Modifications to the Chilean Mining Code

As of Friday, February 4, 2022, there is changes to the Mining Code which are important for companies who are operating in the Chilean mining industry. Law No. 21.420 was published in the Official Gazette which reduces or eliminates tax exemptions that affect the mining industry. The changes to the law are meant to help finance the new Guaranteed Universal Pension (PGU) to ensure it sustainable in the long term.

With that being said, many of the changes are also meant to improve the long term competitivity of the exploration industry. Many of these were suggested in 2018 when the government commissioned a productivity report (See here – Page 281).

That report found the following – 

• Chile’s participation in the mining exploration market is lower than its share in production and reserves.
• There is a small availability of territory for exploration in the central metallogenic strips of the country.
• Maintaining mining concessions is effortless due to its low cost.
• There are signals of important levels of concentration in Chilean mining property, which act, in practice, as an entry barrier.
• Some agents misuse mining concessions for speculative purposes, damaging the actual mining concessionaires.
• The procedural periods for establishing a mining concession are very high (6 to 8 months for exploration and 24 to 29 months for exploitation).
• The cost of the Chilean mining patent is small compared to the benchmark countries, especially since in other jurisdictions, a mixed protection regime exists that requires patent and effective mining labor.
• Chile shows a significant backwardness both in availability and quality of pre-competitive geological information.
• There is a lag in the standard of the coordinate system used in mining rights at both national and international levels

Exploration Mining Concession

• The extension of the concession is increased from 2 to 4 years, eliminating the possibility of renewal.
• The holder of an expired exploration concession is prohibited from acquiring, directly or through a third party, a new exploration concession that includes (partially or totally) the area of that expired exploration concession.
• Important Background – This modification seeks to generate mobility to the mining concession system, in order to discourage the holding of mining concessions with no development in terms of exploration works.

Exploitation Mining Concession

• When applying for an exploitation concession, the time limit to request a survey is increased from 20 to 30 days.
• The on-site survey operation and the placement of landmarks are eliminated.
• The time limit for the presentation of the survey minute and blueprint is reduced from 15 to 10 months.
• Important Background – This modification intends to modernize and makes more efficient the procedure to grant exploitation licenses.

Annual Mining License.

• The exploration concession license (patent) increases from 1/50 to 3/50 UTM per hectare.
• The distinction between licenses (patent) of metallic and non-metallic substances is eliminated.
• The license of an exploitation concession that is unable to prove current mining works in progress will increase progressively from 4/10 UTM per hectare during the first 5 years of validity, up to 12 UTM per hectare from year 31.
• The license of an exploitation concession that can prove that there are mining works underway, and/or is under environmental evaluation, and/ or has an approved Environmental Assessment Resolution will cost 3/10 UTM per hectare.
• The National Geology and Mining Service (“Service”) will publish a list of concessions benefiting from reduced licenses.
• Important Background – Increasing the cost of the licenses for concessions that are not being mined or advanced will hopefully encourage companies who are not doing anything with their properties to release them or to develop them. Also, this modification intends to help finance the new Guaranteed Universal Pension (PGU) to ensure it sustainability in time.

Basic Geological Information

• In the case of exploration concessions, the owner must submit all the geological information obtained from exploration works performed to date upon the expiration or at the end of their term of the concession.
• In the case of exploitation concessions, the owner must submit all the geological information obtained from exploration works performed in them every 2 years.
• Fines up to 100 UTM will be imposed to those who do not deliver the information obtained.
• Important Background – The goal of this modification is to ensure that the National Geological and Mining Service (SERNAGEOMIN) has more updated and accurate information that will hopefully help the development of future mining concessions.

Technical Elements

• The new SIRGAS datum is introduced, regarding the U.T.M. coordinates applicable to mining concessions.
• A process of unification of the coordinates system to the SIRGAS datum will be initiated for existing mining concessions when the amendments to the Mining Code come into effect.

Possessory Actions.

• The possessory actions of the concessionaire against holders or mere holders of the surface property are circumscribed only for cases in which there is a real right of mining easement or another real right that affects the property.
• Important Background – The goal is to discourage speculation between different concessionaires of mining rights or holders of different rights for the use of the surface land to develop projects. An active issue we have seen the in the Northern Chile between renewables projects (surface rights) and mining concessionaire’s holders.

Effective Date of Law

• The provisions of this law shall become effective as of the first day of the month following the date of its publication in the Official Gazette.
• The modifications introduced to the Mining Code shall become effective one year after their publication in the Official Gazette (February 4, 2023).

Conclusion

The recent changes will increase costs for the minig industry but many of these updates were based on a productivity report that was issued in 2018. The recent changes deal directly with many of the shortcomings that were found in that report which will hopefully have a postive effect on the industry over the long term. 

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