La Oroya smelter's creditors extend deadline for sale

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Friday, August 21, 2015

Creditors of the bankrupt La Oroya zinc-lead metallurgical complex in Peru extended a deadline for the potential sale of the former Doe Run unit after protests in the central Andes left one dead and 70 injured last week.

Creditors including Glencore, Trafigura Beheer, Pan American Silver, Buenaventura, El Brocal and Volcan agreed to retain local consultancy firm Profit Consultoría to manage the complex's ongoing bankruptcy process until the next creditors' meeting, the energy and mines ministry (MEM) said in a statement.

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President Ollanta Humala urged creditors to grant more time for the sale after workers clashed with police during four days of roadblocks along the central Andean highway to protest the imminent shutdown of Doe Run Perú's Cobriza copper mine. Workers also opposed tough new environmental standards they fear will discourage potential bidders for the assets.

The smelter's creditors originally planned to start liquidating the assets at the end of the month after failing to draw bidders for the metallurgical complex and Cobriza earlier this month.

Swiss investment bank UBS, hired in 2012 to manage the sale process, presented a report detailing objections of potential bidders, according to the ministry. These included demands for state agency Activos Mineros to clean up decades-old environmental liabilities in La Oroya and greater flexibility for hiring personnel, the ministry said.

The smelter, which restarted zinc and lead operations in 2012 after a three year shutdown but closed again in July 2014, failed to reach an agreement on concentrates sales with Trafigura unit Cormin last year. The smelter owes about US$600mn to a group of 100 creditors, including the government and workers.

La Oroya can produce 122,000t/y of lead and 43,000t/y zinc, according to the ministry. Cobriza produced 21,159t copper in 2014.

Built in 1922 by the Cerro de Pasco Corporation, and acquired in 1997 in a privatization process by US company Doe Run, La Oroya halted its operations in 2009 after metals prices collapsed. La Oroya has the capacity to produce a dozen different metals including copper and silver, but failure to meet environmental standards has shuttered the copper circuit.