La Oroya - Pollution

Pollution

When Doe Run bought La Oroya, it took over Centromin's PAMA, (Programa de AdecuaciĆ³n y Manejo Ambiental or Environmental Remediation and Management Program), an environmental contract requiring environmental remediation measures. The measures required new sulfuric acid plants, elimination of fugitive gases from the coke plant, use of oxygenated gases in the anodic residue plant, a water treatment plant for the copper refinery, a recirculation system for cooling waters at the smelter, management and disposal of acidic solutions at the silver refinery, an industrial wastewater treatment plant for the smelter and refinery, a containment dam for the lead mud near the zileret plant, a granulation process water at the lead smelter, an anode washing system at the zinc refinery, management and disposal of lead and copper slag wastes, domestic waste water treatment, and domestic waste disposal. However, Doe Run Peru has been indemnified by Centromin (and guaranteed by the Peruvian Government) against any environmental liability arising out of Centromin's prior operations. Doe Run's original commitment to this program was US$107 million but it is now expected that it will cost at least US$244 million.

The company caused trouble in 2004, particularly among non-governmental organizations, when it said that it would not be able to complete the PAMA by the deadline of 2006, and asked for an extension. On Dec 29, 2004, the Peruvian Government issued Supreme Decree No. 046-2004-EM, which recognized that exceptional circumstances may justify an extension of the time to complete one or more projects within the scope of a PAMA. Doe Run Peru was granted such an extension by the Ministry of Energy and Mines on May 29, 2006. The exact reason for the request was not given but appears to have been a combination of cash flow availability, additional PAMA requirements and additional upgrading. This includes the replacement of the reverbatory furnace with a submerged lanced reactor furnace at a cost of US$57 million that will reduce gas volume and provide a much richer sulfur dioxide off gas that is far more suitable for sulfuric acid production.

Conditions of the extension include the payment into a trust account each month of revenue sufficient to cover the next month's estimated expenditure on the PAMA. Also the company has been forbidden to make any payment to any shareholder or affiliate that might affect completion of the PAMA. Renco has confirmed that it understands that Doe Run Peru would lose the benefit of the PAMA extension if any such payment is made.

The PAMA has since been modified to include the reduction of stack and fugitive emissions to meet air quality objectives, certain additional pollution controls and the protection of public health including the reduction of lead levels in blood and special health programs for children and expectant mothers.

On February 5, 2008 Doe Run Peru reported that state health officials and OSINGERMIN, an independent Peruvian regulatory agency had confirmed that the quality of the Yauli or Mantaro Rivers was no longer impacted by the smelter's liquid discharges. However, the company also stated that the river was still polluted by mining and other operations upstream.

Other improvements have been achieved and on March 19, 2008, the company announced a 60% improvement in particulate emissions, a 61.7% reduction in air lead levels, 72% reduction in cadmium levels and 81% decrease in arsenic levels and the virtual elimination of polluting liquid discharges from the smelter into the Mantaro and Yauli rivers.

Despite advancements in other areas, sulfur dioxide emissions reached record levels in August 2008. However, according to the Wall Street Journal, the lead smelter acid plant became operational in October 2008. This will reduce sulfur dioxide emissions significantly. Further improvement can be expected when the copper smelter acid plant is completed, which is expected in October 2009. Thereafter the main sources of sulfur dioxide from the smelter should be under control.

Nevertheless, none of these expected results have been attained in reality. The indicators shown above were designed by Doe Run and have not been certified by any official institute. Despite revenues that exceed US$150 million in each year of operations, after four months of lower price in minerals, Doe Run has asked the Peruvian Government for a bailout. No other company from the same activity has done that. But this request surprisingly coincides with a new request from Doe Run for an extension to comply with PAMA requirements. That means, the expected results in 2009 again will not be completed.

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