Mining 2023 Comparisons

The mining industry represents one of the main economic activities in Chile, currently representing between 12% and 14% of the GDP. This is largely explained by the fact that Chile has important reserves of different minerals: it is the main producer of copper and has the largest copper reserves in the world, and also holds 51% of the world's lithium reserves, being one of its top producers as well.

Chile’s mining activity represents more than 50% of the country’s exports.

The majority of the main mining companies worldwide explore, operate or invest in Chile, with Canadian, US, Australian and Asian mining companies having a significant presence in the country. There are also relevant local mining companies, including the state-owned CODELCO, which is the largest copper producer in the world.

For a long time, Chile has been friendly towards mining, developing policies aimed at the improvement of the mining industry. It is also a significant supporter of foreign investment in the country, having subscribed to a great number of trade agreements and implemented relevant investment protections.

Chile has developed a sophisticated and robust legal framework for mining, which has allowed the industry to flourish for many decades. Nonetheless, Chile is currently in the process of modifying its Constitution, which could have an impact on the legal framework applicable to mining.

Despite the fact that the mining industry has a long history in the country and that Chile has several world-class mining deposits and operations, there are still significant unexplored zones in the country.

Chile has a civil legal system.

The main sources of the Chilean legal framework for mining are:

• the Chilean Constitution;
• the Constitutional Organic Law Concerning Mining Concessions (Law 18,097);
• the Mining Code;
• the Mining Code Regulation (Decree No 1 of the Minister of Mining of 1987); and
• other sectorial laws.

The Chilean Constitution provides the basic constitutional regulation for mining in the country, establishing that the Chilean state has absolute, exclusive, inalienable and imprescriptible ownership of all mines, and creating a concession system for the exploration and exploitation of the minerals that the law provides, with some exceptions established in the Constitution. The Chilean Constitution also grants constitutionally protected ownership rights regarding mining concessions.

The Constitutional Organic Law Concerning Mining Concessions and the Mining Code regulate the mineral substances that can be subject to mining concession, the legal characteristics of mining concessions, their granting process and the rights and obligations of the holders of mining concessions, among other relevant matters.

The following sectorial laws are particularly relevant for mining:

• the Mining Safety Regulation (Decree No 132), which relates to safety matters;
• Law No 20,551 and its regulation, which regulate the closure of mining operations and installations;
• Law No 20,235, which regulates competent persons;
• Decree No 104 of 2016 of the Mining Ministry, which governs the delivery of general information obtained from geological exploration;
• the General Environmental Framework Law (Law No 19,300), which regulates environmental issues; and
• the Water Code (DFL No 1122) and its regulation, which govern access to and the use of water.

The ownership of mineral resources is regulated in the Chilean Constitution, the Constitutional Organic Law Concerning Mining Concessions, and the Mining Code and its Regulation.

Article 19 No 24 of the Chilean Constitution indicates that the Chilean state has absolute, exclusive, inalienable and imprescriptible ownership of all mines, including guano deposits, metalliferous sands, salt flats, coal and hydrocarbon deposits, and other fossil substances, with the exception of surface clays, regardless of the property rights over the superficial lands wherein such mines are located.

However, in general, any person may requestthe granting of mining concessions for the exploration or exploitation of minerals through a judicial proceeding before a civil judge, with some exceptions established by law. Such mining concessions are privately owned, and the ownership is protected by the Chilean Constitution. The owner of an exploitation mining concession has the right to exploit all minerals that are located within the boundaries of the concession, with the exception of liquid or gaseous hydrocarbons, lithium, deposits of any kind located in maritime waters under Chilean national jurisdiction that cannot be accessed by tunnels from land, and deposits of any kind located in areas classified by law as being important for national security with mining effects. Once the minerals subject to concession are extracted, the holder of the relevant mining concession becomes the owner of such minerals.

The holder of a mining concession or a treatment facility has the right to judicially request the easements described in the Mining Code to access the land required for its mining activities, paying the corresponding compensation.

Landowners hold the rights over surface clays, artificial salt flats, sands, rocks and other materials directly applicable to construction.

The granting of mining concessions in Chile is executed through a judicial process regulated by law, so Chilean courts are responsible for granting or cancelling mining concessions, based on the applicable legal dispositions. This system eliminates any arbitrary state intervention concerning the minerals that are subject to mining concession, which are freely explorable or exploitable by the holder of the corresponding concessions, according to the regulations and requirements set forth in the law.

The state can hold mining concessions and explore or exploit the relevant minerals, depending on the type of concession, by means of state-owned companies or companies in which the state has participation (such as CODELCO).

In certain circumstances established by law, the state can expropriate mining concessions through a judicial process and by paying a fair market compensation to the owner.

Minerals that are not subject to concession according to law can be exploited by the state or its companies, or they can be subject to administrative concessions or special operation agreements.

This is notwithstanding the taxes or burdens applicable to mining, which are to the benefit of the state. Nevertheless, there are no mandatory national or government joint ventures, contracting nor participation concerning the minerals that can be subject to mining concessions according to law.

With the exceptions mentioned in 1.3 Ownership of Mineral Resources, mineral rights in Chile are granted by means of privately held mining concessions. Such concessions are legally regarded as immovable property, protected by ownership rights.

The mining concessions system in Chile is established and regulated by the Chilean Constitution and the law, and the holder of a mining concession has all legal resources available in the Constitution and in the law to protect its property rights over the concession.

Mining concessions can be subject to any legally valid contract or agreement and can be freely transferred or assigned, and subject to voluntary property limitations.

In Chile, the authority that grants mining concessions is the civil courts (Juzgados de Letras en lo Civil), by means of a judicial award granted on a first-come, first-served judicial proceeding regulated by law, with no intervention from third parties (with the exception of some cases of overlap). Usually there is one civil court per commune, which is the most basic political-administrative division in Chile.

The civil court competent to grant a mining concession has jurisdiction over the place where the midpoint (punto medio) indicated in the corresponding mining exploration concession claim (pedimento) is located, or where the point of interest (punto de interés) indicated in the corresponding mining exploitation concession claim (manifestación) is located. The technical aspects of the granting process for mining concessions are reviewed and assessed by a state technical entity named SERNAGEOMIN.

Granted mining concessions are registered at the relevant Custodian of Mines; in addition to this, SERNAGEOMIN has a national mining concessions cadastre.

There is no administrative arbitrary involvement in the process of granting mining concessions in Chile, and all aspects of the judicial granting process are regulated in detail by the law and are completely objective.

Exploitation mining concessions in Chile have an indefinite duration, and exploration mining concessions have a legal term of two years from the date of the court decision that granted them, unless the holder requests an extension prior to the relevant expiry date, for a maximum of two additional years upon waiver of half the area of the concession. Nevertheless, as of February 2023 exploration concessions will have a fixed term of four years and there will be a prohibition on the holder of an exploration mining concession requesting a new exploration concession in the same area.

The holder of an exploration mining concession has the exclusive right to request an exploitation mining concession in the area of this concession.

Mining concessions in Chile are subject to the payment of mining fees to the state, and the amount of such fees depends on the kind of concession and its extension. If the relevant mining fees are not paid in a timely manner, the mining concession can be judicially auctioned or declared cancelled. There are no minimum work or investment requirements to maintain tenure of mining concessions.

Mining concessions can only be cancelled by a court decision in certain cases set forth in the law, and there is no room for arbitrary cancellations. Mining properties can also be renounced by the owner by means of a judicial process.

Mining concessions can be transferred with no limitations or state intervention of any kind, and can be subject to any agreement that conforms with the law.

The right to live in a pollution-free environment is established primarily as a constitutional right in the Chilean Political Constitution. At a legal level, environmental issues are mainly covered in the General Environmental Framework Law (No 19,300) and the Environmental Impact Assessment System Regulation.

The main Chilean environmental authorities are:

• the Ministry of Environment, in charge of the design and implementation of environmental policies, plans and programmes;
• the Environmental Superintendence, responsible for the control and enforcement of environmental regulations;
• the Environmental Assessment Agency, in charge of the Environmental Impact Assessment System (EIAS); and
• the Environmental Courts, which are specialised courts competent to resolve environment-related judicial issues.

Mining projects shall be environmentally assessed (or not) depending on their monthly mineral production. Projects with a monthly production of more than 5,000 tons of mineral must obtain, prior to their construction and execution, a favourable environmental qualification resolution (RCA), which is an operating authorisation that is obtained after an administrative procedure led by the regional Environmental Assessment Service (SEA) corresponding to the region where the project is located. If the project is in two or more regions, it shall be assessed at a central level.

The environmental assessment process of a mining project has the following characteristics.

• The instrument by which a mining project shall be environmentally assessed varies depending on the existence of significant environmental impacts. If the project generates significant environmental impacts, it must be assessed through an environmental impact study (EIS); if the project does not generate such significant environmental impacts, it shall be assessed through an environmental impact declaration (EID). This last form of assessment is simpler and involves a shorter processing period (ranging from six to 12 months), while an EIS involves a more sophisticated assessment procedure, with the purpose of recognising, establishing and evaluating the significant environmental impacts and corresponding mitigation, remediation and compensation measures, among other issues. The EIS procedure has an average duration of between 12 and 24 months and includes a citizen participation period. If indigenous communities or persons are affected, a special indigenous consultation process also needs to be performed.
• Various public agencies participate in the environmental assessment process for the purpose of reviewing and analysing the information provided by the project holder. This review is performed from a technical point of view, through the delivery of observations and queries by the public agencies, according to their specific areas of competence, so that the project holder can provide a resolution from a technical standpoint.
• The final decision to grant or reject the environmental qualification resolution (EQR) is made by a special Environmental Commission formed by several regional authorities. Administrative and judicial actions can be initiated against the EQR.
• Compliance with the corresponding EQR will be supervised and enforced by the Environmental Superintendence (an administrative authority), which may sanction the project owner in the event of non-compliance with the provisions of the EQR. The resolutions of the Environmental Superintendence may also be challenged before the Environmental Courts.

Chile is in the process of issuing a new law that “Creates the Biodiversity and Protected Areas Service and the National System of Protected Areas”, which aims to comprehensively implement policies, plans, programmes and regulations for biodiversity conservation. To date, there are several regulations in force that grant environmental protection to different categories of areas under official protection as national parks, national reserves, nature sanctuaries, marine reserves, Ramsar Sites and historic monuments, among others.

The existence of these areas affects exploration and mining in the sense that projects to be developed over – or that affect – areas under official protection are required to be environmentally assessed through the EIAS, and in certain cases through an environmental impact study, and to obtain a favourable EQR prior to their construction and operation.

Chile has a relevant extractive industry throughout its geography. For several years, the development of effective, stable and lasting community relations has become a central issue in order to secure feasible and sustainable investment projects.

A significant number of productive and investment projects have been brought to court since the 1990s, and especially in the 2000s, particularly from the citizen participation instruments set forth in the EIAS. Of these, many have generally not ended up being operational or have had a significant increase in costs due to the resistance of neighbouring communities that have been harmed by, or have not benefited from, the development of such activities.

The Chilean environmental authorities have issued a series of instructions regarding early participation and covering the duration of the environmental assessment in order to ensure the inclusion of communities in the assessment process.

The country's courts have also played a relevant role in the interpretation of the regulations in light of Convention No 169 of the International Labour Organization (ILO), which Chile ratified in 2009 and which is consistently applied in court rulings.

Today, successful projects are those that have developed shared-value initiatives, embracing the principles of the Global Compact and other international standards, including the UN Human Rights and Business Principles, which ensure due diligence regarding their potential social and community impacts, promoting transparent information and participation, seeking to generate long-term co-operation agreements and local community development.

According to national law, the environmental assessment for the operation of a mining project in Chile necessarily considers citizen participation. Depending on which communities are likely to be affected by the impacts of the project, this citizen participation could include prior indigenous consultation.

In international matters, Chile is a signatory to Convention 169 of the ILO, which is widely applied by national courts, particularly requiring prior indigenous consultation in relation to administrative or legislative acts affecting indigenous human groups.

Although it is a matter debated by the communities, the jurisprudence has understood that the granting of mining exploration and exploitation concessions does not require prior consultation. This determination is based on the fact that possible effects are materialised at the moment of executing a mining project, and it is the mining project itself that will require mandatory prior indigenous consultation during its environmental assessment process. Legal mining easements have been understood not to be considered within the process of indigenous consultation, since they are granted in Chile by jurisdictional and not administrative means.

In relation to environmental assessment processes, the fact that a project is likely to affect indigenous peoples necessarily implies that it must enter the SEIA through an environmental impact study. During the processing of this study by the Environmental Assessment Service (SEA), an early consultation process must be carried out to define in a participatory manner the possible effects of the project and to establish its mitigation, compensation and reparation measures with respect to the affected communities. In accordance with the provisions of Article 16 of Convention No 169 of the ILO, in the event of the displacement or relocation of indigenous communities, the consultation process requires the consent of the community, to be given freely and with full knowledge of the facts.

The Chilean state recognises Mapuche, Aymara, Rapa Nui, Atacameños or Lickan Antai, Quechua, Colla, Chango, Diaguita, Kawésqar and Yagán as indigenous peoples through Law 19,253 (the “Indigenous Law”).

In principle, this regulation considers the land traditionally inhabited by members of these communities to be indigenous lands. According to the Indigenous Law, the sale, exchange or lease of indigenous community lands to persons who do not belong to the same ethnic group is prohibited.

The establishment of encumbrances and real rights over these lands is prohibited with respect to the dwelling house and the land necessary for subsistence, requiring the prior authorisation of the National Corporation for Indigenous Development (CONADI) in all other cases.

The Chilean jurisdiction has progressively advanced in the recognition of ancestral possession of lands as a valid title of dominion of the indigenous communities. This criterion has also been applicable in some areas of the country with respect to water rights. Likewise, Law No 20,249 recognises the original possession of the coastal border by Mapuche-Lafkenche communities that were claiming recognition and protection of their territorial rights over the coastal border.

This law establishes a mechanism to allocate a Maritime Coastal Space (ECMPO) for the preservation of indigenous uses and customs, which is given in administration to the corresponding communities, as long as there are no rights constituted by third parties in said area and CONADI verifies the alleged uses and customs.

A significant number of mining projects being developed in Chile are located on indigenous land. It is necessary to evaluate the effects of these projects on the ways of life and ancestral customs of indigenous communities. In this regard, prior indigenous consultation and agreements that establish community engagement relations are a concrete guarantee for the social licence of the project.

Large-scale mining does not contemplate development that does not generate local benefits and special engagement with indigenous communities.

There are many examples of agreements aimed at financing and promoting aspects such as education, culture, tourism or the traditional economy of communities surrounding the projects. This is regardless of the new contribution for regional development purposes that has recently been required by law in all investment projects (1% applied on the acquisition value of their fixed assets on the portion that exceeds USD10 million).

The Financial Market Commission (CMF) plays a key role in setting ESG standards in Chile, and in November 2021 issued Rule No 461, which establishes disclosure obligations in relation to corporate governance practices, supplier management and regulatory compliance, and sustainability indicators. The information must be provided in an integrated annual report prepared by each company. All entities’ annual reports are publicly available on the CMF’s website. The application of this standard is progressive, as the date of its enforcement depends on the equity of the company.

In addition, mining projects in Chile are embedded in global supply chains and, therefore, companies are being forced to incorporate new ESG disclosure rulings, from both the European Union (European Sustainability Reporting Standards) and the United States of America (SEC Climate Related Disclosure).

The need for a social licence has become increasingly evident in Chile. Experience has shown that large mining projects – with economic and scientific backing, sometimes with explicit political support – are unable to continue operating, or fail to start operating due to a deteriorated or non-existent relationship with surrounding communities.

In turn, the most successful long-term projects tend to be those that, from a very early stage, generate links with communities, concretising them in co-operation agreements and social development projects with respect for the autonomy of the communities, and paying special attention to the concerns, worries and questions of the people.

As mentioned above, a significant number of legalised projects have been challenged by communities that are negatively impacted by them or that do not benefit from the project. In the case of mining, it is mainly indigenous communities that bring legal actions, which can take years to reach a final judgment and have sometimes resulted in the owner having to resubmit the project for evaluation, or even in the rejection of the project.

The legal actions filed by the communities are generally due to the fact that prior consultation was not carried out because certain impacts that particularly affect the communities were not considered. Since indigenous communities are often susceptible to being affected in specific ways because of their relationship with the territory and the environment, these effects are not always perceived by project owners, even if they are technically advised to identify risks.

Projects that have been successful, in terms of not seeing their execution delayed or impeded, have initiated a direct relationship with the surrounding communities so that they are the ones that determine the impacts that are likely to affect them.

This engagement is materialised in agreements that establish the basis for a transparent and good-faith relationship. Sometimes, projects have also created working groups to channel the concerns of the communities and generate a space for horizontal dialogue with the company.

The large mining companies have made a transition from the mere material delivery of contributions to a constant effort to build a mutually beneficial relationship based on good faith and transparency.

In June 2022, the Chilean Congress approved the Climate Change Framework Law, which aims to:

• address the challenges posed by climate change;
• move towards low greenhouse gas emission development; and
• reduce vulnerability to the effects of climate change by increasing resilience to them.

The Climate Change Framework Law established a target of reaching carbon neutrality by 2050, with its related impacts on the mining industry.

Notwithstanding the above, Chilean courts of justice with environmental jurisdiction have adopted different jurisprudential criteria that address the climate change issue. An example of this is the judgment pronounced by the Second Environmental Court in the case of the Cerro Colorado mining project, which states that Chile is a country that is vulnerable to climate change, referring specifically to the impact of climate change on the aquifer recharge capacity, indicating that this factor should be considered when evaluating a mining project from an environmental point of view.

The Supreme Court also ruled on this case, noting that science and the international community concerned about the environment have incorporated new guidelines and principles governing Chilean environmental law, which include the precautionary nature and liability for environmental damage. It indicates in its ruling that these principles should be incorporated when evaluating projects (in this case mining projects), in order to adopt effective measures to deal with the impact of climate change, avoiding possible irreparable damages.

In June 2022, the Chilean Congress approved the Climate Change Framework Law, which is highly relevant considering that Chile meets seven of the nine vulnerability criteria established by the United Nations Framework Convention on Climate Change. The law seeks to create a legal framework to regulate the institutional framework for climate change and the instruments to manage it, assigning responsibilities for the implementation of climate change mitigation and adaptation measures.

The guiding principles of the law are the scientific principle, cost-effectiveness, transversality, equity, non-regression and progressiveness. Mining is postulated as one of the activities that generates the highest greenhouse gas emissions, so the Climate Change Framework Law provides for the development of specific climate change adaptation plans in this area and the creation of a national greenhouse gas inventory system, among other things.

Chile has had an institutional framework for climate change since 2010, following the creation of the Ministry of the Environment, the Environmental Superintendence and the SEA. There have also been other regulations that have had an environmental protection content related to mining, without specifically referring to climate change. First, the Chilean Constitution ensures the right to live in a pollution-free environment. Second, the Law on General Bases of the Environment, the law regulating the closing of mining sites and facilities, and the law regulating the framework for waste management, extended producer responsibility and the promotion of recycling contain regulations related to the protection of the environment in mining activities.

Chile has made a country-wide commitment to reduce CO₂ emissions, in accordance with Chile's latest Nationally Determined Contribution and carbon neutrality target for 2050. Part of the strategy to achieve this goal involves developing the green hydrogen industry in the country, to produce electricity from renewable resources and form an energy source for local use and export, driving a sustainable economy around it. In this sense, the state developed a National Green Hydrogen Strategy.

In the mining sector, Chile has a trade association of mining companies, the Mining Council, which has principles for sustainable development and principles for climate change that apply to mining companies that are members of the Council and that have a high correlation with the Sustainable Development Goals.

Most of the large mining companies in Chile are also aligned with the main international standards for sustainable development. Many of them are associated with the International Council on Mining and Metals, whose commitments on water, climate change, biodiversity, waste management and mine closure are directly applicable to them.

In addition, as mentioned in 2.7 Environmental, Social and Governance (ESG) Guidelines and Regulations, the CMF has ruled that ESG matters must be reported in companies' annual reports.

There are currently no specific or formal government initiatives in Chile related to the growing demand for energy-transition minerals.

Taxes

Mining operators extracting copper, silver or gold that qualify as “small artisanal miners” will be subject to a single tax with a progressive rate of 1% to 4% depending on the price per pound applicable on the net value of sales of mining products. For the exploitation of other minerals, a fixed rate of 2% will be applied on the net value of sales of mining products.

Mining companies whose annual net sales or income do not exceed CLF17,000 (Unidades de Fomento, or CLF,is a Chilean currency unit indexed according to inflation) may opt to be subject to the presumptive income system.

Mining operators that are not small artisanal miners and whose sales or gross income do not exceed CLF17,000 may be taxed on a presumptive income basis, assuming a percentage of annual net sales as the basis for the general income tax, which will vary between 4% and 20% depending on the value of a pound of copper. These mining operators may choose to be subject to the general income tax.

Mining operators that do not qualify as small artisanal miners and have sales or gross income over CLF17,000 must be taxed according to the general income tax rules, with a rate of 27% on effective income.

Mining operators that do not have average annual income in the last three years of operation above CLF75,000 will meet the requirements to be subject to the Propyme Regime, which, in turn, will make them eligible to be taxed at a rate of 25%.

The owners of companies that are subject to the general regime will be able to impute 65% of the amounts paid by the company as a credit against the final taxes (global complementary or withholding tax), unless the non-domiciled owner is a resident of a country with a treaty in force to avoid double taxation with Chile, in which case they will be able to impute 100% of the tax that was paid as a credit against the withholding tax.

The owners of companies that are subject to the Propyme Regime will be able to impute 100% of the taxes paid by the company as a credit against the final taxes.

Royalties

In addition to the taxes mentioned above, the Income Tax Law establishes a royalty on mining activity for those mining companies with sales equal to or greater than 12,000 metric tons of fine copper, corresponding to a rate of 0.5% to 4.5% of the income from mining operations. If sales exceed 50,000 metric tons of fine copper, the applicable rates on income from mining operations will range from 5% to 14%. Taxes paid on these revenues may be deducted as an expense from the taxable income of mining companies.

A new tax reform bill, currently in Congress, considers a new mining royalty. This project has undergone several changes, and currently consists of a 1% flat rate ad valorem tax for large copper mining companies whose exploitation exceeds 50,000 tons.

Regional Development Contribution

The tax reform contained in Law 21,210 added a contribution to regional development, which established a new burden on taxpayers in investment projects that meet certain conditions. This burden consists of a payment at a rate of 1% on the value of fixed assets exceeding USD10 million corresponding to the same investment project. This payment may also be deducted as an expense from the tax base of the taxes payable by the mining companies.

Mining Fees

Mining concessions are subject to an annual mining fee. Exploration concessions must pay approximately USD1.4 per hectare and exploitation concessions approximately USD6.9 per hectare. As of February 2023 the costs of the mining fees will be increased to approximately USD4.04 per hectare for exploration concessions, and in the case of exploitation concessions will depend on the amount of time that has passed since the mining concession was granted, starting at a value of approximately USD27 per hectare. Failure to pay the mining fees may result in the loss of rights to the mining concession.

Owner Taxation

Owners domiciled or resident in Chile are subject to the so-called global complementary tax, with a progressive rate that goes from an exempt amount up to a rate of 40%, which considers the total income received by the taxpayer. Non-resident owners must pay the withholding tax at a fixed rate of 35% on the amounts remitted abroad.

VAT

Mining projects will be exempted from the payment of VAT on imported capital goods regarding projects involving an investment equal to or greater than USD5 million.

Mining companies will also be able to request a refund of the VAT paid or the imputation of the same against other taxes for the acquisition of fixed assets when they meet a series of conditions, regardless of the amount of the investment.

Foreign Investors

Until 2015, companies could be subject to Decree Law 600, which assured them tax invariability for a certain number of years.

Currently, foreign investors that invest more than USD5 million are assured of the following:

• the right to remit abroad the capital transferred and the net profits generated by their investment, as long as they have complied with their tax obligations;
• access to the formal foreign exchange market for the purchase or sale of foreign currency; and
• that there will be no discrimination regarding the legal regime applicable with respect to domestic investors.

Capital Gain: Sale of a Mining Project

The higher value obtained in the sale of mining concessions is subject to the general income tax rules, and the income generated must be added to the calculation of the taxable net income of the respective year, unless it is made by taxpayers who are individual persons domiciled in Chile.

Capital Gain: Sale of Shares

The owners of shares or social rights of companies domiciled in Chile must pay tax in Chile on the income from the higher value generated in the sale.

Indirect Sales

Sales made by a person or company not domiciled in Chile of an entity that has a Chilean underlying asset with a significant value and whose sale complies with a series of requirements must pay in Chile the withholding tax on the higher value, according to the form established in the Income Tax Law.

Chile has traditionally been one of the most stable countries in the region, notwithstanding the social unrest of recent years that has led to a process for the replacement of the current Constitution. In this regard, mining has a solid legal and institutional framework, which has successfully operated for several decades.

An extensive network of free trade and international taxation treaties provides additional warranties and advantages to foreign investment in Chile, such as fair and equitable treatment and non-discrimination.

Mining investment is protected in Chile by Law No 20,848, which establishes the framework for foreign direct investment in Chile. According to such law, foreign investors in Chilewill be subject to the same common legal regime as applies to nationals, and cannot be subject to arbitrary discrimination. In addition, foreign investors in Chile have the possibility to resort to investment protection bodies, such as the International Centre for Settlement of Investment Disputes.

The sophistication of the mining industry in Chile and the access to adequate infrastructure, cutting-edge technology and highly qualified personnel also provide a beneficial environment for mining investment in Chile.

According to the current Constitution and the law, any person or entity may request or acquire mining concessions. As such, there are no special approvals required for foreign investment in mining in Chile.

Nevertheless, an exception may exist, as there is discussion as to whether foreigners of Argentinian, Bolivian or Peruvian nationality may acquire mining concessions in sectors close to the Chilean border, because Article 7 of Law Decree No 1,939 of 1977 of the Lands and Colonisation Ministry provides that, for reasons of national interest, it is prohibited for nationals of neighbouring countries to acquire ownership and other rights in rem or to exercise possession of real estate located totally or partially in areas bordering the national territory, unless they have prior authorisation.

Chile is one of the countries that has executed the most free trade international agreements, including agreements with the United States, China and the European Union. Chile has also entered into several double taxation treaties. Both kinds of treaties have had a positive impact on foreign investment in the mining industry.

Chile has subscribed to mining treaties with Argentina and Germany. Chile has also signed the following treaties, which are particularly important in terms of mining:

• the Basel Convention;
• the Antarctic Treaty;
• the Convention on Wetlands of International Importance;
• the United Nations Convention to Combat Desertification;
• the Framework Convention on Climate Change;
• the Canada–Chile Agreement on Environmental Cooperation; and
• the ILO's Convention No 169 on Indigenous and Tribal Peoples.

Although Chile has a long history as a mining country, the main source of financing in the industry is currently foreign investment, both from lenders and from capital markets.

Nevertheless, Chile has a robust financing sector and there is availability for local private and public financing, mainly for small to medium-sized projects.

Also, public-owned companies such as CODELCO and ENAMI receive finance from the state.

Even though the Chilean securities market is readily available and there are some mining companies listed in Chile, the majority of mining companies with mining projects or operations in Chile that are listed are done so abroad. In this regard, Chile lacks a well-developed capital market for the financing of mining in the country, particularly for exploration.

However, there have been some efforts to develop a suitable local securities market for mining, such as the Bolsa Venture initiative, which is the first venture capital market in Chile focused specifically on mining. Said initiative originates from an agreement signed with the Toronto Venture Exchange, Canada (TSXV), with the aim of establishing a local stock market for mining, to allow small and medium mining companies to have access to venture capital.

Mining concessions are rights over which the concessionaire has a property right secured by the Constitution and the law. Also, buildings, facilities and other objects that are permanently used by the miner in the exploration or exploitation of mineral substances are legally considered to be immovable goods appendant to the mining concession, protected by the same ownership right. If these property rights are affected in violation of the law, the holder of the mining concession has all the legal actions available in the law to defend such rights.

Mining concessions can be subject to mortgages, encumbrances and other guarantees in relation to financing operations.

Regarding access to land, the holders of mining concessions can judicially request any land easements necessary for their activities, which are regulated by the law; they can also enter into different types of agreements to secure access to land.

Once legally granted, the relevant permits relating to a mining operation are protected by the law and cannot be cancelled without the corresponding administrative proceeding, and only in the cases set forth by the law.

The Chilean legal framework provides all the relevant features necessary to secure financing for mining activities within the country.

Chile has a developed and strong mining industry, with a long tradition and some of the world's largest mine deposits and operations. Nevertheless, there are still significant exploration opportunities in Chile, which makes it an attractive country in which to invest in mining in the coming years.

Even though the COVID-19 pandemic affected mining activities in Chile to some degree, due to the good and preventative response of the industry, the high levels of vaccination in the country and its extended health system, COVID-19 is not currently expected to have a significant impact on the mining industry in the next couple of years.

The main challenges currently facing the mining industry are related to the general uncertainty created by the social unrest in the country over recent years, as well as the changes in legislation that are under discussion in Chile. The most relevant of those changes is the constitutional process that is taking place in Chile, which aims to issue a new Constitution for the country. If the new Constitution is approved, it could have the following impacts on mining:

• change the constitutional protections and regulation that currently exist regarding mining concessions;
• create an extension of environmental and community protections and burdens;
• grant protection to water as a public good and incorporate new criteria for its use;
• include an express protection of glaciers; and
• modify the current concession system and the obligations of concessionaries.

There are also some significant legal changes being discussed, such as changes in water regulation, changes in the environmental legal framework and the incorporation of a new royalty applicable to copper and lithium production, with a 3% flat rate tax over the net value of extracted minerals.

As a way to promote mining in Chile, the government is developing the Mining National Policy 2050, with the involvement of different participants in the industry. This policy will be focused on sustainability – from an economic, social and environmental point of view – and on governance.

Also, two new law projects were submitted to Congress at the end of 2022. One was to postpone the application of the increase in mining fees and other reforms to the Mining Code applicable as of February 2023, while the other was to include new changes in the Mining Code, manly concerning mining fees.