Chilean miners are closely following the development of the Nuam exchange, which will merge the Chilean, Colombian and Peruvian stock markets, hoping to find additional financing for their projects.
A case in point is local miner Pampa Camarones, controlled by Minería Activa, which raised US$5.1mn on the ScaleX Santiago Venture Exchange by taking a 7.2% stake in the company public in November.
Meanwhile, sector players are also keeping an eye on the Senate, where a proposed reform of environmental review agency SEA would speed up project permitting, which could lead to increased investments in the industry.
BNamericas talked about these issues with the head of the mining industry association Sonami, Jorge Riesco, who also gave his opinion on the stalled Dominga mining-port project and the modernization plan of state-run company Enami’s Paipote smelter.
BNamericas: Can Chile’s mining companies open up to capital markets through the Nuam exchange?
Riesco: We’re pushing this with Peru’s mining engineers institute. Chile’s financial regulator CMF has approved it and the idea is for it to begin operations in 2025.
The example of Pampa Camarones is very valuable. It was a normal issue, not venture capital, whose funds will be used to improve the geological information of one of its projects. This shows that the system can work for mining companies and investors, providing certainty for capital placements.
Both the Lima and Santiago stock exchanges have agreements with the Toronto Stock Exchange, and we want to explore that option with the Australian Securities Exchange.
An interesting aspect of the Lima stock exchange is that it has a venture capital market where shares of exploration companies can be listed. It’s essential to get those companies interested and guide them in terms of information, transparency and procedural obligations and safeguards.
Institutional investors, mainly pension funds, could see long-term mining projects as an interesting placement alternative, considering the potential returns.
BNamericas: Some have proposed taking state miner Codelco public to finance part of its debt.
Riesco: If you don’t do it, you’d be losing a source of financing that has proven efficient for developing long-term projects worldwide. Large companies are listed on stock exchanges because their traditional sources of financing, via traders or banks, are no longer sufficient.
It’s an ideal alternative to taking out loans or issuing bonds with fixed maturity rates that are inefficient. Codelco should explore this option, given its level of debt and historical experience. It would not be a privatization.
BNamericas: What do you think of the bills that seek to speed up permitting and improve SEA’s management instruments?
Riesco: The SEA reform submitted to the senate will run into problems because it does not necessarily aim to simplify and make the system more expeditious. It is about eliminating the powers of regional commissions to decide on projects and taking away the option of filing a claim with the ministers’ council, both of which consist of ministry representatives.
In its place, the decision to approve or not will be made by SEA, which today has more of a coordinating role among project reviewers, which also report to the ministries. That is to say, political interference will continue.
Furthermore, there will not be enough resources to undertake the evaluation. The bill’s financial report calls for the hiring of 13 professionals in a country with 16 regions. We’re not even talking about one person per region.
Another bill that was submitted to the lower house to strengthen environmental oversight involves some fines and greater powers over a project. It looks to sanction more than facilitate development.
Finally, a third bill analyzed by the lower house’s economic committee, led by economy minister Nicolás Grau, is positive because it tends to resolve some delays in granting permits.
BNamericas: Sonami suggests raising the SEA entry exemption threshold for small mining to 45,000t/month to improve permitting times and make the conditions for operational continuity projects more flexible, which could lead to increasing production.
Riesco: The current limit for small mining to be exempt from entering SEA’s system is 5,000t/m, but considering that mineral grades have dropped, in the case of copper close to 1%, then 5,000t/m represents about 50t of fine copper, which is scarce for a producer.
If we apply the basic law of Enami’s tariff to purchase ore, which is 2.5%, when converting to minerals, we speak of 45,000t/m as the threshold for a company to be considered a small producer. This limit is adjusted to the scale of small producers and would allow the number of producers to increase.
Although small-scale and artisanal mining represents less than 1% of total copper production in Chile, their impact is very important for regional economies.
It would be good to identify old mines for medium-sized mining to help them comply with standards with a simplified system and expedited processing for useful life extension or operational continuity initiatives.
Normally, medium-sized operations are associated with purchasing powers or agreements with Enami, which, in turn, allows small miners to deliver their minerals to be treated at its beneficiation plants. This generates an important productive chain. Therefore, we are talking about a window that allows operational improvement projects to be interpreted in a more flexible way or that are exempt from environmental qualification.
These measures could increase copper production by around 20% by adding 1Mt to copper production, which in 2023 was just over 5Mt. In terms of tax collection, it would translate into around US$1.3bn additionally, considering last year’s average price.
BNamericas: What do you think about SEA’s opposition to the Dominga project?
Riesco: Technically, the project is feasible and not only from a mining point of view but also from an environmental perspective. During the Dominga process, there was an electoral promise [from then-candidate and current President Gabriel Boric] to reject the project, which is worrying since there should be no other goal than generating harmonious development for the country.
There are technologies that can responsibly address the climate situation. This shows that in the evaluation system, there are officials or positions that hinder the implementation of projects.
There is a valuable opportunity to debate the arbitrary spaces of power that are behind the halting of projects or lead to false technical conclusions. Unfortunately, the reform does not yet attack that level of political influence in the committees. A service that is clearly independent should be incorporated.
We’re hopeful, as authorities have recognized that economic growth and entrepreneurship are irreplaceable to the development of the country, employment and improving tax collection.
BNamericas: Minera Cerro Negro workers and contractors are waiting for a decision by the ministers council on the mine’s continuity, affecting more than 3,000 people. Sonami has said that the legislation is more focused on protecting small and large miners but ignores medium-sized operations like this one.
Riesco: The law does not recognize that smaller operations have fewer impacts that can be mitigated. Minera Cerro Negro is practically 80 years old and, obviously, its facilities no longer meet new standards.
However, its facilities have withstood earthquakes and storms. But that is not taken into account and the strictest standard is applied. It’s essential to connect with the reality of the facilities and their environment.
BNamericas: The US$1.3bn Paipote smelter modernization involves stopping operations from 2025 to incorporate new facilities and technologies. Workers worry their jobs are endangered.
Riesco: China’s smelters are modern and operate with much higher standards than Chile’s. The technology exists, and it is essential to replace the Paipote facilities to reach an acceptable operating standard in economic and environmental terms.
The level of debt and losses generated by the smelter has grown enormously because of the lack of this technology. It has been said that the smelter could have a supply deficit and that operating costs would be higher. But we’re convinced that there is supply in the area and that it is important to persevere with the project that will be profitable, allowing us to have a smelter running at costs similar to the most efficient smelters in the world and the most effective ones in terms of environmental control. It’s a strategic project for the country.
The advantages of having a local operation are great compared to exporting copper concentrate and allow us to maintain capacity that could help defend against having higher smelting costs abroad.
Regarding Enami’s indebtedness, we must mainly focus on the economic authority or the finance minister, who authorizes the financing of the asset. There are also other forms of investment, such as concessions, delegating management to a foreign company or an investor, options that should be explored.
The announcement of the stoppage is not yet certain, but it is necessary to calm the community and call for these types of projects to be carried out, which, at the same time, is a way to praise the workers who still have a lot to contribute to the mining ecosystem.