Mining 2018 Comparisons

Last Updated April 30, 2018

Contributed By Nieto, Morán & Co

Law and Practice

Authors



Nieto, Morán & Co is a boutique firm specialised in natural resources, environment and complex litigation. Its attorneys have vast experience representing national and international clients in mining, water, energy and environmental matters, as well as in resolving any kind of conflict or disputes in arbitration and before ordinary or specialised courts of law. The firm is based in Santiago, Chile. The team offers integral advice to our clients in all the stages of a mining project, including exploration, development, construction, operation and closure. We have vast experience in mining concession constitution procedures and their judicial defence, including an extensive judicial and negotiation practice for the constitution of mining easements. In addition, lawyers offer advice for the procurement of permits, due diligence processes for the acquisition of concessions, options, joint ventures, mining companies and shareholder agreements, royalties, as well as construction and operation contracts. Services include the elaboration of legal reports on complex topics and the co-ordination with the technical teams of mining property.

The Political Constitution of the Republic of Chile asserts that the State is the absolute, exclusive and permanent owner of all mines, including metalliferous sands, salt pans, coal and hydrocarbon deposits, with the exception of surface clays.

This domain of the State is independent and notwithstanding the rights of the owners of the surface land. There exists an absolute distinction between (i) ownership over surface land, and (ii) ownership over the mining concession over the same piece of land (on the understanding that they are completely independent assets, even in cases in which they are both held by the same individual or entity). Note that the Constitution mandates that surface property shall be subject to the obligations and limitations established by law in order to facilitate mining exploration and exploitation as well as mineral processing, but these owners of surface lands must be indemnified.

The State grants individuals the opportunity to acquire, explore and exploit mineral deposits through a mining concession granted by the Judicial Branch. Any natural person or legal entity, Chilean or foreign, is entitled to acquire or request a mining concession in compliance with the requirements established by law, with the exception of individuals mentioned in the Mining Code (judges and the Mining Registrar of the places where the concession is located, State officials involved in the constitution of the concessions). However, there are some limitations for foreign persons or entities regarding lands located close to the country borderline.

The mining concession is always incorporated by a judicial decision issued by the judge of the territory in which the concession is located. The incorporation process established by law must be duly complied with, or else the rights arising from said concessions may be subject to cancellation. The judicial resolution declaring the incorporation of a concession must be registered in the corresponding Mining Register. Once this registration is made, any transfer or granting of any real right over the concession must be executed by public deed.

The date of initial filing for the incorporation of a concession determines the preference to exercise the rights arising from the concession that is being incorporated. The law presumes that whoever first files for the incorporation of the exploration or exploitation concession is the discoverer.

Exploration and Exploitation Concessions

Chilean Mining Legislation Acknowledges Two Forms of Mining Concessions:

  • an exploration concession, with a duration limited to two years, grants its holder the exclusive right to investigate and prospect the existence of all mineral substances that may be granted in concession; and
  • an exploitation concession, with an indefinite duration, grants its holder an exclusive right to explore and exploit freely the exploitation concession and become the owner of all the mineral substances (metallic and non-metallic) that are extracted from within the limits of the exploitation concession, with the sole exception of the minerals that the law has reserved to the State.

Both forms of mining concessions are in rem rights, enforceable upon the State and any other individual or entity. They can be freely transferred, transmitted, and encumbered by mortgages or other forms of in rem collateral. They are inherently conditional, since they may be lost in favour of a third party if they are not protected by paying an annual mining licence, or they can expire if not protected. Notwithstanding, the property rights held by the concessionaire over its concession are guaranteed under the constitutional right of (and to) property.

The territorial extension of mining concessions is in accordance with precise geophysical dimensions and conditions.

The Chilean mining regime is regulated in three fundamental statutes:

  • Political Constitution of the Republic of Chile, which sets out the groundwork in accordance with which Chilean mining legislation is assembled;
  • Constitutional Organic Law on Mining Concessions, which describes the characteristics and features of mining concessions granted by the State to whosoever complies with the requirements linked to their acquisition, as well as all rights and obligations attached to said concessions, and;
  • Chilean Mining Code, which provides in-depth regulation and descriptions of mining concessions, including rules on their shape and purpose, proceedings necessary for them to be granted to a concessionaire, rights and obligations attached to mining concessionaires, mining concession protection regime and certain forms of contracts associated with them.

In addition, the Mining Code was further regulated and itemised by the Mining Code Regulation and mining activities and operations are subject to the rules contained in the Mining Safety Regulation, which contains provisions for the protection of mining workers’ life and safety, as well as on-site safety regulations in connection with machinery, equipment and facilities in mining sites.

The main mining authority is the Ministry of Mining, whose mission is to generate, promote, disseminate and evaluate policies and standards that optimise the country's sustainable mining development, maximise its contribution to social economic development and consolidate its international leadership.

From a technical point of view, the main government body in mining issues is the National Geology and Mining Service (“Servicio Nacional de Geología y Minería” or SERNAGEOMIN), who advise the Ministry of Mining on geology and mining issues. This agency has an important participation in the procedures of incorporation of mining concessions, reviewing the technical aspects of the same, as well as in the approval of the exploitation’s methods and the closure plans of the mining projects. In addition, it performs geological studies, makes inspection works, keeps a special record of all the incorporated mining concessions over the Chilean territory and supervises compliance with the Mining Code Regulation, among other responsibilities.

According to mining law, any person is entitled to dig test pits and to remove samples in the search for mineral substances on any open and without-crops land, except within the limits of someone else's mining concession.

In fenced or cultivated lands, the landowner's authorisation is required, which can be granted by the judge in case of refusal. However, in the case of houses and their dependencies or in land planted with vines or trees, only the owner can grant the authorisation.

Additionally, the law protects certain special land, requiring an authorisation to perform reconnaissance and mining work in certain places of public interest (ie, to mine near to cities, in national parks, national reservations or natural monuments, in lands declared to be border areas, in military areas, in sites declared to be of historical or scientific interest).

According to the Environmental Act, reconnaissance and exploration works do not require an environmental assessment.

See above 2.1 Requirements to Conduct Prospecting and below 2.3 Requirements to Conduct Mining for information on permits/authorisations related to exploration.

To conduct exploration, prospecting and mining, the interested party must have a mining concession.

Due to the separation between surface ownership and mining property, the mining activity needs, firstly, to have an authorisation from the owner of the surface land to develop its mining project. In addition, in the case of special places, it requires the same mining authorisations and permits required for reconnaissance.

Note that, according to environmental law, prospection works are defined as the actions performed with the purpose of reducing geological uncertainties related to the mineral concentrations in a mining projects, establishing even the number of platforms and drillings that are required. These kind of works require an environmental assessment.

The environmental regulations and sectorial environmental permits applicable to a specific project or activity must be determined on a case-by-case basis, depending on various factors, including the type of project or activity in question and the location of the project.

In general terms, according to the mining law, after the concession has been established, its owner shall be empowered to make works required for exploring or exploiting the mine.

The owner of an exploration concession has the exclusive right to investigate and prospect the existence of all mineral substances that may be granted in concession; the owner of an exploitation concession also has the exclusive right to explore and mine his or her concession freely, becoming owner of all mineral substances mined within the limits of the concession.

Both the exploration and exploitation concessionaires have the right to impose easements or rights of way over the surface properties necessary for exploration works and for stockpiles, processing facilities, energy and communications systems, access roads, pipelines, channels, housing, and any other ancillary or supplementary facilities or components necessary for a free and unconstrained exploitation of the mining concession.

Easements may be established by an agreement reached via private negotiations with the owners of the affected properties or, if negotiations are unsuccessful, by a judicial proceeding in which the judge must evaluate the sum to be paid as compensation to the surface-landowner. Mining easements may only be applied for the purposes for which they were originally created, and therefore the easement shall expire once these purposes cease to exist. They may be expanded or restricted, as required by the activities developed under the concession.

Additionally, the owner of the concession is entitled to use the waters found in the mining works within the limits of the concession for exploratory work, exploitation and processing. 

The exploration concessionaire has also the right to transform his or her concession into an exploitation concession, before the expiration of the two-year term of said concession.

Finally, in case of expropriation of the mining concession, the mining concessionaire is entitled to be compensated for the actual damage caused. In the case of the exploitation concession, the compensation must include the commercial value of the concession, based on the existing mineral reserves and the present value of the net cash flows of the concession.

According to the mining law, the owner of the mining concession has the obligation to pay a yearly mining licence, in benefit of the State, which is calculated based on the surface of the concession and the type of concession. The non-payment of the mining licence may give room to an auction process affecting the concession. The highest bidder may acquire the mining concession, in the value of the unpaid mining licences. If there are no bidders in the auction, the judge must declare the land on which the concession is located, as "free land".

In addition, the mining concessionaire has an obligation to defend his or her concession, exercising certain actions of opposition or nullity against third parties. If it does not do so, the holder of the underlying concession loses its rights.

See 3.4 Duties Acquired Towards Landowners.

In addition to complying with the mining and environmental legislation, the owner of the mining concession must compensate the owner of the surface land for the use of the land and for damage caused by its mining activities (on the easement).

According to the Facilities Closing Act (No 20,551 of 2012), every mine must to have a closure plan approved by SERNAGEOMIN before the beginning of the mining operations.

The purpose of the mine closure plan is to integrate and implement the set of measures and actions to mitigate the effects of the development of the mining industry, where it is carried out, in order to ensure the physical and chemical stability of the same, in accordance with the applicable environmental regulations. These measures must grant due protection to life, health, the safety of people and the environment.

Each mining task is considered a particular and individual case, which has its own unique characteristics, and each closing plan should be analysed on a case-by-case basis. According to law, any mining company or mining company that carries out mining operations must constitute a guarantee that assures the State the full and timely fulfillment of the obligations established in the approved closing plan. The amount of the guarantee must be determined based on the periodic estimation of the present value of the implementation costs of the closing plan.

The main law that regulates environmental aspects for mining projects (and all kind of projects) in Chile is Act 19,300 (the “Environmental Act”) and the Supreme Decree No 40 (the “Regulation”).

The Environmental Act establishes that only the projects listed in its Article 10 need to be evaluated from the environmental perspective prior to its construction and operation. This Act created the Environmental Impact Assessment System (EIAS), which allows the project-holder to obtain all the required environmental permits to construct and operate the project through one governmental window. Furthermore, it provides a regulatory framework to address objections both from the community and from governmental agencies.

In order to determine those mining activities that have to be evaluated, the Environmental Act and the Regulation distinguish between exploration, prospection and exploitation. According to these regulations, mining exploration does not require environmental assessments; to the contrary, prospection and exploitation requires such assessment.

Under the Regulation, mining prospection are works conducted to reduce geological uncertainties related to the mineral concentrations in a mining project and that requires more than 40 platforms (or 20 platforms in certain regions). In turn, those activities that require fewer platforms are defined as mining exploration activities. Finally, mining exploitation would require an environmental impact assessment when its purpose is to mine one or more deposits of which the mineral extraction capacity is over 5,000 tonnes per month.

In addition, in certain cases, mining waste, tailing disposals for mining exploitation and mining pipelines will need to pass through an environmental impact assessment.

Once it has been determined that a mining project needs to be evaluated in EIAS, according with the expected impacts of the project, the proponent has to present an Environmental Impact Study (EIS) or Environmental Impact Declaration (EID).

In order to determine if the project would need to be evaluated though an EIS or EID there has to be an assessment of the project impacts. Therefore, if the project does not present significant environmental impacts, it has to be evaluated through a EID. On the other hand, if the project does present one or more of the impacts listed in Article 11 of the Environmental Act, it has to be evaluated through an EIS.

The categories of impacts listed in Article 11 of the Environmental Law, and further developed in the Regulation, refer to risks on human health, effects on renewable resources, relocation of human communities or impacts on cultural traditions, among others.

During the environmental assessment process, the various bodies of the state administration with environmental competence participate; there is also the possibility that citizens may participate by making observations. Finally, the process ends with an Environmental Qualification Resolution approving or rejecting the project, or approving it with certain conditions. Administrative remedies may be brought against this resolution.

On 26 January 2010, Law No 20.417 was passed, creating the Ministry of the Environment, the Environmental Evaluation Service and the Environmental Superintendence. In order to create these institutions, it introduced important modifications to the Environmental Act, which establish the core of the environmental ruling in Chile. In this light, Law No 20.417 creates a new model of environmental institutions where there are organisations of different hierarchy, in a vertical structure, functionally decentralised, and which will be detailed below.

  • The Ministry of the Environment is a State body responsible for co-operating with the President of the Republic in the design and implementation of environmental policies, plans and programmes for the protection and conservation of biological diversity and renewable natural resources. In addition, it promotes the sustainable development of the country, the integrity of the environmental policy and its normative regulation. The Ministry has one undersecretary and six divisions. Finally, it also has geographic presence in each region of the country through the Regional Ministerial Secretariats (SEREMIs).
  • The Environmental Evaluation Service is the legal continuator of CONAMA. Its main functions are to: administer SEIA (System for the study of Environmental Impact); administer the environmental permit information system; make uniform criteria, requirements, conditions; propose simplification of procedures; and administratively interpret the RCA (Environmental Qualification Resolutions).
  • The Environmental Superintendence – its function is to carry out the monitoring and control of compliance of environmental standards and instruments, and to sanction in cases of non-compliance. In this sense, this service is in charge of supervising compliance with the Environmental Qualification Resolutions of mining projects.
  • Environmental Courts are special jurisdictions created by Law No 20.600, whose functions are to resolve environmental disputes within their jurisdiction and resolve other matters that the law submits to them. Among them, Environmental Courts are in charge of resolving claims to obtain compensation for environmental damage and claims against certain administrative acts and regulations issued by the Ministry of the Environment, the Superintendence of the Environment, and the Environmental Assessment Service. Each Environmental Court is composed of three main ministers; two must be lawyers and the third must be a professional from the field of sciences.

The Environmental Act provides that the owner of any project and activity that is submitted to SEIA is obliged to identify the environmental regulations applicable to his or her project or activity and indicate how he or she will comply with the same.

Sectorial Environmental Permits (PAS) have an environmental protection object. Such permits may have more than one protection object and PAS may also have sectorial (non-environmental) protection objects. In these cases, only the content that is part of the environmental protection object (s) is reviewed within the SEIA. The list of PAS is found in Articles 111 et seq of the Regulation (Supreme Decree No 40, 2012, of the Ministry of the Environment, Regulation of the Environmental Impact Assessment System).

As mentioned above, the environmental regulations and sectorial environmental permits applicable to a specific project or activity must be determined on a case-by-case basis.

Notwithstanding, in addition to the environmental obligations set forth below in 5.2 Rights of Indigenous or Ethnic Communities, there exists the obligation to approve a closure plan (mentioned above in section 1.3 Administration of the Mining Industry) and there are some provisions of the Water Code, Health Code and Labour Code that are also applicable to mining operations.

Incomes from a Chilean source – obtained by individuals or legal entities resident abroad (when the money is made available from Chile to the person residing abroad) – are subject to an additional tax of 35%. Corporate tax paid may be partially or totally deducted from the additional tax. Chile has signed several bilateral double taxation treaties.

Article 6 of ILO Convention No 169 (in force since September 2009) on "Indigenous and Tribal Peoples in Independent Countries" provides for the right of indigenous peoples to decide their own priorities and to be consulted, through appropriate procedures, whenever legislative or administrative measures are likely to affect them directly. In Chile, many mining projects are located in areas close to indigenous peoples, so these processes are highly relevant.

Such consultations must be carried out in good faith and in an appropriate way, with the aim of reaching agreement or obtaining consent on the proposed measures. The regulation of indigenous consultation and participation in Convention 169 is an issue that still in full process in Chile.

However, the right to establish easements and rights of way in favour of mining concessionaries, so as to allow them access to and from the land over which their corresponding concessions were granted, is also applicable over indigenous lands.

According to the Indigenous Act (No 19,253), land that has legally been deemed as indigenous is strongly protected. Among other protective measures, the law requires for the National Corporation for Indigenous Development (CONADI) to approve any and all encumbrances established over any such indigenous land, which would include easements and rights of way.

Mining activity is subject to the general tax regime of Chile, consisting of the payment of a corporate tax on profits.

Mining activity is also levied with a special taxation (called “mining royalty”). The mining royalty is levied over mining companies with yearly output exceeding 12,000 metric tons of mineral products (as defined in Law No 20,469), in a progressive tax system – the tax rate may vary from 0% to 14% for mining companies with annual output over 50,000 metric tons of fine copper. The royalty was incorporated into Chilean legislation in 2005, and its revenues were to create a fund for investing in technological development in the country. It is considered as a deductible expense for corporate tax purposes.

Finally, it is necessary to underline that every year the owner of the mining concession must pay for a mining licence.

Nieto, Morán & Co

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contacto@nietomoran.cl www.nietomoran.cl
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Law and Practice

Authors



Nieto, Morán & Co is a boutique firm specialised in natural resources, environment and complex litigation. Its attorneys have vast experience representing national and international clients in mining, water, energy and environmental matters, as well as in resolving any kind of conflict or disputes in arbitration and before ordinary or specialised courts of law. The firm is based in Santiago, Chile. The team offers integral advice to our clients in all the stages of a mining project, including exploration, development, construction, operation and closure. We have vast experience in mining concession constitution procedures and their judicial defence, including an extensive judicial and negotiation practice for the constitution of mining easements. In addition, lawyers offer advice for the procurement of permits, due diligence processes for the acquisition of concessions, options, joint ventures, mining companies and shareholder agreements, royalties, as well as construction and operation contracts. Services include the elaboration of legal reports on complex topics and the co-ordination with the technical teams of mining property.

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