Union workers reject legal action against Doe Run Cayman

Thursday, April 7, 2011

Union workers at Lima-based Doe Run Perú's polymetallic smelter in La Oroya reject the legal action aimed at removing Doe Run Cayman from the former's list of creditors, national mining, metals and steelworkers federation FNTMMSP head Luis Castillo told BNamericas.

"It is an outrage. Workers are very upset and next week they will most likely respond along with the population [of La Oroya]," Castillo said.

Workers plan to meet on Friday (April 8) with residents and authorities from La Oroya to discuss holding a demonstration, he said. The union has also sent an appeal to competition regulator Indecopi to protest its decision to suspend an April 4 creditors meeting.

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"We have sent an appeal because Indecopi has overstepped its role in suspending the meeting," Castillo said.

Indecopi had recognized a US$139mn claim by Doe Run Cayman, making it Doe Run Perú's largest creditor with 59.4% of the voting rights.

Creditors were scheduled to meet this week but Indecopi suspended the meetings following a court ruling, which came about as a result of a legal action filed by local firm Consorcio Minero Cormin.

Indecopi recognized a US$28.9mn claim by Cormin, making it Doe Run Perú's second biggest creditor with 11% of the voting rights.

Cormin claims that an independent audit of Doe Run Perú found that it failed to comply with a 1997 privatization agreement of the smelter and only owes US$2mn to Doe Run Cayman.

"We reject that statement because the only one responsible for determining the debt is Indecopi. It has nothing to do with the courts and, while this process continues, it shouldn't have intervened," Castillo said.

Doe Run Perú has also come out against Cormin arguing that is has complied with the privatization agreement.

"Doe Run Perú has a debt with Doe Run Cayman," the Lima-based firm said in a release. "After an exhaustive legal and accounting analysis that has taken various months, Indecopi recognized the debt and granted Doe Run Cayman a right to vote in the creditors group."

Cormin is looking to gain control of the creditors group in order to promote the liquidation of the company, according to Doe Run Perú, although publicly Cormin has said it has not yet decided whether to support a plan to restructure or liquidate the firm.

The group includes over 60 creditors.

Peruvian miner Volcan is the third biggest creditor with US$16.7mn, or 6.42% of the voting rights. It is followed by local miner Buenaventura (NYSE: BVN) with US$13.1mn (5.02% of the voting rights), Minera Casapalca with US$5.94mn (2.26% of the voting rights) and Vancouver-based Pan American Silver (TSX: PAA) with US$5.61mn (2.14% of the voting rights).

Indecopi recognized a claim by workers for 12.7mn soles (US$4.52mn), which gives them 1.73% of the voting rights in the creditors group, Castillo said.

Other creditors include local miners El Brocal, Ares, Argentum, Atacocha, Raura and Santa Luisa.

Operations at the La Oroya smelter have been suspended since June 2009 when Doe Run Perú ran into financial difficulties as a result of the global financial crisis. The company is an affiliate of the New York-based Renco Group.

The full interview with Luis Castillo will be published in this Friday's Metals Perspectives, for subscribers only.