Mining to Chile

(Last updated: 05 May 2008)

Trends and opportunities

The market

Chile is the largest copper producer of the world. It also has gold, and growing in importance are silver, molybdenum and other minerals.

The operational budget of the mines in Chile is around US$7 billion. The projected investment for the period 2006-2012 is US$14 billion, with new projects and expansion of present operations. 

Opportunities

Chile has mostly hard rock mining and open cut operations. Although it is expected that underground mining should grow significantly in the next 10 years.

The following opportunities exist for Australian suppliers of mining equipment/services for both new mining projects and existing mining operations:

• Specialised mining technology and services
• Mineral processing technology and equipment
• Mine safety
• Mine software
• Services and technologies related to improving water availability

Some specific projects coming up or currently in development are:

• Gaby: US$874 million – under construction and expected to operate in 2008. Codelco new copper project.
• Esperanza: US$1.5 billion – construction approved in July and EA submitted in August. Antofagasta minerals copper/gold/silver new project.
• Andina Expansion I: US$226 million – construction has started. Codelco and copper.
• Lomas Bayas Expansion: US$70 million – EA obtained and approved by board. Xstrata coppper expansion.
• Pascua-Lama: US$2.2 billion – all approvals in place, waiting on tax resolution by Mining Treaty between Argentina and Chile. Barrick new gold project.
• Andacollo: US$350 million – approved. Aur Resources, copper sulphides.
• Regalito: US$700 million – approved but subject to resolving water issue). Lumina new copper project.
• El Abra Sulphide leach project (Sulfolix): US$350 million – approved. Freeport/Codelco JV copper project to extend the life of the minesite.
• Andina Expansion II: US$2.3 billion – construction to start in 2009. Codelco copper expansion.
• Los Bronces expansion: US$800-US$1000 million – subject to feasibility study. This project considers a new flotation plant, tunnel, slurry pipes, new crushing and milling equipment, and conveyor belts. Anglo American, copper.
• Los Pelambres Expansion: US$318 million – subject to court resolution on Mauro Tailings dam. Antofagasta minerals, copper.
• Cerro Casale: US$1.9 billion – subject to resolving water issue. Kinross Gold/Arizona Star new gold project.
• Codelco Norte Concentrator Expansion: US$1.3 billion – approved but subject to resolving financing. Codelco and copper.
• Ministro Hales: US$341 million – subject to resolving high arsenic component. Codelco new copper project, but located very close to Chuquicamata.
• El Teniente new level: US$987 million – subject to financing resolution. Codelco copper expansion.

Competitive environment

The market is mature and very competitive. Canada, USA, Europe, China and Japan have Free Trade Agreements with Chile, which make them tough competitors.

Tariffs, regulations and customs

The basic principles governing Chile's investment environment are non-discriminatory treatment of foreign investors, free access to the foreign exchange market and economic sectors, and minimal state regulation and intervention.

All imported goods must pay a six per cent uniform tariff (ad valorem).

Chile has a number of free trade agreements (FTA) with various countries. The most significant for Australian exporters of mining equipment are the FTAs with Canada, the USA, European Union, China and a recently signed commercial agreement with Japan.

Imports from these countries attract no import duty. All services pay a 30 per cent tax.

There is a software tax that sometimes treats software as a type of service that can generate a tax of up to 15 per cent for software companies.

There is no double taxation treaty with Australia.

Marketing your products and services

Market entry

Over 100 Australian suppliers of mining equipment and services are active in Chile and about 30 have registered offices in Santiago. Most foreign competitors have subsidiaries or branch offices in Chile, while others use distributors or representatives.

Chilean companies tend to avoid working with suppliers that do not have a local presence because of their need for on the ground support and effective communications.

The best way for most Australian companies to address these issues and to achieve success in Chile is to commit to establishing a local presence. Having a knowledgeable and well-connected Chilean representative is a critical factor for success.

This is also dependant on the specific product and market characteristics. Ideally, Australian companies should:

• Have promotional material and brochures in Spanish
• Have a local presence and long-term commitment (tech support)
• Offer in-market support and post-sales service, preferable with an office in Chile
• Follow up – meetings usually start off with a 'yes'
• Learn some Spanish – it sends a message
• Cover the details in paperwork and process
• Visit the market frequently – build confidence with the customer
• Go through the options:
  • Selecting a local distributor or representative
  • Opening up an office and hiring a local sales person
  • Joint venture with a local partner or purchasing an existing company
• Attend key events in the market including Expomin, held every two years and Exponor in the mining capital Antofagasta, also held every two years. The next one is in June 2009. The rest of the events are specific to areas, such as maintenance, exploration, mine closure, environment, etc.

In general, the technical level of people is good but not always easy to find combined with good English skills.

Some common mistakes include:

• Selecting the first company you meet and like as your local representative. You need to research your best option available.
• Coming to the market without pre-arranged meetings.
• Contacting people in mining companies directly without any introduction.