Cobre Panama Maintains Operations as First Quantum, Government Continue Negotiations

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--First Quantum Minerals Limited (Vancouver, Canada) and the Panamanian government seem closer to reaching an agreement over Panama's largest copper mine, as operations remain stable.

The Canadian mining company's chief executive officer, Tristan Pascall, provided an update this week on its contractual negotiations with the Panamanian government over the Cobre Panama mine, one of the largest copper mines in the world.

Following months of negotiations, First Quantum and the government failed to reach a new contractual agreement by December 14, the deadline imposed by local authorities. As a result, authorities on December 21 gave the company 10 days to submit a plan to put the mine under maintenance care in case negotiations failed. Despite the warning, operations remain stable at the mine.

The company's chief executive said in a call this week that the company was ready to accept several of the terms put forward by the government. He said the company is prepared to accept paying a yearly minimum of US$375 million to the government in the form of royalties and taxes. The company believes that "this minimum payment structure is a benefit to the government that First Quantum believes is both unique and unprecedented in the mining industry."

Additionally, the company highlighted that it was willing to accept a profit-based mineral royalty between 12% and 16% with downside protections aligned with the government's position. Finally, the company is ready to provide environmental protection, training and development of its Panamanian workers, and contribute to the development of local communities.

Despite the concessions, it was also mentioned that several important issues have yet to be agreed upon between the parties. Among the company's key concerns is the long-term stability of the project, given that since 1997 the mine has required more than US$10 billion in investments, making it 22 years to make it commercially viable.

As a result, the company still is negotiating for long-term legal protection of its asset as part of these disputes. Among the key issues are the security of surface rights, stability of tax and royalty regimes, and protection against expropriations and early termination.

First Quantum recognized that it is working to submit a plan to put the mine under maintenance care as sought by authorities. The company said it considers such action to be "drastic" and "unnecessary" as it would impact production, operations and employees.

Maintenance care is referred to the process used to shut down operations at a mine while keeping infrastructure safe and minimal staff. It is used to keep operations running at a minimum and allow for a quick restart as soon as disputes or negotiations are settled.

Finally, the company is appealing the government's decision to halt the mine operations.

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