Mining giant Hochschild to fight Peruvian government’s decision to scale back mines over environmental concerns
UK-listed Hochschild Mining saw a 27% drop in share prices on Monday evening (22 November) after the Peruvian Government outlined plans to accelerate silver and gold mine closures in a bid to reduce the sector's environmental impact.
Ministers in Peru have stated that the decision, which would affect several large mines in the southern Ayacucho region, will bar existing mines from further expansion as well as blocking new projects.
Peruvian Prime Minister Mirtha Vasquez has also spoken about the move publicly, after first floating revisions to policy frameworks for mining in the name of sustainability in September.
The decision would affect Hochschild’s largest silver mine, Inmaculada, immediately, as well as its Pallancata mine It would also, in time, likely affect much of the company’s wider portfolio – it sources more than two-thirds of its silver and gold from Peru.
Hochschild published a statement on Monday morning, telling of how the firm had “not received any formal communication from the Peruvian government” and how it believes the decision is “illegal”. As such, the firm stated that it will “vigorously defend its rights to operate these mines using all available legal avenues”.
The statement also defends Hochschild’s sustainability credentials, stating that the business “ operates under the highest environmental standards and applies industry best practice” and that it “categorically rejects any inference with regard to environmental pollution”.
Peru’s wider mining industry has, historically, been linked to deforestation and mercury pollution. Hochschild denies that it is part of the problem. The firm last year implemented a new ‘Environment Culture Transformation Plan’ with new approaches on water and waste management, energy use, climate impact and biodiversity. There is an overall statement of alignment with the UN’s Sustainable Development Goals (SDG) agenda through to 2030. However, there are not yet time-bound numerical targets on issues including reducing absolute emissions. Several of Hochschild’s competitors have already developed such targets, as well as net-zero plans.
After Hochschild’s shares collapsed by 27% – the worst drop on record for a London-listed mining firm – the company’s executives reportedly met with Peruvian Government representatives. According to Reuters, the discussions have been dubbed “very productive”.
The silver, gold and copper mining industries in Peru are the second-largest in the world and, as such, decisions by the Government will potentially affect a string of other mining firms. Others operating in the Ayacucho region, where 70% of all Peruvian silver is sourced, include BHP Group, Glencore, Anglo American, Newmont, McMoRan, MMG, Chinalco and Buenaventura.
Several of these firms – particularly those in copper – had expressed hopes to expand mining in Peru in the coming years, framing the decision as a willingness to support the growth of low-carbon industries like electric vehicles and wind power generation.
Aside from reconsidering policies on licencing and planning permissions for mines, the Peruvian Government is mulling higher taxes for mining firms.
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