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Hochschild Mining Shares Surge After Peruvian Government Clarification

Updated: 25 Nov 2021
  • Hochschild Mining (LON: HOC) shares are currently up over 15% at 140.4p 
  • The company's shares have rebounded after the Peruvian government backtracked on mine closures 
  • Peru’s government said it will consider operating licence extensions if requirements are met
  • Barclays upgraded the stock to Overweight before the Peruvian government's u-turn

Hochschild Mining Shares

After a 27% fall on Monday, the share price of Hochschild Mining has rallied Thursday, climbing to a high of 153.4p at the open. However, the stock has since retraced from the high of the day, and at the time of writing, it is sitting at 140p, up 14.75%.

Despite today's move, it is still down over 31% for the year-to-date.

Peru Backtracks On Mine Closures

Today's move came after Peru backtracked on mine closures. On Monday, Peruvian Prime Minister Mirtha Vásquez said 4 mines, including Hochschild's mines, would be closed as soon as possible.

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However, the government has now backtracked, saying it has discarded the closures. 

Hochschild has 2 mines in the southern Ayacucho region of Peru— the Inmaculada and Pallancata mines — which make up 80%of the company's gold and silver production.

Ignacio Bustamante, Hochschild's CEO, commented: “We welcome yesterday's clarification from the Peruvian government. This has been the result of discussions between senior members of the Cabinet and representatives from the mining industry. 

“We are pleased that our Inmaculada and Pallancata mines can continue to operate without further uncertainty and, furthermore, we reaffirm our goal to increasing our resources and extending our mine lives, in accordance with current legislation.”

Permit Extensions

In addition to the u-turn, the Peruvian government said mining companies can request extensions and modifications to their permits for mining exploration practices. 

Analyst Upgrades

Ahead of the decision to backtrack, Barclays analyst Ian Rossouw upgraded the stock to Overweight from Equal Weight. The analyst told investors in a research note that “softening” of the Peruvian government's tone suggests Hochschild's valuation compared to peers presents a significant opportunity. The analyst's hunch turned out to be on the money.

This morning, Bank of America analyst Kevin Keroudi double upgraded Hochschild shares to Buy from Underperform, setting a 160p price target.

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