Minsur eyes up Volcan's Chungar unit

Peruvian tin producer Minsur is looking at buying zinc miner Volcan's Chungar unit in central Peru's Pasco department, Minsur told the Lima stock exchange. Minsur's general manager and deputy manager, Fausto Zavaleta and Fortunato Brescia respectively, have been given authority to assess information on Chungar and, if positive, to negotiate the purchase of the unit, the company said. An analyst contacted by BNamericas said negotiations are at a "delicate" stage involving "various interested parties." Cash-strapped Volcan, formerly Peru's largest zinc miner, has been looking for a strategic partner for some time to help solve its financial problems. Apart from Minsur, Brazilian industrial conglomerate Votorantim and Swiss natural resources group Glencore have signed confidentiality agreements with Volcan to have access to the company's documents in order to evaluate investment options. Volcan said in a separate letter to the stock exchange on Friday that it had received proposals from Glencore, Paraibuna de Metais (part of the Votorantim group) and a company called BHL Resources, as well as from Minsur. It said the offers were in relation to the "process of incorporating a strategic partner and/or the sale of mining assets," and it is evaluating them. The company acquired Chungar in 2000 with capacity of 500t/d and completed a programmed expansion to 2,000t/d at the unit by the end of last year. In the first four months of 2003, production was 45.2% up at 18,968t zinc compared to same-period last year. In 2002, the unit accounted for 9% of Volcan's total output, compared to 5% the previous year, and the figure is set to increase with the latest hike in capacity. Volcan also operates the Cerro de Pasco unit in Pasco department, and Yauli in neighboring Junin department. Hard-hit by low zinc prices, Volcan owes about US$100mn to financial institutions and US$50mn to suppliers. It reported a net loss of 40.7mn soles (US$12mn) for 2002, up from a loss of 35.2mn soles the year before. The company produced 309,712t of zinc last year. Minsur is the world's third largest tin miner and the only one in Peru. It operates the San Rafael mine in southern Peru and the Funsur smelter-refinery in Pisco, 220km from capital Lima.