Chilean Tax Hike Will Deter Copper and Lithium Mine Investment, Push Japanese Mining Companies to Other 24 Countries

Japanese mining companies say high taxes in Chile may deter them from investing in new mines in the world's largest copper producing country even as this won't prompt them to abandon existing projects, an industry association executive said on June 5.

Rising nationalism in the resource-rich country is creating challenges for miners seeking the minerals needed for the energy transition even as they face rising costs, tougher environmental regulations and pressure from investors to decarbonise.

Chilean lawmakers finally approved a long-awaited mining tax overhaul in May, raising taxes and royalties that big copper and lithium producers must pay the government.

"The tax increase will not lead to the exit of existing mines, but it may have an impact on new development projects," Akira Nozaki, president of the Japan Mining Industry Association, said in an interview.

“Obviously, profitability is going to fall because of higher taxes, making it increasingly difficult to develop new mines,” he said.

In recent years, two major Japanese mining companies have decided to reduce their exposure to key copper projects in Chile, with JX Nippon Mining & Metals planning to sell a majority stake in the Caserones project. Sumitomo Metal Mining Co. sold its stake in the Sierra Gorda mine last year.

Nozaki, president of Sumitomo Metal Mining, said Japanese miners could use experience from previous projects to make major new investments in copper projects.

In April, the G7 pledged $13 billion in financial support to strengthen supply chains for critical minerals. Japan has secured a supplementary budget of more than 200 billion yen ($1.4 billion) for critical minerals.

Japan Organization for Metals and Energy Security (JOGMEC) said last month that it had selected 24 countries based on their potential to provide resources and fuel to Japan, and would analyse the characteristics and conditions of each resource-rich country and study diplomatic approaches.

For minerals, the analysis will focus on copper, lithium, nickel, cobalt and rare earths that are critical to decarbonization, the agency added.

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