Pasminco Announces Business Improvement Program
and Flags Lower Half Year Performance

Pasminco Managing Director and Chief Executive David Stewart announced today that the Group was implementing a wide-ranging business improvement program across its operating divisions and corporate office. The program is expected to yield annual cost savings of $100 million by the end of calendar 2001 and lead to fundamental changes in business practices to restore long-term shareholder value. As an immediate measure all discretionary expenditure has been cut and exploration spending significantly curtailed.

Mr Stewart said today: “Despite our improvement efforts over recent years, our performance has fallen short of expectations and we share the concerns of shareholders about our weak share price. At current metal prices and exchange rates the company will not generate adequate returns and we need to take urgent action. Management is focused on delivering a significant and sustainable improvement in operational performance, reducing debt and restoring shareholder value. I am confident that the cost reduction and business improvement programs we have commenced will turn the company around.”

A project team, led by Mr Stewart, and supported by external consultants Port Jackson Partners, has been established to oversee the delivery of the program, which will be implemented throughout Pasminco. The project team will monitor progress against targets and report directly to the Board.

During the first quarter of 2001, the Group will also conduct an unrestricted and wide-ranging strategic review of all aspects of its business including a critical review of all assets. Business processes across the Group will be simplified and optimised. “A comprehensive program, such as that underway, will necessarily involve significant adjustment costs and will challenge all of our people,” Mr Stewart said.

The company noted that financial results for the December half will fall short of the company’s targets, mainly due to production volume and ore grade issues at the Group’s underground mines, lower than planned metal sales and higher debt servicing costs. The Century mine, while tracking within the normal operating range during its ramp up phase, operated at reduced throughput and recoveries during September and October to improve concentrate quality. Recoveries and concentrate quality have since improved, and the mine is expected to achieve target recoveries and the targeted 90% output level by end December.

Roasting of concentrates resumed on Wednesday at the Hobart smelter on a restricted basis, a little over two weeks after a fire destroyed an overhead conveyor system. Production is expected to ramp up to normal levels over the next two weeks, however the permanent replacement of the overhead conveyor will not be complete until mid February. A total of 15,000 tonnes of production is estimated to have been lost, which will reduce pre tax earnings for the half year by nearly $20 million. The company is insured against property damage and business interruption, but insurance proceeds are unlikely to be quantified until the second half of the financial year.

The impact of the production shortfalls in underground mining and Hobart, higher financing charges and the impact of the weaker Australian dollar on the company’s currency option program will result in the company reporting a loss in the first half. “This un-acceptable result underscores the need to initiate the actions outlined above,” said Mr Stewart.




For further information contact:

Trevor Shard
Group Manager – Investor Relations
Phone ++ 61 3 9288 9186
Mobile 0419 584 515

Peter Griffin
Group Manager - Public Affairs
Phone ++ 61 3 9288 0463
Mobile 0419 314 265

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