Chile minister says mining royalty bill “unconstitutional”

Chile mining minister Juan Carlos Jobet. (Image courtesy of Mining Ministry.)

Chile’s mining minister Juan Carlos Jobet said on Monday a bill to boost royalties on copper and lithium miners currently being discussed by lawmakers was “unconstitutional”, adding that center-right President Sebastian Piñera’s administration would oppose it.

The proposed law, introduced in 2018, would set a 3% mining royalty for companies mining and exploring for the two metals in the country, which is the world’s top copper producer and has the largest known reserves of lithium.

Jobet told the annual CRU World Copper Conference and CESCO Week that the government was fine-tuning a wide-ranging national mining policy proposal, which would be presented in the third quarter.

The minister said that policy would be a better fit for both investors and the government priorities than a royalty increase.

The proposed tax, to be applied on the nominal value of extracted metals, would affect copper miners that produce more than 12,000 tonnes of the metal annually and those extracting 50,000 tonnes a year of lithium, used in batteries that power electric cars.

Half the funds obtained from the royalty would go into a regional convergence fund to finance regional and communal development projects. The other half would directly finance projects to mitigate, compensate or repair environmental impacts from mining activity in communities near mining projects.

Current system “good enough”

Diego Hernández, president of Chile’s National Mining Society (Sonami) and former CEO of copper giant Codelco, has defended the existing system.

In his first term in office a decade ago, Pinera introduced a complicated system of payments that now charges large producers a variable rate on operating profit of as much as 14%.

“It brings in the same or more (than a tax on sales) and does not fundamentally affect the less competitive mines,” Hernández told Reuters in March.

Opposition leaders, who are responsible for the bill, believe royalties on copper and lithium produced by companies such as BHP and Albemarle would fund regional development projects, responding to the growing social and environmental push from investors and supply chains. 

Chile holds about 52% of the world’s known lithium reserves. The nation aims at making the white metal its second-largest mining asset. Lithium is currently the country’s fourth-biggest export.

(With files from Reuters)