Wednesday, August 31, 2011

Mining Regulations in Chile

1. Ownership of the mines in Chile and concession system

According to the Constitution, the state of Chile has the absolute, exclusive, inalienable and perpetual property right over all the mines. However, the Constitution and the law have established a concession system by means of which private parties can apply for and obtain the right to explore and exploit the majority of mineral substances.

Mining concessions are in rem rights, different and independent from the property right of the premises located on the surface. They are freely transferable and transmissible, susceptible to mortgage and other encumbrances and in rem rights, and in general they are susceptible to be subject to any act or contract. Mining concessions in the process of being granted are also transferable and transmissible.

2. Mineral substances susceptible of concession

As a general rule, all mineral substances are susceptible of being subject to a mining exploration or exploitation concession, except for those specifically enumerated by the law, that is: liquid or gaseous hydrocarbons; lithium; deposits of any nature existing in the maritime waters subject to national jurisdiction; and the deposits of any kind situated, fully or partially, in zones that according to the law are important for national security with mining effects.

Mineral substances that cannot be subject to mining concessions can only be exploited directly by the state or its companies, or by private parties through administrative concessions or special operating contracts.

3. Who can be granted with a mining concession

Any person or legal entity, whether Chilean or foreign, can apply for and obtain a mining concession, except for some members of the judiciary and the public administration specifically enumerated by the law.

4. Different kinds of concessions

There are mining exploration concessions and mining exploitation concessions.

Mining exploration concessions grant the right to prospect for and explore a determined area in search of mineral substances. The owner of an exploration concession has a preference above other persons to be granted with an exploitation concession regarding the same area. This kind of concession has an initial duration of two years; this term can be renewed for an additional term of two years, with a requirement of waiving one half of the concession surface area.

Mining exploitation concessions (also referred to as “pertenencias”) grant the exclusive right to prospect for and exploit the mineral substances in a determined area. This kind of concession has an indefinite duration period.

The surface of mining concessions must form either a square or a rectangle. The surface of an exploration concession must be a minimum of 100 hectares and a maximum of 5,000 hectares per concession; the surface of an exploitation concession must be one-hectare minimum and 10 hectares maximum, with the possibility of filing several concession applications jointly comprising up to 1,000 hectares.

5. Procedure for granting mining concessions

Mining concessions are requested through a non-contentious judicial procedure before the lower rank courts with jurisdiction over the area where the concession is located, and are finally granted by a judicial decision.

Exploration concessions do not require a measurement (mensura) process and the application is normally processed within a period between 6 to 8 months. On the other hand, in order to be granted with an exploitation concession it is required to carry out a measurement and demarcation process using UTM coordinates and it takes a period of 18 months approximately for the application to be fully processed.

6. Protection regime (mining patent)

The only requirement in order to keep a mining concession is the annual payment of a mining patent, with the amount depending on the concession area.

As a general rule, the annual patent of exploitation concessions equals to US$8 per hectare approximately, and the annual patent of exploration concessions, US$1,6 per hectare approximately.

7. Mining companies

The exploration and exploitation of mines may be carried out through all kind of companies established in the law, that is, corporations, companies by shares, limited liability companies, collective or joint companies. Additionally, especial mining companies established in the Mining Code may be incorporated, which are the legal mining company and the contractual mining company.

We should point out that in order for a legal mining company to be constituted it is not required an express agreement of the parties/shareholders, but only the joint request of a mining concession by two or more people, or the registration in the corresponding registry of a quota of a mining concession that was registered under the name of only one person or company.

8. Tax regulations

The Income Tax regarding the profit obtained by the company (Impuesto de Primera Categoría) and the dividends distributed to foreign shareholders (Impuesto Adicional) is applicable to mining companies. Additionally, an especial mining tax or royalty is applicable.

Juan Xavier Barriga
LLM Tinghua University 2010
Barriga & Cia Law Firm