MAC: Mines and Communities

Renco files for arbitration against Peru over Andean smelter

Published by MAC on 2011-04-27
Source: Reuters

The government canceled the company's operating license

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Renco asks for arbitration with Peru over Doe Run


13 April 2011

LIMA - New York-based investment company Renco Group has filed for arbitration against Peru to resolve a longstanding dispute over its sprawling Doe Run Peru metals smelter, a government official said on Wednesday.

Local newspaper Peru 21 said Renco had demanded Peru pay penalties of $800 million for cancelling Doe Run Peru's operating license, but the government official did not confirm the amount. Renco could not be reached for comment.

Renco had said in January it might demand an international arbitration process to resolve disputes over the smelter, a protection provided for under the terms of Peru's free-trade agreement with the United States.

Peru's mining minister said earlier this year that creditors were looking at taking over the smelter or liquidating it under a bankruptcy process overseen by regulator Indecopi.

The government canceled the company's operating license for the La Oroya smelter in July after it failed to complete an environment cleanup project. The smelter had not been operating for the previous year because of cash flow trouble caused by the global financial crisis.

The Peruvian government had asked Doe Run to secure financing and guarantees for $110 million owed to creditors and $150 million needed to clean up La Oroya, one of the world's most contaminated sites.

The plant was privatized in 1997. Under the terms of the sale, Renco agreed to put filters on the smelter and Peru's government promised to remove contaminants from the hills and the town surrounding the century-old plant.

Renco also said the pact protected it from lawsuits filed by local residents who complain that years of pollution has damaged their health.

In full-page advertisements published in Peruvian newspapers in January, the company said the government has not followed through on its own cleanup effort or honored the terms of the privatization agreement.

(Reporting by Patricia Velez; Editing by Ed Lane)

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