Chile mining policies

With lots of concerns about environmental destruction of large scale mining in the Philippines, I checked some environmental policies in Chile since that country has high dependence on mining revenues as a portion of GDP and corporate income.

I saw these two papers published in 2014.

(a) Mining in Chile: overview
by Gonzalo Nieto and Maximiliano Urrutia, Urrutia & Co, May 01, 2014

  1. What are the main ongoing requirements for environmental protection?

…With regards to mining waste, the most important issues are the location and construction of the waste dump and the functioning and maintenance of tailings dams.

The Health Code requires the prior approval of the National Health Service for the construction of a waste-treatment plant of any kind. The Mining Safety Regulation requires that the stability of waste dump projects be guaranteed and that the highest safety measures are adhered to with regards to their construction and expansion. Such projects must be reviewed and approved by the National Mining and Geology Service.

There is a specific regulation on the construction and operation of tailings dams, Supreme Decree No 248/2007, which establishes procedures for the approval of tailings dams projects and requirements for their design, construction, operation and closing that guarantee the safety of people and assets.

(b) Mining: A Platform for Chile’s Future
Report  to the President of the Republic of Chile Michelle Bachelet

By The Commission for Mining and Development of Chile National Council of Innovation and Competitiveness. December of 2014 http://www.cnid.cl/wp-content/uploads/2015/06/Mining_a_platform_for_chilean_future.pdf

Inclusive mining is one that encourages the participation of communities living or working in areas affected by mining facilities in the benefits generated by their operations.

Sustainable mining is one that, in the design of its operations, integrates              all variables affecting the socio-environmental  system  in which it operates. In  this way it prevents, avoids, minimizes, mitigates and    compensates its environmental impacts-including effects on the ecology and biodiversity, water and soil quality, and also the social and cultural impact throughout the life cycle of the facilities until their closure              and abandonment. The industry operates with    practices, technologies and verifiable world-class environmental standards. It favors the interests and rights of present and future  generations.

It seems it is not so bureaucratic.
Below, will discuss briefly the Chilean Ambassador, Roberto Mayorga, presentation during the Mining 2011 Conference. See the 34-slides presentation here.

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At $40 billion a year of mining exports, the sector comprising 19 percent of GDP, it is indeed a major part of the Chilean economy. It is something that the Philippines can hope to replicate.

The northern part of the country is the mining region, especially Iquique region.  This Chuquicamata, I saw this in facebook being circulated as an ugly face of mining because of the huge depression in land surface, the barren soil with zero vegetation, and the sight of “natural resources being taken away by big multinational mining companies.” But this is Chile government-owned mining company.

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Another state-owned mining company is El Teniente. From this computer graphics, new/current mine site and future site is going deeper.

This is a private mining project, jointly operated by BHP (Australia), RTZ (UK) and JECO (Japan). This looks shocking and “very exploitative of the planet” in the eyes of many anti-mining activists. For some entrepreneurs though, this deep hole is perfect for a future lake and resort hotel with lots of water sports facilities or even ordinary fishing — and create lots of jobs in the process.

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There are nine major private mining projects in Chile, involving investors from Australia, Canada, Chile, China, Japan and UK. Now look at the huge investments until 2017, $67 billion, wow.

The legal regime for mining seems less complicated than in the Philippines. While the Chilean Constitution provides that the State has the absolute and exclusive dominion over the mines, the  minerals may be explored and exploited with the private sector through Mining Concession. An exception to the Concession is that hydrocarbons can only be exploited by the State or Private Companies through a special Operating Contract granted by the State of Chile.

And it is the court, the judiciary, not an Executive agency like a Department or Ministry of Environment, or a Provincial or City government, that issues a mining concession, truly unique.

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Obligation of the Concessionaire is simply the payment of an annual fee or tax, see below. In case of non payment, there are legal procedures for a public auction. In case there are no bids (or failure of bidding) to buy the concession, the concession is simply cancelled and the area is declared free. Cool and simple policies.

Foreigners are allowed 100 percent foreign equity, and profit can be repatriated anytime so long as taxes have been paid, really business friendly.

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Corporate income tax, 20 percent vs. 30 percent in the Philippines.

 

Environmental regulations in Chile: (a) Approval of Environmental Impact Plan, (b) Community Participation, (c) Mitigation Plan, to repair or compensate impact, and (d) Mine Closure Law in Congress.

Labor regulations, settlement of disputes: Chile is a member of International Center Settlement Investment Disputes (ICSID) in WashingtonDC. The country has signed more than 50 Bilateral Investment Agreement (BIT), with the Philippines in force since 1996. And here’s a kicker:  Foreigners can choose between local court or International Arbitration.

I think the DENR-MGB are aware of these policies in Chile and other countries like Australia. But the legislators and the many anti-mining activist groups are not. They need to study more, see the numbers more, before they make further political noise to further regulate and further tax the sector.

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