Anglo American’s El Soldado copper mine in Chile is currently facing significant environmental charges from Chile’s Superintendency of the Environment (“SMA”), which threatens the company with the potential loss of its environmental permit, mine closure, or financial penalties exceeding 12 billion pesos (around USD 12.4 million). These charges have placed the company’s local operations at risk and have sparked considerable concern within the corporate and governmental sectors. “It remains to be seen whether the relationship between the company and the authorities deteriorates to the point of making this collaborative process unworkable,” mused a mining development consultant.

The charges against Anglo American stem from several alleged infractions that have raised alarms among environmental watchdogs. One of the main issues cited by the SMA is poor water management practices at the El Soldado mine, specifically related to an incomplete drainage system. The failure to implement effective water management systems is particularly troubling in a region like Chile, which faces recurring water scarcity. In addition, the company is accused of neglecting its responsibilities toward the conservation of the vulnerable ‘Sapo rulo’ frogs, with 3,867 of these frogs reportedly left unmonitored.

In response, Anglo American has requested a meeting with regulators to present a compliance plan and formally defend its practices. Our mining industry sources were not worried, “It is not a given that the fine will ultimately be issued and it depends on how well the company responds to the service’s requirements.”

The regulatory scrutiny faced by Anglo American is a clear reminder of the importance of maintaining environmental stewardship, especially in sectors as impactful as mining. “A concern for companies in general and particularly for mining companies is the high level of discretion in the decisions of environmental authorities, at the project approval stage, where the Ministers of the Committee of Ministers have rejected projects that had all the approvals from the technical bodies,” confided the former executive. “This body is facing serious criticism for making decisions without proper justification.”

The former mining executive noted, “The majority of the population and the electorate in Chile is currently more concerned about the recent bad economic situation and the lack of employment.” The executive continued, “If the population perceives extreme attitudes of the government against companies that provide jobs, it risks damaging its popularity, which the government appears very concerned not to do as this is an election year.”

“If the population perceives extreme attitudes of the government against companies that provide jobs, it risks damaging its popularity, which the government appears very concerned not to do as this is an election year.”

A former executive of a mining company, Chile

The mining giant’s environmental, social and governance (“ESG”) rating has also been downgraded by MSCI, a global provider of investment decision support tools. The lowered ESG rating could have far-reaching consequences, as it might result in reduced investments from funds that prioritise strong ESG practices. MSCI’s decision to downgrade the ESG scores of around 31,000 funds, including Anglo American’s, is part of a broader overhaul of its rating methodology, which follows feedback indicating an “upward drift” in ESG ratings.

In addition to these challenges, Chile contributes to growing uncertainty for businesses operating in the country. “There are numerous examples of severe disputes between the authorities and companies, for example, major salmon producers.” The former mining executive believed this to be due to “the government’s strong anti-business bias.”

“In the case of Chile, it is striking that mining companies have undertaken no major new projects...which suggests that mining companies do not consider the country sufficiently attractive to attract new investment.”

A former executive of a mining company, Chile

Business leaders fear that these environmental regulations could be used as a tool for unjustified pressure and attacks by the Chilean state. This has led to concerns over the potential for disproportionate fines, as seen in the case of Anglo American’s El Soldado mine. A source speculated, “I would be surprised if the company wanted to continue doing new business in Chile.” The mining expert expanded, “In the case of Chile, it is striking that mining companies have undertaken no major new projects, but rather expansions and developments of existing operations, which suggests that mining companies do not consider the country sufficiently attractive for new investment.”

Our sources agreed that stricter permitting processes are unlikely, as permitting is already a major barrier to investment. Instead, “there is a consensus across the board that the systems should be much simpler, more transparent and more agile to facilitate investment and operations.” The former executive reiterated that the “lack of rigour and excessive discretion in enforcing regulations” is fuelling widespread uncertainty about Chile’s regulatory environment. The executive added, “Sadly, the situation under the current administration is only getting worse.”