- Chile | 28 April 2022
What are the most prominent risks for the Chilean mining industry?
From my perspective, there are a few notable risks facing the Chilean mining industry. Firstly, I believe that moving forward, mining projects will no longer be approved with fresh water, and instead, companies will have to utilize salt water. This means that desalination is becoming increasingly important in the Chilean mining industry. Additionally, community relations have always been crucial, but with the advent of social media, it is becoming even more fundamental for mining companies to foster good relationships with communities. Finally, there is a risk surrounding royalty increases, which has been in congress for approximately two years. While I believe that congress will be conscious not to impact the competitiveness of the Chilean mining industry internationally, this remains a concern.
Considering high metals prices, how difficult is it to find good value for projects?
The difficulty of finding good value for projects depends on the commodity. For instance, RCF (the company I work for) believed in the potential for electric battery penetration, which led us to invest in lithium in 2019 before prices started to increase. Currently, the lithium market is extremely expensive, with lithium mining companies trading at remarkably high prices. However, RCF sees the copper space as more interesting and is conscious of price expectations regarding how companies are trading. Despite high copper prices, copper producers, developers, and juniors are currently trading around 0.6 or 0.7 times P/NAV, indicating that there is still value in this space. RCF is also interested in the gold sector given the geopolitical climate.
Which areas of Chile’s mining sector need to be clarified?
In my opinion, one area where Chile could improve is permitting. Mining is an expensive industry, and providing more certainty around early stage investments through transparency would be beneficial. Thus, Chile could do a better job of providing clarity in terms of how the permitting process should work.
