Chile is now weighing up a tax increase on mining companies that could raise an additional $1.2 billion in revenue over the next two years. Christian Georges, metals and mining strategist at equities intermediary firm, Olivetree Securities, says “This is yet more bad news to hit the beleaguered mining sector. With the concern around the impact of Chinese expansion on the sustainability of the iron ore price and the Henry tax in Australia one has to wonder whether mining’s near-term future is to be characterised by on-going earnings downgrades. We also have to keep in mind that tax rises are also being considered in both China and South-Africa.”

Anglo American and Xstrata both own a 44% stake in the giant Collahuasi copper mine in Chile and have plans to expand its production to satisfy in particular growing demand from China. The profitability levels anticipated may suffer should the government decide to maintain this increased tax level over a longer period. BHP also controls Escondida in the country, one of the world’s biggest copper mines.