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Monday, January 09, 2023 2:01:33 PM
Grupo_Errázuriz cites_Codelco for non-compliance in lithium_exploration
of Maricunga CEOL and files notice for breach of contract with Ministry of Mining
https://www.latercera.com/pulso-pm/noticia/salar-de-maricunga-grupo-errazuriz-acusa-incumplimientos-de-codelco-en-incursion-en-litio-y-acude-al-ministerio-de-mineria/X5UA3HQEEVB37FJVLR6QXNLCCE/
for English Google translation version Click here
The Errázuriz Group has not listed the specific CEOL violations Codelco has made over the last 5 long years but I think it is safe to say they have violated most of the 10 Points in Article 18 of the Decree (see CEOL red text below with primary emphasis on "abandonment of the works") which would qualify Codelco for CEOL termination. On March 1, 2023 Codelco will be in "original intent" failure of physically starting this project within the 5 year life of the CEOL after refusing to execute/complete the 10-month-long exploration stage 3 times (under Bachelet and Pinera with #4 coming up for Boric) in a row which in itself is grounds for booting them off of all the Maricunga lithium properties (see summary paragraph in Decree section Article 18 on grounds for CEOL termination).
The Doctor
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The English translated version of the Codelco CEOL from March 1, 2018 follows:
CVE 1360658 | Director: Carlos Orellana Céspedes
Website: www.diarioficial.cl | Central Table: +562 2486 3600 E-mail: consultas@diarioficial.cl
Address: Dr. Torres Boonen No. 511, Providencia, Santiago, Chile.
This document has been electronically signed in accordance with Law No. 19,799 and includes a time stamp and
advanced electronic signature. To verify the authenticity of a printed representation thereof, enter this code on the website www.diarioficial.cl
OFFICIAL GAZETTE OF THE REPUBLIC OF CHILE
Ministry of the Interior and Public Security
I SECTION
LAWS, REGULATIONS, DECREES AND GENERAL ORDER RESOLUTIONS
No. 41,996 | Thursday March 1, 2018 | Page 1 of 10
General Standards
CVE 1360658
MINISTRY OF MINING ESTABLISHES REQUIREMENTS AND CONDITIONS OF THE SPECIAL OPERATION CONTRACT (CEOL) FOR THE EXPLORATION, EXPLOITATION AND BENEFIT OF LITHIUM DEPOSITS IN THE SALAR DE MARICUNGA AND ITS SURROUNDINGS, LOCATED IN THE REGION OF ATACAMA, WHICH THE STATE DE CHILE
WILL SUBSCRIBE WITH SALAR DE MARICUNGA SPA
No. 64.- Santiago, October 26, 2017.
Considering:
The provisions of articles 19 No. 24 and 32 No. 6 of the Political Constitution of the Republic of Chile; in Law No. 18,097, Constitutional Organic Law on Mining Concessions; in the decree with force of law No. 302, of the Ministry of Finance, of 1960, and its subsequent modifications;
in decree law No. 2,886, of 1979, which leaves the constitution of mining property on calcium carbonate, phosphate and potassium salts subject to the general regulations of the Mining Code, reserves lithium in favor of the state and interprets and modifies the laws that are pointed out; in Law No. 18,248, which establishes the Mining Code; in Supreme Decree No. 19, of 2001, of the Ministry Secretary General of the Presidency, Y their modifications posterior; in resolution No. 1,600, of 2008, of the Comptroller General of the Republic and its subsequent modifications; in agreement No. 2224/2017 of the board of directors of the Chilean Nuclear Energy Commission (CChEN); in use of the powers conferred on me by law, and
Considering:
1. That, according to the sixth paragraph of article 19 No. 24 of the Political Constitution, the State has absolute, exclusive, inalienable and imprescriptible domain of all mines,
These include caves, metallic-ferous sands, salt flats, coal and hydrocarbon deposits and other fossil substances, with the exception of superficial clays, in whatever terrain they are.
2. That, according to the seventh paragraph of Article 19 No. 24 of the Political Constitution, it is the law to determine which of the substances referred to in the preceding paragraph, except for liquid or gaseous hydrocarbons, may be the object of exploration concessions, or exploitation.
3. That, likewise, the Political Constitution provides, in the tenth paragraph of article 19 No. 24, that the exploration, exploitation or benefit of deposits that contain substances not subject to mining concessions, may be carried out directly by the State or by their companies or through administrative concessions or special operating contracts, with the requirements and under the conditions that the President of the Republic establishes, for each case, by supreme decree.
4. That, Decree Law No. 2,886, of 1979, in its article 5, provided that lithium was reserved to the State as required by the national interest, except for the exceptions that the same law indicates.
5. That, according to the fourth paragraph of article 3 of Law No. 18,097, Constitutional Organic Law on Mining Concessions and article 7 of the Mining Code, liquid or gaseous hydrocarbons, lithium, mineral deposits are not eligible for a mining concession, any species existing in maritime waters subject to national jurisdiction or deposits of any species located, in whole or in part, in areas that, in accordance with the law, are determined to be of importance for national security for mining purposes, without prejudice of the concessions mining validly constituted within anterior of a the corresponding declaration of non-admissibility or of importance for national security.
6. That, likewise, Article 8 of the Mining Code establishes that the exploration or exploitation of substances that, in accordance with the precepts cited in the previous paragraph, are not subject to a mining concession, may be carried out directly by the State or by their companies, or through administrative concessions or special operating contracts, with the requirements and under the conditions that the President of the Republic establishes, for each case, by supreme decree.
7. That, according to article 5, letter i) of decree with force of law No. 302, of the Ministry of Finance, of 1960, it corresponds to the Minister of Mining to sign on behalf of the State, prior favorable report from the Council of the Chilean Commission of the Collect, with the requirements and under the conditions that the President of the Republic establishes by supreme decree, the special operation contracts referred to in the tenth paragraph of article 19 number 24 of the Political Constitution that have as their object metallic or non-metallic mineral substances non- susceptible metallic of concession, with exclusion of the hydrocarbons and natural atomic materials .
8. That, for its part, Article 1, numeral VII, point 4, of Decree No. 19, of 2001, of the Ministry General Secretariat of the Presidency, which authorizes State Ministers to sign by order of the President of the Republic , indicates, among others, that the "Fixing of the requirements and special conditions of the operation contracts for the exploration, exploitation or benefit of deposits that contain substances not subject to concession", must be approved by supreme decree signed by the Minister of Mining, under the formula "By order of the President of the Republic".
9. That, in January 2016, HE the President of the Republic announced the Lithium Policy and Governance of the Salares, which, including the recommendations of the report prepared by the National Lithium Commission, among other matters, commissioned the Corporation Nacional del Cobre de Chile (hereinafter also “Codelco”) the development of a business model for the sustainable use of the Maricunga and Pedernales salt flats, in partnership with the private sector.
10. That the aforementioned Salares Lithium and Governance Policy was the result of the work carried out by the National Lithium Commission, created by supreme decree No. 60, of 2014, of the Ministry of Mining, a technical commission made up of experts, whose purpose was to generate a National Lithium Policy that incorporates the sustainable development of this industry, considering the social, economic and environmental axes.
11. That, according to the Final Report of the National Lithium Commission delivered to the President of the Republic, one of the main proposals that the commissioners considered necessary, almost unanimously, was precisely the creation of a public company or
state company, or or a subsidiary of the existing State mining companies, dedicated to assuming the productive tasks related to the exploitation of the salt flats, preferably in association with third parties (pages 20 and 34, final report of the National Lithium Commission).
12. That, based on the recommendations and proposals made by the National Lithium Commission in its Final Report, through the Salares Lithium and Governance Policy, this State Portfolio was instructed to, together with Codelco, analyze the feasibility of establishing a subsidiary, management or other business model as soon as possible, whose purpose is the use of the Maricunga and Pedernales salt flats and which, in addition to its productive function, establishes public-private alliances, understood as the agreement between an organ of the State administration with the private sector, promoting the attraction of investments.
13. That, in compliance with the mandate contained in the Lithium Policy, Codelco defined and approved a business model that contemplates the creation of a company (subsidiary) to form a public-private association with one or more companies with recognized experience in the lithium industry, in order to speed up the development, evaluation and implementation of a lithium and other non-metallic mineral project in the Maricunga and Pedernales salt flats.
14. That, on January 17, 2017, Codelco submitted to the Ministry of Mining a request for a special lithium operation contract for its subsidiary, at that time in the process of being constituted and today fully constituted, to explore and exploit the substances of lithium found located within of area geographical that indicate in his presentation. The area includes the Maricunga salt flat and its surroundings, not including all the constituted mining claims owned by Codelco or other third parties, located within the requested geographic area and whose manifestations have been registered before January 1, 1979.
15. That, in effect, according to letter PE-179/2017, of August 10, 2017, Codelco complemented the request for a special operation contract referred to in the previous paragraph, in the sense of identifying its subsidiary "Salar de Maricunga SpA" as the one in whose name it should be considered formulated at the request of a special lithium operation contract, whose constitution consists of a public deed granted on April 26, 2017, before a Santiago notary public, Mr. Osvaldo Pereira González, under the Directory No. 2.791-17.
16. That Salar de Maricunga SpA is a subsidiary of the National Copper Corporation of Chile, Codelco, a public mining, industrial, and commercial company, created by Decree Law No. 1,350 of 1976, the world's leading copper producer and engine of development of the country, which has a unique and essential experience in the development of mining projects. In addition to its long history and national and international prestige in the mining field, Codelco has been key to the development of our country.
17. That, according to the minutes of session No. 3, of June 14, 2016, and session minutes No. 9, of June 7, 2017, both of the Council of the Non-Metallic Mining Committee, were presented to said advisory council , the Codelco lithium project and the special operation contract project, respectively, to which the aforementioned Advisory Council expressed its support.
18. That, in accordance with agreement No. 2,224/2017, of the board of directors of the Chilean Nuclear Energy Commission (hereinafter also "CCHEN"), adopted in ordinary session No. 06/17, of March 27, 2017, granted to Codelco a lithium extraction quota in the Maricunga salt flats and its surroundings, allowing said State company to assign this authorization to another company that it constitutes in order to explore and exploit the lithium mineral resources found in the requested polygon.
19. That, in accordance with the provisions of the tenth paragraph of article 19 No. 24 of the Political Constitution, the President of the Republic has constitutional power, which grants him discretionary powers to decide the best way to proceed with the subscription of a
special operating contract on non-concessible substances, in view of which it can even determine the contractor selection mechanism, among which are direct treatment, private bidding or public bidding. Indeed, said situation has been ratified by the Comptroller General of the Republic in Opinion No. 68.476/2012, regarding special oil operation contracts, which pertinently states the following: "As can be seen, within the special legal framework provided for In the Political Constitution that governs the exploration and exploitation of deposits that contain substances not subject to concession -as is the case of hydrocarbons-, it is the exclusive power of the President of the Republic to decide on the essential contractual aspects of the aforementioned Ceops, among which is the possibility of designating the contractor or resolving the modality or mechanism through which it will be determined, either by resorting to public or private bidding, depending on the circumstances of the specific case, the process used for the alluded authority to the determination of their counterparts in the special operation contracts signed on the aforementioned blocks, has been adjusted to the law", that it is advisable for the State of Chile to sign a special operation contract for the exploration, exploitation and benefit of lithium deposits in the Maricunga salt flat and its surroundings, located in the Atacama Region, with the Codelco subsidiary, Salar de Maricunga SpA
Decree:
Single Article: Approve the requirements, terms and conditions that the special operation contract (CEOL) for the exploration, exploitation and benefit of lithium deposits must comply with, hereinafter "the contract", that the State of Chile signs with the contractor, regarding the Maricunga salt flat and its surroundings, located in the Atacama Region, whose wording is as follows:
Article 1. The parties to the contract will be the State of Chile, represented by the Ministry of Mining, hereinafter, indistinctly, the Ministry, on the one hand, and on the other the company "Salar de Maricunga SpA", hereinafter the "contractor".
Article 2. The object of the contract will be to authorize the contractor to carry out, carry out and develop exclusively, all kinds of activities and exploration work, on lithium substances located in the contract area, defined in article 3 of this decree, as exploitation and benefit operations on lithium substances located in the area that is defined as a consequence of the work carried out by it in the exploration and prospecting phase, in exchange for a remuneration and subject to a specific payment, with the exception of those areas covered by mining concessions established in accordance with the Mining Code of 1932. Exploration and exploitation and beneficial operations must be carried out by the contractor in accordance with the terms and conditions stipulated in the contract and in agreement No. 2224/2017 of the board of directors of the Chilean Nuclear Energy Commission (CChEN). Likewise, the contractor must market the entire volume of lithium products produced, under the terms and conditions contemplated in agreement No. 2224/2017 of the CChEN board of directors and in accordance with the provisions of article 8 of this administrative act.
The contractor will assume all the costs and risks inherent to the exploration, exploitation and benefit of lithium, and must contribute at its sole expense the technology, capital, equipment, machinery and other investments that may be necessary for the mining project. The future signing and approval of the contract is without prejudice to the contractor's obligation to comply with current legal regulations, and must obtain all the
authorizations, concessions and permits necessary to carry out the exploration, exploitation and benefit of lithium deposits, such as environmental, sectoral and other applicable permits.
Article 3. The geographical area associated with the contract is the one authorized in agreement No. 2224/2017, which includes the Maricunga salt flat and its surroundings, which is located northeast of the Copiapó province, in the Atacama Region, Chile.
The aforementioned geographic area was defined through a polygon made up of four vertices, whose limits are defined in UTM coordinates, referred to the 1924 International ellipsoid, reference datum PSAD-56, Zone 19 S, whose coordinates are as follows:
VERTEX NORTH COORDINATE EAST COORDINATE
V1 7033075,254 487784.27
V2 7033075,254 498284.313
V3 7003625,211 498284.313
V4 7003625,257 481984,286
The geographical area described only includes those mining properties constituted after January 1, 1979, since, from that day, the existing lithium in them was reserved to the State, as required by the national interest, being therefore excluded of those minerals that may be the object of mining concessions, in accordance with the provisions of article 5 of Decree Law No. 2,886 of 1979, in relation to article three, paragraph four of Law No. 18,097, Constitutional Organic Law on Mining Concessions (for Law 18,097 in English see https://investorshub.advfn.com/boards/read_msg.aspx?message_id=170891585 ).
Article 4. The validity of the contract will be extended until December 31, 2057, unless, prior to the expiration of the aforementioned term, any of the causes of early termination established therein operate.
Article 5. The contract will consist of the following phases: exploration and prospecting phase; construction and exploitation phase; and phase of closure of tasks. The exploration and prospecting phase will have a maximum term of eight (8) years and six (6) months counted from the total processing of the administrative act that approves the contract. The construction and exploitation phase will begin after the end of the exploration and prospecting phase, which may not extend beyond December 31, 2057.
During each of these phases, the contractor will carry out all the operations it deems pertinent, conducive and/or necessary for the start-up and development of the mining project in accordance with the terms established in the future contract, in the laws, regulations and other regulations in force in Chile at the time of its subscription.
A. Exploration and Prospecting Phase: Within this phase, the contractor must carry out exploration and prospecting activities aimed at identifying lithium resources and reserves. Compliance with exploration and prospecting activities will be verified through periodic reports and other specific means that may be established by the Special Lithium Operation Contract (CEOL). The Ministry may, at its cost and without unduly hindering the activities carried out, request an audit of the reports submitted by the contractor during the exploration and prospecting phase.
B. Construction and Exploitation Phase: This phase contemplates the construction stages and the exploitation and benefit stage.
B.1. Construction Stage: In this stage: the contractor must proceed with the construction and/or installation of the necessary facilities for the exploitation of lithium. The contractor must periodically report on the progress of the activities, in the terms specified in the
contract.
B.2. Exploitation and Beneficial Stage: During this stage, the contractor will extract the lithium substances and proceed to their benefit in accordance with the terms established in the contract.
C. Closing phase of the site. It will be the contractor's obligation to comply with the provisions of Law No. 20,551, and its Regulations established by Supreme Decree No. 41, of 2012, of the Ministry of Mining, and other applicable regulations in force on the matter.
Article 6. The execution of the contract will be supervised by two contract administrators.
Each party will designate its respective contract administrator and will notify the other of the name of its representative prior to the start of exploration work. This designation must be made in writing and communicated to the other party. The designated contract administrators will meet at least quarterly to evaluate the progress of the contract, as well as the activities and/or difficulties during its execution.
The contract administrator appointed by the Ministry of Mining must be an official public and shall report of the march (ie progress) of contract, including all the activities, difficulties and aspects that are relevant during its execution, to the Minister of Mining.
Article 7. The contractor must submit a report annually to the Ministry of Mining in which he will give an account of the actions of protection, safeguarding, care and permanent monitoring of operations in the area of exploitation. Said report must also contain any relevant information related to the situation of the superficial lands, possible negative effects on the resources and any other risk or significant circumstance that was
detected. Likewise, they must contain at least the information that the contractor prepares and presents to the other State agencies that have jurisdiction over the mining project.
Article 8. The contractor will commercialize the entire volume of lithium products produced. Notwithstanding the foregoing, the contractor may not market crude brine, concentrated brine and/or refined brine or in any degree of concentration, or lithium carnalite (sic carbonate) salts, either directly or indirectly through third parties, and that are generated from the lithium substances extracted in the exploitation area, unless expressly authorized by the Ministry of Mining.
The sale of any of the previously individualized products to a related company that processes them in plants that are not part of the mining project, and that are located within Chilean territory, will be excepted from the authorization of the Ministry, in order to
generate quality products. marketable lithium. A related company shall be understood as that natural person or entity that controls, is controlled by, or is under the common control of another entity. Likewise, “control” is understood for these purposes:
(i) the ownership of more than fifty percent of the shares with voting rights of an entity; or (ii) possession of sufficient power to decisively influence the management of the entity, whether through a contractual relationship or any other. This definition includes persons who:
____(a) receive products from the Contractor in payment of credits that they have granted to the latter or at preferential prices; or
____(b) refers to article one hundred of Law No. 18,045, Securities Market Law, However, the lithium products of the related company will also be subject to the specific payment.
The contractor may not market lithium with those States that use it inappropriately, in accordance with the provisions of international treaties signed and ratified by Chile. Likewise, the contractor may not sell or dispose of the lithium substances contained in the discard salts that are generated as a result of the exploitation process, except with prior and well-founded authorization from the Ministry.
The contractor must communicate quarterly in writing to the contract administrator designated by the Ministry the total volume of lithium sold, the sale prices and other commercial conditions that affect the setting of said prices. This communication must be made within the month following the expiration of the respective reported quarter. The contractor will receive the whole of the Payments generated for the concept marketing of
lithium products, including value added tax (“VAT”) for sales that occur within Chile.
Article 9. The contractor will have the right to mix brines and/or lithium substances extracted in the geographical area of exploitation of the project, with the brines and/or lithium substances that it extracts outside that area (hereinafter "joint treatment").
In such an event, prior to mixing, the contractor must adopt and apply reasonable practices and procedures for weighing, determination of concentrations, and sampling to distinguish the amount of lithium contained in brines and/or lithium substances from the geographic area of exploitation of the project, with respect to those contained in brines coming from outside said area.
The proportion between the lithium contained in brines from the project's exploitation area and the sum thereof with the lithium contained in brines from outside the project's exploitation area will correspond, as specified in the respective contract, to the adjustment factor for treatment set, the that will serve to estimate the amount of products of lithium from the geographical area of exploitation of the project, and as a basis for calculating the
specific payment and annual R&D payment to be made. The same procedure will be applied in the event that brine from the mining project is processed by a related company. The provisions of article 8 of this supreme decree shall be understood as a related company.
Article 10. The contractor will receive for part of Condition of Chili a remuneration determined on the value of quarterly sales of commercialized lithium products that are associated with the exploitation and benefit of lithium substances obtained from the geographical area of exploitation of the project, discounting the value added tax (VAT), in accordance with the following formula:
Remuneration = (quarterly sales - VAT) - (specific payment) - (annual R&D payment).
The calculation of the remuneration must be made quarterly by the contractor, who will have the right to withhold it. The Ministry of Mining, with the support of the Chilean Copper Commission, will annually carry out a technical and financial audit in order to verify the correct calculation of the remuneration in accordance with the provisions of article 17 of this supreme decree.
Article 11. The contractor must transfer to the State of Chile the specific payment in Chilean pesos, through a deposit in a special account created for this purpose in the General Treasury of the Republic. The conversion to Chilean pesos must be made according to the value of the dollar observed, informed and published by the Central Bank of Chile on the day of payment.
The specific payment will be made up of a quarterly payment, associated with the sales of lithium products; and by an annual payment associated with the operating profit, this being understood as all the annual income of the contractor from the sales of lithium products, less the value added tax, and less the operating costs and expenses necessary to produce such income.
The contractor must transfer to the State of Chile, within the first twenty (20) days following the end of the quarter for which the calculation is made, the amount of the quarterly payment, which will be determined based on the quarterly sales of lithium products. , discounting the value added tax, according to the following formula:
Quarterly payment = Fixed rate x (quarterly sales - VAT) x (adjustment factor) x (adjustment factor for joint treatment, if applicable).
The fixed rate has been defined as 3%.
The adjustment factor shall be understood as the percentage that represents the lithium extracted from the belongings constituted with posterity to the year 1979 upon the total of lithium extracted, When the contractor mixes lithium brines and/or substances extracted in the
Project's exploitation area, with the lithium brines and/or substances extracted outside the project's exploitation area, the adjustment factor must be applied of joint treatment, established in article 9 of this supreme decree. The annual payment must be transferred by the contractor to the State of Chile, no later than April 30 of the year following each exploitation and benefit period, and will be determined based on the annual operating margin of the business generated by the lithium products obtained. by the contractor, according to the following formula:
Annual payment = (annual operating profit for specific payment) x (effective rate) x (adjustment factor) x (adjustment factor for joint treatment, if applicable).
The effective rate is variable according to a progressive and ascending scale, depending on what results from applying the following sections defined for the annual operating margin of the respective year, the latter expressed without decimals and rounded to the nearest value:
if the annual operating margin is:
equal to or less than 20%, the rate is 0.0%;
on the part that exceeds 20% and does not exceed 35%, 3.0%;
on the part that exceeds 35% and does not exceed 40%, 5.0%;
on the part that exceeds 40% and does not exceed 45%, 8.0%;
on the part that exceeds 45% and does not exceed 50%, 13.0%;
on the part that exceeds 50% and does not exceed 55%, 15.5%;
on the part that exceeds 55% and does not exceed 60%, 18.0%;
on the part that exceeds 60% and does not exceed 65%, 21.0%;
on the part that exceeds 65% and does not exceed 70%, 24.0%;
on the part that exceeds 70% and does not exceed 75%, 27.5%;
on the part that exceeds 75% and does not exceed 80%, 31.0%;
and on the part that exceeds 80%, 34.5%.
The adjustment factor shall be understood to be the percentage that represents the lithium extracted from properties constituted after January 1, 1979 over the total lithium extracted, considering that the payment does not correspond to properties constituted prior to 1979.
When the contractor mixes brines and/or lithium substances extracted in the Project's exploitation area, with the brines and/or lithium substances extracted outside the project's exploitation area, must apply the joint treatment adjustment factor, established in Article 9 of this supreme decree.
The delay in payment by the contractor, that is, the non-payment within the term established as the payment date, will imply the application of the daily maximum conventional interest rate for operations in non-indexable pesos on the effective payment of the period.
Article 12. The contractor must offer, throughout the term of the contract, and with prior approval from the Ministry of Mining for each case, the lithium products obtained from the project's exploitation area during the exploitation and processing stage to specialized producers, whether public or private, of higher value-added products that use lithium as an input, including, among others, the production of lithium cathodes and lithium battery components, and that develop or are going to develop their production work in Chile, at the lowest price . under export market parity in Chile, equivalent to the lower of the FOB Chilean port prices at which the contractor has sold to its clients outside of Chile within the last six months.
Under no circumstances will the Ministry allow lithium products purchased under this preferential sale to be sent to specialized producers or their
affiliates for sale in Chile or abroad, without incorporating added value. In order to make this obligation effective, the Ministry must indicate to the contractor, in writing, the company or companies that qualify as specialized producers at least one year in advance of the start date of these sales.
In the event that in a given year the Ministry has not reported the existence of companies that qualify as specialized producers or said companies do not fully or partially acquire the percentage of lithium products subject to the most favorable price obligation, the contractor may sell said production to third parties freely.
Article 13. The contractor must make an annual payment for Research, Innovation and Development ("annual R&D payment") corresponding to the amount that results from multiplying two point five percent (2.5%) of the sales of lithium products made during the previous calendar year, discounting the value added tax, multiplied by the adjustment factor and by the adjustment factor for joint treatment, if the latter corresponds. Saying
payment will be made by transfer in Chilean pesos to the State of Chile, by deposit in the General Treasury of the Republic. The conversion to Chilean pesos must be made according to the value of the dollar observed, reported and published by the Central Bank of Chile on the
day of payment. This payment will be made at the same time as the annual payment of the specific payment, as indicated in article 11 letter b).
Annual R&D Payment = 2.5% x (annual sales - VAT) x (adjustment factor) x (adjustment factor for joint treatment, if applicable).
The adjustment factor shall be understood to be the percentage that represents the lithium extracted from properties constituted after January 1, 1979 over the total lithium extracted, considering that the payment does not correspond to properties constituted prior to 1979.
When the contractor mixes brines and/or lithium substances extracted in the Project's exploitation area, with the brines and/or lithium substances extracted outside the project's exploitation area, must apply the joint treatment adjustment factor, established in article 9 of this supreme decree.
The Ministry of Mining will dispose of these resources as established by the budget law of the respective year, and in its use it will tend to promote research, innovation and technological development ("R&D") in lithium products and their multiple uses. For these purposes, the Ministry of Mining must request the incorporation of said resources in the corresponding budgetary program.
Article 14. During the term of the contract, the contractor may not sell, assign, transfer, convey or dispose of all or part of its rights stipulated in the contract, during any of the stages contemplated therein, except with prior written, well-founded authorization from the Minister of Mining and prior acceptance in any case by the assignee of the obligations included under this contract. Within the pertinent communication, the Minister of Mining must accept or reject in writing and with justified cause, the sale, assignment, transfer or conveyance that has been communicated to him. For the assignment to be accepted by the Ministry of Mining, it must meet at least the following conditions: a) The obligations of the assignor must be fulfilled at least up to the date of the approval request; b) The instrument of the assignment must at least contain stipulations that establish that the assignee is responsible, from the date of the assignment, for each and every one of the obligations of the assignor, and c) The assignee must
have technical and economic capacity that allows you to fulfill the obligations of the contract.
The Minister of Mining must rule on the assignment within a period of ninety days from the date of receipt of the respective approval request.
However, the contractor may enter into contracts with third parties for the development of the object of the contract. Likewise, the contractor may not carry out any action that prevents the normal operation of a new productive lithium project in the exploitation area once the contract is terminated.
Article 15. All relations between the parties derived from the contract will be subject to what is specified in it and to Chilean law. In the exercise of the rights and in the fulfillment of the obligations that derive from the contract, the contractor will be subject to all the pertinent legal regulations in force in the country.
Article 16. In the event of a disagreement between the parties regarding any matter, they will meet, in the manner indicated in the contract, to discuss the problem and will make all possible efforts to resolve it amicably. After a period of thirty (30) days from the notification of the disagreement, without it having been resolved amicably, the Ministry will propose a shortlist of qualified, recognized and prestigious experts, whether natural or legal persons, of which the contractor must choose one, to study the matter in detail and propose to the parties the most appropriate solution in their opinion. The designated expert will not be considered or act as an arbitrator and its costs and expenses will be borne by both parties in equal proportion. Notwithstanding the foregoing, either party may submit the matter in dispute to the resolution of the ordinary courts of Justice of Chile, extending jurisdiction before the courts of the commune of Santiago
Article 17. The Ministry of Mining, with the support of the Chilean Copper Commission, will annually carry out a technical and financial audit in order to verify the correct calculation of the specific payment and remuneration that occurred within the previous year. Likewise, it will be the task of the audit to verify that the sale prices used by the contractor to calculate the specific payment correspond to market prices, to the extent that these serve as a reference for the calculation of the annual or quarterly specific payment. For this purpose, the Ministry of Mining will propose a shortlist of independent experts, from which the contractor must choose one within five business days from the date of the proposal. Said expert must deliver an audit report with the differences found in the calculation of the payment to the State, which will be binding and non-claimable for the parties.
All adjustments to the remuneration or specific payment, valued at the effective gross sales prices derived from the result of this review, will be expressed in Chilean pesos. The State of Chile will have the right to use all the geological, geophysical and similar data provided by the contractor. However, and while the contract is in force, this information may not be transmitted to third parties without the authorization of the contractor, whose refusal must be justified.
Article 18. THE CONTRACT WILL TERMINATE EARLY WHEN ANY OF THE FOLLOWING CAUSES OCCURS:
1. During or at the end of any period contemplated in the exploration and prospecting phase, in the event that the contractor decides not to continue with the following period, in accordance as provided in the contract.
2. Abandonment of the tasks by the contractor, which will be understood to have occurred in the event that the contractor suspends the execution of the operations for a period of more than three years in accordance with the provisions of the contract.
3. If the contractor was declared in forced liquidation by enforceable resolution.
4. Dissolution or termination of the legal personality of the contractor.
5. For repeated breach by the contractor of the obligations contained in the contract.
6. By mutual agreement between the parties, a situation that must be recorded in writing.
7. For the final revocation and without further recourse of the environmental qualification resolution of the mining project.
8. For the final and unappealable (translate = refused for appeal) term or the loss of validity of the authorization delivered by the Chilean Nuclear Energy Commission to Codelco and/or its assignee, of the lithium extraction quota from the Maricunga salt flat.
9. Due to the loss by Codelco of its quality of controller in the company Salar de Maricunga SpA, in the terms described in articles 97 et seq. of Law No. 18,045, on the Securities Market.
10. For non-compliance with the conditions and terms established in this administrative act.
If the contractor, during the term of the contract, incurs in any of the causes of termination referred to in this article without justified cause and excluding cases of force majeure, the Ministry will notify the contractor by certified letter of the breach in question and, if the The contractor has not corrected it or initiated the necessary actions to correct it within ninety (90) days from the date of notification of the breach, the Ministry will request the early termination of the contract. Notwithstanding the foregoing, the full contract will terminate if the contractor does not start production within a period of five years counted from the end of the exploration and prospecting phase.
Article 19. The contractor must ensure that Codelco, at all times, maintains the quality of controller over the company Salar de Maricunga SpA
For these purposes, the contractor must inform the Ministry of Mining about any modification or change that is made in the ownership structure and / or administration of said company, as if it were an essential fact such as those described in Law No. 18,045.
Article 20. Prior to the signing of the public deed containing the contract, a favorable report from the council of the Chilean Copper Commission must be obtained.
of Maricunga CEOL and files notice for breach of contract with Ministry of Mining
https://www.latercera.com/pulso-pm/noticia/salar-de-maricunga-grupo-errazuriz-acusa-incumplimientos-de-codelco-en-incursion-en-litio-y-acude-al-ministerio-de-mineria/X5UA3HQEEVB37FJVLR6QXNLCCE/
for English Google translation version Click here
The Errázuriz Group has not listed the specific CEOL violations Codelco has made over the last 5 long years but I think it is safe to say they have violated most of the 10 Points in Article 18 of the Decree (see CEOL red text below with primary emphasis on "abandonment of the works") which would qualify Codelco for CEOL termination. On March 1, 2023 Codelco will be in "original intent" failure of physically starting this project within the 5 year life of the CEOL after refusing to execute/complete the 10-month-long exploration stage 3 times (under Bachelet and Pinera with #4 coming up for Boric) in a row which in itself is grounds for booting them off of all the Maricunga lithium properties (see summary paragraph in Decree section Article 18 on grounds for CEOL termination).
The Doctor
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The English translated version of the Codelco CEOL from March 1, 2018 follows:
CVE 1360658 | Director: Carlos Orellana Céspedes
Website: www.diarioficial.cl | Central Table: +562 2486 3600 E-mail: consultas@diarioficial.cl
Address: Dr. Torres Boonen No. 511, Providencia, Santiago, Chile.
This document has been electronically signed in accordance with Law No. 19,799 and includes a time stamp and
advanced electronic signature. To verify the authenticity of a printed representation thereof, enter this code on the website www.diarioficial.cl
OFFICIAL GAZETTE OF THE REPUBLIC OF CHILE
Ministry of the Interior and Public Security
I SECTION
LAWS, REGULATIONS, DECREES AND GENERAL ORDER RESOLUTIONS
No. 41,996 | Thursday March 1, 2018 | Page 1 of 10
General Standards
CVE 1360658
MINISTRY OF MINING ESTABLISHES REQUIREMENTS AND CONDITIONS OF THE SPECIAL OPERATION CONTRACT (CEOL) FOR THE EXPLORATION, EXPLOITATION AND BENEFIT OF LITHIUM DEPOSITS IN THE SALAR DE MARICUNGA AND ITS SURROUNDINGS, LOCATED IN THE REGION OF ATACAMA, WHICH THE STATE DE CHILE
WILL SUBSCRIBE WITH SALAR DE MARICUNGA SPA
No. 64.- Santiago, October 26, 2017.
Considering:
The provisions of articles 19 No. 24 and 32 No. 6 of the Political Constitution of the Republic of Chile; in Law No. 18,097, Constitutional Organic Law on Mining Concessions; in the decree with force of law No. 302, of the Ministry of Finance, of 1960, and its subsequent modifications;
in decree law No. 2,886, of 1979, which leaves the constitution of mining property on calcium carbonate, phosphate and potassium salts subject to the general regulations of the Mining Code, reserves lithium in favor of the state and interprets and modifies the laws that are pointed out; in Law No. 18,248, which establishes the Mining Code; in Supreme Decree No. 19, of 2001, of the Ministry Secretary General of the Presidency, Y their modifications posterior; in resolution No. 1,600, of 2008, of the Comptroller General of the Republic and its subsequent modifications; in agreement No. 2224/2017 of the board of directors of the Chilean Nuclear Energy Commission (CChEN); in use of the powers conferred on me by law, and
Considering:
1. That, according to the sixth paragraph of article 19 No. 24 of the Political Constitution, the State has absolute, exclusive, inalienable and imprescriptible domain of all mines,
These include caves, metallic-ferous sands, salt flats, coal and hydrocarbon deposits and other fossil substances, with the exception of superficial clays, in whatever terrain they are.
2. That, according to the seventh paragraph of Article 19 No. 24 of the Political Constitution, it is the law to determine which of the substances referred to in the preceding paragraph, except for liquid or gaseous hydrocarbons, may be the object of exploration concessions, or exploitation.
3. That, likewise, the Political Constitution provides, in the tenth paragraph of article 19 No. 24, that the exploration, exploitation or benefit of deposits that contain substances not subject to mining concessions, may be carried out directly by the State or by their companies or through administrative concessions or special operating contracts, with the requirements and under the conditions that the President of the Republic establishes, for each case, by supreme decree.
4. That, Decree Law No. 2,886, of 1979, in its article 5, provided that lithium was reserved to the State as required by the national interest, except for the exceptions that the same law indicates.
5. That, according to the fourth paragraph of article 3 of Law No. 18,097, Constitutional Organic Law on Mining Concessions and article 7 of the Mining Code, liquid or gaseous hydrocarbons, lithium, mineral deposits are not eligible for a mining concession, any species existing in maritime waters subject to national jurisdiction or deposits of any species located, in whole or in part, in areas that, in accordance with the law, are determined to be of importance for national security for mining purposes, without prejudice of the concessions mining validly constituted within anterior of a the corresponding declaration of non-admissibility or of importance for national security.
6. That, likewise, Article 8 of the Mining Code establishes that the exploration or exploitation of substances that, in accordance with the precepts cited in the previous paragraph, are not subject to a mining concession, may be carried out directly by the State or by their companies, or through administrative concessions or special operating contracts, with the requirements and under the conditions that the President of the Republic establishes, for each case, by supreme decree.
7. That, according to article 5, letter i) of decree with force of law No. 302, of the Ministry of Finance, of 1960, it corresponds to the Minister of Mining to sign on behalf of the State, prior favorable report from the Council of the Chilean Commission of the Collect, with the requirements and under the conditions that the President of the Republic establishes by supreme decree, the special operation contracts referred to in the tenth paragraph of article 19 number 24 of the Political Constitution that have as their object metallic or non-metallic mineral substances non- susceptible metallic of concession, with exclusion of the hydrocarbons and natural atomic materials .
8. That, for its part, Article 1, numeral VII, point 4, of Decree No. 19, of 2001, of the Ministry General Secretariat of the Presidency, which authorizes State Ministers to sign by order of the President of the Republic , indicates, among others, that the "Fixing of the requirements and special conditions of the operation contracts for the exploration, exploitation or benefit of deposits that contain substances not subject to concession", must be approved by supreme decree signed by the Minister of Mining, under the formula "By order of the President of the Republic".
9. That, in January 2016, HE the President of the Republic announced the Lithium Policy and Governance of the Salares, which, including the recommendations of the report prepared by the National Lithium Commission, among other matters, commissioned the Corporation Nacional del Cobre de Chile (hereinafter also “Codelco”) the development of a business model for the sustainable use of the Maricunga and Pedernales salt flats, in partnership with the private sector.
10. That the aforementioned Salares Lithium and Governance Policy was the result of the work carried out by the National Lithium Commission, created by supreme decree No. 60, of 2014, of the Ministry of Mining, a technical commission made up of experts, whose purpose was to generate a National Lithium Policy that incorporates the sustainable development of this industry, considering the social, economic and environmental axes.
11. That, according to the Final Report of the National Lithium Commission delivered to the President of the Republic, one of the main proposals that the commissioners considered necessary, almost unanimously, was precisely the creation of a public company or
state company, or or a subsidiary of the existing State mining companies, dedicated to assuming the productive tasks related to the exploitation of the salt flats, preferably in association with third parties (pages 20 and 34, final report of the National Lithium Commission).
12. That, based on the recommendations and proposals made by the National Lithium Commission in its Final Report, through the Salares Lithium and Governance Policy, this State Portfolio was instructed to, together with Codelco, analyze the feasibility of establishing a subsidiary, management or other business model as soon as possible, whose purpose is the use of the Maricunga and Pedernales salt flats and which, in addition to its productive function, establishes public-private alliances, understood as the agreement between an organ of the State administration with the private sector, promoting the attraction of investments.
13. That, in compliance with the mandate contained in the Lithium Policy, Codelco defined and approved a business model that contemplates the creation of a company (subsidiary) to form a public-private association with one or more companies with recognized experience in the lithium industry, in order to speed up the development, evaluation and implementation of a lithium and other non-metallic mineral project in the Maricunga and Pedernales salt flats.
14. That, on January 17, 2017, Codelco submitted to the Ministry of Mining a request for a special lithium operation contract for its subsidiary, at that time in the process of being constituted and today fully constituted, to explore and exploit the substances of lithium found located within of area geographical that indicate in his presentation. The area includes the Maricunga salt flat and its surroundings, not including all the constituted mining claims owned by Codelco or other third parties, located within the requested geographic area and whose manifestations have been registered before January 1, 1979.
15. That, in effect, according to letter PE-179/2017, of August 10, 2017, Codelco complemented the request for a special operation contract referred to in the previous paragraph, in the sense of identifying its subsidiary "Salar de Maricunga SpA" as the one in whose name it should be considered formulated at the request of a special lithium operation contract, whose constitution consists of a public deed granted on April 26, 2017, before a Santiago notary public, Mr. Osvaldo Pereira González, under the Directory No. 2.791-17.
16. That Salar de Maricunga SpA is a subsidiary of the National Copper Corporation of Chile, Codelco, a public mining, industrial, and commercial company, created by Decree Law No. 1,350 of 1976, the world's leading copper producer and engine of development of the country, which has a unique and essential experience in the development of mining projects. In addition to its long history and national and international prestige in the mining field, Codelco has been key to the development of our country.
17. That, according to the minutes of session No. 3, of June 14, 2016, and session minutes No. 9, of June 7, 2017, both of the Council of the Non-Metallic Mining Committee, were presented to said advisory council , the Codelco lithium project and the special operation contract project, respectively, to which the aforementioned Advisory Council expressed its support.
18. That, in accordance with agreement No. 2,224/2017, of the board of directors of the Chilean Nuclear Energy Commission (hereinafter also "CCHEN"), adopted in ordinary session No. 06/17, of March 27, 2017, granted to Codelco a lithium extraction quota in the Maricunga salt flats and its surroundings, allowing said State company to assign this authorization to another company that it constitutes in order to explore and exploit the lithium mineral resources found in the requested polygon.
19. That, in accordance with the provisions of the tenth paragraph of article 19 No. 24 of the Political Constitution, the President of the Republic has constitutional power, which grants him discretionary powers to decide the best way to proceed with the subscription of a
special operating contract on non-concessible substances, in view of which it can even determine the contractor selection mechanism, among which are direct treatment, private bidding or public bidding. Indeed, said situation has been ratified by the Comptroller General of the Republic in Opinion No. 68.476/2012, regarding special oil operation contracts, which pertinently states the following: "As can be seen, within the special legal framework provided for In the Political Constitution that governs the exploration and exploitation of deposits that contain substances not subject to concession -as is the case of hydrocarbons-, it is the exclusive power of the President of the Republic to decide on the essential contractual aspects of the aforementioned Ceops, among which is the possibility of designating the contractor or resolving the modality or mechanism through which it will be determined, either by resorting to public or private bidding, depending on the circumstances of the specific case, the process used for the alluded authority to the determination of their counterparts in the special operation contracts signed on the aforementioned blocks, has been adjusted to the law", that it is advisable for the State of Chile to sign a special operation contract for the exploration, exploitation and benefit of lithium deposits in the Maricunga salt flat and its surroundings, located in the Atacama Region, with the Codelco subsidiary, Salar de Maricunga SpA
Decree:
Single Article: Approve the requirements, terms and conditions that the special operation contract (CEOL) for the exploration, exploitation and benefit of lithium deposits must comply with, hereinafter "the contract", that the State of Chile signs with the contractor, regarding the Maricunga salt flat and its surroundings, located in the Atacama Region, whose wording is as follows:
Article 1. The parties to the contract will be the State of Chile, represented by the Ministry of Mining, hereinafter, indistinctly, the Ministry, on the one hand, and on the other the company "Salar de Maricunga SpA", hereinafter the "contractor".
Article 2. The object of the contract will be to authorize the contractor to carry out, carry out and develop exclusively, all kinds of activities and exploration work, on lithium substances located in the contract area, defined in article 3 of this decree, as exploitation and benefit operations on lithium substances located in the area that is defined as a consequence of the work carried out by it in the exploration and prospecting phase, in exchange for a remuneration and subject to a specific payment, with the exception of those areas covered by mining concessions established in accordance with the Mining Code of 1932. Exploration and exploitation and beneficial operations must be carried out by the contractor in accordance with the terms and conditions stipulated in the contract and in agreement No. 2224/2017 of the board of directors of the Chilean Nuclear Energy Commission (CChEN). Likewise, the contractor must market the entire volume of lithium products produced, under the terms and conditions contemplated in agreement No. 2224/2017 of the CChEN board of directors and in accordance with the provisions of article 8 of this administrative act.
The contractor will assume all the costs and risks inherent to the exploration, exploitation and benefit of lithium, and must contribute at its sole expense the technology, capital, equipment, machinery and other investments that may be necessary for the mining project. The future signing and approval of the contract is without prejudice to the contractor's obligation to comply with current legal regulations, and must obtain all the
authorizations, concessions and permits necessary to carry out the exploration, exploitation and benefit of lithium deposits, such as environmental, sectoral and other applicable permits.
Article 3. The geographical area associated with the contract is the one authorized in agreement No. 2224/2017, which includes the Maricunga salt flat and its surroundings, which is located northeast of the Copiapó province, in the Atacama Region, Chile.
The aforementioned geographic area was defined through a polygon made up of four vertices, whose limits are defined in UTM coordinates, referred to the 1924 International ellipsoid, reference datum PSAD-56, Zone 19 S, whose coordinates are as follows:
VERTEX NORTH COORDINATE EAST COORDINATE
V1 7033075,254 487784.27
V2 7033075,254 498284.313
V3 7003625,211 498284.313
V4 7003625,257 481984,286
The geographical area described only includes those mining properties constituted after January 1, 1979, since, from that day, the existing lithium in them was reserved to the State, as required by the national interest, being therefore excluded of those minerals that may be the object of mining concessions, in accordance with the provisions of article 5 of Decree Law No. 2,886 of 1979, in relation to article three, paragraph four of Law No. 18,097, Constitutional Organic Law on Mining Concessions (for Law 18,097 in English see https://investorshub.advfn.com/boards/read_msg.aspx?message_id=170891585 ).
Article 4. The validity of the contract will be extended until December 31, 2057, unless, prior to the expiration of the aforementioned term, any of the causes of early termination established therein operate.
Article 5. The contract will consist of the following phases: exploration and prospecting phase; construction and exploitation phase; and phase of closure of tasks. The exploration and prospecting phase will have a maximum term of eight (8) years and six (6) months counted from the total processing of the administrative act that approves the contract. The construction and exploitation phase will begin after the end of the exploration and prospecting phase, which may not extend beyond December 31, 2057.
During each of these phases, the contractor will carry out all the operations it deems pertinent, conducive and/or necessary for the start-up and development of the mining project in accordance with the terms established in the future contract, in the laws, regulations and other regulations in force in Chile at the time of its subscription.
A. Exploration and Prospecting Phase: Within this phase, the contractor must carry out exploration and prospecting activities aimed at identifying lithium resources and reserves. Compliance with exploration and prospecting activities will be verified through periodic reports and other specific means that may be established by the Special Lithium Operation Contract (CEOL). The Ministry may, at its cost and without unduly hindering the activities carried out, request an audit of the reports submitted by the contractor during the exploration and prospecting phase.
B. Construction and Exploitation Phase: This phase contemplates the construction stages and the exploitation and benefit stage.
B.1. Construction Stage: In this stage: the contractor must proceed with the construction and/or installation of the necessary facilities for the exploitation of lithium. The contractor must periodically report on the progress of the activities, in the terms specified in the
contract.
B.2. Exploitation and Beneficial Stage: During this stage, the contractor will extract the lithium substances and proceed to their benefit in accordance with the terms established in the contract.
C. Closing phase of the site. It will be the contractor's obligation to comply with the provisions of Law No. 20,551, and its Regulations established by Supreme Decree No. 41, of 2012, of the Ministry of Mining, and other applicable regulations in force on the matter.
Article 6. The execution of the contract will be supervised by two contract administrators.
Each party will designate its respective contract administrator and will notify the other of the name of its representative prior to the start of exploration work. This designation must be made in writing and communicated to the other party. The designated contract administrators will meet at least quarterly to evaluate the progress of the contract, as well as the activities and/or difficulties during its execution.
The contract administrator appointed by the Ministry of Mining must be an official public and shall report of the march (ie progress) of contract, including all the activities, difficulties and aspects that are relevant during its execution, to the Minister of Mining.
Article 7. The contractor must submit a report annually to the Ministry of Mining in which he will give an account of the actions of protection, safeguarding, care and permanent monitoring of operations in the area of exploitation. Said report must also contain any relevant information related to the situation of the superficial lands, possible negative effects on the resources and any other risk or significant circumstance that was
detected. Likewise, they must contain at least the information that the contractor prepares and presents to the other State agencies that have jurisdiction over the mining project.
Article 8. The contractor will commercialize the entire volume of lithium products produced. Notwithstanding the foregoing, the contractor may not market crude brine, concentrated brine and/or refined brine or in any degree of concentration, or lithium carnalite (sic carbonate) salts, either directly or indirectly through third parties, and that are generated from the lithium substances extracted in the exploitation area, unless expressly authorized by the Ministry of Mining.
The sale of any of the previously individualized products to a related company that processes them in plants that are not part of the mining project, and that are located within Chilean territory, will be excepted from the authorization of the Ministry, in order to
generate quality products. marketable lithium. A related company shall be understood as that natural person or entity that controls, is controlled by, or is under the common control of another entity. Likewise, “control” is understood for these purposes:
(i) the ownership of more than fifty percent of the shares with voting rights of an entity; or (ii) possession of sufficient power to decisively influence the management of the entity, whether through a contractual relationship or any other. This definition includes persons who:
____(a) receive products from the Contractor in payment of credits that they have granted to the latter or at preferential prices; or
____(b) refers to article one hundred of Law No. 18,045, Securities Market Law, However, the lithium products of the related company will also be subject to the specific payment.
The contractor may not market lithium with those States that use it inappropriately, in accordance with the provisions of international treaties signed and ratified by Chile. Likewise, the contractor may not sell or dispose of the lithium substances contained in the discard salts that are generated as a result of the exploitation process, except with prior and well-founded authorization from the Ministry.
The contractor must communicate quarterly in writing to the contract administrator designated by the Ministry the total volume of lithium sold, the sale prices and other commercial conditions that affect the setting of said prices. This communication must be made within the month following the expiration of the respective reported quarter. The contractor will receive the whole of the Payments generated for the concept marketing of
lithium products, including value added tax (“VAT”) for sales that occur within Chile.
Article 9. The contractor will have the right to mix brines and/or lithium substances extracted in the geographical area of exploitation of the project, with the brines and/or lithium substances that it extracts outside that area (hereinafter "joint treatment").
In such an event, prior to mixing, the contractor must adopt and apply reasonable practices and procedures for weighing, determination of concentrations, and sampling to distinguish the amount of lithium contained in brines and/or lithium substances from the geographic area of exploitation of the project, with respect to those contained in brines coming from outside said area.
The proportion between the lithium contained in brines from the project's exploitation area and the sum thereof with the lithium contained in brines from outside the project's exploitation area will correspond, as specified in the respective contract, to the adjustment factor for treatment set, the that will serve to estimate the amount of products of lithium from the geographical area of exploitation of the project, and as a basis for calculating the
specific payment and annual R&D payment to be made. The same procedure will be applied in the event that brine from the mining project is processed by a related company. The provisions of article 8 of this supreme decree shall be understood as a related company.
Article 10. The contractor will receive for part of Condition of Chili a remuneration determined on the value of quarterly sales of commercialized lithium products that are associated with the exploitation and benefit of lithium substances obtained from the geographical area of exploitation of the project, discounting the value added tax (VAT), in accordance with the following formula:
Remuneration = (quarterly sales - VAT) - (specific payment) - (annual R&D payment).
The calculation of the remuneration must be made quarterly by the contractor, who will have the right to withhold it. The Ministry of Mining, with the support of the Chilean Copper Commission, will annually carry out a technical and financial audit in order to verify the correct calculation of the remuneration in accordance with the provisions of article 17 of this supreme decree.
Article 11. The contractor must transfer to the State of Chile the specific payment in Chilean pesos, through a deposit in a special account created for this purpose in the General Treasury of the Republic. The conversion to Chilean pesos must be made according to the value of the dollar observed, informed and published by the Central Bank of Chile on the day of payment.
The specific payment will be made up of a quarterly payment, associated with the sales of lithium products; and by an annual payment associated with the operating profit, this being understood as all the annual income of the contractor from the sales of lithium products, less the value added tax, and less the operating costs and expenses necessary to produce such income.
The contractor must transfer to the State of Chile, within the first twenty (20) days following the end of the quarter for which the calculation is made, the amount of the quarterly payment, which will be determined based on the quarterly sales of lithium products. , discounting the value added tax, according to the following formula:
Quarterly payment = Fixed rate x (quarterly sales - VAT) x (adjustment factor) x (adjustment factor for joint treatment, if applicable).
The fixed rate has been defined as 3%.
The adjustment factor shall be understood as the percentage that represents the lithium extracted from the belongings constituted with posterity to the year 1979 upon the total of lithium extracted, When the contractor mixes lithium brines and/or substances extracted in the
Project's exploitation area, with the lithium brines and/or substances extracted outside the project's exploitation area, the adjustment factor must be applied of joint treatment, established in article 9 of this supreme decree. The annual payment must be transferred by the contractor to the State of Chile, no later than April 30 of the year following each exploitation and benefit period, and will be determined based on the annual operating margin of the business generated by the lithium products obtained. by the contractor, according to the following formula:
Annual payment = (annual operating profit for specific payment) x (effective rate) x (adjustment factor) x (adjustment factor for joint treatment, if applicable).
The effective rate is variable according to a progressive and ascending scale, depending on what results from applying the following sections defined for the annual operating margin of the respective year, the latter expressed without decimals and rounded to the nearest value:
if the annual operating margin is:
equal to or less than 20%, the rate is 0.0%;
on the part that exceeds 20% and does not exceed 35%, 3.0%;
on the part that exceeds 35% and does not exceed 40%, 5.0%;
on the part that exceeds 40% and does not exceed 45%, 8.0%;
on the part that exceeds 45% and does not exceed 50%, 13.0%;
on the part that exceeds 50% and does not exceed 55%, 15.5%;
on the part that exceeds 55% and does not exceed 60%, 18.0%;
on the part that exceeds 60% and does not exceed 65%, 21.0%;
on the part that exceeds 65% and does not exceed 70%, 24.0%;
on the part that exceeds 70% and does not exceed 75%, 27.5%;
on the part that exceeds 75% and does not exceed 80%, 31.0%;
and on the part that exceeds 80%, 34.5%.
The adjustment factor shall be understood to be the percentage that represents the lithium extracted from properties constituted after January 1, 1979 over the total lithium extracted, considering that the payment does not correspond to properties constituted prior to 1979.
When the contractor mixes brines and/or lithium substances extracted in the Project's exploitation area, with the brines and/or lithium substances extracted outside the project's exploitation area, must apply the joint treatment adjustment factor, established in Article 9 of this supreme decree.
The delay in payment by the contractor, that is, the non-payment within the term established as the payment date, will imply the application of the daily maximum conventional interest rate for operations in non-indexable pesos on the effective payment of the period.
Article 12. The contractor must offer, throughout the term of the contract, and with prior approval from the Ministry of Mining for each case, the lithium products obtained from the project's exploitation area during the exploitation and processing stage to specialized producers, whether public or private, of higher value-added products that use lithium as an input, including, among others, the production of lithium cathodes and lithium battery components, and that develop or are going to develop their production work in Chile, at the lowest price . under export market parity in Chile, equivalent to the lower of the FOB Chilean port prices at which the contractor has sold to its clients outside of Chile within the last six months.
Under no circumstances will the Ministry allow lithium products purchased under this preferential sale to be sent to specialized producers or their
affiliates for sale in Chile or abroad, without incorporating added value. In order to make this obligation effective, the Ministry must indicate to the contractor, in writing, the company or companies that qualify as specialized producers at least one year in advance of the start date of these sales.
In the event that in a given year the Ministry has not reported the existence of companies that qualify as specialized producers or said companies do not fully or partially acquire the percentage of lithium products subject to the most favorable price obligation, the contractor may sell said production to third parties freely.
Article 13. The contractor must make an annual payment for Research, Innovation and Development ("annual R&D payment") corresponding to the amount that results from multiplying two point five percent (2.5%) of the sales of lithium products made during the previous calendar year, discounting the value added tax, multiplied by the adjustment factor and by the adjustment factor for joint treatment, if the latter corresponds. Saying
payment will be made by transfer in Chilean pesos to the State of Chile, by deposit in the General Treasury of the Republic. The conversion to Chilean pesos must be made according to the value of the dollar observed, reported and published by the Central Bank of Chile on the
day of payment. This payment will be made at the same time as the annual payment of the specific payment, as indicated in article 11 letter b).
Annual R&D Payment = 2.5% x (annual sales - VAT) x (adjustment factor) x (adjustment factor for joint treatment, if applicable).
The adjustment factor shall be understood to be the percentage that represents the lithium extracted from properties constituted after January 1, 1979 over the total lithium extracted, considering that the payment does not correspond to properties constituted prior to 1979.
When the contractor mixes brines and/or lithium substances extracted in the Project's exploitation area, with the brines and/or lithium substances extracted outside the project's exploitation area, must apply the joint treatment adjustment factor, established in article 9 of this supreme decree.
The Ministry of Mining will dispose of these resources as established by the budget law of the respective year, and in its use it will tend to promote research, innovation and technological development ("R&D") in lithium products and their multiple uses. For these purposes, the Ministry of Mining must request the incorporation of said resources in the corresponding budgetary program.
Article 14. During the term of the contract, the contractor may not sell, assign, transfer, convey or dispose of all or part of its rights stipulated in the contract, during any of the stages contemplated therein, except with prior written, well-founded authorization from the Minister of Mining and prior acceptance in any case by the assignee of the obligations included under this contract. Within the pertinent communication, the Minister of Mining must accept or reject in writing and with justified cause, the sale, assignment, transfer or conveyance that has been communicated to him. For the assignment to be accepted by the Ministry of Mining, it must meet at least the following conditions: a) The obligations of the assignor must be fulfilled at least up to the date of the approval request; b) The instrument of the assignment must at least contain stipulations that establish that the assignee is responsible, from the date of the assignment, for each and every one of the obligations of the assignor, and c) The assignee must
have technical and economic capacity that allows you to fulfill the obligations of the contract.
The Minister of Mining must rule on the assignment within a period of ninety days from the date of receipt of the respective approval request.
However, the contractor may enter into contracts with third parties for the development of the object of the contract. Likewise, the contractor may not carry out any action that prevents the normal operation of a new productive lithium project in the exploitation area once the contract is terminated.
Article 15. All relations between the parties derived from the contract will be subject to what is specified in it and to Chilean law. In the exercise of the rights and in the fulfillment of the obligations that derive from the contract, the contractor will be subject to all the pertinent legal regulations in force in the country.
Article 16. In the event of a disagreement between the parties regarding any matter, they will meet, in the manner indicated in the contract, to discuss the problem and will make all possible efforts to resolve it amicably. After a period of thirty (30) days from the notification of the disagreement, without it having been resolved amicably, the Ministry will propose a shortlist of qualified, recognized and prestigious experts, whether natural or legal persons, of which the contractor must choose one, to study the matter in detail and propose to the parties the most appropriate solution in their opinion. The designated expert will not be considered or act as an arbitrator and its costs and expenses will be borne by both parties in equal proportion. Notwithstanding the foregoing, either party may submit the matter in dispute to the resolution of the ordinary courts of Justice of Chile, extending jurisdiction before the courts of the commune of Santiago
Article 17. The Ministry of Mining, with the support of the Chilean Copper Commission, will annually carry out a technical and financial audit in order to verify the correct calculation of the specific payment and remuneration that occurred within the previous year. Likewise, it will be the task of the audit to verify that the sale prices used by the contractor to calculate the specific payment correspond to market prices, to the extent that these serve as a reference for the calculation of the annual or quarterly specific payment. For this purpose, the Ministry of Mining will propose a shortlist of independent experts, from which the contractor must choose one within five business days from the date of the proposal. Said expert must deliver an audit report with the differences found in the calculation of the payment to the State, which will be binding and non-claimable for the parties.
All adjustments to the remuneration or specific payment, valued at the effective gross sales prices derived from the result of this review, will be expressed in Chilean pesos. The State of Chile will have the right to use all the geological, geophysical and similar data provided by the contractor. However, and while the contract is in force, this information may not be transmitted to third parties without the authorization of the contractor, whose refusal must be justified.
Article 18. THE CONTRACT WILL TERMINATE EARLY WHEN ANY OF THE FOLLOWING CAUSES OCCURS:
1. During or at the end of any period contemplated in the exploration and prospecting phase, in the event that the contractor decides not to continue with the following period, in accordance as provided in the contract.
2. Abandonment of the tasks by the contractor, which will be understood to have occurred in the event that the contractor suspends the execution of the operations for a period of more than three years in accordance with the provisions of the contract.
3. If the contractor was declared in forced liquidation by enforceable resolution.
4. Dissolution or termination of the legal personality of the contractor.
5. For repeated breach by the contractor of the obligations contained in the contract.
6. By mutual agreement between the parties, a situation that must be recorded in writing.
7. For the final revocation and without further recourse of the environmental qualification resolution of the mining project.
8. For the final and unappealable (translate = refused for appeal) term or the loss of validity of the authorization delivered by the Chilean Nuclear Energy Commission to Codelco and/or its assignee, of the lithium extraction quota from the Maricunga salt flat.
9. Due to the loss by Codelco of its quality of controller in the company Salar de Maricunga SpA, in the terms described in articles 97 et seq. of Law No. 18,045, on the Securities Market.
10. For non-compliance with the conditions and terms established in this administrative act.
If the contractor, during the term of the contract, incurs in any of the causes of termination referred to in this article without justified cause and excluding cases of force majeure, the Ministry will notify the contractor by certified letter of the breach in question and, if the The contractor has not corrected it or initiated the necessary actions to correct it within ninety (90) days from the date of notification of the breach, the Ministry will request the early termination of the contract. Notwithstanding the foregoing, the full contract will terminate if the contractor does not start production within a period of five years counted from the end of the exploration and prospecting phase.
Article 19. The contractor must ensure that Codelco, at all times, maintains the quality of controller over the company Salar de Maricunga SpA
For these purposes, the contractor must inform the Ministry of Mining about any modification or change that is made in the ownership structure and / or administration of said company, as if it were an essential fact such as those described in Law No. 18,045.
Article 20. Prior to the signing of the public deed containing the contract, a favorable report from the council of the Chilean Copper Commission must be obtained.
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