BHP says tax hikes threaten Chilean mining industry

Rising taxes and royalties could hurt the mining industry in Chile, the world’s largest copper producer, according to BHP’s chief operating officer in the Americas.

Last week, a congressional committee in Santiago approved changes to a mining royalty bill that would add a progressive tax on sales of copper and lithium, metals that are expected to play a crucial role in shifting to cleaner forms of energy.

While the bill is unlikely to pass in its current form, analysts believe higher taxes and royalties are coming in Chile and other resource-rich countries.
Chile is also considering rewriting its constitution.

The sharp rise in commodity prices, with copper trading above $ 10,000 a tonne last week for the first time in a decade, has raised concerns that miners are being targeted by governments seeking to pay for post-pandemic recovery programs.

Former Australian Prime Minister Kevin Rudd recently called for a super-profits levy on the country’s three big iron ore producers – BHP, Fortescue Metals Group and Rio Tinto. In Peru, the leader of his presidential election has promised a more equitable distribution of mineral wealth.

In Chile, tax increases could make foreign mining companies wary of investing in new projects or expanding existing mines to meet growing demand for copper and lithium from electric vehicle manufacturers and the renewable energy industry.

“You can absolutely try to get the most out of the golden goose, but you just need to be very clear about the long-term implications,” said Ragnar Udd, president of BHP Minerals Americas, in an interview with Financial Times. “And the kind of reforms that are being proposed right now will be really damaging to the industry.”

Chile is the world’s largest copper-producing country, accounting for about 28% of the world’s production of mined metal, used in everything from household appliances to electrical cables. Copper is a key part of its economy, but many of its mines age with declining ore grades and high operating costs as they burrow deeper into the earth.

“The deposits in Chile are not the deposits of 20 to 30 years ago,” Udd said. “The reality is that the ratings have dropped dramatically. Over the past 15 years, we’ve gone from around 1 percent copper to 0.6 to 0.7 percent. . . so you have to work harder and find different ways to be more productive. “

“Over the past 15 years, the reality is that the share of copper from Chile has grown from 34% of the world market to around 28%,” he added.

Udd, a Canadian engineer who joined BHP in 1997, began his current role in November. In addition to BHP’s operations in Chile, which include Escondida, the world’s largest copper mine, he is also responsible for Jansen, a giant potash project the company seeks to develop in Canada.

While the Americas business is often overlooked by investors who focus on BHP’s primary source of revenue, its iron ore mines in Western Australia, Udd believes it will be critical to growth and continued success. the company of “raw materials for the future”.

“I really see this as a growth engine for the organization over the next 30 to 50 years,” he said.

BHP’s board will decide whether or not to approve the first stage of the Jansen project mid-year, but after spending $ 4.5 billion already, this is likely to continue.

“What we love about potash is some of the diversification that we see coming to BHP,” Udd said. “Not only does this allow geographic and customer diversification. . . the drivers of demand growth for potash are slightly different from those for copper. Potash consumption has always been closely linked to population rather than industrialization.

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