Peru's La Oroya smelter seeking bank loans, cutting workforce

Friday, August 23, 2013

Peru's La Oroya metallurgical complex, the only polymetallic smelter in South America, is slashing its workforce and holding talks with local and international banks to finance an upgrade in a bid to make it more attractive for sale, an official said.

The former Doe Run Perú unit, which restarted zinc and lead operations in 2012 after bankruptcy halted operations for three years, is looking to finance a U$200mn upgrade of its copper division, plus US$568mn to modernize the rest of the 90-year-old smelter, Rocío Chávez, representative of smelter administrator Right Business, told BNamericas.

The smelter's board of creditors, which reached an agreement in July with Doe Run Perú to restructure the company's debts, aims to sell the La Oroya complex and the Cobriza copper mine once the smelter is producing copper by 2017, Chávez said. Swiss investment bank UBS is in charge of the sale process.

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"It would be difficult for an operator to buy La Oroya in its current state, with only the zinc and lead circuits operational, without being able to meet environmental standards," Chávez said. "We have to keep taking steps to create more value and make the company more profitable so an operator could buy it at any moment."

Right Business, which seeks to scale back its aging, 4,000-strong workforce, has cut 370 jobs to date by offering incentives to workers near retirement age, according to Chávez. The smelter is "gradually recovering" from a drop in metals prices, she added.

The company hired a Canadian consultant firm to produce a study to prove technology does not yet exist to meet tougher new environmental standards originally due to be enforced January 1, 2014, Chávez said. The smelter will have to invest in upgrades to meet current sulfur emission limits of 80ug/m3, she explained.

The smelter has a capacity of 122,000t/y lead and 43,000t/y zinc, according to Peru's energy and mines ministry (MEM). Cobriza produced 20,258t of copper in 2012.

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