Will the global supply pattern of copper and lithium mines change when the left-wing candidate wins the Chilean election?

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Gabriel Boric (Gabriel Boric), a leftist, was elected Chile's new president on Sunday, local time.

According to Servel, the electoral body, Boric won 55 per cent of the vote with 69 per cent of the votes counted, ahead of conservative candidate Jose Antonio Custer (Jose Antonio Kast) with 45 per cent of the vote. Custer has congratulated his opponent on Twitter, indirectly admitting defeat. Borrick will take office in March next year, and the 35-year-old will become one of the youngest presidents in the world.

However, the news of Borrick's appointment may not be good news for the world's major miners.

Chilean Copper and Lithium Mine production may be restricted

As the world's largest supplier of copper and the second largest supplier of lithium, Chile accounts for 28% of the world's total copper production and 23% of the world's total copper reserves. Chile also has 52 per cent of the world's proven lithium reserves. In addition, Chile also has a large number of minerals such as zinc, molybdenum, gold, silver and lead.

During the campaign, newly elected President Borrick has been emphasizing ecology and environmental protection, advocating higher taxes on miners and royalties for mining privileges, which means that miners' production costs will rise sharply, if copper prices fall. Many mining companies may be forced to close at a loss.

Goldman Sachs had estimated that the passage of the mining royalty reform bill backed by Borrick could put at risk about 1 million tonnes of copper production a year, equivalent to about 4 per cent of global production. They also mentioned that the tax stabilization agreement for more than half of Chile's foreign copper mines will expire in 2023. Although the tax stabilization agreement can limit the short-term direct risks brought about by the passage of the bill, future mine development will be at risk.

In his victory speech on Sunday, Borrick also said directly that he would oppose mining plans that "destroy" the natural environment, including the controversial Dominga iron, copper and gold mining project, which is worth $2.5 billion.

In addition, Borrick has been criticizing the privatization of mineral resources during the campaign. After he takes office, he may live up to his campaign promise and push forward the process of nationalization of SQM. SQM is the largest lithium producer in Chile and the second largest lithium mining giant in the world after Abel. Some media are worried that in the process of nationalization, SQM may have difficulties such as a slowdown in foreign investment, slow capacity expansion, reduced production efficiency and so on.

Jorge Selaive, chief economist at Fengye Bank of Canada in Chile, predicts that Boric's victory could lead to a decline in the exchange rate of the Chilean peso, with the dollar rising to 880-890 against the Chilean peso in the short term, while the Chilean benchmark stock index will fall from about 4300 to 4000.

He will also have to cope with stagnant economic growth, which will slow to nearly 2 per cent from a record high of nearly 12 per cent this year, according to the Chilean central bank. And Chile's central bank has raised interest rates to curb soaring inflation. Although Chile's fiscal account remains relatively robust, the debt-to-GDP ratio is rising rapidly against the backdrop of outbreaks.