Foreign companies operating in world top copper miner Chile on Wednesday asked lawmakers to rewrite a controversial bill that would slap royalties on their sales, warning the fresh taxes could squander their competitiveness and future investment plans.
The royalty bill has gained momentum this year as prices of the red metal – critical for its use in construction and automaking industries – have soared amid a nascent global recovery following the coronavirus pandemic.
Smaller miners with annual production under 100,000 tonnes in particular warned that they would be disproportionately impacted given their higher operating costs.
Giancarlo Bruno, chief executive of Mantos Copper – a consortium run by UK investment firm Audley Capital Advisors and Orion Mine Finance – warned the bill as written could force the closure some such projects, and urged lawmakers to consider a “new formula,” noting that there was still room for higher taxes on margins rather than sales.
Proponents of the bill, which proposes a base rate royalty of 3% on copper and lithium sales that would increase alongside global prices, say proceeds are urgently needed to underwrite social programs for Chileans suffering from the coronavirus pandemic.
Luis Sánchez, president of Minera Candelaria – owned by Canada’s Lundin Mining Corp – said his firm was open to discussion but that the bill as written would put royalties well over those paid by miners elsewhere.
“An increase in the mining royalty would leave us in a position less competitive in world industry,” Sanchez said.
Chile currently churns out 28% of the world’s copper but has for more than a decade lost marketshare, hobbled by declining ore grades and ageing projects.
Francisco Costabal, of U.S.-owned Freeport-McMoran, said the bill could ratchet up their tax burden to an unsustainable 65.3% to 68%.
“The royalty project seriously affects operational continuity from El Abra,” he said. The company’s small El Abra mine in northern Chile produced 71,900 tonnes of copper in 2020.
Official government statistics show miners currently pay 27% of pre-tax profits, in addition to other levies.
The legislation to hike royalties has previously been labeled a death knell “akin to expropriation” by Chile’s National Mining Society, which encompasses all of the country’s largest miners.
(By Fabian Cambero and Dave Sherwood; Editing by Marguerita Choy)