Deal to keep Aroaima afloat close - Hinds
Alcoa prepared to forgive US$60M loan By Daniel DaCosta
Stabroek News
September 26, 2001

Prime Minister Sam Hinds on Saturday told employees of the Aroaima Bauxite Company (ABC) that the government was close to a deal to keep it afloat which would see lower output at a reduced cost, Alcoa forgiving a US$60M loan and a rejigging of share ownership

ABC is under threat of closure at the end of the year because Alcoa - which took over the 50% of the shares held by Reynolds - is unprepared to continue pumping more money into a loss making enterprise.

Hinds made the disclosure of the possible deal to a meeting of ABC employees and contractors, Viceroy Shipping, JP Knight and Boskalis.

"We are almost there and we are very hopeful that we can keep going," he told workers aboard the 'Bulk Venturer' at the mouth of the Berbice River.

Reading from a document, the Prime Minister said "Alcoa has stated its intention to exit from ABC by December 2001. A closure plan has been put on hold to allow stakeholders to fashion and commit to a cash neutral operation based on restructuring the company on a 30 percent lower volume of product and a reduced price of 37 percent for the product."

According to the Prime Minister "we think we have found a way to keep ABC going and this may be better than other opportunities that may be available to us at this time." Noting that in the past the company exported some 2 million tonnes of bauxite annually at US$30 per tonne, earning US$60 million, Hinds said "this year we are looking at producing 1.4 million tonnes which will reduce ABC's income to US$42 million and a price reduction from US$30 per tonne to US$20 per tonne. This will further reduce its income to US$28 million."

Hinds, accompanied by ABC director and head of the Guyana Geology and Mines Commission, Robeson Benn, and head of the Privatisation Unit, Winston Brassington, over the weekend met with ABC employees and contractors at the mouth of the Berbice River and at Aroaima up the river to discuss the situation facing the company including its mining, dredging and contractual operations.

Reminding workers that the price of bauxite has gone up and down over the years, Hinds disclosed that BPU Reynolds - the main ABC purchaser - has stated that it can only buy 1.1 million tonnes of bauxite at US$17.14 per tonne next year down from US$24 per tonne. "The problem with bauxite is we have to go quite deep to reach our bauxite so our production cost is much higher. If we want to stay in business we have to match the prices of other competitors."

BPU Reynolds, he said, has been pressing ABC over the past month to commit to a contract for next year or withdraw. The deadline for such a commitment had been extended to yesterday.

"It is expected that Alcoa and Reynolds on exiting will be prepared to be as accommodating as could be and they have since come forward with a document to be signed in which they have made quite a lot of accommodation. They are willing to forgive the loan of some US$60 million to ABC in order to keep the company operating."

"The government as the other 50 percent shareholder in ABC," he explained, "is willing to facilitate a transition to a stakeholder-owned company owned by workers and contractors in proportion to what they are prepared to give up or need to give up. The general arrangements include that Alcoa/Reynolds would sell their US$2.5 million shares in the company to the Government of Guyana for $1".

The government would than redistribute the shares to those groups which have made some sacrifices and contributions to keep the company afloat.

According to Hinds, the management of ABC has been requested to "rework its income and expenditure statements for next year based on the projected sales and prices. They have been asked to make reductions in their expenditures which they have done," he disclosed.

Addressing the group of anxious workers on the 'Venturer's' massive deck, the Prime Minister explained that "we will be looking to sell approximately 300,000 tonnes of chemical grade bauxite at a price of around US$30?35 per tonne from the 1.1 million tonnes to be sold to BPU Reynolds." Reminding employees that if ABC closes some 800 jobs will be lost, Hinds emphasized that "without committing to the contract with Sherwin Alumina Plant owned by BPU Reynolds, ABC will essentially be without sales."

However, a number of workers told reporters after the meeting that they were very skeptical of the Prime Minister's proposal and indicated that they are unwilling to accept any cutbacks on their salaries.

Most of them were adamant that they would prefer to be paid off if the company was deemed to be no longer viable.

According to one employee "the government should make a decision on whether the company is still viable and if it finds that it is not viable, it should agree to close it down and pay us off."

Another said their salaries are already small and cuts should be made by the contractors who earn large salaries and not workers. "We are being put to the mercies of the contractors. Since 1986 the government had not shown any interest in our welfare but now they have come asking us to make sacrifices. We simply cannot afford any pay cuts and would prefer a closure and to be paid-off for our services over the years," the worker maintained.

Alcoa had earlier this year submitted a concept paper to the government for the continuation of operations at ABC. This paper entailed the merging of ABC's operations with that of the Berbice Mining Enterprise's (Bermine) plant at Kwakwani to form a new company. It was envisaged that Bermine's operations at Everton would be closed and the workforce in Berbice would be slashed from 940 to 400 over three years. In addition ABC's US$60M debt to Alcoa would be transformed into equity in the resultant new company and the operations would be sold off at a convenient time to a buyer that Alcoa would identify. This concept paper has been under consideration by the government and a joint committee set up with the opposition People's National Congress REFORM.