Peru: Putting Hochschild Mining in its place

Shares of Hochschild Mining collapsed in London after government ruled out operational extensions.

The Executive and three southern provinces of Ayacucho reached agreements to protect the headwaters from environmental contamination

PCM Press Release https://www.gob.pe/institucion/pcm/noticias/562272-ejecutivo-y-tres-provincias-del-sur-de-ayacucho-llegan-a-acuerdos-para-proteger-cabeceras-de-cuencas-de-contaminacion-ambiental

November 19, 2021

The president of the Council of Ministers (PCM) of the Government of Peru, Mirtha Vásquez Chuquilín, today headed a High Level Commission composed of representatives from various sectors that arrived in the district of Coracora, in Ayacucho, to hold a meeting with authorities and leaders of the provinces of Lucanas, Parinacochas and Páucar del Sara Sara, whose headwaters have been affected by environmental contamination.
 
The Vice Ministers of Mines, Jorge Chávez Cresta; of Environmental Management, Mariano Castro Sánchez; and Development of Family Agriculture and Agrarian Infrastructure and Irrigation, José Alberto Muro; and the head of the National Water Authority (ANA), Roberto Salazar Gonzales, formed part of the Executive Commission.
 
After an intense day in which the leaders and authorities of the three provinces were heard, an act was signed ratifying the withdrawal of mining companies located in the headwaters of the southern Ayacucho basin, which had previously planned their closing dates.

Agreements

In this sense, it was agreed to set up an Executive Committee to negotiate the terms and conditions for the withdrawal and closure of the four mining units in the region headwaters, under the leadership of the Presidency of the Council of Ministers.
 
On the last week of November, the Ministry of Energy and Mines (MINEM) will report the schedule of meetings with the mining companies Apumayo, Sami S.A.C and Compañía Minera Ares (Inmaculada and Pallancanta mining units) to review the closure of mines; the situation of other mining projects in the area will also be evaluated as well. On December 15, the MINEM will present a schedule of visits to the surroundings of the mining units with the participation of the population.
 
"I want to announce at this time that, with respect to the four mining companies that you have been pointing out, there will be no further expansion for exploitation, exploration, and even for the closure of mines," emphasized Premier Mirtha Vásquez.
 
She also added that mining companies will also be required to comply with their closures on the scheduled dates. “We will close the mines as immediately as possible. In the case of the Apumayo mining company, we have detected that despite the fact that they had already been asked to enter into closure process stage, they have been extracting, which did not correspond,” she explained.
 
Another agreement was that the National Water Authority (ANA) will prioritize the implementation of the methodological framework on the identification, zoning and delimitation of the headwaters in the provinces of Parinacochas, Lucanas and Páucar del Sara Sara, as a national level pilot project.
 
In addition, within the framework of its functions, the Environmental Assessment and Enforcement Agency (OEFA) will visit the surroundings of the Breapampa mining unit to carry out an assessment in order to identify the origin of the sources of environmental alteration.
 
Finally, the High Level Commission will coordinate with the Ministry of Justice and Human Rights the accompaniment of the leaders and social activists affected by investigation processes and criminal complaints due to social protests.
 
The meeting, which was held in the Virgen de las Nieves Bullring in Coracora, was also attended by the governor of Ayacucho, Carlos Rúa; the Secretary for Social Management and Dialogue, Guiselle Huamaní; and twenty-five mayors and leaders of the provinces of Lucanas, Parinacochas and Páucar del Sara Sara, as well as representatives of the population.
 
The chief of the Cabinet specified that the government recognizes Ayacucho Region as a fighter and water defender, and stressed that its demands are fair. “I would like you to know that if I am here as president of the Council of Ministers it is because we recognize that your demands are legitimate and just. For years, many of our peoples have suffered serious environmental damage in the name of development,” she said.
 
Finally, she emphasized that the Government is working on a new conflict management model in which the Presidency of the Council of Ministers will lead the dialogue processes. "When we deal with problems by parts, we do not reach integral solutions," she concluded.

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

November 22, 2021

LIMA (Reuters) - Shares of Hochschild Mining (HOCM.L) 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.

Mining is key to the economy of Peru, which is the world's No. 2 producer of copper and silver.

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.

"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."

Vasquez agreed "dialogue had been very productive."

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

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.

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.

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

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."

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.

The announcement triggered broader remarks about the sector.

"No information suggests that the government will close other mines but we cannot rule out it will go after large(r) mines," Bank of America said in a note, in which it also downgraded Hochschild from "buy" to "underperform."

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.

"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."

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."

Any ruling in Peru would also hurt Hochschild's Pallancata mine.