Chile: Understanding The Recent Changes In Chile's Mining Laws

Changes to Chile's mining legal framework over the past four decades have been rare and modest. However, February 2022 marked a significant turn with the enactment of Law No. 21,420 (the "Law"), which contains the most important amendments to the Mining Code (the "Code") since it was enacted in 1983. More information about the Law can be found in this article.

Although the mining-related sections of the mentioned Law will not enter into force until January 1st, 2024, the Government presented to the National Congress the bill of law No 15,510-08, aimed at making deep amendments to the Law and, additionally, to other legal regulations related to the mining sector (the "Bill"). The Bill has been discussed at large for over a year, and the original text of the Bill presented by the Government has undergone several changes. Recently, the Chamber of Deputies approved an updated text of the Bill by a wide majority, which is currently being discussed in the Senate.

Considering that, if the Bill is not approved by December 31st, 2023, the mining-related sections of the Law as currently drafted will enter into force on January 1st, 2024, the most likely outcome is that the Senate will approve the Bill as it is or with just minor changes.

In this article, the most important changes introduced by the Bill are combined with those provisions of the Law that will remain unchanged. The purpose is to present in a single place the amendments that both the Law and the Bill will make to the mining legal framework, in case the Bill is approved.

I. AMENDMENTS INTRODUCED BY THE LAW AND THE BILL TO THE CODE AND TO OTHER MINING REGULATIONS

1. Adjustment to the Term of the Exploration Concessions.

• The term of the exploration concession is increased to 4 years (from the current 2 years). Once this term has expired, the concession will be extinguished, unless the mining concessionary requests an extension for an additional 4 years from the competent court.
• Before requesting the mentioned extension, the mining concessionaire shall submit to the National Service of Geology and Mining (the "Service"), within the first six months of the last year of the concession, a report with all the geological information obtained in the exploration works. Alternatively, the mining concessionaire may submit proof that an Environmental Qualification Resolution ("RCA") was granted to the project, or that the project has been admitted and there is an ongoing process in the Environmental Impact Assessment System (the "SEIA").
• Exploration concessions in force and registered, whose term has not been extended at the time of entry into force of the Law, shall be deemed as constituted for a term of 4 years from the date of the constitution of the corresponding concession.
• Regarding exploration concessions whose date of expiration is within 2024, if their holder wants to extend the term for another 4 years, the concessions will be deemed to expire, for this purpose, on December 31st, 2024. The extension right can be exercised by those concessionaires by submitting certain information to the Service within the first semester of 2024. The Service shall issue a certificate, to be presented at the relevant court in which the extension shall be requested.

2.Temporary Restriction on Applying for the Same Area of an Extinct Exploration Concession.

• From the filing of the application for an exploration concession until a term of 1 year from its expiration, its holder may not acquire, directly or through an intermediary (e.g., a relative or a related company), a new exploration concession that includes, wholly or in part, the area covered by the original exploration concession.
• If the mining concessionaire violates this temporary restriction and requests a new exploration concession, it will not be granted or, if granted by mistake, will be considered expired. Furthermore, the concessionaire will lose the preference to establish an exploitation concession in that area.
• A third party who denounces a contravention of this restriction and obtains a favorable judicial decision may file a petition for all or part of the area covered by the denounced application, benefiting from the filing date of the denounced application.

3. Obligation to Report by the Holder of a Mining Concession.

• Exploration and exploitation concessionaires must submit a report with geological information as outlined in a regulation to be included in the Regulation of the Mining Code (the "Regulation") and fulfilling the requirements established therein. This regulation will replace the existing procedure for the submission of basic geological exploration work contained in Decree Law No. 3,525.
• The holder of an exploration concession must submit all the geological information obtained from the exploration works to the Service within 30 days after the concession has expired or the granting period has elapsed. Additionally, to request an extension of the term of the concession, a report with all the geological information obtained through the exploration works must be submitted within the first six months of the last year of the concession.
• The holder of an exploitation concession must submit to the Service, every 2 years, all the geological information obtained from the exploration works carried out during that period.
• If the exploration or exploitation concessionaire has carried out advanced exploration, the information submitted will be deemed confidential by the Service, for a term of 4 years from its submission.
• Failure to comply with this reporting obligation will result in a fine of up to 100 Monthly Tax Units ("UTM") on the concessionaire. As of December 2023, one UTM equals $64,216 Chilean Pesos.
• Notwithstanding the fine, the Service is authorized to require such information anyway, and if the mining concessionaire does not comply, the mentioned fine can be doubled and, additionally, the benefit of a reduced mining fee will be denied if requested.

4. Amendments to Exploitation Concessions.

• The applicant of an exploitation concession will have 30 days (increased from the current 20 days) to request its survey, counted between 90 and 120 days from the date on which the application for the concession is filed in court.
• The obligation to carry out the survey (mensura) in the field is eliminated, as is the requirement for placing landmarks (hitos).
• The deadline for submitting the survey map and the survey minutes to the court is reduced from 15 to 10 months, counted from the application for the concession.

5. Future Changes to the Datum.

• The change to the SIRGAS Datum established in the Law was removed by the Bill.
• To implement future changes to the Datum, the Regulation will have to be amended. The Bill establishes the procedure that must be followed by the Service and by the mining concessionaires in case of changes to the Datum.

6.Increase in the Amount of Mining Fees and Elimination of the Distinction between Metallic and Non-Metallic Mining Fees.

• The new article 142 bis of the Code establishes a significant increase in mining fees.
• The mining fees for exploration concessions increase from 1/50 to 3/50 UTM per hectare annually.
• The distinction between metallic and non-metallic mining fees is eliminated, significantly increasing the amount for the latter (currently 1/30 UTM per hectare).
• For exploitation concessions (metallic and non-metallic), not covered by one of the four scenarios outlined below, the mining fees will increase progressively from 4/10 UTM per hectare for the first 5 years, up to 12 UTM per hectare from the 31st year onwards. However, there are four scenarios allowing for a reduced mining fee of 1/10 UTM per hectare annually (the current rate):
• • The first scenario applies to exploitation concessions demonstrating mining works. It will be considered that a concession has begun works when activities are undertaken that permanently allow the development of mining operations (as defined in the Mining Closure Law). This includes advanced geological exploration (subject to the SEIA), prospecting, construction, exploitation, or the processing of minerals of a mineral establishment (faena minera, as defined in the Mining Closure Law). Furthermore, it includes activities related to fulfilling a closure plan.
  • The second scenario covers exploitation concessions not demonstrating mining works, but that are under environmental assessment at the SEIA or have an RCA.
  • The third scenario, mainly relevant to small-scale mining, includes exploitation concessions not required to enter the SEIA but are requesting specific permits under Title XV of the Mining Safety Regulation (e.g., a permit to start the exploitation of a mine with an extraction of less than 5,000 tons per month). However, the benefit of reduced mining fees in this scenario can only be granted once.
  • The fourth scenario is for certain concessionaires who own less than 500 hectares of exploitation concessions, including those held by relatives or related companies. This scenario applies when works are performed under any of the first three scenarios. Once the requirements are met, it is presumed that this scenario is maintained for a term of 5 years. However, for a one-time period of 5 years after the Law enters into force, concessionaires in this category will be presumed to meet the criteria without needing to provide proof.
• Exploitation concessions eligible for reduced fees include all those within a mining productive unit and its possible expansions, as reported to the Service.
• Owners of exploitation concessions are responsible for providing the Service with information proving their eligibility for reduced mining fees.
• For determining the proportional mining fee in the application process, the reduced mining fee (1/10 UTM) should be considered.
• For the first year in which an exploitation concession is in force, the reduced mining fee of 1/10 UTM shall be applied.
• The increase in mining fees will take effect in January 2024. It is important to note that, for 2024 only, all exploitation concessionaires will pay the reduced mining fees, meaning the increase in fees for exploitation concessions will not begin until March 2025.

7. Restrictions on Land Rights Disputes in Mining.

• A mining concessionaire will only be able to challenge the rights of the landowner of the surface land that covers the concession if they have a specific legal right (e.g. a mining easement or another in rem right) that encumbers the surface land.
• If the mining concessionaire demonstrates a risk of significant harm, the court can temporarily stop activities on the surface land. However, this stoppage can be overturned if the landowner provides a financial guarantee. This guarantee should cover the cost of undoing the work done or compensating for any damage, in case the final court decision is against them.
• If a landowner initiates a dispute against the mining concessionaire, the court has the same powers as mentioned above. This means the court can order a temporary halt to mining activities and this order can be overturned, all under similar conditions.

8. Entry into Force of the Bill.

• If the Bill is approved by the National Congress, it will amend the Law and enter into force concurrently with the mining-related sections of the Law, whether they are amended by the Bill or not. This is scheduled for January 1st, 2024.
• Despite the general rule mentioned above, there are specific exceptions. Notably, the amendments to the Code concerning certain obligations related to the survey and landmarks, including the new procedure to conduct the survey and the elimination of the requirement to place landmarks, will take effect once the relevant sections of the Regulation are amended to change the Datum of the coordinates.
• The new procedure for submitting the report of geological information will become effective once the Regulation is amended on this subject.
• Mining concessions that are in the process of constitution at the time the Law comes into force will follow the procedure that was in effect at the time they were applied for.

II. MATTERS THAT NEED TO BE CLARIFIED

1. Scope of the Automatic Extension of the Term of Exploration Concessions.

• Article 12 transitory of the Law states that exploration concessions in force and registered, whose term has not been extended at the time of the Law's entry into force, shall be deemed as constituted for a term of 4 years from the date of their constitution. Conversely, the Bill introduces a new article 10 transitory, indicating that exploration concessions expiring within 2024, and whose holders opt to extend their term for another 4 years, will be deemed to expire on December 31st, 2024, for this purpose.
• Given the current 2-year term of exploration concessions (extendable for another 2 years), applying Article 12 transitory would automatically extend the term of all existing exploration concessions not extended by their holders before January 1st, 2024, at least until January 1st, 2026, and for those constituted in December 2023, until December 2027. Therefore, the Bill's provision regarding concessions expiring within 2024 should apply only to those whose term has already been extended prior to January 1st, 2024, allowing their holders to request a second extension to the term (this time of 4 years). While this interpretation might contravene Article 112 of the Code, which allows only one extension request, it seems the most harmonious way to apply Articles 10 and 12 transitory.
• An alternative interpretation suggests that holders of already extended exploration concessions cannot request another extension, and that the exploration concessions that will be deemed constituted for a 4-year term from the date of their constitution are those that are (i) in force and registered, and which term has not been extended at the time of entry in force of the Law; and (ii) do not expire within 2024. This interpretation, while not contradicting Article 112, appears far-fetched and creates an arbitrary distinction between concessions granted in 2022, which need renewal in 2024, and those granted in 2023, which would be automatically renewed.

2. Expiration Date of Exploration Concessions Not Extended Within 2024.

• Clarification is needed regarding the expiration date of exploration concessions expiring within 2024 if the holder does not submit the required information for an extension. Article 10 transitory states that these concessions are deemed to expire on December 31st, 2024, but only for the purpose of allowing holders six months in the first half of the last year of the concession to submit the necessary information to extend the term of the concession (as required by the new Article 112 introduced by the Bill). If this provision is applied literally and the extension right is not exercised, the concession should not be deemed extended until December 31st, 2024. However, due to the practical difficulties in applying this provision, it is likely that, at least for those concessions expiring in the first half of 2024, they will be deemed extended until the end of that term, as the Service will not know whether the holder will exercise the right to extend or not.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.