Chilean Mining Law Basics
Chile has seen dramatic growth in its mining industry over the past 30 years which has made it one of the world’s top copper exporters. The countries stable government and economic policies has made it a poster child for the global mining community. With the copper outlook looking favourible, there are many junior miners attracted to Chile hoping that they could find the next big discovery. When entering a new jurisdiction, it is important that foreign investors understand the basics of the mining law.
Chile’s mining policy is based on legal provisions that were enacted as part of the 1980 constitution. These were established to stimulate the development of mining and to guarantee the property rights of both local and foreign investors. According to the law, the state owns all mineral resources, but the exploration and exploitation of these resources by private parties is permitted through mining concessions.
Mining concessions have both rights and obligations as defined by a Constitutional Organic Law (enacted in 1982). Concessions can be mortgaged or transferred, and the holder has full ownership rights and is entitled to obtain the rights of way for exploration (pedimentos) and exploitation (mensuras).
In addition, the concession holder has the right to defend ownership of the concession against state and third parties. A concession is obtained by a claim filing and includes all minerals that may exist within its area.
A pedimento is an initial exploration claim whose position is well defined by Universal Transverse Mercator (UTM) coordinates which define north-south and east-west boundaries. The minimum size of a pedimento is 100 ha and the maximum is 5,000 ha with a maximum length-to-width ratio of 5:1.
The duration of validity is for a maximum period of two years; however, at the end of this period, and provided that no overlying claim have been staked, the claim must be reduced in size by at least 50% and renewed for an additional two years. If the yearly claim taxes are not paid on a pedimento, the claim can be restored to good standing by paying double the annual claim tax the following year.
New pedimentos are allowed to overlap with pre-existing ones; however, the underlying (previously staked) claim always takes precedent, providing the claim holder avoids letting the claim lapse due to a lack of required tax payments, corrects any minor filing errors, and converts the pedimento to a manifestación within the initial two-year period.
Before a pedimento expires, or at any stage during its two-year life, it may be converted to a manifestación or exploitation concession.
Within 220 days of filing a manifestación, the applicant must file a “Request for Survey” (Solicitud de Mensura) with the court of jurisdiction, including official publication that advises the surrounding claim holders, who may raise objections if they believe their pre-established rights are being encroached upon.
A manifestation may also be filed on any open ground without going through the pedimento filing process. The owner is entitled to explore and to remove materials for study only (i.e. sale of the extracted material is forbidden). If an owner sells material from a manifestation or exploration concession, the concession will be terminated.
Within nine months of the approval of the “Request for Survey” by the court, the claim must be surveyed by a government licensed surveyor. Surrounding claim owners may be present during the survey.
Once surveyed, presented to the court, and reviewed by the National Mining Service (Sernageomin), the application is adjudicated by the court as a permanent property right (a mensura), which is equivalent to a “patented claim” or exploitation right.
Exploitation concessions are valid indefinitely and are subject to the payment of annual fees. Once an exploitation concession has been granted, the owner can remove materials for sale.
There is a mining tax that provides protection of rights; it is calculated as a percentage of the Unidad Tributaria Mensual (UTM or monthly tax unit) and applies to each hectare of land included in the mining exploration and/or mining exploitation concessions. This tax is paid annually in a single payment before 31 March of each year.
For mining exploitation concessions, the tax rate is currently 10% of a UTM per hectare; for mining exploration concessions the tax rate is currently 2% of a UTM per hectare. The value of the UTM is adjusted monthly according to the consumer price index (IPC) in Chile.
What is the Claims Processes?
At each of the stages of the claim acquisition process, several steps are required (application, publication, inscription payments, notarization, tax payments, patente payment, lawyers’ fees, publication of the extract, etc.) before the application is finally converted to a declaratory sentence by the court constituting the new mineral property.
New claims are published in Chile’s official mining bulletin for the appropriate region (published weekly). At the manifestación and mensura stages, a process for resolution of conflicting claims is allowed.
Most companies in Chile retain a mining claim specialist (landman) to review the weekly mining bulletins and ensure that their land position is kept secure.
Legislation is being considered that seeks to further streamline the process for better management of natural resources. Under the new proposed law, mining and exploration companies will have to declare their reserves and resources and report drilling results. The legislation also aims to facilitate funds for mining projects across the country. In addition to the mining law, the Organic Constitutional Law on Mining Concessions (1982) and the Mining Code of 1983 are the two key mechanisms governing mining activities in Chile.
The claim system in Chile is unique as it allows for claims to overlap pre-existing ones. For this reason, it is important to have a good landman that will review the bulletins weekly to ensure that any news claims are dealt with accordingly. The importance of having someone that is actively keeping an eye on overlapping claims is extremely important. Equally important is to have a landman review claims in the due diligence process to ensure that everything is in good standing before purchasing a property.
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