Hochschild Mining’s market value almost halved on Monday after Peru closed two of its mines for environmental reasons, exacerbating the conflict between the mining industry and the left-wing government.

The FTSE 250 company’s shares fell 47 percent in morning trading after Peruvian Prime Minister Mirtha Vasquez announced over the weekend that four mines in the southern Ayacucho region, two of which are owned by Hochschild, will be “closed as soon as possible.” would be.

Hochschild said Monday it will “vigorously defend its position” and that its mines are operated under the “highest environmental standards.”

The intervention of President Pedro Castillo’s government will frighten the mining sector. The South American country is the second largest copper producer in the world and a major source of gold, silver, zinc and tin.

Anglo American, Newmont, Glencore, and Freeport-McMoRan also operate mines in the country, as do China-controlled companies like MMG and Chinalco and local producers like Buenaventura.

“That increases them. . . geopolitical risks for miners working in Peru, ”said JPMorgan analyst Patrick Jones. “This is a negative analogy for Anglo American, whose flagship Quellaveco copper project is in Peru.”

Two of the targeted mines – Pallancata and Inmaculada – are owned by Hochschild, which is controlled by Peruvian billionaire Eduardo Hochschild, and account for more than two-thirds of the annual gold and silver production of the London-listed group.

“I would like to announce at this point in time that with regard to the four mining companies,” Vasquez said in a statement over the weekend, “there will be no further expansion for the exploitation, exploration and even the closure of mines. We will close the mines as soon as possible. “

Hochschild said it had “received no formal communication from the government on the matter.”

The order from the Peruvian government comes as some right-wing congressmen, including losing presidential candidate Keiko Fujimori, have made efforts to indict Castillo.

He came to power that year and promised to extort more money from the Peruvian miners. His government has already proposed “a new profit tax” for mining companies and “an end to tax breaks”.

Mining accounts for 60 percent of Peru’s export income. Hochschild employs 5,000 people in the country and says its mines support an additional 40,000 jobs.

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“We’re not sure the extent that this type of measure could mean for Peruvian overseas investment has been fully appreciated by the government, which we believe could offer potential for a reversal in due course,” said RBC analyst Tyler Broda .

Hochschild’s shares were already down 25 percent this year when they closed at 164p on Friday, a market value of just over $ 1.1 billion. The company is targeting up to 372,000 ounces of gold and 32 million ounces of silver this year.

Hochschild boss Ignacio Bustamante said the Lima-based company wanted to continue investing in the country.

“However, given the illegal nature of the proposed measure, the company will vigorously defend its rights to operate these mines through all available legal channels.”

Hochschild had awaited approval for a revised environmental impact study that would have paved the way for Inmaculada to expand.

“If this doesn’t come in, it could have a negative impact on production from 2023,” said Jones.

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