Demonstration Plant Update

RNS Number:1113G
AuIron Energy Ld
2 July 2001



SASE DEMONSTRATION PLANT PRODUCES PIG IRON AT STABLE SMELTING RATES 50 per
cent ABOVE DESIGN

   Production rates up to 75 per cent above design have been achieved


AuIron Energy Limited's ("AUY" or "AuIron") plans to commercialise its 90 per
cent owned SASE project have been significantly boosted by the recent
operation of the demonstration plant in Whyalla at much higher than designed
production rates.  The proposed commercial project will involve construction
and operation of a 2.5 million tonne per annum iron smelter which will be
supplied by the Group's  South Australian coal and iron ore..

The demonstration plant, which has been operating since November 2000, has
this week achieved a stable iron smelting rate at 50 per cent above design and
a maximum rate for short durations at 75 per cent above design.

The achievement of much greater than designed smelting rates importantly will
reduce the size of the next scale-up step in the commercial development of the
SASE project.

Encouraging results have also been achieved in respect of pig iron quality
under the recent high operating rate conditions.

There is a short planned shutdown in early July due to third party oxygen
supply issues, following which the high productivity/oxygen enrichment trials
will continue until mid-July when the plant will be shutdown for planned
refractory repairs.

When smelting operations resume later in the month, the plant will use
AuIron's own coal from the bulk sample recently extracted from the Ingomar
pit.


BACKGROUND

AuIron owns 90 per cent of the SASE project and recently announced a fully
underwritten Rights Offer to raise in excess of $A 50 million net of costs
(about Pds Stg 18 million).  The Rights Offer closes on 9 July 2001.

The environmentally friendly top submerged lance smelting process used and
being developed and commercialised by SASE involves direct production of
liquid pig iron from iron ore and steaming coal in a closed smelting vessel
which operates at or slightly below atmospheric pressure and a temperature of
up to 1600 degrees Centigrade.

The project has a number of environmental, cost and product quality advantages
over scrap, blast furnace/coke oven pig iron and DRI/HBI plants as a source of
clean metallic iron for the rapidly growing Electric Arc Furnace steel sector
worldwide.

The SASE Demonstration plant at Whyalla produced its first pig iron in
November 2000.

The proposed commercial plant is intended to produce 2.5 million tonnes of pig
iron per year using the AuIron Group's iron ore and  coal.  The heart of the
smelting process is the top submerged lance, essentially a water-cooled steel
tube which can be lowered into the bath of molten slag that overlies the
molten pig iron "bath" within the operating furnace.  The basic feed raw
materials for pig iron production (iron ore, steaming coal and limestone) are
introduced through a feed port at the top of the furnace, mixing with and
dissolving in the molten slag.   The carbon in the coal reduces the iron oxide
on the iron ore to molten iron metal (pig iron). Oxygen-enriched air and dry
ground steaming coal are injected and combusted at the lance tip directly
within the slag.  Injection has two main objectives: to ensure that the bath
of molten slag is well mixed at all times in order for the newly charged iron
ore, coal and limestone feed to be assimilated and to carefully control the
degree of oxidation and heat release by controlling the ratio of coal and
oxygen for the submerged combustion.

The smelter off-gas is further combusted within the smelter with additional
oxygen enriched air injection via a shroud to the lance. The clean waste heat
so produced can then be used to co-generate competitive electricity supplies
for the project and for external sale.

Photographs of the demonstration plant and the trial coal mine may be
down-loaded from www.auironenergy.com.au .
Yamana Gold (LSE:AUY)
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