Is Incoming Chilean President Boric a Friend or Foe to Mining?

Santiago, Chile.

Gabriel Boric, a young leftist millennial was just elected as Chile’s new president on Sunday, and he is ready to make important changes for the nation and fellow Chileans. 

Boric won 56% of the votes compared to his main opponent, lawmaker José Antonio Kast, who won 44% of the votes with more than 90% of polling stations releasing their data. 

One of the first major changes of the young new leader will be drafting a new constitution, which will likely bring about updated legal and political changes surrounding environmental issues, gender inequality, Indigenous rights, just to name a few important issues. 

One of those issues, mining, remains in the balance as some of the world’s biggest mining companies wait for decisions and the new president to set the tone through policy.

A Liberal Shift

Boric, who is 35, will be the youngest leader of Chile and most liberal since President Salvador Allende, who left behind a 17 year long excruciating dictatorship. Kast, who has a past of supporting the past military dictatorship, tweeted a photo of himself and Boric congratulating him on his “grand triumph,” saying “from now on, he is the president-elect of Chile and deserves all our respect and constructive collaboration.” 

Outgoing President Sebastian Pinera also held a video conference call with Boric to congratulate him, and said “I am going to be the president of all Chileans,” in his brief TV appearance. 

Boric will take over the office in March, and was able to win the majority of the votes from the public by committing to change the lasting effects from the 1973 to 1990 dictatorship. He plans to raise taxes on the “super-rich” in order to expand social services, fight inequality and focus on ways to help the economy into the green movement by implementing more environmentally friendly methods for production.

“We are a generation that emerged in public life demanding our rights be respected as rights and not treated like consumer goods or a business,” Boric said. “We know there continues to be justice for the rich, and justice for the poor, and we no longer will permit that the poor keep paying the price of Chile’s inequality.”

Mining Companies Wait for Decisions

As Chileans celebrate the young leader and his potential, important and necessary changes the country needs, it is somewhat unclear how the mining industry will adapt to new changes from the millennial president. As talks of a greener economy continue, Boric does not want to take away incentives to invest in the mining sector, according to Kracht, head of the mine engineering department at the University of Chile and a director at copper research center CESCO. However, Boric may find difficulty balancing his agenda with balancing the success of the country’s mining industry.

“There’s no intention to change the rules of the game, just to strengthen institutionality so that things function better,” Kracht said. 

Chile is home to some of the biggest copper mining companies in the world, including state-owned Codelco, BHP Billiton (ASX:BHP), Glencore (LON:GLEN), Anglo American (LON:AAL) and Antofagasta (LON:ANTO). Having this many big miners in one country shows the work Boric has cut out for himself in the coming years.

The National Mining Society (Sonami) said in a statement that voters have “sent a clear message” about the need to maintain Chile’s economic and social development. “We trust that the spirit of programmatic convergence, moderation and openness to dialogue shown during the last week of the campaign will prevail,” it added.

However, an already alarming decision has already been made from Boric regarding future mining operations. He pledged to oppose the $2.5 billion iron-copper mine, known as the Dominga mine, which was just approved in August after years of legal battles back and forth. 

“We don’t want more ‘sacrifice zones’ (areas of high pollution), we don’t want projects that destroy our country, destroy communities and we exemplify a case that has been symbolic: No to Dominga,” Boric said. 

This is an environmentally controversial project that investors will be watching out for in the future. His pledge to oppose the mine could be seen as a warning shot for companies outside of ESG compliance. Besides such projects, the economic benefits of the mining industry and the large windfall taxes they produce for the country will be at the top of every discussion for Chile’s Constitutional Assembly.

Environmental reform is only one side of the agenda for the incoming President, and while some projects will need to adjust to regulations or shifts in the economic climate, the mining industry is prepared to deal with challenges from a shifting political climate.

Multiple Mineral Channels

Chile is also home to the world’s largest lithium reserves, the important metal that is being used around the world for mainly electric vehicle batteries. These EV batteries eliminate the need for gases and fossil fuels, which have a huge negative impact on the environment. 

Boric in the past has criticized privatization in the mining sector and would like to see the state have its own lithium firm. The country is also debating raising taxes on mining firms, which Boric supports, along with a stalled bill to protect glaciers in the mineral-rich Andes. The mining industry fears this new bill could potentially “risk current mines and obstruct new ones.”

Firms affected by these potential changes include Codelco, as well as Anglo American’s Los Bronces, Los Pelambres of Antofagasta, and Caserones, linked to JX Nippon Mining. While major mining companies may see their tax bills rise, junior mining companies could remain largely unaffected as this only applies to certain larger thresholds for projects that exploration companies might not pass. 

Boric is passionate about saving the environment, but also understands these changes need to be gradual in order to support its mining firms and economy. 

“Not everything can be done at the same time and we will have to prioritize to make progress that allows us to improve, step by step, the lives of our people,” he said.

It is unclear how the decisions of the new, young president will pan out. The environment is an important and necessary aspect of life for everyone, and the mining sector is an important and crucial part of the economy. Mining companies will be anxiously watching for signs of a friend or foe in the Presidential Palace.

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

By Matthew Evanoff

I cover the mining industry and the best mining stocks around the world. I write about industry news, individual companies, projects, management, and profiles on industry leaders.

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