For much of 2016, Doe Run continued to face challenges from depressed metal prices, regulatory capital spending requirements and other regulatory uncertainty. In order to adjust to these conditions, we had to make a number of tough choices. Those included the difficult decisions to curtail production and to reduce our workforce at several locations early in the year.
Despite this period of uncertainty, Doe Run continued progress on process and equipment improvements, as well as a program of cost reductions, so that we could be poised to capitalize on a lead price rebound. Fortunately, our efforts paid off and lead prices began to improve toward the end of 2016.
Adapting Now to Prepare for the Future
As we prioritized projects for 2016, we focused on those that met our commitments to workforce safety, environmental standards and customer needs, as well as projects that would prepare our company for the economic opportunities of a pricing rebound.
In 2016, Doe Run completed our multi-million dollar equipment update at the Resource Recycling facility. These improvements included:
- Better workforce safety.
- Enhanced productivity and processing capability.
- Stronger competitiveness for the future.
Read more on how we delivered on this commitment here.
Innovative upgrades also occurred at Brushy Creek Mill, where adjustments to our milling process improved mineral recovery and product consistency, and provided a new method to sustainably re-use our water resources. Read more on our updated water management.
We continue to make progress on converting the former smelter site in Herculaneum for new use. In 2016, Doe Run sold 18 acres of previously leased riverfront property to Riverview Commerce Park LLC. This property sale represents a long-term commitment to Herculaneum for the Mississippi River shipping port, which is changing the economic future for the community. Read more about repurposing efforts at the former smelter site.
Continuous Improvement in the Face of Challenges
Market prices are just one of the challenges facing the mining and metal production industries. Our current and long-term success depends on our ability to adapt to a constantly changing regulatory environment, and maintaining a skilled workforce.
As we face these challenges, we’re driven by our commitment to balance our social, environmental and economic responsibilities set forth in our Sustainability Principles. We continually strive to be good stewards of the environment and maintain the health and safety of our employees and the communities in which we operate.
During periods of low lead prices, the financial costs of the changing regulatory environment became increasingly challenging. According to a report for the National Association of Manufacturers, companies in the manufacturing sector spend on average $13,750 per employee each year just to meet federal regulations. During the last five years, Doe Run incurred more than $343 million in environmental expenses – or roughly $57,000 per employee. In 2016 alone, these expenses included $71 million on efforts to limit the impact of our operations and improve energy and water use. As an example, we opened two $12 million water treatment plants at Sweetwater Mine and in Viburnum as part of updating our water management approach at the Southeast Missouri Mining & Milling Division (SEMO).
Our success as a company and an industry depends on protecting the health and safety of our employees, contractors and communities. In 2015, International Lead Association (ILA) members established the goal of reducing employee blood-lead levels to below 30 μg/dL. Our goal is to reduce the number of employees at each location who surpass 19 μg/dL by proactively monitoring employees’ blood-lead levels, which we accomplished at three out of four locations in 2016. In total, the average blood-lead level companywide declined to 10.2 μg/dL. Both the ILA guidelines and Doe Run’s protocols establish lower acceptable blood-lead levels than are required by law. View more about employee health and safety.
To sustain our vital industry in Southeast Missouri, we’re focused on attracting talented workers. By 2019, the mining industry needs 78,000 workers to replace retirees, according to the Energy Information Administration (EIA). During that same time, the industry is expected to grow by about 50,000 workers. Our industry will need to fill 128,000 positions by 2019. Our efforts to address this challenge include our partnerships and donations to Missouri University of Science & Technology, Mineral Area College and other schools with mining-related programs, as well as scholarships and internships to educate the next generation of our workforce. Read more about our partnerships to build a sustainable workforce.
“Our commitment to balance our social, environmental and economic responsibilities set forth in our Sustainability Principles helps us to address many of the challenges facing our business.”
Opportunities for Metals in the Future Economy
We’re excited about the future for the metals we mine. Around the world, lead-based batteries power vehicles, store renewable wind and solar energy, and provide backup power for critical operations at hospitals and financial centers. Market analysts predict demand for lead-based batteries will grow as a result of expanding economies across the globe, growth in hybrid electric vehicles and renewable energy storage demand expands around the globe.
Doe Run is doing its part to support the development of advanced lead batteries to meet these applications as a member of the Advanced Lead Acid Battery Consortium and other industry organizations. Through these industry coalitions, we’re supporting research and development of advanced uses for our lead that will drive demand for decades to come. New lead-based battery technologies will help the lead industry continue to thrive in Missouri. Read more about lead’s economic rebound.
Our future isn’t focused on lead alone. Zinc and copper, two other metals contained in ore found in our Southeast Missouri mines, are vital to everyday life. Zinc-based products are used for construction and the automotive industry and demand for this versatile metal grows as developing nations expand their infrastructure. In addition, zinc-based batteries have been used for many decades in toys, electronics and even aircraft and space applications. Zinc also is vital for human and plant health. Read more about zinc. Doe Run’s third mineral product, copper, is also critical to modern society and is used extensively in construction, manufacturing, electrical and the energy industries to name a few.
As I prepare this report overview, I have the advantage of hindsight. The steps we took in 2016, combined with the dedication of our employees, and the partnerships we have forged with customers and vendors, have put Doe Run in a solid position to capitalize on the improved lead metal prices, a growing economy and a bright future. Thank you for your interest in our business. Please consider sharing your opinions with us in a brief online survey.
Jerry L. Pyatt
President and Chief Executive Officer