No agreement reached on new Cobre Panamá mine contract

Panama's government on Thursday said that it has failed to reach an agreement with Minera Panamá (MPSA) within the deadline set to sign a new contract to operate the Cobre Panamá mine because the company made changes to what had previously been agreed.

Last month, the government stated that it had set December 14 as the deadline for Canada's First Quantum Minerals, the owner of Cobre Panamá, to sign the long-awaited operating contract.

The trade and industry ministry reported that, although the deadline expired at midnight on Wednesday, the talks with the company continued until Thursday morning, after four weeks in which the government had a negotiating team constantly available.

"The government team held talks with the company until 6:00 am today. Even so, the company did not agree to sign the contract proposed by the government that reflected the January 2022 agreement. Instead, at 6:16 am the company sent a new proposal that, among other things, substantially changed economic aspects, such as … the previously agreed royalty regime," the ministry said in a statement.

Panama's presidency stated on Twitter that, on January 17, Minera Panamá had informed the government in a letter that it accepted the proposals and terms previously presented, but had now suggested modifications. 

"We inform the country that this administration does not accept these changes,” it said.

President Laurentino Cortizo has called an extraordinary meeting of his cabinet in which the pertinent measures will be decided to respond to the failure to reach an agreement and he will address the nation on the matter later in the day.  

“The Government of Panamá and MPSA were unable to reach an agreement by the December 14 deadline imposed by the government. The economic package MPSA has proposed would make Cobre Panamá one of the highest payers of royalties and taxes amongst the large copper producing mines in the Americas,” First Quantum Minerals stated in its own release.

"Necessary legal protections on termination, stability and transition arrangements could not be agreed upon. MPSA remains available and open to further constructive dialogue," it added. 

In January, the Vancouver-based miner agreed to increase its royalty payments for the Cobre Panamá copper mine to US$375mn a year, as seen in the letter sent by the company to trade and industry minister Ramón Martínez De la Guardia, also published by the presidency on Twitter.

However, the government proposal included other aspects, such as raising the royalties paid to the State to between 12% and 16% from 2%, improving working conditions, providing more robust environmental protections and carrying out social works in surrounding communities.

First Quantum had been awaiting the proposal since September 2021, when it began negotiations with Panama's trade and industry ministry to renew the contract for the mine.

The Cobre Panamá concession, which consists of four areas totaling 13,600ha, involves estimated capex of US$6.5bn and has a projected mine life of 34 years after having starting commercial operations in 2019.

At its current full capacity, the plant can process 85Mt/y of ore for output of more than 300,000t/y of copper, along with gold, silver and molybdenum, according to the company.