BHP says tax hike poses a threat to Chile’s mining industry

According to the head of BHP’s operations in the Americas, the increase in taxes and royalties runs the risk of damaging Chile’s mining industry, the world’s largest producer of copper.

Last week, a committee in the Santiago Congress approved changes to a Mining Rights Bill that would add a progressive tax on sales of copper and lithium, metals that are expected to play a crucial role in the shift toward cleaner forms of energy.

While the bill is unlikely to pass in its current form, analysts believe higher taxes and royalties will arrive in Chile and other resource-rich countries.
Chile also plans to rewrite its constitution.

The sharp rise in commodity prices, copper traded above $ 10,000 a tonne last week, for the first time in a decade, is raising concerns that miners will be targeted by governments seeking to pay for post-pandemic recovery programs.

Former Australian Prime Minister Kevin Rudd recently called for a tax on profits from the country’s three largest iron ore producers: BHP, Fortescue Metals Group and Rio Tinto. In Peru, the leader in his presidential election has promised a fairer distribution of mining wealth.

In Chile, rising taxes could make foreign mining companies reluctant to invest in new projects or expand existing mines. growing demand for copper and lithium from electric vehicle manufacturers and the renewable energy industry.

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

Chile is the largest copper producing country in the world and accounts for approximately 28% of the world’s metal mining production, which is used in everything from household appliances to power cables. Copper is a key part of their economy, although many of their mines are aging with declining ore grade and high mining costs as they dig deeper into the earth.

“Deposits in Chile are not deposits from 20 to 30 years ago,” Udd said. “The reality is that the grades have decreased significantly. In the last 15 years we have gone from about 1% copper to 0.6% and 0.7%. . . so you have to work harder and find different ways to be more productive. ”

“In the last 15 years, the reality is that the share of copper leaving Chile has gone from 34% of the world market to 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, it is also responsible Jansen, a giant potash project the company wants to develop in canada.

While investors who focus on BHP’s main source of profits, its iron ore mines in Western Australia, often overlook American business, Udd believes it will be key to growth and the search for “products basics facing the future “.

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

The BHP board will decide whether to approve the first stage of the Jansen project by mid-year, but it is likely to have spent $ 4.5 billion.

“What we like about potash is a part of the diversification we see that leads to BHP,” Udd said. “It not only provides geographic and customer diversification. . . the growth engines of potash demand are slightly different from those of copper. ”Historically, potash consumption has been closely tied to population rather than industrialization.