CORPORATE COUNSEL Q&A

Mining is a key sector of the Chilean economy – in 2010, it accounted for nearly 20 per cent of GDP – and the country is often described as a “mining powerhouse” given its position as the world’s largest copper producer and a top-five producer of molybdenum and silver. Forecasts for the future look positive and $70 billion is expected to be invested in mining to increase copper production by 45 per cent by 2025.

Despite these projections, Chile is facing several challenges that need to be addressed in order for this increased production to be realised. The primary concerns are a lack of power, water shortages and a green movement which continues to gather momentum. Combined these factors are increasing the cost of mining considerably which in turn could threaten Chile’s competitiveness in the global market.

Chile is heavily reliant on imported fossil fuels, which has resulted in electricity in Chile being more expensive than anywhere else in South America. Since 2000, the cost of electricity has increased 11 per cent. Demand for energy on the northern grid which supplies most of Chile’s mines is predicted to rise by 8.4 per cent in the next 10 years but the next power plant to come online is not expected until 2016. Furthermore, the position of the mines in Chile – along the edges of the Atacama Desert – requires miners to pump sea water to the site. This in itself is an expensive solution, which only adds to the total production cost.

The country is also increasing its efforts at achieving sustainability and state-owned copper company Codelco recently announced plans to invest nearly $27 billion over the next six years in mining projects, of which, $2 billion will be spent on measures to avoid or mitigate the impact on communities and the environment, while a further $1 billion will be used to upgrade the company’s smelters to ensure they meet stricter greenhouse gas emission standards.

A further example of Codelco’s forward thinking is evident in its contract with Veolia Water Chile and Vapor Procesos to recover copper from its mining operations. This project involves utilising various technologies to treat 3 million cubic metres of water per year and will enhance Codelco’s total mine production. At the El Teniente mine – reported to be the world’s biggest underground copper mine – this process will recover approximately 1,680 tons of copper over the initial five-year contract.

It is apparent that Chile has many challenges to address in the mining sector over the coming years, but as Diego Brieba Vial tells Who’s Who Legal, these issues are being taken very seriously by the industry. We spoke with Diego to find out more about working for the world’s largest copper producer.

What prompted your move in-house?

My move was due to two separate motives. The first was the need to find a healthier work/life balance that would afford me more time with my wife and three boys.

The second was to further my professional career; to gain more corporate exposure while broadening my practice to include more areas of the law and grow by way of being exposed to a corporate culture within the ranks of an industry heavyweight. It was particularly important to me to not over- specialise as I felt I could be trapped into becoming a limited lawyer with fewer opportunities to grow my practice and expand my knowledge and experience.

Tell us about your role.

I am a senior attorney at the office of the general counsel of Codelco. As one of three senior attorneys working directly under the general counsel, I am responsible for all legal issues involving Codelco’s affiliates; this includes joint ventures with foreign mining companies, energy and port and infrastructure entities, investment vehicles, research and development entities.

I also advise two of the nine vice presidents and their respective teams – the VP of business development and the VP of projects – on legal strategy for joint ventures, building relationships through legal agreements, memorandums of understanding and similar arrangements, bidding or tender processes and acquisitions and/or divestment of assets. For the VP of projects, I take a lead role in providing the legal advice required to develop projects, whether they are new greenfield projects or the expansion of existing projects aimed at securing Codelco’s leadership in terms of copper production and supporting the company’s production and growth pipelines.

Describe a typical day.

In stark contrast to law firm life, my day has not, as yet, ended too late. I arrive early, starting at 8am or 8:30am and usually finishing by 6pm (7pm at the latest). So far, no day has been typical. Each day brings its own new challenges and issues that compel me to exert myself to the best of my capabilities under the brilliant and seasoned leadership of the current general counsel.

Since starting at Codelco I have been exposed to a wide range of legal issues including labour, constitutional/administrative, corporate, environment and aboriginal affairs, contract and mining law as well as litigation and antitrust. No contract or legal issue has been small or insignificant in terms of value or impact and even though it has only been four months, I am beginning to believe there is no such thing as a typical day at Codelco.

What size is the legal department?

There are six attorneys at the office of the general counsel: the general counsel, three senior attorneys and two junior lawyers. I should note that each operating division of Codelco has its own general counsel and support staff.

Tell us about any recent special projects you have been working on.

I am currently working on a very important project for one of Codelco’s operating units, which aims to expand mine life by at least 30 years. The project will involve a tender process to award an EPC, BOT or BOOT contract in order to develop the associated infrastructure. We have not yet retained counsel and are currently working on a list of potential firms.

Do you always tend to use the same law firms?

Traditionally Codelco has tended to use some firms more than others, however in today’s market and with Codelco’s needs, this trend is changing and today we do not always use the same firms.

What skills and qualities do you require in external counsel?

Foremost we require specialists on specific areas of law such as environment, tax, litigation, projects, mining, water and so on. However, following the economic crisis in 2008, other considerations including cost and the efficient provision of services have also become crucial. In this regard, we have become more flexible and retain both small and large firms in order to meet our needs in a timely and cost effective manner without sacrificing on quality.

Describe the Chilean legal marketplace. Is there a lot of choice for clients? Do you turn to international law firms or local firms?

The Chilean legal market has grown over the years and has demonstrated that it is up to par with international firms. Despite the increased choice of lawyer that now exists, there are still some practice areas that have too few significant or seasoned practitioners. Codelco turns to international firms when the need arises particularly when cross-border issues are at hand.

As environmental and social conditions become increasingly important in acquiring a permit, how has Codelco responded? What social relations plans has the company put in place?

As a newcomer, I believe that my response may be incomplete. However, I can attest to the fact that Codelco has taken this issue very seriously and has put together a robust and competent team of professionals that deal with the matters at hand. Additionally I understand that, year on year, budgets for these purposes have also increased. No projects are conceived, nor do they continue to operate, without permits in place and this means not just legal or administrative permits but also social or community licences.

What is the most challenging aspect of mining law today?

I believe that this question merits a manifold response. The practice of mining law requires expertise in a variety of legal disciplines each of which is key to conducting and operating a mining project and company. With this in mind I believe that the challenges today reside in the environment and obtaining social licences, financing and securing certain “raw materials” (water, energy and qualified labour) that are absolutely necessary to advance with any project or development and at competitive prices. Personally, I also believe there is room for improvement in the laws and regulations that deal with mineral tenure and environmental considerations so that they might afford greater security to companies and less chance of falling prey to courts and/or activist organisations.