Financial Services Guide and Independent Expert's Report In

Financial Services Guide and Independent Expert’s Report in relation to the Proposal from China Minmetals Non-ferrous Metals Co., Ltd

Grant Samuel & Associates Pty Limited (ABN 28 050 036 372)

5 May 2009

Financial Services Guide

Grant Samuel & Associates Pty Limited (“Grant Samuel”) carries on business at Level 6, 1 Collins Street, Melbourne Vic 3000. Grant Samuel & Associates Pty Limited holds Australian Financial Services Licence No. 240985 authorising it to provide financial product advice on securities and interests in managed investments schemes to wholesale and retail clients. The Corporations Act, 2001 requires Grant Samuel to provide this Financial Services Guide (“FSG”) in connection with its provision of an independent expert’s report (“Report”) which is included in a document (“Disclosure Document”) provided to members by the company or other entity (“Entity”) for which Grant Samuel prepares the Report. Grant Samuel does not accept instructions from retail clients. Grant Samuel provides no financial services directly to retail clients and receives no remuneration from retail clients for financial services. Grant Samuel does not provide any personal retail financial product advice to retail investors nor does it provide market-related advice to retail investors. When providing Reports, Grant Samuel’s client is the Entity to which it provides the Report. Grant Samuel receives its remuneration from the Entity. OZ Minerals Limited (“OZ Minerals”) has engaged Grant Samuel to prepare a Report in relation to the proposal from China Minmetals Non-ferrous Metals Co., Ltd (“Minmetals”) (“the OZ Minerals Report”). The full detailed OZ Minerals Report is available on OZ Minerals’ website or from OZ Minerals on request. The attached letter contains a summary of Grant Samuel’s opinion and main conclusions. Grant Samuel will receive a fixed fee of A$1.25 million plus reimbursement of out-of-pocket expenses for the preparation of the Report (as stated in Section 8.3 of the OZ Minerals Report). No related body corporate of Grant Samuel, or any of the directors or employees of Grant Samuel or of any of those related bodies or any associate receives any remuneration or other benefit attributable to the preparation and provision of the Report. Grant Samuel is required to be independent of the Entity in order to provide a Report. The guidelines for independence in the preparation of Reports are set out in Regulatory Guide 112 issued by the Australian Securities & Investments Commission on 30 October 2007. The following information in relation to the independence of Grant Samuel is stated in Section 8.3 of the OZ Minerals Report:

“Grant Samuel has undertaken four assignments for OZ Minerals and its predecessor organisations since 2005:

in November 2005, Grant Samuel was engaged by Oxiana Limited “(Oxiana”), one of the two predecessor organisations of OZ Minerals, to conduct preliminary work to allow Grant Samuel to prepare an independent expert’s report for Oxiana should such a report be required;

in August 2007, Grant Samuel was engaged by Zinifex Limited (“Zinifex”), one of the two predecessor organisations of OZ Minerals, to conduct preliminary work to allow Grant Samuel to prepare an independent expert’s report for Zinifex should such a report be required;

in March 2008, Grant Samuel was engaged by Zinifex to prepare an independent expert’s report in relation to the merger of Oxiana and Zinifex; and

in December 2008, Grant Samuel was engaged by OZ Minerals to provide independent valuation advice on certain of the assets of OZ Minerals, in relation to the refinancing discussions then underway between OZ Minerals and its bankers.

These engagements do not affect Grant Samuel’s independence or its ability to prepare an independent expert’s report in relation to the proposal from Minmetals. Grant Samuel and its related entities do not have any shareholding in or other relationship with OZ Minerals that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposal.

Two executives of Grant Samuel hold small parcels of shares in OZ Minerals (less than 4,000 shares in total). No other executives of Grant Samuel and its related entities hold any shares in OZ Minerals.

Grant Samuel had no part in the formulation of the proposal from Minmetals. Its only role has been the preparation of this report.

Grant Samuel will receive a fee of A$1.25 million for the preparation of this report. This fee is not contingent on the outcome of the Proposal. Grant Samuel will receive no other benefit for the preparation of this report.

Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the ASIC on 30 October 2007.”

Grant Samuel has internal complaints-handling mechanisms and is a member of the Financial Industry Complaints Services’ Complaints Handling Tribunal, No. F 4197. Grant Samuel is only responsible for the Report and this FSG. Complaints or questions about the Disclosure Document should not be directed to Grant Samuel which is not responsible for that document. Grant Samuel will not respond in any way that might involve any provision of financial product advice to any retail investor.

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5 May 2009

The Directors OZ Minerals Limited Freshwater Place Level 23, Twenty-Eight Freshwater Place Southbank VIC 3006

Dear Directors

Minmetals Proposal

1 Introduction

OZ Minerals Limited (“OZ Minerals”) is a major Australian base metals company. Formed through the merger on 1 July 2008 of Oxiana Limited (“Oxiana”) and Zinifex Limited (“Zinifex”), OZ Minerals’ major assets are the recently commissioned Prominent Hill copper/gold mine in South Australia, the Sepon copper and gold mines in Laos, the Century zinc mine in Queensland, the Rosebery lead/zinc/silver mine in Tasmania and the Golden Grove copper/zinc mine in Western Australia. OZ Minerals’ other assets include the Martabe gold project in Indonesia, the Avebury nickel project in Tasmania and the Dugald River zinc project in Queensland. OZ Minerals is listed on the Australian Securities Exchange (“ASX”) and had a market capitalisation of A$2.5 billion at 4 May 2009.

Since July 2008, OZ Minerals has faced a substantial decline in copper and zinc prices and a sharp contraction in the availability of credit. Simultaneously, it has been engaged in the construction and commissioning of the Prominent Hill mine (at a total cost of around A$1.17 billion), the early stages of the construction of Martabe and a substantial waste removal program at Century. In November 2008, OZ Minerals shares were placed in trading halt at the request of the company as it continued negotiations with its bankers regarding an extension of its debt facilities. OZ Minerals’ net debt at 31 December 2008 was A$1.08 billion (including the Convertible Bonds on issue).

In response to the significantly poorer base metals markets, OZ Minerals restructured its operations so as to maximise profitability and minimise cash requirements. There were major head count reductions at the Century, Sepon and Golden Grove mines, as well as at OZ Minerals’ head office in Melbourne. An expansion project at Sepon was put on hold. Construction of the Martabe project was halted. Production at the Avebury nickel mine ceased and the project was put on care and maintenance. OZ Minerals significantly reduced its exploration expenditure.

On 16 February 2009, OZ Minerals announced a proposal from China Minmetals Non-ferrous Metals Co., Ltd (“Minmetals”) for the acquisition of all the ordinary shares in OZ Minerals. Under this proposal, OZ Minerals shareholders were to receive A$0.825 cash per OZ Minerals ordinary share. On 27 March 2009, the Treasurer of the Commonwealth of Australia announced that, pursuant to the Foreign Acquisitions and Takeovers Act 1975, the Government of Australia had determined that the proposal for OZ Minerals could not be approved if it included Prominent Hill.

On 1 April 2009, OZ Minerals announced that it had reached an agreement for the sale of various assets to Minmetals (“Proposal” or “Minmetals Proposal”). Under the Proposal, OZ Minerals will transfer to Minmetals its interests in the Century, Sepon, Rosebery and Golden Grove mines, the Avebury and Dugald River projects, early stage development projects in Canada and various exploration tenements (“Sale Assets”). The aggregate consideration for the sale of the Sale Assets will be US$1,206 million in cash (“Consideration”)1. OZ Minerals will retain the Prominent Hill copper/gold mine, investments in a number of listed companies and certain gold exploration interests in Cambodia and Thailand. On

1 The Consideration is based on the Sale Assets being sold on a "cash free, debt free" basis and with normal levels of working capital. The actual amount received by OZ Minerals on completion of the transaction will be subject to certain adjustments related to the working capital, net debt and agreed tax liabilities of the assets sold to Minmetals.

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24 April 2009 OZ Minerals announced that it had entered into an agreement to sell the Martabe project for US$211 million in cash subject to necessary regulatory and shareholder approvals. Following completion of the Proposal, OZ Minerals intends to repay all its debt (except for the Convertible Bonds on issue) and expects to have a cash balance of around A$750-800 million (including proceeds from the sale of Martabe).

The Proposal requires the approval of OZ Minerals shareholders under Listing Rule 11.2 of the ASX Listing Rules. The Directors of OZ Minerals have engaged Grant Samuel & Associates Pty Limited (“Grant Samuel”) to prepare an independent expert’s report setting out whether, in its opinion, the Proposal is in the best interests of OZ Minerals shareholders. This letter contains a summary of Grant Samuel’s opinion and main conclusions and will accompany the Notice of Meeting and Explanatory Booklet to be sent to OZ Minerals shareholders in relation to the Proposal. Grant Samuel’s full detailed report is available on OZ Minerals’ website or on request from OZ Minerals.

2 Summary of Opinion

OZ Minerals has been under considerable financial pressure over the last six months. A precipitous fall in base metals prices during the second half of 2008 substantially reduced its profitability. At the same time, OZ Minerals’ net debt increased, as it funded a number of development and expansion projects. The deterioration in OZ Minerals’ financial position coincided with the virtual collapse of global credit markets. As a result, OZ Minerals has a high level of debt requiring repayment or refinancing in an environment where financiers are increasingly risk averse and asset values are dramatically reduced. The Minmetals Proposal addresses this situation by realising cash for a number of assets, resolving the insolvency risk faced by the company (by allowing the repayment of all bank debt) and leaving the company in a financially robust position.

Evaluation of the Minmetals Proposal requires assessments of both value and risk. Key issues for shareholders are:

does the Consideration fully reflect the value of the OZ Minerals Sale Assets?

what alternatives are available that would address OZ Minerals’ financial position?; and

if the Proposal does not proceed, what is the risk that OZ Minerals will be placed in some form of insolvency administration, with the material reduction in shareholder value that would almost certainly follow?

Conclusions regarding these issues are not straightforward. They require judgements about future commodity prices, equity market conditions and the behaviour of OZ Minerals’ financiers.

Judgements regarding future commodity prices are crucial. Commodity markets have been extremely volatile. Prices fell from around US$4.00/lb for copper and US$0.85/lb for zinc at 1 July 2008 to lows of around US$1.27/lb and US$0.47/lb in late December 2008. In the context of commodity prices at those levels, in Grant Samuel’s opinion the Minmetals Proposal would have been compelling.

However, there has since been a significant recovery in base metals prices. Since the announcement of the original Minmetals proposal on 16 February 2009, copper and zinc prices have increased by around 34% and 30% (to around US$2.00/lb for copper and US$0.65/lb for zinc by late April 2009). There has been a substantial increase in the share market values of many copper and zinc producers and a strengthening in equity markets generally. Moreover, OZ Minerals has almost completed the commissioning of its key Prominent Hill copper mine, which is expected to generate substantial free cash flows at current copper prices. Based on base metals prices prevailing at the end of April 2009, all of OZ Minerals’ operating mines are cash flow positive and OZ Minerals overall should be strongly cash flow positive. In these circumstances, assessment of the Minmetals Proposal is not straightforward.

Notwithstanding this uncertainty, in Grant Samuel’s view the Consideration payable by Minmetals of US$1,206 million is less than the underlying value of the Sale Assets. Arguably, the Proposal represents the realisation of a substantial part of OZ Minerals’ asset base on terms struck at a time of particularly depressed prices for resources assets.

On the other hand, given OZ Minerals’ current financial position, value considerations are only partly relevant. There are limited alternatives to the Minmetals Proposal. OZ Minerals’ bankers have made it clear that they require a significant reduction in OZ Minerals’ debt. Since November 2008, OZ Minerals has been unable to secure any long term extension of its debt facilities, with its bankers providing a succession of short term facility extensions. OZ Minerals has investigated various restructuring alternatives and has conducted an extensive process to seek buyers for its assets. This process has demonstrated that, in the current market and given OZ Minerals’ perceived position as a forced seller, it is extremely difficult to complete asset sales at reasonable values.

If OZ Minerals was to pursue a restructuring other than the Proposal, it would urgently need to divest assets and probably raise additional equity. Based on OZ Minerals’ experience in recent months, it could be forced to accept fire sale prices for a number of its assets and there may be a need to raise capital on deeply dilutive terms, with a risk of significant loss of shareholder value. OZ Minerals would be exposed to ongoing commodity and equity market risks during this period.

At worst, in the absence of the Proposal, if asset sales failed to realise adequate proceeds within the requisite timeframe or it proved impossible to raise sufficient new equity, OZ Minerals could face some form of insolvency administration. This insolvency risk is exacerbated by the structure of OZ Minerals’ funding arrangements. OZ Minerals has multiple lenders with potentially differing attitudes to the continued provision of financing. A decision by any one of OZ Minerals’ lenders to withdraw its support could be enough to precipitate an insolvency administration. Such an outcome would almost certainly result in wholesale destruction of shareholder value. The OZ Minerals Explanatory Booklet states that “if the Transaction is not approved, OZ Minerals may not be successful in refinancing its debt, which could potentially lead to it being unable to continue as a going concern and being placed in voluntary administration or receivership.”

The Consideration, in Grant Samuel’s view, is below the full underlying value of the Sale Assets. In the absence of the financial pressure facing OZ Minerals, the Proposal would not be in shareholders’ best interests. However, the reality is that OZ Minerals urgently needs to reduce its bank debt. There are no obvious alternatives to the Minmetals Proposal capable of implementation in the current circumstances. Moreover, for as long as there is extreme pressure on OZ Minerals to achieve substantial debt reduction, it will be almost impossible for OZ Minerals to realise assets at full value: potential buyers will continue to deal with OZ Minerals as a distressed seller. In this context, the Proposal represents an acceptable outcome for OZ Minerals shareholders. OZ Minerals will be left with its premier asset, the Prominent Hill copper/gold mine in South Australia, and a significant net cash balance. Shareholders will retain exposure to any upside in the copper price and OZ Minerals will have a number of options for delivering value to shareholders in the future. Most importantly, the Proposal will eliminate the insolvency risk and the potential for substantial destruction of shareholder value that OZ Minerals currently faces.

Grant Samuel believes that, on balance, shareholders are likely to be better off if the Proposal proceeds than if it does not. In Grant Samuel’s opinion, in the absence of a superior proposal, the Proposal is in the best interests of OZ Minerals shareholders.

Grant Samuel’s opinion that the Proposal is in shareholders’ best interests could change if it became apparent that OZ Minerals no longer faced any real risk of insolvency. This could result if some alternative proposal (satisfactory to OZ Minerals’ bankers) was put forward that would generate cash and allow substantial debt reduction (for example, through a more limited asset sale program and/or an equity raising).

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3 Key Conclusions

OZ Minerals is under considerable financial pressure. During the six months to 31 December 2008, the financial position of OZ Minerals deteriorated significantly. Copper and zinc prices fell from around US$4.00/lb for copper and US$0.85/lb for zinc at 1 July 2008 to lows of around US$1.27/lb for copper and US$0.47/lb for zinc in late December 2008. These sharp falls in copper and zinc prices resulted in a substantial fall in OZ Minerals’ operating earnings. At the same time, OZ Minerals was progressing a number of major capital expenditure projects, including the construction and commissioning of Prominent Hill, the construction of Martabe, a capacity expansion project at Sepon, a major waste movement program at Century and a significant capital expenditure program at Golden Grove. Total capital expenditure for the six months to 31 December 2008 was approximately A$800 million.

The result was a rapid increase in OZ Minerals’ net debt and a reduction in its available cash resources. Concurrently, the deteriorating position in global credit markets meant that debt capital was increasingly difficult to source. OZ Minerals had debt facilities requiring re-financing by the end of November 2008. OZ Minerals was unable to achieve a re-financing but secured a number of short term extensions of its facilities and an additional short term bridging facility. OZ Minerals’ facilities are currently repayable on 30 June 2009. At 31 December 2008, OZ Minerals had net debt of A$1.08 billion (including the Convertible Bonds on issue). OZ Minerals expected that its net debt at 30 April 2009 would be approximately A$1.3 billion.

In the context of current commodity prices and asset values, and given the current risk averse attitude of financiers, OZ Minerals’ current debt level is not sustainable. Arguably, OZ Minerals has only been able to secure the temporary continuation of its debt facilities because of the original proposal from Minmetals announced on 16 February 2009 and the current Minmetals Proposal. OZ Minerals urgently needs to achieve a significant debt reduction. If OZ Minerals is unable to achieve a significant debt reduction, there is a material risk that it will be placed in some form of insolvency administration. Such an outcome could be expected to result in wholesale destruction of shareholder value.

The Minmetals Proposal will completely resolve OZ Minerals’ funding issues. Under the Proposal, Minmetals will pay US$1,206 million (approximatelyA$1,723 million based on a US$:A$ exchange rate of $0.70) for the Sale Assets. OZ Minerals intends to use these funds to repay its bank debt in full, leaving only its Convertible Bonds (with face value of US$105 million) on foot. OZ Minerals expects, following settlement of the Proposal and repayment of its bank debt (excluding the Convertible Bonds), that it will have a cash balance of approximately A750- $800 million (after receipt of the proceeds on sale of the Martabe project). The Minmetals Proposal will eliminate the financing risk that OZ Minerals currently faces. OZ Minerals will have a robust balance sheet that will allow it to fund its operations without any reliance on uncertain credit markets.

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Grant Samuel has valued the Sale Assets in the range US$1,385-1,600 million. Grant Samuel’s valuation of the Sale Assets is summarised below:

OZ Minerals Sale Assets – Valuation Summary Valuation (US$ million) Valuation (A$ million) Low High Low High Sepon (90%) 520 560 743 800 Century 500 550 714 786 Golden Grove 140 170 200 243 Rosebery 125 150 179 214 Development and exploration assets 100 170 143 243 Total Value of Sale Assets 1,385 1,600 1,979 2,286 Note: Assumes an exchange rate of A$1.00=US$0.70.

The valuation of the Sale Assets represents Grant Samuel’s assessment of the full underlying value of the assets to be acquired by Minmetals. It represents the maximum price that could be expected to be realised in an open market over a reasonable period of time given current market conditions and currently available information, assuming that potential buyers have full information and that the price would be negotiated between a willing but not anxious buyer and a willing but not anxious seller acting at arm’s length.

The valuation is based on a number of important assumptions, including assumptions regarding commodity prices and exchange rates. Grant Samuel has assumed long run prices (in real terms) of US$1.80-2.20/lb for copper and US$0.70-0.80/lb for zinc. Commodity price expectations, exchange rates and expectations regarding future operating performance can change significantly over short periods of time. Such changes can have significant impacts on underlying value.

Grant Samuel appointed AMC Consultants Pty Ltd (“AMC”) as technical specialist to review the mineral assets of OZ Minerals. AMC’s role included a review of reserves and resources, development plans, production schedules, operating costs, capital costs and exploration potential. AMC also prepared valuations of OZ Minerals’ exploration interests. AMC’s detailed report is attached to Grant Samuel’s detailed report, which is available on OZ Minerals’ website or on request from OZ Minerals.

Grant Samuel’s valuation of OZ Minerals represents an overall judgement, having regard to a range of relevant evidence as to value. The valuations take into account the results of discounted cash flow (“DCF”) analysis, valuation evidence derived from the share market values of comparable companies, evidence as to value derived from the asset sale program conducted by OZ Minerals, and a judgemental assessment of the impact on values of current equity and credit market conditions. In particular, the valuations recognise that, given current market conditions, traditional DCF analysis might provide only general guidance as to value and values that represent significant discounts to DCF analysis may be justified in certain circumstances. In these circumstances valuation is inevitably subjective.

The valuations also recognise that potential acquirers of the Sale Assets would need to incur at least some of the costs currently accounted for by OZ Minerals as corporate costs. Grant Samuel’s valuation assumes that potential acquirers of the Sale Assets could achieve material cost savings relative to OZ Minerals’ current corporate costs. Minmetals does not have a corporate office in Australia and may therefore not be able to achieve the level of cost savings assumed by Grant Samuel.

Grant Samuel undertook DCF analysis for the major operating assets and development projects of OZ Minerals. The DCF analysis was based on valuation scenarios prepared in conjunction with AMC, reflecting AMC’s judgements regarding the range of assumptions as to ultimate mining

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inventory, mine life, capital costs and operating costs that could reasonably be adopted for valuation purposes.

The DCF models projected cash flows from 1 July 2009 onwards. Cash flows were projected in US dollar terms. Projected A$ cash flow items (principally operating costs) were translated to US$ at rates approximating A$:US$ forward exchange rates. The projected US$ cash flows were discounted to present values using nominal discount rates of 9-11% for the zinc and copper assets of OZ Minerals. These discount rates were selected having regard to estimates of costs of capital for zinc and copper miners based on analysis using the capital asset pricing model. However, given current market conditions, a range of discount rates could arguably be used and the cost of capital estimated by the CAPM may not reflect market behaviour. Grant Samuel has taken this into account in using the DCF analysis to estimate the value of the Sales Assets. Values denominated in US dollars were converted to Australian dollars at a spot exchange rate of A$1.00=US$0.70.

The Consideration is below the bottom end of the valuation range attributed to the Sale Assets. Given current market conditions, the valuation of the Sale Assets is subject to considerable uncertainty. Shareholders could hold different views (either more positive or more negative) on the value of the Sale Assets.

The Consideration of US$1,206 million is below the bottom end of Grant Samuel’s valuation range for the Sale Assets. Accordingly, in Grant Samuel’s view, the Consideration does not fully reflect the underlying value of the Sale Assets.

Given current market conditions, the valuation of the Sale Assets is subject to considerable uncertainty. The valuation requires judgements regarding a number of key assumptions about the future. In particular, the value of OZ Minerals is highly sensitive to assumptions about future commodity prices (principally for copper and zinc).

Copper and zinc prices have been extremely volatile for some time. After reaching lows in December 2008 of US$1.27/lb for copper and US$0.47/lb for zinc, prices have recovered, with copper and zinc trading as high as US$2.19/lb and US$0.69/lb in mid April 2009.

Movements in copper and zinc prices since 1 July 2008 are shown in the chart below:

Copper and Zinc Spot Prices 1 July 2008 - 30 April 2009 4.50 1.00

4.00 0.90

0.80 3.50 Zinc PricesSpot Zinc (US$/lb) 0.70 3.00 0.60 2.50 0.50 2.00 0.40 1.50 0.30 Copper Spot Prices (US$/lb) Prices Spot Copper 1.00 0.20

0.50 0.10

0.00 0.00 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09

Copper Zinc

Source: Bloomberg

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Estimates of future demand and supply for copper and zinc are subject to considerable uncertainty. There appeared to be a very sharp fall in demand for commodities in late 2008 and early 2009. It was not clear to what extent this reduction in demand reflected a permanent change rather than short term de-stocking. Similarly, it is not clear whether the recent strength in commodity prices reflects a recovery in underlying demand or other short term factors. There is a wide range of views regarding the growth prospects of China and other Asian economies, and uncertainty regarding the severity and duration of the economic downturn in Europe and the USA. On the supply side, there is little clarity in relation to future operating and capital costs, and therefore no practical basis for estimating the long run prices that will be required to match market demand and supply. Accordingly, judgements regarding long run copper and zinc prices are highly uncertain.

Although there is little consensus on the part of commodity and equity market analysts as to future copper and zinc prices, Grant Samuel’s long term price assumptions of US$1.80-2.20/lb for copper and US$0.70-0.80/lb for zinc are broadly consistent with the range of forecast price assumptions used by market analysts. However, a wide range of assumptions regarding future copper and zinc prices could credibly be adopted, depending on judgements regarding the prospects for the global economy. A rapid global economic recovery and quick resumption of economic growth could result in much higher prices than those assumed by Grant Samuel, given likely supply constraints in the short to medium term. Conversely, a longer and deeper economic slowdown could see very low prices for a sustained period.

Moreover, depressed equity markets and dysfunctional credit markets mean that it is extremely difficult for potential buyers of base metals assets to raise capital for acquisitions. In these circumstances, the actual prices realisable for assets may be well below those suggested by traditional valuation analysis. While valuations should reflect current market conditions, the extent of any discount to estimated net present values is judgemental.

In these circumstances, shareholders could reasonably reach different judgements on the value of the Sale Assets, particularly if they have strong views (positive or negative) regarding the prospects for global economic recovery. Notwithstanding the wide range of views that could reasonably be held in relation to the value of the Sale Assets, in Grant Samuel’s view the Consideration is less than the full underlying value of the Sale Assets.

OZ Minerals has explored a number of potential alternatives. The funding pressures faced by OZ Minerals have been a major obstacle to realising reasonable value for its assets.

Since late November 2008, OZ Minerals has been under considerable funding pressure. OZ Minerals has only been able to secure a series of temporary extensions of its finance facilities while publicly seeking to sell various assets to reduce debt. In this context and given the market perception that OZ Minerals is a forced seller of assets, it has proved very difficult for OZ Minerals to achieve asset realisations on reasonable terms. In theory, at least, OZ Minerals should have been able to address its financial position through asset sales and possibly some form of capital raising. The sale of (for example) Golden Grove, Martabe, Rosebery and Avebury, together with a modest capital raising, would have the potential to materially reduce OZ Minerals’ debt. It would leave the company focused on two profitable copper operations (Sepon and Prominent Hill) and Century, a world class zinc mine. However, despite an extensive asset sale program, OZ Minerals has been unable to secure binding offers at reasonable prices for any of Golden Grove, Rosebery or Avebury. Potential purchasers have continually extended negotiations or offered fire sale prices, possibly in the hope that a desperate OZ Minerals (or an insolvency administrator of OZ Minerals) would be forced to accept very low values.

OZ Minerals has also explored the potential for a sale of Prominent Hill. Numerous parties have visited the mine site and performed due diligence, but OZ Minerals has not received any attractive offers. In any event, the sale of Prominent Hill and retention of its other assets is, strategically, a less attractive option for OZ Minerals than the Minmetals Proposal. It would represent the divestment of OZ Minerals’ premier asset. By comparison with the Minmetals Proposal, it would realise less cash and would fail to deliver the financial flexibility that OZ Minerals will enjoy following completion of the Minmetals Proposal.

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OZ Minerals has also investigated a wide range of other options that could be combined with asset sales to resolve its financing issues, including commodity linked financing, the sale of precious metal streams and a capital raising involving the introduction of a cornerstone investor. None of these alternatives was able to be completed on reasonable terms.

OZ Minerals’ prospects have improved since the start of 2009. In response to the sharp fall in commodity prices during the second half of 2008, OZ Minerals put on hold construction/expansion projects at Martabe and Sepon, placed the Avebury nickel mine on care and maintenance, significantly reduced operating costs at Century, Sepon, Rosebery and Golden Grove, reduced head office costs and curtailed exploration expenditure. On 24 April 2009 OZ Minerals announced that it had entered into an agreement to sell Martabe for US$211 million.

Copper and zinc prices have risen strongly during 2009, particularly during March and April 2009. Based on prices at the end of April 2009 of around $2.00 for copper and $0.65 for zinc, the copper price has increased by around 34% since the announcement of the original proposal from Minmetals on 16 February 2009, while the zinc price has risen by around 30%.

As a result, at current commodity prices OZ Minerals is cash flow positive, although the completion of Prominent Hill project construction and the continuing Century waste movement program have required additional funding during the first quarter of 2009. Once Prominent Hill commences full scale production, assuming the continuation of current commodity prices, OZ Minerals should be strongly cash flow positive.

There has been a significant improvement in equity market conditions. In particular, share market values of many base metals companies have risen sharply during March and April 2009.

Shareholders would face the risk of substantial destruction of shareholder value if the Minmetals Proposal did not proceed.

On the basis of the commodity and equity market conditions at the time that the original proposal from Minmetals was announced in February 2009, the Proposal would have been (in Grant Samuel’s view) compelling. The subsequent strengthening of copper and zinc prices and improvements in equity market conditions mean that evaluation of the Proposal is no longer straightforward.

Higher copper and zinc prices, at least in theory, should improve the prospects for an alternative restructure of OZ Minerals involving a divestment of smaller assets and an equity raising, with the proceeds used to pay down debt to much lower levels. That would be an attractive outcome, as it would enable OZ Minerals to avoid selling major assets (particularly Sepon and Century) as a distressed seller at or close to the bottom of the market. If such a restructure could be achieved, it would have the potential to deliver significantly improved value to shareholders over the longer term, particularly if there was a sustained recovery in zinc and copper prices.

However, OZ Minerals’ funding position means that pursuing such a course of action would involve considerable risk. If OZ Minerals did not proceed with the Minmetals Proposal, it is likely that its bankers would seek substantial debt reduction in the very short term (and possibly demand immediate repayment of all facilities). OZ Minerals would need to sell assets very quickly, probably followed by some form of equity raising. OZ Minerals’ recent experience is that its perceived status as a distressed borrower would hinder any asset sale process. It is likely that any equity raising could only be undertaken once asset sales were complete and there was some certainty regarding the position of OZ Minerals’ financiers.

The insolvency risk faced by OZ Minerals is exacerbated by the structure of OZ Minerals’ banking arrangements. OZ Minerals has a number of facilities, provided by multiple lenders. Some of these lenders are non-Australian banks, with potentially limited interest in ongoing involvement as lenders to the Australian resources sector. The risk for OZ Minerals is that it would probably require the agreement of all lenders to any restructure proposal and failure to secure the consent of any single lender could be enough to precipitate an insolvency administration.

Moreover, the recent improvement in commodity and equity markets does not necessarily mean that OZ Minerals’ bankers will be more accommodating in their dealings with OZ Minerals. To the contrary, the demonstration (through the Minmetals Proposal) of the value of OZ Minerals’ asset base might in some circumstances encourage (at least some of) its bankers to rely on their security to recover their outstanding loans.

If OZ Minerals was ultimately to enter into some form of insolvency administration, there would almost certainly be a material reduction in shareholder value.

Under the Minmetals Proposal, OZ Minerals will retain its premier asset, the Prominent Hill copper/gold mine, and will enjoy considerable financial flexibility.

OZ Minerals will be a much simpler company following settlement of the Proposal. It will retain its premier asset, the Prominent Hill copper/gold mine, which has an expected mine life of well over ten years and considerable upside potential. OZ Minerals will have a very strong balance sheet, with substantial net cash, and no further dependence on debt funding. Shareholders will retain their exposure to any upside in the copper market (although they will no longer have any zinc exposure).

There is no major impediment to a superior offer from another party The Minmetals Proposal has followed a process involving detailed due diligence and discussions with a number of parties in relation to the major assets of OZ Minerals over an extended period of time. OZ Minerals has agreed not to solicit rival proposals and to pay a break fee of US$12.06 million in certain circumstances. In Grant Samuel’s view, however, the break fee arrangements are unlikely to be a serious disincentive to a committed buyer willing to make a superior offer. In addition, the shares in OZ Minerals are widely held and there are no corporate impediments to a rival offer (subject to the need for some potential bidders to receive FIRB approval).

There has been a significant period for potential counter bidders to consider the opportunity following the announcement of the original Minmetals proposal on 16 February 2009. The more recent improvement in commodity and equity markets could lead potentially interested parties to re- evaluate the opportunity. The Minmetals Proposal is expected to be voted on by shareholders in mid June 2009. Other parties will have ample time to make a rival proposal should they wish to do so.

On balance, OZ Minerals shareholders are likely to be better off if the Proposal proceeds than if it does not. Therefore, the Proposal is in shareholders’ best interests.

In Grant Samuel’s view the Consideration of US$1,206 million is below the full underlying value of the Sale Assets, which Grant Samuel has valued in the range US$1,385-1,600 million. Arguably, the Proposal represents the realisation of a substantial part of OZ Minerals’ asset base at or close to the bottom of the market. In the absence of the financial pressure facing OZ Minerals, the Proposal would not be in shareholders’ best interests.

However, given OZ Minerals’ current financial position, value considerations are only partly relevant. OZ Minerals urgently needs to reduce its bank debt. There are no obvious alternatives to the Minmetals Proposal capable of implementation in the current circumstances. On one view, for as long as there is extreme pressure on OZ Minerals to achieve substantial debt reduction, it will be almost impossible for OZ Minerals to realise assets at full value: potential buyers will continue to deal with OZ Minerals as a distressed seller. In this context, the Proposal represents an acceptable outcome for OZ Minerals. OZ Minerals will be left with its premier asset, the Prominent Hill Page 9

copper/gold mine in South Australia, and significant net cash. Shareholders will retain exposure to upside in the copper price and the company will have a number of options for delivering value to shareholders in the future. Perhaps most compellingly, the Proposal will eliminate the insolvency risk, and the potential for substantial destruction of shareholder value, that OZ Minerals currently faces.

Grant Samuel’s opinion on the Proposal could change if it became apparent that OZ Minerals no longer faced any real risk of insolvency.

In Grant Samuel’s view the Consideration is below the underlying value of the Sale Assets. Grant Samuel’s opinion that the Proposal is nevertheless in shareholders’ best interests reflects OZ Minerals’ urgent need to address its financing issues and the risk of insolvency if this is not achieved. It is possible that circumstances could change such that OZ Minerals no longer faced any real risk of insolvency. This could result if some alternative proposal (satisfactory to OZ Minerals’ bankers) was put forward that would generate cash and allow a significant debt reduction (for example, through a more limited asset sale program and/or an equity raising). In these circumstances Grant Samuel’s opinion that the Proposal is in shareholders’ best interests could change.

4 Other Matters

This report is general financial product advice only and has been prepared without taking into account the objectives, financial situation or needs of individual shareholders in OZ Minerals. Because of that, before acting in relation to their investment, shareholders should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs. Shareholders should read the Explanatory Booklet issued by OZ Minerals in relation to the Proposal.

Voting for or against the Proposal is a matter for individual shareholders, based on their own views as to value and future market conditions and their particular circumstances including risk profile. Shareholders who are in doubt as to the action they should take should consult their own professional adviser.

Grant Samuel has prepared a Financial Services Guide as required by the Corporations Act, 2001. The Financial Services Guide is included at the beginning of this summary.

This letter is a summary of Grant Samuel’s opinion. The full report from which this summary has been extracted is available on the OZ Minerals website or on request from OZ Minerals.

The opinion is made as at the date of this letter and reflects circumstances and conditions as at that date.

Yours faithfully GRANT SAMUEL & ASSOCIATES PTY LIMITED

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Table of Contents

1 Terms of the Proposal ...... 1

2 Scope of the Report...... 3 2.1 Purpose of the Report ...... 3 2.2 Basis of Evaluation ...... 3 2.3 Sources of the Information ...... 4 2.4 Limitations and Reliance on Information ...... 5

3 Profile of OZ Minerals ...... 8 3.1 Overview ...... 8 3.2 Resources, Reserves and Production ...... 9 3.3 Financial Performance...... 10 3.4 Financial Position ...... 12 3.5 Cash Flow...... 13 3.6 Group Hedging ...... 13 3.7 Taxation Position...... 14 3.8 Capital Structure and Ownership...... 14 3.9 Share Market Performance...... 15

4 Profile of OZ Minerals Assets...... 18 4.1 Century...... 18 4.2 Prominent Hill ...... 25 4.3 Sepon ...... 28 4.4 Golden Grove...... 36 4.5 Rosebery...... 40 4.6 Projects...... 45 4.7 Profile of Exploration Assets ...... 52 4.8 Other Assets...... 53

5 Valuation Approach ...... 54 5.1 Valuation Methodology...... 54 5.2 Valuation Assumptions ...... 55 5.3 Resources Projects and Optionality...... 58

6 Valuation of OZ Minerals...... 60 6.1 Summary...... 60 6.2 Sepon ...... 60 6.3 Century...... 63 6.4 Golden Grove...... 66 6.5 Rosebery...... 68 6.6 Development and Exploration Sale Assets ...... 70

7 Evaluation of the Proposal...... 74 7.1 Summary...... 74 7.2 Impact of the Proposal on OZ Minerals’ Financial Position...... 75 7.3 Value Considerations ...... 76 7.4 Alternatives...... 78 7.5 OZ Minerals after the Proposal ...... 80 7.6 Factors affecting Opinion ...... 80

8 Qualifications, Declarations and Consents...... 81 8.1 Qualifications...... 81 8.2 Disclaimers...... 81 8.3 Independence ...... 81 8.4 Declarations ...... 82 8.5 Consents ...... 82 8.6 Other...... 82

Appendices

1 Selection of Discount Rate 2 Overview of the Zinc and Copper Markets 3 AMC Report

THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY

1 Terms of the Proposal

On 16 February 2009 OZ Minerals Limited (“OZ Minerals”) announced a proposal from China Minmetals Non-ferrous Metals Co., Ltd (“Minmetals”) for the acquisition of all the ordinary shares in OZ Minerals. Under this proposal OZ Minerals shareholders were to receive $0.825 cash per OZ Minerals ordinary share. The consideration was to be adjusted upwards if, prior to completion of the scheme, OZ Minerals sold the Golden Grove and Martabe projects for more than $425 million, to the extent that the aggregate net sale proceeds exceeded $400 million. The proposal was subject to a number of conditions, one of which required clearance or approval by the relevant regulators in Australia.

On 27 March 2009 the Treasurer of the Commonwealth of Australia announced that he would not approve a proposal from Minmetals if it included Prominent Hill. Following this announcement, OZ Minerals announced on 1 April 2009 that it had negotiated terms for a revised transaction (“Proposal”) involving the sale by OZ Minerals to Minmetals of Sepon, Golden Grove, Century, Rosebery, Avebury, Dugald River, High Lake, Izok Lake and certain other exploration and development assets (“Sale Assets”). The aggregate consideration for the sale of the Sale Assets will be US$1,206 million in cash including any applicable GST (“Consideration”). OZ Minerals will retain Prominent Hill, exploration assets in Cambodia, gold exploration assets in Thailand and its listed equity interests (“Retained Assets”). The sale price assumes the businesses are purchased on a cash free, debt free basis and assuming normal levels of working capital1. On 14 April 2009 OZ Minerals announced that it had signed a formal Sale Agreement with Minmetals. On 24 April 2009 OZ Minerals announced that it had entered into an agreement to sell the Martabe gold project to China Sci-Tech Holdings Limited (“CST”) for US$211 million.

Minmetals is an 86% held subsidiary of China Minmetals Corporation (“CMC”). CMC’s portfolio of businesses includes a global metals and minerals business, with project development, production and trading operations, and finance, real estate and logistics activities. CMC was listed as one of the 44 “key enterprises” in China in 1999. Minmetals focuses on exploration for and production of metals including copper, aluminium, tungsten, antimony and zinc. Minmetals is the largest trader of metals and minerals in China by volume.

OZ Minerals’ shareholders will be asked to vote on an ordinary resolution to approve the Proposal for the purposes of ASX Listing Rule 11.2 at OZ Minerals’ Annual General Meeting on 11 June 2009 (“Shareholder Meeting”).

The Proposal is subject to a number of conditions that are summarised in Section 5.2 of the Explanatory Booklet and set out in full in the Sale Agreement. In summary, the conditions include:

that the Proposal is approved by the Foreign Investment Review Board (“FIRB”);

that the Proposal is approved by the relevant Chinese Regulatory Authorities;

that the Proposal is approved by the National Development and Reform Commission of the People’s Republic of China by two weeks prior to the Shareholder Meeting;

that, to the extent that any consents or approvals from the Laotian Government are required, such consents are obtained or no objections are raised by two weeks prior to the Shareholder Meeting;

that Minmetals provides OZ Minerals with a copy of a commitment letter from its financiers or is able to show evidence of sufficient cash reserves which collectively are sufficient to fund the consideration payable under the Proposal by two weeks before the Shareholder Meeting;

that OZ Minerals receives written consent from its financiers to extend the repayment of all OZ Minerals’ debt until completion;

1 The actual amount received by OZ Minerals on completion of the transaction will be subject to certain adjustments related to the working capital, net debt and agreed tax liabilities of the assets sold to Minmetals.

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that the Proposal is approved by at least 50% of OZ Minerals Shareholders present and voting on the Proposal for the purpose of Listing Rule 11.2;

that no material adverse change occurs prior to completion. A material adverse change is defined as one or more changes with an actual or likely aggregate impact on consolidated net assets or net present value of the Sale Assets of at least US$50 million (disregarding individual changes with an impact lower than US$7.5 million). A material adverse change excludes anything arising as a result of a change in general economic, business or political conditions, securities markets, interest rates, exchange rates or commodity prices; and

that no insolvency event occurs in relation to OZ Minerals or any material subsidiary before completion.

Each of the OZ Minerals’ Directors recommends that OZ Minerals shareholders vote in favour of the Proposal in the absence of any superior offer.

The Sale Agreement includes exclusivity provisions that grant Minmetals exclusivity in relation to corporate transactions involving OZ Minerals until the earlier of the termination date of the Sale Agreement or the completion date. The exclusivity provisions exclude the Martabe gold project, the exploration assets in Cambodia and Thailand and OZ Minerals’ investments in listed companies.

A break fee of 1% of the sale price is payable by OZ Minerals to Minmetals in certain circumstances, including where any OZ Minerals Director does not recommend the Proposal, or the OZ Minerals shareholders do not approve the Proposal by 31 July 2009.

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2 Scope of the Report

2.1 Purpose of the Report

The Proposal is to be implemented by the sale of various subsidiaries of OZ Minerals that own the relevant mining projects and other assets to be transferred to Minmetals. Under Listing Rule 11.2 of the Listing Rules of the Australian Securities Exchange (“ASX Listing Rules”), the Proposal must be approved by OZ Minerals shareholders, by way of a simple majority (i.e. at least 50%) of votes cast at a general meeting of shareholders.

Although there is no requirement in these circumstances for an independent expert’s report pursuant to the ASX Listing Rules, the Directors of OZ Minerals have engaged Grant Samuel & Associates Pty Limited (“Grant Samuel”) to prepare an independent expert’s report setting out whether, in its opinion, the Proposal is in the best interests of OZ Minerals shareholders and to state reasons for that opinion. A copy of a summary of the report will accompany the Notice of Meeting and Explanatory Booklet (“Explanatory Booklet”) to be sent to shareholders by OZ Minerals or may be obtained by calling OZ Minerals Investor Relations on +61 3 9288 0333.

This report is general financial product advice only and has been prepared without taking into account the objectives, financial situation or needs of individual OZ Minerals shareholders. Accordingly, before acting in relation to their investment, shareholders should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs. Shareholders should read the Explanatory Booklet issued by OZ Minerals in relation to the Proposal.

Voting for or against the Proposal is a matter for individual shareholders based on their views as to value, their expectations about future market conditions and their particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. Shareholders who are in doubt as to the action they should take in relation to the Proposal should consult their own professional adviser.

Similarly, it is a matter for individual shareholders as to whether to buy, hold or sell shares in OZ Minerals. This is an investment decision, independent of a decision to vote for or against the Proposal, upon which Grant Samuel does not offer an opinion. Shareholders should consult their own professional adviser in this regard.

2.2 Basis of Evaluation

There is no requirement under ASX Listing Rule 11.2 for the preparation of an expert’s report and limited regulatory guidance as to how the expression “in the best interests” should be interpreted in the context of a transaction requiring shareholder approval under ASX Listing Rule 11.2.

The Australian Securities & Investments Commission (“ASIC”) has issued Regulatory Guide 111 which establishes guidelines in respect of independent expert’s reports. ASIC Regulatory Guide 111 differentiates between the analysis required for control transactions and other transactions. In the context of control transactions (whether by takeover bid, by scheme of arrangement, by the issue of securities or by selective capital reduction or buyback), it comments on the meaning of “fair and reasonable” and continues earlier regulatory guidelines that created a distinction between “fair” and “reasonable”. A “fair” proposal is one that fully reflects the underlying value of the entity the subject of the proposal. A fair offer will always be reasonable. A proposal could be “not fair but reasonable” if the expert believed there were sufficient reasons for shareholders to accept the offer, notwithstanding that the proposal was not fair. A proposal that, under takeover analysis, was “fair and reasonable” or “not fair but reasonable” would be in the best interests of shareholders. For most other transactions, the expert is to weigh up the advantages and disadvantages of the proposal for shareholders. This involves a judgement on the part of the expert as to the overall commercial effect of the transaction, the circumstances that have led to the proposal and the alternatives available. The expert must weigh up the advantages and disadvantages of the proposal and form an overall view as to whether the shareholders are likely to be better off if the proposal is implemented than if it is not.

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The Proposal has characteristics that are, at least to some extent, consistent with a control transaction. Assets representing a substantial proportion of the overall economic value of OZ Minerals will be sold to Minmetals. Control of these assets will pass to Minmetals, value for these assets will be crystallised and OZ Minerals shareholders will have no ongoing economic interest in the assets. All of these elements suggest that the Proposal should be treated as a control transaction. On the other hand, there are arguments that the Proposal is better analysed outside the control transaction framework. Control of OZ Minerals will not pass: existing OZ Minerals shareholders will continue to control the company. OZ Minerals will retain its major asset (the Prominent Hill mine) and the upside in that asset. OZ Minerals will be well capitalised (with expected net cash after the transaction of around $750-800 million, excluding OZ Minerals’ Convertible Bonds on issue) and the prospect of an ongoing independent future. Moreover, the circumstances that have led to the Proposal (which in large part relate to OZ Minerals’ inability to secure ongoing longer term debt funding for its operations) suggest that the Proposal is best assessed having regard to the overall advantages and disadvantages of the Proposal and their overall effect on shareholders: that is, other than as a control transaction.

Grant Samuel has evaluated the Proposal by:

assessing whether the aggregate consideration to be paid by Minmetals represents the full underlying value of the Sale Assets; and

considering the overall advantages and disadvantages of the Proposal and whether OZ Minerals shareholders are likely to be better off if the Proposal proceeds than if it does not.

In considering the overall advantages and disadvantages of the Proposal, Grant Samuel has taken into account factors including the following:

whether the Consideration to be paid reflects the full underlying value of the Sale Assets (i.e. whether the Consideration is “fair”);

the circumstances leading to the Proposal;

the alternatives available to OZ Minerals; and

the possible consequences for OZ Minerals if the Proposal does not proceed.

Consideration of these factors is broadly analogous to an assessment as to whether the Proposal is “reasonable” for the purposes of a control transaction.

Overall, Grant Samuel’s evaluation of the Proposal is based on a judgement as to whether OZ Minerals shareholders are likely to be better off if the Proposal proceeds than if it does not.

2.3 Sources of the Information

The following information was utilised and relied upon, without independent verification, in preparing this report:

Publicly Available Information

the Explanatory Booklet (including earlier drafts);

pro forma financial information for OZ Minerals for the 12 months ended 31 December 2008 and the six months ended 30 June 2008 prepared by OZ Minerals;

the annual report of OZ Minerals for the year ended 31 December 2008;

annual reports for Oxiana Limited (“Oxiana”) for the three years ended 31 December 2007;

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annual reports for Zinifex Limited (“Zinifex”) for the three years ended 30 June 2008;

the half year announcement of Oxiana for the six months ended 30 June 2008;

quarterly production and exploration reports for Zinifex, Oxiana and OZ Minerals;

the Scheme booklet dated 9 May 2008 prepared by Zinifex in relation to the merger with Oxiana announced on 3 March 2008;

press releases, public announcements, media and analyst presentation material and other public filings by OZ Minerals, Oxiana and Zinifex including information available on OZ Minerals’ website;

brokers’ reports and recent press articles on OZ Minerals and the base and precious metals industries;

sharemarket data and related information on Australian and international listed companies engaged in the base and precious metals industries and on acquisitions of companies and businesses in this industry; and

information relating to the base metals markets including supply and demand forecast.

Non Public Information provided by OZ Minerals

life of mine plans for the Century, Golden Grove, Rosebery, Sepon Copper and Sepon Gold mines;

studies and technical information relating to OZ Minerals’ assets;

management accounts for OZ Minerals for the 15 months ended 31 March 2009;

operating budgets for the three years ending 31 December 2011 for each of OZ Minerals’ major operating assets, prepared by OZ Minerals management; and

other confidential documents, board papers, presentations and working papers.

Grant Samuel has also held discussions with, and obtained information from, senior management of OZ Minerals and its advisers. In addition, representatives of Grant Samuel have visited OZ Minerals’ major operations over the past three years. Representatives of AMC Consultants Pty Ltd (“AMC”) visited the major operations of OZ Minerals in the past three years.

2.4 Limitations and Reliance on Information

Grant Samuel believes that its opinion must be considered as a whole and that selecting portions of the analysis or factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the opinion. The preparation of an opinion is a complex process and is not necessarily susceptible to partial analysis or summary.

Grant Samuel’s opinion is based on economic, sharemarket, business trading, financial and other conditions and expectations prevailing at the date of this report. These conditions can change significantly over relatively short periods of time. If they did change materially, subsequent to the date of this report, the opinion could be different in those changed circumstances.

This report is also based upon financial and other information provided by OZ Minerals and its advisers. Grant Samuel has considered and relied upon this information. OZ Minerals has represented in writing to Grant Samuel that to its knowledge the information provided by it was complete and not incorrect or misleading in any material aspect. Grant Samuel has no reason to believe that any material facts have been withheld.

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The information provided to Grant Samuel has been evaluated through analysis, inquiry and review to the extent that it considers necessary or appropriate for the purposes of forming an opinion as to whether the Minmetals Proposal is in the best interests of OZ Minerals shareholders. However, Grant Samuel does not warrant that its inquiries have identified or verified all of the matters that an audit, extensive examination or “due diligence” investigation might disclose. In any event, an opinion to value is more in the nature of an overall review rather than a detailed audit or investigation.

An important part of the information used in forming an opinion of the kind expressed in this report is comprised of the opinions and judgement of management. This type of information was also evaluated through analysis, inquiry and review to the extent practical. However, such information is often not capable of external verification or validation.

Preparation of this report does not imply that Grant Samuel has audited in any way the management accounts or other records of OZ Minerals. It is understood that the accounting information that was provided was prepared in accordance with generally accepted accounting principles and in a manner consistent with the method of accounting in previous years (except where noted).

Grant Samuel appointed AMC as technical specialist to review the mineral assets of OZ Minerals. AMC’s role included a review of Reserves, Resources, development plans, production schedules, operating costs, capital costs, potential Reserve and Resource extensions and exploration. AMC also prepared valuations of OZ Minerals’ exploration interests. The AMC report is attached as an appendix to this report.

The information provided to Grant Samuel and AMC included mine development plans, forecasts and feasibility studies for OZ Minerals’ key assets. OZ Minerals is responsible for the information contained in the mine development plans, forecasts and feasibility studies (“the forward looking information”). Grant Samuel and AMC have considered and, to the extent deemed appropriate, relied on this information for the purpose of their analysis. In the case of certain assets, AMC has recommended that Grant Samuel adopt assumptions regarding production costs, operating costs, mine life and other matters that are different from those used in the forward looking information provided by OZ Minerals.

Subject to these adjustments, Grant Samuel and AMC have assumed that the forward looking information was prepared appropriately and accurately based on the information available to management at the time and within the practical constraints and limitations of such forward looking information. Grant Samuel and AMC have assumed that the forward looking information does not reflect any material bias, either positive or negative. Grant Samuel has no reason to believe otherwise. However, the achievability of the forward looking information is not warranted or guaranteed by Grant Samuel. Future profits and cash flows are inherently uncertain. They are predictions by management of future events that cannot be assured and are not necessarily based on assumptions, many of which are beyond the control of the company or its management. Actual results may be significantly more or less favourable.

As part of its analysis, Grant Samuel has developed cash flow models which use the forward looking information, amended as deemed appropriate by AMC, as a starting point. Grant Samuel has reviewed the sensitivity of net present values to changes in key variables. The sensitivity analysis isolates a limited number of assumptions which are inputs to the cash flow models and shows the impact of the expressed variations to those assumptions. No opinion is expressed as to the probability or otherwise of those expressed variations occurring. Actual variations may be greater or less than those modelled. In addition to not representing best and worst outcomes, the sensitivity analysis does not, and does not purport to, show the impact of all possible variations to the business model. The actual performance of the business may be negatively or positively impacted by a range of factors including, but not limited to:

changes to the assumptions other than those considered in the sensitivity analysis;

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greater or lesser variations to the assumptions considered in the sensitivity analysis than those modelled; and

combinations of different variations to a number of different assumptions that may produce outcomes different to the combinations modelled.

In forming its opinion, Grant Samuel has also assumed that:

matters such as title, compliance with laws and regulations and contracts in place are in good standing and will remain so and that there are no material legal proceedings, other than as publicly disclosed;

the information set out in the Explanatory Booklet sent by OZ Minerals to its shareholders is complete, accurate and fairly presented in all material respects;

the publicly available information relied on by Grant Samuel in its analysis was accurate and not misleading;

the Minmetals Proposal will be implemented in accordance with its terms; and

the legal mechanisms to implement the Minmetals Proposal are correct and will be effective.

To the extent that there are legal issues relating to assets, properties, or business interests or issues relating to compliance with applicable laws, regulations, and policies, Grant Samuel assumes no responsibility and offers no legal opinion or interpretation on any issue.

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3 Profile of OZ Minerals

3.1 Overview

OZ Minerals was formed on 1 July 2008 as a result of the merger of Zinifex and Oxiana. OZ Minerals is Australia’s third largest diversified mining company by market capitalisation and the world’s second largest zinc producer as well as a significant producer of copper, lead, gold and silver.

OZ Minerals has a portfolio of assets dominated by three large operations: Century, the world’s second largest zinc mine, an open pit operation located in Queensland, the Sepon copper and gold operations in Laos and the Prominent Hill copper-gold mine in South Australia. Output from these mines is supplemented by production from Golden Grove, a copper/zinc underground mine located in Western Australia, and Rosebery, a polymetallic underground mine located in Tasmania. Avebury, an underground nickel mine, where production started in July 2008, was put on care and maintenance in December 2008.

OZ Minerals owns a number of other projects at various stages of analysis and development: the Dugald River zinc project in Queensland, and the High Lake and Izok Lake deposits in Canada. OZ Minerals has an extensive exploration portfolio that includes exploration interests in Australia, Canada, Tunisia, China, Laos, Thailand, Indonesia and Cambodia. On 24 April 2009, OZ Minerals announced that it had entered into an agreement to sell the Martabe project to CST.

Set out below is an overview of OZ Minerals’ operational, development and exploration portfolio:

Operations Projects under development Project pipeline Australia Indonesia Australia Century (zinc/lead/silver) Martabe (gold/silver) Dugald River (zinc/lead/silver) Golden Grove (zinc/copper/gold/silver/lead) Laos Canada Rosebery (zinc/lead/copper/gold/silver) Sepon Copper expansion (copper) High Lake (zinc/copper) Avebury (nickel) Izok Lake (zinc/copper) Prominent Hill (copper/gold) Laos Laos Sepon Copper (copper) Sepon Primary Gold (gold) Sepon Gold (gold) Sepon Primary Copper (copper) Source: OZ Minerals

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3.2 Resources, Reserves and Production

OZ Minerals’ Resources and Reserves as at 30 June 2008 and production for the year ended 31 December 2008 are set out below.

OZ Minerals – Resources, Reserves and Production Metal Resources Reserves Production Zinc (000’s t) 18,245 5,133 738.4 Copper (000’s t) 5,877 1,908 84.6 Gold (Moz) 19.0 4.2 0.2 Silver (Moz) 396.7 90.6 10.4 Lead (000’s t) 2,627 599 98.4 Nickel (000’s t) 171 60 2.1 Source: OZ Minerals

The Resources data set out above includes 5.9 million ounces of gold and 61.5 million ounces of silver at Martabe. The Reserves data includes 2.2 million ounces of gold and 29.7 million ounces of silver at Martabe. The production data includes production from Century and Rosebery from 1 January 2008. It also includes nickel production from Avebury, which was put on care and maintenance in December 2008. However, it does not include production from Prominent Hill, which commenced production in February 2009. OZ Minerals expects to produce 85,000-100,000 tonnes of copper at Prominent Hill in 2009.

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3.3 Financial Performance

The financial performance of OZ Minerals for 2007 and 2008 is summarised below. The information set out below has been prepared on a pro forma basis, as if the merger of Zinifex and Oxiana had occurred at the beginning of the period. The financial information for the year ended 31 December 2007 has been provided by OZ Minerals and adjusted to account for share of net profit of associates and joint ventures. The financial information for the 2008 calendar year has been prepared having regard to the financial statements of Oxiana for the six months ended 30 June 2008, the financial statements for Zinifex for the six months ended 31 December 2007 and the year ended 30 June 2008 and the financial statements of OZ Minerals for the year ended 31 December 2008. However, the information has not been subject to audit or other review.

OZ Minerals - Financial Performance ($ million)2 Year ended Six months ended Year ended 31 December 30 June 31 December 31 December

2007 2008 2008 2008 Sales Revenue 2,672.8 1,003.3 708.8 1,712.1 EBITDA 1,542.8 259.2 238.3 497.5 Depreciation and amortisation (357.3) (183.8) (246.1) (429.9) Impairment of assets - (711.9) (2,401.0) (3,112.9) EBIT 1,185.5 (636.5) (2,408.8) (3,045.3) Net interest income / (expense) 16.4 34.1 2.2 36.3 Share of net profit / (loss) of (1.9) (2.5) (3.0) (5.5) associates and joint ventures Other significant items - 22.5 (42.5) (20.0) Profit before tax 1,200.0 (582.5) (2,452.0) (3,034.5) Income tax benefit / (expense) (350.3) 161.4 (43.7) 117.7 Net profit after tax from 849.7 (421.0) (2,495.8) (2,916.8) continuing operations Net profit after tax of discontinued - 17.9 - 17.9 operations Net profit / (loss) for the year 849.7 (403.1) (2,495.8) (2,898.9) Net profit / (loss) attributable to (12.4) (11.4) (5.4) (16.8) outside equity interests Net profit after tax attributable to 837.3 (414.5) (2,501.2) (2,915.7) OZ Minerals shareholders Source: OZ Minerals and Grant Samuel analysis

OZ Minerals’ financial performance deteriorated significantly during the first half of the 2008 calendar year, reflecting a substantial fall in the zinc price. Its performance declined further in the second half of the 2008 calendar year as a result of falls in copper, zinc and lead prices, partially offset by the fall in the Australian dollar. After falling by 19% in the first half of the 2008 calendar year, from US$1.07/lb to US$0.86/lb, zinc fell a further 38% in the second half to close the 2008 year at US$0.54/lb. The copper price increased from US$3.01/lb on 1 January 2008 to US$3.94/lb on 30 June 2008, but then collapsed to US$1.38/lb on 31 December 2008, 54% down from a year earlier. The lead price fell 31% in the first six months of 2008, down from US$1.15/lb on 1 January 2008 to US$0.80/lb on 30 June 2008, and then fell a further 43% to close at US$0.46/lb on 31 December 2008.

The fall in the Australian dollar against the US dollar in the second half of the year somewhat offset the sharp falls in commodity prices. Zinc, copper and lead prices closed the year down 37%, 42% and 50% respectively in Australian dollar terms by comparison with declines of 50%, 54% and 60% in US dollar terms. For the six months ended 31 December 2008, an increase in sales volumes and a reduction in operating costs had a positive effect on earnings.

2 Numbers may not add up due to rounding.

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The fall in OZ Minerals’ market capitalisation to levels below its net asset value and the substantial decline in commodity prices prompted the company to conduct an impairment assessment, which resulted in a pre-tax impairment charge of $2.4 billion. The breakdown of the asset impairment charge is provided below. Sepon Copper was the only asset against which no impairment charge was recorded.

OZ Minerals - Asset Impairment ($ million)3 As at 31 December Six months ended 31 December 2008 2008 Book value Pre-tax Post-tax Tax impact post impairment impairment impairment Canada 507 (112) 395 - Dugald River 282 - 282 - Century 265 - 265 1,015 Prominent Hill 251 - 251 1,443 Rosebery 245 - 245 180 Golden Grove 229 - 229 200 Martabe 216 (44) 172 210 Investment in Nyrstar NV 143 - 143 35 Avebury 135 - 135 100 Investment in Toro Energy Limited 66 - 66 35 Sepon Gold 35 - 35 725 Sepon Copper - - - Other corporate assets 27 - 27 19 Total asset impairment 2,401 (156) 2,245 3,962 Source: OZ Minerals

3 Numbers may not add up due to rounding.

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3.4 Financial Position

The statement of financial position of OZ Minerals as at 31 December 2008 is summarised below:

OZ Minerals - Financial Position ($ million)4 As at 31 December 2008 Receivables and prepayments 62.2 Inventories 223.6 Payables (164.7) Net Working Capital 121.1 Property, plant and equipment (net) 2,053.2 Assets / (liabilities) classified as held for sale 2,091.6 Intangible assets 4.6 Provisions (210.8) Net other assets / liabilities 250.3 Capital Employed 4,310.0 Bank loans, convertible bonds and lease liabilities (1,149.8) Cash 69.8 Net Assets 3,230.0 Minority Interest 47.9 Shareholder Funds 3,182.1 Source: OZ Minerals

As at 31 December 2008, OZ Minerals was considering the sale of a number of assets, which were accordingly classified for financial reporting purposes as assets held for sale. These assets were Prominent Hill, Golden Grove, Martabe, Rosebery and OZ Minerals’ investment in Nyrstar NV.

OZ Minerals has four major bank facilities (referred to in OZ Minerals’ ASX releases as facilities A, B, C and D). Facilities A and B were established in respect of the Australian operations of Oxiana. Facility C was established in respect of the operations of Zinifex. Facility D is a project finance facility established to fund the Sepon operations. Key terms of the facilities are:

facility A is provided by a syndicate of seven lenders. As of 4 December 2008, it was drawn to US$420 million. This includes a contingent liability of A$15 million for letters of credit provided under a letter of credit facility of A$25 million. The US$420 million was initially due to be repaid in instalments from 31 December 2008;

facility B is provided by a syndicate of two lenders, is fully drawn to its limit of US$140 million and was initially due to be repaid by 30 November 2008;

facility C is provided by a single lender and has a limit of A$250 million, of which A$85.8 million was drawn in respect of a cash advance facility and A$101 million was drawn in respect of a letter of credit facility. The facility matured on 31 December 2008; and

facility D is provided by a syndicate of six lenders. As at 4 December 2008, it was fully drawn to its limit of US$77 million. It matures in June 2011.

OZ Minerals had intended to refinance facilities A and B before 30 November 2008. The fall in commodity prices and the global financial crisis meant that this could not be achieved. OZ Minerals sought an extension to 31 January 2009. On 28 November 2008 the company requested that its shares be put in trading halt pending a response from its lenders. On 2 December 2008 its shares were suspended from trading. OZ Minerals secured an extension of its facilities to

4 Numbers may not add up due to rounding.

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29 December 2008 with an option to extend the date to 31 January 2009 under certain conditions. On 30 December 2008, OZ Minerals announced that it had negotiated an extension to 27 February 2009 for facilities A, B and C. On 22 January 2009, OZ Minerals announced it had secured a A$140 million bridging facility terminating on 27 February 2009.

On 16 February 2009, OZ Minerals announced that Minmetals had made an offer for the company and that OZ Minerals’ debt facilities would be repaid by Minmetals upon successful completion of the transaction. Shares in OZ Minerals commenced trading again on the ASX the following day. Since then, OZ Minerals has announced a revised proposal from Minmetals and that it had secured an extension of its debt facilities to 30 April 2009. On 1 May 2009 OZ Minerals announced a further extension of its debt facilities to 30 June 2009.

3.5 Cash Flow

OZ Minerals’ cash flow statement for the year ended 31 December 2008 is summarised below. It represents the pro forma cash flows of OZ Minerals as if the merger of Zinifex and Oxiana had occurred at the beginning of the period. It has been prepared having regard to the financial statements for Zinifex for the six months ended 31 December 2007 and the year ended 30 June 2008 and the financial statements of OZ Minerals for the year ended 31 December 2008. The information has not been subject to audit or other review.

OZ Minerals - Cash Flow ($ millions) Year ended

31 December 2008 Receipts from customers 2,075.3 Payments to suppliers and employees (1,966.7) Payments for capital expenditure (net) (1,661.1) Operating cash flow (1,552.8) Tax received / (paid) (204.9) Net interest received / (paid) 35.1 Dividends (paid) (336.9) Investments (net of cash) (718.1) Payments for shares purchased on market (14.5) Net proceeds from borrowings 427.9 Net cash generated / (used) (2,364.2) Net cash / (borrowings) – opening 2,474.1 Effects of exchange rate changes 8.9 Net cash / (borrowings) – closing 118.8 Source: OZ Minerals

During the year ended 31 December 2008, operations were financed mainly by cash on hand (Zinifex had net cash at 1 January 2008 of approximately $1.04 billion, after adjusting for the acquisition of Allegiance and dividend payment in early 2008) and proceeds from borrowings. Payments for capital expenditure include payments for development and construction at Prominent Hill, pre-strip at Century, expansion and exploration at Sepon and exploration at Martabe, as well as other development and exploration activities. Total capital expenditure for the six months to 31 December 2008 was $800 million. The payments for investments include the acquisition of Allegiance and proceeds from the sale of discontinued operations.

3.6 Group Hedging

OZ Minerals does not make use of derivative financial instruments to hedge foreign exchange risk arising from normal operations.

OZ Minerals has a policy of not hedging its commodity exposure. However, Sepon’s Lao holding company, Lane Xang Minerals Limited (“LXML”), was required to hedge 35% of its forecast gold

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price exposure out to June 2009 in accordance with the conditions of its debt funding facility. This hedging was achieved by purchasing put options. As of December 2008, the balance of options in place covered 29,500 ounces at a strike price of US$370 per ounce.

3.7 Taxation Position

Under the Australian tax consolidation regime, OZ Minerals and its wholly owned Australian resident entities have elected to be taxed as a single entity.

OZ Minerals had carried forward income tax losses of $1.37 billion, of which $548 million (tax effected $165 million) were recognised in the balance sheet at 31 December 2008. The balance on its franking account at year end was $46 million, although this has since been reduced to nil with the receipt of tax refunds after 1 January 2009.

3.8 Capital Structure and Ownership

As at 1 May 2009, OZ Minerals had the following securities on issue:

3,121,339,800 fully paid ordinary shares;

19,272,288 unlisted options at exercise prices between $1.25 and $4.93, with expiry dates between 28 January 2010 and 30 September 2013;

6,648,152 performance rights;

139,752 sign on equity rights;

340,105 Zinifex Long Term Incentive Opportunities which each convert to 3.1931 OZ Minerals shares; and

US$105 million of senior subordinated Convertible Bonds issued under the Oxiana Convertible Bonds Trust Deed. These bonds are convertible into OZ Minerals shares at US$0.9180 per share, which represents 114,379,085 shares to be issued.

OZ Minerals has a performance rights plan in place whereby rights are granted at no cost to employees. The rights, which at the discretion of the company may extend for up to 10 years, may be exercised into shares one, two or three years after the grant date providing specified non-market performance conditions have been met by the relevant employee.

The top 10 shareholders in OZ Minerals accounted for approximately 48.3% of the shares on issue at 27 March 2009.

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OZ Minerals - Major Shareholders As at 27 March 2009 Shareholders Shares Issued Capital (million) (%) National Nominees Limited 485.6 15.6 HSBC Custody Nominees (Australia) Limited 350.8 11.2 J P Morgan Nominees Australia Limited 317.2 10.2 Citicorp Nominees Pty Limited 113.9 3.7 ANZ Nominees Limited 103.6 3.3 HSBC Custody Nominees (Australia) Limited – A/C 2 34.4 1.1 HSBC Custody Nominees (Australia) Limited – GSCO ECA 32.2 1.0 Romadak Pty Ltd 25.4 0.8 Cogent Nominees Pty Limited 22.7 0.7 Citicorp Nominees Pty Limited 22.5 0.7 Subtotal – Top 10 Shareholders 1,508.3 48.3 Other shareholders 1,613.0 51.7 Total 3,121.3 100.0 Source: OZ Minerals

As at 1 May 2009, OZ Minerals had received notices from the following substantial shareholders:

OZ Minerals – Substantial Shareholders as at 1 May 2009 Shareholder Number of Shares Percentage Morgan Stanley Investment Management Limited 214,987,557 6.89% Merrill Lynch and Co., Inc. 214,970,416 6.89% BlackRock Group 192,557,792 6.17% Source: IRESS

3.9 Share Market Performance

The history of trading in OZ Minerals ordinary shares since the effective date of the formation of the company of 1 July 2008 is set out below. OZ Minerals shares were placed in trading halt on 28 November 2008 and then suspended from official quotation on 2 December 2008. Trading in OZ Minerals shares was reinstated on 17 February 2009 after the announcement of the initial proposal from Minmetals. OZ Minerals shares were again placed in trading halt on 23 March 2009 and reinstated for trading on 1 April 2009 after the announcement of the revised proposal from Minmetals. Off-market trades in December 2008 and January 2009 are not reflected in the following table.

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OZ Minerals – Share Trading History Share Price ($) Average Weekly Average Weekly

High Low Close Volume (000’s) Transactions Month ended: 31 July 2008 2.64 1.90 2.00 168,610 21,555 31 August 2008 2.00 1.63 1.75 148,685 19,758 30 September 2008 1.94 1.27 1.61 192,509 23,862 31 October 2008 1.67 0.84 0.95 148,752 22,259 30 November 2008 1.13 0.49 0.55 181,832 16,679 31 December 2008 - - - - - 31 January 2009 - - - - - 28 February 2009 0.73 0.40 0.63 213,832 10,746 31 March 2009 0.68 0.50 0.56 122,984 8,589 30 April 2009 0.76 0.45 0.75 165,078 9,216 Week ended: 20 February 2009 0.73 0.56 0.65 532,675 22,317 27 February 2009 0.66 0.40 0.63 388,770 24,139 6 March 2009 0.68 0.60 0.61 150,098 11,650 13 March 2009 0.64 0.59 0.62 79,713 6,145 20 March 2009 0.62 0.51 0.60 172,279 11,153 27 March 2009 0.64 0.50 0.56 130,761 8,263 3 April 2009 0.63 0.45 0.58 306,593 11,384 10 April 2009 0.61 0.56 0.57 65,677 4,691 17 April 2009 0.65 0.58 0.65 111,672 7,428 24 April 2009 0.69 0.60 0.68 101,657 7,386 1 May 2009 0.80 0.67 0.78 167,010 11,356 Source: IRESS

The following graph illustrates share price movements and trading volumes for OZ Minerals’ ordinary shares since 1 July 2008.

OZ Minerals Share Price & Trading Volume 1 July 2008 to 1 May 2009

2.75 250,000

2.50

2.25 200,000

2.00 Daily Volume (000's) Volume Daily 1.75 150,000 1.50

1.25 100,000 Share price (A$) price Share 1.00

0.75

0.50 50,000

0.25

- - Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09

Source: IRESS

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OZ Minerals’ share price has fallen substantially since the merger, from $2.47 on 1 July 2008 to a closing price of $0.55 cents immediately before OZ Minerals shares were placed in trading halt on 28 November 2008. This share price decline reflected the sharp fall in copper and zinc prices and overall share market weakness. OZ Minerals shares were reinstated to official quotation on 17 February 2009, the day after the announcement of the initial proposal of $0.825 cash per share. Since then, OZ Minerals shares have traded in the range $0.40-0.80 a share, with a volume weighted average price (“VWAP”) to 1 May 2009 of $0.61 per share. There has been heavy trading in OZ Minerals shares since the announcement of the initial proposal, with approximately 2.2 billion shares traded between 17 February and 1 May 2009.

The chart below shows the relative performance of OZ Minerals shares against the S&P / ASX 300 Materials Accumulation Index and copper, zinc and lead LME spot prices. The chart shows the strong correlation between OZ Minerals’ share price and the spot price of OZ Minerals’ key commodities:

Comparative Performance 1 July 2008 - 1 May 2009

140

120

100

40 Common Base 1 July 2008 1 July Base Common

0 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09

OZL Copper S&P ASX 300 Materials Index Zinc Lead

Source: Bloomberg

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4 Profile of OZ Minerals Assets

4.1 Century

The Century mine is the largest zinc mine in Australia and the second largest in the world. It is located in north-west Queensland, approximately 250 kilometres north-west of Mount Isa. While the area around Century has been mined (although not continuously) for zinc and lead for close to 100 years, the Century deposit was only discovered by CRA Limited (“CRA”), now Rio Tinto Limited (“Rio Tinto”) in 1990. The Century project was subsequently acquired by Pasminco Limited (“Pasminco”). Development of the mine commenced in 1997 and concentrate shipments began in late 1999. The mine was operated by administrators between 2001 and 2004, while Pasminco was in voluntary administration, and formed part of the asset base of Zinifex at the time of its listing.

Century is 100% owned by OZ Minerals and was included in its portfolio of assets through the merger with Zinifex in July 2008. Century is operated on a fly-in/fly-out roster with the on-site workforce being accommodated in the Darimah village, located about six kilometres from the mine site. Mining at Century is based on open pit extraction using conventional hydraulic excavators and haul trucks. A dedicated and well-equipped treatment plant, located next to the mine site, employs a conventional grinding and froth flotation circuit. The resultant zinc and lead concentrates are pumped as slurry to the port facility at Karumba via a 304 kilometre pipeline. At Karumba, the slurry is dewatered, filtered, stockpiled and transported to bulk carriers moored off- shore.

Since 2003, Century has consistently produced more than 500,000 tonnes per annum of zinc in concentrate. While Century is primarily a zinc producer, significant amounts of lead and silver are also recovered. Lead production has ranged between 30,000 and 84,000 tonnes per annum due to fluctuations in lead grade. A material reduction in planned waste movement for 2009 has allowed Century to significantly reduce staffing and equipment levels and lower operating costs. On the assumption that low zinc prices persist, approximately 5.5 million tonnes of sub-economic material will be removed from the mining schedule, and operations at Century will conclude in 2014, a year earlier than previously planned.

Geology and Mineralisation

The Century deposit is hosted by mid-Proterozoic rocks of the Mount Isa Inlier, which hosts a number of other major base metal deposits such as those at Mount Isa, Cannington, Dugald River and McArthur River. The Century mineralisation is stratiform, lying within a sequence of siltstones, shales and sandstones, which is overlain by a Cambrian limestone unconformity. The mineral deposit, which extends over an area of 1.2 kilometres by 1.4 kilometres, is generally flat lying (dipping at 5-25 degrees), although along the western flank of the deposit it rises more steeply towards the surface at an angle of around 70 degrees.

The mineralised package is divided into Upper and Lower mineralised zones, divided by a horizon of siltstone waste. Sulphide mineralisation principally consists of sphalerite and galena, with lesser amounts of pyrite. The Lower zone, which contributes approximately 60% of overall Resources, is characterised by higher zinc grades (around 15% zinc) but lower lead and silver grades (1% lead and 20 g/t silver). Lower zone mineralisation is also typically relatively high in organic carbon and silica by comparison with the Upper zone. While the Upper zone has lower zinc grades (around 10% zinc), it has higher lead and silver grades (4% lead and 150 g/t silver) and lower levels of organic carbon and silica.

The mineral deposit is split into southern and northern blocks by the east-west trending Pandora’s Fault. Mineralisation is constrained at the southern end of the deposit by the east-west trending Magazine Hill Fault, to the east by the Termite Range Fault and to the north by Nikki’s Fault. To the west, as the mineral deposit rises towards the surface, it is constrained by the limestone unconformity and surface erosion. The mineral deposit is well delineated on all four sides and there appears to be little prospect of identifying any significant mineralisation beyond the existing defined Resource.

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Source: OZ Minerals

OZ Minerals has extensive holdings around Century and significant exploration has been conducted (including by Zinifex) with the objective of identifying satellite ore bodies to extend the life of Century operations. However, these exploration efforts have had limited success, with drilling in the vicinity of the old Silver King mine, located about two kilometres south-east of Century, identifying modest quantities of high grade, lead-rich mineralisation. Phosphate deposits have also been identified within the Century exploration licences in the Georgina Basin, about 15 kilometres from the Century mine. A conceptual study to develop these phosphate deposits has confirmed the feasibility of utilising the existing Century infrastructure for phosphate operations following the completion of zinc mining and treatment, including the processing facilities (after modifications), pipeline to port and the port facilities.

Mining

Mining commenced in the relatively shallow southern block, where Stages 1 and 2 of the pit were mined. Subsequently, mining moved to Stages 3, 4 and 5 of the pit in the northern block, with the extraction of mineralisation along the eastern and northern flanks of the deposit. Mining of Stage 6 was completed in December 2008 and Stage 7 is currently being mined. Stage 8, which will mine to the ultimate pit limit for the northern block, will provide the majority of the ore for mining beyond 2010. The deposit deepens to the north. The pit will reach a depth of around 345 metres at its deepest point. Mining operations will conclude with the mining of Stage 9, which will extract the remaining economic ore in the southern block. The diagram below shows a plan view of the pit and the various mining stages.

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Source: OZ Minerals

A geotechnical review of the planned mining of Stage 7 indicated that the original mine plan involved the risk of failure of the western wall of the pit, as a result of the existence of steeply dipping shears towards the western margin of the pit. To address this risk, it was decided to accelerate the removal of overburden (including the steeply dipping shear zone) up to the ultimate western wall of the pit, where competent material will support the final pit design. The result was a substantial increase in the stripping ratio and waste ore movements for the 2006 to 2008 calendar years. A large portion of the overburden removal was completed in 2007-2008 with waste movements increasing from around 24 million bank cubic metres (“Mbcm”) per annum prior to the ramping up in 2006 to in excess of 42 Mbcm per annum during the period. Following the fall in the zinc price during 2008, a revision in the pit design has resulted in the planned deferral of approximately 8 Mbcm of waste removal into Stage 8. The material movement for the calendar year 2009 is therefore expected to be substantially lower than for 2008, at 24 Mbcm, allowing a significant reduction in the mining fleet and manning levels. Furthermore, all waste will be placed in-pit. Waste movement is scheduled at 26 million Mbcm for 2010 and 15 Mbcm tonnes for 2011, with further reductions thereafter. As a result, the stripping ratio will fall from around 20 for the 2007-2008 period to around 11 for 2009 and 13 for 2010, with subsequent reductions through to the end of the mine life, which is scheduled for 2014.

Run-of-mine ore is trucked to the ROM pad to the south-east of the pit. Ore from the Upper and Lower mineralised zones is stored on separate stockpiles to allow blending for optimal plant operation.

Waste dumps to the east and north of the pit have largely been completed. In-pit waste dumping in the southern block has commenced and future waste will be dumped in pit and on a new waste dump currently being developed to the west of the pit.

The deferral of waste removal to Stage 8 will result in an immediate reduction in material movements for the 2009 year followed by a more gradual reduction in subsequent years, as opposed to the previous mining schedule which required high levels of material movements in 2009 followed by a very sharp reduction in subsequent years. This smoothing of the material movement profile over the mine life has allowed a significant reduction in the mining fleet, which

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has been reduced by two shovels and 17 haul trucks and now consists of four shovels, four excavators and around 26 haul trucks.

Processing

The concentrator was commissioned in 1999 and the first shipment of concentrate occurred in December 1999. In recent years, the plant has treated in excess of 5.6 million tonnes per annum of ore. The plant is operated to maximise zinc output. Although the plant is in general terms a conventional crush/grind/flotation design, the actual flow sheet is fairly complex, because of the need to remove organic carbon and silica minerals associated with sphalerite. In particular, the zinc flotation includes two stages of regrinding including an ultra-fine regrind of primary concentrate to liberate silica for rejection to tailings.

Project PERcent was initiated in 2005 with the objective of increasing recoveries by 2.5%. To achieve this objective, the plant was expanded to incorporate a surge tank and an additional ball mill, which were commissioned in mid 2007 and early 2008 respectively. However, given declining production volumes, the two ball mills have been run on a duty/standby basis since early 2009 to maximise availability and minimise costs. Since 2005, recoveries have ranged between 78% and 80% for zinc and 63% and 71% for lead. The budgeted recoveries for zinc and lead for the 2009 calendar year are 80.8% and 67.7% respectively.

The operating costs of the plant are relatively high because of the high power costs associated with fine re-grinding required to remove silica and the presence of carbon in the ore, which results in high reagent consumption. The plant comprises:

a primary crusher;

a grinding section, comprising a 12 megawatt SAG mill and two ball mills of 6-8MW each;

a prefloat circuit of seven 100 cubic metre tank cells as roughers and a Jameson cell for use as a cleaner. The prefloat circuit removes a significant portion of the organic carbon;

a lead flotation circuit of six 100 cubic metre cells as roughers and scavengers, and five 50 cubic metre cells as first and second cleaners;

a zinc primary flotation circuit of eight 100 cubic metre rougher cells, followed by a scavenger circuit of one 200 cubic metre cell and ten 100 cubic metre cells. Scavenger concentrate is reground in six stirred media detritors (“SMDs”) and cleaned in six 100 cubic metre cells; and

an ultra-fine zinc section in which primary flotation concentrates (rougher and cleaner concentrates) are classified using 160, 50mm cyclones, with the underflow reground in up to 15 355kW SMDs. The resultant concentrates are cleaned through a four stage ultra-fine cleaning process, utilising a total of 36 100 cubic metre cells, to produce zinc concentrate.

The plant configuration is diagrammatically illustrated below:

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Source: OZ Minerals

Tailings from the treatment plant are piped to a tailings storage facility approximately 3.8 kilometres from the plant.

Zinc and lead concentrates are transported by a 304 kilometre long pipeline to the port of Karumba. At Karumba, the concentrates are thickened, filtered and dried, before being barged to bulk carriers moored off-shore.

Power for the Century site is supplied by the gas-fired Mica Creek Power Station, near Mount Isa. Water is sourced from the mine dewatering borefield and a second borefield east of the mine site.

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Resources and Reserves

Century Resources and Reserves as at 30 June 2008 as published in December 2008 are set out in the table below:

Century – Resources and Reserves as at 30 June 20085 Tonnage Zinc Lead Silver Zinc Lead Silver

(Mt) (%) (%) (g/t) (000’s t) (000’s t) (Moz) Resources6 Measured 36.6 12.3 1.4 34 4,502 512 39.7 Indicated 10.8 11.7 1.4 36 1,264 151 12.3 Total Resources 47.4 12.2 1.4 34 5,765 664 52.0 Reserves7 Proved 30.8 10.8 1.1 22 3,326 339 21.8 Probable 9.6 10.3 1.0 25 989 96 7.7 Total Reserves 40.4 10.7 1.1 23 4,315 435 29.5 Source: OZ Minerals

Resources are estimated on the basis of a zinc cut off grade of 3.5%, while Reserves are estimated on the basis of a zinc equivalent cut off grade of 3.61%. Given the extensive drilling of the Resource and mining experience, the Resource is well understood (reflected by the fact that all the Resource is in the Measured and Indicated categories) and there are limited prospects of delineating additional Reserves.

Century Resources and Reserves have reduced over the last few years as a result of mining depletion:

Century – Resources and Reserves As at 31 March As at 30 June 2004 2005 2006 2007 2008 Resources (Mt) 73.8 67.6 61.2 53.7 47.8 Reserves (Mt) 62.3 55.7 52.1 46.2 40.4 Source: OZ Minerals

Century’s stated Reserves as at 30 June 2008 of 40.4 Mt were depleted through the mining of 3.15Mt of ore to 31 December 2008. At the lower zinc prices now prevailing OZ Minerals’ current mine plan for Century contemplates the selective mining and treatment of a further 30.9 Mt of ore, with the remaining Reserves not scheduled for treatment. At higher zinc prices, however, the below pay grade material may be economic.

Operating Performance

Century’s operating performance for the three years ended 30 June 2007 and the 12 months ended 31 December 2008 is summarised below:

5 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all Resources, which include Reserves. 6 Excludes Century East Block. 7 Reserves cut off grade has been calculated using a zinc price of US$0.98/lb, lead price of US$0.50/lb, silver price of US$12.5/oz and exchange rate of 0.85.

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Century – Operating Statistics Year to 31 Year to 30 June December 2005 2006 2007 2008 Ore milled (Mt) 5.3 5.3 5.6 5.7 Zinc milled grade (%) 11.8 12.3 11.6 10.5 Lead milled grade (%) 1.5 2.2 1.3 1.6 Zinc recovery (%) 80.0 78.7 77.8 79.6 Lead recovery (%) 62.6 71.3 63.3 67.1 Contained metals in concentrate Zinc (000’s tonnes) 501.5 515.7 502.0 513.6 Lead (000’s tonnes) 49.9 83.6 37.8 56.4 Source: OZ Minerals

Treatment plant throughput has increased modestly over the last few years due to higher mill availability and capacity improvement projects. Except in the last 12 months when the zinc head grade declined as mining transitioned from Stage 6 and Stage 7, zinc head grade has been reasonably consistent at around 12.0%, while lead grade has varied more significantly, between 1.5% and 2.2%. These grades have been reflected in consistent zinc production (around 500,000 tonnes per annum in concentrates) and larger fluctuations in lead production. During the 12 months to 31 December 2008 zinc and lead recoveries improved considerably as a result of the installation of the additional ball mill and surge tank in the treatment plant in 2008. The reported total cash costs of operation for this period were US$0.58 per pound of zinc.

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4.2 Prominent Hill

Prominent Hill is located 650 kilometres north-west of Adelaide and 130 kilometres south-east of the town of Coober Pedy in the Gawler Craton of South Australia, as illustrated below.

Source: OZ Minerals

The Prominent Hill copper-gold deposit was discovered by Minotaur Resources Limited in 2001. Oxiana acquired an initial 35% interest in the project, subsequently increasing its stake to 65% by funding exploration and pre-feasibility and feasibility studies. Oxiana moved to 100% ownership of the project through its acquisition of Minotaur in 2005. On 25 August 2006, the Oxiana Board formally approved development of the Prominent Hill mining operation following completion of a Bankable Feasibility Study.

Prominent Hill consists of an open pit mine, a conventional grinding and flotation processing plant with a capacity of eight million tonnes per annum, a permanent village to accommodate approximately 600 workers and a haulage road, power line and water bore field.

Production of the first commercial copper and gold concentrates occurred on 26 February 2009. All concentrates produced at Prominent Hill are sold under contracts with smelters in China, India, Australia and Europe. Concentrates are shipped to international customers via the Adelaide to Darwin railway and the Port of Darwin and will be delivered to local customers by road.

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As of the end of April 2009, production ramp-up was continuing, with all parts of the plant having already been run at above design throughput rates. A substantial volume of concentrate had been produced, with concentrate comfortably meeting quality specifications, and OZ Minerals was expecting to shortly despatch the first ship load of concentrate from Darwin.

Geology and Mineralisation

The Prominent Hill deposit is located in the Mount Woods Inlier in the north-eastern part of the Archaean to Mesoproterozoic Gawler Craton. The Prominent Hill deposit is recognised as an iron-oxide copper gold deposit of similar style to the deposits mined at the nearby Olympic Dam Mine and the Ernest Henry Mine in Queensland. The copper-gold and gold-only mineralisation occurs within a large haematite breccia complex that lies beneath approximately 100-120 metres of overburden material.

Mining and Processing

Mining of the Prominent Hill mineral deposit is by conventional open pit mining methods. Pre- stripping of the substantial over-burden commenced in October 2007, stockpiling of ore commenced in February 2008 and the first ore was fed through the crusher in October 2008. Based on the current mine design, the final pit will be approximately 1,500 metres long and 1,200 metres wide, with an ultimate depth of 480 metres. Geotechnical analysis supports overall pit wall design angles of around 40 degrees.

The plant will produce a single copper-gold concentrate, grading an average of around 45% copper over the life of the mine, through a conventional crush/grind/flotation treatment process, processing 8 million tonnes of ore per annum. The configuration of the plant is illustrated below:

Source: OZ Minerals

Mining from the Prominent Hill open pit as currently designed is expected to support operations for around 10 years, with production rates expected to decline over time. However, there is potential to maintain production rates or extend the life of the operation through underground mining operations, from mineralisation immediately adjacent to or below the planned pit and from further mineralisation at depth to the west of the pit.

In 2009, the first full year of production, OZ Minerals expects to produce approximately 85,000- 95,000 tonnes of copper, 55,000-65,000 ounces of gold and 330,000 ounces of silver contained in

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copper concentrates. More than five million tonnes of ore are currently stockpiled on the ROM pad.

The total capital cost of Prominent Hill (until completion of commissioning) is expected to be $1.17 billion with approximately $50 million still to be spent in the second quarter of 2009.

Resources and Reserves

Prominent Hill Resources and Reserves as at 30 June 2008, as published in December 2008, are set out in the table below:

Prominent Hill - Resources and Reserves as at 30 June 20088 Tonnes Copper Gold Silver Copper Gold Silver

(Mt) (%) (g/t) (g/t) (000’s t) (Moz) (Moz) Resources Prominent Hill Copper Measured 44.20 1.71 0.5 4 755.8 0.8 5.7 Indicated 62.70 1.29 0.5 3 808.8 1.1 6.0 Inferred 67.20 1.29 0.6 4 866.9 1.3 7.6 Sub-total 174.10 1.40 0.6 3 2,431.5 3.2 19.3 Prominent Hill Gold Measured 0.40 0.38 0.9 2 1.5 0.0 0.0 Indicated 37.50 0.08 1.1 1 30.0 1.3 1.4 Inferred 71.20 0.09 1.3 1 64.1 2.9 1.8 Sub-total 109.10 0.09 1.2 1 95.6 4.3 3.3 Total Resources 283.20 2,527.1 7.4 22.6 Reserves Proved 45.60 1.55 0.52 3.7 707 0.8 5.4 Probable 26.80 0.89 0.77 2.5 238 0.6 2.1 Total Reserves 72.40 945 1.4 7.5 Source: OZ Minerals

Expansion and Exploration

OZ Minerals (and Oxiana as its predecessor organisation) has for some time been examining the feasibility of supplementing open pit production with underground mining. Based on the current open pit mining schedule and diminishing grades at depth in the open pit, copper production will decline from around 2012. Underground mining provides an opportunity to maintain copper production at around 120,000 tonnes per annum beyond 2012, although this will require an expansion of Prominent Hill’s plant capacity (which OZ Minerals believes could be achieved through debottlenecking at relatively little cost).

Studies on underground mining originally focussed on the potential to mine mineralisation adjacent to and immediately beneath the ultimate pit shell for the current pit. In addition, there was an examination of the potential to mine additional mineralisation at greater depth below the pit, through bulk mining methods. Further analysis has suggested that this deeper mineralisation may not be economic, reflecting lower copper prices and uncertainty about continuity of mineralisation.

However, recent drilling successes have suggested that there are good prospects of OZ Minerals delineating an economic resource around 800 metres west of the pit. It appears that this could be

8 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all Resources, which include Reserves.

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the first mineralisation to be mined by underground methods, with the decline then proceeding east towards the pit to provide access to resources adjacent to and immediately below the ultimate pit shell. Feasibility studies on potential underground mining operations are expected to be completed by December 2009, with a view to commencing construction in the first quarter 2010, subject to Board approval. The underground mine is expected to take two to three years to construct, with first production expected around 2012. Preliminary indications are that underground mining operations could produce one to two million tonnes per annum for around 10 years.

The diagram below illustrates the ultimate pit outline as per the current pit design and the location of potential sources of ore to extend mining operations. Approximately $12 million is expected to be spent on resource development at Prominent Hill in 2009.

Source: OZ Minerals

4.3 Sepon

The Sepon copper and gold operations are located 40 kilometres north of Sepon in south-central Laos, within an overall project area of 1,250 square kilometres. Oxiana acquired 80% of the Sepon project from Rio Tinto in 2000. Gold and silver doré was first produced in December 2002 and in early 2004 Oxiana acquired the remaining 20% in Sepon. The first production of copper cathodes occurred in March 2005. The Government of Laos exercised its right to purchase 10% of Oxiana’s Lao operating company, LXML, on 30 June 2007.

The location of Sepon in Laos is illustrated below.

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Source: OZ Minerals

The location of the major mineral deposits that support Sepon’s current and future gold and copper operations is depicted on the map below:

Source: OZ Minerals

4.3.1 Sepon Copper

Feasibility studies into the development of the Sepon copper project began in 2002 and construction commenced in 2003. The copper project was developed after the gold project as it was more complex and capital intensive. Ore was first fed into the plant in February 2005 and the first copper cathodes were produced in mid March 2005.

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Sepon Copper was originally developed on the basis of the Khanong mineral deposit, which is the main deposit currently being mined. The high grade supergene ore from Khanong is treated through an atmospheric leaching/pressure oxidation and solvent extraction/electrowinning process, to produce high quality copper cathode on site. The copper cathode is sold principally into Asian countries close to Laos, including Thailand, Vietnam, Malaysia and China. Given the quality of Sepon’s copper product, proximity to customers and reliability of supply, OZ Minerals typically earns a premium over the London Metals Exchange (“LME”) copper price.

Exploration has resulted in the discovery of lower grade supergene copper Resources in the Thengkham North, Thengkham South and Phabing deposits, approximately seven kilometres west of the current plant. These Resources, along with additional resource potential in and around the Khanong mineral deposit, were the basis of a planned expansion in Sepon Copper’s capacity from the current 60,000 tonnes per annum to 80,000 tonnes per annum by 2010. This expansion was partially completed and has now been put on hold.

In 2008, OZ Minerals started exploring for primary copper and identified a number of promising targets. The processing of primary copper would require a new treatment circuit and significant capital expenditure, although existing infrastructure and, potentially, part of the existing treatment process could be utilised.

Geology and Mineralisation

The Khanong copper deposit is a near surface, high grade, supergene chalcocite and oxide copper body derived from the weathering of a replacement style sulphide deposit developed in shallow dipping, highly sheared carbonate rocks.

Copper mineralisation covers a variety of primary and secondary styles. Along the contacts of the intrusive stocks, copper-gold skarns are developed, while outbound of the skarn front lower temperature silica-sulphide replacement of carbonate rocks is common. Weathering and mobilisation of the primary mineralisation give rise to a number of secondary mineralisation types.

Mining and Processing

The Khanong deposit is mined by conventional open pit truck and excavator methods, with mining conducted by a contractor. The Sepon copper operation is a whole of ore, atmospheric leach, solvent extraction-electro winning copper processing plant, producing cathode equivalent to LME Grade A.

Plant design allows for the production of 65,000 tonnes per annum of copper cathode. Current throughput of the plant is 1.35 million tonnes per annum and this is expected to increase to 2 million tonnes per annum following the expansion. Lower-grade ore mined from the Thengkham deposits is expected to reduce head grade from the current 5.25% copper to 4.3% copper. Sepon, however, will remain one of the world’s highest grade copper mines.

The run-of-mine ore at Sepon is predominantly chalcocite, although a range of copper oxide and carbonate minerals are also present. The treatment process begins with the majority of the copper minerals extracted into solution through a sulphuric acid/ferric sulphate leach medium in a series of agitated tanks at elevated temperature. The dissolved copper is then separated from the solid residue in a counter-current decantation thickener circuit and the final liquor is treated in a solvent extraction circuit to extract the copper. The copper is then electro won to produce copper cathodes. The configuration of the plant is illustrated below:

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Source: OZ Minerals

Residues from the leaching process are processed by way of flotation to recover any remaining copper sulphide and pyrite. The sulphide concentrate is then subjected to pressure oxidation in an autoclave at elevated temperatures and pressures, which produces the acid and ferric sulphate required for the atmospheric leaching process.

Resources and Reserves Sepon Copper Resources and Reserves as at 30 June 2008, as published in December 2008, are illustrated in the table below:

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Sepon Copper Resources and Reserves as at 30 June 20089 Tonnes Gold Silver Copper Gold Silver Copper

(Mt) (g/t) (g/t) (%) (Moz) (Moz) (000’s t) Resources Supergene Measured 20.88 - - 3.38 - - 705.6 Indicated 8.20 - - 3.35 - - 274.4 Inferred 31.12 - - 1.66 - - 517.2 Sub-total 60.20 - - 2.49 - - 1,497.3 Primary Measured 2.08 0.2 7 1.74 0.0 0.4 36.3 Indicated 1.17 0.2 7 1.70 0.0 0.3 19.8 Inferred 20.23 0.3 6 0.97 0.2 3.9 197.1 Sub-total 23.47 0.3 6 1.08 0.2 4.6 253.2 Total Resources 83.67 0.6 27.7 1,750.5 Reserves Supergene Proved 13.50 - - 4.54 - - 612 Probable 4.00 - - 4.50 - - 180 Total Reserves 17.50 - - 4.53 - - 792 Source: OZ Minerals

Depletion from mining at Khanong during the 12 months ended 30 June 2008 was offset by additions to Thengkham North and Phabing.

Expansion and Exploration

In December 2007, OZ Minerals approved a capital expenditure program for the Sepon plant that would increase plant capacity to 80,000 tonnes per annum of copper cathode and reduce overall life-of-mine cash operating costs by approximately 10%, at a total budgeted cost of US$178 million. The expansion would allow the plant to treat increased volumes of ore at lower head grades (down to around 4.3% from current levels of around 5.3%) and bring forward the treatment of lower grade ore which would otherwise only be treated towards the end of the project life. The major components of the planned upgrade are:

an upgrade to the crushing circuit;

additional leach tanks;

an additional ground ore storage tank;

increased oxygen capacity and the introduction of oxygen sparging into the leaching process;

a new counter-current decantation train;

more flotation cells;

an extension of the electro-winning house; and

the installation of a second autoclave.

9 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all Resources, which include Reserves.

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The expansion was partially suspended on 25 November 2008, although some of the initiatives will be completed. The second autoclave was commissioned in March 2009. Approximately US$110 million has been spent on the expansion to date.

In late 2008, OZ Minerals started construction of a second power line and associated infrastructure to address the increased power demand from the proposed plant expansion, mitigate the risks associated with the dependency on a single transmission line and reduce line losses at higher power transmission rates. The capital cost of the project was estimated at US$30.6 million. Give capital constraints, work on the project has been stopped, following expenditure of approximately US$15 million.

OZ Minerals estimates that, subject to capital availability and approval in the third quarter of 2009, the copper expansion and associated power line could be completed during the third quarter of 2010 at a further cost of US$86 million.

Recent exploration drilling has identified a number of primary copper targets and OZ Minerals is undertaking preliminary analysis of the feasibility of an operation that would treat primary copper ore through a conventional flotation plant to produce copper concentrates. There is an opportunity to consider treatment of some copper concentrate via the existing Sepon pressure oxidation process as operating conditions are suitable for high copper extractions.

Operating Performance

Sepon Copper’s operating performance for the last four years is summarised below:

Sepon Copper - Operating Statistics (100% basis) Year ended 31 December 2005 2006 2007 2008 Ore mined (000’s tonnes) 908 2,320 1,942 1,551 Ore milled (000’s tonnes) 644 1,231 1,225 1,328 Copper milled grade (%) 5.80 5.56 5.65 5.40 Copper cathode production (000’s tonnes) 30.5 60.8 62.5 64.1 Total cash costs (USc/lb copper) 78 78 85 106.4 Copper cathodes sold (000’s tonnes) 29.1 61.2 62.8 64.4 Source: OZ Minerals

The first copper cathodes were produced by the Sepon copper plant on 14 March 2005. By the end of the year, the plant had reached full design capacity and total production marginally exceeded design capacity in 2006, 2007 and 2008.

Despite an easing of cost pressures later in the year and the deferral of costs related to the Khanong cutback in the December quarter, cash costs were up almost 25% in 2008.

4.3.2 Sepon Gold

Exploration by CRA between 1993 and 1999 resulted in the delineation of approximately three million ounces of gold Resources in various deposits at Sepon. Following further exploration and development, and Oxiana’s acquisition of the project, production commenced in December 2002. Since then, the Sepon Gold operation has produced almost 800,000 ounces of gold, through open pit mining and conventional treatment of oxide gold ore. The operation has recently had only limited exploration success, and based on current Reserves the mine life is not expected to extend much beyond 2009.

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Geology and Mineralisation

The currently defined gold deposits at Sepon are Discovery, Discovery West-Colluvial, Nalou, Nam Kok West, Nam Kok East, Vang Ngang and Luang. Gold mineralisation is localised in structural and stratigraphic fluid traps. Mineralisation is finely disseminated and closely associated with decalcification and variable silica replacement of calcareous rocks along structures and at lithological contacts. Geometry of the gold ore is controlled by anticlinal structures and shallow dipping stratigraphy, structure and porphyry sills.

Mining and Processing

The Sepon Gold operation is a conventional open pit oxide mining operation. Ore is mined by a contractor from a number of open pits and is treated in a conventional carbon-in-leach processing plant. The plant was originally built with a capacity of 1.25 million tonnes per annum. In 2005 the capacity was increased to 2.5 million tonnes per annum. Mining is currently focused on the Discovery, Houay Yeng and Pha Vat North pits.

Resources and Reserves

Sepon Gold Resources and Reserves as at 30 June 2008, as published in December 2008, are set out in the table below:

Sepon Gold - Resources and Reserves as at 30 June 200810 Tonnes Gold Silver Gold Silver

(Mt) (g/t) (g/t) (Moz) (Moz) Resources Oxide Gold Measured 7.93 1.1 5 0.3 1.3 Indicated 4.66 1.6 5 0.2 0.7 Inferred 5.39 1.0 4 0.2 0.7 Sub-total 17.98 1.2 5 0.7 2.7 Partial Oxide Gold Measured 0.56 3.0 11 0.1 0.2 Indicated 4.02 2.5 9 0.3 1.1 Inferred 2.21 1.1 5 0.1 0.3 Sub-total 6.79 2.1 7 0.5 1.6 Primary Gold Measured 5.13 2.9 7 0.5 1.2 Indicated 13.19 2.7 8 1.1 3.5 Inferred 6.09 1.8 7 0.4 1.5 Sub-total 24.41 2.5 8 2.0 6.1 Total Resources 49.18 3.3 15.1 Reserves Oxide Gold Proved 1.75 1.09 5.15 0.061 0.290 Probable 1.35 2.75 3.85 0.119 0.167 Total Reserves 3.10 0.181 0.457 Source: OZ Minerals

Additions to Ore Reserves, primarily from Houay Yeng, have replaced depletion from mining during the year ended 30 June 2008.

10 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all Resources, which include Reserves.

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Expansion and Exploration

OZ Minerals (and previously Oxiana) has investigated the feasibility of mining and treating the sulphide gold Resources beneath many of the oxide pits. Given the relatively modest grades and tonnages of this mineralisation and the capital expenditure that would be required to build a plant to process the refractory ore, exploitation of the sulphide Resources does not currently appear economic. However, further exploration success could make exploitation of the primary gold Resources more attractive. In addition, there remains some prospect that additional oxide mineralisation will be delineated and treated through the existing treatment plant.

Operating Performance

Sepon Gold’s operating performance for the four years ended 31 December 2008 is summarised below:

Sepon Gold Operating Statistics – 100% basis Year ending 31 December 2005 2006 2007 2008 Ore mined (000’s tonnes) 3,078 2,880 1,510 1,613 Ore milled (000’s tonnes) 2,660 2,965 2,161 2,322 Average head grade (g/t gold) 2.77 2.25 1.79 1.67 Gold production (000’s ounces) 200 176 102 93 Total cash costs (US$/oz) 260 330 445 538 Gold sales (000’s ounces) 199 180 104 91 Average gold price received (US$/oz) 446 598 699 863 Source: OZ Minerals

In 2005, Oxiana completed an expansion of the Sepon gold operation, which doubled the capacity of the gold processing plant to 2.5 million tonnes per annum, in part through the installation of additional primary and pebble crushers and a new mill operating in parallel with the existing mill. As a result, notwithstanding declining head grades, gold production increased over 40% on the previous year. Cash costs increased in 2005 as a result of declining grades, higher prices for fuel, fuel based consumables and parts for plant and equipment. Ore milled increased in 2006. However, due to a further decline in the head grade, gold production was down slightly on the previous year. Cash costs increased in line with diminishing head grades. Sepon Gold production declined further in 2007 due to continuing falls in head grade and lower ore availability. Cash costs continued to increase in 2007 as a result of the declining head grade and higher operating costs, including increases in the price of diesel, power costs, and costs of consumables such as vehicle tyres and reagents used in processing. The trend continued in 2008, with lower grades and recovery rates and higher input costs resulting in greater cash costs. Cost pressures abated towards the end of the year.

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4.4 Golden Grove

OZ Minerals acquired the Golden Grove mine from Newmont Mining in July 2005 for $265 million. Golden Grove is located approximately 450 kilometres north-east of Perth and 280 kilometres east of Geraldton in Western Australia, as illustrated on the map below.

Source: OZ Minerals

The assets acquired included Gossan Hill, a copper-zinc-lead-gold-silver underground mine, the Scuddles zinc-copper underground mine, a treatment plant and a surrounding tenement package covering 12,306 hectares. The mine produces zinc concentrate, copper concentrate and precious metal concentrate (which contains gold, silver and lead). These concentrates are exported to smelters in China, Korea, Japan, India and Thailand, via the Port of Geraldton. A map of the Golden Grove operations is shown below:

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Source: OZ Minerals

Production at Golden Grove began with the mining of the Scuddles mineral deposit in 1990. This was followed eight years later with the mining of ore from Gossan Hill. In July 2005, the Scuddles mine was put on care and maintenance. The mine was re-opened in mid-2007, supporting production on a limited scale. However in January 2009, given lower commodity prices and improved performance from Gossan Hill, which is now producing sufficient ore to keep the plant operating at full capacity, Scuddles was again put on care and maintenance.

Geology and Mineralisation

The Scuddles and Gossan Hill volcanic hosted massive sulphide (“VHMS”) deposits are situated within the Warriedar Fold Belt which is part of the Yalgoo-Singleton greenstone belt in the southern Murchison Province of the Archean Yilgarn Block of Western Australia. The mineralisation is hosted within a thick package of predominantly felsic Archean volcanogenic sediments and volcanics.

VHMS deposits often occur in clusters. The distribution of mineral deposits already discovered at Golden Grove, along with positive results from earlier drilling, suggests that there is strong potential for the delineation of further mineralisation at Golden Grove.

Mining and Processing

Underground mining at Golden Grove is by sublevel open stoping, with the majority of ore mined from the Amity and Catalpa mineral deposits. Ore from Gossan Hill is trucked to the surface where it is crushed and delivered to the mill via a three kilometre overland conveyor. Zinc and copper ores are treated separately on a batch basis using the same process plant, which consists of a two stage grinding circuit followed by sequential flotation to produce zinc, copper and high precious metal concentrates.

Resources and Reserves

Golden Grove Resources and Reserves as at 30 June 2008, as published in December 2008, are set out in the table below:

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Golden Grove - Resources and Reserves as at 30 June 200811 Tonnes Zinc Copper Gold Silver Lead

(Mt) (%) (%) (g/t) (g/t) (%) Resources Measured Zinc 4.49 12.91 0.42 1.7 87 1.28 Primary Copper 8.77 0.70 3.07 0.6 19 0.10 Oxide Copper ------Gold ------Indicated Zinc 1.43 13.31 0.50 2.1 107 1.82 Primary Copper 5.42 0.40 2.84 0.5 14 - Oxide Copper 4.08 - 1.90 - - - Gold 1.04 - - 3.1 94 - Inferred Zinc 4.05 12.01 0.77 1.0 69 0.87 Primary Copper 7.06 0.77 3.17 0.7 25 - Oxide Copper ------Gold 0.07 - - 4.3 197 - Reserves Proved Zinc 1.77 13.68 0.35 1.80 76.91 1.40 Primary Copper 2.37 0.37 3.56 0.35 14.28 0.03 Probable Zinc 1.09 13.00 0.37 2.13 105.33 2.06 Primary Copper 1.94 0.37 3.30 0.47 16.55 0.03 Source: OZ Minerals

Expansion and Exploration

Golden Grove Reserves support mining operations at current rates of production until around 2014. However, there is considerable potential to extend mining operations, both through mining underground Resources and other mineralisation not currently in Reserves, and through potential open pit mining of gold, copper and zinc mineralisation. In addition, the area around the Golden Grove operations remains prospective for further discoveries.

Drilling of the Xantho and Hougoumont prospects at depth in the Gossan Hill mineralised system, and of the Cervantes prospect at depth below Scuddles, suggests that there is a high likelihood that underground mining will extend well beyond current Reserves. OZ Minerals has also conducted studies of the feasibility of mining oxide gold, oxide copper and primary copper mineralisation from open pits above the current Gossan Hill underground mine. Mining of the oxide copper pit might also allow the subsequent recovery of zinc ore-bearing pillar remnants from the top of the underground mining operation. However, treatment of the oxide copper would require some modifications to the current treatment process to allow flotation of the oxide ore. The feasibility study for the open pits is on hold due to current capital expenditure constraints.

The locations of the various expansion opportunities are identified in the following long section of the Golden Grove mineral deposits:

11 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all Resources, which include Reserves.

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Source: OZ Minerals

OZ Minerals estimates that Golden Grove capital expenditure for 2009 will be approximately $36 million (down from $118 million in 2008), with a significant portion of this focused on underground development.

Operating Performance

Golden Grove’s operating performance for the last four years is summarised below:

Golden Grove - Operating Statistics Year to 31 December 200512 2006 2007 2008 Zinc ore mined (000’s tonnes) 569.7 993.6 1,042.5 1,042.8 Copper ore mined (000’s tonnes) 681.9 386.3 403.6 750.7 Average zinc head grade (%) 12.6 15.1 14.0 14.4 Average copper head grade (%) 3.6 3.4 4.0 3.5 Contained metals in concentrates Zinc (000’s tonnes) 70.5 138.8 132.0 139.9 Copper (000’s tonnes) 21.8 10.8 15.4 18.5 Gold (000’s ounces) 25.3 50.2 48.8 47.8 Silver (000’s ounces) 2,174.6 3,064.3 3,165.4 3,157.8 Lead (000’s tonnes) 4.9 11.6 8.1 13.3 Total cash costs (USc/lb zinc)13 29 43 30 43 Source: OZ Minerals

In 2006, OZ Minerals implemented a program to improve efficiency in various areas of the Golden Grove operations. This resulted in record rates of development, mining, milling and production of zinc concentrates. Performance also improved as the result of the mining of higher grade zinc ore from the Catalpa and Amity mineral deposits at Gossan Hill. Production of most metals in concentrate increased significantly in 2006, although copper production declined as the operation focussed on mining zinc-rich sections of the ore bodies. The increase in cash costs in 2006 was principally due to increased treatment and refining charges and reduced by-product credits.

12 OZ Minerals’ ownership is from 1 July 2005. 13 Total cash costs are after treatment and refining costs, royalty costs and net of copper, lead, gold and silver credits.

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During 2007, throughput rates reached an all time record of 1.65 million tonnes per annum following modifications as part of a mill improvement program. Total cash costs declined because of increased production of copper concentrates and a resulting increase in by-product credits, reduced treatment and refining charges and increases in realised metal prices.

The increase in the total cash costs in 2008 was a result of a reduction in by-product credits, the pre-crushing of copper ore, the operation of the Scuddles mine for the full year and increased production drilling.

On 13 January 2009, OZ Minerals announced that Scuddles was to be put on care and maintenance. Scuddles’ operating costs for 2008 were of the order of $31 million. There has been a substantial headcount reduction at Gossan Hill and OZ Minerals has replaced a number of contractors with owner-mining operations. As a result, Gossan Hill operating costs are expected to decline by around $13 million in 2009. In addition, other mine site operating costs are expected to reduce by around a further $10 million. With the fall in zinc prices, Golden Grove will increasingly focus on copper production. It is expected that 2009 zinc production will fall by approximately 84,000 tonnes to 65,000 tonnes and 2009 copper production will increase by approximately 23,000 tonnes to 40,000-45,000 tonnes.

4.5 Rosebery

The Rosebery Mine is located next to the Rosebery Township in north-west Tasmania, approximately 300 kilometres north-west of Hobart and 100 kilometres south of Burnie. Mineralisation was first discovered at Rosebery in 1893 and mining commenced in 1900. Following the construction of a flotation plant on-site, full scale production of base metal concentrates commenced in 1936. The following map shows the location of the Rosebery mine:

Source: OZ Minerals

Rosebery was part of the package of assets of Pasminco at the time of its 1989 float on the ASX, and, following the Pasminco administration, was included in the assets of Zinifex when it listed in 2004.

Rosebery mineralisation is polymetallic, containing zinc, lead, copper, silver and gold. Mining at Rosebery is by underground mining methods. While most mine production is from depths of

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greater than 900 metres, it is estimated that the mineral deposit extends to 1.5 kilometres underground. The treatment plant produces zinc, lead and copper concentrates, as well as gold doré. Zinc and lead concentrates contribute the bulk of the revenue. Concentrates are transported by rail to Burnie, from where they are shipped to smelters. Over the last four years, zinc production has ranged from 82,000 to 89,000 tonnes per annum and lead production from 23,000 to 30,000 tonnes per annum.

Following the commencement in 2006 of the Horizons project to delineate additional mineralisation, the estimated mine life for Rosebery has been extended to beyond 2015 based on the current mining inventory. There is the potential for the conversion of additional Inferred Resources and the delineation of additional mineralisation to further extend the mine life. Residual lower grade ore within the old Hercules Mine, where mining has been discontinued, and lower grade mineralisation in the South Hercules deposit, approximately 10 kilometres south-east of the Rosebery Mine, provide potential additional feed for the Rosebery plant.

Including contractors, approximately 365 personnel are employed at Rosebery. Power is sourced from the local power grid and water supply is principally from a pump station on the Pieman River.

There are no major upgrades in capacity planned at Rosebery but there is an ongoing continuous improvement program to reduce costs and improve efficiencies.

Geology and Mineralisation

Rosebery is a polymetallic massive sulphide mineral deposit, hosted in volcanic and pyroclastic rocks of the Mount Read Volcanics belt, which also hosts the Que River and Hellyer polymetallic deposits, the Mount Lyell copper deposit and the Henty gold deposit. Mineralisation is contained within a series of lenses (more than 15 have been identified), which dip to the east and plunge to the north over a north-south strike length of more than three kilometres. Early mining concentrated on the shallower lenses to the southern end of the deposit, while current and future mining will principally focus on the deeper lenses to the northern end of the deposit. The following charts show a generalised cross section and a long section view of the deposit:

Source: OZ Minerals

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Source: OZ Minerals

The P, K and W Lenses contain the majority of the delineated Resources at Rosebery, and will be the focus of mining and exploration over the medium term. The high grade K Lens contains a substantial Inferred Resource and, subject to successful infill drilling, could potentially provide significant additional Reserves. Rosebery mineralisation consists mainly of sphalerite, galena and chalcopyrite.

Mining

Rosebery is a conventional underground mining operation. Most of the ore production is by way of sublevel open stoping of the deeper lenses to the north of the deposit, at depths of up to 1000 metres, with modest amounts of ore sourced from shallower remnant stopes and pillars. Mined out stopes are backfilled with waste rock. Development and stope drilling are carried out by conventional drill jumbos and ring drilling rigs. Blasted ore is bogged out using large underground loaders and trucked up the mine decline to the surface. As the mining has concentrated on the deeper ore lenses to the north of the deposit, haul distances have increased and are now typically over six kilometres.

A variety of stoping methods are employed, including bench stoping (for the majority of the ore), transverse open stoping (where ore body widths increase up to 25 metres) and slash mining (to extract ore from pillars). The significant depth of mining operations means that ventilation and geotechnical issues require careful management. Two refrigeration plants and two ventilation shafts maintain the temperature and the air flow rate in the lower levels of the mine. Limits to ventilation capacity place constraints on underground plant utilisation rates and therefore mine production. Accordingly, during 2008 OZ Minerals commenced work on a third ventilation shaft that would allow the operation of additional equipment in the mine and support higher rates of ore production. However, given the capital constraints facing OZ Minerals, work on the additional ventilation shaft has been suspended.

The K, P and V Lens will account for most of the ore mined in 2009, with the maintenance of high ore grades being the primary focus. The high grade ore from the K Lens will be used for blending to provide a consistent grade feed to the concentrator.

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Processing

The Rosebery treatment plant features a relatively complex process flow sheet, reflecting the polymetallic nature of the ore. Sequential flotation is employed to produce copper, lead and zinc concentrates, and coarse gold doré is recovered through gravity separation. The treatment process is as follows:

two stage crushing: ore is crushed in a jaw crusher and cone crusher. High and low grade ores are separately crushed on a batch basis and blended to provide a consistent feed grade to the plant;

grinding: the crushing circuit consists of two rolls crushers, two primary ball mills, a primary cyclone, two secondary ball mills for regrinding primary cyclone underflow and a secondary cyclone;

gravity gold recovery: part of the cyclone underflow from the grinding circuit is fed to a Knelson concentrator, which recovers coarse gold. The concentrate from the Knelson concentrator is leached with cyanide and gold doré is produced;

copper flotation: the secondary cyclone overflow from the grinding circuit is thickened and the thickener underflow fed to the copper circuit. The copper feed is processed in 10 rougher and four scavenger tanks, with the rougher concentrate cleaned in 10 cleaning tanks to produce copper concentrate, which also includes gold and silver;

lead flotation: the copper rougher tailings are processed through a lead flotation circuit, which consists of two lines each of four rougher and eight scavenger tanks, and a cleaning line of 28 cells;

zinc flotation: the lead rougher tailings are processed in 12 rougher/scavenger cells, with the resulting concentrate cleaned in a two stage cleaner circuit employing 20 cleaning cells.

The concentrator plant was commissioned in the 1970s and no major upgrade has been carried out in more than 20 years. In the past, the reserves were insufficient to justify major capital spending on the concentrator. With Project Horizon extending the mine life, a prefeasibility study was undertaken in 2008 for the replacement of the concentrator with a more modern plant. However, given lower commodity prices, OZ Minerals is now considering a more modest upgrade or refurbishment of the plant.

The copper, lead and zinc concentrates are pumped to a filter plant located at a nearby rail siding, where, following thickening and dewatering, the concentrates are loaded onto trains for transport to Burnie.

The tailings are currently disposed of in the Bobadil tailings dam, which can support the operations until at least the end of 2012. The South Marion Oak site has been identified as a tailings dam site to cater for the remaining life of operations. Approvals are being sought from the various government departments to commence construction of the new tailings dam.

The geometry of the mineral deposit limits the output of the mine to around 800,000 tonnes per annum. In the past, ore has been purchased from third parties in the region (e.g. the Que River Mine) to provide additional feed for the 850,000 tonnes capacity concentrator.

In 2009 OZ Minerals expects to process around 750,000 tonnes of ore to produce approximately 135,000 tonnes of zinc concentrate, 31,000 tonnes of lead concentrate, 6,600 tonnes of copper concentrate and 339 kg of gold doré.

Resources and Reserves

Historically, the Rosebery Mine has operated with only around three years of Reserves. In 2006 Zinifex commenced a $19 million exploration project, entitled Project Horizon, with the objective

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of extending the life of the mine to 2020. In effect, this represented a doubling of the mine’s exploration budget over the three year period of the project.

In May 2007, Zinifex announced that successful exploration drilling from the initial stages of Horizon had increased the Rosebery Resource by 65% and substantially extended the life of the mine.

Rosebery Resources and Reserves as of 30 June 2008 are summarised as follows:

Rosebery – Resources and Reserves as at 30 June 200814 Tonnage Zinc Lead Silver Gold Copper

(Mt) (%) (%) (g/t) (g/t) (%) Resources15 Measured 2.8 15.4 4.3 156 2.4 0.5 Indicated 3.9 11.3 3.4 132 1.8 0.4 Inferred 8.5 10.3 3.3 114 1.4 0.3 Total Resources 15.2 11.5 3.5 126 1.7 0.4 Reserves16 Proved 2.5 13.4 3.7 131 1.7 0.4 Probable 1.0 8.3 2.3 85 1.3 0.3 Total Reserves 3.5 11.9 3.3 117 1.6 0.4 Source: OZ Minerals Increases to the Resource at Rosebery Mine were primarily due to successful resource infill drilling and exploration of the deeper K and PK Lenses. There remains considerable potential for further increases in Resources and Reserves, through exploration and delineation drilling on the deeper lenses at the northern end of the deposit.

Resources at South Hercules doubled after the completion of exploration drilling. In house feasibility work on mining the South Hercules Resource has been completed and work has been initiated on permitting for the project. Re-establishment of site access and bulk sampling is planned as part of a staged approach to potential extraction of the Resource, which is subject to confirmation that the South Hercules mineralisation is amenable to treatment through the Rosebery plant.

The following table shows movements in total Resources and Reserves at Rosebery in recent years:

Rosebery – Resources and Reserves As at 31 March 2007 As at 30 June 2004 2005 2006 2007 2008 Resources (Mt) 7.2 6.5 7.7 11.7 15.2 Reserves (Mt) 2.8 2.3 2.6 3.8 3.5 Source: OZ Minerals

14 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all Resources, which include Reserves. 15 The cut-off grade is based on metallurgically recoverable total metal units (TMU) expressed as a dollar value (AUD 85 per tonne). The number of contained tonnes does not indicate the tonnes that will be ultimately recovered 16 The cut-off ore value for stoping material is A$175/t and has been calculated using a zinc price of US$1.00/lb, lead price of US$0.50/lb, copper price of US$2.20/lb, silver price of US$11/oz, gold price of US$700/oz and exchange rate of 0.75.

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Operating Performance

Rosebery’s operating performance for the three years ended 30 June 2007 and the 12 months ended 31 December 2008 is summarised below:

Rosebery – Operating Statistics Year ended

Year ended 30 June 31 December 2005 2006 2007 2008 Ore milled (000’s tonnes) 690 672 707 815 Zinc (%) 14.7 13.7 12.9 11.1 Lead (%) 4.5 4.8 4.1 4.1 Copper (%) 0.4 0.4 0.4 0.3 Silver (g/t) 155 147 157 120 Gold (g/t) 1.6 1.4 1.7 1.2 Zinc recovery (%) 88.1 89.4 90.9 88.9 Lead recovery (%) 83.9 79.4 81.0 74 Contained metals in concentrate Zinc (000’s tonnes) 88.1 83.5 82.9 84.9 Lead (000’s tonnes) 29.6 24.0 23.5 28.7 Source: OZ Minerals

Zinc and lead head grades have declined over the last three years as mining has moved to lower grade areas of the mineral deposit. The lower grades have been somewhat offset by an increase in the volume of ore treated, with the result that production of contained zinc and lead has been relatively stable. For the 12 months ended December 2008, cash costs after credits for copper, gold and silver were US$0.40 per pound of zinc.

4.6 Projects

4.6.1 Avebury

The Avebury nickel project is located approximately six kilometres west of Zeehan on the west coast of Tasmania and about 150 kilometres by road from the port of Burnie. The Avebury deposit lies within the western Tasmanian mineral province, which hosts a number of major mineral deposits including copper, gold, lead, zinc and magnetite. The region has a long history of exploration and prospecting and Zeehan was actively mined for silver-lead deposits during the 1890s and early 1900s.

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Source: OZ Minerals

The Avebury deposit was discovered by Allegiance Mining NL (“Allegiance”) in 1998 and mining commenced in December 2006. Zinifex acquired Avebury through a takeover of Allegiance during the first half of 2008. The processing plant was commissioned in May 2008, sourcing power from the State electricity grid. The original mine life, based on Reserves at the time production commenced, was around eight years, with an expectation that additional resources would be identified to support a larger and longer life operation. However, in response to declining nickel prices, OZ Minerals announced on 19 December 2008 that the project would be put on care and maintenance.

The map below shows the location of the deposits, the processing plant and the associated infrastructure.

Source: OZ Minerals

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An agreement is in place to sell all concentrate production to Jinchuan Group Limited, a major Chinese nickel miner and smelter.

Geology and Mineralisation The project is based on the mining of four principal east-west striking nickel lodes, the Avebury North, Avebury Central, Viking North and Viking South lodes as well as a number of minor ancillary lodes. Mineralisation is predominantly pentlandite, with smaller quantities of pyrrhotite and magnetite.

Mining and Treatment Mining at Avebury has been by underground mining methods, primarily by transverse and longitudinal open stoping methods. Access to the mineral deposits is through two declines: the North Avebury decline to the North Avebury mineral deposit and further eastward extensions to the Avebury ore systems, and the Viking Decline to the Viking mineral deposit and westward extensions.

The design of the processing plant is conventional, with capacity to process 900,000 tonnes of ore to produce around 8,500 tonnes of nickel per annum in a nickel concentrate grading around 20%. The treatment process includes 3-stage crushing, milling, flash flotation and then treatment through a flotation circuit to produce nickel concentrates. The plant has the capacity to treat nickel sulphides locked in magnetite, through a magnetic separator, regrind mill and retreat flotation cells.

Resources and Reserves Avebury Resources and Reserves as at 30 June 2008, as reported in December 2008, are summarised as follows:

Avebury – Resources and Reserves as at 30 June 200817 Tonnage Nickel Contained Metal

(Mt) (%) (000’s) Resources18 Measured 2.4 1.0 24.4 Indicated 6.1 1.0 61.1 Inferred 9.8 0.9 85.9 Total Resources 18.2 0.9 171.4 Reserves19 Proved 1.4 0.9 12.7 Probable 2.3 1.1 25.0 Total Reserves 3.6 1.0 37.7 Source: OZ Minerals

Operating Performance The Avebury processing plant was commissioned in May 2008 and was being ramped up to nameplate capacity when, in response to declining nickel prices, OZ Minerals announced that the Avebury operations would be placed on care and maintenance. Below is a summary of the operating performance of Avebury for the 12 months ended 31 December 2008.

17 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all Resources, which include Reserves. 18 Based on 0.4% Ni cut-off grade. The number of contained tonnes does not indicate the tonnes that will be ultimately recovered 19 Based on 0.8% Ni cut-off grade using a nickel price of US$6.50/lb and exchange rate of 0.70.

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Avebury – Operating Statistics Year ended 31

December 2008 Ore milled (000’s tonnes) 336.5 Nickel (%) 0.91 Nickel recovery (%) 68.4 Nickel concentrate (000’s tonnes) 11.8 Nickel grade (%) 17.6 Contained Nickel (000’s tonnes) 2.1 Source: OZ Minerals

4.6.2 Martabe

OZ Minerals acquired the Martabe project through the acquisition of Agincourt in early 2007. Martabe is located on the west coast of North Sumatra, Indonesia. The project is subject to a Contract of Works with the Indonesian government that covers 1,648 square kilometres and is located close to existing infrastructure and facilities. Grid power and water are available and the port of Sibolga is 50 kilometres away. Local government and community interests in North Sumatra have been offered a 5% interest in Martabe.

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Source: OZ Minerals

The OZ Minerals Board approved the development of the Martabe gold and silver project in December 2007. In April 2008, OZ Minerals received final approvals from the Government of Indonesia, allowing construction of the Martabe project to commence. The Board approved budget for the project was US$310 million.

Mining and Processing

The Martabe Definitive Feasibility Study was based on mining the Purnama deposits, which are silica rich high sulphidation epithermal deposits. The operation has an initially identified mine life of nine years with expected total production of 1.7 million ounces of gold and 16.6 million ounces of silver, at average total cash costs of production estimated at US$220 per ounce of gold (including royalties, refining charges and after silver credits). Mining of the deposit will be through open pit mining. The processing plant will use conventional carbon-in-leach technology and have a capacity of 4.5 million tonnes per annum. Due to the level of pyrite-associated gold, recoveries were expected to average a relatively modest 76% for gold and 55% for silver and were expected to be lower at depth due to higher levels of gold in sulphides. Since the feasibility study was completed, in-fill drilling has resulted in an update of the resource model and further analysis has shown the

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potential to accelerate the processing of higher grade material and increase recovery rates. Further metallurgical analysis has also supported higher expected recoveries. In particular, 70% recoveries for silver are now forecast.

Although key approvals are in place, OZ Minerals is awaiting forestry, explosives and tailings storage facility permits. Earthworks commenced during the June 2008 quarter and, before the suspension of the project in November 2008, the preliminary access road had been completed and 40 % of the plant site area had been cleared. Capital expenditure incurred as of 1 January 2009 totalled US$57 million and an additional US$11 million was committed. OZ Minerals believes that commissioning could occur 15 months from recommencement of the project.

Resources and Reserves

Martabe’s Resources and Reserves as at 30 June 2008, as published in December 2008, are set out in the table below:

Martabe Resources and Reserves as at 30 June 200820 Tonnes Gold Silver Gold Silver

(Mt) (g/t) (g/t) (Moz) (Moz) Resources Measured 3.79 2.9 46 0.4 5.6 Indicated 47.71 1.7 22 2.6 33.5 Inferred 86.60 1.1 8 3.0 22.4 Total Resources 138.10 1.4 14 6.0 61.5 Reserves Proved 3.90 2.70 41.8 0.3 5.2 Probable 31.80 1.80 23.9 1.8 24.4 Total Reserves 35.70 1.92 25.9 2.2 29.7 Source: OZ Minerals

Expansion and Exploration

Although the current mine life is around nine years, there is good reason to expect that it will be extended, potentially through mining additional material in the Purnama and Pelangi deposits and mining ore from the Baskara resources, or from new mineralisation still to be delineated. In addition, a large Resource (of around three million ounces) of primary gold mineralisation below the bottom of the current planned Purnama pit is not included in the current mine plan due to elevated levels of silica and lower grades, although it is possible that a suitable treatment route for processing this mineralisation will be developed in due course.

4.6.3 Dugald River

The Dugald River project contains one of the world’s largest known undeveloped lead- zinc-silver deposits. It is located in north-west Queensland, approximately 65 kilometres north-west of Cloncurry. The project is located close to power, water and transport infrastructure. Pasminco acquired the Dugald River project, together with the Century mine, from CRA in 1997. The project formed part of the assets acquired by Zinifex when it listed in 2004.

The location of Dugald River is shown on the map below:

20 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all resources and resources include reserves.

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Source: OZ Minerals

The Dugald River deposit was discovered in the 1870s. Notwithstanding the size and attractive zinc grades of the deposit, it was not developed by previous owners because of marginal project economics and because the elevated manganese content of the deposit made the Dugald River zinc concentrates unattractive to zinc smelters at the time.

However, growth in the smelting industry and technological changes (allowing smelters to accept higher manganese content in zinc concentrates) and the increase in zinc prices from late 2005 prompted OZ Minerals to conduct a pre-feasibility study completed in December 2006. A more detailed feasibility study, which includes resource definition drilling, mining and geotechnical studies, metallurgical test work and a review of options for tailings storage, infrastructure and services, followed in 2007 and was completed in late 2008.

Mining and Processing

The feasibility study concluded that a two million tonnes per annum underground mine with a mine life of over 20 years was optimal. At the time of the study, the forecast average C1 cash cost was around US$0.65 per pound of zinc. The feasibility study contemplated annual average production of more than 200,000 tonnes of zinc in concentrate, 30,000 tonnes of lead in concentrate and 1.7 million ounces of silver. Given the narrow, steeply dipping nature of the ore body, mining would be by conventional underground mining

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methods. High metal recovery rates could be achieved with standard crushing, grinding and flotation processing (although a relatively fine grind will be required).

The project has good access to infrastructure, with a sealed two-lane highway only 10 kilometres to the east and power and water availability. Zinc concentrates would be transported approximately 100 kilometres to BHP’s rail facility at Yurbi and then railed to Townsville. It is currently contemplated that Dugald River would be a fly-in/fly-out operation, through Cloncurry airport.

Given prevailing zinc prices, OZ Minerals currently does not plan to develop the project. However, if zinc prices were to recover, it is estimated that development and commissioning would take approximately three years from commencement of the project. Initial capital costs are expected to be approximately $790 million.

Resources

Dugald River’s Resources as at 30 June 2008, as published in December 2008, are set out in the table below:

Dugald River Resources as at 30 June 200821 Tonnes Zinc Lead Silver Zinc Lead Silver (Mt) (%) (%) (g/t) (000’s t) (000’s t) (Moz) Measured 20.72 13.25 1.97 56 2,745.7 408.6 37.3 Indicated 24.22 12.55 2.02 33 3,041.0 488.3 25.6 Inferred 8.88 11.64 1.82 15 1,033.7 161.5 4.2 Total Resources 53.82 12.67 1.97 39 6,820.4 1,058.5 67.0 Source: OZ Minerals

4.7 Profile of Exploration Assets

OZ Minerals has regional exploration interests in Canada, Australia, Tunisia, Laos, Cambodia, Thailand and China. The major exploration targets are copper, zinc and nickel.

Amongst the most advanced of OZ Minerals’ exploration interests are its projects in the Nunavut Province of Canada. Mineral Resource estimates have been prepared for the Izok Lake and High Lake zinc/copper projects. Their remote location (Izok Lake is approximately 360km north of Yellowknife and High Lake is approximately 190km further north), the Arctic environment and the limited infrastructure in place mean that substantial capital expenditure would be required for their development. The Lupin underground gold mine has been on care and maintenance since 2005. If further mineralisation is delineated there would be potential to reopen the mine. The Ulu gold project, for which underground development is in place, contains a modest Resource with upside potential. Mineralisation from Ulu could potentially be treated at Lupin.

More detail regarding OZ Minerals’ exploration interests is set out in the detailed report of AMC.

21 Significant figures do not imply precision. Figures are rounded according to JORC Code Guidelines. Includes 100% of all resources and resources include reserves.

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4.8 Other Assets

As at 31 March 2009, OZ Minerals had shares in a number of listed companies including:

OZ Minerals Investments as at 31 March 2009 Company Business No. of Shares % Apex Minerals NL Gold exploration and development 9,536,526 2.06 in WA Beadell Resources Limited Gold Exploration in Australia 12,800,000 16.85 EMED Mining Public Limited Exploration in Southern and 27,039,000 10.67 Eastern Europe Halo Resources Ltd Base and precious metals 648,000 1.00 exploration in Canada Minotaur Exploration Ltd Exploration in SA and Qld 7,000,000 9.98 Rolling Rock Resources Corporation Gold exploration in Canada 4,000,000 8.63 Royalco Resources Limited Royalties and exploration in the 10,000,000 18.83 Philippines Strategic Minerals Corp NL Gold and uranium exploration in 5,555,555 2.09 Australia Toro Energy Limited Uranium exploration in Australia 287,392,245 51.71 and Namibia Tri Origin Exploration Limited Base metal exploration and 20,000 0.04 development in Australia and Canada Source: OZ Minerals

OZ Minerals also held 500,000 shares in the private company Interquest Inc, which was previously engaged in exploration in Canada and held 3,611,928 options in AusQuest Limited, an Australia- based exploration company.

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5 Valuation Approach 5.1 Valuation Methodology

Grant Samuel’s valuation of the Sale Assets has been made on the basis of fair market value defined as the maximum price that could be realised in an open market over a reasonable period of time given current market conditions and currently available information, assuming that potential buyers have full information, in a transaction between a willing but not anxious seller and a willing but not anxious buyer acting at arm’s length.

There are four primary methodologies commonly used for valuing operating businesses:

capitalisation of earnings or cash flow;

discounting projected cash flows;

industry rules of thumb; and

estimation of the aggregate proceeds from an orderly realisation of assets.

Each of these valuation methodologies has application in different circumstances. The primary factor in determining which methodology is appropriate is the actual practice adopted by purchasers of the type of businesses and assets involved.

Grant Samuel’s primary approach to the valuation of the Sale Assets has involved the application of the discounted cash flow (“DCF”) methodology. The discounted cash flow methodology involves the calculation of net present values by discounting expected future cash flows. Projected cash flows are discounted to a present value using discount rates that take into account the time value of money and risks associated with the cash flows. The discounted cash flow methodology is particularly appropriate for assets such as mineral assets where reserves are depleted over time and where significant capital expenditure is required. It is the primary method of valuation in the mining industry. In addition, Grant Samuel has considered the option value inherent in mining operations, having regard to the cost structure, mine life and other characteristics of each of the Sale Assets.

Grant Samuel developed cash flow models for each of the key Sale Assets. The financial models were developed by Grant Samuel on the basis of operating models developed by AMC based on life of mine plans provided by OZ Minerals. AMC reviewed each of the technical assumptions in the operating models, including those regarding reserve estimates, production profiles, operating costs, capital costs and the potential for reserve extensions. Grant Samuel determined the economic and financial assumptions used in the cash flow models. The net present value of each mineral asset has been calculated on an ungeared after tax basis as at 1 July 2009.

Alternative valuation methodologies have been considered as secondary evidence of value as to the value of OZ Minerals’ key Sale Assets. In particular, the estimates of value have been reviewed to the extent possible and appropriate in terms of reserve and resource multiples, comparable company analysis and comparable transaction analysis. These alternative approaches to valuation are useful in determining the reasonableness of a discounted cash flow valuation since the discounted cash flow valuation is typically sensitive to the assumptions adopted. In addition, where relevant, Grant Samuel has considered evidence as to value derived from the sale process that OZ Minerals conducted for a number of its assets during late 2008 and early 2009.

The valuations of the Sale Assets represent Grant Samuel’s overall judgements as to value. They do not rely on any one particular scenario or set of economic assumptions. The valuations have been determined having regard to the sensitivity of DCF analysis to a range of technical and economic assumptions. They incorporate Grant Samuel’s judgemental assessment of the impact on value of factors such as location (and therefore exposure to sovereign risk), development status and optionality to the extent not reflected in the DCF analysis. Where appropriate, the valuations take into account direct market based evidence as to the value of broadly comparable projects.

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The valuation of the Sale Assets represents Grant Samuel’s assessment of the full underlying value of the Sale Assets.

The valuations are based on a number of important assumptions, including assumptions regarding future metal prices and the A$:US$ exchange rate. The valuations reflect the technical judgements of AMC regarding the prospects for each of the Sale Assets. Metal prices, exchange rates and expectations regarding future operating parameters can change significantly over short periods of time. Such changes can have significant impacts on underlying value. Accordingly, while the values estimated are believed to be appropriate for the purpose of assessing the Proposal, they may not be appropriate for other purposes or in the context of changed economic circumstances or different operational prospects for the Sale Assets.

5.2 Valuation Assumptions

The valuations of the key Sale Assets have been determined by reference to discounted cash flow valuation analysis. This analysis involves making a number of general assumptions regarding future commodity prices, economic factors and discount rates. The NPV valuations for each of the mineral assets are sensitive to the assumptions used in the analysis. Relatively small changes in certain variables can cause significant changes in value. For this reason NPV valuations should be treated with caution.

Key assumptions include:

long run real zinc prices in the range US$0.70-0.80 per pound;

long run real copper prices in the range US$1.80-2.20 per pound;

long run real lead prices in the range US$0.60-0.70 per pound;

real gold prices in the range US$880-900 per ounce and real silver prices of US$12.15 per ounce, based on gold and silver prices prevailing around 23 April 2009;

an exchange rate of A$1.00=US$0.70 declining in line with forward market estimates;

long run inflation rates of 2.00% per annum;

discount rates for the discounted cash flow valuations in the range 9-11% for non-gold assets. The discount rates represent estimates of the costs of capital for non-gold producers, derived both in world markets and in the Australian market. The rates are estimates of weighted average costs of capital and have been applied to expected future ungeared after-tax US$ cash flows. The basis for the selection of the rates is set out in Appendix 1; and

tax depreciation schedules determined on the basis of tax written down values for various asset categories. Accumulated carry forward expenditures that are deductible for tax purposes have been allowed for in the financial models.

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Grant Samuel has assumed long term zinc prices in the range US$0.70-0.80 per pound for valuation purposes. The zinc price assumption compared to historical zinc prices in US$ terms is shown below:

US$ Zinc Prices April 1999 - April 2009 2.25

2.00

1.75

1.50

1.25

US$/lb 1.00

0.75

0.50

0.25

0.00 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Spot Price US$/lb GS Low (US$/lb) GS High (US$/lb)

Source: Bloomberg

The zinc price assumption compared to historical zinc prices in A$ terms is shown below:

A$ Zinc Prices April 1999 - April 2009 2.75

2.50

2.25

2.00

1.75

1.50

A$/lb 1.25

1.00

0.75

0.50

0.25

0.00 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09

Spot Price A$/lb GS Low (A$/lb) GS High (USA/lb)

Source: Bloomberg

Grant Samuel has assumed long term copper prices in the range US$1.80-2.20 per pound for valuation purposes. The copper price assumption compared to historical copper prices in US$ terms is shown below:

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US$ Copper Prices April 1999 - April 2009 4.00

3.50

3.00

2.50

2.00 US$/lb 1.50

1.00

0.50

0.00 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09

Spot Price US$/lb GS Low (US$/lb) GS High (US$/lb)

Source: Bloomberg

The copper price assumption compared to historical copper prices in A$ terms is shown below:

A$ Copper Prices April 1999 - April 2009 5.50

5.00

4.50

4.00

3.50

3.00

A$/lb 2.50

2.00

1.50

1.00

0.50

0.00 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09

Spot Price A$/lb GS Low (A$/lb) GS High (A$/lb)

Source: Bloomberg

After trading for many years within a reasonably stable range of prices (in the case of zinc, approximately US$0.40-0.60/lb and in the case of copper, approximately US$0.70-0.90/lb), zinc and copper commenced substantial strengthening in late 2004/early 2005 and late 2003 respectively. Zinc and copper prices remained relatively high for a number of years but fell sharply in mid-2007 and mid-2008 respectively. Since late 2005, commodities prices have been very volatile and there has been little consensus regarding future zinc and copper prices, both for the short and the longer term.

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The assumptions regarding long run zinc and copper prices adopted for the purposes of the valuation of the Sale Assets are broadly consistent with the range of forecast price assumptions used by market analysts.

Given the volatility in commodity markets and the widely varying views of industry analysts, commentators and corporate participants, assumptions regarding future zinc and copper prices are inherently subject to considerable uncertainty. It should be noted that the value of the Sale Assets could vary, perhaps significantly, with changes in commodity prices and price expectations. The assumptions in relation to long run zinc and copper prices adopted by Grant Samuel do not represent forecasts by Grant Samuel but are intended to reflect the range of assumptions that could reasonably be adopted by industry participants in their pricing of resources assets and companies.

5.3 Resources Projects and Optionality

The conventional discounted cash flow methodology implicitly assumes that the rate of output from a mining operation is pre-determined. This methodology ignores the value inherent in management’s ability to vary production and other operating parameters in reaction to changes in commodity prices or other circumstances. Management may change the rate of production of a mine, close or re-open the mine or in certain circumstances even abandon it. Accordingly, a mine may be regarded as an option (or series of options) over the resources it contains.

The value of management flexibility is illustrated by the example of a marginal mine, where the marginal cash production cost is equal to expected revenue. Application of the conventional discounted cash flow methodology would result in the estimate of a zero value for the mine. In reality, however, the mine will have some value, because management is able to reduce or cease production if marginal revenue falls below the marginal cash cost of production and to resume or increase production if commodity prices rise.

Similarly, the designs and long term development alternatives for many mines allow management to change operating plans in the light of future commodity prices and operating costs. Life of mine plans frequently involve mining marginal ore, making additional cut backs or making other operational decisions at some point in the future. However, management is commonly not required to commit to such decisions at the commencement of the mining project. Firm commitments are only required much later in the project, at which time management will be able to make decisions on the basis of the commodity prices and other circumstances then prevailing. The mining operations as they relate to (for example) the mining of marginal ore or a final cut back may be thought of as a series of call options exercisable at the marginal mining costs to be incurred at the time. These options represent additional value not captured by the conventional discounted cash flow methodology.

An alternative perspective is that management flexibility results in changes in commodity prices having an asymmetric impact on the value of a mining operation. If commodity prices rise unexpectedly, the mine will earn greater revenue (and may be able to mine additional mineralization not originally scheduled for production). If commodity prices fall unexpectedly, production will be curtailed or, in the worst case, stopped. The mine will not continue, in the long term, to be operated at a cash operating loss. By contrast, deterministic valuation models implicitly assume that there is some possibility of the mine operating on a long term basis at a cash operating loss, in the same way that it implicitly assumes that the mine may earn “super profits” as a result of a persistent increase in commodity prices.

Grant Samuel is aware of valuation methodologies which attempt to incorporate the option value associated with management flexibility, using a combination of conventional discounted cash flow analysis and option theory. However, the application of these methodologies is impractical in the context of the complex and unpredictable nature of mining operations. In making judgments on value, Grant Samuel has given general consideration as to the characteristics of the various mining operations and the value of management flexibility or underlying option value implicit in those characteristics. In particular, Grant Samuel has considered the extent to which:

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operations are marginal or incorporate significant resources, not currently planned for mining, of marginal economics (ie. the operations represent or incorporate options “close to the money”); and

length of mine life or other characteristics give management flexibility over the conduct of mining operations.

The valuation of each project includes a subjective assessment of the real option value inherent in the project.

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6 Valuation of OZ Minerals

6.1 Summary

Grant Samuel has valued the Sale Assets in the range US$1,385 – 1,600 million. The valuation represents the full underlying value of the Sale Assets. The valuation is summarised below:

OZ Minerals Sale Assets – Valuation Summary Value Range Value Range Report Section (US$ million) (A$ million) Reference Low High Low High Sepon (90%) 6.2 520 560 743 800 Century 6.3 500 550 714 786 Golden Grove 6.4 140 170 200 243 Rosebery 6.5 125 150 179 214 Development and exploration assets 6.6 100 170 143 243 Total Value of Sale Assets 1,385 1,600 1,979 2,286

The valuation of the Sale Assets took into account DCF analysis, analysis of comparable projects and companies (where appropriate) and evidence as to value from the asset sale program undertaken by OZ Minerals in recent months. The valuation also took into account costs incurred by OZ Minerals as head office costs, some of which would be incurred by acquirers of the Sale Assets. The value impact of these costs has been reflected in the valuations of the individual Sale Assets, based on judgements as to the extent to which head office costs are referrable to individual assets. For the purpose of the DCF analysis, two different valuation scenarios were developed for each asset. The production rates and operating and capital costs assumed in each scenario were reviewed in detail by independent technical specialists, AMC. The discounted cash flow models take into account cash flows from 1 July 2009 onwards.

AMC valued the development and exploration assets included in the Sale Assets. The AMC valuation is summarised below and is set out in full in AMC’s detailed report which is available on the OZ Minerals website and on request from the company.

6.2 Sepon

Grant Samuel has valued a 100% interest in the Sepon copper and gold operations in the range US$575–625 million. This implies a value for OZ Minerals’ 90% interest in Sepon of US$520- 560 million, which equates to A$743-800 million at an exchange rate of A$1.00 = US$0.70.

The valuation of Sepon is an overall judgement on value. It takes into account the value of Sepon Copper, which contributes most of the value of Sepon, and the value of the existing Sepon Gold operation. In addition, the valuation incorporates the value of exploration upside, including the primary gold and copper Resources for which mining plans have not yet been developed. The valuation reflects Grant Samuel’s judgemental assessment of the impact on value of sovereign risk associated with Sepon’s location in Laos and the optionality inherent in OZ Minerals’ position as the operator of major gold and copper processing plants in a minerals rich province.

The Sepon Copper operation contributes the majority of the value of Sepon. Grant Samuel prepared detailed financial models for the Sepon Copper operations. These models were based on two valuation cases, which incorporate production, capital and operating cost projections developed by AMC using information provided by OZ Minerals.

Case 1 assumes the mining of both reported Reserves and additional mining inventory not currently in Reserves. As a result, total contained copper produced exceeds current reserves by 5%. A total of 20.1 million tonnes of ore at an average copper grade of 4.3% is milled over the life of the project. It is assumed that, following the completion in 2011 of the expansion of the copper operations, the plant is able to produce 78,000 tonnes of copper per annum. Operations continue to 2019, with closure costs of US$74 million in that year.

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Case 2 assumes that an additional 6.0 million tonnes of ore are mined and treated at average grades and cost. This additional ore extends the mine life by three years and reflects AMC’s view that there is a reasonable prospect that mineralisation not currently included in the resource model will be identified, mined and processed. As a result, Case 2 assumes the milling and treatment of a total of 26.0 million tonnes at an average copper grade of 4.3% over the life of the project.

The following table summarises projected production and costs for the two scenarios. The statistics include production for the full year commencing 1 January 2009, although the DCF analysis only takes into account cash flows from 1 July 2009:

Sepon Copper – Model Parameters22 Total Life of 2009 2010 2011 2012 2013 Mine Case 1 Ore milled (000’s tonnes) 1,474 1,447 1,991 2,000 2,000 20,070 Copper milled grade (%) 5.1 5.2 4.3 4.3 4.3 4.3 Copper production (000’s tonnes) 69 69 78 78 78 794 Total cash costs (US¢ / lb Cu)2¹ 0.88 0.97 1.00 1.12 1.15 1.07 Capital expenditure (US$ million) 68.1 94.7 12.0 9.5 9.5 315.4 Case 2 Ore milled (000’s tonnes) 1,474 1,447 1,991 2,000 2,000 26,070 Copper milled grade (%) 5.1 5.2 4.3 4.3 4.3 4.3 Copper production (000’s tonnes) 69 69 78 78 78 1,031 Total cash costs (US¢ / lb Cu)23 0.88 0.97 1.00 1.12 1.15 1.07 Capital expenditure (US$ million) 68.1 94.7 12.0 9.0 9.0 329.9

Commodity prices and exchange rate assumptions are set out in Section 5.2.

The following table summarises the results of the NPV analysis for the two cases:

Sepon Copper – NPV Analysis (US$ million)24 Copper Price Scenario Discount Rate US$1.80 US$2.00 US$2.20 Case 1 9.0% 475 601 728 10.0% 454 575 696 11.0% 435 550 665 Case 2 9.0% 589 746 902 10.0% 557 705 852 11.0% 527 666 805

The table above illustrates the sensitivity of the calculated values to a range of valuation assumptions.

Based on current reserves and oxide resources, the Sepon Gold operations have a limited remaining life. Grant Samuel has assessed the value of the current operations on the basis of two valuation scenarios prepared by AMC. The first scenario assumes the treatment of 3.0 million tonnes of ore grading 1.51g/t (representing 112% of current reserves), for total gold production of

22 Assumes 100% interest. 23 After royalties. The copper premium is taken as a credit. 24 Assumes 100% interest.

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around 111,000 ounces at average cash costs of approximately US$610 per ounce. The second scenario assumes the treatment of 7.0 million tonnes of ore grading 2.07g/t (representing 357% of current reserves), for total gold production of around 352,000 ounces at average cash costs of approximately US$546 per ounce. In both scenarios, 46,000 ounces of gold are assumed to be produced during the six months ending 30 June 2009 and are therefore not reflected in the value attributed to the Sepon Gold operations. DCF analysis at gold prices of US$880-900 per ounce suggests net present values for the first scenario of approximately US$15 million, and net present values of approximately US$90 million for the second scenario.

In addition to the above, Grant Samuel has taken the following into account in its assessment of the value of Sepon:

given current market conditions, potential acquirers of Sepon are unlikely to be willing to attribute substantial value to upside potential. The valuation range selected by Grant Samuel is primarily a reflection of values estimated for Case 1 and attributes little additional value to the upside potential represented by Case 2;

there is no definitive plan for the mining and processing of the primary gold Resource at Sepon, which totals 24 million tonnes at 2.5 g/t for 2.0 million contained ounces of gold at a 1.0 g/t gold cut off. The mineralisation is refractory and cannot be treated through the current carbon-in-leach processing plant at Sepon. Additional plant, employing some alternative treatment process (for example, pressure oxidation) will be required to treat this sulphide material. The primary gold Resources are of relatively low grade and, based on the current known Resource base, the development economics appear marginal. However, the discovery of additional primary mineralisation has the potential to allow the development of a significant primary gold operation. AMC has suggested that the current primary gold Resource could be valued on the basis of $/ounce values in the range $8-12/ounce, implying a value for the primary gold resource of $16-24 million (US$11-17 million);

primary copper Resources at Sepon total 23.5 million tonnes at 1.08% copper for 253,000 tonnes of contained copper at a 0.5% copper cut off. AMC notes that the current Resource is fairly low tonnage and is not suitable for treatment through the current plant. AMC has suggested that the primary copper Resource could be valued on the basis of $/tonne values in the range $30-45/tonne, suggesting a value for the primary copper Resource of $8-11 million (US$6-8 million);

AMC has valued OZ Minerals’ exploration interests in the broader Sepon project area in the range $50-84 million (US$35-59 million);

the DCF analysis and estimated NPVs set out in the table above take into account only mine- site costs. OZ Minerals incurs further costs at its corporate head office that are related to Sepon. OZ Minerals allocates approximately $6 million per annum of head office to Sepon. In addition, some non-allocated corporate costs may also be referrable to Sepon. On the other hand, certain potential acquirers of Sepon are likely to be able to save some proportion of both allocated and non-allocated corporate costs incurred by OZ Minerals. The valuation of Sepon takes into account the incremental head office costs that would need to be incurred by an acquirer of Sepon;

because Sepon is located in Laos, there are sovereign risk issues not associated with mines in first world jurisdictions such as Australia. In Grant Samuel’s view, however, these sovereign risk issues have only a limited impact on the value of Sepon. In general, mining companies appear to be increasingly willing to develop or acquire projects in locations that would traditionally have been viewed as high risk (and which appear significantly riskier than Laos). In the case of Sepon, OZ Minerals has been producing from the Sepon Gold operation since 2002 and from the Sepon Copper operation since March 2005. The permitting approvals process and the determination of arrangements between mine operator and government (which are parts of the project development process during which projects can be particularly vulnerable to the incidence of sovereign risk) are long since completed. OZ Minerals believes that it enjoys a well-established and productive relationship with the Laos government, under a

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50 year agreement that sets out the rights and obligations of both parties. The experience of PanAust Limited (“Pan”) in Laos, where Pan has successfully developed the Phu Bia gold project and is producing from the significant Phu Kham copper-gold project, also suggests that Laos is a relatively benign environment from a sovereign risk perspective; and

OZ Minerals’ position as the operator of a significant treatment facility within the minerals rich Sepon area provides a set of valuable real options, the value of which is not captured in terms of traditional DCF analysis. Similarly, OZ Minerals’ position and experience in Laos generally is not capable of easy duplication and provides a further source of potential value.

Based on the DCF analyses for Sepon Copper and Sepon Gold, and having regard to the matters set out above, Grant Samuel has attributed an overall value of US$575-625 million to a 100% interest in Sepon.

The market value of Pan provides useful evidence as to the value of Sepon.

Pan’s major asset is the Phu Kham copper-gold project. The Phu Kham project mines a primary copper ore body by open pit methods and produces (by way of flotation) a copper-gold concentrate that is trucked to ports in Thailand and then shipped to smelter customers in Asia. Pan’s production target for 2009 is in excess of 65,000 tonnes of copper, with a planned expansion from 2010 to around 75,000 tonnes per annum. Pan’s other assets are the Phu Bia gold project, which has mined and treated by heap leach the low grade gold cap over the Phu Kham deposit, the promising Ban Houayxai gold project, also in Laos, and the Puthep copper project in Thailand. The Ban Houayxai gold project has a reported gold Resource of more than 1 million ounces. Pan has announced that a pre-feasibility study has indicated the potential for the project to support annual production of 100,000-130,000 ounces over a mine life of at least six years.

Copper Companies Statistics – Selected Listed Companies Enterprise Resource Reserve Production Cash Costs Value Copper Copper Copper US¢/lb US$ million 000’s t 000’s t 000’s t cu25 Sepon – Low26 575 1,751 792 69-78 107 - High 625 Pan27 680 1,164 922 65-75 100

While Pan produces copper concentrate by contrast to Sepon’s production of copper cathode, the location of both mines in Laos suggests that the market value of Pan provides useful evidence as to the value of Sepon.

Pan’s enterprise value based on share market trading values at 23 April 2009 was approximately US$680 million (including net debt). Although Sepon has been in production for four years and has higher expected production rates both immediately and in the longer term, Pan has slightly greater reserves and lower cash costs of production. After taking into account the value attributable to the Ban Houayxai gold project, in Grant Samuel’s view, the market value of Pan provides general support for Grant Samuel’s valuation of 100% of Sepon in the range US$575-625 million.

6.3 Century

Grant Samuel has valued Century in the range US$500-550 million, which equates to A$714- 786 million at an exchange rate of A$1.00 = US$0.70.

25 After gold and silver credits and copper premium (where applicable), which may be based on different gold and silver prices. Cash costs correspond to the average cash cost over the life of the mine at Sepon and the steady state cash cost at Phu Kam (as announced in October 2008). 26 Reserves and Resources are as at 30 June 2008 and have not been adjusted for depletion from mining since then. 27 Reserves and Resources are for Phu Kham only. Phu Kham Reserves are as at 31 December 2007 and have not been adjusted for depletion from mining since then.

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Grant Samuel prepared detailed financial models for Century. These models were based on two valuation cases, which incorporate production, capital and operating cost projections developed by AMC using information provided by OZ Minerals.

Both valuation cases are based on the recently revised mining plan that envisages the conclusion of operations at Century in 2014. The mining plan excludes from the production schedule approximately 5.5 million tonnes of lower grade material from the last reported reserves, which is sub-economic at prevailing zinc prices. It is assumed that this material will be waste dumped and unavailable for future processing, even if the zinc price subsequently increases. However, if zinc prices were to improve sufficiently before this material was mined, there would be the potential to treat this additional material and improve the mine economics. The revised mining plan has also deferred some of the bulk waste mining previously scheduled for the 2009-2010 period to later years to preserve cash.

Case 1 assumes the processing of 30.9 million tonnes of ore at average grades of 11.4% zinc and 1.0% lead over the life of the project, for total production of 2.8 million tonnes of zinc and 196,000 tonnes of lead in concentrate. Annual production is assumed to be in the range 500,000- 510,000 tonnes of zinc in concentrate. Cash costs (including waste mining) are projected to decline progressively as the mine stripping ratio decreases. Sustaining and expansion capital expenditure for the remaining life of operations is forecast at $55 million. Rehabilitation costs at the end of the life of mine are estimated at approximately $121 million.

Case 2 also assumes the processing of 30.9 million tonnes of ore. However, Case 2 assumes that the plant achieves higher rates of production from 2010 onwards (in the range 535,000 to 545,000 tonnes per annum), partly as the result of modest incremental capital expenditure of $5 million. Total lead production is assumed to be slightly higher due to improved treatment recoveries relative to Case 1.

While there may be opportunities to mine small high grade deposits outside the current Century deposit, these are not expected to have a material impact on project life and have not been included in the scenario modelling.

The following table summarises projected production and costs for the Century operation for the two scenarios. The statistics include production for the full year commencing 1 January 2009, although the DCF analysis only takes into account cash flows from 1 July 2009:

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Century Mine – Model Parameters Total Life of 2009 2010 2011 2012 2013 Mine Case 1 Ore milled (million tonnes) 5.4 5.0 5.7 5.8 5.8 30.9 Zinc milled grade (%) 11.7 12.5 11.2 11.0 11.0 11.4 Lead milled grade (%) 1.0 1.1 0.9 1.0 1.1 1.0 Contained metals in concentrates Zinc (000’s tonnes) 501 505 510 510 510 2,824 Lead (000’s tonnes) 34 33 32 36 39 196 Total cash costs (US¢ / lb Zn)28 46 45 46 47 46 45 Total cash costs (US¢ / lb Zn)29 57 57 57 48 46 51 Capital expenditure (A$ million) 8 13 14 10 10 176 Case 2 Ore milled (million tonnes) 5.4 5.4 6.0 6.1 6.1 30.9 Zinc milled grade (%) 11.7 12.5 11.2 11.0 11.0 11.4 Lead milled grade (%) 1.0 1.1 0.9 1.0 1.1 1.0 Contained metals in concentrates Zinc (000’s tonnes) 501 544 535 534 533 2,824 Lead (000’s tonnes) 37 39 36 41 45 214 Total cash costs (US¢ / lb Zn)26 45 44 46 46 45 45 Total cash costs (US¢ / lb Zn)27 57 56 56 48 45 51 Capital expenditure (A$ million) 13 13 14 10 10 182

Commodity price and exchange rate assumptions are set out in Section 5.2.

The results of the NPV analysis for Cases 1 and 2 are set out below:

Century – NPV Analysis (US$ million) Zinc Price Scenario Discount Rate US$0.70 US$0.75 US$0.80 Case 1 9.0% 537 623 707 10.0% 522 606 688 11.0% 508 590 670 Case 2 9.0% 538 627 715 10.0% 525 611 697 11.0% 512 596 679

Grant Samuel’s valuation of Century in the range US$500-550 million reflects the NPV analysis summarised above and takes into account the following factors:

Century is one of the world’s largest zinc mines and its location in Queensland means that it is exposed to relatively low levels of sovereign risk. On the other hand, it now has a short remaining mine life and limited optionality (other than in relation to the 5.5 million tonnes of sub-economic material that have been removed from the mining schedule);

28 Costs are per lb of zinc payable and are after treatment and refining costs and royalties but do not include costs associated with waste movement. Silver and lead are taken as credits. 29 Costs are per lb of zinc payable and are after treatment and refining costs and royalties and include costs associated with waste movement. Silver and lead are taken as credits.

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the value of Century is extremely sensitive to movements in the zinc price. At zinc prices of US$0.60/lb for the life of the mine, the estimated NPV is only US$327 million. However, the NPV increases to around $578 million for zinc prices of US$0.70/lb and to around US$804 million for zinc prices of US$0.80/lb (all NPVs estimated for Case 1 using a nominal discount rate of 10%);

the DCF analysis and estimated NPVs set out in the table above take into account only mine- site costs. OZ Minerals incurs further costs at its corporate head office that are related to Century. OZ Minerals allocates approximately $12 million per annum of head office costs to Century. In addition, some non-allocated corporate costs may also be referrable to Century. On the other hand, certain potential acquirers of Century are likely to be able to save some proportion of both allocated and non-allocated corporate costs incurred by OZ Minerals. The valuation of Century takes into account the incremental head office costs that would need to be incurred by an acquirer of Century;

at significantly higher zinc prices there would be the potential to treat the 5.5 million tonnes of sub-economic material that has been removed from the mining schedule;

AMC believes that prospectivity in the immediate vicinity of Century is modest and that it is reasonable to assume that the project life will not be extended materially beyond 2014; and

OZ Minerals has recently completed a conceptual study that has examined the possibility of utilising the Century infrastructure for potential future phosphate operations. However the studies are only conceptual at this stage and there are significant risks and uncertainties to be resolved. In Grant Samuel’s judgement potential acquirers would attribute relatively little value to the possibility of using the remnant infrastructure to support a phosphate operation.

6.4 Golden Grove

Grant Samuel has valued the Golden Grove operations in the range US$140-170 million, which equates to a value of A$200-243 million using an exchange rate of A$1.00 = US$0.70.

The valuation of Golden Grove relies on indications as to value provided through OZ Minerals’ recent asset sale program, but also considers DCF analysis.

Detailed financial models were developed for the purpose of the DCF analysis, based on two valuation cases incorporating production, capital and operating cost projections developed by AMC using information provided by OZ Minerals.

Case 1 is primarily based on reported reserves and indicated resources not currently included in reserves, with some mining of inferred resources. Case 1 assumes that 1.9 million tonnes of ore are mined from the planned Gossan Hill copper oxide open pit, following which mining at Scuddles resumes. Total ore milled over the life of the project is approximately 10.0 million tonnes at grades of 12.1% zinc and 3.2% copper, at a production rate of approximately 1.75 million tonnes per annum. Total capital expenditure is $141 million and operations cease in 2014.

Case 2 is based on Case 1. In addition, it assumes further underground production from Xantho Extended, Amity and Hougoumont (all at Gossan Hill) and Cervantes (at Scuddles), as well as the mining of gold and copper sulphide mineralisation from the proposed Gossan Hill open pits. Total ore milled over the life of the project is around 17.5 million tonnes at average grades of 12.7% zinc and 3.3% copper. Zinc production falls away from 2012 and copper production increases substantially, such that measuring cash costs per pound of zinc becomes less meaningful. The increase in cash costs in 2013 is the result of increased mining costs from the mining of open pit waste. Total capital costs over the life of the project are over double those for Case 1, reflecting the additional underground development required as well as capital expenditure associated with the open pit developments. Annual production rates increase to 2.1 million tonnes from 2011 and operations continue to 2019.

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Golden Grove – Model Parameters Total Life

2009 2010 2011 2012 2013 of Mine Case 1 Ore milled Zinc (000’s tonnes) 457 844 912 568 518 3,429 Copper (000’s tonnes) 1,270 860 790 1,000 435 4,688 Oxide copper (000’s tonnes) - - - 200 800 1,880 Zinc milled grade (%) 15.2 13.0 11.0 12.8 9.9 12.1 Zinc concentrate grade (%) 52.5 52.5 52.5 52.5 52.5 52.5 Copper milled grade (%) 3.6 3.8 3.4 3.2 2.5 3.2 Copper concentrate grade (%) 23.0 23.0 23.0 23.0 23.0 23.0 Contained metal in concentrates Zinc (000’s tonnes) 65 101 92 67 47 384 Copper (000’s tonnes) 41 29 24 32 25 174 Lead (000’s tonnes) 6 8 9 6 2 33 Gold (000’s ounces) 31 35 29 22 10 133 Silver (000’s ounces) 1,373 1,920 1,839 1,597 1,110 8,124 Total cash costs (US¢ / lb Zn)30 (0.05) 0.16 0.27 0.18 0.25 0.14 Capital expenditure (A$ million) 41.7 30.2 13.9 24.3 3.9 140.9 Case 2 Ore milled Zinc (000’s tonnes) 390 898 908 536 534 5,030 Copper (000’s tonnes) 1,336 805 811 1,000 920 10,588 Oxide copper (000’s tonnes) - - 200 600 700 1,880 Zinc milled grade (%) 15.2 13.0 12.3 12.9 9.9 12.7 Zinc concentrate grade (%) 52.5 52.5 52.5 52.5 52.5 52.5 Copper milled grade (%) 3.6 3.8 3.3 3.2 3.6 3.3 Copper concentrate grade (%) 23.0 23.0 23.0 23.0 23.0 23.0 Contained metal in concentrates Zinc (000’s tonnes) 56 107 103 63 49 589 Copper (000’s tonnes) 43 27 28 40 43 341 Lead (000’s tonnes) 5 9 10 6 3 48 Gold (000’s ounces) 28 37 32 22 21 330 Silver (000’s ounces) 1,261 2,001 2,045 1,531 1,634 17,325 Total cash costs (US¢ / lb Zn)28 (0.11) 0.19 0.25 0.04 0.23 0.05 Capital expenditure (A$ million) 41.8 59.4 63.9 71.5 37.4 326.3

30 Costs are per lb of zinc produced and are after treatment and refining costs and royalties. Gold, silver, copper and lead are taken as credits.

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The following table summarises the results of the NPV analysis for the two cases:

Golden Grove – NPV Analysis (US$ million) Zinc and Copper Price Scenario Zinc US$0.70 Zinc US$0.75 Zinc US$0.80 Discount Rate Copper US$1.80 Copper US$2.00 Copper US$2.20 Case 1 9.0% 159 196 232 10.0% 156 192 227 11.0% 153 188 222 Case 2 9.0% 207 277 344 10.0% 198 265 330 11.0% 190 254 316

Grant Samuel’s valuation of Golden Grove in the range US$140-170 million is broadly consistent with indications of value received by OZ Minerals during the course of the asset sale program that it has recently conducted. The valuation is at the bottom end of the range of estimated NPVs for the operation. In addition to the results of the NPV analysis, the valuation of Golden Grove reflects:

OZ Minerals’ exploration interests in the broader Golden Grove project area which AMC has valued in the range $4-8 million (US$3-6 million);

the limited number of potential buyers with the financial capacity to fund an acquisition of Golden Grove;

the likely reluctance on the part of potential buyers to attribute any value to upside potential; and

the corporate head office costs incurred by OZ Minerals in relation to Golden Grove, but not incorporated in the DCF analysis. OZ Minerals allocates around $6 million per annum of head office costs to Golden Grove and additional non-allocated costs may also be referable to Golden Grove, although potential purchasers could be expected to achieve some savings in relation to these costs.

6.5 Rosebery

Grant Samuel has valued Rosebery in the range US$125–150 million, which equates to A$179- 214 million at an exchange rate of A$1.00 = US$0.70.

The valuation relies on indications as to value provided through OZ Minerals’ recent asset sale program, but also considers DCF analysis.

For the purpose of the DCF analysis, detailed financial models were developed to analyse the mining operations, based on two valuation cases incorporating production, capital and operating cost projections developed by AMC using information provided by OZ Minerals. These valuation cases do not take into account corporate costs allocated by OZ Minerals to the Rosebery operation.

Case 1 includes the mining of reported Reserves and additional mineralisation not currently included in Reserves. The production schedule is based on indicative mine planning optimised on all material in Resources (i.e. not limited to Reserves). Approximately 54% of all Resource tonnes are assumed to be mined and processed, which compares with a historical conversion rate of Resources to Reserves of 60%. As a result, the total contained zinc mined over the life of the mine exceeds that in current Reserves by approximately 140%. Over the life of the mine, a total of 8.2 million tonnes of ore grading an average of 12.2% zinc and 3.9% lead is treated to produce circa 930,000 tonnes of zinc and 260,000 tonnes of lead in concentrates. Capital costs of $28 million, related primarily to the tailings dam, are incurred in 2009. An upgrade to the ventilation shaft infrastructure and refurbishment of the treatment plant are projected to result in

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approximately $100 million in capital costs during the 2010-2011 period. Approximately $16 million is expected to be incurred in resource development over the life of the operation to prove up additional reserves. The cash costs per pound of payable zinc are expected to be low, benefitting particularly from the significant gold and silver credits. Operations continue until 2019, following which closure costs of $26 million are incurred.

Case 2 builds on Case 1 and includes an additional 3.8 million tonnes of ore mined and treated at average grades and cost. This additional ore extends the mine life by five years and reflects AMC’s judgement that it is reasonable to expect that additional ore will be sourced from mineralisation not currently included in the resource model. Over the life of the project, a total of 12.0 million tonnes of ore grading an average of 12.1% zinc and 3.9% lead is treated, to produce 1.4 million tonnes of zinc and 381,000 tonnes of lead in concentrate. Operations continue until 2024, following which closure costs of $26 million are incurred.

Rosebery –Model Parameters Total Life of 2009 2010 2011 2012 2013 Mine Case 1 Ore milled (000’s tonnes) 750 750 750 750 750 8,225 Zinc milled grade (%) 11.3 12.2 12.3 12.3 12.3 12.2 Lead milled grade (%) 3.4 3.9 3.9 3.9 3.9 3.9 Contained metals Zinc (000’s tonnes) 79 85 85 85 85 930 Lead (000’s tonnes) 21 24 24 24 24 260 Total cash costs (US¢ / lb Zn)31 31 21 26 23 22 22 Capital expenditure (A$ million) 29 60 51 26 40 314 Case 2 Ore milled (000’s tonnes) 750 750 750 750 750 12,000 Zinc milled grade (%) 11.3 12.2 12.3 12.3 12.3 12.1 Lead milled grade (%) 3.4 3.9 3.9 3.9 3.9 3.9 Contained metals Zinc (000’s tonnes) 79 85 85 85 85 1,360 Lead (000’s tonnes) 21 24 24 24 24 381 Total cash costs (US¢ / lb Zn)29 31 21 26 23 22 27 Capital expenditure (A$ million) 29 60 51 26 40 459

Commodity price and exchange rate assumptions are set out in Section 5.2.

31 Costs are per lb of zinc payable and are after treatment and refining costs and royalties. Gold, silver, copper and lead are taken as credits.

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The following table summarises the results of the NPV analysis for the two cases:

Rosebery – NPV Analysis (US$ million) Zinc Price Scenario Discount Rate US$0.70 US$0.75 US$0.80 Case 1 9.0% 275 312 348 10.0% 261 296 331 11.0% 248 281 314 Case 2 9.0% 282 330 378 10.0% 265 310 354 11.0% 249 291 332

Grant Samuel’s valuation of Rosebery in the range US$125-150 million is at a deep discount to the estimated NPVs for the operation. The valuation relies to a significant extent on OZ Minerals’ experience through the asset sale program it has conducted in recent months, and is broadly consistent with indications of value it received through that program.

Reconciliation of NPV estimates from DCF analysis with what appear to be much lower current market values is not straightforward. It appears that there are relatively few parties interested in mining projects such as Rosebery, and even fewer with the financial capacity to fund an acquisition. The fact that the vast majority of Rosebery’s production is contractually committed may reduce its attractiveness to some potential acquirers. Given the limited number of potential purchasers, it appears that a seller would have to accept a significant discount to calculated net present value to complete a sale. Alternatively, it may be the case that potential purchasers are unwilling to attribute any significant value to mineralisation potential beyond current reserves. In these circumstances valuation is essentially judgemental and a wide range of values could credibly be suggested.

6.6 Development and Exploration Sale Assets

Grant Samuel has valued the Development and Exploration Sale Assets in the range US$100- 170 million. The valuation is summarised below:

OZ Minerals Development and Exploration Sale Assets – Valuation Summary Section Valuation (US$ million) Valuation (A$ million) Reference Low High Low High Avebury 6.6.1 40 60 57 86 Dugald River 6.6.2 30 50 43 71 Regional Exploration 6.6.3 30 60 43 86 Total Value of Development and 100 170 143 243 Exploration Sale Assets

6.6.1 Avebury

Grant Samuel has valued Avebury in the range US$40-60 million, which equates to A$57- 86 million at an exchange rate of A$1.00 = US$0.70. Based on current nickel prices, Avebury has negligible value. In its assessment of value for Avebury, Grant Samuel has taken into consideration indications of value OZ Minerals received for Avebury during the asset sale program and evidence as to value derived from share market trading and transaction evidence involving Albidon Limited (“Albidon”), an ASX listed company.

Albidon’s principal asset is the Munali nickel sulphide project in Zambia. Construction of the project was completed in early 2008 and the plant was commissioned in the second half of 2008. The processing plant has a nameplate capacity of 900,000 tonnes per annum with the potential to increase the throughput to 1.2 million tonnes per annum. The plant is expected to produce approximately 8,300 tonnes per annum of nickel in concentrate with

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production increasing to about 10,000 tonnes per annum at expanded capacity. Jinchuan Group Limited (“Jinchuan”), which owns an 18% stake in the company and is the largest shareholder, has a life of mine off take agreement for 100% of the nickel concentrate. As at 31 December 2008, Albidon had net debt of US$59 million.

On 3 March 2009, in response to the declining nickel prices, Albidon reported that it would place the Munali Nickel mine on care and maintenance. This suspension of operations triggered an event of default under Albidon’s senior debt facilities. On the same day, the company reported that it had received a refinancing proposal from Jinchuan. The proposal included a US$7 million equity investment by Jinchuan at A$0.08 per share implying an enterprise value of US$70 million for Albidon. The proposal, which if completed will result in Jinchuan owning a 50% stake in the company, was approved by shareholders on 20 March 2009. Shares in Albidon closed at A$0.039 on 23 March 2009 (implying a value of around US$60 million) and have been suspended from trading since then as the company continues to negotiate with the senior lenders and Jinchuan. On 23 April 2009 Albidon announced that it had appointed voluntary administrators and that negotiations between Jinchuan and Albidon’s financiers were continuing.

The following table compares key statistics for Avebury and the Munali project:

Avebury and Munali – Comparative Statistics Resource Reserve Production Cash Costs Value Nickel Nickel Nickel US$ million 000’s t 000’s t 000’s t US¢/lb Avebury 40-60 171 38 8.5 7.132 Munali 60-70 12433 n/a 8.3-10.5 4.0 – 5.034

Given Albidon’s financially distressed position, evidence as to value inferred from the recapitalisation proposal and recent trading in Albidon shares needs to be treated with caution. In addition, the Avebury project has a larger resource base and is exposed to lower levels of sovereign risk than the Munali project, although its expected cash costs are higher. On balance, Grant Samuel believes that the Albidon transaction supports the valuation of Avebury in the range US$40-60 million.

6.6.2 Dugald River

Grant Samuel has valued OZ Minerals’ Dugald River project in the range US$30- 50 million, which equates to A$43-71 million at an exchange rate of A$1.00 = US$0.70.

The valuation of Dugald River is an overall judgement on value and reflects Grant Samuel’s assessment of the impact on value of development and financing risk. A feasibility study for the development of the Dugald River project was about to be completed as at the date of this report and no reserves had yet been defined. OZ Minerals does not have a current plan for the development of the project.

Grant Samuel undertook indicative financial analysis of Dugald River based on hypothetical development scenarios. These assumed a decision to develop in 2010 followed by project construction through to 2012, at a total start up capital cost of around $750 million, and first production in 2013. The analysis assumed an operation with a processing capacity of 2-2.2 million tonnes of ore per annum, producing 200,000-220,000 tonnes of zinc and 30,000-35,000 tonnes of lead in concentrate per annum, for a life of around 20 years. AMC reviewed the capital and operating costs and other assumptions incorporated in the development scenarios.

32 OZ Minerals reported total cash costs for December 2008 quarter. 33 Total Resources 10.3Mt @ 1.2% Ni, 0.2% Cu, 0.07% Co, 0.6g/t Pd, 0.3g/t Pt. 34 As projected by management assuming full production levels.

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DCF analysis of the scenarios suggests a range of NPVs, from modestly negative to modestly positive values.

Some guidance as to value is provided by a comparison with Terramin Australia Ltd (“Terramin”), which has a significant undeveloped zinc project.

Zinc Companies Statistics – Selected Listed Companies Enterprise Value Resource Reserve $ million Zinc 000’s t Zinc 000’s t Dugald River 43-71 6,820 -

Terramin 133 3,047 1,419

Terramin’s enterprise value based on share market trading values at 23 April 2009 was approximately $135 million. Terramin’s main asset is its 65% owned Oued Amizour project in Algeria, which contains the Tala Hamza zinc deposit, one of the largest undeveloped zinc deposits in the world. Terramin recently announced new financing arrangements for the development of Oued Amizour, the signing of a five-plus-five year off take agreement for up to 100,000 tonnes of zinc and 40,000 tonnes of lead per annum and the completion of a pre-feasibility study for the project. The study suggests that Tala Hamza could support a 2.0 million tonnes per annum mining operation producing approximately 95,000 tonnes of payable zinc at cash costs of US$0.43/lb of zinc. Terramin also owns the Angas zinc mine in South Australia, which commenced production in July 2008, and has a 24% interest in the Menninnie Dam joint venture with OZ Minerals.

Valuation of Dugald River is essentially judgemental, given its development status. Dugald River would not be expected to enter production before 2013, even if development of the project recommenced immediately. Dugald River would be a significant project in an environment in which few new major zinc projects are expected to come on stream and its Australian location is highly attractive from a sovereign risk perspective by comparison with many other potential new zinc projects (including Terramin’s Oued Amizour project). However, OZ Minerals is not currently planning on developing the project. Having regard to these factors, Grant Samuel believes that its valuation of Dugald River in the range US$30-50 million is reasonable.

6.6.3 Regional Exploration

OZ Minerals’ regional exploration assets include the Nunavut and Ontario interests in Canada, the Wiluna assets in Western Australia, OZ Minerals’ interest in the Menninnie Dam zinc project in South Australia and exploration assets in Indonesia (unrelated to Martabe), China, Thailand (iron ore, phosphate and potash)35 and Tunisia. Grant Samuel has valued these assets in the range US$30-60 million, which equates to $43-86 million at an exchange rate of A$1.00 = US$0.70.

The Nunavut assets are the most significant of the exploration assets listed above. OZ Minerals acquired their Nunavut interests through the acquisition in June 2007 of Wolfden Resources, a Canadian-based listed company, for approximately $388 million (C$345 million). However, during the 2008 calendar year, OZ Minerals wrote down the value of its Canadian assets (Nunavut and Ontario assets) to zero.

There are no current, robust estimates of likely future capital and operating costs available on which to base a meaningful DCF analysis of any of these regional exploration assets. AMC has valued these assets in the range $38-127 million, based on the in-situ value of the mineral resources or other benchmarks. This equates to US$27-89 million at an exchange

35 The gold exploration assets in Thailand are retained by OZ Minerals.

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rate of A$1.00 = US$0.70. Grant Samuel selected a narrower range of values of US$30- 60 million for the purpose of the valuation, which equates to $43-86 million.

AMC’s valuation of OZ Minerals’ exploration interests is set out in Appendix 3.

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7 Evaluation of the Proposal

7.1 Summary

OZ Minerals has been under considerable financial pressure over the last six months. A precipitous fall in base metals prices during the second half of 2008 substantially reduced its profitability. At the same time, OZ Minerals’ debt increased, as it funded a number of development and expansion projects. The deterioration in OZ Minerals’ financial position coincided with the virtual collapse of global credit markets. As a result, OZ Minerals has a high level of debt requiring repayment or refinancing in an environment where financiers are increasingly risk averse and asset values are dramatically reduced. The Minmetals Proposal is designed to address this situation by realising value for a number of assets, resolving the insolvency risk faced by the company (by allowing the repayment of all bank debt) and leaving the company in a financially robust position.

Evaluation of the Minmetals Proposal requires assessments of both value and risk. Key issues for shareholders are:

does the Consideration fully reflect the value of the OZ Minerals Sale Assets?

are there any more attractive alternative proposals currently available to OZ Minerals?; and

Conclusions regarding these issues are not straightforward. They require judgements about future commodity prices, equity market conditions and the behaviour of OZ Minerals’ financiers.

However, there has since been a significant recovery in base metals prices (copper and zinc prices traded has high as US$2.19/lb and US$0.69/lb respectively in mid April 2009). There has been a substantial increase in the share market values of many copper and zinc producers and a strengthening in equity markets generally. Moreover, OZ Minerals has almost completed the commissioning of its key Prominent Hill copper mine, which is expected to generate substantial free cash flows at current copper prices. In these circumstances, assessment of the Minmetals Proposal is less straightforward.

Grant Samuel has valued the Sale Assets in the range US$1,385-1,600 million. The valuation reflects the full underlying value of the Sale Assets. It takes into account the substantial strengthening in base metals prices and equity market values in recent months. Given the volatility in commodity markets, valuation judgements are subject to considerable uncertainty. Notwithstanding this uncertainty, in Grant Samuel’s view the Consideration payable by Minmetals of US$1,206 million is less than the underlying value of the Sale Assets. Arguably, the Proposal represents the realisation of a substantial part of OZ Minerals’ asset base at or close to the bottom of the market for resources assets.

On the other hand, given OZ Minerals’ current financial position, value considerations are only partly relevant. The reality is that there are limited alternatives to the Minmetals Proposal. OZ Minerals’ bankers have made it clear that they require a significant reduction in OZ Minerals’ debt. Since November 2008, OZ Minerals has been unable to secure any long term extension of its debt facilities, with its bankers providing a succession of short term extensions. OZ Minerals has investigated various restructuring alternatives and has conducted an extensive process to seek buyers for its assets. This process has demonstrated that, in the current market and given OZ

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Minerals’ perceived position as a forced seller, it is extremely difficult to complete asset sales at reasonable values.

If OZ Minerals was to pursue a restructuring other than the Proposal, it would urgently need to divest assets and probably raise additional equity. Based on OZ Minerals’ experience in recent months, it would probably be forced to accept fire sale values for a number of its assets and there may be a need to raise capital on deeply dilutive terms, with a risk of significant loss of shareholder value. OZ Minerals would be exposed to ongoing commodity and equity market risks during this period.

The Consideration, in Grant Samuel’s view, is below the full underlying value of the Sale Assets. In the absence of the financial pressure facing OZ Minerals, the Proposal would not be in shareholders’ best interests. However, the reality is that OZ Minerals urgently needs to reduce its bank debt. There are no obvious alternatives to the Minmetals Proposal capable of implementation in the current circumstances. On one view, for as long as there is extreme pressure on OZ Minerals to achieve substantial debt reduction, it will be almost impossible for OZ Minerals to realise assets at full value: potential buyers will continue to deal with OZ Minerals as a distressed seller. In this context, the Proposal represents an acceptable outcome for OZ Minerals shareholders. OZ Minerals will be left with its premier asset, the Prominent Hill copper/gold mine in South Australia, and a significant net cash balance. Shareholders will retain exposure to any upside in the copper price and OZ Minerals will have a number of options for delivering value to shareholders in the future. Perhaps most compellingly, the Proposal will eliminate the insolvency risk and the potential for substantial destruction of shareholder value that OZ Minerals currently faces.

Grant Samuel believes that, on balance, shareholders are likely to be better off if the Proposal proceeds than if it does not. Accordingly, in Grant Samuel’s opinion, in the absence of a superior proposal, the Proposal is in the best interests of OZ Minerals shareholders.

7.2 Impact of the Proposal on OZ Minerals’ Financial Position

During the six months to 31 December 2008, the financial position of OZ Minerals deteriorated significantly. Copper and zinc prices fell from around US$4.00/lb for copper and US$0.85/lb for zinc at 1 July 2008 to lows of around US$1.27/lb for copper and US$0.47/lb for zinc in late December 2008. These sharp falls in copper and zinc prices resulted in a substantial fall in OZ Minerals’ operating earnings. At the same time, OZ Minerals was progressing a number of major capital expenditure projects, including the construction and commissioning of Prominent Hill, the construction of Martabe, a capacity expansion project at Sepon, a major waste movement program at Century and a significant capital expenditure program at Golden Grove. Total capital expenditure for the six months to 31 December 2008 was approximately A$800 million.

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In the context of current commodity prices and asset values, and given the current risk averse attitude of financiers, OZ Minerals’ debt level is not sustainable. Arguably, OZ Minerals has only been able to secure the temporary continuation of its debt facilities because of the original proposal from Minmetals announced on 16 February 2009 and the current Minmetals Proposal. OZ Minerals urgently needs to achieve a significant debt reduction. If OZ Minerals is unable to achieve a significant debt reduction, there is a real risk that it will be placed in some form of insolvency administration. Such an outcome could be expected to result in wholesale destruction of shareholder value.

Under the Proposal, Minmetals will pay US$1,206 million (approximately A$1,723 million based on a US$:A$ exchange rate of $0.70) for the Sale Assets. OZ Minerals intends to use these funds to repay its bank debt in full, leaving only its Convertible Bonds (with face value of US$105 million) on foot. OZ Minerals expects, following settlement of the Proposal and repayment of its bank debt (excluding the Convertible Bonds), that it will have a cash balance of approximately A$750-800 million (including proceeds from the sale of Martabe). The Minmetals Proposal will eliminate the financing risk that OZ Minerals currently faces. OZ Minerals will have a robust balance sheet that will allow it to fund its operations without any reliance on uncertain credit markets.

7.3 Value Considerations

Grant Samuel has valued the Sale Assets in the range $1,385 – 1,600 million. The Consideration of US$1,206 million is below the bottom end of Grant Samuel’s valuation range for the Sale Assets. Accordingly, in Grant Samuel’s view, the Consideration is less than the underlying value of the Sale Assets.

Conclusions as to value need to be treated with some caution. Given current market conditions, the valuation of the Sale Assets is subject to considerable uncertainty. The valuation requires judgements regarding a number of key assumptions about the future. In particular, the value of the Sale Assets is highly sensitive to assumptions about future commodity prices (principally for copper and zinc).

Movements in copper and zinc prices since 1 July 2008 are shown in the chart below:

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Copper and Zinc Spot Prices 1 July 2008 - 1 May 2009 4.50 1.00

4.00 0.90

0.80 3.50

0.70 (US$/lb) Prices Zinc Spot 3.00 0.60 2.50 0.50 2.00 0.40 1.50 0.30 Copper Spot Prices (US$/lb) 1.00 0.20

0.50 0.10

0.00 0.00 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09

Copper Zinc

Source: Bloomberg

Although there is little consensus on the part of commodity and equity market analysts as to future copper and zinc prices, Grant Samuel’s long term price assumptions of US$1.80-2.20/lb for copper and US$0.70-0.80/lb for zinc are broadly consistent with the range of forecast price assumptions used by market analysts and reflective of the forward curve for copper and zinc. However, a wide range of assumptions regarding future copper and zinc prices could credibly be adopted, depending on judgements regarding the prospects for the global economy. A rapid global economic recovery and quick resumption of economic growth could result in much higher prices than those assumed by Grant Samuel, given likely supply constraints in the short to medium term. Conversely, a longer and deeper economic slowdown could see very low prices for a sustained period.

The value of the Sale Assets is sensitive to changes in zinc and copper prices. In particular, the value of Century is highly leveraged to movements in the zinc price, given that Century’s cash costs (including waste movement costs) are of the order of US$0.56-0.57/lb for 2009 and 2010, and therefore close to recently prevailing zinc prices. DCF analysis for Century shows that estimated NPVs vary dramatically for changes in assumed zinc prices. At zinc prices of US$0.60/lb for the life of the mine, the estimated NPV is only US$327 million. However, the NPV increases to around $578 million for zinc prices of US$0.70/lb and to around US$804 million for zinc prices of US$0.80/lb (all NPVs estimated for Case 1 of Grant Samuel’s DCF analysis for Century, using a nominal discount rate of 10%). Given this NPV sensitivity and volatility in zinc prices, valuation of Century is inherently uncertain and a wide range of values could credibly be adopted.

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Moreover, depressed equity markets and dysfunctional credit markets mean that it is extremely difficult for potential buyers of base metals assets to raise capital for acquisitions. In the case of many assets there may be very few potential buyers. In the absence of competition for assets, potential buyers are unlikely to be prepared to pay for any asset upside: to the contrary, those buyers with financial capacity are more likely to be seeking acquisitions at bargain prices. In these circumstances, the actual prices realisable for assets may be well below those suggested by traditional discounted cash flow valuation analysis. OZ Minerals’ recent asset sale program for assets including Prominent Hill, Golden Grove, Rosebery and Martabe suggests that (for some assets at least) current market values may be well below net present values. (On the other hand, OZ Minerals’ perceived status as a distressed seller may mean that the value indications received by OZ Minerals through its asset sale program are not representative of fair value). While valuations should reflect current market conditions, the extent of any discount to estimated net present values is judgemental.

In these circumstances, shareholders could reasonably reach different judgements on the value of OZ Minerals, particularly if they have strong views (positive or negative) regarding the prospects for global economic recovery.

7.4 Alternatives

In Grant Samuel’s view the Consideration is less than the full underlying value of the Sale Assets. In addition, it is arguably the case that the Proposal represents the sale of a substantial part of OZ Minerals’ asset base at prices struck at or close to the bottom of the market. In the ordinary course of events OZ Minerals would probably defer any asset sales until overall market conditions improved. OZ Minerals would not be contemplating the Proposal (or any major asset sale program) were it not for the financial pressure that it faces.

Against this background, the question for shareholders is whether there are realistic alternatives available that would minimise the extent to which assets need to be realised in the currently depressed market conditions.

OZ Minerals has investigated a number of possibilities, including:

the sale of various non-core assets, combined with some form of capital raising; and

the sale of Prominent Hill.

The sale of (for example) Golden Grove, Martabe, Rosebery and Avebury, together with a modest capital raising, would have the potential to materially reduce OZ Minerals’ debt. It would leave the company focused on two profitable copper operations (Sepon and Prominent Hill) and Century, a world class zinc mine. Arguably this would be an ideal outcome for OZ Minerals. It would have the potential to deliver significantly improved value to shareholders over the longer term, particularly if there was a sustained recovery in zinc and copper prices.

OZ Minerals conducted an extensive asset sale program during late 2008 and early 2009. However, it was unable to secure binding offers for any of Golden Grove or Rosebery at reasonable values. Potential purchasers continually extended negotiations or offered fire-sale prices, possibly in the hope that a desperate OZ Minerals (or an insolvency administrator of OZ Minerals) would be forced to accept very low values. The sale of Martabe was only announced in late April 2009, nearly six months after the asset sale program commenced.

OZ Minerals also explored the potential for a sale of Prominent Hill. Numerous parties visited the mine site and performed due diligence, but OZ Minerals did not received any attractive offers. In any event, the sale of Prominent Hill and retention of its other assets is, strategically, a less attractive option for OZ Minerals than the Minmetals Proposal. It would represent the divestment of OZ Minerals’ premier asset. By comparison with the Minmetals Proposal, it would realise less cash and would fail to deliver the financial flexibility that OZ Minerals will enjoy following completion of the Minmetals Proposal.

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In addition, OZ Minerals also investigated a wide range of other options that could be combined with asset sales to resolve its financing issues, including commodity linked financing, the sale of precious metal streams and a capital raising involving the introduction of a cornerstone investor. None of these alternatives was able to be completed on reasonable terms.

Since OZ Minerals first commenced to explore asset sale opportunities and other restructure possibilities, there has been a significant improvement in its financial prospects, both as a result of initiatives undertaken by OZ Minerals and because of an improvement in the external environment. OZ Minerals has put on hold the expansion projects at Martabe and Sepon, closed the Avebury nickel mine, significantly reduced operating costs at Century, Sepon and Golden Grove, reduced head office costs and curtailed exploration expenditure. It has announced the sale of Martabe for US$211 million.

In addition, copper and zinc prices have improved significantly in recent months. After reaching lows in late December 2008, copper and zinc prices have risen strongly, particularly during March and early April 2009. The copper price has increased by around 34% since the announcement of the original proposal from Minmetals on 16 February 2009, while the zinc price has risen by around 30% (to around US$2.00/lb for copper and US$0.65/lb for zinc by late April 2009).

The recent improvements in copper and zinc prices, together with continued progress in the commissioning of Prominent Hill, have improved the financial prospects of OZ Minerals, reduced its risk profile and increased the value of its assets. Equity markets have improved and other base metals miners have been successful in negotiating debt extensions or refinancings.

These improved circumstances suggest that there could be an opportunity to revisit an alternative restructure involving a smaller asset divestment and an equity raising, with the proceeds used to substantially pay down debt. However, OZ Minerals’ funding position means that pursuing such a course of action would involve considerable risk. OZ Minerals’ debt facilities have been extended to 30 June 2009, but if the Proposal does not proceed, certain of the facilities can be declared immediately due and payable at the election of OZ Minerals’ financiers. If OZ Minerals did not proceed with the Minmetals Proposal, it is likely that its bankers would seek significant debt reduction in the very short term (and could possibly demand immediate full repayment of all facilities). OZ Minerals would need to sell assets very quickly, presumably followed by some form of equity raising. OZ Minerals’ recent experience is that its perceived status as a distressed borrower would hinder any asset sale process. Moreover, it is likely that any equity raising could only be undertaken once asset sales were complete and there was confidence about the position of OZ Minerals’ bankers.

There would be a real risk of value destruction if OZ Minerals was forced to sell assets on a fire sale basis, or to complete a dilutive capital raising. At worst, a failure to complete asset sales or a capital raising of sufficient scale or within the time frame required would leave OZ Minerals exposed to insolvency risk. In a letter to its shareholders dated 16 March 2009, OZ Minerals stated that “in the event that Minmetals’ proposal does not proceed, there is a material possibility that OZ Minerals may be unable to continue as a going concern, and may be placed into voluntary administration or receivership”. The OZ Minerals Explanatory Booklet states that “if the Transaction is not approved, OZ Minerals may not be successful in refinancing its debt, which could potentially lead to it being unable to continue as a going concern and being placed in voluntary administration or receivership.”

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require the agreement of all lenders to any restructure proposal and failure to secure the consent of any single lender could be enough to precipitate an insolvency administration.

If OZ Minerals was ultimately to enter into some form of insolvency administration, there would almost certainly be a material reduction in shareholder value.

7.5 OZ Minerals after the Proposal

OZ Minerals will be a much simpler company following settlement of the Proposal. It will retain its premier asset, the Prominent Hill copper/gold mine, which has an expected mine life of well over ten years and considerable upside potential. The Prominent Hill mine could form the cornerstone asset of a rebuilt resources company. OZ Minerals will have a very strong balance sheet, with substantial net cash, and no further dependence on debt funding. OZ Minerals will also hold its listed equity investments, which are set out in section 4.8. Shareholders will retain their exposure to any upside in the copper market (although they will no longer have any zinc exposure).

Based on current market conditions, OZ Minerals will be a relatively substantial Australian listed resources company, with the market capitalisation and share liquidity to make it attractive to investors in the Australian resources sector. Over time, OZ Minerals may have considerable corporate appeal, given the quality of its Prominent Hill mine.

7.6 Factors affecting Opinion

In Grant Samuel’s view the Consideration is below the underlying value of the Sale Assets. Grant Samuel’s opinion that the Proposal is nevertheless in shareholders’ best interests reflects OZ Minerals’ urgent need to address its financing issues, and the risk of insolvency if this is not achieved. It is possible that circumstances could change such that OZ Minerals no longer faced any real risk of insolvency. This could result if some alternative proposal (satisfactory to OZ Minerals’ bankers) was put forward that would generate cash and allow a significant debt reduction (for example, through a more limited asset sale program and/or an equity raising). In these circumstances Grant Samuel’s opinion that the Proposal is in shareholders’ best interests could change.

The decision whether to vote for or against the Proposal is a matter for individual shareholders based on individual shareholders’ views as to value, their expectations about future market conditions and their particular circumstances. If in any doubt as to the action they should take in relation to the Proposal, shareholders should consult their own professional adviser.

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8 Qualifications, Declarations and Consents

8.1 Qualifications

The Grant Samuel group of companies provides corporate advisory services (in relation to mergers and acquisitions, capital raisings, debt raisings, corporate restructurings and financial matters generally), property advisory services and manages specialist funds and provides marketing and distribution services to fund managers. The primary activity of Grant Samuel & Associates Pty Limited is the preparation of corporate and business valuations and the provision of independent advice and expert’s reports in connection with mergers and acquisitions, takeovers and capital reconstructions. Since inception in 1988, Grant Samuel and its related companies have prepared more than 415 (to September 2008) public independent expert and appraisal reports.

The persons responsible for preparing this report on behalf of Grant Samuel are Stephen Cooper BCom (Hons) ACA CA (SA) ACMA and Cameron Stewart LLB BCom. Each has a significant number of years of experience in relevant corporate advisory matters. Matt Leroux M.Aero.E MBA and Shakeel Mohammed MS MBA assisted in the preparation of the report. Each of the above persons is an authorised representative of Grant Samuel pursuant to its Australian Financial Services Licence under Part 7.6 of the Corporations Act.

8.2 Disclaimers

It is not intended that this report should be used or relied upon for any purpose other than as an expression of Grant Samuel’s opinion as to whether the Minmetals Proposal is in the best interests of shareholders. Grant Samuel expressly disclaims any liability to any OZ Minerals shareholder who relies or purports to rely on the report for any other purpose and to any other party who relies or purports to rely on the report for any purpose whatsoever.

This report has been prepared by Grant Samuel with care and diligence and the statements and opinions given by Grant Samuel in this report are given in good faith and in the belief on reasonable grounds that such statements and opinions are correct and not misleading. However, no responsibility is accepted by Grant Samuel or any of its officers or employees for errors or omissions however arising in the preparation of this report, provided that this shall not absolve Grant Samuel from liability arising from an opinion expressed recklessly or in bad faith.

Grant Samuel has had no involvement in the preparation of the Explanatory Booklet issued by OZ Minerals and has not verified or approved any of the contents of the Explanatory Booklet. Grant Samuel does not accept any responsibility for the contents of the Explanatory Booklet (except for this report).

8.3 Independence

Grant Samuel has undertaken four assignments for OZ Minerals and its predecessor organisations since late 2005:

in March 2008, Grant Samuel was engaged by Zinifex to prepare an independent expert’s report in relation to the merger of Oxiana and Zinifex; and

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have any shareholding in or other relationship with OZ Minerals that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposal

Grant Samuel had no part in the formulation of the Minmetals Proposal. Its only role has been the preparation of this report.

Grant Samuel will receive a fixed fee of $1.25 million for the preparation of this report. This fee is not contingent on the outcome of the Minmetals Proposal. Grant Samuel’s out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant Samuel will receive no other benefit for the preparation of this report.

Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the ASIC on 30 October 2007.

8.4 Declarations

OZ Minerals has agreed that it will indemnify Grant Samuel and its employees and officers in respect of any liability suffered or incurred as a result of or in connection with the preparation of the report. This indemnity will not apply in respect of the proportion of any liability found by a court to be primarily caused by any conduct involving gross negligence or wilful misconduct by Grant Samuel. OZ Minerals has also agreed to indemnify Grant Samuel and its employees and officers for time spent and reasonable legal costs and expenses incurred in relation to any inquiry or proceeding initiated by any person. Where Grant Samuel or its employees and officers are found to have been grossly negligent or engaged in wilful misconduct Grant Samuel shall bear the proportion of such costs caused by its action. Any claims by OZ Minerals are limited to an amount equal to the fees paid to Grant Samuel.

Advance drafts of this report were provided to OZ Minerals and its advisers. Certain changes were made to the drafting of the report as a result of the circulation of the draft report. There was no alteration to the methodology, evaluation or conclusions as a result of issuing the drafts.

8.5 Consents

Grant Samuel consents to the issuing of this report in the form and context in which it is to be published on the OZ Minerals’ website and provided by OZ Minerals to its shareholders. Neither the whole nor any part of this report nor any reference thereto may be included in any other document without the prior written consent of Grant Samuel as to the form and context in which it appears.

8.6 Other

The accompanying letter dated 5 May 2009 and the Appendices form part of this report.

Grant Samuel has prepared a Financial Services Guide as required by the Corporations Act. The Financial Services Guide is set out at the beginning of this report.

GRANT SAMUEL & ASSOCIATES PTY LIMITED 5 May 2009

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Appendix 1

Selection of Discount Rate

1 Overview

Grant Samuel has selected discount rates of 9.0-11.0% (US dollar cash flows) to apply to the forecast nominal ungeared after-tax cash flows for OZ Minerals’ major businesses.

The cash flows of OZ Minerals’ major assets have been denominated in US dollars and discounted on the basis of rates appropriate for international capital markets. Given that many of the potential acquirers of the major assets of OZ Minerals are international mining companies, the assets are likely to be priced on the basis of costs of capital established in international capital markets.

Selection of the appropriate discount rate to apply to the forecast cash flows of any business enterprise is fundamentally a matter of judgement. The valuation of an asset or business involves judgements about the discount rates that may be utilised by potential acquirers of that asset. There is a body of theory which can be used to support that judgement. However, a mechanistic application of formulae derived from that theory can obscure the reality that there is no “correct” discount rate. Despite the growing acceptance and application of various theoretical models, it is Grant Samuel’s experience that many companies rely on less sophisticated approaches. Many businesses use relatively arbitrary “hurdle rates” which do not vary significantly from investment to investment or change significantly over time despite interest rate movements. Valuation is an estimate of what real world buyers and sellers of assets would pay and must therefore reflect criteria that will be applied in practice even if they are not strictly consistent with parameters based on theoretical calculations. Grant Samuel considers the rates adopted to be reasonable discount rates that acquirers would use irrespective of the outcome or shortcomings of applying any particular theoretical model.

The discount rates that Grant Samuel has adopted are reasonable relative to the rates derived from theoretical models. The discount rates represent an estimate of the weighted average cost of capital (“WACC”) appropriate for these assets. Grant Samuel has calculated a WACC based on a weighted average of the cost of equity and the cost of debt. This is the relevant rate to apply to ungeared cash flows. There are three main elements to the determination of an appropriate WACC. These are:

cost of equity;

cost of debt; and

debt/equity mix.

The cost of equity has been derived from application of the Capital Asset Pricing Model (“CAPM”) methodology. The CAPM is probably the most widely accepted and used methodology for determining the cost of equity capital. There are more sophisticated multivariate models which utilise additional risk factors but these models have not achieved any significant degree of usage or acceptance in practice. However, while the theory underlying the CAPM is rigorous the practical application is subject to shortcomings and limitations and the results of applying the CAPM model should only be regarded as providing a general guide. There is a tendency to regard the rates calculated using CAPM as inviolate. To do so is to misunderstand the limitations of the model. For example:

the CAPM theory is based on expectations but uses historical data as a proxy. The future is not necessarily the same as the past;

the measurement of historical data such as risk premia and beta factors is subject to very high levels of statistical error. Measurements vary widely depending on factors such as source, time period and sampling frequency;

the measurement of beta is often based on comparisons with other companies. None of these companies is likely to be directly comparable to the entity for which the discount rate is being calculated and may operate in quite different markets;

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parameters such as the debt/equity ratio and risk premium are based on subjective judgements; and

there is not unanimous agreement as to how the model should adjust for factors such as taxation. The CAPM was developed in the context of a “classical” tax system. Australia’s system of dividend imputation has a significant impact on the measurement of net returns to investors.

The cost of debt has been determined by reference to the pricing implied by the debt markets in the US. The cost of debt represents an estimate of the expected future returns required by debt providers.

Selection of an appropriate debt/equity mix is a matter of judgement. The debt/equity mix represents an appropriate level of gearing, stated in market value terms, for the business over the forecast period. The relevant proportions of debt and equity have been determined having regard to the financial gearing of the industry in general and comparable companies, and judgements as to the appropriate level of gearing considering the nature and quality of the cash flow stream.

The following sections set out the basis for Grant Samuel’s determination of the discount rates to be applied in valuing the assets of OZ Minerals and the factors which limit the accuracy and reliability of the estimates.

2 Definition and Limitations of the CAPM and WACC

The CAPM provides a theoretical basis for determining a discount rate that reflects the returns required by diversified investors in equities. The rate of return required by equity investors represents the cost of equity of a company and is therefore the relevant measure for estimating a company’s weighted average cost of capital. CAPM is based on the assumption that investors require a premium for investing in equities rather than in risk free investments (such as US medium to long term Treasury Bond rates). The premium is commonly known as the market risk premium and notionally represents the premium required to compensate for investment in the equity market in general.

The risks relating to a company or business may be divided into specific risks and systematic risks. Specific risks are risks that are specific to a particular company or business and are unrelated to movements in equity markets generally. While specific risks will result in actual returns varying from expected returns, it is assumed that diversified investors require no additional returns to compensate for specific risk, because the net effect of specific risks across a diversified portfolio will, on average, be zero. Portfolio investors can diversify away all specific risk.

However, investors cannot diversify away the systematic risk of a particular investment or business operation. Systematic risk is the risk that the return from an investment or business operation will vary with the market return in general. If the return on an investment was expected to be completely correlated with the return from the market in general, then the return required on the investment would be equal to the return required from the market in general (i.e. the risk free rate plus the market risk premium).

Systematic risk is affected by the following factors:

financial leverage: additional debt will increase the impact of changes in returns on underlying assets and therefore increase systematic risk;

cyclicality of revenue: projects and companies with cyclical revenues will generally be subject to greater systematic risk than those with non-cyclical revenues; and

operating leverage: projects and companies with greater proportions of fixed costs in their cost structure will generally be subject to more systematic risk than those with lesser proportions of fixed costs.

CAPM postulates that the return required on an investment or asset can be estimated by applying to the market risk premium a measure of systematic risk described as the beta factor. The beta for an investment reflects the covariance of the return from that investment with the return from the market as a whole. Covariance is a measure of relative volatility and correlation. The beta of an investment represents its systematic risk only. It is not a measure of the total risk of a particular investment. An

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investment with a beta of more than one is riskier than the market and an investment with a beta of less than one is less risky. The discount rate appropriate for an investment which involves zero systematic risk would be equal to the risk free rate.

The formula for deriving the cost of equity using CAPM is as follows:

Re = Rf + Beta (Rm – Rf)

Where: Re = the cost of equity capital; Rf = the risk free rate; Beta = the beta factor; Rm = the expected market return; and Rm - Rf = the market risk premium.

The beta for a company or business operation is normally estimated by observing the historical relationship between returns from the company or comparable companies and returns from the market in general. The market risk premium is estimated by reference to the actual long run premium earned on equity investments by comparison with the return on risk free investments.

The formula conventionally used to calculate a WACC under a classical tax system is as follows:

WACC = (Re x E/V) + (Rd x (1-t) x D/V)

Where: E/V = the proportion of equity to total value (where V = D + E); D/V = the proportion of debt to total value; Re = the cost of equity capital; Rd = the cost of debt capital; and t = the corporate tax rate

The models, while simple, are based on a sophisticated and rigorous theoretical analysis. Nevertheless, application of the theory is not straightforward and the discount rate calculated should be treated as no more than a general guide. The reliability of any estimate derived from the model is limited. Some of the issues are discussed below:

Risk Free Rate

Theoretically, the risk free rate used should be an estimate of the risk free rate in each future period (i.e. the one year spot rate in that year if annual cash flows are used). There is no official “risk free” rate but rates on government securities are typically used as an acceptable substitute. More importantly, forecast rates for each future period are not readily available. In practice, the long term Commonwealth Government Bond rate is used as a substitute in Australia and medium to long term Treasury Bond rates are used in the United States. It should be recognised that the yield to maturity of a long term bond is only an average rate and where the yield curve is strongly positive (i.e. longer term rates are significantly above short term rates) the adoption of a single long term bond rate has the effect of reducing the net present value where the major positive cash flows are in the initial years. The long term bond rate is therefore only an approximation.

The ten year bond rate is a widely used and accepted benchmark for the risk free rate. Where the forecast period exceeds ten years, an issue arises as to the appropriate bond to use. While longer term bond rates are available, the ten year bond market is the deepest long term bond market in Australia and is a widely used and recognised benchmark. There is a very limited market for bonds of more than ten years. In the United States, there are deeper markets for longer term bonds. The 30 year bond rate is a widely used benchmark. However, long term rates accentuate the distortions of the yield curve on cash flows in early years. In any event, a single long term bond rate matching the term of the cash flows is no more theoretically correct than using a ten year rate. More importantly, the ten year rate is the standard benchmark used in practice.

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Where cash flows are less than ten years in duration the opposite issue arises. An argument could be made that shorter term, and therefore lower, bond rates should be used in determining the discount rate for there assets. While Grant Samuel believes this is a legitimate argument, an adjustment may give a misleading impression of precision for the whole methodology. In any event, the impact on valuation would usually be trivial.

In practice, Grant Samuel believes acquirers would use a common rate. The ten year bond rate can be regarded as an acceptable standard risk free rate for medium to long term cash flows, particularly given its wide use.

Market Risk Premium

The market risk premium (Rm - Rf) represents the “extra” return that investors require to invest in equity securities as a whole over risk free investments. This is an “ex-ante” concept. It is the expected premium and as such it is not an observable phenomenon. The historical premium is therefore used as a proxy measure. The premium earned historically by equity investments is calculated over a time period of many years, typically at least 30 years. This long time frame is used on the basis that short term numbers are highly volatile and that a long term average return would be a fair indication of what most investors would expect to earn in the future from an investment in equities with a 5-10 year time frame.

In the United States it is generally believed that the premium is in the range of 5-6% but there are widely varying assessments (from 3% to 9%). Australian studies have been more limited but indicate that the long run average premium has been in the order of 6% using a geometric average (and is in the order of 8% using an arithmetic average) measured over more than 100 years of data1. Even an estimate based over a very long period such as 100 years is subject to significant statistical error. Given the volatility of equity market returns it is only possible to state that the “true” figure lies within a range of approximately 2-10% at a 95% confidence level (using the geometric average).

Grant Samuel has consistently adopted a market risk premium of 6% and believes that, particularly in view of the general uncertainty, this continues to be a reasonable estimate. It is: not statistically significantly different to the premium suggested by the historical data; similar to that used by a wide variety of analysts and practitioners; and the same as that adopted by most regulatory authorities in Australia.

Beta Factor

The beta factor is a measure of the expected covariance (i.e. volatility and correlation of returns) between the return on an investment and the return from the market as a whole. The expected beta factor cannot be observed. The conventional practice is to calculate an historical beta from past share price data and use it as a proxy for the future but it must be recognised that the expected beta is not necessarily the same as the historical beta. A company’s relative risk does change over time.

The appropriate beta is the beta of the company being acquired rather than the beta of the acquirer (which may be in a different business with different risks). Betas for the particular subject company may be utilised. However, it is also appropriate (and may be necessary if the investment is not listed) to utilise betas for comparable companies and sector averages (particularly as those may be more reliable).

However, there are very significant measurement issues with betas which mean that only limited reliance can be placed on such statistics. Even measurement of historical betas is subject to considerable variation. There is no “correct” beta.

1 See, for example, R.R. Officer in Ball, R., Brown, P., Finn, F. J. & Officer, R. R., “Share Market and Portfolio Theory: Readings and Australian Evidence” (second edition), University of Queensland Press, 1989 (“Officer Study”) which was based on data for the period 1883 to 1987 and therefore was undertaken prior to the introduction of dividend imputation in Australia.

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Debt/Equity Mix

The tax deductibility of the cost of debt means that the higher the proportion of debt the lower the WACC, although this would be offset, at least in part, by an increase in the beta factor as leverage increases.

The debt/equity mix assumed in calculating the discount rate should be consistent with the level implicit in the measurement of the beta factor. Typically, the debt/equity mix changes over time and there is significant diversity in the levels of leverage across companies in a sector. There is a tendency to calculate leverage at a point in time whereas the leverage should represent the average over the period the beta was measured. This can be difficult to assess with a meaningful degree of accuracy.

The measured beta factors for listed companies are “equity” betas and reflect the financial leverage of the individual companies. It is possible to unleverage beta factors to derive asset betas and releverage betas to reflect a more appropriate or comparable financial structure. In Grant Samuel’s view this technique is subject to considerable estimation error. Deleveraging and releveraging betas exacerbates the estimation errors in the original beta calculation and gives a misleading impression as to the precision of the methodology. Deleveraging and releveraging is also incorrectly calculated based on debt levels at a single point in time.

In addition, the actual debt and equity structures of most companies are typically relatively complex. It is necessary to simplify this for practical purposes in this kind of analysis.

Finally, it should be noted that, for this purpose, the relevant measure of the debt/equity mix is based on market values not book values.

Specific Risk

The WACC is designed to be applied to “expected cash flows” which are effectively a weighted average of the likely scenarios. To the extent that a business is perceived as being particularly risky, this specific risk should be dealt with by adjusting the cash flow scenarios. This avoids the need to make arbitrary adjustments to the discount rate which can dramatically affect estimated values, particularly when the cash flows are of extended duration or much of the business value reflects future growth in cash flows. In addition, risk adjusting the cash flows requires a more disciplined analysis of the risks that the valuer is trying to reflect in the valuation.

It is also common in practice to allow for certain classes of specific risk (particularly sovereign and other country specific risks) by adjusting the discount rate applied to forecast cash flows. In Grant Samuel’s view this approach can be problematic. In particular, it can result in unintentional and unwarranted reductions in estimated value that do not reflect the particular circumstances and characteristics of the asset to be valued. In Grant Samuel’s view it is generally more appropriate to make a judgemental adjustment to calculated net present values (which is conceptually akin to risk adjusting cash flows) having regard to the particular circumstances and characteristics of the relevant asset. Where available, market based evidence as to value (through share trading in companies with similar assets or change of control transactions involving similar assets) can provide additional insight into the impact on value of sovereign risk.

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3 Estimation of variables for OZ Minerals

Risk-Free Rate

A risk free rate of 3.0% has been selected for the US dollar denominated assets of OZ Minerals. The risk free rate is judgmentally estimated by Grant Samuel having regard to the current yield to maturity on the 10 year United States Treasury Notes.

Market Risk Premium

A market risk premium of 6% has been assumed. While recognising the uncertainties attached to this estimate, Grant Samuel believes this figure is within the range of generally accepted figures of long term market risk premiums in Australia and United States. Some research analysts and other valuers may use even lower premiums. Overall, Grant Samuel believes 6% to be a reasonable, if not conservative, estimate.

Beta Factor

Grant Samuel has adopted beta factors for the purposes of valuing OZ Minerals’ assets of 1.1-1.3 (US dollar cash flows).

In adopting these beta factors, Grant Samuel has considered estimates of beta for a range of mining companies, estimated both by reference to each company’s home exchange index and by reference to the Morgan Stanley Capital International Developed World Index (“MSCI”), an international equities market index that is widely used as a proxy for the global stock market as a whole. In Grant Samuel’s view betas estimated by reference to the MSCI are generally more relevant than those estimated relative to home indices, because they represent a better measure of the systematic risk added to the portfolio of a diversified international investor as the result of investing in the resources sector.

Grant Samuel has also considered betas estimated on the basis of share market data over various periods of time. Betas are, conceptually, estimates of the expected systematic risk added to a diversified portfolio by an investment (although they are estimated by reference to historical share market data). Estimates based on historical data do not necessarily reflect investor expectations.

A summary of betas for selected comparable listed companies, based on share market data over the last four years, is set out in the table below:

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Equity Beta Factors for Selected Listed Mining Companies Monthly Observations Weekly Observations Market over 4 years over 2 years Capital- isation AGSM / Bloomberg Bloomberg (USD LBS / Local Local Company millions) 2 3 Barra Index MSCI Index MSCI OZ Minerals 1,319 2.9 2.26 2.02 1.49 1.04 Diversified Mining BHP 134,602 0.97 1.25 1.07 1.53 1.22 Rio Tinto 60,187 1.92 1.50 1.18 1.18 0.86 Anglo American 27,291 1.51 2.00 1.75 1.74 1.71 Xstrata 24,943 1.41 1.35 1.21 2.32 2.37 CVRD 74,853 1.05 1.07 1.18 1.05 1.24 Median 1.41 1.35 1.18 1.53 1.24 Weighted average 1.22 1.33 1.19 1.43 1.29 Zinc Kagara 127 4.82 3.13 3.06 2.14 1.42 Boliden 1,865 1.59 2.09 2.16 1.28 1.18 Lundin 918 2.70 3.79 3.85 1.66 1.73 Median 2.70 3.13 3.06 1.66 1.42 Weighted average 2.01 2.67 2.73 1.44 1.37 Copper Teck Cominco 4,342 2.61 2.63 2.59 2.59 2.31 Equinox Minerals 1,025 1.77 2.94 2.31 1.75 1.68 Aditya Birla 94 5.12 3.91 3.67 2.31 2.23 PanAust 445 3.45 2.74 2.23 2.31 1.54 Antofagasta 8,084 1.40 1.32 1.04 1.46 1.43 Median 2.61 2.74 2.31 2.31 1.68 Weighted average 1.66 1.91 1.67 1.87 1.73 Source: AGSM, Bloomberg, London Business School, Barra

The beta estimates in the above table suggest that pure play zinc and copper companies have betas of well over 1.0 (indicating more systematic riskiness than the overall market), although large diversified mining companies such as BHP, Rio, Anglo American and Xstrata (which have significant exposure to copper and other base metals and bulk commodities) appear to have betas of closer to 1.

However, in Grant Samuel’s view, it is not clear that beta calculations based exclusively on share market data for the last four years will provide reliable estimates of expected systematic riskiness.

Resources companies for some periods over the last four years have outperformed broader measures of equity market performance. This was largely the result of a substantial increase in prices for nearly all commodities, itself the result of the increasing impact of growing Chinese and other developing nation demand for commodities, supply shortages, significantly increased production costs and other factors. However, since mid 2008 this outperformance has been reversed (at least in part), as commodity prices have fallen precipitously in response to the development of global recessionary conditions.

2 The Australian beta factors calculated by the Australian Graduate School of Management (“AGSM”) as at 31 December 2008 over a period of 48 months using the Scholes-Williams technique. United Kingdom beta factors calculated by London Business School (“LBS”) as at January 2009 over a period of 60 months using ordinary least squares regression or the Scholes-Williams technique (including lag) where the stock is thinly traded. Canadian and European beta factors are calculated by Barra, Inc. (“Barra”) as at 27 February 2009 over a period of 60 months using ordinary least squares regression. 3 The MSCI beta factor is calculated using the MSCI Developed World Local Currency Index.

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ASX 300 Resources Accumulation Index vs S&P/ASX 300

12,000 (16 April 2005 - 16 April 2009)

10,000

8,000 ASX 300 Resources

6,000

4,000

S&P/ASX 300 2,000 Re-based to ASX300 -2005 16 April

0 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09

Source: IRESS

In Grant Samuel’s view the estimation of betas based purely on data over the last four years will potentially yield inappropriate results. The share price performance of listed resources companies in the context of what now appears (with the benefit of hindsight) to have been a commodities “bubble” (and the beta estimates derived from this performance) is not necessarily reflective of expectations of future resource company share price performance relative to broader measures of equity markets.

Accordingly, Grant Samuel has had regard to betas estimated over various time periods based on share market data over the last twelve years. These were estimated in the context of the Rio bid for North (July 2000), the Xstrata acquisition of MIM (April 2003) and the Xstrata bid for WMC (January 2005). This beta analysis is set out below:

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Beta Factors for Selected Listed Resources Companies July 2000 Equity Beta Factor Market Bloomberg4 AGSM5 Company Value Millions Home Scholes- MSCI6 OLS US$M Exchange William Base Metals MIM Limited 1,024 1.40 0.99 1.91 1.49 Pasminco Limited 612 1.32 0.98 1.76 1.73 Cominco Limited 1,144 0.91 1.20 - - Phelps Dodge 3,075 1.03 1.13 - - Grupo Mexico 2,297 0.70 0.88 - - Western Metals 49 1.06 0.82 1.15 1.02 Asturiana de Zinc 407 1.08 1.41 - - Antafagasto 1,137 0.81 1.10 - - Union Miniere 960 0.81 1.10 - - Freeport McMoran 1,412 1.23 1.48 - - Teck Corporation 691 0.99 0.85 - - Simple average 1.03 1.09 1.61 1.41 Weighted average 0.99 1.10 1.83 1.56 Median 1.03 1.10 1.76 1.49 Source: AGSM, Bloomberg

4 Betas sourced from Bloomberg are calculated over a five year period to 30 June 2000 using monthly observations. 5 Betas sourced from AGSM are calculated over a four year period to 31 March 2000 using monthly observations. They are calculated relative to the All Ordinaries Index of the Australian Stock Exchange. 6 MSCI (Morgan Stanley Capital International All Countries World Index) calculated using the local currency of each company.

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Beta Factors for Selected Listed Resources Companies April 2003

Equity Beta Factor Market Bloomberg7 AGSM8 Company Value 9 Millions Home Exchange MSCI Scholes- OLS US$M Raw Adj Raw Adj William Base Metals Phelps Dodge Corporation 2,961 1.19 1.13 1.29 1.19 n.a. n.a. Freeport McMoRan Copper and Gold 2,468 1.16 1.11 1.35 1.23 n.a. n.a. Inc Xstrata plc 2,132 0.99 0.99 0.73 0.82 n.a. n.a. Antofagasta plc 2,020 0.73 0.82 0.73 0.82 n.a. n.a. Noranda Inc 2,001 0.59 0.72 0.69 0.80 n.a. n.a. MIM Holdings Limited 1,752 1.40 1.27 0.77 0.85 1.80 1.85 Teck Cominco Limited 1,409 0.61 0.74 0.59 0.73 n.a. n.a. Southern Peru Copper Corporation 1,231 0.66 0.78 0.71 0.81 n.a. n.a. Umicore SA 902 0.60 0.74 0.70 0.80 n.a. n.a. Grupo Mexico SA de CV 758 0.79 0.86 0.72 0.81 n.a. n.a. Boliden AB 181 0.78 0.85 1.42 1.28 n.a. n.a. Simple average 0.86 0.91 0.88 0.92 1.80 1.85 Weighted average 0.93 0.95 0.90 0.93 1.80 1.85 Median 0.78 0.85 0.73 0.82 1.80 1.85 Diversified BHP Billiton Limited 32,918 1.24 1.16 0.72 0.81 1.62 1.89 Rio Tinto Limited 29,423 1.25 1.17 0.69 0.80 1.73 1.76 Anglo American plc 21,314 1.36 1.24 1.13 1.09 n.a. n.a. Simple average 1.28 1.19 0.85 0.90 1.68 1.83 Weighted average 1.27 1.18 0.81 0.88 1.67 1.83 Median 1.25 1.17 0.72 0.81 1.68 1.83 Source: AGSM, Bloomberg

7 Betas sourced from Bloomberg are calculated over a five year period to 31 March 2003 using monthly observations. 8 Betas sourced from AGSM are calculated over a four year period to 31 December 2002 using monthly observations. They are calculated relative to the All Ordinaries Index of the Australian Stock Exchange. 9 MSCI (Morgan Stanley Capital International All Countries World Index) calculated using the local currency of each company.

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Beta Factors for Selected Listed Resources Companies January 2005 Equity Beta Factor Market Bloomberg10 AGSM11 Company Value Millions Home Scholes- MSCI12 OLS US$M Exchange William Diversified Mining BHP 70,676 1.17 0.60 1.38 2.02 Rio Tinto 41,265 0.77 0.57 0.91 1.12 Anglo American 33,042 1.10 1.05 n.a. n.a. CVRD 27,657 0.28 0.11 n.a. n.a. Xstrata 11,039 1.43 1.46 n.a. n.a. Median 1.10 0.60 1.15 1.57 Weighted Average 0.95 0.65 0.74 1.03 Copper Phelps Dodge 10,281 1.64 1.70 1.4113 n.a. Freeport McMoRan 6,750 1.06 1.07 n.a. n.a. Teck Cominco 5,683 1.43 1.22 n.a. 0.6314 Grupo Mexico 4,163 1.30 0.87 n.a. n.a. Antofagasta 4,047 0.64 0.64 n.a. n.a. Southern Peru Copper 3,720 0.79 0.81 0.59¹ n.a. Median 1.18 0.97 1.00 0.63 Weighted Average 1.24 1.18 1.19 0.63 Source: AGSM, Bloomberg

The evidence suggests a wide range of betas. However, for betas measured against the MSCI, the betas tend to be around 1 (and for some periods arguably appear somewhat lower than 1). Beta estimates are by their nature imprecise and judgmental, as highlighted by the shift in measured betas illustrated in the tables above.

In Grant Samuel’s view, it is reasonable to adopt betas in the range 1.1-1.3. This range reflects beta estimates over a longer period of time than betas estimated over the last four years and appears broadly consistent with the views of market participants.

Cost of equity capital

Using the CAPM formula of Re = Rf + Beta (Rm – Rf) and the estimates set out above, the cost of equity capital can be calculated to be in the range 9.6-10.8%.

10 Betas sourced from Bloomberg are calculated over a five year period to 30 November 2004 using monthly observations. 11 Betas sourced from AGSM are calculated over a four year period to 30 September 2004 using monthly observations. They are calculated relative to the All Ordinaries Index of the Australian Stock Exchange. 12 MSCI (Morgan Stanley Capital International All Countries World Index) calculated using the local currency of each company. 13 Sourced from Ibbotson. 14 Sourced from the Financial Post Data Group, calculated based on 60 months of monthly data.

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3.1 WACC

Grant Samuel has adopted a nominal WACC in the range 9.0-11.0%.

Cost of Debt

A cost of debt of 6.5% has been adopted. This figure represents the expected future cost of borrowing over the duration of the cash flow model. Grant Samuel believes that this would be a reasonable estimate of an average interest rate, including margin that would match the duration of the cash flows assuming that the operations were funded with a mixture of short term and long term debt. For the purpose of this valuation we have selected a margin of 3.5% over the risk free rate. The larger range reflects current debt market volatility and the subsequent wide spread of debt margins priced in issues this year to date.

Debt/Equity Mix

The selection of the appropriate debt/equity ratio involves perhaps the most subjectivity of all the elements of discount rate selection analysis. In determining an appropriate debt/equity mix, regard was had to gearing levels of selected comparable listed Australian and international mining companies and the nature and quality of the cash flow streams from OZ Minerals’ businesses.

Gearing levels for selected listed companies in the Australian and international mining sector over the past four years are set out below:

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Gearing Levels for Selected Listed Mining Companies Net Debt/(Net Debt + Market Capitalisation) Company Year Ended Current15 Average 2005 2006 2007 2008 OZ Minerals 9.2 11.5 (5.9) 3.1 n.a. 4.5% Diversified Mining BHP 8.1 9.4 6.0 5.6 3.5 6.5 Rio Tinto 8.7 1.8 3.4 22.7 51.5 17.6 Anglo American 17.1 8.4 4.0 5.8 26.1 12.3 Xstrata 11.1 14.5 21.3 14.4 53.0 22.9 CVRD n.a. 8.2 20.6 10.7 11.8 12.9 Median 9.9 8.4 6.0 10.7 26.1 12.9 Weighted average 7.3 8.0 9.9 10.7 20.2 11.8 Zinc Kagara 14.8 4.7 1.7 0.0 6.7 5.6 Boliden 43.2 20.9 -1.3 18.5 54.5 27.1 Lundin (58.3) (14.1) (11.3) (0.9) 23.4 (12.2) Median 14.8 4.7 (1.3) 0.0 23.4 5.6 Weighted average 9.9 9.2 (4.3) 11.6 42.6 13.8 Copper Teck Cominco 1.5 (8.7) (24.7) 0.7 79.8 9.7 Equinox 11.0 (80.5) (8.7) 6.1 45.7 (5.3) PanAust (45.6) 1.3 (24.4) 10.6 27.0 (6.2) Aditya Birla16 n.a. n.a. n.a. 14.7 (1.1) 6.8 Antofagasta (6.1) (13.7) (15.8) (15.1) (66.9) (23.5) Median (2.3) (11.2) (20.1) 6.1 27.0 (5.3) Weighted average (3.7) (16.5) (18.2) (7.6) (9.7) (11.1) Source: Bloomberg

Having regard to the above, and given the quality of the cashflow streams of the assets of OZ Minerals, Grant Samuel has adopted a debt/equity mix of 15% debt 85% equity for the purpose of the analysis.

WACC

On the basis of the parameters outlined and assuming a corporate tax rate of 30%, a nominal WACC in the range 8.8-9.8% can be calculated.

This is an after tax discount rate to be applied to nominal ungeared after tax cash flows. However, despite the apparent precision of the calculated WACC, must be recognised that the calculated is based on statistics of limited reliability and involving a number of judgemental assumptions.

Having regard to these matters, current volatility and market uncertainty, and the calculations and data set out above, Grant Samuel has adopted discount rates of 9.0-11.0% (US dollar cash flows) for the purpose of its DCF analysis. While the range is reasonably wide, and discount rates of 11% are higher than those estimated using the CAPM approach, Grant Samuel believes that the range of rates is reasonable having regard to current equity market conditions.

15 Current gearing levels are based on the most recent balance sheet information and on sharemarket prices as at 5 March 2008. 16 Cash and debt balance as at ended 30 September2008.

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4 Dividend Imputation

The conventional WACC formula set out above was formulated under a “classical” tax system. The CAPM model is constructed to derive returns to investors after corporate taxes but before personal taxes. Under a classical tax system, interest expense is deductible to a company but dividends are not. Investors are also taxed on dividends received. Accordingly, there is a benefit to equity investors from increased gearing.

Under Australia’s dividend imputation system, domestic equity investors now receive a taxation credit (franking credit) for any tax paid by a company. The franking credit attaches to any dividends paid out by a company and the franking credit offsets personal tax. To the extent the investor can utilise the franking credit to offset personal tax, then the corporate tax is not a real impost. It is best considered as a withholding tax for personal taxes. It can therefore be argued that the benefit of dividend imputation should be added into any analysis of value.

There is no generally accepted method of allowing for dividend imputation. In fact, there is considerable debate within the academic community as to the appropriate adjustment or even whether any adjustment is required at all. Some suggest that it is now appropriate to discount pre tax cash flows, with an increase in the discount rate to “gross up” the market risk premium for the benefit of franking credits that are on average received by shareholders. On this basis, the discount rate might increase by approximately 2% but it would be applied to pre tax cash flows. However, not all of the necessary conditions for this approach exist in practice:

not all shareholders can use franking credits. In particular, foreign investors gain no benefit from franking credits. If foreign investors are the marginal price setters in the Australian market there should be no adjustment for dividend imputation;

not all franking credits are distributed to shareholders; and

capital gains tax operates on a different basis to income tax. Investors with high marginal personal tax rates will prefer cash to be retained and returns to be generated by way of a capital gain.

Other have proposed a different approach involving an adjustment to the tax rate in the discount rate by a factor reflecting the effective use or value of franking credits. If the credits can be used, the tax rate is reduced towards zero. The proponents of this approach have in the past suggested a factor of up to 50% as representing the appropriate adjustment (gamma). Alternatively, the tax charge in the forecast cash flows can be decreased to incorporate the expected value of franking credits distributed.

There is undoubtedly merit in the proposition that dividend imputation affects value. Over time dividend imputation will become factored into the determination of discount rates by corporations and investors. In Grant Samuel’s view, however, the evidence gathered to date as to the value the market attributes to franking credits is insufficient to rely on for valuation purposes. More importantly, Grant Samuel does not believe that such adjustments are widely used by acquirers of assets at present. While acquirers are undoubtedly attracted by franking credits there is no clear evidence that they will actually pay extra for them or build the value of franking credits into values based on long term cash flows. The studies that measure the value attributed to franking credits are based on the immediate value of franking credits distributed and do not address the risk and other issues associated with the ability to utilise them over the longer term. Moreover, to the extent that costs of capital for resources companies are effectively determined in international markets (where franking credits have limited value), there is limited basis for including the value of franking credits in valuation analysis. Accordingly it is Grant Samuel’s opinion that it is not appropriate to make any adjustments for the value of franking credits in the valuation methodology. This is a conservative approach.

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Appendix 2

Overview of the Zinc and Copper Markets

1 Zinc

Overview

Zinc, a hard silver-grey metal, is the third most commonly used non-ferrous metal after aluminium and copper. Zinc is chemically reactive, rapidly oxidizing when exposed to air. It alloys readily with metals such as copper and aluminium, and has a relatively low melting point. These characteristics are the basis of its major applications in corrosion protection, brass and die-casting.

Zinc production is essentially a two stage process. Zinc miners mine zinc ore and treat the ore at mine site to yield zinc concentrates. Miners then sell the concentrates to smelters, which use hydrometallurgical or (less commonly) pyrometallurgical processes to produce refined zinc metal. A small amount of zinc slab (around 1% of production) is produced through recycling of scrap.

Applications

Corrosion Protection

Zinc’s most important application is in corrosion protection, which relies on zinc’s reactive nature. Galvanising is the main method of protection against the corrosion of steel. Galvanising involves the deposition of a thin coat of zinc over steel. Galvanising provide a physical barrier to protect steel, with the galvanising process resulting in a zinc-iron compound that creates an unbreakable bond between the steel and the zinc. The surface of the zinc coating on galvanised steel rapidly oxidises, creating a dense and relatively impermeable layer of zinc oxide that protects the zinc surface and steel below from further corrosion. Moreover, the zinc and iron form an electrolytic cell, such that even if the physical zinc barrier is damaged, corrosion preferentially attacks the more chemically reactive zinc rather than the less reactive iron.

Galvanising accounted for around 48% of global zinc usage in 2006. Galvanised steel is principally used in the construction and automotive industries. In construction, galvanised steel is used for steel girders and structures and smaller items such as nuts, bolts and washers. In the automotive industry, galvanized steel sheet is used extensively in the manufacture of rust-resistant car bodies. In addition, galvanized steel sheet is used in the production of consumer appliances (eg washing machines) and industrial machinery for which corrosion resistance is important.

Brass

Brass is a copper-zinc alloy (commonly 65% copper and 35% zinc). Brasses have good corrosion- resistance properties, are machineable and malleable. Brasses have traditionally been used in marine applications, in engineering and for household fittings.

Diecasting

Zinc’s relatively low melting point (420 degrees C) makes it well suited for diecasting, in which molten metal is injected under high pressure into moulds or dies. Speciality zinc alloys, with small quantities of added aluminium, copper or magnesium, are used in diecasting applications. While diecasting has lost market share in some applications to plastics, diecasting is still used to manufacture precision components, for example in the automotive industry. Approximately 10% of zinc metal consumption relates to diecasting applications.

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Rolled Zinc

Zinc alloys are more malleable than pure zinc and can be rolled into sheet or extruded into bars. Zinc sheet is used in the building industry, particularly in continental Europe, for roofing, gutters and other applications for which corrosion resistance is important. Rolled and extruded products account for around 10% of zinc consumption.

Chemicals

Zinc oxides and chemicals represent around 10% of zinc consumption. Zinc oxide is used in the vulcanization of rubber, mainly for the manufacture of car tyres. Zinc oxide is also used in applications such as paints, ceramics, animal feed and fertilizers, and in various consumer applications.

The Zinc Market

The overall zinc market consists of two closely related but distinct sub-markets: the market for zinc concentrates, in which zinc miners are suppliers and smelters are consumers, and the market for zinc metal, in which smelters are suppliers and end users are consumers. Short term imbalances between the supply of and demand for concentrates (ie smelting capacity vs concentrate supply), as well as fluctuations in zinc prices, affect the treatment charges levied by smelters and the sharing of value between miners and smelters. The basis on which treatment charges are levied by smelters is discussed in more detail below. In the longer term, it appears reasonable to expect that smelter capacity will adjust to, on average, approximately match concentrate supply and that smelter charges will broadly reflect the rates of return required to justify the building of new smelters. Accordingly, in the longer term the major dynamics affecting the overall zinc market will be the factors affecting mine supply and end use demand for zinc, rather than factors relating to smelter arrangements.

Demand for zinc is closely related to world GDP and industrial production growth. In addition, demand growth tends to slow as economies become wealthier and a greater proportion of GDP growth is contributed by services and high value-add activities. Global zinc demand grew very slowly towards the end of the 20th century, with zinc demand growing by no more than 5% in aggregate over the period 1980- 1992, and more rapidly, but still at relatively modest rates of 3.8% per annum, for the period 1993 to 2002. The result of this slow growth in demand for zinc was that zinc supply generally matched or exceeded demand and, with the exception of price spikes in 1980/1990 and 1997, zinc prices were generally subdued.

However, since 2004 accelerating demand growth from developing nations (and, in particular, dramatic growth in Chinese demand) has significantly changed the overall demand/supply balance. Rapid Chinese industrialization resulted in strong Chinese demand growth. Given the relatively slow rates of growth of demand for zinc in developed economies and the absolute size of the Chinese economy, Chinese growth in demand is expected to be the major determinant of aggregate demand growth for the rest of this decade.

Mine supply of zinc (to be precise, of zinc concentrates) is a function both of factors relating to the discovery and development of new zinc deposits and of zinc prices, with higher zinc prices stimulating the development of zinc ore bodies that might otherwise not be developed.

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The following table shows reserves and annual production data for some of the world’s largest zinc mines:

Zinc Mines Reserves 12 months production Date Zinc Lead Silver Gold Zinc Lead Mine Location measured (Mt) (Mt) (Moz) (Moz) (kt) (kt) Red Dog1 Alaska / USA 31 Dec 08 11.1 3.0 - - 515 123 Century2 Australia 30 Jun 08 4.3 0.4 - - 514 56 Rampura India 31 Mar 08 8.3 1.2 - - 490 48 Agucha Antamina3 Peru 31 Dec 08 5.0 - 280 - 348 - Lisheen Ireland 31 Dec 08 1.0 0.2 - - 167 16 Skorpion Namibia 31 Dec 08 1.0 - - - 145 - Golden Australia 31 Dec 08 0.4 0.1 10.2 0.2 140 13 Grove4 Source: company reports

A steady increase in Chinese mine production during the 1990s and early 2000s resulted in China becoming the single largest producer of zinc concentrate. Much of Chinese production is believed to be from small scale artisanal mines, for which there is little accurate cost or production data. However, it appears that much of this artisanal production is relatively high cost and sensitive to changes in zinc prices.

Low zinc prices for much of the 1990s and early 2000s and consequent modest investment in new zinc mine capacity meant that the industry had limited ability to respond to the China-driven growth in demand over the period 2004-2006. LME stockpiles declined significantly and the zinc price rose to record levels, reaching a high of US$4,619 per tonne (US$2.10/lb) in November 2006.

The dramatic increase in the zinc price during 2006 resulted in a substantial expansion in zinc production, particularly from the Chinese small mine artisanal sector. Easing of supply pressures resulted in a sharp fall in zinc prices which ended 2007 at approximately US$2,400/tonne (US$1.10/lb). Zinc prices continued to decline in 2008 as growth in the demand for zinc slowed resulting in increasing zinc stocks. From lows of approximately US$1,050/tonne (US$0.48/lb) witnessed in December 2008, zinc prices have recovered somewhat to around US$1,400/tonne (US$0.64/lb) in late April 2009, although they remain highly volatile.

1 Red Dog Reserves are as of 31 December 2007 and Production is for the period ending 31 December 2008 2 Century Reserves are as of 30 June 2008 and the Production is for the period ending 31 December 2008 3 Antamina Reserves as of 1 July 2008 and Production is for the period ending 31 December 2008 as reported by Teck Cominco 4 Golden Grove Reserves are as of 30 June 2008 and the Production is for the period ending 31 December 2008

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The following table summarises zinc production and consumption, zinc inventory levels and price movements for the period 2004-2008:

Worldwide Zinc Industry (‘000 tonnes) 2004 2005 2006 2007 2008 Mine production Europe 1,006 1,057 1,037 1,115 1,118 Americas 3,577 3,528 3,497 3,731 4,169 Africa 352 414 343 375 375 Oceana 1,298 1,329 1,338 1518 1512 Asia 3,499 3,821 4,246 4,490 4,593 Total production 9,732 10,148 10,462 11,228 11,767

Total refined 10,365 10,229 10,691 11,355 11,688

Total consumption 10,651 10,611 11,044 11,310 11,490

Worldwide stockpile 629 394 90 89 254

LME Cash Average US$/tonne $1,047 $1,381 $3,274 $3,247 $1,870 USc/lb 48 63 149 147 85 Source: OZ Minerals

The following chart shows movements in zinc inventories between April 1999 and April 2009:

Global Zinc Inventory April 1999 - April 2009 900

800

700

600

500

400 000's tonnes 000's 300

200

100

0 Apr 99 Apr 00 Apr 01 Apr 02 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09

Source: Bloomberg

Zinc inventories reached a low in late 2006/early 2007 (corresponding to strong zinc prices). While inventories have since recovered, they remain low by historical levels.

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Historical zinc prices in US$ and A$ terms are compared to the long run zinc price assumptions adopted by Grant Samuel for valuation purposes below:

US$ Zinc Prices April 1999 - April 2009 2.25

2.00

1.75

1.50

1.25

US$/lb 1.00

0.75

0.50

0.25

0.00 Apr 99 Apr 00 Apr 01 Apr 02 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09 Spot Price US$/lb GS Low (US$/lb) GS High (US$/lb)

Source: Bloomberg

A$ Zinc Prices April 1999 - April 2009 2.75

2.50

2.25

2.00

1.75

1.50

A$/lb 1.25

1.00

0.75

0.50

0.25

0.00 Apr 99 Apr 00 Apr 01 Apr 02 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09

Spot Price A$/lb GS Low (A$/lb) GS High (USA/lb)

Source: Bloomberg

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The following chart shows pricing for zinc forwards contracts for various time periods. The forwards prices are broadly consistent with the long run zinc price assumptions adopted by Grant Samuel for valuation purposes:

Zinc Forward Prices (As at 1 May 2009) 0.78

0.76

0.74

0.72

US$/lb 0.70

0.68

0.66

0.64 May 09 Nov 09 May 10 Nov 10 May 11 Nov 11 May 12 Nov 12 May 13 Nov 13 May 14

Source: Bloomberg

While there is little consensus on the part of commodity and equity market analysts as to future zinc prices, Grant Samuel’s long term price assumption of US$0.70-0.80/lb for zinc is broadly consistent with the range of forecast price assumptions used by market analysts. The long term prices assumed are modestly higher than spot prices prevailing in late April 2009 of around US$0.65/lb. Although zinc stocks have increased in recent times, they remain low by historical standards. A number of major zinc mines face short to medium term reserve exhaustion and there are few identified major resources being developed in the near term. Cost pressures suggest that much supply (including supply from artisanal mining in China) will not be economic at significantly reduced zinc prices. In the context of even modest demand growth, all these factors suggest that there are good grounds to expect zinc prices to strengthen over the medium to longer term.

2 Copper

Overview

Copper is valued for its electrical and thermal conductive properties, its durability and its strength. Copper is the second most commonly used non-ferrous metal after aluminium. It readily alloys with other metals and is also resistant to corrosion. These properties allow copper to be used in a wide range of applications in building and construction, electrical applications, electronics and communication, transportation, industrial machinery and equipment, consumer and general products.

Copper is mined in open pits and underground. The orebodies usually contain a percentage of copper that is generally less than 5% copper. The miners either produce a copper concentrate (which is sold to smelters or traders) or copper metal (which is sold to end users or traders). Over the past decade, the commissioning of large copper mines that produce copper metal using solvent extraction/electrowinning (SX/EW) metallurgical processes has resulted in additional, low cost copper production.

Recycled copper is a significant secondary source of copper. Copper and its alloys have been recycled for hundreds of years and account for a substantial proportion of the copper produced and sold each year.

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Applications

Copper is one of the first metals to be used by humans though its role has evolved over time. Since the discovery of electricity and magnetism in the 18th and 19th century, copper has found widespread use in electrical goods and wires.

Building and Construction

The building and construction industry is the largest consumer of copper. For several centuries non- corrosive copper pipes have been used for plumbing in buildings. Copper pipes are convenient to use as they can be easily joined metallurgically by brazing or soldering. It is also safe to use copper in buildings, because, although it is an excellent thermal and electrical conductor, copper does not burn or support combustion. Copper and its alloys are extensively used in building construction for wiring, water piping, gas tubing, roofing, architectural building design, heating and air conditioning systems, interior and exterior artwork, doorknobs, lightning rods, faucets, and even fire sprinkler systems. Copper used in building products can be recovered, recycled and reused.

Electrical, Electronics and Communication

Copper is malleable and ductile and given its efficiency in transferring electricity at room temperature, copper is widely used in electric generators, household electrical wiring, and the wires in appliances, lights, motors, radios and TV sets. Copper wires are used extensively in telecommunication networks for high speed transfer of voice and data. In the semiconductor industry, copper is used in microprocessor chips to transfer heat from the chip circuitry.

Industrial Machinery and Equipment

Copper readily forms alloys with other metals and some of these alloys are commonly used in industrial machinery and equipment. Copper and its alloys are preferred for making products such as gears, bearings, and turbine blades because of their durability, machinability, and ease of casting with high precision and tolerance.

Transportation

Copper is also used in the automobile, aerospace and railway industries. For many years in the automobile industry, the automotive radiator was the most important end use of copper. However, the usage of copper in automotive electrical and electronic applications has grown rapidly while its use in the heat exchanger has declined. In the aerospace industry, the mechanical properties of copper alloys including their good strength-to-weight ratios, bearing strength, and fatigue and corrosion resistance, have favored the use of these alloys in undercarriage components, aero engine bearings, bushings, display unit components, and helicopter motor spindles. A large amount of copper is used in railway systems for electrification and in the manufacture of switchgears and motor windings.

General Products

Copper and its alloys are commonly used in home furnishing and kitchen ware. Traditionally, copper has also been used in the manufacture of coins and medallions. It is estimated that production of copper coins across the world consumes thousands of tons of copper each year.

The Copper Market

Copper miners produce either copper concentrates (generally from floatation treatment of primary copper deposits) or copper metal (including by way of SX/EW treatment of copper oxide ore bodies). Copper concentrates are sold to smelters or concentrate traders.

Mined copper accounts for approximately 70% of the total copper produced each year. Recycling from scrap is a secondary source of copper accounting for the remaining 30%.

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Worldwide Copper Industry (‘000 tonnes) 2005 2006 2007 2008 Refined Copper Production Europe 3,386 3,425 3,427 3,440 Americas 5,750 5,676 5,826 5,802 Africa 553 633 738 645 Oceania 441 429 483 511 Asia 6,409 7,038 7,721 7,873 Total production 16,540 17,201 18,194 18,271 Total consumption 16,849 17,373 18,039 17,630

Worldwide stockpile 452 592 563 755

LME Cash Average USc/lb 167 305 323 315 Source: OZ Minerals

Global copper production is still dominated by Chilean mines, accounting for approximately 35% of total production in 2007. Other major producing areas are Asia and Europe.

Worldwide Copper Production

20,000

18,000

16,000

14,000

12,000

10,000

000 tonnes 8,000

6,000

4,000

2,000

- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Europe North America South and Central America China Asia (excl. China) Rest of World

Source: OZ Minerals

A large proportion of production is from mines owned by large integrated international producers and industry consolidation continues to increase concentration. Production from many large existing mines is expected to decline due to falling ore grades and depletion of reserves. In addition a number of major new mines that are planned in the next 5 years are in higher risk countries, including projects in Zambia, the Democratic Republic of the Congo and Mongolia.

The growth in direct metal production (largely through SX/EW processes) means that the copper concentrate market is a less significant component of the overall copper market than previously. While copper concentrate production from mines has declined over the last few years, worldwide smelter capacity has increased.

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Worldwide Copper Concentrate Supply/Demand (‘000 tonnes) 2004 2005 2006 2007 2008 Mine Production of Conc. 11,849 12,177 12,141 12,315 12,565 Smelter Production 11,840 12,406 12,856 13,209 12,803 Adj. for secondary production 360 423 494 408 501 & losses World Balance 369 193 (221) (380) (238) Source: OZ Minerals

This resulting imbalance between the supply of and demand for concentrates has shifted smelting terms in favour of copper concentrate producers. The concentrate producers have been able to negotiate favourable treatment terms with the smelters which include low treatment charges and no price participation. With additional smelter capacity committed for the next couple of years, smelting terms are expected to remain favourable for miners in the short term although in the longer term smelter capacity will adjust to match concentrate supply and treatment charges will ultimately reflect smelter operating costs and the cost of capital.

The demand for copper is heavily influenced by the level of economic activity and infrastructure development in the world. Between 1970 and 2008, world consumption of refined copper more than doubled from approximately 7.2 million tonnes to 17.6 million tonnes. During the first half of this period, Europe and North America accounted for the majority of copper consumption. Although European and North American copper consumption increased modestly during the latter half of this period, the European and North American relative share of world copper consumption has declined significantly. Except for brief spells in 1990, 1992 and 2001, world consumption of copper has increased consistently over the last two decades. However, world copper consumption declined in 2008 and market commentators are forecasting a further decline in 2009.

Worldwide Copper Consumption

20,000

18,000

16,000

14,000

12,000

10,000

000 tonnes 8,000

6,000

4,000

2,000

- 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Europe (including former Soviet Union) Americas China Asia (excl China) Rest of World

Source: OZ Minerals

Increased demand for copper in the last decade is largely a reflection of rising consumer demand and infrastructure development in developing nations. Most of the increase in global copper consumption can be attributed to the developing Asian nations and to China in particular. Consumption in China has grown at double digit rates in six of the last nine years. For most of the last decade, demand has also remained strong in the industrialised nations, especially the United States. This has been the result of strong growth

Page 9

in the use of wire and cable for telecommunications and information technology, despite substitution in some applications by improved alloys and the introduction of generally smaller, more efficient products.

Year on year copper consumption is estimated to have declined by about 11.5% in North America and about 5.5% in Europe in 2008. The modest consumption growth of 4.5% in China in 2008 was unable to offset these large declines in consumption in the developed nations and resulted in overall world refined copper consumption declining by 2.3%.

During the 1990’s, the price of copper gradually declined, falling to its lowest level in March 1999, as worldwide copper production consistently exceeded consumption. As seen in the chart below, in the period between 1993 and 1999, global production exceeded consumption in every year even though consumption increased. The growth in production of refined copper reached a plateau during 2001 to 2003. Between 2003 and 2006, driven by rapid growth in demand from China, copper consumption consistently exceeded production. While production matched consumption in 2007, production exceeded consumption in 2008.

World Refined Copper

20,000 3.50

18,000 3.00 16,000

14,000 2.50

12,000 2.00 10,000

1.50 US$/lb 8,000 000 's tonnes 000 's 6,000 1.00 4,000 0.50 2,000

0 0.00 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Consumption Production Average Copper Price

Source: OZ Minerals

As a result copper stocks have risen significantly but are still modest in comparison with the levels witnessed earlier in this decade.

Page 10

The following chart shows movements in copper inventories between May 1999 and April 2009:

Global Copper Inventory April 1999 - April 2009 1,200

1,000

800

600 000's tonnes

400

200

0 Apr 99 Apr 00 Apr 01 Apr 02 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09

Source: Bloomberg

Following a long period of copper prices below US$1.00/lb, the copper market strengthened steadily through 2004 and 2006, reaching around US$2.00/lb by the end of 2005. In 2006, the copper price increased dramatically. Since then, the copper price has been very volatile, with copper trading in the broad range of $2.00-3.90 during 2006 and 2007. After weakening in late 2007, the copper market strengthened in early 2008, with the copper price reaching US$4.00 in early April 2008. Since then copper prices have declined dramatically, reaching lows of around US$2,800/tonne (US$1.27/lb) in December 2008 in volatile trading. The copper price has partially recovered in early 2009, to around US$4,400/tonne (US$2.00/lb) by late April 2009, but the price volatility remains.

While there is little consensus among market commentators as to future copper prices, Grant Samuel’s long term copper forecast range of US$1.80-US$2.20/lb is broadly consistent with the long term forecasts of market commentators and analysts.

Page 11

Historical copper prices in US$ and A$ terms are compared to the long run copper price assumptions adopted by Grant Samuel for valuation purposes in the charts below:

US$ Copper Prices April 1999 - April 2009 4.00

3.50

3.00

2.50

2.00 US$/lb 1.50

1.00

0.50

0.00 Apr 99 Apr 00 Apr 01 Apr 02 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09

Spot Price US$/lb GS Low (US$/lb) GS High (US$/lb)

Source: Bloomberg

A$ Copper Prices April 1999 - April 2009 5.50

5.00

4.50

4.00

3.50

3.00

A$/lb 2.50

2.00

1.50

1.00

0.50

0.00 Apr 99 Apr 00 Apr 01 Apr 02 Apr 03 Apr 04 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09

Spot Price A$/lb GS Low (A$/lb) GS High (A$/lb)

Source: Bloomberg

Page 12

The following chart shows pricing for copper forwards contracts for various time periods. The forwards prices are broadly consistent with the long run copper price assumptions adopted by Grant Samuel for valuation purposes:

Copper Forward Prices (As at 1 May 2009)

2.14

2.12

2.10

2.08 US$/lb 2.06

2.04

2.02

2.00 May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19

Source: Bloomberg

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