Doe Run Lead and Zinc Smelter Still Going Nowhere

by on
Commodities, Green, Non-ferrous Metals

Most metals producers managed to ride out the catastrophic drop in metals prices in 2008 but a few were hit by the combination of plummeting prices, canceled orders and the severing of credit lines. Inevitably it was the smaller players who got hit the most.

Doe Run Company, the Missouri based metals miner and processor who purchased the mining and refining facilities of Centromin from the Peruvian state in 1997 is one such company. The Peruvian operations consist of a copper and lead smelter and zinc refinery. These are closely integrated and have additional facilities to recover byproducts, particularly from the ‘dirty concentrates’ produced by a number of local mines according to Wikipedia. They include gold and silver (mainly from refinery residues), antimony, arsenic trioxide, bismuth, cadmium, indium, selenium, tellurium, and sulfuric acid. Production in 2006 was 48,600 tons of copper, 120,600 tons of lead, 45,000 tons of zinc, 34 million ounces of silver and 67,000 ounces of gold. The company also owns a copper mine at Cobriza, south of La Oroya, where it produced 16,244 tons of copper in concentrate in 2006.

In an effort to protect their still profitable US operations, Doe Run USA has quietly transferred Doe Run Peru’s status as a subsidiary to that of an affiliate. Doe Run purchased the mines and smelters in Peru with a massive environmental problem. While they were indemnified against legacy claims by the state they still had a challenge meeting the investment needed to clean up the water, particulate and gaseous emissions from the smelters. In the first half of the last decade, lead and zinc prices were flat but as prices rose in the second half, profits should have been sufficient to embark on an extensive investment campaign. Unfortunately the price crash and banks withdrawal of credit have ended that and the mine ceased operations last summer when suppliers stopped extending credit as debts rose to $110m.

The government of Peru had given the firm several extensions to deadlines to complete the clean up program that is needed at the plant. The La Oroya smelter and associated mines employ some 20,000 people but the environment around the smelter and the town are considered an environmental disaster ranked as one of the ten most polluted mine sites in the world. Even so, in a Reuters article company officials say Doe Run has spent $307 million installing scrubbing and other upgrades to the smelter and may need up to $150 million more to complete the cleanup.

Apparently Glencore is reported to have offered Doe Run credit lines to re-start production but the company needs to come to an agreement with its suppliers and the credit line probably doesn’t extend to further environmental clean-up work. The firm was given a further 30 month extension to its deadline to complete the clean up last October. We read Doe Run MO’s move regarding the legal status of Doe Run Peru as recognition that the long-term viability of the Peruvian operation is in doubt and distancing the US operations is likely to improve the chance of not being dragged down if it fails. The Peruvian government looks like it is finally losing patience issuing a warning that if production (and hence employment and tax revenues) do not re-commence by July 31 they will take action, probably meaning re-nationalization.

Ultimately metal will be shipped from the La Oroya smelter again but whether it is under the Doe Run name or some other entity remains to be seen. The challenge is not the economics of mining ore and smelting metal it is meeting the long term environmental responsibilities that go with it.

–Stuart Burns

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.