Shares of Peruvian-focused mining companies dropped on Monday after the country voted in left-wing former army commander, Ollanta Humala.
Humala's victory caused the Lima General Index to drop more than 12 percent, its biggest ever one-day loss, bringing trading to a halt. It's the first time trading has stopped on the exchange since the October 2008 crisis.
The new president had previously made claims of higher taxes to foreign mining companies, provoking fears that Peru will become a far more expensive place to build and operate mines. In the past, Humala has suggested a windfall tax of up to 40% on profits by mining companies, in addition to an increase to the 30% rate that miners currently pay, in order to better distribute the country’s mineral wealth.
Peru-based junior mining companies Rio Cristal Resources (CVE:RCZ) and Vena Resources (TSE:VEM) were among the hardest hit by the election result, dropping 25% and 16%, respectively, by market close on Monday. Dozens of other mining companies were also hit by the news, including Tier 1 silver producer Pan American Silver (NASDAQ:PAAS, TSE:PAS).
Markets across the globe slipped, with the Toronto Stock Exchange dropping 199 points; the mining and metals sector fell 24.5 points to finish the day at just under 1,362.
The June contract for copper, initially rose on fears that future mine developments from the second largest copper producer in the world could be jeopardized. However, by the end of play, copper dropped by 0.18%.
Peru's currency also took a hit at Humala's victory. The sol dropped 1.25% today, at 2.791 per U.S. dollar.