The UK metals company Hochschild Mining is to fight plans by Peru’s government to hasten the closure of several mines in the southern Ayacucho region because of concerns over their environmental impact.
The London-listed mining company has promised to “vigorously defend” its plan to continue mining gold and silver from two mines – Pallancata and Inmaculada – which it claims operate under the “highest environmental standards”.
Ignacio Bustamante, the Hochschild chief executive, said he was “surprised” by the “illegal nature” of the government’s planned action and would “vigorously defend its rights to operate these mines using all available legal avenues”.
Shares in Hochschild plunged nearly 40% on Monday morning, wiping more than £300m off the value of the company, after the Peruvian prime minister, Mirtha Vásquez, told local media over the weekend that four mines in the southern Ayacucho region would be barred from further expansion, and would be closed “as soon as possible”. They closed down 27%, the lowest since April 2020.
Hochschild said it had “not received any formal communication from the government regarding this matter”.
The plan could have severe consequences for Lima-headquartered Hochschild, which sources more than two-thirds of its gold and silver from its Peruvian mines.
The announcement is likely to raise hackles throughout the mining sector in Peru, the world’s second largest producer of copper, which includes UK miners Anglo American, Newmont, Glencore and Freeport-McMoRan. Peru’s mines are also operated by China’s MMG and Chinalco alongside local producers such as Buenaventura.
Peru’s mining industry has been linked to a string of environmental issues in recent years including deforestation, pollution and the mistreatment of environmental activists.
Bustamante said: “Our goal is to continue investing in Peru, growing our resources and extending mine lives, in accordance with the Peruvian legal framework.”
Hochschild said it was a significant employer in the region, employing more than 5,000 people directly and about 40,000 indirectly, and has long-term investment plans for the local region.
“We are prepared to enter into a dialogue with the government in order to resolve any misunderstandings with respect to our mining operations. 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,” Bustamante added.
