This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Peru Election Raises Specter of Mining Tax

(Updated to include analyst commentary and for closing stock prices)

NEW YORK ( TheStreet) -- The apparent election victory of a leftist presidential candidate who wants to hike taxes on mining companies has clouded the resource-extraction business Peru, which has enjoyed booming economic growth in recent years.

Shares of Southern Copper (SCCO - Get Report) and Buenaventura (BVN - Get Report), the most visible U.S.-listed plays on Peruvian mining, fell sharply in Monday morning trading in New York. Southern Copper, majority owned by the Mexican minerals giant Grupo Mexico, saw its shares drop more than 11% to $30.78, while Buenaventura, a gold and silver miner, plunged nearly 15% to $35.75.

Peru's new president, Ollanta Humala

In a runoff election Sunday, Ollanta Humala won a tight race over rival Keiko Fujimori, the daughter of former Peruvian president Alberto Fujimori, who is serving a 25-year sentence for human-rights crimes. Humala's victory came as something of a surprise. Heading into the weekend, polls showed that Fujimori, widely perceived as more investor-friendly, held a narrow lead.

Humala, a one-time ally of Venezuela's Hugo Chavez and the leader of a failed military coup in 2000, has attempted in recent years to curb a reputation for strident left-wing views. Still, he has achieved success among voters in Peru by promising to do more to spread the wealth produced by one of South America's fastest-growing economies. Discontent has been brewing in the country as poverty remains a widespread problem, in spite of the boom.

Peru is the second largest producer of copper in the world, behind its southern neighbor Chile.

Humala has discussed instituting a windfall mining tax in order to distribute the country's mineral wealth, though the candidate hasn't detailed a specific plan.

Because of his reported connection with Chavez, some observers have even speculated about outright nationalization of the country's mining interests, though most feel that possibility is remote. "There's always that risk with a nationalist coming to power, and the market is quite risk-averse at the moment," said David Radclyffe, metals and mining equities analyst at BMO Capital Markets in London.

A spokesman for Southern Copper at its U.S. offices in Phoenix declined to comment on the Humala victory or how the company might respond to an effort by the new government to raise taxes on natural-resource profits. "We're not a political institution, we are a productive institution," the spokesman said. "We can say congratulations to the new president, but no more."

Shares of Freeport McMoRan (FCX - Get Report) slid 14 cents to $49.79 after spending much of the session in the green. The company has substantial Peruvian exposure, holding a more than 50% stake in the Cerro Verde copper mine. By Radclyffe's reckoning, the asset makes up 10% of Freeport's value.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BHP $46.94 1.08%
BVN $10.63 0.85%
FCX $20.66 -0.05%
SCCO $30.00 0.00%
TCK $13.83 2.67%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs