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Metals miner Hochshild’s market value almost halved today as Peru’s socialist government moved to accelerate mine closures amid environmental protests and political turmoil.
The FTSE250-listed company, chaired by billionaire Eduardo Hochschild, said it would vigorously defend its position, calling the ruling “illegal” and insisting its mines operate under the highest standards.
The sell-off in London came after Peru’s newly-installed PM Mirtha Vasquez - an environmental and human rights activist - signalled that four mines in the Ayacucho region would be closed “as soon as possible” with no further exploration permitted.
Hochschild runs two of the mines under threat — Pallancata and Inmaculada — which employ 5,000 people and account for around two-thirds of the group’s annual production of gold and silver.
Ignacio Bustamante, who heads Hochschild subsidiary Minera Ares, said: "Hochschild is surprised by this unilateral announcement.
“We are prepared to enter into a dialogue with the government in order to resolve any misunderstandings. 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."
Peru, the world’s second-biggest producer of copper after Chile, has been riven by political turmoil since the removal of President Martin Vizcarra last year (pictured above).
His successor, former union activist Pedro Castillo, pledged to raise taxes on mining groups to fund healthcare and education reform.
Mines across the country have been blockaded and firebombed. Anglo American, Glencore, BHP and Freeport-McMoRan also operate mines in the country.
The mining sector has criticised Castillo for taking a soft line on protesters. Raul Jacob, the president of Peru’s Society of Mining, Energy and Oil, said: “We are legitimising violence as a justified measure of social pressure.”
Shares in Hochschild have fallen 25% this year and tumbled to 70p as markets opened, wiping more than £300million off the value of the company, before recovering to settle down 34% down at 108.20p.
Bank of America downgraded Hochschild to underperform, setting a price target of 90p, saying: “While the company will likely dispute this decision we don’t see equity outperforming until the dispute is resolved.”