Chile mining minister Juan Carlos Jobet stated on Monday that a proposal to increase royalties on lithium and copper miners currently being discussed by legislators was unconstitutional and noted that the administration of President Sebastian Piñera would be against it. The proposed bill, which had been introduced in 2018, would impose a 3% mining royalty on firms mining and exploring for lithium and copper in Chile. The country is known to have the biggest reserves of lithium and is also the top producer of copper globally.
During the annual CRU World Copper Conference and CESCO Week, Jobet stated that the Chilean government was making improvements to a broad-spectrum national mining policy measure that would be presented later this year, during the third quarter. The minister asserted that the policy would be a better fit for both the government’s priorities and the investors, in comparison with a royalty increase.
The suggested royalty tax, which is to be applied on the nominal value of extracted minerals, would impact lithium miners that produce 50,000 tons of the metal, which is used in EV batteries, annually and those extracting over 12,000 copper tons.
Half of the monies acquired from the royalty would be directed to a regional convergence fund to finance communal and regional development projects while the remaining half would be used to directly fund projects to repair, compensate or reduce the environmental effects of mining activities in communities located near mining projects.
The former CEO of copper giant Codelco and the current president of Chile’s National Mining Society Diego Hernández has spoken in support of the current system.
During his first term in office ten years ago, Pinera introduced a system of payments that charges big producers a variable rate on operating profit. This rate can go as high as 14%
Earlier in March, Hernández stated in an interview that the rate did not impact the less-competitive mines and brought in a little more than the tax imposed on the sale of minerals mined.
Opposition leaders, who introduced the proposed legislation, believe that royalties on lithium and copper produced by mining firms such as Albemarle and BHP would finance regional development projects, in response to the growing environmental and social push from supply chains and investors.
Chile is aiming to make lithium its second-largest mining asset, given that it owns roughly 52% of the world’s known lithium reserves. Currently, the white metal is Chile’s fourth-largest export.
Many mining sector players such as GoldHaven Resources Corp. (CSE: GOH) (OTCQB: GHVNF) enjoy having operations in areas with stable regulatory climates, so it would be good for the mining industry if the issue of the proposed royalties bill is resolved quickly.
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