Doe Run Peru has halted work at 95 percent of its La Oroya metals smelter because of financial trouble, and Peru's finance minister said on Wednesday he wants the private sector to solve the company's problems.
Banks have cut credit lines, strangling the company's ability to buy concentrates in Peru, where miners are struggling as global metals prices have plunged.
Doe Run Peru, which produces lead, zinc, silver and copper, relying almost entirely on other miners for concentrate, said the risk of a full stop was imminent.
Three weeks ago, the supply of concentrates was stopped, severely restricting operations at the metallurgical complex at La Oroya and creating the risk of an imminent halt to all work, the company said.
Doe Run Peru warned that its long-term viability will depend on recouping access to credit in the short term and said it was a victim of the global financial crisis.
Finance Minister Luis Carranza appeared to downplay expectations of a bailout, even as other government officials suggested help was on the way.
The case of Doe Run is one of a private company and it has financial problems of a private nature. The government is interested in the subject, but until there's a private solution I'm not going to talk about it, Carranza said.
He spoke after other officials seemed to say the government was considering extending help.
The solution will be announced later this week, I don't think it will go beyond that, Juan Felipe Isasi, the vice minister for mining, told Reuters.
The government wants to find a solution because the issue is delicate and grave, he said.
Local reports have said Doe Run Peru needs a $75 million credit facility, and that it has unpaid bills to suppliers of $100 million.
La Oroya is a hub for dozens of Peruvian mining companies and thousands of people rely on it for work.
Miners that normally sell concentrates to the smelter, Peru's largest, will either hold onto stocks or try to sell their products elsewhere.
Doe Run Peru's plant, in the mountains 108 miles (174 km) east of Lima, processes lead, zinc, copper, silver and gold. The site has been ranked as one of the most polluted places on earth.
Peru's mining ministry says Doe Run 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 is the world's top producer of silver, and metals account for more than half of total exports and are the government's largest source of revenue. (By Teresa Cespedes and Marco Aquino; Writing by Terry Wade; Editing by Michael Urquhart)
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