SANTIAGO - Chile's Celulosa Arauco, one of the world's leading wood pulp producers, Monday acknowledged problems at a pulp plant that was closed last week following the death of thousands of fish in a nearby river. Arauco has fired the plant, production and environmental managers, will begin an environmental clean-up and will take responsibility for the economic damages to fishing for as long as fishing activities on the river are suspended, Arauco Chief Executive Officer Matias Domeyko said in a statement.

Celulosa Arauco, controlled by Chile's Angelini economic group through its holding company Antar Chile and Copec, shut down its Licancel plant on the Mataquito river in southern Chile last week after the death of the fish, and started an investigation. "With the preliminary results obtained to date in our internal investigation we have verified anomalies at the plant," Domeyko said. He gave no further details about the problems.

The plant had been closed for 20 days for maintenance at the end of May and reopened earlier this month, but on Friday the government water regulator ordered it closed for a further 30 days pending its own investigation.

The Licancel plant, with a capacity of 145,000 tonnes of wood pulp per year, accounts for about 5 percent of Arauco's wood pulp production, but some think the problem could affect other business units as well.

"It's a complicated issue for the company," said Raul Barros, an industry analyst with the Alfa brokerage. "Even though the plant represents only 5 percent of the company's annual production, the signal it sends is not a good one."

Two years ago Arauco gained media attention after hundreds of black neck swans died at a nearby wetland sanctuary after operations started at its Valdivia plant.

Since then the Valdivia plant, which is capable of producing 650,000 tonnes of wood pulp annually, has been operating at 80 percent capacity until it gets the go-ahead from authorities to operate at full capacity. "Valdivia is nearly ready, but there are these other noises: just when the regulator is considering authorizing one plant, another is killing fish," said Barros.

Chile's wood pulp exports doubled in the first four months of the year compared with the same period last year. Chile is the world's fifth-largest exporter of wood pulp.

(Planet Ark, 13/06/2007)