THE Guyana Government and Reynolds International Inc. (RII), a fully owned subsidiary of the major United States ALCOA firm, yesterday concluded agreements for RII to disengage from the Aroaima Bauxite Mining Company (ABC) on the Berbice River.

Prime Minister Sam Hinds, who is responsible for the bauxite sector, said the terms of the disengagement and related agreements "provide ABC with a fighting chance to continue".

There were doubts about the future of ABC with the ALCOA pullout but Mr. Hinds the arrangement has helped save some 700 jobs.

He reiterated that under the new arrangement which takes effect January 1, 2002, there would be no recourse to the Treasury.

Signing the agreements were the Prime Minister on behalf of the Guyana Government and Mr. Larry Grace, RII Vice President.

The terms of the disengagement and related agreements include:

** transferring RII's 50% interest in ABC to the National Industrial Commercial Investments Limited (NICIL) for US$1;

** transferring all RII's interest in SMS/Green Construction Inc. to NICIL for US$1;

** converting all ABC debt to RII and related companies, of about US$68M to non-voting preferred shares. The conversion of the debt allows ABC to achieve an annual savings in interest cost of about US$5M.

** Transferring various assets leased by ALCOA for ABC at no cost. Excluding the debt conversion, these transfers to ABC by RII/ALCOA have a value of more than US$5M.

The Prime Minister said that simultaneously with the transaction, the Government was transferring its 50% interest in ABC to NICIL.

He said the Government was also discussing with the contractors, equity participation based on their cost reduction and their ability to be strategic partners in the on-going operation.

"Workers will also participate in this share distribution scheme", he said.

Mr. Hinds said the preference shares to be issued to RII will enable it to receive some benefit in the "extremely unlikely event of sudden changes which enable ABC to be profitable enough to distribute dividends, or if ABC is liquidated and assets sold and funds are available for equity holders after paying all liabilities."

"RII will continue its management contract with ABC/AMC to year-end, following which NICIL has planned to have a management contract for approximately five persons, including persons employed by RII, who will continue on a personal basis without any relationship to ALCOA/RII", the Prime Minister stated.

He said the deal with RII also signals agreement with the major customer, Sherwin Alumina Plant (BPU-R) in Corpus Christi, Texas and the major contractors (Viceroy Shipping Limited and Boskalis bv) which will enable a cash neutral position for ABC for the year 2002.

ABC was also discussing terms for next year with the union representing employees of the company, Mr. Hinds said.

He explained that the cash-neutral position was premised on:

** total production and sale of metallurgical and chemical bauxite of 1.4 million wet metric tones (WMT) for the period 2002; 1.1 million WMT of bauxite will be for BPU-R.

** Savings in annual interest cost of approximately US$5M, the reduction of payments to contractors, and savings in employment cost, all contributing to a reduction of costs.

** The existing net working capital of ABC, including cash, after the transaction, being in excess of US$12M.

** ABC Balance Sheet having a net equity position after the debt conversion in excess of US$45M.

** Equipment with the capability to produce two million tonnes of bauxite being available for the projected 1.4 million tonnes in the year 2002 and providing reserve capacity to react positively to any increase in demand.

Also signing the agreements were Mr. Winston Brassington on behalf of NICIL, Mr. Robson Benn on behalf of ABC and Mr. Neendkumar on behalf of AMC. (AMC is the fully owned operating subsidiary of ABC; ABC is registered in Barbados and AMC is registered in Guyana.)

Resigning from the boards of ABC and AMC were two RII directors who are being replaced by Brassington and a fourth director to be named, Mr. Hinds said.

The new board will in the next few days review and execute agreements, or amendments to existing agreements with BPU-R Viceroy (for transshipment services), J.P. Knight for barging and Boskalis for dredging.

The Prime Minister said ALCOA has signalled its continuing interest in studying potential bauxite resources in Guyana which goes back to before its merger with Reynolds.

The Government welcomed the continuing interest, he said.

He also expressed the Government's appreciation to ALCOA/RII, the contractors and the employees and union for their cooperation "during this difficult period in the history of ABC and their contributions in saving in excess of 700 jobs provided by ABC and the contractors."