Mining to Chile

Trends and opportunities

The market

Mining is a major driver of the Chilean economy, contributing more than 53 per cent of Chile’s 2018 exports and nine per cent of gross domestic product (GDP) (Source: Consejo Minero annual report 2018).

Chile produces a third of the world’s copper and is a major producer of iodine, rhenium, and lithium. It is also growing in importance for its gold, silver and molybdenum processing. CONSEJO MINERO, the association representing the largest producers of copper, gold, molybdenum and silver, the current mining investment portfolio stands at US$65bn for the period of 2018 to 2027. Mining companies have announced 44 projects in Chile, of which 14 relate to copper, seven are silver , gold and molydbdenum projects (Source: Cochilco – Chilean Copper Commission –Mining portfolio 2018 ).

Chile's mining industry is losing competitiveness, however given it has the world's largest copper and fourth largest gold reserves, strong political and economic stability and a long mining history, it is still considered a world-class investment jurisdiction.

Though copper remains a staple of the nation's economy, lower prices for the metal and rising construction and operating costs are hurting mining companies' margins and slowing investment decisions. Falling copper grades, lower productivity, uncertain power and water supply and growing socio-environmental pressure also must be addressed to recapture Chile's competitive edge.

Annual copper production growth is expected to average 1.6 per cent over this period, increasing in volume from 6.0 million tonnes (mnt) in 2016 to 6.3mnt by 2019 (Source: BCC, BMI Q1 2016).

State-owned Codelco and another 25 mining companies undertake large scale mining - 10 to 12 companies represent 90 per cent of Chile’s copper production. Codelco produces 10 per cent of the world’s copper and almost 30 per cent of Chile’s total copper production.

Opportunities

Australian miners and suppliers to the industry are accustomed to operating in markets with similar conditions to Chile. Australia has innovative solutions and expertise operating in countries with environmental and social demands, safety requirements and remote locations, where energy is expensive and water scarce.

Specific areas where Australia has strong offerings that match market needs in Chile include:

  • innovation and research and development
  • underground mining and especially block-caving
  • safety in mining
  • intelligent mining (interoperability)
  • automation and robotics
  • land rehabilitation and mine closure
  • energy Infrastructure
  • development of human capital and training in line with the industry’s current and future needs
  • environmental related products and services (tailing management, water treatment plants, software)
  • communities engagement consulting
  • renewable energies.

Tariffs, regulations and customs

As at July 2016, Chile has 24 free trade agreements in place with 62 countries, including 10 APEC member nations such as Australia, Japan, Singapore, India, New Zealand and Korea.

The Australia-Chile free trade agreement (ACI-FTA) came into force in 2009 and covers goods, services and investment with all tariffs (except on sugar) eliminated from 2015.

In 2013, the Double taxation agreement (DTA) came into effect. The agreement provides certainty for Australian and Chilean businesses, through a framework for the taxation of cross-border transactions. It reduces barriers to the cross-border movement of people, capital and technology, primarily through reducing withholding taxes on dividend, interest and royalty payments.

Chile is also a member of Mercosur (Customs Union involving Argentina, Brazil, Paraguay and Uruguay), the Andean Community (Colombia, Ecuador, Peru and Bolivia) and the Pacific Alliance Agreement (Colombia, Mexico and Peru).

Chile’s FTA and DTA with Australia combined with its extensive network of agreements with other Latin American countries, reinforces its position as the hub for Australian companies’ expansion plans into Latin America.

Chile is a civil law country, as opposed to a common law country, which has implications in the way that business is done in the country and how contracts are enforced and it is highly advisable to consult with a lawyer before entering the market.

Marketing your products and services

More than 70 Australian suppliers to the mining industry has established an office in Chile as of July 2016. Many have developed a presence through a subsidiary office, acquired a local company or developed a joint venture.

The best approach depends on factors such as the type of business, the appetite for risk, funds available to the company and issues around protection of intellectual property. Relationships are very important in Chile and a local partner can provide valuable connections and networks to decision makers.

There are also suppliers that prefer not to have a presence in Chile, instead selecting to sell into the market through distributors or agents. This approach is certainly less capital intensive, but requires patience and a good local partner.

Some tips to keep in mind:

  • The Mining Equipment, Technology and Services (METS) industry in Chile is highly competitive and all of the major multinational vendors are in the market.
  • Setting up in Chile sends a strong message to customers signalling commitment to the market and will often convert interest into a solid commercial relationship.
  • Given the focus on productivity in the mining industry, prepare a concrete value proposition which demonstrates clearly how your solution has saved customers money in previous projects.
  • Understand Chilean mining company structures and their process for procurement. To be successful you need to be patient, persistent and polite. It is not uncommon that contacts will not answer emails.
  • It is important to consult with headquarters and the mine site while conducting business development. The mine sites tend to be in remote locations in the north of Chile and headquarters tend to be in Santiago.
  • It is becoming increasingly difficult to visit mine sites and meet with personnel due to increased protocols related to mine visits.
  • Consider participating in technical seminars or the Exponor and Expomin industry conferences in Chile. They are excellent ways to meet customers and gather intelligence and Austrade manages the Australian national pavilion at these events.
  • Carefully segment the market based on how open it is to new suppliers and whether it uses Total Cost of Ownership (TCO) for procurement. Different mines within the same company can have vastly different cultures and procedures, affecting how willing they are to try a new approach or new supplier. Do your research on the mine itself, as well as the company that operates the mine.

Among the Chilean mining sector the perception of Australia’s mining industry is positive and is continuously used as an aspirational point of reference with regards to productivity and best practice.

Austrade is actively promoting the Australian METS sector and its innovative solutions as the means in which the Australian mining sector has attained better efficiency and productivity.

Chilean media wants to report on new technology, services and products that respond to Chile challenges.

Some tips to help your media promotion:

  • Have communication collateral for your company in Spanish, this could be a local website and/or printed material.
  • Customise your value proposition and pitch your key messages to match.

Links and industry contacts

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

Contact details

The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

  • develop international markets
  • win productive foreign direct investment
  • promote international education
  • strengthen Australia's tourism industry
  • seek consular and passport services.

Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.