Peru rules out cleanup extension for Doe Run Peru

By Teresa Cespedes

LIMA (Reuters) - Peru has no plans to grant Doe Run Peru an extension to meet the terms of an environmental cleanup that is scheduled to be completed by October, the vice minister of mining said on Wednesday.

One of the company's suppliers told Reuters earlier this week that Doe Run Peru, the country's No. 4 metals exporter, told the government it will only meet the terms of a financial bailout plan if its deadline on the cleanup is pushed back.

"We have not seen any legislative change that would permit us to foresee an extension of the cleanup," said Juan Felipe Isasi, Peru's mining vice minister.

"There is a rule in force, which mandates that Doe Run complete the cleanup in October," he said, adding the company has sufficient time to do what it is required.

The company's sprawling La Oroya smelter has been mostly stopped since March after banks, worried about falling metals prices, cut its credit line in a sign the global downturn was hitting the backbone of Peru's economy.

In April, a group of mining companies that sell concentrates to Doe Run Peru agreed to give it a $175 million credit line if its parent company, U.S.-based Renco Group, met two conditions.

The stipulations were that Renco had to fill a $156 million financial shortfall in its Peruvian unit and pledge its shares to the Peruvian government as a way of promising that its unit would finish an environmental cleanup project at one of the world's most polluted sites.

"Doe Run Peru and its parent company are committed to filling the $156 million debt and putting the company's shares in the hands of the Peruvian government in order to complete the cleanup," the company said in a statement on Tuesday.

When Doe Run Peru bought the smelter in 1997, it was expected to take 10 years to clean up La Oroya. In 2006, the company got a three-year extension.

Doe Run Peru says it has so far spent $307 million on repairing damages and total costs will hit $500 million.

Isasi said the company may be forced to close if it fails to comply with the terms of the environmental agreement.

"There is no official request to postpone the cleanup, nor could there be a conditioning of it. A company cannot condition its environmental obligations," said Isasi.

Earlier this week, the company said the smelter's copper and lead circuits were partially working, while the zinc circuit was stopped.

Isasi said the smelter was working at 30 percent capacity.

Unions have pressured President Alan Garcia to make sure the plant starts up again as it generates some 3,500 direct jobs and 16,000 indirect jobs.