- By: Daniel Weinstein, lawyer, member of the Mining Chamber of Chile
If only a couple of months ago I had seen a column entitled “Mining Exploration and Universal Guaranteed Pension”, I would probably have read it exclusively out of curiosity, since it is difficult to imagine what these two topics have in common. However, in the context of the Universal Guaranteed Pension (PGU), and specifically with its sources of financing, on February 4, 2022, Law No. 21,420 was published that “Reduces or eliminates tax exemptions indicated” ( the “Law”), which introduces a series of reforms to the Mining Code (the “Code”).
Modifying a legal body as important as the Code through a law that is related to a pension issue is, to say the least, striking. Without judging whether the modifications were good or bad, the legislative technique is not appropriate. Nobody would think, for example, in a paragraph of the Sports Law to modify the composition of the Senate, or take advantage of a modification to the Drug Law to reform the Migration Law. Now, someone can say that, since the Law sought sources of financing and mining patents were raised, it was justified. But, as we will see, the modifications go far beyond the mere increase in the amounts of mining patents.
The Code, together with the Constitutional Organic Law on Mining Concessions and the Political Constitution of the Republic, have provided mining with an institutional framework that, for almost 40 years, has given stability to the mining sector, thus attracting large investments, which They have turned Chile into an example to follow. All of the above does not mean that the Code is untouchable; in fact, I think that it needs certain modifications, but these must be done considering the mining system as a whole and listening to the experts.
On this last point, it should be noted that representatives of several trade associations received a hearing at the Treasury Commission, but no one from the mining sector, an omission that I think occurred because the modifications to the Code were introduced, making an analogy with football, “in the discounts ”. In fact, in the Message of the draft of the Law dated December 21, 2021, it says nothing about mining. Reviewing the history of the Law, the reforms to the Code only appear in a presentation by the Minister of Finance dated January 18, when they had already been presented for discussion.
Unfortunately, the history of the Law is not yet complete in the Library of the National Congress, so it is not possible to know the foundation that was made when the provisions related to mining were introduced into the Law project. The closest thing we have to understanding the reasons for the modifications to the Code, in addition to raising more money, is reflected in a Report of the Senate Finance Commission dated January 24, 2022, which contains on a single page the exposition of the Chief of Advisors of the Ministry of Mining entitled “Modernization of Mining Concessions”, indicating that the existence of large areas under mining concessions makes it difficult for new actors to enter and prevents the development of infrastructure.
In this column I will focus briefly and exclusively on giving my opinion on the matters that are modified or introduced by the Law in relation to exploration concessions. If you are interested, you can find more information about these modifications here. (https://camaraminera.cl/modifications-introduced-por-la-ley-n21-420-a-las-concesiones-de-exploracion/)
Regarding the increase in the term of the exploration concession to 4 years, I think it will not have a great impact, but it will not help to give dynamism to the mining property either. If the mining concessionaire stops exploring with several years remaining before the concession expires, during that time the concession will not be available to other interested parties in exploring said area.
Regarding the Obligation to inform, the Law incorporates the obligation of the holder of an exploration concession, once said concession has expired or the term of granting has elapsed, to send to the National Mining Service (the “Service”) all the geological information that obtained from the exploration works. This obligation is only new insofar as it leaves the burden of presentation to the holder.
Having a centralized system of geological and mining information built on the basis of the work carried out by mining concessionaires is a long-standing desire, which notwithstanding the provisions of article 21 of the Code and Law No. 20,819, has not able to fully develop. It is not clear what level of information should be delivered, the form and several other important aspects, which should be regulated in the future regulations of the Law. The success of this measure will therefore depend a lot on that regulation. If it is successful and such information is made available to interested parties, it will undoubtedly encourage further exploration.
In addition, to replace the PSAD56 currently in use, the Law establishes that the request must express the coordinates in SIRGAS datum. The Service will publish the new coordinates, with a term for the concession holder to object to them or request their inclusion. The new coordinates must be registered by the holder of the concession and, if they do not do so within the terms established in the Law, the mining titles will expire. Although the change to the SIRGAS datum constitutes an attempt to modernize and standardize the geodetic reference system, it is foreseeable that the measure will initially be difficult to implement, thus giving rise to controversies and an increase in mining lawsuits and, in some cases, the expiration of The titles.
Also, the amount of the mining license was increased and it is indicated that to protect the exploration concession, payment must be made for each complete hectare of the equivalent of 3/50 of UTM for each year of validity of the concession. This represents an increase of three times the current amount.
In the first instance, it can be thought that this increase will discourage the request and maintenance of concessions on which no work is being carried out, which will give rise to a greater availability of concessions and, therefore, exploration will be encouraged. However, it could eventually not have such an effect, since, although the increase is significant, it is within the reach of large companies. On the contrary, this increase could make exploration by junior mining companies, which have a considerably smaller budget, extremely expensive. Likewise, the non-payment of the patent must be duly detected, a procedure must be followed and the concessions auctioned off, which lengthens the times of unavailability for new explorations.
The Law limits the exercise of possessory actions by the mining concessionaire against the owner or possessor of surface properties, only being able to be exercised in those cases in which the concessionaire proves to be the holder of a real right of mining easement or other real right that grave said property. This limitation has its origin in the malpractice of people who constitute mining concessions not for mining purposes, but to demand money from those who intend to develop energy or other projects on surface properties. Undoubtedly, this is good news for the country’s development, although it may have negative effects for the concessionaire that was actually carrying out exploration work, since now it will be practically forced to request an easement or other real right, something that, in practice, , did not happen in the early stages of exploration.
The impact that these modifications contained in the Law will cause must be analyzed together with those suffered by the exploitation concessions and the mining system in general, which exceeds the purpose of this column.
However, I once again state that, if the Code was to be “modernized”, it should have been carried out by means of a specific law, and not one whose purpose is, as stated in the first report of the House Finance Committee of Deputies, increasing tax collection, eliminating or reducing a set of tax exemptions that are no longer justified today, with the main objective of substantially increasing the economic conditions of the elderly, through a pension reform. We hope that future modifications that affect mining will be carried out systematically and organically, listening to experts and trade associations linked to mining.
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