Chile has taken a tiny, but symbolic step towards nationalising some of the biggest copper and lithium mines in the world – a move, that if it ever happened, would damage the likes of BHP and Rio Tinto, directly, while boosting them and other Australian companies mining both metals, and Australia as a whole.
Chile is the world’s largest copper producer and the second-largest lithium producer – Australia is a smaller producer of copper, but the number one in lithium and would benefit immensely from any nationalisation proposal, even though it would damage BHP and Rio Tinto for their investments in the world’s biggest copper mine, Escondida.
BHP holds stakes or controls other mines in Chile’s huge copper industry. Albemarle, the big US producer, has significant investments in Australian mines with Mineral Resources.
The nationalisation proposal was approved on Tuesday by a committee as part of the drafting of a new constitution in Chile.
The 13-to-6 vote by members of an environmental committee is the first of several hurdles that the controversial proposal would need to clear before becoming a proposal capable of being voted on.
It would require support from two thirds of the full assembly to become part of the draft charter that will be put to a referendum later this year.
The vote drew the ire of the country’s huge mining industry – which is state-dominated anyway by the world’s biggest copper miner in Codelco.
The environmental commission of the assembly, which is drafting Chile’s new constitution, approved the proposal “for the Nationalization and New Social and Environmental Management of Copper Mining, Lithium and other Strategic Assets.”
Chile is rewriting its Constitution to replace a market-centric one that dates back to the military dictatorship of General Augusto Pinochet.
Debate on the draft will start in earnest later this month, but proposals have already started to cause jitters in some sectors.
“The proposal adopted is barbaric, with clear and obvious legal errors,” said Diego Hernández, president of the National Mining Society, which represents companies in the sector.
He said the measure would nationalize companies themselves as well as just the metal resources and would have a major economic and legal impact.
“A nationalization would have serious consequences for our economy in a context of globalization, since the affected companies will resort to these treaties to defend their legitimate interests,” he added, according to a Reuters report.
Chile has the world’s largest reserves of copper and lithium, both of which are important green metals for the renewable future instead of fossil fuels.
Prices for both are at or close to all-time highs.
There is a total of almost $US70 billion in possible mining projects this decade some of which would be upended by nationalisation. But some of these projects involve modernisation and expansion of Codelco and the state-controlled copper mining industry.
Hundreds of billions of dollars would be needed to compensate private mining companies which would weaken Chile’s finances to where it couldn’t afford to pay for the improvement of social services and reduce inequalities – the two main issues that have driven the upending of the constitution.
If full compensation wasn’t delivered, Chile would find itself in international tribunals and could become a financial pariah (although that wouldn’t worry China which would swoop to help the Chileans and in doing so, financially enslave the country).
The motion being considered would seize privately run mineral operations and end concessions on the grounds that strategic resources should serve the interest of all Chileans and therefore be incorporated into the “full and exclusive domain of the state,” according to a document on the constitutional assembly’s website.
Last week, the same committee gave a first up approval for a proposal to annul operations that infringe on indigenous land.
Other proposals include setting time limits on concessions, with the industry pushing hard to retain the indefinite model, arguing it is critical for long-term planning that underpins investments.
While this will probably amount to nothing, when you link it to the rise in nationalism in neighbouring Peru and Ecuador, it makes for some increasingly worried mining company executives, local and foreign, including Chinese who are having continuing problems at the Las Bambas mine in southern Peru.
And makes Australia look increasingly attractive.
