THE 10TH COPPER RESOURCE DIALOGUE BETWEEN CHILE AND …mric.jogmec.go.jp/wp-content/uploads/2015/01/20150120_02.pdf · Lift exsisting barriers for non-Conventional Renewable Energy

THE 10TH COPPER RESOURCE DIALOGUE BETWEEN CHILE AND JAPAN

“Update of Chilean legislative agenda”

Alex Matute Johns General Counsel

Chilean Copper Commission

Japan, January 20, 2015

CONTENT

1. Regulatory Framework

2. Main Challenges of Chilean Mining:

Energy, Communities, Water and Glaciers

3. COCHILCO and the Tax Reform

4. National Lithium Commission

5. Territorial Planning

1. REGULATORY FRAMEWORK

REGULATORY FRAMEWORK 1º Political Constitution of the Republic (Article 19 Nº 24 subparagraphs 6° to 10); 2º Law Nº 18.097 (LOCCM); 3º Mining Code of 1983 (Law Nº 18.248); 4º D.L. Nº 1.089, on special operating contracts relating to hydrocarbons (CEOP); 5º Mining Treaty with Argentina;

6º Various Laws: Ministry of Mining, COCHILCO, CODELCO-CHILE, ENAMI and SERNAGEOMIN; 7º Various Regulations: Mining Code, Mining Safety, Responsible Individuals, Tailings Facility Operations, etc., and 8º Influential Laws within the mining business: Law Nº 19.300 and its regulations, Sanitary Code, indigenous regulations, tax legislation and foreign investment, Water Code, etc.

TYPES OF CONCESSION. EXPLORATION CONCESSION.

Motion (Art.43)

Judge 8 day time frame from the resolution Yes (optional)

-Minimum Area 1000x1000

-Maximum Area 5000 hectors

-Maximum relationship between length and width 5:1

Pay rate of the

motion (Art.51)

30 day time frame from the date in which the motion is presented.

It can be paid

through form No. 10 in any authorized institution or bank.

Inscription and

Publication (Art.52)

30 day time frame from the

resolution

Payment of the proportional

Patent

The application of a

Legal Precedent (Art.52)

90 day time frame from the date of

the resolution which orders for the

inscription and publication.

8 day time frame to correct any

omissions or errors Judge

With the application:

-Proof of payment for the rate of the motion

-Proof of payment for the proportional patent

-Copy of the motion’s inscription

-Copy of the Official Newsletter with the inscription

-Requested concession plan

EXPLORATION CONCESSION. Cont.

30 day time frame from the resolution

to accept or reject the observations.

SERNAGEOMIN Report

(Art. 56-57)

Judge

60 day time frame from the receipt of

the document.

Natural Person

(Art. 57)

The sentencing should be delivered within 60 days

following the previous deadline. Otherwise, the natural person

may complain to the

Court within a 15 day time frame and will be subject to

revocation.

Legal Precedent

(Art. 57 and 86-90)

Publication extract

(Art. 90)

First business day of any month before the inscription.

120 business days from the sentencing date

Inscription

(Art. 89)

EXPLOITATION CONCESSION

Declarations

(Art. 44)

-Less than 100 hectors, allow viewings or UTM.

-Greater than 100 hectors, turn in UTM coordinates

-Maximum area to declare: 1000 hectors

-Each area has a minimum of 10 hectors

-The maximum relationship between length and width is 5:1

8 days from the resolution optional

Judge

Pay rate of the

declaration

(Art. 51)

Yes

30 day timeframe from the date of the declaration.

It may be paid through form

No. 10 in authorized institutions and banks.

Inscription and Publication

(Art. 52) Payment of the

Proportional Patent

(Art. 144)

Measurement

Application(Art.

59)

200 to 220 day time frame from the declaration

8 day time frame to correct omission

or errors.

Judge The application must include:

-Proof of payment for the rate of the declaration

-Proof of payment for the proportional patent

-Copy of the declaration inscription

-Area plan with UTM coordinates of the vertices.

EXPLOITATION CONCESSION. CONT.

Publication

(Art. 60)

30 day time frame from the date in which

it was mandated.

If there is no opposition, the opposition period will

end.

If there is some type of opposition, it will be taken into

account once the sentence is rejected.

15 month time period from the date of the

presentation of the declaration, except if there is

opposition.

Measurement

(Art. 71-74) Opposition to

Measurement

(Art. 61-70)

Measurement

Recording

(Art. 75)

30 day time frame from the publication date. (Only 2 causals).

Judge

Judge

Period to issue a report: 60 days

Period to contradict: 8 days

Natural Person

Period to address errors: 60 days,

renewable for another 60 days, prior

Service Report (Art. 82) Legal Precedent (Art. 86 to 90)

Publication extract

(Art. 90)

Inscription (Art. 89)

120 business days from the sentencing date

First business day of any month.

CHARACTERISTICS OF MINING CONCESSION

• It is a real right that the concessionaire may exercise freely; • It is an immovable property; • It is constituted as a distinct right, independent from the superficial area; • It is transferable, as it can be subject to a legal act between successors who take over its transfer or disposal in part or whole; • It is transmissible, the death of its owner passed to the successor, wheter testate or intestate;

• It is a conditional right (patent payment); • It is divisible;

• It can be waived or resigned, part of the concession or the

entire concession, through the judicial process;

• It generally cannot be seized, in order to give stability and security to mining work;

• It enjoys the constitutional guarantee of property rights that are embodied in the Constitution, and

• Are temporary or indefinite. The exploration concession lasts two years and can be extended for another two year period.

CHARACTERISTICS OF CONSTITUTIONAL PROCEEDING

They are made up of mining concessions through the justice system’s resolution;

There is no intervention of any authority or person other than the judge;

Constitutional proceeding, as a general rule, is not contentious;

The period includes calendar and set days;

The sentence or judgement that grants the concession, eliminates all procedural irregularities and expiration dates;

CHARACTERISTICS CONSTITUTIONAL PROCEEDING. CONTINUED

The sentence or judgement on the mining concession constitution allows for res judicata;

The publications that are requested are completed and published in the Official Mining Newsletter, and

Notifications are made, as a general rule, through this publication.

CONSTITUTIONAL FRAMEWORK FOR EXPLORATION CONCESSION

1º Motion 2º Subsequent procedures to the motion - Sentencing/Judgement Application - SERNAGEOMIN Report 3º Legal Precedent constitues the title of the mining concession, and final procedures (effects).

CONSTITUTIONAL FRAMEWORK FOR EXPLOITATION CONCESSION

1º Declarations 2º Procedures prior to a declaration - Measurement Application - Opposition to the Measurement Application - Taking measurements and creating the plan - SERNAGEOMIN Report - Opposition to the concession constitucion - Judicial control of the proceedings 3º Legal precedent constitutes the title of a mining concession, and final procedures (effects).

MINE CLOSURE LAW

MINE SAFETY REGULATIONS

1. Obligated to file closure plans, which must be approved by the Service.

2. Regulates technical aspects of applicable safety regulations for these closures.

3. Regulates physical stability.

4. NOT considered:

- Audits

- Guarantees

- Post-Closure Fund

5. Easy sanctions

LAW N°20.551

1. Obligated to file closure plans, which must be approved by the Service.

2. Considers technical aspects of applicable safety regulations for these closures.

3. Regulates physical and checmical stability

4. ESTABLISHES:

- Audits

- Guarantees

- Post-Closure Fund

5. Strict sanctions

16

Closure Regulation before Law N° 20.551

MINING CLOSURES

Mining Safety Regulations Title

X

Environmental Qualification Resolution

International Standards(ICMM)

Corporate Standards

Sectoral Regulations (ex:

Water Code)

Law N°20.551 – Milestones of the Law

November 11, 2011 Publication

D.O. Law N° 20.551

1 year to issues regulations

November 12, 2012 The law went

into effect

Main Content of the Law

• Statues that govern the closures of the extractive mining industry.

• Recognizes that the closures are part of the lifecycle of all mining projects (Article 2º).

• Mine closures should be progressively planned and implemented throughout the various mining operation stages within its lifecycle (Article 2º).

Two Closure Plan Procedures have been accepted:

▶ General Procedure

▷ Simplified Procedure

2. Main Challenges for Mining

Main Challenges for

Chilean Mining

Geology

Innovation

Human Capital

Communities

Water

Energy

Challenges for Chilean Mining

Energy is key to the development of Chile and the greater well being of the country’s inhabitants.

There is very little awareness as a country concerning the importance of energy in our lives and its sustainability.

Furthermore, little effort has been made to educate people on the importance of energy in our lives.

It has been years since there has been a national consensus concerning advances in energy.

The price of electricity for the population will be more expensive in the coming years.

Energy prices in the Industry are already high and could increase in the coming years, eliminating jobs and opportunities for improvement.

Energy. Current Scenario

0

20

40

60

80

100

120

140

160

Electricity Costs in Mining 2000 – 2014* ($US/MWh)

Max Min Chile Promedio sin Chile

0

10

20

30

40

50

60

70

80

Electricity Consumption by Processes

(Tera Joules)

Mina Concentradora LXSXEW

Fundición Refinería Servicios

Concentrators

Hydrometallurgy

Mining

Foundry

Concentrators

Refinery Services

Source: WBMS, Cochilco Source: Cochilco, Wood Mackenzie

Energy

Use of Electricity in the Production of Copper

Average without Chile

General Electricity Services Law (LGSE)

Energy. Legislation

Law N° 19.940 (Short Law I)

Law N° 20.018 (Short Law II)

Law N° 20.257 (Law NCRE)

Law N° 20.220

Marginal Energy Cost

BEHAVIOR OF MARGINAL COSTS

Spike reflects 4 consecutive

years of drought

Evolution of July in the last 15 years

In MWh

Law N° 20.257 provides a mechanism that encourages non-Conventional Renewable Energies; however, this is not enough. The Law should be amended so that the market power is with those that offer energy and not with those who buy energy. Regulate to have the State tender contracts for intermittent energy.

Pushing for NCRE

The problem in some communities is that they oppose new project installation, expressing that the benefits of these projects are seen in other locations. They complain that all they see are the overall costs of the new projects. Besides the declarations that establish environmental evaluations, companies that develop projects are subject to environmental impacts and must contribute a percentage to the community and/or region in which they invest. It is estimated that a legal framework which establishes the compensation mentioned above, will better align incentives and both transaction costs and negotiation.

Compensation for the Communities

Current restrictions for production increase transmission needs.

The incorporation of NCRE, will require greater transmission requirements in the future.

The construction of a transmission system faces both enviornmental and territorial conflicts.

Criteria for a solution. Change paradigms: a) Regarding the role of the transmission in the economy of the electric system. b) In regard to the role of the State. The growth relationship – energy consumption can be improved with the following specific policies:

Energy Saving Energy Efficiency Investments

The Challenge for Chile

What is not happening in Chile today

The challenges to solve Chile’s energy problem

involves changing the rules of the game

Complete the processing of and put into effect the 4 pending laws to allow for the easy transport of energy from its sources to consumers. Liquefied natural gas is a short term solution. Liquefied natural gas should be part of Chile’s energy matrix so that the country does not have to continue to depend on coal as the solution to its energy shortage. The previous involves the modification of the regulation from the National Energy Commission.

The Challenge for Chile. Continued

Goals and Objetives of the Government’s Energy Agenda

Over the next decade, reduce by 25% the bidder’s prices for electricity supply to homes, and businesses with respect to the prices that were offered in the previous bidders of 2013.

Lift exsisting barriers for non-Conventional Renewable Energy (NCRE) within the country. Promote the efficient use of energy as a resource, establishing a goal to save 20% by 2015.

Design a system to stablize prices on fuels that effectively reduce the volatility of fuel prices which households are exposed to.

Transform NCRE into a robust business that takes on a strong role in the country’s energy challenges.

Develop in 2015, a long term Energy Policy, accpeted by Chilean society through both a participatory and regional process.

Communities

Agreement 169 (ILO)

June 27, 1989: The General Conference of the ILO adopted Agreement No. 169 on Indigenous and Tribal Peoples in Independent Countries.

September 15, 2009: Goes into effect in Chile.

Government Responsibilities

Fundamental Principle: No

Discrimination

Ensure equal rights of

indigenous peoples

Promote social,

economic and cultural rights

Respect social and cultural

identity, customs,

traditions and institutions

Consulting Indigenous Peoples

CONSULTATION

Obligation of E° to establish a mechanism

Consider institutions

that are representative of the people

Must be conducted in

good faith

Achieve an agreement on the proposed

measures

What should be consulted?

All legislative and administrative measures that could directly affect them.

Supreme Decree N° 66/14, MDS

Its objective is to develop

concepts that the Agreement uses in a general way, and create an opportunity for those to participate in the consultation process.

Current Consultation Process

For all investment projects subject to the Evaluation System for Environmental Impact and for those that require a process of indigenous consultation, the process will be done according to the rules of the SEIA, within the established limits, while also respecting the provisions of regulation D.S. N°66/14, which refers to the steps of the consultation process.

Steps of the Consultation Process

Annoucement

Planning

Disclosing Information

PI Deliberation

Dialogue

Systematization

Stages

Amendments to Agreement 169 from the ILO

The Supreme Decree N° 66, began in March of 2014, and does not

meet an important condition: the indigenous people should be consulted prior to the public

participation stage. The indigenous consultation stage by citizens should be distinguished

between the consultations of those involved in the investment process.

Both separating the mechanism of the Evaluation System for

Enviornmental Impact and creating a national consultation organization

will be investigated.

JURISPRUDENCE

The Supreme Court has gone through three

stages to analyze the validity of environmental administrative

acts.

In the first (1997 - 2009) the Court

stated that environmental conflicts in the

SEIA are matters of broad

knowledge and whose decisions

are the responsibility of

technical authorities.

In the second, (2009 - 2012)

the Court established a

control mechanism of the decisions of the environmental assessment on

the basis of compliance with

aspects of administrative

procedure

In the third (2012 - 2014) the Court

has used a criteria of

substantive control over

environmental decisions.

THE CASE OF EL MORRO

Adverse sentence/judgment of the Supreme Court which stops the El Morro project, ordering a new indigenous consultation process according to Agreement 169 of the International Labor Organization (ILO), which implies the Environmental Qualification Resolution no longer effective.

The Court accepted the appeal for protection filed by the Diaguitas communities against the decision of the Commission for Environmental Assessment in the Region of Atacama, which approved the environmental impact study of the mining project.

The sentence/judgment of the court considers the resolution that approves the environmental impact study as flawed, since it did not consult the communities through the National Commission for Indigenous Development (CONADI).

42

In Chile water is a national resource for public use. Nevertheless, the law gives private individuals the right to its use.

The rights of these private invidiuals over water are recognized and constituted in accordance with the law, granting them ownership of water.

Water

43

Currently a bill will be established to: 1. Declare the country’s water and its rights, a public utility for expropriation purposes. 2. The State and private individuals who have been granted titles over water have a preferential duty to ensure its protection and sustainable use. 3. The law establishes priorities for water use such as the conditions in order to acquire and exersize rights over it.

44

The protection of glaciers as ecosystems, which are a fundamental part of a country’s natural environment and represent one of the largest fresh water reserves, should be recognized and promoted by the Chilean Government, a duty imposed by the Constitution to ensure the right to live in a pollution free environment. They have the obligation to promote the conservation of nature.

Glaciers

Legislative Proposals

May of 2006, Bill “Protection of Glaciers”:

• Presented in 2006

• Filed in 2010

• En actual tramitación

May of 2014, Parlimentary Motion “Preservation and Protection Law of Periglacials and Glaciers”:

• Presented in 2014

• Currently in the first constitutional stage

3. COCHILCO AND THE TAX REFORM

47

D.L. N° 600/74 On January 1, 2006, D.L. N° 600 was repealed (Foreign Investment Statute). From this above date, the CIE has not entered into new foreign investment contracts. Those that have investment contracts that have already been signed with the Committee, will continue to be governed by the legal rules applicable to their particular contracts. No later than January 31, 2015, the National Congress will send a bill to create a new institutional framework for foreign investment. If by January 1, 2016, the new law has not come into effect, that period shall be extended until the date the condition is met.

48

Disclosing Information COCHILCO, SERNAGEOMIN and the Mine Conservators will refer to the forms and time frame put forth by SII, the information, income and mining costs among other documents, including those that are outlined in the final paragraph of article 2° del D.L. N° 1.349.

49

Sanctions The Institution may impose fines for non or untimely income or those that do not comlpete the essential terms of their contracts that allow for the export of copper and its byproducts, and its modifications, in the System for Mining Exports.

50

Per Pound Copper Price (Assumed Income) The price per pound of copper affirms that the Chilean Producers Price fixed by the Chilean Copper Commission (the provision D.L. N° 824 of the Income Tax Law is maintained).

4. NATIONAL LITHIUM COMMISSION

52

On June 11, 2014, President Michelle Bachelet signed the Supreme Decree N° 60, of the Ministry of Mining, that created the National Lithium Commission. This Commission aims at creating a national policy which incorporates the sustainable development of lithium, taking into consideration the social, economic and environmental factors.

5. TERRITORIAL PLANNING

Territorial Planning is a norm that regulates the use of land, defining the potential uses for the various areas that have divided the country either as a whole or a political-administrative subdivision thereof.

TERRITORIAL PLANNING AND MINING

The current problem regarding the above topic is that mining can only be performed where the mineral is to be extracted, which requires that mining facilities are located close to the extraction site for the sake of their economic viability. El problema anterior recae en que la locación de los minerales no siempre coincide con aéreas preparadas o con capacidad de acogida para proyectos mineros. As a consequence of the previously mentioned, it has been a work in progress to obtain prior and future territorial plans. With this in mind, the mines should concentrate on defining their territorial systems, legal framework, physical labor, human resources sector etc., so that future projects or spatial reformulations are conducted within a secure, reliable and low cost framework.

THE 10TH COPPER RESOURCE DIALOGUE BETWEEN CHILE AND JAPAN

“Update of Chilean legislative agenda”