Chile mining sector remains key driver of national economy

Chile’s mining industry remains the highest recipient of foreign direct investment in the national economy since 2022. The sector is anchored by two critical minerals: copper and lithium. In 2024, copper production reached 5.5 million tons, marking a five percent increase over the previous year. The average copper price for 2024 sat at $4.18 per pound, with estimates for 2025 rising to $4.25 per pound.

Codelco and the Mining Royalty Law

The Chilean government estimates that state-owned mining company Codelco owns and operates 30 percent of the country’s copper mines, while private companies control the remaining 70 percent. Major U.S. investors in the market include Albemarle Corporation of Charlotte, North Carolina, and Freeport McMoran Copper & Gold Inc. of Phoenix, Arizona.

Operational costs for these companies were impacted by the 2024 implementation of the Mining Royalty Law. This government initiative reformed taxes on large-scale operators. Companies with annual sales exceeding 50,000 metric tons (MT) of fine copper—where copper makes up more than 50 percent of sales—face a one percent ad valorem tax on annual sales. Additionally, a tax between eight and 26 percent is applied to the Adjusted Taxable Mining Operating Income (RIOMA). Operators producing over 80,000 MT of fine copper may face a maximum tax of 46.5 percent on their RIOMA.

Lithium Reserves and the National Lithium Strategy

Chile holds 36 percent of the world’s lithium reserves, largely found in brine deposits beneath salt flats, according to the USGS. Production output rose from 44,300 MT of lithium content in 2023 to 49,000 MT in 2024. The average price for battery-grade lithium carbonate was estimated at $14,000 per metric ton in 2024.

Currently, only two companies are active in the extraction industry: Albemarle Chile Ltda. and Soquimich S.A. (SQM), the latter of which is associated with Tianqui, which owns 24 percent of SQM. To manage the future of this sector, President Boric launched the National Lithium Strategy in June 2023. This policy utilizes public-private partnerships to involve the state across the production cycle, from exploration to manufacturing.

As part of this strategy, the government established the National Lithium Company. This state-owned enterprise uses private tenders to attract capital and innovative technology for sustainable development.

Supply Chain Barriers and LFP Battery Demand

Chile’s role in the global energy transition is tied to lithium carbonate, of which the country holds 61 percent of global reserves, according to Columbia University. This material is the primary ingredient for lithium iron phosphate (LFP) batteries. These are considered safer and cheaper than nickel, manganese, and cobalt (NMC) alternatives that rely on lithium hydroxide.

Despite the demand from electric vehicle producers and American battery manufacturers, accessing brine deposits is more difficult than traditional hard rock mining. The Center of Global Energy Policy at Columbia University reports that it can take approximately seven years from an initial investment decision to reach first production due to complicated permitting rules and long lead times.

To address these delays, the Chilean Senate is currently reviewing the Smart Permit System law, which intends to streamline the processing times for sectoral permits.

Industrial Mining Suppliers and U.S. Exports

The supporting infrastructure for the mining sector is substantial. In 2022, there were over 3,000 official suppliers with combined sales exceeding $13 billion, according to the Association of Industrial Mining Suppliers. The United States provided roughly 20 percent of the parts and equipment for the sector.

Export opportunities remain for companies that can provide services resulting in operational cost reductions, improved productivity, and more efficient use of water and energy, as well as cleaner and safer processes.