SANTIAGO, Sep 16, 2010 (Dow Jones Commodities News Select via Comtex) --
Chile's lower house late Wednesday approved a bill to revamp the existing royalty structure that large-scale copper mining companies currently pay to the government on their sales, sending the bill on its way to the Senate.
Chilean President Sebastian Pinera's administration previously tried to increase the royalty when it sent its earthquake reconstruction financing bill earlier this year, but Congress shot down the articles modifying the copper tax.
With the lower house approving the bill by a count of 57 votes to 54 votes, the Senate must now vote on the bill.
Currently, the large-scale copper mining companies that opted for the voluntary royalty that went into effect in 2005 pay a royalty of 4% on their copper sales.
Pinera's new bill sets a range of 4% to 9% for these mining companies through 2017. If they opt for the revamped structure, they would pay a 5% to 9% royalty, based on sales and copper prices, from 2018 to 2025.
Any new project coming on line and opting for the voluntary royalty would pay at the 5% to 9% sliding scale, Finance Minister Felipe Larrain recently said.
The bill, if signed into law, will collect a minimum of $1 billion over the next three years if copper mines opt for this voluntary scheme, the Finance Minister and Mining Minister Laurence Golborne have said.
The government is looking to revamp the existing royalty structure to help pay for $8.4 billion in earthquake damages it is responsible for. The devastating 8.8-magnitude quake, among the strongest on record, and tsunami it spawned in late February left behind total damages estimated at $30 billion.
Chile is by far the world's leading copper producer, churning out about a third of the world supply. Income and royalty taxes from private-sector mining companies and the income from state copper giant Corporacion Nacional del Cobre de Chile, or Codelco, are a significant source of government income.
The mining sector--which produces not only copper but also molybdenum, iodine, lithium, fertilizers, gold, silver and other metals--accounts for about 20% of the country's gross domestic product.