Renco Group Inc.’s Doe Run Peru unit, the country’s fourth-largest exporter, has shut zinc-and lead-processing plants after a group of banks froze its accounts last month, curtailing the nation’s metal supplies.
Doe Run Peru stopped buying concentrates for its La Oroya smelter in the central Andes, according to an internal memo obtained by Bloomberg News and confirmed by spokesman Victor Belaunde. The company may also close its Cobriza copper mine, Luis Castillo, general secretary of the Mining Federation, a group that represents 28,000 miners, said in a March 18 telephone interview.
“The company doesn’t have any working capital despite making money over the past four years,” Castillo said. “We will meet with Energy & Mines Ministry officials to find out if the company can be saved.” Belaunde, the Doe Run Peru spokesman, said the company is working on a solution with banks and declined to comment further.
The collapse of metals prices caused by the global economic crisis forced about 30 other miners in the Peruvian central highlands, the country’s biggest producer of zinc, lead and silver, to seek other buyers after banks “froze” financing to Doe Run on Feb. 24, according to the memo. The freeze prompted Doe Run to halt payments to suppliers the next day.
Doe Run’s La Oroya smelter, 140 kilometers (87 miles) east of Lima, last year refined 114,259 metric tons of lead; 43,440 tons of zinc; 53,831 tons of copper and 1.1 million kilograms of silver, according to the Energy & Mines Ministry.
The crisis forced Glencore International AG, Volcan Cia. Minera and Pan American Silver Corp. to shut mines in Peru and shed jobs after metals prices slumped. Copper, zinc, lead and silver have all fallen at least 20 percent since July. Peru is the world’s largest producer of silver, the third-largest miner of copper, zinc and tin and No. 5 for gold.
“These difficulties are the result of the global financial crisis, which has produced a drastic drop in demand in metals prices and consequently, our income,” according to the memo.
The unit cut 1,100 subcontracted workers at its copper mine and zinc, lead and copper smelter in January in a bid to reduce costs, according to the Mining Federation.
“Everything’s apparently on hold pending a government bailout,” Roiberto Guzman, a Doe Run Peru metallurgical union spokesman, said by telephone from La Oroya, Peru. “The union has requested an interview with Doe Run management, as we can’t go on with this suspense.”
Doe Run’s suppliers include Cia. de Minas Buenaventura SA, Soc. Minera El Brocal SA, Cia. Minera Milpo SA, Cia. Minera Atacocha, Volcan and Pan American, according to the National Society of Mining, Petroleum & Energy, an industry group.
Buenaventura Chief Financial Officer Carlos Galvez, El Brocal Chief Executive Officer Ysaac Cruz, Volcan Chief Executive Officer Jacob Timmers, Atacocha Chief Executive Officer Abraham Chahuan, Milpo spokesman Francisco Ismodes and Pan American’s spokeswoman Kettina Cordero didn’t return phone calls or e-mails seeking comment. Glencore spokesman Marc Ocskay declined to comment in an e-mail.
The company, which posted $1.45 billion in sales in 2007, buys $1 billion of concentrates a year, according to Doe Run’s Web site. The company has invested $300 million in improvements since buying the smelter from state mining company Centromin in 1996.
“The problems at Doe Run will have more of an impact on Peru’s economy than they will on base metals prices,” Rodrigo Zuazo, a mining analyst at Lima-based brokerage SAB Centura, said in a telephone interview. “Demand has yet to recover for metals like zinc and lead.”
Source: Bloomberg
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