OZ MINERALS ANNUAL REPORT 2009 OZ MINERALS LIMITED ABN 40 005 482 824 OZ MINERALS ANNUAL REPORT 2009 ANNUAL REPORT CONTENTS 1 Results for announcement to the market 2 Chairman’s letter 4 Managing Director & CEO’s letter 6 Corporate Governance 13 Directors’ report 27 Remuneration Overview 29 Remuneration Report 47 Auditor’s Independence Declaration 48 Consolidated income statements 49 Consolidated statements of comprehensive income 50 Consolidated statements of changes in equity 52 Consolidated balance sheets 53 Consolidated statements of cash flows 54 Notes to the financial statements 119 Directors’ declaration 120 Independent audit report 122 Shareholder information 124 Contact details RESULTS FOR ANNOUNCEMENT TO THE MARKET The key information for the consolidated entity is set out below: 12 months 12 months Movement Movement ended ended $m % 31 December 31 December Consolidated entity results 2009 2008 Revenue from continuing operations – A$m 608.5 – 608.5 n.a. Revenue from discontinued operations – A$m 764.9 1,218.4 (453.5) (37%) Consolidated revenue – A$m 1,373.4 1,218.4 155.0 13% (Loss) after tax attributable to equity holders of OZ Minerals Limited – A$m (517.3) (2,501.7) 1,984.4 (79%) Net tangible assets per share – cents 82.2 103.3 Dividends paid on: Cents per share Record date 29 September 2008 – 156.1 5.0 3 September 2008 9 April 2008 – 61.8 4.0 19 March 2008 Since there are no retained earnings or profit for 2009, the Directors do not propose to pay any dividends for the year ended 31 December 2009. The commentary on results and outlook is set out in the Directors’ Report. Highlights • The plant at Prominent Hill was commissioned in February 2009 and was ramped up during the year achieving full production levels in Q4 2009 • Overall there was an excellent performance from the Prominent Hill operation during the year which resulted in $380.9 million EBITDA and $202.6 million NPAT for the period post commissioning (from 1 May 2009) • Significant closing cash in the balance sheet with $1,076.2 million at 31 December 2009 • Profits for the group were impacted by losses recorded on the sale of assets to China Minmetals Non-Ferrous Metals Co. Ltd. 1 CHAIRMAN’S LETTER Barry Cusack, OZ Minerals Chairman since 2002, has announced his intention to retire on 13 April 2010, at which time it is proposed that Neil Hamilton become the new Chairman of OZ Minerals. Dear Shareholder 2009 was a rebirth year for OZ Minerals, with the sale of assets to China Minmetals and China Sci-Tech. Following the asset sales and the repayment of all the Company’s bank loans, OZ Minerals retained the new Prominent Hill operation in South Australia, exploration tenements around Prominent Hill and in Cambodia, as well as certain other assets and around $1 billion in cash. The Company achieved excellent results from Prominent Hill in its first year of operation in 2009, both in terms of the safe and rapid ramp-up of the mine and financial performance. When considering the mine’s performance as a stand-alone entity, the net profit after tax of $202.6 million generated for the year was an outstanding maiden result. The overall loss of $(512.4) million for the Group was largely as a result of the $(606.8) million loss recorded on the sale of assets in 2009. As foreshadowed at the last AGM, the Board has been refreshed over the year. Three new directors have been appointed who will each stand for re-election at the 2010 AGM. We have recruited a new Chairman in Neil Hamilton who joined the Board as a Director in February 2010, and it is proposed that Neil will assume the role of Chairman on my retirement on 13 April 2010. Neil is an experienced company director and has broad industry experience relevant to OZ Minerals. Also newly elected to the Board was Paul Dowd (in July 2009), who is a mining professional with more than 40 years experience, including as Managing Director of Newmont Australia Limited, and Charles Lenegan (in February 2010), a former Managing Director of Rio Tinto Australia. These new directors together with Terry Burgess, Brian Jamieson, Michael Eager and Dean Pritchard will form the Board upon the retirement of Peter Mansell and myself. In accordance with the terms of the Constitution, Brian Jamieson will stand for re- election at the 2010 AGM. This is a Board that has an extremely well suited set of skills and experience for this Company. It has been my pleasure and privilege to have served as Chairman of OZ Minerals and its predecessor Oxiana over the last eight years, during which the market capitalisation has grown from around $200 million to $3.6 billion. The potential for further growth of this Company is outstanding and I wish Neil, Terry, the Board and employees of OZ Minerals and OZ Minerals’ shareholders a successful and prosperous future. Barry Cusack Chairman 31 March 2010 Dear Shareholder I am delighted to have joined the OZ Minerals Board at such a promising time for the Company. As Barry said in his letter, it is proposed that I be elected Chairman on his retirement on 13 April and as such I have taken this opportunity to write to you as Chairman-elect. My background is in law and in the investment and funds management industry, and I have been a professional company director for the last 10 years. I also have experience in banking, insurance, retail and wholesale and in resources. I have had a long association with the resources sector through service companies, providers and as a director on the boards of other resource companies. OZ Minerals is a company which has a long history of exploration, development and operation of mines. In its newly restructured form, the Company boasts an outstanding asset in Prominent Hill and a robust cash balance, but it importantly retains a team of people who are highly skilled and experienced. It also has a new CEO in Terry Burgess, who has been in the mining industry for over 35 years. Terry has been CEO for eight months and leads a team well equipped to meet the challenges and opportunities facing OZ Minerals. Terry and his team have set a clear and well considered strategy for the Company and it is one which I, and the other Board members, fully endorse. With Prominent Hill now up and running and with plans to add efficiency improvements in 2010, the outlook for the year is positive. The strong focus on exploration at Prominent Hill and the proposed joint venture with IMX Resources gives significant potential for mineral discovery in the region. Our investment here, both financial and through our people, is reflective of our view of the prospectivity in the Prominent Hill district tenements – all of which are within ‘truckable’ distance of the processing plant. 2 CHAIRMAN’S LETTER South Australia is an excellent jurisdiction for exploration and mining. The foresight of the South Australia Government with regard to exploration over a number of decades has been continued in recent years with projects like PACE, in which the government funds exploration drilling. The recent approval of the Mining and Rehabilitation Plan for the underground development at Prominent Hill is indicative of the support that we have had from the Department of Primary Industries and Resources SA and the prompt and professional approach it has shown in all of our dealings. Copper is the focus for the Company. We consider its outlook to be superior to any of the other base or precious metals. Although stockpiles of copper in warehouses increased throughout 2009, this supply remained at less than two weeks of current global consumption. Supply disruptions from, for example, technical issues or labour disputes continue to be experienced and new supply is slow to materialise. Demand from China and also India continues to grow and in the medium term the outlook for the market looks very strong. One of the pillars of the Company’s strategy is disciplined capital management. This Board supports the principle of returning funds to shareholders that are in excess of the requirements and investment opportunities of the business. With no profits or retained earnings at 31 December, there was no capacity to pay dividends in respect of 2009; however, the Board will review the position in mid 2010 and consider future dividend policy. Any dividend that may be declared in the future will be unfranked and will remain so until the Company uses its accumulated tax losses. I appreciate the confidence shown by my Board colleagues in selecting me as Chairman and I look forward to the opportunity of working with the Board and management of the Company to maximise the significant opportunities that sit before us as we embark on what is a new chapter in the life of the Company. Neil Hamilton Chairman-elect 31 March 2010 3 MANAGING DIRECTOR & CEO’S LETTER Dear Shareholder I feel very fortunate to be the Managing Director and Chief Executive Officer of a company that is so well positioned. The Company has a first-class asset in Prominent Hill, it has excellent exploration potential, a very healthy cash balance and an experienced and skilled team, who have a desire to perform, improve and grow. As a shareholder, it is my intention to realise value for all OZ Minerals’ shareholders. In 2009, OZ Minerals sold its operating, development and exploration assets, apart from the Prominent Hill operation in South Australia, exploration ground around Prominent Hill, an advanced exploration project in Cambodia and some equity interests in exploration companies.