UPDATE: Several Large Copper Miners To Opt For New Chile Royalty

Several of Chile's largest private mining companies have opted for the new copper royalty structure, Mining Minister Laurence Golborne said Wednesday.

Earlier this week, BHP Billiton Ltd. (BHP, BHP.AU)'s mines in Chile --Escondida, Spence and Cerro Colorado-- opted for the new tax structure which will increase the average income tax currently paid by two to four percentage points, depending on international copper prices.

The government moved to increase the royalty copper miners were paying to in part finance reconstruction efforts following the 8.8-magnitude quake that ravaged the country in early 2010.

The quake, the fifth strongest on record, left behind damages totaling $30 billion, of which the government will foot $8.4 billion.

Under the new structure, which is voluntary, copper producers could pay a royalty of up to 14%, based on their sales and world copper prices.

Among the companies adopting the modified tax are Antofagasta PLC (ANFGY, ANTO.LN), Anglo American PLC (AAUKY, AAL.LN), Xstrata plc (XTA.LN), and Freeport-McMoRan Copper & Gold Inc. (FCX).

Antofagasta's three Chile mines, Los Pelambres, El Tesoro and Michilla, as well as its Esperanza project coming on line, will pay the new taxes.

Anglo's Sur operations, which includes the Los Bronces mine, and its 44% stake in Collahuasi will also move to the increased tax.

Collahuasi spokeswoman Bernardita Fernandez confirmed that all of Collahuasi's other owners, Xstrata and a consortium led by Mitsui & Co. (MITSY, 8031.TO), also opted for the new tax.

With these companies opting for the new structure, about 80% of private copper output will now pay higher taxes, Golborne said.

"We hope by next week's [deadline to adopt the new tax], 90% of production will be under the new structure, Golborne said in speech in which he gave a review of last year and details the ministry's plans for 2011.

He added that the tax increase will bring in an additional $1 billion to fiscal coffers in 2011-2013.

In the case of Anglo American, some of its mines might not opt for the new tax structure as they have a shorter life span, the company's chief executive in Chile Miguel Angel Duran told reporters after the speech.

Duran, who also heads the Consejo Minero mining trade group, said mining companies had evaluated their operations in detail before deciding to switch over and that less profitable, smaller or older mines would likely opt to stay with the previous royalty structure.

With the previous structure, the large-scale copper mining companies that opted for the voluntary royalty that went into effect in 2005 paid a tax of 4% on their copper sales.

The Consejo Minero represents the country's largest copper, gold and silver companies, most of which are units of the larger global diversified miners.

For its part, Freeport said it opted to pay the new royalty on the copper output from its Candelaria mine and the 51% stake it controls in the El Abra mine. State copper giant Corporacion Nacional del Cobre de Chile, or Codelco, holds the other 49%.

Freeport "had decided to adopt the new structure of the mining tax...with the understanding of the positive impact it will have on the reconstruction of the areas the February earthquake and tsunami devastated," the company said in a statement.

-By Carolina Pica, Dow Jones Newswires; 56-2-715-8919; carolina.pica@dowjones.com

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