Reforms and collaborations set the course for the industry's future

The Chilean Mining Renaissance

June 04, 2024

 

Image courtesy of Glencore

The Chilean mining industry stands at the threshold of an evolutionary era. In 2023, the industry navigated through a period of considerable legal turbulence and transformative change; the long-debated royalty reform was approved, and the constitutional developments set a new precedent, reshaping the legislative landscape that underpins the sector. 2024 was marked by a transformative beginning, as on January 1st, the amendments to Law No. 21,420, refined by Law No. 21,649, came into effect. These revisions represented the first major update to Chile’s mining regulatory framework since 1983, ushering in a new era of industry regulation. 

From 2023 to 2032, the Chilean mining investment portfolio comprises 49 projects, totaling an investment of US$65.71 billion, according to Cochilco. Six of these projects successfully concluded in 2023, with a cumulative investment of US$7.77 billion. A highlight among those is Vancouver-based producer Teck Resources completed ramp up of its Quebrada Blanca (QB) mine expansion. In Q1 2024, production jumped 74%, amounting to 99,000 t with QB responsible for 43,300 t of that total. The firm’s full-year copper production for 2024 is predicted between 465,000 t and 540,000 t, well above the 296,500 t produced in 2023. 
Six new projects, amounting to US$6.31 billion, were included in the total, showing the growth of the industry. State-owned Codelco increased its budget by US$4.38 billion for the implementation of both operational and structural projects. In the private sector, investment increased by US$2.33 billion, within that, Los Andes Copper’s investments rose from US$1.89 billion to US$2.44 billion for 2023. Los Andes’ Vizcachitas project aims to be operational by 2030, "with a daily throughput of 136,000 t, with an annual output of 183,000 t for the first eight years”, said the firm’s CEO, Santiago Montt. 

The US$65.71 billion investment portfolio is, however, a significant US$7.94 billion drop from the 2022-2031 period. Dominique Viera, president of APRIMIN, explained: “In the context of investment, it encompasses far more than just obtaining permits; it is about fostering an environment conducive to investment. In terms of permits, there are numerous actions we can undertake to expedite the process without necessitating new legislation. For instance, simplifying the accreditation of teams and streamlining the approval for exceptional shifts can significantly reduce waiting times.”

The government is determined to be proactive. “There is an explicit commitment from the government to reduce permit processing times for mining investment projects in Chile by a third,” said Minister of Mining Aurora Williams.

Under the Mining Royalty Law, the government created a public-private working group that proposed 20 actionable measures aligned with this goal. Measures included a reform to Law No. 19.300 to improve the environmental assessment process, implementing modernization projects in institutions responsible for processing permits to review and redesign their processes, significantly streamlining administrative procedures, integrating more critical permits into the unified sectoral permits platform to enhance centralized tracking and reduce delays, and implementing an online permit platform to streamline the application process, among others.

These moves come at a critical time. Copper is trading at its highest levels in over two years. International firms perceive current copper prices and Chile as the perfect marriage. CEO Martin Kostuik of US-based Battery Mineral Resources, which plans to operationalize its new Punitaqui mine in Chile in 2024, explained: “Our commitment to investing in Punitaqui and bringing it into production reflects our confidence in the future of copper.”

“Amid political and global instability where others cut back, Odfjell chose to escalate investments in Chile, signaling our aim not just to sustain but to expand our presence and embark on another 50 years in the country,” said Diego Rodríguez, general manager  of sulfuric acid logistic supplier, Odfjell Terminals Terquim. 

Power companies are also forecasting growth: 30% of Chile’s electricity demand comes from the mining sector, and by 2030, 50% will be required to come from renewable sources. Sergio del Campo, president of Sonnedix and former Minister of Energy, highlighted Chile’s potential: “Our portfolio in Chile stands as the largest within our global operations, reflecting the trust investors place in the Chilean power market.” 

The regulatory environment also fosters a unique environment said Nelson Batistucci, general manager power technique South America at Atlas Copco: “Chile stands out as a market that readily embraces change and innovation, partly due to its regulatory environment. Stringent regulations, such as those governing light pollution to protect observatories, drive the adoption of advanced technologies.” 

Lithium: the horses are in the gate
Chile is the world’s second-largest producer of lithium. Following the lithium boom of 2021, governmental debates stalled further growth in the industry. The delay came with reason, explained Minister of Mining, Aurora Williams: “Rather than aiming for production numbers or a global position, we aim to develop responsible mining capable of capturing revenue for the state, incorporating technology, and including the Chilean talent. If this places us first in terms of global production, excellent. However, our primary goal is to develop lithium ethically and sustainably.”

Racing into development could have meant neglecting blind spots that would have created even larger problems down the road. Instead, the government decided to take the time to consider all the variables to ensure sustainable development of the sector. “The process of awarding Special Operation Contracts (CEOLs),” exemplified Minister Williams, “arises from the previous experience of a failed tender in 2021, when potential impacts were not properly assessed, leading indigenous communities to challenge the process.”

In 2024, the government classified Chile’s 69 saline environments, identifying 26 salt flats open exclusively to private investors. On April 15th, the country announced a Request for Information (RFI) process. The results will be published in 60 days from that date, in July. The government aims to award permits by the end of the year, if there is no need for indigenous community sign-off, intending to develop three to five new projects
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Collaboration is key
Collaboration plays a fundamental role in addressing the mining industry’s future challenges, according to Andrés Souper, general manager at Glencore Chile: “Collaboration and strategic alliances to exchange knowledge, technologies, and resources specific to the mining industry, both nationally and internationally will be the primary method to meet the impending copper shortage,” he said. 

At the CRU World Copper Conference and CESCO Week, industry players across the entire copper value chain cited collaboration as the path forward. According to Iván Arriagada, CEO at Antofagasta Minerals, partnerships enable mining companies to employ capital in more efficient ways— sharing the financial burden of constructing a desalinization plant, for example, recycles millions worth of capital. Joint ventures allow companies to mitigate financial risk in a time of challenging markets. Collaboration also augments sustainability efforts. Teck acted as a catalyst for the establishment of the North Pacific Green Corridor Consortium, a collaborative effort to decarbonize the supply chain across North America, Asia, and Europe, said its CEO, Jonathan Price. 

On the exploration front, collaboration is the key to unlocking a greenfield pipeline said Christian Barra Llano, general manager at Orbit Garant: “It would also be beneficial to promote collaboration between mining companies to standardize operational and safety requirements, like in Québec. This would simplify accreditation processes and reduce costs, allowing a quicker start to new projects.” 

The year has begun with some of the most significant collaborative, and general, moves the industry has seen in years. On April 16th, 2024, Australia-based BHP made an all-share offer for Anglo American, valuing the company at US$38.9 billion. Should the deal be finalized, the combined entity would surpass state-owned Codelco as the world’s leading copper producer.

The Chilean mining industry is not without challenges. An estimated 34,000 skilled workers are needed to meet the supply gap caused by the energy transition, but the number of people entering the industry dwindles. Liquidity for juniors is at an all-time low, while the pressure to make discoveries is at an all-time high. Global lead times to bring mines into production continue to lengthen. Productivity is hampering Chilean miner’s production goals. The impacts of climate change accelerate, yet miners are forced to mine more and mitigate their impacts simultaneously. Chilean miners strive to find the way forward for Chile and the general industry. In many respects they have been successful, reviving the sector, and helping to redefine the future of the industry. The succeeding pages serve to reveal a part of those efforts. 

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