Cash-strapped Peru smelter La Oroya halts operations

Peru's La Oroya metallurgical complex halted all operations until August 9 because of a lack of concentrates supply, an official said Friday.

The former Doe Run Perú unit, which restarted zinc and lead production in 2012 after bankruptcy halted operations for three years, lacks both concentrates and capital to continue operating, Rocío Chávez, representative of smelter administrator Right Business, told BNamericas.

The smelter sent home 1,500 workers and only brought in management and emergency maintenance staff, Chávez said. Workers would be paid, she said, adding that the company's Cobriza copper mine was operating normally.

Chávez told BNamericas last month that the company was holding talks with traders Trafigura Beheer and Glencore to secure lead supplies after slumping metals prices discouraged suppliers from selling concentrates to the smelter.

"We still haven't managed to line up supply, so this has sparked a force majeure," Chávez said. "The situation at the smelter is very difficult."

The smelter's unions scheduled assemblies later Friday to discuss the measures, Lima-based newspaper La República said. And they may, after earlier this month postponing a strike originally called for July 21, block roads and take over public buildings to protest a company plan to lay off 750 workers, the paper added.

Creditors including Glencore, Trafigura, Pan American Silver, Buenaventura, El Brocal and Volcan, which last year hired Swiss investment bank UBS to sell the La Oroya complex and Cobriza, are looking to put the zinc-lead smelter up for sale by December.

The board of creditors is scheduled to meet in mid-July, according to Right Business. The smelter owes around US$600mn to a group of about 100 creditors.

La Oroya, the only polymetallic smelter in South America, can produce 122,000t/y of lead and 43,000t/y zinc, according to the energy & mines ministry (MEM). Cobriza produced 19,578t copper in 2013.

Built in 1922 by the Cerro de Pasco Corporation, and acquired in 1997 in a privatization process by Doe Run, La Oroya halted 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.