AuIron Energy Ld
27 November 2000
AuIron To accelerate Ballymoney Power Project
AuIron has now decided to accelerate strategies to finance and progress the
proposed lignite mine and associated power station. This will not divert the
Company from maintaining its priority focus on the SASE Project.
In light of recent developments in the UK and Republic of Ireland energy
markets, the Board has decided to accelerate its development strategy on the
Ballymoney mine and power project.
In the 2000 Annual Report the Company commented that it had decided to put the
project on hold until the SASE pig iron project was closer to commercial
development. At the Company's AGM on 8 September 2000, AuIron stated that if
prices of competitive fuels in the UK continued to rise, the Ballymoney
Project's competitive position could increase and a fast-track approach to its
strategy may be warranted.
On 6 November, the Northern Ireland authorities announced electricity price
rises of 9 p.c. with effect from 1 January 2001, attributing the increase to
fuel cost rises. The Northern Ireland electricity regulator (OFREG) reported
on 17 November 2000 that domestic Northern Ireland consumers paid the highest
tariffs in Europe in 1999, the latest country bases comparison that is
Generation is said by NIE (the former Northern Ireland Electricity) to account
for about 60% of the cost of electricity. Fuel is about 45% of the generating
cost or therefore about 27% of the cost of electricity. It follows that the
new electricity tariff is based on recovering fuel cost increases of 33%.
Rapid increases in natural gas, oil, imported coal and electricity prices have
been a feature of the UK and the Republic of Ireland energy markets in recent
Since March this year UK gas spot prices have risen by more than 100% and
international steaming coal prices have risen by about 100% over the past 12
months. This upward trend in fuel prices is continuing and we believe this
inevitably equates to further significant electricity price rises in Northern
Ireland and the Republic of Ireland.
In addition, the governments of the UK and the Republic of Ireland have each
forecast increased dependence on gas imports over the next few years with
attendant implication for yet further rises in power generation costs.
Northern Ireland is more exposed than most electricity systems to fuel price
rises because, according to the Electricity Regulator, the generators are only
about 30% efficient. A new station, such as Ballymoney, would expect to have
much higher efficiency than older technologies.
As previously reported, independent mining consultants are updating capital
and operating cost estimates for the proposed coal mine at Ballymoney. The
update, which was started in October, is expected to be completed by
AuIron has identified potential key senior management, commercial, financial
and energy market advisors for Ballymoney. Upon completion of contractual
negotiations with these parties, further details will be announced.
The review process will also include completion of the potential listing on
AIM (Alternative Investment Market on the London Stock Exchange) of the
Ballymoney is largest single open-cast coal deposit in Western Europe - 660mt
of very low sulphur lignite in thick, easily mineable seams lying close to
surface. It has previously been approved by the relevant UK inspectorate as
an acceptable power station fuel that would not require expensive flue gas
In the present NI generation system, all power generation fuels are imported:
56% of capacity relies on natural gas, 41% on imported coal and the balance on
AuIron listed on the Alternative Investment Market (AIM) of the London Stock
Exchange on 1 September 2000 (AIM and ASX Code 'AUY'). The Company has been
listed in Frankfurt, Stuttgart and Berlin since March 1999 (German
Registration Number 852095).
AUY is in seven of the ASX indices and on its present market capitalisation
could expect to be included in the ASX 200 in the new year review.