Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF) said it has heard media reports that the Peruvian government could close certain mining projects in the southern Ayacucho region, including the FTSE-250 company's Pallancata and Inmaculada mines.
The two mines accounted for 80% of Hochschild’s attributable production of 289,293 gold equivalent ounces in 2020.
The precious metals producer has learnt through various media outlets about minutes of a meeting signed by the Peruvian Head of Cabinet, certain vice-ministers as well as regional authorities in the town of Coracora in the Ayacucho region. The minutes refer to alleged environmental complaints and state that a commission has been constituted to negotiate the timetable and terms for the closure of certain mining projects in the region, it said.
The Peruvian Head of Cabinet subsequently indicated that approvals will no longer be granted to facilitate additional mining or exploration activities in relation to these mining operations.
Hochschild said it has not received any formal communication from the government regarding this matter.
“The company believes this conduct by the Peruvian Head of Cabinet is not in accordance with Peruvian law and is wholly without merit. Accordingly, Hochschild will vigorously defend its position and take all action necessary to ensure that the rights of the company and its wholly-owned subsidiaries under Peruvian and international law are respected,” it said in a statement.
“The company operates under the highest environmental standards and applies industry best practice. As such, Hochschild categorically rejects any inference with regard to environmental pollution. The company's sustainable operations are strictly regulated and supervised by several Peruvian regulatory bodies and our activities remain in compliance with their requirements.”
Hochschild employs more than 5,000 people directly and approximately 40,000 people indirectly in Peru.
“The communities located close to the affected operations as well as the trade unions representing the operations' workforce have issued formal statements in support of Hochschild. Furthermore, a number of reputable institutions including the National Confederation of Private Business and the National Society of Mining, Energy & Oil have declared their support for Hochschild,” it said.
The company currently operates three underground mines: the two in southern Peru and one in southern Argentina.
"Hochschild is surprised by this unilateral announcement by the Head of Cabinet,” said chief executive Ignacio Bustamante. “Our goal is to continue investing in Peru, growing our resources and extending mine lives, in accordance with the Peruvian legal framework.
“We are prepared to enter into a dialogue with the government in order to resolve any misunderstandings with respect to our mining operations. 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."