MAC Mines and Communities

Peru shall not grant any more term extensions to Doe Run for environmental plan

Huancayo’s people march against environmental contamination produced by Doe Run

Published Date: 27‐05‐2009 Source: CNR, El Comercio, Reuters Source Date: 21‐05‐2009

Wednesday, May 20, 2009 By Teresa Céspedes

LIMA (Reuters) – Peru declared on Wednesday that it had no plans to extend the term it had granted the beaten‐up Doe Run Peru, the fourth major exporter of metals in the country, which could aggravate the financial crisis the company is experiencing.

Nonetheless, Doe Run Peru’s general manager, Juan Carlos Huyhua, insisted in requesting more time to complete its environmental clean‐up plan (PAMA) and the possibility of obtaining “a structured financing”.

A creditor of Doe Run Peru said this past Tuesday that the company is not complying with a pact it made with the State and mining companies that would help it to save itself from a financial collapse, going so far as to conditioning its fulfillment of its commitments to the PAMA extension term.

“From the PAMA point of view, we have not seen, we have not experienced any legislative change that would make us foresee an extension of the PAMA”, stated Juan Felipe Isasi, the Vice Minister of Mining.

“There is a legal framework in force [...] within which Doe Run’s PAMA must be completed, which expires in October”, he added.

The company, that operates the largest metallurgical complex in the country, later said in a communication “[that it] ratifies its commitment […] as soon as it defines all the details of the required commitments with its providers and the Government.”

“Doe Run needs the extension […] to culminate the execution of the PAMA, either through the use of its resources or through a structured financing”, said Huyhua to the local television station Canal N.

“Everything is subject to an arrangement that will define the financing and pertinent timing of the PAMA”, added Huyhua, who explained that currently the company is losing 7.0 million dollars a month.

Doe Run mining company still has time to complete the plan that has a pending investment of 73 million dollars, said Isasi, the Vice Minister of Mining. The company states that it has already spent 307 million dollars in this program.

The State has previously granted Doe Run extensions of the PAMA, and officials of the sector now say that the deadlines should be respected.

THE COMPAY STILL HAS TIME

The company is facing a terminal financial problem after banks cut a line of credit vital to its operations, at a time when the global crisis plummeted metals prices.

The mining crisis worries the Government of President Alan García, who fears that the collapse of Doe Run could lay off 3,500 direct workers and another 16,000 indirect workers. In early April, Doe Run Peru managed for a group of local companies to guarantee two lines of credit in the amount of 175 million dollars. In exchange, the company’s parent company, Renco Group, must capitalize a debt of 156 million dollars to the Peruvian affiliate.

The company must also pledge 100% of its shares to the State to comply with the PAMA, but according to the company’s creditors, Doe Run Peru is first looking to extend the PAMA deadline. “There is no official PAMA extension request, nor is there a conditioning, obviously, of a company to meet its obligations which are, by rule of law and within an administrative act, compulsory”, said Isasi.

The official explained that, according to the law, Doe Run “could close if, after all the requests it has made to the supervising authority, it persists in its non‐compliance.”

The Vice Minister calculated that, after October, Doe Run will have six or eight more months, the duration of the audit, to comply with the PAMA. “It still has time to honor its commitments”, added Isasi, who explained that Doe Run’s smelter and refinery is operating at 30% of its capacity.

According to the company, the metallurgical complex, located in the Andean region of Junín, is partially producing its copper and lead circuits, while operations at the zinc circuit are still suspended.

ECONOMICS Doe Run shall cease to operate if it breaches the PAMA Says the Vice Minister of Mining May 21, 2009

Doe Run Peru’s situation may become more complicated over the next months. Felipe Isasi, the Vice Minister of Mines, warned that if the mining company does not reduce its contaminant emissions in La Oroya by October, forming part of its Programa de Adecuación y Manejo (PAMA), the operations would close. Currently, the mining company is going through a difficult financial situation, after the banks BNP Paribás, Banco de Crédito and Standard Bank cut a revolving line of credit of US$ 75 million in February, which left the company without working capital to purchase concentrates and process them in its smelter and refinery in La Oroya.

Moreover, Doe Run has a US$ 100 million debt with various mining companies that provide it minerals.

Despite the fact its mining providers offered it a loan of US$ 100 million in concentrates and guaranteed a bank credit in the amount of US$ 75 million, until now such aid has not crystallized.

This is because the loans were tied to a commitment Doe Run Peru made to capitalize a debt of US$ 156 million it has with its parent company, the Renco Group. Additionally, the mining company agreed to pledge its shares to the Peruvian Government to guarantee its fulfillment of the PAMA. These agreements have not yet been met.

According to sources in the sector, Doe Run conditioned the capitalization of its debt to the government as long as it is guaranteed an extension of the PAMA for one more year. It also requested Cofide to grant it a line of credit of US$100 million for the PAMA.

Isasi flatly denied the possibility of the Peruvian Government providing financial assistance to the mining company. Yesterday, Doe Run published a communication indicating that “as soon as it defines all the details of the required commitments with its providers and the Government to implement the integral solution, Doe Run Peru and its parent company (the Renco group) shall provide all necessary documentation (as part of the agreements signed 45 days ago with the Government and company creditors)”. The general manager of Doe Run, Juan Carlos Huyhua, said that this could take place in three weeks time.

The Doe Run matter was discussed yesterday in the Council of Ministers, although no details have been given as to whether an agreement was reached.

The ex‐president of the National Mining, Oil and Energy Society, José Miguel Morales, indicated that the issue is currently at an impasse—there is uncertainty surrounding what will happen in the next few days.

Huancayo’s people march against environmental contamination produced by Doe Run Fiorella Orihuela – Radio Cumbre

Huancayo, May 14, 2009 (CNR) – The Regional Environmental Commission (CAR per its initials in Spanish) of Junín, in coordination with various civil institutions, began a campaign called “Not one more day”, arising from the mining company Doe Run’s extension request for the Programa de Adecuación y Manejo Ambiental (PAMA).

In light of this request, [the people of Huancayo] announced a peaceful march to take place this Friday, May 22nd, concentrating in Huancayo, Jauja and La Oroya.

The Dialogue Roundtable began the social week with the ‘Thursday trainings’, and today will discuss the air, water and soil quality evaluation, in the auditorium of the Casa Pastoral de Marcabaya, in La Oroya, with the participation of the entire town and regional authorities.

The Programa de Adecuación y Manejo Ambiental (PAMA) of the mining company Doe Run expires next October 31st.