OZ MINERALS 2014 REPORT ANNUAL A MODERN ANNUAL REPORT 2014 REPORT ANNUAL MINING COMPANY OZ MINERALS LIMITED ABN 40 005 482 824 2014 Snapshot 2 A Message from the Chairman 3 A Message from the CEO 4 Our Company Strategy 5 Prominent Hill 6 Carrapateena 8 Sustainability 10 Reserves and Resources 2014 11 Results for Announcement to the Market 18 Corporate Governance Statement 19 Directors’ Report 26 Operating and Financial Review 34 Remuneration Overview and Report 47 Consolidated Financial Statements 70 Shareholder Information 123 Contact Details/Annual General Meeting IBC Cover Story IBC OZ Minerals is an Australian based modern mining company with a focus on copper. OZ Minerals owns the Prominent Hill copper-gold mine and Carrapateena copper-gold project, both situated in South Australia. Prominent Hill consists of the Malu Open Pit, Ankata Underground mine and the recently commissioned Malu Underground mine. In 2014, OZ Minerals achieved or exceeded all of our production targets, returning to a copper production ‘run rate’ of 100,000 tonnes per annum and exceeding market guidance for copper production, gold production and costs. 2014 Snapshot 2 A Message from the Chairman 3 A Message from the CEO 4 Our Company Strategy 5 Prominent Hill 6 Carrapateena 8 Sustainability 10 Reserves and Resources 2014 11 Results for Announcement to the Market 18 Corporate Governance Statement 19 Directors’ Report 26 Operating and Financial Review 34 Remuneration Overview and Report 47 Consolidated Financial Statements 70 Shareholder Information 123 Contact Details/Annual General Meeting IBC Cover Story IBC Business Strategy OZ Minerals is an Australian based modern mining company with a focus on copper. OZ Minerals owns the Prominent Hill copper-gold mine and Discovery + Development Production + Sales Shareholder Value Carrapateena copper-gold project, both situated in South Australia. Prominent Hill consists of the Malu Open Pit, Ankata Underground mine and the recently commissioned Malu Underground mine. In 2014, OZ Minerals achieved or exceeded all OZ Minerals is pursuing Prominent Hill produces copper OZ Minerals strives to generate a sustainable project pipeline concentrates which are sold superior value for its shareholders. of our production targets, returning to a copper through maximising value from to customers in Asia, Europe production ‘run rate’ of 100,000 tonnes per its existing operating assets and Australia. and looking to grow organically annum and exceeding market guidance for through exploration project copper production, gold production and costs. development and acquisitions. 1 OZ Minerals Annual Report 2014 2014 SNAPSHOT 2014 key commitments achieved or exceeded Balance sheet remains strong with cash with Prominent Hill production of 92,615 of $218.5 million at 31 December 2014 tonnes of copper and 148,192 ounces of gold. and no debt. Return to a 100,000 tonnes per annum Strategic review announced by new ‘run rate’ for Prominent Hill by the end Managing Director and CEO. of the third quarter of 2014. First steps: Commencement of a third operation › Relocate corporate functions to Adelaide; at Prominent Hill with first production from the Malu Underground mine. › Carrapateena initiatives announced on infrastructure and processing Consistent performance at technology; and Ankata Underground mine. › Strategic partnership with Quality pre-feasibility study released South Australian Government. for Carrapateena. An interim dividend of 10 cents paid in Return to profit with revenue of $831.0 million, September 2014. So as not to pre-empt the Underlying EBITDA (1) of $341.1 million, outcome of the strategic review, no further Underlying NPAT (1) of $30.3 million and dividend was declared with respect to 2014. Statutory NPAT of $48.5 million. Full year financial results summary (1) OZ Minerals financial results are reported under 2014 $m 2013 $m International Financial Reporting Standards (‘IFRS’). This Annual Report and Results for Group revenue 831.0 644.0 Announcement to the Market include certain Underlying EBITDA (1) 341.1 115.8 non-IFRS measures including Underlying EBITDA, Underlying EBIT, Underlying EBT and Underlying Depreciation and amortisation (296.1) (218.5) NPAT. These measures are presented to enable Underlying EBIT (1) 45.0 (102.7) understanding of the underlying performance of the Consolidated Entity without the impact of Net financing income 3.6 7.0 non-trading items such as write-down of assets Income tax (expense)/benefit (18.3) 33.2 and results from discontinued operations. Non-IFRS measures have not been subject to audit or (1) Underlying NPAT 30.3 (62.5) review. Underlying EBITDA, Underlying EBIT, Non-underlying items net of tax 18.2 (231.9) Underlying EBT and Underlying NPAT are included in Note 3 Operating Segments, which form part NPAT 48.5 (294.4) of the Consolidated Financial Statements. Refer Dividends per share – unfranked (cents) 10 20 Note 3 Operating Segments to the Consolidated Financial Statements for further details. Gold price Copper price US$/oz A$/oz US$/lb A$/lb $/oz Source: Bloomberg $/lb Source: Bloomberg 1,800 4.5 DEC DEC 1 1 3 3 4.0 1,600 3.5 1,400 3.0 1,200 2.5 1,000 2.0 4 4 4 4 4 4 4 4 4 4 4 4 5 5 4 4 4 4 4 4 4 4 4 4 4 4 5 5 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 FEB JUL SEP FEB FEB JUL SEP FEB JAN MAR APR MAY JUN AUG OCT NOV DEC JAN JAN MAR APR MAY JUN AUG OCT NOV DEC JAN OZ Minerals Annual Report 2014 2 A MESSAGE FROM THE CHAIRMAN Dear Shareholder, During the year, Terry Burgess left as CEO after five years in the position. Terry arrived shortly after the sale of assets I am pleased to report that in 2014, OZ Minerals demonstrated to China Minmetals, a challenging time for the Company. reliable and predictable performance meeting or achieving all Under Terry’s leadership, Prominent Hill produced more than of its targets, with strong operating performance in the open 500,000 tonnes of copper and 800,000 ounces of gold, the pit and the underground mines at Prominent Hill and delivery Ankata and Malu Underground operations were commenced in other areas of the business as promised. and the Carrapateena asset was acquired and has proven Our production from Prominent Hill exceeded guidance, with to be a most valuable development asset. 92,615 tonnes of copper and 148,192 ounces of gold against On top of these significant achievements, the Company our stated guidance of 85,000–90,000 tonnes of copper and maintained a strong balance sheet while also returning 130,000–140,000 ounces of gold. approximately $1.2 billion to shareholders in the form Following a series of productivity improvement initiatives of dividends, capital returns and share buy backs. implemented in 2014, Prominent Hill returned to an effective In addition, Terry’s leadership in the development of a strong 100,000 tonnes per annum ‘run rate’ by the end of the third safety culture and performance, and his contribution to quarter of the year. We also commenced production from a social responsibility issues, gender equality and diversity second underground mine at Prominent Hill, Malu Underground. and Indigenous opportunities within both the Company Our operational performance saw OZ Minerals return to and industry, is recognised and appreciated. profit, with revenue of $831.0 million and statutory NPAT On 3 December 2014, Andrew Cole joined OZ Minerals as of $48.5 million. Our balance sheet remained strong, with Managing Director and CEO. Andrew has the requisite skills a cash balance of $218.5 million at 31 December 2014 and and background to lead OZ Minerals through its next phase. no debt. The Company paid a dividend of 10 cents per share, His mining experience covers the full value chain in multiple which in aggregate equated to $30.3 million. jurisdictions, and he has a proven track record in leading and We delivered a high-quality pre-feasibility study for developing people. Carrapateena in 2014, highlighting the technical and Andrew has instigated a whole of business strategic review financial viability of the project and we also established to be completed by April 2015, and in the first few months more potential in discoveries nearby. of Andrew’s tenure, I am pleased to see early decisions made We have now embarked on further testwork and studies which to drive continuous improvement. could significantly improve the value or composition of any I encourage you to read the Operating and Financial Review future partnership stake in the development of Carrapateena, on page 34 of this report, which includes detailed information and as such, we suspended the partnering process we had on our operational and financial results for 2014. underway until these initiatives are completed and the results then integrated into the pre-feasibility study. Neil Hamilton Chairman 31 March 2015 3 OZ Minerals Annual Report 2014 A MESSAGE FROM THE CEO Dear Shareholder, A second aspect of this partnership is to collaborate on infrastructure solutions that can enhance the value I am extremely pleased to join OZ Minerals. of Carrapateena. We have committed to undertaking Since my appointment in December, I have had the opportunity a pre-feasibility study during 2015 on a rail study to to familiarise myself with, and assess, the business. OZ Minerals investigate potential to transport ore by rail from is in an enviable position with a healthy balance sheet and Carrapateena to Prominent Hill for processing, instead a very good set of assets. Copper continues to have one of the of constructing these facilities at Carrapateena. best outlooks for base metals.