Chile: Decrees Relating to the Establishment of "Sociedad Minera El Teniente, S.A.," Jointly-Owned...

Chile: Decrees Relating to the Establishment of "Sociedad Minera El Teniente, S.A.," Jointly-Owned by a Subsidiary of Kennecott Copper Corporation and the Chile Government CopperCorporation and Authorization of InvestmentsSource: International Legal Materials, Vol. 6, No. 6 (NOVEMBER 1967), pp. 1146-1161Published by: American Society of International LawStable URL: http://www.jstor.org/stable/20690288 .

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1146

CHILE - KENNECOTT COPPER CORPORATION ARRANGEMENTS: FORMATION OF SOCIEDAD MINERA EL TENIENTE S.A. AND AUTHORIZATION OF

INVESTMENTS*

MINISTRY OF MINES Diario Oficial No. 26,522 August 24, 1966_

AUTHORIZES THE COPPER CORPORATION TO PURCHASE SHARES OF THE "SOCIEDAD MINERA EL TENIENTE S.A."**_

Santiago, July 19, 1966

His Excellency today decreed the following:

No. 99.- In view of the provisions of Sec. 8 of Article 15 of Law 11,828; the statement of the Copper Corporation in Communication No. 180 of July 15, 1966, and the provisions of Title III of Law 16,425,

I HEREBY DECREE:

1) The Copper Corporation is authorized to acquire 51% of the stock forming the capital of the joint stock company which it is intended to establish, known as "Sociedad Minera El Teniente S.A.,"

2) Said 51% will comprise the entire stock issue of the series A and C shares of which there are, respectively, 65,280,000 and 16,320,000 shares, or a total of 81,600,000.

3) The total price of these shares will be US$ 80,000,000 and the Copper Corporation is authorized to agree on the form and manner of payment, interest

which it will bear, and quarantees which must be provided.

4) Until such time as the "Sociedad Minera El Teniente S.A." obtains author

ization for its legal establishment, the Copper Corporation may conclude a pur chase commitment in respect of such shares.

5) The purchase of the shares mentioned in this decree is conditional upon the constitution of the "Sociedad Minera El Teniente S.A." to the entire satis

faction of the Copper Corporation.

(signed) Eduardo Frei - Eduardo Simian - Sergio Molina

*[Unofficial translation edited for International Legal Materials by Helen L.

Clagett from the official texts published in Diario Oficial de la Republica de Chile.

[Decree No, 2,046 of September 16, 1966, exempting the Braden Copper Company, a wholly-owned subsidiary of Kennecott Copper Corporation, from designated taxes and duties appears at page 1147. Decree No. 2,167 of October 1, 1966, authoriz ing the existence and approving the statute of Sociedad Minera El Teniente S.A., to be jointly owned by Braden Copper Company and the Chilean Government, appears at page 1148. Decree No. 316 of March 1, 1967, authorizing Sociedad Minera El Teniente S.A. to invest $230,241,000 in the El Teniente Mine and com

plementary installations appears at page 1151. [Chile decrees authorizing investment to increase production at copper facili

ties in which the Anaconda Company has interests appear at 6 International Legal Materials 424 (1967).]

**[The Copper Corporation is a Chile government-owned entity.]



1147

MINISTRY OF FINANCE Diario Oficial No. 26,546 September 22, 1966_

EXEMPTS BRADEN COPPER COMPANY, A FOREIGN CORPORATION, FROM TAXES AND DUTIES DESIGNATED HEREUNDER._

Santiago, September 16, 1966

The following was promulgated today:

NO. 2.046.- IN CONSIDERATION OF THE

Provisions of Arts. 3 and 7 of Law 16,425, and Article 13-A of Law 11,828*

I HEREBY DECREE:

Article 1.- The Braden Copper Company, a foreign Corporation organized under the laws of the State of Maine of the United States, and with an agency authorized to operate in this country, is exempted from all taxes, contributions, duties or charges arising from, caused by, or as a consequence of the transfer of its

property, assets and liabilities, rights and obligations, which it may effect upon formation of the Joint Mining Company** to be known as Sociedad Minera El Teniente S.A. This same exemption is granted to legal persons (corporate) who may be stockholders of Braden Copper Company. This exemption expressly includes Income Tax, Capital Gains Tax and Additional Tax which are applicable according to the Income Tax Law whose text is laid down in Article 5 of Law 15,564, and also taxes laid down in Law No. 16,272 which may be applicable upon effecting their contributions to the said company by the partners which constitute it.

Likewise, expressly included are taxes, duties, and notarial fees which may be

charged for the public [notarial] instruments for establishing the Sociedad and the contributions thereto and those applicable for registration of the Sociedad, of an abstract of its Statutes (By-laws), of the Decree which authorized its existence and declared it legally established and [for registration] of the contributions made thereto in the Registers of Property, Commerce, Water, Trade

mark, Mines, and other Records where it may be necessary to register or record

them.

Article 2.- Exemption is granted from all taxes, contributions, duties or

charges on transactions, or contracts or documents originating from or consequent

upon the purchase of shares in the Sociedad Minera El Teniente S.A. by the Copper Corporation. Expressly included in this exemption are the acts, contracts or documents drawn up relating to the agreement on purchase of shares by the Copper

Corporation, to the transfer and conveyance of shares, documents of any nature

drawn up for the transfer, the cash receipts, and the security contracts which

may be necessary in the operation of sale of shares.

Article 3.- Articles 95, 97, 100, 101, 106, 107, and 108 of DFL 251 of May 20, 1931, and Article 463 of the Code of Commerce will not be applicable to the

joint mining company named Sociedad Minera El Teniente S.A.

*[New Text of Law 11,828, revised by Law 16,624 of May 15, 1967.]

**[Mixed companies using government and private funds jointly.]



1148

MINISTRY OF FINANCE Diario Oficial No. 26,590 November 14, 1966_

AUTHORIZES THE EXISTENCE AND APPROVES THE STATUTES [CHARTER AND

BY-LAWS] OF THE STOCK CORPORATION NAMED "SOCIEDAD MINERA EL TENIENTE S.A. "_

Santiago, October 1, 1966

The following decree was promulgated today:

No. 2,167.- Considering the attached application and reports, and pursuant to

the provisions of Articles 427 and 433 of the Code of Commerce and the Regula tion No. 4,705 on Stock Corporations dated November 30, 1946

'

I HEREBY DECREE:

1) The existence is authorized and the statutes approved of the Stock

Corporation named "Sociedad Minera El Teniente S.A." The statutes are incorpo rated in the public [notarial] instrument dated September 16, 1966, executed before the Notary Public of Santiago, Jaime Garcia Palazuelos.

2) In order to declare the above-mentioned Corporation legally established, the Corporation must show evidence of full payment of the corporate capital within a period of six months computed from the date of this decree.

Let the formalities required under Article 440 of the Code of Commerce be observed.

Let this be recorded, communicated and published. -

(signed) Eduardo Frei -

Sergio Molina - Eduardo Simi?n.

Extract from the Statutes [Charter and By-Laws] of the Stock Corporation named "Sociedad Minera El Teniente S.A."_

As incorporated in the public notarial instrument Drawn up on September 16,

1966, before the Notary Public of Santiago, Jaime Garcia Palazuelos, a Stock

Corporation was created, named "Sociedad Minera El Teniente S.A."

In the instrument of the constitution [articles of incorporation], all the shares into which the capital of the Company is divided have been subscribed.

The Stock Corporation's objective shall be the continuance of the exploita tion of the mining deposits of Braden Copper Company producing copper ores, copper bars, by-products and other derivatives and substances obtained in the

processing of copper ores, or that may result from the complementary production

processes.

The Corporation may also enter into any agreements or contracts for the

production, development, sale, transportation and freighting of copper, its

by-products, derivatives, accessories and others resulting from its activities

or which may be necessary or appropriate for the development and achievement of

the Corporation's purposes.

Likewise, one of the purposes of the Corporation shall be the fulfillment of one or more of the objectives listed in Article 13-A of Law 11,828, in order to comply with the obligation relating to investment of profits which it may accrue, pursuant to this legal provision.

The Corporation may, furthermore, promote, or, as an associate or in other

ways, form part of enterprises, corporations or associations of any nature to



1149

advance the purposes referred to in this Article.

The legal domicile of the Corporation is the city of Rancagua, and its duration will be for 50 years, computed from the date on which it is declared

legally constituted.

The Corporation's capital stock shall be the amount of $160,000,000 (US) divided into 160,000,000 registered shares, having a par value of one dollar, which shall be issued in four series, that is: Series "A", 65,280,000 shares; Series "B", 62,720,000 shares; Series "C", 16,320,000 shares, and Series "D", 15,680,000 shares.

Shares in Series "C" and "D" have no voting rights and shall constitute

preferred stock, such preference, with regard to the Corporation's profits made available for dividends, consisting in preferential payment of 6.5% on their nominal value, in dollars, currency of the United States of America. Should the net profits of one fiscal year not be sufficient to pay all or part of the 6.5%

stipulated, it shall be paid preferentially, without interest, out of the net

profits of subsequent fiscal years. The 6.5% received in any year shall be credited to the amount of the dividend which the preferred stock would be en titled to receive.

Shares of Series "A" or "C" which may be transferred to physical persons or to juridical persons of a private nature [private corporations], shall auto

matically be changed to Series "E" and "F", respectively.

The capital shall be subscribed and paid in as follows:

a) The Braden Copper Company subscribes to 65,280,000 shares of Series "A", 62,700,000 of Series "B", 16,320,000 of Series "C" and 15,680,000 of Series "D", the value of which will be paid within six months from the date of the decree

authorizing the establishment of the Corporation, by the contribution of all of its property, assets and liabilities, rights and obligations in Chile, accord ing to the balance sheet as of September 30, 1966.

b) The remaining 20,000 shares of Series "B" shall be subscribed in the instrument of incorporation by the persons therein designated, and shall be

payable within the same period above-mentioned.

The Corporation shall be administered by a Board of Directors to serve for three years, and whose members will be renewed simultaneously.

Until such time as shares in the Series "A" and "C" are transferred to the

Government of Chile or the Agency or Institution endowed with a legal power, that is to purchase such shares, the Board of Directors shall be composed of

three persons, two of whom shall represent Series "A" shares and the third, Series "B" shares. There shall also be two Alternates, one for each series of

shares.

Once the transfer of the shares of Series "A" and "C" has been effected, the Board of Directors shall consist of seven principal members and four alter

nates, four of the Directors and two of the Alternates representing Series "A"

and three of the Directors and two Alternates representing Series "B".

The Directors shall each post a bond of E?. 1,000 [Escudos] in cash, insur ance policies or equivalent securities.

The Directors shall receive a monthly compensation equivalent to two and a half times the monthly salaries of Schedule "A" paid by the Department of

Santiago, provided they attend all the meetings held during the month. This

remuneration, for any Director who fails to attend one or more meetings, shall

be reduced in the same proportion as exists between the total number of meetings



1150

held and the number of those he failed to attend.

The Regular Stockholders Meeting will be held between February 1st and March 31st of each year. At this meeting, each of the Series "A" and "B" shall

designate one Auditor and one Alternate, who shall act as authorized by regula

tion.

Amendment of the Statutes [Charter and By-Laws], any premature dissolution

of the Corporation, and the sale of its assets and liabilities, may only be dealt with in the Extraordinary Stockholder Meetings.

At these meetings each share of Series "A" and "B" shall be entitled to

one vote.

A Balance Sheet of the corporate business shall be prepared on December

31st of each year.

The net profits shall be distributed as dividends among the stockholders, priority in payment to be made on the preferred shares of Series "C" and "D".

Notwithstanding the foregoing, part of the net profits may be destined for the creation of special funds for specific purposes and/or for investment in the manner contemplated in Art. 13-A of Law 11,828.

The Corporation shall be dissolved upon loss of 50% of its capital; at the

expiration of the term stipulated for its duration; by agreement reached at an

Extraordinary Stockholders' Meeting; and for other legal reasons, and its

liquidation shall be effected by a Commission composed of two representatives of Series "A" and one of Series "B".

I hereby certify that the above extract has been approved by this Superin tendency for the purposes of Art. 440 of the Code of Commerce. Santiago, October 21, 1966.

Jose F. Guzman, Superintendent.



1151

MINISTRY OF ECONOMY, Diario Oficial No. 26,697 DEVELOPMENT AND RECONSTRUCTION March 20, 1967_

AUTHORIZES THE SOCIEDAD MINERA EL TENIENTE S.A. TO INVEST

$230,241,000 IN THE EL TENIENTE MINE AND COMPLEMENTARY

INSTALLATIONS._

Santiago, March 1, 1967

The following was promulgated today by His Excellency:

No. 316.- In Consideration of:

1) The application presented by Robert M. Haldeman, mining engineer, alien, domiciled for the purposes of this document at Agustinas 1389 of this city, on behalf of the Sociedad Minera El Teniente S.A., constituted by public [notarial] instrument dated September 16, 1966, before the Notary Public Jaime Garcia Palazuelos and approved by Supreme Decree No. 2167 of October 1, 1966, of the

Ministry of Finance;

2) Decree No. 99 of July 19, 1966, of the Ministry of Mines, whereby the

Copper Corporation was authorized to acquire 51% of the stock of the Sociedad Minera El Teniente S.A.;

3) Communication No. 3721, of June 15, 1966, of the Superintendency of Insurance Companies, Joint Stock Companies and Stock Exchanges, issued in accordance with the terms of Art. 10 of Law 16,425;

4) Decree No. 2,046 of September 16, 1966, of the Ministry of Finance, which grants certain exemptions under the terms of Article 13-A of Law 11,828 and Articles 3 and 7 of Law 16,425;

5) The report dated October 21, issued by the Confederation of Production and Commerce; the Communication dated November 25, issued by the Ministry of Public Health forwarding the report made by the National Health Service; the Communication No. 24,390 dated November 11, issued by the National Health Service; the Communication dated November 21, issued by the Housing Corporation; the Communication No. 18,955 dated October 19, issued by the Production Development Corporation; the Communication No. 4744 dated November 26, issued by the Internal Revenue Service; the Communication No. 1847 dated November 10 and the letter dated October 10, both issued by the Ministry of Education, all of the above issued in 1966;

6) The report by the Copper Corporation contained in Communication No. 26, dated February 28, 1967; and

7) The provisions of Decree with Force of Law 258 of 1960 and of Laws 11,828 and 16,425 and Art. 239 of Law 16,464,

I HEREBY DECREE:

Article 1.- The Sociedad Minera El Teniente S.A., a Chilean Joint Stock Company, hereinafter the Sociedad or El Teniente, with legal domicile at Avenida Millan, no street number, Rancagua, is hereby authorized, subject to the terms of Laws Numbers 11,828; 16,425 and 16,464 and Decree with Force of Law 258 of March 30, 1960, to make investments in this country of approximately US$ 230,241,000 dollars, currency of the United States of America, partially in credits obtained

abroad, from the Export-Import Bank of Washington, hereinafter Eximbank, and

from Braden Copper Company, hereinafter Braden, and partially in credits granted

by the Copper Corporation, investments which the Sociedad agrees to make in

accordance with the terms of the present Decree. The object of the investment

will be to expand, activate and improve the mining operations of the El Teniente



1152

Mine, located in the O'Higgins Province, in order to increase the installed copper production capacity of said mine from approximately 180,000 short tons

annually to an estimated 280,000 short tons annually.

The investments referred to in this Decree shall be distributed as follows:

a) $110,016,000 US dollars deriving from credits extended by the Eximbank. These credits shall be granted in accordance with, and at the time of the re

quirements of the Sociedad in order to execute the investment, and shall bear 6% annual interest, payable semiannually on amounts drawn, and of 1/2% annually, payable semiannually, on the amount of the credit at the disposal of the Soci

edad, but not yet drawn.

El Teniente shall amortize the total amount of these credits in 30 succes sive semi-annual payments commencing from the nearest June 30 or December 31,

always provided that at either of said dates, more than three months shall have

elapsed from the date on which the Sociedad may have completed the construction work required to increase the installed production annual capacity to approxi

mately 280,000 short tons of copper; but in no case later than December 31, 1971.

These credits and their interest shall be payable in United States dollars, in the United States. Arrangement shall be made for amortization in semi-annual

payments of $3,667,200 dollars, currency of the United States of America, with out prejudice to what is stated below.

In addition to the above-mentioned amortization, if in any year the net income of the Sociedad, before taxes, exceeds the amount required to permit payment jointly to the Chilean Treasurer and the Copper Corporation of an income higher that $51,250,000 dollars, in United States currency, then an additional amortization shall be paid to Eximbank equivalent to 50% of such surplus. For these purposes, the joint income of the Chilean Treasury and the Copper Corpora tion shall be understood to be constituted from all payments which the Chilean Treasury or the Copper Corporation should receive on their own behalf, or on behalf of any persons who may acquire their rights under any title, in the form of 51% of profits after taxes, or derived from taxes imposed on dividends dis tributed to the stockholders of the Sociedad, and from the levy of any other taxes, save existing ones, other than those levied on the profits or income of the Sociedad which are payable to the Chilean Government, all of the above amounts to be computed on net income before taxes.

The amortizations referred to in the preceding paragraphs shall be payable

only up until the date when the unpaid balance of Eximbank credits reaches the figure of $10,000,000, currency of the United States of America, after which time this amount shall be paid in equal semi-annual installments during the period still remaining for payment of the credits. The service on the credits referred

to below in sections b), c) and d) of this article shall be subordinated to the prior service of the credits referred to in the present section which are due and demandable. The credits referred to in this section shall be subject to these terms and conditions, and to any others on which the Sociedad and the above-mentioned credit institution may agree.

These credits shall be used for acquisition of goods abroad, to cover the costs of the other objectives listed below, and any other expenditures which may be incurred on the basis of this investment.

THE MINE

Equipment, machinery, accessories and materials required for the development and

operation of new areas and expansion of existing areas, such as, drills, scrapers,

cars, locomotives, compressors, front-end loaders, electric motors, passenger and

freight elevators, structural steel, piping, etc.



1153

EL TENIENTE 8 RAILROAD SYSTEM

Equipment, machinery, accessories and materials for construction and operation of the tunnel from the Mine to Colon and the shaft system, such as locomotives, ore cars, freight cars, automotive passenger trains, control systems, hoists, steel cables, structural steel, luminaries, safety equipment, explosives,

machinery spare parts, tools, steel rails, etc.

THE COLON CONCENTRATOR

Crushers, screens, feeders, conveyors, mills, cyclones, dust collecting systems,

pumps, flotation machines, automatic control systems, fans, heaters, electric

motors, apparatus feeders, elevators, piping, valves, structural steel for

buildings and bridges, thickener equipment and mechanisms, lime plant equipment, repair parts, etc.

EXPANSION OF THE CALETONES SMELTER

Equipment, machinery, accessories and materials for the expansion of the Smelter, such as, thickeners, vacuum filters, pumps, control system, fluo-solid type roasters, conveyors, feeders, compressors, cyclones, automatic weighing scales,

reverberatory furnace structures, brick hangers, refractories, dust collecting

systems, electrostatic cottrells, dust agglomerating plant, fuel system, electric

motors, piping, valves, cranes, locomotives, slag cars, converters, molding equip

ment, fork-lift trucks, equipment for expansion of the sulphuric acid plant, etc.

ELECTRIC POWER

Equipment, accessories and materials for construction of the Rio Blanco Dam,

pressure piping, valves, automatic gates, turbines, generators, Diesel generating sets, governors, controls, protection, measurement and control cabinets, power

transformers, transmission lines, remote control systems, substations, rectifiers, distribution centers, telephone systems, signaling, etc.

INDUSTRIAL WATER

Includes the purchase of pumps, valves, piping, electric motors, tools, and

accessories, instrumentation, etc.

ROADS

Includes the purchase of asphalt, structural steel for culverts and guard rails, explosives, spare parts for construction machinery, etc.

COMPLEMENTARY INSTALLATIONS

Herein is contemplated the purchase of automatic telephone exchanges, telephones, microwave communication equipment, pumps, valves, instruments and accessories for

fuel unloading systems; weighbridges for trucks; fire-fighting equipment, ambu

lances, cranes, and machine tools for workshops; heating and air-conditioning

equipment, etc.

CONSTRUCTION EQUIPMENT AND MACHINERY

Includes the equipment and machinery to be used during the construction of the various installations, such as: mobile cranes, power shovels, winches, bull

dozers, tractors, loaders, fork-lift trucks, traxcavators, motor graders, classi

fiers, compactors, pneumatic and vibrating rollers, scrapers, trucks of various

types, pick-up trucks, jeeps, motorized vehicles, ambulances, portable concrete

mixing plants, hydraulic jacks, block-making machines, aggregate plants, plant for preparation of asphalt concrete, compressors, welders, portable electric



1154

generators, drills, radio-communication equipment, pumps, machines, tools for

construction workshops, tunnel-drilling equipment, fans, side dump cars, loco

motives, etc.

REPAIR PARTS

Spare parts for equipment, machinery, accessories and other construction elements

and those which may be required for commencement of the operation.

MINING CAMPS AND WORKSHOPS

Equipment and materials for camps and construction workshops.

ENGINEERING AND ADMINISTRATION

Expenditures incurred locally and abroad for engineering and other projects, costs of administration and supervision incident thereto, for payment of fees

and taxes, as well as of costs involved in the importation into the country of

materials chargeable to the investment.

b) $80,000,000 dollars, currency of the United States of America, deriving from credits which the Braden Copper Company, a United States Corporation, or

ganized under the laws of the State of Maine, has agreed to extend. These

credits shall be granted commensurate with, and at the dates required by, the needs of the Sociedad for its compliance with the investment, and, until complete ly amortized, shall bear an annual interest of 5 3/4% payable semi-annually. El Teniente shall amortize the entire amount represented by these credits, in 30 equal and successive semi-annual installments, commencing on December 31, 1971.

The credits, including interest, are payable in United States dollars, in the United States of America, and shall be subject to any additional terms and con ditions which the Sociedad and Braden may agree upon, as also to any other terms

as may be applicable thereto in the credit agreement celebrated between the

Sociedad and Eximbank.

c) Approximately $23,700,000 dollars, currency of the United States of

America, deriving from credits which the Copper Corporation has agreed to extend, which amount shall be delivered in escudos, Chilean currency, at the rate of

exchange referred to in the section (lettered "11") of Article 3 of this Decree, in the installments and contingent upon the needs of the Sociedad in order to

effect compliance with the investment; these credits shall be amortized to the

Copper Corporation in United States dollars, in 30 equal and successive semi

annual payments, commencing December 31, 1971. These credits shall bear annual

interest of 5 3/4% payable in United States dollars every six months until

totally amortized, and shall be subject to all of the stipulations of the Credit Agreement between El Teniente and Eximbank which may be applicable.

d) Approximately $16,525,000 dollars, in currency of the United States of

America, deriving from credits promised in the amount of $12,743,000 dollars, currency of the United States of America, to be granted by Braden, and

$3,782,000 dollars, currency of the United States of America, to be granted by the Copper Corporation, which will correspond to a figure equivalent to the sum of the interests which the Sociedad will pay to the above-mentioned corporations up to December 31, 1971, pursuant to the terms of the preceding sections lettered

b) and c). The same terms laid down in the sections lettered b) and c) of this article shall apply to these credits as regards interest and amortization. The

total of these credits shall be equivalent to the total of the amounts actually paid out as interest by the Sociedad.

The interest payments referred to under sections a), b), c) and d) shall be the expenses incurred during the fiscal period in which they become due.

The credits included under sections b), c) and d) shall be applied for the purchases, payments, and other expenses within the country, where they are



1155

produced as a result of this investment, and those included in section d) may also be used for purchases, payments or expenses abroad.

In accordance with the terms of Sec. 2, Art. 15, of Law 11,828, and for the

purpose of encouraging purchases to be made within the country, the Copper Corpo ration shall determine, within the period of 15 days from the respective presenta tion, the imports which the Sociedad wishes to make chargeable to the investment, in order that those may be imported which have been approved in advance by the

Corporation. Only such goods may be imported which cannot be obtained on the domestic market under competitive terms as regards price, quality, delivery and

quantity.

In the case of imports chargeable to the financing arrangement under section

a), such classification shall not apply, nor shall such authorization be re

quired, and the Copper Corporation shall visa the corresponding documents for

import purposes.

All goods imported pursuant to the authorization given in this article must be new and unused, and be priced at the normal market prices, all of which will be checked by the Copper Corporation.

The listing of goods as stipulated in section a) for purposes of importation by the Sociedad is merely indicative, and the Sociedad may introduce such changes as it deems appropriate.

The expenses for engineering and projects incurred abroad, relating to

preparations for the investment project, shall be considered as part of the investment.

The Sociedad may make necessary changes in the amount of foreign exchange or of expenses abroad, but in no case may it exceed the total figure authorized

by more than 15% without due authorization by the Copper Corporation.

Article 2.- The benefits, franchises, rights and obligations of this Decree, as defined in Decree with Force of Law 258 of 1960 and Art. 2 of Law 16,425, which are herein extended by the present Decree, are made applicable as a single policy to all the goods, investments and activities of the Sociedad.

It shall, particularly, be understood that this regime shall include all

establishments, existing operations, works or investments already completed, or

in progress, or yet to be performed, pursuant to the terms of this present

Decree, and the investments in housing, welfare, cultural or recreation works, as well as the amount constituting an excess over the authorized investment and

any investments complementary to those mentioned in this Decree, as authorized in

paragraphs 4 and 5 of Art. 2 of Law 16,425.

Article 3.- In accordance with the provisions of Laws 11,828, 16,425 and 16,464, and of the Decree with Force of Law 258 of 1960, the following privileges are

granted:

a) The Sociedad shall enjoy the right to amortize, as a single policy, chargeable to its gross income pursuant to the terms of Art. 3 of Law 11,828 and Section 5 of Art. 25 of the Income Tax Law in force, insofar as each of these

provisions may be applicable, the amounts corresponding to the investment author

ized by the present Decree, those corresponding to the amount of the excess over

the authorized investment, and those of complementary investments referred to

respectively in paragraphs 4 and 5 of Art. 2 of Law 16,425, and also the unpaid balance of the goods in stock at the time of creation of the Sociedad Minera El

Teniente, which have been contributed thereto.

The application of this single policy shall be subject to the following specifications:

1) The total amount of the investment to be made pursuant to this Decree,



1156

including engineering expenses, costs of lands destined for roads, and all other

expenditures or outlays included in the above-mentioned investments shall be

amortized within a period of 15 years, and within that same period the total amount paid into the Housing Corporation in compliance with the accelerated housing construction plan shall be written off. Nevertheless, amounts cannot be amortized which are invested in purchase of land for purposes other than

road building, in securities, in credits or in capital contributions, or partici pation in other companies.

The running of the 15-year period mentioned shall commence as of: 1) six months prior to making the first installment payment referred to in section a) of Art. 1 of the present Decree, computed on the amount of the investment equi valent to credits extended by Eximbank; and 2) as of July 1, 1971, for the remainder of the investment.

For the purposes of determining the monthly amortization, the total of the amounts mentioned in the preceding paragraph, less the installments already paid, including that of the previous month, shall be divided by the number of months which remain for completion of the corresponding period of 15 years, and the result shall represent the amortization for that month. The total during the year of the amounts of amortization fixed for each month shall represent the total amortization charge which should be made during the respective fiscal period. All fractions of months shall be computed as complete months.

2) The value of goods corresponding to future investments other than those mentioned in the preceding section, which are not subject to new investment decrees with special amortization, shall be amortized pursuant to the general standards of the Income Tax Law.

3) The value of goods corresponding to future investments which were not included in No. 1 (supra) and which may be the subject matter of decrees, shall observe the rules established in the respective decrees, insofar as concerns amortization.

4) According to the accounts, the unamortized balance of goods existing at the time of creation of the Sociedad and those contributed to the Sociedad, shall be amortized in accordance with the periods and conditions established in the investment decrees, if any, or pursuant to the Income Tax Law, within the periods and under the conditions established by the general rules in cases where the

investment decrees do not grant them any special amortization, all without

prejudice to the provisions of paragraph 2 of Article 9 of Law 16,425. Included in this amortization shall be the unamortized balance or property which, in accordance with the Agreement signed between Braden and the Chilean Government on April 1, 1955, referred to in letter b) of Article 10 of Decree No. 150 of 1956 of the Ministry of Mines, were entitled to the deduction of 1% stipulated in Article 26 of the earlier Income Tax Law, whose revised text was approved by Decree No. 2106 of the Finance Ministry, published in the Diario Oficial (Official Gazette) of May 10, 1954.

The Sociedad shall not be entitled to the deduction stipulated in said Article 26 of the former Income Tax Law with respect to any of its property, or any goods which may be transferred or contributed thereto; and therefore, said right shall be applicable only up to the date stated in Transitional Article 5 of Law 16,425 as to all investments in real estate stipulated in the Agreement of April 1, 1955, celebrated between Braden Copper Company and the Ministers of Finance and of Mines, and as to all real estate property which, in the opinion of the Copper Corporation, has represented a gradual expansion of the plant and on which the real estate tax has already been paid in accordance with the con

ditions of the Agreement between Braden Copper Company and the Ministers of Finance and of Mines dated April 15, 1955.

5) If, in any year, by virtue of insufficient profits, the total amortiza tion mentioned in preceding paragraphs cannot be charged against them, the un

charged balance in any of these may be charged in the subsequent year or years



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until completion of payment, this being the only case when the extension of the

period fixed in Paragraph No. 1 of this Section may be permitted.

In any case, in each fiscal period, the Sociedad must give priority to amortizations which are compulsory in nature.

b) The Sociedad shall enjoy the guarantee that the taxation levied on

profits or income shall be a sole and invariable tax, and that its rate shall be

20% on taxable net income, without prejudice to the rebate referred to in the

ante-penultimate paragraph of Section d) of Article 20 of the Income Tax Law, con tained in Article 5 of Law 15,564, and to the terms of Article 9, Section c) of Law 11,828, all of the above in accordance with the terms of Section j), Article

2, Title II of Law 16,425.

c) The guarantee that the stockholders of the Sociedad subject to the tax referred to in Title V, Article 5 of Law 15,564 shall only have levied on them the additional tax mentioned in said Title V, as a sole and invariable tax at a fixed rate of 30% on dividends or profits distributed by the Sociedad pursuant to the terms of Section j) of Article 2, Title II of Law 16,425.

d) The guarantee that the Sociedad and its stockholders shall, without

prejudice to the provisions of Sections b) and c), supra, be exempted from any new tax which may be levied on ordinary or excess profits which might affect

corporation profits, and the guarantee that its stockholders shall be totally exempt from taxes on the undistributed profits due to them. All the above shall be in accordance with the provisions of Section j), Article 2, Title II of Law

16,425.

e) The guarantee that the Sociedad shall not be burdened with any new taxes or duties, liens or charges, or with any increase in the existing ones, and that

likewise, no application made thereto of any reductions, beneficial modifications, or of any exemptions or repeal of those liens already in force or created in the

future, should application thereof prove to be discriminatory in the sense de fined in the three paragraphs of Section 6(b) of Article 2 of Law 16,425.

This guarantee is given without prejudice to those granted under Sections

b) , c) and d) of this article.

f) The guarantee of total exemption from all taxes, contributions, duties or liens is granted to Braden, as creditor of the Copper Corporation, on any interests accruing on the purchase price of their stock in the Sociedad, and to Eximbank, Braden and the Copper Corporation, as creditors of the Sociedad, on any interest derived from the credit operations mentioned in Sections a) , b) ,

c) and d) of Article 1 of the present Decree, and granted to the creditors of the Sociedad on any interest derived from loans which it may obtain for financing the investment, always providing that the total amount of the interest and other financial costs are approved by the Copper Corporation, in accordance with the

terms of Article 7 of Law 16,425.

The same exemption guarantee, pursuant to the same legal provisions above

cited, shall be applicable to credit or loan contracts entered into by the Sociedad for financing the investment, and to the promissory notes which the Sociedad may issue in accordance with such contracts; likewise, it shall apply to the contract between the Sociedad and the Empresa Nacional de Electricidad

S.A. for supply of electric power required for operations of the Sociedad.

g) The Sociedad shall enjoy the advantage of being permitted to include as an expense for tax purposes, a half cent, based on the dollar in United States

currency, for each pound of blister copper electrolytically refined in the

country in new installations of its own, in accordance with the terms of

Article 2, Section 6(e) of Law 16,425.

h) The Sociedad shall enjoy the guarantee that its net taxable income shall be computed in accordance with the rules in force at this time, as established



1158

in the First Category of Title II of tne Income Tax Law, which text is incorpo rated in Article 5 of Law 15,564, pursuant to provisions of Article 9 of Law

16,425; and provided under the terms of Section b) of Article 2 of that same law, the Sociedad may be permitted the advantage of any new deductions which may be established in the future, should the non-application thereof prove discrimina

tory, according to said legal provision.

According to the statement of the Internal Revenue Service in its Opinion No. 15,236 of November 14, 1966, the Sociedad shall keep its account books in

dollars, United States currency.

i) The Sociedad is granted the guarantee of unaltered application thereto

of Articles 5, 7, 8, 9, 12 and 15-A of Law 11,828, and of the Regulation referred to in the last named article, whose text is incorporated in Decrees 61 and 91, of

the Ministry of Mines, dated April 21, and June 28, 1966, respectively. Likewise, it shall enjoy the advantage of no alterations in the percentage of commission

referred to in Article 19 of this same Law, and in the provisions contained in

Title III, of Law 16,425, concerning Joint (Mixed) Mining Companies, pursuant to Section 6(c) of Article 2 of the latter.

Without impairment of the obligations established in Article 12 of Law 11,828, the Sociedad shall be authorized to dispose freely abroad of any foreign exchange received for its own exports or operations. In particular, it may contract and

maintain current banking accounts outside the country, and, may dispose of said

foreign exchange to pay, among other purposes, the credits mentioned in Sections a) and b) of Article 1 of this Decree, and in its Section d) insofar as concerns

Braden; for accrued interests, profits and those dividends which are not includ

ed among those which must be returned; for operating expenses such as mainte

nance of offices abroad, technical advice, freight, loading and unloading of ves

sels, and insurance, imports and other expenses or disbursements required to

cover obligations in foreign currency, arising from contracts for smelting, re

fining or rendering of services or labor, whether such operations or services

are provided or performed within or outside the country. For payment of the credits referred to in Sections c) and d) of Article 1 insofar as regards the

Copper Corporation, and for other disbursements which must be made in Chile, the Sociedad may freely make arrangements within the country for necessary funds, pursuant to Article 12 of Law 11,828.

j) With regard to exportation of its products, the Sociedad shall be granted the franchise of exemption from the tax laid down in Section c) of Article 17, of Law 7,747, in conformity with the terms of Sections 6(j), Article 2 of Law

16,425, and pursuant to the amendment introduced by Law 16,464. An exception to the above tax exemption shall apply to those exports of unrefined copper which should have been treated at the Las Ventanas Refinery in conformity with

the contracts signed between the Sociedad and Enami, but which have not been so

refined in said plant for reasons attributable to the Sociedad, such facts to be

duly ascertained by tne Copper Corporation, and in such event, these exports must

pay the tax levied in Article 134 of Law 15,575, unless the exports fall within those entitled to tax exemptions under one of the cases or situations stipulated in Sections 3, 4, 6 or 7 of Article 136 of said Law, or which may have been ex

pressly authorized by the Copper Corporation, for market reasons, to be exported without payment of the export tax, all such facts to be duly verified by said Corporation.

k) The Sociedad is guaranteed that no alteration shall be made in its right to enjoy the exceptions stipulated in Article 136 of Law 15,575, according to Section 6(f) of Article 2 of Law 16,425.

1) In conformity with provisions of Section 6(d), Article 2 of Law 16,425, and with the stipulations in the contract to be executed between the Sociedad

Minera El Teniente S.A. and the Central Bank of Chile, the Sociedad is guaranteed the right to sell the proceeds in foreign exchange arising from its exports at the same exchange rate governing other exporters, and that an exchange rate

which is or may prove to be discriminatory, shall not be applied to it.



1159

"11") The Sociedad shall enjoy the right of free access to the foreign exchange market as regards foreign exchange which it brings into the country or invests in accordance with this Decree, and shall sell such foreign exchange, through the Central Bank of Chile, at the most favorable rate or treatment of

exchange in force for investments at the time of the sale, in conformity with Section c), Article 9, of Decree with Force of Law 258 of 1960.

For the purpose of determining the most favorable rate or treatment of ex

change referred to in the preceding paragraph, there shall not be taken into con sideration the prices in national currency which are obtained from the sale of

foreign exchange deriving from the capital contributions authorized by Decrees implementing DFL 258 of 1960, or from contracts issued pursuant to Article 16 of Decree No. 1272 of the Ministry of Economy, Development and Raconstruction, dated September 6, 1961, conferring the right of free access to the foreign exchange market, which may have been enacted or issued prior to December 7, 1966; or the prices which may be obtained in national currency in the sale or transfer of capital in foreign exchange registered with the Central Bank under the present Article 14 of the above-cited Decree 1,272, and other governing regulations thereon, whatever the date of the registration or the sale of said transfers.

Nevertheless, the foreign exchange brought into the country or invested in accordance with this Decree shall, in no case, be paid for at a lower rate of exchange than that mentioned in Section 1) of this article.

m) The Sociedad will enjoy exemption from all duties and taxes collected through the Customs, and from any other charges or contributions, as also of

any advance deposit or other obligations or requirements which may affect the

importation of goods which enter the country as part of the investment, subject matter of this Decree, in accordance with Article 6 of DFL 258. Exemption is

expressly declared of the clearance charges established in Article 190 of Law

16,464, on importation of foreign goods, merchandise and items which form part of the investment, and from the 1% tax established in Article 182 of the same

Law, on the documents required to effect the import operations of same.

n) The Sociedad shall enjoy exemption from duties and taxes collected through Customs on goods which are disposed of ten years after the date of their importa

tion, or after a shorter period, pursuant to the terms of the Customs Regulations as laid down in Article 7 of DFL 258 and in Article 16 of Law 14,572.

fl) The Sociedad shall enjoy the guarantee that any expenses incurred for

engineering and projects performed abroad, shall form part of the authorized

investment, together with those expenditures relating to the purchase of equip ment, machines, machinery parts and others, listed in Section a) of Article 1

of the present Decree, in conformity with Section 6(i) of Article 2 of Law 16,425.

o) The Sociedad shall enjoy the privilege that any interest derived from capital whose investment is authorized by the present Decree, or any profits

produced by the Sociedad which may be capitalized or invested in their capital assets, shall automatically benefit from these same privileges granted herein, up to the date of expiration, according to Article 29 of DFL 258, of 1960.

Article 4.- The Sociedad shall be subject to the obligation to invest 4% of its annual profits, with observance of the form, conditions, requirements, discounts, and stipulations indicated in Article 13-A of Law 11,828 and in Regulation 114 of the Ministry of Mines, of August 30, 1966. The characteristics of this

obligation to invest shall be that it is sole and unalterable during the entire

period that the benefits, franchises and rights being conferred upon the Sociedad in this Decree continue in force.

The obligation to invest shall be applicable to the annual profits from the calendar year following the one in which the period expires, which was fixed by this Decree for the completion of the works; nevertheless, if, in the opinion of the Sociedad, the works have been terminated earlier, the obligation to invest

shall be applicable to the annual profits from the calendar year following that

marking the termination of that investment.



1160

Article 5.- The Sociedad shall be subject to the rights referred to in Article 21 of DFL 285 of 1953, and consequently must allot for the purposes indicated in said Article 21 only 2% of its profits, following payment to the CORVI, of the sum of $10,555,000 dollars, currency of the United States of America, charge able to the investment, which finances part of the accelerated housing plan which the above organization will carry out in accordance with the agreement made

between CORVI and the Sociedad, since this, in the opinion of the President of the Republic, satisfies the housing requirements of its personnel; that the

welfare, recreational and cultural needs of the workers are already being pro

vided for through the action of the Supreme Government, and that the Sociedad has renounced the right to credit the housing whose construction was terminated before January 1, 1966. The value of the new housing constructed for its person nel shall constitute a contribution towards the 2% above-mentioned, as also the cost of the repairs, additions or improvements to the houses, and also any ex

penses incurred for town planning and works destined to welfare, recreation and

physical culture instituted in the respective housing developments.

Article 6.- Contracts made by the Sociedad for smelting or refining within the

country are hereby exempted from all taxes, contributions, duties, or charges as

are contracts for management, counsel, administration, or any services relating

to the investment or operation, entered into by the Sociedad with partners, or third parties which are corporate entities, whether such taxes should be paid by any of the parties on the execution of the contracts themselves, or on the value involved in the contracts, or on the income or the payments made, always

provided that the payment of these taxes increases the amount of the investment

needed, or of the costs of operation.

Article 7.- For the purposes of the final paragraph of Article 12 of Law 11,828, the minimum permanent balance which the Sociedad must maintain, in total, in current account with the Central Bank of Chile shall be the sum of $1,351,050, in United States currency, which amount shall be increased to $2,700,000, United States currency, from the date of completion of the works referred to in the

present Decree, and in any case, from the expiration of the period referred to in Article 8.

Article 8.- The investment which is the subject of this Decree shall be made within a period of six years, computed from the date of its incorporation into the form of a public instrument. The foreign exchange brought into the country in accordance with Article 1 of this Decree shall be sold within that same period

of years.

For the purposes of this Decree, cases of force majeure shall be considered, for the period of its duration, to be events of this character which affect the Sociedad or third parties participating in the execution of the project, or which

prevent or cause delay in obtaining required technical assistance or labor, or

financing for the project, or for the purchase, shipment, transportation or

delivery of the goods needed for the execution or construction of the works, or

others, including among such events, legal or illegal strikes and the impossibili ty or delay in obtaining permits, water rights, rights of way, or other necessary concessions, provided they retard or impede the execution of the investment. The Sociedad must advise the Copper Corporation of any events constituting force majeure. The Copper Corporation shall verify these facts, and the period of duration of the impediment.

Article 9.- The Copper Corporation shall control and inspect the obligations arising form this capital contribution.

Article 10.- The privileges granted by this Investment Decree shall have a dura

tion of 20 years computed from the date of said Decree.

Article 11.- For the purposes of Articles 24 and 25 of DFL 258 of 1960, this

Decree should be published in the Diario Oficial (Official Gazette) within 30

days computed from the time when the Reception Office of the Ministry of Economy, Development and Reconstruction stamps it "Processing Completed" (Termino de



1161

Tramitaci?n) and executes the public [notarial] instrument which shall be

signed by the Minister of Economy, Development and Reconstruction and by the authorized representative of the Sociedad Minera El Teniente S.A. within a

period of 90 days computed from the publication of this Decree in the Diario Oficial (Official Gazette).



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Chile: Decrees Relating to the Establishment of "Sociedad Minera El Teniente, S.A.," Jointly-Owned...

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