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Mine closure in Chile: closure plans, the financial guarantee, temporary shutdowns, the post closure fund, fines and tax treatment

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Last verified: 2026-10-26 · Status: Stable

Every mining operation in Chile needs a closure plan approved by SERNAGEOMIN. Mines extracting more than 10,000 tonnes of ore a month follow the general procedure, and smaller mines and exploration follow a simplified one. Under the general procedure the operator must post a guarantee for the present value of all closure and post closure costs. It starts at 20 percent in the first year of operation and must be complete within two thirds of the mine's life, or 15 years if the life is longer than 20 years. The guarantee follows the assets when a mine is sold. Before the final closure certificate, the operator pays the post closure cost into a State fund, which ends its liability. Breaches are fined 10 UTM a day, up to 10,000 UTM.

USD figures use the Central Bank exchange rate of CLP 986.58 per US dollar published in the Diario Oficial for 23 October 2026 (CVE 2891564). UTM amounts use the SII value of CLP 72,151 for October 2026. Fines are applied at the UTM in force when imposed.

Key facts

Monthly ore extraction capacity above which the general closure procedure and guarantee apply	10,000 t per monthLey Nº 20.551 art. 10, as of 2026-10-26 · in force
Minimum closure guarantee in the first year of operation, share of present value of closure costs	20 %Ley Nº 20.551 art. 53, as of 2026-10-26 · in force
Latest year by which the full closure guarantee must be posted for mines with a life over 20 years	15 yearsLey Nº 20.551 art. 53, as of 2026-10-26 · in force
Period for SERNAGEOMIN to rule on a closure plan (general procedure)	60 daysLey Nº 20.551 art. 12, as of 2026-10-26 · in force
Daily fine for closure law infringements	10 UTM per dayLey Nº 20.551 art. 41 a), as of 2026-10-26 · in force
Maximum total fine under the closure law	10,000 UTMLey Nº 20.551 art. 41 a), as of 2026-10-26 · in force
Initial maximum temporary shutdown period, extendable by up to 3 years	2 yearsLey Nº 20.551 art. 24, as of 2026-10-26 · in force

The rule

1. Closure of mining sites and facilities is governed by Ley Nº 20.551, which took effect one year after publication. SERNAGEOMIN approves each closure plan as a sectoral approval. Approval runs through the general procedure or the simplified procedure. Mining exploration, as defined under Ley Nº 19.300, uses the simplified procedure. The general procedure applies to operators that extract or process ore with an extraction capacity above 10,000 gross tonnes a month per site. The simplified procedure applies at or below that capacity. This threshold applies only for closure and does not change when a project must enter environmental assessment.
Cost to do it: Engineering and valuation of the closure plan, plus periodic external audits by auditors in SERNAGEOMIN's public register (art. 18 to 21).Ley Nº 20.551, Regula el Cierre de Faenas e Instalaciones Mineras, Art. 1, art. 4, art. 10 and art. 60, 2011-11-11 official text · verified 2026-10-26

2. Under the general procedure SERNAGEOMIN must rule on the closure plan within 60 days of filing. It cannot approve the plan before it has approved the mining, deposit or ore treatment method. Within 30 days it may ask for clarifications, corrections or additions, which the operator must answer within 30 days, and the request suspends the 60 day period. It may extend its own deadline by up to 10 days by reasoned resolution.
Cost to do it: No State fee is set in the law for review.Ley Nº 20.551, as amended by Ley Nº 20.819, Art. 12, 2015-03-14 official text · verified 2026-10-26

3. An operator may stop operations temporarily only after SERNAGEOMIN approves a temporary closure plan, keeping all guarantees in force. The shutdown may last up to two years, extendable with cause by up to three more. After that, an exceptional extension needs an additional guarantee of 30 percent of the total guarantee in A.1 instruments. If the mine has not restarted when the authorised periods end, SERNAGEOMIN enforces the full guarantee.
Cost to do it: Maintenance of the site during the shutdown; for an exceptional extension, an extra 30 percent of the guarantee in cash like instruments.Ley Nº 20.551, Art. 24, 2011-11-11 official text · verified 2026-10-26

4. Operators under the general procedure must post a guarantee assuring the State of full and timely closure. The amount is the present value of the cost of all closure measures over the life of the site plus post closure monitoring and administration. It is discounted at the Central Bank UF bond (BCU) rate of at least ten years, net of guarantees already posted for the same works under Código de Aguas art. 297. Posting the guarantee gives SERNAGEOMIN an irrevocable statutory mandate to cash it. Eligible instruments are A.1 (sight deposits, bank guarantees, deposits under 360 days, standby letters of credit from banks rated at least A, and first demand surety policies from Chilean insurers) and A.2 (investment grade debt instruments of DL Nº 3.500 art. 45, rated at least national A). A.3 covers other instruments such as assignment of ore sale contracts, a pledge over export proceeds, or a joint surety from a controlling shareholder rated at least national A. In mergers, divisions or sales of the mining assets, the closure and guarantee obligations pass indivisibly to the acquirer, and any such change must be reported to SERNAGEOMIN within three business days.
Cost to do it: Bank or insurer fees on guarantees, or the opportunity cost of cash and securities posted, on an amount equal to the present value of closure costs.Ley Nº 20.551, as amended by Ley Nº 20.819 and Ley Nº 21.169, Art. 49, art. 50, art. 51 and art. 52, 2019-07-18 official text · verified 2026-10-26 · changed: Ley Nº 21.169, published on 18 July 2019, added first demand surety policies issued by Chilean insurers as A.1 instruments and let operators manage, renew and replace A.1 instruments with SERNAGEOMIN authorisation.

5. The operator starts building the guarantee when it notifies SERNAGEOMIN that mining operations have started. Within 30 days, and for the first year, the guarantee must be at least 20 percent of the present value of total closure costs. From the second year it grows pro rata until fully posted within two thirds of the estimated life if the life is under 20 years, or within 15 years if the life exceeds 20 years. Composition: in the first third of that period at least 40 percent A.1, up to 40 percent A.2 and up to 20 percent A.3; in the second third at least 60 percent A.1 and up to 40 percent A.2; in the last third 100 percent A.1. Increases from plan updates must be posted within 30 days of notice, and returns on the instruments add to the guarantee.
Cost to do it: At least 20 percent of closure cost present value from the first year, rising to 100 percent.
Example: Closure costs with a present value of CLP 98,658 million and a 30 year life: at least CLP 19,732 million in the first year, the full CLP 98,658 million by year 15, and only A.1 instruments from year 10. / For US$100 million of closure costs: at least US$20 million in year one and US$100 million by year 15.Ley Nº 20.551, Art. 53, 2011-11-11 official text · verified 2026-10-26

6. Before the final closure certificate, the operator must make a non refundable contribution to the Fund for the Management of Closed Mining Sites, in cash or A.1 instruments. The contribution equals the present value of all post closure measures for the period the plan sets, including contract administration. SERNAGEOMIN may release part of the guarantee to fund it. Paying in full and obtaining the final closure certificate releases the operator from responsibility for post closure measures, which the State then carries out with the fund. The fund also receives the fines collected under the law.
Cost to do it: The present value of post closure monitoring and maintenance, paid once.Ley Nº 20.551, Art. 43, art. 55, art. 56 and art. 57, 2011-11-11 official text · verified 2026-10-26

7. SERNAGEOMIN may fine breaches 10 UTM per day of infringement, up to a total of 10,000 UTM. Some infringements carry fines of 50 to 300 UTM. It may also order temporary suspension of operations, or require the full guarantee in A.1 instruments within 30 days. Fines can be challenged before the civil court and are not payable while the challenge is pending. They must be paid within 10 days of becoming final, and both the fine and the liability prescribe in three years.
Cost to do it: 10 UTM a day, up to 10,000 UTM; 50 to 300 UTM for the infringements in art. 40 letters a) and b).
Example: 10 UTM a day is CLP 721,510; the 10,000 UTM ceiling is CLP 721,510,000 at the October 2026 UTM. / About US$731 a day, with a ceiling of about US$731,324.Ley Nº 20.551, Art. 40, art. 41 and art. 43, 2011-11-11 official text · verified 2026-10-26

8. For income tax, only the guarantee actually posted may be deducted as a necessary expense, and only during the last third of the mine's useful life. The yearly deduction is the posted guarantee divided by the number of years in that last third, with adjustments at the end of the life for costs actually incurred. If the useful life is extended, the excess deduction is added back to taxable income in the year of the extension. VAT charged on closure plan goods and services gives the right to VAT credit.
Cost to do it: No cost; this is the timing of the tax deduction.Ley Nº 20.551, Art. 58 and art. 59, 2011-11-11 official text · verified 2026-10-26

Stage	Amount	A.1 (cash, bank guarantees, first demand policies)	A.2 (rated debt)	A.3 (other)
First year, within 30 days of start up notice	At least 20% of present value	At least 40%	Up to 40%	Up to 20%
First third of the period	Pro rata	At least 40%	Up to 40%	Up to 20%
Second third	Pro rata	At least 60%	Up to 40%	None
Last third and after	100% by the end	100%	None	None

Closure guarantee build up and composition under the general procedure (Ley Nº 20.551 art. 53). The period is two thirds of the estimated life, or 15 years if the life exceeds 20 years.

Worked example

A copper project with a 30 year life and closure costs with a present value of US$100 million (CLP 98,658 million) must post at least US$20 million (CLP 19,732 million) within 30 days of notifying start up, at least 40 percent of it in A.1 instruments. Because the life exceeds 20 years, the full amount is due within 15 years, roughly another US$5.7 million a year pro rata; from year 10 everything must be in A.1 instruments (Ley Nº 20.551 art. 53).
For income tax, the company can deduct the posted guarantee only over the last third of the life, years 21 to 30: US$10 million a year if US$100 million is posted (Ley Nº 20.551 art. 58).
If it sells the mine in year 8, the buyer inherits the closure plan and guarantee in full, and the change must be reported to SERNAGEOMIN within three business days so it can decide within 30 days whether the guarantee stays, is replaced or topped up (Ley Nº 20.551 art. 51).

Step by step

1. Classify each site: above 10,000 tonnes a month of extraction capacity means the general procedure and a guarantee (Ley Nº 20.551 art. 10).
2. Get the mining method approved by SERNAGEOMIN, then file the closure plan; expect a ruling within 60 days, suspended while clarifications are pending (art. 12).
3. Line up A.1 capacity (bank guarantees, standby letters of credit or first demand policies) before start up, since 20 percent is due within 30 days of the start up notice (art. 52 and 53).
4. Update the plan and the guarantee when the plan changes, with external audits in the periodic cycle (art. 18 and 22).
5. For any stoppage, get a temporary closure plan approved first (art. 24).
6. At end of life, implement the plan, obtain partial and final closure certificates, and pay the post closure contribution to the fund (art. 29 to 31 and 56).

Common traps

Stopping a mine without an approved temporary closure plan, or overstaying the authorised shutdown: SERNAGEOMIN can enforce the whole guarantee (Ley Nº 20.551 art. 24).
Assuming a share or asset deal leaves closure liability with the seller: the obligation and the guarantee pass indivisibly to the acquirer (art. 51).
Relying on A.2 or A.3 instruments late in the mine's life: in the last third of the build up period only A.1 instruments count (art. 53).
Deducting closure provisions early: only posted guarantees count, and only in the last third of the life (art. 58).
Treating the 10,000 tonne closure threshold as the environmental assessment threshold: it applies only to closure (art. 10; see investing/project-permits-and-environmental-assessment).

Sources

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