Santiago — The Chilean government’s proposal to impose a new royalty on large-scale copper mining has not been well received by the sector. Following the plan’s presentation by the Finance Ministry, and the indications made following its debate in the Senate, questions from various sectors continue to add up.
Australian mining company BHP has stated that it has “serious concerns” regarding the new royalty proposals, El Mercurio newspaper reported in its print edition on Sunday.
According to the company’s estimates, the proposal would give Chile the highest tax rates, above those of Peru, Australia and Canada, and which are a factor when competing to attract new investments.
“If the proposed royalty materializes, we would have to reevaluate our investment plan in Chile. This royalty has an effect that has yet to be measured. In the short term, the proposal would affect new investments. And in the medium term it would affect total taxation, as a result of lower production”, the multinational was quoted by the newspaper as saying.
BHP said Chile could “lose the opportunity to be a world leader in copper production, in a world that demands more copper every day for the efforts to decarbonize the economy”.
According to consulting firm CRU Group, the proposal would increase the average effective tax rate for large mining companies to 50% in 2024, and to 59%, on average, for the 2024-2040 period, which could slow down investments.
Likewise, Fitch Ratings warned that the proposed royalty payments could severely affect the copper industry, favoring the migration of investors to other countries.
Interviewed by Bloomberg Línea regarding BHP’s concern, Economy Minister Nicolás Grau said the new royalty payments proposed by the government are in line with those of other countries.
“We believe that the design of the tax reform, not only the royalti3w, but in general terms, is well thought out to maintain strong incentives for investment,” Grau said.
The proposal presented by the government to the Senate consists of an ad valorem royalty, which would range in effective rates of 1% to 2% for mining companies producing from 50,000 to 200,000 metric tons of fine copper; and a marginal rate of 1% to 7% for sales of over 200,000 metric tones, with the amounts depending on the average annual price of copper.
