Why should Bolivia junior exploration plays care about this news today?

Pretty simple: According to the Evo government's plans, once Karachipampa is up and running the country will insist that all silver, lead and zinc concentrate production in the country is sent to this smelter for processing, no exceptions. "What? You see a potential issue with smelter fees going forward? Nah, surely not! Here's DJNW today, click through for the rest:

BUENOS AIRES -(Dow Jones)- Bolivia's state-run mining company Corporacion Minera de Bolivia, Comibol, has taken control of the Karachipampa metals smelter after reaching an agreement with its Canadian joint-venture partner Atlas Precious Metals Inc., according to government news agency ABI.
"We have recovered Karachipampa for the State," Vice Mining Minister Hector Cordova was quoted as saying by ABI at a press conference Tuesday.
ABI said that Atlas handed over the keys to the smelter last Friday after reaching what the news agency described as a "friendly agreement" with the Canadian CONTINUES HERE

Unmissable information on Doe Run Peru

Chernobyl, anyone? This bizarre mashup photo is
actually part of DRPs promo propaganda

US citizen and Fulbright Scholar Corey Laplante has been living in Peru and studying the operations at Doe Run Peru (DRP) for around eight months. He has a blog (that I recently discovered) and last night posted this article about the operational situation at DRP.

Thus the scales fall from mine eyes. All this time I fell for the DRP line. I was wrong.

This is seriously, seriously unmissable reading. Laplante shoots down in flames the company propaganda about how the place is cleaner than before. Also, this guy is not speaking from some treehugging NGO save the planet prejudiced playbook about DRP, but has done some very solid research work on the company. What he has found has made him angry. Damn I'm angry, too.

You should be angry too, when a shit like Ira Rennert takes over a company, significantly increases poisonous pollution outputs, then uses his first year at the site for his own benchmark thus later falsely claiming reductions in pollution. Here's an excerpt from Corey's post, but I strongly recommend that you read the whole thing. Here's the link to Corey's post again, just to make sure you go.

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3) You site “dramatic reductions” in contamination levels. Over the last few years Doe Run has reduced contamination. In fact, according to a graph that they sent CNN for December’s planet in Peril piece, they have reduced lead contamination by 77%. Wow. Seems impressive right? Trust me I know—I was fooled too (see some of my earlier posts)

When we look a little more closely however, we see what is really going on here. The graph that Doe Run sent to CNN compares 2008 against 1997. That is to say, they are pointing out that lead contamination is 77% lower in 2008 than it was in 1997. I confirmed the numbers with the Ministry of Energy and Mines, the reduction does, in fact amount to 77%

BUT, 1997 is the year that Doe Run came to La Oroya and dramatically increased contamination levels. They have only reduced contamination relative to when they increased it before.

If we really want to measure the changes in La Oroya—absolute changes—we need to look at the situation as it was before Doe Run came to town. Luckily, I was able to get my hands on this information. Specifically, I have the information for the same monitoring station that DRP used to derive the 77% figure—Sindicato. And when I compared 2008 against 1995 (instead of using 1997 as the baseline), I found that lead contamination at the Sindicato monitoring station did not decrease by 77%. In fact it increased by 6%.

At another monitoring station, Hotel Inca, lead contamination increased by 255%. That is not a typo. 255%.

Continues here

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Once again, I am in debt to reader MH. Thank you. There will be more on Doe Run and the (looking like it's about to happen) government bailout soon. Watch this space.

Ira Rennert, Doe Run Peru, Leopards and Spots

Ira Rennert (for it is he)

Seems to me

You don't wanna talk about it
Seems to me
You just turn your pretty head and walk away
The James Gang, 'Walk Away', 1970

We won't really know until the whole story unravels, but right now I'd bet a tenspot that Ira Rennert (above), the owner of Renco which is in turn owner of Doe Run Peru (DRP), has sucked all the money out of his wholly owned Peru operation and left it with no working capital. From here he knows that he can palm off the heavily indebted company to the Peruvian government as the complex is a vital hub in mining activity and the country can't afford to see it close down.

There's little doubt that even though DRP is a private company and under no obligation to disclose its operational results, it has been very profitable over the last four years. For example, Mineweb reports that in 2007 DRP's sales of $1.45Bn outstripped payments to suppliers ($1Bn) very easily. So at first light it seems strange that all of a sudden there's no money left in the coffers after just six months of low spot metals prices and slack demand. It's not just this corner of cyberspace that find this strange, either. Luis Castillo, Sec Gen of Peru's Mining Federation today said that it was suspicious that "the company doesn’t have any working capital despite making money over the past four years.”

But then if you look back at Ira Rennert's past business history, you see that he has a clear pattern that could even be called a modus operandi. This BusinessWeek article dated 2003 is particularly enlightening and here's an extract (the whole article is fully recommended):

• Two of his companies--a Kentucky coal company and a Utah magnesium producer--have filed for Chapter 11 bankruptcy protection in the past two years. Two others, a steelmaker and a lead producer, both reported big losses in their most recent filings. "Rennert has a track record of dramatically leveraging up companies with debt," says Thomas A. Watters, an analyst at Standard & Poor's. "They're really financially distressed."

• The $1.5 billion in bonds his companies issued from 1992 to 1998 have now lost about $700 million, or almost half their value, according to a rough tally by BusinessWeek of his companies' 10 bond issues. For example, the steel outfit's bonds are trading for as little as 26 cents on the dollar, while the lead company bonds have fallen to around 20 cents. A Rennert spokesman disputes the figure, calling the calculation "overly simplistic and misleading," but didn't offer another one

• Some bondholders are gunning for Rennert. He became one of Corporate America's highest-paid chief executives in the '90s by taking a total of about $500 million in dividends and management fees from his companies, according to a 2001 report from Barclays Capital Inc. and Securities & Exchange Commission filings. Now the bondholders are trying to get some of that back: On Jan. 16, AIG Global Investment Corp., Carlyle High Yield Partners, and hedge fund Citadel Equity Fund asked a Manhattan bankruptcy court to appoint a trustee to decide whether the transfer of dividends, management fees, and other funds from Magnesium Corp. of America to Rennert was legal. "We believe the transfers made it impossible for the company to pay its reasonably anticipated debts and may have rendered it insolvent," according to their lawyer, Gerald K. Smith, of Phoenix-based Lewis & Roca LLP.

• Despite the carnage, Rennert has done very well for himself. He owns a plush duplex apartment furnished with antiques and Impressionist paintings on Manhattan's Park Avenue near his Rockefeller Center headquarters. He has a palatial home in Israel and a Gulfstream 5 jet. And he's building a mansion, allegedly complete with bowling alleys and a huge garage, on 64.8 acres in tony Southampton, N.Y., for an estimated $100 million. Still incomplete after five years, the 100,000-square-foot complex angered neighbors and inspired James Brady's novel, The House that Ate the Hamptons.

• This isn't the first time that Rennert's companies have run low on cash. BusinessWeek has learned that in 1962, when Rennert was a young securities broker running his own firm, I.L. Rennert & Co., in a Beaver Street office in Lower Manhattan, he was censured by the NASD for operating without enough capital. The NASD treats violations of federal rules requiring brokerages to be capitalized adequately as one of the most serious securities offenses because a lack of capital could leave clients in the lurch if a firm were to run out of money. Then, in 1963, the NASD caught Rennert with insufficient capital again, but it didn't give him another chance: It revoked his license on Nov. 29, 1964, according to securities regulators' documents, in effect banning him from the securities industry.

• Today, nearly 40 years since he was ousted from the industry, Rennert denies he was punished by the NASD at all. Through a spokesman, he says he shut his firm voluntarily and the NASD revoked his license as a routine administrative matter because he was no longer in business. "Due to market conditions, the firm found itself in violation of the net-capital rule," says spokesman Jon Goldberg. Rennert "raised capital and put it into the firm to bring it into compliance. Again the firm fell below the net-capital requirements, and he voluntarily shut the firm down." But former NASD lawyer Bill T. Singer, a partner at New York-based law firm Gusrae, Kaplan & Bruno PLLC, points out that "you don't revoke your license, you surrender it; there is no voluntary revocation." NASD rules specify that anyone whose license is revoked is not allowed to associate with any NASD firm "in any capacity."

Or in other words, this wouldn't be the first time in a long career that Ira takes the money and runs, leaving other unfortunates to pick up his pieces.

According to reports, DRP owes its suppliers around $100m at the present time. This goes a long way to explaining why a deal led by Peru's Banco de Credito to refinance to the tune of $75m fell through last week and the government said that it would step in to bail out the company. However the news of plant closedown today demostrates that the García government hasn't yet stepped up to the plate. It also suggests that Ira Rennert via his Renco controlling company is willing to let DRP close rather than inject new capital. Thus comes the classic investor's question....

"Where has all the money gone?"

......as only a company used as a cash cow by its controlling company in the year-over-year good times and deliberately vacuumed clean of hard cash and left to wither and die in just months when the markets turned against its sector could run out of money so quickly. No?

Part of the answer may be the reported $200m that Ira Rennert had invested with a certain Bernie Madoff (a guy with a profile these days). But then again, with Rennert's individual net worth at U$6Bn acording to Forbes (update, Forbes March '09 has him at 'just' $4bn), his $185m mansion in The Hamptons and his past history of covering his tush first and watching others carry the can, it's unlikely that the guy is heading for his own personal chapter 11. More likely is that Peru will be forced to pick up the pieces and keep DRP in business, as the country has far more to lose by creating a production bottleneck than anyone else. And Ira knows it.

Update: Know more about Doe Run Peru from enviro-campaigners point of view at this 10 minute youtube. Features a couple of good interviews.