MAC: Mines and Communities

Peru Wins Arbitration Dispute Over Doe Run Cleanup

Published by MAC on 2016-07-21
Source: Bloomberg, Reuters

Peru Wins Arbitration Dispute With Renco Over Smelter Cleanup

Andrew Martin

18 July 2016

Peru defeated an arbitration case brought by Renco Group Inc., claiming the government had overstepped in authority by ordering its affiliate, Doe Run Peru, to clean up pollution linked to its lead and zinc smelting operations in the mountain town of La Oroya and forcing it into bankruptcy.

The arbitration panel issued a partial award for Peru on Friday, the Ministry of Economy and Finance said Monday in a statement. Renco, owned by U.S. billionaire Ira Rennert, had sought $800 million in compensation.

The case illustrated the complexities of allowing private investors to file arbitration claims against sovereign nations, and became a lighting rod for the debate over remediation claims allowed under trade agreements.

Renco brought the case in 2011 under the trade agreement between Peru and the U.S. The arbitration panel found that Renco hadn’t complied with the terms of that treaty and dismissed Renco’s claims for lack of jurisdiction, according to the statement. A decision on costs for the proceedings will be decided later, the Peruvian government said.

Peru's president-elect vows to reopen smelter formerly owned by Doe Run

Mitra Taj


6 July 2016

Peru President-elect Pedro Pablo Kuczynski vowed on Wednesday to make his "strongest effort" to reopen the polymetallic smelter La Oroya, part of his goal of wringing more value out of the country's key mineral exports.

The former operator of the smelter, Doe Run Peru, owned by U.S.-based Renco Group Inc, halted operations at La Oroya in 2009 when it ran out of money to buy concentrates. The company also lacked financing needed to finish an environmental clean-up and to pay for upgrades to curb pollution.

Now controlled by Doe Run's former creditors, the smelter faces liquidation on Aug. 27 unless a new buyer is found.

"La Oroya is dying and we have to change that. We have to give it oxygen, oxygen from investors," Kuczynski said in televised comments before a crowd in the town of La Oroya, where former workers have held rallies to demand operations resume.

"You have my word that I'll make my strongest effort to push this out!" Kuczynski said to cheers. The former investment banker, 77, takes office on July 28.

Kuczynski asked La Oroya residents to march to Lima to help him press the incoming opposition-controlled Congress to extend the liquidation deadline. He did not say what he would do to make the smelter, which opened in 1922, more attractive.

Kuczynski's party will have just 18 lawmakers in the 130-member Congress, threatening his proposed reforms as the party of his defeated rival, Keiko Fujimori, will hold 73 seats.

Kuczynski wants Peru to become a refining and smelting hub to boost its copper, zinc, tin, gold and silver exports as slumping prices drag on growth. His first trip abroad as president will be to China to talk with officials about potential partnerships on refineries.

La Oroya, some 87 miles from Lima in central Peru, could process concentrates from several nearby mines, Kuczynski said. Toromocho, operated by Chinese miner Chinalco Mining Corp. International, is the biggest copper deposit near the La Oroya smelter.

"When minerals are refined here, their value will go up. There's a margin of about $400 million that we can recover," Kuczynski said.

The smelter was once the world's most diversified — churning out gold, silver, lead, zinc, copper and a dozen specialty metals. But it turned La Oroya into one of the 10 most polluted places in the world, according to a 2007 report by the environmental group the Blacksmith Institute organization.


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