Chile government to consider copper producers’ cost variations in new royalty bill

BHP’s Escondida copper mine in Chile. (Image: Wikimedia Commons)

The disparity in costs faced by different copper mining companies in Chile will be taken into account in an industry-wide royalty planned by the government to help finance its ambitious social agenda, the undersecretary of Mining said on Friday.

A study by the national Chilean Copper Commission (Cochilco) revealed that the cash costs for Chile’s largest operators rose by 10 cents per pound in year-on-year terms in 2021, due to the lower quality of the ore as well as higher energy and transportation prices.

The document also states that smaller operators, consisting of those who produce less than 150,000 tonnes annually, have been the most affected by these changes.

“One of the important things that has been salvaged from everything that has been presented is the diversity in the mining sector,” Undersecretary Willy Kracht said at a conference while delivering the report.

“It seems to me that it is tremendously relevant to put this on the table when we are in the middle of discussions on the royalty. It seems that it is an element that must be considered,” he added.

In addition, Cochilco pointed out costs will likely rise again this year due to the crisis in Ukraine, and due to the persistent drought, which could lower production across some areas in Chile, the world’s largest producer of copper.

The government of President Gabriel Boric has made increasing tax collection on mining activity part of its broad tax reform plan, the full details of which should be announced in the coming weeks.

The project could replace or modify a controversial clause being considered in Congress, which the industry has harshly criticized for not considering the operational performance of each site.

In addition to the state-owned Codelco, global mining companies such as BHP, Glencore Plc, Anglo American and Antofagasta Plc operate in Chile.

(By Fabián Andrés Cambero and Isabel Woodford; Editing by Matthew Lewis)

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