BHP Ceases Orinoco HBI Invest
BHP Limited
29 March 2001
Release Time IMMEDIATE
Date 29 March 2001
Number 30/01
BHP CEASES ORINOCO HBI INVESTMENT
BHP Limited (BHP) today announced it would write-off its equity investment in
the Venezuela Hot Briquetted Iron (HBI) facility, cease any further investment
and raise provisions to support BHP's total financial obligations in relation
to the asset.
The Orinoco HBI plant is operated by Orinoco Iron and is a joint venture
between International Briquettes Holding (IBH) and BHP.
The decision follows completion of a detailed review of the future economic
value of the asset - initiated as a result of a poorer than expected
commissioning performance - a deterioration in the market for HBI and a
requirement for significant additional capital and other expenditure.
The review identified that, in the context of changed operating and market
conditions, BHP does not expect the plant to meet BHP's operational and
financial performance targets necessary to justify any further investment in
the project, nor would it satisfy bank completion requirements for project
financing.
The financial consequences of BHP's decision are a write-off of the carrying
value of the asset of US$168 million, the raising of a provision to cover its
financial liability to the banks of US$313 million including interest costs,
and legal, direct and indirect costs amounting to US$34 million. This will
result in an after tax charge of approximately US$410 million. The charge will
be taken in the quarter ending 31 March 2001.
President BHP Minerals Ron McNeilly said: 'The action is an appropriate
portfolio management decision given the new information in relation to the
outlook for the economic value of BHP's investment and the requirements for
additional expenditures. Effective immediately BHP will not invest further
financial resources in the development of this project.'
BHP initiated a detailed review of the Orinoco Iron HBI facility late last
year. As at 31 December 2000, the plant had produced 139,000 tonnes of
briquettes against a forecast of 214,000 tonnes since commissioning. Production
in the third quarter has continued to be seriously constrained.
In combination with commissioning difficulties, pricing for the product from
the plant has also deteriorated significantly over the last twelve months,
associated with the weakness in the demand by the United States steel
industry. A recovery of prices into this market is not expected to occur over
the short to medium term
BHP is assisting Orinoco Iron and International Briquettes Holding in seeking
alternative sources of funding required for the project to continue.
* * * *
Further information can be found on our Internet site: http://www.bhp.com
Contact:
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Manager Media Relations
Ph: 61 3 9609 4157
Mob: 61 419 546 245
INVESTOR RELATIONS
Dr Robert Porter
Vice President Investor Relations
Ph: 61 3 9609 3540
Mob: 61 419 587 456
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