Govt claims Panama hasn't received 2022 royalties from First Quantum copper mine

Panama has not received royalties due last year from First Quantum Minerals' local subsidiary, Minera Panamá, for the Cobre Panamá copper mine due to the lack of a valid contract.

"It is important to clarify that after the publication of the ruling in the official gazette that renders the … agreement unconstitutional, the commerce and industry ministry has not accepted these royalties ... because we consider these royalties subject to a contract that was declared unconstitutional," commerce and industry minister Federico Alfaro told the national assembly on Tuesday night.

Alfaro was providing updates on the status of talks on a new concession contract.

Deputy director of mineral resources Ana Méndez told the lawmakers that “the royalty reports presented during 2022, despite having been evaluated, have not been charged to the company, since the amounts were based on the 2% [royalty] that was in force in the … contract declared unconstitutional.”

Méndez did not mention the amount due last year, but said Minera Panamá paid US$5mn in royalties in 2019, when operations started, US$32mn in 2020 and US$49mn in 2021, when prices reached record levels.

Citing the financial statements, she added that the asset generated US$1bn in revenues in 2019 and US$2bn in 2022.

Alfaro said the royalties negotiated as part of a new contract in January last year range from 12% to 16%, but are only one component in the proposed tax agreement. In other countries the ministry analyzed, the figures are between 35% and 50%.

"If we at this time included all the fiscal and economic components the mine would be charged for, the country would be receiving between 40% and 42% of income from mining extraction," Alfaro said.

CONSULTATION

The government and Vancouver-based First Quantum are finalizing a new contract, according to Alfaro.

“This consultation period is 90 days established by the FTA between Panama and Canada. That is where we are at the moment between the government and the company, trying to resolve the differences to reach a contract that is fair,” he said.

Negotiating a new contract became necessary after in 2018, the supreme court declared unconstitutional a 1990s law that formed the basis for the mine’s concession.

On December 15, President Laurentino Cortizo ordered the cessation of commercial operations at the mine, after Minera Panamá failed to meet a deadline set by authorities to sign a new contract because of disagreements over royalties and taxes.

The parties resumed talks over Christmas, but details remain murky. A deadline for the negotiations has not been established, and it is unclear if Minera Panamá must still present a care and maintenance plan, which it has not done even though a December 19 ministerial decree defined a 10-day deadline to do so.

"The clock is ticking. Once the ministry rules on those legal processes they started, such as appealing the closure order, the care and maintenance process starts, for the which the company has 10 days," said Alfaro.