Welcome to the OZ Minerals Sustainability Report 2008.
By any measure 2008 was an extraordinary year for the global economy, the base metals industry and for OZ Minerals. On 1 July 2008, OZ Minerals was formed with the merger of Oxiana Limited and Zinifex Limited. The rapid and severe decline in base metals prices, particularly in the second half of the year, and a significant deterioration in access to debt and equity markets which accompanied the global financial crisis, culminated in an extremely difficult operating environment for OZ Minerals. Our financial results reflected this difficult economic environment.
Throughout this period of uncertainty and significant organisational change, OZ Minerals has worked to maintain focus on both the financial and non-financial aspects of sustainability. We understand that caring for our people, our neighbours and the environment is critical to our business.
A key area of focus during the integration of the Oxiana and Zinifex operations was alignment and integration of policies, standards, systems and processes across the business. The OZ Minerals Sustainability Policy, adopted in December 2008, details our commitments to economic, social and environmental sustainability while responsible corporate governance is supported by our core values – respect, integrity, action and results.
In August 2008 the OZ Minerals Sustainability Standards were adopted. These are a comprehensive set of standards for management of the safety, health, environmental and social aspects of the business. They are aligned with industry best practice standards such as the International Council on Mining and Metals (ICMM) Sustainable Development Principles and the Minerals Council of Australia’s (MCA) Enduring Value.
To improve the accuracy and transparency of reporting, a number of assurance processes were broadened during 2008, including development of an internal audit function and independent external assurance of this report.
Despite continuing emphasis and initiatives to improve safety during 2008, our safety and health performance was not good enough. We suffered two fatalities and one serious permanent disabling injury. In July 2008, an employee at Sepon was killed when a lightning strike occurred during installation of a radio tower. In September 2008, a contractor at Prominent Hill was killed in a light vehicle rollover and a contractor at Century sustained a serious permanent disabling injury while conducting drill rig maintenance.
Our deepest sympathies are with all those who were impacted by these events and I want to give an assurance that these incidents have resulted in an even greater focus being placed on safety management at all of our operations. Thorough investigations of these incidents were conducted by OZ Minerals and external agencies, and we are in the process of implementing all recommendations.
Pleasingly though, OZ Minerals received recognition for safety innovation, with Avebury and Century mines both receiving awards for development of a cable bolt installation machine and an automatic lighting plant activation system respectively. Our operations also performed consistently well at mine rescue competitions.
OZ Minerals prides itself on being a valued member of the communities we operate in and, to this end, continued to make significant contributions to local, regional and national economies through taxes and royalty payments, direct and indirect employment, purchase of goods and services and community investments. In 2008 we contributed over $7.3 million to community development programs and initiatives targeting improvements in education and training, health, infrastructure and local business development.
At Century mine, in the lower gulf region of North West Queensland, a ten-year review was conducted of the Gulf Communities Agreement, a unique tri-partite agreement between OZ Minerals, the Queensland Government and four Native Title groups. This produced a number of recommendations for improvement, which we are now implementing.
Sepon, in Laos, undertook significant work in developing its cultural heritage program during 2008, including working with the Government of Laos and James Cook University (Australia) to excavate two significant archaeological sites within the area of its operations.
OZ Minerals strives to demonstrate good stewardship of natural resources by minimising its environmental footprint, reducing waste, and using energy, water and other raw materials efficiently.
A range of environmental improvement programs and initiatives were implemented by OZ Minerals during 2008. Sepon achieved certification under the ISO14001 standard for its environmental management system. Land rehabilitation and closure accounting provisions for all operations were updated, including independent external assessment of these provisions.
OZ Minerals continues to participate in the Australian Government’s Energy Efficiency Opportunities and Greenhouse Challenge programs, and is well advanced in its preparations for reporting under National Greenhouse and Energy Reporting Act 2007 (“NGERS”).
During 2008 OZ Minerals had 26 significant environmental incidents and 61 incidences of non-compliance with licence/permit conditions, including exceedences of specified water discharge limits at the Avebury and Golden Grove operations and at the Karumba Port Facility, as well as two chemical spills at the Golden Grove operation. These events were reported to the relevant authorities and none were judged to have had a major environmental impact with actions implemented to address each of these incidents.
In response to the impact of the Global Financial Crisis, from October 2008 OZ Minerals actively pursued a number of activities to secure its financial position including asset sales, pre-selling expected future production and several equity-raising options.
This culminated in an announcement on 1 April 2009 that OZ Minerals had agreed, subject to regulatory and shareholder approval, to sell all of its assets other than the Prominent Hill operation in South Australia, the Martabe gold and silver project in North Sumatra, Indonesia, certain exploration projects in Cambodia and Thailand, and its listed equity interests to China Minmetals Non-ferrous Metals Company for US$1,206 million.
The Treasurer of the Commonwealth Government of Australia subsequently approved this transaction on 23 April and shareholders will be asked to agree to the sale on 11 June 2009 at the company’s Annual General Meeting. Subject to this approval, the transaction will be executed on 16 June 2009. This offer is unanimously recommended by the Board, in the absence of a superior offer.
On 24 April 2009 OZ Minerals announced the sale of its Martabe project to China Sci-Tech Holdings Limited for US$211 million. The transaction is expected to be completed in early June and the proceeds will make a significant contribution to addressing OZ Minerals’ refinancing issues.
The final months of 2008 and early 2009 have been a turbulent period for OZ Minerals and all of its stakeholders and I want to assure you that the Board and Executive Management fully appreciate the stress and concern that these activities have placed on everyone. I would especially like to acknowledge the ongoing efforts and dedication of all our people who have worked tirelessly to get the company through this uncertain period, continued to meet production forecasts and customers’ requirements and have done so with an ongoing commitment to safety, health, environmental and social concerns.
Managing Director and Chief Executive Officer