Productivity in the Chilean Copper Mining Industry Copyright © 2017
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Productivity in the Chilean Copper Mining Industry Copyright © 2017. All rights to National Productivity Commission, Amunátegui 232, of. 401, Santiago, Chile. www.comisiondeproductividad.cl ISBN: 978-956-7725-08-3 Productivity in the Large Scale Copper Mining Industry CNP technical team: Alfie Ulloa Urrutia, José Luis Contreras Biekert, Joaquín Gana Aravena, Rodrigo Miranda Toledo, Paul Chauveau Gerber, Fernando Villalobos Valenzuela, Javiera Farías Soto. Acknowledgements: Ministry of Economy, Ministry of Mining, COCHILCO, SERNAGEOMIN, Ministry of Labor and Social Security, Labor Directorate, Fundación Chile, CESCO, Consejo Minero, Alianza Valor Minero, SONAMI, APRIMIN, Programa Alta Ley, Chilean Chamber of Construction, MatrixConsulting. Cover photo © NataliyaHora / Shutterstock.com Interior photography © Javier Espuny, Kaband, Mark Agnor, Christopher Halloran, Toniflap, Jeremy Richards, Djelen, Andrew J Billington, Jose Luis Stephens, Erlucho, Nattanan726, Shetakov Dmytro / Shutterstock.com Design and layout Editorial Universitaria S.A. Avda. Libertador Bernardo O'Higgins 1050, Santiago de Chile www.universitaria.cl This FIRST EDITION was printed at Editora and Imprenta Maval SpA. Rivas 530, San Joaquín, Santiago de Chile, October 2017 http://www.comisiondeproductividad.cl The unauthorized use of any part of this publication is prohibited. Contents 6 Acronyms 9 The Chilean Productivity Commision 11 Foreward 13 Terms of reference 15 Preface 19 Executive Summary Part 1 Characterization of the Copper Mining Industry in Chile Chapter 1 35 Chilean Copper Mining Industry 39 1.1. Introduction 39 1.2. Copper's productive processes 41 1.3. Copper Mining in Chile 59 1.4. Conclusions Chapter 2 61 Productivity in Chilean Copper Mining 65 2.1. Introduction 67 2.2. Productivity in the Copper Mining Industry in Chile 77 2.3. Total Factor Productivity 85 2.4. Evolution of Labor's Partial Producivity 91 2.5. Conclusions 93 References Chapter 3 95 Benchmark Analysis 99 3.1. Introduction 100 3.2. Methodology 102 3.3. Partial Labor Productivity 110 3.4. Partial Capital Productivity 121 3.5. Conclusions Chapter 4 149 Suppliers: Characterization and Productivity 153 4.1. Introduction 155 4.2. Expenditure and Suppliers of Goods and Services 159 4.3. Characterization of Chilean Mining Industry Suppliers 170 4.4. Productivity in the Suppliers Sector 178 4.5. Conclusions 180 References Second Part Productivity Analysis of The Chilean Copper Mining Industry Chapter 5 183 Energy and Water Resources 187 5.1. Introduction 188 5.2. Energy 199 5.3. Water 210 5.4. Conclusions 214 References Chapter 6 217 Mining and Communities 221 6.1. Introduction 222 6.2. Conflicts and their Costs 224 6.3. Challenges for the Mining Industry in its Relations with Communities 228 6.4. The Social License 229 6.5. What is being done in Chile? 232 6.6. Case Studies 237 6.7. Conclusions 241 References 242 Annex Chapter 7 247 Labor Aspects and Mining Security 251 7.1. Introduction 251 7.2. Security 259 7.3. Geographic Altitude in the Mining Industry 261 7.4. Occupatinal Diseases 262 7.5. Organizational Aspects 270 7.6. Work days and shifts 277 7.7. Human Capital 283 7.8. Conclusions 288 References Chapter 8 291 Mining Exploration 295 8.1. Introduction 298 8.2. Mining Concessions and Copper 312 8.3. The judicial granting of mining concessions 321 8.4. The Protection obligation of mining concessions 328 8.5. Geological information and its availability 336 8.6. Financing for mining exploration 339 8.7. The coordinate system of mining property 342 8.8. Conclusiones 361 Bibliography 363 Annex Chapter 9 365 Medium-scale Mining 369 9.1. Introduction 369 9.2. Chilean Medium-scale Mining industry 375 9.3. Productivity Constraints 388 9.4. Conclusions 391 Bibliography 393 Annex Chapter 10 395 Suppliers: Barriers to Productivity and Recommendations 399 10.1. Introduction 399 10.2. Barriers to Suppliers 405 10.3. Supplier Innovation 417 10.4. Conclusions 420 Bibliography Chapter 11 423 A Mining Strategy for Chile 427 11.1. Strategy Pillars 441 11.2. Findings and Recommendations Summary 457 Glosary Acronyms All the acronyms are in their spanish versions. AIA Association of Industrialists of Antofagasta APRIMIN Association of Industrial Mining Suppliers CCM Council of Mining Competencies of the Mining Council CIS Centers of International Excellence ChP Primary Crushing CNE National Energy Commission CNID National Council of Innovation for Development COCHILCO Chilean Copper Commission CODELCO National Copper Corporation COMPIN Commission of Preventive Medicine and Disability CONAF National Forestry Corporation CONICYT National Commission for Scientific and Technological Research CORFO Corporation for the Promotion of Production DGA National Water Bureau EE Energy Efficiency EMTP Technical Education in High School ENAMI National Mining Company ERNC Non-Conventional Renewable Energy EVAST Assessment and Surveillance of Environment and Occupational Health IEAM Specific Tax on Mining Activity IIMCh Institute of Mining Engineers of Chile INE National Statistics Institute INGEMMET Geological, Mining and Metallurgical Institute FESUC Federation of Supervisors of Codelco FESUMIN Federation of Mining Supervisors FIE Strategic Investment Fund 6 FIC Innovation Fund for Competitiveness FIRR Regional Investment and Reconversion Fund FMC Mining Federation of Chile FTC Federation of Copper Workers LOC Constitutional Organic Law on Mining Concessions LSO Social License to Operate MINNOVEX Innovative and Export Mining ML Grinding OGP Office of Large Project Management ILO International Labor Organization ONEMI National Emergency Office ONG Non-Governmental Organization OTEC Technical Training Organizations PC Concentrator PHm Hydrometallurgical Plant PPCM World Class Supplier Program TFP Total Factor Productivity SEA Environmental Assessment Service SEIA Environmental Impact Assessment System SENCE National Service of Training and Employment SERNAGEOMIN National Service of Geology and Mining SIC-SING Central Interconnected System - Northern Interconnected System SONAMI National Mining Society SUSESO Social Security Superintendence SQM Chemical and Mining Society SVS Superintendence of Securities and Insurance UAI-CORFO Adolfo Ibañez University - Corfo 7 The Chilean Productivity Commission The Chilean Productivity Commission is an institution created through Presidential Decree No. 270, of February 9, 2015. It is an independent, autonomous and consultative institution, whose mission is to advise the Government of Chile on issues aimed at increasing produc- tivity, focusing on the improvement of the citizens’ well-being, proposing evidence-based public policies, which consider the views of civil society in general. It has a technical and transversal council of eight members appointed by the President of the Republic for a three year period. Counselors Joseph Ramos Quiñones, President Raphael Bergoeing Vela, Vicepresident Carlos Álvarez Voullieme Andrea Butelmann Peisajoff Fernando Carmona Alert Rossana Costa Costa (counselor 2015-2017) Verónica Mies Moreno (current counselor 2017) Claudio Muñoz Zúñiga Soledad Ovando Green It's permanent challenge is to increase productivity in order to improve the lives and well-being of people. 9 Foreword The mining sector, specifically, the copper mining industry, is essential to Chile's economic and social development. Mining contributes significantly to national income, tax revenue, jobs and business opportunities, and, ultimately, the country's growth. Given its importance, the Government has requested us to review the evolution of pro- ductivity in the Chilean Copper Mining Industry, and propose measures to improve it. This study, the Chilean Productivity Commission’s first, suggests that there is wide scope for improvement, both in public entities and the mining sector, and particularly in mining companies. As an extractive sector, the mining industry may generate adverse effects and nega- tively affect the surrounding communities. Therefore, it must be subject to a series of governmental protocols and regulations, and also to society’s permanent scrutiny. Our study angles its recommendations towards international best practices, with the aim of increasing productivity and thus generating economic gains for the country, without sacrificing social, environmental, occupational safety and community relations standards. The study was developed by the team of the Technical Secretariat of the National Pro- ductivity Commission, under the supervision and unanimous approval of the Presidential Advisory Council. It benefited from the support of both Chilean and international mining companies that provided vital information on their performance. The Ministry of Mining, Ministry of Economy, Sernageomin, Ministry of Labor, the Consejo Minero, Valor Minero, Aprimin, Chilean Chamber of Construction, among many others, collaborated in the de- velopment of this report. The contributions of MatrixConsulting, Cochilco and Fundación Chile were especially important to this analysis. The Commission is grateful to a large number of people, workers, business people, experts, officials, academics, and others related to industry, for their significant support to our inquiry, both in work meetings and in the hearings that took place for this study. Without them, this study would not have been possible. Joseph Ramos Alfie A. Ulloa President Executive Secretary May 2017 11 Terms of reference Request from the President of the Republic to the National Productivity Commission: Terms of Reference.