The future of mining exploration in Chile

The competitiveness of Chilean mining in exploration activities related to Junior companies and greenfield investment has deteriorated in recent years. In general terms, the mining industry and its investment move in relation to the demand for commodities and the prices of metals. Explorations are no exception and go hand in hand with these fundamentals. However, under different scenarios, local conditions encourage or discourage this activity, which is crucial for the replacement of resources from existing operations and for maintaining or increasing the inventory of exploitable minerals in a country. In this way, the mining industry is nourished through explorations for its medium and long-term future.

Chile has always been a preferred destination for mining companies because of its geological potential, that is, for its large mineral resources (mainly copper and gold) and for its social, political and economic stability. When the prices of metals deteriorate, the restrictions and contingencies that some countries present, such as tax uncertainties, access to mining and surface property, complexities and obstacles in obtaining environmental and community permits (social license), get greater relevance and they make the exploration companies choose jurisdictions that offer them more certainties and stability in the long term.

Although it is true that in its latest report the Fraser Institute recognizes Chile as a political support for mining activities, it also indicates that according to the “Best Practices Mineral Potential index” (where jurisdictions are classified according to their geology and the policies that encourage investment in exploration) Peru already surpasses Chile, positioning itself in eighth place, one position ahead of our country. Additionally, in the section in which the study gets the opinions on the effects of “pure” policies in the best well-known jurisdictions (without considering their geological potential), neither of the two countries obtains prominent positions at a global level.

As a consequence, the expenditure on exploration carried out by Junior companies in Chile has deteriorated significantly (S & P Global, 2018). From the budget for exploration in the country, 89% corresponds to Major companies and 4.4% to Junior companies. 42% of the expenditure is made in the advanced stages of exploration and only 31% in basic exploration, the main focus of the Junior companies and the one that is destined to discover new economically exploitable deposits.

On the other hand, the country shows a restriction on the access of potential exploration lands that cover large extensions, located in metallogenic strips identified in Chile and capable of containing economic deposits. Due to a lack of adequate regulation, there is “captive” mining property in Chile, with no mining nor exploratory activity, in the hands of large companies and smaller private companies; the latter with excessive expectations that hinder access or prevent companies that have the necessary resources to perform explorations in these areas. There are also complexities for accessing the surface property, either via mining easement or land acquisition, and there is no territorial order that regulates the activity and allows communities and companies to know what to expect and establish relationships of mutual benefit. It is also difficult to get financing for a risk activity such as exploration, both at a local level and in the original countries of the foreign Junior companies operating in Chile.

All the above makes Chile lose competitiveness in terms of exploration. This was reflected in the low interest for the country in the latest version of the PDAC, the main mining exploration convention worldwide (and reinforced by the presence of Chile at the convention with a stand in a corner away from the center of the investors’ interest and without an attractive offer or a new proposal).

Chile must remain a pole of attraction for the world in mining explorations

Definitely, a satisfactory mechanism must be created to release mining property and make it available to the mining exploration market, with the obligation to carry out fast exploration work with adequate budgets and concrete action plans. It should culminate promptly with the execution of drilling and without harming the small or the medium size mining.

Tax benefits must be established to recover certain taxes from pre-production stages, or other mechanisms similar to those implemented in other countries such as Canada with the so-called “Flow Through Shares” , or the VAT discount on pre-operational expenses as it happens in Peru.

For its part, a well-conditioned budget must be set aside to continue building a high-quality geoscientific information base at a local level, a process that should be led by Sernageomin (National Service of Geology and Mining). So far the resources allocated for this purpose have been insufficient with slow management. The resulting information is not totally free, being available only for large companies capable of acquiring it.

Chile is not a mature country in terms of mining exploration. A mature country is one that has already reached a state of knowledge where it is concluded that it has already exhausted its possibilities of discovering and generating new economically extractable mineral resources. And this is not the case. The success some mining companies in Chile have had in recent years – in little-known exploration projects – gives support and should encourage investment in the country.

“The real voyage of discovery consists not in seeking new landscapes but seeing with new eyes”

(Marcel Proust)

The future of exploration in Chile does not depend so much on the wealth of undiscovered deposits, which are present there, as on the way we do and will do exploration and mining. The decreasing grades and the greater depths where the minerals are found are features present in all the districts of the world. And possibly, the new discoveries will follow this tendency in the future. Therefore, the challenge is different: we must find a way to obtain more from less, and at a lower economic, environmental and social cost through innovation and technological development.

With this objective in mind, Chile can and must prepare itself for the exploration and discovery of the future generation of deposits: some with lower grades, others with potential to develop medium mining, and other major deposits, deep, with possibilities of high grades (as it has been confirmed in several discoveries in the country). For this, the positive factors continue to be Chile’s clear and friendly regulatory framework for investment, its social, political and economic stability, and the presence of competent professionals and technicians with a mining tradition. In addition, its geological potential, rich in high-demand minerals for the economy of the future predicts an excellent future. However, to make the best of these advantages, it is imperative to face the great current challenges: the exploration (and mining) of the future must be friendly to the environment, and the fruits of these activities have to be shared and valued by the whole society. Then, more than large and rich new deposits, we need people open to innovation and technology, with environmental and social awareness that allows us to “discover” new ways of doing mining.