Chile’s mining players still hope to reach agreement on royalty bill

Almost two weeks after Chile’s lower house gave the green light to a mining royalty bill on copper and lithium over certain production levels, authorities and representatives of the industry are betting on improved knowledge of the sector among legislators to reach agreements to benefit mining regions, the nation's coffers, and private companies. 

Chile’s government has been arguing that the bill is unconstitutional as only President Sebastián Piñera has the power to promote tax-related legislation. However, mining and energy minister Juan Carlos Jobet has been publicly saying that he hopes a reasonable discussion will be held in the senate.

The head of national mining association Sonami, Diego Hernández, has been warning that if the bill becomes law there will be no more mining in Chile, the world’s largest copper producer, but speaking on national television he said that “we are interested in the bill being passed in a way that encourages mining [investment] and funds go to the [mining] regions.”

“In this process [the debate on the bill], the 3% [royalty] will be distributed within mining regions, but the rest [an incremental tax based on copper prices] would be absorbed by the general revenues of the nation. Again, there’s a risk that nothing new reaches the mining regions,” he said. 

The bill would send resources from the 3% rate to mining regions, with 25% for development and 75% to mitigate and/or repair environmental damage caused by mining. 

“Without a doubt, mining regions don’t receive adequate compensation from the state within the national budget. That’s not our fault. Private companies aren’t able to make a different distribution [of resources],” Hernandez said.

The industry representative said he hopes that Chile would be less centralized. “We hope that this will be reflected in the discussion of the new constitution,” he added. 

However, Jobet recently said in a webinar on the future of the sector, hosted by Ernst & Young, that the royalty debate reveals that the population’s and the industry’s needs are not connected. 

“If the mining sector is not capable of closing the gap, it will be in a very fragile position considering the political and social process that Chile will experience in the coming years,” he said. 

A date for discussion of the bill in the senate has not yet been fixed, but representatives of the country’s chamber of mines, industry suppliers association Aprimin and copper research center Cesco have publicly asked congress to hold a technical discussion of the bill. 

Photo credit: Chile's mining ministry