BROADENING OUR HORIZONS - Arrium

Managing Director’s ReviewCommitment to safetyOneSteel’s commitment to the safety of our employees, contractorsand customers is integral to our licence to operate and deliver superiorand sustainable returns. In the 2011 financial year, we reported animprovement to our safety performance measurements. Our keyindicators, Lost Time Injury Frequency Rate (LTIFR) and MedicalTreatment Injury Frequency Rate (MTIFR), improved 7% and 24%,down to 1.3 and 6.3 respectively.IT WAS A YEAR OF SUCCESS,CHALLENGES AND TRANSFORMATIONOutlookIn our international markets, the short-term outlook remains positivefor steelmaking raw materials and mining consumables.In our Iron Ore and Recycling segments, the supply/demand balanceis expected to keep prices high compared to historical standards, butwith continued volatility.In Recycling, we expect our international businesses to build on theimproved 2011 financial year performance, while in our Australianbusiness, trading conditions are expected to remain challenging untilthere is a lift in the supply of scrap arisings.In Mining Consumables, we expect the continued strength in miningactivity to underpin strong demand in both the Americas andAustralasia.In Australian steel, the immediate outlook for domestic constructionactivity is to continue to be relatively weak overall. However, we expectincreased activity in the resources sector and from Governmentfunded civil works projects. Prices are expected to remain underpressure from weak confidence, soft international steel markets andthe Australian dollar, if it remains at recent high levels.In the longer term, we expect continued strong growth in demandfor mining consumables due to increased mining activity, particularlycopper and gold.In our Australian steel businesses, we remain confident we will seeimprovements in the fundamentals for key Australian and internationalsteel markets over the longer term, and that Australian steel demandand pricing will improve as economic conditions improve.We continue to have a positive long-term outlook for both our Iron Oreand Recycling segments, but with continued volatility.In September, OneSteel announced a number of management changesthat better align our organisational structure with the increased scaleand scope of the business, particularly following our recent expansionin Mining Consumables and in Iron Ore, including the recentlyannounced port expansion at Whyalla and the agreement to acquireWPG Resources’ iron ore assets, as mentioned by the Chairman. Thesechanges better support our ability to deliver value to shareholders,both through delivering on the growth opportunities from ourresources focused businesses and from addressing the unique setof challenges currently facing our Australian steel businesses. Thesechanges are now being implemented and will be reflected in nextyear’s annual report.9Thank youI would like to extend my gratitude to all of OneSteel’s employees fortheir commitment to conducting their duties safely and keeping thesafety of others top of mind, while also remaining dedicated to all ofOneSteel’s customers and clients.To OneSteel’s customers, thank you for your ongoing support. Thesuccess of your business is fundamental to OneSteel deliveringsuperior and sustainable returns.To OneSteel’s Chairman and Board of Directors, your guidance,unwavering support and availability is greatly appreciated.And finally, I would like to thank OneSteel shareholders for yoursupport during the year.Geoff PlummerManaging Director and CEO