The election of left-wing Ollanta Humala as president in Peru has unreasonably spooked investors and brought miner Metminco's (LON:MNC, ASX:MNC)) share price down around 14 per cent since last Friday, says analyst Charlie Long at Singer Capital Markets.
In a research note, he says the main fear was Humala's proposal for a windfall tax on mining profits but the broker believes that any new tax regime will be "less onerous" than is feared.
Now is an excellent time for investors to pick up the stock of the copper-focused firm and rates it a "buy" with a target price of 33 pence (current price: 19.5 pence), he added.
Humala replaces Alan Garcia and is 94th president of the South American country. He will serve for five years.
Long says Humala has pledged to govern by consensus and consult mining firms on any proposed tax change and says the broker thinks that onerously high taxes are an unlikely outcome.
He adds that mining windfall taxes have a reputation for not lasting and emphasised that presidential terms are restricted to five years, so even if Humala introduced a tax, it is very possible that it would be changed or scrapped before mining starts at the firm's flagship project "Los Calatos".
He also said Peru's sign-up to several trade agreements meant if it introduced unacceptably high new taxes it would risk legal action from foreign-owned miners and pressure from US and other governments.
Metminco has six projects in Chile and one in Peru. Los Calatos in Peru is at an early stage of exploration and already has an estimate of 4.7 mio/t contained copper equivalent.
Also, Long points out that Humala has pledged to end the environmental conflicts, which were a big issue under Garcia, who is blamed for rapid expanion at the detriment of the environment and indigenous people.
"Interestingly, if Humala gives more power to local anti-mine groups, Los Calatos could benefit from being a project with low environmental and social risk. Los Calatos is located in an uninhabited area with no history of Indian populations, 50km from the nearest town and where there are no rivers to pollute. Furthermore, the land is owned by the government which removes land ownership and access issues."