Hochschild loses more than a quarter of its value as Peru announces plans to shut mines on environmental grounds
Hochschild Mining lost more than a quarter of its value after Peru moved to shut down two of the company’s mines.
The country’s prime minister Mirtha Vasquez said late on Friday that the government would shut down several mines in the south western Ayacucho region ‘as soon as possible’ on environmental grounds.
The closures would hit two Hochschild sites – including its lucrative flagship Inmaculada mine.
Closures: Peru said it would shut down several mines in the south western Ayacucho region which would hit two Hochschild sites – including its flagship Inmaculada mine (pictured)
The FTSE 250-listed miner yesterday hit back, vowing to fight the ‘illegal’ plans. The company, which mines silver and gold, also said it had not been formally contacted by the authorities.
But the threat of the closure of its mines sent Hochschild’s shares tumbling by as much as 57 per cent in early trading.
The stock ended the day down 27.2 per cent, or 44.8p, at 119.8p, leaving Hochschild valued at £616million.
Vasquez’s remarks followed weeks of anti-mining protests. The industry has been linked to a number of environmental problems in the country over several years, including pollution and deforestation.
Vasquez is reported to have said: ‘There will be no further expansion for exploitation, exploration. We will close the mines as soon as possible.’
In a press release the prime minister said she was open to dialogue with the industry and would be contacting the affected companies.
Peru’s vice minister of mines, Jorge Luis Chavez Cresta, seemed to backtrack on some of Vasquez’s comments on Sunday night, saying ‘the door is not closed’ to the industry.
Hochschild intends to keep mining at Inmaculada and its other Peruvian site, Pallancata, for decades but it has to regularly apply for new permits to extend operations.
If these are not secured, it will be forced to start closing the mines in the next two years.
This could be catastrophic for the company, which traces its roots back to the 1920s and is chaired by Eduardo Hochschild, who owns more than a third of its shares.
Hochschild gets more than two-thirds of its gold and silver from its two Peruvian mines. It also owns a third mine in Argentina.
Chief executive Ignacio Bustamante said: ‘We are prepared to enter into a dialogue with the government.
‘However, given the illegal nature of the proposed action, the company will vigorously defend its rights to operate these mines using all available legal avenues.’