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Hochschild ready to meet Peruvian prime minister to resolve threat of mine closu

Hochschild is seeking dialogue with the Peruvian government after being blindsided by reports that their Pallancata and Inmaculada mines will be denied licences to continue operating.

 Hochschild's Inmaculada mine in Peru

Hochschild's Inmaculada mine in Peru

Peru's prime minister Mirtha Vasques said over the weekend licence extensions would no longer be granted for four mines in Peru's Ayacucho region, including two operated by Hochschild.

Hochschild CEO Ignacio Bustamante said the company had received no communication from the government, prior to learning of the comments from media reports.

"There has been no formal communication from the government," Bustamante told Mining Journal. "We hope that this is a result of misinformation," he added.

"We are seeking to engage constructively with the government," he said. "We have heard in a recent communication by the head of cabinet that she is open to dialogue. We are ready to meet with her."

Minutes from a meeting between Vasques, vice ministers and local authorities released on November 19 laid out a plan to close the mines "as quickly as possible," and stated that a commission has been constituted to enact the closures. Hochschild's Pallancata and Inmaculada mines are forecast to account for 80% of the company's production in 2022.

"We believe that this proposed action is completely without merit and completely illegal," Bustamante said. "Under Peru's legal system, if you comply with the requirements, you are entitled to the permit. The state cannot arbitrarily deny granting the permit."

Bustamante said environmental issues cited by the Peruvian prime minister had not been raised by with them prior to the announcement. "We are part of the formal mining sector, the formal mining sector is completely and permanently regulated and supervised. The claims that the government are referring to have not come from those supervising authorities," he said.

Bustamente said the company would proceed with operations as it sought further dialogue with the government. "We have only been aware of this situation from press and social media, so we will continue operations as normal," he said.

"Hopefully, the way to resolve this is through dialogue. If that dialogue doesn't progress, we will need to wait to see what we are notified of by the government. Then we will decide how to proceed legally, in Peru and internationally."

Analysts suggested that the lack of formal communication to Hochschild from the government left the future of the mines uncertain, but conceded the issue could indeed be resolved with further dialogue.

"In our view, although still a highly uncertain situation as it is impossible to understand the true intentions of the government at this stage, we believe the context of the potential 2022 closure date is key, and increases the potential in our view that this is a misunderstanding of sorts," RBC said in a note.

BMO said it was "surprised that Hochschild learned of such impactful news second hand without any engagement from the government".

"Given how things have unfolded (seemingly disorganized and hastily), the situation will likely remain fluid in the near term," said BMO.

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