Chile Ministers Confirm Top Miners Opt For New Royalty

All of the privately-owned, large-scale copper miners operating in Chile opted for the country's new royalty structure, the Finance and Mining Ministers said in a joint press conference Wednesday.

The government moved to increase the royalty copper miners were voluntarily paying to in part finance reconstruction efforts following the 8.8-magnitude quake that ravaged the country in early 2010.

The quake, the fifth strongest on record, left behind damages totaling $30 billion, of which the government will foot $8.4 billion.

Under the new structure, which is also voluntary, copper producers could pay a royalty of up to 14%, based on their sales and world copper prices.

As a result of the country's largest mining companies moving to the new tax structure, the government will receive royalties on 94% of the copper privately held companies will produce in 2011, Mining Minister Laurence Golborne said.

Mining companies such as BHP Billiton Ltd. (BHP, BHP.AU), Antofagasta plc (ANFGY, ANTO.LN), Anglo American plc (AAUKY, AAL.LN), Xstrata plc (XTA.LN) and Freeport-McMoran Copper & Gold Inc. (FCX) all opted for the higher royalty.

The ministers declined to detail which operations didn't volunteer for the new tax, but commented that the remaining 6% of output not paying the new royalty are mines that are older and have only a few years left in production.

While private sector estimates say the government will collect $2 billion in 2011-2014 from the revamped royalty as a result of high international copper prices, the government says it expects to raise $1 billion during that period.

"We've based our estimate on an average copper price of $3.20-$3.30 a pound. If one sees current prices, this is a conservative estimate, but since we don't have a crystal ball, we'd rather remain conservative," Finance Minister Felipe Larrain told reporters.

According to the new structure, existing projects will pay a royalty of 4-9% through 2014. By 2018, all large-scale miners will be paying a 5%-14% royalty, based on their sales margins.

In addition, privately held mining companies pay a income taxes of around 20% and taxes on their remittances as most of them are units of global diversified miners.

-By Carolina Pica, Dow Jones Newswires; 56-2-715-8919; [e-mail]