A new mining bill that increases taxes and royalties for large producers has reached Chilean President Gabriel Boric’s desk for signature.
Companies that mine over 80,000 metric tons of refined copper annually will face a maximum tax rate of nearly 47 per cent, which the industry considers quite high. The bill had final approval from Congress on Wednesday in a 101 in favour to 24 against vote after approving modifications.
The reform also introduces a 1 per cent tax on the total value of copper sales for companies that sell more than 50,000 tons of refined copper per year. In addition, it levies an extra tax of 8 per cent to 26 per cent on copper miners, with the exact rate depending on the company’s operating profit margin.
Jorge Riesco, president of the Chilean mining association Sonami, said that while the result is positive, the tax rate is high and it could put pressure on companies and investors.
“We were skeptical that our technical arguments could be addressed in the Lower House, we even feared that what came out of the Senate could worsen. That has not happened and it has been approved at the instance, therefore it becomes law,” Riesco said in a statement.
“It must be recognized that what finally came out is better than what the Executive originally intended with a maximum tax burden of 50 per cent,” he said.
“The most important thing about this initiative is that, for the first time, direct resources are allocated to mining regions, which did not happen before due to fiscal centralization,” added Riesco.
🎙️"Creemos que hay un exceso de la contribución que se está exigiendo que puede afectar a proyectos concretos, y ojalá no, pero también algunas decisiones de inversiones futuras" @JorgeJRiesco
— Sonami (@Sonami_Chile) May 18, 2023
Read more: Chile announces plans to nationalize its lithium industry
Read more: Chilean government open to discussions after facing criticism over new copper royalty tax
Read more: Anglo American gets environmental permit for US$3B extension of Chilean copper mine
Chile is among the top producers of copper in the world and has abundant resources in lithium, gold and iron. Its unique mountain geography allows for exposure of mineral veins at the surface making it easier to find.
Anglo American plc (LON: AAL) recently received an environmental permit from Chilean authorities enabling the company to complete a US$3 billion extension of its Los Bronces copper project in the Andes Mountains.
Toronto’s Lundin Mining Corporation (TSX: LUN) (Nasdaq Stockholm: LUMI) also announced in March that it will be acquiring a majority stake in a Chilean copper mine located in the Atacama Region and paying $800 million in cash upfront.
Other companies operating in the region include Rio Tinto (NYSE: RIO), Antofagasta (LSE: ANTO), Glencore (LSE: GLEN) and state-run Codelco operate in Chile.
Last month, President Boric said the country may nationalize its lithium industry as it was an opportunity for economic growth presenting short-term benefits.
The move will transfer control of domestic lithium operations in Chile from the major industry players Sociedad Quimica y Minera de Chile (NYSE: SQM) and Albemarle Corporation (NYSE: ALB) to a state-owned company.