History of mining in Chile

Pre-Hispanic mining

Incas exploited placer gold in the northern half of Chile prior to the arrival of the Spanish. It has been claimed that the Inca Empire expanded into Diaguita lands because of its mineral wealth. This hypothesis was as of 1988 under dispute. Further, an additional possibility is that the Incas invaded the relatively well-populated Eastern Diaguita valleys (present-day Argentina) to obtain labor to send to Chilean mining districts.

Archaeologists Tom Dillehay and Américo Gordon claim Incan yanakuna extracted gold south of the Incan frontier in free Mapuche territory. Following this thought, the main motive for Incan expansion into Mapuche territory would have been to access gold mines.

Besides gold indigenous people in Chile did also mined native copper and copper minerals producing copper bracelets, earrings and weapons. The use of copper in Chile can be traced to 500 BC. While Pre-Hispanic Mapuche tools are known to have been relatively simple and made of wood and stone a few them were actually made of copper and bronze.

Colonial mining (1541–1810)

Early Spaniards extracted gold from placer deposits using indigenous labour, deaths related to mining contributed to a population decline among native Mapuches. Mining activity declined in the late 16th century as the richest part of placer deposits, which are usually the most shallow, became exhausted.

Compared to the 16th and 18th centuries Chilean mining activity in the 17th century was very limited. Gold production totaled as little as 350 kg over the whole century. Chile exported minor amounts of copper to the rest of the Viceryoalty of Peru in the 17th century. Chile saw an unprecedented revival of its mining activity in the 18th century with annual gold production rising from 400 to 1000 kg over the course of the century and the silver annual production rising from 1000 to 5000 kg in the same interval. Chilean copper mining of high-grade oxidized copper minerals and melted with charcoal produced 80,000 to 85,000 tons of copper in the 1541–1810 period.

Gold, silver and copper from Chilean mining begun to be exported directly to Spain via the Straits of Magellan and Buenos Aires first in the 18th century.

Early Spanish conquistadores and explorers were aware of the existence of coal in Chilean territory. For example, Diego de Rosales noted that when governor García Hurtado de Mendoza and his men stayed in Quiriquina Island (36.5° S) in 1557 they made fire using local coals. In Magallanes Region coal was first discovered by Pedro Sarmiento de Gamboa who visited the Straits of Magellan in 1584.

Silver rushes and early coal mining (1810–1870)

Following the discovery of silver at Agua Amarga (1811) and Arqueros (1825) the Norte Chico mountains north of La Serena were exhaustively prospected. In 1832 prospector Juan Godoy found a silver outcrop (reventón) 50 km south of Copiapó in Chañarcillo. The finding attracted thousands of people to the place and generated significant wealth. After the discovery of Chañarcillo, many other ores were discovered near Copiapó well into the 1840s. Copiapó experienced a large demographic and urbanistic growth during the rush. The town became a centre for trade and services of a large mining district. The mining zone slowly grew northwards into the diffuse border with Bolivia. At the end of the silver rush rich miners had diversified their assets into banking, agriculture, trade and commerce all over Chile.

A last major discovery of silver occurred 1870 in Caracoles in Bolivian territory adjacent to Chile. Apart from being discovered by Chileans, the ore was also extracted with Chilean capital and miners.

In the 19th century Claudio Gay and Benjamín Vicuña Mackenna where among the first to raise the question of the deforestation of Norte Chico caused by the firewood demands of the mining activity. Despite the reality of the degradation caused by mining, and contrary to popular belief, the Norte Chico forests were not pristine either before the onset of mining in the 18th century.

Besides silver coal mining also boomed in the early republican period. As coal mining was commonplace in industrialized Britain early British travellers had the oportunity to comment on Chilean coals before they were profitable. British travelers had differing opinions on the economic value of Chilean coals, or more specifically, the coals of Zona Central Sur (36–38° S). While David Barry found the coals to be of good quality, Charles Darwin held them of to be of little value. The British consul in Chile correctly predicted in 1825 that the area around the mouth of Biobío River would be a centre of coal industry. It was however not until the mid-19th century that large scale coal mining begun in the region. The initial trigger of coal mining was the arrival of steamships to the port of Talcahuano. These steam ships, most of whom were English, bought initially the coal very cheaply and the exploited coal seams were easy to work as they laid almost at ground level. Demand of coal stemmed not only from steam navigation but from the growth of copper mining in northern Chile. As wood in northern Chile became increasingly scarce copper smelters recurred to the coals found around Zona Central Sur. Demand from copper smelters proved in 1840s crucial to stabilize the coal business.

Coal mining operations were chiefly owned by Chilean businessmen contrasting with the heavy foreign involvement seen in silver mining and later also in salpeter and copper mining. Silver mining and coal mining were somewhat linked by Matías Cousiño a silver mining magnate who expanded into the coal bussines. Cousiño begun mining operations in Lota in 1852 a move that rapidly transformed the town, from being a sparsely populated frontier zone in the mid-19th century, into a large industrial hub that attracted immigrants from all over Chile well into the 20th century.

Saltpetre Era (1870–1930)

Starting in 1873, Chile's economy deteriorated. Several of Chile's key exports were out-competed and Chile's silver mining income dropped. In the mid-1870s, Peru nationalized its nitrate industry, affecting both British and Chilean interests. Contemporaries considered the crisis the worst ever of independent Chile. Chilean newspaper El Ferrocarril predicted 1879 to be "a year of mass business liquidation". In 1878, then-President Anibal Pinto expressed his concern through the following statement:

It was during this context of economic crisis that Chile became involved the costly Saltpetre War (1879–1883) wrestling control of mineral-rich provinces of Peru and Bolivia. The notion that Chile entered the war to obtain economical gains has been a topic of debate among historians.

As the victor and possessor of a new coastal territory following the War of the Pacific, Chile benefited by gaining a lucrative territory with significant mineral income. The national treasury grew by 900 percent between 1879 and 1902, due to taxes coming from the newly acquired lands. British involvement and control of the nitrate industry rose significantly, but from 1901 to 1921 Chilean ownership increased from 15% to 51%. The growth of Chilean economy sustained in its saltpetre monopoly meant, compared to the previous growth cycle (1832–1873), that the economy became less diversified and overly dependent on a single natural resource. In addition the Chilean nitrate, used world-wide as fertilizer, was sensitive to economic downturns as farmers made cuts on fertilizer use one of their earliest economic measures in the face of economic decline. It has been questioned on whether the nitrate wealth conquered in the War of the Pacific was a resource curse or not. During the Nitrate Epoch the government increased public spending but was however accused of squandering money.

When conquering Peruvian territories in 1880 Chile imposed a 1.6 $ tax on each quintal exported. This tax made saltpetre more expensive at a global scale, in other words it was a "tax exportation". In the 1920s this tax begun to be considered obsolete by Chilean politicians. A new mining code was enacted in 1888.

From 1876 to 1891 Chilean copper mining declined, being largely replaced in international markets by copper from the United States and Río Tinto in Spain. This was in part due to the exhaustion of supergene (shallow) high-grade ores. The introduction of new extraction techniques and technology in the early 20th century contributed to a significant resurgence of copper mining. Technological innovation in drilling, blasting, loading and transport made it profitable to mine large low-grade porphyry copper deposits.

Copper Era (1930–2010)

In the 1910s the main copper mining countries were Chile, Spain and the United States. The tax paid by copper mining amounted to "little or nothing". In the 1950s the taxation on copper mining was reformed. In 1932 a new mining code replaced the older code from 1888.

The Law on Mining Concessions was rectified in 1982 moving mining concessions rights away from the ad coelum principle.

Investments in mineral exploration in Chile reached a maximum 1997 and declined from there on to 2003. As a consequence of this by 2004 there were relatively few active mining projects. From 1995 to 2004 the principal discoveries were the copper porphyries of Escondida and Toki. In addition these in the 1995–2004 period a larger group medium sized mineral deposists (with non-mineralized cover rocks) were discovered including Candelaria, El Peñón, Gaby Sur, Pascua Lama and Spence.

Another tendency by 2004 was that the number of companies involved in exploration had diminished due to mergers.