RNS Number:9637S
AuIron Energy Ld
14 March 2002
AUIRON ENERGY LIMITED
ACN 000 754 174
Interim Financial Report for period to 31 December 2001
DIRECTORS' REPORT
The directors present their report together with the consolidated interim
financial report for the half-year ended 31 December 2001 and the audit report
thereon.
DIRECTORS
The directors of AuIron Energy Limited, at any time, during or since the end of
the half-year are :
Name Period of Directorship
Alfred L Paton Director since 30/11/98
B Eng, FAIM, MIE, MausIMM, FAICD Appointed Chairman 1998
Neill F Arthur Director since 30/10/87
Eur Ing. BE(Chem) Hons, C Eng, FIChE, FAusIMM, FAICD Appointed Managing Director 1998
Louis A Clinton Director since 30/11/98
AIMM Appointed Deputy Chairman 1998
Dr Michael Andrews Director since 21/09/94
B.Sc. Ph.D., MAusIMM
Warwick J Higgs Director since 01/06/94
FCA, FIAA
Robin H Chambers Director since 16/12/99
BA LLB (Hons) (Melb) LLM (Duke)
REVIEW OF OPERATIONS
The principal continuing activities of the consolidated entity were operating a
demonstration pig iron smelter in South Australia and exploration and assessment
of iron ore and coal in Australia and the United Kingdom. As at 31 December,
2001 the Company had $43.7 million in cash. Net assets almost doubled from $53.9
million at 30 June 2001 to $103.9 million at 31 December 2001.
SASE South Australia (90% AuIron)
During the six months to 31 December 2001, AuIron continued to advance the
operational requirements of the SASE demonstration plant and the parallel
Phillipson coal-washing program. In September 2001 preparation of approximately
4,500 tonnes of washed coal product was completed, most of which is being used
in the smelting plant.
During 2001, the smelting operations achieved steady operating rates as high as
55% above nominal design capacity using commercially available third party coal
for economy. Such an operating performance bodes well for scale up to the
proposed commercial smelter modules.
Accordingly, in August 2001, the Company announced a two Phase upgrade of the
demonstration plant designed to achieve much higher smelting intensity levels -
as much as three times design during additional operating trials known as the
"high intensity smelting feasibility program". Should this objective be achieved
as planned during 2002, there would be direct benefits to the proposed
commercial project from reducing the scale-up ratio and reducing commercial
plant financing risks and costs.
Work on increasing the plant's coal drying capacity commenced during August as
the major part of Phase 1 of the expansion plan and concluded in December 2001
with the successful commissioning of the upgraded fuel coal preparation
facilities.
The first successful production of hot metal (pig iron) using AuIron's
Phillipson (Ingomar) coal as fuel (lance injected) coal to the process was
tapped from the smelter furnace during a short campaign period up to the
Christmas/New Year shutdown. This achievement is a major milestone for the
project.
Further plant modifications are underway (in parallel with the continuing
operating campaign using Phillipson coal) that will allow the Company to assess
a number of reductant coal (coal added with the iron ore feed) formulations for
several Phillipson and non-Phillipson coals. As at 31 December 2001, the
procurement of major equipment was in progress. Basic engineering, including
flowsheets, process and instrumentation diagrams, general arrangements and HAZOP
(hazardous operations review) was completed. The installation of this plant will
begin once the current operating program, which restarted in January 2002, is
completed.
Work designed to assist the Company to assess the potential for power station
long term coal sales contracts was also progressed during the half year. Washed
coal samples referred to above have been delivered to an independent commercial
combustion testing organisation. These samples are the subject of ongoing
combustion tests jointly supervised by an overseas owned utility and the
Company.
SASE has been granted a 2.5 square kilometres mineral claim (MC 3258) covering
the Peculiar Knob hematite deposit situated approximately 50 kilometres to the
northeast of SASE's Hawks Nest iron ore deposits.
The iron mineralisation at Peculiar Knob occurs in a steeply dipping zone of 15
to 36 metres wide extending for approximately 1,100 metres. The dominant mineral
in the ore zone is coarse, massive, high grade, specular hematite. An Inferred
Resource of 14 million tonnes averaging 63 per cent Fe (iron) has been estimated
by the SA Department of Minerals and Energy (MESA) from drilling carried out in
1995 by MESA and previous drilling by CRA (Rio Tinto).
During December 2001, the Company announced the appointment from January 2002 of
Mr Jon Parker as Chief Operating Officer - Australia. Mr Parker, formerly a
senior development executive with the Rio Tinto Group with wide experience in
coal and iron mine development, power generation and smelting, has taken over
responsibility for progressing all South Australian projects. Mr Parker is based
in the company's new Adelaide office, and reports to the Managing Director and
CEO, Mr Neill Arthur.
Ballymoney, Northern Ireland (100% AuIron)
The Ballymoney Power project continues to be advanced in a previously announced
four-phased process leading to the planned commissioning of the proposed 600MW
generator on the Ballymoney lignite coalmine site.
The first and second phases involve:
• refining the data relating to the lignite coal deposit to the level
needed to support mine and power station design and capital and
operating costs determinations. Rank Geological Services Pty Limited
completed the infill drilling programme needed to complete the
refinement during December 2001.
• selecting the boiler/generator process and configuration best suited
for the resource and determining the power station capital and operating
costs. Burns Roe Worley, the international power station engineering
group, has been engaged to complete this work. MineConsult Pty Limited
has been engaged to finalise the mine design and determine mining
capital and operating costs to supply fuel to this power station
configuration.
• confirming that the market for electricity available to the project
will deliver a demand for the entire output of the project. Private
Energy Partners Pty Limited has been engaged to carry out the updated
electricity market analysis for the "all island" system.
These phases are on schedule for completion in the March quarter of 2002.
The third phase involves obtaining the project approvals for planning,
development and operations. RPS Environmental Sciences Limited has been engaged
and is preparing the environmental base-line study to support the approval
process. The study is scheduled for completion in April 2002 and updates two
previous detailed environmental planning studies.
The fourth phase involves the funding of the design and construction of the
mine, generator and associated infrastructure. Engagement of a financial advisor
is an integral part of this phase and will occur either:
• immediately prior to the commencement of the negotiations to take on a
"power partner" or,
• if the decision is taken to proceed without a "power partner", in the
lead up to securing funding for the commercial project.
A decision concerning the taking on of a "power partner" will be made as late as
possible in the third phase so as to maximize the value of the project to
Ballymoney Power and its AuIron shareholders.
State of Affairs
Significant changes in the state of affairs of the consolidated entity during
the half-year were as follows:
• The non-renounceable fully underwritten pro rata 1 for 4 Rights Offer
closed in July 2001 and raised total net proceeds of $51,625,784 (some
costs were recognised prior to 30 June 2001), upon the issue of
65,157,846 ordinary Shares. The cash proceeds are reflected in the
Statement of cashflows at 31 December 2001.
Other than as commented about or dealt with in these accounts, there has not
arisen in the interval between the end of the half-year and the date of this
report, any item, transaction or event of a material nature that has
significantly affected or may significantly affect:
i. the operations of the consolidated entity;
ii. the results of those operations; or
iii.the state of affairs of the consolidated entity subsequent to the half-year
ended 31 December 2001.
Group Results
The loss from ordinary activities for the half-year after income tax was $2.587
million (half-year 31 December 2000 $4.96 million).
The economic entity operates in one industrial segment, being exploration and
assessment of base metals and hydrocarbons.
Signed at Sydney on 14 March 2002 in accordance with a resolution of the
Directors.
Neill F Arthur
Managing Director & Chief Executive Officer
DIRECTORS' DECLARATION
In the opinion of the directors of AuIron Energy Limited:
1. The financial statements and notes set out on pages below:
(a) give a true and fair view of the financial position of the
consolidated entity as at 31 December 2001 and of its performance,
as represented by the results of its operations and cash flows for
the half-year ended on that date; and
(b) comply with Accounting Standard AASB 1029 "Interim Financial
Reporting" and the Corporations Regulations 2001; and
2. at the date of this declaration there are reasonable grounds to
believe that the company will be able to pay its debts as and when they
become due and payable.
Signed at Sydney on 14 March 2002 in accordance with a resolution of the
Directors.
Neill F Arthur
Managing Director & Chief Executive Officer
AUIRON ENERGY LIMITED AND ITS CONTROLLED ENTITIES
Statements of Financial Position
as at 31 December 2001
CONSOLIDATED
Note 31 Dec 2001 30 June 2001 31 Dec 2000
$ $ $
CURRENT ASSETS
Cash 4 43,731,057 6,180,544 16,292,246
Receivables 537,708 664,157 207,878
Other 180,359 113,441 5,665
TOTAL CURRENT ASSETS 44,449,124 6,958,142 16,505,789
NON-CURRENT ASSETS
Exploration Expenditure 5 29,313,191 27,043,651 20,145,058
Property, Plant and Equipment 545,957 538,841 375,665
Demonstration Plant 34,933,934 26,472,111 17,461,411
Intangible Assets 6 5,269,053 5,415,416 5,561,778
TOTAL NON-CURRENT ASSETS 70,062,135 59,470,019 43,543,912
TOTAL ASSETS 114,511,259 66,428,161 60,049,701
CURRENT LIABILITIES
Payables 2,816,673 5,011,501 2,803,071
Interest Bearing Liabilities 32,074 31,068 30,096
Provisions 1,295,983 1,002,448 280,694
TOTAL CURRENT LIABILITIES 4,144,730 6,045,017 3,113,861
NON CURRENT LIABILITIES
Government Grant 6,205,713 6,205,713 6,205,713
Interest Bearing Liabilities 191,746 208,495 224,732
Provisions 97,452 77,247 -
TOTAL NON-CURRENT LIABILITIES 6,494,911 6,491,455 6,430,445
TOTAL LIABILITIES 10,639,641 12,536,472 9,544,306
NET ASSETS 103,871,618 53,891,689 50,505,395
SHAREHOLDERS' EQUITY
Contributed Equity 7 141,362,349 89,110,335 83,210,740
Reserves 7,075,483 6,760,385 5,694,842
Accumulated losses (45,159,302) (42,665,619) (39,280,648)
SHAREHOLDERS' EQUITY ATTRIBUTABLE TO MEMBERS OF 103,278,530 53,205,101 49,624,934
AUIRON ENERGY LIMITED
OUTSIDE EQUITY INTERESTS IN CONTROLLED ENTITIES 593,088 686,588 880,461
TOTAL SHAREHOLDERS' EQUITY 103,871,618 53,891,689 50,505,395
The accompanying notes form part of these financial statements.
AUIRON ENERGY LIMITED AND ITS CONTROLLED ENTITIES
Statements of Financial Performance
for the half year ended 31 December 2001
CONSOLIDATED
6 mths ended Year ended 6 mths ended
31 Dec 2001 June 2001 31 Dec 2000
Note $ $ $
Revenue
Other revenue from ordinary activities 2 1,037,584 806,891 442,517
Occupancy expenses (87,688) (123,947) (64,000)
Administration expenses (3,529,046) (6,410,945) (2,535,063)
Borrowing costs expense (8,033) (15,215) (7,826)
Other expenses from ordinary activities - (2,795,889) (2,795,889)
Loss from ordinary activities before income tax (2,587,183) (8,539,105) (4,960,261)
Income tax expense - - -
Loss from ordinary activities after income tax (2,587,183) (8,539,105) (4,960,261)
Outside equity interests in operating loss after 93,500 193,873 -
income tax
Net (loss) after income tax attributable to the (2,493,683) (8,345,232) (4,960,261)
members of the group
Non - owner transaction charges in equity
Net exchange difference on translation of financial
statements on self-sustaining foreign operations 315,098 3,661,397 2,595,854
Total revenues, expenses and valuation adjustments
attributable to members of the parent entity
recognised directly in equity 315,098 3,661,397 2,595,854
Total charges in equity other than those resulting (2,178,585) (4,683,835) (2,364,407)
from transactions with owners as owners
The only movement in accumulated losses is the net loss after income tax
attributable to the members of the group in the period.
EARNINGS PER SHARE
Basic earnings loss per share (cents per share) (0.1) (3.4) (2.1)
Diluted earnings loss per share (cents per share) (0.1) (3.2) (1.8)
Weighted average number of ordinary shares on issue used in 323,012,447 247,497,237 238,290,548
the calculation of basic earnings per share
AUIRON ENERGY LIMITED AND ITS CONTROLLED ENTITIES
Statements of Cash Flows
for the half year ended 31 December 2001
CONSOLIDATED
6 mths ended Year ended 6 mths ended
31 Dec 2001 June 2001 31 Dec 2000
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Payments for exploration expenditure and to suppliers (5,512,552) (11,037,326) (3,206,205)
and employees
Cash receipts in course of operations 18,048 10,038 -
Interest paid (8,033) (15,215) -
Interest received 903,185 780,922 442,517
NET CASH USED IN OPERATING ACTIVITIES (4,599,352) (10,261,581) (2,763,688)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for non-current assets (9,834,682) (19,716,869) (10,990,497)
NET CASH USED IN INVESTING ACTIVITIES (9,834,682) (19,716,869) (10,990,497)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of shares 52,012,909 23,053,349 16,914,651
Repayment of Borrowings (30,051) (30,051) -
Grant from Federal Government - 374,871 374,870
NET CASH PROVIDED BY FINANCING ACTIVITIES 51,982,858 23,398,169 17,289,521
Net increase/(decrease) in cash 37,548,824 (6,580,281) 3,535,336
Cash at beginning of financial period 6,180,544 12,747,759 12,747,759
Effect of exchange rate changes on the balances of 1,689 13,066 9,151
cash held in foreign currencies at the beginning of
the period
CASH AT END OF FINANCIAL PERIOD 43,731,057 6,180,544 16,292,246
AUIRON ENERGY LIMITED AND ITS CONTROLLED ENTITIES
Notes to and forming part of the Financial Statements
for the half year ended 31 December 2001
1. BASIS OF PREPARATION OF HALF-YEAR FINANCIAL STATEMENTS
The half-year consolidated financial report is a general purpose
financial report and does not include a full set of notes as disclosed
in the Annual Financial Report. The half year financial report has been
prepared in accordance with the requirements of the Corporations Act
2001, Accounting Standard 1029 "Interim Financial Reporting" and Urgent
Issues Group consensus views. It is recommended that this half-year
financial report be read in conjunction with the 30 June 2001 Annual
Financial Report and any public announcements by AuIron Energy Limited
and its Controlled Entities during the half-year in accordance with
continuous disclosure obligations arising under the Corporations Act
2001.
It has been prepared on the basis of historical costs and except
where stated, does not take into account changing money values or
current valuations of non-current assets.
These accounting policies have been consistently applied by each
entity in the economic entity and, except where there is a change in
accounting policy, are consistent with those of the previous year and
annual financial report.
The carrying amounts of non-current assets are reviewed to
determine whether they are in excess of their recoverable amount at the
end of the half-year. If the carrying amount of a non-current asset
exceeds the recoverable amount, the asset is written down to the lower
amount. In assessing recoverable amounts the relevant cash flows have
not been discounted to their present value. Certain significant
accounting policies are restated below;
Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is accumulated in
respect of each separate identifiable area of interest. These costs are
only carried forward where right of tenure of the area of interest is
current and to the extent that they are expected to be recouped through
successful development and commercial exploitation, or alternatively,
sale of the area or where activities in the area have not yet reached a
stage which permits reasonable assessment of the existence of
economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off
in full in the period in which the decision to abandon the area is made.
Government Grants received relating to exploration activities are
offset against exploration and evaluation expenditure.
Goodwill
Goodwill represents the excess of the purchase consideration plus
incidental costs over the fair value of identifiable net assets acquired
on the acquisition of a controlled entity.
Goodwill associated with the purchase of equity in SASE Pty Ltd is
amortised on a straight line basis over 20 years. The policy regarding
amortisation is reviewed on a regular basis as the project is in
developmental phase.
Cash
For the purpose of the statements of cash flows, cash includes:
i. cash on hand and at call deposits with banks or financial institutions, net
of bank overdrafts; and
ii. investments in money market instruments with less than 14 days to maturity.
Demonstration Plant
Costs associated with the construction of the iron ore smelting
demonstration plant are capitalised until such time as an assessment of
the commercial viability of the plant is determined. If a decision is
made to proceed to commercial development of smelting operations, the
accumulated costs will be amortised against future revenue streams.
AUIRON ENERGY LIMITED AND ITS CONTROLLED ENTITIES
Notes to and forming part of the Financial Statements
for the half year ended 31 December 2001
CONSOLIDATED
31 Dec 2001 30 June 2001 31 Dec 2000
$ $ $
2. REVENUE FROM ORDINARY ACTIVITIES
Revenue from operating activities
Sales revenue 18,048 10,038 -
Other revenue
- interest received 1,019,536 796,853 442,517
1,037,584 806,891 442,517
3. LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX
Loss from ordinary activities before income tax has
been determined after charging/(crediting) the
following:
Borrowing costs expenses:
Finance lease charges 8,033 15,215 7,826
8,033 15,215 7,826
Provision for annual leave 10,603 56,883 92,743
Provision for long service leave 83,136 246,474 56,883
Provision for employee bonuses - 420,000 -
Provision for directors' retirement allowance 220,000 225,000 -
Depreciation of plant and equipment 28,958 40,492 19,503
Depreciation of buildings 4,308 718 -
Net loss on disposal of plant and equipment - 5,233 -
Amortisation of leased motor vehicles 16,560 33,157 16,597
Amortisation of goodwill 146,363 292,725 146,363
Rental expense on operating leases 87,688 58,628 26,640
Unrealised foreign exchange gains (1,689) (13,066) -
Individually significant items included in loss from
ordinary activities before income tax
Write-off of expenditure on exploration areas in - 212,724 212,724
Indonesia and associated expenses
Write-off Indonesian Investment - 2,583,165 2,583,165
- 2,795,889 2,795,889
4. CASH
Cash at bank and on hand 6,938,180 563,469 96,340
Short-term deposits 36,792,877 5,617,075 16,195,906
43,731,057 6,180,544 16,292,246
5. EXPLORATION EXPENDITURE
Expenditure carried forward in respect of areas of
interest in the exploration and evaluation phase:
Expenditure relating to projects current 1 July 27,043,651 18,595,506 18,595,506
Add: Expenditure during the period 1,950,704 6,443,126 599,643
Exchange difference on opening balances 318,836 2,005,019 949,909
Expenditure carried forward at 31 December 29,313,191 27,043,651 20,145,058
The above exploration and evaluation expenditure has been incurred largely in
respect of coal deposits in Australia and Northern Ireland. Specifically the
costs relate to drilling, the completion of reports dealing with geological,
hydrological, geotechnical and environmental studies, together with mine plans
and capital and operating cost studies.
The ultimate recoupment of this expenditure is dependent on the successful
development and commercial exploitation or, alternatively, sale of these areas
of interest.
AUIRON ENERGY LIMITED AND ITS CONTROLLED ENTITIES
Notes to and forming part of the Financial Statements
for the half year ended 31 December 2001
CONSOLIDATED
31 Dec 2001 30 June 2001 31 Dec 2000
$ $ $
6. INTANGIBLES
Goodwill on the purchase of SASE Pty Ltd ( at cost ) 5,854,504 5,854,504 5,854,504
Less : Accumulated amortisation (585,451) (439,088) (292,726)
5,269,053 5,415,416 5,561,778
7. SHARE CAPITAL
a) Issued and paid up capital 326,589,232 ordinary 141,362,349 89,110,335 83,210,740
shares
During the half year ended 31 December 2001
65,207,486 shares were issued (Rights Offer
65,157,486, Other 50,000) net proceeds credited to
capital $52,252,014.
b) The company has on issue the following options at NUMBER ON ISSUE
31/12/2001exerciseable:
2,810,000 - -
@ $0.52 on or before 7 December 2008
500,000 500,000 500,000
@ $0.30 on or before 30 November 2003
1,060,000 1,060,000 1,060,000
@ $0.30 on or before 18 October 2005
7,500,000 7,500,000 7,500,000
@ $0.45 on or before 31 December 2002 or
@ $0.90 on or before 31 December 2004
5,500,000 5,500,000 5,300,000
@ $0.77 on or before 8 September 2005
150,000 150,000 -
@ $1.10 on or before 8 September 2005
- - 950,000
@ $0.24 on or before 30 June 2001
8. SEGMENT INFORMATION
Geographic segments Australia Indonesia
Dec 2001 June 2001 Dec 2000 Dec 2001 June 2001 Dec 2000
$000 $000 $000 $000 $000 $000
Inter-segment sales 720
Total revenue 1,019 807 442
Segment Result (2,342) (8,253) (2,271) (2,796)
Consolidated Loss before
income tax
Segment assets 147,460 87,756 74,330
8. SEGMENT INFORMATION (continued)
Geographic segments United Kingdom
Dec 2001 June 2001 Dec 2000
$000 $000 $000
Inter-segment sales
Total revenue
Segment Result (245) (286) 1,046
Consolidated Loss before
income tax
Segment assets 15,365 13,891 15,477
8. SEGMENT INFORMATION (continued)
Geographic segments Eliminations Consolidated
Dec 2001 June 2001 Dec 2000 Dec 2001 June 2001 Dec 2000
$000 $000 $000 $000 $000 $000
Inter-segment sales (720)
Total revenue 797 807 442
Segment Result (939) (2,587) (8,539) (4,960)
Consolidated Loss before (2,587) (8,539) (4,960)
income tax
Segment assets (48,314) (35,219) (29,757) 114,511 66,428 60,050
9. COMPARATIVE INFORMATION
The information for the half-year ended 31 December 2001 has been
audited and the balance sheet at 30 June 2001 has been audited.
10 EVENTS SUBSEQUENT TO BALANCE DATE
There have been no significant events since balance date.
This information is provided by RNS
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