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Peru miners, govt carry out "productive" talks following Hochschild stock collapse

By Reuters

<div> <p>By Marco Aquino and Marcelo Rochabrun</p> <p><span class="caps">LIMA</span> -Shares of Hochschild Mining collapsed 27% on Monday after Peru’s government ruled out any operational extensions for its flagship Inmaculada silver mine, but mining executives and government officials also said they had had a “productive” late night meeting to ease tensions. </p> <p>Mining is key to the economy of Peru, which is the world’s No. 2 producer of copper and silver. </p> <p>Peru’s prime minister, Mirtha Vasquez, said on Friday that a group of four mines – including two owned by Hochschild – would not be granted any further operational extensions due to environmental concerns and would instead close down in the near future. </p> <p>“We haven’t discussed anything specific,” said Raul Jacob, who heads the National Society of Mining, Energy and Oil, following a meeting with Vasquez. “I do want to say there was very good open dialogue, very productive.” </p> <p>Vasquez agreed “dialogue had been very productive.”</p> <p>“We have expressed our will to respect the rule of law (and) private investment,” she told reporters. </p> <p>The original announcement triggered a furious reaction from mining executives over the weekend and caused Hochschild’s shares to plummet as much as 57%, before paring losses for a 27% drop, the worst for the London-listed miner. </p> <p>Vasquez’s new statement follows remarks from Peru’s vice minister of mines, who appeared to backtrack on the closure decision in an interview on Sunday night. </p> <p>“If (the mining companies) have all the mechanisms to present an extension, they can do so, the door is not closed,” Chavez said. </p> <p>According to a government statement, Vasquez’s initial announcement said the mines would be closed as soon as possible on environmental concerns, with “no extensions, whether for exploitation, exploration or even shutdown.”</p> <p>Peru is currently in the process of proposing higher taxes on miners, and socialist President Pedro Castillo has said the additional revenue will be crucial to fund social programs. </p> <p>The announcement triggered broader remarks about the sector. </p> <p>“No information suggests that the government will close other mines but we cannot rule out it will go after large® mines,” Bank of America said in a note, in which it also downgraded Hochschild from “buy” to “underperform.” </p> <p>Hochschild said it had not received any formal communication from Peru’s government on the matter and had found out through the press and social media. </p> <p>“She’s just gone rogue. That arm of the government doesn’t have the right to do what it did,” said a source with direct knowledge of company discussions. “We’ll take the arbitration route if it comes to that – most definitely.”</p> <p>In a statement, Hochschild Chief Executive Officer Ignacio Bustamante said the company was prepared to enter “into a dialogue with the government in order to resolve any misunderstandings.” </p> <p>Any ruling in Peru would also hurt Hochschild’s Pallancata mine. </p> <p>The Inmaculada mine is the company’s biggest, representing over 60% of its cash flow, according to its 2020 annual report. Both mines account for the bulk of the company’s production.</p> </div>