Royalty bill and exploration take center stage at opening of Cesco Week

Chilean copper production has been stagnant for more than 10 years and exploration is failing to take advantage of the country’s geological potential, leaning more towards brownfield than greenfield initiatives, according to industry sources. 

This is the case despite the country having the opportunity to become a leader in sustainable mining, according to Jorge Cantallopts, executive director of copper studies group Cesco. 

In addition, there are variables that affect Chilean mining’s competitiveness that are "more complex than the uncertainties generated by the constitutional [rewrite] process or the potential impacts of the royalty bill that is currently being discussed in the senate," Cantallopts said at the opening of Cesco Week in Santiago on Monday.

Regarding the royalty bill, mining minister Marcela Hernando spoke of the importance of having a new, more efficient tax collection mechanism.

"Approving the bill will mean new resources that will go directly to benefit Chilean families, and tangible improvements for the regions, reaching 87% of the municipalities of the country," she said.

Hernando said the royalty bill will also promote decentralization, economic autonomy, and productivity in the country's regions, since "the resources of the large-scale mining sector will return significantly to the communities of origin, promoting investment and local development," she added.

If approved, the royalty would result in tax collection equivalent to 0.46% of GDP and double the contribution to the common municipal fund, which constitutes the main source of financing for Chile’s more than 300 municipalities, the minister said via the Gobierno Informa channel.

Although the royalty bill has not yet achieved a consensus in the sector, there is agreement among both authorities and private sector mining players that it is necessary to encourage exploration, and especially greenfield exploration, so Chile does not lose competitiveness.

In 2022, exploration spending in Chile totaled US$713mn, or 5.48% of the worldwide figure, positioning the country as the top destination in Latin America and the fourth worldwide, after Canada with 20.6%, Australia with 17.8% and the US with 12.3%, Hernando told the event.

For the period 2022-26, some 45 mining projects involving investments of US$46.3bn are being considered, which could offset the drop seen during the pandemic.

Sergio Giglio, corporate manager of global exploration at local copper miner Antofagasta Minerals (AMSA), acknowledged that the company saw a drop in exploration in 2020 due to COVID-19 protocols and restrictions on travel and logistics issues. However, last year the figure "exceeded pre-pandemic levels by 20%."

Klaus Heppe, exploration manager at Canada’s Teck Resources, said that in 2021 the company invested Cdn$65mn (US$49mn) in exploration, an amount that will increase, particularly in Chile to expand the potential of the Quebrada Blanca copper mine.

One of the main difficulties faced is the increase in costs, both executives told Cesco Week, adding to the lengthy process involved in obtaining permits to explore.

Giglio said the intervention of the State is necessary to facilitate the granting of permits, including in the phases related to community engagement.

Regarding greenfield exploration, AMSA is developing the Cachorro and Encierro projects, which are at an intermediate stage and "we're trying to grow the resources that we have reported," said Giglio.

In AMSA's latest annual report, the company said last year it drilled 80,000m, 27% more than in 2021, increasing resources by 765Mt.

Cachorro is located between the company’s Antucoya and Centinela mines in Antofagasta region, which could allow for synergies, while the Encierro project is in the Andes mountain range in Atacama region and consists of a copper, gold and molybdenum deposit that AMSA is exploring in a joint venture with Barrick Gold.

Teck’s Heppe said one of his challenges this year will be to increase resources through more greenfield initiatives.