Government fails to encourage investment from junior companies

The Mining Ministry has recognized its failure to encourage junior mining companies to invest in exploration. During the inauguration of the Exploration Forum 2019, the Undersecretary of Mining, Mr. Pablo Terrazas, confirmed that they have not been successful in encouraging junior mining companies to explore.

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The Mining Ministry has recognized its failure to encourage junior mining companies to invest in exploration. During the inauguration of the Exploration Forum 2019, the Undersecretary of Mining, Mr. Pablo Terrazas, confirmed that they have not been successful in encouraging junior mining companies to explore.

He said «Good platforms are missing that can be used by junior mining companies to identify interesting concessions and areas (…) Developing a new exploration market requires evaluating financing mechanisms and analyzing initiatives that were not successful.»

In fact, the Venture Capital Investment Fund Financing Program, known as the Phoenix Funds, was one of these failed initiatives. During the first government of Mr. Sebastián Piñera (2010-2014) a US$150M fund was created to finance exploration projects in Chile.

At that time, 11 fund managers presented their bids to finance 26 projects through six investment funds. The winners were: IMT Exploración Minera, FIP MIning Equity, Asset Chile Exploración Minera, FIP EPG Exploración Minera, FIP Mining and FIP Lantánidos.

When the Chilean Economic Development Agency (CORFO) distributed the money to the fund managers, it expected all the funds to have been invested within a 10 year period.

However, eight years have passed and only one initiative has achieved significant progress. The Biolantanidos project is owned by Minería Activa and received the largest funding allocation from the program, being US$13.5M. It was allocated to innovating and developing new extraction and processing methods for clays in southern Chile, to open up opportunities to produce rare earths.

The initiative has reached the Environmental Assessment stage, and consists of constructing and operating a mine, along with a processing plant with a production capacity of 1,700tpa of rare earth concentrates.

IMT Explorations and Asset Chile received US$15.3M and US$15.8M to execute six and eight projects, respectively. They have not yet reported results nor shown a return on this investment.

Sources linked to the investment funds believe that the Phoenix Funds initiative did not prosper because there was no schedule for releasing funds and reporting results.

An executive questioned by CEXR said «There were no clear deadlines. The funds were released and everyone then did what they believed to be correct.»

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