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Cerro de Pasco Resources Seeks Fair Deal With Glencore – Columns

The name Cerro de Pasco has become a global negative symbol for the raw materials industry. The mine in Peru, notorious for its damage to people and the environment, has been in operation since 2017 Glencore-Group, therefore plays an exemplary role in the current Swiss discussion about the liability of Swiss companies. A referendum on the subject is scheduled for next Sunday.

The initiators of the so-called corporate responsibility initiative demand that Swiss companies take on more responsibility for their international business. They are supposed to be liable if companies they control violate human rights or damage the environment. Parliament and the Swiss Federal Council also want to make Swiss companies more accountable. However, they recommend rejecting the initiative and present a counter-proposal. If the initiative is not accepted, this counter-proposal comes into play. This also provides for stricter accountability requirements for companies. Popular initiative “For responsible companies – to protect people and the environment” (admin.ch)

Commodity trader Glencore is once again the target of criticism

The commodities trader Glencore and its stake in Cerro de Pasco are currently being discussed in prominent positions. Glencore has been the target of NGOs for years. In preparation for the referendum, the Neue Züricher Zeitung devoted extensive coverage to the topic, including a large background report on the Cerro de Pasco project from November 20 https://www.nzz.ch/wirtschaft/konzernverponsung-die-mine-in- den-andes-eats-a-city-on-ld.1587644 # subtitle-is-glencore-responsible-for-unsustainable-conditions-of-the-mine-in-cerro-de-pasco-second and a full-page interview with the Glencore board member Ivan Glasenberg personally. https://www.nzz.ch/wirtschaft/glencore-ceo-wir-haben-ueberall-die-gleich-hohen-standards-ld.1586489#register. In the interview Glasenberg et al. answer the question, how does it affect him when he sees posters all over Switzerland accusing Glencore of poisoning children? His answer: “In Switzerland there is too little understanding of the mining industry.”

Cerro de Pasco Resources seeks a fair deal with Glencore

Today’s public statement by the Canadian junior mining company fits into this mix Cerro de Pasco Resources Inc. (CSE: CDPR; OTCMKTS: GPPRF; FRA: N8HP), which has been trying to acquire the Cerro de Pasco mine since 2018 and was founded specifically for the purpose of rehabilitating the mine operation and eliminating damage to humans and the environment. For this purpose, CDPR et al. Financing commitments of around CAD 60 million in prospect.

Cerro de Pasco intends to generate further investments for the rehabilitation of the project and the contaminated sites from ongoing operations, which should also bring important new jobs on site. Cerro de Pasco can be certain of the public effectiveness of its position just before the referendum in Switzerland. The message to Glencore is unequivocal: Cerro de Pasco is ready for a deal with Glencore and could make a significant contribution to at least alleviating Glecore’s image problem. Cerro certainly uses the public to exert gentle pressure.

The statement said CDPR continues to seek to close a fair deal with Glencore and Volcan. CDPR has special skills and experience to achieve the best possible result for all stakeholders, especially for the local population of Peru and the environment.

An image that contains nature, sunset.Automatically generated description

Figure 1: From the current presentation by Cerro de Pasco. The company is promoting a “brighter future” for the mine and the place of the same name.

Cerro de Pasco wants to operate the mine of the same name in Peru cleanly and remove contaminated sites

Cerro de Pasco Resources Inc. was founded in 2012 and has been listed on the stock exchange since 2017. The company specializes in resource management. CDPR is committed to treating and reconditioning all tailings, mountains, mining waste and essential resources at Cerro de Pasco in Peru. The company owns the El Metalurgista concession, which is adjacent to the Cerro de Pasco mining operation and includes the Quiulacocha Mountains and Excelsior waste dumps. The Cerro de Pasco mine is currently controlled by Volcan Companía Minera SAA (“Volcan”), a subsidiary of Glencore AG, which in turn is a subsidiary of Glencore Plc.

CDPR has been in active discussions with Volcan since 2018 regarding the acquisition and integration of the entire Cerro de Pasco operation under the CDPR umbrella. In November 2019, Volcan and CDPR announced a transaction whereby CDPR would acquire all of the shares (100%) in the concessions and operations owned by Volcan at Cerro de Pasco. On November 2, 2020, CDPR and Volcan (the “Parties”) mutually announced that the originally agreed deadline for closing the Transaction has expired. The main reason for this was the need for CDPR to realign the prioritization of the possible cash flows generated after the transaction. The parties have agreed to pursue discussions as soon as possible in order to reach a transaction that will be satisfactory to both parties and beneficial to the local communities.

History of Cerro de Pasco: Why we are in today’s situation

Cerro de Pasco is a famous polymetallic mine in the central highlands of Peru. The company is almost 400 years old and was discovered by the Spanish in 1630. The mine was unofficially operated by many operators and was commercially developed in 1902 by the Cerro de Pasco Copper Corporation, a company then listed in New York. At that time it was one of the largest and most productive copper-silver mines in the world and over the next fifty years grew into one of the most important mining centers for Peru and South America. In parallel with the expansion of the mine, the mining camp, which began in 1630, developed into an important mining town. In the early 1950s, the mining focus shifted from copper, gold and silver to zinc, lead and silver after the demand for base metals increased worldwide.

In 1974 the Cerro de Pasco mine was nationalized by the Peruvian military government under the leadership of General Juan Velasco Alvarado. While the mine was state-owned, it was developed with little regard for the environment or the health of workers and local communities. The city grew into a major city with no formal planning or control of mining activities, and to some extent merged with the mine itself, with little attention paid to the potential negative effects of living in an industrial area.

Volcan acquired the Cerro de Pasco mine from the Peruvian government in 1999. The Quiulacocha and Excelsior heaps were expressly excluded from this transaction. With Volcan as owner, the operation continued to produce zinc, lead and silver from material within the mine; Waste was responsibly dumped at the fully licensed Ocroyoc mining facility. Between 2012 and 2014, the open-cast and underground mining operations were phased out and processing shifted to treating old heaps, which continues to this day. In 2015, Volcan commissioned a precious metal leach facility to process the remaining in-situ oxide material. This is still in operation today.

In 2017, Glencore acquired a majority stake in Volcan and thus an indirect stake in the Cerro de Pasco mining operation.

Need for an integrated solution

The complex challenges in the rehabilitation and reclamation of Cerro de Pasco require an integrated, holistic solution that addresses all problems. Bringing all assets together at Cerro de Pasco under the direction of a single operations team with an integrated approach and focused skills is therefore of great importance.

CDPR’s plan is based on an awareness of this enormous responsibility, but the company has the necessary funding and support to implement the long-term vision of recycling all waste resources at Cerro de Pasco by 2050, creating numerous opportunities within a circular economy .

CDPR has an unmatched in-house understanding of the challenges and opportunities presented by the mineral deposits within the Cerro de Pasco mining complex. The company benefits first-hand from its experience and an extensive team of experts who employ world-class georesource exploration and industrial development solutions to ensure long-term economic and operational sustainability in harmony with a healthy and affluent local population. The main focus of CDPR is people, and the company plans to work with affected communities and government to restore a better living and working environment. Over the past few years, CDPR has developed strong working relationships with affected communities near its El Metalurgista concession.

Unlike many conventional mining companies, CDPR focuses on the sustainable and profitable disposal of acidic waste and heavy metals found in historical dumps and recovery facilities, as well as the responsible storage of residues in properly closed and managed facilities. This alone would have an immediate positive impact on the local environment and create sustainable development opportunities.

In parallel, CDPR plans to address the acid mine drainage treatment as it extensively rehabilitates and reclaims the El Metalurgista mining concession for the community. The company plans to similarly adequately treat and remediate any other remaining environmental pollution at Cerro de Pasco.

Justification for all stakeholders

Since the talks regarding the takeover began in 2018, CDPR has completed extensive due diligence and detailed reviews of all operational aspects and is fully aware of the challenges and opportunities. After Glencore recognized the problems, the group responded appropriately, developed a long-term social and environmental management plan specifically for this company and began implementing it. This plan fits very well with the larger, integrated, and holistic plan of CDPR.

Pending completion of the transaction, CDPR has secured funding commitments and expressions of interest of more than USD 60 million in a combination of equity and unsecured loan financing to meet conditions precedent of proof of financial standing. This amount is intended for the first handover phase.

CDPR advertises with seven points for a consolidation of all assets of Cerro de Pasco in one hand.

Full operating capacity

CDPR has maintained full management capacity for several months in anticipation of taking control of the entire Cerro de Pasco mining complex on an integrated basis. The team has unique skills and can draw on its own experience at Cerro de Pasco.

Strong financial support

Strong financial support and market approval was evident from a wide range of financial institutions, including specialized resource and ESG (Environment, Social, Corporate Governance) focused investors.

Relationships with the community

CDPR has invested a great deal of time and energy in understanding and building relationships with local communities and authorities. The CDPR proposal has undergone extensive scrutiny and received support from all major communities and local and national authorities.

Contaminated sites

A number of contaminated sites dating back to the time of state ownership have created considerable tension between the current operator and local stakeholders. A survey confirms the desire of the local population for a change of ownership at Cerro de Pasco.

Time for a renewal

Given the current situation, which has evolved over many years, it is becoming clear that a change of ownership is the best solution in creating an acceptable path forward for all stakeholders. This would include a sustainable and economical decommissioning plan as well as the possibility for new projects. The pooled assets require a fully dedicated, determined owner and operator. CDPR is perfectly positioned to build a “partnership model” with local stakeholders and government agencies alike to achieve balanced social license.

CDPR’s core strategy

CDPR will significantly extend operations at Cerro de Pasco and promote additional new economic activities. In parallel, it will focus on the permanent and effective elimination of existing environmental pressures and introduce new technologies aimed at ensuring waste-free operation.

Technology in focus

CDPR will invest in advanced technology solutions to manage stakeholder engagement, corporate governance risks and regulatory compliance. It will also use the latest technology to produce metals through the treatment and reclamation of all essential resources, heaps, tailings and mining waste at Cerro de Pasco to ensure long-term economic prosperity. The company will also support the authorities in introducing effective geometries and data management. It will work with local authorities to optimize urban planning and design and, if necessary, to facilitate relocation.

Past working practices and fragmented ownership changes throughout the stories would have ultimately led to poverty and poor health in local communities, argues CDPR. To reduce these imbalances, it is necessary to pool the assets within the city and use the natural synergies for the benefit of all stakeholders.

Regardless of the result of the planned referendum in Switzerland on November 29, 2020 on the “responsibilities of corporations with global business activities”, CDPR continues to strive to conclude a fair transaction with Glencore and Volcan, CDPR wants the best possible result for all stakeholders, especially for the People in Peru and the environment.

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