Chile expected to impose royalty on miners

Chilean lawmakers have sent a bill to the country’s Congress that would see a 3% royalty imposed on mining operations. The move would put an extra US$300 million a year in the government purse.

The bill is expected to pass easily, as most congressional legislators favour it.

The move to introduce a mining royalty has gathered momentum as copper prices have soared some 70% in 12 months to 8-year highs. Chile produces more copper than any other country.

Mining companies say the proposed law would scare off investment.

Other major mining countries charge royalties. Chile and top silver miner Mexico are among the exceptions.

The proposed royalty could become a key campaign issue as Chile heads into municipal elections in December and a presidential race in 2005. So far, President Ricardo Lagos has neither supported nor opposed the bill.

Advocates of a royalty are open to several different alternatives for calculating the fee and believe it should vary to reflect changes in global metals prices.

Chilean mining is dominated by 17 large companies, most of which are foreign-owned and one of which, Codelco, is state-owned. Among the major players are Anglo American, BHP Billiton, and Phelps Dodge.