Doe Run Peru edged away from the brink of collapse on Thursday, receiving two new credit lines totaling $175 million that were guaranteed by a group of miners, company and government officials said.
Doe Run Peru, a unit of the U.S.-based Renco Group, halted nearly all work last month at its sprawling La Oroya smelter - one of the largest smelters in the Americas -- after banks cut its financing, strangling its ability to buy concentrates.
Low prices and debt payments have squeezed the company, which also must make millions of dollars in investments under an environmental agreement.
Doe Run Peru has offered the government a 100 percent stake to guarantee it will complete a clean-up program at La Oroya, a factory town often ranked one of the world's 10 most polluted places, said Peru's Finance Minister Luis Carranza.
Companies across the metals sector are struggling as prices have plunged on the global economic crisis. The near collapse of Doe Run Peru shows how fast a company's fortunes can turn.
This private aid is made up of two credit lines -- one worth $75 million ... which will allow the company to continue operating and one, valued at $100 million, which will provide La Oroya with the concentrates it needs, said Ysaac Cruz, head of El Brocal, a Peruvian miner that sells to Doe Run Peru.
Doe Run Peru had lost credit lines of at least $75 million and has unpaid bills to suppliers of $100 million.
In addition to the credit facility, the Peruvian unit of Doe Run will not have to repay, but rather reinvest, $156 million it owed its parent company.
Among the miners that said they are backing the credit are El Brocal, Buenaventura (BUEv.LM: Quote), Peru's largest precious metals producer, and Volcan (VOL_pb.LM: Quote), one of the country's largest zinc miners.
Thursday's announcement ended speculation that Doe Run Peru would be bailed out by the government.
This was a rescue from the private sector, said Cruz. It shows the mining sector is continuing to thrive and bet on Peru.
SMELTER OPERATIONS TO RESTART
La Oroya is a hub for dozens for Peruvian mining companies, and 3,500 people rely on it for work.
The company, which buys concentrates from about 30 different mining firms in Peru, said it would restart work at its smelter soon.
Operations will restart as soon as possible, in the next few days, Doe Run Peru President, Juan Carlos Huyhua, told reporters.
La Oroya is located in the mountains, about 108 miles (174 km) east of Lima, Peru's capital.
The mining ministry says Doe Run Peru produced 53,831 tonnes of copper, 114,259 tonnes of lead, 43,440 tonnes of zinc and 1.07 million kilograms of fine silver last year.
Peru, a major metals exporter, is the world's top producer of silver. Minerals account for more than half of total exports and are the government's largest source of revenue. (Reporting by Teresa Cespedes; Writing by Dana Ford; Editing by David Gregorio, Gary Hill)
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