Peruvian miners, government hold ‘productive’ talks after Hochschild stockpile collapse

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LIMA, Nov. 22 (Reuters) – Shares in Hochschild Mining (HOCM.L) collapsed 27% on Monday after the Peruvian government ruled out any operational expansion of its flagship silver mine Inmaculada, but mining executives and government officials also said they had had a “productive” late-night meeting to ease tensions.

Mining is the key to the economy of Peru, which is the world’s second largest producer of copper and silver.

Peruvian Prime Minister Mirtha Vasquez said on Friday that a group of four mines – including two owned by Hochschild – would not be granted further operating extensions due to environmental concerns and would instead close in the near future.

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“We haven’t discussed anything specific,” said Raul Jacob, who heads the National Mining, Energy and Petroleum Company, after a meeting with Vasquez. “I want to say that there was a very good open dialogue, very productive.”

Vasquez agreed that “the dialogue has been very productive”.

“We have expressed our willingness to respect the rule of law (and) private investment,” she told reporters.

The initial announcement sparked a furious backlash from mining executives over the weekend and caused Hochschild shares to drop to 57%, before cutting losses to a 27% drop, the worst for the listed miner. in London.

Vasquez’s new statement follows remarks by Peru’s deputy mining minister, who appeared to reverse the shutdown decision in an interview on Sunday evening.

“If (the mining companies) have all the mechanisms to present an extension, they can do it, the door is not closed,” Chavez said.

According to a government statement, Vasquez’s initial announcement indicated that the mines would be closed as soon as possible for environmental reasons, without “any extension, whether for exploitation, exploration or even closure.”

Peru is currently proposing an increase in taxes on minors, and Socialist President Pedro Castillo has said the additional revenue will be crucial to fund social programs.

The announcement sparked broader remarks about the industry.

“There is no information to suggest that the government will close other mines, but we cannot rule out that it will tackle large (r) mines,” Bank of America said in a memo, in which it also demoted Hochschild from “buying” to “underperforming”.

Hochschild said he had not received any formal communication from the Peruvian government about it and found out through the press and social media.

“She just became a thug. This branch of government is not allowed to do what she did,” said a source with direct knowledge of the company’s discussions. “We’ll go down the arbitration route if it is about that – most certainly.”

In a statement, Hochschild CEO Ignacio Bustamante said the company was ready to start “a dialogue with the government to resolve any misunderstanding.”

Any decision in Peru would also harm Hochschild’s Pallancata mine.

The Inmaculada mine is the company’s largest, accounting for over 60% of its cash flow, according to its 2020 annual report. The two mines account for the bulk of the company’s production.

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Reporting by Marco Aquino in Lima and Pushkala Aripaka in Bengaluru Additional reporting by Zandi Shabalala in London and Marcelo Rochabrun in Lima Editing by Bernadette Baum, Matthew Lewis and Sonya Hepinstall

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