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Gold/Mining/Energy : KERM'S KORNER -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (14489)	12/23/1998 9:30:00 AM
From: Kerm Yerman	Respond to of 15196

IN THE NEWS / Ipsco To Build $650-Million Alabama Mill Plans To Replace Imports During Normal Steel Markets Wednesday, December 23, 1998 Greg Keenan - Steel Reporter Globe & Mail Steel maker Ipsco Inc. will build a $650-million mini-mill in Mobile County, Ala., which will replicate its operation in Montpelier, Iowa, and is scheduled to begin turning out steel plate by the second quarter of 2001. Construction will start early next year on the 1.25-million-ton mill, which will employ about 450 people to make plate for storage tanks, rail cars, machinery and equipment and construction. "Our new mill is expected to displace imports in a region which has traditionally been a high user of imported steel," Ipsco president Roger Phillips said in a statement yesterday. But the plan is to replace imports during normal steel markets, Mr. Phillips said in an interview, not the flood of imports U.S. and Canadian steel makers are facing now. The mill will be financed by a recent $150-million issue of preferred shares, a private placement of $150-million (U.S.) in junior subordinated notes announced yesterday and cash flow or lines of credit. Ipsco officials took a close look at "what would happen if a whole bunch of negative things happened" in the economy and the steel market, Mr. Phillips said. "We're in a position to handle ourselves without getting close to the line." The Regina-based steel maker said the U.S. Gulf of Mexico region has had the highest growth rate in steel consumption in recent years and has good transportation facilities. A deal to buy electric power at favourable rates has already been reached. The new operation will be a "cookie cutter" of the Montpelier facility, Mr. Phillips said, with the exception that Ipsco intends to make sure the Mobile mill will not come on stream 15 months behind schedule, as Montpelier did. One way to do that, he said, is to follow the method developed by mini-mill pioneer Nucor Inc., and make a 10-per-cent down payment to the builders at the beginning of the process, pay another 15 per cent or so when the drawings are delivered "and then you don't see another nickel until you completely deliver the stuff to the site." He would not reveal the financial incentives Alabama gave Ipsco, but said it will be eligible for normal training grants and income tax relief that is granted by every state to companies that create a lot of jobs. Alabama set a modern-day record in government giveaways with grants and other incentives to Daimler-Benz AG that exceeded $200,000 for each job. Ipsco's incentives from Iowa amounted to about $73-million. The project is a "very high-risk proposition," said industry analyst Jay Gordon of Maison Placements Inc. "God knows where the steel cycle will be in two or three years." He said in a recent report that increasing Ipsco's debt-to-equity ratio makes little sense and if the new mill comes on stream when demand is weak, Ipsco's other operations may have trouble carrying the debt load. Mr. Phillips disagreed. He does not anticipate an early 1990s-style steel depression where the economy collapsed and steel distributors unloaded millions of tons of inventory, which wiped out prices and started what he called a "buyers' strike." "The [current] buyers' strike has been on since August," he said, but the market should return to more normal conditions next year when U.S. and Canadian officials take action on the flood of imports. In addition, the lessons learned from the Montpelier startup and cash flow that will be generated in 1999 from new operations in Toronto, Houston and Blytheville, Ark., make it a prudent investment, he said. "I don't think any company has ever been better equipped to implement a project in the steel industry than we are," Mr. Phillips said. Another analyst agreed that cash flow should be more than adequate to finance the Mobile project during the next three years. Ipsco generated about $135-million (Canadian) in cash last year and that should rise to an average of $200-million a year during the next few years, the analyst said. A new mill appears to be a risky decision now, given the dramatic decline in steel prices this year, but Ipsco has demonstrated an ability to grow, the analyst said. Ipsco shares rose 30 cents to $26.50 yesterday on the Toronto Stock Exchange.

To: Kerm Yerman who wrote (14489)	12/23/1998 9:35:00 AM
From: Kerm Yerman	Read Replies (4) \| Respond to of 15196

IN THE NEWS / Regulator Imposes Cap On Hibernia Production Cut 30% Until Gas Burning Stops Wednesday, December 23, 1998 Bloomberg News The Hibernia oil project off the Newfoundland coast has been ordered by its regulator to cut production 30 per cent until it stops burning off surplus natural gas. Starting next month, production from the Hibernia field 320 kilometres southwest of St. John's will be limited to 68,000 barrels of oil a day from the current 97,000. The Canada-Newfoundland Offshore Petroleum Board is concerned about emissions from the burning gas. It said the limit will stay in place until the Hibernia group can show it can inject all of the gas that's produced with the oil back into the oil reservoir. Hibernia is drilling a second well for that purpose and expects to finish it by the middle of next month. Production is still scheduled to peak at 135,000 barrels a day by the end of March, and the project is on target to produce its goal of 50 million barrels of oil in 1999, spokesman Brian Crawley said. "This is a short-term situation for us," he said. "When the second gas injector comes on stream we'll gradually increase production back up to where it is now." Hibernia's largest shareholder is Fairfax, Va.-based Mobil Corp., the second-biggest U.S. oil company, with a 33.1-per-cent stake. San Francisco-based Chevron Corp., the fourth-largest U.S. oil company, owns 26.9 per cent of the project. Other partners are Petro-Canada of Calgary, with 20 per cent; the Canadian government with 8.5 per cent; Murphy Oil Corp. of El Dorado, Ark., with 6.5 per cent; and Norway's Norsk Hydro ASA, with 5 per cent.