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Mining in Chile

The mining sector in Chile has historically been and continues to be one of the pillars of the Chilean economy.[1] Copper exports alone stands for more than one third of government income. Mining in Chile is concentrated in the northern half of the country and in particular in the Norte Grande region spanning most of the Atacama Desert.

1947 map of mines in Chile

Chile was, in 2024, the world's largest producer of copper,[2] iodine[3] and rhenium,[4] the second largest producer of lithium[5] and molybdenum,[6] the sixth largest producer of silver,[7] the seventh largest producer of salt,[8] the eighth largest producer of potash,[9] the thirteenth producer of sulfur[10] and the fourteenth producer of iron ore[11] in the world. In the production of gold, between 2006 and 2017, the country produced annual quantities ranging from 35.9 tons in 2017 to 51.3 tons in 2013.[12]

In 2021 mining taxes stood for 19% of the Chilean state's incomes.[13] Mining stood for about 14% of gross domestic product (GDP) but by estimates including economic activity linked to mining it stood for 20% of GDP.[13]

About 3% of Chile's workforce work in mines and quarries but in a wider sense about 10% of the country's employment is linked to mining.[13]

Historically, coal mining had some importance in the southern half of country from the 1850s to the 1990s with a brief revival in Invierno mine from 2013 to 2020. In the 19th century Chile was a major producer of silver (1830s to 1850s) and copper (1850s to 1870s). From the 1870s to the 1930s nitrate mining was an important employment and income source for Chile. Modern copper mining in Chile begun in the 1910s with the arrival of companies from the United States which were fully nationalized in 1971 forming the state-owned copper company Codelco.

Nitrate

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Mining nitrate in the North of Chile defined the country's history from the late 19th century to the mid 20th. Indeed, the period 1873–1914 is referred to as the Saltpetre Republic.

Copper

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See also: Fundición Ventanas
 
El Teniente, an underground copper mine in the commune of Machalí in the Cachapoal Province (2005)

Although the relative importance of copper 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 1995, 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.

 
Chilean copper miners

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 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.

Copper Stabilization Fund

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Despite the decline in copper's importance, Chile continued to be affected by the vagaries of the international copper market. The fund received 0.2–0.5% of GDP, depending on the size of the budget surplus each year. In 2006, a one-off sum of $600 million United States dollars was added to the fund. The fund was replaced with the Economic and Social Stabilization Fund in 2007. The new fund received fiscal surpluses in excess of 1% of GDP.[14] 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 favorable; 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, 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.

Lithium

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Northern Chile forms part of the Lithium Triangle with substantial reserves in the form of brine. The explosive growth in electric vehicles since 2015 has triggered increased demand.

Chile is the main producer of lithium from brine.[15] Until 2017, when it was surpassed by Australia, Chile was the over-all main producer of lithium.[16] By one estimate Chile will be surpassed also by Argentina and China in lithium production by 2030.[16]

Most of Chile's lithium reserves are in Salar de Atacama and Salar de Maricunga,[15] and all lithium extracted in Chile as of 2023 comes from Salar de Atacama.[17] The only two lithium-extracting companies currently operating in Chile, SQM and Albemarle, have licences to extract lithium until 2030 and 2043 respectively.[17][18] In April 2023 Chilean government announced plans for nationalizing its lithium industry.[19] The state-owned copper company Codelco was commissioned by the government to negotiate nationalization with SQM.[18]

Other minerals

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See also: Coal mining in Chile and Chilean silver rush
 
Gold mine in Andacollo

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.

SQM is also a significant iodine producer.

Almost no mining of placer gold occurs today.[20]

Small-scale mining

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The number of artisan miners in Chile, often known as pirquineros, has varied widely over the years.[21] Since 2000 in some years with high metal prices have had up to c. 14,000 small-scale miners active. On average 95% of small-scale miners work in copper mining.[21] These miners are supported by ENAMI which processes copper ore it purchases at stabilized prices.[21][22] The levels of illegal mining in Chile are low relative to neighbouring countries.[23]

See also

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References

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  1. ^ Centner, Charles William (1942). "Great Britain and Chilean Mining 1830-1914". The Economic History Review. 12 (1/2): 76–82. doi:10.2307/2590393. ISSN 0013-0117.
  2. ^ Copper production in 2024 by USGS
  3. ^ USGS Iodine Production Statistics
  4. ^ USGS Rhenium Production Statistics
  5. ^ USGS Lithium Production Statistics
  6. ^ USGS Molybdenum Production Statistics
  7. ^ USGS Silver Production Statistics
  8. ^ USGS Salt Production Statistics
  9. ^ USGS Potash Product ion Statistics
  10. ^ USGS Sulfur Production Statistics
  11. ^ USGS Iron Ore Production Statistics
  12. ^ Gold production in Chile
  13. ^ a b c Cardemil Winkler, Magdalena (2023-04-04). Impactos socioeconómicos de la minería en Chile (PDF) (Report) (in Spanish).
  14. ^ Saggu, A. & Anukoonwattaka, W. (2015). "Commodity Price Crash: Risks to Exports and Economic Growth in Asia-Pacific LDCs and LLDCs". United Nations ESCAP. SSRN 2617542. {{cite web}}: Missing or empty |url= (help)
  15. ^ a b Cabello, J. (2022). Reserves, resources and lithium exploration in the salt flats of northern Chile. Andean Geology. 49 (2): 297–306. doi: 10.5027/andgeoV49n2-3444. Retrieved July 2, 2022.
  16. ^ a b "Argentina could help the world by becoming a big lithium exporter". The Economist. 2022-11-15. Retrieved 2023-04-21.
  17. ^ a b Munita C., Ignacia (2023-04-21). "Control estatal de los salares, negociar con SQM y empresa nacional: Las claves de la estrategia del Gobierno por litio". Emol (in Spanish). Retrieved 2023-04-21.
  18. ^ a b Browne R., Vicente (2023-04-21). "Las razones del desplome bursátil de SQM tras el anuncio presidencial del litio". Ex-Ante (in Spanish). Retrieved 2023-04-21.
  19. ^ Villegas, Alexander; Scheyder, Ernest (2023-04-21). "Chile plans to nationalize its vast lithium industry". Reuters. Retrieved 2023-04-21.
  20. ^ Jara, J. Joaquín; Moreno, Francisco; Jara, Raúl; Dubournais, Francisco; Mata, Rodrigo; Peters, David; Marquardt, Carlos; Lagos, Gustavo (2019). "Ranking of Placer Gold Prospects in Chile Through Analytic Hierarchy Process". Natural Resources Research. 28 (3): 813–832. Bibcode:2019NRR....28..813J. doi:10.1007/s11053-018-9420-5. S2CID 169899273.
  21. ^ a b c Scholvin, Sören; Atienza, Miguel. "La formalización de la pequeña minería en Chile: logros y desafíos de la Empresa Nacional de Minería (ENAMI)". Investigaciones Geográficas (in Spanish). 66: 1–13.
  22. ^ Costabal M., Francisco (2015-06-10). Fundiciones de Cobre en Chile (PDF) (Report) (in Spanish). SONAMI. Retrieved 2025-03-23.
  23. ^ Guzmán, José Tomás (2025-03-04). "Minería ilegal en Chile: Las cifras detrás del tipo de extracción que terminó en un derrumbe fatal en Copiapó". Emol (in Spanish). Retrieved 2025-03-05.
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