Peru's largest zinc company Volcan has closed a syndicated loan for US$120mn led by Credit Suisse to restructure existing credit agreements and for working capital, the company told the Lima stock exchange.

The loan will prepay outstanding obligations with a syndicate of banks led by West LB, a loan with West LB and a loan with Glencore International, according to risk agency Apoyo & Asociados, part of Fitch Ratings.

The new loan facility will have an interest rate of Libor plus 2.6% with three months grace and must be paid off over 5.3 years.

The restructured debt will allow Volcan to reduce their financial costs that totaled 58.7mn soles in 2005, said Apoyo & Asociados.

This has led Apoyo & Asociados to upgrade the rating for Volcan shares from 3a(pe) to 2a(pe), which also took into account recently improved financial results driven by higher metal prices and a brighter future thanks to a portfolio of mining investments.
Yauli projects

At the Yauli unit in central Peru's Junin department, Volcan shareholders have approved development of a small open pit at San Martin Sur and the expansion of its Victoria concentrator plant.

The San Martin project contemplates mining 952,000t of mineral with a grade of 3.25% zinc, 0.77% lead and 1.29oz/t silver, according to Volcan documents. The ore will be processed at Volcan's reopened Mahr Tunel concentrator.

At Victoria, Volcan plans to increase capacity from 2,400t/d to 3,000t/d in 2006 and to 4,000t/d in 2007 and, among other factors, takes into account renewed production from Yauli's mainly underground Ticlio operation.

The Yauli unit produced 194,718t of zinc concentrates and 31,469t of lead concentrates in 2005, up 6.02% and 11.5% respectively from 2004 thanks improved mining rates from the San Cristóbal mine and infrastructure improvements at the Andaychagua concentrator.
Cerro de Pasco unit

At the Cerro de Pasco unit in central Peru's Pasco department, Volcan shareholders have approved the development of a silver-copper oxide plant to process 4Mt of silver oxides with a grade of 7oz/t.

Cerro de Pasco churned out 257,322t of zinc concentrates and 82,562t of lead concentrates in 2005, slightly less than the previous year.

A source close to Volcan told BNamericas that the company should start seeing the fruits of these new projects from 2008.

One of the world's ten largest zinc companies, Volcan also operates the Chungar and Vinchos units. In 2005, the company produced a total of 543,265t of zinc, 2.5% higher than 2004, and 150,906t of lead, up 9.35% on the previous year.

Volcan also produced 4,403t of copper concentrates and 13.3Moz of silver last year.

As of December 31, 2005, Volcan had proven and probable reserves of 64.5Mt grading 6.37% zinc, 1.88% lead, 0.06% copper and 3.64oz/t (113g/t) silver, providing production until 2017, according to Apoyo & Associados.