Peru Prime Minister, Mirtha Vásquez, told local media that four mines in the southern Ayacucho region of the country would be barred from further expansion, and would be closed “as soon as possible,” because of concerns over environmental impacts.

The decision sent shockwaves through the companies that currently operate in the region including Newmont, Glencore, Anglo American, Freeport-McMoran and Hochshild Mining.

Hochschild Mining has promised to “vigorously defend” its plan to continue mining gold and silver from two mines – Pallancata and Inmaculada – which it claims operate under the “highest environmental standards.”

Ignacio Bustamante, the Hochschild chief executive, said he was “surprised” by the “illegal nature” of the government’s planned action and would “vigorously defend its rights to operate these mines using all available legal avenues.”

The Guardian reported shares in Hochschild plunged nearly 40 percent on the news. The company said it had “not received any formal communication from the government regarding this matter.”

The plan could have severe consequences for Lima-headquartered Hochschild, which sources more than two-thirds of its gold and silver from its Peruvian mines.

Bustamante said: “Our goal is to continue investing in Peru, growing our resources and extending mine lives, in accordance with the Peruvian legal framework.”

Hochschild said it was a significant employer in the region, employing more than 5,000 people directly and about 40,000 indirectly, and has long-term investment plans for the local region. The company and its employees work in collaboration with local communities, implementing not only social development projects, but also contributing to the local economies through the hiring of personnel and services. Hochschild has long-term investment plans to further develop its mining assets, an example being Inmaculada, where a modified environmental impact assessment has been submitted for approval and which, once obtained, will see the continuation of mining activities to deliver significant benefits to the region and its communities.

“We are prepared to enter into a dialogue with the government in order to resolve any misunderstandings with respect to our mining operations. However, given the illegal nature of the proposed action, the company will vigorously defend its rights to operate these mines using all available legal avenues,” Bustamante added.