RELEASE TO THE AUSTRALIAN STOCK EXCHANGE AUSMELT …

Ausmelt Limited 12 Kitchen Road Dandenong 3175 Victoria Australia

Tel: + 61 3 9794 6200 Fax: + 61 3 9794 9411 Website: www.ausmelt.com.au Email: [email protected] ABN: 72 005 884 355

18 February 2008

RELEASE TO THE AUSTRALIAN STOCK EXCHANGE

AUSMELT LIFTS DIVIDEND AFTER SUBSTANIAL PROFIT INCREASE

• Net profit after tax up 34.1% to $1.95 million • Pre-tax profit up 50.8% to $2.64 million • Interim dividend up by 100% to 2c • Record $19 million in new contracts and work orders Ausmelt Ltd (AET) increased net profit after tax by 34.1% in the six months to 31 December 2007 and will double interim dividend from 1 cent to 2 cents per share. Profit after tax increased from $1.45 million to $1.95 million in the latest half. This favourable result followed regular sales of the Company’s mineral flotation reagent, AM2, and continuing demand for the Company’s top submerged lance smelting technology for non-ferrous metals projects. Pre-tax profit rose 50.8% to $2.64 million compared with $1.75 million in the previous corresponding period. Revenue increased 6.8% from $11.0 million to $11.75 million. The Company exhausted its accumulated tax losses in 2006-07, which meant the effective tax rate was significantly higher than previously. The Company will pay an unfranked interim dividend of 2 cents a share on 2 April 2008 to shareholders registered by 19 March 2008. The increased payout is comfortably covered by earnings per share of 4.87 cents compared with 3.66 cents previously. Ausmelt Managing Director, Mr Paul Abbott, said today the Company now had a record level of work in hand, worth more than $30 million. He added that the company’s pipeline of prospective contracts was still filling. In the latest half-year, the Company signed new contracts and work orders with a combined value of more than $19 million, which was a record level of new business for a 6-month period. During the December half, Ausmelt signed four significant contracts comprising: • A licence agreement and design and engineering contract for a lead project in Bulgaria for

Intertrust Holdings. • A licence agreement and design and engineering contract for a Chinese copper project. • A licence agreement and basic engineering design agreement for a lead project in Brazil for

Votorantim Metais Zinc S.A. • An equipment supply contract for the Carat lead project in Russia. Mr Abbott said the non-ferrous business had continued to flourish since 31 December 2007. The Company has won its largest-ever copper smelting project in China. The smelter would have a design capacity to produce 300,000 tonnes a year of contained copper, which is three times the size of Ausmelt’s next largest Chinese copper smelter. Mr Abbott said Ausmelt’s Whyalla plant was now being cold commissioned in readiness for hot commissioning and start up of plant operations. The Whyalla project will treat primary leach zinc residues for Nyrstar using patented Ausmelt technology and convert the residues to zinc oxide which would be used as a feed for Nyrstar’s Risdon, Tasmania smelter.

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Mr Abbott said Ausmelt had increased its capital expenditure on the Whyalla plant from the originally budgeted $8.6 million to $9.9 million. The supply agreement between Ausmelt and Zinifex has now been formally assigned to Nyrstar. The Company’s chemicals business contributed to earnings in the December half-year. Sales of the flotation reagent AM2 totaled $2.4 million in the period. The bulk of these sales were made to the Ruashi copper-cobalt project in the Democratic Republic of Congo. Regular shipments are continuing to be made to Ruashi, although volumes vary depending on the type of ore being treated. The Company shipped 30 tonnes of AM2 to Tintaya copper mine in Peru for trials. A further 10 tonnes of AM2 were delivered to other groups for testing and trials. The Company’s Ausmelt Minmet Metallurgical Laboratories (AMML) is now fully established and is rapidly gaining client support. The business reached break-even point during the December quarter. Mr Abbott said the Company was confident that it could build on this good result in the second half of the year. He said demand for the Company’s non-ferrous TSL technology continued to be buoyant and AM2 was likely to continue making an important contribution. Mr Rod Chadwick took over as Chairman of Ausmelt on 14 January 2008 following the retirement of Mr Tony Larkin at the Company’s annual general meeting in November 2007. For further information please contact: Mr Paul Abbott, Managing Director Ausmelt Ltd Telephone: 03 9794 6200 Email: [email protected]

Mr Garry Oliver, Managing Director InterCapital Group Telephone: 03 9941 3158 Email: [email protected]

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AUSMELT LIMITED AND CONTROLLED ENTITIES AUSMELT LIMITED ABN 72 005 884 355 DIRECTORS' REPORT Your directors submit their report for the half-year ended 31 December 2007.

DIRECTORS The names and details of the directors of Ausmelt Limited (the Company) in office during the half-year and until the date of this report are: R L Chadwick, FCPA, FAICD (Non-Executive Chairman – appointed 14 January 2008) Dr J M Floyd, AM, MSc, PhD, DIC, FTSE, FAusIMM(CP), CEng, MIMM, MCIM, MAIME, FAICD (Non-Executive Deputy Chairman) P V Abbott, BB (Acc), ASCPA (Managing Director) Dr C M Adam, BEng (Met), PhD (Qld) (Non Executive Director) G F Lord, B Economics (Hons), MBA (Dist), ASSA, ASIA (Non-Executive Director) A C Larkin, FCPS, FAICD (retired from the Board effective 19 November 2007)

REVIEW AND RESULTS OF OPERATIONS Ausmelt increased after-tax profit from $1.45 million to $1.95 million in the six months to 31 December 2007. This favourable result followed regular sales of the Company’s AM2 mineral flotation reagent and continuing demand for the Company’s top submerged lance smelting technology for non-ferrous metals projects. Pre-tax profit rose 50.8% to $2.64 million compared with $1.75 million in the previous corresponding period. The Company exhausted its accumulated tax losses in 2006-07. Revenue increased 6.8% from $11.0 million to $11.75 million. The Company has increased interim dividend from 1 cent to 2 cents a share (unfranked). The dividend is payable on 2 April 2008 to shareholders registered by 19 March 2008. The increased payout is covered by earnings per share of 4.87 cents compared with 3.66 cents previously. Ausmelt paid the unfranked final dividend for the 2006-07 financial year of two cents per share on 14 September 2007. The Company now has a record level of work in hand, worth more than $30.0 million. In addition, the Company is currently pursing a number of other prospective contracts. In the latest half-year, the Company signed new contracts and work orders with a combined value of more than $19.0 million, which was a record level of new business for a 6-month period. During the period, Ausmelt signed four significant contracts including: • A licence agreement and design and engineering contract for a lead project in Bulgaria for Intertrust

Holdings. • A licence agreement and design and engineering contract for a Chinese copper project. • A licence agreement and basic engineering design agreement for a lead project in Brazil for Votorantim

Metais Zinc S.A. • An equipment supply contract for the Carat lead project in Russia. Demand for Ausmelt’s TSL technology for non-ferrous projects has continued to be buoyant since 31 December 2007. The Company has won its largest ever copper smelting project in China. The smelter would have a design capacity to produce 300,000 tonnes a year of contained copper, which is three times the size of Ausmelt’s next largest Chinese copper smelter. Ausmelt’s Whyalla plant is currently being cold commissioned in readiness for hot commissioning and start up of plant operations. The Whyalla project will treat primary leach zinc residues for Nyrstar using patented Ausmelt technology and will convert the residues to zinc oxide which will be used as a feed for Nyrstar’s Risdon, Tasmania smelter.

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The Company increased its capital expenditure on the Whyalla plant from the originally budgeted $8.6 million to $9.9 million. The supply agreement between Ausmelt and Zinifex has now been formally assigned to Nyrstar. The Company’s chemicals business contributed to earnings in the December half-year. Sales of the flotation reagent AM2 totalled $2.4 million in the period. The bulk of these sales were made to the Ruashi copper-cobalt project in the Democratic Republic of Congo. Regular shipments are continuing to be made to Ruashi, although volumes vary depending on the type of ore being treated. The Company shipped 30 tonnes of AM2 to the Tintaya copper mine in Peru for trials. A further 10 tonnes of AM2 were delivered to other groups for testing and trials. The Company’s Ausmelt Minmet Metallurgical Laboratories (AMML) is now fully established and is rapidly gaining client support. The business reached break-even point during the December quarter. The Company is confident that it can build on this good result in the second half of the year. Demand for the Company’s non-ferrous TSL technology continues to be buoyant and AM2 is expected to continue making an important contribution. Mr Rod Chadwick took over as Chairman of Ausmelt on 14 January 2008 following the retirement of Mr Tony Larkin at the Company’s annual general meeting in November 2007. Auditor's Independence Declaration We have obtained the following independence declaration from our auditors, Ernst & Young.

Auditor’s Independence Declaration to the Directors of Ausmelt Limited

In relation to our review of the financial report of Ausmelt Limited for the half year ended 31 December 2007, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Brett Croft Partner 18 February 2008 Signed in accordance with a resolution of the Directors.

P V Abbott Director Melbourne, 18th February 2008

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Income Statement

FOR THE HALF YEAR ENDED 31 DECEMBER 2007Note

2007 2006$ $

Rendering of external services 3,657,086 4,557,431Technology licence fee revenue 2,770,703 1,555,037Testwork and study revenue 489,902 324,888Sale of goods 4,604,413 4,394,338Interest 227,572 176,481

Revenue 11,749,676 11,008,175

Cost of Sales (4,779,471) (5,310,046)Gross Profit 6,970,205 5,698,129

Other income 4 (13,400) 307,700

Operational expenses (1,760,897) (1,344,200)Marketing expenses (776,114) (655,900)Corporate expenses (1,782,027) (1,885,978)Other expenses 4 - (349,213)Finance costs (981) (21,827)

Profit before income tax 2,636,786 1,748,711Income tax expense 5 687,130 294,532Profit after tax 1,949,656 1,454,179

Net profit / (loss) attributable to members of Ausmelt Limited 1,949,656 1,454,179

Earnings per share (cents per share)Basic earnings per share 4.87 3.66 Diluted earnings per share 4.86 3.64

Ausmelt Limited - Half Year ReportA.B.N. 72 002 884 355

CONSOLIDATED

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Balance SheetAS AT 31 DECEMBER 2007

NotesAs at As at

31 December 2007 30 June 2007$ $

ASSETSCurrent AssetsCash and cash equivalents 6,265,412 8,892,635Trade and other receivables 4,058,632 3,388,850Inventories 2,091,448 1,598,929Prepayments 303,891 272,797Unrealised foreign exchange contract receivable 499,556 510,828Accrued licence fee receivable 120,036 - Total Current Assets 13,338,975 14,664,039

Non-Current AssetsUnrealised foreign exchange contract receivable 178,932 239,947Property, Plant & Equipment 9,318,479 1,747,750Intangible assets 939,916 910,171Net deferred tax assets 25,536 204,257Total Non-Current Assets 10,462,863 3,102,125TOTAL ASSETS 23,801,838 17,766,164

LIABILITIESCurrent LiabilitiesTrade and other payables 5,295,936 1,666,031Contract revenue received in advance 3,418,981 2,524,435Income tax payable 487,185 341,898Provisions 654,425 573,415Total Current Liabilities 9,856,527 5,105,779

Non-Current LiabilitiesProvisions 467,408 452,802Total Non-Current Liabilities 467,408 452,802TOTAL LIABILITIES 10,323,935 5,558,581NET ASSETS 13,477,903 12,207,583

EQUITYIssued Capital 10 10,867,829 10,695,529Other reserves 473,043 525,543Retained earnings 2,137,031 986,511TOTAL EQUITY 13,477,903 12,207,583

A.B.N. 72 002 884 355Ausmelt Limited - Half Year Report

CONSOLIDATED

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Statement of Changes in EquityFOR THE HALF YEAR ENDED 31 DECEMBER 2007

Issued Retained Other Total

capital earnings reserves Equity

$ $ $ $

At 1 July 2006 10,454,529 (872,489) 374,774 9,956,814

Net movement on cash flow hedges (Net of tax) - - (57,795) (57,795)

Total income and expense for the period recognised directly in equity - - (57,795) (57,795)

Profit/(Loss) for the period - 1,454,179 - 1,454,179

Total income and expense for the period - 1,454,179 57,795- 1,396,384

Exercise of options 241,000 - - 241,000

Payment of dividend - (793,136) - (793,136)

At 31 December 2006 10,695,529 (211,446) 316,979 10,801,062

At 1 July 2007 10,695,529 986,511 525,543 12,207,583

Net movement on cash flow hedges (Net of tax) - - (52,500) (52,500)

Total income and expense for the period recognised directly in equity - - (52,500) (52,500)

Profit/(Loss) for the period - 1,949,656 - 1,949,656

Total income and expense for the period - 1,949,656 (52,500) 1,897,156

Exercise of options 172,300 - - 172,300

Payment of dividend - (799,136) - (799,136)

At 31 December 2007 10,867,829 2,137,031 473,043 13,477,903


Consolidated

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Cash Flow StatementFOR THE HALF YEAR ENDED 31 DECEMBER 2007

Notes2007 2006

$ $

Cash flows from operating activitiesReceipts from customers 11,608,021 14,029,254Payments to suppliers and employees (8,819,372) (7,888,991)Interest received 227,572 176,481Income tax paid (320,000) - Receipt of government grants 62,682 - Interest and other costs of finance paid (981) (21,827)

Net cash flows from operating activities 2,757,922 6,294,917

Cash flows from investing activitiesPurchase of property plant & equipment (4,625,964) (386,216)Payments for patents (132,345) (158,907)

Net cash flows from/(used in) investing activities (4,758,309) (545,123)

Cash flows from financing activitiesProceeds from issue of shares 172,300 241,000Payment of dividends (799,136) (793,136)

Net cash flows from/(used in) financing activities (626,836) (552,136)

Net increase/(decrease) in cash and cash equivalents (2,627,223) 5,197,658Cash and cash equivalents at beginning of period 8,892,635 4,793,755

Cash and cash equivalents at end of period 6,265,412 9,991,413

A.B.N. 72 002 884 355Ausmelt Limited - Half Year Report

CONSOLIDATED

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Notes to the Half Year Financial StatementsFOR THE HALF YEAR ENDED 31 DECEMBER 2007

1 CORPORATE INFORMATION

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

(b) Basis of Consolidation

(c) Significant accounting judgements, estimates and assumptions


The half year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as is provided by the full financial report. The half year financial report should be read in conjunction with the annual Financial Report of Ausmelt Limited as at 30 June 2007.

The accounting policies adopted for the half year accounts to 31 December 2007 are consistent with the previous reporting period to 30 June 2007.

It is also recommended that the half year financial report be considered together with any public announcements made by Ausmelt Limited and its controlled entities during the half year ended 31 December 2007 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001 .

The half year financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and AASB 134 Interim Financial Reporting.The half year financial report has been prepared on an historical cost basis except for derivative financial instruments which have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged with fair value hedges, and are otherwise carried at cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged.

The financial report is presented in Australian dollars and values are rounded to the nearest dollar.

For the purpose of preparing the half year financial report, the half year has been treated as a discrete reporting period.

The financial report of Ausmelt Limited (the Company) for the half year ended 31 December 2007 was authorised for issue in accordance with a resolution of the directors on 18 February 2008. Ausmelt Limited is a company incorporated in Australia and limited by shares, which are publicly traded on the Australian Stock Exchange. The nature of operations and principle activities of the Group are described in note 3.

The consolidated financial statements comprise the financial statements of Ausmelt Limited and its subsidiaries (the Group). The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

In applying the Group's accounting policies management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments,estimates and assumptions. Significant judgments, estimates and assumptions made by management in the preparation of these financial statements are outlined below:

(i) Significant accounting judgmentsDetermination of the percentage of completion of current projects and estimated costs to completeThe determination of the percentage completion of current projects and the costs to complete are measured by reference to the labour hours incurred to date as a percentage of total estimated labour hours for each contract. This is determined by the work required to meet contracted deliverables compared to the work completed to date.

Assessment of probability factors to be applied to employee benefit calculationsThe liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at balance date. In determining the present value of the liability, attrition rates and remuneration increases through promotion and inflation have been taken into account.

Estimation of useful life of assetsThe estimation of the useful lives of assets has been based on Australian Tax depreciation rates. In addition, an asset review is conducted based on a review programme that has regard to the asset type and the value of the asset. Adjustments to useful life are made when considered necessary. Depreciation charges are included in note 14.

Consideration of the useful life of patentsThe Group has determined that patents have a finite life of eight years. This finite life was determined based on market experience and industry knowledge. An impairment review is conducted at least annually to determine if any indicator of impairment exists for these intangible assets.

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Ausmelt Limited – Half Year Report A.B.N 72 002 884 355

Notes to the Half Year Financial Statements FOR THE HALF YEAR ENDED 31 DECEMBER 2007 (c) Significant accounting judgements, estimates and assumptions (continued) Taxation The Group's accounting policy for taxation requires management's judgement as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are not expected to occur in the foreseeable future. Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on management's estimates of future cash flows. These depend on estimates of future production and sales volumes, operating costs, restoration costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement Derivative financial instruments and hedging The Group uses forward currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently adjusted to fair value at balance date. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to the income statement for the year. The fair values of forward currency contracts are calculated by reference to current forward exchange rates by reference to market values. (d) New accounting standards and interpretations Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the reporting period ending 31 December 2007. These are not expected to have a material impact on the Group.

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Notes to the Half Year Financial StatementsFOR THE HALF YEAR ENDED 31 DECEMBER 2007

3 SEGMENT REPORTING

The Group comprises the following business segments which is the primary basis of reporting:

Non-Ferrous - Proven pyrometallurgical technology for the non-ferrous metals industry.

Chemicals - Sales of the Company's mineral floatation reagent AM2 to the mining industry.

AMML - Provides metallurgical laboratory services to the mining and mineral exploration industry.

Corporate - Corporate transactions which were not allocated to the business segments.

Business Segments

The following table presents revenue and profit information regarding business segments for the half year periods ended 31 December 2007 and 31 December 2006:

Non-Ferrous Chemicals2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

$ $ $ $ $ $ $ $ $ $

Segment Revenue 8,500,200 10,594,400 2,380,100 235,100 293,500 - 575,876 178,675 11,749,676 11,008,175

Segment Result 3,289,900 3,962,900 741,500 (136,500) (15,100) - (1,379,514) (2,077,689) 2,636,786 1,748,711

Consolidated


AMMLCorporate

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Notes to the Half Year Financial Statements (continued)FOR THE HALF YEAR ENDED 31 DECEMBER 2007

2007 2006$ $

4 REVENUE, INCOME AND EXPENSES

(a) Other incomeGovernment grants - 318,000Net gain/(loss) on foreign exchange (13,400) (10,300)

(13,400) 307,700

(b) Other ExpensesWrite-off of investment in SASE Pty. Ltd. - 147,761Options expense - 201,452

- 349,213

5 INCOME TAX

The major components of income tax expense for the half year ended 31 December 2007 and 31 December 2006 are:

Consolidated Income Statement

Current Income Tax Current income tax charge 488,621 596,800Deferred Income Tax Relating to origination and reversal of temporary differences 198,509 (302,268)Income tax expense / (benefit) reported in the consolidated income statement 687,130 294,532

Additional income tax informationA reconciliation of income tax expense applicable to accounting profit beforeincome tax at the statutory income tax rate to income tax expense at the Group'seffective income tax rate for the half year ended 31 December 2007 and 2006is as follows:

Accounting profit before tax 2,636,786 1,748,711

At the statutory income tax rate of 30% (2006: 30%) 791,036 524,613 Unrecognised / (recognised) tax losses - (437,494) Expenditure not allowable / (allowable) for income tax purposes (60,719) 222,754 Research and development (R&D) concessions (21,449) (18,618) Other (21,738) 3,277Income Tax Expense reported in the consolidated income statement 687,130 294,532

As at As at31 December 2007 30 June 2007

$ $

6 CASH AND CASH EQUIVALENTS

For the purpose of the half year cash flow statement, cash and cashequivalents are comprised of the following:

Cash at bank and in hand 3,115,412 1,742,635Short term deposits 3,150,000 7,150,000

6,265,412 8,892,635


CONSOLIDATED

CONSOLIDATED

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2007 2006$ $

7 DIVIDENDS PAID AND PROPOSED

Equity dividends on ordinary shares: (a) Dividends paid during the half year

Final unfranked dividend for financial year 30 June 2007: 2.00 cents (2006: 2.00 cents) 799,136 793,136

(b) Dividends proposed and not recognised as a liabilityInterim unfranked dividend for financial year 30 June 2008: 2.00 cents 802,136 399,568(2007: 1.00 cent)

8 PROPERTY PLANT AND EQUIPMENT

Acquisitions and disposalsDuring the half year ended 31 December 2007, the Group acquired assets at a cost of $7,664,973 (2006 $386,216).

No assets were disposed of by the Group during the half year ended 31 December 2007.

9 COMMITMENTS AND CONTINGENCIES

During the half year, there has been no change in the state of contingencies as previously reported except for the PT Krakatau Steelclaim as set out below.

Legal Claim

As at As at31 December 2007 30 June 2007

$ $10 CONTRIBUTED EQUITYOrdinary Shares (i) 10,867,829 10,695,529

10,867,829 10,695,529

(i) Ordinary SharesFully paid ordinary shares carry one vote per share and carry the right to dividends.

Movements in ordinary shares on issue $ $Value of shares at the beginning 10,695,529 10,454,529Value of shares issued during the half year ended 31 December 2007 172,300 - Value of shares issued during the financial year ended 30 June 2007 241,000 Value of shares at the end 10,867,829 10,695,529

No. of Shares No. of SharesNumber of shares at the beginning 39,956,824 39,656,824Number of shares issued during the half year ended 31 December 2007 150,000 - Number of shares issued during the financial year ended 30 June 2007 - 300,000 Number of shares at the end 40,106,824 39,956,824

A.B.N. 72 002 884 355

CONSOLIDATED

Ausmelt Limited - Half Year Report

PT Krakatau Steel (PTKS) of Indonesia commenced legal proceedings against Felix Resources Limited, SASE Pty Ltd and Ausmelt Limited in respect of the asserted entitlement for PTKS to take iron ore or coal from SASE tenements as recompense for its US$2.5 million investment in SASE Pty Ltd. On a broad assessment, Ausmelt has minimal exposure to any potential liability, and the matter is being co-ordinated by Felix Resources Limited, the 90% shareholder and manager of SASE Pty Ltd. Clayton Utz Lawyers, who are representing all three defendants in the case have advised that preliminary advice from Senior Counsel is that this is a case in which it will be difficult for the plaintiff (PTKS) to succeed in its claims. A mediation meeting between the plaintiff and the three defendants was held in December 2007. A further meeting is scheduled for March 2008.

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11 EVENTS AFTER THE BALANCE SHEET DATE

Directors Declaration

On behalf of the Board

P AbbottManaging Director

Melbourne, 18 February 2008


In accordance with a resolution of the directors of Ausmelt Limited, I state that:

In the opinion of the directors:

(a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, and:

(i) give a true and fair view of the financial position as at 31 December 2007 and the performance for the half year ended on that date of the consolidated entity; and

(ii) comply with Accounting Standard AASB 134 “Interim Financial Reporting” and the Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

The Company has won its largest-ever copper smelting project in China. The smelter would have a design capacity to produce 300,000 tonnes ayear of contained copper, which is three times the size of Ausmelt’s next largest Chinese copper smelter.

No other matters or circumstances have arisen since the end of the half year to 31 December 2007 which significantly affect or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in subsequent financial periods.

On 18 February 2008 the Board declared a interim dividend as per Note 7 to the accounts.

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To the members of Ausmelt Limited Report on the Half-Year Condensed Financial Report We have reviewed the accompanying half year financial report of Ausmelt Limited, which comprises the balance sheet as at 31 December 2007, and the income statement, the statement of changes in equity and the cash flow statement for the half year ended on that date, other selected explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the 31 December 2007 or from time to time during the period. Directors’ Responsibility for the Half Year Financial Report The directors of the company are responsible for the preparation and fair presentation of the half year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the half year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express a conclusion on the half year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2007 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and other mandatory financial reporting requirements in Australia. As the auditor of Ausmelt Limited and the entities it controlled during the half year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the Directors’ Report. The Auditor’s Independence Declaration would have been expressed in the same terms if it had been given to the directors at the date this auditor’s report was signed.

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Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Ausmelt Limited and the entities it controlled during the half year is not in accordance with: (a) the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2007 and of its performance for the half year ended on that date; and

(ii) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and

(b) other mandatory financial reporting requirements in Australia.

Ernst & Young Brett Croft Partner Melbourne 18 February 2008

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Appendix 4D

Half Year Report

Ausmelt Limited – ABN 72 005 884 355

For the Financial Period ended 31 December 2007

Results for announcement to the market Ausmelt increased after-tax profit by 34% from $1.45 million to $1.95 million in the six months to 31 December 2007. This favourable result followed regular sales of the Company’s AM2 mineral flotation reagent and continuing demand for the Company’s top submerged lance smelting technology for non-ferrous metals projects. Pre-tax profit rose 50.8% to $2.64 million compared with $1.75 million in the previous corresponding period. The Company exhausted its accumulated tax losses in 2006-07. Revenue increased 6.8% from $11.0 million to $11.75 million. The Company has increased interim dividend from 1 cent to 2 cents a share (unfranked). The dividend is payable on 2 April 2008 to shareholders registered by 19 March 2008. The increased payout is covered by earnings per share of 4.87 cents compared with 3.66 cents previously. Ausmelt paid the unfranked final dividend for the 2006-07 financial year of two cents per share on 14 September 2007. The Company now has a record level of work in hand, worth more than $30.0 million. In addition, the Company is currently pursing a number of other prospective contracts. In the latest half-year, the Company signed new contracts and work orders with a combined value of more than $19.0 million, which was a record level of new business for a 6-month period. During the period, Ausmelt signed four significant contracts including: • A licence agreement and design and engineering contract for a lead project in Bulgaria for

Intertrust Holdings. • A licence agreement and design and engineering contract for a Chinese copper project. • A licence agreement and basic engineering design agreement for a lead project in Brazil

for Votorantim Metais Zinc S.A. • An equipment supply contract for the Carat lead project in Russia. Demand for Ausmelt’s TSL technology for non-ferrous projects has continued to be buoyant since 31 December 2007. The Company has won its largest-ever copper smelting project in China. The smelter would have a design capacity to produce 300,000 tonnes a year of contained copper, which is three times the size of Ausmelt’s next largest Chinese copper smelter. Net tangible assets per security with the comparative figure for the previous corresponding period. The net tangible asset backing per ordinary security as at 31st December 2007 was 30.3 cents, compared with 24.8 cents for the previous corresponding period.

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Details of entities over which control has been gained or lost during the period. Not applicable. Details of individual and total dividends or distributions and dividend or distribution payments Refer Financial Statements Details of associates and joint venture entities. Not applicable. For foreign entities, which set of accounting standards is used in compiling the report. Not applicable.

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Documents

RELEASE TO THE AUSTRALIAN STOCK EXCHANGE AUSMELT …