RNS Number:4253J
AuIron Energy Ld
4 September 2001
PART 1
AuIron Energy Limited
ACN 000 754 174
ANNUAL REPORT 2001
Chairman's Message
This has been a busy year of achievements for your Company and we are moving
with increasing momentum.
The SASE plant has already attained stable high levels of output and
efficiency with pig iron quality acceptable to the market.
An investment in AuIron represents a unique integrated investment in the
mining, manufacturing and energy sectors.
During the financial year to 30 June 2001 and in the weeks since, we have
completed commissioning the Demonstration Plant, smelted pig iron to market
quality and opened a trial coal mine at Phillipson. We have also listed on
the Alternative Investment Market (AIM) of the London Stock Exchange and
managed a successful placement and fully underwritten rights offer. AuIron is
moving forward with increasing confidence.
Our vision remains to develop SASE and add value to coal. Ballymoney,
potentially of separate value to Shareholders, is also progressing with our
imminent appointment of banking financial advisors. Other market, mining and
power station pre-feasibility studies and regulatory approvals are being
advanced.
At last year's AGM, I discussed our plans for the coming year with you. Twelve
months down the track, I can report excellent progress on all fronts.
Exploration work has delineated over 20 years supply of iron ore. The pig
iron quality has met market expectations. The plant's operational success has
allowed us to plan for a significant smelting capacity increase and to allow
for the introduction of our Phillipson coal within our agreed budget for the
SASE feasibility study. The planning of the commercial plant's location is
advanced and discussions about coal resource sales and co-generation capacity
continue.
During the year ahead, our funds will be mainly directed to the
commercialisation of our SASE operations. Our inclusions in major stock
exchange indices and new investment by substantial institutional shareholders
mean your Company is now increasingly regarded and well capitalised. The
immediate future will continue the busy story at AuIron as a committed
development company with clear objectives. We have achieved what we have done
with the considerable efforts from all AuIron staff.
Managing Director and CEO's review
AuIron's vision is to develop the SASE Project and seek high volume, secure
markets for our coal and to add value to these substantial assets.
In South Australia the markets we are moving to develop involve meeting the
coal needs of our SASE Project, the emerging demands of the electricity
generating industry and the demand in export markets. In Northern Ireland we
are moving to take the Ballymoney power project forward.
With the financial support of our Shareholders and both the Commonwealth and
South Australian Governments AuIron has the opportunity to pursue and secure
markets for its Australian Coal.
We have a clear vision of what we are seeking to achieve. Most of AuIron's
expenditure over the past two years has been directly related to the SASE
Project's Demonstration Plant and the opening of AuIron's Phillipson coal
seam. With this vision central to our corporate strategy we have set a
demanding timetable.
Since gaining control of the SASE Project in late 1999 when we increased
AuIron's interest to 90% our progress has been steady and our achievement
considerable. Our significant milestones include:
* December 1999 Thiess was engaged to design and construct
the Whyalla Demonstration Plant.
* May 2000 The iron ore exploration program
was completed confirming SASE's rights to
and availability of more than 20
years supply of iron ore from two of our
deposits.
* July 2000 Construction of the Demonstration
Plant was completed on budget.
* September 2000 Admitted to trading on the London
Exchange's AIM section.
* November 2000 Smelting of our first pig iron was
undertaken.
* March 2001 We produced and sold pig iron with
quality accepted by the market.
* April 2001 Admitted to the S&P ASX 200 index.
* May 2001 AuIron's Phillipson coal seam
opened on time and under budget producing
coal that is to be trialled in the
Demonstration Plant later this year.
Additional coal will be used to pursue
other markets.
* July 2001 Admitted to Morgan Stanley S&P
GICS Materials Index; and
* July 2001 Completed fully underwritten capital
raising.
The Company's progress is reflected in the growth of sharemarket
capitalisation over the past three years.
Through our work at the Demonstration Plant at Whyalla we intend to prove that
pig iron can be produced using top submerged lance smelting technology.
We have already demonstrated that the technology works under the current
parameters by producing pig iron of a marketable quality.
By the end of this year we will establish the estimated operating costs of the
smelting process using AuIron coal and other raw materials.
Managing Director and CEO's review
In the Demonstration Plant we have driven production beyond the nominal design
iron ore feed rate of 2 tonnes per hour (tph) to a sustainable 3 tph with
peaks of 3.5 tph using third party materials. Our ability to further drive
production rates higher from the existing furnace is constrained mainly by the
gas handling capacity of the off-take system. We plan to upgrade the plant,
within the budget allocated to the feasibility study, so that it is no longer
constrained and production can reach our target of above 5 tph. At this level
of production we will have achieved a smelting intensity (standardised output
of hot metal per hour per unit of furnace hearth area) that matches the level
needed in a commercial sized smelter. This achievement will greatly reduce
the risks associated with scale up to the commercial plant. By driving risks
down we will enhance the financial borrowing capacity of the project and
enhance equity returns when the time comes to move to commercial development.
We plan to complete the feasibility study in the first half of 2002. Our
vision is to build a business that has the capacity to produce more than 2.5
million tonnes of pig iron a year using AuIron's coal and SASE's iron ore.
This vision will be achieved by taking well-planned and measured steps.
Following completion of the feasibility study the first step is build the
first of five smelters modules each with a capacity of 0.5 million tonnes of
pig iron per year. With the commissioning of that first smelter we will enter
the business of processing and selling pig iron. Our focus will then switch
from developing to growing a cash generating business and increasing value to
Shareholders.
We are looking to develop markets beyond SASE for our coal. Trial bulk
washing tests of AuIron's coal indicate that it can be prepared and offered to
the market with low salt, ash and sulphur levels. We expect that the prepared
coal will fit within the parameters of internationally traded steaming coals.
This testing programme will continue as part of the feasibility study that we
are developing to establish the commercial viability of AuIron's coal business
as fuel to supply local and overseas power stations as well as SASE's needs.
In the past year, we have adopted a more aggressive strategy in our work at
Ballymoney in Northern Ireland and our activity has generated significant
results. Recent consultants' electricity market studies show that a large new
power generation opportunity exists in Northern Ireland and in the Republic of
Ireland of a size necessary to support an economic open cast lignite coal
mine. Updated mine design and cost work has shown that Ballymoney will be
very competitive with other fuels. Power station pre-feasibility studies have
shown that a Ballymoney lignite fuelled power station should generate cheaper
power than existing or new stations. An agreement was signed in August 2001
with a UK scientist to assist in the development of non-power station uses for
Ballymoney lignite. These could assist in scale economies in the mining
developments.
We are moving to appoint banking financial advisers to Ballymoney Power
Limited, our renamed Northern Ireland subsidiary, to carry forward the project
for which expressions of interest were called in July 2001. The adviser when
appointed will assist in the selection of and negotiation of terms on which a
power station partner might be introduced.
We are also taking steps with the relevant authorities in Northern Ireland and
in the Republic of Ireland to position the project for the necessary
governmental approvals.
Strategies to pass directly to Shareholders part of the apparently large value
represented by the potential commercial development of the Ballymoney project
will be kept under review.
Review Of Operations - Coal
The 15.8 billion tonne (Measured, Indicated and Inferred) resources contained
in the Phillipson and Arckaringa coalfields are the Australian component of
AuIron's large energy resource portfolio representing with Northern Ireland,
approximately 50 tonnes of coal for each AuIron ordinary Share on issue.
Both South Australian coalfields are situated near the centre of the State in
the vicinity of the mining town of Coober Pedy. They are close to the
existing main railway line that terminates in the south at the coastal city of
Whyalla, 33 kilometres from the deep water Port Bonython on Spencer Gulf.
Work on extending the railway from Alice Springs to the northern port at
Darwin in the Northern Territory has commenced. The railway consortium has
advised that completion will be achieved in 2004.
AuIron acquired the Phillipson coalfield tenements from the South Australian
Government in 1995 and 1997 and the Arckaringa tenements in 1980. Since
acquisition AuIron has undertaken substantial exploration and mine planning
work to establish which deposits are the most economic to develop as well as
the most appropriate mining techniques.
The 5 billion (Measured, Indicated and Inferred) Phillipson coalfield will be
the first to be developed and is the focus of the planning development work
that is now being undertaken.
The coal in both fields is of Permian Age and is classified as sub-bituminous.
An indicative specification of unwashed Phillipson coal product reported at
an 18% moisture content is:
Ash Volatile Matter Fixed Specific Sulphur
Content Content Carbon Energy Content
6.6% 35.5% 39.9% 22.7Mj/Kg 0.87%
(Based on Rankin Seam Coal from the Ingomar Deposit)
The Phillipson coal is being considered for use in SASE's planned commercial
pig iron smelter and for electricity generation. The SASE Project has a
production level of 2.5 million tonnes of iron a year and is expected to
consume about 4.0 million tonnes of as mined coal each year. The potential
market for additional coal sales to third parties is very large. The
development of supply arrangements with coal users in Australia (notably for
power generation in South Australia) and in export markets (where there is
demand for a low ash thermal coal) is a primary objective in AuIron's plan to
drive down overall coal mining costs at Phillipson through the production
economies that are accessible in large scale mining operations.
The coal
A 16,000 tonne sample of coal was extracted from the Phillipson coalfield in a
trial mining programme that began in March 2001 and was completed in May 2001.
This coal will be used to supply the SASE Project's Demonstration Plant in
the final phase of the 2001 Demonstration Plant program and for other power
station test burn programmes. The trial mining was completed on time and
under budget. The programme required the opening of a pit with a surface area
of 200 by 200 metres and a depth of 32 metres and the removal of 670,000 bank
cubic metres (bcm) of overburden.
A feature of the contractor's achievements was the employment of indigenous
people as some 30% of its workforce.
The pit, which represents a major investment for AuIron, has been left in a
state that is ready for the commencement of commercial mining by agreement
with the relevant authorities. Commercial mine planning and costings at
various production levels are now being completed, drawing on the practical
experience gained during the trial pit operation.
Review Of Operations - Coal
A 5,000 tonne portion of the coal sample was transported 582 kilometres south
to Whyalla where it was washed for the SASE Project's Demonstration Plant.
Water contained in the aquifers near the Phillipson coalfield is expected to
be used for washing of coal in the commercial operations at the mine site.
Summary of AuIron's Coal Resources
DEPOSIT TONNAGE (million tonnes) TOTAL
Measured Indicated Inferred
Phillipson 62 33 5,000 5,095
Wintinna 1,150 750 2,000 3,900
East Wintinna 250 700 1,200 2,150
Murloocoppie 250 300 2,600 3,150
Westfield 100 200 500 800
Penrhyn 700 700
Total 1,812 1,983 12,000 15,795
Prepared by Rank Geological Services Pty Limited in accordance with the
Australasian Code of Mineral Resources and Reserves as at September 1999.
AuIron is in market exploratory discussions in respect of local and overseas
coal export and power generation market options. In addition to the coal
required for the Demonstration Plant, 11,000 tonnes of coal is stored under
cover in stockpiles adjacent to the mine site. It is intended that part of
this tonnage will be made available as bulk samples for combustion testing by
potential power station buyers.
Review Of Operations - Tenements & Technical Information
SCHEDULE OF MINING TENEMENTS
TENEMENT REFERENCE NATURE OF INTEREST INTEREST HELD
South Australia
Arckaringa Basin EL's 2797, 2809 91.66%
Sub-Bituminous coal 2,759 sqkm
Phillipson EL 2717 100%
Sub-Bituminous coal 1,367 sqkm
Robins Rise EL 2249
Sub-Bituminous coal 308 sqkm 100%
Hawks Nest EL 2587 90%
Iron Ore & other minerals 2,278 sqkm
Watson EL 2586 90%
Limestone 104 sqkm
Peculiar Knob MC 3258 90%
Iron ore 2.5 sqkm
Northern Ireland
Ballymoney PL MM 9/98 100%
Lignite 91 sqkm
Indonesia
South Sumatra (Kukusan) COW 70%
Zeolite 66 sqkm
TECHNICAL INFORMATION
All technical information in respect of coal resources was compiled by
consultant geologist Mr N Kennedy, BSc, MAusIMM of Rank Geological Services
Pty Ltd Roseville NSW Australia who has consented and not withdrawn his
consent to include herein that information in the form and context in which it
appears.
All technical information in respect of the coal and electric power and pig
iron related projects was prepared by Eur Ing Mr N F Arthur, B E (Chem) Hons,
C Eng, FIChE, FAusIMM, FAICD, Managing Director and Chief Executive Officer
and accurately reflects the information compiled by him.
All technical information in respect of the iron ore resources was compiled by
Dr M J Andrews BSc, PhD, MAusIMM consulting geologist and Director of the
Company and accurately reflects the information compiled by him.
The identified mineral resources are reported in accordance with "The
Australasian Code for Reporting of Identified Mineral Resources and Ore
Reserves (September 1999)" as published by the Joint Committee of the
Australasian Institute of Mining and Metallurgy, Australian Institute of
Geoscientists and Minerals Council of Australia (JORC, September 1999). These
figures disclosed conform to the Official Listing Rules of the Australian
Stock Exchange Ltd for mining companies.
Review Of Operations - Iron
SASE holds exploration licences covering an area totalling 2,278 square
kilometres in South Australia located to the south of Coober Pedy. These
licences include the Hawk's Nest and Peculiar Knob iron ore deposits. SASE
also has access to additional nearby iron ore resources at the Sequoia area
through a joint venture with a third party licence holder and potentially to
iron ore contained within AuIron's coal areas.
Since acquiring the tenements SASE has devised and executed an exploration
programme that built on the results of the exploration activities previously
carried out by CRA (Rio Tinto Ltd) as part of its base metal exploration
programme in 1985 and more recently the Exploration Initiative undertaken by
the then Department of Mines and Energy (MESA) in 1995-1997.
During 2000, AuIron carried out exploration programmes on behalf of SASE, that
include geophysical surveys and drilling primarily in the Hawk's Nest area. A
total of 12,284 metres of reverse circulation drilling (90 drill holes) and
2,630 metres of diamond drilling (18 drill holes) was undertaken to enable
estimation of the tonnage and grade of two of the seven deposits identified at
Hawk's Nest (the Kestrel and Buzzard deposits). These exploration activities
established the region now covered by SASE's tenement as having significant
iron ore potential and have confirmed that these two deposits alone contain
sufficient iron ore to supply the proposed SASE 2.5 million tonne per year
commercial pig iron smelter for more than 20 years.
The following table summarises the iron ore resources currently available to
the SASE Project.
DEPOSIT TONNAGE (million tonnes) GRADE Fe
Measured Indicated Inferred Total
Hawks Nest (Kestrel)* 100.0 60.0 60.0 220.0 36% to 135 m depth
Hawks Nest (Buzzard)* 1.8 3.1 1.8 6.7 60% to 125 m depth
Hawks Nest (other deposits)** 346.0 346.0 35% to 130 m depth
Peculiar Knob** 14.0 14.0 63% to 120 m depth
Giffen Well** 240.0 240.0 36% to 100 m depth
Sequoia** 25.0 25.0 25% to 100 m depth
Total 101.8 63.1 686.8 851.7
* Resource estimates by independent consultants Hellman & Schofield Pty Ltd
** Resource estimates published by Department of Mines and Energy South
Australia
It is expected that lower-grade iron ores containing less than 60% iron would
require some form of metallurgical beneficiation prior to introduction into a
commercial smelter. Therefore, continuing iron ore exploration is being
directed to locating additional high-grade (> 60% Fe) resources, which can
provide "direct smelter" feedstock. By maximising the tonnage of high-grade
iron ore available to the SASE Project the economics should be significantly
enhanced by reducing or deferring the capital requirements for construction of
an iron ore beneficiation plant.
Work is being carried out to clearly define total versus recoverable iron
grades, appropriate cut-off grades and potential contaminant levels. These
issues are being addressed as part of the feasibility study phase of the SASE
Project and will lead to a definition of mineable reserves in the context of
the smelting technology that will be used in the SASE Project.
Review Of Operations - SASE Demonstration Plant
SASE plans to smelt its iron ore in South Australia using AuIron's coal and
top submerged lance smelting techniques. These techniques have been
extensively applied to the commercial processing of non-ferrous minerals for
more than 30 years. The challenge for SASE has been to apply this top
submerged lance-smelting technique to iron smelting.
The submerged lance technique for smelting involves the injection of oxygen
enriched air and coal directly into the layer of slag floating on top of a
layer of molten pig iron once smelting has begun. Iron ore and further coal
is introduced from the top of the smelter and allowed to fall into the slag.
The entire system operates at slightly less than atmospheric pressure and is
proving to be both robust and simple in its operation. Stable coal
combustion levels of 85% have been achieved at the lance tip (stoichiometry)
while maintaining good reducing conditions in the slag bath. Heat transfer
efficiency from the post combustion gas space back into the slag bath has
improved with 85% being attained under stable conditions. Energy transfer
levels in these orders points to a highly efficient process. These levels of
stoichiometry and heat transfer point to an energy utilisation efficiency in
the smelting process that is better than originally contemplated.
Starting in 1999 SASE designed and built a demonstration smelter at Whyalla in
South Australia. The smelter was commissioned and first produced iron on 23
November 2000. With the build-up in operating experience, changes to the
composition of refractories, the upgrading and modifications to coal delivery
and furnace wall cooling systems and other significant process equipment,
particularly the lances, stable smelting rates of about 150% of nominal design
capacity are being achieved with peaks at 175%. Plans are being prepared
that, when implemented, will see a substantial increase in the capacity of the
waste gas system. This is expected to allow significantly higher smelting
rates to be achieved. The objective is to attain the highest practicable
smelting rate in the SASE Project's Demonstration Plant, thereby reducing the
scale up factor to the first of five commercial furnace modules each with a
half a million tonnes per annum projected capacity of pig iron.
The very nature of the top submerged lance smelting process causes a major
proportion of the contaminants of the iron ore and coal to report to the slag.
In traditional iron making which uses coke ovens and blast furnace
technologies, some contaminants such as phosphorus have a higher propensity to
report to the pig iron. SASE, using submerged lance smelting techniques, is
expected to be able to produce high quality pig iron while using raw materials
that would not otherwise be usable in blast furnace pig iron making. The
project also has the potential to produce specialist quality pig iron to
attract premium prices.
During the fourth quarter of 2001, SASE plans to operate the Demonstration
Plant using coal supplied by AuIron from its Phillipson coalfield. This will
represent another significant step towards the feasibility study intended to
confirm that the top submerged lance technique can be applied to the smelting
of iron ore using AuIron's coal within a cost structure that makes it
competitive in both the domestic and international markets.
Another area of process investigations planned to receive increased attention
during the feasibility study test work programme focuses on attainment of the
maximum levels of process intensity from the Demonstration Plant will be
energy recovery from waste gas emitted during operations.
It is planned that hot gases given off from the smelter will be continuously
sampled to collect data to enable design of a membrane hood and offgas duct
which are able to withstand operating temperatures up to 1800 degree Celsius.
It is intended that the heat energy in the waste gas be recovered as steam for
sale "over the fence" to an electricity co-generation facility. Electricity
produced will be used to meet the demands of the smelting process with the
excess being sold into the electricity generation system.
Review Of Operations - Ballymoney Power
The Ballymoney Project features a lignite coal (brown coal) fuelled
electricity generating plant near Ballymoney in Northern Ireland that will be
capable of meeting demand in Northern Ireland and, through existing and
planned interconnections, the remainder of the United Kingdom and the Republic
of Ireland.
With Ireland's increasing dependence on imported gas and other fuels the
Ballymoney Project alternative will be the only substantial electricity
generator in the island of Ireland that draws on indigenous fuel. More
importantly, it will be the only major generator not at the mercy of movements
in the price and exchange rates of imported gas, oil and coal. Its
competitive advantage has the potential to be considerable in the light of
much higher gas prices than a year ago and the increasing dependence of the
Republic, Northern Ireland and the United Kingdom as a whole on a restricted
number of long-term imported gas suppliers (with prices indexed to oil).
The foundations for the Ballymoney Project are:
* Acquisition and retention of rights to the lignite deposit,
* Confirmation of the size of the lignite resource,
* Establishment that the lignite deposit is suitable for use as fuel
for boilers in an electricity generation plant,
* Determination of the costs of mining, processing and delivering
lignite to an on-site generating plant,
* Determination of the capital and operating costs of an on-site
power station, and
* Establishment of the size of the market opportunity for a new
electricity generating plant.
In 1986 AuIron's subsidiary, Ballymoney Power Limited, acquired a lignite
prospecting licence covering an area of land in County Antrim in Northern
Ireland not far from the town of Ballymoney. The licence has been renewed
every two years since first issued. The expectation is that the licence will
continue to be renewed provided the exploration expenditure obligations that
are incorporated in the licence from time to time by the Government of
Northern Ireland continue to be met.
Ballymoney Power has explored and assessed the area and has drilled more than
100 boreholes to define the underlying lignite deposit.
The defined lignite deposit covers an area of 13.8 square kilometres and
contains a lignite resource of 660 million tonnes (Measured and Indicated).
The cumulative mineable thickness of lignite in the 6.8 square kilometre
northeastern portion of the deposit ranges from 10.0 to 76.8 metres. In this
area a Measured Lignite Resource of 139 million tonnes could be mined with a
waste to lignite ratio averaging 2.7:1 (bcm waste/tonne of product lignite).
Ballymoney Power has determined that the lignite is well suited as a fuel for
electricity because of its:
* Reactivity level which is sufficiently high to minimise power
station ignition or combustion stability problems,
* Low fouling and slagging tendencies,
* Moisture content much lower than other lignites, and
* Very low sulphur content (0.13%).
Review Of Operations - Ballymoney Power
The preliminary mine design has estimated mining costs for delivery of lignite
to the power station stockpile. Scope exists to reduce the mining costs
following further infill drilling commencing in September 2001 as there is a
view that the mine design is based (notably the batter angle which affects the
stripping ratio) on geotechnical assumptions that are conservative.
Independent analyses of the market for electricity in Northern Ireland point
to a deficit in the electricity available to meet demand to be 83 MW in 2002/
2003. A similar analysis in respect of the Republic of Ireland indicates a
deficit of 196 MW in 2002/2003. The total deficit for the all-island energy
market opportunity that is available to new operators of new electricity
generation plant is expected to be 279 MW in 2003 with the potential to
increase up to 1272 MW by 2007.
Source:
* "Electricity market opening - the time to win" The Director General of
Electricity Supply for Northern Ireland 2 May 2001 (based on
contracted supply of electricity) and
* "Ballymoney Electricity Market Assessment - Phase I Report" WEFA
Review Of Operations - Corporate
OPERATING LOSS
As the Group is still evaluating both of its projects, the Group does not yet
generate sales revenues or profits. The Company is unlikely to generate
revenue and profits until its projects commence commercial operations.
The loss from ordinary activities after tax for the year was $8.539 million
(2000: $13.649 million). The loss before interest, tax, goodwill
amortisation, depreciation and individually significant items was $6.148
million (2000: $2.757 million), 123% higher than the previous financial year.
The increased loss can be primarily attributed to the increased activities of
the Group which have required:
(*) Additional personnel and administration resources to be employed to progress
the projects and
(*) Raise the Company's profile within the international investment community.
STATEMENT OF FINANCIAL POSITION
The net assets of the Group at 30 June 2001 increased by 53% to $53.892
million from $35.133 million the previous year (not including additional cash
of $51.654 million from the rights issue completed after balance date).
The increase in net assets is primarily the result of capitalising project
expenditures. Major capitalised expenditures during the year include:
* Demonstration plant construction and operating costs of $17.529 million; and
* Exploration expenditures of $8.448 million, the majority being in respect of
the Phillipson coal Trial Pit.
Capital expenditure for the next 12 months will largely comprise:
* Demonstration Plant upgrade and operating expenditures
* The feasibility studies for SASE and Phillipson coalmine; and
* Ballymoney study costs.
CASH FLOWS
AuIron's ability to further progress its projects is dependent on the support
of its Shareholders to provide the necessary funding.
During the financial year AuIron raised $21.228 million from:
* AIM Listing - $14.928 million (net)
On 1 September 2000, AuIron shares were admitted to trading on the Alternative
Investment Market of the London Stock Exchange. At the same time AuIron
issued 26,150,000 at 25 pence sterling (A$0.65) and raised net proceeds of
$14.928 million.
* Placement - $6.300 million
In April 2001, AuIron issued 7,000,000 shares at 90 cents to a major
international investment group raising $6.300 million.
Review Of Operations - Corporate
Post 30 June 2001, the Company concluded a Rights Offer raising net proceeds
of $51.654 million.
* Rights Offer - $51.654 million (net)
On 1 June 2001 AuIron announced a fully underwritten pro-rata 1 for 4
non-renounceable Rights Offer to all Shareholders at 85 cents (31.25 pence).
Subsequent to 30 June 2001, the Company received net proceeds of $51.654
million and issued 65,157,846 shares.
ASX INDICES
During the year AuIron was included in several ASX indices including the ASX
200. AuIron is currently included in the following:
* S&P ASX 200
* S&P ASX 200 Resources
* S&P ASX 300
* S&P ASX 300 Resources
* S&P ASX Small Resources
* S&P ASX Small Ordinaries
* All Ordinaries
* All Resources
* Energy
* Share Price Index
From 1 July 2001, AuIron has been included in a new international fund manager
index, the "GICS Materials Index" complied and published jointly by Morgan
Stanley and Standard and Poors. The Company is one of only 30 Australian
listed companies in this index.
SHAREHOLDERS
At 30 June 2001 AuIron had 8,499 Shareholders, an increase of 88 per cent
since 30 June 2000.
Subsequent to 30 June 2001, Artemis Investment Management Limited (AIM)
advised it had become a substantial Shareholder of the Company.
SHARES
30 June 2001 2000 1999
Shareholders 8,499 4,512 3,690
Issued fully paid ordinary Shares 261,381,386* 216,668,862 119,727,404
Price $ per share
Year high $1.35 $0.80 $0.21
Year low $0.58 $0.18 $0.11
Year end $0.80 $0.78 $0.17
* Issued fully paid ordinary shares at 30 June 2001 do not include the
65,157,846 shares issued pursuant to the 2001 Rights Offer.
Board of Directors
Alfred L Paton BEng. FAIM, MIE, MAusIMM, FAICD
Chairman and Director, since November 1998. Chairman of Audit Committee and
member of the Remuneration Committee. Mr Paton has had an extensive career as
an engineer, consultant and senior manager. He was formerly Chairman and
Managing Director of Placer Pacific Limited; Chairman, until 1998 of ABN Amro
Hoare Govett and Chairman or Director of a number of other listed companies.
He currently holds a range of directorships including CARE Australia and
various other unlisted companies.
Louis A Clinton
Deputy Chairman and Director since November 1998. Member of the Audit
Committee and Chairman of Remuneration Committee. Mr Clinton served as
President and Chief Executive Officer of Freeport-McMoran Pacific and was a
Member of the Office of the Chairman of Freeport McMoran overseeing
Freeport-McMoran's operations in the Pacific Basin. Mr Clinton retired from
active management with the Freeport companies in 1996. Former Chief Executive
Officer of Weda Bay Minerals Inc. he currently serves as non-executive
chairman. Until 2001 was a Non-Executive Director of Osprey Maritime Limited,
Singapore.
Neill F Arthur Eur Ing BE (Chem) Hons, C Eng, FIChE, FAusIMM, FAICD
Managing Director and Chief Executive Officer since December 1998; Director
and General Manager since October 1987. Joint originator of the SASE Project
and executive director of SASE Pty Ltd and chairman of Ballymoney Power
Limited. He was formerly inaugural General Manager of the Coal Corporation of
Victoria for three years and, prior to that, a senior executive with CSR Ltd
with extensive Australian and international experience in 14 coal and other
resource businesses. From April 1986 to August 1992 he was a Councillor of
the Australian Government's National Energy Research Development and
Demonstration Council and Chairman of its Technical Standing Committee dealing
with the technology of coal beneficiation and utilisation. Councillor, South
Australian Chamber of Mines and Energy since 1998.
Michael J Andrews BSc PhD, MAusIMM
Director since September 1994. A Consulting Geologist having 22 years'
research and industry experience in mineral exploration, he has an honours
degree in Geology with Soil Science and a doctorate in Geochemical
Exploration. He served as executive director of AuIron from 1994 until the
end of 2000 during which time be was responsible for Company's Indonesian
operations and South Australian iron ore exploration. Prior to joining AuIron
he served as Exploration Manager for Ashton Mining Ltd and Aurora Gold Ltd in
Indonesia. He served on the Board of Directors of the Indonesian Mining
Association during 1999 and 2000.
Robin H Chambers BA LLB (Hons) Melb, LLM Duke USA
Director since December 1999. Mr Chambers has been involved in the mining
industry for more than 30 years as a lawyer practising in the United States
and Australia. He was general counsel of CRA Limited (now Rio Tinto Limited)
for 13 years and has been involved in resources projects around Australia and
in more than 30 countries. His involvement has included advising on the
development of iron ore and iron ore processing projects in Australia
targeting the Asian steel markets. He has held, or holds, various
directorships, including the non-executive Chairmanship of Ausmelt Limited and
the Chinese Government's iron and steel industry subsidiaries operating in
Australia.
Warwick J Higgs FCA, FIAA
Executive Director since June 1994 and previously Company Secretary. Member
of the Remuneration Committee and member of the Audit Committee and the
Company Secretary from June 1994 to December 2000. He is a Fellow of the
Institute of Chartered Accountants having 36 years' experience in that
profession with an audit and investigation base and a Fellow of the Institute
of Arbitrators. A former Senior Audit Partner of Duesbury's chartered
accountants and auditors, he also held a number of public company and
non-executive directorships. He has acted as referee for the court and is a
former member of the Commonwealth Government's "Takeover Panel".
Corporate Governance
This statement outlines the main Corporate Governance principles and concepts
that were in place during the financial year.
Responsibilities and Functions of the Board
The Board is responsible for the management and affairs of the group under its
direction on behalf of the Shareholders. It sets policies and procedures for
the protection and enhancement of long term Shareholder value.
The responsibility for the day-to-day operation and administration of the
group is delegated by the board to the managing director and the senior
management team. The board ensures that this team is appropriately qualified
and experienced to discharge their responsibilities.
The Board's most important functions include:
* setting of objectives, goals and corporate direction;
* adopting and monitoring progress of agreed strategies;
* ensuring adequate internal controls exist and are appropriately
monitored for compliance;
* ensuring significant business risks are identified and
appropriately managed;
* setting compensation arrangements for executive Directors and
senior management.
The Directors support and have adhered to the principles of Corporate
Governance and in supporting those principles the Directors recognise the need
for the highest standards of behaviour and accountability.
The Directors consider that the Board is of a size consistent with the
undertakings of the group and of an appropriate size to ensure that all issues
that are appropriate for board consideration can be dealt with at Board level.
Details concerning the qualifications and experience of individual Directors
are set out elsewhere in this Annual Report.
In accordance with the Articles of Association, one third of the Directors,
except the Managing Director, shall retire at each Annual General Meeting and
are eligible for re-election.
Independent Advice
The procedures by which Directors can seek independent professional advice at
the Company's expense in furthering their duties are well established.
Directors can seek legal advice, on accounting and auditing matters and advice
on risk management insurance from insurance consultants.
The first point of contact for a Director in need of external advice is the
Company Secretary.
Sale/Purchase of Shares by Directors
A policy has been adopted which restricts the times and circumstances in which
Directors and senior executives may buy or sell shares in the Company. These
are for periods prior to announcements when Directors are in receipt of
material information not available to the market and short periods after
announcements are made to the Stock Exchange and after the Annual General
Meeting.
Corporate Governance
Audit Committee
The Audit Committee is subject to the direction of the Board of Directors.
The primary functions of the Audit Committee are to assist the Board to ensure
that:
* the systems of control which management has established
effectively safeguard the assets, real and intangible, of the
Company; and
* the financial information provided to Shareholders and others is
reliable.
The Committee addresses its primary responsibilities by reviewing work
performed by the external auditors and the Company's management. This process
is supplemented by discussions, as deemed appropriate by the Audit Committee,
with senior executives, the external auditors and consultants.
Specifically, in meeting its responsibilities, the Audit Committee is expected
to:
* provide an open avenue of communication between external auditors
and the Board of Directors;
* assure the professional independence of the external auditors;
* meet with the external auditors at the completion of their annual
and semi-annual examinations to review the external auditors'
evaluation of the fairness of the presentation of the financial
statements, the financial position and operating results, including
the adequacy of disclosures made by management.
Membership: A L Paton (Chairman), L A Clinton, W J Higgs.
Remuneration Committee
The Remuneration Committee consisting of 2 non-executive directors and 1
executive director, advises the Board on remuneration policies and practices
generally, and makes specific recommendations on remuneration packages and
other terms of employment for executive directors, other senior executives and
non-executive directors. Details of policy are disclosed in the Directors'
Report.
Membership: L A Clinton (Chairman), A L Paton, W J Higgs
Environment Statement
The Group is fully committed to operating in an environmentally responsible
manner, in accordance with world best practice as appropriate to each project.
Corporate policy requires all operations within the group to achieve a balance
between economic development and protection of the environment. They must
integrate environmental considerations into decision making, regularly
evaluate the environmental impact and risk potential of their activities and
correct any deficiencies identified, operate with due regard for environmental
legislation and keep employees aware of the consolidated entity's
environmental responsibilities.
The Role of Shareholders
The Board encourages full participation of Shareholders at the Annual General
Meeting to ensure a high level of accountability and identification with the
consolidated entity's strategies and goals. Important issues are presented to
the Shareholders as single resolutions. The Shareholders are responsible for
voting on the appointment of directors. Shareholders are encouraged to
contact the Company Secretary at any time.
Directors' Report
Your Directors present their report on the financial statements of the Company
and its controlled entities for the year ended 30 June 2001 and the Auditor's
Report thereon.
DIRECTORS
The Directors of AuIron Energy Limited at any time during or since the end of
the financial year are:
Name Period of Directorship and special
responsibilities
Alfred L Paton Director since 30 November 1998
B Eng, FAIM, MIE, MAusIMM, FAICD Appointed non-executive Chairman 1998
Chairman of Audit Committee and
Member of Remuneration Committee
Neill F Arthur Director since 30 October 1987
Eur Ing. BE(Chem) Hons, C Eng, Appointed Managing Director and CEO 1998
FIChE, FAusIMM, FAICD
Louis A Clinton Director since 30 November 1998
Appointed non-executive Deputy Chairman
1998
Chairman of Remuneration Committee and
Member of Audit Committee
Michael J Andrews Director since 21 September 1994
B.Sc. Ph.D., MAusIMM (non-executive since January 2001)
Warwick J Higgs Director since 01 June 1994
FCA, FIAA Member of Audit Committee and
Remuneration Committee
Company Secretary to 31 December 2000
Robin H Chambers Non-executive director since 16 December
BA LLB (Hons) (Melb) LLM (Duke) 1999
Additional information on Directors is shown on page 13 of the Annual Report.
ACTIVITIES
The principal continuing activities of the consolidated entity consisted of
the construction and operation of a demonstration iron smelter in South
Australia and exploration for base metals and hydrocarbons in Australia and
the United Kingdom.
GROUP RESULTS
The consolidated operating loss after income tax and outside equity interests
of the consolidated entity for the year was $8,345,232 (2000: $13,568,580).
DIVID
Yamana Gold (LSE:AUY)
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