Mining in Chile
Encyclopedia
HOWDY PARTNER!:D.. The sector in Chile is one of the pillars of Chilean economy
and copper
exports alone stands for more than one third of government income. Most mining in Chile is concentrated to the Norte Grande
region spanning most of the Atacama Desert
. Mining products of Chile includes copper
, gold
, silver
, molybdenum
, iron
and coal
.
declined in the 1970s and 1980s, it was still the Chilean economy's most important product in 1992. The mining sector represented 6.7 percent of GDP in 1992, as compared with 8.9 percent in 1985. In 1991, copper exports represented 30 percent of the total value of exports, a substantial decline with respect to the 1960s, when it represented almost 80 percent of total exports. Mining exports in general accounted for about 48 percent of total exports in 1991.
Two developments in the copper sector were noteworthy. First, in the 1987-91 period, there was a substantial increase in the output of refined copper, as well as a relative decline in the production of blister copper. Second, the state-owned Copper Corporation (Corporación del Cobre—Codelco), the world's largest copper producer, still had an overwhelmingly dominant role (accounting for 60 percent of Chile's copper output in 1991).
The so-called Codelco Law of April 1992 authorized Codelco for the first time to form joint ventures with the private sector to work unexploited deposits. Thus, in a major step for Codelco, in 1992, it invited domestic and foreign mining firms to participate in four joint explorations in northern Chile. Foreign owned private firms were to become increasingly important as new investment projects got underway.
The heightened importance of these foreign private firms in large-scale copper mining also resulted from the international business community's improved perception of Chile and from a mining law enacted during the Pinochet regime that clearly established compensation rules in the case of nationalization and otherwise encouraged investment in this sector.
Given this more favourable context, Phelps Dodge
, a United States mining company and the Sumitomo Metal Mining Company, a Japanese firm, signed a US$1.5 billion contract in 1992 with the Chilean government to develop La Candelaria, a copper and gold mine south of Copiapó
. The mine's potential production of refined copper was equivalent to about 10 percent of Codelco's entire production.
The government decided to counteract the effect of the variability of copper prices by creating the Copper Stabilization Fund
, which worked as follows: whenever the price of copper increased, the government would direct a proportion of the increased revenues into the fund; these resources would then be used during those years when the price of copper fell below its "normal" level. This institutional development helped Chile at least partially free itself from the volatility of the copper market. The Copper Stabilization Fund is occasionally tapped into if there is a major need for more money. Part of the fund will be used to help pay for reconstruction after the devastating 2010 Chile earthquake
.
Since the late 1970s, the production of gold
and silver
has increased greatly. The lead, iron and petroleum industries have shrunk since the mid-1970s, the result of both adverse international market conditions and declines in the availability of some of these resources. With a combined total value of about US$4 billion, two of the largest investments planned in Chile in the early 1990s were designated for aluminium
-smelter projects in the Puerto Aisén and Strait of Magellan
areas.
Economy of Chile
The economy of Chile is ranked as an upper-middle income economy by the World Bank, and is one of South America's most stable and prosperous nations, leading Latin American nations in human development, competitiveness, income per capita, globalization, economic freedom, and low perception of...
and copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
exports alone stands for more than one third of government income. Most mining in Chile is concentrated to the Norte Grande
Norte Grande, Chile
The Norte Grande is one of the five natural regions into which CORFO divided continental Chile in 1950. It borders Peru to the north, the Pacific Ocean to the west, the Altiplano, Bolivia and Argentina to the east, and the Copiapó River to the south, beyond which lies the Norte Chico natural...
region spanning most of the Atacama Desert
Atacama Desert
The Atacama Desert is a plateau in South America, covering a strip of land on the Pacific coast, west of the Andes mountains. It is, according to NASA, National Geographic and many other publications, the driest desert in the world...
. Mining products of Chile includes copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
, gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
, silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
, molybdenum
Molybdenum
Molybdenum , is a Group 6 chemical element with the symbol Mo and atomic number 42. The name is from Neo-Latin Molybdaenum, from Ancient Greek , meaning lead, itself proposed as a loanword from Anatolian Luvian and Lydian languages, since its ores were confused with lead ores...
, iron
Iron
Iron is a chemical element with the symbol Fe and atomic number 26. It is a metal in the first transition series. It is the most common element forming the planet Earth as a whole, forming much of Earth's outer and inner core. It is the fourth most common element in the Earth's crust...
and coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
.
Copper
Although the relative importance of copperCopper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
declined in the 1970s and 1980s, it was still the Chilean economy's most important product in 1992. The mining sector represented 6.7 percent of GDP in 1992, as compared with 8.9 percent in 1985. In 1991, copper exports represented 30 percent of the total value of exports, a substantial decline with respect to the 1960s, when it represented almost 80 percent of total exports. Mining exports in general accounted for about 48 percent of total exports in 1991.
Two developments in the copper sector were noteworthy. First, in the 1987-91 period, there was a substantial increase in the output of refined copper, as well as a relative decline in the production of blister copper. Second, the state-owned Copper Corporation (Corporación del Cobre—Codelco), the world's largest copper producer, still had an overwhelmingly dominant role (accounting for 60 percent of Chile's copper output in 1991).
The so-called Codelco Law of April 1992 authorized Codelco for the first time to form joint ventures with the private sector to work unexploited deposits. Thus, in a major step for Codelco, in 1992, it invited domestic and foreign mining firms to participate in four joint explorations in northern Chile. Foreign owned private firms were to become increasingly important as new investment projects got underway.
The heightened importance of these foreign private firms in large-scale copper mining also resulted from the international business community's improved perception of Chile and from a mining law enacted during the Pinochet regime that clearly established compensation rules in the case of nationalization and otherwise encouraged investment in this sector.
Given this more favourable context, Phelps Dodge
Phelps Dodge
Phelps Dodge Corporation was an American mining company founded in 1834 by Anson Greene Phelps and William Earle Dodge, Sr.. On March 19, 2007, it was acquired by Freeport-McMoRan and now operates under the name Freeport-McMoRan Copper & Gold Inc.-History:...
, a United States mining company and the Sumitomo Metal Mining Company, a Japanese firm, signed a US$1.5 billion contract in 1992 with the Chilean government to develop La Candelaria, a copper and gold mine south of Copiapó
Copiapó
Copiapó is a city in northern Chile, located about 40 miles east of the coastal town of Caldera. Founded on December 8, 1744, it is the capital of Copiapó Province and Atacama Region....
. The mine's potential production of refined copper was equivalent to about 10 percent of Codelco's entire production.
Copper Stabilization Fund
Despite the decline in copper's importance, Chile continued to be affected by the vagaries of the international copper market. The high variability of copper prices affected the Chilean economy, particularly the external accounts and the availability of foreign exchange, in several ways. In the 1987-91 period, the international copper market was very favourable; for example, copper prices in 1989 were 50 percent higher than in 1980. By May 1992, however, the price of copper had declined to about its 1980 level.The government decided to counteract the effect of the variability of copper prices by creating the Copper Stabilization Fund
Stabilization fund
A stabilization fund generally refers to a mechanism set up by a government or central bank to insulate the domestic economy from large influxes of revenue, as from commodities such as oil...
, which worked as follows: whenever the price of copper increased, the government would direct a proportion of the increased revenues into the fund; these resources would then be used during those years when the price of copper fell below its "normal" level. This institutional development helped Chile at least partially free itself from the volatility of the copper market. The Copper Stabilization Fund is occasionally tapped into if there is a major need for more money. Part of the fund will be used to help pay for reconstruction after the devastating 2010 Chile earthquake
2010 Chile earthquake
The 2010 Chile earthquake occurred off the coast of central Chile on Saturday, 27 February 2010, at 03:34 local time , having a magnitude of 8.8 on the moment magnitude scale, with intense shaking lasting for about three minutes. It ranks as the sixth largest earthquake ever to be recorded by a...
.
Other minerals
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
and silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
has increased greatly. The lead, iron and petroleum industries have shrunk since the mid-1970s, the result of both adverse international market conditions and declines in the availability of some of these resources. With a combined total value of about US$4 billion, two of the largest investments planned in Chile in the early 1990s were designated for aluminium
Aluminium
Aluminium or aluminum is a silvery white member of the boron group of chemical elements. It has the symbol Al, and its atomic number is 13. It is not soluble in water under normal circumstances....
-smelter projects in the Puerto Aisén and Strait of Magellan
Strait of Magellan
The Strait of Magellan comprises a navigable sea route immediately south of mainland South America and north of Tierra del Fuego...
areas.