Halting Cobre Panamá could cost nearly US$5bn/y, claims study

Bnamericas Published: Friday, January 20, 2023
Halting Cobre Panamá could cost nearly US$5bn/y, claims study

If First Quantum Minerals halts operations at its Cobre Panamá mine for one year, it could stop generating up to US$4.67bn, according to a study from economic analysis firm INDESA Capital.

“Of that amount, US$1.719bn would be stopped from being generated by other companies in the country that are linked to the mine directly (because they are mine suppliers), indirectly (because they sell to mine suppliers) and induced (because they produce goods and services that the employees linked to the mine buy with their salaries),” the Canadian miner’s local operating subsidiary Minera Panamá said Thursday on social networks, citing the analysis of INDESA Capital.

On December 15, President Laurentino Cortizo ordered a halt to commercial operations at the copper mine after Minera Panamá missed a deadline to sign a new contract due to disagreements over the payment of royalties and taxes. However, there is no clear date for that to happen, nor for a care and maintenance plan to be executed.

INDESA's analysis calculated that, in terms of GDP, the Central American country would be at risk of stopping production worth approximately US$3.07bn due to the operation of the mine, the power plant and the companies associated with its production, that is, 4.8% of the country’s GDP in 2021.

“Additionally, 5,839 Panamanians who work directly in the mine or in projects developed by it would be at risk of losing their jobs, while 35,481 jobs could be lost in the rest of the sectors of the economy that are linked to the commercial operation of the mine," said Minera Panamá.

Related jobs (direct, indirect and induced) are equivalent to 2.3% of total employment in the country, according to INDESA.

Minera Panamá said the analysis was carried out two years after an initial study for the mine was presented.

“These estimates represent an upward adjustment of the impact that had been previously estimated with provisional data: a contribution of 3.5% of GDP and a number of associated jobs of 39,000,” the company said.

Negotiations on a new operating contract with Panama’s government started after the supreme court declared unconstitutional in 2018 a law from the 1990s under which the mine’s concession was awarded.

Light at the end of the tunnel

Despite the negative scenario, the consultancy's managing partner, Felipe Chapman, who was at the presentation of the analysis with Cobre Panamá, told BNamericas this week that he saw little chance of prolonged litigation between the government and Minera Panamá, due to the importance of the mine for the country and how these problems have been solved in the past. He added that he did not fear the country’s risk would be affected.

The parties resumed talks around Christmas, but the future of the mine remains uncertain as authorities insist on halting operations because there is no contract in place.

INDESA Capital said approximately two out of every 100 jobs that exist in the country are associated with the production of the copper mine directly, indirectly or induced.

First Quantum reported record copper output of 350,000t at Cobre Panamá last year, up from 331,000t in 2021. It says normal operations at what is one of Latin America’s biggest copper mines, which also produces gold and silver, continue as normal.

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