port Pirie a new baghouse at the Melbourne taskforce is investigating options to At 185,176 tonnes, lead plant will further improve working improve performance further. production was 8% lower than the conditions and environmental Following renewed emphasis previous year’s 202,000 tonnes, performance. on hygiene, there was a marked due to disruptions associated with decline in the number of the commissioning of co-treatment employees with lead in blood and the construction works for the greater than or equal to 40 µg/dL. refinery modernisation (see page With the closure of the Woodlawn 13). The latter will be fully European Smelting Mine, Pasminco Elura Mine is now commissioned by October 1998. ■ There were 21 serious injuries, Cockle Creek’s major source of Zinc production of 35,243 tonnes of which 1 resulted in lost time. concentrates, supplemented by was 8% higher than the previous bulk concentrates from year’s 32,651 tonnes. The SIFR increased from 20 to 21 McArthur River. At 112 tonnes, silver production and the LTIFR was steady at 1. A new General Manager, was severely limited while the silver Lucien van den Boogaard refinery processes were replaced ■ Earnings before interest and tax (transferred from Pasminco’s Budel with new technology. increased substantially to $77.3 smelter), was appointed during the Copper production of 3,787 tonnes million on strong production and year. was 4% below the previous year’s 3,934 tonnes. The plant operated Hobart sales results, and the strong US very well but was limited by the At 197,043 tonnes zinc, 1997/8 dollar relative to the Dutch guilder. lack of feed from the lead plant. production was 5.1% lower Environmental and hygiene Further efficiencies contributed than last year’s 207,703 tonnes, improvements, together with mainly due to downtime associated to the good result. improved operating practices with commissioning the new ■ resulted in a further reduction Production reached the highest paragoethite (PG) process to from 41 to 33 in the number of eliminate jarosite (see Co-treatment level since 1992. employees with a blood lead level on page 14). greater than or equal to 40 µg/dL. In addition to optimising the PG A detailed environmental plan circuit, a critical focus next year will Budel Zink’s production of 215,400 (above) Port Pirie’s to upgrade effluent treatment and be building calcine stocks in the tonnes in 1997/8 was up more refinery upgrade will control was established lead up to the No 6 Roaster than 5% on the previous year’s enable it to treat lead to ensure the site meets South shutdown in March/April 1999. 204,200 tonnes. Australian effluent emission concentrates from the Safety performance was excellent, Engineering design for Budel’s guidelines by 2000/1. An extensive Cannington and Century with a new LTI-free record of more conversion to Century concentrates air monitoring program aimed at mines and increase than six consecutive months being progressed and the smelter was identifying key lead emission silver production. achieved. By end June 1998, only granted a renewed operating sources was also completed during Pictured is one of the one employee and no contractors licence accommodating the the year. new vacuum induction had lead in blood greater than or changeover. Progress continued Looking ahead, total lead and silver retorts in the completely equal to 40 µg/dL, down from five on Budel’s environmental program. production in 1998/9 is expected rebuilt precious metals at end June 1997. By year end, some 65% of the to be above the current year’s. jarosite and gypsum ponds were area, which was Following some production covered and 70% of the area completed in May 1998. restrictions during the phased containing historic residues (zinc changeover to the new technology ashes) had been cleaned. from June to October 1998, the Construction also commenced on smelter will achieve its expanded the new effluent purification facility, annual production rate of 250,000 which will enable Budel to eliminate tonnes p.a. towards the end of the production of gypsum. calendar 1998. Pas A/R Final Text 18/9/98 8:29 AM Page 29

80 Note: Includes 50% sharsharee of Budelco EBIT prior to 1996, 1100%00% frfromom 1996 70 77.3

40 42.9

30 Port Pirie successfully

commissioned 20 25.1

a new, high-productivity 19.2 lead moulding machine 10 using robotics to 12.7 remove dross. 0 199 456 78

Budel’s new effluent purification facility will be completed in second quarter of calendar 1999, enabling an end to gypsum waste production. Pas A/R Final Text 18/9/98 8:29 AM Page 30

Management Team

Back (from left): Ian Williams, Bronwyn Constance, David Stewart, Tom Eadie, Ron Berenholtz Front (from left): Wim de Graaff, John Winckel, Christine Burnup, Bryan Davis

David M Stewart Ron N Berenholtz R Bryan Davis Managing Director Executive General Manager - Human Resources (age 45) joined Pasminco Executive Director - Mining and Chief Executive in May 1998. His most recent role was Group General Manager Human (Refer to Board profiles on (Refer to Board profiles page 31.) on page 31.) Resources with Smorgon Consolidated Industries where he was responsible for all human resource activities across a diverse range of manufacturing and processing industries. Prior to this, he was Group General Manager Human Resources for Elders IXL and held senior management positions in both the operating groups and the corporate office. Christine M Burnup Executive General Manager - Corporate Affairs (age 49) was appointed to her current role in August 1995, after joining Pasminco as General Manager - Environment and Public Affairs in 1993. She was previously an Assistant Director at the Business Council of Australia for four years, with responsibility for development of Council policies on environment, manufacturing and immigration. Prior experience includes senior positions in the public sector in education, training and labour portfolios. Bronwyn M Constance (FCPA, FCIS) Executive General Manager - Finance and Services (age 49) joined Pasminco in February 1997. She spent the previous eight years with Kraft Foods where she was Vice President - Finance & Administration, Central Asia, based in Hong Kong, and Finance and Administration Director - Australia and New Zealand. Prior to joining Kraft, Bronwyn held senior financial positions, both at a head office and operating division level, with the ACI Group of companies. She was a founding board member of Citipower Ltd when that company was established in 1994. Wim P F H de Graaff Executive General Manager - European Smelting (age 60). Prior to joining E Tom Eadie Budel Zink, Wim managed exploration activities and directed mining Executive General Manager - Exploration & Technology companies in Europe, Asia, Africa and North and Central America, working (age 44) was appointed to his current role following the primarily for Canadian mining companies. In 1972, he joined Shell/Billiton formation of the Exploration division in early 1990. He and in 1986 became General Manager of the Billiton/Pasminco joint spent eight years in the minerals exploration industry in venture Budelco (now Pasminco Budel Zink) in the Netherlands. North America, including three years with Cominco. In 1983, he was transferred to Aberfoyle Limited (then 48% owned by Cominco) in Melbourne as Chief Geophysicist. For the three years prior to joining Pasminco, Tom was manager of Aberfoyle’s base John W Winckel metals and minerals sands exploration programs. In Executive General Manager - Australian Smelting (age 53) joined Pasminco in his August 1995, he assumed responsibilities for Group current position in October 1995. He spent the previous 34 years with BTR Technical Support, Pasminco’s technology group based Nylex in a number of operational roles both in Australia and overseas. His most in Newcastle. recent position was General Manager, Glass Packaging with accountability for Ian J Williams the operational performance of six Australian sites, including responsibility for Executive General Manager - Pasminco Century (age 60) joined Pasminco sales and marketing, human resources and environmental performance. He also in September 1997 following the acquisition of the Century project from chaired a research consortium of international companies. Rio Tinto Ltd. He was appointed Managing Director of Century Zinc Ltd in 1994 following a 25-year career with Rio Tinto in a variety of engineering, operational and project development roles in Australia, as well as South Africa and North America. In his earlier career, Ian worked for BHP Ltd, and Siemens Industries in Germany. Prior to his appointment to the Century project, he had been active in education and training in Western Australia and for a time was Chairman of the State Training Board. Pas A/R Final Text 18/9/98 8:29 AM Page 31

From left: Geoff Allen, Andrew Guy, Bryan Davis, Anthony Daniels, David Stewart, Mark Rayner, David Brydon, Board David Macfarlane

Mark R Rayner David J Brydon Chairman of the Board Chairman of the Audit Committee Chairman of the Remuneration Committee Member of the Remuneration Committee Mark Rayner (age 60), BSc (Hons) Chem Eng., FTSE, FAusIMM, David Brydon (age 68), has been a Director since 1988. Mr Brydon FIEA, FAICD, has been a Director since 1989 and was appointed is Chairman of UAP Australia Limited, a Director of WMC Limited, Chairman of Pasminco in October 1992. Mr Rayner is also Spicers Paper Limited, PMP Communications Limited, Norwich Chairman of National Australia Bank Limited and Mayne Nickless Union Financial Holdings and Djerriwarrh Investments Limited. He Limited and a Director of Boral Limited. He is a member of the was previously Managing Director of ACI International Limited. Mr Executive Committee of the Australia Japan Business Brydon resides in Melbourne. Co-operation Committee and Chairman of the Australia Japan Business Forum. He was previously Chief Executive of Comalco Anthony B. Daniels OAM Limited and a Director and Group Executive of CRA Limited. Member of the Audit Committee Mr Rayner resides in Melbourne. Tony Daniels (age 63) was appointed a Director in January 1996. Mr Daniels is Chairman of Australian National Industries Ltd and a David M Stewart Director of Capral Aluminium Limited, Orica Limited and Pacific Managing Director and Chief Executive, Member of the Board Safety, Dunlop Ltd. He is also a Director of IBJ Australia Bank Limited and Health and Environment Committee O’Connell Street Associates Pty Ltd, and Chairman of the NSW David Stewart (age 52) joined Pasminco in early 1992 as Executive State Superannuation Trustee Corporation. He was previously General Manager - Metals. He was appointed a Director in August Managing Director of Tubemakers of Australia Limited. Mr Daniels 1994 and Managing Director and Chief Executive of Pasminco on resides in Sydney. 1 July 1995. He returned to Australia from North America, where as an Executive Director for Libbey Owens Ford he was responsible for R Bryan Davis the operation of their Automotive Replacement Business in the Bryan Davis, Executive Director - Mining (age 55) BSc (Tech) - Mining United States, Mexico and Canada. Prior to joining Libbey Owens Engineering was appointed a Director in May 1995. Prior to joining Ford, Mr Stewart was Chief Executive of Pak Pacific, an Australian Pasminco in November 1991 as Executive General Manager - Mining based printing and packaging business with operations in Australia, he spent 23 years with CRA Group, commencing his career at Broken New Zealand and Singapore. His previous experience included Hill where he became Manager - Mining at the ZC/NBHC operations operational roles in the building products and packaging industries, before moving to Cobar as General Manager of the CSA Mine. In 1988 both in Australia and South-East Asia. Mr Stewart graduated as a he joined the Australian Consolidated Minerals Group to oversee the chemical engineer from Monash University. He subsequently development of the Golden Grove base metals in Western Australia received postgraduate degrees from the Universities of Manchester and was General Manager - Mining and an Executive Director of ACM and Cambridge in the United Kingdom. Mr Stewart is Vice President Gold, incorporating operational responsibilities for the group’s gold of the Minerals Council of Australia and member of the Business mines. He was also Director of North Flinders Gold Mines. Currently he Council of Australia. Mr Stewart resides in Melbourne. is a Director of Newcrest Mining Limited, a Director of NSW Minerals Council and a Director of the Centre for Mining Technology & Geoffrey D Allen Equipment. Mr Davis resides in Melbourne. Member of Safety, Health and Environment Committee Geoff Allen (age 56), BA (Hons), MBA, joined the Board in August Andrew F Guy 1994. He was formerly a Commonwealth public servant, political Member of the Audit Committee adviser and business school academic. He was the foundation Andrew Guy (age 50), LLB, MBA, was appointed to the Board in Executive Director of the Business Council of Australia and is August 1994. Mr Guy is a partner of the legal firm Arthur Robinson & currently Chairman of the Allen Consulting Group and the Hedderwicks. Currently, he is a Director of McPherson’s Limited, Australasian Centre of Corporate Public Affairs. He was Chairman Djerriwarrh Investments Limited and Anglicare Victoria, and of the Australian Government’s Trade Negotiations Advisory Group Chairman of Commercial Union Holdings Australia Limited. Mr Guy during the Uruguay Round and is a member of the Australian resides in Melbourne. Government’s Trade Policy Advisory Council and Foreign Affairs Council. He was formerly Council Member of the Australian Film, David K Macfarlane Television and Radio School and is currently a Director of World Chairman of the Safety, Health and Environment Committee Competitive Practices Pty Ltd, Lancemore Pty Ltd and Melbourne Member of the Remuneration Committee Business School Ltd. He is Principal Fellow at the Melbourne David Macfarlane (age 68), has been a Director since 1988. Business School, and President of the Melbourne Business School Mr Macfarlane is Chairman of Spicers Paper Limited, Vice Chairman Alumni. Mr Allen resides in Melbourne. of National Australia Bank Limited and a Director of Schroders Australia Holdings Limited, DEM Limited and the Australian Foundation Investment Company Limited. He was previously Managing Director of James Hardie Industries Limited. Mr Macfarlane resides in Sydney. Pas A/R Final Text 18/9/98 8:29 AM Page 32

Ore Reserves The Ore Reserves are compiled by competent persons for each location and reported according to the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves.*

Broken Hill - Southern operations The reserve for the Southern operations at Broken Hill is based on assays from diamond drill holes and mapping data interpreted on cross-sections spaced 19.8 metres apart. The resource is based on a three-dimensional model of the geology and mapping of the mine openings. The reserve has been calculated by intersecting actual three-dimensional stope design shapes with the resource model, and is derived from a measured (31.7 million tonnes), indicated (6.4 million tonnes) and inferred (2.6 million tonnes) resource at 30 June 1998 of 40.7 million tonnes at 9.3% zinc, 5.5% lead and 59 grams per tonne silver, at a cut-off grade of 7% lead plus zinc. During 1997/8, diamond drilling added 1.9 million tonnes to the reserve. Mining depleted it by 2.5 million tonnes and a further 2.6 million tonnes were deleted as having no reasonable expectation of being mined. The reserve at 30 June 1998 is estimated to be 23.7 million tonnes at 8.1% zinc, 5.2% lead and 51 grams per tonne silver. (Compiled by C Lutherborrow, Chief Geologist, Pasminco Broken Hill Mine)

Broken Hill - Potosi The reserve for the Potosi open-cut mine is based on assays from drilling and mapping data interpreted on cross sections 10 metres apart. This Pasminco information is used to create a three-dimensional block model of the Exploration geologists resource. The depth of the production surface in the Potosi open-cut Caroline Hilton and operation during 1997/8 approached the limit of the ore defined by closely Fergus O’Brien log spaced grade control drilling. This required additional drilling of the lower core samples at section of the resource followed by a re-optimisation of the final pit design. Broken Hill. The exercise decreased reserves by 0.3 million tonnes, while the grade increased from 11.6 % to 12.5% lead and zinc. Mining at Potosi during 1997/98 depleted the reserve by 0.2 million tonnes. At 30 June 1998, the reserve is estimated to stand at 0.3 million tonnes at 9.7% zinc, 2.8% lead and 30 grams per tonne silver. (Compiled by C Lutherborrow, Chief Geologist, Pasminco Broken Hill Mine)

Century assessed and mining loss and dilution parameters applied. More than 500 diamond, reverse circulation and percussion holes have A variable cut-off grade has been applied in compiling the ore reserves. been drilled at an average drilling density of 70 metres to delineate the The cut-off grade is based upon the zinc equivalence (ZnEq) relationship, resource and to explore for additional resources. which includes value for lead and silver, and varies from 8.0% ZnEq The reported reserves were developed from mine planning studies reducing to 4.0% ZnEq over the planned life of the open-pit mining completed in April 1997. In the course of these studies, the economic operations. The equivalence relationship is based upon analysis of the factors impacting upon the exploitation of the identified mineral resource metallurgical performance of the ore and assumptions of metal prices were evaluated. The physical disposition of the mineralisation has been expected to be achieved for the project. The variable cut-off grade has been developed with the objective of maximising the net present value of the mine operation. The reserve as at 30 June 1998 was 98.5 million tonnes at 11.6% zinc, 1.7% lead and 43 grams per tonne silver, calculated from a measured (69.3 million tonnes) and inferred (2.9 million tonnes) resource of 105.1 million tonnes at 12.1 zinc, 1.7 % lead and 46 grams per tonne silver. (Compiled by R A Adam, Mining & Resource Technology Pty Ltd)

*Report of the Joint Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC) Pas A/R Final Text 18/9/98 8:30 AM Page 33

Crystalline calcite and Typical high grade galena galena (lead sulphide) (lead sulphide), sphalerite mineralisation from (zinc sulphide), calcite and Broken Hill. rhodonite ore from Broken Hill, one of the world’s richest lead-zinc deposits.

Ore Reserves as at 30 June 1998 1997 Zinc Lead Copper Silver Gold Location Tonnes (millions) %% %% % Broken Hill Southern Proved 21.0 20.3 8.2 5.4 53 Operations Probable 2.7 6.6 7.5 3.9 43 Total 23.7 26.9 8.1 5.2 51 Potosi Proved 0.3 0.9 9.7 2.8 30 Probable - Total 0.3 0.9 9.7 2.8 30 Rosebery Proved 2.0 2.2 8.3 2.7 0.40 83 1.6 Probable 1.4 1.5 11.4 4.2 0.43 155 2.6 Total 3.4 3.7 9.5 3.3 0.41 112 2.0 Elura Proved 2.9 6.1 8.2 5.5 77 Probable 14.2 14.7 8.3 4.9 53 Total 17.1 20.8 8.3 5.1 59 Century Proved 67.5 11.6 1.7 42 Probable 31.0 11.6 1.6 47 Total 98.5 11.6 1.7 43 Beltana Proved 0.1 0.2 40.0 2.2 Proved 93.8 29.7 Probable 49.3 22.8 Total 143.1 52.5

Dugald River Rosebery The Dugald River resource was estimated using a block modelling Reserves at the Rosebery mine are based on diamond drilling conducted technique with a cut-off of 10% zinc plus lead, a minimum block thickness on sections spaced from 10-40 metres along strike, together with of 5 metres and a vertical extent from surface of 1,000 metres. At 30 June information gained from underground ore exposures in some lenses. They 1998,the indicated (48 million tonnes) and inferred (2 million tonnes) are derived from a measured (2.3 million tonnes), indicated (1.5 million resource is estimated to be 50 million tonnes at 12.1% zinc, 1.9% lead and tonnes) and inferred (7.9 million tonnes) resource at 30 June 1998 of 11.7 41 grams per tonne silver. million tonnes at 12.3% zinc, 4.3% lead, 0.35% copper, 139 grams per (Compiled by J H Duke, Principal Geologist, Metals) tonne silver and 2.2 grams per tonne gold. During 1997/8, successful surface and underground exploration programs Elura increased the measured, indicated and inferred resource by 14% The reserves at the Elura mine are based on assays from diamond drill compared with end June 1997. Additions were delineated in the south holes and samples from underground mapping and have been interpreted (T lens), central (V lens) and northern mine areas (B, P, K and W lenses). on vertical cross-sections at 10 and 20 metre spacings. The reserve is The reserve base decreased 7% compared with last year. Moderate derived from a measured (22.5 million tonnes) and indicated (0.7 million increases were defined in B and C lenses with incremental rises in P, K and tonnes) resource of 23.2 million tonnes at 8.1% zinc, 5.0% lead and 59 T lenses, but were offset by mining depletion and conversion of reserves grams per tonne silver. into the inaccessible category, principally in B and J lenses. The reserve at A total of 4.9 million tonnes written out of the Elura reserve during 1998/9 30 June 1998 is estimated to be 3.4 million tonnes at 9.5% zinc, 3.3% was partly offset by 1.1 million tonnes moving from resource to reserve in lead, 0.41% copper, 112 grams per tonne silver and 2.0 grams per tonne the lower levels. Mine production in 1997/8 reduced ore reserves by gold. 1.1 million tonnes. During 1998/9, the focus of drilling will be to continue exploring for new During 1997/8, major problems occurred in the recovery of zinc to zinc resources in the mine area, together with upgrading the large amount of concentrates from ore mined from the centre pillar between the two lenses inferred resource tied up in K and P lenses. that make up the main ore body. As a result, mining of the 4/5 block was (Compiled by M Berry, Chief Geologist, Pasminco Rosebery Mine) curtailed before planned tonnes had been extracted, as production from stopes with satisfactory metallurgical performance was favoured. A total of 1.4 million tonnes was written out of reserves as a result of metallurgical information now known about the area. (Compiled by P Levers, Geology Superintendent, Pasminco Elura Mine) Pas A/R Final Text 18/9/98 8:30 AM Page 34

Production 5-Year Summary

Mines 1998 1997 1996 1995 1994 Broken Hill

Broken Hill operations (includes ore sourced from Pototsi open-cut operations). Ore Treated Tonnes 2,715,402 2,700,642 2,547,179 2,525,153 2,431,711 Assaying Zinc % 7.5 8.2 7.7 8.0 8.7 Lead % 4.7 5.2 5.5 5.9 6.9 Silver g/t 43.4 53 54 56 61 Zinc Concentrate Tonnes 360,885 393,791 349,323 362,222 374,447 Containing Zinc tonnes 181,097 196,371 174,926 181,148 190,931 Lead Concentrate Tonnes 165,749 191,269 185,118 196,504 219,311 Containing Lead tonnes 114,595 130,185 129,490 138,689 158,067 Silver kg 96,788 118,922 119,594 121,801 134,107

Elura

Ore Treated Tonnes 1,021,965 1,044,253 1,023,641 1,059,602 813,928 Assaying Zinc % 7.8 8.5 8.5 9.2 8.9 Lead % 5.1 5.7 5.8 5.9 5.9 Silver g/t 79.2 94 74 101 103 Zinc Concentrate Tonnes 105,772 124,217 130,865 146,069 108,364 Containing Zinc tonnes 53,305 62,498 66,219 73,149 54,659 Lead Concentrate Tonnes 72,444 83,020 85,329 88,110 59,580 Containing Lead tonnes 37,587 43,166 43,716 44,169 31,577 Silver kg 31,125 36,046 31,732 44,150 30,267

Rosebery

Ore Treated Tonnes 649,657 640,593 600,053 500,181 539,066 ex Rosebery Mine 569,940 622,643 600,053 500,181 532,126 Purchased Ore 79,717 17,950 - - 6,940 Assaying Zinc % 9.8 10.0 11.1 11.0 9.7 Lead % 2.8 2.9 3.0 3.7 3.1 Copper % 0.4 0.4 0.4 0.4 0.4 Silver g/t 84.5 104 103 114 97 Gold g/t 1.4 1.5 1.7 1.6 1.9 Zinc Concentrate Tonnes 106,719 108,390 113,750 94,392 83,567 Containing Zinc tonnes 56,134 57,089 59,321 48,942 45,970 Lead Concentrate Tonnes 19,646 19,877 20,046 9,047 7,709 Containing Lead tonnes 12,243 12,608 12,228 5,919 5,066 Silver kg 25,412 28,304 27,820 10,388 8,909 Gold kg 88 78 130 38 50 Copper Concentrate Tonnes 5,553 5,855 4,649 3,680 4,409 Containing Copper tonnes 1307 1,394 990 865 1,078 Silver kg 12,103 18,765 14,062 12,876 12,250 Gold kg 363 400 326 233 284 Gold Dore’ kg 113 226 247 174 294 Containing Gold kg 79 147 168 120 194 Silver kg 34 68 79 52 81 Bulk Concentrate Tonnes - - - 14,964 14,235 Containing Zinc tonnes - - - 1,844 1,715 Lead tonnes - - - 7,599 7,610 Copper tonnes - - - 341 258 Silver kg - - - 18,267 17,500 Gold kg - - - 185 140

Beltana Aroona Open Cut

Ore Mined Tonnes 57,269 9,600 - - - Assaying Zinc % 38 40.0 - - - Containing Zinc tonnes 21,762 3,840 - - - Pas A/R Final Text 18/9/98 8:30 AM Page 35

Smelters 1998 1997 1996 1995 1994

Hobart Tonnes Zinc and Alloys 197,042 207,703 207,840 189,067 193,763 Cadmium 368 244 319 316 354 Lead Residue 26,797 28,779 26,913 23,676 23,386 Sulphuric Acid 390,989 395,827 392,304 347,150 361,959 Fertilisers - - - 3,525 75,933 Copper Sulphate 3,088 3,446 3,985 3,062 2,542 Port Pirie

Lead and Alloys 185,061 201,755 223,654 204,665 217,386 Cathode Copper 3,787 3,943 4,065 3,834 3,055 Zinc and Alloys 35,243 32,651 38,013 36,051 37,375 Silver (kg) 112,030 231,756 206,016 206,201 208,698 Gold (kg) 311 700 661 550 500 Sulphuric Acid 68,058 82,985 87,264 81,540 83,264 Cockle Creek

Zinc and Alloys 71,291 79,393 84,437 86,804 75,201 Lead Bullion 25,149 28,795 31,447 33,556 27,833 Cadmium 350 201 514 538 408 Copper Sulphate 1,681 2,731 3,514 2,969 2,766 Lead Dross 1,176 1,627 2,045 2,834 2,140 Sulphuric Acid 150,799 170,646 177,286 177,955 168,276 ARA *

Lead Alloys 13,147 12,486 11,782 10,545 12,615 Lead Bullion 742 1,485 1,141 1,640 560 * These figures represent Pasminco’s 50% share of ARA production. Europe Avonmouth

Zinc and Alloys - - - - 33,431 Lead Bullion - - - - 14,210 Cadmium - - - - 117 Copper Lead Dross - - - - 2,428 Sulphuric Acid - - - - 66,386 Budel Zink *

Zinc and Alloys 215,385 204,626 205,674 107,631 105,652 Cadmium 730 605 700 297 324 Copper in Residue 1,279 1,189 1,166 850 494 Cobalt in Residue 35 38 40 33 21 Sulphuric Acid 341,372 311,468 305,934 273,696 172,990 Zinc Dross 178 141 264 212 173 * These figures represent Pasminco’s 50% share of Budel Zink production up until 1995. 1997 & 1998 show Pasminco’s 100% share. Bloxwich

Zinc Alloys - - - - 8,178 Zinc/Aluminium Anodes - - - - 1,759 Zinc Dust/Oxide/Phosphate - - - - 3,512 Zinc Secondaries - - - - 1,754 Pas A/R Final Text 18/9/98 8:30 AM Page 36

Led by Anthropologist Peter Bindon (first from left), Century’s Cultural Clearance Team searches for artefacts. Performance 10-Year Summary

Profit & Loss 1998 1997 1996 1995 Gross sales $m1,370.1 1,352.8 1,318.2 1,224.1 Cost of sales (including exploration & research) $m1,152.5 1,104.2 1,108.7 1,049.6 Depreciation $m131.7 121.5 121.5 120.1 Earnings before interest and tax $m85.9 127.1 88.0 54.4 Net interest and finance charges $m13.5 17.1 17.0 21.5 Income tax charge/(credit) $m32.8 40.0 30.2 16.2 Operating profit/(loss) after tax and before abnormal and extraordinary items $m39.6 70.0 40.8 16.7 Abnormal items (net of tax) $m23.7 (5.3) 0.0 (4.5) Extraordinary items (net of tax) $m0.0 0.0 0.0 0.0 Operating profit/(loss) after tax and abnormal and extraordinary items $m63.3 64.7 40.8 12.2 Earnings per share ◗ cents6.2 8.1 5.1 1.5 Return on shareholders’ equity ◗ %4.3 8.3 5.4 1.6 Dividends $m45.0 31.8 23.8 15.9 Dividends per share cents4.0 4.0 3.0 2.0 Dividend cover ◗ times1.6 2.0 1.7 0.8 Net cash provided by operating activities $m258.6 151.0 80.2 180.6 Interest cover ◗ times19.2 8.8 4.7 8.1 Balance Sheet Shareholders’ equity $m1,490.7 778.5 750.6 740.0 Property, plant and equipment $m1,652.6 948.4 887.4 891.7 Economic entity (Group) net debt $m166.5 239.1 153.1 76.5 Operating working capital $m267.6 306.3 268.6 209.8 Net Debt to Net Debt plus Equity ◗ %10.0 23.5 16.9 9.4 Capital expenditure $m445.3 196.5 140.7 97.3

Production Mines

Ore treated tonnes4,387,000 1,352.8 4,395,000 4,170,900 4,084,900 Contained zinc ▲ tonnes312,400 1,436.8 319,800 300,500 305,100 Contained lead ▲ tonnes164,400 1,799.9 186,000 185,400 196,400 Contained silver kg165,500 1,913.5 202,100 193,300 207,500 Contained gold kg 1,667.2530 625 620 580 Smelters

Zinc ✚ tonnes519,000 1,436.8 524,400 536,000 419,600 Lead (metal and bullion) ◆ tonnes224,100 1,913.5 244,500 268,000 250,400 Silver kg112,000 1,224.1 231,000 206,000 206,200 Commodity Prices

Zinc (year average) US$/tonne1,192* 1,667.2 1,124* 1,022 1,045 Lead (year average) US$/tonne 1,799.9562* 724 721 613 Exchange Rates

AUD/USD (year average) 0.70* 0.77* 0.76 0.74 AUD/Nlg (year average) 1.38* 1.40 1.24 1.25

▲ includes purchased ore ✚ includes 50% share of Budel Zink production prior to 1996, 100% from 1996 ◆ includes 50% share of ARA production Pas A/R Final Text 18/9/98 8:31 AM Page 37

Rosebery extended its community Before casting, zinc is treated with sodium Budel relations activities during the year. to remove arsenic. Cockle Creek is currently renovated its A Community Liaison Committee was trialling a new automated liquid sodium fire water established and a site Open Day was process to reduce manual labour and mains system held in May 1998. Here at the Open Day, improve environmental performance. during the visitors view the Atlas Copco Jumbo drill Project Engineer Peter Brain (on left) year. rig on display underground in the and Metallurgist John Laws are pictured 17 Level workshop. checking equipment for the project.

1994 1993 1992 1991 1990 1989 1,193.7 1,487.1 1,431.2 1,692.2 1,913.5 1799.9 1,066.1 1,384.9 1,326.5 1,562.0 1,503.6 1,409.6 112.2 130.3 131.8 132.0 115.2 100.4 15.4 (28.1) (27.1) (1.8) 294.7 289.9 21.2 28.5 33.5 43.0 44.5 42.1 (4.1) (15.7) (17.4) (10.9) 96.5 84.5

(1.7) (40.9) (43.2) (33.9) 153.7 163.3 (12.7) (46.0) (15.4) (13.7) 0.0 0.0 0.0 0.0 (81.5) 0.0 0.0 (6.8)

(14.4) (86.9) (140.1) (47.6) 153.7 156.5 (1.9) (12.1) (8.1) (6.6) 21.3 22.7 (2.0) (12.2) (7.1) (5.2) 17.2 19.7 0.0 0.0 0.0 0.0 86.4 97.0 0.0 0.0 0.0 0.0 12.0 13.5 0.0 0.0 0.0 0.0 1.8 1.6 128.2 168.5 80.1 309.1 337.8 355.8 5.9 5.8 2.3 7.2 7.6 8.4

739.6 665.7 759.4 885.4 935.4 857.4 900.1 966.6 1,083.8 1,223.4 1,103.2 1005.9 272.8 521.1 560.7 469.2 291.5 207.4 221.2 306.1 402.2 388.7 598.2 468.3 26.9 43.9 42.5 34.6 23.7 19.5 50.0 94.2 114.3 258.1 214.0 217.0

3,784,700 3,662,800 3,814,300 4,157,900 4,451,500 4,490,700 293,300 285,400 299,000 366,400 365,100 365,900 202,300 200,300 199,300 211,000 210,600 225,000 203,100 225,400 234,300 261,100 310,300 377,800 670 690 680 1,090 1,080 1,310

445,400 544,600 533,600 519,400 482,200 480,300 272,600 308,500 303,000 295,600 280,200 249,700 208,700 214,400 204,100 221,300 228,300 245,400

938 1,116 1,162 1,309 1,609 1,609 438 487 528 682 772 639

0.69 0.70 0.77 0.79 0.77 0.82 1.31 1.24 1.45 1.41 1.54 1.70

◗ refer page 48 of financial statements for definition * realised prices and exchange rates Pas A/R Final Text 18/9/98 8:31 AM Page 38

Glossary

A$ Australian dollars LTI Lost Time Injury, an injury to a person which results in that person losing one normal working day or shift AUD/USD any time after the date of the injury exchange rate Australian US dollar exchange rate LTIFR Lost Time Injury Frequency Rate, the number of lost Ag Chemical symbol for silver time injuries per million hours worked ARA The Australian Refined Alloys joint venture with Simsmetal Nlg Netherlands guilder Limited, in which a Pasminco subsidiary has a 50% interest ore reserves As defined in the 1996 Australasian Code for Reporting Au Chemical symbol for gold of Identified Mineral Resources and Ore Reserves break-even The lowest zinc price for a particular performance period paragoethite A hydrated iron oxide produced at the Hobart smelter as zinc price at which Pasminco would break even i.e. make zero profit part of the co-treatment process contained Amount of zinc/lead metal contained Pb Chemical symbol for lead zinc/lead in a mineral deposit or concentrate, calculated by multiplying average grade by total tonnes PBS Pasminco Business Systems, an initiative to introduce an integrated business system utilising SAP software co-treatment Co-treatment of paragoethite (or ‘co-treatment’) is an and encompassing sales and marketing, asset integrated process developed by Pasminco and involving management, maintenance, finance, purchasing and human two of its smelting sites. Commissioned in 1997/8, the new resources processes across Pasminco technology has eliminated jarosite production at the Hobart smelter, which now produces an intermediary product called premium Dollar amount payable over and above the LME price as paragoethite. This is shipped to the Port Pirie lead smelter to negotiated between buyer and seller (includes freight and undergo additional treatment and further metal recovery other realisation costs) Cu Chemical symbol for copper resource As defined in the 1996 Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves EBIT Earnings before interest and tax SI Serious Injury, any injury that results in lost time, medical ESHE Executive Safety Health and Environment Committee treatment or selected/restricted duties (Pasminco Group subsidiaries) consists of Pasminco’s management team (see page 30), is attended by the SIFR Serious Injury Frequency Rate, the number of serious Group Managers Environment and Safety & Health injuries per million hours worked and chaired by the Managing Director and Chief Executive. SO2 sulphur dioxide The ESHE establishes policy and strategic directions for the management of safety, health and environment across the µg/dL micrograms per decilitre Pasminco Group Western world A term used by industry analysts such as Brook Hunt g/t grams per tonne and CRU to include all countries apart from China, Vietnam, North Korea, Cuba, the former Soviet Union Gulf Communities Agreement between Century, native title claimants and eastern Europe (Romania, Bulgaria, Czech Republic, Agreement and the Queensland Government, dated 7 May 1997 Slovak Republic, Hungary, Poland) ISO14001 An international standard for environmental Y2K Year 2000 management systems published by the International Standards Organisation in 1996. Key elements Zn Chemical symbol for zinc include Policy, Planning, Implementation and Operation, ZnEq Zinc equivalence is a concept which allows the mine Checking and Corrective Action, and Management Review. planner to take into account not only the zinc grade of an ISO 9002 International standard for quality assurance in production, ore block but also the value of lead and silver. The total installation and servicing value of zinc, lead and silver in a block is divided by the zinc price to give the zinc equivalent grade of that block ISO 9003 International standard for quality assurance in final inspection and test jarosite A residue of the roasting and hydrometallurgical treatment of zinc concentrates. A compound of ammonia, iron and sulphate, it takes its name from a similar naturally occurring material. Jarosite cannot be reprocessed except at very low rates. Historically, it has been disposed of at sea, in permanent ponds or landfill sites LME London Metal Exchange Pas A/R Final Text 18/9/98 8:32 AM Page 39

Directors’ Report and Financial Statements 1998

Key Financial Dates (subject to change) Contents Books close for 1998 final dividend 21 October 1998 40 Directors’ Report Annual General Meeting 28 October 1998 43 Corporate Governance September quarter production report released 28 October 1998 Statement Final dividend payment 2 November 1998 44 Profit and Loss Half-year end 31 December 1998 45 Balance Sheet December quarter production report released 27 January 1999 46 Statement of Cash Flows Half-year results 24 February 1999 47 Notes to the Financial March quarter production report released 21 April 1999 Statements 1998/9 year end 30 June 1999 47 Summary of Significant June quarter production report released 28 July 1999 Accounting Policies Full-year results and final dividend announcement 25 August 1999 69 Directors’ Statement Annual Report mailed to shareholders 20 September 1999 70 Auditors’ Report Annual General Meeting 27 October 1999 71 Shareholder Information September quarter production report released 27 October 1999 Pas A/R Final Text 18/9/98 8:33 AM Page 40

Directors’ Report

Your Directors present their report for the year ended 30 June 1998. Information on Directors Directors Particulars of the qualifications, experience and special responsibilities The Directors of Pasminco Limited at the date of this report are: of each Director at the date of this report are set out on page 33 in the M R Rayner (Chairman) 1998 Annual Report. D M Stewart (Managing Director & Chief Executive) G D Allen Attendance at Meetings D J Brydon The number of meetings of the Board of Directors and its principal A B Daniels Board Committees held during the year were: R B Davis Board of Directors: 11 A F Guy Audit Committee: 4 D K Macfarlane Environment Committee: 5 Remuneration Committee: 4 Principal Activities The principal activities of the corporations in the economic entity during The following table sets out the number of meetings Directors were the year were exploration and integrated mining, smelting and marketing eligible to attend, and the meetings attended by each Director. to produce zinc and lead concentrates, and zinc, lead and silver metals together with various alloys and by-products. Present Board of Audit Safety, Health Remuneration Directors Directors Committee & Environment Committee Consolidated Results Meetings Meetings Committee Meetings 1998 $m 1997 $m Meetings Consolidated economic entity held attended held attended held attended held attended profit attributable to the members of Pasminco Limited 63.3 64.7 M R Rayner 11 11 - - - - 4 4 D M Stewart 11 11 4 4 5 4 - - Review of operations G D Allen 11 10 - - 5 4 - - A review of the operations of the economic entity during the year and D J Brydon 11 10 4 4 - - 4 4 the results of those operations are set out in the 1998 Annual Report. A B Daniels 11 11 4 4 - - - - R B Davis 11 11 ------Significant Changes in the State of Affairs and Events A F Guy 11 11 4 3 - - - - Subsequent to Year End D K Macfarlane11 10 - - 5 4 4 3 Other than items noted in this report, and in the 1998 Annual Report to which it refers, there were no significant changes in the state of affairs Directors’ Benefits of the economic entity during the financial year. There are no other The interests of each Director in the share capital of the Company at matters or circumstances that have arisen since the end of the financial the date of this report were: year which significantly affected or may significantly affect: Pasminco Limited a) the operations of the economic entity; Ordinary Shares of $1.00 each b) the results of those operations; or c) the state of the affairs of the economic entity. Directors Beneficial Non-Beneficial Interest Interest Likely Developments and Expected Future Results M R Rayner 13,629 Nil Directors believe it would be likely to prejudice the interests of the D M Stewart 25,000 1,029 Company to provide additional information relating to likely G D Allen 10,000 Nil developments in the operations of the economic entity and the D J Brydon 2,572 Nil expected results of those operations in the financial years subsequent A B Daniels 10,572 Nil to the financial year ended 30 June 1998. R B Davis Nil 5,000 A F Guy 10,000 Nil Dividend D K Macfarlane 2,572 Nil The Directors have declared a dividend of 4 cents per share unfranked from profits payable on 2 November 1998, books closing/record date 10.00 pm AEST on 21 October 1998. Dividends paid during the year totalled $31.8 million. This amount represents the final 1996/7 dividend declared of 4 cents per share which was 96% franked. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 2

Directors’ Report

Your Directors present their report for the year ended 30 June 1998. Information on Directors Directors Particulars of the qualifications, experience and special responsibilities The Directors of Pasminco Limited at the date of this report are: of each Director at the date of this report are set out on page 33 in the M R Rayner (Chairman) 1998 Annual Report. D M Stewart (Managing Director & Chief Executive) G D Allen Attendance at Meetings D J Brydon The number of meetings of the Board of Directors and its principal A B Daniels Board Committees held during the year were: R B Davis Board of Directors: 11 A F Guy Audit Committee: 4 D K Macfarlane Environment Committee: 5 Remuneration Committee: 4 Principal Activities The principal activities of the corporations in the economic entity during The following table sets out the number of meetings Directors were the year were exploration and integrated mining, smelting and marketing eligible to attend, and the meetings attended by each Director. to produce zinc and lead concentrates, and zinc, lead and silver metals together with various alloys and by-products. Present Board of Audit Safety, Health Remuneration Directors Directors Committee & Environment Committee Consolidated Results Meetings Meetings Committee Meetings 1998 $m 1997 $m Meetings Consolidated economic entity held attended held attended held attended held attended profit attributable to the members of Pasminco Limited 63.3 64.7 M R Rayner 11 11 - - - - 4 4 D M Stewart 11 11 4 4 5 4 - - Review of operations G D Allen 11 10 - - 5 4 - - A review of the operations of the economic entity during the year and D J Brydon 11 10 4 4 - - 4 4 the results of those operations are set out in the 1998 Annual Report. A B Daniels 11 11 4 4 - - - - R B Davis 11 11 ------Significant Changes in the State of Affairs and Events A F Guy 11 11 4 3 - - - - Subsequent to Year End D K Macfarlane 11 10 - - 5 4 4 3 Other than items noted in this report, and in the 1998 Annual Report to which it refers, there were no significant changes in the state of affairs Directors’ Benefits of the economic entity during the financial year. There are no other The interests of each Director in the share capital of the Company at matters or circumstances that have arisen since the end of the financial the date of this report were: year which significantly affected or may significantly affect: Pasminco Limited a) the operations of the economic entity; Ordinary Shares of $1.00 each b) the results of those operations; or c) the state of the affairs of the economic entity. Directors Beneficial Non-Beneficial Interest Interest Likely Developments and Expected Future Results M R Rayner 13,629 Nil Directors believe it would be likely to prejudice the interests of the D M Stewart 25,000 1,029 Company to provide additional information relating to likely G D Allen 10,000 Nil developments in the operations of the economic entity and the D J Brydon 2,572 Nil expected results of those operations in the financial years subsequent A B Daniels 10,572 Nil to the financial year ended 30 June 1998. R B Davis Nil 5,000 A F Guy 10,000 Nil Dividend D K Macfarlane 2,572 Nil The Directors have declared a dividend of 4 cents per share unfranked from profits payable on 2 November 1998, books closing/record date 10.00 pm AEST on 21 October 1998. Dividends paid during the year totalled $31.8 million. This amount represents the final 1996/7 dividend declared of 4 cents per share which was 96% franked. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 3

Pasminco Limited Board and Committee Fees Options on Ordinary Shares of $1.00 each Directors’ fees are determined by the Board on the basis of recommendations received from the Remuneration Committee from Executive Allocation Year Exercise Expiry time to time. Company policy is to set fees around the median of the Directors of Issue Price Date marketplace for listed companies of similar size to Pasminco. There is D M Stewart 150,000 1995 $1.67 10 November 2000 no direct relationship between the quantum of the directors’ fees and 200,000 1996 $2.07 8 November 2001 the Company’s performance in any given year. 300,000 1997 $1.84 14 November 2002 The nature and amount of each element of the directors’ emoluments are: R B Davis 75,000 1995 $1.67 10 November 2000

75,000 1996 $2.07 8 November 2001 Safety, Health Company 100,000 1997 $1.84 14 November 2002 Directors’ Audit & Environment Contribution to No interests were held in the share capital of related companies. Base Fee Committee Committee Fee Superannuation Total M R Rayner 100,000 6,000 106,000 Mr D K Macfarlane is a Director of Schroders Australia Holdings G D Allen 42,000 7,000 2,940 51,940 Limited which provides advisory services on a commercial basis to the economic entity. D J Brydon 42,000 10,000 3,120 55,120 A B Daniels 42,000 7,000 2,940 51,940 Mr A F Guy is a partner of Arthur Robinson & Hedderwicks, Solicitors, A F Guy 42,000 7,000 2,940 51,940 who provide legal advice on a commercial basis to the economic entity. D K Macfarlane 42,000 10,000 3,120 55,120 Other than as stated above, the Directors do not have an interest in a Notes contract or proposed contract with the Company being an interest the The emoluments of Executive Directors D M Stewart and R B Davis are nature of which the Directors are required to declare in accordance reported in the following section relating to the five highest paid officers. with Section 307 of the Corporations Law. During the financial year, Mr D M Stewart and Mr R B Davis have been Emoluments of Five Highest Paid Officers engaged in the full-time employment of the economic entity, and The emoluments of Pasminco employees is determined by the received or became entitled to receive in connection with that individual’s performance, the Company’s performance and the employment, medical and other benefits relating to such employment. marketplace generally. Pasminco assesses its position annually to Other than as stated in this report, during or since the financial year no ensure that its remuneration policy is aligned with the median level in the Director of Pasminco Limited has received or become entitled to marketplace. For executive level positions, the marketplace is defined as receive a benefit, other than a benefit included in the aggregate executive positions in Australian-based operations. Data is obtained amount of emoluments received or due and receivable by the from remuneration and management consultants and other policy Directors shown in the consolidated accounts by reason of a contract survey forums. Individual remuneration is reviewed in the context of this entered into by the Company or an entity that the Company controlled policy, taking into account the executive’s current remuneration and or a body corporate that was related to the Company when the performance. A significant element of the potential remuneration for contract was made or when the Director received, or became entitled managers, including executives, is linked to organisational performance. to receive the benefit, with: At the executive level, a maximum incentive payment of up to 30% of salary is achievable. ■ a Director; or ■ a firm of which the Director is a member; or ■ an entity in which a Director has a substantial financial interest. The Group has in place an insurance policy to indemnify Directors and Officers against liability incurred which arises out of the conduct of business or in the discharge of their duties as a Director or Officer. The insurance premium is currently $163,000 per annum. The nature and amount of each element of the emoluments for the five highest paid named officers are:

Salary - inclusive of Company Contribution Company Provided Incentive Plan Other Salary Sacrifice items to Superannuation Motor Vehicle Payments for 97/8 Sundry Items Total D M Stewart Managing Director and Chief Executive Officer 550,202 60,522 47,062 100,000 11,860 769,646 R B Davis Director - Mining 300,202 39,627 35,985 24,124 14,726 414,664 J W Winckel Executive General Manager - Australian Smelting 257,702 28,347 24,770 20,018 7,815 338,652 I J Williams Executive General Manager - Century Project 290,784 4,254 14,336 - 5,402 314,776 B M Constance Executive General Manager - Finance and Services 225,202 24,772 36,000 18,097 7,815 311,886 Notes I J Williams has been employed by Pasminco since 25 September 1997. Sundry items includes telephone reimbursement, parking, medical plan assistance, and spouse travel plus Fringe Benefits Tax where applicable. Employees who worked mainly outside of Australia for the financial year have been excluded. Emoluments are costed on the same basis used for reporting Executive Remuneration set out in note 27 to the Financial Statements. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 4

Directors’ Report

Rounding of Amounts The names of all holders of options are entered in the Company’s The Directors have chosen to express amounts in millions of dollars to register, inspection of which may be made free of charge. one decimal place, in accordance with ASC Class Order 97/1005, In disclosing these details, the Directors have availed themselves of ASC except where rounding to the nearest one thousand dollars is required, class order 97/1011. as permitted by Section 311 and Regulation 3.6.05 of the Corporations No person entitled to exercise these options had or has any right, by Law and Regulations. virtue of such options, to participate in any share issue of any other body corporate. Deed of Cross Guarantee Non-executive Directors do not participate in the employee option plan. Pursuant to Class Order 95/1530, relief has been granted to those The 1997 options shown above were granted on the basis that each identified controlled entities of Pasminco Limited shown in Note 10 to option can, under most circumstances, be converted to one ordinary the financial statements from the Corporations Law requirements for $1.00 share in the Company, after a two year period from the date of preparation, audit and publication of accounts. issue, by the holder subscribing $1.84 per share, being 10% above the As a condition of the Class Order, Pasminco Limited and the identified weighted average sale price of Pasminco Limited shares on the controlled entities entered into a deed of cross guarantee on 23 April Australian Stock Exchange over the five business days immediately 1997. Under the deed of cross guarantee, each named Company before 14 November 1997. For employees other than those at Budel guarantees the debts of the other named companies. This guarantee is Zink, options can be exercised after 14 November 1999 and on or conditional upon the winding up of any companies which are a party to before 14 November 2002. Employees of Budel Zink can exercise the deed. options at any time on or before 14 November 2002. Under certain circumstances, such as redundancy, retirement or death, options may Pasminco Limited Employee Option Plan be exercised by Australian employees prior to 14 November 1999. At the date of this report, options over shares pursuant to the Pasminco Under the terms of the Plan, participants may, upon exercise of their Limited Employee Option Plan are as follows: options, participate in any issue of additional shares or bonus shares to shareholders. Pasminco Limited Employee Option Plan Other than as stated above, no shares of the Company (or subsidiaries) No. of No. Year of Exercise Expiry have been issued during the financial year or since the end of the Participants of Options Issue Price Date financial year by virtue of the exercise of any options granted by the 1,922 4,128,000 1995 $1.67 10 November 2000 Company (or subsidiaries). 2,062 5,587,000 1996 $2.07 8 November 2001 2,898 11,924,000 1997 $1.84 14 November 2002 Signed, 26 August 1998 in accordance with a resolution of the Directors. The total number of options outstanding at the end of the period was 21,639,000, equivalent to 1.9% of the total issued ordinary shares in the Company.

During the financial year, options over the shares of the Company have been exercised as follows: Year No. of Participants No. of Options Exercised of Issue Exercised 1995 13 93,000 1996 11 41,500 M R Rayner Chairman

D M Stewart Managing Director and Chief Executive 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 5

Corporate Governance Statement

Corporate Governance Board Safety, Health and Environment Committee In the exercise of their duties as your Directors, the Pasminco Board is The terms of reference of the Board Safety, Health and Environment committed to observing the highest standards of corporate governance. Committee are to oversee the implementation of the Pasminco Safety, Following is a statement of the main features of the corporate governance Health and Environment policies which are aimed at achieving high procedures and guidelines adopted by the Board. standards of care in all activities in which the Group is engaged, from exploration through mining and smelting to the marketing of its Board Composition products. The Pasminco Board is comprised of a majority of non-executive In particular, the Committee reviews with Management: directors. The Chairman is a non-executive member of the Board. In ■ the Safety, health and environmental risks associated with appointing additional Directors, the Board specifies the mix of Pasminco’s operations; qualifications, skills and experience it believes is desirable and selects ■ the response to be adopted with respect to such risks; individuals who will bring characteristics which are necessary to achieve ■ the implementation and audit of such responses; and this mix. To identify appropriate candidates, the assistance of external ■ the appropriate management structure in the light of the consultants is utilised. The Remuneration Committee undertakes the responses adopted. nomination function, and brings recommendations to the full Board. Apart The Board Safety, Health and Environment Committee members are from the statutory retirement age, no maximum age is prescribed for David Macfarlane (Chairman), David Stewart and Geoff Allen. Members of Directors. management attend meetings as appropriate. Responsibilities and Operation Remuneration Committee The Board regularly reviews the operational and financial performance of The charter of the Remuneration Committee is to review with the Chief each of the Group’s activities, considers strategic plans and initiatives, Executive the overall remuneration structure and policies for staff reviews plans and budgets, reviews and approves significant capital employed by Pasminco, and to review and approve the remuneration of investment proposals and establishes and monitors delegated authority the senior executive staff and appointments at senior level. levels for capital and financial commitments. It monitors and receives The Committee seeks to ensure that the remuneration policy structure is advice on areas of operational and financial risk and considers strategies equitable, market competitive and consistent to assure the recruitment for appropriate risk containment. and retention of staff with the capabilities, competence and experience The Pasminco Board meets monthly, but from time to time the Board necessary for the achievement of Pasminco’s business objectives. convenes outside the scheduled monthly meetings to consider issues With advice from appropriate external consultants, the Committee reviews of special importance. Members of management, auditors, and and establishes the remuneration and other employment conditions of the representatives from the Company’s advisers attend Board and Chief Executive. In consultation with the Chief Executive, the Committee Committee meetings as appropriate. Three Committees of the Board - also obtains the advice of qualified external consultants on appropriate the Audit Committee, the Safety, Health and Environment Committee and levels of remuneration for the non-executive Directors. The Committee the Remuneration Committee - have been established to consider these acts as the nomination committee in developing recommendations for specific areas in detail and to report to the full Board. new Board appointments. Independent Advice The Committee consists solely of non-executive Directors and current members are Mark Rayner (Chairman), David Brydon and David Procedures are in place for Directors to obtain independent professional Macfarlane. The Chief Executive attends meetings when appropriate. advice, at the entity’s expense, if appropriate after consultation with the chairman. Risk Assessment and Management Audit Committee The Board as a whole monitors and receives advice on areas of operational and financial risk and considers strategies to manage The charter of the Audit Committee is to review significant financial business risks. In turn the Audit Committee, the Safety, Health and information to ensure that it is complete, accurate, adequate and timely Environment Committee and working committees of the Board and to advise the Board accordingly. It is comprised only of non- established for specific projects, regularly report back on the particular executive Directors. risks associated with their respective areas of responsibility. To achieve this, the Audit Committee:

■ reviews annual and half-yearly financial reports; Ethical Standards ■ reviews the terms of engagement and scope of activity of the The economic entity has adopted a vision and values statement external auditors; developed with the involvement of many employees throughout the ■ provides a direct line of communication between Directors and group. The values which support the group’s vision include, through an both the internal and external auditors; adopted code of conduct, a commitment to respect the law and act ■ reviews internal audit activities and reports in conjunction with accordingly and to fair, honest and consistent dealings and behaviour. senior management; The code of conduct also deals with conflicts of interest, use of Company ■ monitors the effectiveness of internal control systems; assets and information, honesty and accountability. ■ reviews the Group’s commercial practices and policies; and ■ reviews the performance of the external and internal auditors and their audit fees.

In addition to the non-executive Director members, Audit Committee meetings are attended by members of management and the external and internal auditors as appropriate. Current members of the Committee are David Brydon (Chairman), Andrew Guy and Tony Daniels. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 44

Profit & Loss Notes 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) Pasminco Limited and its controlled entities for the year ended 30 June 1998

Operating profit before abnormal items and income tax 2, 3 72.4 110.0 15.0 5.1 Abnormal items before income tax 4 30.3 (8.2) - - Operating profit before income tax 102.7 101.8 15.0 5.1 Income tax charge attributable to operating profit 5 39.4 37.1 4.4 1.3 Operating profit after income tax attributable to the members of Pasminco Limited 63.3 64.7 10.6 3.8 Retained profits/(Accumulated losses) at the beginning of the financial year (105.5) (138.4) 177.7 205.7 Total available for appropriation (42.2) (73.7) 188.3 209.5 Dividends provided for or paid 15, 31 45.0 31.8 45.0 31.8 Retained profits/(Accumulated losses) at the end of the financial year (87.2) (105.5) 143.3 177.7

The above Profit and Loss Account should be read in conjunction with the accompanying notes. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 45

Balance Sheet Notes 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) Pasminco Limited and its controlled entities as at 30 June 1998 Current Assets Cash at bank 58.9 20.0 - - Receivables 6 194.3 200.4 527.4 397.9 Inventories 7 311.9 249.8 - - Other 8 37.8 16.9 - - Total current assets 602.9 487.1 527.4 397.9

Non-current Assets Receivables 9 - 0.1 476.9 142.7 Investments 10 - 10.0 1,065.7 903.9 Property, plant and equipment 11(a) 766.7 711.7 - - Capitalised exploration 11(b) 29.7 23.8 - - Mine properties & development 11(c) 856.2 212.9 - - Future income tax benefit 5(b) 102.9 102.7 - - Other 12 53.0 21.0 - - Total non-current assets 1,808.5 1,082.2 1,542.6 1,046.6 Total assets 2,411.4 1,569.3 2,070.0 1,444.5

Current Liabilities Accounts payable 13 227.5 133.3 - 0.1 Borrowings 14 13.4 85.7 18.7 0.2 Provisions 15 166.1 103.1 45.0 31.8 Total current liabilities 407.0 322.1 63.7 32.1

Non-current Liabilities Accounts payable 16 0.1 0.7 - - Borrowings 17 215.4 175.8 315.2 357.5 Provisions 18 298.2 292.2 4.7 2.8 Total non-current liabilities 513.7 468.7 319.9 360.3 Total liabilities 920.7 790.8 383.6 392.4 Net assets 1,490.7 778.5 1,686.4 1,052.1

Shareholders’ Equity Share capital 19 1,124.6 795.1 1,124.6 795.1 Reserves 20 453.3 88.9 418.5 79.3 Retained profits/(Accumulated losses) (87.2) (105.5) 143.3 177.7 Total shareholders’ equity 1,490.7 778.5 1,686.4 1,052.1

The above Balance Sheet should be read in conjunction with the accompanying notes. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 46

Statement of Cash Flows Notes 1998 $m 1997 $m (Consolidated) Pasminco Limited and its controlled entities for the year ended 30 June 1998

Cash Flows from Operating Activities Receipts from customers 1,377.2 1,305.7 Payments to suppliers and employees (1,092.3) (1,155.6) Net income taxes (paid)/received (26.3) 0.9 Net cash provided by operating activities 34(b) 258.6 151.0

Cash Flows from Investing Activities Investment in property, plant and equipment (430.6) (193.6) Investment in Pasminco Century Mine Limited and Dugald River 10(b),34(c) (344.7) (10.0) Payments for major maintenance and repairs 1(o) (14.7) (2.9) Proceeds from sale of property, plant and equipment 8.6 7.5 Net cash used in investing activities (781.4) (199.0)

Cash Flows from Financing Activities Net proceeds from share issues 668.7 0.9 Proceeds from borrowings 504.4 450.1 Repayments of borrowings (571.1) (381.9) Net finance charges 3 (13.5) (17.1) Dividends paid (31.8) (23.8) Net cash derived from financing activities 556.7 28.2 Net increase/(decrease) in cash held 33.9 (19.8) Cash at start of reporting period 21.1 39.3 Effects of exchange rate on foreign currency denominated cash balances 2.2 1.6 Cash at end of reporting period 1(r),34(a) 57.2 21.1

The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 47

47 Notes to the Financial Statements

1 Summary of Significant Accounting Policies the benefits to be realised, and for the economic entity to continue This general purpose financial report has been prepared in to comply with deductibility conditions imposed by law. Dividend accordance with Accounting Standards, other mandatory withholding tax is provided on the economic entity’s portion of professional reporting requirements (Urgent Issues Group earnings of certain foreign subsidiaries where it is intended to Consensus Views) and the Corporations Law. repatriate those earnings to Australia as dividends.

It is prepared in accordance with the historical cost convention, (e) Inventories except for certain assets which, as noted, are at valuation. The Stocks of ores, metals, concentrates and work in progress are accounting policies adopted are consistent with those of the valued at the lower of cost and net realisable value. Cost includes previous year except where noted. Comparative information is expenditure incurred in acquiring and bringing the stock to its reclassified where appropriate to enhance comparability. existing condition and location and includes an appropriate portion of fixed and variable overhead expenses, including depreciation. (a) Principles of Consolidation Stores are valued at cost with due allowance for obsolescence. The consolidated accounts incorporate the assets and liabilities of In each case, cost is determined on an average cost basis. all entities controlled by Pasminco Limited (the chief entity) as at 30 June 1998, and the results of all controlled entities during the year (f) Investments ended 30 June 1998. All intercompany balances and transactions Shares in companies held as long-term investments, including have been eliminated. controlled entities, have been stated at Directors’ valuation or cost. A complete list of Pasminco Limited’s controlled entities is set out in Controlled entities are accounted for in the consolidated accounts note 10(b). The economic entity’s interest in joint ventures has been as set out in note 1(a). Dividend income is brought to account as included in the economic entity’s accounts by taking up the it becomes receivable. Interest income is brought to account as it economic entity’s share in each of the individual assets and liabilities accrues on a daily basis. of the joint ventures. (g) Leases (b) Financial Instruments Leases of plant and equipment under which the economic entity (i) Foreign Exchange assumes substantially all the risks and benefits of ownership are Refer note (c) Foreign Exchange classified as finance leases, whilst other leases are classified as (ii) Other operating leases. Finance leases are capitalised with a lease asset Gains and losses on derivatives used as hedges are accounted and liability equal to the present value of the minimum lease for on the same basis as the underlying physical exposures they payments being recorded at the inception of the lease. Capitalised are hedging. Accordingly, hedge gains and losses are included lease assets are amortised on a straight-line basis to their residual in the profit and loss account when the gains and losses arising value over the term of the lease, or where it is likely that the on the related physical exposures are recognised in the profit economic entity will obtain ownership of the asset, the life of the and loss account. Gains and losses related to qualifying hedges asset. Lease payments made under operating leases are charged of firm commitments or anticipated transactions are deferred and against profits in equal instalments over the accounting periods recognised in income as adjustments to the underlying hedged covered by the lease term. transactions when they occur. (h) Property, Plant and Equipment (c) Foreign Exchange Property, plant and equipment are carried at cost or at Directors’ Amounts payable and receivable in foreign currencies have been valuation. Any surplus on revaluation is credited directly to the translated into Australian currency at the rates of exchange ruling asset revaluation reserve and excluded from the profit and loss at balance date. Gains and losses on unhedged balances are account. All items of property, plant and equipment, with the recognised in the result of the period. Costs arising from forward exception of freehold land, and certain mine freeholds and exchange contracts are deferred and amortised over the term of leaseholds, are depreciated over their estimated remaining useful the contracts. Costs and gains or losses arising on the hedging lives. Depreciation rates are reviewed regularly and reassessed in contracts relating to sales commitments are deferred and included light of commercial and technological developments. The expected in the measurement of the sales. All other transactions in foreign useful lives are as follows: currencies during the year have been brought to account at the Buildings 40 years exchange rate ruling at the time of the transactions. Exchange gains Plant and Equipment 5-15 years and losses on designated borrowings, effectively hedging net assets of foreign operations, are taken to the foreign currency translation Capital spares purchased for particular plant are capitalised and reserve on consolidation. The accounts of self sustaining overseas depreciated on the same basis as the plant to which they relate. controlled entities are reported in Australian currency by translating assets and liabilities at the rates of exchange ruling at balance date (i) Exploration Expenditure and the revenue and expense items at the average of rates ruling Expenditure on exploration and evaluation of individual projects is during the year. Translation differences arising are included in the written off against earnings as incurred except that, when a project foreign currency translation reserve. reaches the stage where such expenditure is considered to be capable of being recouped through development or sale, all (d) Taxation subsequent expenditures are capitalised and amortised against Tax effect accounting procedures are followed whereby income tax production from the area once mining commences. is regarded as an expense and is matched with the accounting profit after allowing for permanent differences. Provisions for current and (j) Research & Development Expenditure future income tax are calculated on earnings using the “liability” Expenditure on research and development is written off against method. Certain items of expenditure, mainly depreciation and other earnings as incurred, except that, when a project reaches the stage provisions, may be deductible for income tax purposes in years where such expenditure is considered capable of being recouped different from those in which they are charged against earnings. The through development or sale, all subsequent expenditures are amount of the taxation difference due to such timing differences is capitalised. Unamortised costs are reviewed at each balance date classified as a deferred tax liability or future tax benefit. It is economic to determine the amount (if any) that is no longer recoverable and entity policy not to carry forward any part of future tax assets, arising any amount so identified is written off. from tax losses, including those arising as capital losses, unless their recovery is virtually certain through the economic entity’s ability to derive future assessable income or capital gains sufficient to enable 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 48

Notes to the Financial Statements

1. Summary of Significant Accounting Policies (continued)

(k) Mine Development (p) Sales Revenue Mine development expenditure for the initial establishment of access Sales revenue is stated on a gross basis, with freight and realisation to mineral reserves, together with capitalised exploration, evaluation expenses included in the cost of sales. Sales revenue is stated net and commissioning expenditure, and financing costs on borrowings of the impact of gains and losses arising on foreign exchange for a project prior to the commencement date of commercial hedging contracts relating to sales commitments. Sales of metals, production, are capitalised to the extent that the expenditure results concentrates, ores and by-products are recognised when the in significant future benefits. These amounts are amortised over the product passes out of the physical control of the selling company current estimated economic reserve of the mine on a unit production to external customers pursuant to enforceable sales contracts. output basis. This calculation includes consideration of appropriate As the final value of concentrate sales can only be determined from estimates of the future costs to be incurred in developing the weights, assays, prices and exchange rates applying after a estimated economic reserve, which includes the proven and shipment has arrived at its destination, sales of concentrates are probable reserve, plus an estimate of the economic resource within recorded at estimated values pursuant to contract terms, with the inferred category. adjustments being subsequently recognised in the period when final values are determined. (l) Recoverable Amount of Non-Current Assets The values of assets are reviewed on an ongoing basis, and where (q) Borrowing Costs necessary the carrying amount of non-current assets are revalued Borrowing costs are recognised as expenses in the period in which to their recoverable amount. Where net cash flows are derived they are incurred, except where they are included in the costs of from a group of assets working together, recoverable amount is qualifying assets. To the extent that additional funds have been determined on the basis of the relevant group of assets. The borrowed for the purpose of, and are associated with the qualifying expected net cash flows included in determining recoverable asset, the interest rate used is that applicable to those funds. The amounts of non-current assets are discounted to their present interest rate for any funds utilised in excess of specified borrowings values using a market-determined, risk adjusted discount rate. is the weighted average for all other borrowings. Borrowing costs include: (m) Employee Benefits - interest on short-term and long-term borrowings Provision is made for expected benefits accruing to past and present - amortisation of discounts or premiums relating to borrowings employees in relation to such items as annual leave, long service - amortisation of ancillary costs incurred in connection with the leave, sick leave, medical benefits and workers’ compensation. - arrangement of borrowings; and These provisions are accrued on at least the basis of statutory or - exchange differences arising from foreign currency borrowings. contractual obligations. A number of employee superannuation funds exist which provide benefits for employees and their dependents on (r) Cash retirement, disability, resignation, retrenchment or death For the purposes of the statement of cash flows, cash includes (refer note 29). The value of the employee share scheme described cash on hand and deposits at call which are readily convertible to in note 35 is not being charged as an employee entitlement. cash and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. (n) Restoration Expenditure (i) Mining Operations (s) Trade and Other Creditors Provision is made for the anticipated costs of future restoration These amounts represent liabilities for goods and services provided and rehabilitation of areas from which natural resources have to the economic entity prior to the end of the financial year and been extracted. The provision is recognised on a gradual basis which are unpaid. The amounts are unsecured and are usually paid over the life of the mine as production occurs. The provision within 30 days of recognition. includes costs associated with reclamation, plant closure, waste site closure, monitoring, demolition and decontamination. These (t) Trade Receivables costs have been determined on an undiscounted current cost Trade receivables are carried at nominal amounts due less any basis with reference to current legal requirements and current provision for doubtful debts. A provision for doubtful debts is technology. The restoration provision is separated into current recognised when collection of the full nominal amount is no (estimated costs arising within 12 months) and non-current longer probable. components. Any change in the provision estimate is dealt with on a prospective basis. The extent of the restoration provision is, (u) Basis of Calculation of Ratios and in part, dependent upon the remaining life of each mine as Statistical Information calculated by reference to the economic reserve. (i) Earnings per share (ii) Smelting Operations The calculation of earnings per share is based on the operating Provision is made for the anticipated costs of future restoration profit after income tax and abnormal items but before and rehabilitation of smelting sites to the extent that a legal extraordinary items and the weighted average number of obligation exists and that the anticipated expenditure is not ordinary shares on issue during the financial year. capital in nature. The provision includes costs associated with (ii) Return on Shareholders’ Equity reclamation, monitoring, water purification and coverage and This measures the relationship of profit after tax to permanent storage of historical residues. The provision is based shareholders’ equity, expressed as a percentage. upon current costs and has been determined on an (iii) Interest Cover undiscounted basis with reference to current legal framework This measures the relationship of net cash provided by and current technology. Any change in the provision estimate is operating activities to net finance charges. dealt with on a prospective basis. The restoration provision is (iv) Dividend Cover separated into current (estimated costs arising within 12 months) This measures the relationship of operating profit after tax and and non-current components. before extraordinary items, to dividends paid or payable in (o) Major Maintenance and Repairs Expenditure respect of the same period. The costs of major overhauls of operating plant are considered to (v) Net Debt to Net Debt & Equity Ratio constitute increases in assets. Accordingly, the accounting treatment This ratio is expressed as the proportion of total net debt adopted is to recognise overhaul expenditure as an asset to be to total shareholders’ equity and net debt. Total net debt amortised over the period in which benefits are expected to arise comprises all borrowings and overdrafts less cash and (typically 3-4 years). short-term deposits. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 49

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 2 Operating Revenue (a) Sales revenue (note 1(p)) 1,370.1 1,352.8 - - (b) Other revenue (i) Dividends received (note 3) - - - 0.5 (ii) Interest received (note 3) 7.5 3.3 17.8 23.9 (iii) Proceeds on sales of non-current assets 8.6 7.5 - - (iv) Other 8.5 9.4 3.9 - 1,394.7 1,373.0 21.7 24.4 3 Operating Profit The operating profit before abnormal items and income tax is arrived at after charging and crediting the following specific items: Charges Amortisation - (a) Deferred expenditure 6.1 3.1 - - (b) Mine development 31.1 30.2 - - 37.2 33.3 - - Depreciation of property, plant and equipment 97.0 88.2 - - Less: Depreciation capitalised 2.5 - - - Depreciation expensed 94.5 88.2 - - Borrowing costs - (a) Interest paid/payable - (i) Controlled entities - - 9.0 20.0 (ii) Other persons and/or corporations 20.8 14.7 - - (b) Other finance charges 3.2 5.7 - - Total borrowing costs 24.0 20.4 9.0 20.0 Less: borrowing costs capitalised 3.0 - 3.0 - Borrowing costs expensed 21.0 20.4 6.0 20.0 Rent expense relating to operating leases 14.9 12.7 - - Exploration costs 21.2 22.7 - - Research and development costs 7.7 10.8 - - Government royalties 2.0 1.6 - - Superannuation 16.2 15.7 - - Net foreign exchange loss 11.5 0.4 - 0.4 Net loss on disposal of property, plant and equipment 0.8 - - - Provisions - (a) Employee entitlements 26.2 22.7 - - (b) Workers’ compensation 19.4 19.4 - - (c) Restoration 1.1 0.9 - - (d) Sundry 0.7 0.1 - - 47.4 43.1 - - Credits Dividends received/receivable - Controlled entities - - - 0.5 Interest received/receivable - (a) Controlled entities - - 17.3 23.9 (b) Other persons and/or corporations 7.5 3.3 0.5 - Net foreign exchange gain - - 0.3 - Net bad and doubtful trade debts (note 6(a)) 0.5 0.4 - - Net profit on disposal of property, plant and equipment - 2.2 - - Profit on share buy back - Controlled entity - - 2.8 - 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 50

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 4 Abnormal Items The following abnormal item was credited /(charged) in arriving at the operating profit after tax: Credit Release of environmental provision (a) 30.3 - - - Charge Provision for retired staff medical benefits (b) - (8.2) - - Abnormal items before income tax 30.3 (8.2) - - Applicable income tax (charge) /credit (6.6) 2.9 - - Abnormal items after income tax 23.7 (5.3) - -

(a) In the light of progress to date with Budel Zink’s environmental program, Pasminco has reduced the provision in agreement with the Dutch Authorities. The remaining environmental provision is sufficient to complete the program previously agreed with the Dutch Authorities. (b) On formation, Pasminco took over the obligations for a Retired Staff Medical Benefits Scheme relating to the sites previously part of the Rio Tinto Limited Group (then CRA Limited). Eligibility of this scheme was restricted to employees retiring before 1987 ie before Pasminco’s formation. In prior years Pasminco expensed any payments as incurred. An actuarial review was used to establish the necessary provision for future expenditure.

5 Income Tax 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) (a) The prima facie tax payable on the operating profit differs from the income tax provided in the accounts and is reconciled as follows: Operating profit 102.7 101.8 15.0 5.1 Prima facie tax payable at 36% 37.0 36.7 5.4 1.8 Taxation charge on profit for the year 39.4 37.1 4.4 1.3 Variation from prima facie tax 2.4 0.4 (1.0) (0.5) The following major items caused the charge for income tax to vary from the prima facie tax payable on reported profit: Permanent differences – Exempt income - (2.3) - (1.5) Development allowance (0.5) (6.4) - - Research and development allowance (2.5) (2.9) - - Non-allowable depreciation and amortisation 19.2 14.5 - - Non-assessable capital profit - (0.8) (2.8) - Non-allowable demolition expenditure 1.4 1.2 - - Non-assessable component of environmental provision write-back (11.4) - - - Sundry (0.6) 0.5 - - Total permanent differences 5.6 3.8 (2.8) (1.5) Tax effect of these differences at 36% 2.0 1.4 (1.0) (0.5) Tax on overseas income at lower rates (1.0) (0.6) - - Overseas tax losses not brought to account 2.4 2.3 - - Under/(over) provision for previous years (1.0) (2.7) - - Consequent increase/(decrease) in tax charge 2.4 0.4 (1.0) (0.5) 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 51

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 5 Income tax (continued) (b) Analysis of future income tax benefits: Future income tax benefits arising from tax losses of controlled entities which have been brought to account amount to: 102.9 102.5 - - Future income tax benefits arising from timing differences amount to: - 0.2 - - 102.9 102.7 - - Future income tax benefits arising from tax losses of controlled entities which have been offset against the provision for deferred income tax amount to: 34.2 30.0 - -

(c) Deferred income tax liability arising from timing differences net of the offset of future income tax benefit, amounts to: 96.3 66.6 4.7 2.8

(d) The Directors’ estimate that the potential future income tax benefit at 30 June 1998, in respect of tax losses not brought to account is: 13.7 8.6 - -

The benefit of these tax losses will only be obtained if: (i) the economic entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised; (ii) the economic entity continues to comply with the conditions for deductibility imposed by tax legislation; and (iii) no changes in tax legislation adversely affect the economic entity in realising the benefit from the deductions for the losses. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 52

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 6 Current Assets - Receivables Trade debtors 181.9 189.2 - - Less provision for doubtful debts (a) 0.6 1.2 - - 181.3 188.0 - - Other debtors 13.0 12.4 - - Trade debts receivable from controlled entities - - 527.4 397.9 194.3 200.4 527.4 397.9 (a) Reconciliation of provision for doubtful debts Opening balance 1.2 1.6 - - Doubtful debts previously provided for written back during the year (0.8) (0.7) - - Bad and doubtful debts provided for during the year 0.3 0.3 - - Bad debts written off against the provision (0.1) - - - Closing balance 0.6 1.2 - -

7 Current Assets - Inventories Raw materials and stores (at cost) 84.8 78.7 - - Less provision for diminution in value 1.0 1.1 - - 83.8 77.6 - - Work in progress At cost 129.5 78.3 - - At net realisable value 10.3 18.5 - - 139.8 96.8 - - Finished goods At cost 88.2 73.9 - - At net realisable value 0.1 1.5 - - 88.3 75.4 - - 311.9 249.8 - - 8 Current Assets - Other Short-term deposits 3.4 2.4 - - Prepayments 12.9 14.5 - - Deferred net option premiums 12.2 - - - Land held for resale at written down value (a) 7.3 - - - Property, plant and equipment held for resale at written down value (b) 2.0 - - - 37.8 16.9 - - (a) Land held for resale Cost of acquisition of the land 2.5 2.5 - - Costs incurred in developing the land which have been recognised as part of its carrying value 6.4 6.4 - - Other costs incurred which have been recognised as part of its carrying value Pasminco Group formation adjustment 1989 5.1 5.1 - - Provision for loss on sale (10.6) (8.5) - - Exchange rate adjustment 3.9 0.5 - - Carrying value at 30 June 7.3 6.0 - - In the previous year, land held for resale was included as a non-current asset under freehold and leasehold land and buildings. (b) Property, plant and equipment held for resale At cost 3.5 - - - Accumulated depreciation (1.5) - - - Carrying value at 30 June 2.0 - - - 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 53

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 9 Non-current Assets - Receivables Loans receivable from controlled entities - - 476.9 142.7 Other receivables - 0.1 - - - 0.1 476.9 142.7 10 Non-current Assets - Investments (a) The investments include: Unlisted investments Shares in controlled entities (note 10(c)) - - 1,065.7 893.9 Investment in Century Zinc Limited (note 10(b)) - 10.0 - 10.0 - 10.0 1,065.7 903.9

(b) On 9 January 1997, the Group agreed to purchase from the Rio Tinto Group (formally the CRA Group) both Century Zinc Limited and the Rio Tinto Group’s interest in the Dugald River joint venture. A deposit of $10 million was paid with the balance of $335 million due on settllement. Settlement was subject to the issue of valid mining leases, pipeline leases and port leases. On 24 September 1997, Pasminco settled with Rio Tinto the 100% purchase of Century Zinc Limited for $322.5 million and Dugald River joint venture for $22.5 million. Century Zinc Limited has been renamed Pasminco Century Mine Limited. Details of the acquisition of Pasminco Century Limited are as follows:

Fair Value of Identifiable Net Assets of Controlled Entity Acquired $m Sundry debtors 0.3 Prepayments 0.2 Land and buildings 5.1 Plant, machinery & equipment 17.3 Mine properties & development 345.9 Provisions (2.4) Net deferred tax balances (43.8) Creditors & accruals (0.1) 322.5 Net cash effect Cash consideration paid for purchase of shares 163.8 Cash consideration paid for settlement of loan 158.7 322.5 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 54

Notes to the Financial Statements

10 Non-current Assets - Investments (continued) (c) Unquoted investments of the chief entity in controlled entities which are all wholly owned comprise the following:

Country of Investment of Investment of Notes Incorporation Pasminco Limited Immediate entity 1998 1997 1998 1997 $thousands $thousands American Zinc Company B USA 22,165 22,165 Budel Management BV A Netherlands 32 27 Budel Zink BV A Netherlands 161 137 Budelco BV A Netherlands 8 7 Buzifac BV A Netherlands 32 27 Buzipon BV A Netherlands 32 27 Buzisur BV A Netherlands 32 27 North-West Acid Pty Limited D Australia - - Pasminco Australia Limited F Australia 354,444 354,444 Pasminco Broken Hill Mine Pty Limited F Australia 105,027 105,027 ($110 only) ($110 only) Pasminco Century Mine Limited C,F Australia 172,985 n/a Pasminco Cockle Creek Smelter Pty Limited F Australia 151,497 151,497 Pasminco Europe Limited A UK 62,400 62,400 Pasminco Europe (ISC Alloys) Limited A UK 699 559 Pasminco Europe (Mazak) Limited A UK 3,058 2,447 Pasminco Europe (Smelting) Limited A UK 23,719 18,975 Pasminco Exploration (Canada) Limited B,E Canada ($1 only) ($1 only) Pasminco Exploration & Mining BV A,G Netherlands 32 n/a Pasminco Exploration Private Limited A,G India 16 n/a Pasminco Europe (UK) BV A UK 28,377 28,377 Pasminco Finance Limited F Australia 20,000 20,000 Pasminco Incorporated B USA 41,467 33,727 Pasminco Insurance Private Limited A Singapore 1,935 1,935 Pasminco International Pty Limited C Australia 42,077 43,200 Pasminco International (Holdings) Pty Limited Australia 40 40 Pasminco Metals Pty Limited F Australia 2 2 Pasminco Netherlands (Holdings) BV A Netherlands 48 43 Pasminco Pacific Pty Limited Australia 23,101 23,101 Pasminco Pakistan (Private) Limited A Pakistan ($362 only) ($308 only) Pasminco Port Pirie Smelter Pty Limited F Australia 129,265 129,265 Pasminco Superannuation Pty Limited Australia ($2 only) ($2 only) Pasminco UK (Holdings) Limited A UK 13 13 Pasminco UK Limited A UK 17 13 Pasminco Zinc Limited B,C Cayman Islands 249,203 48,251 The Emu Bay Railway Company Limited F Australia 2,959 2,959 Warmframe Limited A,C UK 249,203 48,251 1,065,732 893,870

(A) These controlled entities had other member firms of Ernst & Young International acting as their auditors. (B) The accounts of these controlled entities have been reviewed by the auditors for inclusion in the consolidated accounts as a statutory audit is not required in the country of incorporation. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 55

Notes to the Financial Statements

(C) Acquisition of Controlled Entities and increases in Investments in Controlled Entities (a) On 24 September 1997, Pasminco Limited acquired 100% of the issued capital of Century Zinc Limited, subsequently renamed Pasminco Century Mine Limited, for $322.5 million (refer 10 (b)). The results of this entity have been included in the Group since this date. (b) On 23 October 1997, Pasminco International Pty Limited bought back 260,000 $1 ordinary shares held by Pasminco Limited at $15.12 per share. (c) On 3 September 1997, Pasminco Europe (UK) BV, a wholly owned controlled entity of the Pasminco Group, subscribed for 68 million 6% cumulative preference shares of 1 GBP each in Warmframe Limited. (d) On 3 September 1997, Warmframe Limited, a wholly owned controlled entity of the Pasminco Group, subscribed for 68 million ordinary shares of 1 GBP each in Pasminco Zinc Limited. (D) This controlled entity was deregistered during the year. (E) This controlled entity is currently in the process of being liquidated (F) Pursuant to Class Order 95/1530, relief has been granted to these identified controlled entities of the parent entity from the Corporations Law requirements for preparation, audit and publication of accounts. As a condition of the Class Order, the parent entity and the identified controlled entities entered into a deed of cross guarantee on 23 April 1997. Under the deed of cross guarantee, all of the named companies guarantee the debts of the other named companies. This guarantee is conditional upon the winding up of any companies which are a party to the deed. The aggregate assets and liabilities of the companies subject to the deed as at 30 June 1998, and the aggregate result of these companies for the year then ended (after eliminating inter-company investments and other inter-company transactions) are as follows:

1998 $m 1997 $m Assets 2,209.7 1,386.4 Liabilities 667.5 582.2 Profit after income tax (13.0) 38.5 (G) This controlled entity was incorporated during the year.

Movements in the value of the investment of the immediate entity represent exchange rate fluctuations except where detailed in (C) and (G) above. Rounding to the nearest thousand dollars has been adopted except where shown.

11 Non-current Assets - Property, Plant and Equipment 1998 $m 1997 $m 1998 $m 1997 $m

(Consolidated) (Pasminco Limited) Property, plant and equipment are included in the accounts on the following bases: (a) Freehold and leasehold land and buildings At cost 51.1 50.5 - - Less: accumulated depreciation 14.3 10.3 - - 36.8 40.2 - - At Directors’ valuation 1979 4.4 4.5 - - Less: accumulated depreciation 2.1 2.0 - - 2.3 2.5 - - Total freehold and leasehold land and buildings 39.1 42.7 - - Construction in progress (at cost) 113.9 89.9 - - Plant and equipment At cost 1,292.3 1,179.0 - - Less: accumulated depreciation 695.6 622.7 - - 596.7 556.3 - - At Directors’ valuation 1979 74.9 74.9 - - Less: accumulated depreciation 67.9 64.9 - - 7.0 10.0 - - At Directors’ valuation 1992 27.8 27.8 - - Less: accumulated depreciation 17.8 15.0 - - 10.0 12.8 - - Total plant and equipment 766.7 711.7 - - (b) Capitalised exploration and evaluation expenditure (d) 29.7 23.8 - - (c) Mine properties and development At cost 1,084.8 410.4 - - Less: accumulated depreciation 243.2 213.3 - - 841.6 197.1 - - At Directors’ valuation 1992 23.0 23.0 - - Less: accumulated depreciation 8.4 7.2 - - 14.6 15.8 - - Total mine properties and development 856.2 212.9 - - Total property, plant and equipment 1,652.6 948.4 - - 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 56

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 11 Non-current assets - Property, Plant and Equipment (continued)

(d) Capitalised Expenditure in the Exploration and Evaluation Phase Cost brought forward 23.8 15.1 - - Expenditure incurred during current year 27.1 31.4 - - Less expenditure written off during current year 21.2 22.7 - - Cost carried forward 29.7 23.8 - -

An independent valuation of the Australian freehold land and buildings of the Pasminco Group was undertaken by AT Cocks and Partners Pty. Ltd. during the previous year. The freehold land and buildings held overseas were subject to a Directors’ valuation. All valuations are estimates of the amounts for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction at the valuation date. The valuation of freehold land and buildings for the Pasminco Group is $53.9M (1997 - $46.7M). This compares with the net written down value of $48.2M shown in the balance sheet (1997 - $42.7M). It is the policy of the economic entity to ensure an independent valuation and/or a Directors’ valuation of freehold land and buildings is undertaken at least once every three financial years. The market value of the economic entity’s operations is subject to cyclical variation because of changes in internationally determined metal prices and exchange rates. It is the economic entity’s policy to assess the recoverable amount of non-current assets using long-term metal price and exchange rate parameters. No assets are carried in excess of their recoverable amount. This basis of valuation is consistent with the existing use of the assets to the business as a going concern and does not purport to show the current market value of assets. Where this assessment indicates a permanent loss in value of the assets of an operation, an appropriate writedown is made.

12 Non-Current Assets - Other Net deferred expenditure (note 1(o)) 20.0 10.1 - - Deferred foreign exchange hedge loss (note 1(c)) 33.0 10.9 - - 53.0 21.0 - -

13 Current Liabilities - Accounts Payable Trade creditors 225.6 131.5 - 0.1 Other creditors 1.9 1.8 - - 227.5 133.3 - 0.1 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 57

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 14 Current Liabilities - Borrowings Bank overdrafts 5.1 1.3 - - Revolving bank credits 8.3 17.7 - - Transferable loan certificates - 66.7 - - Short-term borrowings - controlled entities - - 18.7 0.2 13.4 85.7 18.7 0.2 15 Current Liabilities - Provisions Taxation 31.3 - - - Employee benefits 41.1 39.1 - - Restoration - mining operations 0.4 0.3 - - Restoration - smelting operations 27.5 14.4 - - Workers’ compensation 17.8 16.4 - - Dividends 45.0 31.8 45.0 31.8 Sundry 3.0 1.1 - - 166.1 103.1 45.0 31.8 16 Non-current Liabilities - Accounts Payable Sundry creditors 0.1 0.7 - - 17 Non-current Liabilities - Borrowings Transferable loan certificates 133.5 108.7 - - Long-term borrowings - controlled entities - - 315.2 357.5 Synthetic loans - 0.4 - - Revolving bank credits 81.9 66.7 - - 215.4 175.8 315.2 357.5 Summary of economic entity net debt position (All amounts are unsecured) The economic entity’s net debt position may be summarised as follows: Bank overdrafts 5.1 1.3 - - Revolving bank credits 90.2 84.4 - - Synthetic loans - 0.4 - - Transferable loan certificates 133.5 175.4 - - Gross debt 228.8 261.5 - - Less: Cash & short term deposits 62.3 22.4 - - Economic entity net debt at 30 June 166.5 239.1 - - Being: Current 13.4 85.7 - - Non-current 215.4 175.8 - - Less: Cash & short term deposits 62.3 22.4 - - Economic entity net debt at 30 June 166.5 239.1 - - 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 58

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 18 Non-current Liabilities - Provision Employee benefits 24.8 24.7 - - Deferred income tax 96.3 66.6 4.7 2.8 Restoration - mining operations 14.2 10.4 - - Restoration - smelting operations 137.7 168.9 - - Workers’ compensation 25.2 21.6 - - 298.2 292.2 4.7 2.8

19 Share Capital - Pasminco Limited (a) Authorised 2,000,000,000 ordinary shares of $1 each 2,000.0 2,000.0 2,000.0 2,000.0 (b) Issued and paid up 1,124,630,499 (1997-795,086,120) ordinary shares of $1 each fully paid 1,124.6 795.1 1,124.6 795.1 (c) Employee share scheme On 14 November 1997, 11,924,000 options at an exercise price of $1.84 were issued over ordinary $1.00 shares (refer note 35). (d) Shares issued during the year To assist in the financing of the Pasminco Century Mine Limited and Dugald River acquisition and the development of the Century mine the following share issues took place: On 25 September 1997, a global offering to institutions of 79,500,000 fully paid ordinary shares was made at $2.30 per share. On 24 September 1997, the company announced a renounceable rights issue of new shares on a 2 for 7 basis at a price of $2.00 per share. On 14 November 1997, the company announced that 249,909,879 ordinary shares were issued as a result of the rights issue. During the year, 134,500 share options were exercised by Budel Zink BV employees and employees leaving the Group and in accordance with the special provisions of the scheme.

20 Reserves Share premium account 418.5 79.3 418.5 79.3 Capital reserve 4.6 4.6 - - Foreign currency translation 30.2 5.0 - - 453.3 88.9 418.5 79.3 Movements in reserves: Share premium account Balance at the beginning of the financial year 79.3 78.9 79.3 78.9 Premiums on shares issued during the year: Share placement 103.4 - 103.4 - Rights issue 249.9 - 249.9 - Pasminco employee option plan 0.1 0.4 0.1 0.4 Share issue expenses (14.2) - (14.2) - Balance at the end of the financial year 418.5 79.3 418.5 79.3 Foreign currency translation Balance at the beginning of the financial year 5.0 10.9 - - Gain/(loss) on translation of overseas controlled entities 25.2 (5.9) - - Balance at the end of the financial year 30.2 5.0 - - 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 59

Notes to the Financial Statements 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) 21 Receivables and Payables not Effectively Hedged (a) Current foreign exchange exposures – economic entity, at 30 June. Of the $602.9 million current assets (1997 – $487.1 million) and $407.0 million current liabilities (1997 – $322.1 million) disclosed in the balance sheet, receivables and payables denominated in foreign currencies not effectively hedged are: (A$ equivalents) (i) Current assets UK pounds 1.8 3.1 - - US dollars 5.2 13.1 - - Other 29.6 24.4 - - 36.6 40.6 - - (ii) Current liabilities UK pounds - 0.3 - - US dollars 3.6 14.8 - - Other 4.2 2.7 - - 7.8 17.8 - - (iii) Net current assets/ (current liabilities) UK pounds 1.8 2.8 - - US dollars 1.6 (1.7) - - Other 25.4 21.7 - - 28.8 22.8 - -

(b) Non-current foreign exchange exposure – economic entity, at 30 June. There are no material non-current foreign exchange exposures in the economic entity as at 30 June 1998. Hedging of the loans denominated in US dollars is undertaken by: (i) Utilising the natural hedge afforded by the economic entity’s US dollar denominated net monetary receivables. (ii) Utilising the large US dollar revenue stream arising from metal and concentrate sales. (iii) Hedging of loan repayments utilising currency options (refer note 22).

22 Financial Instruments Derivatives, including Off-balance Sheet Risk Hedging is undertaken in order to avoid or minimise possible adverse financial or cash flow effects of movements in exchange rates and commodity prices. The economic entity manages these exposures using a comprehensive set of policies and procedures approved by the Board of Directors. Financial risk is managed centrally, and no speculative trading has taken place throughout the current year. Instruments used by the economic entity to hedge natural exposures to exchange rates and commodity prices include forward foreign exchange contracts, currency options and metals futures. Accounting for these instruments is outlined in notes 1(b) and 1(c). (a) Interest Rate Risk Management The economic entity does not have any exposure to fixed interest rates with all interest rates on borrowings and cash investments being transacted at the market rate. The current hedging policy in relation to interest rate risk is for the economic entity to be exposed to the market rate. The weighted average interest rate received on financial assets and paid on financial liabilities was as follows:- Financial Assets Average Interest Rate % Cash and cash equivalents 4.9 Financial Liabilities Borrowings 6.4 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 60

Notes to the Financial Statements

22 Financial Instruments (continued) (b) Foreign Exchange Risk Management The economic entity enters into foreign exchange contracts and currency options to hedge capital obligations and expenses and revenues denominated in foreign currencies. The following table sets out at balance date the outstanding foreign currency contracts and foreign currency options, the weighted average contracted exchange rates and settlement dates of outstanding contracts:-

Forward Foreign Exchange Contracts Maturity date of transactions 6 month ending Average 31/12/98 30/06/99 31/12/99 Total Contract price A$m A$m A$m A$m USD/NLG forward 2.03 27.9 - - 27.9 USD/AUD forward 0.7333 279.6 259.1 145.9 684.6 AUD/GBP forward 0.3636 2.8 - - 2.8 USD/European currencies various 30.2 13.2 9.4 52.8

Currency Options Maturity date of transactions 12 months ending 30/06/99 30/06/00 30/06/01 30/06/02 Total A$m A$m A$m A$m A$m AUD/USD purchased 265.0 410.6 546.4 185.3 1,407.3 Average rate 0.6793 0.6820 0.6589 0.6475 AUD/USD sold 300.8 464.8 614.0 208.6 1,588.2 Average rate 0.5984 0.6024 0.5863 0.5753

This listing excludes the internal forward exchange contracts held between controlled entities. (c) Commodity Price Risk Management The economic entity is exposed to commodity price volatility on commodity sales made by mines and smelters and raw materials purchased by the smelters. The economic entity enters into futures contracts to hedge commodity exposures with the objective of obtaining the LME commodity price existing at the date of the transaction. The following outlines metals futures contracts entered into as at 30 June 1998:-

Metals Futures Contracts Maturity date of transactions 6 months ending Average 31/12/98 30/06/99 31/12/99 30/06/2000 Total Contract price A$m A$m A$m A$m A$m US $ per tonne (i) Zinc Contracts purchased 1,170 105.8 33.2 15.8 3.1 157.9 Contracts sold 1,099 (1.9) (19.8) - - (21.7) Net position 103.9 13.4 15.8 3.1 136.2 (ii) Lead Contracts sold 533 (3.5) - - - (3.5) (iii) Silver US $ per ounce Contracts purchased 5.38 0.7 - - - 0.7

(d) Credit Risk Credit risk represents the loss that would be recognised if the counterparties to financial instruments fail to perform as contracted. On Balance Sheet The credit risk on financial assets of the economic entity which have been recognised on the balance sheet is generally the carrying amount, net of any provisions for doubtful debts. The economic entity minimises concentration of credit risk by undertaking transactions with a large numbers of customers in various countries. The economic entity is not materially exposed to any individual customer. Credit risk in trade receivables is also managed in the following ways: - payment terms are generally 30 days; - a regular risk assessment process is undertaken with credit limits imposed on customers; - export sales are predominantly covered by a letter of credit with approved financial institutions; and - credit insurance is obtained for export sales debtors on open terms. Off Balance Sheet Credit risk arising from dealings in financial instruments is controlled by a strict policy of credit approvals, limits and monitoring procedures. The economic entity has no significant concentration of credit risk with any single counterparty. Credit exposure of foreign currency and commodity derivatives is represented by the net fair value of the contracts, as disclosed. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 61

Notes to the Financial Statements

22 Financial Instruments (continued) (e) Net Fair Value The following methods and assumptions were used to estimate the net fair values. Cash & Cash Equivalents, Debtors, Creditors, Dividends Payable and Short-term Borrowings The carrying amounts of these financial instruments approximate net fair value because of their short maturity. Long-term Borrowings The carrying amounts of these financial instruments approximate net fair value because interest is charged at the current prevailing market rate. Foreign Currency Forwards and Commodity Hedging Contracts Carrying amounts for commodity and foreign currency futures and forwards are based on the revaluation of open contracts at 30 June 1998 against spot rates at that date. The fair value disclosed represents the same contracts on a mark-to-market basis using forward rates and prices. Options For purchased call options, the fair value disclosed represents the difference between the forward rate and the strike price where the option is in the money. Where the option is not in the money, the fair value is nil. For sold put options, the fair value disclosed represents the difference between the forward rate and the strike price where the option is out of the money. Where the option is not out of the money, the fair value is nil.

The net fair value of unrecognised financial instruments at balance date are as follows: Off Balance Sheet $m Foreign currency forward contracts (129.0) Currency options (2.8) Metals futures contracts (17.8)

Foreign currency forward contracts relate to the conversion of USD borrowings to AUDs’ to fund the AUD portion of expenditure required to construct the Century Mine. The contracts ensure the USD borrowings will be sufficient to meet the budgeted AUD expenditure on the project. The foreign currency forward contracts were established at rates less favourable than the rate at balance date. The contracts mature progressively throughout the construction period and the gain or loss on each contract will be determined by the exchange rate at the time of drawdown. The gains or losses on the foreign currency forward contracts will be amortised over the period of the project. Metals futures contracts match existing fixed price sale commitments to external customers.

Liquidity Risk Liquidity risk arises from the possibility that a market for derivatives may not exist in some circumstances. To counter this risk, the economic entity only uses derivatives in highly liquid markets.

23 Contingent Liabilities During the course of the 1994 financial year certain warranties were issued by the entity in relation to the sale of UK based assets of the Group. At the date of this report, the directors are not aware of any claims or intentions to claim under these warranties and indemnities. Pasminco Australia Limited has guaranteed a residual value of $6.9 million (1997: $5.9 million) for a shiploader it is currently operating under lease. Pasminco Limited has, with certain exceptions, guaranteed all the obligations of Pasminco Finance Limited. Pasminco Limited has guaranteed a US$5 million (1997: US $5 million) revolving bank credit loan taken out by Pasminco Incorporated. Pasminco Limited has guaranteed the obligations of certain controlled entities in relation to Banker’s Undertakings provided by the Company’s bankers to the controlled entities’ respective Workers’ Compensation authorities. In relation to the Pasminco Century Project, the following bank guarantees have been entered into: - a $8.3 million guarantee to the Queensland Department of Mines and Energy in relation to rehabilitation works of which $4.4 million has been provided for in the financial statements; - a $0.7 million guarantee to the Queensland Department of Transport in relation to the security deposit under the Pipeline Corridor Licence; - a $0.25 million guarantee to the Gulf Aboriginal Development Corporation in relation to environmental management; and Cross guarantees by Pasminco Limited and other Group companies are as described in note 10(c)(F). 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 62

Notes to the Financial Statements

($thousands) ($thousands) ($thousands) ($thousands) 1998 1997 1998 1997 24 Commitments for Expenditure (Consolidated) (Pasminco Limited) (a) Capital expenditure contracted for at balance date but not provided for is as follows: Payable not later than one year 307.8 38.3 - - Payable later than one year but not later than two years 20.7 5.1 - - 328.5 43.4 - - The capital expenditure obligations predominantly relate to contracts entered into for the construction and operation of the Pasminco Century Project. (b) Lease expenditure commitments Operating leases: Not later than one year 13.8 13.1 - - Later than one year and not later than two years 12.8 12.1 - - Later than two years and not later than five years 18.9 28.1 - - Aggregate lease expenditure contracted for at balance date but not provided for: 45.5 53.3 - - The operating lease obligations predominantly relate to a long-term ship time charter.

25 Auditors’ Remuneration Amounts received, or due and receivable by the auditors of Pasminco Limited for: -an audit or review of the financial statements of the entity and any other entity in the economic entity 401 384 90 90 -other services in relation to the entity and any other entity in the economic entity 160 158 92 103 561 542 182 193 Amounts received or due and receivable by auditors other than the auditors of Pasminco Limited for: -an audit or review of the financial statements of the entity and any other entity in the economic entity 88 79 - - 649 621 182 193 26 Remuneration of Directors (a) The cost of amounts paid or payable, or otherwise made available, in relation to all Directors of each entity in the economic entity, directly or indirectly, by the entities of which they are Directors or any related party 1,557 1,343 - - (b) The cost of amounts paid or payable, or otherwise made available, to Directors of Pasminco Limited, directly or indirectly, from the entity or any related party - - 1,557 1,343 (c) Number of Directors of Pasminco Limited whose total remuneration falls within the following bands: 50,000 - 59,999 5 5 100,000 - 109,999 1 - 110,000 - 119,999 - 1 360,000 - 369,999 - 1 410,000 - 419,999 1 - 600,000 - 609,999 - 1 760,000 - 769,999 1 -

(d) Details of options in Pasminco Limited shares granted to Directors during the year ended 30 June 1998 are set out in the Directors’ Report. Details of the employee share scheme are set out in note 35. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 63

Notes to the Financial Statements

($thousands) ($thousands) ($thousands) ($thousands) 1998 1997 1998 1997 27 Remuneration of Executives (Consolidated) (Pasminco Limited) (a) The cost of amounts paid or payable to Executive Officers of the economic entity and the Company whose remuneration is $100,000 or more from entities in the economic entities and related entities in connection with the management of the affairs of these entities. 7,036 6,150 2,786 2,919 (b) The number of Executive Officers of the economic entity and the Company whose remuneration was at least $100,000 is shown in the following bands: 100,000 - 109,999 1 - - - 120,000 - 129,999 1 1 1 1 130,000 - 139,999 2 - - - 140,000 - 149,999 1 1 - - 150,000 - 159,999 2 2 - - 160,000 - 169,999 4 3 - - 170,000 - 179,999 2 2 - - 180,000 - 189,999 1 2 - - 190,000 - 199,999 2 1 - - 200,000 - 209,999 2 1 - - 210,000 - 219,999 - 3 - 1 220,000 - 229,999 3 1 - - 230,000 - 239,999 1 - - - 240,000 - 249,999 1 2 - 1 250,000 - 259,999 1 - 1 - 260,000 - 269,999 2 1 1 - 270,000 - 279,999 - 1 - 1 290,000 - 299,999 - - - - 310,000 - 319,999 2 - 2 - 320,000 - 329,999 - 1 - 1 330,000 - 339,999 1 - 1 - 360,000 - 369,999 - 1 - 1 410,000 - 419,999 1 - 1 - 600,000 - 609,999 - 1 - 1 760,000 - 769,999 (e) 1 1 1 1

(c) The remuneration reflected above excludes remuneration paid to those executives that worked mainly outside Australia for the whole of the financial year. (d) Executive Officers of the economic entity and the Company whose remuneration is $100,000 or more were granted 1,630,000 options (1997 - 860,000) over $1.00 ordinary Pasminco Limited shares during the year ended 30 June 1998. Options exercised during the year totalled 50,000 (1997 - 50,000). Details of the employee share scheme are set out in note 35. (e) Includes entitlements paid on resignation in 1997.

28 Earnings per Share (Refer Note 1(u)) 1998 1997 Basic earnings per share - cents 6.2 8.1 Basic earnings per share before abnormal items - cents 3.9 8.8 Weighted average number of ordinary shares outstanding during the financial year - million 1,016.1 794.8

Diluted earnings per share is not materially different from basic earnings per share. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 64

Notes to the Financial Statements

29 Superannuation Commitments The commitments not provided for in the accounts of the economic entity as at 30 June 1998 are: Economic entity companies participate in a number of superannuation and retirement benefit plans, the majority of which have been established by or sponsored by those companies or related companies. The plans provide benefits on retirement, disablement, death, retrenchment or withdrawal from service, the principal types of benefits being lump sum defined benefits and lump sum accumulation benefits. Contributions are made by employees and the employing corporations as percentages of salary or wages or specified dollar amounts as required by the relevant trust deeds.The latest actuarial assessments for those plans subject to actuarial supervision were as follows: Broken Hill Mine Employees’ Pension Fund, reviewed as at 30 June 1996 by R R Codron FIAA of William M Mercer Pty Ltd, BHAS Employees Superannuation Fund, reviewed as at 30 June 1995 by R R Codron FIAA of William M Mercer Pty Ltd, Pasminco Superannuation Fund, reviewed as at 30 June 1995 by R R Codron FIAA of William M Mercer Pty Ltd, Sulphide Pensions Fund, reviewed as at 31 December 1995 by R R Codron FIAA of William M Mercer Pty Ltd. The last actuarial review of the Broken Hill Mine Employees’ Pension Fund indicated that there were sufficient assets to cover the vested benefits payable on voluntary termination of each and every employee member. In the unlikely event of the compulsory termination of each and every employee member at 30 June 1996 there would have existed a potential deficiency of Fund assets of $4.9 million. Other than in the event of the closure of mining operations and the resultant compulsory termination of each and every employee member, no contingent liability would have arisen had the Fund been terminated as at 30 June 1996. The Company has raised its contributions to compensate for the known increased level of compulsory terminations over recent years and to finance future prospective liabilities. The last actuarial assessment for the BHAS Employees Superannuation Fund indicated that the Fund’s assets were sufficient to cover the Company’s obligations under the Superannuation Guarantee legislation. A shortfall of $271,000 existed in the event of the voluntary termination of the employment of each employee provided all employees elected the “cash/partly preserved” benefit option. However, if a member on voluntary termination elects to receive a “fully preserved benefit”, the benefit is calculated in the same way as the benefit payable on the compulsory termination of the employment of the employee by the employer (ie, on retrenchment). In the unlikely event that each and every member was compulsorily terminated (or voluntarily terminated and chose the “fully preserved” option), there would have been a potential deficiency of Fund assets of $3.94 million at 30 June 1995. The Company has maintained its practice of funding additional amounts in respect of every terminating member with the aim of maintaining the Fund’s solvency. The last actuarial review of the Pasminco Superannuation Fund’s financial position carried out as at 30 June 1995 indicated that there were sufficient assets to cover the vested benefits payable on the voluntary termination of each employee or the termination of the Fund. In the unlikely event of the compulsory termination of each and every employee member, there was a potential shortfall of Fund assets of $12.4 million at 30 June 1995. The last actuarial review of the Sulphide Pensions Fund as at 31 December 1995 indicated that the funds assets were sufficient to satisfy all benefits that would have been vested under the Fund in the event of: termination of the fund; voluntary termination of the employment of each employee on the initiative of that employee; and compulsory termination of the employment of each employee by the employer. With the exception of the contribution obligations in respect of those members of the Pasminco Superannuation Fund who were members of the CRA Staff Provident Fund immediately prior to joining the Fund, the contribution obligations to the respective plans are legally enforceable only up to the date upon which any such obligation is terminated by appropriate action pursuant to the relevant trust deed, subject to the terms of any relevant award agreement. In respect of the ex-members of the CRA Staff Provident Fund, the obligation to contribute is enforceable to the extent necessary to finance the defined benefits provided under the Rules of the Pasminco Superannuation Fund in relevant circumstances. The accrued benefits and Fund assets at net market value at the previous actuarial review dates, together with the Fund assets net market value and the vested benefits disclosed in the Fund’s most recently available statements, are as follows:

Broken Hill BHAS Pasminco Sulphide Mine Employees’ Superannuation Pensions Employees’ Superannuation Fund Fund Pension Fund Fund

$’000 $’000 $’000 $’000 Fund assets at net market value at actuarial review date 42,377 17,921 106,908 14,626 Accrued benefits at actuarial review date 40,738 17,657 106,643 13,219 Excess of Fund assets over accrued benefits 1,639 264 265 1,407 Date of most recent actuarial review 30/06/96 30/06/95 30/06/95 31/12/95 Fund assets at net market value at most recently available year end 42,722 25,288 121,459 14,867 Vested benefits at most recently available year end 35,070 27,201 115,583 12,535 Date of most recent year end 30/06/97 30/06/97 30/06/97 31/12/97

Notes: 1. Accrued benefits have been determined based on the amounts calculated by the Fund’s actuary at the most recent actuarial review. These amounts represent the present value of the benefits which the Fund is presently obliged to pay at some future date as a result of membership of the Fund as at the date of the actuarial review. 2. Vested benefits are benefits which are not conditional upon the continued membership of the Fund or any factor other than resignation from the Fund. 3. The value of the accrued benefits at the last actuarial reviews did not make any specific allowance for retrenchment benefits. 4. The vested benefits at 30 June 1997 shown in the BHAS Employees Superannuation Fund financial statements assumed that all members would have elected the “fully preserved” option. 5. The BHAS Employees’ Superannuation Fund and Pasminco Superannuation Fund are currently in the process of an actuarial review. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 65

Notes to the Financial Statements

30 Segment Information Industry segments: The principal activity of the economic entity comprises the conduct of an integrated lead and zinc business, including exploration for and mining of ores, concentrating to saleable concentrates, smelting of metals and marketing in a primary form.

Geographical Segments Australia Overseas Total 1998 $m 1997 $m 1998 $m 1997 $m 1998 $m 1997 $m External sales 987.5 1,046.6 382.6 306.2 1,370.1 1,352.8 Operating profit before abnormal items and income tax 6.6 76.3 65.8 33.7 72.4 110.0 Total assets 2,212.7 1,386.4 198.7 182.9 2,411.4 1,569.3

Compilation of segment information: The division of the economic entity’s results and assets into geographical segments has been ascertained by reference to direct identification of assets and revenue/cost centres and where inter-related segment costs exist, an allocation has been calculated on a pro-rata basis of the identifiable assets and/or costs. Inter-segment pricing is on an arm’s-length market basis. Inter-segment transactions are not material. Segment results reflect the allocation of the economic entity’s net external finance charges apportioned on the basis of total assets employed (intra group interest has been eliminated).

31 Franked Dividends 1998 $m 1997 $m 1998 $m 1997 $m (Consolidated) (Pasminco Limited) (a) The franked portion of dividends paid during the year franked @ 36 cents (1997 - 36 cents) 30.6 23.8 30.6 23.8 (b) Amount of dividends provided for in the current year. The final dividend of 4 cents has not been franked, (1997 - 4 cents, 96% franked @ 36 cents). 45.0 31.8 45.0 31.8 (c) Franking account balance at 30 June franked @ 36 cents 0.2 0.3 - -

The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for: (a) franking credits that will arise from the payment of income tax payable as at the end of the year, (b) franking debits that will arise from the payment of dividends proposed as at the end of the year, and (c) franking credits that may be prevented from being distributed in the subsequent year.

32 Related Parties Related parties of Pasminco Limited (ultimate parent entity) fall into the following categories: Controlled Entities Transactions with entities in the wholly owned Group during the year included sales on a commercial basis, interest charged/earned on a commercial basis, dividends paid and received, hedging transactions, asset sales, borrowings on a commercial basis and tax loss transfers. Directors The names of persons who were Directors of the chief entity as at the date of this report are set out in the Directors’ Report. There have been no changes in Directors since 30 June 1997. Transactions of Directors and Director Related Entities Concerning Shares or Options The aggregate number of shares acquired by Directors of the Company and their Director related entities in the Company was 47,974 fully paid ordinary shares and 400,000 (1997 - 275,000) options under the Pasminco Limited Employee Option Plan. There were nil shares and options disposed of by Directors and their Director related entities in the Company. The aggregate number of shares and share options held directly, indirectly or beneficially by Directors and their Director related entities in the Company at balance date was 80,374 (1997 - 32,400) fully paid ordinary shares, and 900,000 (1997 - 500,000) options under the Pasminco Limited Employee Option Plan.

Information on the remuneration of Directors is set out in note 26. Superannuation Fund Information in respect of the entity’s superannuation funds is set out in note 29. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 66

Notes to the Financial Statements

33 Joint Ventures A controlled entity, Pasminco Port Pirie Smelter Pty. Limited, participates in the Australian Refined Alloys (ARA) joint venture to produce and market lead alloys ex-secondary materials. Pasminco Port Pirie Smelter Pty. Limited has a 50% interest in the assets, liabilities and output of this joint venture. Another controlled entity, Pasminco Pakistan (Private) Limited, participates in a joint venture for the exploration and development of ore deposits in Pakistan. Activities thus far have been restricted to exploration drilling and feasibility studies. Pasminco Pakistan (Private) Limited has met all costs to date and owns all the assets associated with the joint venture. As a consequence, details of the Pakistan joint venture are not included with the production joint venture information shown below. The share of assets employed in the ARA joint venture is included in the economic entity balance sheet under the following classifications.

1998 $m 1997 $m

(Consolidated) (Consolidated) Non-current assets – property, plant and equipment 2.7 2.5 Current assets – receivables 1.3 1.2 Current assets – inventories 1.5 2.3 Share of assets employed in the ARA joint ventures 5.5 6.0

Output 11.2 11.8 Profit contribution to the economic entity result (before tax) 2.7 3.0

Output represents the economic entity’s share of the joint venture’s value of production. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 67

Notes to the Financial Statements 1998 $m 1997 $m (Consolidated) 34 Statement of Cash Flows (a) Components of cash (Refer note 1(r)) Cash, as shown in the statement of cash flows, is reconciled to the statements of financial position as follows: Cash at bank 58.9 20.0 Short-term deposits 3.4 2.4 Bank overdrafts (5.1) (1.3) 57.2 21.1 (b) Reconciliation of operating profit after tax to net cash provided by operating activities Operating profit after tax and abnormal items 63.3 64.7 Depreciation and amortisation 131.7 121.5 Net finance charges 13.5 17.1 Net (profit) loss on disposal of non-current assets 0.8 (2.2) Net exchange differences 11.5 2.8 Change in assets and liabilities Receivables – current (2.3) (27.4) Receivables – non-current 0.1 (9.6) Payables – current 97.2 (20.3) Payables – non-current (0.6) 0.3 Inventories (62.1) (8.9) Provisions (13.5) (24.6) Prepayments 1.9 0.1 Income tax payable 31.3 (2.0) Deferred income tax (14.0) 12.7 Future income tax benefit (0.2) 27.8 Other - (1.0) Net cash provided by operating activities 258.6 151.0

(c) A statement of cash flows for the chief entity, Pasminco Limited, has not been included as there were no material cash flows other than the payment of $31.8 million in dividends and $344.7 million investment in Pasminco Century Mine Limited and Dugald River funded by intra-Group borrowings. Net proceeds from share issues of $668.6 million were transacted via intra-Group accounts. The cash balance for Pasminco Limited at the beginning and end of the 30 June 1998 financial year is nil.

1998 $m 1997 $m 1998 $m 1997 $m 1998 $m 1997 $m (d) Current loan facilities Total Facilities Drawn at 30 June Undrawn at 30 June Long term 1,514 404 224 176 1,290 228 Short term 76 229 - 80 76 149 1,590 633 224 256 1,366 377

These facilities comprise: (i) US dollar facilities 984 - - - 984 - Syndicated loan 134 176 134 176 - - Transferable loan certificate facility 352 287 82 67 270 220 Revolving credit facilities 1,470 463 216 243 1,254 220

The transferable loan certificates were fully drawn down with a maturity date of February 2000. The revolving credit facilities have varying maturity dates through to June 2002.

(ii) Australian dollar facilities Multi option facility 75 75 8 7 67 68 Revolving credit facility - 50 - - - 50 Bank bill and cash facility 45 45 - 6 45 39 120 170 8 13 112 157

(iii) A lease facility with A$ and US$ components totalling A$6 million (1997-A$6 million) all undrawn at balance date. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 68

Notes to the Financial Statements

35 Employee Share Scheme After shareholder approval was obtained at the 1995 Annual General Meeting, the Pasminco Limited Employee Option Scheme was established where all full-time or permanent part-time employees of the Pasminco Group (including Executive Directors but excluding Non-Executive Directors) were offered options over ordinary $1.00 shares of Pasminco Limited. The options, issued for nil consideration, are issued in accordance with the guidelines established by the Directors of Pasminco Limited pursuant to the approved Scheme. The options cannot be transferred and will not be quoted on the Australian Stock Exchange. At 30 June 1998, options over shares pursuant to the Pasminco Limited Employee Option Plan are as follows:

No. of Options Year of Issue Exercise Price Expiry Date 4,128,000 1995 $1.67 10 November 2000 5,587,000 1996 $2.07 8 November 2001 11,924,000 1997 $1.84 14 November 2002

The total number of options outstanding as at 30 June 1998 was 21,639,000 which is equivalent to 1.9% of the total issued ordinary shares in the Company.

The Pasminco Limited Employee Option Scheme rules provides for the exercise price of options to be adjusted for the dilutive impact of a rights issue. Effective 1 October 1997, the 1995 and the 1996 option exercise price was reduced by six cents to $1.67 and $2.07 respectively arising from 249,909,879 ordinary shares being issued as a result of the rights issue to fund the Century mine project.

During the financial year, options over the shares of the Company have been exercised as follows:

Year of Issue No. of Options Exercised 1995 93,000 1996 41,500 1997 -

During the financial year, 11,924,000 options were granted on the basis that each option can, under most circumstances, be converted to one ordinary $1.00 share in the Company, after a two year period from the date of issue, by the holder subscribing $1.84 per share, being 10% above the weighted average sale price of Pasminco Limited shares on the Australian Stock Exchange over the five business days immediately before 14 November 1997. For employees other than those at Budel Zink BV, options can be exercised after 14 November 1999 and on or before 14 November 2002. Employees of Budel Zink BV can exercise options at any time on or before 14 November 2002. Under certain circumstances, such as redundancy, retirement or death, options may be exercised by Australian employees prior to 14 November 1999. Under the terms of the Plan, participants may, upon exercise of their options, participate in any issue of additional shares or bonus shares to shareholders.

The market value of ordinary $1.00 Pasminco Limited shares closed at $1.23 on Tuesday 30 June 1998 (the last trading day of the financial year). No other equities in any of the entities within the economic entity were acquired by or issued to employees during the year in relation to any other ownership-based remuneration scheme. 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 69

69 Directors’ Statement

In accordance with a resolution of directors of Pasminco Limited, we state that –

(1) In the opinion of the Directors:

(a) the profit and loss account is drawn up so as to give a true and fair view of the profit of the Company for the financial year ended 30 June 1998; (b) the balance sheet is drawn up so as to give a true and fair view of the state of affairs of the Company as at 30 June 1998; and (c) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

(2) In the opinion of the Directors the consolidated accounts: (a) give a true and fair view of: (i) the profit of the economic entity, constituted by the Company and the entities it controlled from time to time during the financial year, for the financial year ended 30 June 1998; and (ii) the state of affairs of the economic entity, constituted by the Company and the entities that it controls at the year’s end, as at 30 June 1998; and (b) have been made out in accordance with Divisions 4A and 4B of Part 3.6 of the Corporations Law.

(3) In the opinion of the Directors at the date of this statement: (a) there are reasonable grounds to believe that the closed group comprising the company and the controlled entities identified in note 10 will be able to meet any obligation or liabilities to which it is, or may become, subject by virtue of the deed of cross-guarantee disclosed in note 10; and (b) the company and the wholly owned controlled entities obtaining relief under the Class Order remain within the class of companies affected by the Class Order.

(4) In accordance with section 285(3) of the Corporations Law, the directors have elected to apply the requirements of AASB 1036: “Borrowing Costs” earlier than its mandatory application date.

On behalf of the Board.

M. R. Rayner Chairman

D. M. Stewart Managing Director and Chief Executive Melbourne, 26 August 1998 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 70

70 Auditors’ Report

To the members of Pasminco Limited

Scope We have audited the financial statements of Pasminco Limited for the financial year ended 30 June 1998, as set out on pages 44 to 69, including the Statement by Directors. The financial statements include the accounts of Pasminco Limited, and the consolidated accounts of the economic entity comprising Pasminco Limited and the entities it controlled at year’s end or from time to time during the financial year. The Company’s directors are responsible for the financial statements. We have conducted an independent audit of these financial statements in order to express an opinion on them to the members of the Company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial statements are free of material misstatement. Our procedures included examination on a test basis, of evidence supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial statements are presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements, and statutory requirements so as to present a view which is consistent with our understanding of the Company’s and the economic entity’s financial position, the results of their operations and their cash flows.

The names of the entities controlled during all or part of or at the end of, the financial year, but of which we have not acted as auditor are disclosed in Note 10. We have, however, received sufficient information and explanations concerning these controlled entities to enable us to form an opinion on the consolidated accounts.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion In our opinion, the financial statements of Pasminco Limited are properly drawn up: (a) so as to give a true and fair view of: (i) the state of affairs as at 30 June 1998, and of the profit and cash flows for the financial year ended on that date of the Company and of the economic entity; and (ii) the other matters required by Divisions 4, 4A, and 4B of Part 3.6 of the Corporations Law to be dealt with in the financial statements; (b) in accordance with the provisions of the Corporations Law; and (c) in accordance with applicable Accounting Standards and other mandatory professional reporting requirements.

Ernst & Young

Alan I Beckett Partner Melbourne Date: 26 August 1998 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 71

71 Shareholder Information

Investor Information Pasminco makes a significant commitment to investor relations. Stock Exchange Listing Pasminco’s shares are listed on the Australian Stock Exchange and Institutional investors and stockbroking analysts are invited to visit the trade under the ASX code PAS. Company’s operations in May and November each year. After the release of the half-year and full-year financial results, senior Direct Deposit of Dividends management provide briefings to the investment community, both in Dividend payments may be paid directly to a nominated Australian Australia and overseas. Through the site visit program and investor financial institution. Payments are electronically credited on the dividend briefings Pasminco strives to achieve a greater level of understanding payment date and confirmed by payment advices mailed directly to the and transparency of the Group’s operations. shareholder’s registered address. A form for this purpose is available from Corporate Registry Services Pty Ltd. Substantial Shareholders The Register of Substantial Shareholders as at 18 August 1998 Shareholding Alternatives under Chess showed that: Shareholders may choose to trade their shares using the Clearing PDFM Limited and its associates have a relevant interest in House Electronic Sub-register System, otherwise known as the 134,536,129 fully paid ordinary shares (Notice dated “CHESS” system offered by the Australian Stock Exchange. Until the 15 July 1998) move to Issuer Sponsorship which will be completed before the end of December 1998, Pasminco shareholders can continue to hold their Bankers Trust Australia Limited and its associates have a shares by way of their current share certificates, continue to request a relevant interest in 56,738,872 fully paid ordinary shares certificate when purchasing new shares and use certificates for delivery (Notice dated 3 July 1998) to their stockbroker upon sale.

Distribution of Shareholders and Shareholdings The number of issued shares at the date of this report was 1,124,630,499 held by 31,578 shareholders whose voting rights are one vote for each share held.

Top 20 Shareholders Size of Shareholding Number of Number of Shareholders Shares 1-1,000 16,429 8,048,747 1,001 - 5,000 10,208 28,014,819 5,001 - 10,000 2,832 22,306,537 10,001 - 100,000 1,847 48,837,715 100,001 and over 262 1,017,422,681 Total 31,578 1,124,630,499 Shareholders of less than a marketable parcel (having a market value of $500 or less) 9,810 3,192,643

Shareholding Distribution Top 20 Shareholders Number of % Shareholders Westpac Custodian Nominees 157,521,843 14.01 National Nominees 140,297,660 12.48 ANZ Nominees 98,802,002 8.79 Chase Manhattan Nominees 76,611,993 6.81 AMP Life 40,986,347 3.64 BT Custodial Services 28,638,673 2.55 Queensland Investment 25,900,000 2.30 Permanent Trustee Company 20,953,987 1.86 SAS Trustee Corporation 19,677,074 1.75 BT Custodial Services 18,652,912 1.66 Reinsurers Investments 15,903,949 1.41 Citicorp Nominees 15,363,865 1.37 Mercantile Mutual Life 13,905,390 1.24 HKBA Nominees 12,283,569 1.09 Perpetual Trustees Nominees 12,283,297 1.09 MLC Limited 12,276,534 1.09 Prudential Corporation Australia 10,393,007 0.92 Australian Foundation Investment 9,041,745 0.80 Queensland Investment 8,797,410 0.78 Invia Custodian 8,552,600 0.76 117318.175P.M7.TEXT 21/9/98 4:21 PM Page 72

Shareholder Information

Tax File Number (TFN) Information While it is not compulsory for a shareholder to provide a TFN, Pasminco is obliged to deduct tax from any unfranked portion of dividend payment to shareholders resident in Australia who have not supplied such information. If you have not already supplied your TFN, you may do so by writing to Corporate Registry Services Pty Ltd.

Changing Name or Address Changes to your name or address must be advised in writing to Corporate Registry Services Pty Ltd. You will need to provide the following information: For changes to your address: your full name your shareholder number your old address your new address you must also sign the request For changes to your name: your old name your address your shareholder number your new name original documentary evidence (or copy certified by a Justice of the Peace) of your change of name, such as: marriage certificate deed poll, or certificate of registration on change of name (for corporations) If you are sponsored by a broker, in both cases, your notice in writing must be sent to your sponsoring broker.

Lost Certificates/Statements Shareholders should inform Corporate Registry Services Pty Ltd immediately, in writing, so that a replacement certificate/statement can be arranged. Removal from the Annual Report Mailing List Shareholders can nominate not to receive an Annual Report by writing to Corporate Registry Services Pty Ltd. Shareholders will continue to receive all other shareholder information including Notice of Annual General Meeting and Proxy. Company Information The Annual Report is the major source of information for investors in Pasminco. Other publications for shareholders are: Report of the Annual General Meeting which includes the Chairman’s Address and Managing Director’s Review of Operations Half-yearly results summary which reviews the December half year.

Further information and publications about the Company’s operations are available on request from the Company Secretary:

Tel: (03) 9288 0426 Fax: (03) 9288 0406 or by writing to the Melbourne address.

Web-Site Pasminco has a web site accessible through the Internet. All publications sent to shareholders, and other public releases, including the 1998 Annual Report can be accessed in this way. Our address is www.pasminco.com.au.