Political Risk Latin America Blog @PolRiskLatam

As mine rescue nears, Chile kicks off new mining tax regime

Posted in News and Articles, Political Risk by politicalrisklatam on October 8, 2010

by Jude Webber for Financial Times, October 8th, 2010.

Everyone in Chile is gripped by the rescue – due to kick off next week – of 33 miners who have been trapped in a small gold and copper mine since August 5.

But there has been another dramatic event taking place in the mining sector. This week, the government and opposition finally reached an accord, after months of haggling, on a new royalty scheme which the government says will raise $1bn for regional, education and health spending – vital after Chile’s devastating earthquake in February.

The industry is Chile’s backbone: copper is the red that runs through the nation’s mining veins and it is proud to be the world’s biggest copper-producing nation. But some in the key industry are not happy at the new royalty deal cooked up by the politicians, which sets a royalty of 4 to 9 per cent of profits (depending on copper prices) for a transitional period of 2010-12, before raising that to between 5 and a much more hefty 14 per cent by 2018.

In addition, the mining tax regime will be untouchable for six years, not eight as the government had proposed, and which the opposition had considered too generous. (continue reading… )

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