Fronts harden in Panama-First Quantum copper mine dispute

Panama’s trade and industries ministry denied a solution to the fallout over First Quantum Minerals’ US$6.5bn Cobre Panamá copper mine was close.

First Quantum CEO Tristan Pascall told a conference call on Tuesday that only a few points remain pending and an agreement could be reached soon.

He added that talks on the asset, operated by Minera Panamá, would continue in good faith, but in a press release, the ministry retorted the comments "do not reflect the reality of the situation."

It said, “the parties disagree on certain fundamental issues such as royalties, deductions for depletion, international measures to mitigate tax evasion, [transfer taxes], scope of easements, material breach, termination, and others.”

The ministry even added that Minera Panamá’s recent proposals “have further distanced the two parties.”

Negotiations for a new operating contract started after the supreme court declared unconstitutional in 2018 a law from the 1990s on which the Cobre Panamá concession is based.

Pascall told the call that First Quantum will plead with the trade and industries ministry to repeal a ministerial order that mandated the suspension of operations. The order came after a December 14 deadline expired without an agreement and required the company to implement a care and maintenance plan within 10 business days. However, talks later resumed.

The ministry still insists on the plan because “Minera Panamá has continued to operate the Cobre Panamá mine without a contract, and the irregular status quo cannot continue indefinitely.”

The miner promised to meet or even exceed government demands, which include at least US$375mn per year for public coffers, comprising corporate taxes and a 12-16% profit-based royalty, and certain downward protections.

Yet, the ministry claimed "Minera Panamá has presented proposals that offer more benefits to the company in favorable scenarios, when the copper price is high, and not only protections in unfavorable scenarios, when the copper price falls."

As example, it mentioned that the “proposal on depletion decreases the number of years the guaranteed minimum income will be paid and decreases Panama's economic benefits in high copper price and/or high production scenarios.”

Meanwhile, the ministers for trade and industries and for the environment, as well as the head of the mineral resources department, presented written excuses to the national assembly, which summoned them to clarify the status of the negotiations.

Cobre Panamá is among Latin America’s biggest copper producers, with 2023 guidance of 330,000t-360,000t. Government figures show the mine represents about 3.5% of GDP, but Pascall claimed the figure was 5%.