Hochschild Mining: its fall on the London Stock Exchange and everything that happened in Peru after the threat of closure of operations

The Lima Stock Exchange (BVL) closed lower and the dollar price slightly up today, after ad of the president of the Council of Ministers, Mirtha Vasquez, on the possible closure of four mining companies in Ayacucho: Sami SAC, Apumayo, Inmaculada and Pallancanta. These last two are owned by the mining company Hochschild, whose shares closed yesterday with a 27.22% drop in the London Stock Exchange, where they are listed.

Panorama

At the close of Monday, November 22, the BVL de Lima registered a 1.46% drop due to the decrease in mining index, which showed a decline of 2.88%. In addition, the dollar closed at S / 4,011, which represented an increase of 0.05% compared to the close of last Friday.

“During the morning the falls of the actions were deeper and in the course of the day they were more contained. The most significant fall was those of the mining company Southern with -3.2%, but the rest was less than 3%, compared to those at the beginning of the day that were between -4% and -6% “said Luis Eduardo Falen, head of Macroeconomics at Intéligo SAB.

There are 30 mining companies that list in the BVL and between Those with the greatest drops were Southern Copper Corporation (-3.29%), Compañía de Minas Buenaventura (-2.93%), Volcan Compania Minera (-1.56%), Minsur (-1.30%), Sociedad Minera Cerro Verde (-1.18%), and Sociedad Minera Corona (-0.87%).

According to Alberto Arispe, general manager of Kallpa SAB, the basket of Peruvian stocks listed on international markets also fell, registering a 2.6% decline.

“It was a day where emerging markets were ‘flats’. The United States Stock Market is up and the Chilean Stock Market is 9% up due to the results of their elections. Clearly Peru is an ‘underperformer’ (poor performance) and it is because of the Prime Minister’s announcement “, he pointed.

And, according to the executive of Kallpa SAB, it is the latter that generated the 27% drop in the shares of the mining company Hochschild Mining on the London Stock Exchange.

“The market had discounted lower economic growth and political noise, but had not discounted violation of the law by the state. What investor is going to want to invest in a country where the premier destroys private equity all at once. You cannot violate the law like this, it hurts all Peruvians “, ad.

Likewise, Falen indicated that in the international arena metal prices remain at high levels, although a little hit today by particular issues regarding possible restrictive measures in Europe, which could reduce the demand for base metals .

“The international field is not helping much today (yesterday) and it will probably maintain that behavior in the coming days, but what today is affecting more is the issue of expectations”, said.

Regarding the behavior of the dollar, Falen explains that the sun has depreciated slightly, with a contained decline. “We see that outside the US currency is strengthening, that makes the local currency hit.”

Both analysts agree that the downward behavior of the stock market has been due to the drag of the decline in the mining index.

Hochschild

The miner Hochschild announced a vigorous defense and legal action necessary to ensure that its rights and those of its subsidiaries are respected. In addition, the mining company rejects any inference regarding environmental contamination.

“We are ready to enter into a dialogue with the Government in order to resolve any misunderstandings regarding our mining operations. However, given the illegal nature of the proposed action, the Company will vigorously defend its rights to operate its mines in Peru using all available legal avenues. “, announced Ignacio Bustamante, executive president of Hochschild.

Given the current situation, Bank of America, downgraded the miner by two notches, lowering its price target from 280 pence to 90 pence and downgrading it from “buy” to “underperforming.”

“While it is likely that the company challenge this decision, we do not see capital outperforming until the dispute is resolved “, indicated the financial institution.

Likewise, the analysts of Bank of America They pointed out the possible implications for copper miners in the country.

“No information suggests that the government it will close other mines, but we cannot rule out that it will look for large mines “they commented.

Guilds speak out

After the announcement by the president of the Council of Ministers, the Ares Mining Company denounced that the closure of the mines represents an outrage on private investment and the country’s stability, as well as an illegal act, since the rule of law and all its principles, in addition to putting 5,000 Peruvians out of work directly and 40,000 indirectly.

For its part, the National Confederation of Private Business Institutions (Trust), the National Society of Mining, Oil and Energy (SNMPE), the Institute of Mining Engineers of Peru (IIMP) and the mining companies Apumayo and SAMI (Breapampa) expressed their rejection of the measure carried out by Vásquez.

Likewise, the Lima Chamber of Commerce demanded that President Pedro Castillo define his position vis-à-vis private, national and foreign investment, as the messages, announcements and contradictory measures expressed and adopted since the beginning of his government -especially during the last week- they exacerbate the uncertainty, mistrust and instability that characterize their management.