New Chilean president cheers Canadian miners
Andy Hoffman
RTGAM






The best place to mine in South America just got better.

Canadian mining executives and industry players are lauding the Sunday election of billionaire businessman Sebastian Pinera as Chile's new president and say the mineral-rich and politically stable country will attract even more foreign mining investment under its new leader.

"His reputation is to have a favourable stance towards business and tax, so those are all positives. But even before he stepped in, we think Chile is absolutely one of the best jurisdictions in the world for what we do," said Tye Burt, the president and chief executive officer of Kinross Gold Corp., which operates two mines in Chile and is considering investing close to $2-billion more on a pair of development projects.

Chile is by no means the only country in South America endowed with abundant stores of copper, gold and silver. But unlike its neighbours in Argentina, Venezuela and Colombia, it has become a model of political and economic stability and become a favourite destination of Canada's largest mining firms, including
Barrick Gold Corp.,
Teck Resources Ltd.


and Kinross.

Mr. Pinera's election ends 20 years of centre-left rule in Chile and marks a decided shift to the right by the electorate for the first time since the brutal dictatorship of General Augustus Pinochet ended in 1990.

Yet while the new president is not expected to introduce major legislative changes he is expected to make Chile's thriving mining sector, which has already attracted billions of dollars of foreign capital, even more investor-friendly.

The Harvard-educated airline magnate hopes to lure additional foreign investment in mining that will help Chile's economy achieve an annual growth target of 6 per cent.

Mr. Pinera plans to offer further tax incentives to mining companies that develop new technologies and expand mining research. Chile already has an extremely low corporate tax rate of about 17 per cent for foreign mining firms on income that is reinvested back in the country.

Mr. Burt believes Chile's tax policy is so effective it should serve as a model for Canada's mining tax regime.

"I've been trying to urge the Canadian government to think about a similar stance to help Canada remain an attractive place for foreign investment in mining," he said.

Among his other campaign promises, Mr. Pinera also pledged to sell up to 20 per cent of state-owned copper producer Codelco. The interest in the world's largest copper producer would likely be sold to private pension funds in Chile. Mr. Pinera's advisers have also floated the idea of listing Codelco shares on Chile's stock exchange.

The new president has also suggested creating incentives for companies to build desalinization plants to provide water to mining operations in dry regions such as the Atacama desert, where miners including Teck, Kinross and BHP Billiton Ltd., the world's largest mining company, all have operations.

Teck, Canada's largest base-metals mining company, has spent more than $4-billion acquiring copper assets in Chile in the past three years. The deals have paid off handsomely for both Teck and Chile, as the price of the metal has rebounded dramatically in the past 12 months. Copper has climbed to more than $3.40 per pound from less than $2 last year thanks to strong demand from China.

"Chile has great copper resources. It has a very stable political and economic system and a stable and well thought-out tax regime. Those factors are all good for encouraging investment," said Greg Waller, Teck's vice-president of investor relations.

Mr. Pinera's political opponent Eduardo Frei had pledged to double revenues from Chile's 5-per-cent mining royalty to raise an additional $300-million (U.S.) per year for government coffers, which raised fears from some mining firms that the royalty would be increased.

Orest Wowkodaw, a mining analyst at Canaccord Adams, said Mr. Pinera's election can only strengthen Chile's lead on rival countries as South America's top mining jurisdiction.

"It is the best. It is that simple. Ask any mining executive where they want to own assets in South America and No. 1 on their list is always Chile," he said.