1999 Annual General Meeting - Chairman`s Address
Mark R Rayner

When I addressed you one year ago, I spoke about our achievements over the company’s first decade, and I spoke about our potential.

In 1998 we were marking the occasion of our tenth year of operations and the many strides we had taken to develop Pasminco into a leading zinc, lead and silver producer.

I also commented on the potential of the Century development and the possible outcomes that would be delivered resulting from a successful acquisition of Savage Resources Limited.

Today, I will only briefly look at 1998/99. Your Chief Executive David Stewart will discuss in some detail the events of the year and the factors contributing to our result. I want to speak today about our capacity to return to profitability and deliver sustainable returns to our shareholders.

Let me first restate the long term strategy of this company.

Pasminco is a focused zinc and lead producer. We aim to reduce the cost base so that Pasminco will be profitable at all points in the metal price cycle and will achieve an average 15 percent return on shareholders’ funds over time.

Significant progress has been made in balancing the operations and identifying areas where costs can be reduced further. Initiatives undertaken during the past year have all been directed towards developing increased flexibility in the operations, increasing exposure to key markets and managing the business more effectively.

The significant investments made this year are crucial to the long term viability of the business, and have placed Pasminco in a position where we can look forward to positive investment returns.

So, how do we intend to increase sustainable returns to shareholders?

First, it is important to provide an outlook for the markets in which Pasminco operates.

Demand for metals in the Asian markets was depressed during most of the past year. During the latter part of the financial year, we saw some signs of improving conditions in some of the regional economies including Taiwan and South Korea. Depressed demand of course exerted downward pressure on premiums. This underscored again the importance for Pasminco to expand its market base to cover a wider geographical spread.

Looking ahead, sales to Indonesia, Malaysia, China and Taiwan are expected to increase this year. Areas of particular interest include the construction sector, galvanised sheet market and dry cell battery sectors.

During the year, Pasminco improved its distribution system throughout Asia with the opening of four strategically placed warehouses. As a result, delivery times to customers have reduced significantly, and Pasminco is able to guarantee metal availability.

The European markets continue to be strong while our presence in the North American markets has been strengthened as a result of the acquisition of the Clarksville Zinc Plant.

Early signals of increasing demand in key markets have been accompanied by changes in metals prices.

During 1998/99, metal prices overall were lower than in the previous year. In US terms, the prices were the lowest they had been for five years. Pasminco’s average realised zinc price was down 17 percent and lead was down 7.8 percent on the previous year.

During the first quarter of this financial year, prices for our products have improved, reflecting both a return of confidence in some markets and the running down of metal stockpiles. However, these higher price levels will need to be sustained for a greater period of time to give confidence that they are likely to yield lasting benefit to Pasminco.

Global economic activity, metal demand, prices and exchange rates are largely areas over which we have little or no control. However, let me now address elements of our long term strategy which we can control.

The acquisition of Savage Resources Limited was a significant step for Pasminco during the year. It was a unique opportunity to grow the business, while increasing access to the key North American market. In our view, the assets became available at a price that represented good value. It provided a strong strategic advantage for Pasminco, and had the potential to generate long term value for our shareholders.

As already reported, the US Operations have been integrated successfully into our business. The Clarksville Zinc Plant is making a solid contribution while the Gordonsville Mine has recovered from a lengthy industrial dispute which occurred immediately prior to the acquisition. The Clinch Valley Mine in East Tennessee will reopen from July next year and once in full production, will employ about 60 people and produce about 20,000 tonnes of zinc in concentrate per annum.

The disposal of the Savage non-zinc assets continues. The coal assets in the Hunter Valley in NSW were sold in July for $69 million and work is progressing to complete the sale of our 49 percent share in the Ernest Henry Mine in Queensland. This sale is following a similar process to the sale of the coal assets and there are a number of interested parties. Pasminco remains committed to selling Ernest Henry to maintain the strategic position of being a specialist producer of zinc, lead and silver. There is a desire to complete the sale by the end of the year and the tender process is being managed on that basis.

However, we are prepared to hold the asset until a price is achieved that represents optimum value for our shareholders.

Turning now to the Century Project. I am pleased to report today that ore is now being processed at Century and the mine and mill are on track. Concentrates are expected to be flowing along the 304 kilometre pipeline to the Karumba Port facility by the middle of November and initial shipments to Budel should be despatched by the end of the year.

Although some difficulties have been encountered as we progressed through the commissioning phase - not uncommon for a project of this scale - nothing has occurred to significantly alter our schedule.

At Budel itself, we have almost completed work to convert that facility to operate exclusively on Century concentrate feed. This will improve environmental performance by eliminating jarosite waste production, thus fulfilling the agreement with the Dutch government to secure the plant’s long-term survival.

On behalf of the Board, I congratulate everybody involved in developing the Century Project to the point where it can now begin to make a very real contribution to Pasminco and indeed to the whole country. Pasminco employees, its contractors and the people of the local gulf communities have demonstrated their commitment to overcome any obstacles to achieve a positive outcome.

I should also record the successful completion of the Pasminco Business Systems Project. This project has standardised information systems across the entire group to provide greater efficiencies. The new business systems provide a platform for the next generation of cost savings across the group.

A major step forward in this area was announced as recently as last Friday with a re-organisation within the Australian Mining and Smelting Divisions, Group Technical Support and Corporate Office. These changes make will make Pasminco a leaner organisation as the divisional structure will more efficiently perform tasks that are currently undertaken both at the group office and at sites. There will be less duplication, more effective business support, coordination and reduced costs.

The acquisition of Savage Resources, the development of Century and the Pasminco Business Systems project were critical achievements during the past year. Each is an essential element of the overall corporate strategy to return Pasminco to profitability and put it on track to achieve its target level of shareholder return.

Each project has involved significant investments in terms of capital and human resources but each will contribute to the delivery of strong returns.

While we have come through a very challenging period, both internally and externally, I am confident that Pasminco is entering the next phase of its development in excellent condition.

I want to mention several other milestones recorded this year.

You will recall that in February we announced that operations at Broken Hill were not expected to continue beyond 2006. Pasminco is working with the Broken Hill community on a transition strategy to support its move towards a new future. In the meantime, Broken Hill continues to be a significant part of our business.

We published our first comprehensive Environment Report this year. That report details the environmental performance across the group and the major environmental milestones during its first decade.

We owe our appreciation to representatives from the communities where we operate, NGO’s, shareholders and employees who contributed to the publication. The Pasminco Environment Report will be produced annually and copies are available from the company. There are also copies available here today.

We have made significant progress this year in our relationship with indigenous communities. While the work at Century and our participation in the Gulf Communities Agreement have perhaps been most visible, the principles of Pasminco’s strategic approach to working with indigenous communities are in place wherever we operate.

I also want to acknowledge the contribution of two of our senior executives who have moved on to other pursuits. Bryan Davis retired as Executive Director - Mining in June. His influence extended beyond Pasminco to the broader Australian resources industry and his experience and knowledge will be missed.

Christine Burnup, Executive General Manager Corporate Affairs, has resigned to follow other interests and she leaves this week. Chris has made a significant contribution to the development and strengthening of our position in respect of our community relationships, indigenous affairs, occupational health and safety and environmental performance. We wish them both well in the future.

Before asking David Stewart to review operations, I want to thank every member of the Pasminco team on behalf of the Board for their commitment and contribution during the past year. It has been a challenging time, in difficult market conditions. The hard work and dedication of people in all parts of the world has been outstanding.

I would now like to ask David Stewart to review operations for the year.

CHIEF EXECUTIVE`S REVIEW

[David Stewart delivers the Chief Executive`s Review.]

Thank you, David.

I am sure you will agree Pasminco is well positioned to take advantage of the strategic initiatives made during the past year.

The commissioning of Century is clearly a major step forward for us, reinforcing Pasminco’s position as the world’s leading producer of zinc. Production at our existing mines and smelters remains strong.

The fundamentals for our products are encouraging. There are signs of recovery in key Asian markets while European and American demand remains strong. LME stockpiles of zinc continue to decline.

The outlook is for continued growth of the world economy which should underpin the metal markets.

Internally, Pasminco will continue its drive to reduce costs across all of its operations.

Let me conclude with a comment on our performance during the first quarter of the current financial year.

The strong performance of the final quarter of last year has continued into the current financial year with Hobart, Port Pirie and Rosebery performing extremely well. Production at Budel was down slightly due to a brief shutdown which was a part of the modifications being made to process concentrate from Century although the benefits of this work will accrue once in full production.

Pasminco has traded profitably during the first quarter. Continued good performance and higher metal prices have contributed, however, we have had to deal with a strengthening Australian dollar. A continuation of the current price and exchange rate conditions would place Pasminco on track for a positive result for the year.

Further work in the area of effective cost management and performance efficiencies will contribute to our goal of achieving sustainable profitable performance.

It will be another challenging year for us all.

I would now like to turn to the business of the meeting.

27th October 1999

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