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(Alliance News) - Shares in Hochschild Mining halved in value in early trading in London on Monday after it warned of a regulatory threat to its mines in Peru.
The FTSE 250 constituent's shares dropped 51% to 81.00 pence each.
Hochschild said it had become aware that the Peruvian head of Cabinet is potentially looking to close some mining projects in southern Ayacucho, including Hochschild's Pallancata and Inmaculada mines, due to "alleged environmental complaints".
"The company has not received any formal communication from the government regarding this matter," the miner said.
It learnt through various media outlets of the minutes of the meeting, which say that a commission has been constituted to negotiate the closure of mines. The head of Cabinet subsequently indicated that approvals will no longer be granted for additional mining or exploration activities, Hochschild said.
"Hochschild is surprised by this unilateral announcement by the head of Cabinet," commented Chief Executive Ignacio Bustamante.
"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," Bustamante added.
"The company believes this conduct by the Peruvian head of Cabinet is not in accordance with Peruvian law and is wholly without merit," the company said. "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."
The miner said it "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," it added.
Hochschild highlighted plans to further develop its Peruvian mines, an example being Inmaculada, where a modified environmental impact assessment has been submitted for approval.
By Will Paige; willpaige@alliancenews.com
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