FINANCIAL WOES Doe Run halts production at La Oroya...

FINANCIAL WOES
Doe Run halts production at La Oroya copper/lead/zinc smelter
Financial difficulties at Doe Run's La Oroya smelter, one of the world's largest, mean it has had to shut down as suppliers are no longer prepared to supply it with concentrates for processing.

Author: Teresa Cespedes
Posted: Wednesday , 03 Jun 2009

LIMA (Reuters) -

Doe Run Peru, the country's fourth largest metals exporter, said on Tuesday it will halt all operations at its sprawling La Oroya smelter on Wednesday because financial and environmental setbacks have prevented it from buying concentrates.

The plant, hobbled by financial woes since March, processes lead, zinc and copper. Its work permits could be canceled if it does not meet an October deadline for an environmental cleanup.

"Starting June 3, 100 percent of operations at the La Oroya metallurgical facility will be temporarily stopped," Doe Run Peru said in a statement.

Earlier on Tuesday, a company source had told Reuters work at the smelter was already stopped.

"Yes, we have halted everything. Today, lead stopped and on Friday, zinc and copper," the source said. "There are no concentrates. No one wants to sell to us."

Smelter operations have been on and off since banks cut credit lines over worries about falling metals prices. Without credit, the company could not consistently buy concentrates.

In April, a group of Peruvian miners that sells supplies to Doe Run Peru agreed to give it a $175 million credit line, if its parent company, U.S.-based Renco Group, met two conditions.

The stipulations were that Renco had to fill a $156 million financial shortfall in its Peruvian unit and pledge its shares to the government as a way of promising it would complete an environmental cleanup project.

But so far Renco has not turned over its shares.

Peru's mining ministry has ruled out giving the company more time and Doe Run Peru has said completing the mandatory cleanup before the October deadline would be "difficult."

In its Tuesday statement, the company said it was committed to reaching deals with both its suppliers and the government, but that any final solution would need to be "flexible" with respect to the cleanup deadline.

Peruvian suppliers are waiting to sell to Doe Run Peru until the government and the company reach an agreement on the cleanup issue, the source said.

JOBS IN JEOPARDY

Unions have pressured President Alan Garcia to make sure the plant starts up again as it generates some 3,500 direct jobs and 16,000 indirect jobs.

On Tuesday, Luis Castillo, head of Peru's largest federation of mine workers, said he hoped the government clarifies its position soon on whether it will grant Doe Run Peru more time to complete the cleanup.

La Oroya, located about 108 miles (174 km) east of Lima, Peru's capital, frequently ranks among the world's top 10 most polluted sites.

"We are concerned for the security of jobs, for thousands of workers," said Castillo.

Nationally, the federation says some 9,750 mine workers have lost their jobs since November, as the global economic slowdown has slammed prices for most metals, the backbone of Peru's economy. (Writing by Dana Ford; Editing by David Gregorio and Carol Bishopric)

© Thomson Reuters 2009. All rights reserved.