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31 October 2020

Chilean Mining Conference

Tag(s): Foreign Affairs, Politics & Economics, Chile

Last week I attended the Chilean mining conference organised by the Anglo Chilean Society of which my wife is Secretary. The Minister of Mining Baldo Procurica P was the main speaker. Owing to the pandemic the conference was held virtually but was no less interesting for that. The United Kingdom is seen as a strategic partner to Chile. An important percentage of investments come from British firms and funds participate in the ownership of important mining companies in Chile. These include Anglo-American and BHP. Antofagasta is quoted on the London Stock Exchange and has a large physical presence in the UK and the conference was sponsored by some of these companies.

Mining is undoubtedly Chile's most important economic activity and a great engine for development due to its capacity to generate employment and help many families in Chile get out of poverty. This has enabled various governments to move forward with the social programme and to make progress in reducing poverty and inequality. The present government of President Sebastián Piñera has made a major effort to attract new investment and develop more and better mining projects. In 2020 investment in Chilean mining has reached US$74 billion up from US$49 billion in 2016, a 50% increase. Of this total investment 49% comes from Chilean resources, 23% from Canada, 10% from the UK with the remaining 18% split between USA, Australia and others.

Chile's mining exports in the first nine months of 2020 grew by 4% compared to the same period in 2019 while non-mining exports fell by 11%. The price of copper has been rising. One of the reasons for this is that as the automotive industry gradually converts production to electric vehicles these vehicles use considerably more copper than those driven by internal combustion engines.

Mining in Chile has been able to deal with the coronavirus pandemic better than other industries. It did initially have an impact in the way miners could enter and leave the mines. But the mining companies were better prepared owing to their strong health and safety procedures at all times. The mining sector has taken all measures to safeguard the health of its workers and the community. These include:
  • activation protocols in case of suspicion of contagion by Covid-19
  • health declarations
  • body temperature monitoring
  • teleworking for those in risk groups, either age or chronic diseases
  • social distancing using teleconferences and extended hours for food services
  • sanitation of means of transport of mining workers
  • passenger status information follow-up as suspicious cases and close contacts
  • shifts were made more flexible to minimise the risk of contagion
  • to date more than 200 companies have adopted 14×14 day shifts
During President Piñera’s first term of office no one will forget the successful rescue of the 33 miners trapped in the San José mine in the Atacama region. President Piñera and his then mining minister took the lead when they heard of this. That event 10 years ago marked a turning point in mining safety. The number of site inspections has grown from 2,586 in 2010 to 10,545 in 2019. In 2010 there were just 18 auditors and today there are now 64. In most major mining countries in the world mining safety has improved in recent years but Chile is one of the mining countries with the lowest rates of fatality, only bettered by Australia.

The pace of technological development in the world is of course colossal but none of this could happen without mining. Mobile phones, computers, spaceships and electric vehicles are made possible by minerals such as copper, lithium, silver, cobalt and molybdenum among others.  Chile has 23% of known reserves of copper and 51% of known reserves of lithium, the highest in the world. In Chile there are 45 salt flats. Lithium is the key mineral for batteries in electric vehicles and global demand for lithium is expected to reach almost 1.8 million tonnes of lithium carbonate equivalent (LCE)by 2030. Production in 2019 in Chile was 111,000 tonnes of LCE and this is expected to more than double to 238,000 tonnes of LCE by 2025. I was also pleased to hear that Chile plans to develop added value to the lithium, not just mine it. I suggested this a few years ago to my good friend Rafael Moreno when he was Ambassador to the UK.

This growth will come through agreements reached both with public and private companies. Codelco which is the largest producer of copper in the world and is owned by the Chilean state and Enami, the Ecuadorian state company have reached agreements to mine their lithium assets.

The Ministry has developed a national mining plan towards 2050 to enable sustainable development of the mining industry in Chile which will play a key role in the country's development. This includes a national tailings dam plan which provides guidelines, programmes and tools to address tailings deposit issues and challenges with a view to embracing the circular economy and innovation, protecting the environment and the safety of the population.

Rare earth elements, chemical elements found in deposits and tailing dams, are very important in the manufacture of LED mobile phone screens, iPads, computers, televisions, energy-saving lightbulbs, hybrid vehicles, fibre optics, wind turbines, permanent magnets and some types of batteries among others. With the wasteful extraction of copper and other minerals (tailings), there is considerable sustainable potential which will allow a circular economy when extracting valuable elements from these residues. The Minister told us “In Chile there are currently about 750 rare earth tailings that have not been mined. This is like a savings bank, safe deposit box that Chile has.” They include Lanthanium, Cerium, Praseodymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium, Lutetium, Scandium and Yttrium.

He also told us that they are committed to moving toward green mining involving:
  • the efficient use of energy and promotion of clean energy
  • efficient use of water resources in mining operations
  • the incorporation of the circular economy into operations
  • Improving the conditions for the safety and health of workers and minimising viable impacts on communities.
I was particularly pleased to hear that this included the widespread use of solar energy. At a previous mining conference some years ago I had asked the then minister why they did not use solar energy in Chile. Mining is energy intensive and energy use is one of its major costs. The Chilean mines are all in the north of Chile where they have the Atacama Desert, the driest desert in the world with almost zero rainfall throughout the year. Nearly every day the sun shines strongly there. It seemed to me logical that this energy should be harnessed. The Minister told me at that time that the solar panels were too expensive. That has changed considerably as solar energy is being adopted widely throughout the world and the Chilean mining industry will benefit hugely from this.[i]

The actions they will take for sustainable mining include:
  • promotion of electro-mobility through buses and equipment with Codelco Anglo-American and BHP
  • installation of solar panels at the Las Tortolas tailings dam of the Anglo-American mining company
  • Minera El Abra has reduced its CO2 emissions by recovering and reusing mine truck tyres
  • Escondida will stop the extraction of water from high Andean aquifers, thanks to investment in desalination plants and operational improvements
  • Freeport-McMoran announced its commitment to the International "Copper Mark" seal that certifies companies' responsible production practices.
The Ministry of Mining will continue to stimulate and disseminate the use of renewable energies in public and private companies. At present this represents 10.5% of all energy in mining. It is planned to grow rapidly to 36.2% in 2021, 47.5% in 2022 and 49.2% in 2023. By that time several companies will have 100% clean energy supply.

They also plan to introduce green hydrogen in mining. This is obtained directly from water through electrolysis. If it is produced based on renewable energies such as wind, solar and geothermal energy, the hydrogen obtained is called green hydrogen and it can replace natural gas and diesel in boilers and other thermal uses; transport, trucks and machinery; and be the source of electrical energy storage in batteries.

The Ministry is promoting incorporation of the digital transformation of the mining sector to solve its main problems and challenges. Under the banner Mining 4.0 this will be a great opportunity for the industry to continue to increase its productivity and position itself as a safer activity. This will include autonomous trucks, remote operation centres, and robots that replace components of SAG mill.[ii] Efficient data management will be fundamental for the traceability of production processes improvements in sustainability. Codelco has been a pioneer in this field with its "Traceable Copper" project.

The Minister concluded by saying that the mining sector will play a key role in the post-pandemic period and driving Chile's economic and social recovery. The conference took place before last Sunday’s referendum on the Chilean constitution, but the Minister referred to this as depending on which way the vote went this could have some impact on the outlook if, for example, it led to higher taxation on the mining industry.  

This referendum has been poorly reported in the British media partly because those asking for the referendum inaccurately describe it. The Constitution was introduced by President Pinochet in 1980 and was approved by a majority of the Chilean people in a referendum. In this constitution Pinochet promised to stand down in 1988 when new elections would be held. He did step down and elections were held and have continued to be held every four years. The constitution also provided for a fresh approach to managing the economy. This has led to Chile having the best economic performance in the whole of Latin America over this period.

Those arguing for change assert that the Constitution of Chile is that of Pinochet, but that is simply not the case. It was amended considerably on August 17, 1989 after he had stepped down. It was amended legislatively, not by referendum, by President Lagos in 2005.[iii] Lagos was a Socialist. It has been further amended in 1991, 1994, 1997, 2000, 2001, 2003, 2007, 2008, 2009 and 2010.

In the referendum Chilean voters voted overwhelmingly for writing a new constitution by a convention. This draft constitution is to be approved or rejected by another popular vote referendum in 2022.

Those calling for change claim that Chile has high levels of poverty and inequality. But in 2005 when Lagos was President over 30% lived in poverty. That is down to 8%. Compared with other OECD countries Chile has high inequality but compared to other South American countries it has one of the lowest. Chile has only recently become part of the OECD.

We watched the BBC news just repeating the lies of the left that this is Pinochet’s constitution when Lagos made 50 changes to it and it has been changed 12 times since Pinochet left power.

[i] We have just ordered sonar panels for installing on our roof. We live in an L-Shaped house so when the sun shines there is always sunlight on some part of the roof. We are using the money we received on a refund of a cancelled cruise.
[iii] I met President Lagos on his visit to London. I met President Pinochet when I worked in Chile. I have also met Presidents Bachelet and Piñera.

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