Agreement of Purchase and Sale

The Duferco Steel Nova Scotia Corp. will begin the transition to take over ownership of the Sydney Steel Corp. starting today.

At a cabinet meeting earlier today, the provincial government ratified a recommendation from Sysco's board of directors to move forward with Duferco. This decision was based on a recommendation put forward by Ernst and Young, the company hired to help sell the plant. An agreement of sale and purchase has been signed by all parties.

"The province is getting out of the steel business with the proposal that holds the best future for the local economy, the workforce and the taxpayers of Nova Scotia," said Economic Development Minister Gordon Balser. "Duferco provided the best prospect for lasting jobs, the strongest business plan, the best financial and operational track record and no requirement for new taxpayer funding."

The closing date will occur no later than Oct. 31, 2000. The minister noted that there is still considerable work to be done over the next several months, but he is confident in a successful conclusion.

"The board of directors is confident that Duferco is the company with the best business case," said board chair Teresa MacNeil. "They have a solid history of investing in steel operations and are ready to make this work."

Duferco was founded in 1979. It is headquartered in Switzerland and operates in 38 countries worldwide. The company's main areas of activity are steel trading, steel production (both flat and long products) and related specialized services. The company has invested capital of about $500 million (US) in its steel-making operations in the United States, Belgium, Italy, South Africa and Macedonia. For the fiscal year ending 1999, Duferco had annual sales totalling $2.1 billion (US) and equity of $256 million (US).

Duferco's business plan for the plant includes a potential for three phases. Phase 1 involves the operation of the steel melt shop to produce 750,000 tonnes of steel slab for the Duferco mill in Farrell, Pa. The facility will operate on a 20-shift per week basis with a total employment of 215 people, both salaried and hourly employees. Phase 2 contemplates the operation of the blooming/breakdown mill to produce steel plates and an increase in employment of up to 80 positions. Phase 3 could involve the construction of a facility to produce hot briquetted iron, as well as an additional 100 new positions. The construction of this facility will involve an investment of $120 million (Cdn). If all three phases are achieved, there is potential for up to 400 jobs at the plant.

Representatives from Duferco are in Sydney today to explain their plan to representatives of the United Steelworkers Union and other community leaders.

Duferco has offered to purchase the plant for $25.5 million (Cdn) with $10.5 million in cash upon closing and a $15- million performance guarantee. For the next five years, Duferco has committed to operate the plant in Sydney, to maximize production and commensurate employment, and to work to achieve additional production and employment levels. As incentive to uphold this commitment, the performance guarantee will decline by $3 million each year for a five- year period -- as long as the company is meeting the terms.

"Our company looks forward to quickly establishing strong, productive working relationships with the workforce and becoming an active member of the local community," said Ben Sciortino, president and CEO of Duferco Farrell Corp. "We have a sensible, long-term plan that includes significant investment in the plant."

A special capital investment fund of $21 million will be established to fund the required improvements to the plant. This will be more than offset by the purchase price plus about $18.1 million, which Sysco currently holds in operating funds and accounts receivable. This results in a return to the province of approximately $7.6 million. Access to the capital improvement fund requires Sysco approval.

"This ensures that Duferco is reinvesting in the future of the plant and the additional employment for steelworkers," said the minister. "It also holds the potential for spinoff employment in Cape Breton."

For the past five months, the firm of Ernst and Young has been working to find a buyer for Sysco. After canvassing the world market, the request for proposals closed on April 20, 2000. Four offers were received for continued operation of the steel plant and 14 offers were received for various components of the assets.

Duferco was the only "going concern" offer to meet all requirements of the request for proposals, which included submitting a $1.5-million deposit and detailed financial information. All offers received a thorough evaluation by Ernst and Young, and this was presented to the board.

Sysco became a Crown corporation on Dec. 19, 1967. In its 30-year history it has cost taxpayers about $3 billion. Efforts to privatize the Crown corporation have been underway since 1992.

NOTE TO EDITORS: Representatives of Duferco are available or interviews by calling Peter Halpin.

For more information on Duferco, go to the company's website at: http://208.243.129.21/duferco/home/home.html .