Reality Bites Peter Johnston CEO Sydney Mining Club

Reality Bites Peter Johnston, CEO Sydney Mining Club Luncheon 1 August 2002 1

Who’s squeezing who? 2

Agenda v Background to Murrin & Anaconda v Major issues impacting on current position v The promises v The facts (current performance) v Now and the future v Summary 3

Murrin 4

Murrin Joint Venture v Murrin is a 60/40 Joint Venture between Anaconda Nickel Ltd and Glencore International AG v Project is located in the North Eastern Goldfields region of Western Australia v Design Basis: • 4 MTPA Mill Feed • 45, 000 TPA Nickel (LME) • 3, 000 TPA Cobalt v Current reserve approx 300 Million tonnes at 1% Nickel v Process Design based on licensed Sherritt Technology 5

Murrin v Project Construction started in May 1997 v US$420 m Financing Aug 1997 v Mechanical Completion Dec 1999 v Lloyds Insurance Recovery (A$113 m) Aug 2000 v Commercial Production April 2001 v Fluor Arbitration – 1 st stage - Begins - Interim award Jan 2002 Sep 2002 6

Major Issues v Significant commissioning delays v Slow production ramp-up v Capital cost overruns v True operating costs still emerging v Technical viability v Short term liquidity/viability v Debt restructuring essential 7

The promises: Three Nickel Provinces (3 NP) Dominating Australia’s rich and ancient Yilgarn Craton 8

The promises – Production profile Announced Plans Date announced 2000 1999 1998 Expected 1997 1995 9

The promises – Production profile Announced Plans Date announced 2000 1999 1998 Expected 1997 1995 10

The promises: Corporate Governance – the missing 5 th autoclave Quotes from Quarterly Reports: v Sep 99 - 100 day rolling expansion v Mar 00 - studying installation of 5 th autoclave v Jun 00 - tenders received for 5 th autoclave v Sep 00 - contract has been let for supply of 5 th autoclave v Dec 00 - 5 th autoclave specifications finalised v Mar 01 - progress on 5 th autoclave continued v Jun 01 - ramp up strategy in line with forecast 11

Over promising – The Share Price Reality Debt restructure requirement announced 12

The facts: Cash burn $ million Cashflow: 6 months July – Dec 2001 13

The facts: Commissioning delay Design Actual 14

The facts: Production 15

Now and the future New management – achievements to date v Restructured the organisation v Reduced overhead v $457. 4 m loss for Dec 2001 half year v Re-budgeted next 18 months - realistic v Reduced all peripheral activities v Resolved liquidity issues v Debt restructuring negotiations commenced 16

Now and the future Absolute imperatives v Debt restructure - Complete recapitalisation v Murrin operations – plant performance v Focus on cost management v Retention of key personnel v Eliminate legacy legal disputes v Remain cash positive pre financing v Resolve Fluor Daniel arbitration v Transparent organisation – focus on corporate governance 17

Summary v Debt restructure close to resolution v Murrin performance trending up v Experienced management team in place v Consolidation phase: - reduce costs - reduce production variability - generate positive cash flow v Clean balance sheet v Viable long term future 18

If this is difficult wait for Saturday 19