An eco-friendly mine development in Chile, the world’s largest copper producer

Copper is used in a wide range of applications, including power transmission and wiring, electric vehicles, renewable energy systems, and semiconductors. Demand is expected to increase even more due to its use in AI and data centers. KATAYAMA Hiroki, SASAKI Kota, and MORISAKI Momoko of JBIC's Mining and Metals Finance Department, Division 1, explain the importance of Chile from the aspect of mineral resources, and the initiatives taken for environmental and social considerations in mine development.

What is the relationship between Japan and Chile in terms of copper resources?

MORISAKI When people hear “Chile,” wine and foods such as salmon that are a part of our daily lives might generally come to mind, but from the perspective of mineral resources, Chile is the world's leading "copper powerhouse,” holding more than 20 percent of the world's reserves and production.

It is also Japan’s largest copper supplier, and so in terms of the Japanese government's resource diplomacy, it is positioned alongside Middle East oil-producing countries as a traditional stable resource supplier. Japan imports all of its copper concentrate, the raw material used to make copper, meaning a long-term, stable supply is vital; Chile fulfils that crucial role.

What are the key points in developing business there?

KATAYAMA Mine developments are long-term developments requiring a large amount of investment, and so a country’s risk profile is extremely important. In this respect, Chile is an OECD member regarded as a “developed country in South America” that is politically and economically stable.

Another very important advantage is the country’s emphasis on attracting foreign investment to drive economic growth and its track record of maintaining a business-friendly environment. Even in the process of formulating the New Mining Royalty Law, enacted in 2023 to implement a special mining tax, the government held talks with the mining industry and other stakeholders, reaching an acceptable consensus.

SASAKI Similar to Brazil and other Latin American countries, there is an issue with the time difference since it is located on the opposite side of the world from Japan. Flying to Chile is also work in itself since it takes about 30 hours including transit. However, public safety is good, and depending on the place, you can basically go out at night without fear. The people of Chile are very diligent and appear to have a strong affinity with Japanese work styles compared to other Latin American countries.

What environmental and social initiatives are taken in copper mine development?

MORISAKI One notable feature of Chile is how thorough it is regarding environmental and social stewardship in mine development, with the government requiring a wide range of permits. I was able to get a real sense of this when I visited the country in 2023 for an environmental survey of a new project. Several hundred permits and approvals related to the mine development were required. In addition to permits for the mine development itself, an environmental impact assessment report for the entire project had to be approved, and a range of measures were required to meet the necessary conditions and commitments.

One example is the protection of vegetation in the developed area. Plants that can be transplanted are transplanted, but this is not possible for some species. In such cases, seedlings are planted, sometimes as many as 10 times the original number of plants in the planned area. If the habitats of certain species of reptiles or mammals are confirmed, their nests will also need to be moved to another location. There are also times when archaeologically significant sites are unearthed after mine excavation begins, in which case the plans for the mine development area itself may be changed.

In search of new copper deposits, mine developments are taking place on higher ground and farther into the backwoods. Lenders need to determine whether the economic feasibility of a project can be secured while conducting "responsible production," including construction safety and environmental impact.

KATAYAMA Securing water resources is a perennial issue in Chile, and notably, there are many copper mines in the desert area in the north of the country, which has severe water shortages. Copper mines require large amounts of water, raising concerns that diverting from rivers and groundwater will disrupt the supply for local residents and negatively impact the ecosystem. To avoid this, measures have also been taken in recent years to use seawater desalination plants to draw water from the sea to inland mine sites. Consideration for local communities is paramount for developments.

SASAKI The current Boric administration is particularly conscious about giving back to the people through resource development, but Chile is a country that has long emphasized environmental and social stewardship. When doing business in Chile, it is important to keep in mind that even higher levels of environmental and societal consideration may be required in the future.

Meanwhile, at the copper mines, they are trying to build sustainable production systems that take into account the environment and safety. These include switching to renewable energy sources, recycling water, and automating and remotely operating dump trucks. We will be keeping a close eye on future developments.

Are there any other resources besides copper that we should be paying attention to?

KATAYAMA In the mineral sector, that would be lithium. Demand is increasing, especially for use in EVs, and many countries are focused on its acquisition. Chile ranks among the top three countries in the world for both lithium reserves and production. Under the National Lithium Strategy, Chile’s government is implementing a state-led initiative to develop it as a strategic commodity. It has signaled its intention to promote its development by partnering with overseas companies with technologies for direct lithium extraction, which has a lower environmental impact and is more efficient than the conventional lithium brine extraction method. This presents opportunities for Japanese companies.

In November 2023, JBIC signed a Memorandum of Understanding (MOU) with Corporación Nacional del Cobre de Chile (CODELCO), which plays an important role in the National Lithium Strategy, with the objective of promoting collaboration between CODELCO and Japanese companies in the sectors of critical minerals, such as copper and lithium, and decarbonization, and to accelerate the structuring of projects.

SASAKI From the perspective of decarbonization, hydrogen is another area where business opportunities for Japanese companies will probably expand. Chile has abundant renewable energy sources, with solar power in the north and wind power in the south, and its competitiveness ranks among the top in the world. To make green hydrogen, which is produced using these renewables and has been set as the state’s next driver of growth, the government of Chile released its National Green Hydrogen Strategy in November 2020. It aims to establish a production system for the world's most affordable green hydrogen by 2030, and become one of the world’s leading hydrogen exporters by 2040.

In response to such trends, JBIC signed an MOU with Chile's Ministry of Energy in August 2023 to promote the development of green hydrogen and ammonia. I hope that the relationship JBIC has cultivated with Chile will be strengthened in these new areas as well, so that we can further support Japanese companies in developing their business.