Chile's election may affect 1/3 of the world's copper supply

Chilean voters went to the polls on Sunday to take part in a highly polarised presidential election led by far-right conservatives and left-wing young former student leaders in an extreme stand-off not seen since the country returned to democracy in 1990.

Chile, the world's largest copper producer and the country with the largest known lithium reserves, will be the first since months of violent protests against inequality rocked the country at the end of 2019.

At the same time, the country is drafting a new constitution to replace the constitution approved during the military regime of the autocratic Augusto Pinochet (Augusto Pinochet), which is believed to be the main cause of the extreme socio-economic reality that has divided the country for decades.

Experts say the new constitution could mean stricter rules on water, minerals and community rights.

Adding to the overall uncertainty is that Sebastian Pinera, the incumbent president (Sebasti á n Pi ñ era) (Chile's term limit prohibits him from serving a second consecutive term), has just survived impeachment.

Until recently, Chile seemed likely to elect a new president with the same goals as the protesters. Gabriel Baldrick (Gabriel Boric), a 35-year-old former student leader allied with the Communist Party, is the most popular in months.

His campaign focused on a commitment to equality, feminism and eco-Chile.

In mining, the 35-year-old candidate favours a more active role of the state in the area and higher royalties.

Jos é Antonio Kast), a 55-year-old lawyer, Catholic and father of nine, turned to talk about more private investment in Codelco, the state-owned copper giant, and changes in mining property law. Custer, who is often compared to Brazilian President Jal Borsolaro or former US President Donald Trump, praised the "economic legacy" of former dictator Pinochet and promised to take measures to promote foreign investment in the industry.

Both candidates are in favour of diversifying the country's mining industry to produce metals other than copper and molybdenum to improve sustainability and reduce emissions.

The results of Sunday's election will determine the fate of a controversial tax reform bill that could put 1/4 of Chile's copper production at risk.

Under the proposed changes, the "royalty" tax rate-the amount charged by the government-would be based on output rather than profits, and could rise to 75 per cent when copper prices exceed $4 a pound.

About 14 large copper mines in the country cost more than $2.50 a pound to produce. With royalties, many copper mines may be forced to close when prices fall again.

Manuel Vieira (Manuel Viera), president of the Chilean Mining Chamber of Commerce, said in May: "many low-level businesses will be eliminated, destroying jobs."

Miners will not immediately feel the full impact of the new tax. According to the Chilean Mining Commission, most private mines are protected by tax unchanged agreements signed with the Chilean government until 2023.

Diego Hern á ndez, president of the National Mining Association (Sonami), which represents industry companies, said Sunday's election results could lead to an "investment shortage". He said this would delay the supply of new copper and lithium to meet the expected growth in demand.

The government expects mining investment to reach about $70 billion by the end of the decade, most of which will come from private companies.

Chile produced 1/3 of the world's copper last year in the form of concentrates, anodes and cathodes. The country is also the second largest producer of lithium and has large reserves of zinc, molybdenum, gold, silver and lead.

It is estimated that Chile needs US $150 billion in investment to achieve its goal of almost doubling copper production by 2050.

Copper is seen as a bellwether of economic growth because of the central role of metals in construction, wiring and electronics. It is also seen as a key metal in the ongoing global transition to a green economy.

BHP Billiton, the world's largest miner, estimates that global demand for copper will double over the next 30 years.

This vision echoes the vision of most experts, from consultants such as Wood Mackenzie, ING Economics and BloombergNEF to industry players, including top miners and electric carmakers led by Tesla and Volkswagen.

Mining companies and investors will keep a close eye on the upcoming events in Chile. The results of Sunday's presidential and congressional elections, the future of the royalty bill and constitutional rewriting are crucial to future foreign investment in the country and the supply of key metals.

If no candidate gets more than 50% of the vote, a run-off will be held on December 19. Chileans will also elect new representatives for the 155-member House of Commons and about half of the Senate.