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Kobe Steel Transfers HBI Plant to Venezuela

Completes world's first BOT project for steel-industry plant

July 3, 2007

Kobe Steel, Ltd. transferred a Hot Briquetted Iron (HBI) plant to Venezuela after successfully managing the facility for nearly 20 years. On June 1, 2007, CVG Ferrominera Orinoco formally resumed operation of the HBI facility.

In late 1987, Kobe Steel and Venezuela's Corporacion Venezolana de Guayana (CVG) reached an agreement for Kobe Steel to refurbish, restart and operate the idled Minorca direct reduction plant, located in Ciudad Guayana, Bolivar State, and owned by CVG. Under an innovative build, operate and transfer (BOT) scheme, Kobe Steel converted the facility to use the MIDREX® Direct Reduction Process and produce HBI for merchant sale. The BOT arrangement called for Kobe Steel to manage the HBI facility for a specified period of time and eventually return it to the owner in good operating condition.

In 1997, the annual production capacity was increased from the initial 830,000 metric tons to 1 million metric tons following modifications to the plant. In May 2003, the plant achieved a record when it produced a cumulative total of 10 million metric tons of HBI. At the end of May 2007, the Minorca Plant produced more than 13.5 million metric tons under operation by Kobe Steel.

More than just a manufacturing and marketing business, the Minorca Project has established a new business model in the plant business by successfully executing the first BOT project with project financing for a steel industry plant.

Kobe Steel continues to be involved in the direct reduction business in Venezuela as an operator of and equity partner in the Comsigua HBI plant. Kobe Steel and other Japanese companies together hold a majority equity share in this joint venture, which started up in 1998 and has annual production capacity of 1 million metric tons of HBI.