Chilean Mining Code -Recent Changes for Exploration

Chile’s mining industry has been in the spotlight over the last few years due to changes to the mining code and royalties. The discussions and finally the passing of these laws caused concern for investors who were accustomed to a stable legal environment in Chile over the last 30 years.

In the end, the changes introduced were much lighter then originally expected. While they would raise costs for miners and push Chile up towards higher taxing jurisdictions, they still maintained competitiveness for the countries mining industry.

The most recent amendments were published on August 2^nd, 2024, related to Decrees N° 9 and N° 10. Generally, the changes pertain to exploration companies providing geological information to the government. The other consists of smaller changes to how mining concessions are managed, with the most important being the reduction of the annual patent for companies that can verify that exploration work was completed on their properties.

DECREE N° 9: WHAT IS IT?

As per the provisions of Article 21 of the Mining Code, and as amended by Law N° 21,420 and Law N° 21,649, mining concessionaires have the obligation to submit to the Geology and Mining National Service (“SERNAGEOMIN”) a report with the geological information obtained from the exploration works executed in their mining concessions.

Consequently, this regulation of the Ministry of Mining establishes the form, terms, and conditions that such report requires, in order to comply with this obligation by the “Reporting Entity”, as defined below.

Article 1 – Provides details of the definitions contained in the regulation.  

The most important topics that need to be reported are the following:

1. Reporting Entity: The holder of a mining concession (exploration or exploitation), is obliged to submit a report with the geological information obtained from exploration works executed in the concessions.
2. Exploration: Set of works and actions leading to the discovery, characterization, delimitation and estimation of the potential of a concentration of mineral substances.
3. Basic Geological Exploration: First stage of the exploration process, consisting of the selection of geographical areas with geological structures that are favorable to contain mineral deposits, and the identification therein, through the application of one or more geological reconnaissance techniques of specific sectors or targets in which the presence of such deposits can be eventually verified.
4. Advanced Geological Exploration: Exploration activity based on information obtained from basic geological exploration, in order to characterize the mineral deposits with greater precision and define the resource in economic value. The results of this stage are used for the development of pre-feasibility studies and the conversion of mining resources to reserves.
5. Geological information: Set of data and background information obtained from exploration works, such as sampling databases, analytical certificates, maps, geological, geophysical, topographic surveys, drilling databases, and any other type of study.

Title II, Chapters I and II of the regulation refers to the report and submitting of the geological information by the Reporting Entity.

The mining concessionaire must provide a report with the geological information obtained from the exploration works executed in their mining concessions to SERNAGEOMIN, through a form on the SERNAGEOMIN website, which must have the following information (if it exists):

1. Presentation of the project: explored area and exploration activities, among others.
2. Regional and district geological maps of the project.
3. Geophysical surveys.
4. Geochemical surveys and surface samples.
5. Drilling information.

The Reporting Entity shall submit the report together with an affidavit stating that such information is complete, consistent and truthful.

The information is and will continue to be property of the Reporting Entity but will be available for public consultation in accordance with the provisions of Law N° 20,285 on Access to Public Information. The Reporting Entity may indicate, and provide evidence, that the information comes from Advanced Geological Exploration work, in which case it will be considered confidential for four years as of its submission to SERNAGEOMIN.

Timeframes and report examinations by SERNAGEOMIN:

With respect to exploration mining concessions: The submission of the report needs to be made within 30 days following the expiration date thereof, or within the first 6 months of the last year in which the concession is in good standing, provided that the mining concessionaire intends to apply for an extension of his concession.

With respect of exploitation mining concessions: The submission shall be made every other two years as of the date of constitution of the mining concession, within 30 days as of the end of the two-year period.

After SERNAGEOMIN receives the report by the Reporting Entity, it shall conduct a formal examination, with the possibility of granting a term to correct errors and/or omissions, and then a thorough examination with respect to technical aspects, content and format of the report. In this respect SERNAGEOMIN can request to the Reporting Entity clarifications, amendments or supplements. Finally, SERNAGEOMIN shall issue a resolution that will consider the obligation to submit the information as having been fulfilled, or else will initiate a sanctioning process.

Sanctions:

The mining concessionaire that does not comply with the submitting of the report, in the established manner, and within the established deadlines, will be sanctioned with a fine of up to 100 UTA (annual tax unit) / approx. US$ 84,000.

If, having been requested, the owner fails to comply with the request, the SNGM will apply double the penalty: 200 UTA (annual tax unit) / approx. US$168,000 and, in addition, will not be able to benefit from a reduction in its annual mining patent.

To determine the fine to apply, SERNAGEOMIN will take into consideration the following factors:

1. Previous conduct of the offender.
2. Economic capacity of the offender.
3. Seriousness of the infraction.
4. Negligence or malicious acts in not complying with the submitting of the information.

Transitional provisions

The two-year period set forth for exploitation concessions shall be counted from their date of constitution, if after the entry into force of Law N° 21,649, whereas for those pre-existing mining concessions the same term will begin to run on January 1^st, 2024.

Ax Legal Practical Advice –

The goal of the government is to be able to have access to the exploration information so that it can be recorded and used in the future. In the past, exploration information could be lost and future concession holders would not be able to use the information to help with their own exploration programs. Having this information public, will help build more transparent and fluid exploration market for Chile. 

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DECREE N° 10: WHAT IS IT?

This decree amends the Supreme Decree N°1 of 1987, Ministry of Mining, which approves the Mining Code Regulations. These amendments have the objective to make consistent the Mining Code Regulations with the Mining Code, as amended by Laws N° 21,420 of 2022 and N° 21,640 of 2023.

Most Relevant Modifications

• Extension of the exploration mining concession: To apply for the extension of an exploration concession, the mining concessionaire shall comply with the obligations established in Article 112 of the Mining Code, with respect to the obligation to submit the geological information obtained from exploration works.
• Derogation of mining claims “by sight”: Elimination of the Article 19 of the Mining Code Regulations which allowed filing mining claims (“manifestaciones”) for exploitation mining concessions “by sight” (manifestaciones por vista).
• The term to file the request for survey (“solicitud de mensura”): the new term regarding this stage, in the process to grant an exploitation concessions shall be 30 days, between days 91 to 120, both inclusive, counted from the filing date of the mining claim.
• Requirements and proceedings to request the extension of an exploration mining concession: They consist on submitting to SERNAGEOMIN a report with all the geological information obtained from exploration works that evidence they were executed, or documentation that evidences having obtained an Environmental Qualification Resolution (environmental approval), or a resolution issued by the Environmental Assessment Service stating that the project has been submitted to the Environmental Impact Assessment System.
• Reduced annual patent on exploitation concessions: It establishes the different hypotheses and proceedings to apply for a reduced annual patent (in the case of exploitation mining concessions) of 1/10 UTM (approx. US$70), per hectare and defines the concept of “mining productive unit”.
• Exploitation mining concessions not eligible to apply for a reduction: It establishes the amount of the annual mining patent for exploitation mining concessions not eligible to apply for a reduction.

Transitional provisions

To access the benefits of the reduced annual mining patent, the respective information must be submitted by the mining concessionaire within 30 days following the publication of the Decree in the Official Gazette.

Ax Legal Practical Advice –

According to Sernageomin’s estimates, as of today, 75% of the territory in mining areas is under some type of mining concession, however, it is estimated that only 10% is actively being explored. In addition, large miners held a significant amount of these concessions with no active work taking place. This left very little room for junior exploration companies to enter the Chilean market and overall encouraged companies to hold concessions they had no plans for. 

Changes were made to the mining code last year which increased the annual patents for mining concessions. This goal is to encourage companies to explore the properties or let them elapse so others could possibly pick them up. The most recent changes help clarify how companies can apply for lower patent fees and encourages companies that have carried out exploration work to apply for them. 

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