Peru government rejects Doe Run smelter plan

Production and Markets

Peru’s government rejected a proposal by Doe Run Peru to reopen its shuttered lead and zinc smelter, saying the company needs to put up more cash.

The government said that it will not agree to delay a deadline for an environmental clean-up unless the company puts up 100% of its shares as a guarantee. The Energy and Mines Ministry said that the subsidiary of the Renco Group needs to spend "at least US$100 million", compared with the US$31 million proposed last month.

Banks froze Doe Run’s accounts in February after metal prices collapsed, and the smelter halted all operations on June 2 because it couldn’t buy the raw materials needed. Copper, zinc and lead prices plunged at least 49% in London last year, leading to US$124 million in company losses, Doe Run said in June.

"We’re studying a new proposal for suppliers and the government to be discussed in a meeting later this week," Doe Run vice president Jose Mogrovejo said in a telephone interview from La Oroya. "We hope to reach an agreement on this as soon as possible."

US billionaire Ira Rennert, Renco’s owner, must inject cash for the smelter, deputy mining minister Fernando Gala said in his statement. The government rejected the company’s proposal to use a prior US$18 million guarantee and tax rebates to finance part of its US$156 million debt to suppliers.

The government may extend an October 31 clean-up deadline if the company commits US$150 million over an 11-month period. Doe Run proposed a 30-month period to build a sulphuric acid plant to curb emissions.

(Bloomberg, July 15)