Chile is a country rich in natural resources -especially copper and lithium- with a long tradition in mining. In the last three decades, it has attracted large amounts of foreign investment, in part because of the stability provided by the mining legal framework, whose pillars are: the Constitution enacted in 1980 and heavily amended in 2005, the Organic Constitutional Law of Mining Concessions of 1982 and, finally, the Mining Code enacted in 1983. Despite an attempt to change the mining legal framework in a draft of constitution that was rejected last September in a referendum, mining regulations have pretty much remained unchanged in the last 40 years. That is, until now, as the most important amendments to the Mining Code since it was enacted will enter into force in February 2023.

Indeed, several matters were modified or introduced by Law No. 21,4201 which "Reduces or eliminates certain tax exemptions" (the "Law") to the Mining Code (the "Code"). Although the Law -which amends regulations of various sectors of the economy- entered into force on April 1, 2022, as a general rule with regard to amendments to the Code, it will enter into force on February 4, 2023.

The most important amendments introduced by the Law to the Code are the following

  1. Increase in the term of the exploration concession.

  • The term of the exploration concession is increased from 2 years to 4 years. Once this term has expired, the concession will be extinguished, without the possibility of requesting an extension of the term.
  1. Prohibition of applying for the same area of an extinct exploration concession.
  • Once the exploration concession has expired, the holder may not acquire, by himself or through an intermediary (e.g., a relative or a related company), a new exploration concession that includes in whole or in part, the area covered by the original exploration concession that has been extinguished.

  1. Obligation to report by the holder of a mining concession.

  • The holder of an exploration concession, once said concession has expired or the granting period has elapsed, has to send to the National Service of Geology and Mining (the "Service") all the geological information that has been obtained from the exploration works.
  • The holder of an exploitation concession must send to the Service, every 2 years, any geological information obtained from the geological exploration works carried out during that period.
  • Failure to comply with this obligation to report, will be sanctioned with a fine to the concessionaire of up to 100 UTM2, without prejudice to the fact that the Service is authorized to require such information anyway.

  1. Amendments to exploitation concessions.

  • The applicant of an exploitation concession will have 30 days to request its survey (the current period is 20 days), which are counted between 90 and 120 days from the date on which the concession is requested to the court.
  • The obligation to carry out the survey (mensura) in the field is eliminated, as well as the placement of landmarks (hitos).
  • The deadline for submitting the map of the survey and the survey minutes to the court is reduced from 10 to 15 months.

  1. Introduction of the SIRGAS datum – Potential expiration of mining concessions.

  • The Law establishes that the request of an exploration or exploitation concession shall be made expressing the coordinates using SIRGAS datum.
  • To achieve the unification of the coordinate system of the existing mining concessions, the Service will publish the new coordinates. The holder of a concession will have 90 working days from said publication to challenge them or request their inclusion in the publication (in case they were not included). If there are no objections by the concessionaire within this period, the coordinates provided by the Service will be deemed accepted for all legal purposes.
  • The new coordinates must be registered within 6 months from the end of the term for submitting objections, if there are no objections, or from the date of the final decision that resolves any such objections. It is very important to bear in mind the burden of the concession holder to make this registration in the respective Mining Register, since the sanction for not doing so is the expiration of the mining concession.

  1. Increase in the amount of mining fees and elimination of the distinction between metallic and non-metallic mining fees.

  • The new article 142 bis of the Code establishes an important increase in the amounts of mining fees.
  • Likewise, the distinction between metallic and non-metallic mining fees is eliminated, thus significantly increasing the amount of the latter.
  • The mining fee of the exploration concession increases from 1/50 to 3/50 of UTM per hectare annually.
  • With respect to exploitation concessions that do not demonstrate mining works, the amount will increase progressively from 4/10 of UTM per hectare for the first 5 years, up to 12 UTM per hectare from year 31. The mining fees of exploitation concessions that demonstrate mining works3 will be 1/10 of UTM per hectare annually (the same amount that is currently in force).
  • Finally, the amount of the mining fees of the exploitation concession that does not demonstrate mining works but that is under environmental assessment or has an Environmental Qualification Decision, will be 3/10 of UTM per hectare annually.

  1.  Limitation of possessory actions.

  • The Law limits the exercise of possessory actions by the mining concessionaire against the owner or holder of the surface land that covers all or part of its concession, only being able to be filed in those cases in which the concessionaire proves that it has a mining easement or other in rem right encumbering the surface land.

  1. Entry into force.

  • The Law entered into force on April 1, 2022 (not with respect to the amendments to the Code).
  • As a general rule, regarding the amendments to the Code, the Law will enter into force on February 4, 2023.
  • The deadline to amend the regulation of the Code by the Ministry of Mining (the "Regulation") is between February 4, 2023, and August 4, 2023. This Regulation will complement several aspects of the Law.
  • The deadline for submission to the Service of the geological information by the holder of a concession begins on April 1, 2024.
  • With respect to the calculation of deadlines to determine the progressive mining fees of unworked exploitation concessions, which are subject to the payment of the annual mining fees prior to the entry into force of the amendments to the Code (i.e. prior to February 4, 2023), it will be deemed that such concessions completed their first year of validity on the last day of the month of February following the date of entry into force of the Law (i.e. February 28, 2023).
  • With respect to the date from which the increase in mining fees becomes effective, there is an inconsistency within the Law. As there is no express mention of the date of entry in force of the increase, it could be concluded that it enters into force in February 2023; however, the Regulation will not be enacted by that date, making it impossible to request the benefit of a reduced mining fee (see section 6 above).

Matters that need to be clarified.

  • The scope of "all the information" that the holder of a concession must report to the Service (see section 3 above) was not defined or limited in any way in the Law. We must wait for the Regulation, which will establish the requirements.
  • It is not clear when the increase in the mining fees will entry in force. As per the Law, it should be February 2023; however, if that is the case, it will not be possible to request the benefit of reduced mining fees before making the payment. Indeed, the Service shall publish on January 15 of each year a list of the concessions that benefit from the reduced mining fees, and the Regulation -which should be issued between February 4, 2023, and August 4, 2023- will regulate the requirements and formalities. This point has been raised to the Ministry of Mining, and hopefully will be clarified within the next few months, so the concessionaries will know whether the increase will take place in 2023 or 2024.
  • A point that is not unclear, but should be amended, is the definition of "works", for the purpose of requesting the reducing mining fee for exploitation concessions. Indeed, the Law makes a reference to the first paragraph of Article 6 of the Mining Safety Regulation, which defines works, for this purpose, as the activities carried out from the construction stage onwards, leaving out the exploration made in exploitation concessions. This exclusion puts mining exploration at risk, as it will increase costs significantly, discouraging the exploration, especially by junior companies. And if there is something that the Chile mining sector needs is greenfield exploration.

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Footnotes

1. This law was in turn reformed by Law No 21,462, enacted on July 26, 2022. This note has been updated to include the modifications introduced by Law No 21,462 to Law No 21,420.

2. UTM = Monthly Tax Unit. As of November 2022, one UTM equals $60,853 Chilean pesos.

3. For the purposes of demonstrating mining works, it will be deemed that a mining concession has begun work when work or activities are carried out in an exploitation concession or group of exploitation concessions that permanently allow the development of mining operations (as defined in the first paragraph of Article 6 of the Mining Safety Regulation).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.