Los Frailes expansion on hold

Continued losses at the Los Frailes zinc-lead mine in southwestern Spain have forced Boliden (BOL-T) to apply for court protection for operating subsidiary Boliden Apirsa.

Apirsa, which had been losing money since Los Frailes resumed production in 1999, has applied to the Spanish courts for a suspension-of-payments order, which would permit it to reorganize its debts. The company says the move “preserves assets and enables it to pay creditors in an orderly manner and to ensure that operations at Los Frailes continue until the planned completion of Pit 2 in October 2001.”

Apirsa had originally planned a third-phase open pit, which was to have been pushed back from Pit 2 after mining was complete. However, Apirsa does not have sufficient funds to cover the estimated US$26.3-million cost of developing the third pit.

Boliden says it is not prepared to make any further investments in Apirsa.

Operations at Los Frailes resumed in the second quarter of 1999, following an April 1998 tailings dam failure that flooded a large area downstream from the mine along the Rio Agrio and the Rio Guadiamar. The accident forced Boliden to take a US$42.5-million charge to provide for compensation and cleanup costs.

Since then, Apirsa has suffered significant operating losses, including US$19.2 million during the first half of this year.

Boliden is looking at ways to continue operating the mine after Pit 2 is mined out, in October 2001, one option being to sell the mine. Otherwise, revenues generated by completing Pit 2 will enable it to wind down operations, pay creditors and reach agreements with employees, suppliers and customers.