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Peru's La Oroya smelter to be auctioned in first quarter of 2017
October 6, 2016 / 12:02 AM / a year ago

Peru's La Oroya smelter to be auctioned in first quarter of 2017

* President Kuczynski’s vow to restart smelter revived interest

* Plans for workers’ strike next week could hurt sale prospects

* Emissions standards are under review

By Mitra Taj and Marco Aquino

LIMA, Oct 5 (Reuters) - Peru’s nearly 100-year-old polymetallic smelter La Oroya and the nearby copper mine Cobriza will likely be offered up in an auction in the first quarter of 2017, the head of the company tasked with finding a buyer said Wednesday.

Pablo Peschiera, director of consulting firm Dirige, said the two assets of the now-bankrupt company Doe Run Peru would likely fetch at least $100 million, though investments to upgrade the smelter could cost $700 million.

Peschiera said he was optimistic about the new bidding round that follows an August 2015 auction that failed to draw any offers as investors fretted over environmental standards, past pollution and demands from workers.

Dirige has asked the government to ease sulfur dioxide emission limits in La Oroya and to tweak rules to clarify that a new operator would not be liable for Doe Run Peru’s obligations.

Dirige has also connected potential buyers with workers to broker preliminary deals, Peschiera said.

“The market is in charge. We’ll launch the auction with whatever conditions are in place and hope that by then these changes will have been made,” Peschiera said in an interview.

The smelter in Peru’s central Andes was shuttered in 2009 when Doe Run Peru, owned by New York billionaire Ira Rennert’s Renco Group, ran out of money to buy concentrates and pay for environmental upgrades.

The company left $650 million in debts unpaid, including $90 million to $100 million owed to workers, Peschiera said.

The smelter now only processes some zinc, employing a fraction of some 2,200 mostly furloughed workers.

A workers’ strike scheduled next week to demand the rest of the smelter restarts could hurt sale prospects, Peschiera said, adding he hopes to persuade the union to call off the stoppage.

President Pedro Pablo Kuczynski’s promise to revive La Oroya as part of his plan to boost the value of the country’s mineral exports has sparked fresh interest from investors, Peschiera said.

Kuczynski, who took office in July, convinced Congress to give La Oroya more time to find a buyer and has slammed Peru’s emissions standards as too strict, saying upgrading La Oroya’s copper circuit would cost $500 million under current rules but only $200 million if Canadian standards applied.

Peru relaxed the sulfur emissions limit for La Oroya in 2014, but Peschiera said standards should be loosened further.

Kuczynski’s environment minister told Reuters last month that air and water quality standards are under review.

Reporting by Mitra Taj and Marco Aquino; Editing by Lisa Shumaker

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