ASX Year 2000 Disclosure

Overview

On 30 June 1998 Pasminco outlined to the ASX measures it had put in place to address issues arising from the Year 2000 problem. The purpose of this report is to provide an update on the status of this program.

Pasminco is the world`s largest integrated producer of zinc and lead. As such, Pasminco is a global Australian business with an international customer base.

The objective of the Year 2000 program remains the same. To deliver a level of Year 2000 systems and vendor compliance across Pasminco which ensures business continuity and minimizes the impact to Pasminco operations through the Year 2000 date horizon and beyond.

Has your company`s assessment of its overall potential exposure to the Year 2000 problem changed materially from what the market has previously been told? If it has, your response should describe the change.

Compliant Equipment

A significant part of the equipment inventory has been assessed and tested resulting in the majority of it being accepted as Year 2000 compliant. Many inventory items have been found not to include date functionality as a result of vendor advice and Pasminco testing. The number of inventory items potentially impacted by Year 2000 issues has subsequently reduced greatly.

Savage Resources Acquisition

In February 1999 Pasminco acquired control of Savage Resources who already had a Year 2000 project in place.

Pasminco is reviewing the status of the Savage Resources Year 2000 project with the aim of ensuring that Year 2000 compliance is achieved at the US operations, and that an effective Year 2000 risk mitigation program is underway at the Australian operations, which Pasminco plans to divest before the end of 1999.

Has your company initiated any material action to address the Year 2000 problem beyond actions previously disclosed to the market, or does it propose to initiate any such action? If it has, your response should describe the action.

Year 2000 Readiness Planning (Contingency Planning )

Pasminco has prepared guidelines for Year 2000 Readiness Planning which incorporates provision of contingency plans, emergency plans and recovery plans. These guidelines are now being used at all sites to identify and plan for risk events which may occur as a result of the Year 2000 problem. Further detail on these guidelines is given later.

Extension of Vendor Management Program

In recognition of Pasminco`s reliance on third party vendors of goods and services, considerable effort has been made towards planning a comprehensive approach to assessing their level of Year 2000 compliance.

In addition to requesting written vendor compliance statements, Pasminco sites are undertaking visits to critical vendors. During these visits the needs of Pasminco and the vendor are discussed so each party can reach an understanding of their dependency and develop a plan to work together through the Year 2000. As a result of these visits plans are established to monitor the progress of the vendor. Finally, Pasminco is developing a Readiness Plan, due by August 1999.

Enhanced status reporting from sites

Pasminco`s Year 2000 team comprises a Steering Committee, a Project Office and site based teams. The Steering Committee provides direction and priority focus for the project. To assist the Steering Committee in assessing progress and identifying issues the status reporting has been enhanced. Through the reporting mechanism the Steering Committee monitors slippage to schedule and budget so corrective actions can be taken.

Please provide details of your company`s progress in relation to its activities to address the Year 2000 problem, including the date by which your company expects to have completed those activities.

Commercial Systems

The definition of commercial systems is computer hardware, office applications, e.g. network equipment, accounting packages.

• 
  
  
• SAP Implementation
  
  The implementation of the SAP business system which began in 1997 will largely mitigate the risks associated with the Group`s commercial systems. Vendor compliance confirmation for all elements of this implementation has been received and a Year 2000 testing program has been initiated.
  
  The implementation of SAP is proceeding to the schedule established in 1998 and all site go-live dates have been achieved without modification to the schedule. Four major sites have implemented SAP. All primary Smelters and Mines are scheduled to implement SAP by August 1999. ARA Sydney and Melbourne are scheduled to implement SAP in September 1999.
  
  
• Legacy Applications
  
  A small number of commercial systems will still be required at sites after the SAP rollout is complete. These applications are scheduled to achieve compliance progressively. Compliance of the last system is scheduled for June 1999.
  
  
• Group System Infrastructure
  
  This project ensures that all IT infrastructure associated with the support of Pasminco`s business systems are Year 2000 ready. The project covers the compliance of PC`s, PC software and network equipment. Compliance of network equipment and PC hardware is scheduled for June 1999. The PC Standard Operating Environment will become progressively compliant with key applications scheduled for compliance in June 1999.

Technical Systems

The definition of technical systems is hardware and software used in creation of product. Areas covered include process control, laboratory systems, environmental systems and building services.

Testing to establish Year 2000 compliance has greatly reduced the number of systems potentially impacted by the Year 2000 problem. Many systems have been confirmed as not having date functionality by the testing process. Each site has undertaken a number of risk mitigation projects. These mainly involve repairing existing equipment through hardware and software upgrades. Complete replacement of several non compliant systems has also occurred. Many business critical projects are complete or nearing completion at this time and completion of other business critical projects is scheduled to occur progressively until June 1999.

Vendor Management

A detailed program is in place to establish the level of compliance of Pasminco`s vendors. The program is based on the criticality of the vendor to the business. A number of vendors are being assessed and managed on a company wide basis. Meeting with vendors is adding significantly to the understanding derived from vendor written information. The vendor management process is seen as ongoing and will continue into the Year 2000.

Estimated Cost

As reported in the June 1998 ASX Year 2000 Disclosure the estimated cost for Pasminco`s Year 2000 project was $7 million. This is less than otherwise might be expected because of Pasminco`s implementation of the integrated and Year 2000 compliant SAP system, the cost of which is not included in these numbers. As at 19 March 1999 the estimated cost of Pasminco`s Year 2000 project has reduced to $6 million. The forecast cost has been reducing as systems are found to be compliant and repair or replacement is not required.

Are there areas of your company`s activities where, in your company`s assessment, material Year 2000 risks will remain after the company`s activities to address the Year 2000 problem are completed? Examples might include dependencies on third parties such as utilities. If there will be remaining risks, your response should describe them.

When the Year 2000 program activities are completed there will remain some risk from the Year 2000 problem.

To minimise these risks Pasminco is undertaking Year 2000 Readiness Planning. This planning is being used with selected inventory and critical vendors to reduce the likelihood of a Year 2000 failure occurring. The chosen inventory may include items of equipment and/or vendors which have or have not had Year 2000 modifications made to them. The formal Year 2000 Readiness Planning methodology is described later.

External Entities

Pasminco cannot be responsible for the preparedness of any external entity. However, through the Vendor Management process vendors are being assessed. If required, alternate vendors and readiness plans are being developed.

Testing Issues

Testing a continuous production process, such as that which occurs at some sites has particular difficulties. Where the risk has been confirmed by review process as minimal the production process will not be tested. Readiness plans will be prepared where the business criticality justifies it.


Legal Liability

Pasminco continues to review new and existing contracts with vendors to negotiate Year 2000 provisions to the supply of equipment, goods and services.
There is also a risk to Pasminco of being held liable for loss or damage caused to a third party, breach of contract or possible negligence caused by a failure due to the Year 2000 issue. To reduce this risk Pasminco looks to its Readiness Planning process to identify the key events where there is a risk and then put plans in place to cover these events. Pasminco is reviewing its insurance policies to confirm the cover they provide is consistent with market practice.

Please describe your company`s contingency plan in relation to Year 2000 issues.

Year 2000 Readiness Planning

Pasminco sites are conducting a Readiness Planning process to develop contingencies in relation to Year 2000 issues. The Readiness Planning process aims to focus on where business critical Year 2000 risk is and build Readiness Plans for particular Year 2000 risk events. The knowledge of Year 2000 compliance from the equipment and Vendor inventories are key inputs to this process. They provide guides to potential business critical risk events. Review of existing emergency procedures and business continuity plans is scheduled to form part of the overall process.

The Readiness Plans produced will include emergency plans, contingency plans and recovery plans.

Completion of the preparation of the Readiness Plans is scheduled for August 1999. Training and awareness activities relating to the plans will continue through to the Year 2000.

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.

For further information please contact:

Peter Griffin
Group Manager, Public Affairs
Telephone: (03) 9288 0463

or

Trevor Shard
Group Manager, Investor Relations
Telephone: (03) 9288 9186

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