The Election that Could Shape Copper’s Future

Chileans headed to the polling stations on Sunday to elect their new president in a highly polarized election cycle. Two front runners, leftist Gabriel Boric and far-right conservative Jose Antonio Kast’s votes were very close in the first round, with Kast 2% ahead of Boric. The second round will be held on December 19.

The election in Chile is important for the future of copper as Chile is the world’s top copper producer. The country also has the largest known lithium reserves.

Gabriel Boric, who was ahead in the polls for a long time, has been leaning towards a more active role for the state in mining, as well as higher royalties.

On the other hand Boric’s rival Kast, an ultra-conservative, has been calling for more private investment in state-owned copper company Codelco. He also proposes changes in mining property law. Kast is often likened to Brazilian President Bolsonaro or former U.S. President Trump.

Both candidates are in favor of diversifying the country’s mining industry into other metals outside of copper and molybdenum.

One pressing issue for the copper industry is the new tax reform bill of Chile.

Under the proposed change, the royalty– amount taken by the government – could rise to 75% if copper prices exceed $4 per pound. Among the nation’s top copper mines, 14 of them have production costs above $2.50 per pound. With a high royalty, many could be forced to shut down when prices drop.

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