PASMINCO LIMITEDACN 004 368 674

Registered OfficeLevel 15,380 St Kilda Road Melbourne 3004 Australia

Telephone 61 3 9288 0333 Facsimile 61 3 9288 0406

Email pasminco@pasminco.com.au

1999

Pasminco

Limited

AnnualReport1999

Pasminco Annual Reportwww.pasminco.com.au

David Stewart

Ron Berenholtz

Christine Burnup

Bronwyn Constance

Wim de Graaff

Tom Eadie

Ian Williams

John Winckel

Pasminco was formed in 1988 throughthe merger of the zinc and lead miningand smelting interests of CRA Limited(now Rio Tinto Ltd) and North BrokenHill Peko Limited.

The Company’s name represents itsstrength, its mining and smelting baseand its regional and international focus.

The name Pasminco is built from acomposite of all of these elements-thePAcific Smelting and MINing COmpany- hence PASMINCO.

The logo provides an identifiable visualsymbol of the Company. The circlerepresents the global nature ofPasminco’s operations while thegraduated horizontal lines carry theimage of a dynamic business.

Key Financial Dates Annual General Meeting 27 October 1999September quarter production report released 27 October 1999Half-year end 31 December 1999December quarter production report released 24 January 2000Half-year results 23 February 2000March quarter production report released 26 April 20001999/2000 year end 30 June 2000June quarter production report released 26 July 2000Full-year results and final dividend announcement 30 August 2000Annual Report mailed to shareholders 18 September 2000Annual General Meeting 25 October 2000September quarter production report released 25 October 2000

The Century Project

entered the final

commissioning phase,

on schedule

and under budget

Cover: A Total Magnetic Intensity colour drape of the Mt Isa region used to identify

magnetic materials in key exploration areas

1 Review2 Statement from the Chairman

and the Managing Director4 Operations at a Glance 6 Financial Highlights8 Marketing

10 Our people - Our world •People•Safety•Environment

14 Exploration 15 Technology 16 Mining18 Smelting 21 Ore Reserves and Resources24 Production 5 Year Summary26 Performance 10 Year Summary27 Board28 Corporate Governance Statement29 Directors’ Report, Financial Statements,62 Shareholder Information64 Glossary

IBC Management Team

Contents

Annual General Meeting11.30 am Wednesday, 27 October 1999. The Auditorium Level 2, Melbourne ExhibitionCentre, 2 Clarendon Street, Southbank.

A notice of meeting and proxy form are included with this Annual Report. For furtherinformation on investor services please refer to page 62.

Pasminco’s Vision:To be the Best from

Mine to Market throughPerformance, Quality

and Respect.

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David M Stewart

Managing Director & Chief Executive Officer

Refer Board Profiles on page 27

Ron N BerenholtzExecutive General Manager - Human Resources(age 46) joined Pasminco in May 1998. Hismost recent role was Group General ManagerHuman Resources with Smorgon ConsolidatedIndustries where he was responsible for allhuman resource activities across a diverserange of manufacturing and processingindustries. Prior to this, he was Group GeneralManager Human Resources for Elders IXL andheld senior management positions in both theoperating groups and the corporate office.

Christine M BurnupExecutive General Manager - Corporate Affairs(age 50) was appointed to her current role inAugust 1995, after joining Pasminco as GeneralManager - Environment and Public Affairs in1993. She was previously an Assistant Directorat the Business Council of Australia for fouryears, with responsibility for development ofCouncil policies on environment, manufacturingand immigration. Prior experience includessenior positions in the public sector ineducation, training and labour portfolios.

Bronwyn M Constance(FCPS, FCIS) Executive General Manager -Finance and Services (age 50) joinedPasminco in February 1997. She spent theprevious eight years with Kraft Foods whereshe was Vice President - Finance &Administration, Central Asia, based in HongKong, and Finance and Administration Director -Australia and New Zealand. Prior to joiningKraft, Bronwyn held senior financial positions,both at a head office and operating divisionlevel, with the ACI Group of companies.

R Bryan Davis

Executive Director - Mining (Retired- June1999)

Refer Board Profiles on page 27

Wim P F H de GraaffExecutive General Manager - InternationalSmelting (age 61). Prior to joining Budel Zink,Wim managed exploration activities in Nigeriaand directed mining companies in Europe, Asia,Africa and North and Central America, workingprimarily for Canadian mining companies. In 1972, he joined Shell/Billiton and in 1986became General manager of theBilliton/Pasminco joint venture Budelco (nowPasminco Budel Zink) in the Netherlands. SinceFebruary 1999, he is also responsible forPasminco’s mining and smelting activities in the United States of America.

E Tom EadieExecutive General Manager - Exploration &Technology (age 45) was appointed to hiscurrent role following the formation of theExploration division in early 1990. He spenteight years in the minerals exploration industryin North America, including three years withCominco. In 1983, he was transferred toAberfoyle Limited (then 48% owned byCominco) in Melbourne as Chief Geophysicist.For the three years prior to joining Pasminco,Tom was manager of Aberfoyle’s base metalsand mineral sands exploration programs. InAugust 1995, he assumed responsibilities forGroup Technical Support, Pasminco’stechnology group based in Newcastle.

Ian J WilliamsExecutive General Manager - Mining (age 61)joined Pasminco in August 1997 following theacquisition of the Century project from Rio TintoLtd. He was appointed Managing Director ofCentury Zinc Ltd in 1994 following a 25-yearcareer with Rio Tinto in a variety of engineering,operational and project development roles inAustralia, as well as South Africa and NorthAmerica. In his earlier career, Ian worked forBHP Ltd and Siemens Industries in Germany.Prior to his appointment to the Century project,he had been active in education and training inWestern Australia and for a time was Chairmanof the State Training Board in that State.

John W WinckelExecutive General Manager - AustralianSmelting (age 54) joined Pasminco in hiscurrent position in October 1995. He spent theprevious 34 years with BTR Nylex in a numberof operational roles both in Australia andoverseas. His most recent position was GeneralManager, Glass Packaging with accountabilityfor the operational performance of six Australiansites, including responsibility for sales andmarketing, human resources and environmentalperformance. He also chaired a researchconsortium of international companies.

Management Team

1Pasminco

Review

Year at a Glance 1999 1998 % VarianceGross sales revenue $1,564.4m $1,370.1m 14.2%Cost of sales (including exploration & research) $1,379.2m $1,152.5m 19.7%Depreciation and amortisation $158.3m $131.7m 20.2%Operating profit(loss) after tax & before abnormals ($8.3)m $39.6m (121.0)%Operating profit(loss) after tax & after abnormals ($8.3)m $63.3m (113.1)%Earnings per share-before abnormals (0.7)c 3.9c (117.9)%-after abnormals (0.7)c 6.2c (111.3)%

Dividend per share nil 4.0c (100.0)%Return on shareholders’ equity (0.1)% 4.3% (102.3)%Paid up capital as at 30 June ▲ $1,543.1m $1,124.6m 37.2%Shareholders’ equity $1,463.9m $1,490.7m (1.8)%Economic entity (Group) net debt $1,256.3m $166.5m 654.5%Capital expenditure $820.9m $445.3m 125.6%Total assets $3,888.9m $2,411.4m 61.3%

• Recorded a loss after tax of $8.3 million resulting primarily from lower metals prices and reduced premiums. Directors have decided not to declare a final dividend

• Higher production and sales volumes were achieved, including record levels at Hobart and Budel smelters

• Major development projects across the Group laying groundwork for future profitability including Port Pirie and Budel smelter upgrades and implementation of new information management systems

• Development of the Century Mine under budget and on schedule to ship first concentrates to Budel by the end of 1999

• Acquisition of Savage Resources Limited completed in February. United States-based mining and zinc plant operations fullyintegrated and surplus coal assets sold for AUD$69 million

Profit/(loss) After Taxand after Abnormal and Extraordinary Items

95 96 97 98 99

70

$m

0

10

20

30

40

50

60

(10)

▲ In accordance with the Company Law Review Act 1998, the Share Premium Reserve totalling $418.5 million has

been transferred to issued and paid up capital.

Holding our course

2 Pasminco

Our primary responsibility is to provide a safeand healthy work environment. In spite ofsignificant progress across the Group to furtherthe safety mission, it is with deep regret that wereport that a fatal accident occurred at the EluraMine in March. Pasminco has continued torefine the Pasminco Safety Management Systemso that safety becomes a part of the culture,demonstrated by behaviour, regardless of thetype of job being performed.

In terms of performance, this has been one of the most challenging years in the Company’shistory but also a year of significantachievement.

Pasminco recorded a loss after tax of $8.3 million, a decrease of $71.6 million fromthe previous year’s result which included anabnormal gain of $23.7 million. There were no abnormal items in this year’s result. Afterconsidering the result, the Directors decided not to declare a final dividend.

Higher production and sales volumes wereachieved across the Group, including recordproduction levels at the Hobart and Budelsmelters. However, the result was significantlyimpacted by lower prices for zinc and lead,offset to some extent by the weaker Australiandollar. There were major pressures on productpremiums and margins because of difficultmarket conditions in Asia. Issues associatedwith plant and technology upgrades alsoincreased operating costs.

Although trading conditions were difficult, it was a year in which a number of initiativeswere undertaken to fundamentally change andstrengthen the organisation, confirmingPasminco as the world’s leading producer of zinc and lead.

Pasminco now has global market coverage, a sustainable environmental position and solidore reserves, placing it in a strong position forfuture growth and development. The groundworkhas been laid to achieve the goal of beingprofitable at the bottom of the cycle anddelivering strong returns to shareholders.

The commissioning of Century and theacquisition of Savage Resources Limited arekey elements of the strategy.

Century will lift the Company to a new level ofcapacity and size, and fundamentally change itsresource base. It is arguably the most importantstrategic step Pasminco has taken given therelatively short remaining life of existing mines.

The Century Project including the mine, mill and Karumba Port Facility, is in the finalcommissioning phase. It is running ahead oftime and under budget with first concentratesdue to be shipped to Budel later this year.

Savage Resources was acquired in February forAUD$457 million. It is pleasing to report that theUS operations are performing well and havebeen fully integrated into Pasminco. Workcontinued on the divestment of those assets notcore to our business, resulting in the sale of thecoal operations to interests associated withGlencore International AG effective from 1 July1999 for a price of AUD$69 million in cash. TheGroup is working towards the sale of the interestin the Ernest Henry Mine by the end of 1999.

The US operations extend our distributionnetwork, complementing our existing presencein Europe, Asia and Australia. Marketingoperations were further strengthened in Asiaduring the year with the establishment of newdistribution arrangements allowing the Companyto meet customers’ needs more rapidly and cost effectively.

In February it was confirmed that mining wasunlikely to continue at Broken Hill beyond 2006.Pasminco is working in partnership with a broadrange of community interests in the city tomanage the transition for Broken Hill. In themeantime, the mining operations continue tomake a valuable contribution to overall Company performance.

Statement from theChairman and theManaging Director

Pasminco Share Price vs Other Metals Index

30 Jun '99

29 Mar '99

24 Dec '98

28 Sep '98

1 Jul '98

Pasminco Share Price Other Metals Index

1.0

1.2

1.4

1.6

1.8

2

Mark Rayner

3Pasminco

Mark R Rayner

Chairman

The Port Pirie smelter was upgraded, the Budel conversion continued to ensure itsreadiness to treat Century concentrate and a quenched bullion process was developed at Cockle Creek to streamline and simplify the production process.

People from all sites continue to makepreparations for the Year 2000 transition to ensure that there is minimal impact on the business.

In August 1999 the first Pasminco EnvironmentalReport was published in accordance with theAustralian Minerals Industry Code forEnvironmental Management. Development of a Group wide strategy for managing indigenousaffairs continued. At Century, a strongcommitment to the Gulf Communities Agreementwas maintained and job opportunities for morethan 350 indigenous employees were providedduring the construction period. As the operationalphase of the project begins, we look forward tostrengthening existing partnerships withcommunities in the region.

In the year ahead, with major projects completed,Pasminco will increase its focus on costcontainment and reduction. The corporatestructure is being reviewed to ensure theCompany is well organised to take advantage ofthe flexibility now being built into the operations.Through the Pasminco Business Systems (PBS)project, significant investments were made in the management of critical information.

Executive Director Bryan Davis retired in Junethis year after heading mining operations since1991 and serving as a director since 1995. The Board acknowledges his contribution to thegrowth of Pasminco and wishes him well for the future.

The fundamentals for zinc remain strong. When confidence in world growth emerges, the markets should respond accordingly. Through the efforts made this year, Pasminco is well positioned to meet future customerdemand and make a strong return to profitability.

Every part of the business and every one of Pasminco's people faced major challengesduring this year of transition. Considerable efforthas been made to build the business. The Boardand executive appreciate the teamwork anddedication demonstrated by every employee as we strive to consolidate Pasminco's positionas a world leader and achieve a consistent andacceptable return for shareholders.

David M Stewart Managing Director and CEO

Profit After Tax Break-Even Zinc Price

95 96 97 98 99

900

1,000

1,100

1,200

1,300

800

US$/t

Return on Shareholders' Equity

95 96 97 98 99

1.5

4

99

6.5

0

%

(1)

David Stewart

4 Pasminco

Exploration and Technology

Pasminco Exploration is headquartered inMelbourne and concentrates on thedevelopment of existing sites and theidentification of prospects both in Australia and overseas. Apart from the existing miningdistricts, activity during the past year focused onPeru and Benagerie Ridge in South Australia.

Group Technical Support (GTS) is based atCockle Creek in NSW and provides ongoingtechnical expertise across all areas of Pasmincomining and smelting operations in addition tomanaging the Y2K program across the Group.

Headquartered in Melbourne, Pasminco has

production facilities in Australia, the Netherlands

and the USA and marketing offices in Melbourne,

Hong Kong and Guangzhou.

Budel

Clarksville, Gordonsville

Smelters

Mines

Mine Development Projects

Lead Recycling

Financials 1999 $m 1998 $m

Expenditure-expensed(Exploration group only) ★ 17.5 16.8

Expenditure-expensed(Mine sites only) 4.5 5.1

Total expenditure-expensed 22.0 21.9

Expenditure-capitalised 2.5 5.9

Contained LeadTonnes

95 96 97 98 99

37,500

75,000

112,500

150,000

225,000

187,500

Zinc MetalTonnes

95 96 97 98 99

100,000

200,000

300,000

400,000

500,000

600,000

Lead Metal and BullionTonnes

95 96 97 98 99

50,000

100,000

150,000

200,000

300,000

250,000

Contained ZincTonnes

95 96 97 98 99

70,000

140,000

210,000

280,000

350,000

Production Production ProductionProduction

Sales Sales SalesSales

0 000

Operations at a glance

Legend◗ includes unrealised profit on consolidation from

intra-group sales 1998/99-$3.9m (1997/98 - nil)

▼ includes sales to Group smelters of $258.8m in 1998/99

and $258.6m in 1997/98 and sales of $76.5m from the

Ernest Henry Mine and coal operations

◆ includes exploration and research and development

▲ includes sales to Group smelters

❁ includes research and development

❒ includes purchased lead

● includes sales from Cockle Creek to Port Pirie

★ includes research and development expenditure and

depreciation of $0.6m (1998/99 $0.7m)

✙ excludes Ernest Henry Mine ore treated of 1,960,600

tonnes since 1 February

5Pasminco

Mining Australian Smelting International Smelting

Pasminco operates three major underground zinc-lead-silver mining operations in Australia at BrokenHill, Elura and Rosebery. It also operates an open-cutmine, Potosi, at Broken Hill. The world’s largest zincmine at Century in north west Queensland entered thepre-commissioning phase in June with first ore to themill expected in September and first concentrateshipments by the end of 1999. As a result of theacquisition of the Savage Resources Limited Group inFebruary 1999, Pasminco operated coal mines atLiddell in NSW and currently holds a 49% share in theErnest Henry Mine in Queensland. The coal businesswas sold in July 1999 and the sale process for theinterest in Ernest Henry is proceeding.

Pasminco operates and markets the output from threeprimary and two secondary smelters in Australia: theCockle Creek ISF zinc and lead smelter, the Hobart electrolytic zinc smelter, the Port Pirie lead and zinc smelter and ARA leadrecycling plants in Sydney and Melbourne. ARA is a 50-50 joint venture with Simsmetal. Sales andmarketing offices are located in Melbourne, HongKong and Guangzhou.

Pasminco Budel Zink operates and markets the output from the electrolytic zinc smelter inthe Netherlands. Also part of this division arethe Clarksville Zinc Plant and Gordonsvillemining operations in Tennessee, USA.

Financials 1999 $m 1998 $m

EBIT ◗ 20.1 15.1

Gross sales revenue ▼ 459.9 377.4

Cost of sales ◆ 365.4 300.7

Depreciation & amortisation 74.4 61.6

Capital expenditure 57.0 71.9

Total assets 731.2 512.4

Production 1999 1998

Tonnes (Contained Metal)

Zinc 340,140 312,358

Lead 172,756 164,425

Silver (kg) 191,593 165,462

Gold (kg) 672 530

Total ore treated ✙ 4,577,000 4,387,000

Sales 1999 1998

Tonnes (Contained Metal)

Zinc ▲ 340,606 291,187

Lead ▲ 177,128 168,341

Silver (kg) ▲ 192,288 180,730

Gold (kg) ▲ 622 499

Financials 1999 $m 1998 $m

EBIT 11.6 78.7

Gross sales revenue 873.1 868.8

Cost of sales ❁ 828.6 732.8

Depreciation & amortisation 56.1 57.3

Capital expenditure 55.9 65.1

Total assets 818.4 788.4

Production 1999 1998

Tonnes (Metal)

Zinc 322,689 303,576

Refined lead & alloys 196,498 185,061

Lead bullion 28,978 25,149

Secondary lead 14,776 13,889

Silver (kg) 290,339 112,030

Sales 1999 1998

Tonnes (Metal)

Zinc 305,356 300,245

Refined lead & alloys ❒ 178,085 187,887

Lead bullion ● 28,380 22,304

Seconary lead 14,315 14,497

Silver (kg) 287,618 104,700

Financials 1999 $m 1998 $m

EBIT 65.1 77.3

Gross sales revenue 490.2 382.6

Cost of sales ❁ 408.4 295.0

Depreciation & amortisation 16.7 10.3

Capital expenditure 98.9 23.4

Total assets 648.3 198.7

Production 1999 1998

Tonnes (Metal)

Zinc 263,738 215,385

Tonnes (Contained Metal)

Zinc 16,000 –

Total ore treated 564,061 –

Sales 1999 1998

Tonnes (Metal)

Zinc 267,976 217,792

Tonnes (Contained Metal)

Zinc 16,001 –

Clarksville Zinc Plant, Tennessee, USA

6 Pasminco

• Pasminco recorded a loss after tax of $8.3 million for 1999. There were no abnormal items

• Lower commodity prices impacted significantly on the result, although these were offset to some extent by a weaker Australian dollar

• Operating performance improved, with higher production and sales volumes, but higher costs and lower metal premiums impacted unfavourably on the result

• The Group’s debt level and gearing ratio increased during the year, due mainly to investment in the Century project and the acquisition of Savage Resources

Financial Highlights

External FactorsAt US$994/tonne, the average realised zinc pricein 1999 decreased 17%, compared with US$1,192in 1998. The realised lead price was also lower in 1999, averaging US$518 compared withUS$562 in 1998.

The average realised AUD/USD exchange rate for1999 was 62.4 cents compared with 70.0 centsin 1998. The Group’s natural revenue hedge,which allows the Group to match movements inits US dollar debt against future revenue, did notimpact significantly on the realised AUD/USDexchange rate in 1999.

The Australian dollar/Dutch guilder exchange rate averaged 1.24 guilders compared with 1.38guilders in 1998. As approximately 15% of theGroup’s cost base is in Dutch guilders, a strongerguilder has an unfavourable impact on the Group’s results.

The lower zinc and lead prices combined reducedearnings by $170 million. The weaker Australiandollar contributed $115 million, while the strongerDutch guilder reduced earnings by $14 million.

Operating Performance Output of zinc and lead from the Group’s mines and smelters was 11% higher than the previous year.

Higher production and sales volumes increasedearnings by $59 million, but this was offset in part by higher costs of $42 million.

The impact of weaker metal market conditions in some parts of Asia flowed through to lowerpremiums, but this was offset to some extent bystronger market conditions in Europe. Lowermetal premiums overall reduced earnings by $6 million in 1999, but the Group’s global marketspread ensured production remained fully sold.

The Group’s key measure of competitiveness, its break-even zinc price, increased by 2%, fromUS$998/tonne in 1998 to US$1,020/tonne in1998/99. However, excluding the impact of theabnormal gain in 1998, the break-even zinc pricewas reduced by US$41/tonne.

Cash FlowThe Group generated cash from operations of $440 million in 1999.

From this, capital expenditure of $821 million was funded. Major projects included Budel’sconversion to Century concentrates ($74 million),and installation of new business systems ($24 million). Capital expenditure on the Centuryproject was $500 million.

Working capital levels at year end were $4 millionhigher than the previous year.

An unfranked dividend of 4 cents per share waspaid in November 1998, the dividend paymenttotalling $45 million. Net financing costs in 1999were $35 million, $21 million higher than 1998due to higher debt levels during the year.

The acquisition cost of Savage ResourcesLimited net of cash acquired was $406 million.

Net Debt to Debt Plus Equity

95 96 97 98 99

12.5

25

37.5

50

%

0

Profit SensitivityProfit After Tax Impact A$

A B C D

Gross Sales

95 96 97 98 99

3

6

12

400

800

1,200

1,600

Cash Flow From Operations*

95 96 97 98 99

112

225

337

450

* Cash flow from operating activities plus movement in operating working capital

A. Impact of US$25/t change in zinc priceB. Impact of US$25/t change in lead priceC. Impact of A$:US$ 1 cent changeD. Impact of A$:Nlg 1 cent change

9

$m $m $m

0 0 0

1999 1998 ChangeFav/(Unfav)

Zinc Prices(US$/t) 994 1,192 (198)

Lead Prices(US$/t) 518 562 (44)

A$/US$(cents) 62.4 70.0 7.6

A$/Nlg(cents) 123.9 138.0 (14.1)

External Factors

Realised LME Price Realised exchange rate

Understanding the results

LME Lead Prices/Stock

Lead US$/tLead LME Stocks (t)

Zinc US$/tZinc LME Stocks (t)

400

600

800

1,000

Tonnes

50,000100,000150,000200,000250,000300,000350,000400,000

LME Zinc Prices/Stock

300,000

600,000

900,000

1,200,000

1,500,000

Jul 9

4

500

1,000

1,500

2,000

Tonnes

0

Jun

99

Jul 9

8

Jul 9

7

Jul 9

6

Zinc Premiums

Average premium achieved above base LME price across product range for Australian Smelting sales

US$/t

50

100

150

0

Lead Premiums

Average premium achieved above base LME price across product range for Australian Smelting sales

US$/t

0

50

100

150

Jul 9

5

Jul 9

4

Jun

99

Jul 9

8

Jul 9

7

Jul 9

6

Jul 9

5

Jul 9

4

Jun

99

Jul 9

8

Jul 9

7

Jul 9

6

Jul 9

5

Jul 9

4

Jun

99

Jul 9

8

Jul 9

7

Jul 9

6

Jul 9

5

US$/t

US$/t

7Pasminco

Currency OptionsA currency option program was recommenced in 1998 to protect the Group’s US dollar revenuestream against adverse movements in theAUD/USD exchange rate. When the exchangerate weakened significantly in the latter part of1997, and in periods of weakness since then,call options were purchased and put optionswere sold simultaneously. This is referred to as a cap and floor option strategy. As at 30 June 1999, cap and floor options to the value of US$940 million were in place overthe period July 1999 to December 2002. Theaverage strike price of the cap is US65 centsand the average strike price of the floor is US58 cents. The effect of this strategy is toprotect US$940 million of revenue against a risein the AUD/USD exchange rate above US65cents while forgoing the benefit of a fall in the exchange rate below US58 cents.

Full details of this position are contained in Note 26 to the accounts on page 49 of thisAnnual Report.

Financing ActivitiesThe Group undertook a number of financinginitiatives during the year to support thesignificant investment in Century and theacquisition of Savage Resources Limited.Sources of finance were accessed to best matchthe nature of the investment and likely revenuestream. Debt levels during the year wereimpacted by these investments, the benefits ofwhich will be seen during 2000 and beyond.

The major financing activity during the year was the arrangement of $475m bridgingfinance for the acquisition of Savage ResourcesLimited. Additional finance of US$70m wasraised to repay existing financiers to the ErnestHenry project.

A five year forward silver sale was arrangedduring the year, raising A$307m. Pasminco isrequired to deliver approximately 60% of the Port Pirie Smelter’s silver production over thenext five years in satisfaction of the forward sale obligation.

Financing for ancillary activities in connectionwith the Century project (including the mine fleetand accommodation village) were finalisedduring the year. Sale and lease back arrangementsfor the Century mine’s pipeline, port and transfervessel have now been completed.

Bilateral facilities of A$100m were establishedand facilities to the value of US$25m andA$45m were renegotiated during the year.

The CreditWatch placed on the Group’s ratingfollowing the announcement of the Savagetakeover in October 1998 was removed and theGroup’s BBB- rating reaffirmed in April 1999.

At year end the Group had committed facilities ofA$1,654 million of which A$377 million wasundrawn. Net debt drawn at 30 June 1999 wasA$1,256.3m and the Group’s net debt to debtplus equity ratio was to 46.2%.

1998/99 1997/98Gross sales made by Groupto external customers 1,564.4 1,370.1

Less goods & services bought in from outsidethe Group 1,160.6 870.3

Value Added by Group companies 403.8 499.8

Distribution 1998/9 1997/8Salaries & wages to employees 233.8 222.0

Reinvested in the business 16.8 171.1

Net interest to lenders of funds 35.4 13.5

Dividends to shareholders 45.0 31.8

Taxes and other government charges 72.8 61.4

Total 403.8 499.8

Salaries & wagesto employees 58%

Net interests to lenders of funds 9%

Taxes and other government charges 18%

Dividends provided to shareholders 11%

Reinvested in the business 4%

Explanatory NoteThe 1998/99 Annual Accounts for Pasminco

Limited and the consolidated Pasminco

Group reflect the impact of several

significant transactions which have occured

during the financial year. During 1998/99 the

Pasminco Group acquired Savage Resources

Limited with its US smelting and mining

assets and investments in the Ernest Henry

Mine and coal assets in Australia. Goodwill

has been recognised as a result of the

acquisition, and is shown as an intangible

asset in the Annual Accounts.

The acquisition of Savage Resources Limited

has had a significant impact on the Annual

Accounts with an increase in almost every

line in the consolidated balance sheet as the

assets and liabilities acquired are reflected

for the first time. This should be given

consideration when making comparisons

with the prior year balances.

Pasminco has sold the coal assets effective

from 1 July 1999 (refer note 40 to the

Annual Accounts) and is currently in the

process of selling its interest in Ernest Henry.

As a result the coal assets and the

investment in Ernest Henry are disclosed in

the Annual Accounts as current assets.

The treatment of these assets is fully

disclosed in the Annual Accounts.

Other transactions which have significant

impact on the consolidated balance sheet

include the increase in Pasminco Group

borrowings to finance the acquisition of

Savage Resources Limited and the continued

development of the Pasminco Century Mine.

Value Added

8 Pasminco

Marketing

A challenging year in terms of lead and zinc prices anddemand from Asian markets.But a new distributionnetwork in Asia, presence in US markets and newconcentrates from Centurymeans a platform for futureprosperity is being built.

The Year AheadContinue to grow market

share of the zinc, lead

and silver metal markets

in Australia and other

core regions in Asia,

Europe and the USA

Improve product quality

and service delivery in

domestic and overseas

markets in the face of a

highly competitive

environment Build the international

sales and distribution

network and maximise

global metal sales by

moving metals from

smelters in Australia,

Europe and the United

States to worldwide

markets

Complete frame sales

contracts for Century

zinc concentrate

and negotiate

improved treatment

charges for calendar

1999 concentrate

sales to Asia

Negotiate a new

ocean freight contract

incorporating

significantly reduced

freight charges for

concentrate

shipments to Asia for

1999/00 and 2000/01

Every year in Australia, more than 200,000 tonnes of steel is hot dipped

galvanised for protection from corrosion at sites including GB Galvanizing

Service Pty Ltd in Victoria

to marketMetals

9Pasminco

significant improvements in the galvanised sheetsectors in Malaysia and Taiwan.

Pasminco is now starting to see some signs ofrecovery in the Asian economies, particularly inSouth Korea, Taiwan (which has continued to bestrong through the Asian crisis), and Indonesiawhich is improving off a low base. In particular,zinc sales to the core Asian markets ofIndonesia, Malaysia, Hong Kong/China andTaiwan are estimated to increase by 15% thisyear with these markets expected to contribute62% of Pasminco’s total Australian zinc sales,compared to 51% last year.

Pasminco will continue to work closely with its customers to expand its sales of value added alloys in both lead and zinc. These includespecialised zinc alloys for diecasting andgalvanising, and the ‘VRLA REFINED Lead’ and‘MF REFINED Lead’ products for the growing high-tech battery sector supplying the automotive, UPS and telecommunicationindustries.

‘In the field’ technical consultancy and services,fully supported by research and laboratoryfacilities in Australia, are being provided toPasminco’s valued customers to assist them to improve their manufacturing processes and toenhance the utilisation of Pasminco’s products.

Pasminco works closely with various industrialassociations including the International ZincAssociation, International Lead Zinc ResearchOrganisation, Advanced Lead Acid BatteryConsortium, and Galvanisers Associations incustomers’ countries encouraging the promotionand market development of the industry and end-use. With its expanded silver productioncapacity to 430 tpa, Pasminco will continue tomaintain and build on its core silver markets and end users in the photographic and industrialsegments and jewellery.

Concentrates MarketingMines negotiated modest improvements in frame contract treatment charges for the 1999calendar year for both zinc and lead concentrates.There is, however, anticipation that a marketsurplus will emerge from the latter part ofcalendar 1999, especially for zinc concentrates,as new mines such as Century add to globalconcentrate supply.

Pasminco retains frame contracts with Asiancustomers covering the major portion ofconcentrate production not required by theGroup’s smelters. The largest contracts are withJapanese and Korean smelters and allcustomers have continued to perform reliablyagainst their contracts. A small proportion ofoutput is reserved for spot sales or to coverfluctuations in production or requirements atGroup operations. During the year a number ofspot sales were executed, capitalising on tightmarket conditions and enabling working capitallevels to be minimised.

Total zinc concentrate sales for 1998/99increased by 14% compared to the previousyear, with sales to Group smelters rising by

North Asia 21%

West Asia 5%

SE Asia 10%

North America 8%

Other 3%

Europe 36%

Australasia 17%

Pasminco Zinc Sales by Region 1998/99

Australasia 20%

Other 10%

West Asia 16%

SE Asia 15%

Africas 6%

North Asia 33%

Pasminco Lead Sales by Region 1998/99

External 28%

Cockle Creek 12%

Clarksville 3%

Hobart 30%

Port Pirie 27%

Pasminco Concentrates Sales 1998/99

Pasminco’s products are sold into 45 countriesspanning the core markets of Europe, UnitedStates, Australia and Asia. During the year lowmetal prices on the London Metals Exchange(LME) and depressed conditions in key Asianmarkets presented significant challenges forPasminco. The average realised price for zincduring the year was US$994, down 17% fromthe previous year’s US$1,192; and for lead itwas US$518, down 7.8% from the previousyear’s US$562.

The downturn of metals demand in Pasminco’sAsian markets required an expansion of themarket base to service a wider spread ofgeographical markets. This included work tosecure new zinc customers for Australian metalin Europe and the USA through Pasminco’sBudel Zink and Clarksville operationsrespectively, ensuring a fully sold sales bookacross the Pasminco Group.

In spite of securing market share growth in a depressed Asian economy, premiums wereunder downward pressure during the year. Incontrast, premiums achieved in Europe and theUSA remained firm.

Pasminco consolidated its improved distributionsystem in Asia with warehouses established infour strategic locations enabling efficient door to door delivery services to our core customerswho now have a shorter lead time and aguarantee of metal availability. Dedicated andcost effective shipping arrangements have beensecured to replenish the various warehouses in regular intervals for efficient supply chain management.

The Group improved its share of the dry cell battery sector in Indonesia, and gained

9% and external sales increasing by 22%. Lead concentrate sales increased by 2% and98% of lead sales were made to Group smelters.

To optimise feed mix, Pasminco purchasessome concentrates from other Australian andoverseas mines. The largest suppliers toPasminco’s Australian smelters are the Hellyermine in Tasmania, the McArthur River mine inthe Northern Territory and the Cannington minein Queensland. The Hellyer mine is due to closeby mid 2000 and arrangements are welladvanced to replace this material with concentratefrom other Group mines, including Century,together with concentrate from external suppliers.

Considerable work has been done on themarketing of Century concentrate and framecontracts have been secured with a range ofsmelters in Asia and Europe. Together with salesto Pasminco’s own smelters, these contractscover approximately 90% of annual zincconcentrate production capacity.

10 Pasminco

Our people - Our worldPeople

Enterprise BargainingPasminco has maintained its focus onimprovements to workforce flexibility through the adoption and alignment of Pasmincooperations to the Group’s Employee RelationsStrategy. Central to this development have beenenterprise agreement negotiations at Rosebery,Broken Hill and Port Pirie.

Pasminco Century has recruited the currentworkforce using the provisions available throughAustralian Workplace Agreements.

SAP ImplementationIn all, more than 60,000 hours of classroomtraining to 2,500 end users was delivered byboth site and Pasminco Business Systems (PBS)based instructors with the bulk of the site basedtraining focusing on maintenance and projectmanagement and purchasing because of theimmediate payback opportunities for Pasminco.

Savage Resources TransitionElements of Savage Resources Limited corporateactivity, based in Sydney, were integrated into Pasminco’s Melbourne office. Someemployees were offered and accepted ongoingroles with Pasminco while others wereretrenched and provided with professionaloutplacement support.

Employees in Savage’s coal business wereadvised of Pasminco’s sales plans and continuedto perform effectively while the selling processtook place.

Most employees of Savage’s US zinc businesswere not impacted by the acquisition. Whereappropriate, Pasminco human resource systemsand processes will be integrated into the USoperation over time.

Workforce flexibility throughopen and honest negotiations,integration of SavageResources employees in twocountries and the challengesof Century and SAP continuedto develop Pasminco as anemployer of choice

A year focused on providing aworkplace where it is possibleto work free of injury andillness and developing ourpeople to make safe decisions

Work on EnvironmentalManagement Systemsprogressed, an EnvironmentReport was produced andactions arising from externalaudits were being undertakenacross all sites

The Year Ahead

Successful completion

of the Hobart

Smelter’s Enterprise

Agreement, and

ongoing review

of work practices

and shift

arrangements

at Cockle Creek

Smelter

Continue the role clarity

and performance

management work

which aims at helping

employees achieve key

performance targets

Employee Numbers 1999 1998 1997 1996 1995

Mining* 1278 1242 1214 1339 1320

Australian Smelting 1842 1814 1835 1926 1989

International Smelting** 1126 579 575 592 596

Exploration/Group Office/GTS 203 184 173 180 166

Total 4449 3819 3797 4037 4071* includes 200 for Century

** includes US Operations from February 1999

CenturyDuring construction employee figures peaked at more than 1,500 of which more than 400were local people from the Gulf of Carpentariaregion. To enhance ongoing local employment,traineeship programs have been introduced in the areas of mining, engineering production,clerical, hospitality, environment, ranger and pastoral.

Further progress was made in co-operation withthe Gulf Aboriginal communities under the termsof the Gulf Communities Agreement (GCA). Key activities included the establishment ofprocesses for employment and training of localAboriginal people during construction and intooperations, identifying business opportunities forlocal Aboriginal people and assisting in theestablishment of those businesses and theestablishment of systems of cultural heritageprotection. To provide guidance and assistancein implementing the key GCA aspects, theAboriginal Development Benefits Trust,Employment and Training Committee and theCentury Environment Committee were formed.

The Human Resources

planning program will

assist organisational

development by

ensuring people with

the desired skills and

experience are

available when needed

Our energy

11Pasminco

• recognition and respect for indigenous peoples’ traditional values and historical affiliation to the land

•acknowledging their disadvantaged background and position in contemporary society and committing where possible, to improving their social and economic conditions

•building on the value of diversity at all Pasminco sites and workplaces

•promoting tolerance, respect and mutual understanding to establish trust between Pasminco employees and indigenous communities and organisations.

While the initial focus of the strategic approachwill be on Australia, Pasminco recognises theneed to transfer this approach to work withindigenous communities wherever it operates.

In addition to work undertaken at Century,activities in the field of indigenous affairsincluded the development of cultural awarenesstraining programs for Pasminco employees,ongoing support and community consultation in relation to the management of the WardangIsland rehabilitation project in South Australia,establishing links between Pasminco employees and key government and community representatives and presentations on activities and strategies at industryconferences and events.

Mining MRI’s MRIFRBroken Hill 96 (192) 63 (139)Elura 49 (51) 80 (76)Rosebery 73 (72) 91 (87)Century 88 (6) 22 (6)Total 306 (321) 75 (88)

Australian SmeltingARA 27 (28) 214 (236)Cockle Creek 66 (81) 67 (81)Hobart 88 (123) 53 (88)Port Pirie 195 (208) 98 (98)Total 376 (440) 79 (95)

International SmeltingBudel 22 (21) 13 (21)US Operations+ 24 67.9Total 46 80.9

Group (includes GTS, Exploration and Group Office)

728 (811) 51 (77)

*Note: Figures in brackets for 1997/98.

+US Operations since Feb 99

Indigenous Affairs During the year, Pasminco introduced itsstrategic approach to Working with IndigenousCommunities 1999-2002. This approach aims to establish broad based support forPasminco’s exploration and mining activitieswhile encouraging indigenous communities to access a broad range of employment, businessand other opportunities. The key elements of this strategy include:

Employee Lead Blood LevelsNumber of employees with above target blood lead levels

96 97 98 99

20

40

60

80

100

120

140

160

>=40ug/dl*

>=50ug/dl*

0

Like the team at Port Pirie, more than

4,000 people come to work at Pasminco

mines, smelters, laboratories, offices

and exploration sites across the world

source

12 Pasminco

SafetyExcellence in safety and health is fundamental to Pasminco’s vision to be the Best from Mine to Market. This year work focused on futurerequirements to continuously improve safety andachieve the objective of an incident free workplace.

Prevention through the development of a safetyculture remains the key objective with the threemain areas of attention being:

•Safety behaviours, awareness and culture.

•Management commitment, standards and audits.

•Systems of work.

The Safety and Health Leadership Group (SHLG)was formed during the year, consisting ofoperating executives, senior management andchaired by the managing director. The keyobjective of the group is the strategic drive and direction of safety and health at Pasminco.

The Safety and Health Reporting andMeasurement Standard was implemented,enabling safety performance and improvementopportunities to be consistently measured andmonitored. Also introduced was the SignificantIncident reporting system which enables keydetails of significant incidents, the lessonslearned and effective preventative measures to be shared across the Group.

The Blood Lead Protocol was reviewed andreissued, including revised targets and standards for measuring and monitoring lead in blood levels.

The Year AheadDriving safety

improvement

through mindset,

awareness,

behaviour

and culture

Streamlining

Pasminco Safety

Management System

(PSMS)Effective promotion

and understanding

of PSMSImplementation of the

Self evaluation

and Audit process Introduction of

stated safety beliefs

020406080

100120140

98/994Q

98/993Q

98/992Q

98/991Q

97/984Q

97/983Q

97/982Q

97/981Q

Medical Referral Injury Frequency Rate 1998/99

12 MonthMoving Average-MRIFR

Safety and Health TaskforcesFour taskforces have been formed to drive the Pasminco Safety System across the Group. They are the Safety Health Network Group, theHygiene Taskforce, the Mine Managers WorkingGroup and the Rehabilitation Network Group. The key activities of these Groups include areview of the total Pasminco Safety Standardsand the audit and evaluation system, the controland effective management of operatingexposures and investigations into safe systemsof work for our underground operations. A critical component of their work is thedevelopment of a safety awareness andbehavioural program.

Safety and Health PerformanceA fatal accident in March 1999 at Elura servedas a reminder that more work is needed toimprove safety and health in Pasminco. An incident review was completed andrecommended actions have been implemented.

The Group has moved to a broader outcomemeasure known as Medical Referral InjuryFrequency Rate (MRIFR). This captures allinjuries resulting in medical treatment and/oralternate duties including lost time and includesall employees and contractors.

Group MRIFR performance has shown asignificant downward trend from 77 to 51 in theperiod, complimented by excellent performanceat Broken Hill, Hobart and Budel. Broken Hill alsobecame the first Pasminco site to participate inthe Minerals Council of Australia MINEX awardsfor safety excellence.

Changing Culture

Our people - Our world

Lead in Air at Cockle Creek Buffer Zone Boundary

Jan 99Jan 98Jan 97Jan 96Jan 95

Lead in Air µg/m3

Pasminco COC (1.0 µg/m3)

0.20.40.60.81.01.21.4

0

Jan 99Jan 98Jan 97Jan 96Jan 95

Lead in Air at Port Pirie Police Station

Lead in Air µg/m3

Pasminco and NHMRC Guideline (1.5 µg/m3)

0.51.01.52.02.53.0

0.0

13Pasminco

Greenhouse ChallengeIn May 1997, Pasminco signed a co-operativeagreement with the Australian Government’sGreenhouse Challenge. The agreement commitsthe Group’s Australian operations to voluntarilyreduce greenhouse gas emission rates by 3% per unit of production by the year 2000.

Pasminco has implemented a number ofinitiatives to achieve this target which arecontained in the Pasminco Environment Report.

Environmental AuditingA new cycle of internal auditing commenced in December 1998 with all sites scheduled forcompletion by June 2000. Sites are preparingaction plans to address the issues identified in these audits.

External audits of Century and the assetsacquired with the takeover of Savage Resourcesalso were completed. The next cycle of externalaudits is scheduled to begin during the2000/2001 financial year.

The Executive Safety Health and EnvironmentCommittee continued to review the status of the action plans addressing the issues from thelast round of external audits. The review foundthat 61% of the issues identified in these auditshad been addressed with actions in hand for the remainder.

Pasminco Environment Report (PER)As a signatory to the Australian MineralsIndustry Code of Practice for EnvironmentalManagement, Pasminco published its first PER in August 1999.

The Year AheadContinue progress

towards ISO 14001

accreditation

across all sites,

including US

operations

Refine process for

producing PER and

produce second

report covering the

1999/2000 year Complete current

round of internal

audits and prepare

for next phase of

external audits

EnvironmentShareholders, local communities, representativesfrom some of the major green groups andemployees were consulted during the productionof the report. It will be available to all employees,shareholders and the public. It also will beavailable on the Pasminco web site.

The PER details environmental performanceacross all sites, the development of managementsystems, major issues facing the Company andaction plans. The report also contains details ofthe environmental milestones during Pasminco’sfirst decade and information on lead, zinc andjarosite issues. Copies of the PER are availablefrom Pasminco.

Lead in AirPrevious reports have contained graphs detailingambient air at Port Pirie and Cockle Creek. It should be noted that the monitoring stationsused to produce these graphs have now beendecommissioned - Port Pirie monitoring is nowdone on State Government equipment while anearth mound is being constructed on the site ofthe Cockle Creek monitoring station. This yearcharts include five years data for monitoringstations located at the Port Pirie Police Stationand at Fourth St Boolaroo (Cockle Creek). The Fourth St location is where the Condition of Consent of 1.0µg /m3 is to be achieved at Cockle Creek.

During the financial year, a downward trend was recorded at both of these sites and theCondition of Consent requirements wereachieved at Fourth St.

Environmental Management Systems (EMS)All sites made steady progress on the development of an EMS that complies with ISO 14001. The Pasminco target is to have theexisting (non Savage) sites certified to ISO 14001 by June 2002. Target dates for theUS operations acquired from Savage Resourceshave not yet been established.

Budel and Cockle Creek had their EMS audited by independent accredited auditors and their systems were certified to the ISO 14001 Standard.

Pasminco’s goal is to ensure the benefits of

a safe and healthy workplace are enjoyed by

the families and friends of every employee

Where we live

Our people - Our world

14 Pasminco

Exploration

The most active exploration project wasBenagerie Ridge where drilling for copper/goldand base metal mineralisation continued at a vigorous pace. Exploration increased in thedistricts surrounding the Elura and Roseberymines. Activity decreased however in north westQueensland as a result of the QueenslandGovernment not granting any new explorationlicences due to the lack of Native Title legislationand procedures.

Internationally, focus shifted from Pakistan and India to the zinc rich provinces of Peru. This change in focus was accelerated by theacquisition of Savage Resources Limited,which controlled a number of high potentialproperties in Peru, including the oxide resourceat Accha.

ResultsOn the Benagerie Ridge, several project areaswere upgraded by further drilling.

At Portia the coarse grained eluvial mineralisationis continuous over a strike length of 500 metres.Inferred tonnage for this zone has been estimatedat 270,000 tonnes at a grade of 7g/t Au. Thegrade may be understated because of samplingproblems associated with the coarse gold.

Portia also has potential for further resources inthe underlying Proterozoic bedrock as shown bysome high grade drill intersections (eg 3 m(98m-101m) containing 115.6 g/t Au in verticalaircore hold BEN 1207).

At Lorenzo, the gold mineralised zone wasextended by 200 metres to the south with verticalaircore hole BEN 937 intersecting 12 mcontaining 3.24 g/t Au from 87 m-99 m.

Exploration activity wasfocused on current miningdistricts, Benagerie Ridge and Peru while GTS continuedits major contributions toimportant projects rangingfrom the Hobart StabilityProject to Y2K readiness andmineral processing at Century

At Morocco, a vein stockwork system containing 4.9% Pb over 4.1 m was intersectedin diamond drill hole BEN 1047, illustrating thepotential for lead/zinc mineralisation on theBenagerie Ridge.

Elsewhere there has been early stageencouragement at the Minotaur prospect 10 kilometres west of Broken Hill where reversecirculation drill hole PN 75 intersected 4 mcontaining 5.6% Pb and 5.3% Zn and at theBeatrice prospect located 25 kilometres south of Rosebery in Tasmania where diamond drillhole MS 08 intersected over 100 m of low grade(<1% Zn + Pb) mineralisation.

During 1999/2000, work in Peru will beconcentrated around the Accha deposit (inferred resource of 9 million tonnes containing9% Zn) and several other well mineralisedproperties inherited from Savage Resources. A vigorous project generation strategy will alsobe pursued in Peru.

At Benagerie Ridge, diamond drilling will further test excellent targets at Portia, NorthPortia, Lorenzo, Shylock and South Nerissa.Further aircore and geophysical work willattempt to extend these prospects and developnew target areas.

Work will focus on the existing Minotaur andBeatrice prospects in the districts surroundingPasminco’s mines and also on generatingprospects based on new information, ideas and ore deposit models.

Pakistan $1.0m

India $0.4m

Mt Isa Block $2.2m

Broken Hill Block $6.0m

(includes Benagerie Ridge)

Tasmania $2.3m

Cobar $2.1m

Peru $2.2m

Other $0.7m

Total $16.9m

Exploration Expenditure 1998/99 The Year AheadSupporting the

commissioning of

the Century Mine and

the Budel Smelter’s

changeover to

Century concentrates

Exploration activity

in the 1999/2000

year will focus on

Peru, Benagerie

Ridge and in the

districts surrounding

the mines

Development of

a cost effective

process for the

Dugald River zinc

concentrates

Future search

15Pasminco

Work in the Sintering/Blast Furnaces/SlagFuming area included assistance with thecommissioning of the GTS developed quenchedbullion process at Cockle Creek. The team alsodeveloped a zinc oxide scrubbing technology to enable Cockle Creek to meet stringentenvironmental conditions.

A simple top heating system for Hobart zincingot quality improvement and a lugless zinc block removal process to reduce safetyincidents at Hobart were developed in theRefining/Casting/Products area.

The Mineral Processing area constructed alaboratory scale Century process flowsheet fortesting of ore prior to main plant commissioningand supported the Rosebery mine in the lifting ofthe mill metallurgical performance. They alsodeveloped an extra cleaning stage for Broken Hilllead concentrate grade improvement andassisted Elura in the optimisation of its grindingand flotation circuit to improve zinc recovery.

Significant output from the TechnicalDevelopments group included continueddevelopment of the Elura tailings leach/electrowinprocess, confirming operating parameters andreducing the technical risk of the project. This group also commenced a project aimed at improving the performance of the CockleCreek Zinc Refining Columns, including greaterthroughput, less energy consumption and lowergreenhouse gas emissions.

The Pasminco Information Service continued the development of the Pasminco intranet tointernational sites and Century (Lawn Hill).

Research and Development Expenditure

95 96 97 98 99

4

8

12

16

$m

0

Group Technical Support (GTS) continued itsrole as a valuable resource for all sites as itpursued its objective of providing Pasminco witha competitive edge in process technology. Eacharea within GTS made significant contributionsacross a wide range of projects.

The Roast/Leach/Purification/Electrolysis teamsupported the ‘Hobart Stability Project’ initiativeachieving record zinc production. They alsoassisted in lifting Hobart cellroom performanceand developed an alternative iron source for thePort Pirie Zinc Plant purification process.

In addition to coordinating the Y2K projectacross the Group, Process Engineering providedsupport to improve plant operating timeefficiency. The Materials Engineering groupworked on projects including the Cockle Creekzinc column failure, improvements to Hobartinduction furnaces refractory life, redesign of the Port Pirie blast furnace forebay weir and a survey of Century mill equipment prior to commissioning.

Technology

Pasminco Year 2000 Project The Pasminco Year 2000 Project aims to

deliver systems and vendor compliance

across the Group ensuring business continuity

and minimising the impact to Pasminco

operations through the Year 2000 date horizon

and beyond. The project is being directed by

Pasminco Group Technical Support.

The Year 2000 Project has a central Project

Office in Melbourne and project teams based

at each site. These teams report monthly

through a Steering Committee to the Pasminco

Board. Pasminco’s equipment inventory has

been assessed and testing conducted

resulting in the majority of it being accepted

as Year 2000 compliant. Where required,

equipment has been replaced or upgraded

to achieve compliance.

A detailed Vendor Management program

is in place and vendors have been assessed

for Year 2000 compliance and contacted

regarding their plans.

Each Pasminco site is conducting Readiness

Planning which includes emergency,

contingency and recovery plans for key

business processes through the Year 2000

transition period. While immunity from Year

2000 related issues cannot be guaranteed,

all reasonable efforts are being made to

ensure Pasminco’s business will not be

disrupted.

This statement is a Year 2000 disclosure statement for the

purposes of the Year 2000 Information Disclosure Act 1999.

A person may be protected by that Act from liability for this

statement in certain circumstances.

Total Magnetic Intensity colour drapes are used to identify magnetic

materials in the key exploration areas

16 Pasminco

Mining

The Broken Hill transitionprogram began and increasedproduction was recordedacross the Group. The Pasminco Century Project met all construction and budget targets.

Rosebery

Broken Hill

Elura

Century

Australia

Safe and efficient remote control mining operations at Broken Hill

Ore

Broken HillCompletion of the site’s Life of Mine OptimisationStudy estimated an end of mine life in 2006.Pasminco is working in partnership with thelocal community and Local, State and FederalGovernment to develop and implement atransition strategy which will assist the BrokenHill community to sustain economicindependence from mining.

Total ore milled was a record of 2,809,357tonnes. Contained metal was 9.5% above lastyear for zinc, but 4.7% below last year for lead.Planning will focus on accelerating the SouthEastern A Lode (SEAL) development to ensurethe ore source is available by 2000/01.Production performance will be driven bysustaining 250,000 tonnes of high grade ore per annum from pillars, seen as critical toensuring maximum recovery of the remainingore reserve. A 16,000 cubic metre six-pondwetlands was completed in May as part of thesite’s Water Management Strategy. It will usenatural elements such as activated carbon, riversand and vegetation to improve water quality.

17Pasminco

Mining EBIT

95 96 97 98 99

10

20

30

Includes unrealised profit on consolidation from intra-group sales 1999 - $3.9m 1998 - $nil

$m

0

The Year AheadWork to continually

improve safety

performance

by modifying

behaviours, raising

awareness and

building a culture

of safe working

practices

Continued focus

on increased

production at a

lower cost at

all sites

Ongoing

implementation

of Broken Hill

transition strategy

Commissioning of

Century mine and

Karumba Port Facility

EluraRegrettably a fatality occurred at the Elura mine during the period. A thorough independent review of the incident wasundertaken and recommended actions wereimplemented. Lessons learned were alsotranslated to other sites.

At 1,061,161 tonnes, mine production was at thehighest level since 1996 indicating a recoveryfrom the subsidence that year. The indicatedimprovement in lead metallurgy resulting fromthe installation of the fine grinding circuit wasrealised with lead recovery and concentrategrade being increased from historical levels of68% and 50% to 75% and 54% respectively.

Fine grinding of the zinc circuit was trialed and preliminary results indicated that a similarimprovement in zinc metallurgy was achievable.

Work commenced to further develop theNorthern Lodes and the main ore body below the 6 level. The development will underpinproduction for the next four years.

RoseberyTotal ore milled was up 8.7% from last year to706,054 tonnes. At 75,177 tonnes, containedzinc was 33.9% higher than last year, whilepayable silver production increased by 55.7% to 56.44 tonnes, and payable gold productionincreased by 19.7% to 624.3 kg.

Performance was boosted by increasedproductivity in mine development and production.Stope design improvements contributed tohigher feed grades and an underground primarycrusher was commissioned. Higher metalrecoveries were achieved through changes to mill process and improved circuit control.

Recommendations from the Life of Mine studywere implemented including increasingproduction rates and cut off grades, boostingmine development and trucking capacity, and increasing productivity through employeenumber reductions and improved work practices.

The key capital project for the year was the $8 million, 1,125 metre Northern UpcastVentilation Shaft which will provide exhaustventilation to the deep northern mine areasrequired for Rosebery’s future.

CenturyAt the close of the 1998/99 financial year,development work at the Pasminco CenturyProject was continuing ahead of schedule and under budget.

By June 1999 mining operations in stage onewere close to the upper zones of the orebody.Stripping of near surface limestone in stage two commenced in preparation for the largerrope shovels to work this section early in the1999/2000 financial year.

By 30 June 1999 major supply and constructioncontracts were approaching completion and pre-operational testing had commenced.

Permanent power supply from the Mica Creekpower station in Mt Isa was energised on 30 June 1999 while the port power station had been supplying construction needs forseveral months.

The transfer vessel, MV WUNMA was launchedon 16 April in China and was due to arrive in Karumba during September 1999.

Work progressed with Gulf Aboriginal communitiesunder the Gulf Communities Agreement (GCA)with activities ranging from the implementationof environmental management systems toidentification of business opportunities for local Aboriginal people.

A number of committees were established to provide guidance and assistance inimplementing the key GCA aspects of smallbusiness development, employment and trainingand environmental auditing.

to mill

18 Pasminco

The Port Pirie expansion,record production at Hobartand Budel, Cockle Creek’squenched bullion project andthe inclusion of operations inClarksville were visibleachievements in a challenging year

Smelting

Continue identifying

and overcoming

technical challenges

arising from more

flexible operations

Ensure ongoing

effectiveness of

facilities post Broken

Hill closureMaintain the pursuit

of the highest

standards of

environmental

performance

Maintain focus on

product improvement

and cost

management

Australian SmeltingCockle CreekThe Cockle Creek Smelter experienced a difficult 12 months in 1999 which resulted in overall zinc production of 76,630 tonnes and lead production of 28,978 tonnes.

Poor sinter reliability in the first half wascorrected through the implementation of a Sinter Stabilisation Plan but further problemswere experienced in the second half with the premature failure of a Refining Column.Production also was affected for six weeks when a leak was found in the condenser.

The $3.3 million quenched bullion facility wascommissioned in June 1999 following researchthat identified it would be more economical toquench and cast lead bullion direct from the blastfurnace rather than move molten metal by kettleto a lead floor for casting. The quenched bullionis now cast into three tonne blocks andtransported by road to Port Pirie for remelting torecover the lead and copper. This has resulted inthe closure of the Lead Floor - a source offugitive emissions - and the Dross Leaching Plantat Cockle Creek.

The decision to install tail gas scrubbing at a cost of $7 million to assist the Company toconsistently meet the World Health Organisation(WHO) goal for sulphur dioxide was announcedin October 1998. This follows exceedences of the stringent WHO SO2 standards throughout1998 and 1999 despite a $2 million dollarinvestment in pollution control equipment in late 1997.

The smelter was granted ISO 14001 certificationin February in recognition of the environmentalmanagement systems now in place.

An amended development application for anenvironmental mound to be constructed on the southern boundary of the smelter to assist in reducing noise and fugitive emissions wasapproved by Lake Macquarie City Council.

HobartMarketable metal production of 214,188 tonneswas 8.7% higher than last year’s 197,042tonnes, and more than 4,000 tonnes better than the previous site record set in 1992/93.Cathode zinc production of 225,777 tonnes also was a record, 7.8% higher than last year’s209,374 tonnes and bettering the 1992/93 resultby more than 500 tonnes.

Initial improvement was due to improved circuitcontrol and filtration early in the year, as the siteovercame the previous year’s difficulties with the new paragoethite process. In Electrolysis, a current efficiency improvement program beganin December 1998, with benefits being recordedby year end.

A number of capital projects were associatedwith the biennial planned major shutdown of No 6 Fluid Bed Roaster in March 1999. Thisone-month maintenance program and shutdownwas completed with minimal loss in production,although at year end calcine stocks were still low.

The Year Ahead

Australia

Hobart

Melbourne

Port Pirie

Cockle Creek

Sydney

Australian Smelting EBIT

95 96 97 98 99

20

40

60

80

$m

0

Extracting

19Pasminco

Silver production at

Port Pirie’s Precious

Metals Refinery is

expected to increase

during 1999/2000

to 430 tpa

Environmental performance improved, with anoverall decrease in incidents. Further progresswas made on the rehabilitation of the old jarositestockpile site, which at year end was set forcapping and revegetation.

The site’s environmental activities wererecognised with a Tasmanian Government Award for Environmental Excellence.

Port PirieAt 196,498 tonnes, lead production was 6%higher than the previous year. The first eightmonths of production were impacted by therefinery modernisation project, however since its completion in February 1999, production has been at the smelter capacity rate of 250,000 tpa or higher.

The first quenched bullion butts from CockleCreek were successfully treated from June 1999.

Zinc production of 31,870 tonnes was 9.6%lower than the previous year. During earlySeptember 1998, an employee was seriouslyinjured when one of four spent acid tankscollapsed necessitating the replacement of two other tanks in the area. Production washalted for 16 days and limited for a further three months while repairs were completed.

The modernisation of the Precious MetalsRefinery completed during the previous financial year boosted silver production by 160%to 290.3 tonnes. The full impact of this work willaccrue next year with silver production expectedin the order of 430 tpa.

Copper production of 3,272 tonnes was 13.6%lower than the previous year. While the plantoperated well, it was limited by the lack of feedfrom the lead plant. Operations improved when a new control system was installed six monthsinto the financial year.

Site environmental personnel are working with Environmental Protection Agency staff to modernise the Smelter operating licence to provide the operation with more clarity on environmental expectations. The secondphase of the Waste Water Management plan was completed and during the next financial yeardetailed design work will commence on the water treatment process.

Australian Refined Alloys (ARA)The secondary lead joint venture operationsachieved record production arising from thesuccessful implementation of a 20% expansion in the smelting capacity of the Sydney andMelbourne plants.

Metal production was 29,551 tonnes which was 6.4% higher than last year and recycledbatteries increased by 4.9% to 43,650 tonnes.An estimated 540 tonnes production was lostdue to the disruption to gas supplies in Victoriain September-October 1998.

the value

20 Pasminco

U.S.A.

Clarksville

Gordonsville

residue ponds excluding one jarosite and one gypsum pond, will be covered inaccordance with the agreement with the Stateand Provincial authorities. This will result in 75% of all the ponds being covered.

In a significant environmental step, PasmincoBudel Zink acquired the ISO 14001 certificate in June 1999 from Lloyd’s.

Clarksville (USA)Pasminco completed the acquisition of SavageResources Limited in February 1999. Savage’sUS zinc assets, comprising the GordonsvilleMine and Clarksville Electrolytic Zinc Plant, wereincorporated into Pasminco’s InternationalSmelting Division. A senior Pasminco Managerhas been nominated as Integration Manager torapidly integrate these new properties intoPasminco.

Clarksville produced 43,295 tonnes of specialhigh grade and continuous galvanising alloysduring the last five months of the 1998/99financial year.

GordonsvilleThe Gordonsville Mine resumed production in January 1999, after a five-month strike.Concentrate production from Gordonsville duringthe last five months of the financial year was24,958 tonnes. Underground development of the Clinch Valley Mine in north east Tennessee isprogressing with the mine expected to resumeoperation in July of 2000.

International SmeltingBudel (Netherlands)No lost time injuries were recorded at Budel thisyear. Programs designed to increase the safetyawareness among employees have assisted thisachievement. An ISRS (International SafetyRating System) safety audit by Det NorskeVeritas (DNV) resulted in Budel obtaining a safetycertificate with a level 9, with 10 being thehighest level.

Production increased by 2.3% to establish a new production record of 220,443 tonnes,eclipsing the 1992 mark of 218,400 tonnes. The marketing effort was further strengthened in a few European markets as Pasminco strives to establish strong, long-lasting customer relationships.

Construction of the Effluent Purification Facilities was completed in June 1999. The commissioning commenced in July 1999.

The construction of plant modifications requiredfor the conversion to Century concentrates iswell advanced with completion scheduled forNovember 1999. The first concentrate shipmentfrom the Pasminco Century Mine is expected in January 2000, leading to a completechangeover to Century concentrates byFebruary/March 2000.

The environmental program progressed well withthe clean-up of historic zinc ashes at the sitebeing 85% complete. By the end of 1999 all the

Budel

Netherlands

Smelting

International SmeltingEBIT

95 96 97 98 99

10

20

30

40

50

60

70

80

Note: Includes 50% share of Budel Zink EBIT prior to 1996, 100% from 1996

$m

0

Global production

21Pasminco

Reserves at 31 March 19991999 1998 Zinc Lead Copper Silver Gold

Location Tonnes (millions) % % % g/t g/t

Broken HillSouthern Proved 13.0 21.0 7.5 4.2 – 42 –Operations Probable 4.9 2.7 7.4 3.4 – 38 –

Total 17.9 23.7 7.5 4.0 – 41 –

Potosi Proved 0.1 0.3 8.5 3.4 – 12 –Probable – – – – – – –Total 0.1 0.3 8.5 3.4 – 12 –

Rosebery Proved 2.0 2.0 10.2 3.8 0.48 119 2.1Probable 1.1 1.4 11.4 4.2 0.38 132 3.1Total 3.1 3.4 10.6 3.9 0.45 123 2.4

Elura Proved 13.6 2.9 8.2 5.1 – 55 –Probable* 1.3 14.2 8.6 3.8 – 55 –Total 14.9 17.1 8.2 5.0 – 55 –

Century Proved 67.5 67.5 11.6 1.7 – 42 –Probable 31.0 31.0 11.6 1.5 – 47 –Total 98.5 98.5 11.6 1.7 – 43 –

Beltana Proved 0.1 0.1 40.0 2.2 – – –Probable – – – – – – –Total 0.1 0.1 40.0 2.2 – – –

Tennessee**Gordonsville Proved 2.2 2.3 3.12 – – – –

Probable 17.4 17.8 3.25 – – – –Clinch Valley Proved 0.7 0.7 2.6 – – – –

Probable 2.4 2.3 3.6 – – – –Total 22.7 23.1 3.23 – – – –

TOTAL Proved 99.2 96.8 – – – – –Probable 58.1 69.4 – – – – –Total 157.3 166.2 – – – – –

* Below 9L, probable reserve is calculated by applying mining factors to the measured plus indicated resource

** Reserves are as at 30 April 1999

Resources at 31 March 1999

1999 1998 Zinc Lead Copper Silver GoldLocation Tonnes (millions) % % % g/t g/t

Broken HillSouthern Measured 18.9 31.7 9.1 5.5 – 61 –Operations Indicated 8.0 6.4 8.8 4.8 – 52 –

Inferred 2.1 2.6 9.3 5.9 – 63 –29.0 40.7 9.0 5.3 – 59 –

Potosi Measured 0.4 0.6 8.3 5.5 – 42 –Indicated 0.4 0.4 7.6 4.3 – 45 –Inferred 1.6 1.6 9.2 4.2 – 46 –

2.4 2.6 8.8 4.4 – 45 –

Rosebery Measured 2.3 2.3 11.1 4.4 0.54 127 2.3Indicated 1.7 1.5 9.8 3.8 0.33 151 3.2Inferred 7.6 8.6 14.9 5.4 0.32 169 2.2

11.6 12.4 13.4 5.0 0.37 158 2.4

Elura Measured 22.5 22.5 8.3 5.2 – 62 –Indicated 0.3 0.7 9.8 2.4 – 62 –Inferred – – – – – – –

22.8 23.2 8.3 5.2 – 62 –

Century Measured 69.3 69.3 12.2 1.7 – 44 –Indicated 32.9 32.9 11.9 1.6 – 50 –Inferred 2.9 2.9 12.3 1.7 – 45 –

105.1 105.1 12.1 1.7 – 46 –

Dugald Indicated 48.0 48.0 12.1 1.9 – 41 –Inferred 2.0 2.0 12.1 1.9 – 36 –

50.0 50.0 12.1 1.9 41 –Beltana Measured 0.1 0.1 40.0 2.2 – – –

0.1 0.1 40.0 2.2 – – –Tennessee#

Gordonsville Indicated 13.3 12.6 3.3 – – – –Clinch Valley Indicated 3.8 3.6 3.0 – – – –

17.1 16.2 3.2 – – – –

TOTAL Measured 113.5 126.5 – – – – –Indicated 108.4 106.1 – – – – –Inferred 16.2 17.7 – – – – –

238.1 250.3 – – – – –# Refer page 23 for explanation

Ore Reserves and Resources

22 Pasminco

Ore Reserves and Resources

The Ore Reserves are compiled by the competent persons for eachlocation and reported according tothe Australasian Code for Reportingof Identified Mineral Resorces andOre Reserves.*

Broken Hill – SouthernOperationsThe reserve for the Southern Operations atBroken Hill is based on assays from diamonddrill holes and geological mapping interpreted oncross sections spaced 19.8 m apart. The current measured, indicated and inferredresource at a cut-off grade of 7% Zn + Pbstands at 29.0Mt at 9.0% Zn, 5.3% Pb and 59 g/t Ag. The resource is based on a threedimensional model of the geology and the mineopenings. The reserve is derived from themeasured and indicated resource by intersectingactual three dimensional stope design shapeswith the resource model. The proved plusprobable reserve at 31 March 1999 stands at17.9Mt at 7.5% Zn, 4.0% Pb and 41 g/t Ag.During the period from 30 June 1998 to 31 March 1999, high resolution modelling ofhistorical cut and fill mining allowed detaileddesign and mining evaluation of all individualpillar stopes to be undertaken for the first time.This was carried out in conjunction with a MineOptimisation Study by Australian MiningConsultants. These studies identified 5.1 Mt of material in the reserve that had no reasonableexpectation of being mined. During the reporting period 1.9 Mt of reserve material was mined, 5.1 Mt was deleted and 1.2 Mt of new material added.

an ongoing reassessment of remnant orereserves in previously mined areas, were themajor contributing factors in the fall in reservesand the increase in metal grades.

Continued success in the exploration programwas insufficient to fully offset the losses due to mining depletion and the effects of theincreased cut-off grade. During the reportingperiod, 0.45 Mt of the reserve were mined, 0.5 Mt were deleted and 0.62 Mt were added.The deep exploration drilling program has been deferred and diamond drilling in the coming year will focus on upgrading the statusof the inferred resources to allow additionalreserve estimation.(Compiled by P Edwards - Superintendent and R McLean -

Senior Planning Engineer Pasminco Rosebery Mine)

EluraThe Elura Mine reserve is based on assays fromdiamond drill holes and from undergroundmapping interpreted on cross sections at 10 mand 20 m spacing. The current measured plusindicated resource stands at 22.8 Mt at 8.3% Zn,5.2% Pb and 62 g/t Ag The resource is based on a three dimensional geological model of the orebody.

Broken Hill - PotosiThe resource for the Potosi Open Cut Mine isbased on assays from drilling and geologicalmapping interpreted on cross sections 10 mapart. The reserve is calculated by intersectingthe resource model with a three dimensionalmodel of the in situ volume of the final open pitdesign and applying a mining dilution factor. ThePotosi reserve at 31 March 1999 stands at 0.1 Mt at 8.5% Zn, 3.4% Pb and 12 g/t Ag.During the reporting period there were noadditions to the reserve and mining depleted the reserve by 0.2Mt.(Compiled by C Lutherborrow - Chief Geologist and D Edwards

- Superintendent Projects Pasminco Broken Hill Mine)

RoseberyOre reserves at the Rosebery Mine have beenbased on assays from diamond drilling conductedon sections spaced from 10 m to 40 m alongstrike and 10 m to 50 m up and down dip andon geological mapping. The current measured,indicated and inferred resource stands at 11.6 Mtat 13.4% Zn, 5.0% Pb, 0.3% Cu, 150 g/t Ag and2.4 g/t Au. The resource is based on a threedimensional model of the orebody and thedistribution of remnant pillars.

The proved plus probable reserve at 31 Marchstands at 3.1 Mt at 10.6% Zn, 3.9% Pb, 0.45%Cu, 123 g/t Ag and 2.4 g/t Au. During the ninemonth period since the last reserve statement,the reserve tonnage has fallen 10% but has beenoffset by an increase in grade as a consequenceof raising the cut-off grade for resourceestimation by 30%. This increase in the cut-offgrade followed the recommendations of theRosebery Life of Mine Study and together with

23Pasminco

identified mineral resource were evaluated. Thephysical disposition of the mineralisation hasbeen assessed and mining loss and dilutionparameters applied.

A variable cut-off grade has been applied incompiling the ore reserves. The cut-off grade is based upon the zinc equivalence (ZnEq)relationship, which includes value for lead andsilver, and varies from 8.0% ZnEq reducing to4.0% ZnEq over the planned life of the open-pitmining operations. The equivalence relationshipis based upon analysis of the metallurgicalperformance of the ore and assumptions ofmetal prices expected to be achieved for theproject. The variable cut-off grade has beendeveloped with the objective of maximising thenet present value of the mine operation.

The reserve as at 30 June 1998 was 98.5 Mt at11.6% zinc, 1.7% lead and 43 grams per tonnesilver, calculated from a measured (69.3 Mt)indicated (32.9 Mt) and inferred (2.9 Mt)resource of 105.1 Mt at 12.1 zinc, 1.7 % leadand 46 grams per tonne silver.(Compiled by R A Adam, Mining & Resource Technology Pty Ltd)

Dugald RiverThe Dugald River resource was estimated usinga block modelling technique with a cut-off of10% zinc plus lead, a minimum block thicknessof 5 m and a vertical extent from surface of 1,000 m. At 30 June 1998,the indicated (48 million tonnes) and inferred (2 milliontonnes) resource is estimated to be 50 milliontonnes at 12.1% zinc, 1.9% lead and 41 gramsper tonne silver.(Compiled by J H Duke, Principal Geologist, Metals)

Tennessee – Gordonsvilleand Clinch Valley The reserves at the Gordonsville and ClinchValley Mines in Tennessee USA are based on economic grade ore that is exposed byunderground development and by undergrounddrilling. In addition, economic grade ore isincluded that is delineated by surface drilling andcan be developed from existing mine workings.The proved plus probable reserves as at 30 April 1999 stand at 22.7 Mt of 3.2% Zn.

The inferred resource is based on surface drillintersections that occur in a primary ore horizonbut are currently uncommenced due to thedistance from existing mine workings. Unlike the other Pasminco mines, the indicatedresource total does not include the proved andprobable reserve tonnages. The reserve is 17.1 Mt at 3.2% Zn.

Work is in hand to ensure that the reserves and resources quoted will be compliant with the JORC standards.(Compiled by Wallace Mitchell - Geological Consultant)

The proved plus probable reserve at 31 March1999 stands at 14.9 Mt @ 8.2% Zn, 5.0% Pband 55 g/t Ag.

A review of the stoping strategy below 6 level to 9 level and completion of stope designs forthis area has resulted in the significant increasein the proved reserve from 2.2 Mt in 1998 to13.6 Mt in 1999. Mining depleted the reserve by0.8 Mt, 0.3 Mt was removed for geotechnicalreasons and a further 1.0 Mt was lost as a resultof the stoping strategy review.

Below 9 level the probable reserve is calculatedby applying mining factors to the measured plusindicated resource.(Compiled by P Leevers - Geology Superintendent and P Fairfield

- Senior Mining Engineer Pasminco Elura Mine)

CenturyMore than 500 diamond, reverse circulation andpercussion holes have been drilled at an averagedrilling density of 70 m to delineate the resourceand to explore for additional resources.

The reported reserves were developed frommine planning studies completed in April 1997.In the course of these studies, the economicfactors impacting upon the exploitation of the

Ernest HenryPasminco Limited has a 49% interest in theErnest Henry Mine in Queensland (MIM Ltd 51%).

The following statement is the first majorrecalculation of the Ernest Henry Mine reservesand resources since the initial feasibility studywas completed in 1995. The published resourcethen was 166 Mt which has been depleted by16.3 Mt through mining operations. A successfuldrilling program in 1998 and a reappraisal ofexisting data have delineated an additional 5 Mtof resources and reserves.

The resource at Ernest Henry Mine is based onordinary kriging of blocks with dimensions 20 mx 20 m x 16 m. Supergene mineralisation isbased on ordinary kriging on a geologicallyconstrained block model at 0.5% Cu cut-off.Primary mineralisation utilises a 0.4% Cu cut-off.The resource as at 30 June 1999 is 155 Mt at1.1% Cu and 0.52 g/t Au. The reserve is 113 Mt at 1.1% Cu and 0.54 g/t Au.(Compiled by R A Crookes - Technical Services Manager

Ernest Henry Mine)

Ernest Henry Reserves and Resources as at 30 June 1999

Resources Copper GoldTonnes (millions) % g/t

SupergeneMeasured 6 1.3 0.6Indicated 1 1.3 0.4

PrimaryMeasured 65 1.1 0.5Indicated 83 1.1 0.5

TotalMeasured 71 1.1 0.5Indicated 84 1.1 0.5Total 155 1.1 0.5

ReservesSupergene

Proved 6 1.3 0.5Probable 1 1.3 0.4

PrimaryProved 53 1.1 0.6Probable 53 1.1 0.5

TotalProved 59 1.1 0.6Probable 54 1.1 0.5Total 113 1.1 0.5

* Report of the Joint Committee of the Australasian Institute of

Mining and Metallurgy, Australian Institute of Geoscientists and

Minerals Council of Australia (JORC)

24 Pasminco

Production 5 Year Summary

★ representing five months production since 1 February when Pasminco assumed control of the operations

Mining

Broken Hill Mine 1999 1998 1997 1996 1995

Total Ore Treated Tonnes 2,809,357 2,715,402 2,700,642 2,547,179 2,525,153

Assaying Zinc % 7.9 7.5 8.2 7.7 8.0

Lead % 4.3 4.7 5.2 5.5 5.9

Silver g/t 44.8 43.4 53 54 56

Zinc Concentrate Tonnes 391,185 360,885 393,791 349,323 362,222

Containing Zinc (tonnes) 198,353 181,097 196,371 174,926 181,148

Lead Concentrate Tonnes 157,910 165,749 191,269 185,118 196,504

Containing Lead (tonnes) 109,209 114,595 130,185 129,490 138,689

Silver (kg) 102,076 96,788 118,922 119,594 121,801

Elura Mine

Total Ore Treated Tonnes 1,061,160 1,021,965 1,044,253 1,023,641 1,059,602

Assaying Zinc % 8.1 7.8 8.5 8.5 9.2

Lead % 5.4 5.1 5.7 5.8 5.9

Silver g/t 63.0 79.2 94 74 101

Zinc Concentrate Tonnes 131,123 105,772 124,217 130,865 146,069

Containing Zinc (tonnes) 66,610 53,365 62,498 66,219 73,149

Lead Concentrate Tonnes 83,301 72,444 83,020 85,329 88,110

Containing Lead (tonnes) 45,232 37,587 43,166 43,716 44,169

Silver (kg) 30,405 31,125 36,046 31,732 44,150

Rosebery Mine

Total Ore Treated Tonnes 706,054 649,657 640,593 600,053 500,181

ex Rosebery Mine 610,658 569,940 622,643 600,053 500,181

Purchased Ore 95,396 79,717 17,950 – –

Assaying Zinc % 11.9 9.8 10.0 11.1 11.0

Lead % 3.2 2.8 2.9 3.0 3.7

Copper % 0.4 0.4 0.4 0.4 0.4

Silver g/t 105.6 84.5 104 103 114

Gold g/t 1.5 1.4 1.5 1.7 1.6

Zinc Concentrate Tonnes 136,486 106,719 108,390 113,750 94,392

Containing Zinc (tonnes) 75,177 56,134 57,089 59,321 48,942

Lead Concentrate Tonnes 28,056 19,646 19,877 20,046 9,047

Containing Lead (tonnes) 18,315 12,243 12,608 12,228 5,919

Silver (kg) 39,559 25,412 28,304 27,820 10,388

Gold (kg) 146 88 78 130 38

Copper Concentrate Tonnes 5,925 5,553 5,855 4,649 3,680

Containing Copper (tonnes) 1,347 1,307 1,394 990 865

Silver (kg) 19,502 12,103 18,765 14,062 12,876

Gold (kg) 412 363 400 326 233

Gold Dore’ kg 165 113 226 247 174

Containing Gold (kg) 114 79 147 168 120

Silver (kg) 51 34 68 79 52

Beltana/Aroona Mine

Total Ore Treated Tonnes – 57,269 9,600 – –

Assaying Zinc % – 38 40.0 – –

Containing Zinc (tonnes) – 21,762 3,840 – –

Gordonsville Mine★

Total Ore Treated Tonnes 564,061 – – – –

Assaying Zinc % 3.0 – – – –

Zinc Concentrate Tonnes 24,758 – – – –

Containing Zinc (tonnes) 16,000 – – – –

25Pasminco

★ these figures represent Pasminco’s 50% share of ARA production

★★ includes 50% share of Budel Zink production prior to 1996, 100% from 1996

★★★ representing five months production since 1 February when Pasminco assumed control of the operations

Metals

Hobart Smelter 1999 1998 1997 1996 1995

Tonnes

Zinc and Alloys 214,188 197,042 207,703 207,840 189,067

Cadmium 303 368 244 319 316

Lead Residue 24,910 26,797 28,779 26,913 23,676

Sulphuric Acid 388,168 390,989 395,827 392,304 347,150

Fertilisers – – – – 3,525

Copper Sulphate 3,516 3,088 3,446 3,985 3,062

Cockle Creek Smelter

Zinc and Alloys 76,630 71,291 79,393 84,437 86,804

Lead Bullion 27,262 25,149 28,795 31,447 33,556

Quenched Lead Bullion 1,716 – – – –

Cadmium 202 350 201 514 538

Copper Sulphate 1,488 1,681 2,731 3,514 2,969

Lead Dross 1,323 1,176 1,627 2,045 2,834

Sulphuric Acid 158,552 150,799 170,646 177,286 177,955

Port Pirie Smelter

Lead and Alloys 196,498 185,061 201,755 223,654 204,665

Cathode Copper 3,273 3,787 3,943 4,065 3,834

Zinc and Alloys 31,870 35,243 32,651 38,013 36,051

Silver (kg) 290,339 112,030 231,756 206,016 206,201

Gold (kg) 562 311 700 661 550

Sulphuric Acid 75,544 68,058 82,985 87,264 81,540

ARA★

Lead Alloys 14,776 13,147 12,486 11,782 10,545

Lead Bullion – 742 1,485 1,141 1,640

Budel Zink★★

Zinc and Alloys 220,443 215,385 204,626 205,674 107,631

Cadmium 759 730 605 700 297

Copper in Residue 1,724 1,279 1,189 1,166 850

Cobalt in Residue 327 35 38 40 33

Sulphuric Acid 357,723 341,372 311,468 305,934 273,696

Zinc Dross 115 178 141 264 212

Clarksville★★★

Zinc and Alloys 43,295 – – – –

Germanium 716 – – – –

Cadmium 151 – – – –

Sulphuric Acid 60,661 – – – –

26 Pasminco

Performance 10 Year Summary

▲ includes 50% share of Budel Zink production prior to 1996, 100% from 1996

❒ includes 50% ARA production

● includes purchased ore

★ realised prices and exchange rates

Profit & Loss 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990Gross sales $m 1,564.4 1,370.1 1,352.8 1,318.2 1,224.1 1,193.7 1,487.1 1,431.2 1,692.2 1,913.5

Cost of sales

(including exploration & research) $m 1,379.2 1,152.5 1,104.2 1,108.7 1,049.6 1,066.1 1,384.9 1,326.5 1,562.0 1,503.6

Depreciation $m 158.3 131.7 121.5 121.5 120.1 112.2 130.3 131.8 132.0 115.2

Earnings before interest and tax $m 26.9 85.9 127.1 88.0 54.4 15.4 (28.1) (27.1) (1.8) 294.7

Net interest and finance charges $m 35.4 13.5 17.1 17.0 21.5 21.2 28.5 33.5 43.0 44.5

Income tax charge/(credit) $m (0.2) 32.8 40.0 30.2 16.2 (4.1) (15.7) (17.4) (10.9) 96.5

Operating profit/(loss) after tax

and before abnormal

and extraordinary items $m (8.3) 39.6 70.0 40.8 16.7 (1.7) (40.9) (43.2) (33.9) 153.7

Abnormal items (net of tax) $m 0.0 23.7 (5.3) 0.0 (4.5) (12.7) (46.0) (15.4) (13.7) 0.0

Extraordinary items (net of tax) $m 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (81.5) 0.0 0.0

Operating profit/(loss)

after tax and abnormal

and extraordinary items $m (8.3) 63.3 64.7 40.8 12.2 (14.4) (86.9) (140.1) (47.6) 153.7

Earnings per share cents (0.7) 6.2 8.1 5.1 1.5 (1.9) (12.1) (8.1) (6.6) 21.3

Return on shareholders’ equity % (0.1) 4.3 8.3 5.4 1.6 (2.0) (12.2) (7.1) (5.2) 17.2

Dividends $m 0.0 45.0 31.8 23.8 15.9 0.0 0.0 0.0 0.0 86.4

Dividends per share cents 0.0 4.0 4.0 3.0 2.0 0.0 0.0 0.0 0.0 12.0

Dividend cover times 0.0 1.6 2.0 1.7 0.8 0.0 0.0 0.0 0.0 1.8

Net cash provided by operating activities $m 435.9 258.6 151.0 80.2 180.6 128.2 168.5 80.1 309.1 337.8

Interest cover times 12.3 19.2 8.8 4.7 8.1 5.9 5.8 2.3 7.2 7.6

Balance Sheet

Shareholders’ equity $m 1,463.9 1,490.7 778.5 750.6 740.0 739.6 665.7 759.4 885.4 935.4

Property, plant and equipment $m 2,525.0 1,652.6 948.4 887.4 891.7 900.1 966.6 1,083.8 1,223.4 1,103.2

Economic entity (Group) net debt $m 1,256.3 166.5 239.1 153.1 76.5 272.8 521.1 560.7 469.2 291.5

Operating working capital $m 325.6 267.6 306.3 268.6 209.8 221.2 306.1 402.2 388.7 598.2

Net Debt to Net Debt plus Equity % 46.2 10.0 23.5 16.9 9.4 26.9 43.9 42.5 34.6 23.7

Capital expenditure $m 820.9 445.3 196.5 140.7 97.3 50.0 94.2 114.3 258.1 214.0

ProductionMines

Ore treated tonnes 5,140,632 4,387,000 4,395,000 4,170,900 4,084,900 3,784,700 3,662,800 3,814,300 4,157,900 4,451,500

Contained zinc ● tonnes 356,140 312,400 319,800 300,500 305,100 293,300 285,400 299,000 366,400 365,100

Contained lead ● tonnes 172,756 164,400 186,000 185,400 196,400 202,300 200,300 199,300 211,000 210,600

Contained silver kg 191,593 165,500 202,100 193,300 207,500 203,100 225,400 234,300 261,100 310,300

Contained gold kg 672 530 625 620 580 670 690 680 1,090 1,080

Smelters

Zinc ▲ tonnes 586,427 519,000 524,400 536,000 419,600 445,400 544,600 533,600 519,400 482,200

Lead (metal & bullion) ❒ tonnes 240,252 224,100 244,500 268,000 250,400 272,600 308,500 303,000 295,600 280,200

Silver kg 290,339 112,000 231,000 206,000 206,200 208,700 214,400 204,100 221,300 228,300

Commodity Prices

Zinc (year average) US$/tonne 994★ 1,192★ 1,124★ 1,022 1,045 938 1,116 1,162 1,309 1,609

Lead (year average) US$/tonne 518★ 562★ 724★ 721 613 438 487 528 682 772

Exchange Rates

AUD/USD (year average) 0.62★ 0.70★ 0.77★ 0.76 0.74 0.69 0.70 0.77 0.79 0.77

AUD/NLG (year average) 1.24 1.38 1.40 1.24 1.25 1.31 1.24 1.45 1.41 1.54

27Pasminco

Board

Mark R Rayner

Chairman of the Board

Chairman of the Remuneration Committee

Mark Rayner (age 61), BSc (Hons) Chem Eng.,FTSE, FAusIMM, FIEA, FAICD, has been aDirector since 1989 and was appointedChairman of Pasminco in October 1992. Mr Rayner is also Chairman of National AustraliaBank Limited and Mayne Nickless Limited and a Director of Boral Limited. He is Vice Presidentof the Australia Japan Business Co-operationCommittee and Chairman of the Australia JapanBusiness Forum. He was previously ChiefExecutive of Comalco Limited and a Director and Group Executive of CRA Limited. Mr Raynerresides in Melbourne.

David M Stewart

Managing Director and Chief Executive Officer

Member of the Safety, Health and

Environment Committee

David Stewart (age 53) joined Pasminco in early1992 as Executive General Manager - Metals. Hewas appointed a Director in August 1994 and Managing Director and Chief Executive of Pasminco on 1 July 1995. He returned to Australia from North America, where as an Executive Director for Libbey Owens Ford he was responsible for the operation of theirAutomotive Replacement Business in the UnitedStates, Mexico and Canada. Prior to joiningLibbey Owens Ford, Mr Stewart was ChiefExecutive of Pak Pacific, an Australian basedprinting and packaging business with operationsin Australia, New Zealand and Singapore. Hisprevious experience included operational roles inthe building products and packaging industries,both in Australia and South-East Asia. Mr Stewart graduated as a chemical engineerfrom Monash University. He subsequentlyreceived post graduate degrees from theUniversities of Manchester and Cambridge in theUnited Kingdom. Mr Stewart is President of theMinerals Council of Australia, a member of theBusiness Council of Australia and a member ofthe Victoria Council of the Division of theAustralian Institute of Company Directors. Mr Stewart resides in Melbourne.

Geoffrey D Allen

Member of Safety, Health

and Environment Committee

Geoff Allen (age 57), BA (Hons), MBA, joined theBoard in August 1994. He was formerly aCommonwealth public servant, political adviserand business school academic. He was thefoundation Executive Director of the BusinessCouncil of Australia and is currently Chairman ofThe Allen Consulting Group and the AustralasianCentre of Corporate Public Affairs. He wasChairman of the Australian Government’s TradeNegotiations Advisory Group during the UruguayRound and is currently Chairman of theAustralian Government’s Trade Policy AdvisoryCouncil. He is also a member of the Government’sForeign Affairs Council. He was formerly CouncilMember of the Australian Film, Television andRadio School and is currently a Director of WorldCompetitive Practices Pty Ltd, Lancemore PtyLtd, Melbourne Business School Ltd and theAustralian Services Network (Inc). He is PrincipalAcademic Associate at the Melbourne BusinessSchool, and President of the Melbourne BusinessSchool Alumni. Mr Allen resides in Melbourne.

David J Brydon

Chairman of the Audit Committee

Member of the Remuneration Committee

David Brydon (age 69), has been a Directorsince December 1988. Mr Brydon is a Directorof WMC Limited, PMP Communications Limitedand Djerriwarrh Investments Limited. He waspreviously Managing Director of ACI InternationalLimited. Mr Brydon resides in Melbourne.

Anthony B. Daniels OAM

Member of the Audit Committee

Tony Daniels (age 64) was appointed a Directorin January 1996. Mr Daniels is a Director ofCapral Aluminium Limited, Orica Limited, PacificDunlop Ltd and Australian Gas Light Company.He is also a Director of IBJ Australia BankLimited and O’Connell Street Associates Pty Ltd,and Chairman of the NSW State SuperannuationTrustee Corporations. He was previouslyManaging Director of Tubemakers of Australia Limited. Mr Daniels resides in Sydney.

Robert Bryan Davis (retired June 1999)

Bryan Davis (age 56), BSc (Tech)- MiningEngineering was the Executive Director - Miningand was appointed a Director in May 1995.Prior to joining Pasminco in November 1991 asExecutive General Manager - Mining, he spent23 years with the CRA Group, commencing hiscareer at Broken Hill where he became Manager- Mining at the ZC/NBHC operations beforemoving to Cobar as General Manager of theCSA Mine. In 1988 he joined the AustralianConsolidated Minerals Group to oversee thedevelopment of the Golden Grove base metalsmine in Western Australia and was GeneralManager - Mining and an Executive Director of ACM Gold, incorporating operationalresponsibilities for the group’s gold mines. He was also Director of North Flinders GoldMines. Currently he is a Director of NewcrestMining Limited, New South Wales MineralsCouncil Limited and Centre for MiningTechnology & Equipment.

Andrew F Guy

Member of the Audit Committee

Andrew Guy (age 51), LLB, MBA, wasappointed to the Board in August 1994. Mr Guy is a partner of the legal firm ArthurRobinson & Hedderwicks. Currently, he is a Director of Djerriwarrh Investments Limited,Anglicare Victoria, Spicers Paper Limited andCGU Insurance Australia Limited. Mr Guyresides in Melbourne.

David K Macfarlane

Chairman of the Safety, Health

and Environment Committee

Member of the Remuneration Committee

David Macfarlane (age 69), has been a Director since December 1988. Mr Macfarlaneis Chairman of Spicers Paper Limited, ViceChairman of National Australia Bank Limited anda Director of Schroders Australia HoldingsLimited, DEM Limited and the AustralianFoundation Investment Company Limited. He was previously Managing Director of JamesHardie Industries Limited. Mr Macfarlane residesin Sydney.

Mark Rayner

David Stewart

Geoffrey Allen

David Brydon

Anthony Daniels

Bryan Davis

Andrew Guy

David Macfarlane

28 Pasminco

Corporate Governance Statement

Corporate GovernanceYour directors are committed to observing high standards of corporategovernance. A description of the main features of the corporate governanceprocedures and guidelines adopted by the Board is set out below.

Board of DirectorsThe Pasminco Board is comprised of a majority of independent non-executivedirectors. Currently one member of the Board, the Chief Executive, is anexecutive director. The Chairman is an independent non-executive member ofthe Board. In appointing additional directors, the Board specifies the mix ofqualifications, skills and experience it believes is desirable and selectsindividuals who will bring characteristics necessary to achieve this mix. Toidentify appropriate candidates, the assistance of external consultants isutilised. The Remuneration Committee undertakes the nomination function,and brings recommendations to the full Board. Apart from the statutoryretirement age, no maximum age is prescribed for directors.

Responsibilities and OperationThe Board regularly reviews the operational and financial performance of eachof the Group’s activities, considers strategic plans and initiatives, reviewsplans and budgets, reviews and approves significant capital investmentproposals and establishes and monitors delegated authority levels for capitaland financial commitments. It monitors and receives advice on areas ofoperational and financial risk and considers strategies for appropriate risk minimisation.

The Pasminco Board meets 11 times per year, but from time to time convenesoutside the scheduled meetings to consider issues of special importance. At least two of the scheduled Board meetings are held at operating sites eachyear and undertaken in conjunction with detailed briefings from managementon site-specific issues. Members of management, auditors, andrepresentatives from the Company’s advisers attend Board and committeemeetings as appropriate. Three committees of the Board – the AuditCommittee, the Safety, Health and Environment Committee and theRemuneration Committee – have been established to consider these specificareas in detail and to report to the full Board. In addition the Board hasestablished a Standing Committee to consider matters which arise betweenregular scheduled meetings of the full Board.

Independent AdviceDirectors may obtain independent professional advice, at the entity’s expense,if appropriate. Prior to seeking advice directors are required to consult with the Chairman.

Audit CommitteeThe charter of the Audit Committee is to review significant financialinformation to ensure that it is complete, accurate, adequate and timely and toadvise the Board accordingly. It is comprised only of non-executive directors.

To achieve this, the Audit Committee:

• reviews annual and half-yearly financial reports;

• reviews the terms of engagement and scope of activity of the external auditors;

• reviews the performance of the external and internal auditors and their audit fees.

•provides a direct line of communication between directors and both the internal and external auditors;

• reviews internal audit activities and reports in conjunction with senior management;

•monitors the effectiveness of internal control systems;

• reviews the Group’s commercial practices and policies; and

In addition to the non-executive director members, Audit Committee meetingsare attended by members of management and the external and internalauditors as appropriate. Current members of the Audit Committee are David Brydon (Chairman), Andrew Guy and Tony Daniels.

Safety, Health and Environment CommitteeThe terms of reference of the Board Safety, Health and EnvironmentCommittee are to oversee the implementation of the Pasminco Safety, Healthand Environment Policies which are aimed at achieving high standards of carein all activities in which the Group is engaged, from exploration throughmining and smelting to the marketing of its products.

In particular, the Committee reviews with management:

• the safety, health and environment risks associated with Pasminco’s operation and products;

• the response to be adopted with respect to such risks;

• the implementation and audit of such responses; and

• the appropriate management structure in the light of the responses adopted.

The Board Safety, Health and Environment Committee members are DavidMacfarlane (Chairman), David Stewart and Geoff Allen. Members ofmanagement attend meetings as appropriate.

Remuneration CommitteeThe charter of the Remuneration Committee is to review with the ChiefExecutive the overall remuneration structure and policies for staff employed by Pasminco, and to review and approve the remuneration of the seniorexecutive staff and appointments at senior level.

The committee seeks to ensure that the remuneration policy structure isequitable, market competitive and consistent to assure the recruitment andretention of staff with the capabilities, competence and experience necessaryfor the achievement of Pasminco’s business objectives.

With advice from appropriate external consultants, the committee reviews and establishes the remuneration and other employment conditions of theChief Executive. The committee also obtains the advice of qualified externalconsultants on appropriate levels of remuneration for the non-executivedirectors. The committee acts as the nomination committee in developingrecommendations for new Board appointments.

The Remuneration Committee members are Mark Rayner (Chairman), David Brydon and David Macfarlane. No fees are payable to directors inrespect of Remuneration Committee duties.

Board Standing CommitteeThe charter of the Board Standing Committee is to deal with urgent issuesarising between scheduled Board meetings which relate to matters the Boardhas previously approved in principle. All directors are members and a quorumis three, being any two non-executive directors and, wherever possible, theManaging Director (failing which any other director). All directors are notifiedof meetings in advance and minutes are circulated within 48 hours of eachmeeting. Membership of the Standing Committee is not considered an extraservice for the purposes of the article in the Company’s constitution dealingwith directors’ remuneration.

Risk Assessment and ManagementThe Board as a whole monitors and receives advice on areas of operational andfinancial risk and considers strategies to manage business risks. In turn theAudit Committee, the Safety, Health and Environment Committee and workingcommittees of the Board established for specific projects, regularly report backon the particular risks associated with their respective areas of responsibility.

Year 2000 ReadinessPasminco has maintained active Year 2000 project teams since mid 1997.The Board and Audit Committee review progress on Year 2000 readinesspreparations at each scheduled meeting. More information on this issue is set out on page 15 of this report.

Ethical StandardsThe economic entity has adopted a vision and values statement developedwith the involvement of many employees throughout the Group. The valueswhich support the Group’s vision include, through an adopted code ofconduct, a commitment to respect the law and act accordingly and to be fair,honest and consistent in dealings and behaviour. The code of conduct alsodeals with conflicts of interest, use of Company assets and information,honesty and accountability.

29Pasminco

Directors’ Report

Your Directors present their report on the consolidated entity for the yearended 30 June 1999.

DirectorsThe name of each person who has been a Director of Pasminco Limitedduring or since the end of the financial year is:

M R Rayner (Chairman)D M Stewart (Managing Director & Chief Executive)G D AllenD J BrydonA B DanielsR B DavisA F GuyD K Macfarlane

Each of them has been a Director during the whole of the financial year and since the end of it except R B Davis who retired on 30 June 1999.

Principal ActivitiesThe principal activities of the corporations in the consolidated entity duringthe year were exploration and integrated mining, smelting and marketing toproduce zinc and lead concentrates, and zinc, lead and silver metals togetherwith various alloys and by-products.

Consolidated Results 1999 $m 1998 $mConsolidated economic entity profit/(loss) attributable to the members of Pasminco Limited (8.3) 63.3

Review of OperationsA review of the operations and the results of the consolidated entity for the financial year are set out on pages 4 to 26 of the 1999 Annual Report.

Significant Changes in the State of Affairs and Events Subsequent to Year EndThe Company has reached agreement on the sale of the coal business itacquired in February 1999 as a result of the acquisition of Savage ResourcesLimited Group. The Company concluded agreements relating to the transferto external equity investors of the pipeline, port facility and transfer vessel(“PPTV assets”) under construction for the Century project during the financialyear and in July and August 1999. The sale of the PPTV assets is recognisedin the consolidated financial report as at 30 June 1999. Details of thesetransactions are set out in note 40 to the financial statements on page 59.

Other than items noted in this report, there were no significant changes in the state of affairs of the consolidated entity during the financial year. Thereare no other matters or circumstances that have arisen since the end of thefinancial year which significantly affected or may significantly affect:

(a) the operations of the consolidated entity;

(b) the results of those operations; or

(c) the state of the affairs of the consolidated entity in future financial years.

Likely Developments and Expected Future ResultsDirectors believe it would be likely to prejudice the interests of the Companyto provide additional information relating to likely developments in the operationsof the consolidated entity and the expected results of those operations in thefinancial years subsequent to the financial year ended 30 June 1999.

Information on DirectorsParticulars of the qualifications, experience and special responsibilities of eachDirector at the date of this report are set out on page 27 in this Annual Report.

Attendance at MeetingsThe number of meetings of the Board of Directors and its principal BoardCommittees held during the year were:

Board of Directors: 11

Audit Committee: 4

Safety, Health & Environment Committee: 4

Remuneration Committee: 3

The following table sets out the number of meetings Directors were eligible to attend, and the meetings attended by each Director.

Directors Board of Audit Safety, Health RemunerationDirectors Committee & Environment CommitteeMeetings Meetings Committee Meetings

Meetings

held attended held attended held attended held attended

M R Rayner 11 11 – – – – 3 3

D M Stewart 11 11 – – 4 4 – –

G D Allen 11 11 – – 4 4 – –

D J Brydon 11 10 4 4 – – 3 3

A B Daniels 11 11 4 3 – – – –

R B Davis 11 11 – – – – – –

A F Guy 11 10 4 3 – – – –

D K Macfarlane 11 11 – – 4 4 3 3

Directors’ BenefitsThe interests of each Director in the shares of the Company at the date ofthis report were:

Pasminco Limited Ordinary Shares

Directors Beneficial Interest Non-Beneficial Interest

M R Rayner 13,629 Nil

D M Stewart 25,000 1,029

G D Allen 10,000 Nil

D J Brydon 2,572 Nil

A B Daniels 10,572 Nil

R B Davis1 Nil 5,000

A F Guy 10,000 Nil

D K Macfarlane 2,572 Nil1as at 30 June 1999

Pasminco LimitedOptions on Ordinary Shares

Executive Allocation Year of Exercise ExpiryDirectors Issue Price Date

D M Stewart 150,000 1995 $1.67 10 November 2000

200,000 1996 $2.07 8 November 2001

300,000 1997 $1.84 14 November 2002

300,000 1998 $1.49 13 November 2003

R B Davis1 75,000 1995 $1.67 10 November 2000

75,000 1996 $2.07 8 November 2001

100,000 1997 $1.84 14 November 2002

100,000 1998 $1.49 13 November 20031as at 30 June 1999

No interests were held in the share capital of related companies.

Mr A F Guy is a partner of Arthur Robinson & Hedderwicks, Solicitors, who provide legal advice on a commercial basis to the economic entity.

Mr D M Stewart and Mr R B Davis were engaged throughout the financialyear in the full-time employment of the economic entity, and received orbecame entitled to receive in connection with that employment, medical and other benefits relating to such employment.

Other than as stated in this report, during or since the financial year noDirector of Pasminco Limited has received or become entitled to receive abenefit, other than a benefit included in the aggregate amount of emolumentsreceived or due and receivable by the Directors shown in the consolidatedaccounts, by reason of a contract entered into by the Company or an entitythat the Company controlled or a body corporate that was related to theCompany when the contract was made or when the Director received, or became entitled to receive the benefit, with:

•a Director; or

•a firm of which the Director is a member; or

•an entity in which a Director has a substantial financial interest.

30

Directors’ Report Continued

Directors’ EmolumentsNon-executive directors fees are determined by the Board on the basis ofrecommendations received from the Remuneration Committee from time totime. Company policy is to set fees around the median of the marketplace forlisted companies of similar size to Pasminco. There is no direct relationshipbetween the quantum of non-executive directors fees and the Company’sperformance in any given year.

The remuneration of executive directors is determined by the RemunerationCommittee, based on recommendations from the Chairman or ManagingDirector as appropriate. The principles applied to the remuneration of the fivehighest paid officers detailed below also apply to the remuneration ofexecutive directors.

Pasminco

Insurance and IndemnityThe Group has in place an insurance policy to indemnify Directors andOfficers against liability incurred which arises out of the conduct of businessor in the discharge of their duties as a Director or Officer. The insurancepremium is currently $171,750 per annum.The economic entity has entered into agreements with each Director toindemnify them in respect of any liability:• to a third party (other than the Company or a related body corporate) unless

the conduct arises out of conduct involving a lack of good faith; and• for reasonable costs and expenses incurred in successfully defending civil

or criminal proceedings in which judgement is given in favour of the Director or the Director is acquitted, or in connection with an application, in relation to such proceedings, in which relief is granted under the Corporations Law.

Emoluments of Five Highest Paid OfficersThe remuneration of executives who report to the Managing Director isdetermined by the Board Remuneration Committee, based on recommendationsfrom the Managing Director. For other senior officers, the Board RemunerationCommittee reviews and approves the overall remuneration program withindividual remuneration levels requiring approval by the Managing Director.The actual remuneration of executives and senior officers is influenced by theindividual’s performance, the marketplace generally and the Company’sperformance. In broad terms, Pasminco targets its remuneration policy at themedian of the marketplace. Remuneration is delivered in fixed and variablecomponents. Fixed remuneration, which covers cash, motor vehicles andsuperannuation contributions is positioned to attract and retain qualifiedexecutives. Incentive payments, the variable remuneration component, arelinked to measures which reflect the operational performance of theorganisation and also to the achievement of outcomes or other milestonesregarded as crucial to the longer term success of the Company.The nature and amount of each element of the emoluments for the five highestpaid named officers are:

DM Stewart Managing Director & Chief Executive Officer 670,889 52,592 73,019 4,991 32,631 834,122 300,000

RB Davis Executive Director – Mining 281,781 50,200 73,019 21,732 10,877 437,609 100,000

MR Rayner Chairman 100,000 7,000 107,000

GD Allen Director 42,000 7,000 3,430 52,430

DJ Brydon Director 42,000 10,000 3,640 55,640

AB Daniels Director 42,000 7,000 3,430 52,430

AF Guy Director 42,000 7,000 3,430 52,430

DK Macfarlane Director 42,000 10,000 3,640 55,640

Notes1. No legislative or accounting standard exists for the valuation of employee share options for disclosure purposes. We have valued share options issued during the reporting period using the formula

contained in Section 139FK of the Australian Income Tax Assessment Act. This formula is used to value options for tax purposes where option holders elect to be taxed ‘up front’ rather than when the options are exercised. Although it is unusual for Australian employee share option holders to make this taxation election, the formula provides a methodology in the absence of other guidelines. Application of the formula results in a value of $0.10877 per option for options issued in November 1998.

2. The terms of the options issued to Mr Stewart and Mr Davis are in accordance with the Pasminco Limited Employee Option Scheme which was approved by shareholders at the 1995 AGM. The aggregate number of options issued during the year to Mr Stewart and Mr Davis was in accordance with the resolution passed at the 1998 AGM. All employee options held by Mr Davis have either been exercised or lapsed following his retirement from the Company on 30 June 1999.

3. For non-executive directors, this represents contributions made to an approved superannuation fund, in accordance with superannuation guarantee requirements. Non-executive directors who have served in excess of 5 years are eligible for retirement benefits under the Directors’ Retiring Allowance Scheme established in accordance with the Company’s constitution equal to their total emoluments over the preceding 3 years. A pro-rata allowance is payable for service between 3 and 5 years and no allowance is payable for less than 3 years service. Amounts payable under this scheme are reduced by the balance of that director’s superannuation account resulting from superannuation guarantee contributions. Provision for Directors’ Retiring Allowances is made in the accounts. Individual payments will be disclosed when payable on retirement.

4. Sundry items includes parking, travel and accommodation benefits, plus FBT, where applicable.

5. For 1999 no amounts have been included in respect of the Manager Incentive Plan. Any amounts which are paid for the 1999 year will be detailed in disclosures for the year ended 30 June 2000. Nonexecutive directors do not participate in the Manager Incentive Plan.

Optio

ns Is

sued

ov

er O

rdin

ary

Shar

es (2

)

Tota

l

Shar

e Op

tions

(1)

Ince

ntiv

ePa

ymen

ts (5

)

Othe

r Sun

dry

Bene

fits

(4)

Com

pany

Cont

ribut

ions

toSu

pera

nnua

tion

(3)

Com

pany

Pro

vide

dM

otor

Veh

icle

s

Cash

Sal

ary

Boar

d Co

mm

ittee

Fee

Dire

ctor

’s

Base

Fee

Posi

tion

Nam

e

IJ Williams Executive General Manager – Pasminco Century Project 375,414 36,000 6,855* 2,248 100,000 8,158 528,675 75,000

WPFH de Graaff (3) Executive General Manager– International Smelting 374,382 21,799 53,717* 15,064 – 464,962 –

L van den Boogaard (4) General Manager– Cockle Creek Smelter 203,927 25,369 45,031* 101,441 4,351 380,119 40,000

JW Winckel Executive General Manager – Australian Smelting 230,746 35,024 73,019* 7,542 8,158 354,489 75,000

BM Constance Executive General Manager– Finance and Services 262,864 47,253 24,883* 5,642 8,158 348,800 75,000

Notes1. No legislative or accounting standard exists for the valuation of employee share options for disclosure purposes. We have valued share options issued during the reporting period using the formula

contained in Section 139FK of the Australian Income Tax Assessment Act. This formula is used to value options for tax purposes where option holders elect to be taxed ‘up front’ rather than when theoptions are exercised. Although it is unusual for Australian employee share option holders to make this taxation election, the formula provides a methodology in the absence of other guidelines. Applicationof the formula results in a value of $0.10877 per option for options issued in November 1998.

2. The terms of the options issued to the above officers are in accordance with the Pasminco Limited Employee Option Scheme which was approved by shareholders at the 1995 AGM.

3. WPFH de Graaff is based in the Netherlands and paid in Dutch Guilders. The Dutch Guilder amounts have been converted to Australian dollars at the average A$/Nlg exchange rate over the year. ieA$1=Nlg1.2386

4. L van den Boogaard, a Dutch national on assignment to Australia, is remunerated partly in A$ and partly in Dutch Guilders. The Dutch Guilder amounts have been converted to A$ at the average A$/Nlgexchange rate for the year, ie A$1=Nlg1.2386

5. Sundry items includes parking, travel, and accommodation benefits, plus FBT where applicable.

6. Expatriate benefits include the provision of housing, home leave travel expenses and other allowances related to the expatriate assignment. Amounts include FBT where applicable

7. For 1999 no amounts have been included in respect of the Manager Incentive Plan. Any amounts which are paid for the 1999 year will be detailed in disclosures for the year ended 30 June 2000. Non-executive directors do not participate in the Manager Incentive Plan.

* Figures in printed Annual Report were incorrectly listed in the Expatriate Benefits column

Com

pany

Cont

ribut

ions

toSu

pera

nnua

tion

(3)

Othe

r Sun

dry

Bene

fits

(5)

Ince

ntiv

e Pa

ymen

ts (7

)

Shar

e Op

tions

(1)

Tota

l

Nam

e

Posi

tion

Cash

Sal

ary

Com

pany

Pr

ovid

ed

Mot

or V

ehic

les

Expa

triat

e Be

nefit

s (6

)

Optio

ns Is

sued

ov

er o

rdin

ary

shar

es (2

)

Directors’ Report Continued

31Pasminco

Rounding of AmountsThe Directors have chosen to express amounts in millions of dollars to onedecimal place, in accordance with ASIC Class Order 98/0100, except whererounding to the nearest one thousand dollars is required, as permitted by thatClass Order.

Deed of Cross GuaranteePursuant to Class Order 98/1418, relief has been granted to those identifiedcontrolled entities of Pasminco Limited shown in note 12(c) to the financialstatements on pages 42 and 43 from the Corporations Law requirements forpreparation, audit and publication of accounts.

As a condition of the Class Order, Pasminco Limited and the identifiedcontrolled entities have entered into a deed of cross guarantee. Under thedeed of cross guarantee, each named company guarantees the debts of theother named companies. This guarantee is conditional upon the winding upof any companies which are a party to the deed.

Environmental PerformancePasminco has an Environmental Management System (EMS) based on theInternational Standard ISO 14001 and all sites are working towards achievingcertification to that standard. Two sites have achieved that goal and it isexpected that the balance of the Australian operations will hold certificationby 2002.

A key element of the EMS is to establish a register of consents and toestablish procedures to achieve compliance with the consent requirements.Pasminco’s EMS classifies any breach of a licence condition or a conditionof consent as a significant environmental incident. These incidents require aformal report identifying the factors that contributed to the incident and anaction plan to prevent a recurrence.

As part of the Company’s internal reporting system operating management isrequired to report in detail on environmental incidents to the executivemanagement group, the Chief Executive and the Board. The system alsorequires that any breach of licence or consent conditions is reported to therelevant authorities.

A formal system is used to rank incidents to ensure that all incidents aregiven appropriate priority.

Details of significant incidents during the reporting period are as follows:

•exceedences of the condition of consent for ambient sulphur dioxide at the Cockle Creek Smelter. These exceedences occurred because the reduction in sulphur dioxide emissions achieved when the acid plant converter was upgraded in 1997 were not sufficient to allow compliance in some weather conditions, resulting in poor dispersion of the discharged gas. The problem is being addressed through the installation of a tail gas scrubber which will be commissioned by 1 July 2000.

•exceedence of ambient lead in air licence condition at Port Pirie. This is being addressed by an action plan on fugitive emissions.

•non-compliance with ground vibration limits for two firings at Broken Hill. This issue is being addressed by controlling the charge size and the duration of the blasts.

•non-compliance with water discharge conditions at Hobart due to inability to capture all runoff in some storm conditions. This issue is being addressed through the implementation of a water management plan which involves increasing the storage capacity for storm water runoff.

•exceedences of ambient lead in air condition at ARA Melbourne. A new baghouse was commissioned in February 1999 to address this issue.

Further details on environmental performance are available on page 13 of thisreport and in the Pasminco Environment Report which was published inAugust 1999.

Pasminco Limited Employee Option PlanAt the date of this report, options over shares pursuant to the PasmincoLimited Employee Option Plan approved by shareholders at the 1995 AnnualGeneral Meeting are as follows:No of No of Year of Exercise Expiry Date Participants Options Issue Price

1,748 3,689,000 1995 $1.67 10 November 2000

1,893 5,019,500 1996 $2.07 8 November 2001

2,787 10,941,500 1997 $1.84 14 November 2002

2,020 10,399,000 1998 $1.49 13 November 2003

The total number of options outstanding at the date of this report was30,049,000, equivalent to 2.7% of the total issued ordinary shares in theCompany. The maximum number of shares to be issued in respect ofemployee options may not exceed 5% of total issued ordinary shares. Noperson entitled to exercise these options had or has any right, by virtue ofsuch options, to participate in any share issue of the Company or of anyother body corporate.

During or since the end of the financial year, options over the shares of theCompany have been exercised as follows:

Year of Issue No of Participants No of Options Exercised

1995 20 144,000

1997 1 6,000

1998 13 156,500

The names of all holders of options are entered in the Company’s register,inspection of which may be made free of charge.

Non-executive directors do not participate in the employee option plan.

The 1998 options shown above were granted on the basis that each optioncan, under most circumstances, be converted to one ordinary share in theCompany, after a two year period from the date of issue, by the holdersubscribing $1.49 per share, being 10% above the weighted average saleprice of Pasminco Limited shares on the Australian Stock Exchange over thefive business days immediately before 13 November 1998. For employeesother than those at Budel Zink, options can be exercised after 13 November2000 and on or before 13 November 2003. Under certain circumstances,such as redundancy, retirement or death, options may be exercised byAustralian employees prior to 13 November 2000. Under the terms of theplan, participants may, upon exercise of their options, participate in any issueof additional shares or bonus shares to shareholders.

Other than as stated above, no shares of the Company (or subsidiaries) havebeen issued during the financial year or since the end of the financial year by virtue of the exercise of any options granted by the Company (or subsidiaries).

This report is made in accordance with a resolution of the Directors

M R Rayner D M StewartChairman Managing Director and CEO

32 Pasminco

1999 $m 1998 $m 1999 $m 1998 $m

Profit and Loss Statements

Notes 1999 $m 1998 $m 1999 $m 1998 $m

The above Profit and Loss Statements should beread in conjunction with the accompanying notes.

Pasminco Limited and its controlled entities for the year ended 30 June 1999

Revenue from operating activities 2 1,596.1 1,394.7 20.0 21.7Revenue from outside the operating activities 2 204.0 – – –

Total revenue 1,800.1 1,394.7 20.0 21.7

Operating profit/(loss) before abnormal items and income tax 2,3 (8.5) 72.4 7.6 15.0

Abnormal items before income tax 4 – 30.3 (31.3) –

Operating profit/(loss) before income tax (8.5) 102.7 (23.7) 15.0

Income tax charge/(credit) attributable to operating profit/(loss) 5 (0.2) 39.4 2.6 4.4

Operating profit/(loss) after income tax attributable to the members of Pasminco Limited (8.3) 63.3 (26.3) 10.6

Retained profits/(Accumulated losses) at the

beginning of the financial year (87.2) (105.5) 143.3 177.7

Total available for appropriation (95.5) (42.2) 117.0 188.3

Dividends provided for or paid 18,35 – 45.0 – 45.0

Transfer from Capital Reserve 24 4.6 – – –

Retained profits/(Accumulated losses) at the end of the financial year (90.9) (87.2) 117.0 143.3

Cons

olid

ated

Cons

olid

ated

Pasm

inco

Lim

ited

Pasm

inco

Lim

ited

Balance Sheets

The above Balance Sheets should be read in conjunction with the accompanying notes.

33Pasminco

1999 $m 1998 $m 1999 $m 1998 $mNotes 1999 $m 1998 $m 1999 $m 1998 $m

Pasminco Limited and its controlled entities as at 30 June 1999

Current AssetsCash 6 24.6 62.3 – –

Receivables 7 542.7 194.3 319.1 527.4

Inventories 8 366.1 311.9 – –

Investments in Associates 9 70.7 – – –

Other 10 107.5 34.4 – –

Total current assets 1,111.6 602.9 319.1 527.4

Non-current AssetsReceivables 11 0.4 – 822.2 476.9

Investments 12 – – 1,042.6 1,065.7

Property, plant and equipment 13(a) 1,104.5 766.7 – –

Capitalised exploration 13(b) 1.7 29.7 – –

Mine properties & development 13(c) 1,418.8 856.2 – –

Future income tax benefit 5(b) 193.8 102.9 – –

Intangibles 14 27.1 – – –

Other 15 31.0 53.0 – –

Total non-current assets 2,777.3 1,808.5 1,864.8 1,542.6

Total assets 3,888.9 2,411.4 2,183.9 2,070.0

Current LiabilitiesAccounts payable 16 292.5 227.5 – –

Borrowings 17 189.3 13.4 342.5 18.7

Provisions 18 235.1 166.1 – 45.0

Other 19 49.1 – – –

Total current liabilities 766.0 407.0 342.5 63.7

Non-current LiabilitiesAccounts payable 20 0.6 0.1 – –

Borrowings 21 1,091.6 215.4 175.8 315.2

Provisions 22 262.7 298.2 5.5 4.7

Other 19 304.1 – – –

Total non-current liabilities 1,659.0 513.7 181.3 319.9

Total liabilities 2,425.0 920.7 523.8 383.6

Net assets 1,463.9 1,490.7 1,660.1 1,686.4

Shareholders’ EquityShare capital 23 1,543.1 1,124.6 1,543.1 1,124.6

Reserves 24 11.7 453.3 – 418.5

Retained profits/(Accumulated losses) (90.9) (87.2) 117.0 143.3

Total shareholders’ equity 1,463.9 1,490.7 1,660.1 1,686.4

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34 Pasminco

Statement of Cash Flows

The above Statement of Cash Flows should beread in conjunction with the accompanying notes.

Pasminco Limited and its controlled entities for the year ended 30 June 1999

Cash Flows from Operating ActivitiesReceipts from customers 1,870.5 1,377.2

Payments to suppliers and employees (1,394.4) (1,092.3)

Net income taxes (paid) received (40.2) (26.3)

Net cash provided by operating activities 38(a) 435.9 258.6

Cash Flows from Investing ActivitiesInvestment in property, plant and equipment (810.0) (430.6)

Investment in infrastructure assets 40 (183.6) –

Investment in Pasminco Century Mine Limited and Dugald River – (344.7)

Investment in Savage Resources Limited, net of cash acquired 12(b) (406.1) –

Payments for major maintenance and repairs 1(o) (10.9) (14.7)

Proceeds from sale of property, plant and equipment 33.1 8.6

Loans repaid by Associate 3.4 –

Net cash used in investing activities (1,374.1) (781.4)

Cash Flows from Financing ActivitiesNet proceeds from share issues – 668.7

Proceeds from borrowings 1,909.6 504.4

Repayments of borrowings (925.0) (571.1)

Repayments of lease liabilities (0.3) –

Interest and finance charges paid 3 (43.4) (21.0)

Interest received 3 8.0 7.5

Dividends paid (45.0) (31.8)

Net cash derived from financing activities 903.9 556.7

Net increase/(decrease) in cash held (34.3) 33.9

Cash at the beginning of the reporting period 57.2 21.1

Effects of exchange rate changes on foreign currency denominated cash balances (1.7) 2.2

Cash at the end of the reporting period 1(r),6 21.2 57.2

Notes 1999 $m 1998 $m

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Pasminco

Notes to the Financial Statements

1 Summary of Significant Accounting PoliciesThis general purpose financial report has been prepared in accordance withAccounting Standards, other mandatory professional reporting requirements(Urgent Issues Group Consensus Views) and the Corporations Law.

It is prepared in accordance with the historical cost convention, except forcertain assets which, as noted, are at valuation. The accounting policiesadopted are consistent with those of the previous year except where noted.Comparative information is reclassified where appropriate to enhancecomparability.

(a) Principles of ConsolidationThe consolidated accounts incorporate the assets and liabilities of all entitiescontrolled by Pasminco Limited (the chief entity) as at 30 June 1999, and the results of all controlled entities during the year ended 30 June 1999.The effects of all transactions between entities in the consolidated entity areeliminated in full.

Where control of an entity began or ceased during the financial year, itsresults are included only from the date on which control commenced or up to the date control ceased.

Investments in associates are accounted for in the consolidated financialstatements using the equity method. Under this method, the consolidatedentity’s share of the profits or losses of associates is recognised as revenuein the consolidated profit and loss statement, and its share of movements inreserves is recognised in consolidated reserves. Associates are those entitiesover which the consolidated entity exercises significant influence, but notcontrol.

A complete list of Pasminco Limited’s controlled entities is set out in note12(c). The economic entity’s interest in joint ventures has been included in the economic entity’s accounts by taking up the economic entity’s share ineach of the individual assets and liabilities of the joint ventures.

(b) Financial InstrumentsHedging is undertaken in order to avoid or minimise possible adverse financialor cash flow effects of movements in exchange rates and commodity prices.

(i) Foreign Exchange

Refer note (c) Foreign Exchange

(ii) Other

Gains and losses on derivatives used as hedges are accounted for on the same basis as the underlying physical exposures they are hedging.Accordingly, hedge gains and losses are included in the profit and lossaccount when the gains and losses arising on the related physicalexposures are recognised in the profit and loss account. Gains and lossesrelated to qualifying hedges of firm commitments or anticipatedtransactions are deferred and recognised in income as adjustments to the underlying hedged transactions when they occur.

(c) Foreign ExchangeAmounts payable and receivable in foreign currencies have been translatedinto Australian currency at the rates of exchange ruling at balance date. Gainsand losses on unhedged balances are recognised in the result of the period.Costs arising from forward exchange contracts are deferred and amortisedover the term of the contracts. Costs and gains or losses arising on thehedging contracts relating to sales commitments are deferred and included in the measurement of the sales. All other transactions in foreign currenciesduring the year have been brought to account at the exchange rate ruling atthe time of the transactions. Exchange gains and losses on designatedborrowings, effectively hedging net assets of foreign operations, are taken tothe foreign currency translation reserve on consolidation. The accounts of selfsustaining overseas controlled entities are reported in Australian currency bytranslating assets and liabilities at the rates of exchange ruling at balance dateand the revenue and expense items at the average of rates ruling during theyear. Translation differences arising are included in the foreign currencytranslation reserve.

(d) TaxationTax effect accounting procedures are followed whereby income tax isregarded as an expense and is matched with the accounting profit afterallowing for permanent differences. Provisions for current and future income

tax are calculated on earnings using the “liability” method. Certain items ofexpenditure, mainly depreciation and other provisions, may be deductible forincome tax purposes in years different from those in which they are chargedagainst earnings. The amount of the taxation difference due to such timingdifferences is classified as a deferred tax liability or future tax benefit. It iseconomic entity policy not to carry forward any part of future tax assets,arising from tax losses, including those arising as capital losses, unless theirrecovery is virtually certain through the economic entity’s ability to derivefuture assessable income or capital gains sufficient to enable the benefits to be realised, and for the economic entity to continue to comply withdeductibility conditions imposed by law. Dividend withholding tax is providedon the economic entity’s portion of earnings of certain foreign subsidiarieswhere it is intended to repatriate those earnings to Australia as dividends.

(e) InventoriesStocks of ores, metals, concentrates and work in progress are valued at thelower of cost and net realisable value. Cost includes expenditure incurred inacquiring and bringing the stock to its existing condition and location andincludes an appropriate portion of fixed and variable overhead expenses,including depreciation. Stores are valued at cost with due allowance forobsolescence. In each case, cost is determined on an average cost basis.

(f) InvestmentsShares in companies held as long-term investments, including controlledentities, have been stated at Directors’ valuation or cost. Controlled entities,joint ventures and associates are accounted for in the consolidated accountsas set out in note 1(a). Dividend income is brought to account as it becomesreceivable. Interest income is brought to account as it accrues on a daily basis.

(g) LeasesLeases of plant and equipment under which the economic entity assumessubstantially all the risks and benefits of ownership are classified as financeleases, whilst other leases are classified as operating leases. Finance leasesare capitalised with a lease asset and liability equal to the present value of the minimum lease payments being recorded at the inception of the lease.Capitalised lease assets are amortised on a straight-line basis to their residualvalue over the term of the lease, or where it is likely that the economic entitywill obtain ownership of the asset, the life of the asset. Lease payments madeunder operating leases are charged against profits in equal instalments overthe accounting periods covered by the lease term.

(h) Property, Plant and EquipmentProperty, plant and equipment are carried at cost or at Directors’ valuation.Any surplus on revaluation is credited directly to the asset revaluation reserveand excluded from the profit and loss account. All items of property, plant andequipment, with the exception of freehold land, and certain mine freeholdsand leaseholds, are depreciated over their estimated remaining useful lives.Depreciation rates are reviewed regularly and reassessed in light ofcommercial and technological developments. The expected useful lives are as follows:

Buildings 40 years

Plant and Equipment 5-15 years

Capital spares purchased for particular plant are capitalised and depreciatedon the same basis as the plant to which they relate.

(i) Exploration and Evaluation ExpenditureExpenditure on exploration and evaluation of individual projects is written offagainst earnings as incurred except that, when a project reaches the stagewhere such expenditure is considered to be capable of being recoupedthrough development or sale, all subsequent expenditures are capitalised and amortised against production from the area once mining commences.

(j) Research & Development ExpenditureExpenditure on research and development is written off against earnings as incurred, except that, when a project reaches the stage where suchexpenditure is considered capable of being recouped through development or sale, all subsequent expenditures are capitalised. Unamortised costs arereviewed at each balance date to determine the amount (if any) that is nolonger recoverable and any amount so identified is written off.

35Pasminco

36 Pasminco

1. Summary of Significant Accounting Policies(continued)

(k) Mine DevelopmentMine development expenditure for the initial establishment of access to mineral reserves, together with capitalised exploration, evaluation andcommissioning expenditure, and financing costs on borrowings for a projectprior to the commencement date of commercial production, are capitalised to the extent that the expenditure results in significant future benefits. These amounts are amortised over the current estimated economic reserveof the mine on a unit production output basis. This calculation includesconsideration of appropriate estimates of the future costs to be incurred indeveloping the estimated economic reserve, which includes the proven andprobable reserve, plus an estimate of the economic resource within theinferred category.

(l) Recoverable Amount of Non-Current AssetsThe values of assets are reviewed on an ongoing basis, and wherenecessary the carrying amount of non-current assets are revalued to theirrecoverable amount. Where net cash flows are derived from a group ofassets working together, recoverable amount is determined on the basis of the relevant group of assets. The expected net cash flows included indetermining recoverable amounts of non-current assets are discounted totheir present values using a market-determined, risk adjusted discount rate.

(m) Employee BenefitsProvision is made for expected benefits accruing to past and presentemployees in relation to such items as annual leave, long service leave, sick leave, medical benefits and workers’ compensation. These provisionsare accrued on at least the basis of statutory or contractual obligations. A number of employee superannuation funds exist which provide benefits for employees and their dependents on retirement, disability, resignation,retrenchment or death (refer note 33). The value of the employee sharescheme described in note 39 is not being charged as an employeeentitlement.

(n) Restoration Expenditure(i) Mining OperationsProvision is made for the anticipated costs of future restoration andrehabilitation of areas from which natural resources have been extracted. The provision is recognised on a gradual basis over the life of the mine asproduction occurs. The provision includes costs associated with reclamation,plant closure, waste site closure, monitoring, demolition and decontamination.These costs have been determined on an undiscounted current cost basiswith reference to current legal requirements and current technology. Therestoration provision is separated into current (estimated costs arising within12 months) and non-current components. Any change in the provisionestimate is dealt with on a prospective basis. The extent of the restorationprovision is, in part, dependent upon the remaining life of each mine ascalculated by reference to the economic reserve.(ii) Smelting Operations

Provision is made for the anticipated costs of future restoration andrehabilitation of smelting sites to the extent that a legal obligation exists and that the anticipated expenditure is not capital in nature. The provisionincludes costs associated with reclamation, monitoring, water purificationand coverage and permanent storage of historical residues. The provision is based upon current costs and has been determined on an undiscountedbasis with reference to the current legal framework and current technology.Any change in the provision estimate is dealt with on a prospective basis.The restoration provision is separated into current (estimated costs arisingwithin 12 months) and non-current components.

(o) Major Maintenance and Repairs ExpenditureThe costs of major overhauls of operating plant are considered to constituteincreases in assets. Accordingly, the accounting treatment adopted is torecognise overhaul expenditure as an asset to be amortised over the periodin which benefits are expected to arise (typically 3-4 years).

(p) Sales RevenueSales revenue is stated on a gross basis, with freight and realisationexpenses included in the cost of sales. Sales revenue is stated net of theimpact of gains and losses arising on foreign exchange hedging contractsrelating to sales commitments. Sales of metals, concentrates, ores and by-products are recognised when the product passes out of the physical controlof the selling company to external customers pursuant to enforceable salescontracts. As the final value of concentrate sales can only be determinedfrom weights, assays, prices and exchange rates applying after a shipmenthas arrived at its destination, sales of concentrates are recorded at estimatedvalues pursuant to contract terms, with adjustments being subsequentlyrecognised in the period when final values are determined.

(q) Borrowing CostsBorrowing costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of qualifying assets. To the extent that additional funds have been borrowed for the purpose of,and are associated with the qualifying asset, the interest rate used is thatapplicable to those funds. The interest rate for any funds utilised in excess of specified borrowings is the weighted average for all other borrowings.Borrowing costs include:

– interest on short-term and long-term borrowings

– amortisation of discounts or premiums relating to borrowings

– amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and

– exchange differences arising from foreign currency borrowings.

(r) CashFor the purposes of the statement of cash flows, cash includes cash on hand and deposits at call which are readily convertible to cash and are subject toan insignificant risk of changes in value, net of outstanding bank overdrafts.

(s) Trade and Other CreditorsThese amounts represent liabilities for goods and services provided to the economic entity prior to the end of the financial year and which areunpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(t) Trade ReceivablesTrade receivables are carried at nominal amounts due less any provision fordoubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable.

(u) GoodwillOn acquisition of some or all, of the assets of another entity or, in the case of an investment in a controlled entity, on acquisition of some, or all, of theequity of that controlled entity, the identifiable net assets acquired aremeasured at fair value. In determining the fair value of any identifiableexploration assets acquired, and in allocating the cost of acquisition to them,all risks relating to such assets are considered. The excess of the fair valueof the cost of acquisition over the fair value of the identifiable net assetsacquired, including any liability for restructuring costs, is brought to accountas goodwill and amortised on a straight line basis over twenty years, beingthe period during which the benefits are expected to arise.

Notes to the Financial Statements

Notes to the Financial Statements

37Pasminco

1999 $m 1998 $m 1999 $m 1998 $m

2 Revenue

Revenue from operating activities(a) Sales revenue (note 1(p)) 1,564.4 1,370.1 – –(b) Other operating revenue

(i) Interest received/receivable (note 3) 8.0 7.5 20.0 17.8(ii) Proceeds from sales of non-current assets 12.6 8.6 – –(iii) Share of net profits of associates (note 9(b)) 1.9 – – –(iv) Net foreign exchange gain – – – 0.3(v) Other 9.2 8.5 – 3.6

Total Operating Revenue 1,596.1 1,394.7 20.0 21.7

Revenue from outside the operating activitiesProceeds from sales of non-current assets 204.0 – – –Total Revenue 1,800.1 1,394.7 20.0 21.7

3 Operating Profit/(Loss)The operating profit/(loss) before abnormal items and income tax isarrived at after charging and crediting the following specific items:

ChargesAmortisation –(a) Deferred expenditure 8.1 6.1 – –(b) Mine properties and development 42.7 31.1 – –(c) Leased plant and equipment 0.1 – – –(d) Goodwill 0.6 – – –

51.5 37.2 – –Depreciation of property, plant and equipment 111.9 97.0 – –Less: Depreciation capitalised 5.1 2.5 – –Depreciation expensed 106.8 94.5 – –Borrowing costs –(a) Interest paid/payable –

i(i) Controlled entities – – – 9.0(ii) Other persons and/or corporations 58.1 20.8 – –

(b) Realised hedge losses on foreign currency borrowings/contracts 100.2 – – –(c) Other finance charges 9.5 3.2 – –Total borrowing costs 167.8 24.0 – 9.0Less: borrowing costs capitalised 124.4 3.0 – 3.0Borrowing costs expensed 43.4 21.0 – 6.0Rent expense relating to operating leases 15.3 14.9 – –Decrement in value of inventories 0.2 – – –Exploration and evaluation expenditure 21.4 21.2 – –Research and development costs 7.1 7.7 – –Government royalties 5.7 2.0 – –Superannuation 16.9 16.2 – –Net foreign exchange loss 3.8 11.5 – –Net loss on disposal of property, plant and equipment 1.0 0.8 – –Bad and doubtful debts written off/provided for 0.2 – – –Provisions –(a) Employee entitlements 34.9 26.2 – –(b) Workers’ compensation 7.8 19.4 – –(c) Restoration 1.4 1.1 – –(d) Sundry 0.8 0.7 – –

49.3 47.4 – –

CreditsInterest received/receivable –(a) Controlled entities – – 20.0 17.3(b) Other persons and/or corporations 8.0 7.5 – 0.5Net foreign exchange gain – – – 0.3Net bad and doubtful trade debts (note 7(a)) – 0.5 – –Profit on share buy back – Controlled entity – – – 2.8

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4 Abnormal ItemsThe following abnormal items were credited/(charged) in arriving at the operating profit/(loss) after tax:

CreditRelease of environmental provision at Budel Zink. – 30.3 – –

ChargeProvision for diminution in investment in controlled entity* – – (23.1) –

Provision for diminution in controlled entity receivable* – – (8.2) –

Abnormal items before income tax – 30.3 (31.3) –

Applicable income tax (charge)/credit – (6.6) – –

Abnormal items after income tax – 23.7 (31.3) –

*Reduction in the carrying value of Pasminco Limited’s investment and intercompany receivable with Pasminco Pacific Pty Ltd.

5 Income Tax(a) The prima facie tax payable on the operating profit/(loss) differs from

the income tax provided in the accounts and is reconciled as follows:

Operating profit/(loss) before income tax (8.5) 102.7 (23.7) 15.0

Prima facie tax charge/(credit) at 36% (3.0) 37.0 (8.5) 5.4

Taxation charge/(credit) on profit/(loss) for the year (0.2) 39.4 2.6 4.4

Variation from prima facie tax 2.8 2.4 11.1 (1.0)

The following major items caused the charge for income tax to varyfrom the prima facie tax payable on reported profit/(loss):

Permanent differences –

Development allowance – (0.5) – –

Research and development allowance (2.8) (2.5) – –

Non-allowable depreciation and amortisation 21.6 19.2 – –

Non-assessable capital profit (0.8) – – (2.8)

Non-allowable demolition expenditure 0.5 1.4 – –

Non-assessable component of environmental provision write-back – (11.4) – –

Provision against investment in controlled entity – – 23.1 –

Provision against receivable in controlled entity – – 8.2 –

Sundry (3.2) (0.6) – –

Total permanent differences 15.3 5.6 31.3 (2.8)

Tax effect of these differences at 36% 5.5 2.0 11.2 (1.0)

Tax on overseas income at lower rates (1.4) (1.0) – –

Overseas tax losses not brought to account – 2.4 – –

Under/(over) provision for previous years (1.3) (1.0) (0.1) –

Consequent increase/(decrease) in tax charge 2.8 2.4 11.1 (1.0)

(b) Analysis of future income tax benefits:

Future income tax benefits arising from tax losses of controlled entities which have been brought to account amount to: 143.9 102.9 – –

Future income tax benefits arising from timing differences amount to: 49.9 – – –

193.8 102.9 – –

Future income tax benefits arising from tax losses of controlled entities which have been offset against the provision for deferred income tax amount to: 84.6 34.2 – –

(c) Deferred income tax liability arising from timing differences net of the offset of future income tax benefit, amounts to: 86.8 96.3 5.5 4.7

(d) The Directors’ estimate that the potential future income tax benefit at 30 June 1999, in respect of tax revenue losses not brought to account is: 13.5 13.7 – –

The benefit of these tax revenue losses will only be obtained if:

ii(i) the economic entity derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;

i(ii) the economic entity continues to comply with the conditions for deductibility imposed by tax legislation; and

(iii) no changes in tax legislation adversely affect the economic entity in realising the benefit from the deductions for the losses.

1999 $m 1998 $m 1999 $m 1998 $m

Notes to the Financial Statements

38 Pasminco

1999 $m 1998 $m 1999 $m 1998 $m

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39Pasminco

1999 $m 1998 $m 1999 $m 1998 $m1999 $m 1998 $m 1999 $m 1998 $m

6 Current Assets – CashCash at bank and on hand 19.2 58.9 – –

Short term deposits 4.0 3.4 – –

Bank Bills 1.4 – – –

24.6 62.3 – –

The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows:

Balances as above 24.6 62.3 – –

Less: Bank overdrafts (note 17) 3.4 5.1 – –

Balances per statement of cash flows 21.2 57.2 – –

7 Current Assets – ReceivablesTrade debtors 235.9 181.9 – –

Less provision for doubtful debts (a) 1.5 0.6 – –

234.4 181.3 – –

Loan to associate – secured (note 9(b)) 104.6 – – –

Other debtors 203.7 13.0 – –

Trade debts receivable from controlled entities – – 319.1 527.4

542.7 194.3 319.1 527.4

Other debtors includes $183.6 million of Century’s infrastructure spending sold to third parties during June and included in revenue from outside the operating activities (refer note 2).

(a) Reconciliation of provision for doubtful debts

Opening balance 0.6 1.2 – –

Acquisition of Savage Resources Limited 1.2 – – –

Doubtful debts previously provided for written back during the year (0.1) (0.8) – –

Bad and doubtful debts provided for during the year 0.3 0.3 – –

Bad debts written off against the provision (0.5) (0.1) – –

Closing balance 1.5 0.6 – –

8 Current Assets – InventoriesRaw materials and stores (at cost) 102.8 84.8 – –

Less provision for diminution in value 0.9 1.0 – –

101.9 83.8 – –

Work in progress

At cost 102.4 129.5 – –

At net realisable value 45.5 10.3 – –

147.9 139.8 – –

Finished goods

At cost 114.2 88.2 – –

At net realisable value 2.1 0.1 – –

116.3 88.3 – –

366.1 311.9 – –

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9 Current Assets – Investments in AssociatesThe associated companies shown below were acquired as a result of the February 1999 acquisition of Savage Resources Limited. The investment in Ernest Henry Mining Pty Limited has been accounted for in the consolidated financial statements using the equity method of accounting. It is Pasminco’s intention to sell Ernest Henry Mining Pty Limited therefore this investment has been shown as a current asset. The remaining associated companies have been accounted for as part of the underlying joint ventures to which they relate (refer note 37). Effective 1 July 1999, these associated companies have been sold to Glencore International AG (refer note 40).

(a) Associated companiesErnest Henry Mining Pty Limited Copper/Gold Mining 49.0 n/a

Liddell Power Generation Sales Pty Limited Dormant 67.5 n/a

Liddell Collieries Pty Limited Coal Mining 67.5 n/a

Liddell Coal Preparation Pty Limited Coal Preparation 67.5 n/a

Liddell Coal Marketing Pty Limited Coal Marketing 67.5 n/a

Liddell Tenements Pty Limited Tenement Holding 67.5 n/a

Liddell Southern Tenements Pty Limited Tenement Holding 67.5 n/a

Foybrook Tenements Pty Limited Tenement Holding 67.5 n/a

Glendell Tenements Pty Limited Tenement Holding 67.5 n/a

Togara Coal Sales Pty Limited Coal Marketing 33.3 n/a

The 67.5% interest that the economic entity holds in companies set out above does not allow control of these companies. These companies are associated with joint ventures that limit voting rights such that the economic entity does not have control.

The balance date of all associated companies is 30 June 1999.

1999 $m 1998 $m(b) Equity Information

Movements in Carrying Amounts of Investments in Ernest HenryDirectors’ valuation at acquisition (note 12(b)) 68.8 n/a

Share of operating profits after income tax since acquisition (note 2(b)) 1.9 n/a

Equity carrying amount at the end of the financial year 70.7 n/a

Loan to associate (note 6) 104.6 n/a

Carrying value at the end of the financial year 175.3 n/a

Results Attributable to AssociateOperating profits before income tax 3.1 n/a

Income tax expense 1.2 n/a

Operating profits after income tax 1.9 n/a

Accumulated (losses) attributable to associate at acquisition (2.6) n/a

Accumulated (losses) attributable to associate at the end of the financial year (0.7) n/a

Summary of the Performance and Financial Position of AssociateThe consolidated entity’s share of the assets and liabilities of associate in aggregate are as follows:

Current assets 29.0 n/a

Non-current assets 160.2 n/a

Current liabilities 18.8 n/a

Non-current liabilities 46.4 n/a

Net Assets 124.0 n/a

The consolidated entity’s share of associate’s commitments and contingent liabilities are disclosed in notes 27 and 28 respectively.

(c) Transactions with Ernest HenryDuring the year a controlled entity purchased concentrates for $52.2 million from Ernest Henry at market prices.

Loan repayments made by Ernest Henry to a controlled entity totalled $3.4 million. The total outstanding loan with Ernest Henry at 30 June 1999 is $104.6 million. Interest charged on this loan since the acquisition by Pasminco of Savage Resources Limited totalled $3.1 million. Interest is calculated using a market determined interest rate.

40 Pasminco

Notes to the Financial Statements

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41Pasminco

1999 $m 1998 $m 1999 $m 1998 $m1999 $m 1998 $m 1999 $m 1998 $m

10 Current Assets – OtherPrepayments 16.8 12.9 – –

Deferred net option premiums 4.4 12.2 – –

Deferred foreign exchange hedge loss (note 1(c)) 7.2 – – –

Land held for resale at written down value (a) 4.1 7.3 – –

Property, plant and equipment held for resale at written down value (b) 60.0 2.0 – –

Other 15.0 – – –

107.5 34.4 – –

(a) Land held for resale

Cost of acquisition of the land 4.1 2.5 – –

Costs incurred in developing the land which have been recognised as part of its carrying value – 6.4 – –

Other costs incurred which have been recognised as part of its carrying value

Pasminco Group formation adjustment 1989 – 5.1 – –

Provision for loss on sale – (10.6) – –

Exchange rate adjustment – 3.9 – –

Carrying value at 30 June 4.1 7.3 – –

(b) Property, plant and equipment held for resale

At cost and valuation 71.8 3.5 – –

Accumulated depreciation 11.8 1.5 – –

Carrying value at 30 June 60.0 2.0 – –

11 Non-current Assets – ReceivablesLoans receivable from controlled entities – – 830.4 476.9

Less provision for diminution in value – – 8.2 –

– – 822.2 476.9

Other receivables 0.4 – – –

0.4 – 822.2 476.9

12 Non-current Assets – Investments(a) The investments include:

Unlisted investments

Shares in controlled entities (note 12(c)) – – 1,065.7 1,065.7

Less provision for diminution in value – – 23.1 –

– – 1,042.6 1,065.7

(b) Effective 1 February 1999, Pasminco acquired 100% of Savage Resources Limited at 85 cents per share. Details of the acquisition are as follows:

Fair Value of Identifiable Net Assets of Controlled Entities Acquired Cash and deposits 47.7Receivables 173.0Inventories 35.5Associated investments (note 9) 68.8Future income tax benefit 77.6Property, plant and equipment 355.8Other assets 16.1Provisions (140.9)Creditors and accruals (63.5)Borrowings (141.2)

428.9Goodwill on consolidation (note 14) 27.7Cash consideration paid/payable 456.6

Outflow of cash to acquire the Savage Group net of cash acquiredCash consideration paid/payable 456.6Less: Cash balance acquired 47.7Outflow of cash 408.9Less: Acquisition costs accrued 2.8Outflow of cash as shown in the cashflow statement 406.1

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12 Non-current Assets – Investments (continued)(c) Unquoted investments of the chief entity in controlled entities which

are all wholly owned, except Savage Sogem LLC and Savage-Taylor Chemicals, Inc., which are 80% owned, comprise the following:American Zinc Company B USA OrdinaryBudel Management BV A Netherlands OrdinaryBudel Zink BV A Netherlands OrdinaryBudelco BV A Netherlands OrdinaryBuzifac BV A Netherlands OrdinaryBuzipon BV A Netherlands OrdinaryBuzisur BV A Netherlands OrdinaryPasminco Australia Limited G Australia Ordinary 354,444 354,444Pasminco Broken Hill Mine Pty Limited G Australia Ordinary 105,027 105,027Pasminco Century Mine Limited G Australia Ordinary 172,985 172,985Pasminco Cockle Creek Smelter Pty Limited G Australia Ordinary 151,497 151,497Pasminco Europe Limited A UK Ordinary 62,400 62,400Pasminco Europe (ISC Alloys) Limited A UK OrdinaryPasminco Europe (Smelting) Limited A UK OrdinaryPasminco Exploration (Canada) Limited B,E Canada Ordinary ($1 only) ($1 only)Pasminco Exploration & Mining BV A Netherlands OrdinaryPasminco Exploration Private Limited A India OrdinaryPasminco Europe (UK) BV A UK OrdinaryPasminco Finance Limited G Australia Ordinary 20,000 20,000Pasminco Hong Kong Limited A,D Hong Kong OrdinaryPasminco Incorporated B USA OrdinaryPasminco Insurance Private Limited A Singapore Ordinary 1,935 1,935Pasminco International Pty Limited Australia Ordinary 42,077 42,077Pasminco International (Holdings) Pty Limited Australia Ordinary 40 40Pasminco Investments Holdings Pty Limited D,G Australia Ordinary ($2 only) n/aPasminco Investments Pty Limited D,G Australia OrdinaryPasminco Metals Pty Limited G Australia Ordinary 2 2Pasminco Netherlands (Holdings) BV A Netherlands OrdinaryPasminco Pacific Pty Limited Australia Ordinary 23,101 23,101Pasminco Pakistan (Private) Limited A Pakistan OrdinaryPasminco Port Pirie Smelter Pty Limited G Australia Ordinary 129,265 129,265Pasminco Superannuation Pty Limited Australia Ordinary ($2 only) ($2 only)Pasminco UK (Holdings) Limited A UK OrdinaryPasminco UK Limited A UK OrdinaryPasminco Zinc Limited B Cayman Islands OrdinaryThe Emu Bay Railway Company Limited G Australia Ordinary 2,959 2,959Warmframe Limited A UK OrdinarySavage Resources Group controlled entities acquiredGabume Pty Limited C,F Australia OrdinaryLiddell Coal Loader Pty Limited C,F Australia OrdinaryLiddell Coal Operations Pty Limited C,F Australia OrdinaryRamala Holdings Pty Limited C,G Australia OrdinarySavage Australian Exploration Pty Limited C Australia OrdinarySavage Canada Holdings, Inc. A,B,C USA OrdinarySavage Coal Pty Limited C,F Australia OrdinarySavage EHM Finance Pty Limited C,G Australia OrdinarySavage EHM Pty Limited C,G Australia PreferenceSavage International Exploration, Inc. A,B,C USA OrdinarySavage Marketing Company A,B,C USA OrdinarySavage Minerals Limited C,F Australia OrdinarySavage Resources Canada Company A,B,C Canada OrdinarySavage Resources Limited C,G Australia OrdinarySavage Resources (US), Inc. A,B,C USA OrdinarySavage Sogem LLC A,B,C USA OrdinarySavage South East Asian Ventures, Inc. A,B,C USA OrdinarySavage-Taylor Chemicals, Inc. A,B,C USA OrdinarySavage Togara Coal Pty Limited C,F Australia OrdinarySavage Zinc, Inc. A,B,C USA OrdinarySavox Pigments Pty Limited C Australia Ordinary

1,065,732 1,065,732

42 Pasminco

Notes to the Financial Statements

Notes 1999 1998$’000$’000

Coun

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43Pasminco

12 Non-current Assets – Investments (continued)

Notes(A) These controlled entities had other member firms of Ernst & Young International acting as their auditors.

(B) The accounts of these controlled entities have been reviewed by the auditors for inclusion in the consolidated accounts as a statutory audit is not required in the country of incorporation.

(C) All companies were acquired as a result of the acquisition of Savage Resources Limited in February 1999. Details of the acquisition are set out in note 12(b).

(D) These controlled entities were incorporated during the year.

(E) This controlled entity is currently in the process of being liquidated.

(F) These controlled entities have been sold with effect from 1 July 1999 to Glencore International AG (refer note 40).

(G) Pursuant to Class Order 98/1418, relief has been granted to these identified controlled entities of the parent entity from the Corporations Law requirementsfor preparation, audit and lodgement of its financial report.

As a condition of the Class Order, the parent entity and the identified controlled entities, (the ‘Closed Group’), have entered into a deed of cross guarantee. Under the deed of cross guarantee, all of the named companies guarantee the debts of the other named companies. This guarantee is conditional upon thewinding up of any companies which are a party to the deed.

The Consolidated profit and loss statements and balance sheets of the entities which are members of the ‘Closed Group’ are as follows:

1999 $m

Operating (loss) before abnormal items and income tax (33.1)Abnormal items before income tax (31.3)Operating (loss) before income tax (64.4)Income tax (credit) attributable to operating (loss) (6.9)Operating (loss) after income tax (57.5)Accumulated (losses) at the beginning of the financial year (257.9)Total available for appropriation (315.4)Aggregate of amounts transferred to reserves 4.6Accumulated (losses) at the end of the financial year (310.8)

Current AssetsCash 14.2Receivables 676.2Inventories 281.5Investments in Associates 70.7Other 19.5

Total Current Assets 1,062.1

Non-current AssetsReceivables 231.4Investments 303.6Property, plant and equipment 709.8Mine properties & development 1,397.9Exploration expenditure 1.7Future income tax benefit 148.2Other 51.3

Total Non-current Assets 2,843.9Total Assets 3,906.0

Current LiabilitiesAccounts payable 451.7Borrowings 172.4Provisions 188.1Other 49.1

Total Current Liabilities 861.3

Non-current LiabilitiesBorrowings 1,091.6Accounts payable 291.3Provisions 126.2Other 304.1

Total Non-current Liabilities 1,813.2Total Liabilities 2,674.5Net Assets 1,231.5

EquityShare capital 1,543.1Reserves (0.8)Accumulated (losses) (310.8)

Total Equity 1,231.5

1999 $m 1998 $m 1999 $m 1998 $m

Notes to the Financial Statements

44 Pasminco

13 Non-current Assets – Property,

Plant and EquipmentProperty, plant and equipment are included in the accounts on the following bases:(a) Freehold and leasehold land and buildings

At cost 151.8 51.1 – –Less: Accumulated depreciation 21.5 14.3 – –

130.3 36.8 – –At Directors’ valuation 1979 4.4 4.4 – –Less: Accumulated depreciation 2.2 2.1 – –

2.2 2.3 – –Total freehold and leasehold land and buildings 132.5 39.1 – –Construction in progress (at cost) 206.4 113.9 – –Plant and equipmentAt cost 1,514.3 1,292.3 – –Less: Accumulated depreciation 760.0 695.6 – –

754.3 596.7 – –At Directors’ valuation 1979 70.3 74.9 – –Less: Accumulated depreciation 66.4 67.9 – –

3.9 7.0 – –At Directors’ valuation 1992 27.8 27.8 – –Less: Accumulated depreciation 20.5 17.8 – –

7.3 10.0 – –Plant and equipment under finance lease 0.2 – – –Less: Accumulated amortisation 0.1 – – –

0.1 – – –Total plant and equipment 1,104.5 766.7 – –

(b) Capitalised exploration and evaluation expenditure (d) 1.7 29.7 – –(c) Mine properties and development

At cost 1,684.1 1,084.8 – –Less: Accumulated depreciation 278.7 243.2 – –

1,405.4 841.6 – –At Directors’ valuation 1992 23.0 23.0 – –Less: Accumulated depreciation 9.6 8.4 – –

13.4 14.6 – –Total mine properties and development 1,418.8 856.2 – –Total property, plant and equipment 2,525.0 1,652.6 – –

(d) Capitalised Expenditure in the Exploration and Evaluation PhaseCost brought forward 29.7 23.8 – –Acquisition of Savage Resources Limited 8.3 – – –Expenditure incurred during current year 23.9 27.1 – –Less Expenditure written off during current year 21.4 21.2 – –Less Expenditure transferred to mine properties and development 32.2 – – –Less Expenditure transferred to property, plant and equipment held for resale 6.6 – – –Cost carried forward 1.7 29.7 – –

An independent valuation of the Australian freehold land and buildings of the Pasminco Group was undertaken by AT Cocks and Partners Pty. Ltd. duringthe 1997 year. The freehold land and buildings held in Europe were subject to a Directors’ valuation. The land and buildings acquired in February 1999 aspart of the acquisition of Savage Resources Limited were subject to a Directors’ valuation. All valuations are estimates of the amounts for which the assetscould be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction at the valuation date.The valuation of freehold land and buildings for the Pasminco Group is $142.7m (1998 – $53.9m). This compares with the net written down value of $136.5m shown in the balance sheet (1998 – $48.2m). It is the policy of the economic entity to ensure an independent valuation and/or a Directors’ valuation of freehold land and buildings is undertaken at least once every three financial years.The market value of the economic entity’s operations is subject to cyclical variation because of changes in internationally determined metal prices and exchange rates. It is the economic entity’s policy to assess the recoverable amount of non-current assets using long-term metal price and exchange rateparameters. No assets are carried in excess of their recoverable amount.This basis of valuation is consistent with the existing use of the assets to the business as a going concern and does not purport to show the current market value of assets. Where this assessment indicates a loss in value of the assets of an operation, an appropriate writedown is made.

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Notes to the Financial Statements

45Pasminco

1999 $m 1998 $m 1999 $m 1998 $m

14 Non-current Assets – IntangiblesGoodwill (note 12(b)) 27.7 – – –

Less: Accumulated amortisation 0.6 – – –

27.1 – – –

15 Non-current Assets – OtherNet deferred expenditure (note 1(o)) 22.2 20.0 – –

Deferred foreign exchange hedge loss (note 1(c)) – 33.0 – –

Deferred net option premiums 5.0 – – –

Other 3.8 –

31.0 53.0 – –

16 Current Liabilities – Accounts PayableTrade creditors 274.9 225.6 – –

Other creditors 17.6 1.9 – –

292.5 227.5 – –

17 Current Liabilities – BorrowingsBank overdrafts 3.4 5.1 – –

Revolving bank credits 62.1 8.3 – –

Transferable loan certificates 123.5 – – –

Short term borrowings – controlled entities – – 342.5 18.7

Lease liabilities 0.3 – – –

189.3 13.4 342.5 18.7

18 Current Liabilities – ProvisionsTaxation 11.4 31.3 – –

Provision for deferred income tax 7.3 – – –

Employee benefits 68.2 41.1 – –

Restoration – mining operations 2.7 0.4 – –

Restoration – smelting operations 13.0 27.5 – –

Workers’ compensation 20.2 17.8 – –

Dividends – 45.0 – 45.0

Acquisition hedge book provision (note 26(e)) 103.6 – – –

Sundry 8.7 3.0 – –

235.1 166.1 – 45.0

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46 Pasminco

Notes to the Financial Statements

19 Other Liabilities

Current Deferred revenue 49.1 – – –

Non-current Deferred revenue 256.5 – – –

Deferred foreign exchange hedge gain (note 1(c)) 47.6 – – –

304.1 – – –

In May 1999, Pasminco Port Pirie Smelter (‘PPS’), a wholly owned entity of Pasminco Limited, entered into a five year forward silver sales agreement. PPS received gross proceeds of $US200m and in return is required to deliver silver on a quarterly basis over the term of the agreement. The deferred revenue represents the unfulfilled obligations to deliver silver under the terms of this forward sale agreement.

20 Non-current Liabilities – Accounts PayableSundry creditors 0.6 0.1 – –

21 Non-current Liabilities – BorrowingsTransferable loan certificates – 133.5 – –

Long-term borrowings – controlled entities – – 175.8 315.2

Revolving bank credits 1,006.5 81.9 – –

Lease liabilities 0.1 – – –

Bank bills 85.0 – – –

1,091.6 215.4 175.8 315.2

Summary of economic entity net debt position

The economic entity’s net debt position may be summarised as follows:

Bank overdrafts 3.4 5.1 – –

Revolving bank credits 1,068.6 90.2 – –

Bank bills 85.0 – – –

Transferable loan certificates 123.5 133.5 – –

Lease liabilities 0.4 – – –

Gross debt 1,280.9 228.8 – –

Less: Cash (note 6) 24.6 62.3 – –

Economic entity net debt at 30 June 1,256.3 166.5 – –

Being: Current 189.3 13.4 – –

Non-current 1,091.6 215.4 – –

Less: Cash (note 6) 24.6 62.3 – –

Economic entity net debt at 30 June 1,256.3 166.5 – –

22 Non-current Liabilities – ProvisionsEmployee benefits 33.9 24.8 – –

Deferred income tax 79.5 96.3 5.5 4.7

Restoration – mining operations 17.4 14.2 – –

Restoration – smelting operations 113.8 137.7 – –

Workers’ compensation 17.7 25.2 – –

Sundry 0.4 – – –

262.7 298.2 5.5 4.7

1999 $m 1998 $m 1999 $m 1998 $m

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Notes to the Financial Statements

47Pasminco

1999 $m 1998 $m 1999 $m 1998 $m

23 Share Capital – Pasminco Limited(a) Issued and fully paid up ordinary shares (1,124,653,499)

(1998 – 1,124,630,499) 1,543.1 1,124.6 1,543.1 1,124.6

(b) Employee share scheme

On 13 November 1998, 10,858,000 options at an exercise price of $1.49 were issued over ordinary shares (refer note 39).

(c) Shares issued during the year

In accordance with the Company Law Review Act 1998, the balance in the share premium reserve totalling $418.5m has been transferred to issued and paid up capital. Refer to note 24.

During the year, 23,000 share options were exercised by Budel Zink BV employees and employees leaving the Group and in accordance with the special provisions of the scheme. Details are provided in note 39.

24 ReservesShare premium account – 418.5 – 418.5

Capital reserve – 4.6 – –

Foreign currency translation 11.7 30.2 – –

11.7 453.3 – 418.5

Movements in reserves:

Share premium account

Balance at the beginning of the financial year 418.5 79.3 418.5 79.3

Premiums on shares issued during the year:

Share placement – 103.4 – 103.4

Rights issue – 249.9 – 249.9

Pasminco employee option plan – 0.1 – 0.1

Share issue expenses – (14.2) – (14.2)

Transfer to paid up share capital (note 23(c)) (418.5) – (418.5) –

Balance at the end of the financial year – 418.5 – 418.5

Capital reserve

Balance at the beginning of the financial year 4.6 4.6 – –

Transfer to retained profits (4.6) – – –

Balance at the end of the financial year – 4.6 – –

Foreign currency translation

Balance at the beginning of the financial year 30.2 5.0 – –

Gain/(loss) on translation of overseas controlled entities (18.5) 25.2 – –

Balance at the end of the financial year 11.7 30.2 – –

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48 Pasminco

Notes to the Financial Statements

1999 1998

1999 $m 1998 $m 1999 $m 1998 $m

Interest Rate Swap (US$m) 14.0 14.0 14.0 14.0 7.0 63.0

Rate (%) 7.2 7.2 7.2 7.2 7.2 7.2

Interest Rate Swap (A$m) 0.7 2.5 1.7 – – 4.9

Rate (%) 6.0 6.0 6.0 – – 6.0

25 Receivables and Payables not Effectively Hedged(a) Current foreign exchange exposures – economic entity, at 30 June.

Of the $1,111.6 million current assets (1998 – $602.9 million) and $766.0 million current liabilities (1998 – $407.0 million) disclosed in the balance sheet, receivables and payables denominated in foreign currencies not effectively hedged are:

(A$ equivalents)

(i) Current assets

UK pounds 0.8 1.8 – –

US dollars 20.7 5.2 – –

Other 26.3 29.6 – –

47.8 36.6 – –

(ii) Current liabilities

UK pounds 0.8 – – –

US dollars 9.8 3.6 – –

Other 3.0 4.2 – –

13.6 7.8 – –

(iii) Net current assets/(current liabilities)

UK pounds – 1.8 – –

US dollars 10.9 1.6 – –

Other 23.3 25.4 – –

34.2 28.8 – –

(b) Non-current foreign exchange exposure – economic entity, at 30 June.

There are no material non-current foreign exchange exposures as at 30 June 1999. Hedging of the loans denominated in US dollars is undertaken by utilising the natural hedge afforded by the economic entity’s US dollar denominated revenue stream arising from metal and concentrate sales.

26 Financial InstrumentsDerivatives, including Off-balance Sheet RiskHedging is undertaken in order to avoid or minimise possible adverse financial or cash flow effects of movements in exchange rates and commodity prices.The economic entity manages these exposures using a comprehensive set of policies and procedures approved by the Board of Directors. Whilst theeconomic entity has not changed its policies and procedures governing the application of derivative instruments for hedging purposes, the composition of thehedge portfolio has changed in terms of type of transaction and tenure as a result of the acquisition of Savage Resources Limited. These changes are reflectedin this note. Financial risk is managed centrally, and no speculative trading has taken place throughout the current year. Instruments used by the economicentity to hedge exposures to exchange rates, interest rates and commodity prices include forward foreign exchange contracts, currency options, interest rateswaps and metals futures. Accounting for these instruments is outlined in notes 1(b) and 1(c).

(a) Interest Rate Risk ManagementAs a result of the acquisition of Savage Resources Limited the economic entity is exposed to fixed interest rates due to interest rate swaps whereby theeconomic entity has agreed to pay interest on a fixed rate basis and receive interest on a floating rate basis. Details of the existing swaps are as follows:

The weighted average interest rate received on financial assets and paid on financial liabilities was as follows:

Financial AssetsCash and cash equivalents 4.82 4.9

Financial LiabilitiesBorrowings 5.97 6.4

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26 Financial Instruments (continued)

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

30 June 1999

Forward Foreign Exchange Contracts Maturity date of transactions 12 months ending

AUD/GBP 0.417 2.4 – – – 2.4

USD/AUD 0.7087 264.0 83.1 65.0 267.5 679.6

AUD/CHF 1.0127 0.1 – – – 0.1

USD/CAD 1.3360 1.5 1.5 1.5 6.6 11.1

USD/European currencies Various 25.1 2.8 – – 27.9

Currency Options Maturity date of transactions 12 months ending

AUD/USD purchased 431.8 568.7 402.5 226.6 1,629.6

Average rate 0.6837 0.6612 0.6360 0.6542

AUD/USD sold 519.3 674.2 481.7 455.4 2,130.6

Average rate 0.6172 0.5962 0.5855 0.6713

This listing excludes the internal forward exchange contracts held between controlled entities.

30 June 1998

Forward Foreign Exchange Contracts Maturity date of transactions 12 months ending

USD/NLG forward 2.03 27.9 – – 27.9

USD/AUD forward 0.7333 538.7 145.9 – 684.6

AUD/GBP forward 0.3636 2.8 – – 2.8

USD/European currencies various 43.4 9.4 – 52.8

Currency Options Maturity date of transactions 12 months ending

AUD/USD purchased 265.0 410.6 546.4 185.3 1,407.3

Average rate 0.6793 0.6820 0.6589 0.6475

AUD/USD sold 300.8 464.8 614.0 208.6 1,588.2

Average rate 0.5984 0.6024 0.5863 0.5753

Notes to the Financial Statements

49Pasminco

A$m A$m A$m A$m A$m

A$m A$m A$m A$m

A$m A$m A$m A$m A$m

A$m A$m A$m A$m A$m

30/0

6/01

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26 Financial Instruments (continued)

(c) Commodity Price Risk ManagementThe economic entity is exposed to commodity price volatility on commodity sales made by mines and smelters and raw materials purchased by the smelters.The economic entity enters into zinc, lead and silver futures contracts to hedge commodity exposures with the objective of obtaining the relevant commodityprice existing at the date of the transaction.

As a result of the acquisition of Savage Resources Limited the economic entity has forward sales of a quantity of copper and gold futures contracts and a series of copper min/max strategies hedging a percentage of future production from the Ernest Henry mine.

The following outlines metals futures contracts entered into as at:

30 June 1999

Metals Futures Contracts Maturity date of transactions 6 months ending

(i) Zinc

Contracts purchased 1,079 85.3 26.3 6.9 – 118.5

Contracts sold 1,054 (21.5) – – – (21.5)

Net position 63.8 26.3 6.9 – 97.0

(ii) Lead

Contracts purchased 498 1.4 – – – 1.4

Contracts sold – – – – – –

Net position 1.4 – – – 1.4

(iii) Silver

Contracts purchased 5.08 0.5 – – – 0.5

Contracts sold 5.25 (7.6) – – – (7.6)

Net position (7.1) – – – (7.1)

(iv) Gold

Contracts purchased 745 – – – – –

Contracts sold (4.5) (4.5) (4.5) (44.6) (58.1)

Net position (4.5) (4.5) (4.5) (44.6) (58.1)

30 June 1998

Metals Futures Contracts Maturity date of transactions 6 months ending

(i) ZincContracts purchased 1,170 105.8 33.2 15.8 3.1 157.9

Contracts sold 1,099 (1.9) (19.8) – – (21.7)

Net position 103.9 13.4 15.8 3.1 136.2

(ii) Lead

Contracts sold 533 (3.5) – – – (3.5)

(iii) Silver

Contracts purchased 5.38 0.7 – – – 0.7

50 Pasminco

Notes to the Financial Statements

US $ per tonne A$m A$m A$m A$m A$m

US $ per ounce

US$ per ounce

US$ per tonne A$m A$m A$m A$m A$m

Copper Forwards (tonnes) 2,050 – – – – 2,050

USc/lb 92.7 – – – – 92.7

Put Options Bought (tonnes) 3,000 – – – – 3,000

USc/lb 92.0 – – – – 92.0

Call Options Sold (tonnes) 5,050 – – – – 5,050

USc/lb 102.1 – – – – 102.1

A $ per ounce31

/12/

00

30/0

6/99

31/1

2/98

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Notes to the Financial Statements

51Pasminco

1999 $m 1998 $m

26 Financial Instruments (continued)

(d) Credit RiskCredit risk represents the loss that would be recognised if the counterparties to financial instruments fail to performas contracted.

The credit risk on financial assets of the economic entity which have been recognised on the balance sheet is generally the carrying amount, net of any provisions for doubtful debts. The economic entity minimises concentration of credit risk by undertaking transactions with a large number of customers in various countries. The economic entity is not materially exposed to any individual customer.

Credit risk in trade receivables is also managed in the following ways:

– payment terms are generally 30 days;

– a regular risk assessment process is undertaken with credit limits imposed on customers;

– export sales are predominantly covered by a letter of credit with approved financial institutions; and

– credit insurance is obtained for export sales debtors on open terms.

Credit risk arising from dealings in financial instruments is controlled by a strict policy of credit approvals, limits and monitoring procedures. The economic entity has no significant concentration of credit risk with any single counterparty. Credit exposure of foreign currency and commodity derivatives is represented by the net fair value of the contracts, as disclosed.

(e) Net Fair ValueThe following methods and assumptions were used to estimate the net fair values.

Cash & Cash Equivalents, Debtors, Creditors, Dividends Payable and Short-term BorrowingsThe carrying amounts of these financial instruments approximate net fair value because of their short maturity.

Long-term BorrowingsAside from the borrowings attached to the interest rate swap, the carrying amount of these financial instrumentsapproximate their net fair value because interest is charged at the prevailing market rate. The value of the interest rate swap is discussed below.

Derivative Transactions (forward exchange contracts, currency options, metals futures and options and interest rate swap transactions)The net fair value of all derivative transactions is measured using the marked to market valuation calculation as at 30 June 1999.

As a result of the acquisition of Savage Resources Limited, some of these transactions have been provided for. The marked to market valuation of these positions at acquisition was a liability of A$109m. At balancedate, the acquisition liability provision has reduced to A$103.6m (note 18) as a result of contracts maturing.

Apart from the interest rate swap, these positions hedge exposures relating to the copper/gold and coal assets of the economic entity.

At balance date, the marked to market position of the transactions was represented as follows:

Foreign currency forward contracts (26.1) n/a

Foreign currency options (44.3) n/a

Metals futures and options contracts 23.7 n/a

Interest rate swaps (2.5) n/a

(49.2) n/a

Off Balance Sheet

Foreign currency forward contracts (16.0) (129.0)

Foreign currency options 61.8 (2.8)

Metals futures contracts (0.5) (17.8)

45.3 (149.6)

The off balance sheet currency forward contracts relate to the conversion of USD borrowings to AUD to fund the AUD portion of expenditure required to construct the Century Mine. These contracts were established at rates less favourable than the rate at balance date. The last hedge will mature in December 1999.

The realised gains or losses on the off balance sheet foreign currency forward contracts will be brought to account when the underlying transaction occurs. In the case of capital expenditures the realised gains and losses will be capitalised and amortised over the period of the project.

Off balance sheet foreign currency options hedge revenue streams denominated in USD. The unrealised gain on these contracts will be realised and matched against future revenue received. The options hedge a percentage of revenue from July 1999 to December 2002.

Off balance sheet metals futures contracts match existing fixed price sale commitments to external customers.

Liquidity Risk

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

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52 Pasminco

27 Contingent LiabilitiesDuring the course of the 1994 financial year certain warranties were issued by the entity in relation to the saleof UK based assets of the Group. At the date of this report, the directors are not aware of any claims orintentions to claim under these warranties and indemnities.

Pasminco Australia Limited has guaranteed a residual value of $6 million (1998: $6.9 million) for a shiploader it is currently operating under lease.

Pasminco Limited has, with certain exceptions, guaranteed all the obligations of Pasminco Finance Limited.

Pasminco Limited has guaranteed the obligations of certain controlled entities in relation to Banker’sUndertakings provided by the Company’s bankers to the controlled entities’ respective Workers’ Compensation authorities.

The economic entity has contingent liabilities in respect of termination benefits which may arise pursuant toagreements entered into with certain management employees. The maximum amount of contingent liability isdependent upon the circumstances in which the employment is terminated. Accordingly, no provision has beenmade in the financial statements.

Pasminco Limited has undertaken to render continuing financial support to certain wholly owned controlled entities that have negative shareholders funds to enable maintenance of operations in the ensuingtwelve months.

In relation to the Pasminco Century Project, the following bank guarantees have been entered into:

– a $0.7 million guarantee to the Queensland Department of Transport in relation to the security deposit underthe Pipeline Corridor Licence (1998: $0.7 million);

– a $0.25 million guarantee to the Gulf Aboriginal Development Corporation in relation to environmentalmanagement (1998: $0.25 million).

Cross guarantees by Pasminco Limited and other Group companies are as described in note 12(c).

Associated CompaniesA $21 million Indemnity has been provided by Ernest Henry Mining Pty Limited to the National Australia Bankfor bank guarantees provided to the Department of Mines and Energy for Environmental Bonds. Pasminco’s49% share of this indemnity is $10.3 million.

Various Native Title Claims have been made over lands which include Ernest Henry Mine (‘EHM’) and othertenures held by EHM. Litigation has also been commenced in the Queensland Supreme Court seeking certaindeclarations and injunctions to prevent continuation of mining operations arising out of claimed Native Title andthe Native Title Act 1993. EHM does not believe existing operations will be materially affected.

Notes to the Financial Statements

Notes to the Financial Statements

53Pasminco

1999 $m 1998 $m 1999 $m 1998 $m

28 Commitments for Expenditure

Controlled entities(a) Capital expenditure contracted for at balance date but not provided for is as follows:

Payable not later than one year 57.4 307.8 – –

Payable later than one year but not later than two years 0.2 20.7 – –

57.6 328.5 – –

The capital expenditure obligations predominantly relate to contracts entered into for the construction and operation of the Pasminco Century Project.

(b) Lease expenditure commitments

Non-cancellable operating leases:

Not later than one year 29.7 13.8 – –

Later than one year and not later than two years 44.0 12.8 – –

Later than two years and not later than five years 87.3 18.9 – –

Later than five years 77.2 – – –

Aggregate lease expenditure contracted for at balance date but not provided for 238.2 45.5 – –

Associates(a) Non-cancellable operating leases:

Due not later than one year 2.3 – – –

Due later than one year and not later than five years 9.7 – – –

Due later than five years 0.1 – – –

12.1 – – –

(b) Other Commitments:Infrastructure costs

Due not later than one year 15.5 – – –

Due later than one year and not later than two years 15.5 – – –

Due later than two years and not later than five years 62.0 – – –

Due later than five years 104.0 – – –

197.0 – – –

1999 $’000 1998 $’000 1999 $’000 1998 $’00029 Auditors’ RemunerationAmounts received, or due and receivable by the auditors of Pasminco Limited for:

– an audit or review of the financial statements of the entity and any other entity in the economic entity 334 376 50 90

– other services in relation to the entity and any other entity in the economic entity 268 160 – 92

602 536 50 182

Amounts received or due and receivable by auditors other than the auditors of Pasminco Limited for:

– an audit or review of the financial statements of the entity and any other entity in the economic entity 146 113 – –

748 649 50 182

30 Remuneration of Directors(a) The cost of amounts paid or payable, or otherwise made available,

in relation to all Directors of each entity in the economic entity, directly or indirectly, by the entities of which they are directors or any related party 1,647 1,557 – –

(b) The cost of amounts paid or payable, or otherwise made available, to Directors of Pasminco Limited, directly or indirectly, from the entity or any related party – – 1,647 1,557

(c) Number of Directors of Pasminco Limited whose total remuneration falls within the following bands:

50,000 – 59,999 5 5

100,000 – 109,999 1 1

410,000 – 419,999 – 1

430,000 – 439,999 1 –

760,000 – 769,999 – 1

830,000 – 839,999 1 –

(d) Details of options in Pasminco Limited shares granted to Directors during the year ended 30 June 1999 are set out in the Directors’ Report. Details of the employee share scheme are set out in note 39. Refer note 31(c) for details on Manager Incentive Plan payments.

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54 Pasminco

Notes to the Financial Statements

1999 1998

31 Remuneration of Executives(a) The cost of amounts paid or payable to Executive Officers of the economic

entity and the Company whose remuneration is $100,000 or more from entities in the economic entities and related entities in connection with the management of the affairs of these entities. 8,162 7,036 3,356 2,786

(b) The number of Executive Officers of the economic entity and the Company whose remuneration was at least $100,000 is shown in the following bands:

100,000 – 109,999 – 1 – –

120,000 – 129,999 – 1 – 1

130,000 – 139,999 1 2 – –

140,000 – 149,999 – 1 – –

150,000 – 159,999 2 2 – –

160,000 – 169,999 2 4 – –

170,000 – 179,999 4 2 – –

180,000 – 189,999 2 1 – –

190,000 – 199,999 1 2 – –

200,000 – 209,999 3 2 – –

210,000 – 219,999 2 – – –

220,000 – 229,999 1 3 – –

230,000 – 239,999 2 1 – –

240,000 – 249,999 1 1 – –

250,000 – 259,999 2 1 – 1

260,000 – 269,999 2 2 1 1

280,000 – 289,999 1 – 1 –

290,000 – 299,999 1 – 1 –

310,000 – 319,999 – 2 – 2

330,000 – 339,999 – 1 – 1

340,000 – 349,999 1 – 1 –

350,000 – 359,999 1 – 1 –

410,000 – 419,999 – 1 – 1

430,000 – 439,999 1 – 1 –

520,000 – 529,999 1 – 1 –

760,000 – 769,999 – 1 – 1

830,000 – 839,999 1 – 1 –

(c) For 1999, remuneration includes a valuation for share options consistent with the basis outlined in the Directors’ Report regarding the Emoluments of Directors and the five highest paid officers. The 1998 amounts do not include a valuation for share options. For 1999, no amounts have been included in Executives or Directors remuneration (note 30 or note 31) in respect of the Manager Incentive Plan. Any Manager Incentive Plan payments made in relation to the 1999 year will be included in remuneration disclosures for the year ending 30 June 2000. The remuneration reflected above excludes remuneration paid to those executives who worked mainly outside Australia for the whole of the financial year.

(d) Executive Officers of the economic entity and the Company whose remuneration is $100,000 or more were granted 1,650,000 options (1998 – 1,630,000) over ordinary Pasminco Limited shares during the year ended 30 June 1999. Options exercised during the year totalled nil (1998 – 50,000).

Details of the employee share scheme are set out in note 39.

32 Earnings per ShareBasic earnings per share – cents (0.7) 6.2

Basic earnings per share before abnormal items – cents (0.7) 3.9

Weighted average number of ordinary shares outstanding during the financial year – million 1,124.6 1,016.1

Diluted earnings per share is not materially different from basic earnings per share.

1999 $’000 1998 $’000 1999 $’000 1998 $’000

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$’000 $’000 $’000 $’000 $’000

55Pasminco

33 Superannuation CommitmentsThe commitments not provided for in the accounts of the economic entity as at 30 June 1999 are:

Economic entity companies participate in a number of superannuation and retirement benefit plans, the majority of which have been established by orsponsored by those companies or related companies. The plans provide benefits on retirement, disablement, death, retrenchment or withdrawal from service,the principal types of benefits being lump sum defined benefits and lump sum accumulation benefits. Contributions are made by employees and the employingcorporations as percentages of salary or wages or specified dollar amounts as required by the relevant trust deeds.The latest actuarial assessments for thoseplans subject to actuarial supervision were as follows:

Broken Hill Mine Employees’ Pension Fund, reviewed as at 30 June 1999 by R R Codron FIAA of William M Mercer Pty Ltd, BHAS Employees SuperannuationFund, reviewed as at 30 June 1998 by R R Codron FIAA of William M Mercer Pty Ltd, Pasminco Superannuation Fund, reviewed as at 30 June 1998 by R R Codron FIAA of William M Mercer Pty Ltd, Sulphide Pensions Fund, reviewed as at 31 December 1998 by R R Codron FIAA of William M Mercer Pty Ltd.Savage Zinc, Inc. (Pasminco) Hourly Employees’ Pension Plan; Savage Zinc, Inc. (Pasminco) Salaried Employees’ Retirement Plan; The Pension Plan ofSavage Zinc, Inc. (Pasminco) for Bargaining Unit Employees; SZI/JC Pension Plan for Bargaining Unit Employees; and SZI Supplemental Executive RetirementPlan, all had actuarial assessments performed as at 30 June 1999 by V.N. Williams FSA of Bryan, Pendleton, Swats & McAllister, LLC.

The last actuarial review of the Broken Hill Mine Employees’ Pension Fund indicated that there were sufficient assets to cover the vested benefits payable on voluntary termination of each and every employee member. In the unlikely event of the compulsory termination of each and every employee member at 30 June 1999 there would have existed a potential deficiency of Fund assets of $4.8 million. Other than in the event of the closure of mining operations andthe resultant compulsory termination of each and every employee member, no contingent liability would have arisen had the Fund been terminated as at 30 June 1999. The Company has raised its contributions to compensate for the known increased level of compulsory terminations over recent years and to finance future prospective liabilities.

The last actuarial assessment for the BHAS Employees Superannuation Fund indicated that the Fund’s assets were sufficient to cover the Company’sobligations under the Superannuation Guarantee legislation and in the event of the voluntary termination of the employment of each employee provided allemployees elected the “cash/partly preserved” benefit option. However, if a member on voluntary termination elects to receive a “fully preserved benefit”, the benefit is calculated in the same way as the benefit payable on the compulsory termination of the employment of the employee by the employer (ie, on retrenchment). In the unlikely event that each and every member was compulsorily terminated (or voluntarily terminated and chose the “fully preserved”option), there would have been a potential deficiency of Fund assets of $1.97 million at 30 June 1998. The Company has maintained its practice of fundingadditional amounts in respect of every terminating member with the aim of maintaining the Fund’s solvency.

The last actuarial review of the Pasminco Superannuation Fund’s financial position carried out as at 30 June 1998 indicated that the Fund’s assets weresufficient to satisfy all benefits that would have been vested under the Fund in the event of: termination of the Fund; voluntary termination of the employment of each employee on the initiative of that employee; and compulsory termination of the employment of each employee by the employer.

The last actuarial review of the Sulphide Pensions Fund as at 31 December 1998 indicated that the Fund’s assets were sufficient to satisfy all benefits thatwould have been vested under the Fund in the event of: termination of the Fund; voluntary termination of the employment of each employee on the initiative of that employee; and compulsory termination of the employment of each employee by the employer. The most recent actuarial assessments of the SavageZinc plans were as at 30 June 1999. These assessments showed the plans had a surplus of funds of A$5.261 million (US$3.472 million) at 30 June 1999.

With the exception of the contribution obligations in respect of those members of the Pasminco Superannuation Fund who were members of the CRA StaffProvident Fund immediately prior to joining the Fund, the contribution obligations to the respective plans are legally enforceable only up to the date upon whichany such obligation is terminated by appropriate action pursuant to the relevant trust deed, subject to the terms of any relevant award agreement. In respect ofthe ex-members of the CRA Staff Provident Fund, the obligation to contribute is enforceable to the extent necessary to finance the defined benefits providedunder the Rules of the Pasminco Superannuation Fund in relevant circumstances.

The accrued benefits and Fund assets at net market value at the previous actuarial review dates, together with the Fund assets net market value and the vestedbenefits disclosed in the Fund’s most recently available statements, are as follows:

Fund assets at net market value at actuarial review date 44,746 27,621 132,315 16,365 28,326Accrued benefits at actuarial review date 47,839 28,181 129,560 13,947 23,065Excess of Fund assets over accrued benefits (3,093) (560) 2,755 2,418 5,261Date of most recent actuarial review 30/06/99 30/06/98 30/06/98 31/12/98 30/06/99Fund assets at net market value at most recently available year end 44,746 27,621 132,315 16,365 28,326Vested benefits at most recently available year end 41,473 29,648 126,328 13,949 20,264Date of most recent year end 30/06/99 30/06/98 30/06/98 31/12/98 30/06/99

Notes:

1.Accrued benefits have been determined based on the amounts calculated by the Fund’s actuary at the most recent actuarial review. These amounts represent the present value of the benefits which the Fund is presently obliged to pay at some future date as a result of membership of the Fund as at the date of the actuarial review.

2. Vested benefits are benefits which are not conditional upon the continued membership of the Fund or any factor other than resignation from the Fund.

3. The value of the accrued benefits at the last actuarial reviews did not make any specific allowance for retrenchment benefits with the exception of the Broken Hill Mine Employees’ Pension Fund where the value of the accrued retrenchment benefits is included owing to the announced closure of the mine.

4.The vested benefits at 30 June 1998 shown in the BHAS Employees Superannuation Fund financial statements assumed that all members would have elected the ‘fully preserved’ option.

5. United States dollar denominated amounts relating to Savage Zinc Plans have been converted to Australian currency at A$1 = US$0.66.

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56 Pasminco

Notes to the Financial Statements

1999 1998 1999 1998 1999 1998 1999 1998$m $m $m $m $m $m $m $m

1999 1998 1999 1998 1999 1998 1999 1998 1999 1998$m $m $m $m $m $m $m $m $m $m

1999 $m 1998 $m 1999 $m 1998 $m

34 Segment InformationIndustry segments

External sales 1,487.9 1,370.1 76.5 – – – 1,564.4 1,370.1

Intersegment sales – – – – – – – –

Other revenue 233.9 24.6 6.9 – (5.1) – 235.7 24.6

Total Revenue 1,721.8 1,394.7 83.4 – (5.1) – 1,800.1 1,394.7

Segment result before income tax (14.3) 102.7 10.8 – (5.0) – (8.5) 102.7

Segment assets 3,583.3 2,411.4 305.6 – – – 3,888.9 2,411.4

The principal activity of the economic entity comprises the conduct of an integrated lead and zinc business, including exploration for and mining of ores,concentrating to saleable concentrates, smelting of metals and marketing in a primary form. The other industry segment relates to the Copper and Coal operations acquired as part of the February 1999 acquisition of Savage Resources Limited.

Geographical Segments

External sales 1,074.2 987.5 391.3 382.6 98.9 – – – 1,564.4 1,370.1

Intersegment sales 10.8 – 19.9 54.3 – – (30.7) (54.3) – –

Other revenue 240.1 26.9 33.4 23.3 0.2 – (38.0) (25.6) 235.7 24.6

Total Revenue 1,325.1 1,014.4 444.6 460.2 99.1 – (68.7) (79.9) 1,800.1 1,394.7

Segment result before income tax (61.3) 6.6 48.1 96.1 4.7 – – – (8.5) 102.7

Segment assets 3,240.6 2,212.7 269.4 198.7 378.9 – – – 3,888.9 2,411.4

Compilation of segment information:

The division of the economic entity’s results and assets into geographical and industry segments has been ascertained by reference to direct identification of assets and revenue/cost centres and where interrelated segment costs exist, an allocation has been calculated on a pro-rata basis of the identifiable assets and/or costs. Intersegment pricing is on an arms-length market basis.

Segment results reflect the allocation of the economic entity’s net external finance charges apportioned on the basis of total assets employed (intra group interest has been eliminated).

35 Franked Dividends

(a) The franked portion of dividends paid during the year – 30.6 – 30.6(1998 – franked @ 36 cents)

(b) Amount of dividends provided for in the current year. – 45.0 – 45.0

The prior year dividend of 4 cents per share was 100% unfranked.

(c) Franking account balance at 30 June franked @ 36 cents 0.3 0.2 – –

The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for:

(a) franking credits that will arise from the payment of income tax payable as at the end of the year,

(b) franking debits that will arise from the payment of dividends proposed as at the end of the year, and

(c) franking credits that may be prevented from being distributed in the subsequent year.

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57Pasminco

Notes to the Financial Statements

1999 $m 1998 $m

36 Related PartiesRelated parties of Pasminco Limited (ultimate parent entity) fall into the following categories:

Controlled EntitiesTransactions with entities in the wholly owned Group during the year included sales on a commercial basis, interest charged/earned on a commercial basis, dividends paid and received, hedging transactions, asset sales, borrowings on a commercial basis and tax loss transfers.

DirectorsThe names of persons who were Directors of the chief entity as at the date of this report are set out in the Directors’ Report. Bryan Davis, Executive Director – Mining, retired on 30 June 1999. There have been no other changes in Directors since 30 June 1998.

Transactions of Directors and Director Related Entities Concerning Shares or OptionsThe aggregate number of shares acquired by Directors of the Company and their Director related entities in the Company was nil (1998 – 47,974) fully paid ordinary shares and 400,000 (1998 – 400,000) options under the Pasminco Limited Employee Option Plan. There were nil shares and options disposed of by Directors and their Director related entities in the Company. The aggregate number of shares and share options held directly, indirectly or beneficially by Directors and their Director related entities in the Company at balance date was 80,374 (1998 – 80,374) fully paid ordinary shares, and 1,300,000 (1998 – 900,000) options under the Pasminco Limited Employee Option Plan.Information on the remuneration of Directors is set out in note 30.

Superannuation FundInformation in respect of the entity’s superannuation funds is set out in note 33.

37 Joint VenturesA controlled entity, Pasminco Port Pirie Smelter Pty. Limited, participates in the Australian Refined Alloys (ARA) joint venture to produce and market lead alloys ex-secondary materials. Pasminco Port Pirie Smelter Pty. Limited has a 50% interest in the assets, liabilities and output of this joint venture. The share of assets employed in the ARA joint venture is included in the economic entity balance sheet under the following classifications.

Non-current assets – property, plant and equipment 3.3 2.7Current assets – receivables 1.2 1.3Current assets – inventories 1.9 1.5Share of assets employed in the ARA joint ventures 6.4 5.5

Output representing the economic entity’s share of the ARA joint venture’s value of production 10.8 11.2Profit contribution to the economic entity result (before tax) 2.7 2.7

In addition to the above joint venture, at 30 June 1999 Pasminco held an interest in the following joint venturesas a result of the recent acquisition of Savage Resources Limited.Joint Venture Ownership Principal

Interest % ActivityLiddell 67.5 Coal miningFoybrook 67.5 Coal miningGlendell 67.5 Coal mine developmentTogara North 33.33 Coal exploration

For the year ended 30 June 1999, the above joint ventures contributed a pre tax profit of $3.4 million. The valueof Pasminco’s share of the coal mined since the acquisition date was $24.3 million. As stated in note 40,effective 1 July 1999, these coal joint ventures have been sold.Included in the assets and liabilities of the economic entity as at 30 June 1999 are the following items whichrepresent the economic entity’s interests in the assets and liabilities employed in the coal joint ventures. As thecoal joint ventures have been sold with effect from 1 July all of the assets and liabilities have been shown ascurrent.

Current AssetsCash 0.2 n/aReceivables 10.3 n/aInventories 6.0 n/aLand held for resale 4.1 n/aProperty, Plant and Equipment held for resale 58.9 n/aOther 14.7 n/a

94.2 n/aCurrent LiabilitiesAccounts payable 15.9 n/aBorrowings 0.2 n/aProvisions 9.9 n/a

26.0 n/a

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58 Pasminco

Notes to the Financial Statements

1999 $m 1998 $m

1999 $m 1998 $m 1999 $m 1998 $m 1999 $m 1998 $m

38 Statement of Cash Flows(a) Reconciliation of operating profit/(loss) after tax to net cash provided by operating activities

Operating profit/(loss) after tax and abnormal items (8.3) 63.3

Depreciation and amortisation 158.3 131.7

Bad debt provision 0.2 (0.5)

Interest and finance charges paid 43.4 21.0

Interest received (8.0) (7.5)

Share of profits of associates not received as dividends (1.9) –

Net profit (loss) on disposal of non-current assets 1.0 0.8

Net exchange differences 22.5 11.5

Change in assets and liabilities

Receivables – current (2.8) (1.8)

Receivables – non-current (8.2) 0.1

Payables – current 28.5 97.2

Payables – non-current (0.1) (0.6)

Other liabilities – current 49.1 –

Other liabilities – non-current 256.5 –

Inventories (20.2) (62.1)

Provisions (37.0) (13.5)

Prepayments 5.0 1.9

Income tax payable (19.9) 31.3

Deferred income tax (16.9) (14.0)

Future income tax benefit (5.8) (0.2)

Other 0.5 –

Net cash provided by operating activities 435.9 258.6

(b) A statement of cash flows for the chief entity, Pasminco Limited, has not been included as there were no material cash flows other than the payment of $45 million in dividends and a $453.8 million investment in Savage Resources Limited which were both funded by intra-Group borrowings. The cash balance for Pasminco Limited at the beginning and end of the 30 June 1999 financial year is nil.

(c) Current loan facilities

Long-term 1,208 1,514 1,091 216 117 1,298

Short-term 446 76 186 8 260 68

1,654 1,590 1,277 224 377 1,366

These facilities comprise:

(i) US dollar facilities

Syndicated loan 909 984 818 – 91 984

Transferable loan certificate facility 123 134 123 134 – –

Revolving credit facilities 402 352 251 82 151 270

1,434 1,470 1,192 216 242 1,254

The syndicated loan facility is an amortising facility with a final maturity date of January 2008.

The transferable loan certificates were fully drawn down with a maturity date of February 2000.

The revolving credit facilities have varying maturity dates through to June 2002.

(ii) Australian dollar facilities

Multi option facility 125 75 50 8 75 67

Bank bill and cash facility 95 45 35 – 60 45

220 120 85 8 135 112

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1999 $m 1998 $m 1999 $m 1998 $m

Notes to the Financial Statements

59Pasminco

39 Employee Share SchemeAfter shareholder approval was obtained at the 1995 Annual General Meeting, the Pasminco Limited Employee Option Scheme was established where all full-time or permanent part-time employees of the Pasminco Group (including Executive Directors but excluding Non-Executive Directors) were offered options over ordinary shares of Pasminco Limited. The options, issued for nil consideration, are issued in accordance with the guidelines established by the Directors of Pasminco Limited pursuant to the approved Scheme. The options cannot be transferred and will not be quoted on the Australian Stock Exchange. At 30 June 1999, options over shares pursuant to the Pasminco Limited Employee Option Plan are as follows:

3,832,000 1995 $1.67 10 November 2000

5,139,500 1996 $2.07 8 November 2001

11,116,500 1997 $1.84 14 November 2002

10,631,000 1998 $1.49 13 November 2003

The total number of options outstanding as at 30 June 1999 was 30,719,000 which is equivalent to 2.7% of the total issued ordinary shares in the Company.

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

1995 12,000

1996 –

1997 –1998 11,000

During the financial year, 10,858,000 options were granted on the basis that each option can, under mostcircumstances, be converted to one ordinary share in the Company, after a two year period from the date of issue, bythe holder subscribing $1.49 per share, being 10% above the weighted average sale price of Pasminco Limited shareson the Australian Stock Exchange over the five business days immediately before 13 November 1998. For employeesother than those at Budel Zink BV, options can be exercised after 13 November 2000 and on or before 13 November2003. Employees of Budel Zink BV can exercise options at any time on or before 13 November 2003. Under certaincircumstances, such as redundancy, retirement or death, options may be exercised by Australian employees prior to13 November 2000. Under the terms of the Plan, participants may, upon exercise of their options, participate in anyissue of additional shares or bonus shares to shareholders.

The market value of ordinary Pasminco Limited shares closed at $1.67 on Wednesday 30 June 1999 (the last tradingday of the financial year). No other equities in any of the entities within the economic entity were acquired by or issuedto employees during the year in relation to any other ownership-based remuneration scheme.

40 Event Occurring after Reporting DatePasminco has reached agreement on the sale of the coal assets it acquired in February this year as a result of its acquisition of Savage Resources Limited.

Interests associated with Glencore International AG, which is a Swiss-based leading diversified industrial andcommodity trading company, will acquire the assets, effective from 1 July for a price of $69 million in cash. Theassets include the interests in the Liddell, Glendell and Foybrook joint ventures in the Hunter Valley and the TogaraNorth joint venture in Queensland.

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Directors’ Declaration

In accordance with a resolution of the Directors of Pasminco Limited,we state that:

(1) In the opinion of the Directors:

(a) the financial statements and notes of the Company and of theconsolidated entity are in accordance with the Corporations Law,including:

(i) giving a true and fair view of the Company’s and consolidatedentity’s financial position as at 30 June 1999 and of theirperformance for the year ended on that date; and

(ii) complying with Accounting Standards and CorporationsRegulations; and

(b) there are reasonable grounds to believe that the company will beable to pay its debts as and when they become due and payable.

(2) In the opinion of the Directors, as at the date of this declaration, thereare reasonable grounds to believe that the members of the Closed Groupidentified in note 12(c) will be able to meet any obligations or liabilitiesto which they are, or may become, subject by virtue of the Deedof Cross Guarantee.

On behalf of the Board.

M. R. RaynerChairman

D. M. StewartManaging Director and CEOMelbourne25 August 1999

60 Pasminco

61Pasminco

Independent Audit Report

To the members of Pasminco Limited

ScopeWe have audited the financial report of Pasminco Limited for the financialyear ended 30 June 1999, as set out on pages 32 to 60, including theDirectors’ Declaration. The financial report includes the financial statementsof Pasminco Limited, and the consolidated financial statements of theconsolidated entity comprising the Company and the entities it controlled at year’s end or from time to time during the financial year. The Company’sdirectors are responsible for the financial report. We have conducted anindependent audit of the financial report in order to express an opinion on it to the members of the Company.

Our audit has been conducted in accordance with Australian AuditingStandards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies andsignificant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report ispresented fairly in accordance with Accounting Standards, other mandatoryprofessional reporting requirements and statutory requirements so as topresent a view which is consistent with our understanding of the Company’sand the consolidated entity’s financial position and performance asrepresented by the results of their operations and their cash flows.

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

Audit OpinionIn our opinion, the financial report of Pasminco Limited is in accordance with:

(a) the Corporations Law including:

(i) giving a true and fair view of the Company’s and the consolidatedentity’s financial position as at 30 June 1999 and of theirperformance for the year ended on that date; and

(ii) complying with Accounting Standards and the CorporationsRegulations; and

(b) other mandatory professional reporting requirements.

Ernst & Young

Alan I BeckettPartnerMelbourne25 August 1999

Shareholder Information

Substantial ShareholdersSubstantial Shareholders as at 12 August 1999 were:

•PDFM Limited and its associates have a relevant interest in 123,000,131 fully paid ordinary shares (Notice dated 30 October 1998)

Distribution of Shareholders and ShareholdingsThe number of issued shares at the date of this Report was 1,124,936,999 heldby 33,288 shareholders whose voting rights are one vote for each share held.

Top 20 ShareholdersSize of Shareholding Number of Number of

Shareholders Shares

1-1,000 16,240 8,127,6871,001-5,000 11,290 31,659,1965,001-10,000 3,385 26,609,49410,001-100,000 2,136 53,691,147100,001 and over 237 1,004,849,475

Total 33,288 1,124,936,999

Shareholders of less than a marketable parcel having a market value of $500 or less 798 126,444

Shareholding DistributionTop 20 Shareholders Number of %

Shareholders

National Nominees Limited 208,977,273 18.58Chase Manhattan Nominees 140,416,660 12.48Westpac Custodian Nominees 112,599,686 10.01ANZ Nominees Limited 108,136,936 9.61Citicorp Nominees Pty Limited 38,702,877 3.44Australian Mutual Provident Society 31,036,158 2.76MLC Limited 28,940,412 2.57BT Custodial Services Pty Limited 27,904,851 2.48Queensland Investment 25,900,000 2.30Mercantile Mutual Life 15,425,835 1.37Reinsurers Investments Pty Limited 12,143,534 1.08Perpetual Trustees Nominees Limited 11,534,219 1.03Perpetual Trustee Company Limited 9,810,448 .87AMP Nominees Pty Limited 9,351,618 .83Macquarie Life Limited 9,232,485 .82HKBA Nominees Limited 8,566,521 .76BT Custodial Services Pty Ltd 8,438,739 .75Perpetual Trustee Company Limited 8,128,695 .72National Mutual Life 7,664,103 .68Djerriwarrh Investments Limited 7,520,872 .67

Stock Exchange ListingPasminco’s Shares are listed on the Australian Stock Exchange and tradeunder the ASX code PAS.

Direct Deposit of DividendsDividend payments may be paid directly to a nominated Australian financialinstitution. Payments are electronically credited on the dividend payment dateand confirmed by payment advices mailed directly to the shareholder’sregistered address. A form for this purpose is available from ComputershareRegistry Services Pty Ltd.

Shareholding Alternatives Under CHESSShareholders may choose to trade their shares using the Clearing HouseElectronic Sub-register System, otherwise known as the "CHESS" systemoffered by the Australian Stock Exchange. In December 1998 the Company moved to Issuer Sponsorship and accordingly no longer issues share certificates.

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

Changing Name or AddressChanges to your name or address must be advised in writing toComputershare Registry Services Pty Ltd. You will need to provide thefollowing information:

For changes to your address:

•your full name•your shareholder number•your old address•your new address•you must also sign the request

For changes to your name:•your old name•your address•your shareholder number•your new name•original documentary evidence (or copy certified by a Justice of the Peace)

of your change of name, such as:•marriage certificate•deed poll, or•certificate of registration on change of name (for corporations)

If you are sponsored by a broker, in both cases, your notice in writing mustbe sent to your sponsoring broker.

Share Buy-BackThe Company has not during the year in review had, and does not currentlyhave, an on-market buy-back program in place.

Lost StatementsShareholders should inform Computershare Registry Services Pty Ltdimmediately, in writing, so that a replacement statement can be arranged.

Removal from the Annual Report Mailing ListShareholders can nominate not to receive an Annual Report by writing toComputershare Registry Services Pty Ltd. Shareholders will continue toreceive all other shareholder information including Notice of Annual GeneralMeeting and Proxy.

62 Pasminco

Investor InformationPasminco makes a significant commitment to investor relations.

Institutional investors and stockbroking analysts are invited to visit the Company’s operations in May and November each year. After the release of the half-year and full-year financial results, senior management provide briefings to the investment community, both in Australia and overseas.

Company InformationThe Annual Report is the major source of information for investors in Pasminco.

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

Pasminco LimitedCompany SecretaryGPO Box 1291KMelbourne VIC 3001 Australia

Telephone 61 3 9288 0426

Facsimile 61 3 9288 9191

E-mail pasminco@pasminco.com.au

The Company’s Share Register is maintained by Computershare Registry Services Pty Ltd.

Shareholders’ enquiries about their shareholdings should be addressed to:

Computershare Registry Services Pty LtdLevel 12 565 Bourke Street Melbourne VIC 3000 Australia

GPO Box 2975EEMelbourne VIC 3001 Australia

Telephone 61 3 9611 5711

Facsimile 61 3 9611 5710

63Pasminco

Shareholder Information

Web SitePasminco has a web site accessible through theInternet. Pasminco’s Home Page on the Internet islocated at

www.pasminco.com.auHere you will find a range of useful informationand options.

•Read news releases on financial and production performance within minutes of release to the Australian Stock Exchange.

•Access the Chairman’s AGM address and other key presentations on the day of delivery for insights into strategy and policy.

•View an electronic version of the 1999 Annual Report print publication or review excerpts.

•Register to receive news release notification directly via e-mail by clicking on the Register button on the top menu bar.

•Ask a question or make a comment by clicking on the Contact Us button on the top menu bar. For example, use this convenient option rather than mailing your Shareholder Questions form.

•Learn more about our operations, products and policies by exploring Operations & Projects, Products & Services and Employees & Community.

As we work to improve the site, we would be veryinterested to receive shareholders’ comments.

Just click ‘Contact Us’ on the top menu bar.

Glossary

64 Pasminco

A$ Australian dollar

AUD/USD Australian dollar/US dollar exchange rate exchange rate

Ag Chemical symbol for silver

ARA The Australian Refined Alloys joint venture with Simsmetal Limited, in which a Pasminco subsidiary has a 50% interest

Au Chemical symbol for gold

break-even The lowest zinc price for zinc price a particular performance

period at which Pasminco would break even i.e. make zero profit

contained Amount of zinc/lead metalzinc/lead contained in a mineral

deposit or concentrate, calculated by multiplying average grade by total tonnes

co-treatment Co-treatment of paragoethite (or ‘co-treatment’) is an integrated process developed by Pasminco and involving two of its smelting sites. Commissioned in 1997/98, the new technology has eliminated jarosite production at the Hobart smelter, which now produces an intermediary product called paragoethite. This is shipped to the Port Pirie lead smelter to undergo additional treatment and further metal recovery

Cu Chemical symbol for copper

EBIT Earnings before interest and tax

EMS Environmental Management Systems

ESHE Executive Safety Health and Environment Committee(Pasminco Group subsidiaries) consists of Pasminco’s management team (see inside back cover) is attended by the Group Managers Environment and Safety & Health and chaired by the Managing Director and Chief Executive. The ESHE establishes policy and strategic directions for the management of safety, health and environment across the Pasminco Group

g/t grams per tonne

Gulf Agreement between Century, Communities Native title claimants and the Agreement Queensland Government,

dated 7 May 1997

ISO 14001 An international standard for environmental management systems published by the International Standards Organisation in 1996. Key elements include Policy, Planning, Implementation and Operation, Checking and Corrective Action, and Management Review.

ISO 9002 International standard for quality assurance in production, installation and servicing

ISO 9003 International standard for quality assurance in final inspection and testing

jarosite A residue of the roasting and hydrometallurgical treatment of zinc concentrates. A compound of ammonia, iron and sulphate, it takes its name from a similar naturally occurring material. Jarosite cannot be reprocessed except at very low rates. Historically, it has been disposed of at sea, in permanent ponds or landfill sites.

JORC Code The Australasian Code for Reporting of Mineral Resources & Ore Reserves (the ‘JORC Code’ or ‘the Code’) sets out minimum standards, recommendations and guidelines for Public reporting of exploration results, Mineral Resources and Ore Reserves in Australasia. It has been drawn up by the Joint Ore Reserves Committee of The Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.

LME London Metal Exchange

MRI Medical Referral Injury. Injuries resulting in medical treatment, lost time or alternate duties

MRIFR Medical Referral Injury Frequency Rate. The number of medical referral injuries per million hours worked

MV Wunma Transfer vessel’s name ‘Wunma’ is pronounced ‘Wood – MA’ and is from the Lardil language group (Mornington Is). It is a variety of frigate bird which is found in the Gulf region.

NHMRC National Health & Medical Research Centre

Nlg Netherlands guilder

ore reserves As defined in the 1996 Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves

paragoethite A hydrated iron oxide produced at the Hobart smelter as part of the co-treatment process

Pb Chemical symbol for lead

PBS Pasminco Business Systems, an initiative to introduce an integrated business system utilising SAP software and encompassing sales and marketing, asset management, maintenance, finance, purchasing and human resources processes across Pasminco

PER Pasminco Environment Report

premium Dollar amount payable over and above the LME price as negotiated between buyer and seller (includes freight and other realisation costs)

quenched At Cockle Creek, lead is tapped bullion from the blast furnace into a

continuously stirred and cooled lead kettle. Molten lead flows into the kettle and is rapidly quenched from 1,150ºC to 400ºC, three tonne blocks. The casting process is fully automated.

resource As defined in the 1996 Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves

PSMS Pasminco Safety Management System

SAP SAP AG SAP (Systems, Applications and Products in Data Processing) was founded in 1972, in Walldorf, Germany, is a publicly held corporation with shares traded on the German and Swiss stock exchanges, and in 1995 the company was added to the DAX, the index of German blue-chip companies. In the US, SAP’s unrestricted American Depository Receipts (ADR) trade over the counter under the symbol SAPHY.

SHLG Safety and Health Leadership Group

SO2sulphur dioxide

µg/dL micrograms per decilitre

Western world A term used by industry analysts such as Brook Hunt and CRU to include countries apart from China, Vietnam, North Korea, Cuba, the former Soviet Union and eastern Europe (Romania, Bulgaria, Czech Republic, Slovak Republic, Hungary, Poland)

WHO World Health Organisation

Y2K Year 2000

Zn Chemical symbol for zinc

ZnEq Zinc equivalence is a concept which allows the mine planner to take into account not only the zinc grade of an ore block but also the value of lead and silver. The total value of zinc, lead and silver in a block is divided by the zinc price to give the zinc equivalent grade of that block