Consolidated interim income statement OZ Minerals Limited ABN 40 005 482 824 Half-Year Report 30 June 2008 Contents Page Directors report 2 Auditor s independence declaration 5 Consolidated interim income statement 6 Consolidated interim balance sheet 7 Consolidated interim statement of recognised income and expense 8 Consolidated interim cash flow statement 9 Condensed notes to the consolidated interim financial report 10 Directors declaration 23 Independent review report to the members of OZ Minerals Limited 24 OZ Minerals Limited half-year report 30 June 2008 1
Consolidated interim income statement DIRECTORS' REPORT Your Directors present their Report and the half-year Financial Report of the OZ Minerals Group ( Group ) comprising OZ Minerals Limited* and the entities it controlled for the half-year ended 30 June 2008. * Formerly known as Oxiana Limited ( Oxiana ) until change of name on 18 July 2008. Directors The following persons were Directors of OZ Minerals Limited at any time during or since the half-year report: Barry L Cusack (Chairman) Andrew Michelmore 1 (Chief Executive Officer and Managing Director) Ronald H Beevor Peter W Cassidy 3 Michael A Eager Owen L Hegarty 2 Brian Jamieson Peter J Mansell 3 Richard Knight 3 Anthony C Larkin 3 Dean A Pritchard 3 1 Appointed Chief Executive Officer and Managing Director on 20 th June 2008. 2 Retired as Chief Executive Officer and Managing Director on 20 th June 2008 and remains a Director of the OZ Minerals Group. 3 Appointed as a Director on 20 th June 2008. Principal activities During the period the principal continuing activities of the OZ Minerals Group consisted of: production of gold and of copper cathode at Sepon in Laos; production of zinc, copper and precious metal concentrates at Golden Grove in Western Australia; construction of a copper and gold mine at Prominent Hill in South Australia; construction of the Martabe gold mine in North Sumatra province, Indonesia; exploration for further resources at Sepon, Golden Grove and Prominent Hill; exploration activities in other parts of Laos, Indonesia, China, Thailand, Cambodia, Vietnam and Australia; and evaluation of other exploration and business development opportunities. Consolidated results The consolidated loss attributable to members of OZ Minerals Limited for the half-year ended 30 June 2008 was $543,000 (2007: $173,451,000 profit). The consolidated profit attributable to members of OZ Minerals Limited prior to individually significant items for the half-year ended 30 June 2008 was $72,223,000 (2007: $173,451,000 profit). Refer Note 9 of financial statements. The net assets of the OZ Minerals Group have decreased by $92,701,000 from 31 December 2007 to $1,472,575,000 at 30 June 2008. This decrease is mainly attributable to the strengthening of the Australian Dollar ( AUD ) against the United States Dollar ( USD ). Dividends On 20 February 2008 the Directors declared an unfranked dividend of 4.0 cents per share which was paid on 9 April 2008 in relation to the financial year ended 31 December 2007. In addition to the above dividend, since the half-year end the Directors have declared an unfranked dividend of 5.0 cents per fully paid ordinary share to be paid on 29 September 2008. OZ Minerals Limited half-year report 30 June 2008 2
Consolidated interim income statement Review of results and operations Golden Grove Concentrates Production During the half-year period the Golden Grove operations have produced 56,297 tonnes of zinc concentrates (2007: 61,189 tonnes), 5,618 tonnes of lead concentrates (2007: 4,095 tonnes), 9,677 tonnes of copper concentrates (2007: 12,028 tonnes), and 23,694 ounces of gold in concentrates (2007: 28,370). This produced revenue of $175,778,000 (2007: $298,477,000) and a segment operating result of $31,243,000 (2007: $151,483,000). Sepon Copper Production During the half-year period the Sepon Copper operation has produced 30,372 tonnes of copper cathode (2007: 30,098 tonnes). This has produced revenue of $258,064,000 (2007: $236,162,000) and segment operating result of $172,820,000 (2007: $163,769,000). Sepon Gold Production During the half-year period the Sepon Gold operation has produced 43,331 ounces of gold (2007: 59,438 ounces) and 34,281 ounces of silver (2007: 107,906 ounces). This has produced revenue of $41,093,000 (2007: $49,521,000) and segment operating result of $1,622,000 (2007: segment loss $4,249,000). Prominent Hill Mine Development Development and construction of the copper and gold mining operation at Prominent Hill in South Australia continued during the half-year with the commencement of ore stockpiling. Overall construction of the process plant and infrastructure was 72% complete to 30 June 2008. First commercial production of concentrate is expected in the fourth quarter of 2008. Martabe Gold Project Development is underway at the gold mining project at Martabe in North Sumatra province, Indonesia following the receipt of final regulatory approvals from the Indonesian Department of Energy and Mineral Resources in April 2008. The first construction contractor has moved to site and earth works have now commenced. Negotiations continued through the half-year to 30 June 2008 for the sale of 5% of the Martabe project to local Governments in North Sumatra, Indonesia where OZ Minerals recently entered into a Memorandum of Intent ( MOI ). On 25 June 2008 OZ Minerals entered into a Memorandum of Understanding ( MOU ) with PT Antam Tbk ( Antam ) of Indonesia to cooperate in examining opportunities and to form joint ventures or other cooperative ventures for exploration, development and operation of precious or base metal or bulk commodity projects within Indonesia. Under the MOU and subject to approval by both Boards, OZ Minerals is in negotiations for the transfer of an initial 10% interest in the Martabe project to Antam, with the potential to sell a further 15% subject to certain conditions. Exploration Activity OZ Minerals has continued the near-mine exploration activity at all operations with the commitment to expand its resource inventory throughout Asia, Australia and elsewhere. In addition, OZ Minerals Australian exploration activities also include joint venture exploration with Legend Mining Limited and exploration activities in the Wiluna tenements in Western Australia. OZ Minerals international exploration ventures continued during the year to date both in their own right and with the co-venturers, Yunnan Jinlong Minerals Company Limited, Laoxuzhai Minerals Company Limited (Rexing JV), Sichuan Yangtze Minerals Company Limited, Ningxia Hui Autonomous Region Institute of Nuclear Geological Exploration and Yinchuan High-tech District Shijin Mining Co. Limited in China and Shin Ha Company Limited in Cambodia. OZ Minerals Limited half-year report 30 June 2008 3
Consolidated interim income statement Other Significant Transactions and Events The following significant transactions have occurred during the half-year period: On 19 February 2008 OZ Minerals announced an updated resources and reserves statement as at 30 June 2007. The announcement detailed increases in contained metal resources of gold (+98%) and silver (+59%) while the existing resources of copper, zinc and lead remained relatively stable. On 3 March 2008 the boards of Oxiana and Zinifex Limited* ( Zinifex ) agreed to enter into a merger whereby Zinifex shareholders would receive 3.1931 Oxiana shares for each Zinifex share they own. Shareholders of Zinifex each received an Explanatory Memorandum in relation to the planned merger and at a shareholders meeting on 16 June 2008, Zinifex shareholders approved the merger which was implemented on 1 July 2008. On 19 April 2008 OZ Minerals announced updates to modelling for zinc and copper resources at Golden Grove which resulted in expansion of Golden Grove zinc and copper resources by 25% and 32% respectively. On 19 April 2008 OZ Minerals announced that due to delays in the delivery of key equipment, commercial production at the Prominent Hill mine would commence in the fourth quarter 2008. On 28 April 2008 OZ Minerals received final approval from the Indonesian Department of Energy and Mineral Resources to commence construction of the Martabe gold project in North Sumatra province. Impairment tests undertaken over the Group s investment in Toro Energy Limited ( Toro ) has resulted in the recognition of an impairment of $60,000,000 against a carrying amount of $146,000,000. During the half-year ended 30 June 2008 the Group recognised a provision of $8,350,000 in respect of an ex-gratia payment for Owen Hegarty's (previous Chief Executive Officer and Managing Director) services to the OZ Minerals Group until his retirement on 20th June 2008. * Change of name to OZ Minerals Holdings Limited on 21 July 2008. Events occurring after reporting date On 1 July 2008 the merger between Oxiana and Zinifex Limited was implemented following Zinifex shareholder approval granted on 16 June 2008. On 18 July 2008 an extraordinary general meeting of Oxiana shareholders convened to approve the name change of Oxiana Limited to OZ Minerals Limited. On 21 August 2008, the Directors resolved to pay an unfranked dividend of 5.0 cents per fully paid ordinary share. The record date for the dividend will be 3 September 2008, and will be paid on 29 September 2008. There have been no other events subsequent to the reporting date which have significantly affected or may significantly affect the OZ Minerals Group s operations, results or state of affairs in future years. Rounding of amounts The Group is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated. Auditor s Independence Declaration The lead auditor s independence declaration for the half-year ended 30 June 2008 as set out on page 5 forms part of the directors report. This report is signed in accordance with a resolution of the Board of Directors.... Andrew G. Michelmore Managing Director and Chief Executive Officer Melbourne 21 August 2008 OZ Minerals Limited half-year report 30 June 2008 4
Consolidated interim income statement OZ Minerals Limited half-year report 30 June 2008 5
Consolidated interim income statement 30 June 30 June Note $'000 $'000 Revenues from continuing operations 8 509,575 584,160 Other income 276 - Change in inventories of finished goods and WIP 9,725 6,242 Raw materials, consumables and other direct costs (141,315) (125,363) Employee expenses (97,133) (62,876) Depreciation and amortisation expenses 9 (56,938) (56,968) Royalties (21,630) (23,501) Exploration and evaluation expenditure (24,029) (17,975) Net foreign exchange losses (5,920) (20,147) Impairment of investments 9 (64,984) - Other expenses (23,169) (12,543) Share of net loss of associates and joint venture partnerships accounted for using the equity method (2,498) (230) Profit before net financing costs and income tax 81,960 270,799 Interest revenue 8 4,599 15,454 Finance costs 9 (26,537) (22,321) Profit from continuing operations before income tax 60,022 263,932 Income tax expense (49,159) (84,989) Profit from continuing operations 10,863 178,943 Loss from discontinued operation 7 - (6,209) Profit for the half-year 10,863 172,734 Attributable to: Members of OZ Minerals Ltd (543) 173,451 Minority interest 11,406 (717) Profit for the half-year 10,863 172,734 Cents Cents Earnings per share for profit/(loss) attributable to the ordinary equity holders of the Company Basic earnings/(loss) per share 15 (0.03) 11.88 Diluted earnings/(loss) per share 15 (0.03) 11.03 Continuing operations Basic earnings/(loss) per share 15 (0.03) 12.31 Diluted earnings/(loss) per share 15 (0.03) 11.42 The income statement should be read in conjunction with the accompanying notes. OZ Minerals Limited half-year report 30 June 2008 6
Consolidated interim balance sheet As at 30 June 2008 30 June 31 December Note $'000 $'000 ASSETS Current Assets Cash and cash equivalents 103,322 246,108 Receivables 100,340 111,670 Inventories 115,151 88,126 Derivative financial instruments - 416 Current tax assets 25,401 - Other assets 11,145 5,651 Total current assets 355,359 451,971 Non-current assets Available-for-sale financial assets 35,496 38,500 Investments accounted for using the equity method 85,849 148,347 Property, plant and equipment 10 2,091,128 1,739,687 Intangible assets 47,881 46,788 Deferred tax assets 1,625 492 Other assets 45,901 1,610 Total non-current assets 2,307,880 1,975,424 Total assets 2,663,239 2,427,395 LIABILITIES Current Liabilities Trade and other payables 178,173 141,216 Interest bearing liabilities 11 288,120 154,421 Current tax liabilities 54,665 101,659 Provisions 23,933 14,097 Derivative financial instruments 2,207 1,582 Total current liabilities 547,098 412,975 Non-current liabilities Interest bearing liabilities 11 464,788 266,409 Deferred tax liabilities 111,799 119,728 Provisions 64,146 58,480 Derivative financial instruments 2,833 4,527 Total non-current liabilities 643,566 449,144 Total liabilities 1,190,664 862,119 Net assets 1,472,575 1,565,276 EQUITY Contributed equity 13 1,122,294 1,056,681 Treasury Shares 13 (1,858) (2,583) Reserves 13 (193,482) (97,177) Accumulated profits 13 503,006 566,084 Total equity attributable to members of OZ Minerals Ltd 1,429,960 1,523,005 Minority interest 13 42,615 42,271 Total equity 1,472,575 1,565,276 The balance sheet should be read in conjunction with the accompanying notes. OZ Minerals Limited half-year report 30 June 2008 7
Consolidated interim statement of recognised income and expense Amounts recognised directly in equity 30 June 30 June Note $'000 $'000 Exchange differences on translation into presentation currency 13 (94,729) (31,113) Net change in fair value of available for sale financial assets, net of tax 13 (2,874) 4,857 Changes in fair value of cash flow hedges, net of tax 13 409 28 Net expense recognised directly in equity (97,194) (26,228) Profit for the half-year 10,863 172,734 Total recognised loss for the half-year (86,331) 146,506 Attributable to: Members of OZ Minerals Ltd (97,737) 147,223 Minority interest 11,406 (717) Total recognised loss for the half-year (86,331) 146,506 The statement of recognised income and expense should be read in conjunction with the accompanying notes. OZ Minerals Limited half-year report 30 June 2008 8
Consolidated interim cashflow statement Consolidated 30 June 30 June $'000 $'000 Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) 592,213 599,317 Payments to suppliers and employees (inclusive of goods and services tax)* (398,032) (331,967) Interest received 4,607 15,656 Interest paid (9,722) (18,172) Income tax paid (125,299) (86,661) Net cash inflow/(outflow) from operating activities 63,767 178,173 Cash flows from investing activities Payments for capitalised exploration and evaluation (538) (12,159) Payments for property, plant & equipment and development (556,753) (294,675) Proceeds from fixed asset disposal 467 - Purchase of subsidiaries net of cash acquired - 117 Payments for purchase of investments (3,380) (2,016) Proceeds from sale of investments 22 - Net cash inflow/(outflow) from investing activities (560,182) (308,733) Cash flows from financing activities Gross proceeds from issues of shares 43,112 9,111 Repurchase of own shares (161) (9,165) Proceeds from borrowings 389,287 201,074 Repayment of borrowings (13,617) (187,869) Payments for capitalised finance costs (1,515) - Finance lease payments (314) (157) Payments for derivative financial instruments (243) (356) Dividends paid to company's shareholders (43,159) (54,422) Net cash inflow/(outflow) from financing activities 373,390 (41,784) Net increase/(decrease) in cash and cash equivalents (123,025) (172,344) Cash and cash equivalents at 1 January 246,108 670,851 Effects of exchange rate changes on cash and cash equivalents (19,761) 3,834 Cash and cash equivalents at 30 June 103,322 502,341 Note: * Includes payments for Exploration and Evaluation expensed by the Group of $24,029,000 (2007: $17,975,000) The cashflow statement should be read in conjunction with the accompanying notes. OZ Minerals Limited half-year report 30 June 2008 9
1. Reporting entity Condensed notes to the consolidated interim financial report OZ Minerals Limited (the Company ) is a company domiciled in Australia. The condensed consolidated interim financial report of the Company as at and for the six months ended 30 June 2008 comprises the Company and its subsidiaries (together referred to as the Group ) and the Group s interest in associates and jointly controlled entities. The consolidated annual financial report of the Group as at and for the year ended 31 December 2007 is available upon request from the Company s registered office at Level 29, 2 Southbank Boulevard, SOUTHBANK, Victoria, Australia or from the Company s website at http://www.ozminerals.com. 2. Statement of Compliance The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standard AASB 134 Interim Financial Reports and the Corporations Act 2001. The consolidated financial statements are presented in Australian Dollars. The consolidated interim financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report of the Group as at and for the year ended 31 December 2007. This consolidated interim financial report was approved by the Board of Directors on 21 August 2008. Where required by accounting standards, comparative figures have been reclassified to conform with changes in presentation in the current financial year. The Group is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the financial report have been rounded off to the nearest thousand dollars, unless otherwise stated. The Group's current liabilities exceed its current assets due primarily to the maturity of certain debt facilities within 12 months of balance date. The financial report has been prepared on a going concern basis, which contemplates the continuity of normal trading operations as the Group is trading profitably, has the capacity to refinance short term debts, and following the merger with Zinifex, effective 1 July 2008, has acquired $1.2 billion in cash. 3. Significant accounting policies The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial report as at and for the year ended 31 December 2007. 4. Estimates The preparation of the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from those estimates. The significant estimates and judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report as at and for the year ended 31 December 2007. 5. Financial Risk Management In preparing this condensed consolidated interim financial report, the Group s financial risk management objectives and policies were the same as those that applied to the consolidated financial report as at and for the year ended 31 December 2007. OZ Minerals Limited half-year report 30 June 2008 10
6. Segment information Condensed notes to the consolidated interim financial report The Group is organised into the following business segments: Sepon Gold operations - exploration, development and mining of gold; Sepon Copper operations - exploration, development and mining of copper; Golden Grove operations exploration, development and mining of zinc, copper and precious metal concentrates; Prominent Hill exploration, development and construction of a copper and gold mine; Martabe exploration, development and construction of a gold mine; and Other - including revenues and expenses associated with Jabiru Metals Limited concentrate purchase and resale activities and general corporate office activities, none of which is a separately reportable segment. Primary Reporting Business Segments Sepon Sepon Golden Prominent Consol- Gold Copper Grove Hill Martabe Other Elimination idated June 2008 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 External revenue 41,093 258,064 175,778 - - 34,640-509,575 Segment revenue 41,093 258,064 175,778 - - 34,640-509,575 Cost of goods sold (23,173) (54,264) (89,426) - - (32,639) - (199,502) Depreciation and amortisation (11,860) (11,567) (31,027) (1,058) (58) (1,368) - (56,938) Other income and expense (7,682) (19,413) (24,082) (8,150) (937) (43,430) - (103,693) Segment result (1,622) 172,820 31,243 (9,208) (995) (42,797) - 149,442 Impairment of investments - - - - - (64,984) - (64,984) Share of net loss of associates and joint ventures accounted for using the equity method - - - - - (2,498) - (2,498) Profit before net financing costs and income tax (1,622) 172,820 31,243 (9,208) (995) (110,279) - 81,960 Net financing costs (21,938) Profit from continuing operations before income tax 60,022 Income tax expense (49,159) Net profit after tax 10,863 OZ Minerals Limited half-year report 30 June 2008 11
Condensed notes to the consolidated interim financial report 6. Segment information (continued) Primary Reporting Business Segments June Sepon Sepon Golden Prominent Consol- Gold Copper Grove Hill Martabe Other Elimination idated 2007 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 External revenue 49,521 236,162 298,477 - - - - 584,160 Segment revenue 49,521 236,162 298,477 - - - - 584,160 Cost of goods sold (26,216) (49,338) (87,298) - - - - (162,852) Depreciation and amortisation (21,342) (13,348) (21,122) (29) (27) (1,100) - (56,968) Other income and expense (6,212) (9,707) (38,574) (849) (146) (37,823) - (93,311) Segment result (4,249) 163,769 151,483 (878) (173) (38,923) - 271,029 Share of net profit of associates and joint ventures accounted for using the equity method - - - - - (230) - (230) Profit before net financing costs and income tax (4,249) 163,769 151,483 (878) (173) (39,153) - 270,799 Net financing costs (6,867) Profit from continuing operations before income tax 263,932 Income tax expense (84,989) Profit from continuing operations 178,943 Loss from discontinued operations (6,209) Net profit after tax 172,734 OZ Minerals Limited half-year report 30 June 2008 12
Condensed notes to the consolidated interim financial report 7. Discontinued operations Discontinued operations June 2008 No operations were discontinued in the half-year ended 30 June 2008. Discontinued operations June 2007 On 1 August 2007 the Group sold the Wiluna gold mining and processing operation, acquired as part of the Agincourt Resources Limited acquisition, to Apex Minerals NL ( APEX ) in exchange for cash, receivables and shares in APEX. The loss attributable to discontinued operations for the period ended 30 June 2007 was as follows: Results from discontinued operations 30 June 2007 $'000 Revenue 21,167 Expenses (29,745) Result from operating activities (8,578) Income tax benefit 2,369 Results from operating activities, net of income tax (6,209) Profit on sale of discontinued operations - Income tax expense - Profit on sale of discontinued operations after income tax - Profit/(loss) from discontinued operations (6,209) Basic earnings/(loss) per share 0.0 Diluted earnings/(loss) per share 0.0 Cash flows from/(used in) discontinued operations Net cash from operating activities 5,237 Net cash used in investing activities (12,539) Net cash from financing activities 5,892 Carrying amounts of assets and liabilities available for sale Inventory 2,865 Property, plant and equipment 32,767 Total assets 35,632 Provision (8,993) Total liabilities (8,993) Net assets 26,639 OZ Minerals Limited half-year report 30 June 2008 13
Condensed notes to the consolidated interim financial report 8. Revenue 30 June 30 June $'000 $'000 From continuing operations Sales revenue 533,641 634,349 Discounts and pricing adjustments 19,829 (1,877) Refining and distribution costs (43,895) (48,312) 509,575 584,160 Interest revenue External interest revenue 4,599 15,454 4,599 15,454 9. Expenses Profit/(Loss) before income tax includes the following specific expenses: 30 June 30 June $'000 $'000 Finance costs Interest costs 18,095 18,813 Accretion of discount on convertible note 1,680 1,671 Finance lease charges 146 1 Unwinding of discount on mine rehabilitation provision 1,431 1,340 Other borrowing costs 5,185 496 Total finance costs 26,537 22,321 Depreciation and amortisation Plant and equipment 25,121 22,179 Leasehold improvements 140 136 Buildings and other infrastructure assets 3,172 10,760 Mining property and development assets 26,007 21,596 Mine rehabilitation assets 1,738 1,943 Total depreciation and amortisation - Property, plant and equipment 56,178 56,614 Intangible assets 760 354 Total depreciation and amortisation 56,938 56,968 OZ Minerals Limited half-year report 30 June 2008 14
9. Expenses (continued) Condensed notes to the consolidated interim financial report Individually significant items Pretax $ 000 30 June 2008 30 June 2007 Tax impact $ 000 Post tax $ 000 Pretax $ 000 Tax impact $ 000 Post tax $ 000 Merger related expenses 11,117 (3,335) 7,782 Impairment of investments 64,984 64,984 Total of individually significant items 76,101 (3,335) 72,766 Merger related expenses During the half-year ended 30 June 2008 the Group recognised net merger related expenses of $11,117,209, which included a provision for contractual entitlements and $8,350,000 in respect of an exgratia payment for Owen Hegarty's (previous Chief Executive Officer and Managing Director) services to the OZ Minerals Group until his retirement on 20th June 2008. Impairment of investments During the half-year ended 30 June 2008 the Group recognised the following impairment losses in the income statement: 30 June 30 June Impairment recognised in profit & loss: $'000 $'000 Available-for-sale financial assets Strategic Minerals Corporation NL 706 - Apex Minerals NL 4,278-4,984 Investments accounted for using the equity method Toro Energy Limited 60,000 - Total impairment of investments 64,984 - Available-for-sale financial assets The available for sale assets have been measured with reference to their quoted values on the Australian Securities Exchange ( ASX ) at 30 June 2008. The fair values have suffered a significant and/or prolonged decline in their respective fair value below original carrying amounts, which has resulted in the need to recognise the impairment of these available for sale financial assets. Investments accounted for using the equity method The Group holds 227,518,860 shares in Toro Energy Limited ( Toro ), a uranium exploration company listed on the ASX; representing a 46% interest. Since 31 December 2007, the market value of the Group s investment in Toro has declined from $102,383,000 to $56,880,000. The Group has undertaken an impairment test of the investment and has recognised an impairment loss of $60,000,000 against a carrying amount of $145,849,000. The recoverable amount of the investment in Toro of $85,849,000 is assessed on a value in use basis, which reflects the following key assumptions: The estimated average contracting price for Toro uranium production of $US80/lb. USD/AUD long-term exchange rate of 77c After tax discount rate of 14% OZ Minerals Limited half-year report 30 June 2008 15
9. Expenses (continued) Condensed notes to the consolidated interim financial report Income tax expense The Group s effective tax rate for the six months ended 30 June 2008 was 82 percent (for the year ended 31 December 2007: 32 percent; for the six months ended 30 June 2007: 32 percent). The increase in effective tax rate was caused primarily by the following factors: 1. Impairment of investments including Toro Energy Limited, the tax benefits of which are not considered probable of recovery (increase of 32 percent); 2. Under provision for a prior year amount (increase of 9 percent); 3. Losses on entities not in the Australian tax consolidated Group for which a deferred tax asset has not been recognised (increase of 3 percent); and 4. Increases in foreign expenditure not deductible for Australian taxation purposes (increase of 2 percent). 10. Property, plant and equipment Acquisitions During the six months ended 30 June 2008 the Group acquired capital assets with a cost of $564,201,000 (six months ended 30 June 2007: $864,840,000), including assets acquired through business combinations of nil (six months ended 30 June 2007: $570,165,000). 11. Interest bearing liabilities The following changes in interest bearing liabilities occurred during the half-year ended 30 June 2008: Currency Nominal interest rate Year of Maturity Face value 30 June 2008 $000's Carrying Amount 30 June 2008 $000's Balance at 1 January 2008 450,296 420,830 New Issues Secured bank loan - mezzanine loan USD LIBOR + 1.25% 2008 150,233 145,500 Drawdown Secured bank loan USD LIBOR + 1.50% 2012 228,643 228,643 Repayments Finance lease liabilities USD/AUD 0.80% & 11.41% 2008/2009 (167) (167) Secured bank loan USD LIBOR + 2.5% 2011 (13,095) (13,095) Other movements: Foreign currency Amortisation of finance costs/accretion of discount (32,431) 3,628 Balance as at 30 June 2008 752,908 OZ Minerals Limited half-year report 30 June 2008 16
11. Interest bearing liabilities (continued) Condensed notes to the consolidated interim financial report The carrying amount of current and non-current interest bearing liabilities at 30 June 2008: 30 June 31 December $'000 $'000 Current 288,120 154,421 Non-current 464,788 266,409 752,908 420,830 12. Dividends Ordinary Shares Half-year ended 30 June 2008 Unfranked dividend for the year ended 31 December 2007 of 4.0 cents per fully paid ordinary share paid on 9 April 2008. Half-year ended 30 June 2007 Dividend franked to 46% for the year ended 31 December 2006 of 5.0 cents per fully paid ordinary share paid on 30 April 2007. 30 June 30 June $'000 $'000 61,841 76,257 Dividends not recognised at half year end In addition to the above dividends, since the half year end the Directors have recommended the payment of an unfranked dividend of 5.0 cents per fully paid ordinary share* (2007 4.0 cents unfranked). The aggregate amount of the proposed dividend expected to be paid on 29 September 2008 out of retained profits at 30 June 2008, but not recognised as a liability at half-year end is: 156,067 61,502 * Ordinary shares at the date of dividend declaration include 1,554,756,421 ordinary shares issued as part of the acquisition of Zinifex Limited. See Note 19. OZ Minerals Limited half-year report 30 June 2008 17
Condensed notes to the consolidated interim financial report 13. Total Equity Reconciliation of movement in capital and reserves Consolidated $'000 Contributed equity Treasury shares Foreign currency translation reserve Attributable to shareholders of the company Equity Available Accumulated compensation asset reserve for sale Hedging profits reserve reserve Total Minority interest Balance 1 January 2007 608,475 - (46,920) 10,358 2,216 2,580 427,871 1,004,580-1,004,580 Exercise of share options and rights 1,381 9,165 - (3,628) - - (4,653) 2,265-2,265 Shares issued - Dividend Reinvestment Plan 21,369 - - - - - - 21,369-21,369 Agincourt acquisition 401,935 - - - - - - 401,935 111,999 513,934 Purchase of own shares - (9,165) - - - - - (9,165) - (9,165) Shares issued - controlled entity - - - - - - - - 6,531 6,531 Establishment of minority interest - - - - - - (20,286) (20,286) 40,246 19,960 Equity compensation expense - - - 4,385 - - - 4,385-4,385 Recognised income and expense - - (31,113) - 4,857 28 173,451 147,223 (717) 146,506 Dividend payments - - - - - - (80,511) (80,511) - (80,511) Balance at 30 June 2007 1,033,160 - (78,033) 11,115 7,073 2,608 495,872 1,471,795 158,059 1,629,854 Balance 1 January 2008 1,056,681 (2,583) (137,738) 38,043 8,887 (6,369) 566,084 1,523,005 42,271 1,565,276 Exercise of share options and rights 3,896 886 - (1,249) - - (728) 2,805-2,805 Shares issued - Dividend Reinvestment Plan 61,717 - - - - - - 61,717-61,717 Purchase of own shares - (161) - - - - - (161) - (161) Equity compensation expense - - - 2,947 - - - 2,947-2,947 Deferred tax adjustment - - - (4,298) - - - (4,298) - (4,298) Reversed to profit and loss - - - - 3,489 - - 3,489-3,489 Recognised income and expense - - (94,729) - (2,874) 409 (543) (97,737) 11,406 (86,331) Dividend payments - - - - - - (61,807) (61,807) (11,062) (72,869) Balance at 30 June 2008 1,122,294 (1,858) (232,467) 35,443 9,502 (5,960) 503,006 1,429,960 42,615 1,472,575 Total Equity OZ Minerals Limited half-year report 30 June 2008 18
14. Acquisition of Subsidiary Acquisition of subsidiary June 2008 There were no acquisitions of subsidiaries during the half-year ended 30 June 2008. Effective 1 July 2008, OZ Minerals Zinifex Holdings Pty Ltd, a wholly-owned subsidiary of OZ Minerals Limited, gained control of the shares of Zinifex Limited pursuant to the merger announced on 3 March 2008 (refer Note 19). Acquisition of subsidiary June 2007 Effective 21 March 2007 OZ Minerals Agincourt Holdings Pty Ltd, a wholly-owned subsidiary of OZ Minerals Limited, gained control of the shares of Agincourt Resources Limited ( Agincourt ). At the date of acquisition, the acquired entities were involved in mining, exploration and evaluation activities. In the three months to 30 June 2007 the Agincourt group contributed a loss of $6,998,000 of which $789,000 relates to continuing operations and $6,209,000 relates to discontinued operations. Details of the purchase consideration for all of the shares in Agincourt are as follows: Purchase consideration: 2007 $ 000 Shares issued (144,764,528 shares) 401,935 Cash paid or payable 13,536 Transaction costs 11,910 Total purchase consideration 427,381 The fair value of the shares issued is based on the market price at the date of acquisition. The purchase consideration has been allocated to the assets, liabilities and contingent liabilities acquired based on fair value as follows: Pre-acquisition carrying amount Final fair value adjustments Recognised values on acquisition $'000 $'000 $'000 Property, plant and equipment 177,554 382,221 559,775 Inventories 6,701 (2,772) 3,929 Trade and other receivables 8,522-8,522 Other current assets 794-794 Cash and cash equivalents 7,383-7,383 Interest bearing liabilities (11,607) - (11,607) Deferred tax liabilities - (113,709) (113,709) Trade and other payables (12,303) - (12,303) Derivative financial instruments (16,443) - (16,443) Provisions (11,060) - (11,060) Minority interests (2,232) (99,377) (101,609) Net identifiable assets and liabilities 147,309 166,363 313,672 Goodwill on acquisition 113,709 Consideration paid 427,381 Goodwill arises due to the recognition of deferred tax liabilities in relation to the fair value of the identifiable net assets acquired. OZ Minerals Limited half-year report 30 June 2008 19
14. Acquisition of Subsidiary (continued) Pro-forma financial information The following table summarises the pro-forma consolidated results of operations of the OZ Minerals Group for the half-year ended 30 June 2007 assuming that the acquisition of Agincourt occurred as at 1 January 2007. This pro-forma financial information does not necessarily represent what would have occurred if the transaction had taken place on the dates presented, and should not be taken as representative of the Group s future consolidated results of operations or financial position. The pro-forma information does not include all costs related to the integration of Agincourt into the OZ Minerals Group. OZ Minerals Consolidated Pro-forma adjustments for Agincourt Pro-forma Consolidated Entity 30 June 2007 $ 000 $ 000 $ 000 Revenue 584,160 15,102 599,262 Profit for the period 172,734 (13,279) 159,455 The pro-forma information represents the historical operating results of Agincourt, adjusted to give effect to the acquisition at the date presented. 15. Earnings per share (a) Basic earnings/(loss) per share - cents Profit/(loss) from continuing operations attributable to the ordinary equity holders of the Company 30 June 30 June (0.03) 12.31 Profit/(loss) from discontinued operations - (0.43) Profit/(loss) attributable to the ordinary equity holders of the Company (0.03) 11.88 (b) Diluted earnings/(loss) per share - cents * Profit/(loss) from continuing operations attributable to the ordinary equity holders of the Company (0.03) 11.42 Profit/(loss) from discontinued operations - (0.39) Profit/(loss) attributable to the ordinary equity holders of the Company (0.03) 11.03 * The effect of options, rights and convertible notes of the Group has an anti-dilutive effect on the calculation of 'Diluted earnings/(loss) per share'. (c) Reconciliation of earnings/(loss) - thousands Basic earnings/(loss) per share Profit/(loss) from continuing operations attributable to the ordinary equity holders of the Company (543) 179,660 Profit/(loss) from discontinued operations - (6,209) Profit/(loss) attributable to the ordinary equity holders of the Company (543) 173,451 Diluted earnings/(loss) per share Profit/(loss) from continuing operations attributable to the ordinary equity holders of the Company (543) 179,660 Interest savings on options - 530 Interest savings on convertible notes - 2,224 (543) 182,414 Profit/(loss) from discontinued operations - (6,209) Profit/(loss) attributable to the ordinary equity holders of the Company (543) 176,205 OZ Minerals Limited half-year report 30 June 2008 20
15. Earnings per share (continued) (d) Weighted average number of shares used as denominator Weighted Average number of ordinary shares on issue used in the calculation of basic earnings per share 30 June 30 June 1,554,144,986 1,460,010,388 Convertible notes - 108,247,423 Options and rights - 29,219,585 Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share 1,554,144,986 1,597,477,396 16. Net tangible assets per share 30 June 30 June Net tangible assets per share (cents) 90.9 98.2 In accordance with Chapter 19 of the ASX listing rules, net tangible assets represent total assets less intangible assets, less liabilities ranking ahead of, or equal with, ordinary share capital. 17. Commitments for Expenditure 30 June 31 December Capital expenditure commitments $ 000 $ 000 Capital expenditure commitments contracted for: Capital expenditure projects 320,508 300,344 Payable - not later than 1 year 263,916 287,404 - later than 1 year but not later than 5 years 56,592 12,940 320,508 300,344 18. Contingent assets and liabilities Contingent liabilities not considered remote The Group had contingent liabilities at 30 June 2008 in respect of claims received for cost increases incurred by unrelated parties performing various supply and construction contracts relating to the construction of the Prominent Hill mine. These claims are being investigated. While the liability is not being admitted, should these claims be upheld, a liability estimated at $41,300,000 (December 2007: $14,650,000) may be payable. OZ Minerals Limited half-year report 30 June 2008 21
19. Events subsequent to balance sheet date Dividends Since the end of the half-year ended 30 June 2008, the Directors have resolved to pay an unfranked dividend of 5.0 cents per fully paid ordinary share. The record date for the dividend will be 3 September 2008, and will be paid on 29 September 2008. Acquisition of Zinifex Limited On 24 March 2008 Oxiana Limited and Zinifex Limited agreed to a merger to be implemented on 1 July 2008 by exchanging 3.1931 Oxiana shares for each Zinifex share. The merger resulted in OZ Minerals Zinifex Holdings Pty Ltd, a wholly-owned subsidiary of OZ Minerals Limited, gaining control over 100% of the voting shares of Zinifex Limited. At the date of acquisition, the acquired entities were involved in mining, exploration and evaluation activities. Details of the purchase consideration for all of the shares in Zinifex Limited are as follows: Purchase consideration: $'000 Fair value of shares issued (1,554,756,421 shares) 3,980,176 Transaction costs 43,000 Total purchase consideration 4,023,176 The fair value of the OZ Minerals Limited shares issued is based on the market price at the date of acquisition of $2.56. The disclosures provided in respect to fair values of the net assets acquired have been determined on a provisional basis at 1 July 2008. The Group is currently finalising the fair values of assets, liabilities and contingent liabilities of Zinifex. The assets and liabilities arising from the acquisition of Zinifex Limited at 1 July 2008 are as follows: Preacquisition carrying amount Provisional fair value adjustments Recognised values on acquisition $'000 $'000 $'000 Cash and cash equivalents 1,173,515-1,173,515 Trade and other receivables 98,182-98,182 Inventories 153,320-153,320 Current tax assets 30,598-30,598 Investments 150,060-150,060 Property, plant and equipment 1,645,971 541,548 2,187,519 Mineral rights 226,014 304,300 530,314 Deferred tax assets 311,213-311,213 Trade and other payables (214,001) - (214,001) Interest-bearing liabilities (164,375) - (164,375) Current tax payable (37,323) - (37,323) Provisions (148,165) - (148,165) Deferred tax liabilities (47,681) - (47,681) Net identifiable assets and liabilities 3,177,328 845,848 4,023,176 The above pre-acquisition carrying amounts and provisional fair value adjustments at 1 July 2008 vary to the information provided in the scheme booklet as provided to Zinifex Limited shareholders in relation to the planned merger, which was based on business conditions, assumptions and information available at the time of preparation. OZ Minerals Limited half-year report 30 June 2008 22
OZ MINERALS LIMITED ABN 40 005 482 824 AND CONTROLLED ENTITIES DIRECTORS DECLARATION In the opinion of the directors of OZ Minerals Limited ( the Company ): 1. the financial statements and notes set out on pages 6 to 22, are in accordance with the Corporations Act 2001 including: (a) (b) giving a true and fair view of the Group s financial position as at 30 June 2008 and of its performance for the half-year period ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and 2. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Dated at Melbourne this 21 st day of August 2008. Signed in accordance with a resolution of the directors: Andrew G. Michelmore Director OZ Minerals Limited half-year report 30 June 2008 23
OZ Minerals Limited half-year report 30 June 2008 24