SONAMI is Chile’s chamber of mines and is looking to attract medium sized exploration and production to Chile.

Diego Hernández

PRESIDENT, SONAMI

July 31, 2017

Could you please give an introduction to SONAMI?

Founded in 1883, SONAMI is Chile’s chamber of mines and our membership includes small, medium and large mining companies. The small mining companies belong to different regional associations and produce about 1% of Chilean copper. The large mining companies, with the exception of Antofagasta Minerals, are international and produce the full range of commodities that Chile has to offer. We belong to the Confederation of Production and Commerce, which is the top business association in Chile. Presidents are elected for three-year terms, and I will be president for the next two and a half years.

What are mining companies’ major concerns at the moment?

In a short amount of time, mining companies had to transition from producing as much as possible while commodity prices were high to defending operating margins while commodity prices are low. There have been some positive effects, including lower operational costs. The devaluation of our currency has lead to lower cash costs compared in terms of American dollars. Companies have also begun to make more decisions with the future in mind, including focusing on innovation and other long-term initiatives. In Q1 2017, we have seen an increase in tax payments from mining companies, indicating that the worst is behind us. We are also seeing an increase in pre-feasibility studies and brownfield exploration. Everyone wants to be prepared for when the price of copper reaches a certain level. Our expectation is that, as grades fall and some mines run out of ore, the demand for copper will continue to grow by around 2% annually for the next ten years.

What are the major innovation trends that you have observed in the industry?

Large mining companies tend to be conservative with technological investments because production is so capital intensive. Using unproven technology creates additional risks for these operations. Over the past few years, however, we have seen companies increasing the scale of their equipment and incorporating communications technology into their operations. We expect companies to increase their investments in automation. There has been quite a bit of spending on automation, but we have yet to see its full use. At first, companies were hesitant to implement automation because introducing new technology could take time away from production efforts. However, as companies began to focus on operating margins, they are finding that they have no choice but to invest in this technology. A key benefit of automation is the increase in safety associated with having fewer employees on-site.

Do you expect the current legislation around land claims to change to attract more attention to greenfield activity?

We may see some changes to attract more greenfield investment, but land claim legislation will fundamentally remain the same. Guaranteed land claims is one of the biggest factors that attracted international investment to the Chilean mining industry in the first place. Ideally, we would like to have more medium-sized exploration companies enter Chile, but any changes that are made must be done cautiously so as not to drive away existing investment. Chile’s current project portfolio is competitive and we anticipate more development in Chile during the next wave of mining investments. The government recently dropped foreign investment agreements that guarantee stability and certainty for international companies, and we believe these agreements should be brought back to attract more foreign investment.

What are the main advantages to investing in Chilean mining?

Chile is a mining country. We produce 30% of the world’s copper, our mines are quite mature, and the mining industry is very well established. That said, there is still more room for production in Chile. SONAMI has prepared some strategies to attract more foreign investment, which we plan to share with the next president. We need to find a way to make our regulations more similar to those of the world’s most competitive mining jurisdictions, but without jeopardizing what the regulations were originally meant to protect. For example, an environmental permit that normally takes four years to obtain should only take two years to obtain.

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