Peru softens stance on mining permits that rattled sector

By Marco Aquino

LIMA (Reuters) -Peru's government said on Wednesday that mining companies could seek permission to extend operations, a notable shift in stance after officials had appeared to rule out extensions for some key mines over environmental concerns, rattling industry advocates.

The Andean country's leftist President Pedro Castillo is seeking to shake up the mining sector after pledging to redistribute mineral profits more evenly and empower indigenous groups and farming communities.

In what was the government's toughest move yet, Prime Minister Mirtha Vasquez last week said it would not approve extensions for four mines, including London-listed Hochschild Mining's flagship Inmaculada silver project.

On Wednesday, it appeared to soften that stance after talks this week with industry leaders. Mining operators play a major role in the economy of the world's No. 2 producer of copper and silver.

"Mining companies can request extensions and modifications to their permits to explore and exploit in strict adherence to current regulations," the government said in a statement. It did not name Hochschild specifically.

Hochschild's shares had sunk by as much as 57% on Monday, before recouping some of those losses to end down 27%. It fell a further 4.5% on Tuesday before gaining 6.6% on Wednesday.

Vasquez said in a tweet after the announcement that the government would still make the final call on any extensions.

"The government respects the rule of law, there is no violation of legal security or unilateral closures," she said.

"But the State does assume the function of supervising the processes of mine closures and environmental control, according to the law," she added.

Earlier this week, the government and the National Society of Mining, Energy and Oil held "productive" talks, though no specific agreements were announced. On Wednesday, the industry body called the government statement "a positive measure."

"It is urgent to seek consensus and build the necessary trust between the state, the private sector and civil society to guarantee the development of a modern, socially and environmentally responsible mining sector," it said.

Communities in Peru have long protested against mining operations in the country, saying that the mines pollute local water sources and can impact farming.

(Reporting by Marco Aquino, writing by Hugh Bronstein; editing by David Evans, Barbara Lewis and Aurora Ellis)

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