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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