Cortadera tax refund to boost Hot Chili’s coffers by $4m

Hot Chili could receive a cash boost of up to $4m after it was granted a tax refund benefit related to its exploration expenditure in Chile.

The VAT refund exporting benefit was awarded by the Chilean Ministry of Economy, Development, and Tourism for all expenditure associated with its wholly-owned subsidiary Frontera, which controls the Cortadera copper-gold discovery.

An initial VAT Refund Payment of between $1.8m and $2m is expected to be received in the coming months while further refunds will be received against all forthcoming expenditure that attracts the 19 per cent tax rate such as drilling and assays costs.

Hot Chili (ASX:HCH) was previously granted a VAT Refund Payment for its Productora copper project in July 2014 that remains active until 1 January 2025, highlighting Chile’s desire to promote itself as a stable and attractive destination for foreign investment.

VAT Refund Payment

The VAT Refund Payment relates to the future exporting capacity of Hot Chili’s Cortadera copper-gold project, allowing the company to claim refunds for ongoing expenditure up to US$258 million ($334.7m) over the course of its development activities.

Under the terms, the company has until 1 January 2025 to commercialise production from Cortadera and meet certain export targets though it has the right to extend this term.

Should Hot Chili not extend the term or meet the export targets, it would be required to repay the VAT refund.

Cortadera project

The Cortadera project is located 600km north of Chile’s capital Santiago and has a contained resource of 1.7 million tonnes of copper, 1.9 million ounces of gold and almost 10 million ounces of silver.

While substantial, this resource is likely to be just the beginning as drilling at Cuerpo 2, the second largest porphyry at the project, has already uncovered a second high-grade core.

Additionally, drilling to expand the core at the main Cuerpo 3 porphyry has already returned significant results ahead of a resource upgrade in 2021.

This article was developed in collaboration with Hot Chili, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.