Population 16.6 millions Unemployment (seasonally adjusted) 7.0% - - PowerPoint PPT Presentation

▌2007 figures Population 16.6 millions Unemployment (seasonally adjusted) 7.0% GDP (current prices) $ 163.9 billions GDP per capita (current prices) $ 9.884 Total Trade $ 111.6 billions Trade Balance $ 23.6 billions Current Account (% of GDP) 4,4% Inflation (Dec/Dec) 7.8% Fiscal Balance (% of GDP) 9.0%

Source: Chilean Central Bank, IMF, National Institute of Statistics.

Chile has free-trade agreements with the main economies of the world, and it is also an associated member of Mercosur.

Source: Chilean Central Bank.

▌World Copper Production 15.5 m tons. (#1) ▌World Molybdenum Production 216 k tons (#3) ▌World Gold Production 2,207 tons (#16) ▌World Silver Production 19,694 tons (#5)

World ; 64% Chile; 36% World; 79% Chile; 21% World ; 98% Chile; 2% World; 91% Chile; 9%

Source: Chilean Copper Commision.

“La Moneda”

Ministry of Mines

• Chilean Copper Commission (Cochilco)
• National Geology and Mining Service (Sernageomin)

Agencies

• Chilean Copper Corporation (Codelco)
• National Mining Corporation (Enami)

Companies

• Mining and Metallurgy Research Centre (CIMM)

Research Centre

Using Foreign Investment Law (DL 600), foreign investors enter into a contract with the Foreign Investment Committee, which acts on behalf of the government of Chile, granting fixed tax rates, repatriation of profits at any time, foreign currency accounting and other benefits. Chilean law does not allow monopolies in production of steel or steel-related raw materials (i.e., iron, manganese, molybdenum). Free competition is protected and guaranteed by the Antitrust Department and the Free Competition Tribunal. Concessions (exploration or exploitation) takes the form of a legal contract subject to review by the courts rather than by an administrative authority, reducing unpredictability.

In the exploration stage, there is not discrimination between domestic or foreign investors. The Chilean labour legislation does not restrict foreign staff and managers in any sector of the economy. As a conclusion, Chilean law makes no distinctions among economic sectors or

• wnership types, that could give rise to discriminatory or preferential treatment

among nationals or to foreign investment.

A specific tax on mining activities came in force on January 1, 2006. The tax is applied to mining companies whose sales are equal to or greater than the equivalent value of 12,000 metric tons of fine copper. It varies from 0% (less than 12 thousand tons) to 5% (more than 50 thousand tons), and the tax base is applied to the net operational income It also modifies Foreign Investment Law (DL 600), allowing investors to opt to a new tax invariability for the following 15 years.

Investment Promotion Trade-Related Support Assistence to Ailing Enterprises We did not found any important government support measure -described in the survey- in areas such as:

Created in 1993 by the Ministry of Mining, is oriented to small-scale miners (mostly subsistence miners) acting in metallic and non metallic extraction, in order to improve their quality of life. In 2007 it financed 314 projects for around US$ 1.5 million, benefiting two thousand subsistence miners, and made a total of 28 courses to 890 miners.

“Titanium Tower”

1888

• The Chilean Iron and Steel Industry started with a feasibility study and the request of government

support.

1939

• The government created an agency to promote infrastructure, with the I&S industry as a priority.

1946

• A Steel Commission is created by the Ministry of Economy, that later laid the groundwork for

CAP (Compañía de Aceros del Pacífico) as a public-private company, under private management.

1970

• In the beginning of the “Popular Unity” Government,

CAP became a part of the “social

• wnership area”, becoming an state-owned iron monopoly.

1980-87

• CAP´s “new privatization” lasted from 1980 to 1987. The company was sold into the stock market

and to the government workers.

Domestic production meets about 70% of local market needs and the remaining 30% is imported mainly from Brazil, Argentina and China. Only a small share of locally made rolled products is exported, while 90% is sold locally. 0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 10 20 30 40 50 60 2003 2004 2005 2006 2007 Share (%) Production (m tons)

▌Steel Production

Chile South America Chilean Production Relative to World (%)

Chilean steel market is served by two producers (CAP and Gerdau Aza), which provide around 70% of domestic needs of 2.4 million tons. Most of the Chilean iron and steel mining business is led by CAP subsidiaries, a former public company. Vertically integrated for secure a stable supply of raw materials, has 66% share of the market. Gerdau Aza, subsidiary of Brazilian Gerdau, is a scrap recycler that produces the remaining 33%.

Construction Industry Growth Through the past five years nominal construction spending has increased 27.8%, representing 7.2% of GDP in 2007.

Construction 33% Forming Industry 25% Mining 19% Wiredrawing 11% Others 12%

▌Demand by Sector

The apparent consumption per capita has increased 35% in the last five years, reaching 151 kg/capita in 2007, due to growth of mining and construction sectors, that set us above the regional average

• f

102kg/capita.

Europe; 7,496 Nafta; 4,354 C&S America; 128,063 Asia- Pacific; 16,223 Africa; 107 ROW; 354

▌Exports (tons): 156,9 k tons

Changes in trade by origin/destination: Increase in exports to South American countries (mainly Peru) and a decrease to NAFTA countries; in imports there is a change in sourcing from CIS and NAFTA, to Asia-Pacific countries.

Source: Chilean Customs.

Within the context of the Iron and Steel Development Plan, CAP production will increased its capacity to 3 million tons a year, effective 2013. Gerdau Aza plans to increased its production capacity from 520 to 800 thousand tons, effective 2011.

Before financial crisis, the local steel industry was facing growth opportunities in local and regional markets, without threats to its long-term viability.

0.0 0.5 1.0 1.5 2.0 2.5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 m tons

▌Steel Production

Capacity Total Production

• Prod. BOF
• Prod. EF

Forecast Historic

Source: ILAFA.

“Division Andina, Codelco”

Molyddenum (tons fine) 4,039 Manganese (tons ore)

• Iron Ore (m tons ore)
• Molyddenum (tons fine)

19,065 Manganese (tons ore)

• Iron Ore (m tons ore)
• Molyddenum (tons fine)

1,214 Manganese (tons ore)

• Iron Ore (m tons ore)

6,840 Molyddenum (tons fine) 10,157 Manganese (tons ore) 26,808 Iron Ore (m tons ore) 1,977 Molyddenum (tons fine) 2,525 Manganese (tons ore)

• Iron Ore (m tons ore)
• Molyddenum (tons fine)

5,192 Manganese (tons ore)

• Iron Ore (m tons ore)

6,840 Molyddenum (tons fine) 2,583 Manganese (tons ore)

• Iron Ore (m tons ore)
• Molybdenum is produced in the central and

north of Chile, in zones where copper mining is important. Iron ore and Manganese production is more geographically concentrated.

Source: Chilean Copper Commision

Chilean share of world iron resources and reserves is only 0.5% (1.5 billion tons of mineral), and the production is 8.8 million tons of mineral, made by two companies. A 23% of this production is exported mainly to China, Japan, Peru, Indonesia, United States, Malaysia and Australia. Bulk Iron exports grew 85% between 2003-07, to 3.5 thousands tons, and Pellet iron exports decreased 9% to 3.2 thousands tons.

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 500 1000 1500 2000 2500 2003 2004 2005 2006 2007 Share (%) Production (m tons)

▌Iron ore Production

World Total Chile Chilean Share

Source: USGS, Chilean Copper Commission.

There are new projects and investment oriented to sustain domestic demand and increasing exports. The biggest one is part of the Iron and Steel Development Plan by CAP that considers an US$2.5 billion investment. Although, some of the projects could suffer a delay under the current economic circumstances.

Manganese reserves and resources in Chile are marginal (0.25% of world reserves), as well as ore production, which in 2007 stood at 26.8 thousands tons (slightly under 0.1% of world production). Only one company produces the mineral, Manganesos Atacama, related to CAP. Chilean International Trade ore and products (alloys) is marginal on a world basis.

0.00 0.03 0.06 0.09 0.12 0.15 5 10 15 20 25 30 35 40 45 2003 2004 2005 2006 2007 Share (%) Production

▌Manganese Production

Chile (ktons) World (Mtons) Chilean Share (%)

Source: World Bureau of Metals Statistics.

Chile has the third largest reserves and resources of Molybdenum in the world (13% of world reserves), after China and United States. The production in 2007 stood at 44.9 thousands tons (slightly over 21% of world). Chile processes Moly to produce different products. Concentrates are processed to

• btain

different products by

• nly

three companies: Codelco Norte Division (Codelco), Alto Norte Smelter (Xstrata), Nos Plant (Molymet).

5 10 15 20 25 30 50 100 150 200 250 2003 2004 2005 2006 2007 Share (%) Production (ktons)

▌Molybdenum Production

Chile World Share (%)

5 10 15 20 25 30 35 40 45 2003 2004 2005 2006 2007 Production (ktons)

▌Molybdenum Products

Concentrates Oxides Trioxides Ferromolybdenum

Source: World Bureau of Metals Statistics. Source: Chilean Copper Commission.

Chilean mine production of Mo is obtained entirely as a by-product of copper mining only by five companies. International Trade of Moly products is relevant for Chile ($ 4 billions in exports in 2007 – 6% of total Chilean exports), meanwhile significant imports of Concentrates came from Peru and Mexico, and exports of Oxides and Concentrates are made to Europe and Japan.

10 20 30 40 50 60 2003 2004 2005 2006 2007 Production (ktons)

▌Production by company

Codelco Anglo American Sur Pelambres Collahuasi Valle Central

Source: Chilean Copper Commission.

• Molymet new plant in Mejillones
• Codelco new plant in Mejillones
• Alto Norte toaster expansion

New processing plant facilities:

• Minera

Escondida molybdenum concentration facilities

• Other

mine capacity expansions (Anglo American Sur, Pelambres, Collahuasi, others)

Expand Mining Capacity: However, this projects are under review due to current economic conditions.

Price Index (base 2003=100)

100 200 300 400 500 600 700 800 ene-04 mar-04 may-04 jul-04 sep-04 nov-04 ene-05 mar-05 may-05 jul-05 sep-05 nov-05 ene-06 mar-06 may-06 jul-06 sep-06 nov-06 ene-07 mar-07 may-07 jul-07 sep-07 nov-07 ene-08 mar-08 may-08 jul-08 sep-08 nov-08 Nickel Molybdenum

Source: Cochilco.