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Caracas, March
28, 2001… International Briquettes Holding (IBH) reported today
that it is reviewing financial and operating issues at Orinoco
Iron, its 50%-owned affliliate, with The Broken Hill Proprietary
Company (BHP), one of whose subsidiaries owns the other 50% of
Orinoco Iron. IBH and the BHP subsidiary also each own a 50% interest
in two other companies as part of the IBH/BHP joint venture.
Orinoco Iron
has constructed a hot briquettted iron (HBI) plant in Puerto Ordaz,
Venezuela. The facility has a design capacity of about 2.2 million
metric tonnes of HBI per year. The construction phase of the project
was completed in August, 2000. However, a series of mechanical
failures has delayed the buildup of production and added to project
costs. As a result of increased costs, lower than planned production
rates and depressed prices in the international markets, actual
revenues and cash flows have been substantially below amounts
originally planned. As a result of these and related factors,
IBH anticipates that Orinoco Iron may not be able to comply with
certain requirements in its credit facilities. At present, one
of four production trains is in operation. HBI production for
the train has been running at an average rate of about 1,540 metric
tonnes per day over the last 30 days, which represents about 92%
of the design capacity of the train.
As of December
31, 2000 the net book value of IBH´s investments in the IBH/BHP
joint venture was about US$ 98.3 million and in addition it has
guaranteed about $312 million of Orinoco Iron's borrowings under
its credit facilities. Additional funding will be required in
order for Orinoco to continue existing operations, place the remaining
three production trains in operation (two of which are now ready
to begin production) and for working capital, debt service, purchases
of spare parts and other purposes. The amounts required will depend
in part on the commercial and business strategy to be followed
by Orinoco in the future, but are estimated by IBH to range between
$220 million and $240 million for 2001. No commitments currently
exist to provide this funding from IBH, BHP or others. No assurance
can be given as to whether, and if so on what terms, any additional
financing for Orinoco Iron can be arranged. The operating and
financial condition of Orinoco Iron is expected to continue to
have material adverse consequences for the financial condition,
business and prospects of IBH. In particular, IBH is considering
whether the value of its investment in the joint venture has been
impaired by the changed circumstances at Orinoco Iron.
In another
development, IBH also reported that on Sunday, March 25, the IBH/BHP
joint venture began a temporary shutdown of its RDI plant, which
is a separate HBI facility at Puerto Ordaz with a design capacity
of about 400,000 metric tonnes per year which began operations
in 1976. The closing is due to maintenance requirements at the
facility and unfavorable market conditions for the plant's HBI
production. No decision has been made as to how long the plant
will be closed.
This press
release contains statements about future events and financial
results that are forward-looking and subject to substantial risks
and uncertainties. Actual results could differ materially from
those indicated in such forward-looking statements. Factors which
may cause actual results to differ materially from those discussed
include economic considerations that could affect demand for HBI,
competition, general economic conditions in Venezuela and in the
global steel industry, the availability and terms of financing
and the risk factors set forth in IBH's various filings with the
U.S. Securities and Exchange Commission and the Comision Nacional
de Valores of Venezuela. IBH undertakes no obligation to revise
these forward-looking statements to reflect events or circumstances
after the date hereof, and claims the protection of the safe harbor
for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
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