CHILE’S MINING INDUSTRY ON A GLOBAL SCALE - ALABC · source: CIA factbook ... CHILE’S MINING...
Transcript of CHILE’S MINING INDUSTRY ON A GLOBAL SCALE - ALABC · source: CIA factbook ... CHILE’S MINING...
CHILE’S MINING INDUSTRY ON A GLOBAL SCALE
PEDRO PABLO DÍAZ HERRERA
AMBASSADOR OF CHILE TO AUSTRALIA
Brisbane, 18th May 2011
•Chile-Australia
AUSTRALIA CHILE
Population 21,766,711 (July 2010 est.) 16,746,491 (July 2010 est.)
GDP PPP (2010) 889.6 billion 260 billion
GDP PPP (2009-2010) 3% 5.3%
GDP PPP per capita (2010) 41,300 15,000
Work Force (2010) 11.62 million 7.58 million
Unemployment (2010) 5.10% 9%
Inflation rate (2010) 2.9% 1.7%
Exports (2010) 210.7 billion 64.28 billion
Imports (2010) 200.4 billion 54.23 billion
source: CIA factbook
Figures in US$ 2010
INTERNATIONAL INDICES
NAME SOURCE NUMBER OF PARTICIPANTS CHILE'S POSITION AUSTRALIA'S POSITION
Economic Freedom Index 2010 Heritage Foundation, Wall Street Journal 179 10 3
Quality of Life Index 2010 International Living 194 31 2
Environmental Performance Index 2010 Yale University-Colombia University 163 16 51
Human Development Index 2010 United Nations Development Program 169 45 2
Gender Inequality Index 2010 World Economic Forum 134 48 23
Travel and Tourism Competitiveness Index 2011 World Economic Forum 139 57 13
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•Content
I. CHILE: A MINING COUNTRY
II. KEYS OF SUCCESS
III. OTHER LEGAL ASPECTS
IV. CURRENT TRENDS
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CHILE’S MINING INDUSTRY ON A GLOBAL SCALE
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Metallic Mining /
Industrial Mining
Copper
Molybdenum
Rhenium
Silver
Gold
Naturals Nitrates
Lithium Carbonate
Iodine
•I.- Chile: A Mining country
1.1. Chilean mining industry: Its worldwide relevance.
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Production (TT)
(2009)
5,389,600
34,924
25.000
1,301
40,8
1,048,706
25,154
17,399
Worldwide
production ranking
1°
3°
1°
5°
15°
1°
1°
1°
Worldwide production
percentage
34.2%
15.3%
48%
7.1%
1.8%
100%
53%
61%
(Source: Cochilco & USGS).
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•I.- Chile: A Mining country
1.2. Mining activity development
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Chile’s copper production versus worldwide copper production (1974-2009).
(Source: Cochilco).
0,0
2.000,0
4.000,0
6.000,0
8.000,0
10.000,0
12.000,0
14.000,0
16.000,0
18.000,0
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Worldwide
Chile
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•I.- Chile: A Mining country
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Chile versus other copper producing countries (1980-2009).
(Source: Cochilco).
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•I Chile: A Mining country Copper production by company (1985-2009).
(Source: Chilean Mining Council).
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Main worldwide
mining companies
present in Chile:
BHP, Xstrata, Anglo
American, Teck,
Barrick, Antofagasta
Minerals, Freeport,
Kinross in addition to
Codelco.
0,0
1.000,0
2.000,0
3.000,0
4.000,0
5.000,0
6.000,0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Others
Spence
El Tesoro
Los Pelambres
Lomas Bayas
Collahuasi
El Abra
Zaldívar
Quebrada Blanca
Cerro Colorado
Candelaria
Michilla
Compañía Minera El Indio
Escondida
Anglo American Sur
Anglo American Norte
Codelco
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6
21
4 5
1
Sources: Brook Hunt, Codelco and AON Group.
*: Include High Probably, Probable and Possible projects.
**: Include factors like war, terrorism, strikes, sovereign non-payment , political interference, supply chain vulnerability, exchange rate, legal and regulatory,
resources of water and food.
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1
4
2
3
6
27
38
9
16
1
1
1
3
8
Low risk
Medium –Low risk
Medium risk
High risk
Very high risk
Country Risk Level:**
Medium – High risk
2 1
1 17 1
2
2
3
31
8
2
1
1
9
1
1
22
1
1
Jorge Bande | November 2010
•I Chile: A Mining country Sites of the Future: Number of Copper Mining Projects by Country*
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•I.- Chile: A Mining country
1.3. The Mining industry’s contribution to the Chilean economy.
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• Gross Domestic Product
• Exports
• Fiscal Revenue
• Employment
• Foreign Investment
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•I.- Chile: A Mining country
Gross Domestic Product
The mining industry’s participation within 2009 GDP: 16%.
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GDP participation by Area (2009) (Source: Central Bank of Chile).
Agriculture 3%
Fishing 1%
Mining 16%
Manufacturing 13%
Power, Gas & Water 5%
Construction 8%
Market, restaurants & Hotels 9%
Transport 6%
Communications 2%
Financial Services 16%
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•I.- Chile: A Mining country
Fiscal revenue
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Mining revenue (US$) % Participation in GDP
GDP (million US$)
(Source: Ministry of Mining).
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•I.- Chile: A Mining country
Employment
Estimation: Each direct employment in the mining industry generates 6.5 positions in other areas of the local economy.
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Direct mining employment 1990-2009 (Source: Cochilco).
Contractor
Employees
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•I.- Chile: A Mining country
Foreign Investment
Since 1974, the mining sector represents a 37.2% of the authorized Foreign Investment, and a 32.7% of the materialized Investment.
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Foreign Investment 1974-2009 Thousands of US$ (Source:
Chilean Foreign Investment Committee).
0
20000000
40000000
60000000
80000000
100000000
120000000
140000000
Authorized Materialized
Mining
National Total
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•II.- Keys of success
2.1. Geological potential and exploration
2.2. Mining culture
2.3. New Mining Legislation
2.4. New rules on Foreign Investment
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•II.- Keys of success
2.1. Geological potential and exploration
Geological potential
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Copper
Molybdenum
Rhenium
Silver
Gold
Natural Nitrates
Lithium Carbonate
Iodine
Participation in world’s
reserve
38%
12.8%
52%
17.5%
4.3%
100%
27%
60%
United States
Australia
Canada
Chile
China
Indonesia
Kazakhstan
Mexico
Peru
Poland
Russia
Zambia
Other Countries
Worldwide Copper Reserves
(Source: USGS).
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•II.- Keys of success
Investment in exploration
• Chilean investment in exploration represents 5% of the worldwide exploration budget in 2009.
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(Source: Metal Economic Group).
Other Countries 33%
Canada 16%
Australia 13%
Peru 7%
United States 6%
Russia 5%
Mexico 5%
Chile 5%
China 4%
Brazil 3%
South Africa 3%
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•II.- Keys of success
2.2. Mining Culture
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• General social agreement about the relevance of the mining activity on Chile’s
development and the need to promote its development.
• High quality of professionals and specialised manpower.
- Mining School of Copiapó (1857).
´- Mining Engineering Career: international recognition.
- Mining Law classes in Law and Business Schools .
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•II.- Keys of success
2.3 New Mining Legislation
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A. Legal framework
B. Mining concessions
C. Mining preparatory agreements
D. Business structures
E. Legal mining easement
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•II.- Keys of success
A.-Legal framework
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•Technology and foreign investment’s contribution (1920-1960): Development of the “Large Copper Mining Projects” by American companies.
•Economic Model changes (1960-1971): protectionism and statism to mining exploitation and lack of confidence on foreign investment.
Background
“Copper Chilienisation”: modest compensations. (1964-1970).
“Copper Nationalisation”: without compensations. (1971).
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•II.- Keys of success
Political Constitution of the Republic of Chile. (“PC”).
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•The State owns all mines (as general principle).
•Ownership of surface lands is different from mining concessions.
•Surface lands are subject to obligations and limitations to facilitate mining
exploration, exploitation and mineral processing plants.
•Minerals, with the exception of gas and liquid hydrocarbons and lithium, can be
subject to mining exploration or exploitation concessions.
•Ownership over mining concessions is protected by the Property Right’s
Guarantee.
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•II.- Keys of success
Constitutional Organic Mining Law Nº 18.097 from 1982 (“COM”)
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• An amendment requires a quorum of 4/7 of every representative and senator on exercise.
• Mining concessions’ rights and obligations.
• Mining exploration and exploitation concessions.
• Mining concession holder’s right to impose a legal easement.
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•II.- Keys of success
Mining Code of 1983
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• Further development of PC and COM’s regulations.
• Mining concessions’ characteristics.
• Legal protection of mining concessions (required steps to keep the mining concessions in good standing).
• Mining corporations regulation.
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•II.- Keys of success
B.-Mining exploration and exploitation concessions.
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GRANTING
EXTINCTION
CADUCITY
CONTROVERSIES
Granted on a first-come, first-served basis by a regulated judicial process, non-subject to a judge’s discretion or an arbitrary decision by the Administration.
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•II.- Keys of success
THE SAFETY OF A CONCESSION
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• Constitutional's Guarantee of Property Rights.
• If an exploitation concession is expropriated, the indemnity’s calculation process must consider the present value of future cash flows corresponding to the proved reserve base.
• Express causes of caducity and extinction regulated by law.
• Independent judicial system, that adheres to the rule of law and due process.
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•II.- Keys of success
D.- Business structures
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General principle: Any kind of companies
Contractual mining companies
Mining Joint Ventures
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•II.- Keys of success
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2.4 New rules about foreign investment
Clear and solid foreign investment legal framework.
-Framework of both constitutional and legal status.
-Non-discriminatory treatment Principle.
-Non-discretionary Principle.
-Liberalisation of the formal exchange market.
-Right to repatriate funds and remittances of revenue from abroad.
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•III. Other legal aspects
Taxes
Different tax provisions subject to scale and volume of mining industry:
• Small mining companies: to an overall income tax at a certain fixed rate.
• Mid-sized mining companies: taxed on a presumptive basis.
• General system;
Corporate income tax (called First Category Tax), 20% rate in 2011, 18.5% rate in 2012 and 17% rate in 2013 and thereafter.
Additional Tax, 35% rate, on dividends or profit remittances to foreign shareholders. The aforesaid First Category Tax can be deducted as a credit from the Additional Tax.
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•III. Other legal aspects
No specific restrictions or limitations are imposed to the importation of machinery and equipment or services required for mining activities.
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•III. Other legal aspects
Restrictions imposed to the use of foreign employees
• No less than 85% of the workers of one employer (with more than 25 employees) must be Chilean, though certain exceptions may apply.
•Foreign workers are required to obtain visas to work in Chile and individual employment contracts of foreigners must include certain mandatory clauses.
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•III. Other legal aspects
Environmental review and permitting process for a mining project.
The holder of a mining project must submit an environmental assessment of the project to the SEA (Environmental Assessment Service) which can adopt two forms, depending on the environmental impacts:
• An environmental impact study (EIA), which could take about 9 to 15 months.
• An environmental impact statement (DIA), which could take between 4 to 8 months.
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•III. Other legal aspects
International treaties that apply to the mining industry or mining investments.
• Agreements for promotion and protection of investments.
• Chile is a member of the WTO.
• Chile signed the Kyoto Protocol, the Washington Convention and the Stockholm Convention.
• Chile has a mining treaty with Argentina.
• Chile has also signed many double taxation treaties (i.e. Canada, etc), and free-trade agreements (i.e. Australia, Canada, U.S, etc).
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•IV.- Current Trends
National level
- Same mineral deposit: different mining operations.
- Agreements between private parties: avoid eventual conflicts achieving joint exploitation synergies. The case of Codelco Andina and Anglo American Los Bronces.
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4.1 Joint Mining
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•IV.- Current Trends
• Exploration and exploitation of border line mineral deposits.
• Power to create operational areas: easier processes for immigration, employment and environmental matters.
• Use of both countries’ natural resources, goods and infrastructure.
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International Level: Mining treaty with Argentina
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•IV.- Current Trends
• Social License.
• Corporate Social Responsibility.
• ILO Convention 169
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4.2 Mining industry and communities.
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•IV.- Current Trends
• Institutional mechanisms and legal instances for community participation.
• Communities with geographical, economic, cultural or ancestral traditions, should be rewarded if a mining project is implemented.
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Social License
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•IV.- Current Trends
Mining Royalty(2005): The society was not receiving the benefits from the economic success of mining activities.
New company’s behaviour: 3 P
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Corporate Social Responsibility
PEOPLE
PLANET
PROFIT
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•IV.- Current Trends
ILO CONVENTION 169: Related to aboriginals and indigenous tribes in independent countries, ratified by Chile in 2008.
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Protection of lands, territories and indigenous tribes’ ancestral resources.
Consult Participation Rights.
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•IV.- Current Trends
4.3. Access to geo-scientific information related to mining concessions, surface lands and water rights.
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•IV.- Current Trends
4.4. Water for mining.
• Projects in dry areas are using sea water.
• For fresh water, state is investigating the basins, to make feasible new water rights
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•IV.- Current Trends
Energy for mining.
• Demand for energy is growing dramatically, as the mining and other industrial areas need it.
• Mining companies are seeing investment opportunities in the energy sector.
• Incentives for non-conventional renewable energies (“NCRE”).
•The 2010 Corruption Perceptions Index
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Thank you !