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Caracas,
December 1st, 1999...International Briquettes Holding (IBH), a
company engaged in the production and sale of iron-ore briquettes,
reported consolidated sales for fiscal year 1999 of US$ 52.5 million,
a 37% decrease compared to last year's sales of US$ 83.5 million.
The company had an operating loss of US$ 16 million and a net
loss of US$ 15 million.
This performance was principally the result of the sharpest decrease
in metallic prices seen over recent decades. In fact, the average
price of our products, the briquettes produced by Operaciones
RDI and Venprecar, fell 28% compared to the prior year. This reduction
reflects the performance in the market for other raw materials
used in the steel industry such as scrap and pig iron.
The lowest price for our briquettes was reached in December 1998.
After that, price behavior was erratic until March, and in April
a gradual but firm recovery began that has been continuous. We
estimate that the price of briquettes will return to the 1997
levels in the near to medium term.
The lower sales revenues are also linked to Venprecar's production
of 624,000 MT during the period, a 9% reduction in volume compared
to the 1998 fiscal year. This decrease is attributable to the
shutdown of the Venprecar plant for expansion and maintenance,
and to the market constraints that were evident during the October-December
1998 quarter.
Venprecar
After the shutdown to increase plant capacity from 715,000 MT/year
to 815,000 MT/year, Venprecar re-started operations during the
first week in January 1999. Production for the fiscal year was
624,000 MT and sales were 570,000 MT. 93% of total sales were
for the export market and the balance was sold domestically.
Regarding production costs, other than the reduction in the cost
of iron-ore, the cost per metric ton for Venprecar fell 6.57%
owing mainly to a decrease in manufacturing overhead. In addition,
Venprecar's net working capital fell from the equivalent of 74
days of sales to 54 days. Separately, an important improvement
in the physical quality of Venprecar's briquettes was achieved,
with the percentage of chips generated falling from 12% last year
to 7% during the 1999 fiscal year.
Operaciones RDI
The former Fior plant, now called Operaciones RDI, had production
of 360,000 MT and sales of 343,000 MT, of which 97% was for the
export market.
A cyclone system was successfully tested in the reactors of the
Operaciones RDI plant. This design, developed by Orinoco Iron,
reduces the clumping of mineral fines inside the reactor, reducing
the number of days the plant needs to be shut down each year for
maintenance.
Orinoco Iron
The joint venture with the Broken Hill Proprietary (BHP) to build
a 2.2 million metric-tons-per-year FINMET® plant to directly reduce
iron ore reached 88% of completion on September 30. A slight delay
of 2% with respect to the original construction schedule was caused
by adverse weather and labor-related problems during the fiscal
year.
The most important milestones reached during the fiscal year ended
September 30, 1999 were: completed erection of the reactors for
Module 1; finalization of the Natural Gas Substation; installation
of the Reformer for Module 1; and availability of electric energy.
As of the date this report, tests were conducted on equipment
in the common services area and in the mineral receiving system
with satisfactory results. As a result, the start-up date for
the first module of the plant has been re-estimated for March
2000.
Orinoco Iron is the largest private investment to ever be made
in Venezuela outside of the petroleum industry. It is based on
the FINMET® technology, which uses iron ore fines as a raw material.
Other direct reduction technologies (Midrex and HyL) use pellets
and lumps as raw materials. The advantage of FINMET® over other
technologies is that production costs are lower because it is
not necessary to go through the process of pelletizing the fines.
Brifer
Between October 1998 and September 1999, thirteen Venezuelan experts
provided technical assistance for the start-up of the FINMET®
plant which is being built by the Broken Hill Proprietary (BHP)
in Port Hedland, Australia. This participation is part of the
Brifer technology agreement. Brifer is part of the joint venture
between IBH and BHP and holds the intellectual property rights
associated with the FIOR® and FINMET® technologies.
Mission and Strategy
International Briquettes Holding's mission is to be the world's
most competitive and reliable producer and supplier of metallic
iron units. To fulfill this mission, the company has outlined
four basic strategies: promoting value-in-use of the product for
our costumers, pre- and post-sale technical service, differentiating
through its competitive advantages, and achieving leadership in
costs. At the same time, the company intends to increase its long-term
sales and penetrate new markets.
As part of these strategies, the amount of HBI produced by IBH
and its affiliates is expected to increase by almost 300% in the
next few years. In the current fiscal year, our marketing team
sold a preponderant amount of the year's production under long
term contracts. Of these sales, 92% were for final users.
International Briquettes Holding (IBH) produces iron-ore briquettes
for sale mainly in foreign markets. IBH holds 98.9% of Venprecar
and 50% of Operaciones RDI. Its operations are strategically located
to take advantage of the low cost of inputs needed to produce
HBI such as iron-ore and natural gas. In association with the
Australian company, BHP, IBH is currently building a 2.2 million
MT/year plant in Puerto Ordaz, Venezuela that will use the FINMET
technology.
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