Mining Giant BHP Warns Against Chile's Mining Tax

The world’s top miner BHP (ASX, LON, NYSE: BHP) said a proposed royalty on copper and lithium sales being discussed by lawmakers in Chile risks making international miners wary of investing in new projects or expanding existing mines to meet growing demand for both metals.

A congressional mining committee in the biggest copper-producing nation approved last week a version of a bill that would charge higher rates at times of high prices for copper and lithium.

The proposed law, first introduced in 2018 by opposition lawmakers, originally called for a 3% mining royalty for companies mining and exploring for the two metals. The new version would charge a marginal rate of 15% on sales derived from copper prices of between $2 and $2.50 a pound and as much as 75% on cash generated from prices above $4. At current prices, the effective rate would be 21.5%, although miners could discount refining costs from copper sold as refined cathode.

The proposed tax, to be applied on the nominal value of extracted metals, would affect copper miners that produce more than 12,000 tonnes of the metal annually and those extracting 50,000 tonnes a year of lithium.

Half the funds obtained from the royalty would go into a regional convergence fund to finance regional and communal development projects. The other half would directly finance projects to mitigate, compensate or repair environmental impacts from mining activity in communities near mining projects.

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“You can absolutely try and take more from the golden goose but you just need to be very clear on what the implications are on that longer term”, Ragnar Udd, president of BHP Minerals Americas, told the Financial Times. “And the sort of reforms that are being put forward at the moment will be really quite damaging to the industry.”

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