Lower Prices Impact Profit


Pasminco recorded a loss after tax of $8.3 million for the 1999 year. This represents a decrease of $71.6 million from 1998`s result of $63.3 million, which included an abnormal gain of $23.7 million. There were no abnormal items in 1999.

After considering Pasminco`s results for the year, Directors have decided not to declare a final dividend in respect of the 1999 year.

Results were significantly impacted by lower prices for the Company`s principal products, zinc and lead, offset to some extent by the weaker Australian dollar.

Higher production and sales volumes were achieved, including record production levels at the Company`s Hobart and Budel smelters. However, the favourable impact of higher volumes was partly offset by higher costs and the Company experienced lower sales margins due to weaker market conditions in Asia.

"Despite a difficult external environment during the past year, we have held course, and made significant progress," said Managing Director and Chief Executive David Stewart.

"The Savage Resources acquisition and development of the Century mine are key planks in our strategy to improve Pasminco`s competitive position in the global zinc/lead industry. The US zinc operations acquired through Savage Resources have been successfully integrated and are contributing positively to the Group. We look forward to Century coming into production shortly with the first shipment of concentrates by year end.

"Sale of the non-zinc assets is continuing, with coal finalised in July for $69 million, and the sale process for the 49% interest in the Ernest Henry copper/gold mine is underway.

"During the year we have made significant investments for Pasminco`s future. The recent period of low metal prices, however, reinforces the need to maintain our focus on improving cost competitiveness and carefully managing our balance sheet. A strong production performance for the year from our existing operations and the improved outlook for metal prices provides encouragement for the year ahead."

Century Development

Significant progress was achieved at Century during the year with the project now in the final stages of commissioning. The first delivery of ore to the mill is expected to be ahead of the original schedule, and the first shipment of concentrates to Budel by year end. Final capital cost of the project to Pasminco is expected to be approximately $810 million.

External Factors

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

The average realised Australian US dollar exchange rate for the 1999 year was 62.4 cents, compared with 70.0 cents in 1998. The Australian dollar/Dutch guilder exchange rate averaged 1.24 guilders, compared with 1.38 guilders in 1998.

Lower zinc and lead prices and a stronger Dutch guilder reduced earnings by $170 million and $14 million respectively, offset by the weaker Australian dollar, which contributed $115 million.

Operating Performance

Output of zinc and lead from the Company’s mines and smelters was 11% higher than the previous year. Mine production for the year was assisted by the Rosebery and Elura mines recording higher ore throughput and ore grades, while at Broken Hill, ore throughput increased and combined ore grades were maintained.

Strong performances from the Budel and Hobart smelters and the contribution from the Clarksville smelter resulted in higher zinc metal production for the year, despite the impact of repairs to a refining column at Cockle Creek. Commissioning of the new refinery at Port Pirie was completed earlier in the year, resulting in higher lead and silver production for the year.

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

The impact of weaker market conditions in some parts of Asia flowed through to lower premiums and net margins as alternative sales were pursued. This was offset to some extent by stronger market conditions in Europe. Lower metal premiums overall reduced earnings by $12 million in 1999, but the Group`s global market spread enabled it to remain fully sold.

The Group`s key indicator of competitiveness, its break-even zinc price, was US$1,020 in 1999, compared with US$1,061 in 1998.


Outlook

Zinc and lead prices have picked up during recent months as the prospects for the world economy have improved. The continuing decline in global zinc stocks adds to confidence about the prospects for its price.

Pasminco has started the year with good operating performance being maintained. The Company continues to seek improvements in competitiveness and efficiency wherever possible. This, together with the impact of the world-scale low cost Century mine and the newly acquired US operations, position Pasminco favourably going forward.



For further information, please contact:

Trevor Shard
Group Manager - Investor Relations
(03) 9288 9186

Peter Griffin
Group Manager - Public Affairs
(03) 9288 0463


Click Here to download the Preliminary Final report (not equity accounted) for the financial year ended 30 June 1999 (MS Excel 5.0 format).

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