Location of the Arcata mine in Peru. Image courtesy of Google Maps.
South American mining company Hochschild Mining PLC has announced that it is to shutdown its operations at the Arcata mine in Peru. The announcement came as part of the company’s 2019 forecast, with the Arcata site already removed from all forecast figures for the year.
The gold and silver mining firm, which is listed on the FTSE 250, operates in Peru, Argentina and Bolivia. The company’s share value slumped after the news was published, with prices down 1.7% to 187.10 pence. The company has since bounced back to 197.50 pence per share.
A statement from Chief Executive Officer Ignacio Bustamante said: “This decision has been expected but is still disappointing for the organisation. Arcata was the company's first mining operation and started producing in 1964. It has been an excellent operation with an outstanding workforce and supportive communities but the continuing low silver price over some years and current geological conditions leaves us no option.”
The low silver price has forced the company’s hand into putting the Arcata site into a “care and maintenance” mode for the foreseeable future, will full shutdown complete by the end of Q2 2019. Silver prices have been coming down consistently since the record levels of $49.50 in 2011. The low prices are good for those using the precious metal in industry, but not the mining firms harvesting it. The silver spot price today is $15.66 per ounce, but the average price was closer to $20 per ounce in 2016, $18 per ounce in 2017, and $17 per ounce in 2018. The hope for mining firms is that the growth in demand for gold will help improve demand for silver, and that the reduction in silver output will also help boost prices similar to the reduction tactics that oil firms use to stabilise prices.
The Arcata mine site in the Arequipa Region of Peru. Image courtesy of Google Maps.
The mine is in the Arequipa Region of Peru, to the south west, and the 47,000 hectare site is located within one of Peru’s largest silver reserves. The Arcata mine was the first that Hochschild developed, with work beginning in 1961 and the site being operational since 1964. Exploration work is set to continue in the area, with Hochschild confirming that they will be ready to reopen the mine as soon as prices improve.