mining law in chile: from exploration to operation · mining law in chile: from exploration to...

Mining Law in Chile: From Exploration to Operation

Cristián Solís , Attorney at Law 1

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Access to mining rights: concessions for exploration and exploitation

Mining property • Constitution “The State has the absolute, exclusive, inalienable and imprescriptible

property right over all mines…” “…notwithstanding the rights of individuals or legal entities on the surface land where they are located”.

• All the mines were property of the King of Spain. The State exercises the eminent domain by way of granting private persons the right to explore and exploit the mines through concessions established following a judicial proceeding. The State may eventually recover the property in case the holder does not fulfill its legal obligations (basically pay the annual taxes affecting the concessions). The mine then goes back to the State to allow other private persons to apply for a new mining concession on the vacant space.

• The Chilean system is based on the notion of the State’s eminent domain: that legally the property of the mining resources lies in the hands of the State, this is in order to differentiate the State’s ownership from the ownership of the land which is privately held.

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Rights arising from mining concessions

• Once the mining rights are established by way of a judicial proceeding, the holder gains the right to explore and exploit all the minerals existing within the concession excepting gas and liquid hydrocarbons, lithium, mining resources existing in the territorial see and continental shelf as well as other mining sites that are of importance to the national security which can only be exploited by the State.

• Mining concessions are owned by their holders and they are protected as private property by the Constitution.

• The law and constitution allows the holder to freely transfer it, create security interests on them, explore, exploit and lease them and in general enter into any contract according to its interests within the applicable regulatory and tax framework.

• The owner of the surface land cannot block the creation of mining rights within its property and is obliged to allow the establishment of easements necessary for the exploitation of the mine, with certain restriction that applied in populated areas and other areas referred to in the Mining Code and other laws.

• You may have heard that there is a distinction between metallic and non-metallic concessions. This is only of relevant for purposes of defining the applicable rate of the annual tax payment affecting mining properties. Non-metallic tax is 1/5 of the rate.

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Exploration Concessions

• Term: 2 years renewable for another 2 years (relinquishing at least 50% of the surface area)

• Surface area: 100 has – 5,000 has. • Measurement: No

Exploitation Concessions

• Term: permanent • Surface area: 1 ha – 1,000 has. • Measurement: Yes

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Key Differences Between Exploration and Exploitation Concessions


Loss of mining property rights Mining property rights are permanent. However, they may be lost in the following cases: A. Non-payment of the annual payment of the tax affecting the mining property. The

property is lost after a public auction is carried out by a competent Court. In case of lack of interest in the auction the property is declared vacant and thus eligible for a new application to be filed on it.

B. Competing rights. The Chilean law does not block third parties from applying for mining rights in concessions already established. The holder of a mining concession has two opportunities to defend their rights:

(i) Within 30 days after the publication in the “Mining Bulletin” of the application of the “intruder”; and

(ii) Within 4 years following the date in which the “new” concession was granted. However, once these terms have expired the “intruder” can still apply for the annulment of the previous concession.

This is the reason why holders of mining properties must keep constant and vigilant surveillance of mining applications that may effect their existing concessions and obstruct the new applications by means of filing oppositions to the competing applications with the Courts. Normally oppositions are accepted, the main cost being the expense and nuisance of being engaged in litigation.

C. Resignation by the holder made by public deed.

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Requirements to hold and maintain mining concessions (“Amparo”) • Annual contribution payment known as a “patente”. This is a tax affecting mining

properties. Failure to make payment of the patente may result in the loss of the concession. Payment is due in March of each year.

• Amount set forth in the Mining Code. Varies between concessions for exploration or exploitation. It is calculated on the basis of surface area (per hectare): • Exploration concessions 1há = US$1,7 • Exploitation concessions 1há = US$ 8,4

• Reduced Payment for concessions related to :

• Non-metallic substances 1 ha = US$2,8 • Metalliferous sands 1 ha = US$2,8 • Substances existing in salar pans 1 ha = US$2,8

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Protection regime for mining concessions (“Amparo”) • Lack of payment collection proceeding.

• The collection proceeding is conducted annually and includes all the mining concessions on which mining patent payments are not up-to-date by March 31 of each year.

• The National Treasurer sends a list to the competent courts of unpaid mining patents.

• The Courts publish a list of the affected concessions twice. • The holder of the concession may stop the process by paying the taxes due

before the auction takes place. • Auction results: a) Property sold to a third party; or b) Absence of interest in the auction --> property is declare vacant

(concession is extinguished)

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Competing Rights • The competing right derives from the fact that a new application is filed

(exploration or exploitation) covering the whole or a part of an existing concession.

• The “intruder” faces the risk of losing efforts if the holder of the already existing concession files an opposition within the legal terms.

• The expert in charge of the measurement operation that performs the measurement covering an existing concession may be subject to imprisonment.

• The law provides for the right of the holder of the existing concession to oppose the creation of mining rights within its concession BUT if the “intruder” due to the passive attitude of the holder is able to obtain a concession, then, the pre-existing holder may end up losing its right after 4 years since the establishment of the new concession. After this term has expired, the “intruder” is entitled to ask for the annulment of the pre-existing concession.

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Mining easements • Chilean Constitution: “Surface land shall be subject to the obligations and

conditions provided in the law to facilitate the exploration and exploitation of mines and processing of minerals…”. This shows the right of the miner to oblige the owner of the surface land to be subject to easements is constitutionally recognized. This a clear indicator of the importance of mining for Chile.

• Purpose: Grants the right to the exploration and exploitation of mines with a right to priority use of the surface land for the purpose of processing of minerals or to prospect and dig, subject to the obligation to indemnify the owner of the land against damages suffered.

• It is absolutely necessary to have an existing concession (exploration or exploitation) in order to be able to establish a mining easement. Before the concession is granted, holder may negotiate with surface owners, but easement as such can only be created once the concession has been granted.

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Mining easements

Information to third parties. Easement must be recorded in the Real Estate Registrar or Mine Registrar as appropriate.

May be expanded or reduced according to the need of the respective concession or processing plant.

While the judicial proceedings for the creation of an easement are pending, the Court can authorize an applicant to exercise the easement, provided it renders a guarantee to answer for the indemnities that applicant may be required to pay.

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Mining easements Classification

A.- Easements that affect surface land (may be created in favour of processing plants).

• Occupation. Unrestricted use of the surface land in order to satisfy operational requirements of a mining site, for instance, processing plants;

• In favour of electric utility companies;

• Access roads, transit and other systems to connect the concession with public roads, ports, etc.

B.- Easements affecting concessions among themselves.

• The mining concession in favour of which there is an easement is obliged to allow other concession or processing plant to use such easement.

• Mining concessions are subject to the easement of allowing mining activities with the aim of allow ventilation, drain or access to other mining concessions or processing plants.

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Environmental and sector permits

System of Evaluation of Environmental Impact (“SEIA”)

• Purpose: Establish if the environmental impact of certain activities are in line with current regulations.

• Advantage: Unifies proceedings All permits or environmental decisions required or that may be issued by Government agencies, concerning projects and activities submitted to the SEIA, will be dealt with through this system.

Role of the Service of Environmental Evaluation (“SEA”)

• Administer the SEIA.

• Coordinate other Government agencies involved in the SEIA.

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Entering the SEIA

• Projects or activities named in Art. 10 of law # 19,300 (General Environmental Act)

• Art. 10, letter i): “Mining development projects, including coal, oil and gas including exploration, prospection, processing plants and waste disposal and sterile materials, and the industrial extraction of aggregates, peat or clay”

• Located in protection areas or also called “of relevancy”

• SEIA free from regulation less than 5.000 t/month of mineral extraction provided a letter of no relevancy is granted (free from protection areas)

• Art. 10, letter p) performing works, programmes or activities in national parks, national reserves, etc.

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Entering the SEIA

Mechanisms available to comply with Regional SEIA regional solved by the Regional Director unless the project involves more than one region. Then is solved by National Director:

i) Declaration of Environmental Impact (DEI)

ii) Environmental Impact Assessment (EIA)

Projects or activities named in Art. 10 of law # 19,300 in connection with art. 11 of the same law.

Environmental Qualification Resolution (EQR)

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Sectorial Environmental Permits “PAS”. PAS are sectorial environmental permits that have to be granted by Government bodies with authority over environmental issues. Example of PAS granted by Sernageomin

• PAS 84 Tailings dams

• PAS 85 Mining activities within a city or population center

• PAS 86 Mining activities in National Parks

• PAS 87 Mining activities in guano deposits

• Pas 88 Mining waste and deposit of sterile material

• Must be granted within the framework of the SEIA

• Consider: - Permits with only environmental content

- Permits with non environmental content

The “NO Relevancies”.

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The Mine Safety Regulation and its impact on operations: offences and penalties

Requirements to start a mining operation

1. To be a registered mining entrepreneur with Chilean tax registration and declaration of start of business activities.

2. To be owner or lessor of a mining concession.

3. Alternatively to have an operation of less than 5,000 and letter of “no relevancy” of the SEA, or in any other case the relevant RCA.

4. To have prepared, filed and obtained an approval from Sernageomin of the exploitation method and closure plan of the mining operations.

5. To have the necessary easements in place;

6. To have reported to start up of activities with Sernageomin.

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Base Rules of Mining Safety in Chile

MINING SAFETY REGULATION Scope Applies to all activities of the Mining Extraction Industry as defined in Art. 5 of

the Regulation.

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“Organic Act of the National Geologic and Mining Service” Art. 2 Nº 8 Law Decree 3,525

Sernageomin is in charge of: 1) ensuring compliance with safety and police mining regulations and apply

appropriate sanctions to their offenders; 2) proposing the enactment of regulations aimed at improving safety conditions in

mining activities in accordance with the technical and scientific progress.

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How does the Sernageomin work to ensure compliance with safety and

police mining regulations? 1.- Information sent by mining companies to Sernageomin. - Statistics on accidents (Forms E-100 and E-200) - Statistics of mining and metallurgical output (Form E- 300) - Quarterly report of tailing deposits (Form E-700) 2.- Personal inspections by Service officers of mining sites.

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How are penalties imposed on offenders?

By means of resolution of the National Director of Sernageomin following request by the National Sub Director of Mining.

What are the penalties?

a) Fines from US$2.000 to US$4.000 for each breach. b) Temporary or permanent closure, total or partial of a mining site. In case of repeated offenses. In cases in which the Service, taking into account the nature of the breach

and the damages caused or that could be caused, consider there has been a serious breach of the regulations.

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What to do after a Sernageomin notice of breach?

a) Administrative Reconsideration.

Is filed with the Sernageomin. Term: 5 administrative business days. Following administrative decision applicant may file a judicial challenge.

b) Judicial Challenge. Before the Labour Courts of Santiago Term: 15 judicial business days.

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Water rights for mining

Water Rights (Mining Code and Water Rights Code)

• Allows the use in processing activities of the waters found within a mining

concession.

• Applies to the exploration, exploitation and processing stages.

• Rights appears and disappears with the mining concession.

• Limitation of Use.

General Proceeding Applicable

• Applicable rules

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New regulation regarding the closure of mining operations and mining facilities

Law Nº 20,551 “Governs the closure of mining operations and mining facilities”

• Changes the concept of closure of mining sites considering the closing stage a

part of the life cycle of any project.

• Considers mitigation measures.

• Considers technical aspects of closures (Physical and chemical stability)

• Imposes the requirement to provide for a guarantee.

• Creates the post-closure Fund

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Tailings deposits

Dumps and Tailings. Dumps are always part of a concession. Tailings result from processing plants.

Tailing deposits are subject to mining property rights (exploration and exploitation concessions)

It is important to identify whether we are in presence of dumps or tailings. The transfer of a concession automatically implies the transfer of the

associated dumps. The transfer of a concession does not necessarily implies the transfer of a processing plant, if it is excluded, by contract, from the transfer. If the processing plant is excluded, then the tailings remain property of the owner of the processing plant.

In order to exploit tailing deposits it is required to have a concession.

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