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Mining Industry Reforms Fail in Chile, But A New Generation Wants Scrutiny
Article 27 would have given the state exclusive mining rights over lithium, rare earth metals, and hydrocarbons and a majority stake in copper mines.
On Saturday, Chile’s mining industry dodged a legislative challenge over control of their assets. A constitutional assembly in the world’s top copper-producing nation rejected a major reform to mining rights that would have expanded the state's ownership of natural resources.
Article 27 would have given the state exclusive mining rights over lithium, rare earth metals, and hydrocarbons and a majority stake in copper mines. The environment commission that submitted the article tried many different variations of the law to ensure its passage, but it ultimately failed to achieve a super majority needed to pass into the constitution under Chilean law.
However, Article 25, passed which legislates that miners must set aside resources to repair damage to the environment where mining has impacted.
The assembly also approved articles banning mining in glaciers, protected areas and regions critical to maintain watersheds. In addition, farmers and Indigenous people gained the right to traditional seeds for their crops, the right to safe and accessible energy, and a host of other environmental protections.
Voting to approve articles concludes after Saturday, and new commissions in charge of fine-tuning the text take over on Monday. The final draft is due in early July and citizens will vote to approve or reject it on 4 September.
These changes do not touch ownership when the 1980 constitution imposed by Pinochet enshrined private property right, but the writing is on the wall that mining companies will be facing increased scrutiny and further attempts for state intervention.
Miners in the Crosshairs
This recent legislative push is a long time in the making but the recent election of a young leader, Gabriel Boric, won the presidency back in March.
When Gabriel Boric was running as a candidate for president, he pledged to create a state-owned lithium company.
"Chile cannot again commit the historic mistake of privatizing resources and for that we will create the National Lithium Company, generating jobs in their reservoirs and a Chilean seal on the product," Boric said on social media today during a campaign visit in northern Chile's mining territory.
Currently, two companies, Albemarle and Sociedad Química y Minera de Chile, or SQM, produce lithium under contracts with the government.
SQM, the largest global lithium producer, is expanding capacity at its facilities near Antofagasta to meet growing demand from increased EV production and sales, particularly in China and Europe.
Mr. Boric has since said little about his lithium plans which are currently derailed by the rejection of Article 27. However, it appears his stance was more grandstanding as the mining industry is not worried about nationalization.
Ragnar Udd, BHP’s president of minerals, Americas, told the 2021 CRU-CESCO World Copper Conference in Santiago said that Chile does not plan to nationalize the country’s mining sector.
But Boric has long advocated for increased control over the mining industry and appointed new minister that specializes in climate change who is planning on addressing the mining industry directly.
Maisa Rojas is Chile’s new Environment Minister, a leading climate scientist with a PhD from Oxford who went into politics this year, plans to strengthen the Andean country’s environmental rules and hold mining firms to account.
Rojas, 49, is spearheading a new climate change law that binds Chile to carbon neutrality by 2050 and gives her ministry more power to set emission caps, including for the mining sector in the world’s top copper producer.
“In the case of mining, there are concrete commitments that will have to be put in place,” she told Reuters, citing efforts that will be closely watched by miners of copper and in-demand battery metal lithium.
The law will put “borders” around the country’s industries in terms of emissions and pollution, Rojas said in an interview.
The Chilean mining ministry plans to hold companies to account on emissions, mining tailings, water use and environmental adaptation plans, with a mandatory yearly reporting requirement to congress, she said.
Rojas said a water code reform will help simplify water management by reducing the number of institutions from 40-50 currently and letting the ministry directly coordinate with new basin councils.
The current system prioritizes private water rights, but Rojas said the new councils would allow “those who have rights to water and those that don’t have rights to water” to make decisions together.
Chile faces a tough challenge to balance goals to toughen environmental regulation while providing many of the critical metals needed for a global energy transition.
Preparing for a New Generation of Mining
The new demands for lithium is creating a new gold rush into the fragile water aquifers in the driest regions of the world and placing pressure on nearby communities. However, the mining industry has a poor reputation when addressing environmental concerns.
The past is prologue to current legislative efforts to control the mining industry. One mine above others highlight the problems that Chile's current administration is attempting to address.
The massive Pascua-Lama copper-gold mine and the years of legal debates sparked a lasting and high profile debate in Chile between investing in mining and prioritizing glacier and waterway health and access. After, years of protests and legal challenges, this mine is the process of being closed and its metals unavailable for use.
Maybe Boric's legislative and administrative efforts intended to prevent the mistakes of the past and provide a framework for the next generation of mining and ensure Chile remains a top mineral producer.
Either way the mining industry is "unfazed" by Boric and have plans for the future of the Andean nations minerals.
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