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London-listed mining firm banned from expanding in Peru region

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Peruvian Gold Mining Rush Brings Social And Environmental Stresses To Amazon
PUERTO MALDONADO, PERU – NOVEMBER 14: Mist hangs amid trees at sunrise in the capital of the Madre de Dios region, a boomtown located at the confluence of two rivers, on November 14, 2013 in Puerto Maldonado, Peru. The biologically diverse Madre de Dios (‘Mother of God’) region has seen deforestation from gold mining in the area triple since 2008, when gold prices spiked during global economic turmoil. Small-scale miners are drawn to the area in hopes for higher pay but often face abysmal conditions. Gold is usually amalgamated with mercury during the process of informal mining in the region, which is discharged into the water supply and air, poisoning fish and sickening people in the area. Peru is the largest producer of gold in Latin America and the sixth-largest in the world. Informal mining accounts for roughly 20 percent of the gold production in Peru. (Photo by Mario Tama/Getty Images)

London-listed mining company Hochschild Mining will no longer be allowed to post more mining operations in southern Ayacucho Peru, after environmental complaints.

The company’s response to the move by the Peruvian government saw shares plunge more than 36 per cent to 105.3p per share by mid-afternoon.

The Peruvian head of cabinet had indicated that approvals for more mining or exploration will no longer be granted.

The meeting also suggested a timetable and terms for the closure of certain mining projects in the southern Ayacucho region, including the company’s Pallancata and Inmaculada mines. 

Hochschild, which operates primarily in Peru and Argentina, said that it would defend its position in the region, adding that it has not received any formal communication from the government regarding the alleged ban.

“Hochschild is surprised by this unilateral announcement by the head of cabinet. Our goal is to continue investing in Peru, growing our resources and extending mine lives, in accordance with the Peruvian legal framework,” CEO Ignacio Bustamante said in a statement this morning.

“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.”

The mining firm employs more than 5,000 people directly and around 40,000 people indirectly in Peru.