Mining exploration: The unknown world of gold and copper prospectors in Chile

The vast majority are small businesses not local, but come from Canada or Australia.

Before the millionaire exports of copper or gold to the international market, there is an activity that normally does not shine so much and is even little known, but that is fundamental if not even the most important for the main business of our country to grow or maintain: the mining exploration.

Last year alone, the industry invested US $ 458 million in this area, distributed among 101 companies, according to the latest Cochilco “Mining Exploration Companies Registry 2020”.

Of course, most of the companies that carry out this activity are not national, but come especially from Canada and Australia, and are generally smaller firms, the so-called “junior miners”, known for detecting deposits and then selling them to larger players. . Although the large mining companies also carry out exploration tasks, in fact their budgets are much larger, but in general they are associated with the growth of their own operations.

Using geological mapping, sampling and drilling, the explorers quietly scour the country in search of deposits, mainly copper and gold, which are increasingly remote and even inaccessible, at a time when current operations show fewer and fewer grades of mineral. Once the deposits are found, the companies are awarded the exploitation rights. Therefore -and especially in its early stage-, exploration is considered a high economic risk activity due to the low success rate of the projects: 1 in 10 mining prospects end up in projects, while a smaller part is converted. in operating mining companies after more than 10 or 15 years.

Although the large mining companies accumulate 85% of the budget for exploration, “it is the smaller companies, the junior ones, that take the high initial risk in the markets and favor exploration for new discoveries”, explains Eric Medel, market and industry analyst at Plusmining.

The financing of junior companies comes mainly from venture capital, generally from stock openings in Australia, Canada and the United States. To this are added the economic aid from the same countries of origin. “Normally, Canadian and Australian companies have some tax incentives, such as the deduction of some taxes related to exploration,” says Diego Hernández, president of Sonami.

However, a high risk is rewarded by a large profit: companies generally sell the deposits found to large mining companies or partner with them to share part of the income from production, since they do not have sufficient financing to pay for extraction.

Although in previous periods the bulk of the projects were located in the Antofagasta Region – an area controlled by the major and highly exploited companies – Cochilco’s balance sheet places Atacama as the preferred one in 2020.

From Sonami they warn that the unexplored territory and that it is not covered by exploitation rights is little, forcing exploration companies to look for alternatives throughout the country. Hernández says that “junior companies go mainly to the coast, where there was or is some type of small-scale exploitation or mines that were closed because they were not economically viable, but today they are.”

The great productive and geological base of the territory, added to good regulation, continue to position Chile as one of the most attractive destinations for the mining industry: it currently holds the first place in exploration budgets in the region and the fourth worldwide, with 5% of the total.

However, the outlook is far from ideal. “The attractiveness of the country has been stagnant in recent years, as a result of unfavorable conditions in the Canadian copper market, and of lb. The complexity of aspects related to the regulatory and environmental framework ”, warns Medel from Plusmining.

While an eventual new Constitution generates concern in the industry. “Chile has deteriorated a bit, and with a change in the Constitution and some wonder if the same conditions that have allowed us to make all the investments will be maintained,” Hernández believes.

Source: La Segunda

Translated with Google Translator