MAC: Mines and Communities

Peru cancels US mining company's smelter license

Published by MAC on 2010-08-08
Source: Associated Press, Reuters, La Republica

...but not for another 20 months

Peruvian President Alan Garcia has accused Doe Run Peru of "playing games" and said its license to operate the La Oroya smelter would be cancelled, since it missed the deadline - July 27 - to comply with the Environmental Management and Adaptation Program.

However, this does not mean the closure of La Oroya operations per se, as the law stipulates another 20 months grace for Doe Run.

Presumably this won’t satisfy either the majority of its workforce or those, on the other hand, who have been calling – both inside and outside Peru – for the company to fold its toxic tent and quit Peru altogether.



Peru cancels US mining company's smelter license

The Associated Press

28 July 2010

LIMA, Peru - Peruvian President Alan Garcia announced Wednesday that the government has canceled the license of the U.S.-owned Doe Run mining company to operate a smelter after it failed to meet a financial deadline.

The Ministry of Energy and Mines said Doe Run did not demonstrate it obtained needed financing to improve environmental safeguards at the smelter, which was idled in June 2009 because of the company's money problems.

The government had given Doe Run until Saturday to produce documentation.

"Expiration of the period without solving environmental pollution will cancel the operating license," Garcia said during a speech.

Fernando Gala, deputy minister of mines, told The Associated Press that the cancellation decision would probably be officially published Friday or Monday.

Doe Run, a subsidiary of New York-based Renco Group, has a debt of $110 million with suppliers and has yet to make any investment in government-mandated environmental improvements with an estimated cost of about $150 million.

The mining company had operated the smelter in the city of La Oroya in the central Andes since 1997, processing copper, zinc, silver, lead, indium, bismuth, gold, selenium, tellurium and antimony.

La Oroya is ranked sixth on a list of the 10 areas with the highest air pollution in the world, according to the Blacksmith Institute, an environmental group based in New York.

Gala, the deputy mining minister, said the government is running a work project for the smelter's nearly 3,500 workers.

Peru's Garcia says Doe Run license being canceled

Terry Wade and Patricia Velez


28 July 2010

LIMA - Peruvian President Alan Garcia accused Doe Run Peru on Wednesday of "playing games" and said its license to operate the sprawling La Oroya smelter would be canceled after a drawn out financial crisis.

Garcia, who made his comments during a raucous speech to Congress, suggested the company, a unit of privately held U.S.-based Renco Group, had been asked to leave the Andean country.

On Tuesday, the mining ministry declared Doe Run's contract void after it failed to meet a series of deadlines to finish an environment cleanup and restart its smelter, idled a year ago after it fell into financial trouble when metals prices plunged during the global crisis.

"Having missed the deadline without solving the environmental pollution problem, the law will be strictly applied and the operating license canceled," Garcia said. "A company that abuses the country or plays games like Doe Run should be stopped."

The government had asked Doe Run to secure financing and guarantees for $110 million owed to creditors and $150 million needed to finish an environmental cleanup of one of the world's most polluted sites.

Now, regulators could opt to close the plant or allow creditors to push the company into a bankruptcy proceeding that might put it in the hands of a new operator so the smelter could reopen, saving thousands of jobs.

Shortly before the government's announcement, a Doe Run Peru official said the company would keep trying to line up help from creditors, suggesting the company would challenge the government's findings.

Union leader Royberto Guzman told Reuters that workers were anxious to return to their jobs.

Doe Run's prolonged crisis has troubled President Alan Garcia's administration, which fears the loss of 3,500 direct jobs and 16,000 indirect jobs in the Andean region of Junin where the mining company operates.

Closing Doe Run, at one time the country's sixth largest metals exporter, could also leave unfinished a program to clean up a city ranked as one of the world's 10 most polluted places.

Peru is the world's largest producer of silver, second-largest producer of copper and the sixth-largest producer of gold.

(Reporting by Terry Wade; Editing by David Gregorio)

Doe Run mocks government

La Republica *

3 August 2010

Their hands are tied. Decisions about closing the company cannot be made until 2012. According to the law that extended the PAMA, Osinergmin may only take such an action within 20 months. The company will only receive fines for failing to restart their operations. 

A tense and long wait. Despite the announcement of President Alan Garcia to revoke the company's operating license, the government has 20 months to decide to close the company, in other words until March 2012.

The Law 29 410 - approved by Congress in September of 2009 - extended the deadline by 30 months for the compliance of the Environmental Management and Adaptation Program (PAMA in its Spanish acronym). 

This was divided into two phases: An initial period of 10 months to establish funding for the project "Sulfuric acid plant and modification of the copper circuit” and for the plant operations to restart. The first stage was given the deadline of July 27, which has already lapsed, and the company has failed to restart their operations and obtain financing.

The second stage established a period of 20 months for the company to complete the sulfuric acid plant.

20 months left

The Supreme Decree 075-2009-EM, which regulates Law 29 410, says that only after the 20 months has lapsed, can Osinergmin order partial or total cessation of operations of the smelter. In case of violating the first term, the decree can only claim fines, but not closure.

The decree states: "After the maximum period of twenty (20) months has expired, Osinergmin must carry out an audit to determine full compliance of the company’s obligations regarding the project. If the company has not complied with the full obligations under the Law 29 410, Osinergmin will order the partial or total cessation of operation of the La Oroya Metallurgical Complex”

Apparently the announcement of the President to revoke Doe Run’s operating license was more a reflection of his own feelings rather than the law.

Only failure of compliance was reported

Yesterday, the Ministry of Energy and Mines (MEM), through Resolution 289-2010-MEM-DGM, notified Doe Run of their breach of the commitments of the first term, but does not mention the possibility of closing the company. Osinergmin only announced the breach.

In this regard the former Mining Director of the MEM, Mary Chappuis, reported that Doe Run can restart their operations at any time during the second term since the law allows it.

"A shutdown process is not simply padlocking the doors of the smelter and sending everyone home. It is much more complex than that," she said.

They insist in compliance

Also, yesterday afternoon the company issued a new statement which said it will fulfill its environmental and financial commitments within the 20 month period.

"We will adjust the implementation schedules to compensate for delayed resumption of operations in order to complete the final environmental project," they promised.

[* Translated from Spanish original by MAC]

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