Chile’s Critical Minerals and the Need for a Stronger Exploration Push
By Daniel Weinstein

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Chile has long been recognized as a global mining powerhouse, with vast reserves of key minerals
essential for modern industries and the global energy transition. As the world moves towards
electrification and renewable energy, the demand for critical minerals—such as copper, lithium, rare
earth elements, molybdenum, and cobalt—is increasing rapidly.

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Chile stands out as the world leader in copper and rhenium production and reserves, the second-largest
producer of lithium (although it has the largest reserves), and a key player in molybdenum and other
strategic minerals. However, despite this geological advantage, Chile must take proactive steps to
promote mineral exploration to maintain its leadership and fully capitalize on its potential.

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The Need to Boost Mineral Exploration

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For decades, Chile has been one of the most attractive mining investment destinations globally, thanks
to its regulatory certainty, well-developed mining ecosystem, and investor-friendly legal framework.
Foreign investment has played a crucial role in developing its mining sector, with most exploration and
development funding coming from international players. However, exploration activity has not kept
pace with demand (although Chile remains the fourth largest recipient of exploration investments, after
Canada, Australia, and the USA), particularly for minerals that are becoming increasingly critical to the
global supply chain.

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A major challenge is that Chile’s greenfield exploration pipeline is not as dynamic as it should be. Many
companies and investors hold mining concessions without necessarily developing them, as Chile’s
regulatory framework does not require financial or technical commitments for acquiring or maintaining
mining claims. This system provides strong certainty and security for investors, but it also results in
underutilized exploration areas, with companies effectively “parking” concessions without active
development.

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Moreover, lithium has a different regulatory framework than the rest of the minerals, and the
challenges to reclaim the place of the largest lithium producer that was lost to Australia in 2017 have
specific considerations, which will not be addressed here.

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Regulatory and Policy Measures to Enhance Exploration

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To unlock Chile’s full potential in critical minerals, several regulatory and legal measures could be
considered to incentivize exploration investment and create a more dynamic ecosystem:
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1. Tax Incentives for Exploration

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- Flow-Through Shares: A model used in Canada, where investors can deduct exploration
expenses from their taxable income, making early-stage exploration projects more attractive.

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- VAT Reimbursement for Exploration Companies: As exploration companies generate losses
before discovering economically viable deposits, they are unable to deduct VAT from earnings.
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2. Reforming Mining Concessions to Encourage Active Exploration

Chile currently grants mining concessions without requiring proof of financial or technical capability, and
there is no mandatory minimum investment to retain them. This ensures legal certainty, but it also leads
to inactive or speculative holding of claims.

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Mining fees increased for the first time in decades for exploration concessions in 2024 and will increase
for exploitation concessions in March 2025. In the case of exploitation concessions, an exemption to the
increase can be requested when there is advanced exploration or when the project is being developed.
These measures have the potential to open opportunities to new players, but their success will depend
on the capability of attracting companies willing to invest in exploration.

Potential reforms could include:
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- Reduced fees when exploration is taking place in exploitation concessions, broadening the
current framework to include early exploration works as well. As long as it can be demonstrated
that exploration activities and expenditures are occurring, reduced fees should apply to
incentivize all stages of exploration.

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- Exploration expenditure commitments: A requirement for concession holders to conduct a
minimum level of exploration work to retain their claims. These expenditures should be
deductible from mining fees or completely replace them.

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- Strengthening the secondary market for concessions: Encouraging earn-in and joint ventures to
facilitate the entry of new investors. Chile has a robust legal framework for this kind of deal, but
both current owners and potential investors, especially from abroad, need to be in contact.
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3. Strengthening Public-Private Partnerships for Critical Minerals

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- Chile already has world-class geological and technical expertise through institutions like
SERNAGEOMIN and COCHILCO. Expanding public-private collaborations can support data-
sharing, geological surveys, and the identification of promising deposits.

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- Creating specific funds or incentives for exploration in critical minerals could align Chile with
global trends in securing supply chains.

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- Building partnerships with countries looking to secure a supply of critical minerals. Chile has
been a reliable partner in the mining industry for decades, offering unparalleled stability and
respect for agreements.

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Chile’s Competitive Advantages Remain Strong

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While challenges exist, Chile remains one of the best places in the world to invest in mining. The country
offers political and economic stability, a strong legal framework, and a deep mining ecosystem. Unlike
other jurisdictions, Chile has not expropriated or nationalized mining assets for over five decades and
provides constitutional and legal protections for both mining activities and investors.
Moreover, Chile has a strong network of service providers, a skilled workforce, and robust
infrastructure, making it an ideal hub for mining investment.
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Conclusion:

Chile’s vast mineral wealth, particularly in critical minerals, gives it a natural competitive edge. However,
maintaining leadership requires more than just having rich deposits—it requires proactive policies to
attract exploration investment and develop new projects.
The world is looking for reliable sources of critical minerals. Chile has the potential to be a key supplier,
but it must take strategic steps today to secure its role in the future.

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