Prime Minister Sam Hinds is maintaining that the arrangements to keep the Aroaima Bauxite Company (ABC) in operation after December 31 would be cash neutral to the Government of Guyana (GoG).

He asserted that "a company like ABC is a corporate person and there is no question of the GoG or Guyanese being liable for or being made to pay any debt of ABC. Only ABC, not ABC shareholders are liable for debts of ABC."

He also argued in a letter to be published in tomorrow's edition that the write-off by Alcoa would be in the form of preference shares, which would be sold to the government for US$1 on or before December 31, 2002.

The Prime Minister was responding to a letter in the Stabroek News yesterday by financial consultant, P.Q. DeFreitas, who charged that rather than being "cash neutral" the government was providing Alcoa and its associate companies with funds that could exceed US$10 million a year.

DeFreitas' letter, among other things, also claimed that if the write-off would in fact be a conversion of the debt into preference shares, "Guyanese would still be liable for the US$60 million."

The Prime Minister said the acquisition of the preference shares would be in addition to the purchase this year of Alcoa's equity in ABC for US$1.

Another claim in the letter was that in selling chemical grade bauxite to BPU-Reynolds at US$35 a tonne, which it could sell directly for US$40 a tonne, the government was making a gift of US$1.5 million if it could sell all of the 300,000 tonnes ABC has agreed to provide.

The Prime Minister pointed out that ABC would not be selling chemical grade bauxite to BPU-Reynolds but to a special purpose company set up by Reynolds International Inc (RII), the original partner with the GoG in ABC, which will store and retail it to its traditional customers.

Commenting on another claim by DeFreitas, the Prime Minister pointed out that the number of chemical grade bauxite customers was about 20 and not ten. He explained that were ABC to sell its chemical grade bauxite directly to customers in the US it would need to set up a company in the US and that there was a cost attached to this process, including the cost of providing silos to store the product. He also explained that the company was able to sell small amounts to the smaller users in the vicinity of its plant directly from its storage facilities. He said that RII was seeking a buyer for this company.

To another point raised by DeFreitas that the sale of the chemical grade bauxite should be covered under the Alcoa management contract, Hinds said that this contract would end on December 31, and "there is no management fee for RII?Alcoa."

He also stressed that hard evidence of ABC undercutting Bermine's and Linmine's sale of bauxite "has been hard to come by."

To another claim by DeFreitas that ABC's production cost would hardly fall below US$25 per tonne from the present US$30 per tonne, the Prime Minister explained that the US$60 million write-off would save about US$5 a tonne with another US$5 a tonne coming from the reduction in payments to contractors and workers.

In return for these "givebacks," the Prime Minister said, the GoG had offered to disperse its 100 per cent stake in ABC "to contractors and workers say quarterly in proportion to their foregoings." A team is due to travel to the US to finalise the proposed share-ownership arrangement with Viceroy Shipping, JP Knight and Boskalis International, the contractors at ABC.

He also disputed the argument by DeFreitas that the Guyanese people would be the only losers in the arrangement to keep ABC going, by pointing out that "this transaction is one of salvaging a situation until better can be done as has been and continues to be the case with Guymine, Linmine and Bermine."