First Quantum Mining Company in Tax Dispute with Panamanian Government

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Negotiations have resumed between copper miner First Quantum Minerals Limited (Vancouver, Canada) and the Panamanian government in a dispute over the future of the Cobre Panama mine and how much taxes the company should pay. The mine could soon face a shutdown unless progress is made.

First Quantum is battling to maintain control over its 300,000-metric-ton-per-year Cobre Panama mine, which contributes 3.5% of Panama's gross domestic product (GDP). The dispute over the mine started after the government demanded an increase in tax and royalties to US$375 million per year. Based on the Canadian company's financial statements, First Quantum paid US$61 million in royalties to the Panamanian government last year.

Negotiations over royalties dragged on and a December 14 deadline was missed, raising concerns over the mine's future production and First Quantum's license to operate in Panama. On December 28, the mining company issued a statement saying it had resumed negotiations with the government and that the talks were ongoing.

"We appreciate the Government of Panamá's constructive engagement this week. The preferred option for both sides is to achieve a balanced agreement that will benefit all parties for many years to come. We have ambitious plans for Cobre Panamá and strongly believe that an agreement would pave the way for additional investment in Panamá and its people," said Chief Executive Officer Tristan Pascall.

The company also highlighted that operations and production remain normal at the Cobre Panama mine. However, First Quantum received a resolution on December 21 from the government "to submit a plan within 10 working days of such notification to suspend commercial operations at Cobre Panamá and put the mine under "care and maintenance."

"Care and maintenance" involves shutting down operations at the mine while keeping infrastructure safe and minimal staff. It is used to keep operations at a minimum and grant a fast ramp-up of operations as soon as disputes or negotiations are settled.

The Cobre Panama mine has 3 billion tons of proven and probable reserves, representing one of the world's biggest new copper mines. It is located in the Colon province, about 120 kilometers from Ciudad de Panama. The mine started production in 2019, and it has the capacity to process 85 million tons per annum (Mtpa) to produce over 300,000 tons of copper per year in addition to gold, silver and molybdenum.

Last year, First Quantum produced 331,000 tons of copper, 141,637 ounces of gold, and 2.5 million ounces of silver from the Cobre Panama mine.

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