THE MINERAL INDUSTRY OF CHILE By Pablo Velasco and Steven T. Anderson The Republic of Chile is located at the southern tip of approval has been expedited for almost all foreign investors South America and borders Argentina, Bolivia, Peru, and the through heavier reliance on the provisions of the 1974 Chilean South Pacific Ocean. Chile has a total area of 756,950 square foreign investment statute (Decree Law 600), which allows kilometers (U.S. Central Intelligence Agency, 2003§1). In 2002, investors to sign standardized contracts with the Government of the country had a population of more than 15 million and a gross Chile (U.S. Commercial Service, 2001§). domestic product (GDP) of about $64.45 billion. The nominal GDP in current U.S. dollars fell by 3% in 2002 compared with Structure of the Mineral Industry the decrease of about 11% in 2001 (International Monetary Fund, 2003§). The real GDP increased by 2.1% in constant The Chilean Government, through the Ministry of Mines, 1996 Chilean pesos. In 2002, the output of the service sector exercised control of the mineral industry through three amounted to 56% of the GDP; industry, which included mining, large state-owned mining companies and four regulatory 34%; and agriculture, 11% (Central Bank of Chile, 2003, p. 16, agencies. The mining companies were the world’s leading 30, 62). copper-producing company Corporación Nacional del Cobre In 2002, total exports were valued at $22.3 billion. Of this (CODELCO), Corporación de Fomento de la Producción total value, $7.6 billion (34.2%) was from copper, although this (CORFO), and Empresa Nacional de Minería (ENAMI). The value of copper exports was a decrease of 7.1% compared with subsidiaries of CORFO included Cía. Chilena de Electricidad that of 2001 as a result of historically low international copper S.A., Cía. de Acero del Pacífico S.A. de Inversiones, Empresa prices. The value of the main nonc opper exports, such as, in Nacional del Carbón S.A. (ENACAR), and the state-owned order of importance, fruits, wine, and fish, increased by about oil company Empresa Nacional del Petróleo S.A. (ENAP). 3% and that of nontraditional goods decreased by 0.3% in value. Sociedad Química y Minera, S.A. (SQM) was formerly a Total imports were valued at $20.7 billion. The registered trade subsidiary of CORFO but was privatized in 1988 (Sociedad surplus amounted to $1.6 billion in 2002 compared with $1.1 Química y Minera, 2003§). The four regulatory agencies were billion in 2001 (Central Bank of Chile, 2003, p. 34). Total the Comisión Chilena del Cobre (COCHILCO), the Comisión foreign direct investment (FDI) inflows to Chile decreased to Nacional del Medio Ambiente (CONAMA), the Comité de $1.1 billion in 2002 from $3.0 billion in 2001 (U.S. Embassy, Inversiones Extranjeras, and the Servicio Nacional de Geología Santiago, Chile 2002). y Minería (SERNAGEOMIN). ENAMI processed, smelted, and refined minerals for small- Government Policies and Programs and medium-scale mining companies. In 2002, ENAMI controlled concentrators at Matta, Ovalle, Taltal, and Vallenar Chile has free trade agreements with Canada, Colombia, in addition to the Paipote smelter and Las Ventanas smelter and Costa Rica, Ecuador, Mexico, and Venezuela that provide refinery. Las Ventanas smelter and refinery, which was located for duty-free trade in most products. In 2002, Chile was 8 kilometers (km) from Quinteros in Region V, had an installed an associate member of the Mercado Común del Cono Sur smelting capacity of 400 metric tons per year (t/yr) and a (MERCOSUR) (Argentina, Brazil, Paraguay and Uruguay) and refining capacity of 315 t/yr. has a trade liberalization agreement with Bolivia. In April 2002, CODELCO had four mining divisions (Codelco Norte Chile entered into trade agreements, one with the European Division, Salvador Division, Andina Division, and El Teniente Union and one with the Republic of Korea, in which both sides Division) and one industrial division (Talleres Division); all agreed to eliminate all import tariffs between them during the were located in northern and central Chile. In 2002, the Board next 10 years. On December 11, 2002, the United States Trade of CODELCO approved the creation of the Codelco Norte Representative announced that the United States and Chile had Division by the merger of the Chuquicamata and the Radomiro successfully concluded negotiations for the U.S.-Chile Free Tomic Divisions. The new Division started operations in Trade Agreement, which was signed on June 9, 2003 (U.S. 2002. The Chuquicamata mining complex, which was located Commercial Service, 2004§). This agreement, however, would 1,650 km north of Santiago, Chile, in Region II at 2,870 meters still require the approval of the legislatures of both countries (m) above sea level, had two open pit mines, Chuquicamata before actually being adopted (U.S. Energy Information and Mina Sur. Ore from both mines was processed by using Administration, 2003§). electrorefining and electrowinning methods to produce 596,000 Chilean law requires that FDI proposals be approved by the t/yr of cathodes with a purity of 99.99% copper. It also Government’s Foreign Investment Committee. Since 1991, this produced some 12,800 t/yr of anodic slimes, molybdenum, and sulfuric acid. The Radomiro Tomic Mine, which was located 1References that include a section mark (§) are found in the Internet 1,670 km north of Santiago at 3,000 m above sea level, had References Cited section. an open pit mine from which oxide minerals were extracted; THE MINERAL INDUSTRY OF CHILE—2002 7.1 after leaching treatment, 297,000 t/yr of copper cathodes was in Region III and increased the indicated resource to 465 produced (Corporación Nacional del Cobre, 2003, p. 7). million metric tons (Mt), which contained 0.61% copper and SQM was the world leader in specialty fertilizers, iodine, and 0.50 gram per ton (g/t) gold at a 0.4% copper cut-off. El Morro lithium in 2002. These products were obtained from processing was owned by Metallica Resources Inc. of Denver, Colorado. caliche ore in Regions I and II and saline brines in the Atacama Although Noranda Chile was in good standing with respect to its Desert in Region II. The caliche was extracted from mines agreement with Metallica Resources to earn a 70% interest in El located in Maria Elena, Pampa Blanca, and Pedro de Valdivia Morro by spending $10 million on exploration and development and was processed to produce iodine, potassium nitrate, sodium from 1999 to 2005, paying an additional $10 million to nitrate, and sodium sulfate. The brines in the Atacama Desert Metallica in 2005, and completing a feasibility study by 2007, contain high concentrations of boron, lithium, magnesium, Noranda Chile announced in 2002 that it would suspend its potassium, and sulfate. The favorable atmospheric conditions of exploration efforts at El Morro during 2003 (Tarbutt, 2003). the Atacama Desert and the quality of the brines and caliche ore Also in Region III, Minera Atna Chile Ltda. (a subsidiary of allow SQM to be one of the lowest cost producers worldwide of, Atna Resources Ltd. of Vancouver, British Columbia, Canada) in order of economic importance, potassium chloride, lithium found extensive silver and zinc in Chañarcillo, but Apex Silver carbonate, potassium sulfate, and boric acid (Sociedad Química Mines Limited of Denver, Colorado, elected to drop its option y Minera, 2003, p. 13). to continue funding this initial drilling program in 2002; grade In 2002, the mineral industry employed 47,304 people, which values at Chañarcillo were insufficient to indicate a viable included staff and office personnel who worked directly for bulk tonnage operation (Atna Resources Ltd., 2002c§). Atna the minerals sector. The metals sector employed about 39,809 Resources acquired the option to purchase Cerro Negro, which workers; the industrial minerals sector, 5,290 miners; and the is a large copper oxide deposit, from a Chilean subsidiary of mineral fuels sector, 2,205 workers, which included 800 coal Phelps Dodge Corp. and with the approval of ENAMI, which miners and 1,405 oil workers. Copper mining alone employed owned Cerro Negro (Atna Resources Ltd., 2002b§). Although 34,997 workers, or about 74% of the mineral industry; this previous exploration carried out by Phelps Dodge outlined an total included copper mining company workers and copper overall resource of 191 Mt at a grade of 0.46% copper, Minera contractors’ personnel. The large-scale copper mining firms Atna Chile conducted some drilling and extensive metallurgical employed 28,604 miners; the medium-scale firms, 3,707; and testing that focused more on higher grade oxide resources the small-scale firms, 2,686 (Servicio Nacional de Geología y in 2002; initial results indicated more than Atna Resource’s Minería, 2003, p. 114). threshold of a 50-Mt resource at grades of more than 0.5% copper (Atna Resources Ltd., 2002d§). Minera Atna Chile Environment acquired a 100% interest in the Celeste project claims that surrounded Cerro Negro. The best drill intersections in the The basis of Chilean environmental regulation is the Chilean Celeste claims included grades from 0.77% copper to 1.41% Environmental Framework Law (Law 19,300). Adopted in copper and lower grades of silver in the predominantly sulfide 1994, it established the country’s general environmental policy mineralization (Atna Resources Ltd., 2002a§). and regulates all major activities likely to have an environmental During 2002, Coeur d’Alene Mines Corp. continued its impact. This law created an Environmental Impact Assessment exploration and development program at the Cerro Bayo System that is implemented by CONAMA when more than one deposit in Region XI, near the border with Argentina. The region of the country is involved or by the respective Comisión majority of the reserves within this primarily silver and gold Regional de Medio Ambiente (COREMA) when only a single trend was discovered in the Lucero vein, which was estimated region is involved (Baker & McKenzie, 1997§).