Clarksville smelter is located four kilometres southwest of Clarksville, Tennessee in the United States. It was commissioned in 1978 by Union Miniere SA, making it one of the newest zinc smelters in the world. The facility is surrounded by over 1,400 acres of land owned by Zinifex. It is ideally situated within one days delivery distance from many of the US's major zinc consumers. It is within 800 kilometres of Chicago, Detroit and much of the US industrial heartland. This provides Clarksville with a location advantage, which contributes to its realisation of a premium over the LME price for its zinc products. Clarksville is the smallest of Zinifex's smelters, producing approximately 110,000 tonnes of SHG and CGG zinc metal per year. It also produces cadmium and sulphuric acid. Clarksville is accessible by barge, rail and road for feedstock and product handling.

Clarksville's strategy focuses on consolidating its current competitive strengths. This will potentially involve expanding its capacity by 36,000 tonnes per year, reducing unit cash costs, entering selected US zinc alloy markets to increase proportion of premium margin products sold and securing medium term concentrate supplies and shortening its current concentrate supply chain.

Operations

Historically, Clarksville smelter sourced the majority of its concentrates from the nearby Gordonsville and Clinch Valley mines. As a result of the closing of Gordonsville in 2003 and the closing of Clinch Valley in 2004, Clarksville now obtains all of its concentrates from Central and South America, Ireland, Australia, including 19% from Century. Clarksville has successfully processed concentrate containing up to 30% Century content.

Zinifex plans to expand Clarksville's capacity to 154,000 tonnes in three stages. The first stage, scheduled for 2006, will involve increasing roaster throughput capacity to 130,000 tonnes and is expected to cost pproximately US$1.5 million. Subsequent stages to expand capacity to 143,000 and 154,000 tonnes will address cell house constraints.

Zinc Production

Zinc production in 2003 was around 110,000 tonnes and represented 30% of total US domestic zinc production. As part of its strategy, Zinifex is considering entry to the high value zinc alloy market in the US, a move Zinifex believes will increase Clarksville's overall margin.

The smelter also produces approximately 145,000 tonnes per year of sulphuric acid which is marketed through an 80% owned subsidiary, Taylor Chemical Inc.

Minor additional revenues are derived from the sale of cadmium.

Environmental Management

In July 2003, the US Environmental Protection Agency's Office of Solid Waste confirmed that by-products and wastes generated by Clarksville are done so from beneficiation activities and are therefore exempt from certain Resource Conservation and Recovery Act (RCRA) regulations.

This is a positive outcome for Clarksville, as it means that the materials currently stored on-site can be treated as solid waste rather than hazardous waste, with no immediate additional storage or disposal requirements.

Capital Expenditure

Over the next two years to 2005, Zinifex expects to spend US$6.5 million on capital expenditure. The plan includes replacements of relatively small plant items, as well as environmental expenditures.