MAC: Mines and Communities

A double exodus for Doe Run?

Published by MAC on 2010-12-27
Source: Business News Americas, Bloomberg, AP

Doe Run Peru may be shut down or liquidated once the competition regulator Indecopi announces Doe Run Peru’s list of creditors before the end of the year. The creditors will then have to decide on the fate of the company. In the meantime, workers reached a new agreement with the company to continue receiving 70% salaries even though the smelter is currently closed.

In the United States a similar fate may be developing for Doe Run in Herculaneum. The company is considering closing down by 2013 after years of grappling with the Environmental Protection Agency and attracting citizen lawsuits over health issues. Doe Run figures it has done its part having bought out 130 residential properties near the smelter and replacing the soil at more than 500 homes and more importantly it will pay $65 million to settle pollution issues and establish trust funds to clean up its sites. See previous MAC: Doe Run - Lead Producer to Pay $7M Fine, Spend $65M on Cleanups

If the company goes through with their exodus, it will be a relief as well as a worry for some residents south of St. Louis where the company has been for more than a century. While the cause of theirresient's health risks will be gone, hundreds of Herculaneuans will loose their jobs from the town's biggest employer and millions in tax revenue.

ESPAÑOL

MEM seeks to increase Doe Run Peru debt claim to US$259mn

By Ryan Dube

Business News Americas

15 December 2010

Peru's mines and energy ministry (MEM) is asking competition regulator Indecopi to recognize a US$259mn debt held by Lima-based Doe Run Peru, according to a document obtained by BNamericas.

The amount is about US$96mn more than what the ministry was originally claiming.

On September 14, MEM filed a request for Indecopi to recognize a US$163mn debt related to Doe Run Peru's future investment plans for the completion of environmental cleanup program PAMA at the company's polymetallic smelter in La Oroya.

The PAMA program dates back to a 1997 agreement when the smelter was privatized. The company has received several extensions to the original deadline to complete the cleanup, the most recent being a 30-month extension approved in September 2009 by congress.

MEM said that its original claim should be increased due to payments related to the company's failure to submit two letters of guarantee. The debt for failing to submit those documents is US$18.2mn, according to MEM.

In addition, the ministry said the debt should take into account an additional US$77.7mn in accumulated interest since the original deadline to complete the PAMA program expired in January 2007.

MEM is one of four government agencies that requested to be included in the list of creditors. The others are tax agency Sunat, energy and mining investment regulator Osinergmin and state-run environmental remediation firm Activos Mineros.

Indecopi is expected to announce Doe Run Peru's list of creditors before year-end. Once the company's debts are confirmed, the creditors will decide whether to restructure or liquidate the company.

The decision requires the support of two-thirds of the voting rights in the creditors' group unless Indecopi approves a related-party creditor that holds more than 50% of the total debt. In that case, the creditors group will be split in two and major decisions will require the approval of both groups.

Doe Run Peru suspended operations at its smelter last year when it ran into financial difficulties as a result of the global economic crisis.

Built in 1922 by the Cerro de Pasco Corporation and acquired in 1997 by St Louis-based Doe Run, the plant is known for having caused serious lead contamination around La Oroya.

The company is an affiliate of the New York-based Renco Group.


Peru to Ask Doe Run to Build $100 Million Acid Plant

By Alex Emery

Bloomberg

10 December 2010

Doe Run Peru will be required to build a $100 million plant to retain sulfuric acid emissions before it can restart copper production at its shuttered La Oroya smelter, Energy & Mines Minister Pedro Sanchez said.

The government may cancel the smelter concession after the Renco Group Inc. unit, which filed for bankruptcy last year, failed to reach an accord with creditors, Sanchez told reporters today at the ministry.

"The company must comply with its environmental cleanup plan," Sanchez said. "The other option is for its creditors to run the smelter."

Doe Run shut its Peruvian zinc, lead and copper smelter last year after metals prices plunged at least 50 percent in London in 2008.

Doe Run Vice President Jose Mogrovejo didn't return two telephone calls and an e-mail seeking comment.

Peruvian metals output may decline next year before Xstrata Plc and Cia. Minera Antamina SA complete expansions at their copper mines in 2012, Sanchez said. Copper production fell 2.5 percent and gold dropped 11 percent through October, according to the ministry.

Copper futures for March delivery rose 2.7 cents, or 0.7 percent, to $4.114 a pound at 10:06 a.m. on the Comex division of the New York Mercantile Exchange. Zinc for delivery in three months fell $22.50, or 1 percent, to $2,277.50 a metric ton on the London Metal Exchange, and lead fell $15, or 0.6 percent, to $2,390 per ton.


Doe Run Peru reaches wage agreement with La Oroya workers

By Ryan Dube

Business News Americas

16 December 2010

Lima-based Doe Run Peru will continue to pay workers from its polymetallic smelter in La Oroya 70% of their salaries and other benefits even though the plant remains closed, according to a copy of the recent agreement obtained by BNamericas.

The contract was signed on Wednesday (Dec 15) at the labor ministry. Workers had been receiving 70% of their salaries under a previous agreement that expired on November 30.

The new agreement requires workers to help with maintenance at the smelter. The company and union will also meet periodically to discuss updates to proceedings at competition regulator Indecopi that will result in Doe Run Peru being restructured or liquidated.

Operations at the smelter were suspended last year when the company ran into financial difficulties as a result of the global economic crisis.

The new agreement is valid until August 31, 2011 but it will be suspended if Doe Run Peru's creditors make a decision before that date.

Built in 1922 by the Cerro de Pasco Corporation and acquired in 1997 in a privatization process by St Louis-based Doe Run, the plant is known for having caused serious lead contamination around La Oroya.


Lead smelter's pending exodus tugs at Mo. town

Associated Press (AP)

11 December 2010

HERCULANEUM, Mo. - The sprawling green space across from the Catholic church might be Herculaneum's prettiest asset, the kind of inviting place where people could flock to picnic or sling a Frisbee - if potential danger didn't lurk in the grass and ground.

That land, fenced off and marked by warning signs, once had a collection of homes and businesses. Each was bought up and systematically cleared by the owner of the lead smelter blamed for tainting the area with the toxic metal.

Letting the property sit empty is the kind of adjustment residents have made in the Mississippi River community of 3,600, where the nation's biggest smelter and worries about the pollution that the century-old facility emits mean people sometimes wash their hands more often and leave their shoes outside.

Yet soon, those concerns may scatter to the wind. Owner Doe Run Co., after years of grappling with the Environmental Protection Agency, plans to shutter the smelter by the end of 2013. Even as the cause of their health risks will be gone, people fear the loss of hundreds of jobs - Doe Run is Herculaneum's biggest employer - and millions in tax revenue, along with the grim prospect that they could be left with homes no one will buy.

"In my heart of hearts, I would like to see the jobs and the process stay, but I don't want anything that endangers the people of Herculaneum," said Larry O'Leary, a member of the community group that has monitored Doe Run's pollution.

The plant, dating to 1892, is the nation's only primary lead smelter, the place where heat helps extract from raw ore the lead used in such things as car batteries, computer screens and X-ray shields. Doe Run figures its future may rest in the technology of a heatless, liquid process it says can cull lead from the ore virtually free of emissions.

Doe Run hasn't said if it's leaving town for good, taking with it the 270 jobs and millions of dollars in taxes it contributes locally and to the state each year. The company warns that if it closes the smelter without replacing it, the U.S. risks becoming dependent on China and other countries for its primary lead metal. Chief Operating Officer Jerry Pyatt said the company is weighing whether to build the new processing site and, if so, where - with Herculaneum a possibility.

"I prefer they stay. If they do, they probably are going to buy our property," the Rev. Bob Fleiter said, as turf belonging to the Catholic Church of the Assumption - in the shadow of the smelter's smokestack - was being resodded for the second time, courtesy of Doe Run. "If we got a fair price for the church, we'd have been out of here yesterday."

Doe Run has drawn citizen lawsuits and has increasingly has grappled with the EPA about its ability to contain the lead, which in low levels early in life can affect learning, IQ and memory in children. The toxic metal can also cause cardiovascular, blood pressure and kidney problems in adults. At times the EPA deemed the pollution severe enough that families were asked to take measures such as washing children's toys if they were used outdoors.

Over the past three decades, the EPA has cited Doe Run for air emissions, lead dust in homes, and elevated levels of the metal in yards and children's blood. The standards got even tougher two years ago, the result of a lawsuit by a Missouri environmental coalition on behalf of two former Herculaneum residents. The federal government changed its standards for the permissible amount of lead in the air for the first time in three decades, making them 10 times stricter.

Doe Run figures it has done its part, over the past decade or so having bought out 130 residential properties near the smelter and replacing the soil at more than 500 homes. Much of that property has been transformed into the off-limits green space. As part of a potentially $65 million settlement with the EPA, Doe Run also agreed to pay a $7 million fine for pollution violations, with the money split equally between the federal government and the state for regional schools. And the company will establish trust funds of tens of millions of dollars to clean up its sites in Herculaneum and elsewhere in southeast Missouri.

O'Leary credits the company for its cleanup efforts and trying to meet the EPA's air-pollution guidelines. He wouldn't mind Doe Run staying - if it turns to cleaner lead processing, which he hopes could stoke local economic development some believe the pollution flap has stifled in a town with a coveted place along a freeway, rail lines and the Mississippi River.

But what's to be done with the smelter property? Pyatt says Doe Run has spent more than $500,000 in the past two years studying that, with some concluding it'd be a great spot for a Midwest port. Doe Run's deal with the EPA calls for the company to comprehensively clean up the site after it closes. And there's the prospect that the property - and plant - could be used for something else.

Stan Stratton, head of the school district that includes Herculaneum, worries about losing most or all of Doe Run's $500,000 yearly contribution to the district's $13 million operating budget. The company's possible exodus could mean the district might have to renege on its promise to its patrons two years ago that their taxes wouldn't rise if they signed off on a bond issue paying for $12 million in upgrades to the high school and a grade school, Stratton frets.

"It's just going to put a bigger burden on the rest of taxpayers," he says, and perhaps force more cuts in a district that last year had to jettison a handful of staff positions.

Just a couple of blocks from the smelter, Lisa Price lives in the only occupied house on the street after Doe Run snapped up the nearby properties with buyouts the Prices opted not to take, thinking the company's offer wasn't sufficient. She knows she may not get another offer from Doe Run, and that the house may be unsellable.

Yet she counts her blessings. Routine tests on lead levels in her blood have come back negative, and there are no young children - the most vulnerable to lead exposure - who romp around in her yard, which Doe Run replaced a few years ago.

"It doesn't bother me - I don't eat the dirt," she said as a big truck rumbles its way to the smelter. "What drives me nuts is that (Doe Run) workers speed during shift changes."

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