The Vancouver-based miner had been in talks with Panama since September last year, a period during which copper prices have traded at record levels.
Sources close to the matter told MINING.COM the Central American nation’s government had proposed a royalty of between 12% and 16% of the mine gross profits, compared to the previously agreed 2% of revenue. They also said the $375-million figure was the minimum annual amount the company would have to pay.
The minister of commerce and industries, Ramón Martínez, said in a press conference last week he also wanted to end a “tax holiday” that allowed First Quantum to put off taxes until de capital costs of building the mine were recouped.
Jefferies analyst Christopher LaFemina said the magnitude of the proposed royalty hike was a “shocker”, adding that the consultancy had estimated the miner would end up paying 5% of revenues in royalties.
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.
Record production
First Quantum announced in a separate statement it produced 816,000 tonnes of copper last year, a 5% increase from 2020, mainly due to record production at Cobre Panama.
The mine churned out 331,000 tonnes in 2021, 125,000 tonnes more than in the previous year. Despite facing covid-19 restrictions for over three quarters of the year, the company noted that Cobre Panama’s performance exceeded initial 2021 guidance.
The company, which is the world’s sixth largest copper miner an Canada’s largest producer of the metal, is hosting a virtual Capital Markets Day later on Tuesday, during which it will outline its strategy for the next three years including guidance and growth opportunities.
Panama’s government said President Laurentino Cortizo would also give details of the agreement on Tuesday.
(More to come…)
