First Quantum agreed as well to start paying 25% corporation tax, from which it was previously exempted until its investments at the mine were recovered.
The new contract has yet to be approved by Panama’s Congress and must be signed by both parties.
“The parties continue to finalize the details behind these principles, including the appropriate mechanics that would achieve this outcome, the necessary protections to the business for downside copper price and production scenarios and to ensure that the new contract and legislation are both durable and sustainable,” First Quantum said in its recently published 2021 production report.
Once the final document is drawn up, it would be put to the national assembly for debate.
“The company welcomes the transparency of the robust ministerial commission process and is hopeful that this matter can be concluded shortly,” it added.
New power source
Shortly after accepting the royalty increase, First Quantum’s local unit receive a request to stop drawing power from the country’s only plant left that still burns coal for power generation.
That is why the agreement will include a clause indicating the miner must start technical studies six months after signing the deal. The goal is to implement cleaner energy technologies to replace burning coal at an existing power plant, the energy ministry said earlier this month.
Panama, which last year produced 82% of its electricity from renewable sources, is upgrading its legal framework and running price forecasts to encourage cleaner energy sources, including the production of sugarcane-based ethanol and the installation of decentralized power generation plants.
Another piece of Panama’s clean energy agenda is a natural gas-fueled 670-megawatt power plant near Colon, a $1 billion project by a consortium between InterEnergy Group, a unit of AES, and the government. Construction of the facility began last month.
The government also plans to call consulting companies this month for advice on reforming Panama’s hydrocarbon law, aimed at updating regulations for downstream projects, the minister said.
Cobre Panama, which began operations in 2019, is estimated to hold 3.1 billion tonnes in proven and probable reserves. It has generated some $6.7 billion in private investment, and includes two open pits, a processing facility, two power plants and a port.
The mine complex, located about 120 km west of Panama City and 20 km from the Atlantic coast, contributes 3.5% of the Central American country’s gross domestic product, according to government figures. It can produce more than 300,000 tonnes of copper per year at full capacity.
Minera Panama’s concession was approved in 1997 and initially granted to Canada’s Inmet Mining Corporation, which was acquired by First Quantum in 2013.
The miner, which is the world’s sixth largest copper company and Canada’s largest producer of the metal, generated 331,000 tonnes of the metal at Cobre Panama in 2021, 125,000 tonnes more than in the previous year.
For 2022, it expects to churn out between 330,000 and 360,000 tonnes of copper at the operation, increasing to 350,000-380,000t next year and to 370,000-400,000t in 2024.
