Future of Cobre Panamá mine mired in confusion

A month after Panama’s President Laurentino Cortizo ordered a halt to commercial operations of the Cobre Panamá mine on December 15 after failing to reach an agreement on a new operating contract, it is still unknown when First Quantum Minerals will start any suspension.

There is also no clear date by which First Quantum subsidiary Minera Panamá must present a care and maintenance (C&M) plan for the copper mine, despite the fact that a decree was published on December 19 that obliges the company to come up with the plan within 10 business days. The company later specified that it had been notified by the authorities on December 21.

The government made the decision to suspend operations based on a supreme court ruling that declared unconstitutional a 1997 law under which the concession was awarded to the then-named Minera Petaquilla. When published in the official gazette in December 2021, the contract between the State and Minera Panamá ceased to be legal, according to the government.

Neither government officials nor the Canadian company have said when the care and maintenance plan will be implemented, although trade and industry minister Federico Alfaro reiterated to last week that he maintains his position on the requirement to halt operations because there is no current contract, according to new agency EFE.

In an interview with Reuters, the minister indicated that the 10-day period for the order to present the C&M plan had not yet begun, although he did not provide a specific date.

Alfaro also told Reuters that another deadline for the company to appeal the ministerial order expired on Friday (Jan 13), although last Tuesday First Quantum CEO Tristan Pascall told a conference call with analysts that the company was going to appeal that same day to the ministry.

“We're not currently aware of a deadline or a clock that's running in regards to the current discussions. We are working according to the timetable, obviously, that the 10 working days established to deliver the care and maintenance regime, but … at the moment that's subject to legal actions from us. So, the timing of that, the exact timing is not yet clear, but otherwise there's no information that we're aware of,” said Pascall. 

Production guidance for the US$6.5bn mine was previously put at 330,000-360,000t copper for 2022. The company has said on several occasions that operations continue as normal.

The trade and industry ministry published a video on Friday where Alfaro told a local television station that he does not consider the talks that continue to be held with Minera Panamá to be a new negotiation process. "The government's position is that the negotiation process culminated in January when the negotiated agreements were reached on economic, fiscal, environmental and labor matters, and when the government and the company accepted those terms by means of a written note," he said.

The government accuses Minera Panamá of reneging on an agreement announced a year ago that included raising royalties from 2% to 12-16%, guaranteeing a minimum annual contribution to the State of US$375mn and the payment of previously exempted taxes, among other things.

Alfaro told foreign correspondents last Thursday that there was still a "significant gap" to sign a new concession contract for the copper mine, although Pascall had announced that they were "not very far" from reaching a deal.