Key Points

• 
  
• Pasminco recorded a profit after tax and abnormal items of $23.4 million for the 2000 year, representing an increase of $31.7 million from 1999`s result, which was an $8.3 million loss
  
• The result included an abnormal loss of $11.6 million relating to the impact of the change in Australia’s corporate tax rate from 36% to 30% on the Group’s carried forward tax losses
  
• No dividend was declared and cash flow in the current year will be applied to reduce debt
  
• A higher zinc price and stronger Australian dollar/Dutch guilder exchange rate improved earnings but this was partly offset by a lower lead price
  
• Higher production and sales volumes were achieved and costs were lower overall
  
• Lower sales margins were experienced
  
• The Group benefited from tax credits arising from start-up of the Century mine
  
• Net debt at 30 June was $1,322.4 million and the Group’s gearing ratio as measured by net debt to net debt plus equity was 46.7%
  
• The Group’s debt levels have peaked following completion of construction of the Pasminco Century Mine and the significant investment in operational upgrades during the past two years. Debt levels are expected to fall during the current year and beyond
  

External Factors
The average realised zinc price was 14% higher in 2000, at US$1,138/tonne, compared with US$994/tonne in 1999. The realised lead price was lower, averaging US$465/tonne compared with US$518/tonne in 1999.

The average realised AUD/USD exchange rate for the 2000 year was 62.9 cents, compared with 62.4 cents in 1999. Although the exchange rate was virtually unchanged year on year, the Group incurred currency losses on the expiry of out-of-the-money options and repayment of US$ loans. The Group’s currency option position is explained in more detail in the section Currency Options below.

The Australian dollar/Dutch guilder exchange rate averaged 1.39 guilders, compared with 1.24 guilders in 1999.

The combined impact of the higher zinc price, stronger Australian dollar/Dutch guilder and lower lead price was to increase earnings by $98 million.

Operating Performance
Output of zinc and lead from the Company’s mines and smelters was 17% higher than the previous year.

Mine production was assisted by the contribution from the Century mine, which although operational from 1 March, is still in ramp-up phase.

The Group`s smelters achieved record production, 13% ahead of last year, despite lower production at the Budel smelter in the Netherlands due to a maintenance shutdown, and lower production at Cockle Creek. The Hobart, Port Pirie and Clarksville smelters all set new annual production records.

Higher production and sales volumes, including the contribution from Century, added $14 million in earnings, and lower costs, including the impact of the Elura insurance claim, added $8 million to earnings.

Lower metal premiums overall reduced earnings by $4 million in 2000, mainly due to the impact of weaker lead market conditions in Asia.

Cash Flow
Cash flow from operating activities was $284.7 million for 2000.

From this capital expenditure of $492 million was funded, which included $320 million for completion of the Century mine and associated infrastructure assets. Sale of the infrastructure assets subsequently realised $217 million. The sale of coal assets realized $69 million which formed a part of the Savage acquisition in 1999.

Net interest paid was $51.3 million, $15.9 million higher than the previous year, reflecting commissioning of the Century mine and cessation of interest capitalisation.

Net debt drawn at 30 June 2000 was A$1322.4m and the Group`s net debt to debt plus
equity ratio was 46.7%.


Currency Options
A currency option program was recommenced in 1998 to protect the Group`s US dollar revenue stream against adverse movements in the AUD/USD dollar exchange rate. When the exchange weakened significantly in the latter part of 1997, and in periods of weakness since then, call options were purchased and put options were sold simultaneously. This is referred to as a cap and floor option strategy. The Company also took on currency options through the acquisition of Savage Resources in 1999.

As at 30 June 2000, cap and floor options to the value of US$2,279 million were in place over the period July 2000 to December 2005. The average strike price of the cap is US68 cents and the average strike price of the floor is US65 cents. The effect of this strategy is to protect US$2,279 million of revenue against a rise in the Australian/US dollar exchange rate above US68 cents while forgoing the benefit of a fall in the exchange rate below US65 cents.

Full details of this position are contained in Note 26 to the accounts on page 74 of the 2000 Annual Report.

Financing activities
The Group undertook a number of financing activities to support the funding strategy which focuses on securing long term funding requirements, efficient capital management and providing low cost finance.

The major financing activities during the year were the arrangement of the US$150million debtors’ securitisation and US$108million transferable loan certificate (TLC) programs.

The debtors’ securitisation program operates under the terms of a receivables acquisition arrangement, whereby eligible trade debtors are sold on a continuous basis to a bank at a discount representing a financing cost. This is a low cost and balance sheet efficient form of finance.

The TLC program is a three year facility replacing the existing US$81.5million program which expired in February 2000.

The Group`s BBB- rating was reaffirmed by Standard & Poor’s in April 2000.

At year end the Group had committed facilities of $1548 million. The value of cash and undrawn committed facilities was $226m.


Click here to download PDF files of:


- 2000 Pasminco Annual Report indexable pdf (4.8Mb)

- Notice of Annual General Meeting 2000 (96Kb)

- Financial Summary (110Kb)

- Operations at a Glance (19Kb)
(excerpt from Annual Report 2000)

- Production 5-Year Summary (13Kb)
(excerpt from Annual Report 2000)

- Performance 10-Year Summary (10Kb)
(excerpt from Annual Report 2000)


The financial information presented on this web site represents extracts from the audited financial report of Pasminco Limited for the financial year ended 30 June 2000 issued on 22 September 2000. These extracts cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the entity as a reading of the complete financial report.

The complete financial report, and the audit report thereon, can be obtained, free of charge, on request to the entity
annualreport@Pasminco.com.au

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