Our primary responsibility is to provide a safe and healthy work environment. In spite of significant progress across the Group to further our safety mission, it is with deep regret that we report that a fatal accident occurred at the Elura Mine in March. Pasminco has continued to refine the Pasminco Safety Management System so that safety becomes a part of our culture, demonstrated by behaviour, regardless of the type of job being performed.

In terms of performance, this has been one of the most challenging years in the Company’s history but also a year of significant achievement.

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

Higher production and sales volumes achieved across the Group, including record production levels at the Hobart and Budel smelters. However, the result was significantly impacted by lower prices for zinc and lead, offset to some extent by the weaker Australian dollar. There were major pressures on product premiums and margins because of difficult market conditions in Asia. Issues associated with plant and technology upgrades also increased operating costs.

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

Pasminco now has global market coverage, a sustainable environmental position and solid ore reserves, placing it in a strong position for future growth and development. The groundwork has been laid to achieve the goal of being profitable at the bottom of the cycle and delivering strong returns to shareholders.

The commissioning of Century and the acquisition of Savage Resources Limited are key elements of the strategy.

Century will lift the Company to a new level of capacity and size, and fundamentally change its resource base. It is arguably the most important strategic step Pasminco has taken given the relatively short remaining life of existing mines.

The Century Project including the mine, mill and Karumba Port Facility, is in the final commissioning phase. It is running ahead of time and under budget with first concentrates due to be shipped to Budel later this year.

Savage Resources was acquired in February for AUD$457 million. It is pleasing to report that the US operations are performing well and have been fully integrated into Pasminco. Work continued on the divestment of those assets not core to our business, resulting in the sale of the coal operations to interests associated with Glencore International AG effective from 1 July 1999 for a price of AUD$69 million in cash. The Group is working towards the sale of the interest in the Ernest Henry Mine by the end of 1999.

The US operations extend our distribution network, complementing our existing presence in Europe, Asia and Australia. Marketing operations were further strengthened in Asia during the year with the establishment of new distribution arrangements allowing the Company to meet our customers’ needs more rapidly and cost effectively.

In February it was confirmed that mining was unlikely to continue at Broken Hill beyond 2006. Pasminco is working in partnership with a broad range of community interests in the city to manage the transition for Broken Hill. In the meantime, the mining operations continue to make a valuable contribution to overall Company performance.

The Port Pirie smelter was upgraded, the Budel conversion continued to ensure its readiness 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 make preparations in readiness for the Year 2000 transition to ensure that there is minimal impact on the business.

In August 1999 the first Pasminco Environmental Report was published in accordance with the Australian Minerals Industry Code for Environmental Management. Development of a Group wide strategy for managing indigenous affairs continued. At Century, a strong commitment to the Gulf Communities Agreement was maintained and job opportunities for more than 350 indigenous employees during the construction period. As the operational phase of the project begins, we look forward to strengthening our partnerships with communities in the region.


In the year ahead, with major projects completed, Pasminco will increase its focus on cost containment and reduction. The corporate structure is being reviewed to ensure the Company is well organised to take advantage of the 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 June this year after heading mining operations since 1991 and serving as a director since 1995. The Board acknowledges his contribution to the growth 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 customer demand and make a strong return to profitability.

Every part of our business and every one of Pasminco’s people faced major challenges during this year of transition. Considerable effort has been made to build the business. The Board and executive appreciate the teamwork and dedication demonstrated by every employee as we strive to consolidate Pasminco’s position as a world leader and achieve a consistent and acceptable return for shareholders.

Mark R Rayner
Chairman

David M Stewart
Managing Director and CEO

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