The Mining Council's assessment of low production: climate phenomenon, production trough, delayed investments, and post-pandemic effect

This week the mining industry surprised the government with the meager copper production figures for August. Finance Minister Jorge Quiroz said Friday morning that what they are "seeing is something we had been warning about, but we had not quantified the magnitude of its impact." He also said they had met with major mining companies to learn about the national situation. "That is what makes us much more cautious about how we can close the year," he noted. Joaquín Villarino, executive president of the Mining Council, head of the country's large-scale mining association, identifies four main factors that have restricted copper production. He also notes that the industry is closely examining the tax invariability of the mega-reform. "They have engaged in analyzing it and we are working with the Internal Revenue Service (SII) on all the regulations that must be issued," he says. August was the worst month for copper production since February 2011. What is the Mining Council's assessment? - Several elements have come together here that explain why we are facing a scenario with production declines like the ones we are seeing. First, if we grade it, and especially the last quarter, it has a lot to do with weather phenomena. The north of the country, the north-central area, has suffered an extremely harsh winter, with floods, snow, low temperatures and very high winds. For safety reasons, this led to production being halted for several days at some operations of the country's large-scale mining industry. That has a direct effect on production. Second, unfortunately it has coincided with several of the major mining deposits being in a production valley due to declining ore grades. This is part of mining plans; they are not extraordinary phenomena, they occur from time to time. Unfortunately for the country, two or three of the major mining companies coincided with production valleys due to low grades. The third phenomenon has to do with something more structural in the country. For more than four or five years we went through legislative discussions that made investment decisions impossible. The constitutional discussions, the Royalty discussion itself. Once these elements were cleared up, the country only then became an attractive district again for developing major mining projects. Did it slow down investment? - A significant part of what we are suffering today is the delay in the start of investments as a result of decision-making being paralyzed by prolonged legislative discussions that in some cases made the development of mining activity unviable. Joaquín Villarino, executive president of the Mining Council. MARIO TELLEZ Are there more reasons explaining the decline? - The last phenomenon, which also partly explains the decrease in production, has a lot to do with maintenance. During the pandemic period - several years have already passed since then - many maintenance operations were postponed because there was less personnel on site and we were more focused on maintaining production. Something that the mining industry, without increasing its health risks - quite the opposite - managed to achieve in the country, and we maintained - and even increased - production. Today we are catching up. In other words, a set of variables... - We are unlucky because all the stars are aligned to be producing at maximum capacity: very good prices, good political will, investment decisions, a significant investment portfolio, we have a good supplier sector, there is labor, we have increased the presence of women, etc. The industry usually says that these variables are natural cycles of the mining sector, but the government, particularly Minister Quiroz, spoke a few weeks ago of a mining recession. Is there a dichotomy or paradox in these views? - It is not a paradox. There is no doubt that today's government is facilitating investment decisions being made and that the decisions made are being carried out. It is a tremendously proactive government that has explicitly stated it has that will and has taken measures in that regard. We see it reflected in the Reconstruction and Economic Development Bill, which contains a series of provisions along those lines. We see it reflected in the functioning of the Committee of Ministers. We see it reflected in operational decisions that tend to speed up decision-making, but mining cycles have their timelines, and making investment decisions, obtaining authorizations, executing the investments - this is not retail, it is not a kiosk. September 10, 2026 Interview with Jorge Quiroz, Minister of Finance. Photo: Andres Perez Andres Perez This is a sector that suffers from the political decisions made at certain moments. Today we are paying the consequences, with this production decline, of many political decisions that essentially did nothing but prevent decisions from being made, or openly oppose there being mining in the country. We have short memories, but that is what happened four or five years ago. What happened was that the decision to invest was paralyzed, and since the decision to invest was paralyzed, for this to resume, a six-month change in political will is simply not enough. This definitely helps, it goes in the right direction and contributes to restoring confidence. Proof of the above is that we have a portfolio of projects in execution of practically US$47 billion and more than US$50 billion under analysis or study. Therefore, today all the elements are in place for mining to return, but this will take a while. Mining companies evaluating opting into tax invariability The mega-reform offers the option of opting into tax invariability. Are the major mining companies considering joining? - All the mining companies have analyzed or are analyzing with great interest the tax invariability framework that was approved in the Reconstruction and Economic Development Law. The particular decisions of which companies opt in and which do not are not up to the Mining Council. They are very particular decisions, but all the mining companies have found the proposed scheme attractive. It must be taken into account that Chile has had three royalties in the last 15 or 16 years. In other words, we started with President Lagos, then President Piñera, then President Boric. So every two or three governments we again find ourselves discussing royalties, and that is very bad for the development of mining activity. So we have the complaints we have today about why mining does not produce more, why we have production declines. We have production declines, among other things - not as the sole cause - because of this incessant increase in burdens on the industry which, I never tire of saying, is not a bottomless barrel. This has a limit, and we must take care of an industry that is tremendously important for the economic, social and cultural life of this country. Shipping yard - Port of Barquito, Chuquicamata Codelco. ©Claudio Pérez Should we expect to see the major mining companies opting into this tax invariability soon? - I hope so, I suppose so, because they have looked at the legislative proposal with great interest, they have engaged in analyzing it, and we are working with the Internal Revenue Service (SII) on all the regulations that must be issued for its application. So I estimate that yes, but these are very particular decisions of each company; they are not association-wide or sector-wide decisions. Six months have already passed since the fuel tax hike. How did you experience it? - When a tax is applied that costs mining US$500 million a year, US$300 million a year, that is a lot of money. We have also been accumulating tax burdens and burdens on the industry that have made us lose a great deal of competitiveness in the world. We have energy costs that are 20% more expensive than Peru's and 16% more expensive than the countries with which we compete in mining in general, we have low labor productivity, and on top of that a fuel tax was imposed that did not correspond to us. But that had a duration of 6 months, it ended on September 30, it was not renewed, just as the government had committed, which must be acknowledged. We once again put forward and contributed with a tax burden so that the impact on final consumers would not be as high as it could have been without our contribution. But this tax burden is over and we are very pleased that it is so.