Release: Unplanned shut down of ferronickel smelter to last five to six months

Jakarta, April 20, 2005 ? PT Antam Tbk announces that on March 23, 2005, at the end of the commissioning period of its refurbished FeNi II smelter, which began following pre-heating on February 15, 2005, and start up on February 22, 2005, Antam halted the commissioning of FeNi II for safety reasons due to abnormal metal levels measured against reference dimensions in the furnace and higher than normal hearth thermocouple temperatures. An analysis has shown there was refractory loss and damage to the refractory bricks at the bottom of the furnace.

Although further analysis is required to know in detail what caused the damage, such as an inspection of the slag, the untapped metal still in the furnace and the refractory bricks, preliminary analysis suggests the cause of the refractory loss and damage is due to incorrect implementation of load-up, or ramp-up, procedures provided by Hatch, which caused the excessive heat at the bottom of the furnace. As the refurbishment included the installation of a new, more advanced type of cooling system for the furnace sidewalls, the commissioning was performed under the supervision of the technical advisor on the project, Hatch Ltd of Canada. The refractory bricks were approved for use and possibly would not have incurred damage with proper implementation of the ramp-up procedures. Initial analysis suggests the damage was not caused by faulty installation, faulty equipment nor faulty technology. Antam will use the same copper cooling system for the upcoming FeNi III expansion.

Antam?s President Director, D. Aditya Sumanagara says:
?We are extremely disappointed our FeNi II smelter will not commence operations as planned, however, we are doing what we can to get back on track as soon as possible, to reduce the impact from lost production, to keep our customers happy and ensure this never happens again. Antam does not foresee any problems in terms of the successful commissioning of FeNi III, which is a turnkey project.?

The shut down of FeNi II is expected to last five to six months, with FeNi II beginning commercial operations at the end of August 2005. On April 1, 2005, Antam began work to repair FeNi II under the supervision of Hatch Ltd. The repairs are highly dependent upon the arrival of new refractory bricks, which must be fabricated and could take a minimum 9 weeks. Antam considered the idea of using refractory bricks that have been shipped for the FeNi III expansion, but abandoned the plan for fear of affecting the construction schedule.

The cost of repairs is still being calculated as Antam awaits information on the cost of new refractory bricks and as the full extent of the damage is unknown. A preliminary estimate of the repair cost is in the range of US$3 million to US$5 million. Antam will make a claim for the damaged equipment under the terms of its Erection all Risks insurance, which covers the risk of testing and commissioning.

Due to the shut down of FeNi II, Antam has lowered the ferronickel production target of Pomalaa by 30% to 6,800 tonnes, from 10,000 tonnes. To offset the loss of production, Antam will increase its volume of toll smelting with Pamco from 150 tonnes to 600 tonnes, such that total ferronickel production is estimated at 7,400 tonnes, 27% lower than the initial target of 10,150 tonnes. To offset lost revenues, Antam will boost its high grade nickel ore sales by 400,000 tonnes. Antam anticipates these measures may offset a substantial portion of the estimated loss of income. As the smelter was still in the commissioning period, Antam's insurance coverage will not compensate Antam for the estimated loss of profits. Antam is currently focused on getting FeNi II running as soon as possible and will consider at a later date what, if any, options it has in terms of compensation.

To prevent the damage from occurring again, Antam will consult with Hatch Ltd and with the new brick supplier. Antam will also seek input from other nickel companies that have conducted similar refurbishments. Antam is in discussions to engage Hatch Ltd to swiftly re-commission the complete FeNi II, including items originally outside of Hatch?s scope. Hatch Ltd has sent engineers to assist and advise Antam on the repairs. Although the bricks used were suitable and had been approved for installation, Antam will install more durable refractory bricks as an extra precaution in the event of an incorrect implementation of ramp-up procedures.

Antam is currently revising its 2005 budget and the precise estimation of the impact to Antam?s ferronickel cash costs is not yet known, although the increase over the US$3.35 per pound of 2004 will likely be substantial. Antam will make its best effort to limit the cash cost increase.

Antam has informed its customers of the required shut down of FeNi II and the impact it will have on their supply contracts. To reduce the amount of disruption to supply contracts Antam has increased the amount of toll smelting from 150 tonnes to 600 tonnes. (end of release)